The inverse cross-country relationship between foreign aid and economic growth should perhaps not come as a surprise in view of the emerging evidence of an inverse relationship between natural resource abundance or dependence and economic growth across countries (see picture). The mechanism could be the same in both cases, or at least have a few things in common. Unrequited foreign aid, like an oil discovery, is like manna from heaven and may imbue the recipient with a false sense of complacency that leads to neglect of investment, education, and other things that are good for growth. So, it is perhaps not surprising that foreign direct investment — which, unlike aid, has to be "earned" — is good for growth, as the next picture shows.
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