3 Responses

  1. Dr DG Blight
    Dr DG Blight August 16, 2012 at 7:42 am

    I think we create a problem in this discussion with the use of the word ‘aid’ which has a defined meaning in the DAC/OECD context and in the public mind. Rather, the word investment might be better – we invest in disease control, climate change mitigation and other examples that Stephen gives primarily for good self-interested and not humanitarian reasons. Australia invests in tfe Northern Territory in Biosecurity management to prevent the entry of damaging invasive species for Australian public good reasons It helps the NT but we would hardly call it aid. Our private sector invest in mining in Africa that will generate private returns but will deliver substantial economic and social benefits to the countries concerned. Would we define this investment as aid if done by a government agency?

    I think an interesting discussion emerges from the transition of countries out of aid. We lost a big opportunity when Korea almost overnight fell out of the aid category and an extensive set of cooperative partnerships built up in aid arrangements were lost through the absence of sustainable partnerships because we had no successor arrangements in place.

  2. Robin Davies
    Robin Davies August 8, 2012 at 7:21 am

    Stephen,

    I have found your three posts on the case for aid to Asia admirably clear and comprehensive. It seems to me that this second post, which enters into the increasingly busy debate about the role of development agencies in supplying international public goods, is quite different in character from the other two. I offer the following three comments on it.

    First, this post is presented as complementing the humanitarian case, or in fact largely superseding that case within two decades. However, I’m inclined to think that it’s not in the same line of business – that it makes a case for something that is not aid as we know it. This point almost makes itself in the post when you say that “sooner or later successful economies are graduated from aid” but then ask “is there a longer-term case for aid, one that survives the prospect of graduation?” The subsequent argument, therefore, might be better described as an argument for continuing international public financial transfers in a post-aid world (leaving aside, for now, the fact that there will always be a residual group of stubbornly unsuccessful economies) rather than an argument for aid. If we do speak of such transfers as aid, we’re using the term in a new sense.

    Second, the post argues that, even as Asian countries get wealthier and traditional aid is no longer warranted, countries substantially wealthier than they are should still bear a greater share of the burden of supplying international public goods. Why, exactly? If the substantially wealthier countries are, in this scenario, no longer obliged to help Asian countries achieve their domestic policy goals, why would they still obliged to help Asian countries meet their share (however measured) of the costs of supplying global or regional public goods? If the economic differential creates a moral obligation to help in this way, then one might wonder why that obligation would not extend to helping them provide ever better social security systems, safer roads, etc.

    Presumably the argument is not based on the moral obligation owed by the richer to the poorer, but rather on the principle of fairness in international burden sharing. That principle seems clear enough in general terms, namely that the contribution of each country should be based on the expected benefits to it of the action financed, adjusted to take account of its current capacity to pay (and perhaps also its historical responsibility for whatever international public bad might be at issue). This is where your reference to the requirement of progressivity seems relevant – the richer should be required to contribute more than is required to secure their share of the benefits, and the poorer less, with this surplus/deficit effectively defined as aid.

    While there’s nothing problematic about the above proposition, it only makes sense if there exist multilaterally or regionally agreed policy goals, financing targets and associated burden-sharing frameworks. However, the post proceeds on the assumption that aid, in this sense just defined, is an alternative to, rather than an ingredient of, multilateral agreement-making. You say, “International binding agreements seem to be a thing of the past. But money talks. Aid talks.”

    And third, a case for international public financial transfers based on equitable burden sharing in pursuit of international public goods is probably never going to be a strong case for bilateral transfers. Given the need for coordinated action across all countries with a stake in the outcome, it will generally make sense for the bulk of the resources to be concentrated in multilateral funds and institutions, who then finance action where it is most needed in an integrated way. Certainly some bilateral technical assistance will continue to be useful, but this won’t be costly and won’t really be distinguishable from technical cooperation between developed economies.

    Currently aid is a useful tool for international action because the funding pool is there, because it can be used for almost anything and because its use in support of international public goods is not particularly prominent. However, the presence of the funding pool is dependent on the humanitarian case. In a scenario where that case no longer applies, or only applies to a residual group of countries, the pool will shrink. Contributions toward the cost of supplying international public goods will have to be extracted painfully from consolidated revenue on a case-by-case basis, with lengthy battles about what benefits we can expect from the action financed, what is our relative capacity to pay, and what is the cheapest and most effective way of achieving the relevant goals.

    I don’t think there’s any escaping the pain of multilateral negotiation – which is not meant to imply any optimism about it! (A converse point here is that one might expect the humanitarian case for aid to be heavily stressed by those wanting to defer the pain for as long as possible, including finance ministries.)

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