Aid Effectiveness

Today we are releasing the report Governance Matters VIII, which includes the new update of the Worldwide Governance Indicators (WGI).   Now collaborating from the Brookings Institution, I continue to take part in this research project with my former World Bank colleagues Aart Kraay and Massimo Mastruzzi.

In the WGI we construct and measure six dimensions of governance, namely: Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption.

Aid is dead:  it is worse than merely useless, since it abets and perpetuates mis-governance and dependency by Africa.  No, to the contrary, massive additional infusions of aid are crucial for all of Africa.  This massive transfer of aid to governments in Africa is particularly urgent right now, in the midst of the financial crisis, which is bound to inflict permanent damage everywhere in the continent.

These blanket statements are nonsense, on both sides.  While they may contain a 'straw man' element, unfortunately in slight variants one often sees such pronouncements in current writings and public debates.  In spite of the practical irrelevance of holding on to such extreme positions, such artificial debates go on and on, pitting the extremes against each other.  The media loves it.  Each side of the argument tends to fit selective 'facts' (and hyperbola) to their extreme cause.  Even reasonable analysts tend to write about one single determinant for the ills of Africa, or just opt to focus on one extreme side of the argument or the other.

A few days ago, Dani Rodrik opened an interesting discussion with his post "How the financial crisis has killed the governance reform agenda."  Basically what he says is that "we need to downplay the role of improved governance as a causal mechanism for economic growth." 

His main argument is that the financial crisis in the US did not only undercovered issues of capture and corruption in this country -as Simon Johnson and Dani Kaufmann have argued- but also showed that it is possible to be corrupt and rich at the same time.  Based on this evidence and on his previous belief that the causal relation between governance and growth was never proofed to be strog, he concluded that even though governance reform is a good thing to do, it should not be confused for a growth strategy.

President Obama has just written an op-ed for over a dozen newspapers throughout the Americas, in the eve of the Fifth Summit of the Americas that is about to take place in Trinidad & Tobago.

This is significant.  I care deeply about the Latin America and the rest of hemisphere, and wanted to write about the upcoming Summit.  Yet until now what we had was a draft Summit "Declaration" which the country leaders and their (Foreign Ministerial?) teams had been belaboring for a couple of years.

That draft "Declaration of Commitment of Port of Spain" is a travesty.  It is interminable and practically devoid of concreteness or substance.  It would be funny if we wouldn't be in the midst of a major economic crisis, one which is expected to hit South America particularly hard in the coming months.  Andres Oppenheimer has commented on that draft, labeling it as a joke.

Consider a very different “group-of-8” countries: Botswana, Chile, Mauritius, Uruguay, New Zealand, Norway, Singapore and Switzerland.  Do they have any relevance for the G-20?  Hardly, at first.  None of them are invited to the London G-20 Summit next week.  They are not G-20 members, since neither their economic size nor their population are large enough, and they lack the global “systemic significance” of most G-20 members.  None of them belongs to the EU.  This particular "group-of-8" in fact does not really exist as a formal body.

But there is a neglected rationale for the leaders of the G-20 to pay attention to this particular set of uninvited countries.  Like the G-20, they comprise a rather diverse group of developing and developed countries from different regions of the world.  But, unlike most of the G-20, this group of eight countries have exhibited high quality of national governance.

‘Aid Effectiveness’ gone astray?  Imagine official multilateral and bilateral donor aid agencies holding high level meetings for years to agree on ‘harmonized’ aid strategies for recipient developing countries whose governments are expected to fully 'own' them.

Don't look in this space for formal definitions of donor aid ‘harmonization’.  They are in official reports from aid organizations; there you can also read about efforts to 'harmonize' the timetable and frequency of official visits by donors to recipient countries.

Instead, in this blog space let me spur debate, as I just did in a panel on ‘Aid Effectiveness’.  Let me start by echoing a panel member in advancing an unorthodox interpretation for donor ‘harmonization’:  lowest common denominator agreement among donors regarding their strategy towards a recipient country.  Spineless strategies, devoid of innovation, and skating over the toughest challenges for development.

As Dani Kaufmann and others on this blog have rightly pointed out, the issues of “grand corruption” and “state capture” are increasingly being viewed as central to promoting more accountable and transparent governments, whether in the developing world or in wealthier countries.  The West has little to show to the developing world by way of successful models, and all countries clearly have plenty of homework to do when it comes to curbing the influence of special interests on the policy process.

In the Global Integrity Report: 2008, we created our first ever Grand Corruption Watch List. This list identifies 13 countries with exceptionally weak anti-corruption safeguards in key areas that lead us to worry about the potential for large-scale theft of public resources.  As national bailout programs and stimulus packages are being rolled out worldwide, these are the countries to keep a close eye on for disappearing funds at the highest levels of government.

Today the world celebrates the International Anti-Corruption Day.  This has become a tradition since 2003, when 129 countries signed the United Nations Convention against Corruption (UNCAC) in Merida, Mexico, after working several years towards the creation of an international legal document against corruption.  Even though an anti-corruption spirit must be embraced at all places and times, today is a good moment to raise awareness about some of the vast and remaining challenges of corruption not only developing countries, but also in the most developed world.

The first G-20 summit, focused on the financial crisis, just took place this past weekend.  When measured against expectations of such gatherings, there were some accomplishments.  Such as in trade:  the collective pledge to avoid raising any trade and investment barriers, or the promise to ‘strive’ for a deal on the stalled Doha round.  And the  summit's ‘action plan’ holds promise. 

The declaration includes a generic list of a plethora of financial sector  ‘principles’ and many areas of work.  But at least it is comprehensive in scope, touching on most of the right ‘buttons’.  It provides space to work concretely on real issues.

“Without good governance, Africa will go nowhere.”  This is the vision behind the Mo Ibrahim Foundation, a $400 million African initiative that aims building a better Africa by supporting civil society and democratic African leaders in the promotion of good governance.  While some of the Foundation’s approaches are traditional among governance practitioners, others are less common, such as a monetary prize for sub-Saharan African leaders committed to good governance and democracy.