In this entry I will describe the double-standards that prevail throughout the system of Red Aid. I start by considering the perverse effects of donor conditionalities and then illustrate this by showing the dissonance between the claimed objectives of Red Aid and its effects in Tanzania. I will then describe how there is little transparency or accountability at international levels. Finally I will suggest that donors behave with more humility, putting their own houses in order before they lecture developing countries.
The perverse effects of conditionalities
Red Aid is characterised by an ideology of development, human rights and good governance. The giving of aid is claimed to be conditional upon recipient countries building local institutions to advance these agendas. However, the message and the practice is mixed.
Rodrik contests the ideology itself, saying that “telling poor countries in Africa or Latin America that they should set their sights on the institutions of the United States or Sweden is like telling them that the only way to develop is to become developed” (2011, p. 172). Stiglitz (2007) argues against the effects of the conditionalities themselves, saying that IMF conditionality undermines democracy, as do demands that monetary policy be taken out of the hands of political processes and turned over to experts.
Vener (2000) studied the relationship between aid flows to Tanzania and the conditionality that Tanzania move towards a multi-party democracy. What she found showed an interesting relationship between claimed values and those in practice. Whilst the major donors stated as official policy that the transfer of aid was conditional on democratization, in practice aid levels were not affected by the donor policy. There was no correlation between fluctuations in aid transfers and Tanzania’s implementation of multi-party democracy. However, the Tanzanian leadership perceived a direct link to exist between donor aid disbursements and political liberalization and it was this perception that prompted the political transition. The mere existence of the policies and subsequent rhetoric in meetings with Tanzanian officials exerted influence on Tanzania’s democratization, irrespective of actual levels of aid that were given.
The dissonance between the of Red Aid and its effects
It matters a great deal what form aid takes and exactly how it is delivered because it can do harm (Booth, 2011). But, donors often fail to work effectively in local contexts and there is a lack of fit between how donors and Tanzanians think about accountability. Lange (2008) argues that local ideas of accountability are rooted in a patriarchal family mode of thinking where an accountable leader provides for his constituency. This means that a leader who provides well, even if the resources he redistributes are acquired in a corrupt way, may be seen as more accountable than a non-corrupt leader who does not provide.
“Aid contains serious moral hazards, and provides perverse incentives to its recipients” (Cooksey, 2003, p. 22). Some of the effects of Red Aid include perpetuating corruption within recipient countries, undermining their sovereignty, shutting down the policy space for Governments, drawing away talented people from working in Government, inhibiting Governments’ ability to engage in long-term planning, and duplicating projects and undermining local governance processes. Each of these are discussed in more depth below.
1. Perpetuating corruption
A tension may be seen in how the anti-corruption discourse plays out in Tanzania, where “anti-corruption conditionalities are rarely applied in practice” (Cooksey, 2003, p. 4). Donors tolerate extreme corruption in order not to undermine their spending imperatives. “Some observers believe that in recent years donors have been overly ‘soft’ on the Government of Tanzania in terms of sanctioning bad governance and grand corruption” (Cooksey & Kelsall, 2011, p. 3). Collins et al. (2009) estimate that globally at least $18 billion of aid a year is susceptible to capture, of which about 25% is currently diverted due to corruption (Ghosh & Kharas, 2011).
“Donors advocate greater transparency and accountability among recipients than they generally practice themselves” (Cooksey, 2003, p. 18). Joseph Warioba, chairman of Tanzania’s 1996 Presidential Commission of Enquiry against Corruption, argued that aid was part of the corruption problem rather than its solution. Corruption exists both among individuals and systemically within the aid agencies. Whilst the World Bank is at least making an effort to clean up its act… there is little evidence that the other main agencies – in particular the UN system, the EU and the regional development banks – have gone beyond the stage of declaring good intentions” (Cooksey, 2003, p. 15). There is no point in making strict distinctions between government-private sector corruption and corruption involving aid because in Sub-Saharan Africa most big projects involving the private sector are aid-funded.
2. Undermining countries’ sovereignty
Warah (2011) argues that Red Aid undermines countries’ sovereignty and is “the most effective (and cost-effective) way in which foreign donor countries control other countries without being labelled as colonialists.” The World Trade Organisation is empowered under international law with a mandate to police country level economic and social policies, derogating the sovereign rights of national governments (Chossudovsky, 2005). Recipient African governments are complicit in this as they “have unquestioningly taken on the roles of victim and beggar” (Warah, 2011) knowing that “aid flows can strengthen the position of incumbent elites to pursue their political agendas” (Cooksey, 2003, p. 3).
One effect of aid is to strengthen the Executive at the expense of Parliament, weakening those very institutions that should protect against corrupt practices. This inhibits the ability of recipient country citizens to be able to hold their governments accountable over any discrepancies between aid received and aid spent (Cooksey, 2003, 2011; Ghosh & Kharas, 2011).
3. Shutting down the policy space for Government
Although the Paris Declaration on Aid Effectiveness espouses the idea of aid harmonization so that recipient governments are not trying to juggle multiple donor demands the reality is that when “donors ‘gang up’, there is less policy space for government. There is therefore less chance of clear policies emerging from domestic decision-making processes” (Booth, 2011, p. 10).
4. Drawing away talented people from working in Government
Aid often has the net effect of suppressing local economies and initiatives (Warah, 2011). Additionally skilled staff are hired away from governments to serve in local agency offices or NGOs, which tend to offer better remuneration, opportunities for travel and promotion (Barder, 2011).
5. Inhibiting Governments’ ability to engage in long-term planning
The perverse effect of large amounts of Red Aid which subsidizes national budgets is to make “governments become less accountable to their own citizens, and more accountable to the donors. It also makes it easy for governments to blame lack of donor funding for their failures to carry out development programmes” (Warah, 2011). In spite of the aid harmonization mentioned above donor funding is often “fragmented and unpredictable, which means that developing countries are often unable to bring together the scale of long-term, predictable finance needed to undertake significant institutional reform and service delivery” (Barder, 2011, p. 1).
Often, Governments are unable to aid track money that is off-budget. The PREPFAR money from USAID is a particular case, where the Kenyan Government admitted being unable to track how the $502 million for 2008 for HIV/AIDS was being used. Quoting an official in the Ministry of Public Health, “It is not easy for us to know what kinds of things and where PEPFAR is funding. But I’ve been asking for a list of partners, where they are working, how much they are spending, on what—but I can’t get it. I’m supposed to be supervising these activities, but I don’t have the information” (Oxfam, p. 6, 2010 in Ghosh & Kharas, 2011).
6. Duplicating projects and undermining local governance processes
Donors often outsource development work to NGOs or community-based organisations because they are in fact ambivalent about supporting the implementation of the local government reform and reluctant to deal with local government bureaucrats who they suspect of rent-seeking and inefficiency. But, this practice in turn de-politicizes development, lets the government off the hook from providing social services and supports parallel structures that can undermine local government reform programs (Lange, 2008).
Where is accountable global governance?
Whilst a key donor conditionality is accountable domestic governance amongst recipient countries, there is increasing consensus that there is a problem of governance in international public institutions like the IMF, which lacks some of the basic rules of democratic institutions (Rodrik, 2011; Stiglitz, 2007). What galls many in Tanzania is that there seems to be one set of rules for the rich and another for the poor. “There is neither international democracy nor any clear centre of authority at which the poor can direct their protests… The organisations and institutions which do have power are those where the principle of one-dollar, one-vote operates. Hence the powerlessness of the UN General Assembly, UNCTAD, UNESCO, and other institutions of that kind; and hence the overwhelming power of the UN Security Council, of the IMF, the World Bank, and the WTO, where there is no pretense what-soever to democracy” (Nyerere, 1999, p. 4).
Donors should not throw stones in glass houses
Natsios (2010) has described the case of USAID and the detrimental effect of the “counter-bureaucracy” where the compliance side has overwhelmed the work of development technicians and experts. He argues that “no other aid agency, with the exception of the World Bank, comes close to having so many conflicting and competing layers of oversight.” That may be so, but there are many other criticisms of donors’ own organizational health that would suggest that more humility may be appropriate from them when dealing with recipient countries.
The primary critique is that aid agencies are not accountable to their intended beneficiaries and are poorly regulated (Ghosh & Kharas, 2011). “Humanitarian aid exists in a free market, where anyone who chooses to can set up a stall” (Polman, 2011, p. 51). Polman argues persuasively that “just as a wheelchair user has the right to protection from helpful people who try to push him across the road against a red light, the victims of war zones have a right to protection from aid workers who arrive unannounced and set about their work without the most basic qualifications. But that right is not laid down anywhere” (2011, p. 62).
In 2005 the aid industry introduced reforms in the Paris Declaration, which set out five principles to make aid more effective, and a set of thirteen targets which they aimed to reach by 2010. But very limited progress has been made. Of the thirteen measured targets to improve the effectiveness of aid only one had been met. This was the donor commitment to talk more to each other. Aid is still not on recipient countries’ budgets, is no more predictable, and is becoming increasingly fragmented (Barder, 2011; Deane, 2011). In Tanzania, where the Government has been effective at “pushing donors to comply with the Paris principles, nobody seems to think that aid now delivers more bang for the buck than aid elsewhere, rather the opposite, if anything” (Barder, 2011, p. 2).
This lack of accountability to both the recipients of their aid and the lack of compulsory regulation perpetuates a set of dysfunctions that I now describe. These are that donors themselves are not transparent and accountable to either their beneficiaries nor to those members of the public who fund them with their tax dollars. Much aid giving is arbitrary, misdirected and misused. The aid industry appears to have a vested interest in stigmatizing recipient countries as basket cases, because aid bureaucrats do not have an interest of working themselves out of a job.
1. A failure amongst donors to be transparent and accountable to the public
Aid organizations do not apply their own principles in their practice, particularly in terms of the transparency and accountability upon which their aid is formally conditioned (Cooksey, 2003). This is because “the peculiar situation of the aid bureaucracies is that the intended beneficiaries of their actions—the poor people of the world—have no political voice to influence the behavior of the bureaucracy” (Easterly & Pfutze, 2008).
Easterly and Pfuze (2008) examined ‘best practices’ in the way in which official aid is given and asked if aid agencies operate the way they themselves say they should operate. They found that the data from which they were able to examine aid practices was “inexcusably poor”. The Development Assistance Committee (DAC) publishes aid data, but cooperation with the DAC is voluntary and a number of international agencies do not participate in this sole international effort to publish comparable aid data.
Analysis of the data that was available revealed considerable variation among aid agencies in their compliance with best practices. Membership of The International Aid Transparency Initiative (IATI) is an important signal of transparency across all dimensions. Indeed, thirteen of the top fifteen most transparent donors are also members of the IATI. Some agencies have remarkably high overhead costs. The international aid effort is fragmented with the worldwide aid budget is split among a multitude of small bureaucracies. Even the small agencies fragment their effort among many different countries and many different sectors. Fragmentation in turn creates coordination problems and high overhead costs for both donors and recipients. Aid practices like money going to corrupt autocrats and aid spent through ineffective channels like tied aid, food aid and technical assistance also continue to be a problem despite decades of criticism.
Easterly and Pfuze’s analysis and that conducted by Ghosh and Kharas (2011) show that there is not any strong, systematic difference between multilateral agencies and bilateral donors on transparency. Among multilateral agencies, the big positive exceptions are the development banks, specifically, the African Development Bank, Asian Development Bank, IDA of the World Bank, and the Inter-American Development Bank. Whilst development banks tend to be closest to best practices for aid, the UN agencies perform worst and the bi-laterals are spread out all along in between.
The UN agencies perform really poorly. Easterly and Pfuze could not find data on administrative or salary budget for WFP, UNFPA, and UNHCR, while UNICEF failed to provide any information on total employment or on the salary budget. Multilateral agencies fail to report the sectors, recipients or amounts they are spending the money on.
There is a very low correlation between the size of donors and the transparency of their activities. France, Japan and the United States are three of the largest donors, accounting for one-third of total net ODA in the last five years. All three donors do poorly on the transparency index, being ranked, 25th, 23rd and 22nd.
Ghosh and Kharas argue that resistance to automating the provision of aid data is political and that the return from investing in mechanisms to automate the reporting of aid data would more than cover the costs of the initial investment. “Greater transparency in aid would help reduce overlap, waste and lack of coordination between donors. Lack of transparency also leads to a lack of opportunities to learn what really works in aid, thus inhibiting rigorous research on aid effectiveness. Because aid is increasingly fragmented, norms and formalized systems of transparency are becoming more important. Informal knowledge sharing among a few large players is no longer a viable alternative, as ever more players need to know what others are doing” (2011, p. 27).
2. The misdirection and misuse of aid money
Easterly & Pfuze (2008) argue that good aid practice would strive to avoid too many donors in a single country and sector and / or too many different projects for a single donor. It would avoid giving money to corrupt autocrats or to less-poor countries and it would excessively high overhead costs relative to the amount of aid dispersed.
But, without investing in mechanisms and organizational cultures that promote greater transparency there is inevitably considerable duplication and waste. “This fragmentation of ODA makes it even harder for aid agencies to coordinate their activities and duplication and waste could be growing. Because of the lack of transparency of who is doing what where, it is impossible to quantify the waste—the data simply do not exist” (Ghosh & Kharas, 2011, p. 5). Money that is supposed to help the poor ends up creating business for companies and organizations in the developed world or finds its way into the hands of corrupt local governments or elite social groups (Yunus, 2009).
In fact, much aid giving is completely arbitrary. “Receiving aid is not a right, as Kofi Annan suggested it was – any more than giving aid is a duty. It is a favor, which donors grant when it suits them” (Polman, 2011, p. 157). Some countries receive lots of aid, others barely nothing. In 2004, less than a quarter of official development assistance was given to the poorest countries. Most went to the frontline states in the war on terror (Ibid).
In Tanzania, the bi-lateral donor organisations who disburse Red Aid seem to know little about local civil society organizations (CSOs) and their capacities, or even about the funding given by various branches of their own organisations to CSOs. For example, Mundy (2010) cites the example of local DFID staff who were unaware of the funding provided by the UK Government to the Commonwealth Education Fund, a programme that funds national civil-society activities in both Kenya and Tanzania. Nor, do many donors have clear rules or transparent processes for selecting which CSOs they support, with many donors preferring to channel funds through their own national NGOs, not trusting direct funding to southern organizations.
3. Perpetuating the stigmatization of recipient countries to feed the aid bureaucracy
Polman argues that it is in the interest of UN and other aid agencies to show a worst-case scenario of recipient countries because this keeps the donor funds flowing. Journalists and agency officials have an inter-dependent relationship which has distorted the way Africa is reported. They focus on disproportionately on Africa’s problems are unlikely to see the continent’s potential. “Africans do not feature much in their stories, except as victims” (Warah, 2011). “In the lottery to win favor with donors and aid organisations, victims have to find a way to distinguish themselves from rival victims. They learn to fit the expected image … “the premise is that Africans lack the capacity to save themselves and must rely upon the kindness of strangers”, said Thabo Mbeki, President of South Africa. “Conscious or unconscious, this assumption pervades discourses on Africa … We can argue about who is to blame for that perception–and we Africans are far from blameless” (Polman, 2011, p. 160).
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