Afghanistan Watch: More aid for Afghanistan--or just better aid?

January 12, 2007

More aid for Afghanistan--or just better aid?

How can we improve the quality of aid delivery in Afghanistan? Many people would point to specific concerns vis a vis Afghanistan's economy, security situation, etc, but it's also worth taking a step back and asking: What are the criteria for successful aid in any country?

There are nearly as many theories on this as there are development economists. But one of the best concise summaries can be found in an important article in Foreign Affairs by Nancy Birdsall, Dani Rodrik, and Arvind Subramanian.

In it Birdsall, Rodrik and Subramian, three top scholars on the impact of foreign assistance, highlight areas in which aid has been successful: eradicating smallpox, lowering infant mortality, increasing school enrollment, etc. Then comes the rub: in each case, they note that “What these successes share is that they were narrowly targeted at specific objectives. Assistance does work well, but only when the recipient countries do the right things to help themselves and have the capacity and the leadership to spend the money wisely.”:

But aid has not been associated with the sustained increases in productivity and wages that ultimately matter. . .There are many reasons for the mixed performance of foreign assistance. Donors themselves cause many of the problems. Recipient countries can be overwhelmed by the multiplicity of donors pursuing many, even inconsistent, objectives, disbursing aid to innumerable projects and imposing a plethora of conditions on its use. These factors contribute to rather than offset a poor country's lack of institutional capacity. On top of that, there is the natural volatility and uncertainty of foreign aid, which make it difficult for recipient governments to plan their budgets. For more than a decade, the bureaucracies of donor states and organizations have been unable, despite good intentions and constant resolve, to change the political incentives and constraints that impede the reform of their aid-delivery apparatuses.

Probably more important, however, are institutional deficiencies on the recipients' side. Aid is only as good as the ability of a recipient's economy and government to use it prudently and productively. Thus, the fundamental dilemma: countries most in need of aid are often those least able to use it well. That sets limits on the extent to which large infusions of foreign funds can make a difference.The greatest example of the success of aid -- the Marshall Plan -- illustrates the importance of homegrown institutional competence. Because the institutions and capabilities of the United Kingdom, France, and Germany survived the war to a large extent, even their war-ravaged economies were able to exploit fully the potential of financial assistance.

Read the complete article for more...

Posted by Carl Robichaud on January 12, 2007 at 10:13 AM in Economics, Health, Investment, Reconstruction, Rule of Law, U.S. Policy | Permalink