THE two routes taken to the Monterrey conference by those who give aid and those who receive it traversed very different territory. A number of aid givers had reached the conclusion that what really matters are government policies that support development in many different ways.

According to this view aid plays only a marginal role. In fact, in the countries with weak institutions and weak legal systems, aid may corrupt the officialdom. The primary emphasis, therefore, has to be institutional development and improvement in the quality of governance. Without it, aid can be counterproductive. As two development experts put in a recent contribution to Financial Times, “aid all too often fattens bloated bureaucracies or enriches corrupt autocrats — and has played no small part in creating the economic and political chaos in which fanaticism flourishes and totalitarians win adherents.”

The aid receivers take an entirely different view. They maintain that most of them are so poor that they cannot adopt the policies that would support sustainable development unless some room for manoeuvre was created by large flows of aid. They were looking for fiscal space within which they could operate. Which of these two points of view is correct?

As is so often the case in economies, the truth lies somewhere in between. The evidence for both positions on aid can be gleamed from the data and information available in the various studies carried out by the World Bank, by far the largest development agency in the world. The data on global poverty can be used to argue in favour of both propositions. As I indicated in the article last week, it is possible to suggest that roughly $1 trillion of aid provided to the developing world since World War II has accomplished little.

One half of the world’s population still lives in poverty, earning less than $2 a day per head. One third of the world population lives in abject poverty with per capita income of less than $1 a day. Some development aid agencies which audit their projects admit to significant failures. The World Bank’s own evaluation department suggests that barely half of its lending operations of the past decade are likely to produce sustainable benefits. Asian Development Bank’s internal audits show that fewer than one-third of the projects it has financed in recent years are likely to provide lasting social or economic benefits.

The same numbers can be told in a different way — the glass is not half empty; in fact, it is half full. Since 1980, the number of people living on less than $1 a day has declined by 200 million. This