How should development practice (and institutions) approach the coming reforms in the aid sector?

The past is gone. And there are lots of reasons not to mourn for its reinstatement.

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I: Change is really hard

Last month I briefly returned to Washington, DC during the annual Spring Meetings. Of course this year’s meetings took place at a critical juncture that will define the future of international development. To paraphrase a famous Italian, we live in a time when the old model of foreign aid that largely cultivated aid dependency in most recipient countries is on its last legs, but the new model is yet to be born: now is the time of great uncertainty and attendant risks.

The goal of this post is to try and synthesize the emerging ideas of potential pathways forward in a world where (1) the resources available for aid are drastically reduced; and (2) the intellectual scaffolding that propped up the old aid model has lost legitimacy.

In Washington, it was clear that the defenders of the status quo in the aid industry are most likely going to double down on the familiar, which will render their actions ever more at variance with objective facts on the ground. I was surprised by the extent to which people in important positions just aren’t ready for change.

On their part, the emerging pro-change crowd are a mixed bag. There are those that recognize some positive aspects of aid (especially in public health and humanitarian assistance), but would want to see a root-and-branch reconfiguring of aid systems to ensure that they do not cultivate aid dependency (and instead catalyze or reinforce structural economic change). Others want to limit foreign assistance to donor countries’ transactional foreign policy goals. Yet others want radical cuts that will undoubtedly cause more harm than good.

Humanitarian food aid being delivered in Ethiopia. Source: NBC News.

So far these four camps have largely been talking past each other. Yet as I’ve repeatedly argued here, these conversations must converge if there’s ever going to be a reasonable consensus on the way forward.

Or perhaps there shouldn’t be a consensus, in which case alternative approaches to aid would duke it out in the real world. Note that this wouldn’t necessarily be a bad outcome (although it might prove to be rather expensive). As things stand there’s too much consensus-fueled collusion, conservatism, and lack of accountability in the aid industry (with lots of box checking rituals draped in intellectual garb). A model that provides a permission structure for unorthodox “aid start-ups” that are willing to try new and different things — like investing in growth and structural economic change(!) — wouldn’t be such a bad thing.

I should reiterate that in my estimation most pro-aid constituencies in donor countries, elites in aid-dependent countries, practitioners/experts, and scholars of international development remain wedded to the old model.

This is absolutely understandable. To many, the coming changes are deeply personal. Jobs and livelihoods, as well as a sense of personal accomplishment and moral/intellectual worth are on the line. Plus it is much easier to train anger on the heartlessness of erratic aid cuts by political/ideological opponents than to honestly look at the mirror and interrogate how aid dependency exposed millions of people to these kinds of developments in the first place. For better or worse, it’s these individuals — who, again, are more likely than not to have their eyes glued to the rear view mirror — that remain in key decision making roles about the future of aid.

With this in mind, the best thing that could happen is for the pro status quo camp to step outside their comfort zone and observe the world for what it is. Going about business as usual is no longer tenable. Attempts to browbeat folks into submission with doomsday figures and narratives of catastrophe outlining how many people will die due to aid cuts and/or reforms to the current aid regime won’t work. Reasonable people understand that it’s a false choice to pit ending aid dependency against not abandoning the most vulnerable people in the world. We can and must strive to do both. It’s as straightforward as that.

To this end, policymakers in donor countries and officials in multilateral institutions should pause for a moment and listen to the many voices around the developing world echoing Mavis Owusu-Gyamfi’s words:

Now is the time for transformation that is owned and driven by Africa. Amidst declining ODA, high debt burdens, and an erosion of multilateralism, we cannot depend on the rest of the world to step in and forge our futures –and frankly, no country has developed on the back of aid alone.

II: Change is ineluctable

Multiple ideas are emerging regarding how to responsively reform the aid industry. In this section I’ll quickly summarize three such ideas (admittedly, this isn’t meant be an exhaustive exercise). I should note that what I have here is my reading of what the authors put forth, which may not exactly match what they intended (fortunately, I know three of the authors and will certainly get feedback if I misrepresent their ideas). Which is to say that I encourage readers to go read the relevant material for themselves.

The first idea is best summarized by Rachel Glennerster and Siddhartha Haria:

Aid agencies already try to cover too many countries and sectors, incurring high costs to set up small programs. Aid projects are far too complicated, resembling a Christmas tree weighed down with everyone's pet cause. With less money (and in the US, very few staff), now is the time to radically simplify. By choosing a few highly cost-effective interventions and doing them at large scale in multiple countries, we would ensure

• aid funds are spent on highly effective projects;

• we benefit from the substantial economies of scale seen in development;

• a much higher proportion of aid money goes to recipient countries, with less spent on consultants; and

• politicians and the public can more easily understand what aid is being spent on, helping build support for aid.

This development would definitely be an improvement on the status quo. While I don’t share Glennester’s and Haria’s optimism about proven evidence being the arbiter of what gets prioritized (as opposed to good old politics of collective choice in recipient countries), it’s true that abandoning the illusion of “Christmas tree” aid goals (like, say, the SDGs) would lead to more focused thinking and spending by donors and recipients alike. A terribly underrated consequence of the “Christmas tree” approach to development assistance is that rather meager aid flows often end up causing lots of policy distortions via utterly meaningless box-checking rituals that no one cares about (not to mention wastage of scarce resources).

It would be ideal if everyone outgrew the notion that their pet issue is the silver bullet that will save the world and therefore must be included in every aid program.

Furthermore, a radical streamlining of aid programming would inoculate donors against thinking that they can solve all the problems in the world with just the right amount of rigorous evidence, consultants, conferences, and conditionalities (few will miss the solipsistic God complex behind this belief). It would also create the intellectual and moral permission structure for donors to not feel the need to be spread thin. For instance, a reasonable person could make the case that instead of running 48 atrociously-designed and poorly-resourced agriculture programs across the Continent, it would be better to focus on 5 intensive interventions that, among other things, helped everyone learn how to run a successful agricultural sector in a low-income country. If successful, this approach would generate strong demonstration effects. Other countries would then learn from the 5 “model countries.”

I cannot stress this enough. With the exception of health interventions, I often get blank states when I ask donors, aid organizations, or implementors to describe their gold standard program(s). Which is to say that an unconscionable share of aid work involves going through the motions without posting real points on the board that anyone can honestly be proud of. Sadly, most of this can’t be attributable to people trying to do big and difficult things. It’s mostly failures at lots of small things, but which are nonetheless highly distortionary at the macro level. This must stop.

The second idea is broadly represented by Stefan Dercon’s work. The basics of this are that development assistance should evolve into a partnership; that those who peddle policy advise must understand the domestic political economies of recipient countries; that the point of aid is for donors to eventually become dispensable; and that the lion’s share of aid flows should favor governments that have demonstrated a willingness to invest in transformational growth (those willing to gamble on development as it were).

This is then a plea for investment and effort in research that tries to [...] find the best development or economic measures that recognise the objectives and therefore incentives of those with political and bureaucratic power in countries simply not committed to maximising growth, bringing down poverty and spreading development. Those designing programmes, in government ministries, donor agencies or international organisations would do well to take these problems seriously. I find it surprising that this is rarely done, not least by economists…

It makes advisors more than distant technocrats and forces them to recognise and understand politics, operate within it as politically-informed advisors, and possibly to be subversive by promoting those measures that shift the economic and development outcomes. It also suggests that it is wise to stay away from the mercenary actions that embed those in power further or from hiding behind politically-uninformed technocracy.

This approach promises to at once force aid recipients to be more agentic in the design and implementation of aid programs, while also ensuring that development assistance programs are not artificially apolitical. The idea is that collaborative development partnership must involve co-creation and co-implementation with policy champions in countries receiving aid. Ultimately, Dercon’s approach is steeped in an understanding of the political economy of development that is often (bizarrely) lacking in the aid industry (as he rightfully observes above, it’s an odd thing in the aid industry that most programs just don’t bother with the domestic political economies of aid-recipients — and often treat PE analyses as fluffy box-checking addendums to otherwise rigorous program designs meaningless bean counting).

Finally, the third and boldest school idea comes from Zainab Usman — as articulated in a recent Foreign Affairs essay (highly recommended):

Proponents of global development now face a choice. They can wait for attitudes in donor countries to shift back toward support for foreign aid at some point in the distant future. Or they can reimagine the entire concept of global development, detaching it from aid and rooting it instead in industrial transformation: helping countries shift from subsistence farming, informal employment, and primary commodity production toward manufacturing and services.

In truth, the aid industry was already adrift.

Its interventions had become spread too thin and often failed to address the key obstacles that poorer countries faced as they tried to upskill their workers, build energy and transport infrastructure, and access new markets. Raising people out of poverty in Africa, South Asia, and parts of Latin America will not only improve their lives but also allow rich countries to maintain their prosperity by creating new markets, and by now, industrial transformation has a strong track record for improving economies. If proponents of global development do not adjust its methods with the times, it will lose its relevance to rich and poor countries alike.

I could not agree more. At first glance it might seem trivial to distinguish between aid and development assistance. But I suspect that Usman’s position is informed by, among other things, her experience in the belly of the beast and, therefore, deep appreciation of the extent to which the “perpetual aid” mindset infects every bit of development assistance.

It’s in the God Complex common among officials in donor countries and multilateral institutions. It’s in the tendency to suspend standard rules of economics and politics (and quite frankly, basic logic) when dealing with low-income countries. It’s in the soft bigotry of low expectations and an abiding inability to countenance the possibility that ideas from aid recipient countries can inform program design. And it’s in the total lack of accountability for failures that impact countless lives; not to mention a radical embrace of a vernacular presentism that’s unburdened by history, anticipation of the future, or contextual knowledge.

Budget support, which in my view ought to be the Gold Standard of development assistance, is a relatively small share of aid flows. At the same time, humanitarian aid comprises a relatively small share of ODA programs. Source: IMF

Under the circumstances, one important benefit of creating an ideational and operational separation between aid and development assistance would be its selection effect. Those motivated by humanitarianism would do aid work; while those interested in the fuzzier world of investing in structural economic change would focus on development assistance. Notice that donor countries could also specialize along these lines (China, for example, already has a brand as a model development partner).

This isn’t a ding on humanitarian aid work — which would still be needed in specific circumstances. It’s simply an acknowledgement that humanitarian aid and development assistance aimed at realizing structural economic change require different sets of skills and attitudes. The former requires a laser focus on preventing harm and helping people make the best of otherwise desperate circumstances (and would likely disproportionately attract those who prioritize warm glow feelings over the empowerment/independence of agentic aid recipients). The latter requires risk taking and making bets on people who are not necessarily in desperate circumstances. Failure in the former tends to result in catastrophe — hence the justifiable conservatism of “do no harm” and obsessive bean counting to keep track of short-term outcomes; while failure in the latter ought to be embraced as a feature of the learning by doing process and not a bug (with outcomes measured over a much longer duration and in complex ways). Tight donor control is often, but not always, a reasonable justification in the former case (e.g., in emergencies); while recipients’ agency is absolutely core to success in the latter.

Keen readers will notice the overlap across the three ideas of change (I recommend this discussion between Glennester and Dercon as an illustration). All three decry the problem of donors being spread thin, albeit from different starting points. There’s also overlap in the idea that more resources should be spent in low-income countries; and that officials in those countries should have more say in programmatic design and implementation. Overall, it’s easy to see how the future of foreign aid ought to adopt a synthesis of these ideas.

That said, I would prefer a world where Usman’s idea was the starting point of such a synthesis. Every organization working in international development must have a clear understanding of whether they are (predominantly) doing humanitarian assistance or investing in structural economic change.

III: Change is an opportunity for renewal

Where does this leave aid recipients? One of the reasons why it is absolutely critical to have open and brutally honest conversations about aid dependency and policy extraversion is in order to reorient the policy posture in aid-dependent countries.

The research is clear: aid tends to be effective in countries that have ownership over agenda setting and that only accept aid that aligns with their own developmental goals. It’s patently absurd to outsource goal-setting (and developmental ambition), or to expect that bilateral donors, philanthropies, and multilaterals will magically coordinate among themselves. All types of donors have their own agendas, politics, and internal logics of operations (not to mention their staff’s career incentives). By construction, they cannot coordinate to the benefit of aid recipients — not least because they have strong incentives to cultivate aid dependency (either deliberately or as a consequence of operational hoarding of agenda setting and program design to maximize measurable impact, need to demonstrate value for taxpayers, or a desire to align interventions with the latest intellectual fad in the literature).

This is why agenda setting and coordination regarding aid programming must always come from the aid recipients. They are the ones that know best where the shoe pinches and (ought to) have the right long-term incentives. You can’t help people who, for whatever reasons, aren’t interested in developing the capacity to help themselves. Notice that recipient-directed coordination is superior to even intra-sectoral coordination by donors (which is seldom effectively done anyway).

Can aid recipients be choosers in efforts to avoid being trapped in conditions of aid dependency? Absolutely! The “Christmas tree” approach to aid is a malady that also afflicts aid recipients. Similar to donors, aid recipients are also likely to positively respond to intellectual and moral license to not saddle themselves with all manner of programs that swamp their attention and administrative-bureaucratic capacity.

Even if we adopted the most optimal permutation of the three ideas for change above, can aid recipients change? The simple answer is yes, because incentives matter. If we accept that aid dependency (and resulting policy extraversion) partially explains the lack of serious attention to policymaking and implementation in low-income countries, then it follows that credible efforts to end aid dependency would alter incentives and appreciably shift the behavior of ruling elites in aid-dependent countries. At a fundamental level, the point would be to alter the very idea of how economic development and structural change happens.