The default process for providing foreign aid is to direct the money through country governments. I’ve long had my doubts about doing things this way: most of the problems that people like Bill Easterly and Dambisa Moyo attribute to aid really boil down to the fact that, when aid money is directed to governments, it becomes a fungible, capturable resource that is quite similar to natural resource proceeds.
Now it seems there are increasing challenges to that default from across the development world. In a great interview about cost effectiveness, Bill Gates highlights Somalia, which has no functioning government but fairly high vaccination coverage, and Nigeria, which has much less success with vaccines:
Well, in Somalia they’ve given up using the government. The money goes through the NGOs. Whereas in Nigeria they’ve designed a system where the federal government buys the vaccines, the state government provides the electricity, and the one level down below that provides the salaries. It’s just a bad design. You know, the north of India has very poor vaccination rates, so we picked a state up there with 80 million people and we drove it from 30 percent to 80 percent. But they had a really good chief health minister and the federal government was providing lots of money and lots of good technocrats, so the skills were there, as long as you employed them in the right kind of system.
Gates takes a very nuanced view: it’s not that funding vaccinations through governments can’t work, but the conditions need to be right. Ethiopia has done well, but Nigeria has not. He’s also not saying that the only reason that vaccination programs have failed in Northern Nigeria is because of the difficulties of running them through the Nigerian government – widespread urban legends about vaccines have played a major role – but the failings of the government are still an important factor.
In the latest edition of the Development Drums podcast (transcript here) Daron Acemoğlu and James Robinson discuss their book Why Nations Fail. I’m not broadly in agreement with their take on development, mainly because I don’t see their findings as actionable. But I agree strongly with the policy implication that Acemoğlu highlights, which is that providing aid through governments can be bad because it can support extractive institutions:
But it’s a better formula than saying whoever is in power, we’re going to hand the power, the money to them.
Is it implicit in what you are saying that some of the current aid modalities, particularly government to government aid, tend to reinforce the elites?
Absolutely, yes. I mean, I’d say our view was that you know, at the end of the day, that’s probably – if you asked where do all these development problems come from in Africa, are they created by the perverse incentives generated by the aid industry? Our answer to that would be no: they are much more deeply rooted in the history of these societies and you know, so sure you can find examples where aid kept in power, you know, Mobutu for another five years and he wouldn’t otherwise have been there but what did you get instead, you know?
We might not be able to do too much to promote beneficial institutions, but it’s pretty clear we can (and unfortunately do) support crappy ones, not by giving foreign aid, but by doing so through horrible governments. Don’t like what Mobutu is doing to the Congo? You don’t have to cut the people of the Congo off, just their government.
The obvious question is why we were giving aid through governments in the first place. There must be a reason, and any change to the process needs to consider the benefits of the current default as well as the costs. The basic argument I’ve heard, as Owen Barder put it during the Development Drums podcast, is “the thinking of providing aid through the governments is to try to build a stronger social contract between citizens and the state.” This claim is crying out for quantification: how much social contract strengthening actually occurs when aid goes through governments? Is that a valuable end in itself, and if so how much do people value it? What about eventual benefits of other kinds – do they happen? How much?
Given all the light being shed on the downsides of automatically sending aid through governments, it’s no longer enough to have qualitative evidence that sending aid through governments promotes their legitimacy. We need to know how much, and whether it’s worth the cost.
Hat tip: Amanda Stype for the Gates interview.