Multilateral aid, politics and poverty: past failures and future challenges

In book: The Global Crisis in Foreign Aid, Edition: First, Chapter: 2, Publisher: Syracuse University Press, Editors: Richard Grant, Jan Nijman, pp.11-26


This chapter presents an overview of empirical evidence on the successes and failures of aid programs with the aim of recommending a future role for multilateral aid agencies. We examine the impact of aid programs that have come into operation since the first Bretton Woods meetings, including long term grants and concessional assistance, major infrastructure projects operated by the multilaterals, and short term aid programs to support new governments or governments in crisis.
This evidence provides one clear message: long term aid programs have broadly failed to achieve their poverty reduction goals. Some forms of short-term aid programs, on the other hand, have been more successful.

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    ABSTRACT: Decentralization or the devolution of power and resources from upper level to lower level governments has become one of the hot topics of our time. It is squarely in the forefront of the development debate throughout Latin America, Africa and Asia. And under the guises of subsidiarity, devolution and federalism it is also at the center of public policy-making in Europe and North America. And yet despite real experiments in decentralization under way in scores of countries, and literally hundreds of empirical studies, the economic and political effects of decentralization are still unclear. This paper seeks to provide the policy community with a synoptic guide to the state of current knowledge on decentralization and governance. Because ideal governance is an inherently subjective notion, the analysis is focused on the effects of decentralization on largely uncontroversial aspects of governance such as the degree of corruption and other arbitrary government interventions as well as efficiency in the provision of basic public services. Section I emphasizes several aspects of decentralization related to accountability and governance. Decentralization is thought to lead to improved governance through four main channels: (i) Improved public oversight of government activity makes officials more accountable to citizens and may reduce corruption and improve efficiency in the provision of public services. This effect may be enhanced if decentralization also involves taxation. In this case both citizens and public officials face even stronger incentives to ensure efficient use of public funds. Better public oversight of government activity may improve governance more generally by making public services and policies more responsive to people’s needs. Finally, improved public oversight and government accountability may allow specific disadvantaged groups to be targeted for benefits or welfare improvements. (ii) More equal power distribution between private actors and local instead of national government agencies may reduce arbitrary government interventions and promote the efficiency of public service. (iii) Competition among local jurisdictions may improve governance at large by giving citizens the possibility to exit a given jurisdiction and allowing them to compare policy performances across jurisdictions. (iv) Political competition at the national level may be enhanced via the creation of new political platforms at the local level and new avenues to power within established parties. Governance may be improved by a more vigorous and competitive national politics leading to political entrepreneurship and policy innovation. On the other hand, governance may be worsened if the decentralizing reform allows local elites to capture the political process. As the subsequent discussion will make clear, decentralization is not an easy fix for unresponsive or inefficient government. In order for decentralization to enhance welfare, a number of conditions must be met in addition to the basic decentralizing reform transferring power and resources from upper to lower levels of government. These can be divided into three categories: (i) Information. Politicians must have good information on what local voters want, and voters must in turn have good information on what government does. (ii) Openness and Competition. This refers to both the political party system and local firms and other economic actors that finance political parties and candidates. Openness and competition facilitate the role of policy entrepreneurs, who identify gaps in the policy offerings and devise new policies to fill these gaps. (iii) Social Trust and Civic Organization. Individuals do not participate in politics only as individual voters, but also collectively according to different cross-cutting cleavages that change over time, grouping a given set of voters in different ways. Local government depends on the relationships that collectively comprise civil society to elicit information necessary to the policy-making process, judge the efficacy of previous interventions, and plan for the future. It will be argued that complementary institutions and organizations can contribute powerfully to information, openness and competition, and social trust and civic organization. As will be made clear below, successful decentralization also requires good governance at the center, as well as a working relationships between central and local governments. In section II the focus is on such intergovernmental relations, and to their connection with the structure of central government itself. Section II begins with an argument why it is that any discussion of decentralization has to take intergovernmental relations into account. The next subsections describe the fiscal and political aspects of intergovernmental relations, highlighting their potential to affect the impact of decentralization. The section closes with a brief discussion of the mechanisms by which accountability (emphasized in section I) and intergovernmental relations (emphasized section II) are intertwined. The paper begins with the question of decentralization and governance, and then moves on to intergovernmental fiscal and political relations.
    Full-text · Book · Apr 2003
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    ABSTRACT: Bolivia decentralized in an effort to deepen democracy, improve public services, and make government more accountable. Unlike many countries, Bolivia succeeded. Over the past generation, public investment shifted dramatically toward primary services and resource distribution became far more equitable, partly due to the creation of new local governments. Many municipalities responded to decentralization with transparent, accountable government, yet others suffered ineptitude, corruption, or both. Why? Jean-Paul Faguet combines broad econometric data with deep qualitative evidence to investigate the social underpinnings of governance. He shows how the interaction of civic groups and business interests determines the quality of local decision making. In order to understand decentralization, Faguet argues, we must understand governance from the ground up. Drawing on his findings, he offers an evaluation of the potential benefits of decentralization and recommendations for structuring successful reform.
    No preview · Book · Jun 2012
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    ABSTRACT: This dissertation comprises a close analysis of decentralization in Bolivia, employing a methodology that marries qualitative and quantitative techniques. It first examines the effects of decentralization on public-sector investment and the provision of public services in Bolivia using a unique database that includes measures of municipalities’ social and institutional characteristics and information on its policy-making processes. I find that decentralization changed both the sectoral uses of public resources and their geographic distribution significantly by increasing government sensitivity to local needs in human capital investment and the provision of basic services. I then investigate the determinants of central and local government investment respectively in order to investigate why the shift in regime produced such large changes in investment patterns. I then turn to a much deeper examination of local government via nine case studies, selected to broadly represent Bolivia’s national diversity. I begin with an account of the workings of local government in the best and worst of these, analyzing the character and interactions of the major societal actors. I locate fundamental causes of good and bad government in the economic structure of a district as it relates to the political party system, and the cohesiveness and organizational capacity of its civil society. These ideas are used to build a conceptual model of the local government process in which the interactions of political, economic and civic actors reveal information and enforce accountability. I show how imbalances between them can cripple accountability and distort the policy-making process. Lastly, the dissertation tests the model by examining government performance in seven additional municipalities. I show that the framework can explain the emergence of good or bad government institutions, and thus the quality of government a district ultimately receives, through the interactions of key players – notably civic organizations – deep in the local political economy.
    Full-text · Article · Mar 2013
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