G8 aid: beyond the target trap

About the author
Stephen Browne has worked for different organisations of the United Nations development system, most recently as deputy executive director of the International Trade Centre (ITC), Geneva - the technical-assistance trade organisation of the United Nations Conference on Trade and Development (Unctad) and the World Trade Organisation (WTO). He is now director of FutureUN.org, a project examining the United Nations development system (including its evolution, its gaps, its duplications) in order to seek improvements. Stephen Browne’s books include Aid and Influence: Do Donors Help or Hinder? (Earthscan, 2006); (with Sam Laird) The International Trade Centre: Promoting an Export Culture (forthcoming, Routledge 2011); and The United Nations Development Programme and the UN Development System (forthcoming, Routledge, 2011)

Another summer, another Group of Eight (G8) summit, and another opportunity for the world's richest countries to wring their hands over the plight of the poorest - it is no wonder that the gathering of world leaders and international organisations at Heiligendamm, Germany on 6-8 June 2007 can appear like the latest act in a perpetual cycle where public declarations matter more than results.

In July 2005 at Gleneagles, Scotland - a summit into which the London bombings irrupted - the G8 countries promised to double their aid to Africa. Since then, they have written off a substantial part of the external debt to the largest and oil-richest country, Nigeria. But new aid to the continent has stayed flat. In 2006, while Europe increased its aid, the two largest G8 economies, the United States and Japan, reduced theirs.

Should the world worry about perpetually missed targets? Or should we rather question whether they are worth setting at all?

Aid targeting is nothing new. The Pearson report (Partners in Development: Report of the Commission on International Development) of 1969 proposed that 1% of rich-country GNP should be transferred every year to developing countries in the form of private and official resources. In 1970 the United Nations confirmed the target of 0.7% for official development assistance (ODA) - the familiar definition of aid established by the Organisation for Economic Cooperation and Development (OECD) - since when a growing number of donor countries have stated their intention to reach it. Five countries have already done so - Norway, Sweden, Denmark, Netherlands and Luxembourg - and other European donors agreed at the Monterrey conference on financing for development in 2002 to set dates for attaining it.

Also in openDemocracy: gendering the G8, with a series of articles and a lively openSummit blog, "Women talk to the G8"

The United States and Japan don't set targets and it is legitimate to ask what targeting really means. Is it based on a realistic estimation of the resources actually required to achieve a "developed" state? In the 1960s, and based on the understanding of the development process at that time, the target had some meaning. Development - often equated with economic growth - was supposed to depend mainly on capital, which developing countries lacked and the developed countries could supply.

A matter of quality

Today, the target has no such meaningful basis. The resources represented by 0.7% of the rich economies in 1970 would be a very different (and a much smaller) percentage today. Even if we still imagined that development depended critically on resources, there are many sources besides aid: export revenues and remittances, for example, and domestic public and private resources. In fact, Pearson's original target, which included private external finance, has been massively exceeded years ago. Total private foreign direct investment (FDI) flows from north to south are several times greater than ODA. The Center for Global Development says that "the 0.7% target was calculated using a series of assumptions that are no longer true, and justified by a model that is no longer considered credible" (see Michael Clemens & Todd Moss, Ghost of 0.7%: Origins and Relevance of the International Aid Target, 2005).

Stephen Browne is deputy executive director and director of operations at the International Trade Centre (ITC), Geneva. This article is written in his personal capacity, and draws in part on the author's Beyond Aid: From Patronage to Partnership (Ashgate, 1999) and Aid and Influence: Do Donors Help or Hinder? (Earthscan, 2006)

Also by Stephen Browne in openDemocracy: "Whatever happened to 'development'?"
(18 April 2007)

If there is still some purpose for setting targets for aid, it is to create and sustain a momentum for ODA. Most donors haven't met the target, but they have agreed that they should increase assistance to the poor countries. For the politicians of the rich countries and their constituents, therefore, aid targeting plays a useful role in reminding governments of their obligations. Targets can have a ratchet effect.

The real problem, however, is not in the quantity of aid but its quality and the way it is used. There is a growing body of evidence (see Stephen Browne, Aid and Influence: Do Donors Help or Hinder? [Earthscan, 2006] and Roger C Riddell, Does Foreign Aid Really Work [Oxford University Press, 2007]) that traditional forms of development aid do not make a major difference. If targets only help to ratchet up the same aid on a larger scale, then more development will not result.

Four problems...

Here are four significant distortions:

▪ Most aid is administered by many large and expensive public bureaucracies each with procedures of their own

There are at least eighty public-aid agencies employing more than a quarter of a million bureaucrats, a substantial number of consultants as well as the employees of non-governmental organisations who are aid-financed. Each agency has its own reporting and accountability procedures prescribed by each of their governing bodies, to which the agencies are mainly accountable (upwards - to the paymasters - rather than downwards to the ultimate beneficiaries of aid).

Supply is excessive and duplicative

Aid is driven by supply i.e. it is always pre-financed. And supply-driven means more rather than less. The existence of many well-resourced aid agencies leads to considerable duplication of services as each agency seeks to market its own particular development "solutions". Some developing countries in Africa receive as many as twenty donor missions per week on average throughout the year. All these missions have their own procedures and styles, and develop their own outputs. Most have them have little impact on the development process but are designed to help justify the expenditure of resources.

▪ Recipient countries are chosen according to the instincts of northern politicians and donor self-interests

The destinations of aid are determined according to eligibility criteria, which the political governors of the agencies determine according to country interest as much as recipient need. Even in the multilateral system, the donor countries can influence the choice of aid recipient by conditioning and targeting their contributions. These criteria include commercial, historical, geopolitical and security considerations. Consequently, developing countries with the most impoverished populations - some of which are fragile or failing states - are often not those which attract the most assistance. Aid might be expected to be concentrated on countries with the lowest levels of human development. But there is no such correlation.

▪ The content and terms of aid are strongly influenced by the needs and interests of the suppliers rather than the recipients and the solutions do not stick

Agencies have their own preferential agendas, which reflect the latest development paradigms of their academics and researchers. These developmental paradigms have provided the frames within which donors have inserted their own technical solutions.

These foreign solutions are not fully absorbed. More often they are grafted on to local institutions without strengthening them from within. Or they remain as enclaves. The proliferation of donor-funded "project implementation units" (PIUs) provides widespread evidence of these grafts. PIUs are there to ensure that the donors' projects are carried out to donor specifications. They employ foreign and local staff who are remunerated at levels well above local scales. When the project has run its course, the PIUs disband leaving little behind in terms of sustainable capacity. Enclaves are similar. They include, for example, some of the withering fruits of capital assistance: empty schools and hospitals, crumbling highways and silted dams.

Also in openDemocracy on the G8 and the politics of aid:

Fred Pearce, "Memo to the G8" (1 June 2005)

Michael Holman, "Welcome to the aid business! "
(27 June 2005)

Chukwu-Emeka Chikezie: "African agency vs. the aid industry" (6 July 2005)

Leni Wild, "China, Africa and the G8: the missing link"
(11 July 2006)

Saleemul Huq & Camilla Toulmin, "The G8 summit: don't forget climate change"
(12 July 2006)

Ehsan Masood, "The aid business: phantoms and realities" (18 July 2006)

Tanya Lokshina, "Russian civil society: the G8 and after"
(19 July 2006)

Michael Holman: "Africa: celebrity and salvation"
(23 October 2006)

Michael Edwards, "A world made new through love and reason: what future for 'development'? "
(26 April 2007)

Stephan Haggard & Marcus Noland, "Famine in North Korea: markets, aid and reform" (3 May 2007)

Plus the nineteen articles in our "G8 summit 2005" debate

...and four reforms

The truth is, development responds more to facilitation that to the kind of distorted hands-on patronage which much development assistance provides. Donors would do better to provide more of something different. Here are four suggestions.

First, they could forgive more debt. For the poorest countries this should mean wiping out external indebtedness entirely, and not lending more either bilaterally or through the multilateral system, such as the World Bank. External funding should be in grant form and should be used to finance mutually approved programmes aimed at promoting growth and meeting human needs, including the Millennium Development Goals.

Second, they could facilitate global trade and stop putting barriers in the way of exports from the poorest countries. There is much talk of "aid for trade" these days, but still developing countries face high tariffs on their exports of goods to which they try to add value. The so-called "donor" countries collect much more in import tariffs from developing countries than they provide in aid. And while global trade rules try to prevent developing countries from subsidizing their farmers, agricultural protection in the richest countries still runs at about three times the level of annual ODA ($300 million). Trade for aid would be better for all, including the consumers of the rich countries.

Third, developing countries need global public goods more than they need hand-outs. More funds should go into vaccines and medicines against the diseases that attack millions of children and adults. The Global Fund for AIDS, Tuberculosis and Malaria - three diseases which kill 6 million people per year in the developing world - needs more funds, as does the Global Alliance for Vaccines and Immunisation to reduce mortality. Theirs are meaningful targets. Other public goods could help eliminate the public bads of conflict and violence, trafficking of people, drugs, small arms and landmines.

Fourth, there is also a rapidly mounting concern for responsible environmental management to turn back global warming, the most deleterious consequences of which will fall on the poorest countries. Funds are needed to accelerate the development and deployment of technological solutions which will wean the world from hydrocarbons.

By the time the G8 meets in Toyako, Japan on 7-9 July 2008, let us hope to hear about some of these more meaningful targets: more widespread debt forgiveness (not mainly confined to the oil providers); the conclusion of the ongoing Doha trade round, which responds to the genuine development interests of the poorer countries; and more funding for peacekeeping, drug control and sustainable-energy solutions.

For the G8 to do more good for the world, it needs to review its broader development footprint: reducing the harmful effects of conditioned aid and distorted trade, while creating a more propitious global environment.

Traditional aid targeting won't cut it.