All posts by Sophia Kagan

Sophia Kagan is currently a student at the London School of Economics, completing an MSc in International Development Management. Prior to this she was a consultant with the United Nations Industrial Development Programme and an Australian Youth Ambassador with the International Labour Organization in China.

It’s Arrested Development! Why ‘fixing’ dysfunctional states is a bit like fixing dysfunctional families

The story of a ‘wealthy family who lost everything and the one son who had no choice but to keep them all together’ might not sound like a great allegory for why technical cooperation assistance to least developed countries has so often been unsuccessful, but look closer and important parallels emerge.

Anyone who’s laughed along with protagonist Michael Bluth’s futile attempts to get his family to be frugal, or to find employment to pay for their extravagant spending, will know that prolific spenders will always find creative ways around the limitations you place on them.

Cut personal credit cards and they will find a way to the company checkbook. Place them in jobs and they will shirk. Drive them to rehab clinics and they escape through the back door. Hilarity ensues.

But the joke might be lost on the citizens of countries run by kleptocratic dictators who, despite whatever institutional reform programs international financial institutions choose to throw at them, always seem to get away with lavish consumption.entertainmentArrestedDevelopment

Indeed, Bill Easterly’s The Elusive Quest for Growth: Misadventures in the Tropics reads pretty much like an episode involving the Bluth family… with some import licenses and domestic liability dollarization thrown in. According to Easterly, “a government irresponsible before an adjustment loan has unchanged incentives to continue being irresponsible” and will thus simply create the illusion of adjustment through creative fiscal accounting – freeing up funds for today by “borrowing from tomorrow” (eg. skipping infrastructure maintenance, robbing pension accounts, dodgy privatizations and the like).

Indeed, many would argue that it was not so much the policies of structural adjustment that led to disaster (though I would question the empirical evidence behind uninhibited liberalization!) but rather the fact that the prescription didn’t pay any attention to the wily nature of the patient. Thus, failing to get incentives right for elites meant that they gratefully helped themselves to donors’ money, introduced ostensible reform and surreptitiously sabotaged it.

A (developing) world of sponges? 

So, can we equate Michael’s misguided but sincere attempts to change his financially irresponsible family with equally misguided donor intentions? And, have the disastrous consequences of ignoring political economy realities improved aid-giving?

Probably not, at least according to two recent books on development assistance – Development Aid Confronts Politics: The Almost Revolution by Thomas Carothers and Diane de Gramont, and The Limits of Institutional Reform by Harvard academic Matt Andrews.

Carothers and De Gramont outline why the modern aid enterprise which emerged in the late 1950s and 1960s was an apolitical endeavor, focused on socioeconomic objectives, and then track how this changed in the 1990s. This change was both in terms of increased ‘democratization’ aid, and also improved sensitivity to political realities in relation to aid projects more generally (but specifically public finance management).

The problem is however two-fold. First, according to Carothers and de Gramont the new changes do not go far enough – donors still invest relatively little in trying to understand political realities of countries and often prefer to fall back on ‘best practices’.

Second, just as the ‘political revolution’ is slowly gaining momentum amongst donors, it is increasingly becoming less and less relevant to least developed countries who can often choose from a host of less picky financial sources (eg. China, and other players, as identified in a recent Overseas Development Institute (ODI) Report). Russia rejected US assistance in September last year claiming it was too political, Bolivia followed suit last month and there is growing pushback in other countries too.

But, before we characterise donors as misguided technocrats who have finally ‘seen the light’ about understanding political landscapes, let’s look at Matt Andrews’ book on institutional reform. Andrews argues that donors have for too long been ‘hawkers of best practice’, not only failing to see how ineffective institutional reform has been through basic ignorance, but perhaps even engaging in willful blindness.

Ok, so he doesn’t actually say that in the book, but the implication certainly seems to be that donors are not just overly optimistic about developing countries’ capacity to push through painful reforms (that would never get through in the donor countries) but that they are guilty of lazy policy design and perhaps even ulterior motives. How else can we understand failure rates of between 40-70% according to the donors own calculations?

During the book launch at ODI, Andrews gave an example of a country so under-developed that Ministry of Finance officials were drafting the national budget with paper and pencil – not a single computer in sight. At the same time, it turned out that there was a World Bank consultant engaged to help the Ministry with some kind of sophisticated double accounting.

Some nations may need analysts and therapists, but not both at the same time.
Some nations may need analysts and therapists, but not both at the same time.

Wouldn’t it have been better for the guy just teach the Ministry officials how to use Excel, and for the donors to supply a handful of computers? Perhaps. But that’s not what he’s going to want to put on his resume. He wants to boast about the technical sophistication he brought to this impoverished nation, and so does the army of technical development economists and specialists with sharp minds, expensive degrees and lofty career objectives. They certainly don’t want to experiment with new strategies and risk failure. Stick with the tried and tested and once legislation is passed, reap the media benefits and never mind about whether it actually leads to long-term change.

So what’s in store for the next season? 

Where does that leave Michael Bluth and his donor community brethren trying to achieve economic prosperity? Carothers and De Gramont would advise him to hire governance consultants to undertake a careful review of the incentives which drive his relatives and work on reforming them. They would advise being ‘politically smart’ and ‘taking seriously how all aid programs in a country fit into and affect the broader political environment’. Andrews would pipe in with a focus on Problem Driven Iterative Learning (‘PDIA’) – get the Bluths together to focus on their own problems, reflect on the opportunities and stop focusing on best solutions. Andrews positively references such initiatives as Cash on Delivery, though some of the projects undertaken by Tony Blair’s Africa Governance Initiative, which provides technical know-how for policy making also seem to be consistent with his approach.

All jokes aside, this is a serious issue which exposes everyone’s flaws – the donors, the donees and perhaps even us, development practitioners. And of course, not all administrations in developing countries can be compared to money grabbing former socialites! Perhaps the most that a more ‘politically savvy’ approach can teach donors is how to separate those who are unwilling to reform from those who cannot for plausible political reasons (the Carothers and de Gramont approach) and design initiatives appropriately. Next, focus on small steps that reward enforcement not just passing flashy legislation not worth the paper it’s written on (the Andrews approach).

Most of all, don’t hold your breath. Development is long, painful and messy. Lucky that Arrested Development fans are such a patient lot.