Aid and Influence: Do Donors Help or Hinder? by Stephen Browne (Earthscan 2006)

27 July 2006 12:00 - 13:15 GMT+01 (BST)
Public event

Speaker:

Stephen Browne, Director at the United Nations

Discussants:

Sir Richard Jolly, Institute of Development Studies, University of Sussex
Roger Riddell, Non-Executive Director, Oxford Policy Management

Chair:

Simon Maxwell, Director, ODI

Description

This joint ODI & Earthscan meeting introduced & discussed Stephen Browne's new book on aid & influence, which was published by Earthscan on 1 July 2006.

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Simon Maxwell introduced the meeting, placing it in the context of a doubling of aid flows.

Stephen Brown described how his book was partly inspired by the 1971 book of the same title about the birth of Bangladesh. The country began its existence with a deficit of food and fuel, but the first gathering of donors extracted a promise to pay the outstanding debt rather than providing development assistance.

His main conclusion in the book is that aid agencies both help and hinder the development process; both donors and recipients agree and he highlighted two major things wrong with the aid enterprise. Firstly, aid is not paid for by the recipient, and secondly, it is always administered by bureaucracies.

This leads to 6 problems:

i. it is bureaucratic;
ii. there is excessive supply and duplication;
iii. recipients are chosen by donors and not development need;
iv. content and terms of aid are donor driven, accountability is upwards not downwards;
v. the rules of engagement are stacked in favour of the donors;
vi. the system encourages waste and corruption.

He claimed that conditionality has failed and asked how much has policy based lending influenced change? He felt that the power of the IFIs has been over-estimated.

Turning to fragile states, he noted that, depending on definition, there are 35 - 50 countries. These contain 1.0-1.5bn people and have poor human development levels. The book gives three examples; Burma as a comprehensive failure, Rwanda where donors were complicit in the structural violence, and Zambia as a country of economic failure which was never an appropriate recipient of BWI policies. He went on to characterise two dimensions of fragility - capacity vs. political will.

A key chapter of the book focuses on aid and imperialism. The US today has unprecedented power and reach, it has used aid as influence since the Marshall plan and it has a dominant concern to keep as much of the world as possible friendly for US business. He noted six drivers of US assistance:

i. military security;
ii. commercial interest;
iii. oil security;
iv. freedom and democracy;
v. political influence;
vi. unilateralism.

Only one of these is remotely developmental. Which begs the question why are we looking at aid effectiveness?

The donors from the South are becoming important players, and he highlighted the roles of China and India in particular; these have the potential to be a counterweight to northern aid and influence.

Finally he touched on the conclusions in the book. Because aid is a help and hindrance he has developed 8 principles of engagement for fragile states. These focus on capacity development. He emphasised just one of these, that debt should be written off and no more money lent; financing should be in the form of grants instead.

He stated that aid is the last bastion of central planning and better markets are needed in: i. trade; ii. Finance, with the North facilitating access capital rather than providing it themselves; and iii. Technical Assistance (TA) which countries should pay themselves because they will try to meet their own needs rather than those dictated by the donor. All this is already happening; India has terminated many bilateral programmes and others are doing this too. There is an increasing ability to pay and to borrow (outside fragile states) and recipients increasingly want to get what they want not what donors offer.

He finished by noted that "countries which divest themselves of free aid are those that make the best progress. History proves this."

The first discussant, Sir Richard Jolly, commended the book, noting that it highlights the distortions in aid. In calling for radical re-thinking, it proposes reform not abandonment. It is impressive and challenging, providing an informed overview of aid priorities.

He had three big criticisms:

i. the book does not look enough at motivation of donors to change;
ii. mechanisms to strengthen choice for recipients are not the same as establishing a market;
iii. it hardly mentions the MDGs.

He felt that the chapter on the importance of US aid, both quantitatively and qualitatively was helpful. He noted that this aid's influence its quintessence and may be more important than influence through military security.

He drew four conclusions from the book:

1. we should hesitate to urge that the US meets the 0.7% target;
2. We should encourage the UK to side with the EU to ensure development focus;
3. we should support more aid being channelled multilaterally and through the UN but not through establishing one consolidated UN fund;
4. aid is about more than just financial transactions, the market model does not work well for the UN because its advocacy role is a crucial element of its own role in development.

The second discussant, Roger Riddell, also felt that the book was important. He noted that it focuses on a central issue, the influence of donors, but is a rare view of bilateral donors from the multilateral community; too much is written by bilaterals themselves. For example, DfID's new White Paper looks at reform of multilaterals but not bilateral agencies.

He posed some questions:

a. the case is made for more multilateral aid, but how to ensure that this happens?
b. In relation to the UN how realistic is it in hoping that change will happen?
c. There are arguments on both sides; does SB think that more aid is needed or not?
d. How should aid best be used, poverty alleviation or productive sector development?

He concluded by stating that we must stop worrying about how aid works in supportive environments and start thinking about how to get it to work in fragile states.

Points raised from the floor in the discussion that followed afterwards included:

- Is there a differentiation between solving the aid problem and solving the development problem?
- There is nothing to stop Southern governments from arranging better trade amongst themselves. How can this be encouraged?
- There is an aid dependency problem; wouldn't it be better to call for more justice in trade rather than increasing aid?
- The book appears to have been written for stronger states. What about more fragile states? How would Zambia, for example, wean itself off aid under your proposals?
- You advocate the market approach to aid, but TA is only one component - how can the other parts of aid be transformed to make countries active agents?
- Aid is not that different from a commodity boom. Why are you making recommendations to donors at all? Zambia is getting more money from copper than from aid and we don't assume they need help to spend this, so why do we with aid?

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