'The Donors’ Dilemma' - The Future of Aid and Beyond

This Column by Myles Wickstead is part of Global Policy’s e-book, ‘The Donors’ Dilemma: Emergence, Convergence and the Future of Aid', edited by Andy Sumner. Contributions from academics and practitioners will be serialised on Global Policy until the e-book’s release in the first quarter of 2014. Find out more here or join the debate on Twitter #GPfutureofaid.

The word ‘aid’ should carry with it a number of health warnings. Bilateral aid will focus increasingly on fragile, badly governed and insecure countries. But as the number of those countries diminishes, there is plenty for aid to do – helping Middle-Income Country Governments address the needs of the poorest and most vulnerable groups, for example. The key shift, however, will be towards support for global public goods – interventions which will benefit humanity across the board. And the better off countries need to focus more on addressing non-aid policies which impact on developing countries.

Language is rarely neutral; most words have associations or carry overtones of one sort or another. ‘Aid’ is a good example. It implies a particular sort of relationship – the strong supporting the weak; the rich supporting the poor; the haves supporting the have-nots.

And there is nothing wrong with that. To the contrary, the actions which may follow from such relationships – the Good Samaritan coming to the aid of the traveller left by the side of the road, for example – are a positive manifestation of the human spirit. But it is all too easy to go beyond this framework when thinking about aid, as being about the competent supporting the incompetent; the well-governed supporting the badly-governed; smart people giving hand-outs to their less intelligent and poorer neighbours.

Some of this - profoundly wrong – view is partly a legacy of the Cold War, when the ideological battles of the West and East were fought out in hot wars in the South. Aid was at least in part a weapon in that ideological battle, a means of rewarding those of (however remotely) the same political persuasion, however inept or corrupt. It is irrefutable that during this period – and in spite of many excellent projects and programmes – some aid did indeed end up in the personal Bank accounts of autocratic, corrupt and venal leaders.

That changed after the end of the Cold War. But those images of the 1970s and 1980s persist (aided and abetted, it must be said, by at least some sections of the media and the NGOs). For example, Ethiopia remains for many people a conflict-ridden backwater populated by children with distended bellies living constantly on the edge of famine. It is in truth a country which has for the last decade enjoyed political stability, double-digit growth and which is making extraordinary progress against the Millennium Development Goals.

Ethiopia is not alone. Many countries in Asia and Africa are making significant progress; countries which once seemed to be basket cases (a term originally applied by Henry Kissinger to Bangladesh as it fought for independence in the early 1970s with few resources and, apparently, no hope) are looking to move to middle-income status over the coming decade or so.

So those countries will become less dependent on the large-scale transfer of concessional financial resources. Country to country financial aid will in practice focus on a decreasing number of countries in which the conditions do not exist to implement transformational change – those countries in which there is continuing conflict and bad governance, in which the conditions for economic growth do not exist, and which lack in-depth human and institutional capacity. The populations of those countries cannot expect support from their own Governments as they try to climb up the ladder out of poverty; they should not have to endure the withdrawal of the international community too.

We know that at the moment the majority of poor people live in middle income countries. As they strengthen their governance and institutions and their overall policy environment, their Governments should rightly take up the slack and provide the health and education services – for example - to which their electorates are entitled. But to expect that this can happen immediately is frankly nonsensical. Because their citizens’ average income per capita has crossed some rather arbitrary threshold does not mean that their Governments are suddenly able to become self-reliant or to provide them with all the social and other services they require.

Deep poverty persists in many of those middle income countries, and their Governments will continue to need external support. This is not just about providing large volumes of concessional financing, but also technical assistance. For example, studies show that every $1 support by donors for the development and reform of the tax system in developing countries can generate up to $10 of income. And the international community can have a crucial role to play in supporting those Governments to help the most marginalised groups – women and children; the disabled; people from ethnic minorities.

Bu there is another set of issues too over which the international community will have to learn to cooperate much more closely, broadly described as ‘global public goods’. These are essentially areas in which having more benefits everyone, without disadvantaging anyone. Addressing the challenges of climate change – both mitigation and adaptation - is an obvious example. So are tackling issues of environmental pollution; or preventing the loss of bio-diversity; or working together to combat deadly diseases, which are no respecter of national borders.

The truth is that many of these problems have been created – or at least exacerbated – by the more developed countries, and the negative effects have been felt most strongly by the less-developed countries. And it will take very significant resources to address them. So there are strong moral and self-interest grounds for the better-off countries to provide the bulk of the financial resources required to tackle them. We ignore the existential threats to our Planet – and to humankind – at our peril.

Whatever the future of aid, there is another set of issues which we also need to address. Whilst the provision of concessional resources will remain important for the foreseeable future, there are many other policies which impact directly and negatively on developing countries. The value of remittances is much higher than aid; so making it easier or more difficult to transfer remittances has real impact. The fact that European cows are subsidised to the tune of $2.50 per day (twice the absolute poverty level) has a very negative impact on dairy farmers in Africa; the heavy subsidies which US cotton farmers receive has similar implications for African cotton farmers; and the restrictions on adding value to the import of raw cocoa into the EU likewise penalises African cocoa farmers. Tight rules on intellectual property rights make it very difficult for African companies to develop basic pharmaceuticals. And so on………………..

In summary, we need a number of things to happen in the area of international development as we look forward over the next 10 or 15 years. One is a commitment to maintain substantial flows of concessional resources and technical support to support the conditions under which development can happen – good governance; peace and security; building human and institutional capacity. As increasing numbers of countries attain these conditions, we should recognise that that these efforts are likely to focus increasingly on fragile states - but with some emphasis too on supporting middle-income countries in addressing issues of vulnerability and marginalisation, ensuring that the benefits of development are shared more equitably across society.

Second is a recognition that increasingly those resources are likely to be targeted towards the support of ‘global public goods’ – issues which impact on the relationship between humanity and the Planet. If we want the lungs of the world – the rain-forests of Africa and the Amazon – to keep pumping away, we need to help preserve them in order to do so. If we want Governments in Africa and Asia to address issues around the circulation of counterfeit drugs, we need to help them provide a proper regulatory environment.

Third, we need to recognise that whilst ‘aid’ will and should continue to be important, we should move swiftly towards a ‘whole of Government’ approach to international development; what is described in European circles as ‘policy coherence for development’. That means looking carefully at the full range of issues such as agricultural subsidies, rules of origin etc to see how they impact negatively on partner countries. And there are some potential quick wins here – trade facilitation, for example – which if addressed seriously would not require significant financial resources but would bring massive benefits.

The future of aid is important. But it is only one element of a broader international development agenda, to which we should be absolutely committed.

Myles Wickstead CBE is Visiting Professor (International Relations) at the Open University and Advisor to Hand in Hand and Development Initiatives; he is also on the Boards of a number of Trusts and Foundations. He has held senior positions in DFID and the FCO, including as Head of the British Development Division in Eastern Africa; the Board of the World Bank; British Ambassador to Ethiopia and Djibouti; and Head of Secretariat to the Commission for Africa.