The development policy debate focuses too much on aid.  Aid policies may help to improve the living conditions of people in developing countries, but it is development policies that will result in lasting transformation. If we are serious about promoting long-term change, we should talk less about aid, and more about the other rich-world policies and behaviours that affect developing countries.

Rich countries have many reasons for wanting to help poor countries. The main three British political parties speak in their manifestos of Britain’s obligations to the developing world (Lib Dems); moral duty, common interest and poverty emergency (Lab); and enlightened self interest and commitment (Cons).  The combination of motives – moral concern for others and self-interest – is a strength of the development cause, not a handicap.

These motives translate into two broad classes of objectives for development policy:

  • One view is that development assistance should help to accelerate economic and institutional change in developing countries. The idea is that temporary support from outside can be a catalyst for permanent changes in developing countries. As economic growth takes off, developing countries will no longer need our help.  This view is attractive both to donors, who do not want to go on giving aid for ever, and for recipient countries who do not want to continue to be aid dependent.  For shorthand we will call this the transformation objective of development assistance.
  • Another view is that development assistance can improve people’s lives today. This is most obvious in the case of humanitarian relief, for which the objective is to provide food and shelter; but more generally a lot of aid is used to send children to school or provide basic health care.  On this view, the development process is long and hard, and one role for outsiders is to enable people to live better lives while this process is happening in their country. Let’s call this the solidarity objective of development assistance.

It is entirely reasonable for countries, organizations and individuals to care deeply about both the transformation and the solidarity objective, and they can coherently pursue both objectives at the same time.

From time to time, people try to make connections between these objectives, positive and negative.

The claim of a positive connection is the idea that spending money on health and education is an investment in the human capital of a country, and that this will, in time, lead to faster economic growth.  Some point to significant investments in education in fast-growing Asian economies as evidence that education spending will promote growth.  Others say that improving health will lead to a demographic transition, in which falling infant mortality leads to smaller family sizes and greater investment in each child.  Both of these stories are appealing, though unfortunately neither is very well supported by the evidence.

The possibility of a negative connection is that the things that donors do to support people in developing countries as a matter of solidarity may actually slow down the political, social, institutional and economic changes that the country needs for transformation.  It may sustain unaccountable governments in power; undermine the social contract between citizen and state; hollow out fragile government institutions; cause appreciation of the real exchange rate and so choke off exports; or create a culture of dependency that dims demand for social change.  Again, the empirical evidence for these (quite plausible) ideas is pretty thin (pace the claims of Dambisa Moyo).

Are we using the right tools to pursue our two types of objective: tying to catalyze transformation, and at the same time to help people live better lives?   I think we are focusing too much on aid and not enough on development policies.

It is quite straightforward to see that aid can help meet solidarity objectives.  It is used to provide clean water and food, and to finance public services such as health and education.  There is quite good evidence that it is effective, though there is much more to learn about how to do it better.

It is much less clear that aid achieves our transformation objectives. The statistical evidence linking aid to economic growth is, at best, uncertain (see The Anarchy of Numbers by David Roodman).  This does not mean that there is no relationship – it is much harder to demonstrate a statistical connection when there are few countries to observe, and so many factors as well as aid that are likely to affect whether a country achieves economic lift-off.  We can think of aid being to growth what venture capital is to start-ups: many investments will fail, but the huge benefits from the few that succeed may make the losses worthwhile.

I personally have my doubts that aid makes much difference to the prospects for economic and social transformation.  Countries change from within, through long, slow, organic processes, and it is hard to see how money and advice from outside can make much of a difference to that.  Consider our own history, and the decades and centuries that it has taken us so far to construct our social and political institutions.

If we are serious about promoting transformation, we need to look beyond aid to how we can change the environment in which developing countries are struggling to change their economic, social and political institutions. Transformation is much likely to take root if we create conditions in which it is likely to succeed.

What are the development policies that might contribute to this?

  1. Trade policy – As well as duty-free, quote-free access for all developing countries to our markets, we have to dismantle the complex rules – such as rules of origin and phyto-sanitary standards – which make exports complicated.
  2. Agriculture policy – We have to stop dumping subsidized agricultural over production abroad, especially as our aid conditions prevent developing countries from competing with us. We also have to stop using food aid as a welfare system for European and American farmers.
  3. Climate change – If anthropogenic global warming is a reality, as is the consensus among scientists, then the harm we are doing to developing countries through climate change will become one of the most important obstacles to development.  Probably the most important thing we can do to accelerate development is to stop our own carbon emissions.
  4. Conflict – We make and sell the guns that are used in conflicts in developing countries.  We buy the oil and minerals over which groups are fighting.  We sustain the unaccountable leaders in pursuit of our geo-strategic interests.   If we were serious about development, we would by now have stopped the Lord’s Resistance Army in Uganda – it would be a simple matter for a well-resourced army.
  5. Immigration – In the 18th Century, a third of Europeans moved to America, to the benefit of both continents.  In the 20th and 21st century we have introduced historically unprecedented restrictions on the movement of people – notwithstanding our rhetoric about globalization. These restrictions may be the single most important factor which explains why poor countries have not been able to converge on rich countries.
  6. Intellectual property – Another constraint on the ability of developing countries to close the gap is that there are historically unprecedented constraints on their ability to appropriate technologies. For centuries, new agricultural techniques such as crop rotation spread through word of mouth.  During the industrial revolution, America and Europe were able to use technologies from Britain.  When Henry Ford invented the assembly line, the idea was rapidly adopted everywhere.  But today’s technologies – from business software to pharmaceuticals and biotechnology – are protected by patents that make it impossible for other countries to adopt.
  7. Corruption – We often think of corruption as a problem of developing countries, but this ignores the fact that the money for corruption comes from, and often returns to, industrialised countries.  Rich western companies pay bribes, in return for access to contracts or minerals.  To his eternal credit, President Jimmy Carter introduced the Foreign Corrupt Practises Act, which made it harder for American companies to pay bribes abroad. But there is much more we could do, if we were prepared to take on the vested interests of our own multinational companies, to reduce corruption in developing countries.
  8. International governance – In our own nations, we have long ago dropped the property qualification for representation; but internationally we do not think that it is strange that representation in our main institutions is based on wealth and power.  This matters because again and again, the interests of developing nations are ignored, or treated only as a footnote.  From banking secrecy to internet peering arrangement, the rules of the game are set by the wealthy in their own interests. Changes to these practices which would be irrelevant to most of us, but could make a huge difference to the prospects for development, are resisted by powerful vested interests from industrialized countries.

It is entirely reasonable that industrialized countries want both to promote transformation in developing countries, and to help people there to live better lives while that process is taking place.  Aid has been proven to be an effective instrument for meeting our solidarity objective, but it is far less clear that it is a significant driver of transformative change.  Our political rhetoric focuses on the idea that development policies should promote transformation.  Yet it seems unlikely that aid is the most useful tool we have for achieving this.  If we are serious about transformation we should invest  more time and effort in creating the global environment in which economic and social change are more likely to succeed, by changing our policies and behaviours on issues like trade, agricultural policies and immigration.

Many people who work in development are directly or indirectly dependent on aid. Government development agencies gain their bureaucratic position from the size of their budget.  International NGOs get a lot of their money from aid budgets or from private charitable giving.  Partly as a result, the debate about development too often shifts to aid: whether it works, how much is given and by what means.  These are important questions, but primarily for the important goal of helping people in developing countries to live better lives while they are waiting for, and helping to build, a more prosperous and fair society.  If we are serious about accelerating the transformation, it is our development policies, not aid policy, that we should be discussing.

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12 Responses to Aid policy vs development policy

  • While I wouldn’t go so far as to suggest that it’s a case of “development vs aid” (there might be complementarities, with aid being used to enable developing countries to build the capacities/institutions to engage effectively with beyond aid issues), Owen’s reminder of the fact that development is and should be about much more than aid is useful. And his question to politicians is the right one – although the answer that comes back may not be to the liking of development enthusiasts and may be irksome for those who see themselves as enthusiasts for both development and democracy (including, let’s say, in the UK).

    As Owen knows, the idea that development is about much more than aid is not new. Many NGOs – at least until they got a bit obsessed about aid quantity – have been making this point for years, in relation to trade, arms exports, and the environment for instance. And DFID was set up to be a development agency, not an aid agency, so the intention was there back in 1997).

    On the more policy-wonk side of things, the point that development is about much more than aid is what the Center for Global Development’s Commitment to Development Index has been saying for years http://www.cgdev.org/section/initiatives/_active/cdi/ (although I have some problems with the idea that a policy – lets say on migration – can be categorised as being development-friendly or unfriendly, regardless of the context/situation faced by a specific developing country.)

    The OECD has also done a lot of work on what they have termed “policy coherence for development”. http://www.oecd.org/development/policycoherence Despite their apparent need to pretend that PCD is a technical issue rather than fundamentally a political one – ie. if and when push comes to shove, what priority do people actually want to give to the interests of developing countries? (the question that Owen would like to ask the politicians) – they have done some useful work.

    And ODI, where I was working until recently, has also done quite a bit on this, including:

    – a note explaining why a developing country perspective on “beyond-aid” policies and impacts is important http://www.odi.org.uk/resources/download/523.pdf

    – a short briefing paper on “Beyond Aid, for sustainable development”, http://www.odi.org.uk/resources/details.asp?id=3288&title=beyond-aid-policy-coherence

    – and an innovative (read interesting, but ultimately not very successful, but still with potential!)project with UNDP which aimed to take a developing country perspective on non-aid issues http://www.odi.org.uk/projects/details.asp?id=530&title=mapping-global-partnership-development-country-level-mappings-global-issues-external-policies-country-contexts

    Owen, I can’t help but ask, will you be allocating some of your resources/time away from work on aid transparency, to beyond aid issues? And, if so, who is going to pay for that?

    best wishes,
    alan

  • Hi Owen,

    Great post I agree almost entirely.

    Two quibbles:

    1. I think the evidence for the health/growth link is probably better than you make out. There was the Acemoglu study (which I think you drew on in your CGD paper) showing a negative link, but that paper isn’t beyond critique; and at the same time there are a considerable number of studies finding a positive relationship. All of the following (taken from a lit review I did once) do, although it’s not always a strong relationship:

    Arora, S. ‘Health Human Productivity, and Long-Term Economic Growth’, The Journal of Economic History, Vol. 61, No. 3
    Mayer, D. 2001, ‘The Long Term Impact of Health on Economic Growth in Latin America’, World Development, V 29, No. 6
    Gallup J & Sachs J. ‘The Economic Burden of Malaria’, American Journal of Tropical Medicine and Hygiene, 64(1, 2)8, 2001, pp85-96
    Bloom, Canning & Sevilla, 2004, ‘The Effect of Health on Economic Growth: A Production Function Approach’, World Development V 32, No 1
    Fogel, R. 2004. ‘Health, Nutrition, and Economic Growth’, Economic Development and Cultural Change; Apr 2004; 52, 3
    Bloom and Canning, 2005, ‘Health and Economic Growth: Reconciling the Micro and Macro Evidence’, CDDRL Working Paper, Online at: http://cddrl.stanford.edu/
    Alsan, Bloom & Canning, 2006, ‘The Effect of Population Health on Foreign Direct Investment Inflows to Low- and Middle-Income Countries’, World Development Vol. 34, No. 4
    Ashraf, Lester & Weil. 2008, ‘When Does Improving Health Raise GDP?’, Online at: http://www.brown.edu/Departments/Economics/Papers/2008/2008-7_paper.pdf

    Having said that, I agree with you that the strongest case for aid to health is not aid->health->growth but rather the direct welfare benefits of being well (something I can certainly personally relate to).

    2. The following statement I think isn’t fully fair on INGOs:

    “International NGOs get a lot of their money from aid budgets or from private charitable giving. Partly as a result, the debate about development too often shifts to aid: whether it works, how much is given and by what means.”

    After all it was folks like Oxfam who really brought questions of trade and rich country protectionism out into the open.

    These are just quibbles though – like I said, a really good post.

    Owen replies: thanks Terence. I think we agree that the evidence connecting health with growth is not as strong as some advocates suggest.

    I was about to agree with you that I may have been a little harsh on international NGOs; and I agree that Oxfam did a good job on raising the issue of trade. But then I read Duncan Green’s blog post today about the election, which I think rather supports my view that even Oxfam is too much focused on aid and not enough on wider development policies.

  • I might be missing it, but I’m curious where you would place ‘development’ initiatives that work on rights, such as rights education, strengthening processes and interest in rights within populations, strengthening grassroots organizations and local advocacy groups to form a stronger civil society, strengthening duty bearers to respond to rights issues, work to support a more democratic media and/or political process, building skills in marginalized populations to participate in local/national decision making….. These are often difficult to measure with traditional aid or development evaluation tools, but I think civil society is a critical piece also. Maybe that fits under governance?

  • interesting post. i wonder if one of the causes of the habit to return to aid always isn’t in the responses here, that once you go “beyond aid” we risk presenting an endless laundry list of issues and concerns. I agree entirely with the need to focus on development and not aid, but i think we need much more focused debate over development policies (which to be used, their obstacles to use, etc)

  • Great article. The distinction between solidarity and transformation is a useful one.

    Alan and ks both make interesting points – there is lots of material out there but the problem is with branding and selling this complicated message to the public. The Commitment to Development Index is fantastic but not enough by itself. I hadn’t even heard of the OECD or ODI work before Alan alerted me to it, and I try to be interested in these issues. For me, the challenge is really for people like Oxfam who see their role as advocating for policy change, to take this on. At the moment the beyond-aid message I hear from British NGOs is fair trade and debt relief, which is really missing the point.

  • Great post. I have been looking for a blogger that gets back to discussing some of the large issues in international development and offer a real set of solutions as opposed to simply debating the merit of Jeffrey Sachs or One Laptop Per Child. I agree that development is often boiled down to aid instead of the array of international policies, grassroots initiatives and spontaneous social transformation which are all incredibly important.

    One thing I would note about the current aid regime that I think holds it back from addressing “development issues” is the inherent reliance on 1. 5 year development plans which are clearly too short terms to address complicated issues of social change and 2. the constant politicization of aid and the changing of priorities depending on the government of the day. If we are to truly address “development” we need to be looking 25 years down the road, not 5.

    Thanks for the thoughtful post.

    Mark L. Ottawa, Canada

  • ‘Countries change from within, through long, slow, organic processes’

    Hundreds of millions of dollars have been spent on public service reform in Tanzania over the past 20 years, but we are sliding down Transparency International’s index and our police and judiciary are rated amongst the most corrupt organisations in the country.

    In brief, our systems are systemically corrupt and this suits our deeply corrupt leaders and those who control them. No amount of external funding will fix this – ;long, slow, organic processes’ are unavoidable. Britian’s transition from a feudal, deeply corrupt, centralised and power hungry monarchy to today’s democracy (corrupt, of course, but at the margins not at its heart) took hundreds of years. While it may be possible to shorten the timescale, fundamental change will not be possible without some kind of revolution, at least in terms of beliefs and values.

    Given that you are correct, what do you believe are the implications for externally funded government and public service reform programs?

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