We’ve seen the recommendations of the UN Millennium Project, the coven of experts led by Jeffrey Sachs tasked with advising the world how to meet the Millennium Development Goals, for the investments and reforms poor countries need to make to meet the goals. But what about rich countries? How does the international system of aid and trade need to change to make the goals possible?

A key area of controversy is aid. Critics of Sachs argue that aid is often wasted, and even can make matters worse for poor countries. Such critics point to studies which suggest that there’s no clear relationship between the levels of aid a country receives and its rate of economic growth. But the problem with these studies, the report argues, is that they look at total aid levels, including things like emergency aid which can’t legitimately be expected to generate growth. Indeed, because this sort of aid is typically given at time of crisis, you could look at the figures and falsely conclude that it is causing, not alleviating, the problems.

The key, the report argues, is to measure the effectiveness of that aid which is intended to generate growth - direct financial support to investments in infrastructure and services. According to a 2004 study1, such aid does contribute significantly to economic growth, if combined with well-intentioned and reasonably effective governance. (p41)

At present, however, the report acknowledges that the development systems of rich countries - particularly aid - are not working as they should. “Low-quality” aid, the report states, “has fostered the serious misconception that aid does not work.” (p40)

The report outlines 10 changes donors need to make to make aid, and their general part in the development process, work better.

  1. The MDGs aren’t at the centre of aid processes. The IMF, World Bank, and donor countries “have not encouraged the countries to take the Millennium Development Goals seriously as operational objectives.” Some countries have devised MDG-focussed plans but have been denied the funding to implement them (Jeffrey Sachs gives the example of Ghana). Others have been advised not to even bother. Instead, rich countries should affirm the goals as the centrepiece of development - “the fulcrum of policy,” as the report put it earlier - and fund them accordingly.
  2. Strategies and needs aren’t assessed at country-by-country level. There’s no established assessment framework that can separate corrupt governments from deserving ones, or precisely calculate the needs of each country. Donors need to carefully assess each country separately, using common criteria SACHS LINK>
  3. Short-term focus. Development is a long-term process, and meeting the Goals is a ten-year project. But PRSPs often last just three years, and aid is often revised annually. Instead, plans should be made within a ten-year framework, and aid should be offered for the whole 3-5 year life of a PRSP.
  4. Technical support isn’t adequate. The numerous specific expert organisations within the international development community - the World Health Organisation, WHO etc - tend to limit their involvement in poor countries to small pilot projects. Instead, they should be encouraged to provide help to governments in developing and implementing massive scale-up plans.
  5. Agencies aren’t coordinating their support. The various agencies compete for donor support, and the UN agencies in particular have poor relations with the World Bank IMF. Instead, the UN Development Group, and its country teams based in each location, should co-ordinate the activity of all multilateral agencies within an agreed funding framework and in support of an agreed plan to meet the goals in each country.
  6. There isn’t enough money. Neither aid nor debt relief is currently designed to help countries meet the goals. Aid is often not provided for education, training or salaries, some of the vital elements of building up public services. And promised increases in aid to meet the goals aren’t happening quickly enough (this was written before the 2005 Gleneagles commitments, which - if fulfilled - will go a long way to addressing this). The MDGs should be the basis for future aid levels.
  7. Debt relief, too, ignores the goals. Measurements for debt relief are based around enabling countries to meet largely arbitrary economic indicators, and not on freeing up resources to meet the goals. Instead, “sustainable” debt should be considered as a level of debt compatible with meeting the Goals.
  8. Aid delivery is poor quality. Aid is:
    • unpredictable;
    • limited to emergency and technical help, not to long-term investmetns;
    • tied to contracts with donors, or to donors’ pet priorities instead of recipients’ plans;
    • not evaluated for effectiveness;
    • often given to poorly-governed countries for political reasons.

    Instead, aid should be focussed on well-intentioned but weak governments, and take the form of general budget support to help them meet their PRSPs.

  9. MDG priorities are being ignored. Issues such as regional integration, the environment, gender equality, sexual health, roads, electricity… and several more, are often overlooked by donor’s development priorities. All these should receive more attention, within the context of comprehensive development plans.
  10. Donors’ priorities are incoherent. In terms of both their aid and trading policies, donors often give with one hand and take with the other, for example supporting agriculture exports with aid and then discouraging them with tariffs. Instead, trade policy, as well as aid, should be aligned with the MDGs, and rich countries should adopt the same stringent transparency standards they expect from poor countries. (p39-46)

Let’s look a little more at point 2 - calculating support according to the needs of different countries. Middle-income countries, primarily in Asia and Latin America, can largely finance meeting the goals themselves, the report notes. For Africa, however, states mostly fall into four categories, each with its own needs:

  1. Well-governed countries who are stuck in a “poverty trap”. For these countries, major extra aid is needed, based on an MDG-focussed poverty reduction plan. Aid should be largely without strings.
  2. Poor countries with ill-intentioned governments. Countries like Zimbabwe, where the government is part of the problem, there isn’t much of a case for increased aid. Most aid should go to charities, and any given to the government should have strict human rights and economic conditions.
  3. Poor countries with well-intentioned but weak governments. For these countries, investments in direct services should be accompanied with investmnt to improve administrative and management capacity. With appropriate support, these countries will “significantly outperform current expectations”
  4. Conflict countries, including those falling into, or climbing out of, wars. Here, quick aid is essential (while currently, promises often come quickly, but the actual aid takes much longer). Quick action can help end violence and restore essential services, and the promise of further aid can act as an incentive for maintaining the peace.
  5. Geographically vulnerable countries, for example landlocked, island or mountain states, or those very prone to natural disasters. These will require additional responses in transport, communications, or disaster warning, prevention and preparation.
  6. Geopolitically important states. Here, the problem is not typically too little action, but too much. Iraq, for example, has received a level of aid and debt relief given its size and economic situation. While aid for such states may be necessary, it shouldn’t be allowed to distract from other countries, nor should it mean lessening requirements of good governance. (p43-44)

By implementing the changes described, and applying the right solutions to the right areas, the report argues, development support from rich countries can be an essential and effective tool to meet the MDGs.

But there’s more to development than aid. What about trade policy? This has been one of the most contentious areas of recent debate about development. Next time, we’ll look at the Project’s ideas in this area.

1. Clemens, Radelet and Bhavnani, “Counting chickens when they hatch: The short term effect of aid on growth,” Center for Global Development, 2004.

Page numbers come from the Overview Report. You can also see the full 300+ page version, ten key recommendations, or the reports of the individual task forces.