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July 01, 2005

Making Africa Poorer: How currently fashionable development policies will ensure that aid is wasted

Posted by S. J. Masty

Currently fashionable Western aid policies will ensure that money is wasted. This is the argument of development expert S J Masty. Western donors are again keen on large scale infrastructure policies. The donor community is also reallocating aid money to the very poorest countries. Finally some major donors, including the UK and the Scandinavian countries, are big supporters of "budget support", meaning that more control of how aid is spent is returned to the government ministries of recipient countries. These three policies, argues S J Masty, will mean that much aid is wasted and will not improve the condition of Africa. In some cases these policies may actually make the situation worse.

Between pop concerts, debt-relief and hopes to double aid to Africa, there has rarely been such popular support for international development. Unfortunately, three counterproductive Western policies will ensure that the money is wasted.

Each are examples of how the bureaucratic priorities of aid agencies take precedence over eradicating poverty, driven by institutional demand to minimise accountability while spending easily and rapidly. Africa will be left poorer.

The first is infrastructure, back in fashion at the World Bank, eager to provide poor countries with new multi-lane highways, pipelines, dams anything big and costly. "It's the World Bank back to doing what it does best", explains an expert in another donor agency. Easier to manage than numerous, smaller development programs, it is also a superhighway to failure - this is the same strategy that, 30-40 years ago, generated much of the Third World's bad debt that G8 taxpayers are now being told to write off.

In the 1960s the Ford Foundation and the World Bank admired the big-project strategies of the Soviet Union and Maoist China. Hoping to lure Third World governments away from communism, the West financed similar infrastructure that immediately began to generate debt.

But infrastructure reduced poverty neither significantly nor sustainably, nor was it kept in good repair by grateful recipient governments. A study by the International Monetary Fund suggests why a corrupt Third World official finds more to be stolen from new construction than from repairing existing infrastructure. So a highway deteriorates under new concrete overpasses.

Many expect the incoming World Bank president, neoconservative Paul Wolfowitz, to make political reform and democratisation a condition of support. But the "carrot" is likely be the infrastructure programmes that the Bank's enormous bureaucracy has spent years gearing up to provide. If so, the reward for political reform may structurally encourage corruption, beget a herd of economic white elephants and start another cycle of crippling debt.

The second policy is to reallocate most aid money to the poorest countries, a modern development mantra. At first this sounds sensible if we want to defeat poverty, why not begin where its predations are the worst felt? It is folly. Pretend that you are a doctor in a war-zone. Faced with hundreds of injured, you perform triage first take the ones likely to die before lunch, put them under a tree and forget about them. Then sort the rest in some semblance of priority and begin treatment. This is what we are not doing by concentrating blindly on the poorest nations, including those that deserve poverty.

I do not mean that everyone there deserves misery, but many of the poorest are No-Hope Nations so internally hostile and dysfunctional that they can only blame themselves. Years on, Somalia is still wracked with savage feuds among clans supported by most Somalis. They a proud people, more interested in making war than making a living. Many of the poorest countries have similarly poisonous social problems that are either within their own capacity to solve, or within nobody's capacity to solve.

Many have predatory governments, full of greedy, corrupt officials who enjoy the full support of their respective clansmen. Many have arrogantly spurned reform for generations and are logically mired in poverty as a result.

Western aid agencies should perform developmental triage first by setting the No-Hope Nations under the metaphorical tree where they qualify for emergency relief aid such as food or medicine, but nothing more until whenever (if ever) they show signs of self-generated improvement. It is not impossible. Stopping clan warfare only needs clans to change their thinking. When governments persistently reject economic reform why keep spending millions on technical experts? Why not declare a 5-year moratorium until the slackers take a few unaided steps themselves?

Meanwhile Western aid agencies could spend their budgets on those poorest and middling poor nations that have shown eagerness to reform, some of whom face reduced assistance or none. Ghana is firmly peaceful, democratic, hard-working and struggling out of poverty. So, by and large, is Uganda, Rwanda, Zambia and others. Why not reward them with all the help that they need to develop a modern economy with a good-sized middle class, the bulwark of peace and prosperity? Unfortunately, linking aid to performance would by definition require periodically interrupting the cashflow that is bureaucratically essential to aid agencies for if they do not spend this year's budget, they do not get as much next year.

The third policy, the current Big Idea among the UK's Department for International Development, the Scandinavians and other major donors, is called "budget support". Strip away the convenient theory about recipient governments needing psychological "ownership" in order to make projects succeed, and it works as follows. A donor agency - or better yet a pool of donors thus diluting individual blame - hands money to a Third World government which has made a non-binding promise to spend it on, say, hiring teachers, but they can ultimately spend it however they like.

Already the new cornerstone of European development strategy, many donors love it. It slashes paperwork and eliminates responsibility for what happens after the cheque is cashed. No needs assessment, no programme design, no selecting qualified local or international consultants, no mid-term reviews and no responsibility, so no risk. The only development system simpler than "budget support" is a direct debit into the secret Swiss bank accounts of corrupt Third World officials.

I exaggerate - not all donor officials love it because some want to fight corruption. They know that even the most honest Third World officials (there are plenty) fear that aid money in their government bank accounts will put them under insuperable political pressure to misspend it. Once it is misspent, their governments will attack the contractors, alleging incompetence rather than confess that the promised fees were squandered on a fleet of Toyota Land Cruisers for the ruling party. Donors will look the other way. Ultimately, expert advisers will tire of being abused and cheated and will find better work in other sectors, while good officials who preferred that aid agencies paid contractors directly will be compromised and made corrupt. But the primary objective will be achieved donor budgets will be depleted efficiently and on schedule.

We could put Africa's money to work on "good credit risks", the poor countries already reforming, using the painstaking methods discovered over the past thirty years - building better governance, entrepreneurship, literacy, women's rights, property rights and access to credit, creating opportunity, transparency and democracy. But, sadly for Africa, managing aid and linking it to recipient performance jeopardises the all-important scheduled flow of bureaucratic funds.
S J Masty 2005

S J Masty advises foreign governments on public policy communications.

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"If they do not spend this year's budget, they do not get as much next year."

I first came across this feature in regard to spending on scientific research. I thought at first that it was peculiar to Britain, but colleagues from abroad told me the same happened in their countries also. How has this absurdity come to be hard-wired into the bureaucratic mind?

If one does decide between hoper and no-hoper countries, I fear that one would be tarred with the brush of the "Vile Victorians" who made distinctions between the "deserving" and "underserving" poor.

Anyway, a very good article.

Posted by: Robert H. Olley at July 2, 2005 04:20 PM

Generally an excellent piece - but aren't you being a bit harsh on Somalia? You say "They a proud people, more interested in making war than making a living." - Isn't the war really caused by political leaders manipulating clan loyalties - rather than the people themselves?

Posted by: Jonathan at July 3, 2005 07:19 PM

Jonathan, I was more optimistic when I started this work 20 years ago, and I increasingly think that most hellholes take a lot of cooperation to become that bad. Most Germans were really satisfied with Hitler: now, Germans think and act very differently. Change is possible. The mindset of the far east improves constantly, as it does in pleasant little places like Ghana which short years ago looked to be a no-hoper. Yes minorities sometime dominate majorities but not as often as we think and not as totally. In most no-hopers that I know, the queue to share in the spoils, and the queue to replace the local warlord, includes more than half the population. Just a guess.

Dr Olley, the trick may be to let the no-hopers define themselves by failing to even make serious attempts to reach assigned benchmarks including deregulation, privatisation, and simple rights of private property - - these would do for starters. Legal reform is another area. I would not be cruel enough to demand success, but I'd demand a damn good try.

Posted by: s masty at July 3, 2005 09:28 PM
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