Thursday, November 4, 2010

Governance and foreign aid allocation

In the current New York Review of Books, William Easterly discusses the continuing reluctance among aid donors to reduce aid to autocratic governments, even though all donors, at a minimum, pay lip service to the notion that good governance in general, and democracy in particular, are key to long-term, sustainable development: "Foreign Aid for Scoundrels."

The article offers a nice overview of the considerable sums that even the worst autocrats continue to receive, and of what Easterly nicely calls the "Gerund Defense": the argument that autocrats are "democratizing" and hence deserve continued aid.

It's a good article overall, and well worth reading. Still, it won't come as a surprise to those who've read Easterly's other work that he is a little too facile in his criticism of donor aid agencies. Specifically, he overlooks two key points:

1. Most aid does not flow to developing country governments in the form of a blank check. Easterly is, of course, correct in noting that aid often "increases the slush funds available to the government." After all, money is fungible. But this conclusion applies only if aid is given to pay for things the government would otherwise have spent its own money on. Aid that is given to strengthen political opposition parties, for example, quite clearly does not increase the slush funds available to the government.

2. Easterly writes as though he believes that countries governed by autocrats should not receive any aid. But really that is only a defensible argument if one thinks either that a) countries have the government they deserve, so it is all right to punish people for the autocrat they have ended up with, or b) it is utterly impossible to do any good for development, and for people at the grass-roots level in countries that are governed by bad autocrats.

Consider, for example, Zaire under Mobutu. Clearly, Mobutu did not care a whit about his own people. As a result, he was not going to spend any money on, say, mosquito nets. We know, however that widely distributing mosquito nets can dramatically reduce the incidence of malaria, which is surely a good thing both in an immediate human rights sense and in terms of the longer-term development of the country.

It is quite plausible that Mobutu would have been perfectly willing to allow an NGO to come in and distribute mosquito nets to all of his citizens. Almost certainly, he would have found a way to extract money from the NGO, so the mosquito nets would have been needlessly expensive to distribute, and Mobutu would have enriched himself further. Nevertheless, I would support a national donor agency's decision to fund such an NGO. Easterly not only implies that he would not, but also that such an aid project would be a bad, paternalistic idea.

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