First published by the OECD here
This blog is part of an ongoing series evaluating various facets of Development in Transition. The 2019 “Perspectives on Global Development” on “Rethinking Development Strategies” will add to this discussion
It is time to bring aid to an end.
Gradually, maybe, as a few “pockets of poverty” still persist. But this symbol of global collective action that has lasted seven decades will now, inevitably and as planned, be ended.
That is the common view of almost everyone. Whether you are a member of the general public in a “donor” country, still feeling the effects of an economic downturn, or a citizen of a “recipient” country whose economy feels like it is taking off for the first time in living memory. Whether you believe the aid era has been an unqualified failure and should be ended as soon as possible, or that aid has actually been quite successful in promoting development but has now largely “done its job” and can be rolled back as countries reach “middle income” status. Whether you think the hole left behind by aid can be filled by fairer tax collection or by better-targeted private sector finance, both of which are experiencing growth of historic proportions. Even (perhaps especially) if you are part of the aid industry and are well-practised at repeating the mantra that “our job is to do ourselves out of a job”.
Whatever side of the political spectrum you sit on, you are unlikely to disagree with the notion that aid should be decreased as recipient countries’ incomes rise, bringing to an end an experiment intended to kick-start growth in sluggish contexts, but not to last in perpetuity. With only 34 so-called low-income countries left, the only question left to be discussed is how to manage a good “exit strategy”.
Aid is temporary. Success is when aid is no longer necessary.
That’s what we thought, too. That’s what we were taught. But it’s wrong.
We have worked in the aid industry for many years; and as the world has evolved, we have become convinced of a startlingly different vision for international public spending. “Aid” or, as we propose to call it, Global Public Investment (GPI), needs to be continually increased and thought of as a permanent contribution to global progress.
Just as large-scale public spending at the national level only really got going 100 years ago, so the era of public spending at the international level is only just beginning – as we argue here.
Our vision of a future in which Global Public Investment evolves and expands is not based on any kind of rose-tinted analysis of aid and its impacts. The last thing we want to do is deny the complex reality of aid relationships, which have led to as much failure as success, or exaggerate the importance of international financial transfers over more fundamental development policy choices.
We have both been energetic in what has become known as the “beyond aid” movement, emphasising the importance of other sources of development finance and, crucially, a raft of measures that are far more important than aid in supporting development, such as trade and taxation policies.
But we face a different problem now than the one we faced ten or 15 years ago when we supported that “beyond aid” push. Then, an over-emphasis on aid meant more fundamental ways the international community can support development were being neglected. Today, while those “beyond aid” issues remain paramount, the importance of continued aid transfers is being downplayed as countries “graduate” from aid recipient status.
Back then, we had to call for people to focus less on aid; today we have to call on people not to forget about it entirely.
And the reason for that is not technical; it is not based on any evidence or research. It is purely politically expedient.
The need is obvious – with MDG targets far from met and with the wildly more ambitious SDG targets now in play. These SDGs challenge previously stingy definitions of poverty – between 70-80% of people live on under USD 10 a day. And they include Global Public Goods for the first time, such as climate change mitigation, crime and security, and cross-border public health concerns. The international community will need to pull out all the stops to move from “billions to trillions” to resource these goals.
The effectiveness of international public finance is well-documented, even (perhaps especially) in so-called middle-income countries where it tends to be a low proportion of GDP. This is not because it arrives in large quantities – it never has, except for a handful of countries. It is because of its unique characteristics that make it a crucial (and sometimes irreplaceable) complement for other sources of finance (as explained here).
All that remains is the political decision to keep directing Global Public Investment into countries of all income levels to help them meet their national challenges and global responsibilities. But wealthy nations no longer see this as a priority, in part because of domestic challenges and in part because we are all steeped in the mantra that “aid needs to end”.
As the forces of nationalism gather, the internationalist vision needs defending more powerfully than ever. For internationalists to retreat on global public finance is a major strategic error.
The Global Public Investment of the future will, of course, be different from the aid of the past. Elsewhere we have explained that this means a number of paradigm shifts: from temporary to permanent, from voluntary to contributory, from graduation to gradation (to use Sagasti’s phrase), and from foreign to global. We will need a new and compelling vision for public spending at an international scale if we are going to persuade often sceptical politicians and publics. That’s one of the reasons we propose the term “investment” – it emphasises that there are returns.
The good news is that, while this might sound radical to some, it is in fact already happening. From the large-scale financial transfers between countries in the EU, to South South co-operation in Latin America, to the Chinese Belt and Road initiative, to climate finance, to attempts to eliminate Somali piracy or clean up after the Fukishama earthquake, involving finance from “developing” as well as “developed” countries, modern spending patterns have more in common with our vision of Global Public Investment than the old-fashioned idea of aid – and they are on the increase across the world. While traditional aid stagnated last year, if you add in all the finance and non-monetised co-operation from non-OECD countries, Global Public Investment is at an all-time high.
Horner and Hulme have proposed the language of global development to replace international development, to reflect that this is about “us” rather than “them”. But the aid sector (in the North) still hasn’t grasped what this means. It is trying to respond to 21st century realities and challenges but it needs to get past the constraints of its 20th century understanding of “aid”.
It is time to respond to new times with a new vision for Global Public Investment.