Should aid fight corruption? New book questions logic behind this week’s anti-corruption summit

May 10, 2016

     By Duncan Green     

Over at the Center for Global Development, Charles Kenny wants comments on the draft of his book on Aid and Charles Kenny portraitCorruption (deadline end of May). Let’s hope this becomes standard practice – it worked brilliantly for me on How Change Happens – more varied voices can chip in good new ideas, spot mistakes or contradictions, and it all helps get a buzz going ahead of publication.

But let me take it one step further. As a contribution to Thursday’s corruption summit, hosted by David Cameron, I thought I would summarize/review the book. Charles gave the green light, provided I stress the ‘preliminary, drafty, subject-to-revisiony nature of the text’. Done.

The summit is about a lot more than aid – for example the rich countries putting their houses in order on tax havens. Which is just as well, because the book poses some real challenges to the whole ‘anti-corruption’ narrative on aid. What’s more, it is erudite, engagingly written and upbeat – as you’d expect given Charles’ optimistic previous takes like Getting Better. He’s got a great eye for telling research and ‘man bites dog’ surprise findings. Example: ‘Taking a cross section of countries and comparing current income (2010) to corruption perceptions in 2002 and income in 2002, results suggests more corrupt countries in 2002 have higher incomes in 2010.’

His core argument is pretty striking – when it comes to aid and corruption, corruption does indeed matter, but the cure is often worse than the disease: ‘an important and justified focus on corruption as a barrier to development progress has led to policy and institutional change in donor agencies that is damaging the potential for aid to deliver development.’ Ouch.

anti corruption summit logoNot only that, but ‘there is a second ‘problem of corruption’ in development – and that is one of perception and response. A narrative that suggests weak governance is the major problem of development and an intractable one justifies aid fatigue (it’s broke, and we can’t fix it). Concern with weak governance and the risk of malfeasance is the primary justification for donor programs that involve heavy oversight or even direct selection, design and management of projects from distant donor capitals. Perhaps more importantly, countries perceived as corrupt also attract less foreign investment and trade.

Were corruption an insurmountable stumbling block to delivering development and if we knew where was particularly corrupt, this second problem of corruption would not be a bug, it would be a feature. Tight control (if it worked) and aid fatigue (if it didn’t) would be a logical response. But the evidence that weak governance is a barrier to all development progress or effective aid programs just doesn’t stack up. And we know considerably less than is usually thought about which countries (or sectors, or activities) are weakly governed or particularly corrupt.’

Kenny argues that the focus on corruption feeds a generalized distrust of the state, but ‘distrust is a big problem because no country has become wealthy without a large government – one involved in a huge range of regulatory, investment and spending roles. By pandering to those who distrust government in the West, donors are helping to hobble governments in the developing world, with dire consequences for aid levels and effectiveness as well as broader development progress.’

And the double standards don’t end there, a focus on bribery (generally more prevalent in poor countries – see chart)

What if it was tax evasion or spending on lobbying?

What wd this look like if it was tax evasion or spending on lobbying?

ignores the other kinds of corruption preferred in rich countries, from tax evasion to lobbying and political capture and ‘the general corrupting influence of money in the system’.

In the aid business, the obsessive focus on corruption has generated a ‘web of oversight and control institutions that ensure staff spend most of their time ensuring oversight requirements are met’. That means centralized approaches that ‘contradict the internationally agreed Paris Principles on aid effectiveness that aid which is ‘owned’ by recipient countries and runs through government budgets is likely to be more effective.’

Kenny’s suggestion for what to do?

‘It is time for a fundamental rethink of anti-corruption approaches in donor agencies. Rather than trying to measure the dimensions of the black box of corruption and change its internal dynamics, this book suggests shrinking the box through approaches that minimize the impact of corruption on aid delivering results. It also suggests using nonaid approaches to support systemic institutional reform.

There is a role for donor agencies in governance and anticorruption efforts, but, first, corruption is only one of many barriers to development, and, second, the role of outsiders in the process is limited, context specific and based on many unknowns.’

PbR theory of change

PbR theory of change

My main comment on reading the draft was that he dismisses too lightly the political economy arguments for donors obsessing about corruption (he just discounts them as ‘not convincing’). I think he needs to come up with a serious and plausible theory of change for how donors might change their ways. Just saying ‘build the evidence and they will come’ is a classic researcher’s cop-out that seldom works.

I was also a bit skeptical about the proposed solution, which is switching from corruption to payment by results. Is every CGD author now contractually obliged to say that, whatever the problem, the answer is PbR?………

Anyone else read it?

May 10, 2016
Duncan Green