Development aid in context

I’ve just started More Than Good Intentions, the new book on impact assessment in international development by Dean Karlan* & Jacob Appel, and was struck by a figure given in their introduction: US$2.3 trillion has been spent on development aid over the past 50 years.  (They don’t specify how this figure was constructed, or whether it’s in nominal or constant dollars.  However, Easterly cites the same figure elsewhere, so I’m going to run with it for the moment.)  K&A mention this in the context of arguments about development effectiveness, with the usual gloss – the question of how that much money could have failed to spark development.  Reading this now, however, I’d sooner ask the opposite question of why anyone might assume that such a trivial sum could suffice to materially transform large swathes of the world.

Think about it: US GDP in 2009 was $14 trillion in nominal terms.  In a single year, the wealthiest country in the world produces up to 6 times the value of all the money spent on aid over the last 50 years.  To put it in per capita terms, US per capita GDP in the same year was $45,989 in nominal dollars.  Let’s assume that the $2.3 trillion in aid was spent equally over those 50 years, for approximately $46 billion in aid per year.  Let’s assume as well that this aid went exclusively to the bottom billion during each of those years.  That leaves us with about $46 per person per year over 50 years – about a month and a half of subsistence at an average of $1 a day.**

This is a highly stylized and inevitably inaccurate description of how aid funding is spent, but I found it useful to put these numbers into context.  Why should we expect that a sum like $46 per person per year, no matter how effectively spent, might successfully pull nations out of poverty?  Why should we expect this paltry ammunition to succeed against the array of historically and politically contingent reasons why countries find themselves unable to grow or to equitably distribute the benefits of growth?

Of course, this isn’t actually an argument against aid, or improving aid effectiveness.  The fact that it isn’t sufficient to raise all impoverished people out of poverty doesn’t mean that the limited but real benefits that it can provide – like improving access to healthcare or education – are suddenly worthless.  And certainly almost everyone in the development community sees aid as necessary yet insufficient for development.  However, to echo Fukuyama’s critique of the lack of historical context in recent political science work (which you can read in my notes [PDF] from his recent talk at SAIS), I find it a bit troubling that we as development practitioners are still quite so focused on the causal link between aid and development, sometimes at the expense of broader thought about how countries develop and why.  As a commentator at the Fukuyama talk said, much development work feels like it’s “trying to do history in a hurry” – and with insufficient tools at that.  Alongside rigorous evaluation of the type K&A advocate, I’d love to see a stronger understanding of historical contingency & context in discourse on development.

* I worked on one of Dean’s projects with IPA, and he generously sent me a galley of the book for free.

** For the sticklers on research methods, yes, I know that nominal & real dollar amounts aren’t directly comparable; that aid hasn’t gone to a tidy billion people per year for exactly 50 years; that $1/day is actually a complex estimate of poverty [PDF]; and that living on $1/day doesn’t actually mean you get a dollar per day.  It’s a thought experiment, yo.

8 thoughts on “Development aid in context

  1. Very interesting post.
    Your thought experiment assumes that the aggregate sum of all development aid fell roughly equally to the bottom billion people on the planet at a consistent rate. (I know this is not the way this actually happens, but I thought I’d have a thought experiment too.) What if they gave the entire 2.3 trillion to JUST ONE PERSON? That person would most definitely no longer be impoverished.
    (Ha!)
    In all seriousness, though, your piece made me curious. I am asking as an outsider – I have a very sparse academic base in African or Economic issues. If the goal of aid is to foster international development, is it best to distribute the money relatively equally to very poor nations (while obviously taking into account differences in circumstances,) or would it be more effective to concentrate on regional ‘leader’ nations who could then play a role in international development on a more local level?
    I guess I am asking because when I hear questions like, “Lordy! We have spent a total of $___ dollars on and, my heavens, is still just as bad as ever!!!” I don’t think that the proper reaction is to conclude that money can’t solve these problems and so any effort is futile. I also intuit that the problem isn’t just that we should spend ‘more.’ In general, one problem with certain development programs (and I myself work for an international non-profit,) is that they are imposing/introducing a lot of well-meaning things without an appropriate context on the ground. These barriers are institutional, cultural, historical, or anything-al and are much more difficult to tackle than a lack of cash-flow.
    I wonder if concentrating on targeted ‘potential leader’ nations would provide a stronger contextual cohesion to underscore and compliment these programs. As in, “ooh, look at ____! That country has some spiffy things going for it. I relate more to that country than to the U.S. Also, this country can involve me much more in its culture and education! I get its institutions and see how they could be incorporated where I live. Neat!”

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    1. Hey Nat – you ask a really good question (about potential leader nations), and make a really good point about programs being introduced without the appropriate context on the ground. One of the big challenges in development is that the poorest countries are often that poor because they have truly atrocious leaders, and so there’s an immediate contradiction between trying to help people who need aid most, and trying to use aid money efficiently. Some donors try to make aid money conditional on various good behaviors (reforming economic policies, releasing political prisoners, etc.), but of course a lot of bad leaders don’t actually care that much about the well-being of their people, and aren’t very swayed by the prospect of losing funds intended for education or health.

      One big program was launched in the early 2000s with an aim similar to the one you mention, though – the US Millennium Challenge Corporation gives aid exclusively to poor countries that have already met certain thresholds for democratic governance, good economic policies, and etc. (It’s rewarding winners rather than trying to reform losers, in other words). I don’t think this is focused on trying to influence the participating countries to promote good development in their regions, in part because a lot of regional organizations like the African Union are still very weak, but it is trying to maximize the impact of aid money by making sure that the context is right for it to be used more effectively. Similar caveats apply to the MCC as to the overall $2.3 trillion spent on aid – it’s still a small amount of money, and in the MCC’s case it really hasn’t had a long time to have effects on countries – but I still think it’s a pretty good idea, but precisely the reasons of contextual appropriateness that you mention.

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  2. The argument you make is one which I feel is important to remember and makes me feel equally as uneasy. It is important because, as you say very well, development is a long process that will not happen in a snap. Money will have to continue to be spent to enable development which, in the end, will not be a small sum.

    I am uneasy when this is used because it is how the MVPs dismiss criticism. I have heard this used by John McArthur to make the case for we need more money while ignoring the fact that there are many programs past and present which use up current money and do a terrible job.

    So I am a bit torn here, but I am glad you brought it up. I look forward to your further thoughts upon completing the book.

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    1. On a similar note, if you didn’t see this on Twitter already, definitely check out this post on how we as practitioners are bad at thinking about how to measure the long-term effects of development aid: http://blogs.worldbank.org/impactevaluations/guest-post-michael-woolcock-on-the-importance-of-time-and-trajectories-in-understanding-project-effe. I wonder sometimes if small amounts of aid have positive, if marginal, effects over the long term that aren’t evident in the short run – the “world would be even poorer without aid” argument, essentially.

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  3. Good points. Worth remembering as well the relevance of aid as a low annual figure compared to other developing country government expenditure, and to remittances. La Vidaid Loca had a nice diagram showing where aid flows and that remittances are about twice as big (http://lavidaidloca.wordpress.com/2011/03/09/what-does-aid-look-like/). However I guess the strength of some of the behavioural economics / ‘nudging’ approaches is that it can help the poor make better use of their own money, regardless of the magnitude of any aid that reaches them.

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    1. Hi Stephen – very good points about both the importance of remittances and the value of “nudge” approaches. And of course this links into the imperative for broader reform of policies that affect business creation & growth, as well…

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