The European Development Fund audit body just came out with a report that suggested its aid funding on roads had been less successful than expected because a lot of them were falling apart due to heavy traffic and insufficient maintenance. So this seems like a good moment to revisit the sectoral aid effectiveness debate.
What’s that, you ask? Perhaps it isn’t usually put in those terms. Think of it as the argument between backers of aid for ‘human development’ and those who support what they see as ‘aid for economic growth’. Or those who have a soft spot for the first set of MDGs with their focus on health and education and those who pine for the days when what aid agencies did was infrastructure projects. Or let’s take the side of the infrastructure folks for a moment: it’s about them versus the amelioristas, the soft, unsustainable underbelly of the aid business who are all about making a bad situation bearable rather than better.
I’ve been part of a few infrastructure projects in my time. I have even been to visit the odd construction site, trying to ask intelligent questions about flow rates or flyover capacity. There’s nothing like wearing a hard had to make you feel hard-headed. I’ve written endless official reports on infrastructure spending --there was a time I read Mongolian railways freight cost reports with the excitement of a Bieber fan clutching the latest issue of Just Seventeen. And I’m still all in favor of aid for ports, roads, pipes, sewers and electricity lines. When done right (and maintained) they are hugely important to improving both broad based quality of life and the environment for businesses to make the kind of revenues which drive economic growth. But I still think it is time to finish with the fiction of a ‘soft aid/hard aid’ divide.
The self-styled aid for growth partisans suggest that aid for infrastructure is likely to have a bigger impact on growth than aid for social sectors. And they suggest that aid for health and education is unsustainable –because once the aid goes away, if there hasn’t been growth, countries won’t be able to afford to maintain the health and education improvements. But the evidence for those statements is weaker than reinforced concrete with shallow-covered rebar (see, I learned something on the site visits).
Take health—the world has seen almost ubiquitous progress against premature death over the past forty years. And aid (not least support for bed nets and vaccines) has played an undoubted role in what my colleague Michael Clemens calls ‘the biggest, best story in development’ –rapidly falling child mortality in Africa over the past decade. Some exceptions to the good news story of sustainably improved health worldwide: AIDS reversed progress in Southern Africa; alcohol achieved the same in post-Soviet Russia, and the US has recently seen declining life expectancy amongst less-educated whites. But none of these cases have anything to do with declining aid flows. Where are the real world exceptions that do? Kids who get an aid-funded measles vaccine are not going to die from measles even if aid dries up tomorrow. Give people bed nets, and they’re more likely to buy their own later. There’s lots of evidence that aid for health can produce sustainable improvements –not ones that will necessarily go away tomorrow or even ten years hence even were that aid to go away.
Meanwhile, the recent European Union aid audit suggests how specious is the argument that infrastructure provided by aid will necessarily be sustained in a way that health or education supported by aid won’t be. CGD’s Lant Pritchett produced a paper years ago noting that cumulative, depreciated investment effort is not capital. His point: when governments invest badly in the wrong infrastructure and then don’t maintain it, there’s no reason to think it will generate economic returns. Of course Lant has also written extensively on the low economic returns to investment in human capital in the developing world. Roads, pipes, vaccines or classrooms –none guarantee rapid economic growth absent functioning governance.
Nonetheless, the overall evidence for a unequivocal link between aid for investment in physical capital and economic growth is no stronger than that between aid for investment in human capital and economic growth. There are lots of aid projects which have had a positive and sustainable impact on the economy in both ‘soft’ and ‘hard’ sectors. There are, sadly, all too many that apparently haven’t –again, across sectors. But we do know that aid for health has played a big role in saving millions of lives –an undoubted and sustainable good in its own right. So if you are really being hard-headed about aid, maybe you should swap out the hard hat for the white coat –or at the very least tone down the language about the ‘soft’ sectors.