Global Development: Views from the Center
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September 27, 2006
Pity the Fools: The UN’s embarrassing aid proposal
Posted by Todd Moss at 12:27 PM
There have been many many bad ideas over the years about how to help Africa, but here’s my vote for the worst one in a long while: UNCTAD’s proposal to create a new UN agency to manage a doubling of aid flows to the continent.
Before we get to the proposed solution, the analysis of the problem is deeply flawed. According to the press release:
a new "aid architecture" is needed, drawing in part on the Marshall Plan that helped revitalize European economies after World War II. That plan, paid for by the United States, recognized that shock therapy and piecemeal projects had not helped in getting Western Europe back on its feet and offered instead a generous, multi-year and coordinated funding approach, with each State drawing up long-term recovery plans with no outside interference.This is a strange interpretation of the Marshall Plan! US assistance to Europe only lasted a few short years and, even at its peak, was never more than a few percentage points of GDP of any receiving country (a fraction of current inflows to many African countries). More importantly, as Brad de Long and Barry Eichengreen demonstrated years ago in The Marshall Plan: History’s Most Successful Structural Adjustment Program (PDF), the success of the Marshall Plan had little to do with capital infusion and mostly was about the attached conditions—precisely the opposite reading of UNCTAD. How UNCTAD decided that the Marshall Plan is a model for hands-off, long-term predictable funding is utterly baffling.
It gets worse:
…existing multilateral aid mechanisms, such as the World Bank´s International Development Association (IDA) and the International Monetary Fund´s Poverty Reduction and Growth Facility, have not lived up to expectations and are not suited to administering doubled aid….These funds along with various new mechanisms related to a doubling of aid might best be merged into a new UN fund...Really? Merge IDA and the PRGF, plus all the new aid coming down the pipeline, into a single UN agency? Any guesses for what might be the donors’ reactions? The suggestion is so naively ludicrous that I first thought it was a joke (or perhaps a hoax designed to finally goad Congress into pulling the US out of the UN?). It's no accident that the World Bank and IMF are designated as the lead multilateral agencies for, respectively, development and fiscal stability. Nor is it an accident that they were set up as distinctly separate from the UN.
This proposal is, in the end, quite a sad indication of the desperation of some marginalized agencies to find a shred of relevance. But rather than making the case for the UN to take more responsibility, this report has instead shown exactly the opposite.
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Comments
It is so much easier for existing bureaucracies to propose new arrangements to dispense money than to figure out how to truly improve aid effectiveness. Rigorous evaluation, based on randomized trials or even traditional cost-benefit analysis is still not used by any aid organization on a large scale. Neither are any of them able to make lending be based on good policies and reform efforts, although there are more efforts in this area than in evaluation. Simply shifting money around existing institutions (or more disastrously, combiningfunds that are meant to be separate)will not make aid delivery better; if anything, it will likely make it worse.
Posted by: Vijaya Ramachandran at September 28, 2006 01:58 PM
While the scramble for the partition of aid by Who, Where Why, When and How rages, only 16 cents of a dollar a year – loaned by the World Bank and IMF - trickles down to an African’s fingers. His government meanwhile, faithfully pays millions of dollars a year just in interest rates, and struggles to utilize 1/4 of the donor funds before the financial year’s deadline. 50% of his countrymen continue to live below the so-called poverty line.
No wonder the UN is desperately looking for a way out of this pathetic vicious cycle, because it is evidently not in the interest (no pun on the word!) of some of the other well-meaning organizations…
“Gates are down, the lights are flashing, but the train isn’t coming.” Au secours!
Posted by: Aggie Alando-Hoffer at October 2, 2006 05:05 PM