Political Incentives for Poverty Reduction

METHODOLOGY

By: stefan On: 2008/05/02 14:46 Shared: YES

Various Drivers of Change studies have been carried out involving in-depth, country level analysis in order to identify the opportunities, incentives and blockages to pro-poor change in a given country. Where possible studies are carried out either with the full support of, or jointly with, other donor agencies operating in-country. Ideally studies should be carried out with the knowledge and support of the government, but this can present problems if reports are critical of government.

The DoC methodology seeks to identify the political institutions, structures and agents, where they exist, that can act as key levers to enable what donors term pro-poor change and therefore improve the effectiveness of aid. The studies are carried out by teams of consultants engaged by DFID, who set out to answer a number of key questions about the political system, how political power is acquired and used, how political institutions function (for this reason some studies are called "Power Analysis"), how state resources are controlled and by whom, the extent and causes of corruption, the political priorities of the elite, the incentives governing political priorities, the extent to which poverty reduction currently features in those priorities and the opportunities for policies which support poverty reduction to be implemented.

In the first instance the studies involve reading the literature on the country's history and development and any other relevant background material. This is followed by visits to the country and interviews with key individuals including leading academics, DFID staff, staff of other donor agencies, non-governmental organisations and, where possible, people in or close to government.

Link to Methodology slide.

AID EFFECTIVENESS?

By: stefan On: 2008/05/02 14:47 Shared: YES

Decades of western aid have done little to ease suffering in many developing countries, particularly in Africa.

Sub-Saharan Africa has long been the most aided major region of the developing world. Aid as a proportion of gross domestic product there has averaged over 5% for much of the past two decades, has reached nearly 10% at times and still equals nearly 6% of the region's GDP. These proportions are much higher in many smaller African countries.

But, despite this level of assistance, development performance in nearly all African countries has been deeply disappointing - indeed the overall picture is very grim.

Because of relatively low growth rates in most African countries over the past four decades, combined with high and rising population, average per capita incomes have fallen since 1970. Although average per capita income in the region increased modestly in 1995-7, it was still 15% lower in that period than it was in 1976-8. More than 300 million Africans live on less than a dollar day and two-thirds of the world's poorest countries are located in Africa. Every 12 hours the same number killed on 9/11 perish from AIDS in Africa, which has 2/3 of the world's cases. In a year 150,000 die giving birth, It is the only region of the world with regular savage wars, and the only continent that has grown steadily poorer over the last 30 years - between '70 and '00 Africa lost half its share of world markets to other developing nations. Over 50% of its population is under eighteen. Finally, making improvement even more difficult, at least 70,000 skilled graduates leave every year.

For many this begs serious questions about the delivery of aid and the prospects for poverty reduction.

Some observers, like Phyllis Pomerantz, argue that foreign aid as currently configured and presented is unnproductive, vain, and fruitless. Instrumental rationality has overtaken purposeful action and reform; reform that places people at the center of interaction and change. The failure of aid is not due to political economy or state sovereignty, selfishness, corruption, greed and/or arbitrary use of government power. It is culture that really matters. She makes a cultural case for why donors and governments need to begin to build greater levels of trust in order for aid to truly be effective. She calls for greater cultural sensitivity and dialogue between giving and receiving countries. If aid reform is to bring sustained development to Africa it can only be successful if aid agencies and other institutional entities change what they are currently doing.

Some observers take the view that aid is always a means of influence: political, commercial, military and security-related - however disguised or covert. Some influence is benign, but much of it is coercive, even imperialistic. They argue that, given the nature of aid, its effectiveness should be judged not only in developmental terms, but in terms of international relations. They assert that on both counts, the returns are meagre.

Others point to the protectionist practices of developed countries. E.g. to protect its farmers, the EU spends $350 billion/year with is 14 times the aid given to all of Africa and equal to its total annual income - thereby damaging its farmers and helping cause economic problems.

Kenyan economist James Shikwati takes the radical view that it is aid itself which has caused many of Africa's problems. The helpful intentions of donors have been damaging the continent for the past 40 years. If the industrial nations really want to help the Africans, he argues, they should terminate the aid. The countries that have collected the most development aid are the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor. Huge bureaucracies are financed with the aid money, corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that needed. If the West were to cancel these payments, normal Africans wouldn't even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid.

For their part donors are also beginning to ask themselves questions about aid effectiveness and to re-evaluate their programmes and approaches. But it would be asking too much of them to accept that aid isn't working at all.

Drivers of Change analysis came about in response to the debate about the overall effectiveness of aid and the "development model" (the set of assumptions about the way countries develop and the role of aid in that) which underpins donor agencies policies and strategies.

One key recognition is that politics is important - development will be much slower if the political environment is not conducive. Drivers of Change analysis is one of the tools DFID and other donors are using to become better aware of the political context of their programmes; to identify sectors in which there may be the political will for reform and those in which there is not.

Link to Aid Effectiveness? slide.

The Politics of Survival

By: stefan On: 2008/05/02 13:42 Shared: YES

Drivers of Change analysis provides an insight into politics in developing countries: into the motives for entering politics, the incentives to which politicians are responding, and the consequent political priorities.

DoC analysis suggests that there is a universal law of politics: POLITICAL SURVIVAL.

This has a different meaning in developed countries than in most developing countries.

In developed countries the political institutions ensure a high degree of accountability and change of transfer of power through regular and fair elections. Also political office does not offer opportunities for self-enrichment; political salaries are low in comparison with the private sector. Whereas no one wants to relinquish political power, it is accepted that that may happen at an election and a smooth and painless power takes place.

In the context of widespread poverty and limited opportunities for wealth accumulation, political power, and the control over state resources, is often the only route to wealth. The stakes are very high and there are powerful incentives for power holders to retain power with whatever means they can. the alternative is often poverty for them and their political supporters.

Once in power political priorities will only represent those issues and actions for which politicians judge that the balance of risks and incentives have moved in their favour and that will contribute to their political survival.

They make a political calculation and more often than not the risks of neglecting the needs of the poor are usually judged to be low in relation to the economic gains from maintaining the status quo.

Link to The Politics of Survival slide.

The Role of 'Good Governance' in Development

By: stefan On: 2008/05/02 16:02 Shared: YES

Governance in this context is the act, fact, or manner (method) of governing; and the various means used to shape society to a desired end. When aid donors talk about 'good governance' they are referring to a number of factors, including: effective policy-making processes, sound economic policies, sound fiscal and financial management, effective and universal service delivery, well functioning democratic institutions, and low levels of corruption.

There is broad consensus in the donor community that one of the key obstacles to achieving the MDGs is poor governance; poverty reduction can not be achieved without a policy and institutional environment which facilitates growth. To most donors top of the list of indicators of poor governance is corruption.

However, the international community's agenda for governance reform has expanded over the years. For example the World Bank's list of recommendations for "good governance" for developing countries grew from 45 in 1997 to 116 in 2004.

Under the banner "Making Government Work for Poor People" the UK's Department for International Development (DFID) aims to "build political systems in developing countries that provide opportunities for all, including the poor, to organise and influence state policy and practice. This has wide implications such as ensuring equal access to information, enabling strong representation for all and establishing robust accountability structures". These may be laudable aims, but, in the context of the overall analysis of political motives, incentives and resultant political priorities, are they not rather overly ambitious and unachievable objectives, particularly give the very limited influence donors have over the development of political systems and policies in developing countries?

There is a growing body of thought that this agenda is completely unrealistic for poor countries with weak capacity. In particular it does not discriminate among:

What is essential and what is not
What should come first and what should follow
What is feasible and what is not
What can be achieved in the short-term vs. longer-term

But some academics point out that donor expectations of governance reform are a-historic. The political institutions in developed countries, on which the donors' "good governance" agenda is based, evolved over several hundred years - often involving a great deal of conflict and bloodshed. They evolved as a result of development, they were not the preconditions for development. History suggests that development can happen despite poor governance and that the full agenda as proposed by the donor agencies is not actually necessary. History also tells us that development can happen even with high levels of corruption - it depends on the type of corruption. For example corruption was endemic in British politics in the 18th and early 19th centuries, in the USA in the 19th century and in many Asian countries in recent times, yet these countries saw significant economic growth. They contend that capital accumulation, even by appropriation, is essential to long term development. The key question is what do the 'accumulators' do with their capital? Do they invest it oversees or spend it frivolously? Or do they invest in productive enterprises which benefit the economy? Therefore a much more sophisticated understanding of corruption, and a targeted and gradualist to governance reform approach is needed.

Not only is it is unrealistic to expect the pace and scope of governance reform demanded by donors, such reform efforts could be counterproductive in that they divert scare human resources away from other more important issues that might lead to growth.

There is therefore a growing belief that:

Donors need to be realistic about the scope and pace of institutional reform in developing countries.
They should focus on the essential reforms which are manageable for partner countries.
They should focus on reforms which are particularly relevant to poverty reduction.
Politics matters.

This is sometime referred to as the "good enough governance" approach.

Link to The Role of 'Good Governance' in Development

Political Incentives for Poverty Reduction