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Is British aid bad? Owen Barder locks antlers with Bill Easterly

March 25, 2009
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Time for a little attention to the rising aid sceptic tide. A number of books (Dambisa Moyo, Jonathan Glennie, Michela Wrong), blogs etc have been trashing aid with both good and bad consequences. Good in that, as From Poverty to Power argues, there is lots wrong with the aid system that urgently needs fixing (and some deeper questions on the potential impact of aid in weakening the social contract between states and citizens). Bad in that if the arguments are too sweeping and crass, they just come across as a ‘aid is a waste of money’ pitch, which is hugely irresponsible in the current climate, when developing countries are actually having to revert to aid finance because all other sources are drying up. We need more aid, not less. 

The latest exchange is between two high octane bloggers: William Easterly, who has been getting increasingly vitriolic about aid on his new-ish Aid Watch blog, and Owen Barder, a former DFID big cheese who now writes a blog from Ethiopia.

Bill Easterly (with Laura Freschi): ‘In 2007, the UK gave 20 percent of their total bilateral ODA in the form of budget support to 13 countries: Tanzania, Ethiopia, Pakistan, Ghana, Uganda, Mozambique, Vietnam, Malawi, Zambia, India, Sierra Leone, Nepal, and Nicaragua.

Of this list, only Ghana and India were classified as “free” by the annual Freedom House ratings on democracy (according to either the 2007 or 2008 rating). For the 11 other countries that did get British budget support, how much is there “country ownership” when the government is not democratically accountable to the “country”?

… There is nothing that says you have to give aid meant for the poorest peoples directly to their governments, if the latter are tyrannical and corrupt. With the examples above, which side are UK aid officials on, on the side of poor people or on the side of the governments that oppress them?

And Owen’s brilliantly-argued reply: ‘With all due respect to Aid Watch, I don’t think they have got this right. For example, they say:

“Ethiopia’s autocratic government, which is inexplicably the largest recipient of UK budget support in Africa, won 99% of the vote in the last “election”.”

Nice point, except:

a. according to the official results of the 2005 election, the ruling party won 59.8% of the votes; the Coalition for Unity and Democracy got 19.9% and the United Ethiopian Democratic Forces got 9.5%.  I have no idea if those accurately reflect how people voted, but it is nonsense to say that the government received 99% of the vote;

b. the UK does not give budget support to the Federal Government of Ethiopia. Through the Protection of Basic Services scheme, which was introduced after worries about the election, the UK Government provides finance to local government (albeit through the existing financial transfer mechanism via central government).  As well as funding health and education, the project includes significant components to increase transparency and accountability of federal and regional parliaments.

Aside from getting the facts wrong, Aid Watch seem to be criticising this form of aid by slinging mud rather than by way of a proper analysis of the advantages and disadvanges. We should be asking what benefits arise from giving aid through government, and what harm may come from it. Aid Watch acknowledge the possible benefits: lower transaction costs, more coherence in development policies, building capacity of government. There is another crucial possible benefit: putting money through government budgets is also a way to make the government more accountable to its own citizens, rather than to a bunch of foreign donors.

But Aid Watch don’t try to spell out what the harm might be if aid is given to governments with unpleasant records on human rights or corruption.  I personally think there is a case to be made against giving money to many governments, for example if there is reason to believe that the money will not be spent on poverty reduction, or if it will sustain in power a government which might otherwise be booted out of office.  But let’s set out these reasons coherently, and let’s try to assess their importance relative to the possible benefits. Aid Watch seems to suggest that guilt-by-association is enough to damn the whole enterprise.

As it happens, the governments mentioned in this piece (Ethiopia, Vietnam and Malawi) all make demonstrably good use of the money they have received.  Here in Ethiopia the expansion of public services such as free education and publich health workers financed by Protection of Basic Services is transforming the quality of lives across the country; and Vietnam has made quite staggering progress in bringing down poverty.  Personally I think there are important questions to be answered about the quality of democracy in both countries: but that doesn’t mean I want to kill some of the citizens of those countries, or deprive them of basic services, by giving less effective aid.

The British Government’s approach of giving some aid in the form of budget support (too little, in my view) is motivated by evidence that in some circumstances this is an important way of building more effective, responsive and accountable institutions.  Developing countries don’t want to receive aid forever, any more than industrialised countries want to give it forever.  Building effective and accountable public services is a way of financing the delivery of public services in the short run, while at the same time making it more likely that countries have an exit strategy from aid in the long run.
That is not preferring governments to poor people: it is preferring poor people to giving aid in a way which maximises the publicity you get and covering your back but doing little to build accountable and sustainable public services.

Giving aid as budget support should not be promoted ideologically: it should be used where the advantages (in terms of better service delivery and the long term benefit to accountability and institutions) outweigh the disadvantages (such as the risk of sustaining a bad government in power).   Equally it should not be opposed ideologically.  Budget support has not been shown to be at any greater risk of corruption or of fungibility than other forms of aid (these are the two main arguments that are offered against budget support).   It should be assessed case-by-case.  Where it can be used, it represents a very powerful mechanism for both the short term benefits of service delivery and the long term benefits of institutional development.  Where it cannot be used, donors should be focusing on what they can do to help create an environment where it can be used in future.

If Aid Watch want to be taken seriously as an aid watchdog, then (a) they’d better get their facts straight and (b) they need to do some proper analysis of the costs and benefits of different choices for aid delivery in different contexts, rather than simply asserting that it is wrong to give aid to and through governments of which they disapprove.

Incidentally, last year Easterly and Pfutze (”Where Does the Money Go? Best and Worst Practices in Foreign Aid.”) ranked the UK as the best bilateral donor.  That doesn’t mean that the UK is perfect, by any means, and it doesn’t mean that they get every judgement right; but it does suggest that UK aid officials might not deserve the allegation in this blog entry that they prefer poor governments to poor people.

Declaration of interest: I used to work for the UK Department of International Development.’

The debate between them continues on the Aid Watch blog here, if you’re interested.

6 comments

  1. As a late-comer to the blogosphere around Christmas, I got hooked on following the different debates on Development, Aid, Social Change etc. on a number of sites. The addiction for most sites, however, has faded a great pace. I have to admit that the debates on some blogs (Easterly’s i.e.) occasionally are great entertainment when in the cynical mood. Deeply saddening, though, on more grounded days.

    I’m honestly surprised to see how absurd, infantile and antiquated many debates run. Kudos to you Duncan for holding up the nuanced tone here. The Moyo debate has been a prime example of how it seems that sophist point-scoring gets more attention than genuine reason. State vs. Market … sigh! This debate about budget support too ended up as either or, instead of pros and cons, under what circumstances, for what benefits, at what costs, etc.

    On the positive side of all of this, I’m increasingly getting confident that finding a job when I get my degree should be no trouble. Seems that many institutions and agencies are in short supply of fresh braincells … (or perhaps they just have have better things to do than ranting on the net).
    On the other and quite more disturbing side, wouldn’t it be great if the advocates of development would seriously consider the meaning of the always included clichés that ‘this is no panacea/silver bullet/one-size-fits-all’ etc., and the market crusaders to have a look at the real world and reconsider the reality of equal access?

    Well, I just wanted to thank you for blogging. Keep up the good work.

  2. I feel that to some degree, Owen Barder and Bill Easterly are talking past each other in this debate. Easterly doesn’t lay out exactly what harm is done by giving aid to bad governments, which means Barder can’t rebut it.

  3. While I agree it’s good for the nuances of this debate to be discussed, I’m not sure how the pat assertion that “we need more aid, not less” is any less sweeping than those Easterly is accused of making. Whether Africa needs more aid is very far from proven, so let’s have less dogmatism all round please.

  4. Not entirely fair Mark. The previous sentence said ‘in the current climate, developing countries are actually having to revert to aid finance because all other sources are drying up.’ i.e. tax revenues and capital flows are both falling fast, so governments are seeing rapidly shrinking fiscal space without having the options to borrow on the money markets that northern governments have. There is nowhere else to turn to (raising domestic taxes would be dumb in a recession), ergo, they need more aid, not less.

  5. Fair enough Duncan. If you define this as an emergency (a good description) then a temporary increase in aid could be justified, if donor countries can afford it. Few if any of those criticising aid are opposed to emergency aid (although Conor Foley’s new book ‘The Thin Blue Line’ casts some doubts on its long-term benefits), but the case for more aid overall is not clear cut – I misinterpreted your assertion as a call for more aid full stop, not just for a temporary increase during the current crisis.

    One question: with interest rates falling everywhere, does this reduce the debt servicing costs of indebted poor countries? If so, this may help governments balance their books to some extent. I’m not sure whether the debts were agreed at a fixed rate, however.

  6. The recent coup in Madagascar highlights the complexities of this issue. You now have a usurper in the president’s office, and any aid money to his undemocratic government is liable to siphoning off by him and his cronies. At the same time, the country’s institutions and public services need all the support they can get. Should the UK take the risk, or make a stand for good governance?

    As someone who grew up in Madagascar, this debate is suddenly not as theoretical as it was two weeks ago.

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