Aid and State Formation in Africa: What the Rich World Cannot Do ODI, London, May 22, 2006 - PowerPoint PPT Presentation

Loading...

PPT – Aid and State Formation in Africa: What the Rich World Cannot Do ODI, London, May 22, 2006 PowerPoint presentation | free to download - id: 6746c5-NDkxZ



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Aid and State Formation in Africa: What the Rich World Cannot Do ODI, London, May 22, 2006

Description:

Aid and State Formation in Africa: What the Rich World Cannot Do ODI, London, May 22, 2006 Nancy Birdsall President Center for Global Development – PowerPoint PPT presentation

Number of Views:82
Avg rating:3.0/5.0
Slides: 64
Provided by: gpettersson
Learn more at: http://www.odi.org
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Aid and State Formation in Africa: What the Rich World Cannot Do ODI, London, May 22, 2006


1
Aid and State Formation in Africa What the Rich
World Cannot DoODI, London, May 22, 2006
  • Nancy Birdsall
  • President
  • Center for Global Development
  • Washington, D.C.

2
Outline
  • Part I The donors dilemma three decades of
    massive aid to still-poor countries, mostly in
    SSA
  • Part II The IPT and the aid-institutions
    paradox aid is not helping and may even by
    hurting
  • Part III What donors can and cannot do about
    poverty and state failure in SSA

3
Part I The donors dilemma
  • A large set of countries remains poor
  • (20 of more of the population living on a 1 a
    day or less)
  • And have received massive amounts of aid
  • (10 of GDP or more)
  • Aid intensity varies among these poor
    countries,but most are in Sub-Saharan Africa
  • O An institutional poverty trap?

4
(No Transcript)
5
Aid dependency varies among these poor
countries,but most are in Sub-Saharan Africa
6
Defining the institutional poverty trap What an
institutional poverty trap is not
  • Not a Sachs-type poverty trap

7
Convergence and divergence
8
The best and worst 10-year average growth rates
within countries
Source Reproduced from Jones and Olker (2005).
9
Growth spurts are not pure recoveryincome after
best 10 year growth episode relative to prior GDP
peak
Source Reproduced from Jones and Olker (2005).
10
Basic facts of growth and poverty do not support
notion of poverty trap defined as a persistent
low-level equilibrium
  • (Berg et. al.) Poor countries are not a
    persistently well-defined group
  • Easterly (2005) growth rates are not
    statistically lower in poor countries income
    levels are not stationary
  • There is lots of movement across quintiles of
    countries, including growth successes and growth
    disasters

11
Growth Successes...
Source Reproduced from Berg and Leite (2006).
12
Growth Successes...
Source Reproduced from Berg and Leite (2006).
13
Maybe there are traps for a subset of countries,
e.g. tropical landlocked countries
Source Reproduced from Berg and Leite (2006).
14
But even tropical landlocked countries in SSA
have had growth accelerations (adapted from Berg
et. al.)
15
The real problem Growth accelerations in SSA
have not led to autonomous sustained growth
(take-offs)
  • Africas problem is more duration of growth
    spells (Berg et. al.) There are growth reversals
  • Sounds more like an institutional poverty trap
    than a conventional low savings poverty trap

16
Some growth reversals ...
Source Reproduced from Berg and Leite (2006).
17
Defining the institutional poverty trap What an
institutional poverty trap is not
  • Not a debt trap aid transfers have financed debt
    payments

Source Birdsall, Claessens, and Diwan (2003).
18
Defining the institutional poverty trap What an
institutional poverty trap is not
  • Not a simple corruption problem, or lack of
    democracy
  • (East Asian tigers in the 1960s and 1970s
    Indonesia 1970s through 1997 Vietnam and China
    1990s to 2005. All these have had decade-long or
    more growth)

19
Defining the institutional poverty trap What an
institutional poverty trap is not
  • Not a Sachs-type poverty trap
  • Not a debt trap per se
  • Not a simple corruption problem, or lack of
    democracy

20
What the institutional poverty trap is some
inadequate definitions
  • Vicious circle in which poor institutions impede
    sustainable growth which undermines building of
    sound institutions
  • The absence of a developmental state a la
    Leftwich) Lack of effective state institutions
    that generate predictable, credible and clear
    rules of the game that enable markets to operate
    and support investment, invention, efficiency and
    thus economic growth
  • The absence of at least one of two
    characteristics an autonomous state (from
    interest groups East Asia) with capable civil
    service, or sufficient direct accountability
    (India, free press, democratic institutions)

21
Ex ante efforts at measuring institutions have
not (yet) been particularly successful
  • Sub-Saharan African low-income countries as a
    group scored better on the ICRG measure of
    institutional quality in 1985 than other
    low-income countries, but have fared worse on
    growth
  • Good institutions are by definition stable and
    credible, but some countries ICRG indices fell
    more than 44 percent between 1985 and 1997
  • MCA eligibility and CPIA scores are not
    consistent, nor are Freedom House, ICRG and CPIA
    scores with other measures of capacity,
    legitimacy etc.

22
Sub-Saharan African countries as a group scored
better on the ICRG in 1985 than other low-income
countries
23
Sub-Saharan African countries as a group scored
better on the ICRG in 1985 than other low-income
countries
24
Though some countries ICRG indices rose between
1985 and 1997
25
Bureaucratic quality increased little over the
same period
26
MCA eligibility and CPIA scores are not
consistent,
Eliminated from MCA by corruption criteria Countries actually selected for the MCA CPIA ranking by quintile 2002
Albania Bangladesh Malawi Moldova Mozambique - - - - Mozambique 2 2 3 3 3
Missed MCA by one indicator (out of 16) Countries actually selected for the MCA
Benin Burkina Faso Georgia India Mali Mauritania Sao Tome and Principe Togo Benin - Georgia - Mali - - - 2 2 4 1 2 1 5 5
Additional countries selected for the MCA
Cape Verde Vanuatu 1 4
Sources Radelet, Steve (2003) Challenging Foreign Aid, The Center for Global Development and International Development Association (2004) Allocating IDA Funds based on Performance. Fourth Annual Report on IDAs Country Assessment and Allocation Process. Sources Radelet, Steve (2003) Challenging Foreign Aid, The Center for Global Development and International Development Association (2004) Allocating IDA Funds based on Performance. Fourth Annual Report on IDAs Country Assessment and Allocation Process. Sources Radelet, Steve (2003) Challenging Foreign Aid, The Center for Global Development and International Development Association (2004) Allocating IDA Funds based on Performance. Fourth Annual Report on IDAs Country Assessment and Allocation Process.
27
nor are CPIA scores with other measures of
capacity, legitimacy etc.
28
Institutional quality ex ante does not seem to be
associated with a subsequent growth acceleration
if anything growth in SSA raises (the measure of)
institutional quality
  • Institutional quality before and after growth
    accelerations by region, 1970s-1990s

29
What characteristics makes a country more likely
to be in an institutional poverty trap?
  • Natural resources (exception Botswana)
  • Low natural openness (landlocked, non-trading
    neighbors)
  • Primary commodity dependent subject to terms of
    trade shocks
  • Historically high inequality and small
    non-state/SOE-dependent middle class
  • High levels of prebendalism
  • Civil service pay low

30
Natural resource rich countries have lower
enrollment and literacy rates
31
The wrong asset Open, globalizing countries
dependent on commodity prices have not grown
32
Source Reproduced from Berg and Leite (2006).
33
Source Reproduced from Berg and Leite (2006).
34
Inequality is high in all developing countries
35
But in Africa, the middle strata get a smaller
piece of the pie
36
But in Africa, the middle strata get a smaller
piece of the pie
37
Prevalent prebendalism (which is worse for growth
than clientelism)
  • Prebendalism refers to the handing out of
    prebends, in which individuals are given public
    offices in order for them to benefit from
    personal access to state resources.
  • (van de Walle, 2005, p. 20)
  • President Mobuto Sese Seko of Zaire famously
    commanded his ministers to enrich themselves but
    not to steal too much.
  • (van de Walle, 2005, p. 21)

38
Civil service pay is low
  • In many Sub-Saharan African countries the real
    value of civil servant wages has declined by
    50-70 since the 1970s (Lindauer and Nunberg,
    1994).
  • In the late 1990s a mid-level economist in Kenya
    could make 250 per month working for the
    goverment, compared to 3,000-6,000 if working
    for an NGO or a donor program (Brautigan, 2000).

39
What characteristics are associated with our
intuition that a country is in an institutional
poverty trap?
40
Conclusion Part I
  • Many low-income countries are probably suffering
    from the institutional poverty trap, even when
    they are growing
  • But the ex post definition and multiple symptoms
    make it hard to identify the institutional
    poverty trap ex ante, let alone pin down its
    causes
  • And we do not know how to help countries escape
    this trap since it is mainly about politics and
    power-sharing
  • Next Are we making things worse when we try to
    help?

41
  • Part I The donors dilemma
  • Part II Country-based aid is not helping and is
    probably hurting
  • Part III What donors can and cannot do

42
Part II Country-based aid is not helping and is
probably hurting
  • Dutch disease and competitiveness
  • Government revenue
  • Accountability
  • Donor fragmentation and poaching
  • The NGO bypass issue
  • Technical assistance
  • The Washington Consensus, a.k.a. Policy autonomy
    and missed opportunities
  • The exit issue
  • Volatility

43
Dutch disease
44
Government revenueSub-Saharan Africa still
relies on trade taxes
45
Government revenue Many low-income and lower
middle-income countries could increase tax
revenue
Source Moss, Pettersson, and van de Walle (2005).
46
Accountability
47
Donor Fragmentation and Bureaucratic Qualityin
Sub-Saharan Africa
Source Reproduced from Knack and Rahman (2004).
48
The NGO bypass issue
49
Technical assistance
  • Expatriate personnel working for aid agencies
    and NGOs rarely are required to pay local income
    taxes. At one point in Tanzania, the total for
    government wages and salaries (which are taxed)
    was 100 million, while the salary bill for
    technical assistants supplied under aid programs
    (and not taxed) was 200 million.
  • (Berg, 1993 cited in Brautigam and Knack, 2004,
    p. 262)

50
The Washington Consensus, a.k.a. Policy autonomy
and missed opportunities
51
The exit issue
Number of Adjustment Loans to the 20 Countries with Most Adjustment Loans Over the Period 1980-1999. Number of Adjustment Loans to the 20 Countries with Most Adjustment Loans Over the Period 1980-1999.
14-19 loans Niger, Zambia, Madagascar, Togo, Malawi, Mali, Mauritania, Kenya, Bolivia, Philippines, Jamaica, Bangladesh
20-25 loans 26-30 loans Senegal, Uganda, Mexico, Morocco, Pakistan Côte dIvoire, Ghana, Argentina
Out of these countries, only Bangladesh, Pakistan and Uganda achieved annual per capita growth rates above 2 over the period from their first adjustment loan to 1999. Out of these countries, only Bangladesh, Pakistan and Uganda achieved annual per capita growth rates above 2 over the period from their first adjustment loan to 1999.
Notes These are IMF and World Bank adjustment loans. The average number of adjustment loans for these countries over the period is 19 compared to the average of 7 for all developing countries. Source Easterly (2002) What Did Structural Adjustment Adjust? The Association of Policies and Growth with Repeated IMF and World Bank Adjustment Loans. Center for Global Development Working Paper 11. Notes These are IMF and World Bank adjustment loans. The average number of adjustment loans for these countries over the period is 19 compared to the average of 7 for all developing countries. Source Easterly (2002) What Did Structural Adjustment Adjust? The Association of Policies and Growth with Repeated IMF and World Bank Adjustment Loans. Center for Global Development Working Paper 11.
52
Volatility
Volatility of aid flows by country, 1975-2003
Source Reproduced from Bulir and Haman (2006).
53
The resulting risk of doubling country-based aid
Aid intensity under Big Push scenarios
Source Moss and Subramanian (2005).
54
Conclusion Part II
55
  • Part I The donors dilemma
  • Part II Country-based aid is not helping and is
    probably hurting
  • Part III What donors can and cannot do

56
A. Humility and regret Living with the
institutional poverty trap of most African
countries
  • Eliminate debt more expeditiously
  • Provide aid in grant form until per capita income
    exceeds 500
  • But only through government budgets and only with
    some matching funds from government revenue
  • Set specific, measurable, time-bound goals a lá
    MDGs for all country-based aid
  • Increase share of aid going through multilaterals
  • End policy and process conditionality, instead
    finance programs on the basis of results
  • More impact evaluation
  • Exit countries where head of state stays in
    office beyond 10-12 years

57
B. Beyond country aid
  • EITI
  • Advocate and support direct distribution of
    proceeds of natural resources
  • Global warming
  • Trade and TRIPS
  • Making markets for vaccines Green Revolution for
    Africa
  • International migration

58
Conclusion
59
(No Transcript)
60
(No Transcript)
61
(No Transcript)
62
(No Transcript)
63
(No Transcript)
About PowerShow.com