THE AID TRAP: Hard Truths About Ending Poverty

By R. Glenn Hubbard and William Duggan

Over the past twenty years more citizens in China and India have raised themselves out of poverty than anywhere else at any time in history. They accomplished this through the local business sector—the leading source of prosperity for all rich countries. In most of Africa and other poor regions the business sector is weak, but foreign aid continues to fund government and NGOs. Switching aid to the local business sector in order to cultivate a middle class is the oldest, surest, and only way to eliminate poverty in poor countries.

A bold fusion of ethics and smart business, The Aid Trap shows how the same energy, goodwill, and money that we devote to charity can help local business thrive. R. Glenn Hubbard and William Duggan, two leading scholars in business and finance, demonstrate that by diverting a major share of charitable aid into the local business sector of poor countries, citizens can take the lead in the growth of their own economies. Although the aid system supports noble goals, a local well-digging company cannot compete with a foreign charity that digs wells for free. By investing in that local company a sustainable system of development can take root.

Read an Excerpt


"Anyone who wants to end poverty should take seriously the powerful and provocative arguments of The Aid Trap. Even if R. Glenn Hubbard and William Duggan don't convince you to embrace their new Marshall Plan, you will come away with a deeper appreciation for the limits of charity, the dangers of top-down planning, and the importance of creating a vibrant and open business sector." — J. Gregory Dees, Center for the Advancement of Social Entrepreneurship, Duke University's Fuqua School of Business

"R. Glenn Hubbard and William Duggan make a persuasive case that international aid flows have been grossly misdirected. In trying to do good, those in the developed world may actually have ended up doing substantial harm to the developing world. Hubbard and Duggan instead argue that aid flows should be redirected towards encouraging business and entrepreneurship. This is a timely and readable book about how to solve one of the most challenging problems of our time." — Raghuram G. Rajan, The University of Chicago Booth School of Business

"The authors' willingness to confront conventional wisdom and examine and energetically attack the problem are refreshing and necessary." — Publishers Weekly

"The Aid Trap is not about the failure of conventional aid but provides the outline of a solution that can work if taken seriously. It is that rare prescriptive book, and the world must pay attention." — Muhammad Yunus, winner of the Nobel Peace Prize

"Glenn Hubbard and William Duggan's considered analysis of The Aid Trap adds a new and important dimension to the on-going development debate. This book, grounded in logic and supported by evidence, presents reasonable and sustainable steps that will move Africa forward." — Dambisa Moyo, author of Dead Aid: Why Aid In Not Working and How There Is a Better Way for Africa

"A few years ago, we in Mauritius set out to make it easier for our own people and foreign companies to do business in our country. The result has been far more prosperity for our people. Other countries want to learn from our experience. I am pleased to see that there is now a book that can help. The Aid Trap makes a strong case and offers concrete steps for countries not to rely exclusively on the aid world and join the business world instead. I hope this book has a wide impact on the minds, hearts, and actions of national leaders, multinational and local businesses, aid agencies, and concerned citizens around the world." — Honorable Navinchandra Ramgoolam, Prime Minister of Mauritius

"Offers a different and logical, if emotionally counter-intuitive, approach to foreign aid." — Sarah Lynch, Forbes

"The authors point to the burgeoning economies of China and India as evidence that thriving businesses are the key to ending poverty." — Chronicle of Philanthropy

"The Aid Trap articulates a constructive set of ideas about how to reform foreign aid." — Economist

"The Aid Trap does a good job of both highlighting problems with the current aid structure and prescribing solutions." — Reuben Abraham, Alliance Magazine

"The Aid Trap the well-entrenched myth that development aid willerase global poverty." —

"[The Aid Trap] offers a refreshing perspective on the current effort to end world poverty." — Bennett Grill, African Affairs

"The Aid Trap is a concise, beautifully written, stimulating, profound, and up-to-date reminder to all of us who are deeply concerned as to just why our traditional aid programs continue to fail us." — Joseph Keckeissen, Journal of Markets & Morality

"I can't think of anyone better qualified than R. Glenn Hubbard and William Duggan to analyze what they perceptively call the 'feudal system of aid' and to suggest ways to break free. They persuasively argue that thriving private businesses are the best hope for the world's poor and have taken a practical approach to allow business to thrive." — William Easterly, author of The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good