Sad to say, Abhijit Banerjee is correct: among the many imperatives that drive the global-development aid business, a practical concern for observable results features far less prominently than it should. Like him, I cannot really prove this claim. But I have hung around aid agencies long enough to feel strongly that it is true.
Why this weak interest in results? One popular answer is that aid money is allocated and monitored by the governments and legislatures of rich countries. They will always give priority to their own diplomatic, electoral, commercial, or bureaucratic interests. There is some truth in this argument. But we should not underestimate the degree of altruism and personal commitment embodied in many aid efforts, national and international, official and voluntary. To understand how this genuine concern can coexist with a fragile commitment to real results, we need to look more closely at how the international aid business has evolved since its advent after World War II.
First, the number of aid agencies has mushroomed. In the immediate postwar period, the United States was the only significant official donor, and the big international voluntary organizations like Oxfam were just beginning to emerge. Since then, the UN family of aid agencies has expanded to several dozen. Many of them have their own offices and programs within poor countries. One of them, the United Nations Development Program, coordinates its siblings.
Instituting a national aid program has become a way for countries to proclaim their “developed” status. All OECD countries—and quite a few others—now have one. Recently, high oil and gas prices have allowed some resource-rich states to become significant international donors. Although still an aid recipient itself, China has greatly expanded its long-standing overseas aid program, and India is establishing one for the first time. Because many emerging economies have been weaned off aid in recent decades, contemporary aid recipients now form a distinctive, limited group of the poorest countries—most of sub-Saharan Africa, Central America, the Andes and “problem Asia” (Afghanistan, Pakistan, Nepal, Laos, Cambodia).
Each nation in this group tends to receive a great deal of aid, often more than half of its government’s budget. And each is subject to the attentions of dozens of official bilateral and multilateral aid agencies, all of them seeking business opportunities. The big international agencies, notably the International Monetary Fund and the World Bank, are having difficulties finding customers. Contrary to conventional stereotypes, the aid agencies themselves are as much supplicants as the countries they support. There are predictable effects on the relationships between the aid offices within recipient countries: rivalry, duplication and overlap, and competition for prominence in some very crowded fields.
Second, since the 1980s in particular, official aid budgets have been partly redirected to development NGOs. These private voluntary organizations, along with some religious organizations, have become the major domestic lobbies supporting official overseas aid programs in many donor countries since the end of the Cold War. Individual NGOs from donor nations have formed strong networks with equivalent organizations within recipient countries. Within those countries, where official aid agencies number in the dozens, foreign and local NGOs number in the hundreds and thousands. NGOs tend to relate to one another in much the same quasi-competitive fashion as the official agencies.
Third, there has been a major change in the professional disciplines of the staff of both official and NGO development agencies. Engineers, medics, accountants, geologists, chemists, and agronomists are out—more precisely, their services are now outsourced. Today the agencies are staffed and run by expressive intellectuals. Trained in social science, they are apprenticed more in seminar rooms than in veterinary clinics or construction sites, and they are skilled in performing the key functions of the contemporary aid business: producing position papers and strategy documents and managing inter-agency coordination meetings.
Fourth, very little aid money now goes to discrete and definable projects. The current orthodoxy is that projects financed by outsiders undermine and fragment the machinery of recipient governments. Official transfers go to large sector-wide programs or, increasingly, into the general revenues of recipient governments. Without evaluating large swaths of national budgets, the true impact of aid cannot be assessed.
The incentives created by these organizational trends shape behavior and discourse within aid agencies and help explain why real impact on poverty is not a priority. The need to keep abreast of their rivals pushes agencies to continually reinvent policies, strategies, and big ideas. In an environment in which few agencies have the autonomy to act with authority and decisiveness, activities are justified to a large degree in terms of their contribution to improving institutional processes. Terms like empowerment, capacity building, participatory development, strengthening civil society, decentralization, and local ownership proliferate. Every one of them generates extensive conceptual debate. None are measurable. Small development NGOs that have built up some modest capacity to provide health services or agricultural-extension advice to their local communities are told by their donors that no more money will be forthcoming unless they move from mere technical support into empowerment or advocacy.
I am not sure that Banerjee is entirely right in characterizing these attitudes and behaviors as “lazy.” I see them rather as rational responses to the organizational environment. Does this mean that they are too deeply entrenched to change? Probably not. There are some important new faces on the scene: the new private philanthropists. These are self-made, mainly American businesspeople who accumulated fortunes quickly enough that they are able to turn to philanthropy while still relatively young. Bill Gates is the most prominent example, but he is not the only one. As Banerjee mentions, Gates is asking searching questions about the impact of his money. Once they gain prominence, organizations like the Bill and Melinda Gates Foundation and the William and Flora Hewlett Foundation could challenge the existing aid business in a constructive way. For reasons given above, it will not change overnight. The most important single indicator of improvement will be reductions in the number of agencies competing on the ground. Some of the big international NGOs such as Save the Children have already begun to consolidate and reduce duplication. When you read that Denmark has agreed to hand over its aid funds and program in Namibia to Germany, and will in return take over Germany’s program in Tanzania, then you will know that the tide is flowing the right way. The fewer the donors in any place, the more difficult it will be for them to sidestep the crucial issues that Banerjee raises.