The Washington Post | By Paul Blustein | March 12, 2002
Seeking to rebut claims by the Bush administration and other critics that foreign aid usually goes to waste, the World Bank plans to issue a report next week asserting that aid has worked particularly well during the past decade, partly because the bank and other donors have learned from their mistakes.
"The past 50 years have seen remarkable successes, as well as failures, in development assistance," said an executive summary of the report released yesterday. "Better policies in developing countries, together with improved allocation of aid since the end of the Cold War, imply that aid is more effective today at reducing poverty than ever before."
The World Bank report is the latest salvo in a battle over whether to increase aid to poor countries, and it is clearly aimed at influencing a United Nations conference on financing for development that President Bush is scheduled to attend next week in Monterrey, Mexico. But critics were quick to blast the report's evidence as faulty, underscoring the obstacles that aid advocates face in persuading the United States and other rich countries to donate more. A major reason for the report is to answer criticism leveled by Treasury Secretary Paul H. O'Neill, who charges that most poor countries have reaped paltry benefits from the tens of billions of dollars they have received in the post-World War II era. O'Neill rejects proposals by World Bank President James D. Wolfensohn, U.N. Secretary General Kofi Annan and British Chancellor of the Exchequer Gordon Brown to double the $ 50 billion in aid currently flowing from rich countries to poor.
The report blames the Cold War for many of the disappointments of the past, asserting that all too often "aid allocations were driven by geopolitical aims rather than by poverty-reduction goals." The report also acknowledges that donors failed to appreciate how easily their efforts at development could go awry; for example, they gave money to governments that weren't genuinely committed to economic reform, and they "underestimated the importance of governance" -- that is, the existence of relatively uncorrupted, well-run bureaucracies and courts.
The report cites six "high-performing" developing countries where, according to the bank, "development assistance has played an important -- even crucial, in some cases -- catalytic and supportive role."
In China, "the World Bank was a trusted advisor and helped lay the foundation for the private investment and productivity growth that has buoyed the country's remarkable progress," the report said. In India, when a reformist government came to power in 1991, "the Bank provided support for fiscal and trade reforms to stabilize and open up the economy." In Uganda, the government adopted major policy reforms in the late 1980s and early 1990s that were backed by aid and World Bank loan conditions; "since that period, Uganda has achieved a remarkable recovery" during which income poverty dropped from 56 percent in 1992-93 to 35 percent in 2000.
The report also cited Poland, Vietnam and Mozambique as places that similar results had been achieved.
But critics dismissed those findings as overblown. "They selected those countries because they include the low-income countries with the highest growth rates," said William Easterly, an economist who recently left the World Bank after writing a book documenting the failings of aid in the postwar decades. "Unfortunately, those are not the countries with the highest amounts of aid, at least measured by how important aid is in their economies." In other words, aid played a relatively small role in those economies' growth.
According to Easterly, who is now at the Center for Global Development, a Washington think tank, aid to China was worth only 0.4 percent of its gross domestic product during the 1980s and 1990s, and aid to India was only 0.7 percent of GDP. Poland got 1.5 percent of GDP in aid, but that was far less than other former Soviet Bloc countries whose economies have shrunk over the past decade including Moldova, Tajikistan and Kyrgyzstan .
Aid to Vietnam was 4 percent of its GDP in recent years, but that is still below average for all low-income countries, Easterly said. As for Mozambique and Uganda, "it's true they did get a lot of aid and had rapid growth," he said, "but of course there are also 54 countries classified as low income by the World Bank that averaged zero per capita growth, and it's not so convenient to mention countries like Zambia, which got tons of aid and had minus 2 percent growth in the '90s."
Still, the report said that the bank and other donors have improved their results by funneling more aid to countries with good policies "that can use it well."
In 1990, countries with "better" policies and institutions (as rated by the bank) received $ 39 per capita in aid, while those with "worse" policies received $ 44 per capita. "By the late 1990s, the situation was reversed: better-policy countries received $ 28 per capita, or almost twice as much as the worse-policy countries ($ 16 per capita)," the report said.The Washington Post:
