Saturday, 13 October 2012

Can Foreign Aid Promote Democracy?

As part of foreign aid and development strategies, the donor community is coming to place an increasing emphasis on strengthening democracy, as many have come to accept Amartya Sen’s assertion that countries don’t become “fit for democracy” but rather become “fit through democracy.”  Critical analysis of this development area, however, has been limited and until relatively recently there has been a distinct failure to integrate support for democracy with other development activities at both strategic and practical levels.  This blog discusses three areas of current thought on aid and democracy: research from the International Institute for Democracy and Electoral Assistance (IDEA), a study of aid in war-afflicted states and the new development paradigm of the ‘golden thread.’

The new Aid Agenda: current thinking and research

The International IDEA is an intergovernmental organisation which gathers knowledge and data, publishes reports and analysis and advocates for policy change in order to strengthen democratic dimensions of development cooperation.  I recommend their website for research papers, data and blogs.  IDEA believes that understanding how donor commitments can affect democratic development needs to be improved, noting that a key problem for democracy-building in development cooperation has been that key political actors have often remained on the margins of development discussion and practice.  The result has often been a vicious cycle in which the legitimacy and effectiveness of democratic actors - political parties and parliaments - is further undermined.  To address this international development architecture problem, the importance of national processes has been made more explicit in two agendas: the Paris Declaration onAid Effectiveness and the Accra Agenda for Action.  IDEA believes that the challenge is to translate these into practical aid strategies that are more supportive of democratic processes.[2]

IDEA tracks research projects carried out in the area of development cooperation and democratic processes.  It has reported on one of the few research projects which focused on the link between aid and democracy; this was undertaken by the Madrid-based think tank the Fundacion par alas Relaciones Internacionales y el Dialogo Exterior (FRIDE) and involved case studies from Mali, Vietnam, Nicaragua and Peru.[3]  The study found that the first step in strengthening democratic decision-making is to recognise that the concept of “effective development states” does not always mean the same thing as “democratic states”.  Democratisation involves the redistribution of power in the interests of citizens, while building state capacity may require concentration of state power and improved state autonomy.  In practice democratic systems are often too weak to handle new aid architecture; the concentration of power - over politics, finances and security – can be very difficult to work with.  Powerful executive branches of government in countries such as Uganda, Rwanda as well as Senegal and Tanzania remain a concern despite long-term aid efforts.[4]

In practice, being in government means access to large resources – sometimes even access to all the available resources. Some of these resources are used to retain political control.  Bribery, coercion and threats for the purposes of securing political loyalty are all a concern.  Parliamentarians and parties – and even NGOs and the media – live in and from the same political and financial environment as the executive.  The capacity and motivation of oversight bodies such as parliamentarians to stay independent and hold the executive to account [can be] minimal.  The political opposition puts in an appearance around election-time, but often has no resources to play their democratic role in between elections, and basically disappears until the next poll.[5]

A country’s media may be free on paper but is all too often challenged on the ground by continuous legal charges and security threats.  The private sector either depends on government for retaining its investments, is intertwined with politics, or both.  Owners of major companies and politicians are often the same people, and for good practical reasons.  Social and grassroots movements are non-existent or very weak due to prevailing capacity and resource constraints.  Democratic checks-and-balances are weak and often under threat.[6]

Aid does play a role in the political-power dynamics of a country, and in the absence of careful calibration of its impact on a range of domestic actors and structures it can easily serve to undermine democratisation processes – albeit unintentionally.  Today aid resources are increasingly channelled directly through government for development purposes, with minimal engagement and oversight by national political actors. In certain authoritarian states, the risk is that donors are involuntarily strengthening the powers that be rather than the redistribution of power and more robust democratic processes as a consequence. [7]

There are no easy answers in this situation.  Aid is usually needed the most precisely in conditions where it is the most difficult to provide it effectively.  Donors should not take – or more accurately, take over – responsibility for the political situation in a given country.  But aid does operate within and thus play into particular political environments and its prospective impact on power dynamics and politics need to be better understood.[8]

On a positive note, the study found that aid programmes in areas such as health and education can strengthen state functions and, together with service delivery, can have an indirect democracy-supporting effect.  Donors have begun to realise the importance of good governance for development and have therefore increased resources for building more effective state institutions as well as the voice of civil society.[9]  Overall, however, aid is often treated as being apolitical - a view based on western assumptions about the functioning of the state.  However, there is an emerging realisation and debate over how real politics influence development outcomes and efforts are being made to address these concerns by donor agencies such as the UK’s DfID, the Swedish International development Cooperation Agency and the Netherlands’ development-cooperation programme. 

LSE Research into aid and States in Conflict

The LSE’s James Putzel and Jonathan Di John have recently published a report into the impacts of Western aid programmes in countries which are either encountering increasing violent problems or are attempting to reconstruct their states in the wake of war.  What characterises notions about this assistance is confusion.  The report has 46 findings of relevance for policy in seven thematic chapters.  Among the 46 findings of relevance for policy, the report discusses the following seven themes as presented in the LSE's press release:

1  Donor attempts to promote democratic or market reforms can lead to violence. 
Research found that sometimes toleration of corruption, unproductive rents and less than democratic governments has actually been the price of peace. “Good governance” reforms promoted by aid agencies need to take into account existing elite bargains or they may have unintended negative outcomes on democratic and developmental possibilities.

2  Military Interventions Often Have Made Democracy Less Rather than More Likely.
In findings relevant to the current situation in Libya and Syria, a large quantitative study of military interventions in the developing world over the past sixty years found that whatever their intentions they tended to make democracy and development more difficult to achieve in the long run.

3  Failures to Prioritise Security in State‐building Threaten to Undermine Aid Efforts.
Comparative studies in Sub‐Saharan Africa demonstrated that where the state’s own security forces are weak or where the state cannot maintain power without unleashing violence against its own population, as is currently the case in the DRC, external efforts need to put the construction of accountable security forces ahead of other aid programmes.

4  Cities have become major sites of violent conflict and state‐building after war and deserve much greater attention from international aid organisations.
The concentration of high‐value economic activity in the cities of fragile states makes them central to state‐building. Urban violence often written off as criminal activity is usually highly political, while both elites and social movements capable of securing progressive reforms are most likely to emerge in cities.

5  Understanding the organisational mechanisms and incentive structures of armed rebel groups is essential to finding a route to peace.
Research in Afghanistan and Colombia demonstrates why a knowledge and appreciation of the different motivational incentives and patterns of organisation among armed groups will be central to current efforts to strike peace agreements. The report summarises extensive research on Afghanistan and Colombia that points to the need to engage constructively with organisations like the Taliban and the FARC if peace is to become a reality.

6  Donor aid programmes in fragile states have not focused enough on promoting economic production.
Comparative country and city studies demonstrate the need for donors to back efforts among developing country officials to elaborate production strategies that can foster accelerated economic growth. Greater resources need to be directed to programmes to formalise and regulate informal economic activities, both to scale up growth and eliminate the possibility of using these sectors as sites of finance for violent challenges to legitimate states.

7  Western donors need to support the creation of taxation capacity in developing country states.
The report provides plenty of evidence supporting recent moves by OECD donors, including the UK, to put resources into the creation of taxation capacity in the states receiving development assistance. Taxation is a key indicator for measuring state performance and taxation can be deployed to promote investment in sectors with developmental potential. Increasing a state’s authority and capacity to raise revenue is crucial to financing all its other activities and the only route to lessen aid dependency in the long‐run.[10]

The Golden Thread and Complexity

A third recent take on development comes from Owen Barder who describes what is known as ‘the golden thread’ of development in political and economic systems characterised by complexity.  He defines this as the notion that long-term development through aid is only effective if there also exists a golden thread of stable government, lack of corruption, human rights, the rule of law and transparent information.  This idea is something David Cameron and other politicians have been promoting.  It’s believed that these conditions, along with openness, accountability, free media, free and fair elections, trade, flexibility and civil society will provide the basis for better economic development and outcomes.

The golden thread is to be contrasted with the Washington Consensus' economic liberalism of the 1980s which offered a set of prescriptions intended to stabilise the macroeconomy, promote open trade & investment and remove obstacles that hindered firms from becoming more efficient; achieving these, it was thought, was the most effective way to promote economic growth.  In contrast, the new development paradigm will allow the economic and social system to improve itself more rapidly and more fairly, based on the notion of ‘country ownership’ – that sustainable change comes from within developing countries, rather than through policies imposed from outside.

How systems change is consistent with the idea that development is the emergence of self-organising complexity which brings about vast improvements in human well-being.  In complex systems successful transition happens more rapidly and more successfully when economic and social systems are able to adapt and evolve, and when that evolution is driven by an evolutionary fitness function which reflects society’s values and priorities.  The ‘enablers’ of development described by Mr. Cameron, Mr. Blair and Mr. Obama are all very plausible candidates for the kinds of system properties which might accelerate the emergence of self-organised complexity.[11]

But Mr. Barder also makes stresses three important shortcomings of the golden thread which he says will be fatal if they are not addressed:

1  The golden thread talks more about free markets, jobs and growth than it does about other ways to encourage social and economic change such as reducing inequality, tackling the power of vested elites, providing social protection and safety nets or ensuring a strong voice of civil society. 

2  The golden thread does not say anything about the need to make changes to the global system as well as within developing countries.  Economic systems are interdependent – they cross borders; global systems and institutions and the policies and behaviour of rich countries have an important influence on the evolution of economic and social systems in developing countries, and the principles of the golden thread apply just as much at global level as they do at the level of the nation state.

3  The golden thread has more to say about desirable dynamics in society than it does about how to bring them about.  “We have had more failures than successes trying to bring about institutional and political reform in other countries. There is a danger of going straight back to failed efforts to transplant institutions from one situation to another."[12]

It’s by using the lens of complex adaptive systems  to view economic, social and political change which will cause donors to become more modest about our ability to change those systems directly. A la Thaler and Sustein, outsiders would do better to think about whether they can nudge systems towards having the right kinds of dynamic properties, including greater capacity for experimentation, feedback and learning so that systems can evolve more democratic and robust institutions on their own, rather than attempting to design and engineer change. “That humility seems to be largely missing form the golden thread narrative, which seems to be presented as a universal blueprint for success.” [13]

In another blog I’ll talk about aid in the form of remittances, a huge source of financial assistance to developing countries.

See also:

Alesina, Alberto and David Dollar, "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, March 2000. 

Barder, Owen, “ All that Glisters: The Golden Thread and Complexity, Complexity, Economic 
Development,” Center for Global Development, August 2012 

Horner, Lisa and Greg Power, Global Partners & Associates, “The Democratic Dimension of Aid,” Literature Review for International IDEA, March 2009.

Knack, Steven, “ Does Foreign Aid Promote Democracy? International Studies Quarterly, 29 Jan 2004. 

Lee Myers, Steven, “ To Back Democracy, US Prepares to Cut $1bnfrom Egypt’s Debt,The New York Times, 3 Sep 2012.

Moyo, Dambisa, “On democracy, Aid and More,” July 2009, also her book, Dead Aid.

Myhrvold-Hanssen, Thomas L. “Democracy, New Media, and Famine Prevention: Amartya Sen and The Bihar Famine of 1966-67,” June 2003.

Resnick, Danielle, “Foreign Aid in Africa: Tracing Channels of Influence on Democratic Transitions and Consolidation,” ReCom, UNU-WIDER, Feb 2012.

Rubin, Olivier, “The Merits of Democracy in Famine Protection – Fact or Fallacy?” University of Copenhagen, 2009.

Smith, David, “Africa: fresh voices, new perspectives,the Guardian, 1 Oct 2012.

[1] Lisa Horner and Greg Power, “The Democratic Dimension of Aid,” Global Partners & Associates, for IDEA, March 2009.
[3] See Stefan Meyer & Nils-Sjard Schulz, Ownership with Adjectives, FRIDE, 2008.
[4] “Democracy and aid: the missing links.”
[5] Ibid.
[6] Ibid.
[7] Ibid.
[8] Ibid.
[9] See Intl IDEA/Centre for Developing Societies, “Democracy and Development in aGlobalised World,” 2009.
[10] James Putzel and Jonathan Di John, “Meeting the Challenges of Crisis States,” LSE, October 2012.
[11] Owen Barder, “All That Glisters: The Golden Thread and Complexity,” Center for Global Development, 26 Aug 2012.
[12] Ibid.
[13] Ibid.

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