Development aid

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Development aid (also development assistance, technical assistance, international aid, overseas aid, official development assistance (ODA), or foreign aid) is financial aid given by governments and other agencies to support the economic, environmental, social, and political development of developing countries. It is distinguished from humanitarian aid by focusing on alleviating poverty in the long term, rather than a short term response.

Technical cooperation grants are one type of development aid.

The term development co-operation, which is used, for example, by the World Health Organization (WHO) is used to express the idea that a partnership should exist between donor and recipient, rather than the traditional situation in which the relationship was dominated by the wealth and specialised knowledge of one side.[1] Most development aid comes from the Western industrialised countries but some poorer countries also contribute aid.

Aid may be bilateral: given from one country directly to another; or it may be multilateral: given by the donor country to an international organisation such as the World Bank or the United Nations Agencies (UNDP, UNICEF, UNAIDS, etc.) which then distributes it among the developing countries. The proportion is currently about 70% bilateral 30% multilateral.[2]

About 80-85% of developmental aid comes from government sources as official development assistance (ODA). The remaining 15-20% comes from private organisations such as "non-governmental organisations" (NGOs), foundations and other development charities (e.g., Oxfam).[3] In addition, remittances received from migrants working or living in diaspora form a significant amount of international transfer.

Some governments also include military assistance in the notion "foreign aid", although many NGOs tend to disapprove of this.

Official development assistance is a measure of government-contributed aid, compiled by the Development Assistance Committee of the Organisation for Economic Co-operation and Development (OECD) since 1969. The DAC consists of 34 of the largest aid-donating countries.

History[edit]

Origins[edit]

The concept of development aid goes back to the colonial era at the turn of the twentieth century, in particular to the British policy of colonial development that emerged during that period. The traditional government policy had tended to favor laissez-faire style economics, with the free market for capital and goods dictating the economic role that colonies played in the British Empire.

Lord Moyne, as Secretary of State for the Colonies presided over a Development Committee for the colonies. He is pictured entertaining Jamaican recruits for the RAF.

Changes in attitudes towards the moral purpose of the Empire, and the role that government could play in the promotion of welfare slowly led to a more proactive policy of economic and developmental assistance towards poor colonies. The first challenge first by Britain was the economic crisis that occurred after World War I. Prior to the passage of the 1929 Colonial Development Act, the doctrine that governed Britain (and other European colonizers) with their territories was that of financial self-sufficiency. What this simply meant was that the colonies were responsible for themselves.[4]

Britain was not going to use the money that belongs to the metropole to pay for things in the colonies. The colonies did not only have to pay for infrastructural development but they also were responsible for the salaries of British officials that worked in the colonies. The colonies generated the revenues to pay for these through different forms of taxations. The standard taxation was the import and export taxes. Goods going out of the colonies were taxed and those coming in were also taxed. These generate significant revenues. Apart from these taxes, the colonizers introduced two other forms of taxes: hut tax and labor tax. The hut tax is akin to a property tax today. Every grown up adult male had their own hut. Each of these had to pay a tax. Labor tax was the work that the people had to do without any remunerations or with meager stipends.[5] As the economic crisis widened and had significant impact on the colonies, revenues generated from taxes continued to decline, having a significant impact on the colonies. While this was going on, Britain experienced major unemployment rates. Parliament began to discuss ways in which they could deal with Britain's unemployment rates and at the same time respond to some of the urgent needs of the colonies.[6] This process culminated in the passage of the Colonial Development Act in 1929, which established a Colonial Development Advisory Committee under the authority of the Secretary of State for the Colonies, then Lord Passfield. Its initial annual budget of £1 million was spent on schemes designed to develop the infrastructure of transport, electrical power and water supply in colonies and dominions abroad for the furtherance of imperial trade.[7] The 1929 Act, though meager in the resources it made available for development, was a significant Act because it opened the door for Britain to make future investments in the colonies. It was a major shift in colonial development. The doctrine of financial self-sufficiency was abandoned and Britain could now use metropolitan funds to develop the colonies.

By the late 1930s, especially after the British West Indian labour unrest of 1934–1939, it was clear that this initial scheme was far too limited in scope. A Royal Commission under Lord Moyne was sent to investigate the living conditions in the British West Indies and it published its Report in 1940 which exposed the horrendous living conditions there.[8][9]

Amidst increasing criticism of Britain's colonial policies from abroad and at home,[10][11] the commission was a performance to showcase Britain’s “benevolent” attitude towards its colonial subjects.[12] The Commission's recommendations urged health and education initiatives along with increased sugar subsidies to stave off a complete and total economic meltdown.[13] The Colonial Office, eager to prevent instability while the country was at war, began funneling large sums of cash into the region.[14]

The Colonial Development and Welfare Act was passed in 1940 to organize and allocate a sum of £5 million per year to the British West Indies for the purpose of long-term development. Some £10 million in loans was cancelled in the same Act.[15] The Colonial Development and Welfare Act of 1945 increased the level of aid to £120m over a twenty-year period. Further Acts followed in 1948, 1959 and 1963, dramatically increasing the scope of monetary assistance, favourable interest-free loans and development assistance programs.

Postwar expansion[edit]

A poster promoting the Marshall Plan in Europe, the first large scale development program. It was designed to boost European economies shattered by war and prevent the growth of communist influence.

The beginning of modern development aid is rooted in the context of Post-World War II and the Cold War. Launched as a large-scale aid program by the United States in 1948, the European Recovery Program, or Marshall Plan, was concerned with strengthening the ties to the West European states to contain the influence of the USSR. Implemented by the Economic Cooperation Administration (ECA), the Marshall Plan also expanded its reconstruction finance to strategic parts of the Middle East and Asia.[16] The rationale was well summarized in the 'Point Four Program', in which United States president Harry Truman stated the anti-communist rationale for U.S. development aid in his inaugural address of 1949, which also announced the founding of NATO:[7]

"In addition, we will provide military advice and equipment to free nations which will cooperate with us in the maintenance of peace and security. Fourth, we must embark on a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas. More than half the people of the world are living in conditions approaching misery. Their food is inadequate. They are victims of disease. Their economic life is primitive and stagnant. Their poverty is a handicap and a threat both to them and to more prosperous areas. For the first time in history, humanity possesses the knowledge and skill to relieve the suffering of these people."[17]

In 1951, the Technical Cooperation Administration (TCA) was established within the Department of State to run the Point Four program. Development aid was aimed at offering technical solutions to social problems without altering basic social structures. The United States was often fiercely opposed to even moderate changes in social structures, for example the land reform in Guatemala in the early 1950s.

In 1953 at the end of the Korean War, the incoming Eisenhower Administration established the Foreign Operations Administration (FOA) as an independent government agency outside the Department of State to consolidate economic and technical assistance. In 1955, foreign aid was brought back under the administrative control of the Department of State and FOA was renamed the International Cooperation Administration (ICA).

In 1956, the Senate conducted a study of foreign aid with the help of a number of independent experts. The result, stated in a 1959 amendment to the Mutual Security Act, declared that development in low-income regions was a U.S. objective along with and additional to other foreign-policy interests, attempting thus to clarify development assistance's relationship with the effort to contain Communism. In 1961, the Congress approved the Foreign Assistance Act of 1961 with President J.F. Kennedy's support, which retained the 1959 policy of international development as an independent U.S. objective and set up a new Agency for International Development, USAID.

The volume of international aid to the Third World grew dramatically from the 1960s. This aid came mainly from the US and Western European countries, but there were also significant contributions from the Soviet Union in exchange for overseas political influence in the context of the heightened global tensions of the Cold War.

The practice of extending aid to politically aligned parties in recipient nations continues today; Faye and Niehaus (2012) are able to establish a causal relationship between politics and aid in recipient nations.[18] In their analysis of the competitive 2006 Palestinian elections, they note that USAID provided funding for development programs in Palestine to support the Palestinian Authority, the US backed entity running for reelection. Faye and Niehaus discovered that the greater the degree of alignment the recipient party has with the donor entity, the more aid it receives on average during an election year.[18] In an analysis of the 3 biggest donor nations (Japan, France, and the US), Alesina and Dollar (2000) discovered that each has its own distortions to the aid it gives out.[19] Japan appears to prioritize giving aid nations that exercise similar voting preferences in the United Nations, France mostly sends aid to its former colonies, and the U.S. disproportionately provides aid to Israel and Egypt.[19] These allocations are often powerful tools for maintaining the strategic interests of the donor country in the recipient country.

The Development Assistance Committee was established in 1960 by the Organisation for European Economic Co-operation to coordinate development aid amongst the rich nations. A 1961 resolution decreed that:

The Committee will continue to consult on the methods for making national resources available for assisting countries and areas in the process of economic development and for expanding and improving the flow of long-term funds and other development assistance to them.

— Development Assistance Committee, Mandate (1961)

Extent of Aid[edit]

Most official development assistance (ODA) comes from the 28 members of the Development Assistance Committee (DAC), or about $135 billion in 2013. A further $15.9 billion came from the European Commission and non-DAC countries gave an additional $9.4 billion. Although development aid rose in 2013 to the highest level ever recorded, a trend of a falling share of aid going to the neediest sub-Saharan African countries continued.[20]

Top recipient countries[edit]

ODA received (2014)[21]
Country US$, billions
 Afghanistan 4.82
 Vietnam 4.22
 Syria 4.2
 Pakistan 3.61
 Ethiopia 3.59
 Egypt 3.53
 Turkey 3.44
 India 2.98
 Jordan 2.7
 Kenya 2.67

Top donor countries[edit]

The Organisation for Economic Co-operation and Development (OECD) measures countries contributing the highest amounts of ODA (in absolute terms). As of 2013, the top 10 DAC countries are as follows (listed in US dollars). European Union countries together gave $70.73 billion and EU Institutions gave a further $15.93 billion.[20][22]

  1.  United States – $31.55 billion
  2.  United Kingdom – $17.88 billion
  3.  Germany – $14.06 billion
  4.  Japan – $11.79 billion
  5.  France – $11.38 billion
  6.  Sweden – $5.83 billion
  7.  Norway – $5.58 billion
  8.  Netherlands – $5.44 billion
  9.  Canada – $4.91 billion
  10.  Australia – $4.85 billion

The OECD also lists countries by the amount of ODA they give as a percentage of their gross national income. The top 10 DAC countries are as follows. Five countries met the longstanding UN target for an ODA/GNI ratio of 0.7% in 2013:[20]

  1.  Norway – 1.07%
  2.  Sweden – 1.02%
  3.  Luxembourg – 1.00%
  4.  Denmark – 0.85%
  5.  United Kingdom – 0.72%
  6.  Netherlands – 0.67%
  7.  Finland – 0.55%
  8.   Switzerland – 0.47%
  9.  Belgium – 0.45%
  10.  Ireland – 0.45%

European Union countries that are members of the Development Assistance Committee gave 0.42% of GNI (excluding the $15.93 billion given by EU Institutions).[20]

Quality[edit]

Warren Buffett is considered one of the world's leading philanthropists, yet he is also the biggest investor in Coca-Cola, which aggressively seeks to expand into poorer countries. This cartoon, from an organization critical of the true motives of international aid, calls attention to what it perceives as a contradiction.

Development aid is often provided by means of supporting local development aid projects. In these projects, it sometimes occurs that no strict code of conduct is in force. In some projects, the development aid workers do not respect the local code of conduct. For example, the local dress code as well as social interaction. In developing countries, these matters are regarded highly important and not respecting it may cause severe offense, and thus significant problems and delay of the projects.

There is also much debate about evaluating the quality of development aid, rather than simply the quantity. For instance, tied aid is often criticized as the aid given must be spent in the donor country or in a group of selected countries. Tied aid can increase development aid project costs by up to 20 or 30 percent.[23]

There is also criticism because donors may give with one hand, through large amounts of development aid, yet take away with the other, through strict trade or migration policies, or by getting a foothold for foreign corporations. The Commitment to Development Index measures the overall policies of donors and evaluates the quality of their development aid, instead of just comparing the quantity of official development assistance given.

Effectiveness[edit]

The 1968 Michenzani apartment blocks in Zanzibar were part of East German development assistance and brought a Soviet-style of living to rural Africa. The apartments were unpopular and only 1,102 out of the 9,992 planned buildings were built (see Ng'ambo). Still used today, they stand as a failed relic of donor-driven (supply-driven) development aid.

Aid effectiveness is the degree to which development aid works, and is a subject of significant disagreement. Dissident economists such as Peter Bauer and Milton Friedman argued in the 1960s that aid is ineffective:[24]

... an excellent method for transferring money from poor people in rich countries to rich people in poor countries.

— Peter Bauer

In economics, there are two competing positions on aid. A view pro aid, supported by Jeffrey Sachs and the United Nations, which argues that foreign aid will give the big push to break the low-income poverty trap poorer countries are trapped in. From this perspective, aid serves to finance “the core inputs to development – teachers, health centers, roads, wells, medicine, to name a few...” (United Nations 2004).[25] And a view that is skeptic about the impacts of aid, supported by William Easterly, that points out that aid has not proven to work after 40 years of large investments in Africa.[25]

American political scientist and professor Nicolas van de Walle has also argued that despite more than two decades of donor-supported reform in Africa, the continent continues to be plagued by economic crises due to the combination of state generated factors and to the counter productivity of international development aid to Africa. Van de Walle first attributes the failure to implement economic policy reform to factors within the African state:

  1. Neopatrimonial tendencies of state elites that serve to preserve and centralize power, maintain limited access orders, and create political obstacles to reform.
  2. Ideological obstacles that have been biased by two decades of failed economic policy reform and in turn, create a hostile environment for reform.
  3. Low state capacity that reinforces and that in turn, is reinforced by the neopatrimonial tendencies of the state.

Van de Walle later argues that these state generated factors that have obstructed the effective implementation of economic policy reform are further exacerbated by foreign aid. Aid, therefore, makes policy reform less likely, rather than more likely. Van de Walle posits that international aid has sustained economic stagnation in Africa by:

  1. Pacifying Africa's neopatrimonial tendencies, thereby lessening the incentives for state elites to undertake reform and preserving the status quo.
  2. Sustaining poorly managed bureaucratic structures and policies that would be otherwise rectified by market forces.
  3. Allowing state capacities to deteriorate through externalizing many state functions and responsibilities.

In order for aid to be productive and for economic policy reform to be successfully implemented in Africa, the relationship between donors and governments must change. Van de Walle argues that aid must be made more conditional and selective to incentivize states to take on reform and to generate the much needed accountability and capacity in African governments.[26]

Additionally, information asymmetries often hinder the appropriate allocation of aid; Blum et al (2016) note that both South Sudan and Liberia struggle tremendously with paying employees and controlling the flow of money - South Sudan had a significant number of ghosts on its payroll, while Liberia's Civil Service Agency could not adequately pay civil servants because there was minimal communication from the Ministries of Health and Education regarding their respective payrolls.[27]

Many econometric studies in recent years have supported the view that development aid has no effect on the speed with which countries develop. Negative side effects of aid can include an unbalanced appreciation of the recipient's currency (known as Dutch Disease), increasing corruption, and adverse political effects such as postponements of necessary economic and democratic reforms.[28]

It has been argued[by whom?] that much government-to-government aid was ineffective because it was merely a way to support strategically important leaders (Alesino and Dollar, 2000). A good example of this is the former dictator of Zaire, Mobuto Sese Seko, who lost support from the West after the Cold War had ended. Mobuto, at the time of his death, had a sufficient personal fortune (particularly in Swiss banks) to pay off the entire external debt of Zaire.[28]

Besides some instances that only the president (and/or his close entourage) receives the money resulting from development aid, the money obtained is often badly spent as well. For example, in Chad, the Chad Export Project, an oil production project supported by the World Bank, was set up. The earnings of this project (6.5 million dollars per year and rising) were used to obtain arms. The government defended this purchase by stating that "development was not possible without safety". However, the Military of Chad is notorious for severe misconduct against the population (abuse, rape, claiming of supplies and cars) and did not even defend the population in distress (e.g. in the Darfur conflict). In 2008, the World Bank retreated from the project that thus increased environmental pollution and human suffering.[29]

Another criticism has been that Western countries often project their own needs and solutions onto other societies and cultures. In response, western help in some cases has become more 'endogenous', which means that needs as well as solutions are being devised in accordance with local cultures.[30] For example, sometimes projects are set up which wish to make several ethnic groups cooperate. While this is a noble goal, most of these projects fail because of this intent.[29]

The Center for Global Development have published a review[31] essay of the existing literature studying the relationship between Aid and public institutions. In this review, they concluded that a large and sustained Aid can have a negative effect in the development of good public institutions in low income countries. They also mention some of the arguments exhibited in this article as possible mechanism for this negative effect, for instance, they considered the Dutch Disease, the discourage of revenue collections and the effect on the state capacity among others.

Furthermore, the effect of Aid on conflict intensity and onset have been proved to have different impacts in different countries and situations. For instance, for the case of Colombia Dube and Naidu (2015)[32] showed that Aid from the US seems to have been diverted to paramilitary groups, increasing political violence. Moreover, Nunn and Qian (2014)[33] have found that an increase in U.S. food aid increases conflict intensity; they claim that the main mechanism driving this result is predation of the aid by the rebel groups. In fact, they note that aid can have the unintentional consequence of actually improving rebel groups' ability to continue conflict, as vehicles and communications equipment usually accompany the aid that is stolen.[33] These tools improve the ability of rebel groups to organize and give them assets to trade for arms, possibly increasing the length of the fighting. Finally, Crost, Felter and Johnston (2014)[34] have showed that a development program in the Philippines have had the unintended effect of increasing conflict because of an strategic retaliation from the rebel group, on where they tried to prevent that the development program increases support to the government.

It has also been argued that help based on direct donation creates dependency and corruption, and has an adverse effect on local production. As a result, a shift has taken place towards aid based on activation of local assets and stimulation measures such as microcredit.

Aid has also been ineffective in young recipient countries in which ethnic tensions are strong: sometimes ethnic conflicts have prevented efficient delivery of aid.

In some cases, western surpluses that resulted from faulty agriculture- or other policies have been dumped in poor countries, thus wiping out local production and increasing dependency.

In several instances, loans that were considered irretrievable (for instance because funds had been embezzled by a dictator who has already died or disappeared), have been written off by donor countries, who subsequently booked this as development aid.

In many cases, Western governments placed orders with Western companies as a form of subsidizing them, and later shipped these goods to poor countries who often had no use for them. These projects are sometimes called 'white elephants'.

According to James Ferguson, these issues might be caused by deficient diagnostics of the development agencies. In his book The Anti-Politics Machine, Ferguson uses the example of the Thaba-Tseka project in Lesotho to illustrate how a bad diagnostic on the economic activity of the population and the desire to stay away from local politics, caused a livestock project to fail.[35]

According to Martijn Nitzsche, another problem is the way on how development projects are sometimes constructed and how they are maintained by the local population. Often, projects are made with technology that is hard to understand and too difficult to repair, resulting in unavoidable failure over time. Also, in some cases the local population is not very interested in seeing the project to succeed and may revert to disassembling it to retain valuable source materials. Finally, villagers do not always maintain a project as they believe the original development workers or others in the surroundings will repair it when it fails (which is not always so).[36]

A common criticism in recent years is that rich countries have put so many conditions on aid that it has reduced aid effectiveness. In the example of tied aid, donor countries often require the recipient to purchase goods and services from the donor, even if these are cheaper elsewhere. Other conditions include opening up the country to foreign investment, even if it might not be ready to do so.[37]

In Congo, an abandoned ferry as a relic of a development project is rusting next to the boats people use today.

All of these problems have made that a very large part of the spend money on development aid is simply wasted uselessly. According to Gerbert van der Aa, for the Netherlands, only 33% of the development aid is successful, another 33% fails and of the remaining 33% the effect is unclear. This means that for example for the Netherlands, 1.33 to 2.66 billion is lost as it spends 4 billion in total of development aid (or 0,8% of the gross national product).[36]

For the Italian development aid for instance, we find that one of their successful projects (the Keita project) was constructed at the cost of 2/3 of 1 F-22 fighter jet (100 million $), and was able to reforest 1,876 square miles (4,900 km2) of broken, barren earth, hereby increasing the socio-economic wellbeing of the area.[38] However -like the Dutch development aid- again we find that, the Italian development aid too is still not performing up to standards.[39] This makes clear that there are great differences between the success of the projects and that budgetary follow-up may not be so strictly checked by independent third parties.

An excerpt from Thomas Dichter's recently published book Despite Good Intentions: Why Development Assistance to the Third World Has Failed reads: "This industry has become one in which the benefits of what is spent are increasingly in inverse proportion to the amount spent - a case of more gets you less. As donors are attracted on the basis of appeals emphasizing "product", results, and accountability…the tendency to engage in project-based, direct-action development becomes inevitable. Because funding for development is increasingly finite, this situation is very much a zero-sum game. What gets lost in the shuffle is the far more challenging long-term process of development."

Effectiveness of development aid can be argued to be uncoordinated and unsustainable. Development aid tends to be put towards specific diseases with high death rates and simple treatments, rather than funding health basics and infrastructure. Though a lot of NGO's and funding have come forth, little sustainable outcomes have been made. This is due to the fact that the money doesn't go towards developing a sustainable medical basis. Money is given to specific diseases to show short-term results, reflecting the donor's best interests rather than the citizens' necessities. It is evident that many development aid projects are not helping with basic and sustainable health care due to the generally high numbers of deaths due to preventable diseases. Development aid could do more justice if used to generate general public health with infrastructure and trained personnel rather than pin-pointing specific diseases and reaching for quick fixes.[40]

Research has shown that developed nations are more likely to give aid to nations who have the worst economic situations and policies (Burnside, C., Dollar, D., 2000). They give money to these nations so that they can become developed and begin to turn these policies around. It has also been found that aid relates to the population of a nation as well, and that the smaller a nation is, the more likely it is to receive funds from donor agencies. The harsh reality of this is that it is very unlikely that a developing nation with a lack of resources, policies, and good governance will be able to utilize incoming aid money in order to get on their feet and begin to turn the damaged economy around. It is more likely that a nation with good economic policies and good governance will be able to utilize aid money to help the country establish itself with an existing foundation and be able to rise from there with the help of the international community. But research shows that it is the low-income nations that will receive aid more so, and the better off a nation is, the less aid money it will be granted. On the other hand, Alesina and Dollar (2000) note that private foreign investment often responds positively to more substantive economic policy and better protections under the law.[19] There is increased private foreign investment in developing nations with these attributes, especially in the higher income ones, perhaps due to being larger and possibly more profitable markets.[19]

MIT based study[edit]

Development aid, German stamp (1981).

The Massachusetts Institute of Technology's Abhijit Banerjee and Ruimin He have undertaken a rigorous study of the relatively few independent evaluations of aid program successes and failures.[41] They suggest the following interventions are usually highly effective forms of aid in normal circumstances:

  • subsidies given directly to families to be spent on children's education and health
  • education vouchers for school uniforms and textbooks
  • teaching selected illiterate adults to read and write
  • deworming drugs and vitamin/nutritional supplements
  • vaccination and HIV/AIDS prevention programs
  • indoor sprays against malaria, anti-mosquito bed netting
  • suitable fertilizers
  • clean water supplies

UK Parliamentary study[edit]

An inquiry into aid effectiveness by the UK All Party Parliamentary Group (APPG) for Debt, Aid and Trade featured evidence from Rosalind Eyben, a Fellow at the Institute of Development Studies. Her evidence to the inquiry stated that effective aid requires as much investing in relationships as in managing money. It suggests Development organisations need to change the way they work to manage better the multiple partnerships that the Accra Agenda for Action recognises is at the core of the aid business. In relation to this specific inquiry, Dr Eyben outlined the following points:[42]

  • Achieving impact requires investing in relationships, development organisations need to support their staff to do this. At the moment, the opposite is happening.
  • In multiple sets of relationships there will be different ideas about what is success and how to achieve it and this should be reflected in methodologies for defining and assessing the impact of aid.
  • Helpful procedural harmonisation should not mean assuming there is only a single diagnosis and solution to any complex problem.
  • In addition to measuring results, donors need to assess the quality of relations at project/programme, country and international levels against indicators agreed with partners.
  • Decisions on aid need to be made on a case by case basis on the advice of well-informed country offices.
  • Accountable states depend on empowered citizens
  • Development organisations also need to be more accountable to UK citizens through encouraging conversations as to the real challenges and limitations of aid. (Point made in relation to UK as evidence for UK parliamentary inquiry)

The views above are of Eyben. There were many other submissions to the All Party Parliamentary Group for Debt, Aid and Trade's inquiry into Aid Effectiveness. The final report gathered a vast amount of information from a wide range of sources to ensure a balanced perspective on the issues of aid effectiveness. The All Party Parliamentary Group for Debt, Aid and Trade's inquiry into Aid Effectiveness can be found online and the submissions of other contributors are available upon request.

Effect on the Recipient Country's Development[edit]

Albert Hirschman’s Exit-Voice-Loyalty model can be used to understand how certain policy changes affect the growth of a nation and the change of bargaining power inside it. Clark et. al.’s formalization of the model to politics shows the effect that developmental aid can have on the receiving country’s development and highlights that the aid can potentially harm that country.

Albert O. Hirschman’s EVL model is based on the foundation that “under any economic, social, or political system, individuals, business firms, and organizations, in general, are subject to lapses from efficient, rational, law-abiding, virtuous, or otherwise functional behavior” Exit, Voice, and Loyalty. The customer who is affected by the lapse in the system (a fall in the quality of a product they are consuming) has two ways to answer to this- “exit” or “voice”. If the individual in a chooses the former, they simply stop buying the product and inflict a revenue drop that forces the firm to either correct their mistake or cease to exist. If the individual chooses the “voice” option, then they will express their dissatisfaction to either the firm or something that has authority over it. This will force the firm to fix their lapse, but it will not suffer a decline in revenue. Lastly, Hirschman introduces the “loyalty” option, which occurs when the consumer cannot “exit” and the firm does not care about the effect that “voice” will have on their revenue, and the consumers who chose it continues to consume the lapsed good.

Clark et. al’s paper takes Hirschman’s Exit-Voice-Loyalty model [1] and applies it to political developments inside a nation. When a government changes a policy that now has a negative effect on the welfare of some citizens, or is already being unresponsive to a deleterious situation, the citizens have the same 3 choices of response as before. Here, “exit” can take the form of citizens leaving the country The Art of Not Being Governed and hence depriving the state of their taxes or simply rearranging their capital and goods so they are not taxed by the government, as seen with British merchants threatening to move capital to the Netherlands if not given representation after the Glorious Revolution. “Voice” takes the form of non-violent civil disobedience, as seen with Gandhi's Salt March and the Black Lives Matter protests in Ferguson, a violent demonstration, as seen with Luddite breaking weaving machinery to protest the lack of protectionist policies by the English government, or even “everyday resistance” [2] where small, non-cooperation and false create high costs for the state. “Loyalty” entails that the citizens simply accept the situation and continue their lives before.

How foreign aid enters this equation in weak states is by changing the citizens’ power of “voice” and “exit” and weakening the state’s dependence on their citizens and hence becoming less responsive to their needs. If the state receives international aid, it is less dependent on the tax revenue that it collects from its constituents. A higher level of fiscal independence on the part of the state decreases the bargaining power of the citizens. The government is threatened less by the citizens’ “exit” option, and less hurt if it is implemented, hence this takes away a credible threat to use at the negotiation table in order for the citizens to request improvement to their current condition. At the same time, the lack of dependence for revenue decreases the “voice” action of the citizen by weakening the effect a violent demonstration or everyday resistance has on impacting the state’s decision-making.

As long as the government of a nation receiving international aid knows that it will keep receiving it, and there will be no repercussion on the side of the donors for failing to address its’ constituents’ issues, it stays optimal for that government to keep ignoring the weakened demands of its citizens. With weakened bargaining power and a less responsive state, there can be no bargaining between citizen and state that will, in the long, run lead to economic and/or development within the nation. Although international has done far-reaching things with respect to increasing access to improved medical care, improving education, and decreasing poverty and hunger, only in 1997 did the World Bank began to rethink its aid policy structure and begin using parts of it specifically for building up the state capability of the aid-receiving nations [3]. Even more recently, the Millennium Challenge Corporation, a US-based aid agency, started working with developing nation to provide them with strictly development aid as they set and implement goals for national development.

Corruption[edit]

While development aid is an important source of investment for poor and often insecure societies, aid's complexity and the ever expanding budgets leave it vulnerable to corruption, yet discussing it remains difficult as for many it is a taboo subject.[43] Corruption is very hard to quantify as it is often hard to differentiate it from other problems, such as wastage, mismanagement and inefficiency, to illustrate the point, over $8.75 billion was lost to waste, fraud, abuse and mismanagement in the Hurricane Katrina relief effort.[43]

Often a lack of understanding of the process by those meant to be receiving aid leads to cynicism and belief that greed and corruption are the key failures. Non-governmental organizations have in recent years made great efforts to increase participation, accountability and transparency, humanitarian assistance remains a poorly understood process to those meant to be receiving it—much greater investment needs to be made into researching and investing in relevant and effective accountability systems.[43]

However, there is little clear consensus on the trade-offs between speed and control, especially in emergency situations when the humanitarian imperative of saving lives and alleviating suffering may conflict with the time and resources required to minimise corruption risks.[43] Researchers at the Overseas Development Institute have highlighted the need to tackle corruption with, but not limited to, the following methods:[43]

  1. Resist the pressure to spend aid rapidly.
  2. Continue to invest in audit capacity, beyond simple paper trails;
  3. Establish and verify the effectiveness of complaints mechanisms, paying close attention to local power structures, security and cultural factors hindering complaints;
  4. Clearly explain the processes during the targeting and registration stages, highlighting points such as the fact that people should not make payments to be included, photocopy and read aloud any lists prepared by leaders or committees.

Private aid[edit]

Development charities make up a vast web of non-governmental organizations, religious ministries, foundations, business donations and college scholarships devoted to development aid. Estimates vary, but private aid is at least as large as ODA within the United States, at $16 billion in 2003. World figures for private aid are not well tracked, so cross-country comparisons are not easily possible, though it does seem that per person, some other countries may give more, or have similar incentives that the United States has for its citizens to encourage giving.[44]

Remittances[edit]

It is doubtful whether remittances, money sent home by foreign workers, ought to be considered a form of development aid. However, they appear to constitute a large proportion of the flows of money between developed and developing countries, although the exact amounts are uncertain because remittances are poorly tracked. World Bank estimates for remittance flows to developing countries in 2004 totalled $122 billion; however, this number is expected to change upwards in the next few years as the formulas used to calculate remittance flows are modified. The exact nature and effects of remittance money remain contested,[45] however in at least 36 of the 153 countries tracked remittance sums were second only to FDI and outnumbered both public and private aid donations.[46]

The International Monetary Fund has reported that private remittances may have a negative impact on economic growth, as they are often used for private consumption of individuals and families, not for economic development of the region or country.[47]

National development aid programs[edit]

See also[edit]

Effectiveness and anti-corruption measures:

General:

Tools and Stories:

References[edit]

  1. ^ WHO glossary of terms, "Development Cooperation" Accessed 25 January 2008
  2. ^ OECD Stats. Portal >> Extracts >> Development >> Other >> DAC1 Official and Private Flows. Retrieved April 2009.
  3. ^ OECD, DAC1 Official and Private Flows (op. cit.). The calculation is Net Private Grants / ODA.
  4. ^ Joseph Hodge, Gerald Hodl, & Martin Kopf (edi) Developing Africa: Concepts and Practices in Twentieth-Century Colonialism, Manchester: Manchester University Press, 2014, p.12.
  5. ^ Bekeh Utietiang, Planning Development: International Experts, Agricultural Policy, and the Modernization of Nigeria, 1945-1967 (Ph.D Thesis), West Virginia University, Morgantown, 2014, p. 38.
  6. ^ Stephen Constantine, The Making of British Colonial Development Policy, 1914-1940, London: Frank Cass, 1984, p.183.
  7. ^ a b Kanbur, Ravi (2006), "The economics of international aid", in Kolm, Serge-Christophe; Ythier, Jean Mercier, Handbook of the economics of giving, altruism and reciprocity: foundations, volume 1, Amsterdam London: Elsevier, ISBN 9780444506979. 
  8. ^ Fraser, Cary (1996). "The Twilight of Colonial Rule in the British West Indies: Nationalist Assertion vs. Imperial Hubris in the 1930s". Journal of Caribbean History. 30 (1/2): 2. 
  9. ^ Basdeo, Sahadeo (1983). "Walter Citrine and the British Caribbean Worker's Movement during the Commission Hearing". Journal of Caribbean History. 18 (2): 46. 
  10. ^ Thomas. p. 229.  Missing or empty |title= (help)
  11. ^ Singh, Kelvin (1994). Race and Class Struggles in a Colonial State. Calgary: University of Calgary Press. p. 186. 
  12. ^ Thomas, Roy Darrow, ed. (1987). The Trinidad Labour Riots of 1937. St. Augustine: University of West Indies Press. p. 267. 
  13. ^ Parker. p. 23.  Missing or empty |title= (help)
  14. ^ Thomas. p. 283.  Missing or empty |title= (help)
  15. ^ Bolland. The Politics of Labour in the British Caribbean. p. 383. 
  16. ^ "USAID: USAID History". Usaid.gov. Retrieved 2011-03-12. 
  17. ^ Transcript of the speech
  18. ^ a b Faye, Michael; Niehaus, Paul (2012-12-01). "Political Aid Cycles". American Economic Review. 102 (7): 3516–3530. doi:10.1257/aer.102.7.3516. ISSN 0002-8282. 
  19. ^ a b c d Alesina, Alberto; Dollar, David (2000). "Who Gives Foreign Aid to Whom and Why?". Journal of Economic Growth. 5 (1): 33–63. 
  20. ^ a b c d "Aid to developing countries rebounds in 2013 to reach an all-time high". OECD. 8 April 2014. Retrieved 18 October 2014. 
  21. ^ "Net official development assistance and official aid received (current US$)". World Development Indicators. World Bank. Retrieved 15 March 2017. 
  22. ^ "Development and cooperation". European Union. Retrieved 29 March 2015. 
  23. ^ OECD The Typing of Aid
  24. ^ "The sad loss of Lord Bauer". 
  25. ^ a b Qian, Nancy (2015-08-03). "Making Progress on Foreign Aid". http://dx.doi.org/10.1146/annurev-economics-080614-115553. doi:10.1146/annurev-economics-080614-115553. Retrieved 2017-05-18.  External link in |website= (help)
  26. ^ Van de Walle, Nicolas (2004). "Economic Reform: Patterns and Constraints". In Gyimah-Boadi, Emmanuel. Democratic Reform in Africa: The Quality of Progress. 1800 30th Street, Boulder, Colorado 80301: Lynne Rienner Publishers, Inc. pp. 29–63. ISBN 1588262464. 
  27. ^ Blum, Jurgen, Fotini Christia, and Daniel Rogger. 2016. “Public Service Reform in Post-Conflict Societies.” World Bank: Fragile and Conflict State Impact Evaluation Research Program paper.
  28. ^ a b Aid Effectiveness and Governance: The Good, the Bad and the Ugly
  29. ^ a b Tsjaad by Dorrit van Dalen
  30. ^ The Future of The Anti-Corruption Movement, Nathaniel Heller, Global Integrity
  31. ^ Moss, Petterson and van de Walle (January 2006). [www.cgdev.org "An Aid-Institutions Paradox? A Review Essay on Aid Dependency and State Building in Sub-Saharan Africa"] Check |url= value (help). Center for Global Development. Working Paper Number 74. 
  32. ^ Dube and Naidu (January 6, 2015). "Bases, Bullets, and Ballots: The Effect of US Military Aid on Political Conflict in Colombia". The Journal of Politics. volume 77, number 1. 
  33. ^ a b Nunn and Qian (June 2014). "US Food Aid and Civil Conflict". American Economic Review. 1630-1666. 
  34. ^ Crost, Felter and Johnston (June 2014). "Aid Under Fire: Development Projects and Civil Conflict". American Economic Review. 1833–1856. 
  35. ^ Ferguson, James (1994). "The anti-politics machine: 'development' and bureaucratic power in Lesotho" (PDF). The Ecologist. 24(5). 
  36. ^ a b Kijk magazine; oktober 2008, Gestrand Ontwikkelingswerk
  37. ^ "US and Foreign Aid Assistance". Global Issues. 2007. Retrieved 2008-02-21. 
  38. ^ Keita project increasing socio-economic wellbeing
  39. ^ Italian aid not up to standard overall
  40. ^ Garrett, Laurie (2007). "The Challenge of Global Health". Foreign Affairs. 86 (1): 14–38. 
  41. ^ "Making aid work" (PDF). 2003. Archived from the original (PDF) on 2008-04-10. Retrieved 2008-02-21. 
  42. ^ 'Putting Relationships First for Aid Effectiveness' Evidence Submission to the APPG Inquiry on Aid Effectiveness, Institute of Development Studies (IDS)
  43. ^ a b c d e Sarah Bailey (2008) Need and greed: corruption risks, perceptions and prevention in humanitarian assistance Overseas Development Institute
  44. ^ "Ranking The Rich Based On Commitment To Development". globalissues.org. Retrieved 2008-03-06. 
  45. ^ Are Immigrant Remittance Flows a Source of Capital for Development? - WP/03/189
  46. ^ Approaches to a Regulatory Framework for Formal and Informal Remittance Systems: Experiences and Lessons, February 17, 2005
  47. ^ Are Immigrant Remittance Flows a Source of Capital for Development

Further reading[edit]

External links[edit]

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