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CENTER FOR GLOBAL DEVELOPMENT
"OVERCOMING STAGNATION IN AIDDEPENDENT COUNTRIES"
Wednesday, March 23, 2005
12:30 p.m. - 2:00 p.m.
Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue, N.W.
Washington, D.C.
[TRANSCRIPT PREPARED FROM A TAPE RECORDING.]
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AGENDA
PAGE
MODERATOR:
Nancy Birdsall, President
Center for Global Development
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PRESENTER:
Nicolas van de Walle, John S. Knight
Professor of International Studies
and Director, Mario Einaudi Center
for International Studies, Cornell
University
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DISCUSSANT:
Edward V.K. Jaycox, Managing Director,
Emerging Markets Partnership, and
President and CEO, The AIG African
Infrastructure Fund, L.L.C.
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PROCEEDINGS
MS. BIRDSALL: How many people in the room have not gotten their
lunch? Oh, then we're in good shape.
If you have not gotten our lunch, you're in a small minority, and I invite
you as we begin to get your lunch. Okay. I'm going to sit down, which is a better place
to start. Let me mention again, as I see some more people drift in, that lunch is over on
the side, and you're most welcome to bring it to your seat.
We had such a good response that we decided to do the seating this way.
So, am I on?
I'm Nancy Birdsall, the proud president of the Center for Global
Development. I'm very proud today, of course, to be launching this fine new book of
Nick van de Walle. Let me start us off by saying just a few words that will set this book
in a larger context, and then we'll turn to Nick and Kim Jaycox for the substantive, the
bulk of today's presentation.
Most of you will probably know if you're aficionados of aid and the donor
business, that there is what I would call a kind of crisis going on in the aid community.
There's a sense in which conditionality is seen as having failed--there's a big debate about
why--and has yielded to concepts like ownership and to a new approach in some
instances that we call selectivity; the idea of selectivity being to replace conditionality by
only moving into countries with large flows of aid when they have already demonstrated
their capability to use those inflows well.
That's the idea behind the Millennium Challenge Account, initiated by the
Bush Administration, which we hope will soon begin actually disbursing some money,
and it is also in a more modest or careful way you might say in a more multilateral style
of being in the middle behind what the World Bank calls the CPIA, the country policy
and institutional assessment, which guides allocation of the resources of the World
Bank's soft window, it's IDA window.
The problem, of course, and the crisis arises around what should the aid
community do in what our sometimes called failing states, weak states, fragile states, in
World Bank lingo LICUS states, that is low-income countries under stress.
We can think right away of Nepal, of some countries in Africa, of some of
the STAN countries in Central Asia. The Center for Global Development put out an
excellent commissioned report of a commission on weak on failing states in the spring,
which is called On the Brink. It focuses on what U.S. policy should be toward weak and
failing states.
There is, in addition to the failing states, or the truly fragile states that
Nick will be talking about, another group that is in a grey area, not completely stagnant,
which is what we'll hear more about, but still certainly vulnerable to both political
changes and to economic turmoil, and vulnerable to the volatility that any kind of
external shock or internal political shock could bring. And I hope we'll hear a little bit
from Kim Jaycox about these kinds of places, which include some of the donor darlings,
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like Uganda, Mozambique, even Ghana, where it's hard to be sure that over the next
decade, new rounds of difficulties might rock them and push them down from this grey
area I'm describing to something closer to what Nick might be talking about.
And on those states, there arise really critical questions, given that we are
living now, even in these months before the G8 meeting to be hosted by the United
Kingdom, in a period when there's a big new discussion about the possibilities of a big
new push that would even do more than doubling of aid flows.
That arises, of course, from the report led by Jeffrey Sachs of the United
Nations Millennium Project and the push from the Europeans in particular for a big front
loading of aid financed by a new international finance facility and from the French new
ideas about doing levies or taxes on global transactions on airplane fuel that would
greatly increase the amounts of resources for some of the poorest countries in the world.
So I think it's absolutely a terrific moment for us to be launching a book
and for you I hope to be reading a book that addresses these issues from the side of
someone who knows an awful lot about politics and political institutions in the
developing world.
Nick van de Walle you have his bio is the John S. Knight Professor of
International Studies and the Director of the Mario Einaudi Center for International
Studies at Cornell University. He's a non-resident fellow of the Center for Global
Development. He's a political scientist who has published widely on just the kinds of
issues that he'll be talking about today.
In this book, he puts a lot of his experience to work and that includes
experience in the field, thinking through deeply what the problems are to address a
particular question about what to do on the foreign aid side.
So Nick's work is part of a larger body of work we are doing at the Center
on the critical issue of aid effectiveness. And I invite all of you who haven't been to our
web site to go there. You will see there papers and earlier books that deal with this issue
from many different perspectives and points of view.
Let's turn now to Nick, who's going to take about 15 minutes to present
some of the ideas in his book, and then we'll go to Kim Jaycox.
MR. VAN DE WALLE: Great. Well, thank you very much, Nancy for
that introduction.
It's really an honor for me to be here and to have written this book,
sponsored by the Center for Global Development. In a brief couple years, Nancy has
really turned the Center into really a--probably the major American player outside of
government on these very important issues, and the Center has published already a
number of important works, so it's an honor to have had my research sponsored by the
Center.
I want to thank also Kim for having graciously come today to discuss the
work. And I want to thank all of you for coming in this miserable weather, although it's
about 30 degrees warmer here than in upstate New York.
Okay. The main question that my book addresses is the one that's on the
screen. A number of low-income countries, basically three dozen depending on one's
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definition, have continued to receive really steady increases with a dip in the mid '90s,
but otherwise steady increases in foreign aid over the last half century, and yet have not
had any economic growth in that period.
What should be done about these countries? That's an important question
in two ways.
The first is that the aid system clearly works and has clearly worked for
what are today the upper middle income and upper income countries, but an aid system
that doesn't work for the poorest countries is really deficient in some fundamental way.
And as we begin the 21st century, it's clearly the case that the aid system will one day
only be present in these countries, in these three dozen or so countries where there has
been very, very little growth.
And so it's time to begin a serious conversation about how does one
change the aid system in such a way that it works in these countries, where it has not
tended to work in the past.
Secondly, I think--and Nancy alluded to the timing issues--in the last
couple months, we've had once again what is part of a cycle in which a major
commission emerges and looks at these issues and recommends once again that aid
should be doubled. As Bill Easterly has suggested, this is a standard prescription in the
aid industry going back to the late '40s.
My answer to this question is--I'll put it right up front at the beginning--it's
not that these countries need more aid, but fundamentally that they need a different kind
of aid. And the book lays out why that's so and then sketches out what a different aid
system would look like. Okay.
I start with a diagnostic. I'm going to--since I have 15 minutes, I'm going
to move very, very quickly to my prescriptions, but the book lays out a careful diagnostic
of what these countries look like; what do these three dozen countries where aid has
essentially failed to bring about development, what do they look like?
Their economic characteristics are well known and the book doesn't
devote much effort to elaborating on them. We know weak infrastructure, low levels of
human capacity, extremely low levels of human development.
I think the book's better contribution is to focus on their common political
characteristics, which are less well known I think and less well appreciated in the
development business.
All these countries are presidential, for example. Every single one has a
presidential constitution. If you look at parliamentary regimes in the Third World, you'll
see that they tend to outperform presidential regimes by quite a large margin. That alone
suggests that political institutions really matter to outcomes in these countries. We look
at other of these characteristics. Virtually all of these countries are non-democratic.
Most of them have a surprising amount of political stability given their poor performance.
In fact, they tend to have presidents who stay in power quite a long time. I don't
remember the exact numbers. I didn't write them down in my presentation, but leaders in
these countries tend to stay in power two to three times longer than, say, democratically
elected leaders in the West.
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Okay. Again, a common characteristic, which I argue in the book is very
much part of a factor in explaining their economic performance. Okay.
As Nancy said, there has been a really a crisis of confidence about aid
since I would say the early to mid '90s, and there's been a series of major studies, going
back to the World Bank's assessing aid study to a number of other studies during this
period, and together they come out with a very clear consensus about what needs to be
done in these countries.
They argue three things, which again I'll fly over here, but which is
elaborate in the book at some length. They argue that the aid business needs to move
away from state-led development strategies and engage with local governments, NGOs,
as well as engage in wholesale privatization and decentralization.
Secondly, they argue, again as Nancy suggested, a sharp move from
conditional aid that is viewed as having failed to a strategy of selectivity where--or
another word for selectivity is performance-based aid, in which aid is allocated to the
countries that are pursuing the right kinds of policies.
Finally, a consensus has emerged that donors needed to do various things
to lessen donor fragmentation and increase ownership and thus move away from the
kinds of very dysfunctional donor-recipient dynamics that had emerged in the '70s and
'80s. Okay. The best example I think of carrying out this last recommendation is the
PRSP process or the poverty reduction strategy paper process, which now structures most
of the World Bank's aid to these countries.
All right. What was the result of all this reform mongering, to use Albert
Herschman's [ph] old phrase?
In fact, reports from the ground suggest extremely slow progress, uneven
progress, and in some cases no progress at all on carrying out this agenda. The data in
the book suggest that the lack of aid coordination remains striking and that aid
fragmentation has, in fact, increased since the mid '90s. There are more donors carrying
out more activities in a less coordinated way today than ever before.
Secondly, there really has continued to be a failure to promote institutional
capacity. There's no evidence that public performance is improving in these three dozen
countries, and much evidence that performance of the government and of public
institutions is worsening through problems like brain drain and a general movement away
of capacity from central governments.
Finally, there has been generally an inability to change government
incentives. One, I think it was the economist in passing a couple years ago mentioned
selectivity as essentially ventriloquism, where governments were perfectly able to carry
out their own development strategies but only if these agreed with the donors. And in
that sense the puppet image was very strong. I would agree. I would agree that there
continues to be this odd mixture of micromanagement by the donors in these countries,
and at the same time a lack of real power or discretion over many important outcomes,
notably political outcomes.
Finally, part of the reason for the failure of aid has been the inability of
governments in the West and of publics in the West to change the incentives faced by the
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donors when they decide on their policies in these countries. There continues to be--and
again I talk through this at much greater length in the book--important bureaucratic
political dynamics, important external pressures on these donors that lead again and
again, often despite the rhetoric and maybe the sincere efforts of donor organizations,
back to old ways of doing things, sometimes with new language.
I would argue, for example, that the PRSP process has formulated a
distinct and new type of discourse, but that the old donor-recipient relations have little
changed within the PRSP process.
I support much of this reform agenda. I don't mean to criticize it. But I
think what one can say after about 10 years of this reform period is that there clearly
hasn't been enough reform; that none of these reforms have been really implemented.
I also think that some of the fundamental issues have been sidestepped and
have not been addressed forcefully, and I want to spend the last five minutes of my talk
focusing on what real reform could look like and should include.
The first thing--and I say this with some unease given the present political
dynamics in Washington, D.C.--is the importance of promoting democracy in these
countries. I argue in the book actually that economic policy conditionalities should be
considerably lessened and brought back to a kind of core set of macro issues of the kind
of conditionality that existed in the '60s and 1970s. I'll talk more in a second. But on the
other hand, aside from the economic policy issues, on the political front, I argue for a
much, much stricter selectivity.
I believe that the donors should enforce term limits and an alternation in
power. I think that there's nothing in these countries that more important than bringing in
new leadership. And again and again, you see that economic performance declines the
longer a president has been in power.
I believe that the donors should not give money to governments where the
president has been power more than 12 years, and I would argue in terms of political
selectivity that we could move pretty easily to a couple core sort of triggers that if a
country doesn't have term limits in its constitution, which all the OECD presidential
regimes certainly have, that the donors should not lend to those countries.
I believe also that emphasizing free and fair elections, a much closer
engagement with legislatures and judiciaries, which continue to be woefully neglected by
foreign aid to the benefit of the executives, is critical.
There is a very, very clear relationship between economic performance
and executive accountability in these countries. And until the donors forcefully grasp
that and undertake measures that help these political system build executive
accountability into their day to day dynamics, I think we will continue to see relatively
unaccountable executive leaders that do what they want and even when they're getting
lots of foreign aid do what they want and don't do development--the sort of nondevelopmental nature of many of these regimes is a striking characteristic of them. And
so, it's very important for donors to change the incentives for these governments and push
them more in a direction where they become developmental. I don't believe that the aid
system does that now.
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Secondly, I think that we could purse a series of new, of measures that
would create a new aid relationship and that would avoid both ventriloquism and the
blank check. I think in a way it's inevitable. If you have very, very poor performing
governments, it's inevitable that these governments not be given a blank check, unlike I
would argue in well performing governments where I think we need to move much more
towards program assistance and forms of aid where there's much less micromanagement
by the donors.
But in these countries, that would be a recipe for disaster. So we don't
want to do a blank check. At the same time, we don't want to do kind of
micromanagement that lessens the incentives for governments to build internal capacity
and developmental institutions.
Thus, as I suggested a second ago, I support very simple, transparent
conditionality of the kind that was featured in the '70s, where on a small number of macro
issues, we would return to basic IMF conditionality, and where in on sectoral issues, the
conditionality would essentially be at the project level, and, if, you know, if say the
policy environment was all wrong in agriculture, you might not lend in agriculture, but
that wouldn't stop you from lending in other areas. But the point is that governments
have to be allowed to experiment with policy in order to engage in policy learning, while
at the same time they shouldn't be allowed to undertake policies that are non--that are
anti-developmental. I agree that there's a tough balance to strike. But the trick it seems
to me is to create incentives for governments to actually engage in policy learning.
A key dimension of this is that the donor community has to accept the
possibility of a lower volume of aid. I believe that the pressure to lend, the pressure to
give, has consistently been the Achilles Hell of donors in the relationship with these nondevelopmental governments. I don't--and maybe I should quickly add the qualifier that
this is at least at the national and governmental level. I can imagine, in fact, the book
advocates, much more lending for regional public goods, regional institutions and so on.
But I think at the national level, donors should be much, much more willing than they
have been to cut off some of these recipients.
None of these countries in my sample have really been cut off. Some of
them, you know, as a result of egregiously high levels of corruption, or egregious forms
of political repression, they get a 30 percent cut in their aid levels. But we're still talking
about hundreds of millions of dollars of aid, and that doesn't send a clear enough signal to
these governments.
Finally, the last three of these is my--the book lays out an agenda
following the foundation model where the donors do much, much--are much, much less
proactive and governments are rewarded for coming up with their own proposals and are
expected to carry the brunt of project identification and design.
As I argue in my last slide, this is necessary to increase state capacity,
which, after all, is absolutely essential if these countries are to undertake development.
The first element of this is civil service reform. It's striking--I know this is
something that everybody in the room probably agrees with, but it remains the case that
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very few of these governments have effective civil services and that very few of these
civil services have received much attention from the donors.
If we look at real turnarounds in developing countries, whether we're
talking about Ghana in the '80s and early '90s or Korea at an earlier period, most of these
successful episodes were started with fundamental civil service reform. I would argue
that that's a really a sine qua non of any progress.
In terms of capacity building, I propose what I call a capacity utilization
approach, where governments are encouraged and pushed to using their--the capacity that
has accumulate in these countries or that is available to them rather than treating capacity
as something elusive that one is always trying to gain. But until one gains it, one has to
continue to rely on foreign experts and technical assistance.
It's very, very striking that these low-income countries 40 years ago had a
handful of college graduates today have tens of thousands of college graduates, and yet
state capacity has declined. And that shows that how we think about using the existing
capacity is wrong. I would argue, for example, that we should restore economic
planning; that governments should design their own development plans, and should be
rewarded for doing so, even when these don't hue strictly to the Washington consensus.
I would argue that project evaluation should be a recipient function and
not a donor function; and that much again the way the foundations work--unless you do a
serious evaluation of the aid you receive, you don't get more aid. I find very, very
striking the fact that recipients generally view the evaluation of aid as something that
doesn't concern them. And I would argue that's just one of the many dysfunctionalities
that exist today.
Finally, I would promote regional institutions and other bodies that help to
promote policy learning and reinforce the technocratic element. These are countries
which potentially have a real technocratic element, but that technocratic element has been
disempowered over many years by the political class that is not interested in
development. What the donors have to do is strengthen the technocrats. And again that
means devolving more decision making, not less, to these countries, but in the context of
conditionality.
To conclude, as I--you know, as I'm writing this, it strikes me more than
once that this is really inside baseball. This is--I devote laborious pages to the details of
why the PRSP process doesn't work and, when I've tried to talk to my students at Cornell
about this, you know their eyes glaze over and they say, well, yeah, but, you know, have
you met Bono. You know, that's-[Laughter.]
MR. VAN DE WALLE: That's what they care about. My proposals
aren't particularly sexy. Many of these proposals have been made in some form in the
past. And that's one reason for which I'm not optimistic that these will be carried out in
the short run.
Secondly, the real problem here is that there's no constituency for reform
along the lines that I'm advocating. This is really the big question. I don't believe that
there is a constituency for these kinds of changes in the donor community, and I don't
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believe that they exist among recipient governments. I'm hopeful that there is a
constituency on the one hand in the publics of recipient countries and then in the other
hand in the private sector and the NGO community in the West.
NGOs have until now really focused on substantive issues. They've
provided a substantive critique of the development business. You know, the development
business is not sufficiently pro-environment, or it's not--it wants to build too many dams.
But they've really not focused on the procedural, the--you know, the processes of the aid
business. And those strike me as as important as the policies and the substantive issues.
But the NGO community could be part of a pro-reform constituency, and it's certainly in
their interest. I think it would mean a substantial rethinking by the NGOs. They're even
more guilty than the regular donors on issues such as donor fragmentation and the
proliferation of donor activities. But nonetheless, I think they could be part of this
constituency.
Finally, in the countries themselves we very much need to build a
constituency for reform among the publics of these countries, because it's their welfare
that is, after all, at stake. Again, I think that ties into things I said before. We need to
strengthen regional institutions. We need to strengthen local universities--the quality of
debates about economic issues and so forth.
But unless we do that, I don't see where my agenda for reform will come
from. And so I end on that slightly pessimistic note. Thank you.
[Applause.]
MS. BIRDSALL: Well, thank you very much, Nick. I think there's an
excellent segue from one of your last points to an introduction of Kim Jaycox. But
before I introduce Kim formally, I need to confess that he and I are both members of a
very important club, which could be the key constituency for your reforms on the donor
side, Nick, and that is the 1818--is there an H?
MR.
: Yes.
MS. BIRDSALL: The 1818 H Society, which is a powerful club of
former World Bank staff, in principle retired, in fact, usually not or not always. I'm
really very pleased that the 1818 H Society agreed to send invitations to its members here
in Washington to join with us today. And I'm pleased because you and us, Kim and I, not
Nick yet, we have a lot of collective wisdom and experience shared among us, and I'm
quite determined that we find ways to have more of the members of 1818 H Society and
of the IMF retirees and the U.S. AID retirees, and, of course, the InterAmerican
Development Bank retirees, since I'm also retired from the InterAmerican Development
Bank, to have you much more engaged in our activities to ensure that you're more aware
of what we're doing and to find ways to exploit your collective and our collective wisdom
and experience in supporting the kinds of messages and the kinds of issues that we want
to keep on the development agenda.
So, Kim, in addition to being a member of this important club, is the
managing director at--a managing director at Emerging Markets Partnership, and he's
president and chief executive officer of the AIG African Infrastructure Fund. But that's
not really the point. The point is that Kim spent more than 30 years at the World Bank
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and a long period of time, more than 10 years, from the mid '80s to the mid '90s, as the
vice president for sub Saharan African Affairs. And I remember what an important
figure he was at the time. There was some period around the time of the controversial
CFA devaluation. I'm sure he doesn't remember, but I do.
I had some role in some discussion, which Kim was leading, and what I
remember--I don't remember the details of what position he was taking at the time. What
I do remember is the sense that I got that he had--he was a proponent of ownership by the
African decision makers well before that word had been coined as a kind of issue in the
development economics World Bank and so on literature.
So I can assure you that he is someone who can really comment wisely on
Nick's book. In addition to my recollection of his being ownership, there's the real
evidence, which is that while he was at the Bank, he invented, for all practical purposes,
he's the one who invented the special program for Africa, which some of you will know
about. He invented the Global Coalition on Africa, which included not just donors but
African heads of state. And he got started the African Capacity Building Foundation.
So there are many respects in which we was truly ahead of his time. Kim,
on to you.
MR. JAYCOX: Thank you very much. Thanks very much, Nancy, for
inviting me. It really is great to see a lot of old friends and colleagues here, despite the
rain. And thank you, Nick, for bringing me close again to some issues that I spent a lot of
time on.
I was--it's been nine years since I left the Bank, and, you know, at that
time I was totally focused on Africa. Most of these countries are in I think this selection
that Nick has called the stagnant, low-income states or is that the--yeah, SLIS.
I used to be preoccupied with the issues that he discusses in this book-conditionality, selectivity, the allocation of IDA funds, the allocation of IDA according to
the performance of the recipient. You know, IDA was allocated on a regional basis
according to population and poverty, but within the Africa region, we allocated that total
by performance and a lot of the stuff that is now being done in the allocative process, in
the MCA, for instance, and others are using matrices that we, in fact, that Steve Denning
[ph] and others in the Africa region invented a long time ago.
I'm, of course, always interested in donor coordination and aid
coordination--and there's a big distinction between the two--ownership of donor-driven or
aid-driven programs and reform programs in particular; capacity building and capacity
utilization. Indeed, we were preoccupied with all of the weaknesses and vulnerabilities
of the aid process, which arise basically from the really striking inequality in the parties-between the parties involved, between the donors and the recipients.
Now, nine years is a long time ago, and I've been doing something entirely
different since then, and it's much easier. I'm doing private equity in Africa. I don't
worry about macroeconomics. I don't worry about micro conditionality. There's no big
picture, none whatsoever.
[Laughter.]
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MR. JAYCOX: There is no agenda for change, but there is absolute
selectivity, which makes my job a lot easier than it used to be. So when you ask me to
speak and comment on Nick's fine new book, I was quite hesitant actually, until I read the
manuscript. And on reading it, the language, the terminology, the exasperations, the
disappointments, they all came rushing back. And he speaks with such a passionate logic
actually in this book that it really got my juices flowing again.
Now this book is a highly readable and a tightly reasoned book, and it's
the kind of book we have come to expect from Nick van de Walle. And I commend this
book to anybody and all of you who are interested in--or maybe even participating in the
debates or the unending debate about aid, poverty reduction, and development. The book
comes at an incredibly opportune moment. I think Nancy alluded to the fact that
everybody seems to be talking about these issues now, all of a sudden. Jeff Sach's has
just put out a new book. The Report of the Blair Commission has just been issued. It's
about, you know, 180 pages long or maybe 456 pages long actually. I tried to download
it the other day and ran out of everything.
[Laughter.]
MS. BIRDSALL: Time.
MR. JAYCOX: And, of course, there are calls--everyone is calling for
big increases in aid and on top of the largest and probably the most successful IDA
replenishment, you know, that we've ever seen. And also it's a time of the changing of
the guard at the World Bank, and that's an event that always stirs this debate it seems to
me, or plenty of debate.
I think Nick does an especially good job of describing the weaknesses in
foreign aid or development aid and both multilateral and bilateral and the forces, the
inertias, the inequalities that give rise to these weaknesses. He's just gotten done a run
through of these, and I'm not going to repeat them all. And he does acknowledge that aid
has had some very important successes over the years in the certain categories of
countries at least, but not in the poorest countries and the weakest countries, the SLIS, as
he calls them.
There the failures of aid are rather large, and I would agree with that. It
seems that the more unequal the relationship between donor and recipient, the more
obvious and debilitating the weaknesses in the aid effort, in the aid modalities and their
implementation.
Nick also acknowledges in his book that a lot has been done. These
weaknesses have been recognized for a long time, and a lot has been done to try to
overcome them and make improvements. And I can vouch for the fact that indeed more
than lip service has been paid to the reform movement in the aid business.
Nevertheless, Nick remains pessimistic. He says not optimistic, not very
optimistic. I say he remains pessimistic about the pace and extent of movement on the
major issues that face the aid. And he contends that radical reform is essential if aid is to
yield satisfactory outcomes, at least in these poorest countries.
I must admit that I was somewhat shocked by this pessimism. When I left
the Bank a long time ago, I thought we were making tremendous strides on these issues,
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if only in the context of the African low-income, highly indebted countries. And that's
when we launched the SPA. The SPA was the Special Program of Assistance for lowincome, debt-distressed Africa. It was launched in 1990. It was set up for a very specific
purpose, and that was to coordinate the aid--mobilize and coordinate the aid, quick
disbursing of aid, actually--quick disbursing financial assistance to these countries that
were all of them a very select group. They were all in structural adjustment, monitored
by the Bank and the IMF. And these programs obviously were designed by the World
Bank and the IMF. I don't think there's any question about that. There was--the issue of
ownership, of course.
Just a digression on ownership. We never went into a program in Africa
or anywhere else for that matter--I worked in Korea and in Thailand on structural
adjustment as well. We never went into a country with a really a full-blown structural
adjustment program where we were not basically in alliance with a tiny minority of local
citizens, local technocrats, people who had the intestinal fortitude, the courage, and the
know-how or the willingness to stick their neck out far enough to try to get reform
moving in their countries. They're countries are at dead stop or in free fall.
So the job of the Bank and the Fund was to go into alliance with these
people, prop them up, ride them with ammunition they could use inside the cabinet-analysis, research findings, and the argumentation necessary to win those political
arguments. But nevertheless, these were definitely designed--these programs were
definitely designed by the World Bank and the IMF.
It doesn't really matter I think on this conditionality point that you raise,
Nick, whether it's ex ante, ex post, whether it's the foundation model or whether the
MCA, it all comes down to conditionality. One way or another, it's--maybe the first
round doesn't look like conditionality, but it is certainly going to be conditional by the
time the money flows. In other words, it has got to conform to the donor's idea of what is
going to work, but the donors idea of what is going be a payoff. I mean, after all, you're
using the donor's taxpayer's money. It's going to have to do that or it's not going to
happen.
So conditionality I think is the--most of the arguments I've heard about
conditionality have really kind of forgotten that point, and we're dealing with some kind
of cosmetic issue, not with really conditionality.
But to get back to the SPA, it mobilized billions of dollars, quick
disbursing aid for these countries. By the time 1994 came around, all of these countries
that were performing had performing structural adjustment programs had moved from
negative per capita income growth to positive per capita income growth. By that time
also, there was--the investment, the project part of the but, was, in fact, also being treated
by the consortium of the SPA. All the donors, major and minor, all of the multilateral
banks--ADB, the Development Bank of South Africa--all of these were involved with
this effort. The point I'm trying to make here is that the--it became more and more
holistic. The debt relief was brought into the picture. The Paris Club sat on the--in the
plenary of the SPA. All of this stuff was integrated to the point where we were able to
create a virtual common pool of funds.
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IDA allocated IDA money in such a way that it made up for the prejudices
and the preferences of the bilateral donors, who favored certain of these 30 countries
which were in structural adjustment so that our--it used to drive Mr. Stern crazy that our
IDA allocations didn't conform to anything that looked like they should because it
depended on what the other donors were doing. We were determined to see that every
one of those structural adjustment programs was at least barely adequately funded and
that that's what it turned out.
I think the results were good. By and large, we've--the feedback on that
has been very positive. Now, actually SPS is now in its sixth phase, six three-year--sixth
three-year period, so in its 15th year, something like that. And it's still going relatively
strong I'm told.
The problem is, though, it has spread way beyond the original purpose.
And, you know, it's clear that--and I think that I have to agree with Nick's diagnosis of
the weaknesses of aid. They're still there. Donor discipline is a very--I mean, this is like
herding cats. Everybody knows that. It's very difficult. The discipline breaks down
from time to time. The bureaucratic tendencies, the old think rears its ugly head quite
often. But, by and large, we think that this has been a big success.
Now what about the future? Basically, I believe that the SPA shows a
way of cooperation. I think that Nick's pessimism about a leadership function being
found for the reform, the necessary reform of aid is too pessimistic. After all, the
leadership of the bank was accepted by these donors, way back in the--15 years ago.
They shifted out of project aid into program aid. They untied all their aid in order to be
able to do this with Africa. So it seems to me it's not the possibility that this same
community, this World Bank could lead the effort in the future of aid reform.
It's a tough order. I mean, after all, there are lot of internal unresolved
tensions between the donor objectives, between capacity building and the efficacious
delivery of services, the building up of NGO and civil society as opposed to the state. All
of these things have a legitimate backing of donors, but they're not prioritized and we're
never--we're always in conflict or seem to be in conflict. It's no wonder then that it looks
like a very difficult area to coordinate.
After all, you know, aid is a political process. Aid is a messy process. It's
a democratic process. All donors are created equal, as we all know. I mean, this is
basically the problem. So but I think that the time that we are now facing with its crisis
has been identified. It is definitely possible that the bank could with a new leadership
certainly reinvigorate this aid effort, this aid reform effort and move to a new level.
Thank you.
[Applause.]
MS. BIRDSALL: Thank you very much, Kim. You know I know that
since we have people, I know so many good friends and colleagues in the room, I'm sure
you have lots of talking and commenting to do. But I ask you to hold your fire for a
minute because I'm going to take the prerogative of asking each participant a question in
the spirit of getting us going.
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Let me start with Nick. I was in Mozambique just last week and at a
conference sponsored by the IMF on the macroeconomics of aid. And attending this
conference were a very impressive and distinguished group of African Ministers of
Finance and some central bank governors. And there was a lot of the same discussion
we're having here. But what was interesting is the extent to which they conveyed--and I
think the facts confirm--that there has been a real change, maybe not in all of the
countries in your SLIS group, but that there has been a real change in Africa no doubt
hurried along at least a little by the broader dialogue, partly sponsored by the donors and
by globalization itself, by the fall of the Berlin Wall, by the increasing attention to
markets, of China. You know, it's hard to deny that some of the resurgence at least from
negative growth to positive growth that Kim mentioned isn't due, at least in part, to the
donor dialogue, so the dialogue with donors and maybe even a little bit the indirect
support that old style conditionality of the Washington consensus variety provided to give
a little umph to the lending and the transfers.
So with that as background, given your focus on selectivity based on
politics, I want you to just answer two simple questions. Should the World Bank and the
other donors and creditors right now dramatically reduce transfers to Uganda, a country
where it looks as though the leadership will be quickly getting beyond your 10- or 12year term?
And the converse, should the World Bank and the creditors now make a
big push in Nigeria, which, after a long period of difficulty, now is trying to develop with
political leadership a set of important reforms on the governance and corruption side? I
see my colleague, Todd Moss [ph]. He and I have been writing and arguing for debt
relief for Nigeria. Okay. Uganda and Nigeria.
MR VAN DE WALLE: Right now?
MS. BIRDSALL: Yeah.
[Laughter.]
MR VAN DE WALLE: Okay. I think Uganda is actually a very good
example of a country where the president has been in power too long, and I think that
Uganda's growth performance shows pretty clearly diminishing returns to President
Museveni. So while I understand why that is a--it's a lot harder call than, say, you know,
Paul Biya in Cameroon or--oops--it's a lot harder call than Paul Biya in Cameroon or
other sort of old fashioned dictators that still exist.
Nonetheless, I would say that the donors should be putting much, much
more pressure on Museveni than they have been, and that it's a good example of a
country where he was very good initially, and although it was a single party regime,
initially there was much--there was as much political participation and competition as in
any multiparty system in Africa. Nonetheless, I think it's pretty clear that over time the
system has become more oppressive and more like a traditional single party regime and
that the growth rates are not what they were before. So I would say, you know, to make a
point in a book, you maybe lack a nuance. I understand that there are difficulties in how
one would do this and so forth. But yeah, I would say more pressure on Uganda.
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Nigeria poses a different kind of problem because it's clearly what
political scientists call an electoral autocracy or a hybrid regime, in which we've moved a
multiparty competition and yet many, many of the old dynamics of a single party regime
are still present. I support the--and the book supports--much more generous debt relief.
But I also would argue that the donors should be much tougher on Nigeria than they have
been.
MS. BIRDSALL: Okay. We'll take that as a very qualified nuanced yes
on Uganda. I assume you mean by donor pressure cut aid-MR VAN DE WALLE: Yeah.
MS. BIRDSALL: Substantially.
MR VAN DE WALLE: Yeah.
MS. BIRDSALL: I'm sure some of you in the room will want to
comment on that.
Let me turn to Kim. Before I do that, it tempts me to reveal that we have
so much trouble when we get to specifics on countries I think in saying yes or no; we
being the larger development community. And it kind of reminds me in the U.N.
Millennium Project Report, there is a discussion of which countries would not be eligible
for the big push in the short run, and despite efforts by many of those engaged, the only
countries that the U.N. could bring itself to name were three. I forget which three, but
they included Zimbabwe and Somalia.
So, you know, this grey area is a little tough. So that's a good introduction
to my question for Kim.
Kim, you are an optimist on donor reform based on the past. So, you
know, this issue of radical reform versus gradual reform that you or Nick mentioned, it to
me has to do with the larger question of whether there are real incentives that have
changed for the donors to change. You know, again, I'm reminded of being in
Mozambique, which is one of the pilot countries for the study or effort among the donors
to harmonize. And they've just finished the peer review. The donors did a peer review of
their harmonization, and the bottom line is not so great.
MR. JAYCOX: Not great.
MS. BIRDSALL: It's kind of a C minus I'd say. You know, even with all
the harmonization and the budget support, still something like only 30 percent of funds
are going into Mozambique in the form of budget support. And then we have the recent
OED study of the PRSPs, which seems to give that approach. I don't know what others
might disagree, but I'd say it comes out at about a C.
So, you know, would you just address what changes you could imagine
that would be more--that would induce more radical reforms? Does it require a complete
revamping of the aid architecture, something closer to Robbie Condor's [ph] common
pool, all the donors pool all the money? Or is it a matter of going on with this sort of,
you know, push, more IDA money?
MR. JAYCOX: You make it sound so tedious and drawn out?
MS. BIRDSALL: Yes. Yes.
MR. JAYCOX: Yeah. Well, I think that's likely to be the case.
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You know I think that the--what Nick's book does and what the SPA--I
didn't mention but I should have is by singling out a group of countries that have a fairly
common set of problems, focusing on them, designing as best you can remedies for their
problem, you can galvanize even disparate thinkers to cooperate. Now that maybe has
not been done enough. It certainly was the main effort in the SPA. And I think it is the
main effort that you're really calling for. You're talking about a very specific syndrome
and the solution is to get tough on the political side, to really emphasize state--central
state capacity building, probably get away from some of the softer elements of aid in this
particular case; prioritize; come out with strong conditionality, strong coordination,
enforcement thereof-MS. BIRDSALL: Political conditionality?
MR. JAYCOX: Political conditionality.
MS. BIRDSALL: Would you recommend that now--would Paul
Wolfowitz-MR. JAYCOX: Well, let me--well, see that's--this is a very problematic
time because when you have a government, one of the major donors who has sort of
justified a preemptive war on the basis of the word democracy, I think it's very difficult to
get the other people to cooperate for a while at least. It's going to be a while before that
word has the kind of power we'd like to see I think generally.
But I think you know actually-MS. BIRDSALL: But you would support political conditionality?
MR. JAYCOX: I would. If you--but it has to be on the basis of a
consensus among these donors. I don't think the Bank can lead that consensus very easily
since it's a cooperative and includes all kinds of political structures in its membership, but
we used to hide behind the donors for democracy in the SPA. I mean, for instance, when-what's his name--Moy would kick over the traces in Kenya or do something very
negative as far as the donors were concerned, they would stop supporting the program,
and then we'd have to stop supporting the program as well, because obviously the
program couldn't go forward with just our money alone. And this became a justification
for our acting on the basis of-[TAPE FLIP.]
MR. JAYCOX: --Only available in the most egregious cases. And I
think Nick points that out. If were more nuanced or it was more adjustable perhaps there
could be, you know, a better kind of twisting of the dial, so to speak, to get performance.
But I think it's a very difficult area. No doubt about it.
MS. BIRDSALL: Yeah, I take from that, but others may disagree that the
World Bank can't take the leadership on-MR. JAYCOX: Democracy.
MS. BIRDSALL: --Walking in more specific measures of political
selectivity and that the donors probably won't because they, until it's really obvious as the
case with Moy in Kenya, they're competing with each other instead of truly collaborating.
But that's probably a controversial statement in itself.
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Let's turn to--and you'll get a chance so that I don't want to seem to have
the last word-MR. JAYCOX: That's okay.
MS. BIRDSALL: --On what you said. Could you--when you are
acknowledged, identify yourself and go to the microphone, please. I saw Sebastian.
Maybe we give him the first question since he wrote the book. Introduce yourself.
MR. MALLABY: I'm Sebastian Mallaby at the Washington Post. And
some of what you say is obviously a critique not of the conventional wisdom, but of the
conventional practice. But where it seems you are critiquing the conventional wisdom is
in this suggestion that you go beyond conditionality tied to transparency, accountability,
these sort of governance buzzwords, to 12-year limits on power, holding power on term
limits being in the constitution and so on. And, you know, leaving aside, whether as
Nancy says, this is politically likely to happen, just addressing the question of is it good
that it should happen. And I mean, obviously the biggest poverty reductions have been
happening in China, Vietnam, which would under this scenario be cut off. It would have
meant cutting off Suharto on the 1970s, although in 1994 Oxfam produced a report
holding up Indonesia as the brilliant case study in poverty reduction. So that was sort of
15 years later after you would have cut them off.
Are those prices that one should be willing to pay in order to send the
signal you'd like to send on alternation of power?
MS. BIRDSALL: Nick, what I'm going to do if it's okay with you is take
two or three-MR. VAN DE WALLE: Sure.
MS. BIRDSALL: --Two or three questions at a time.
MR. FISHER: My name is Fritz Fisher [ph]. I'm a happy retiree from the
World Bank and the German Government. I'm very pleased and thankful for the nice
invitation.
As a European, I'd like to comment a little bit on the need for regional
cooperation, particularly in Africa and I was quite pleased that you focused on that. And
I think the Europeans were the first in the context of the Long [inaudible] Convention
some 30 years ago to put some 10, 15 percent of the volume aside for regional
cooperation. And after some pushing, the World Bank followed suit and didn't have
regional cooperation on its radar screen originally.
But it was fair to say that we had our problems with the Africans because
they didn't believe in regional cooperation. And most of the schemes up to now have
failed, and I think it's high time to revitalize it with new leaderships in Africa, because it
has a lot of benefits and not only trade.
In Europe we know reconciliation--Germany and France, Poland--cross
country fertilization--how do the neighboring countries do. Africa was cut in pieces by
colonial powers. Tribes have been cut. Regional cooperation would be a remedy to
solve these problems.
But I would go a step further not only encouraging regional organizations
but also cross-country regional institutions. I think Africa, for example, some parts of it
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regional universities. They have to have something they are proud of. They don't have it.
They flock to our capitals. Why not think of common training, joint training of police
officers, teachers, military, judges--you name it. There's a whole gamut that can be done,
and I for one am a great believer in the merits of this, and I just wanted to highlight that.
Thank you.
MS. BIRDSALL: Thank you, Fritz. One more question before we--I see
someone way in the back, and then I'll move to the.
MR. DICK: My name is Marleys Dick [ph], University of Maryland. The
Irishman said that he wouldn't start from here if he wanted to go to Dublin, and I can see
the validity to that in some respects. There are a number of issues I think that should be
considered here. And one of the first ones is that the World Bank, after all, was the lead
agency in development before the regional banks got established and, at one time, it has a
very great degree of expertise. And at that time, it also had a great degree of central
supervision of what the various regions were doing. That no longer obtains, or at least in
certain sections, it doesn't obtain. And part of the reason was, as Jose Gomez Ibanez was
saying a couple of weeks ago, that in the 1990s the philosophy of the bank became
privatize everything. And indeed it started privatizing practically everything and,
therefore, losing its internal expertise at that time.
So the question I would have on that is unless the Bank and other
organizations in a similar situation reestablish that expertise, it's going to be rather
difficult for them to really perform the function of advising countries on either donor
matters or on the involvement of the Bank itself.
As a second point there-MS. BIRDSALL: Okay. But, you know-MR. DICK: Yeah. I'll be quick. Just one second point, and that is this:
that it was suggested that the initiative should come the countries. But very often, and I
think Ken knows this better than I do, the countries wanted to hide behind the Bank.
Let's face it. If you put forward an initiative that was really sort of out of the mainstream,
no government that I know of wanted to say this is my idea. They wanted to say this
what the Bank is telling us to do. Thank you.
MS. BIRDSALL: Okay. Let me go to Nick and then Kim to pick and
chose amongst. Do countries want to hide behind the Bank? Nick, what's your take?
MR. VAN DE WALLE: In other words, countries?
MS. BIRDSALL: In Africa.
MR. VAN DE WALLE: Yes. Absolutely.
MS. BIRDSALL: Especially.
MR. VAN DE WALLE: No, I agree very much with what Kim said. I
think it's interesting the way this conversation has very quickly become one about the
Bank and about Africa.
MS. BIRDSALL: Right. Let's try and-MR. VAN DE WALLE: And I don't--I think, as Kim noted, my category
of countries does have an African color, but I don't--I really try to avoid the argument that
there's some thing about Africa that prevents development and there's sufficient--there
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are--some of my cases in every continent of the world, including in Eastern Europe. So
this is really not about Africa. I don't think it's about the Bank either, because I think one
of the very, very striking things is the problems of donor coordination and the fact that
whatever the good intentions and virtues of one donor, other well-intentioned and
virtuous donors, if they don't share the same preferences, can together send a very mixed
signal to these countries.
You know, it's--we're having this conversation in Washington. Well, U.S.
AID has not bought into the PRSP process at all. In fact, I think if you go to the USAID
web site, you can Google PRSP and it won't come up.
Now, so we can talk about donor coordination all we want, but USAID is
the biggest donor in the world. It is, you know, a mile away from the World Bank. And
there's no coordination between the two agencies.
So I think we very much have to make this a story about the sort of the
collective policy--the policy preferences that emerge sort of from the collective
personality, if you will, of the donors.
Two questions. I very much agree on regional institutions and the book
makes a very similar pitch. On Sebastian Mallaby's question, which I think is the very
logical question to my line of argument about the what to do with the development
dictatorships.
If we have cases of countries that are not democratic and are growing very
fast, then I think there are limited returns to political conditionality. It's very striking,
however, that in the countries I focus on that the absence of democracy is really a key to
their dismal performance. So, you know, the issue doesn't come up. I mean, now--I
think we're in a quandary if we are in the '70s and facing Indonesia. I suspect that more
pressure on Indonesia--here I'm going out on a limb--earlier might not have led to the
ignominious end of the Suharto regime. But, you know, the cases that I'm looking at, in
the poorest cases, there's clearly a governance failure, clearly a governance failure.
Finally, one last comment. Nancy and Kim have suggested that things
have somehow really changed in Africa. And I recognize that; you know but if you look
at the overall growth rates, in the '90s, there--and early 2000--maybe, you know, there's
maybe a half a percentage better than the '80s. But the '80s were the most horrible
decade in African history.
There are 15 civil wars in collapsed states in the region. That's basically a
third of the countries in the region have collapsed.
If you look at key institutions, I think as a professor I think a key
institution is universities. Universities in Africa are weaker today than they were five
years after independence. There are fewer African Ph.D.'s being produced today than
there were 20 years ago. And we see this at an institution like Cornell. We have half of
the number of Africans studying in graduate programs at Cornell today than we did 25
years ago. And it may well be the case that the top social scientists from Africa are not
being replaced. Meanwhile, African universities and African research institutions,
notably in a key field such as agriculture, are much weaker than they were 20 years ago.
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So I would say, you know, okay. It's--there has been policy learning.
There has been some progress. NEPAD I think is a small step forward.
But I think that after all the effort, after all the programs such as SPA, the
returns have been really quite limited, and that is cause for pessimism.
MS. BIRDSALL: Kim, do you want to-MR. JAYCOX: Well, yeah, I see the glass more than half full rather than
more than half empty. But, no, coming back to Sebastian's question or the position there,
I think you put your finger on it, Nick. The trick is to isolate the countries you're really
concerned about. Now China is not in that low stagnant group, so it doesn't--there is no-you're not necessarily calling that a remedy for that kind of case.
However, I think that in the very low stagnant cases, the governance is
clearly a major issue. Whether you can get it to go as far as the form of government, i.e.,
democracy, competitive politics, that's, you know, if you can get 90 percent of the way
there, I think you'd have such a tremendous impact on the performance that, you know,
the last few steps are not necessarily essential.
But that's my view, but you have a different one. And it may not be
worth--it may be so difficult to get a consensus. You would have to wait until things got
so bad before you acted that it would really be counterproductive to do that.
You know there are a lot of different theories floating around, and donors
are driven by these theories and approaches. The LICUS example, for instance, about
whether your worry about governance first or you worry about growth first. I mean these
are really legitimate discussions I think and LICUS is an example. Low-income
countries under stress have been singled out by the Bank to be an area where you don't
worry too much about governance at the moment. You just try to deliver services and get
growth going and then hopefully somewhere down the line they'll have more capacity to
actually tackle their governance problems.
Now, that's the very I think pragmatic approach. Now, whether it's right
or not is another matter. Plenty people don't believe that's right. But it is an isolation of a
group of countries, a diagnosis of what their problem is and, you know, a suggestion on
how to remedy it. And I think that is the secret.
MS. BIRDSALL: Well, I think that those of you who haven't read the
book--and that will be many of you, since it's just published. Maybe, Nick, you could
repeat or clarify your--the part of your category that refers to the lack of growth. It's
countries that have grown or not grown in per capita terms over the five years or
something like that?
MR. VAN DE WALLE: Yeah. I looked at the--I took the category of
World Bank countries that were low income, although I cut off at the top of the lowincome group to get a slightly smaller group, and then I looked at those countries which
had had really the--a growth performance of an average less than--I can't remember now-three percent I think overall gross GDP growth over a 20-year period, and had been at
peace. So I--unlike LICUS, I took out the civil war countries, since clearly there you
could say that economic performance had been undermined by issues of violence and
civil war.
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Let met say that so my category was more restrictive than LICUS, which I
think includes something like 50 countries or so. Explicitly, my--the book discusses
LICUS and views the LICUS approach as essentially again old wine in a new bottle-slightly different terminology. But that's what the donors have always done. They've
always said, you know, let's be pragmatic. Let's try to get growth and then we'll worry
about capacity and governance issues once we have some growth.
So I don't see how LICUS is different from what the donors have always
done or say the Bank has always done.
MS. BIRDSALL: Okay. Let's go to Todd and then Paul and then there
was a third hand there. And then I'll go back to--well, try to keep your questions short. I
only have five minutes. So one minute questions.
MR. MOSS: Okay. I'll be very short. I'm Todd Moss from the Center.
Nick, thanks very much. I think one of the most eloquent parts of your book and in your
previous work has been describing this dysfunctional relationship between donors and
recipients and how the incentives for both sides are very often--militate against change so
that it's in neither party's interest really to pursue an active reform agenda in this kind of
game; in some cases a charade just carries on.
And if this is actually the case in lots of the countries that you talked about
in this book, what do you think the prospects for change are likely to be in the context of
this huge new push now for lots more aid in lots of the kinds of countries that you're
talking about. Is this likely to make things a lot worse or is it likely to make things
better?
MR. BLUSTEIN: I'm Paul Blustein at the Washington Post and at the risk
of making it sound as if the Washington Post isn't found of democracy, I want to press
Sebastian's point a little bit further. I mean, the other two--several other countries come
to mind--South Korea and Taiwan, which obviously flourished under dictatorships, the
Philippines, which did not flourish under democracy, and I mean the question--I want to
ask the question not only whether, you know, why it's to loose the conditionality, as you
suggested, but whether we--do you really feel that confident that democracy is such an
important precursor to development given these other examples that we've had.
I mean, I was in Argentina recently. I was floored when I was talking to
the chief executive of one of the local multinational auto companies. He was--not the
chief executive, but the head of the local subsidiary. And he said, you know, when we
get together--and I'm not supposed to say where the headquarters is--but, you know, and
when we talk about where--you know, what we want out of various countries we invest.
You know, China always comes up and we always say, God, we really hope they don't
democratize. We really hope the regime stays in place because all we want is the
stability and the predictability, and you know, for 10 years it will be basically the same
system. We'll know who we're dealing with. The last thing we want is some kind of
upheaval there.
And so if a country like that--you know, if the foreign--I mean foreign
investment obviously is crucial to get--helping these countries get going. So if the
foreign investors just want, you know, nice predictable, solid, you know, authoritarian
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regimes, why should we think that democracy is--why should we be so confident that
democracy is such a great precursor to development.
MS. BIRDSALL: I think we'll collect all the questions and then give
Nick one minute at the end.
MR. WACHMAN: My name is Hal Wachman [ph]. And from '96 to
2001, I was the Director for Kenya for the World Bank, and during that period, with
much angst and analysis, we decided to stop altogether lending to Kenya, and you may
say well that's one of your egregious cases, and that would be an easy decision. But no
one had ever done it before. And it was interesting. I want to bring my question to
Nick's point about-MS. BIRDSALL: Quickly to the question, though.
MR. WACHMAN: Nick's point about--you know, speak a little bit more
about where the points of resistance to making that kind of change, because I saw at least
two. One was the bureaucracy in the World Bank. A lot people didn't like what we did
at all. And another was the donors, who were happy to have the World Bank lead, but
they weren't so happy to follow. You know, they'd say, great that you're doing that, but,
you know, we can't really cut our programs back because this that and the other thing. So
just, you know, where are the points of resistance to going in the direction which I would
support actually and what would you do about it?
MS. BIRDSALL: Thank you.
MR. NEC: I'm Steven Nec [ph] from the World Bank. As someone just
pointed out a minute ago, it's not hard to find examples of countries that have developed
without democratizing first. But I would challenge you to identify some that have
developed without a capable public administration. And you acknowledge the
importance of civil service reform. Why not condition budget support at least on
rationalizing the salary structure and increasing pay to make it at least somewhat
comparable with the salaries that the donors can offer and then you have, you know,
globalized labor markets with migration now. Why would you condition aid on
democratization when that more often follows rather than precedes development instead
of on civil service reform?
MS. BIRDSALL: Okay. I'm afraid I'll have to say don't get on line. The
line has ended, and we'll take the last three questions if you promise to go quickly.
MS. OBANG: I'm only a visitor. Louise brought me. I don't know
whether I'm allowed to participate?
MS. BIRDSALL: Yes. You're allowed to do anything.
MS. OBANG: Thank you.
MS. BIRDSALL: Just introduce yourself and-MS. OBANG: Yes. I will.
MS. BIRDSALL: And go to your question.
MS. OBANG: My name is Leticia Obang [ph]. I used to be the Director
for Africa for the United Nations Environment Program. I'm retired, so I presume I
qualify to be here?
MS. BIRDSALL: Yes.
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MS. OBANG: Louise invited me and I thought it was going to be a very
interesting discussion. That's why I came, particularly since it's related to the question of
can aid work, which is what we've been talking about. This has been good.
MS. BIRDSALL: So I'm sorry. I have to ask you to go to your question.
MS. OBANG: Yes. I am. I'm just going to it now. The donors have
been giving aid to countries--I'm from Ghana, by the way. So I'm one of the--have been
giving aid to countries for a long time. Now, I'm just asking can we think back and
wonder whether we have been giving the aid in the right way? Have we been following
the right procedures, the right approach? Have we taken the right approach? We talk
about democracy. We talk of politics. We talk about all these things. But if you're
giving aid and you want the country to benefit from it, it's the people. It has to go to the
people. I know it's difficult for aid to be given directly-MS. BIRDSALL: Okay. I'm sorry.
MS. OBANG: I know. To be given directly, but what I'm asking is can
we look back and see whether we went wrong with the approach, going through
governments and not really getting to the people as we try to give this aid out. I think
that's what it is.
MS. BIRDSALL: This is the Bill Easterly proposal--question and
proposal. Thank you very much. You're not the first person to raise that central question.
Go ahead.
MR. FEDDEMORE: Hi. My name is Thomas Feddemore [ph]. I'm also
a guest here, and maybe it requires a guest to ask this question. But it seems to me that
with the nomination of Paul Wolfowitz to the World Bank, Wolfowitz being the chief
ideologue in the Bush Administration for the Iraq War and democratization and so on and
so on, and linking a lot of the strategies up to that purpose, don't you think that you now
have a major ally to support your argument?
[Laughter.]
MR. FEDDEMORE: Thank you.
MS. BIRDSALL: Excellent.
MR.
: Answer truthfully.
MR. PERRERA: Coming after that humorous remark. My name is Garai
Thomas Perrera [ph], a retiree from the World Bank. It's a very simple one. Sir, could
you please elaborate the role that corruption plays or has played in the stagnation of the
development of these particular countries. Perhaps you might like to elaborate a little
more because our friend, German colleague here, has mentioned you can train lawyers,
judges, policemen, and what have you. But if you have not helped eliminate corruption,
it's you're back to the old system. Thank you.
MS. BIRDSALL: Thank you, all, very much. Before Nick has his two
minutes, and he can pick and chose, to invite you all, because this is always a good idea
for me to come to our web site. I think today we will have posted an op ed of mine, with
my colleague Stuart Patrick [ph] who's here, on the issue of Wolfowitz and political
institutions. So it might be interesting to those of you who are seeking the different
answers to the question about whether Nick has an ally in Wolfowitz.
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Kim, with apologies to you, let us just give Nick-MR. JAYCOX: Sure.
MS. BIRDSALL: --A few minutes of the last word. Or the last words.
MR. VAN DE WALLE: On two current proposals--on sort of the current
issues. First, Wolfowitz. You know, I don't have any inside information. I'm sure there's
people in the room who have much, much more information on his intentions and things
like that. I don't this Administration is much of a poster child for the kind of approach
that I'm advocating. In fact, they have politicized U.S. aid and linked aid decisions to
foreign policy concerns that have little to do with development really more than any
Administration going back to the, you know, '70s. The biggest recipient of more aid I
think is Uzbekistan, and the struggle against global terrorism has really replaced the Cold
War in terms of allocations, which is hardly the approach that I dictate.
Whether Wolfowitz will promote governance concerns at the Bank, I hope
so, because I think these issues are important, but I don't have any insights beyond that.
What would the effect be of doubling aid as proposed in several recent
reports and books? On these countries I think doubling aid would not have a positive
effect. I think--first, I think a lot of the money would be dissipated and spent in donor
headquarters and in various forms of sort of donor organization consumption that has
little to do with development.
I don't doubt that the reforms proposed by Jeffrey Sachs and the Brown
Commission have the chance to increase welfare levels, although I suspect that, you
know, in health and education, although I suspect that many of these improvements won't
really be sustainable and will be highly related to the aid.
It's striking I think, striking and really disheartening how little those
reports talk about state capacity and improving the ability of central states to promote
development. It's really entirely about providing services on improving the welfare of
these people. I support those issues. I think we have to--you know, there are people who
really do need better food and health services. But we have to look at the long run. We
have to--you know, remember the old cliché that development is about teaching people
how to fish.
Okay. On the two more questions on democracy finally. There is much
econometric evidence not only that democracies grow faster than non-democracies, but
also that the longer a country is democratic, the faster it grows. I realize that there are
pragmatic concerns about how one implements a governance strategy, and I take the
points that have been made. But I do think we have to create incentives to countries to
improve their governance and promote democracy. I entirely agree with Steve Nec's
arguments about the importance of public services and public management. I happen to
think that in these countries public management is entirely endogenous to regime type,
and so I just don't--I think the last 30 years shows that you don't get improvements in
public sector performance without democracy. I understand that that's not true in Korea,
but that is true the countries that have not grown in the last 40 years.
Otherwise, I generally agreed with a lot of what was said. Let me maybe
finish on one note. A gentleman asked about corruption. How much has changed? Well
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Cameroon was I think one of the first three countries to get HPAC debt forgiveness. And
it got HPAC debt forgiveness the same year that Transparency International voted it the
most corrupt country in the world. So--and that--that was five years ago. Maybe things
have really changed in the last five years. I suspect they haven't. Thank you.
MS. BIRDSALL: Thank you to all of you and to Kim Jaycox and Nick
Van de Walle.
[Applause.]
MS. BIRDSALL: I hope you'll all buy the book.
MR. VAN DE WALLE: Before you said they should read the book.
MS. BIRDSALL: Read the book.
MR. VAN DE WALLE: But the important thing is to buy it.
[END OF RECORDED SEGMENT.]
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