Facts and Fiction about Development Aid

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Facts and Fiction about Development Aid

• Arjan de Haan
• Research in Progress

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Why this is important(to me ....)

• In a field littered with hyper-optimism and
  hyper-pessimism about aid as a weapon to end
  global poverty, this goes beyond whether aid
  works to help understand how the aid industry
  works. the complex realities of the development
  challenge and what external inputs can contribute
  as well as the perverse impacts they may have.
• Sakiko Fukuda-Parr, Professor of International
  Affairs, The New School University, New York

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development drama
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• "Stop all development aid to African
  governments. A trillion dollars have not helped.
  Aid has only corrupted Africa and made it inert."

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Foreign Aid Does More Harm Than Good
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• Karimi (Oxfam Novib) compares Moyo to Ayaan Hirsi
  Ali, the Somali-Dutch anti-Islamcrusader. "In the
  end, what has Hirsi Ali really accomplished with
  her harsh criticism of Islam? She offered few
  solutions for the integration issue, and she
  polarised people. Who still talks about her now?"

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• Tony Dietz compares Moyo with Dutch
  anti-immigrant politician Geert Wilders (PVV).
  "The same professionalism, the same extreme
  simplification of the message, the same lack of
  serious alternatives."

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• "I stand by everything I have written in Dead Aid
  . Western countries have had their chance in
  Africa. It is time for different solutions."

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controversy elsewhere

• World Bank loans India 1bn for Ganges river
  clean up
• To exclude and hurt the majority of Indian
  citizens in the name of development and poverty
  alleviation is not merely callous, it verges on a
  social crime.

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The supporters
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Boston Review Development in Dangerous Places

• Paul Collier
• If richer states provide security, the poorest
  can finally grow.
• The world's poorest countries have diverged from
  the rest of mankind. They will never tap their
  vast reservoir of frustrated human potential
  unless the international community provides basic
  public goods that go beyond the typical aid
  agenda.

• Willem Easterly
• Collier wants to de facto recolonise the bottom
  billion

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• International aid is one of the most powerful
  weapons in the war against poverty. Today, that
  weapon is underused and badly targeted. There is
  too little aid and too much of what is provided
  is weakly linked to human development. Fixing the
  international aid system is one of the most
  urgent priorities facing governments at the start
  of the 10-year countdown to 2015.
• HDR 2005 (and HDR 2010 will revisit)

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In this seminar

• What the aid industry is (in 30 secs.)
• Most relevant new trends
• What are (and are not) the relevant questions
• What it means for us

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The aid industry

• History
• Colonial
• Marshall plan
• Constantly expanding
• Money, annually
• 100 billion ODA
• 50 billion other ?

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Aid in perspective
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Aid in perspective
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Organisations

• 21 multilaterals
• 40 large bilaterals
• 20,000 international NGOs
• Development studies

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The new actors
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And new challenges
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So what are the relevant questions ?

• More aid ?
• Less aid ? No aid at all ?
• Or aid doesnt really matter that much
• Foreign policy
• Trade
• migration

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Net private capital flows to developing countries
billions
Percent
647 billion in 2006 (left axis)
Percent of GDP (right axis)
Source World Bank.
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Remittance flows continue to expand
Migrant remittance flows
Migrant remittance flows / GDP
billions
206 billion
Percent
Low-income countries
Middle-income countries
Source World Bank
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3 urgent questions

• How aid is given, not how much
• Measuring success, not does aid work
• Accountability of the industry (and our role)

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1) How aid is given, not how much

• Levels of aid do matter, but when and how it is
  available is critical
• Absorptive capacity matters, and is of course
  political too
• Aid asks for the impossible, and rightly so
• Poor people, poor countries, poor policy
  environments conditionality, selectivity,
  catalyst

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2) Does aid work wrong question

• Stop generalisations ! (incl. on Africa)
• Enormous progress has been made, alongside set
  backs
• Attribution important but also difficult
• Note the quest for the answer drives the
  policies !

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• What do we measure ?
• Projects unpopular and under-studied
• Sector approaches largely experimental
• Aid and growth (poverty, HD) its the black box
  !
• But dont measure it as if it was all about
  poverty reduction !

• Foreign aid in different times and different
  places has thus been highly effective, totally
  ineffective, and everything in between
• World Bank 1998

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Accountability and our role

• In the aid industry 3 things are unaccountable
• development policy not accountable to citizens
• donors are accountable to tax-payers, but they
  know little
• critiques also are unaccountable

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States and citizens in developing countries

• Political nature of development
• Capacity and will conditionality
• doesnt work, will China?
• Middle classes (but they are emerging)
• Taxation vs. aid dependency no accountability
  without taxation

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Donors accountability to tax payers

• Continue broaden the debate on aid, beyond usual
  suspects, inclusive sectors and groups
• Limits of outcome / target driven approaches
  photo opportunity vs capacity building
• Risks
• Backlash (crisis, watch European elections)
• Instrumentalisation

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Circus of supporters and opponents

• We need a better debate and understanding of what
  aid is, and what it is not
• Need to move beyond
• poverty-HD debates
• Washington Consensus
• integrate new perspectives
• Not to de-politicise but to provide intellectual
  space for the South

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But who is really interested in the debate ?