Economic Development, Government Policy, Inequality, International Aid, Political Instability, Poverty

Aid Dependency: The Damage of Donation

~Written by Victoria Stanford, University of Edinburgh (Contact: vstanford@hotmail.co.uk)

  "The Culture of Aid Dependency Need to Change," David Sengeh, Sierra Leone. Photo Credit: www.engineeringforchange.org

"The Culture of Aid Dependency Need to Change," David Sengeh, Sierra Leone. Photo Credit: www.engineeringforchange.org

Aid has long been the response of richer countries to the imbalance of economic development seen across the globe. In the last two decades however, relatively non-intrusive in-kind giving has been re-branded and intensified to the point where aid today is arguably used as a strategic force in increasingly interventionist global development policy. The aid industry has seen a rapid expansion, characterised by an increase in the number of organisations, amounts of funding and geographical reach (Collinson and Duffied, 2013). The question of aid dependence is an important one; many argue that international assistance paradoxically poses a barrier to recipient country development and sustainable economic growth (Moyo, 2009).

Recent rhetoric surrounding aid dependency is clear- it is an unwelcome and unfortunate side effect of aid and its diminishment is high on the aid policy agenda (Thomas et al., 2011). What is becoming increasingly clear however is that there is an emerging type of aid-related dependency that does not refer to economic or financial factors, but political. Cases of corruption in recipient country governments have been met with the development of more complex modes of donation, including direct programme funding, conditionalities, tied aid, and grants, which give donors more control over the direction and ultimate use of their funds. This often means that those providing aid are increasingly entwined in political processes. This combined with aid uncertainty, questionable sustainability, and a tendency of top-down approaches to political involvement, create a situation where countries in need of aid are dependent upon foreign agendas.

How has aid caused dependency?

Aid dependency refers to the proportion of government spending that is given by foreign donors. Since 2000 this has in fact decreased by one third in the world’s poorest countries, exemplified by Ghana and Mozambique where aid dependency decreased from 47% to 27% and 74% to 58% respectively (3). Aid is not intrinsically linked to dependency; studies have shown that dependency is influenced by many factors, mostly length and intensity of the donation period, and 15-20% has been identified as the tipping point where aid begins to have negative effects (Clemens et al., 2012). What causes dependency is when aid is used, intentionally or not, as a long-term strategy that consequently inhibits development, progress, or reform. Food aid is particularly criticised for this; increasing dependency on aid imports disincentivises local food production by reducing market demand. This is compounded when declining aid is replaced with commercial imports rather than locally-sourced food, either because of cheaper prices or a lack of recipient country food production capacity because of long-term aid causing agricultural stagnation (Shah, 2012). This is exemplified in the situation of Haiti, which is dependent on cheap US imports for over 80% of grain stocks even in a post-aid era, or countries such as the Philippines where aid dependency has forced an over-reliance on cash crops. Dependency relates not only to commodities but also technical expertise and skills which donors often bring to specific aid schemes and projects, which when not appropriately coupled with education create an over-reliance on donors (Thomas et al., 2011).

A more concerning type of dependency

The nature of aid almost intrinsically causes what is increasingly known as ‘political dependency’ by encouraging donor intervention in political processes. Donors need to satisfy the interests, values and incentives of the home country, whilst also providing them with expected results in order to maintain the cash flow. This has resulted in donors either bypassing and therefore destabilising government service provision processes to establish donor projects, a strategy often favoured by USAID and the World Bank (Bräuntigam and Knack, 2004), or intervening directly in policy-making and implementation (Bräutigam, 2000).

The involvement of donors, either foreign governments or international agencies, in recipient country political processes has been shown to reduce the quality of governance (Knack, 2001). It reduces leader accountability; the government is “playing to two audiences simultaneously”- the donors and the public (Hayman, 2008). This means the direction of accountability is between government and donor rather than the public, risking government legitimacy and delaying the progress of political reform and development (Bräutigam, 2000). This is particularly damaging in countries where the need for aid stems from political upheaval or civil unrest such as the Democratic Republic of Congo or Zimbabwe, which have a lengthy history of aid dependence (Moss et al., 2006). The risk here is that donors have political leverage, thus decisions and planning become reliant on donor involvement whose motivation and values may not necessarily align with those of the public or government.

Furthermore, ‘earmarking’ is a strategy favoured by many international donors who fear corruption in recipient governments, therefore ‘earmark’ direct sector or programme funding rather than general government budget support (Foster and Leavy, 2001). This not only shifts the agenda-making power to donors who have the authority to set priorities and direct funds accordingly, but also creates patchy and unsustainable development where some sectors outperform others.

An additional significant problem of dependency upon international agenda-making for countries receiving aid is that globally recommended ‘best practice’ policies often lack appropriate contextualisation to cultural, religious, or social values. A top-down, uniform approach to policy implementation by donors also has logistical barriers whereby local infrastructure is incapable of carrying out donor projects effectively and producing satisfactory results. A good example of this is the widely-disseminated policy encouraging syndromic management of sexually transmitted diseases, which was coercively incorporated into aid channels in Mozambique, despite the clear lack of the technical expertise and human resource capacity that such a robust policy requires (Cliff et al., 2004). This then perpetuates aid dependency because donors do not receive satisfactory project results and may consequently reduce funding without actually solving the problem, thus the poverty cycle continues and aid is required once again.

Demolishing aid dependency

Ending or preventing aid dependency will be contingent on affirmative action from both donors and recipients. Botswana is a key example of recipient-led aid policy that effectively resulted in rapidly reducing aid and therefore dependency. Botswana began receiving aid shortly after gaining independence in 1966 (Bräutigam and Botchwey, 1999). Of primary importance here is that Botswana largely decided the direction and use of funding; areas of priority were identified and donors were matched accordingly, thus avoiding reliance on donor ideas and agendas. Only projects that the predicted government capacity could absorb once aid was reduced in the long-term were undertaken, which ensured sustainability. In contrast, the relative ‘success story’ of Taiwan can be explained by donor-led project planning. Taiwan received much aid from the US in the early 1960’s which focused mainly on building infrastructural capacity-docks, railways, factories-with the aim to increase trading systems and boost the economy. In fact, this scheme was so effective that the US eventually withdrew aid for fear of creating competition (Chang, 1965).

It seems evident that recipient-led schemes and projects are more effective and reduce the risk of dependency. Technically speaking, some argue that aid should only ever be in the form of general government budget support rather than selective sector or project aid because it reduces donor involvement in political processes. It is also less bureaucratic, is less influenced by donor missions who need to produce and report results, and avoids the risk of uneven service provision (Moss et al., 2006). Ideologically speaking, the aid industry today is at risk of forming a novel kind of colonialism where ‘Western’ ideas of development and progress are used to influence and hold power over governments of countries receiving aid.

Concluding thoughts

The aid industry must respond to the problem of economic and political dependence. Coordinated efforts to more effectively monitor donor-recipient relationships, using a widely implemented human rights-based legal and moral framework for aid policy should be the ultimate, collective goal (Ooms and Hammonds, 2008). The reality is however that with increasingly complex humanitarian disasters and the destructive forces of climate change looming, the aid industry will be called upon to increase capacity and intensity which may perhaps re-direct focus from implementing ideological change. Nevertheless, the opportunity to ‘get things right’ in aid policy and practice persists, and it is a moral imperative that the industry and its participants make the attempt.


References:

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Bräutigam, D. (2000). Aid dependence and governance, Almqvist & Wiksell International;Stockholm pp.14.

Bräuntigam D and Knack S (2004) Foreign aid, institutions and governance in Sub-Saharan Africa, Economic Development and Cultural Change, Vol 52;2, pp.255-285.

Chang D (1965) US Aid and Economic progress in Taiwan, Asian Survey, Vol 5;3, pp.152-160.

Clemens MA, Radelet S and Bhavnani R (2012) Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth, The Economic Journal, 122(561), 590-617.

Cliff J, Walt G and Nhatave, I (2004) What's in a Name? Policy transfer in Mozambique: DOTS for tuberculosis and syndromic management for sexually transmitted infections. Journal of Public Health Policy, 25;1, p.38-55

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Foster M and Leavy J (2001) The choice of financial aid instruments. London: Overseas Development Institute, pp.4.

Hayman R (2008) Rwanda: milking the cow. Creating policy space in spite of aid dependence. The Politics of Aid, 156.

Knack S (2001) Aid dependence and the quality of governance: cross-country empirical tests, Southern Economic Journal, 310-329.

Moss T, Pettersson G andVan de Walle, N (2006) An aid-institutions paradox? A review essay on aid dependency and state building in sub-Saharan Africa, Centre for Global Development; Working paper No. 74.

Moyo D (2009) Dead Aid, Penguin; London, pp.12

Ooms G and Hammonds R (2008) Correcting globalisation in health: transnational entitlements versus the ethical imperative of reducing aid-dependency. Public Health Ethics, 1(2), 154-170.

Shah A (2012) Food aid, Global Issues [Online] Available at: URL: http://www. globalissues. org/article/748/food-aid [Accessed January 02 2015]

Thomas A, Viciani L and Tench J et al (2011) Ending Aid Dependency, Action Aid; London.