Speakers:

Andrew Natsios - Lecturer Georgetown University and former Administrator of USAID
Discussants:
Dan Smith - Secretary General, International Alert
Chair:
Lord Hastings of Scarisbrick CBE

Followed by closing remarks from ODI Director, Alison Evans

Lord Michael Hastings CBE introduced the speakers and opened the last meeting of the fragile states series on aid systems and aid delivery.

Andrew Natsios – Lecturer Georgetown University and former Administrator of USAID

Andrew Natsios highlighted four concerns within the foreign aid and development industry which he believes have limited donors’ capacity to deliver aid in fragile situations: the growing gap between development theory and practice; the trend towards an aid system focused on service delivery; the lack of policy dialogue; and the absence of functioning formal institutions.

Firstly, there is a growing gap between development theory and practice, at the heart of which lies the question of politics. One the one hand there is a lack of disciplinary balance within the theoretical debate on development; economists remain dominant within the literature whilst there is a lack of input from political scientists and anthropologists. On the other hand, oversight agencies of bi-lateral donors’ governments (what Natsios calls the counter-bureaucracy) are having a profound effect on development practice.

Secondly, the trend towards this counter-bureaucracy has encouraged a service delivery approach to aid programmes in which sector-led approaches and evaluation methods have led to the adoption of misleading measurement indicators and resulted in inappropriate value being placed on the rapidity of fund disbursement. So for example measurements indicators of international health programmes typically focus on the number of child immunisations carried out and the success of a project is equated to how fast the programme disburses its funds. Natsios argues that aid efforts should be focused on developing a country’s indigenous capacity to deliver services through their own systems.

Thirdly, the pressure to disburse funds and the resulting service delivery approach to aid often means that not enough attention is paid to policy dialogue between development agents, especially between donors and national counterparts. Ongoing discussions about policy reform and change with people on the ground (ministry staff, the private sector and parliamentarians) are essential for development.

Finally, Natsios argues that the key to understanding why the aid structure is facing challenges in intervening in fragile states is the absence of functioning formal institutions. Drawing on the institutional economic theory of Douglas North, Natsios suggests that what distinguishes a highly advanced society from a less advanced one is the amount and density of formal institutions and argues that this is particularly relevant in fragile states where many traditional institutions have been destroyed and thus fewer institutions exist. Natsios concludes therefore that development actors engaged in fragile contexts should focus on building institutionsand institutional capacity. However he warns development actors of the need be realistic about the timeframe within which this can be achieved, pointing out that functioning institutions cannot be built overnight. As experience in Afghanistan and elsewhere has shown institutions built quickly are likely to collapse quickly.

Dan Smith – Secretary General, International Alert

Dan Smith began by agreeing with Andrew Natsios’ assessment of the challenges facing the aid architecture. The theme of fragility and conflict throws an interesting light on the development industry and raises sharp questions about the aid ‘industry’. More broadly there is a growing awareness that the issues facing developing countries are complex and not so easily fixable.

Smith outlined three broad models of thinking about development and approaches to it:

1.       The Economic growth model is essentially about economic processes and lends itself towards technical, can do, fixing, technocratic approaches.

2.       The second model sees human processes as drivers of human development and has led to the human development report, poverty alleviation strategies and the creation of indicators such as the MDGs. The problem with this approach is that development is seen as an extended humanitarian process and about helping poor people (which is unquestionable but not necessarily effective).

3.       And the third model sees political and economic processes of systemic change as motors of development. This approach sees development as being a more complex, historical process where questions of power and politics are central to the reality of those processes.

One of the features of fragile situations and conflict afflicted environments is that everything is political because it is about power. Institution building is important because institutions are how power is mediated and channelled and institutional arrangements are what make it possible for power to be articulated in a way which supports the need of the population. In this way institutions can be seen as mechanisms of inclusion and potentially as mechanisms of accountability and transparency. Institution building (particularly in a context of state building) is not just about building technical capacity but about building relationships.

Returning to the question posed by Natsios’ first concern about why the gap between development theory and practice exists, Smith agrees that it is about politics and the arrangement of power but it is also about how bureaucracies work and how international development agents engage with politics.

Discussion

The key points that emerged from the discussion were as follows:

• Reform of the aid architecture is necessary to increase the effectiveness of aid in fragile situations and should include reform of the personnel structures within aid agencies as well as reform of the donor oversight agencies. Decentralising agency personnel and decision making processes (particularly those related to expenditure) to the field would facilitate a better understanding of the realities on the ground.
• Politics is at the heart of development and political analysis is central to creating a greater understanding of the realities of local political and power structures. However political analysis is a dynamic science requiring analytical capacity, and an in-depth knowledge and understanding of the local situation. In order to create the continuity that this type of analysis requires development agents working in fragile situations should spend longer periods in the field than is currently the case.
• Bureaucratic reform should ensure that aid efforts focus more on developing a country’s indigenous capacity to deliver services than on direct service delivery. This will require a shift away from easily measurable evaluation indicators towards a focus on transformational variables. The independence of aid agencies will be crucial in ensuring that the appropriate debates and policy dialogues to advance these reforms take place.
• Experience suggests that there is little correlation between the amounts of money spent and the capacity of aid programmes to build more accountable institutions and thus does not lend its support to the scaling up of aid to fragile states. On the contrary engaging with small scale programmes, paying attention to implementation and detail, may be a more effective means of engaging in fragile contexts.
• Despite the recognition that institutions can follow both formal and informal rules and that society can function with only informal institutions, for a society to develop, these rules must be formalised to legitimise service delivery and rule of law.
• Aid is fundamentally political and how to engage with politics without seen to be supporting one political faction over another remains an unresolved dilemma for development agencies and one which needs to be addressed.