The Aid Paradigm for Poverty Reduction: Does It Make Sense?

Abstract

FORTHCOMING IN DEVELOPMENT POLICY REVIEW July 2008.Abstract: Whilst thinking on economic policy for development has undergone many shifts with the perceived weak results of earlier adjustment reforms a new donor consensus has emerged based around the central themes of economic growth, good governance and social development. This paper examines the logic behind this new Aid paradigm and discusses the empirical evidence to support it. A nuanced story is revealed with country circumstances playing a critical role and particular interventions varying in impact across countries. For example, growth does not always lead to gains for the poor that match the national average; public expenditure needs to be targeted to achieve social development but effective targeting is difficult; governance reform may be critical but there is no simple governance blueprint and the corruption-growth association need not always be negative.

Debt Relief Effectiveness and Institution Building

“…However, more resources and more expenditures on poverty reduction, as incorporated in the Poverty Reduction Strategy Papers, are not necessarily correlated with real improvements in the welfare of the poor. In fact, the evidence about the welfare effects of aid operating through more public expenditures is contrasting (Gomanee et al, 2005a and b;Weiss, 2008) and, with respect to HIPCs, it has been highlighted that, notwithstanding increasing pro-poor spending, heavily indebted countries are still far from achievement of the MDGs (UNCTAD, 2006). Hence, in the Outcomes sub-section we review the most relevant literature on debt-relief effectiveness, focusing on its consequences for social spending, economic performance and for more direct measures of well-being, such as education outcomes.…”

From Rome to Accra via Kigali: ‘Aid Effectiveness’ in Rwanda

“…The desire to improve the efficiency of aid through better co-ordination and coherence has taken an increasingly prominent place since the beginning of the 1990s (Forster and Stokke, 1999), with a new paradigm of aid emerging by the beginning of the 2000s (Weiss, 2008;Renard, 2006;Maxwell, 2005). Within this framework donors commit themselves to providing specific support for a national poverty reduction strategy in the form of financial and technical resources to boost national capacity, while the recipient government commits itself to improving economic and political governance in order to implement the strategy.…”

Less Pretension, More Ambition : Development Policy in Times of Globalization

“…The growth of corruption and economic growth progressed hand in hand. This was known as the East Asian Paradox (Weiss 2008 It has also become clear that democratization often comes after economic growth. Lipset (1959) claimed that "the more well-to-do a nation, the greater the chances that it will sustain democracy", and that statement still holds water.…”