Saturday, 5 March 2011

What should we make of the new UK aid?


Paul Collier

Paul Collier

Professor of Economics

The Department for International Development is already the most respected of the country-to-country development agencies. But in the past it has been distracted by extraneous domestic political interests. In Andrew Mitchell, the department has a Secretary of State who is manifestly committed to the job in hand. He has brought a new agenda which can, I think, be summarised in four elements: greater accountability for the results of aid, concentration on fragile states, greater emphasis on the private sector and a cross-government approach so that other government policy instruments can also promote development objectives. So, what should we make of this agenda?

Greater accountability for the results of aid is a political imperative: how can an increased aid budget be justified in times of unprecedented austerity unless it is demonstrably well used? Yet convincing measurement of impact is far from straightforward. The Gates Foundation insists on quantifiable impact for all its finance, but this is made feasible by restricting what is financed to a relatively narrow range of health-related activities such as immunisation. DFID can and should adopt this model for much of its aid: the pay-off to well-used humanitarian spending can be spectacular and British taxpayers should indeed be able to feel proud that they are achieving concretely measurable improvements in the lives of the planet's poorest people.

The UK is working to avoid state failure in countries like Yemen © Tim Smith / Panos

But restricting aid to the readily measurable would rule out some of the most important objectives. For example, given the enormous costs of state failure, helping to avert it is surely a use of aid of which the British public would approve. Yet attempting to quantify the number of states where failure has been averted as a result of UK aid is self-evidently an impossible task.

The answer is surely a matter of balance, and that almost-banished concept of common sense: DFID should have a portfolio including both the readily measurable humanitarian and the less-measurable strategic. The department has established a highly credible independent panel to assess the effectiveness of British aid, while scaling down the budget for self-promoting departmental advertising: surely these are moves in the right direction.

As to greater concentration of the international development effort on the poorest countries and fragile states, how could I do other than support it? It was the core theme of The Bottom Billion. China does not need British aid: indeed, it hasn't needed it for many years. But, (and with development policy there is always a 'but'), many fragile states are misgoverned and so making aid effective in such environments is demanding.

While DFID's aid budget is set to rise, its administrative budget is set to fall. Spending more in more challenging environments - while increasing effectiveness - will require a radical rethink of how aid is delivered on the ground.

A greater focus on the private sector is long overdue. Credit: Russell Watkins / DFID

Greater concentration on the private sector is long overdue: DFID's concerns have been too narrowly focused on the public sector. An agency whose purpose is to help the economies of poor societies to develop should have a substantial proportion of staff whose core expertise is the promotion of private enterprise. Above all else the poorest societies need jobs, and jobs in sufficient numbers can only be generated by the private sector.

Finally, development policies should indeed extend beyond aid. An example – and a good starting point - is to insist that G20 companies do not undermine governance in the poorest societies by bribing their way into contracts, or by accepting money that is manifestly looted from the public purse. The latest expose from Global Witnessillustrates the scale of the scandal: the son of an oil-enriched African dictator has just commissioned a $300m yacht. An oil company looked the other way while public money was looted, a bank gratefully accepted the deposit, and a German shipyard gleefully accepted the order.

Unfortunately, the UK has not done enough to stop this in the past: only one prosecution in ten years (and that because the company asked to be prosecuted!). DFID has now got the message: it has to take the lead in getting other government departments to act.

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