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Development Without Aid

Development Without Aid

David A. Phillips

(2013)

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Book Details

Abstract

“Development Without Aid” opens up perspectives and analyzes facts about foreign aid to the poorest developing countries. The discussion is advocacy as much as analysis, and makes extensive reference to recent research, including the author’s previous work on the World Bank.

Starting from a perception about development formed during the author’s formative years in what is now Malawi, the book develops a critique of foreign aid as an alien resource inherently unable to provide the necessary dynamism to propel the poorest countries out of poverty, and compromised by profound anomalies which subvert its own effectiveness. The book aims to help move the perception of development in poor countries squarely beyond foreign aid and beyond the discussion of its role, architecture and design, and to re-assert an indigenous development path out of poverty.

To move beyond foreign aid, the book examines a new international dynamic, i.e., the rapid growth of the world’s diasporas as a quasi-indigenous resource of increasing strength in terms of both financial and human capital. It considers the extent to which such resources might be able to replace the apparatus of foreign aid and help move towards a reassertion of sovereignty by poor states, especially in Africa, over their own development process. 


“David Phillips has written a sustained and reasoned condemnation of the aid process as practiced for the last half century. Anyone defending the aid industry will need to confront this important book.” —Kenneth Reinert, Professor of Public Policy, George Mason University


“Development Without Aid” opens up perspectives about foreign aid to the world’s poorest countries. Growing up in Malawi the author developed a sense of the limitations of foreign assistance and from this evolves a critique of foreign aid as an alien resource unable to provide the dynamism that could propel the poorest countries out of poverty.

The book aims to help move the discussion beyond foreign aid. It examines the rapid growth of the world’s diasporas as a quasi-indigenous resource of increasing strength in terms of both financial and human capital, and considers how far such a resource might supersede aid. It uses extensive research findings to explore the possibilities for a resumption of sovereignty by poor states, especially in Africa, over their own development with the assistance of the world’s diasporas.


“The merit of this volume is in bringing together detailed information on aid and its impact with a full insider’s understanding of the bureaucracy of aid and how it can distort weak economies.” —John Weiss, Professor of Development Studies, University of Bradford


“In ‘Development Without Aid,’ David Phillips has written a timely book that challenges many accepted ideas about foreign aid. This compelling text will provoke an interesting and necessary debate.” —Moisés Naim, Carnegie Endowment, and author of “The End of Power”


‘An excellent book – one that I hope starstruck journos at the “FT” and “Economist” [...], who have given the [World] Bank a free pass over the years, will read.’ —Andrew Hilton, ‘Financial World’


‘This is a very well-written book which will no doubt have a wide readership covering practitioners of both public and development policy […] In the context of the unresolved controversies relating to the developmental role of external aid, the author makes important contributions towards bringing out the importance of country-specific insights in understanding the mechanisms and processes that explain why, how and when aid works in particular societies which are key considerations for making the design and delivery of aid effective. ’ —Mustafa K. Mujeri, ‘Bangladesh Development Studies’


David A. Phillips is a writer and economic consultant. He was educated in Britain and has a PhD in economic development. 


“David Phillips makes a compelling case that international migration and remittances have vast potential to promote development in many of the world’s poor nations. By contrast, foreign aid – in its current form – is unlikely to lead to transformative changes in the developing world. His ideas are prescient. Development professionals should take note.”  —Dean Yang, Associate Professor, Department of Economics and the Gerald R. Ford School of Public Policy, University of Michigan


Table of Contents

Section Title Page Action Price
Development Without Aid\r i
FRONT MATTER\r i
Half Title i
Title iii
Copyright iv
CONTENTS v
LIST OF ACRONYMS vii
ACKNOWLEDGMENTS ix
MAIN MATTER \r 1
Chapter 1 INTRODUCTION: MOTIVATION AND PERSPECTIVE 1
A Starting Point 1
Aid or Trade? Preliminary Thoughts 7
Aid for Trade? 9
Aid Effectiveness: Preliminary Thoughts 10
Organization of the Book 11
Chapter 2 WHAT IS FOREIGN AID, WHO DOES IT, WHY AND HOW MUCH IS THERE? 13
What Is Development Aid? 13
A Rapid Review of the Evolution of Aid Strategy 17
The Motives for Giving Aid 21
Who Receives Aid and Who Gives It – Aid Architecture and Activity 23
Aid Effort 26
How Important Is Aid in the Finance of Development? 30
The Human Resources Effort 31
Some Preliminary Conclusions from Simple Facts 34
Chapter 3 HOW FAR HAS DEVELOPMENT AID BEEN EFFECTIVE? 37
Aid and Growth: Macro Evaluation 38
Micro-level Evaluations of Development Projects: The World Bank’s Performance 44
Development Effectiveness on the Ground 47
Capital projects 47
Agriculture, Education and Health 49
Aid Software – Advice, Capacity and Institution Building 52
Microfinance 55
Participation 58
Irrational Behavior? 59
The Cost of Delivering Development Projects 60
Epilogue – Aid Effectiveness 63
Chapter 4 WHY HAS DEVELOPMENT AID DONE SO LITTLE? 65
Impact Evaluation: The Solution to Development Effectiveness? 66
Beyond Evaluation: The Aid Relationship and Its Origins 71
Aid Dependence 75
Aid Dependence and Local Ownership 79
Aid Fragmentation 81
Principals, Agents and Accountability 85
Aid, Accountability and Democracy 88
Taxation and Institution Building 91
The Fruits of the Democracy–Accountability Gap – Corruption 94
Alienation and the Social and Political Determinants of Aid Ineffectiveness 96
Could Chinese Aid Be Different? 98
Chapter 5 CHANGING THE DYNAMICS OF DEVELOPMENT 103
A Prospect for Change? 103
The Emergence of the Diasporas 104
The Emergence of Skilled Migration 105
Different Migrants Have Different Impacts 108
How many Migrants Return? 109
The Emergence of Diaspora Money Flows 110
Aid and Remittances in International Finance 113
Funds Transfer Mechanisms 115
The Total Picture of Diaspora Cash 116
The Reversal of Flight Capital? 119
Diaspora Flows and Development Impact 121
Diaspora Flows: Consumption or Investment? 122
How Much Investment? 126
Stories of the Diasporas 128
India 129
The Indus Entrepreneurs (TiE) and Venture Capital 130
The Overseas Chinese 132
African Diasporas 132
Ethiopians in the US 133
Nigerians and Ghanaians in the UK 134
Diasporas and Political Influence Back Home 135
Do Diasporas Have a Common Purpose? 136
Why Are They Important? Who Owns Diaspora Resources? 137
What Should an Aid Donor Do about Migration? 139
Chapter 6 “NEW AID”: NEW WAYS TO PROMOTE AND FINANCE DEVELOPMENT? 141
Non-alienating and Alienating Aid 141
New Aid’s New Methods 144
Output-based aid 144
Cash on delivery 145
Foundations, funds and challenge funds 147
The US Millennium Challenge Fund 148
Global health funds 149
Budget support 150
Conditional Cash Transfers 151
How Far Does New Aid Create a New Relationship? 152
Chapter 7 ANOTHER PATHWAY OUT OF POVERTY? 155
Private Flows and Foreign Aid 155
Leveraging the Diaspora 156
Government Action to Support Migration 157
Support to Remittances and New Financing Instruments 158
A Summary of Home Government Efforts 160
Can the Diaspora Help to Lead all Poor Countries out of Poverty? 161
Preconditions for Attracting Investors 163
The Role of the Donors in the New Pathway 164
Chapter 8 EXIT STRATEGY – REPLACING FOREIGN ASSISTANCE 167
Some Elements of an Aid Disengagement Strategy 167
Country Assistance Funds: A Possible New Aid Artifact 169
Global and Other Public Goods (GPGs): Where Development Aid Might Be Essential 171
Intentions and Consequences 173
Chapter 9 POSTSCRIPT 177
END MATTER\r 181
NOTES 181
1. Introduction: Motivation and Perspective 181
2. What Is Foreign Aid, Who Does It, Why and How Much Is There? 183
3. How Far Has Development Aid Been Effective? 187
4. Why Has Development Aid Done So Little? 192
5. Changing the Dynamics of Development 200
6. “New Aid”: New Ways to Promote and Finance Development? 207
7. Another Pathway Out of Poverty? 208
8. Exit Strategy – Replacing Foreign Assistance 210
INDEX 213