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Reader response: foreign aid, geopolitics and perverse incentives

Posted By on November 14, 2014 @ 06:00

Money on a Hook [1]I commend Charles Miller for writing [2] on the important and under-examined relationship between our development assistance and broader international goals and settings. I’m puzzled, however, by his leap from the imperfectability of foreign aid to a declaration that it doesn’t work, especially when donated for strategic reasons.

Almost all aid offered by OECD donors such as ourselves is ultimately provided for some mix of both humanitarian and strategic motives. In Australia, a third purpose—supporting domestic commercial interests—was formally removed in 1997. But even at the height of the subsequent ‘One Clear Objective [3]’ phase of our aid approach, a key reason for focusing on poverty reduction was to break the link between underdevelopment, insecurity, and instability in countries that are important to us.

Of course that argument might seem like a self-licking ice-cream if you accept the proposition that foreign aid doesn’t assist, and may even harm, poverty alleviation. But few experts believe that. Divining whether development assistance helped pull some countries out of poverty or made life in other poor countries less abject than it might have been is notoriously difficult and not illuminated much by the absence of aid in a few unusual cases such as Somaliland. True, some scholars such as William Easterly suggest foreign aid has little or no net positive effect. Still, others [4] claim it has near-miraculous transformative powers. Most experts can be found in the middle of that spectrum [5], arguing for good aid [6] and against bad aid [7].

Even if our assistance didn’t work to improve health, education, infrastructure, and governance outcomes—so failing to promote regional growth and stability or peace and prosperity—it could still work instrumentally to advance our national interest in strategic access, influence, and soft power sway. While Joseph Nye feels the strongest form of his concept of soft power is what makes a country attractive when it isn’t trying [8], he suggests deliberate charm-offensives (‘smart power [9]’) involving all the levers of government, including public diplomacy and aid can be powerful too.

What then of Charles’ specific worries that recipient country politicians will steal, waste, or not bother to raise tax revenue that would have been used to acquire services provided by donors; that they’ve an interest in keeping their nations poor to keep the aid flowing; or that they’ll tell us where to shove our governance principles if they know their cooperation or stability is important to us? Well, in practice none of those concerns are as simple as that. Most developing world leaders, like their Western counterparts, are driven by a complex range of noble, venal, nationalistic, and self-serving impulses—inadequately explained by sweeping generalisations that all are kleptocrats [10]. Once-inspiring leaders like Mugabe can go rotten while others who’d be turned away from Transparency International (if only they weren’t treasurer of the local branch) may pursue national, as well as their own, interests more energetically and imaginatively than purer technocrats. And even where some worry our national objectives could put us over a barrel if we wanted to say no to a dubious aid project in a country we want to do well for strategic as well as sentimental and altruistic reasons, donors retain considerable clout. A degree of mutual dependence [11] can also promote a more genuine and equal partnership; we don’t have all the answers. In PNG, for example, our influence is still significant. True, it plunged around 16 September 1975—that was the point of Independence—but it has been up and down since then, rather than steadily downward.

I hope Charles contributes further in this area where much thinking remains to be done, especially in relation to regional shaping and conflict prevention. While he mentions the poverty-busting power of remittances (which now generate a greater proportion of the financial flows [12] to developing countries than foreign aid) no one, to my knowledge, has made the strong security case that surely exists for greater Pacific labour mobility into Australia, for example. But it’ll take more than abstract thought experiments if we want to get beyond let-them-eat-theory prescriptions for helping the region’s poor and safeguarding our own regional interests.

Karl Claxton [13] is an analyst at ASPI. Image courtesy of Flickr user Tax Credits [14].



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URL to article: https://www.aspistrategist.org.au/reader-response-foreign-aid-geopolitics-and-perverse-incentives/

URLs in this post:

[1] Image: http://www.aspistrategist.org.au/wp-content/uploads/2014/11/7214510228_fa7685186d_z.jpg

[2] writing: http://www.aspistrategist.org.au/foreign-aid-geopolitics-and-perverse-incentives/

[3] One Clear Objective: http://aid.dfat.gov.au/Publications/Pages/477_4899_4957_6788_7337.aspx

[4] others: http://www.foreignpolicy.com/articles/2014/01/21/the_case_for_aid

[5] Most experts can be found in the middle of that spectrum: http://devpolicy.org/2014-Australasian-Aid-and-International-Development-Policy-Workshop/Roger-Riddell-Keynote-Address.pdf

[6] for good aid: http://annualletter.gatesfoundation.org/

[7] against bad aid: http://www.ethicsandinternationalaffairs.org/2007/does-foreign-aid-really-work-by-roger-c-riddell-foreign-aid-diplomacy-development-domestic-politics-by-carol-lancaster/

[8] attractive when it isn’t trying: http://www.foreignpolicy.com/articles/2013/04/29/what_china_and_russia_don_t_get_about_soft_power

[9] smart power: http://www.huffingtonpost.com/joseph-nye/smart-power_b_74725.html

[10] kleptocrats: http://en.wikipedia.org/wiki/Kleptocracy

[11] mutual dependence: http://devpolicy.org/of-manus-and-megaphones-or-how-i-learned-to-stop-worrying-and-love-a-bit-of-m-a-d-20140324/

[12] greater proportion of the financial flows: http://www.aph.gov.au/DocumentStore.ashx?id=8f20f45f-3790-4721-897d-dee1d4b1f43f&subId=32663

[13] Karl Claxton: https://www.aspi.org.au/about-aspi/aspi-staff/analysts/karl-claxton

[14] Tax Credits: https://www.flickr.com/photos/smovic/9438540234

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