The Aid Paradigm for Poverty Reduction: Does It Make Sense?

Thinking on economic policy for development has undergone many shifts in response to the perceived weak results of earlier adjustment reforms. A new donor consensus has emerged based around the central themes of economic growth, good governance and social development. This article examines the logic behind this new aid paradigm, revealing a nuanced story with country circumstances playing a critical role and particular interventions varying in impact. For example, growth does not always lead to gains for the poor that match the national average; public expenditure needs to be targeted to achieve social development, but effective targeting is difficult; governance reform may be critical but there is no simple governance blueprint, and the corruption‐growth association need not always be negative.