This is the seventeenth in a series of posts discussing themes from The Trouble With Aid by Jonathan Glennie. In chapter 7 the book discusses Direct Budget Support, the type of aid favoured by the UK. Direct Budget Support involves providing aid directly to the finance ministry of the recipient country, enabling the money to be used to fund programs that are run by the recipient country’s government.

This is thought to be an improvement on types of aid which circumvent the government of the recipient country because it respects the political priorities of the country’s government, and it helps to build institutional capacity or at least prevent institutional capacity from being destroyed. In theory it should also reduce doubling-up on administration and co-ordination of aid efforts and reduces the administrative burden on the recipient country in complying with multiple different aid conditionalities and reporting requirements.

On the other hand, the direct provision of aid to a government increases the opportunities for embezzlement, reduces the accountability of the government to its citizens by reducing the government’s reliance on tax revenue, and tends to strengthen governments and keep them in power when it might be in the interests of democracy in the recipient country to have a change of government.

This is the sixteenth in a series of posts discussing themes from The Trouble With Aid by Jonathan Glennie. In chapter 7 the book discusses the calls which have been made in the past five years for “more and better aid”. Most people and organisations in the aid trade recognise that there have been deficiencies with the ways in which aid has been handled in the past. Meetings of governments and civil society resulted in 2005 in the Paris Declaration on Aid Effectiveness, outlining ways in which aid needed to improve.

The five principles of the Paris Declaration are: Ownership – developing countries need to decide their own policies; Alignment – donors should support national strategies, institutions and procedures; Harmonisation – donors need to work better together; Managing for results – monitoring, decision making and resource management need to be improved; and Mutual accountability – developing countries should be accountable to donors, but donors should also be accountable to recipients for meeting their promised commitments.

According to Glennie, most reviews of the Paris process say that it is not ambitious enough, not working fast enough, is more problematic than anticipated, and fails to take into account the critical importance of the accountability of governments to citizens in recipient countries. Donors have been largely ignoring the five principles, and in Glennie’s view the Paris Declaration entirely overlooks the most serious problems with aid, such as aid’s negative impact on policy choices and on the effectiveness and accountability of state institutions.

This is the fifteenth in a series of posts discussing themes from The Trouble With Aid by Jonathan Glennie. In chapter 7 the book speculates on the future of aid. The author says that, as the rest of the book has demonstrated, aid has had a series of profound and often unforeseen consequences in Africa. Not enough people have taken these problems into consideration in their analyses, and this needs to change.

The author suggests that once the full range of effects of aid are taken into account, more people will agree that it is time to begin reducing aid to most countries in Africa while at the same time starting to fund development from other sources. The impacts of aid that really matter, the ones linked to policy choices and institutions, are, according to the author, unlikely to improve with more aid and will probably get worse.

While the book’s pessimistic outlook seems reasonable based on historical data, it does not seem to account for the more recent success of African economies. Aid to many African countries has been increasing over the past decade, and if the author’s analysis is correct this should have resulted in the economies of those countries going backwards. Instead, most African countries have been experiencing moderate levels of economic growth since 2000. In my view this growth is probably attributable not to aid but to the introduction of new technologies, particularly mobile phones, in a manner affordable to Africans.

This is the fourteenth in a series of posts discussing themes from The Trouble With Aid by Jonathan Glennie. Chapter 6 talks about the macroeconomic impacts of aid. Large amounts of aid in the form of foreign currency entering a country often has unanticipated negative effects on the well-being of the poor. More money competing for a fixed supply of goods and services results in price inflation, so that locals are less able to afford their daily needs.

According to Glennie, the influx of aid to Tanzania in the 1990s led to inflation, which in turn led to the tightening of the supply of credit, so that private firms found it harder to expand, and economic growth was frustrated. Inflows of foreign aid also cause appreciation of the local currency, with the result that local exporters find themselves less competitive in the global marketplace and local businesses struggle to compete with artificially cheap imports.

High levels of aid also crowd out private investment. Reasons for this include the risk that businesses in which investments are made may become uneconomic if forced to compete with free goods or services provided by aid donors; donors perceive that countries which receive high levels of aid are unlikely to experience rapid economic growth because of the dampening effect that aid has on economic activity.

This is the thirteenth in a series of posts discussing themes from The Trouble With Aid by Jonathan Glennie. Chapter 6 discusses the relationship between economic growth and poverty reduction. Many observers assume that they are the same thing, or they are so closely related that they can be treated as the same thing. However, according to the author, the evidence does not support such a conclusion.

In Tanzania, GDP grew by around 4% per year during the 1990s, but the number of poor people in the country at the end of the decade was higher than the number at the start. After allowing for population growth, there was a slight decrease in the proportion of poor people, but significantly less than what might be indicated by the economic growth. In many African countries, revenue from oil or minerals shows up as substantial economic growth, but virtually none of it reaches the poor.

On the other hand, economic growth is almost essential to poverty reduction – the only other method being redistribution of resources from rich to poor, which usually results in overall economic decline. The type of economic growth which is required for poverty reduction is economic growth which helps to reduce inequalities between the rich and the poor, as opposed to growth which benefits only the rich.

This is the twelfth in a series of posts discussing themes from The Trouble With Aid by Jonathan Glennie. One of the themes discussed in chapter 5 is the relationship between aid and keeping people in power. In the absence of outside intervention, a regime falls when it fails. If a regime is governing so poorly that it loses all support and does not have the political or military power to remain in control, it gets replaced… unless it gets propped up by external forces such as aid.

The economic performance of African governments over the past 40 years has, with very few exceptions, been significantly worse than the world average, and it would therefore be expected that the turnover in African governments would be high. However, the average tenure for African leaders has been 12 years, compared to 4 years for Western leaders. The availability of aid means that African governments do not need to be accountable to their citizens.

Glennie argues that the actions of foreign aid agencies in stepping in to feed people in Zimbabwe during famines caused by government policies and drought have enabled Robert Mugabe to cling to power. Mobutu Sese Seko managed to stay in power in Zaire for 30 years because of Western aid. Aid has also been of considerable benefit to the governments of Yoweri Museveni in Uganda, Meles Zenawi in Ethiopia and Benjamin Mkapa in Tanzania.

This is the eleventh in a series of posts discussing themes from The Trouble With Aid by Jonathan Glennie. In chapter 5 the author discusses the relationship between aid and corruption. It is well known that a proportion of aid is often lost to corruption. Does this mean that the level of aid should be decreased, thereby punishing everyone for the corruption of presumably a few, or should the level of aid be increased to make up for that which is lost?

A more troubling question, however, is whether the aid system actually causes corruption. In some countries the availability of large amounts of money – whether through natural resource revenues, aid, or some other source – creates opportunities for corruption where none existed before. When there is pressure to spend large amounts of aid money by a deadline (and one measure of success for many aid agencies and recipient governments is the amount of aid disbursed) proper accountability is likely to be overlooked.

In Mozambique, donors exerted pressure for the rapid privatisation of various institutions including banks, and it is claimed that this resulted in the corruption of a previously healthy civil service and private sector. Notwithstanding this and other examples quoted by Jonathan Glennie, he expresses the view that the evidence on the relationship between aid and corruption is equivocal.

This is the tenth in a series of posts discussing themes from The Trouble With Aid by Jonathan Glennie. In chapter 5 the author discusses how aid results in the weakening of institutions and institutional capacity in the recipient countries. A particularly important example of this is health systems. Aid-supported health programs have positive direct benefits, but they often have substantial negative indirect effects.

Donors typically support vertical disease-specific programs. Such programs reflect donor priorities (such as HIV) and not recipient country health priorities (such as many more prevalent and more readily treatable diseases). Because they have more money to offer, they attract already scarce health professionals in recipient countries away from national health systems, resulting in severe depletion of personnel.

The author refers by way of example to Rwanda, where, at the time of the statistics quoted, the country had a 3% AIDS infection rate, but very high infant and maternal mortality rates and low overall standards of health care. Donors provided $46 million to fight HIV/AIDS, and only $1 million for integrated management of childhood illnesses. The vast majority of funds bypassed official healthcare channels, meaning that the healthcare system was not being strengthened for a future time when donor funds cease.

This is the ninth in a series of posts discussing themes from The Trouble With Aid by Jonathan Glennie. In chapter 5 the author explains how the aid system has created a sense of powerlessness in governments, civil service, parliaments and civil society in most African countries, leading to a psychological malaise of aid dependence. Governments have become answerable to aid donors, and not to their own citizens.

The symptoms of aid dependence include lack of initiative in developing strategies, and a reactive rather than proactive form of government. Perhaps the most serious outcome of aid dependency is that it undermines the institutions which are essential for development. These institutions include courts, judges, the civil service, central banks and public authorities. When donors make the policies and bypass a country’s official institutions, those institutions miss out on acquiring the expertise to formulate policies and perform their functions in a satisfactory manner.

Thus there is a vicious circle. Aid donors are dissatisfied with the weak policies and poor management of official institutions in recipient countries, so they decide to set their own policies and bypass the institutions. Such capacity as the institutions originally had diminishes as a result of them no longer being required to perform their intended functions. The country’s institutions end up being run by poorly educated, inexperienced and incompetent people.

This is the eighth in a series of posts discussing themes from The Trouble With Aid by Jonathan Glennie. In chapter 4 the authors describe the problems which arose with aid conditionalities, in which donors essentially demanded control over key economic policies of recipient governments. As a reaction to the imperialistic nature of aid conditionalities and the consequent lack of commitment by recipient governments to fulfilling policy promises, the Poverty Reduction Strategy Paper (PRSP) approach was created.

The PRSP approach attempts to involve various sectors of society and government in a recipient country in creating poverty reduction proposals which can then be supported by donors. In theory this approach should attract greater commitment to implementation from recipient countries, because those countries have themselves devised the policies and programs. PRSPs in Ghana and Zambia have had some success, but on the whole PRSPs have made little difference.

In general, donors have not respected the PRSP process, and they have continued to impose their own conditions. One of the reasons is that voluntary aid is by its very nature something within the control of the donor rather than the recipient. Another reason is that the PRSPs have on the whole not been very good. They have tended to resemble shopping lists, rather than embodying convincing poverty-reduction strategies that appear convincing to donors.