Aid Beyond Prejudice and Pride

Published on IndeptNews.net (IDN-InDepth NewsSpecial – Part 1), by Eckhard Deutscher, April 21, 2010.

PARIS (IDN) – Africa is drowning in aid money.

  • “Too much aid goes to the private pockets of corrupt regimes and towards a bloated development industry, when much more should be spent on the private sector.”
  • “Aid is a useless distraction given the impact of issues like trade, investment etc on development.”
  • “Aid is not nearly growing quickly enough.”

These are some examples of arguments put forward in a critical political and public debate of development co-operation that has intensified as we approach the reference date for substantial aid commitments and get closer to the deadline for the Millennium Development Goals in 2015. 

While there are elements of truth in these statements, it is useful to dissect them and look behind often quoted but rarely substantiated ‘facts’.

AID: DISMAL UNDER-DELIVERY OR FAR TOO MUCH OF IT? … //

…GOVERNMENT AID VERSUS PRIVATE SECTOR-LED DEVELOPMENT

One answer put forward is to simply avoid the problem by focusing on the private sector instead of working with the government.

After all, there is no doubt that the key driver of wealth creation is the private sector. It is the market economy on which the success and wealth of OECD countries relies. A stronger emphasis on productive capacity and private sector led growth is essential, because this enhanced economic capacity is also the foundation to promote social and human development goals.

So why not cut out aid to governments and just focus on the private sector?

The answer is that the first condition for private sector led growth is the existence of an effective state that can provide political stability and drive economic and social achievement as the basis for a decent life for its whole population.

If we look at today’s world, we see that where such states have emerged, often with considerable aid support, development has usually flourished, the importance of aid has declined over time and the private sector has become the driving force of growth and increasing well-being.

But what is the situation in the many countries where weak capacity or insufficient political cohesion and social consensus mean the de facto absence of such effective statehood?

What are the prospects for relying on private enterprise and civil society to drive development in a country where the state cannot safeguard property rights, contract enforcement or basic personal or economic security?

Where basic conditions for development are in place, it can play a crucial role in creating an enabling environment and in igniting a sustainable growth and development process.

Indeed, looking at the countries with the highest growth rates in Africa in recent years, for examples, reveals a list of “donors’ darlings”: Botswana, Ghana, Mozambique and Tanzania – interestingly, recent critique of aid tended to forget this when referring precisely to these countries as an argument for the irrelevance of aid.

In many countries, where basic conditions for self-sustainable development are not given, or where they still depend on international support, development co-operation is essential for getting them into place in a way that is self-sustainable. This is a difficult, long-term process with lots of uncertainty … (full text).

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