Monday, 23 April 2012

Arguments against aid: Cheap tricks or Compelling evidence?

By Mick Moore

For much of the last 50 years, development studies practiced a conspiracy of near-silence against fundamental criticisms of development aid. Plenty of people wrote books and articles about how aid could be improved, but few questioned its fundamental value.

Easy arguments against aid: Are we addicted to cheap intellectual highs?

The dam broke only a few years back. We then had a small torrent of books arguing that aid is fundamentally a bad thing, more likely to undermine than to promote development – above all because of all the perverse effects it has on the incentives and behaviour of politicians and public servants in recipient countries.

Dambisa Moyo’s Dead Aid: Why aid is not working and how there is another way for Africa, the most publicised of these books, was in many respects one of the least convincing.

The aid business is large, diverse and complex. It is not hard to do as Moyo did: cite one example after another of failures, perversions and negative unintended effects of aid projects. But that does not add up to a convincing general case.

It is useful to bear in mind that many social scientists are addicted to some questionable habits: to digging out and publicising ‘shocking’ arguments about how the world is in fact very different from the way it appears to ‘ordinary mortals’. These arguments conclude that the consequences of our actions are often very different from our intentions.

Making such claims is a way of generating an intellectual high. One of Albert Hirschman’s wonderful little books, titled The Rhetoric of Reaction: Perversity, Futility, Jeopardy (1991) provides a useful corrective. Hirschman explains how opponents of progressive public policies routinely use a standard portfolio of arguments to assert that the actual effects of these policies will be very different from those that ordinary people anticipate.

Evidence of aid’s perverse effects: Can aid leave civil society organisations less able to do public work?

I am sceptical of claims that well-intentioned public policies will have perverse effects. If I am to be persuaded that aid has damaging effects, I want evidence.

Masooda Bano’s new book Breakdown in Pakistan: How Aid Is Eroding Institutions for Collective Action (2012) provides not only convincing evidence but some elegant, plausible and original argument. Her research was on the effect of foreign funding on citizen-led social and political organisations in Pakistan.

Bano zeroes in on the question of why citizens are willing to donate money or volunteer time to particular political, religious or welfare organisations. Her explanation is that they need some reason to believe that their money will be used properly and well. Without that trust, they will make their donations elsewhere.

Her research suggests that one of the most powerful general signals of the basic worth of any organisation dependent on public donations is the life style of the leader(s). If leaders are conspicuously seen to be making some personal sacrifices, and not profiting, then the organisation generally tends to be viewed as trustworthy. Many Pakistani organisations are able to do excellent public work (in education, health and welfare) because citizens  trust the leaders, see them as materially selfless and thus make voluntary contributions.

This is where foreign aid causes problems. Organisations that receive foreign aid are virtually obliged to be ‘professional’, and typically pay their leaders attractive salaries.

Aid donors think they are ‘strengthening civil society’, but all too often they are eroding trust. Pakistanis tend to see a clear dichotomy between social organisations that depend on local contributions and NGOs that are by definition foreign funded. They might be willing to work for NGOs for a salary, but are rarely willing to contribute to them voluntarily. They don’t trust them. Organisations that begin to take aid money quickly find that their volunteers and ordinary donors move elsewhere.

Masooda Bano has some suggestions about how these ill effects can be minimised. Considering how well rooted the book is in social science theory about collective action, it is rather a good read.

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