Owen Barder recently wrote an excellent, thought-provoking piece for Open Democracy about what aid does and how it should be judged. There seems to be an incipient groundswell around the idea that the ‘failing aid’ agenda is based on a misconception of what aid should be assessed against. Roger Ridell alluded to the same in his earlier piece that I wrote about here, and Chris Blattman floated the idea following conversations with Owen.
What Owen and Roger essentially argue is that the role of aid is more limited than that which it has been assessed on. Most critiques of aid are concerned with the stylized fact that aid is being poured into countries that remain resolutely poor. But what if aid isn’t meant to affect how rich or poor a country is? What if aid is just meant to make people healthier, give them a better education, and access to clean water? What if, in short, aid is simply about making conditions for individuals better without actually changing the economic structures within which they live? Owen doesn’t completely rule out the possibility that aid may make long term macroeconomic improvements, but he argues that if they do occur, there is little to suggest that they would become visible before many years pass.
The argument is enticing in that it allows a way out for those who argue that economic transformation is the standard against which development must be measured. Even if we believe this, it no longer follows that aid should be rejected, since its virtues are shorter term. This allows us to celebrate unreservedly the education that aid funds, the bednets it distributes, and the farmers it supports. None of us wants these things to be bad or useless: we all like to see individuals made better off. If we completely separate the arguments for economic growth and transformation from the arguments for education, health and farmer-support, we remove any need for us to choose what to support.
By my reading, there are three central components to this argument that we should examine a little further.
- Aid is aimed at improving lives of individuals and communities, without changing the structural aspects of the socio-economies in which they live. As such, aid can be successful without causing a transformation in the economy.
- Aid doesn’t harm the prospects of structural change in the economy. Owen argues that “aid can be used in ways that make such transformations more likely. It can pay for critical infrastructure – such as power, roads and ports – on which economic growth depends. It can finance new skills and capacity. It can provide access to financial services for entrepreneurs wanting to build their businesses.” He also cites South Korea and Taiwan as countries that grew with the support of aid.
- Though aid is working, according to the bounded criteria we should set for it, it could work better. Just because he thinks aid works doesn’t mean that there isn’t much we can do to make aid work even better; at the heart of this is a need for more transparency.
I believe in aid. This may come as a surprise to some of our readers, because I take a critical view of how it works and question much of our dominant thinking about development. At root, though, I believe that aid can contribute to deeper changes that are necessary, but to get there we need to change a great deal of our discourse about development. From this perspective, there are things I would challenge, and things I would wholeheartedly support from Owen’s argument.
The first point to contest is what aid is meant to achieve. Owen’s argument that aid has educated, prolonged and saved lives, and reduced the misery of living in abject poverty is indisputable. But aid is not a monolithic institution; there are many different kinds of aid with many different aims. One way of splitting aid is to consider what is commonly called ‘development’ aid on the one hand, humanitarian aid on another, military and explicitly political aid on a third hand and capacity building aid on the fourth hand. We may be left with an incomplete octopus, but it’s one with some analytical merit.
Assessing each of these forms of aid based on its explicit aims results in a mixed assessment. Humanitarian aid has undoubtedly averted or minimized several crises the world round in the last fifty years. Yet on some occasions it has exacerbated problems or failed to provide quick assistance through poor planning or unforeseen political implications. It’s hard to fault this form of aid because by its nature it is more prone to mistakes. When a famine, flood, drought or genocide occurs and food, shelter and relocation must be provided, we can’t say “wait! First we need an in depth political assessment of the likelihood of militias forming in the refugee camps” and so on. We should have this analysis done and on stand-by, but ultimately, humanitarian assistance is about rapidity and time-bound needs. I’d call it a by-and-large success.
Military and explicitly political aid is a totally mixed bag, which can only be assessed with after a long cooling off period and on a case-by-case basis. Ultimately, for consistency’s sake it must be assessed based on the limited political aims it had. Did we get rid of dictator number one, or support him against the ‘gawd-damned Commies’? Did we wind up with Frankenstein’s monster?
Capacity building aid is largely a fail, in my book, and I say this as someone whose job title includes the phrase. It’s fiendishly difficult, and I think I’ve had some successes and some failures. But there are institutional problems relating to wages, incentives, performance assessment and job security that systematically make even capacity building successes vulnerable to reversal.
For development aid, we need to use more of our octopus arms to subdivide this. Some development aid focuses precisely on making economic transformations happen. We don’t have to go back too far to see the biggest example of this, Structural Adjustment. SAPs aimed to remake economies to stir their capacities for long term growth. These days, we have enormous Business Environment Strengthening Projects funded by aid. It is simply not correct to say that this aid should not be judged against economic growth and transformation. It aspires to it, and so far has mainly failed.
But Owen rightly claims that other aid looks much more to the improvement of broader standards of living. He’s surely right, and he’s focusing on a huge human success story. Yet, it is incomplete. No-one who works in development has missed the phrase ‘sustainable’ in the last five years. I’ve criticised it before but it’s there. Owen says he doesn’t believe that aid is necessarily temporary, but this certainly isn’t the understanding of aid recipients. Governments ask for handover plans, donors plan to achieve ‘sustainability’ for when they remove funding. Sustainability of aid programmes is the subject of much ad-hoc research, but not much cross-country survey research as far as I’ve seen. Unscientifically, I would suggest it mainly fails to materialise. Most (but by no means all) activities depend on more aid or fall apart. Judged on the grounds by which they were planned on contracted, these activities are failures. It might be almost a semantic point, but if we say we want it to be sustainable and the recipient country says wants to stand on its own feet, then we have to judge it on those grounds.
Now on to the second and vital point the argument: that aid does not hamper the prospects of economic development. Firstly, we have to acknowledge that different types of aid have different effects. The examples of South Korea and Taiwan are instructive in this sense. South Korea received huge volumes of politically motivated aid. I don’t know as much about Taiwan’s aid history but given their position as a non-Communist state just outside China, I’ll bet the same is true of them. Aid to Korea was diverse, but focused on economic reforms, not of the standard neo-classical type, but those designed to strengthen industry and the position of capitalist production of goods. This succeeded, and though the attribution of success to aid would be revisionist it certainly didn’t hurt.
But in defence of aid to Sub-Saharan Africa, the evidence presented addresses some of the issues and not the biggest ones. Firstly, the regression analysis on aid is dismissed as inconclusive. This is the only reasonable conclusion to make. Then the argument that aid distorts incentives and allow poor political systems with low accountability to maintain is rejected as unproven, which is largely correct. This does not make it untrue, however. In any case, it’s not the biggest issue for me. Poor systems of accountability have often been associated with great successes in development: Britain during and before the Industrial Revolution (no votes for women or the poor); China; early American development.
Far more important, though, is the unaddressed argument that aid prevents economic transformation by artificially supporting weak pre-capitalist forms of organisation. This argument is one for a full article or a book, but let me summarise it here. Most of Africa is pre-capitalist. In large part, agriculture in Africa takes the form of peasant labour or pre-capitalist forms of bonded labour including sharecropping and estate-bound labour (in practice if not necessarily by law). In the cities there is a huge potential wage-labour force but equal and opposing forces preventing the accumulation of capital (some practical, others legal, and some political). What obtains instead is a peculiar form of urban retail, productive and service-oriented piece work. I have not mentioned markets, free enterprise or private property. I have already explained why these are not the same as capitalism.
It is these peasants, bonded labourers and piece workers, together with the unemployed and underemployed who are on the margins or in the thick of poverty. They are the ones who are stuck in a twilight where they have extremely limited access to secure and productive wage-labour which reproduces value and is thus open to wage increases above the rate of inflation (secure labour as a private cleaner does not qualify. It does not produce surplus value that can be reinvested in the labour and production process).
These are the people whom the education programmes, healthcare, and smallholder support improves the lives of. The question we need to ask is whether aid entrenches their positions and the pre-capitalism which characterises their economies. I think in some part, it does. Historically, the movement towards agrarian capitalism has been in part powered by the precariousness and unsustainability of peasant and small holder agriculture. When the political circumstances that allowed the establishment of large capitalist farms occurred, they overcame resistance to movement away from ‘noble self-labour’. We all want to be our own bosses, but it makes much better economic sense for most of us to work under others. By backstopping what are inherently unsustainable agricultural practices, aid may well be preventing this kind of land accumulation and conversion into a dynamic agricultural sector. That it isn’t a pleasant process for the poor is an unfortunate, but real, aspect of development. In this sector, aid may well be a constraint to agricultural development.
In urban centres the relationship is much less well defined. The biggest constraints to the emergence of true capitalism lie in the ability of capitalists to accumulate and legally represent their capital. Reform may be slowed by support to the urban labour force, reducing the pressing need to address the issue of wage employment, but this is a much more nebulous argument. It’s not clear that aid is relevant for transition in urban capitalism except insofar as urban capitalism also relies on rural capitalism (as demonstrated by Kalecki). In this case, the argument that aid succeeds in reducing misery and improving lives holds much better.
I haven’t presented evidence of this; it’s largely theoretical at the moment, because I haven’t done formal research into it. I would love it if a great researcher took up this baton, but I don’t think it’s been done yet, at least not very well. If proven, it would mean that our entire conception of aid would need to change and we would need to ask some very tough questions about the balance between improve lives now and helping a more permanent change. It would be a trade-off that requires debate and decision-making in aid-recipient countries.
The third strain of the argument, that regardless of success or failure aid can improve, is where I agree entirely with Owen’s piece. Whatever balance between the short and long term we decide upon, if indeed the trade-off exists, we can do whatever work we are doing much better. Efficiency can be raised enormously; participation and coordination and be improved exponentially and results can be measured and attributed more precisely. Transparency is a major way forward for this, and in no small part thanks to the work of Owen’s aidinfo team and the Publish What You Fund campaign, these are improving and will improve further.