What’s the future role and structure of aid and aid donors? Some options

April 9, 2014

     By Duncan Green     

If I told you, I'd have to shoot you

If I told you, I’d have to shoot you

Yesterday saw the announcement that foreign aid has defied economic and political gravity and reached a record high of $135bn in 2013. The news came as I headed off for a fascinating discussion on reforming the aid system at the ODI. Under Chatham House rules alas, so no names or institutions (ODI gave me a pass on crediting them as hosts), but they included aid types from across Europe, researchers, and a sprinkling of NGOs and retired diplomats.

The underlying dilemma was, I think, how to respond to a world where the big challenges are less and less about shipping cash from ‘North’ to ‘South’, whether because the distinction is no longer useful (rise of the middle income countries, ever-more variable geometry of international alliances and partnerships), or because the issue is a global collective action problem (climate change, arms trade), or because money (or lack of it) is not the main problem/solution (fragile states).

Among the traditional donors (this discussion wasn’t about the new arrivals on the aid scene), the current institutional options seem to be:

  • Integrating aid with the broader foreign affairs function, and foreign affairs takes the lead (Norway, Denmark);
  • A development agency within the ministry of foreign affairs leads on policy and implementation (Australia, Canada, Ireland, Netherlands)
  • A ministry does policy and a separate executing agency, including development banks, spends the money (France, Germany, Japan, US)
  • A single separate ministry runs both policy and implementation (UK)


But which, if any, of these are best suited to the new world order? Some of the points that arose in the discussion included:

  • Reforms and new approaches typically emerge when events/’something new’ combine with a ‘felt urgency’ and political leadership – eg 9/11 or the 1970s oil shock. That generates a period of innovation and cross-departmental cooperation for 3-5 years, before institutional siloes reassert themselves and the system reverts to the status quo.
  • A single ‘ministry of everything’ has downsides – specialist ministries (defence, diplomacy, development) accumulate ‘siloes of expertise’ that are actually very important (don’t ask a social development adviser to run a war or build a bridge).
  • Governments with big aid budgets need a separate department, or else the money will distort the incentives and operations of the host ministry (‘the tail wagging the dog’).
  • Keeping aid under the ministry of foreign affairs makes sense when foreign policy is primarily driven by altruism (the Nordics), but not when the country has an active foreign policy based on national interest (US, UK). (‘development is normative; foreign affairs is functional’; ‘there is a risk of instrumentalization’).
  • Whatever structure we propose has to be highly flexible – we have no idea what will be the medium term outcome of today’s big geopolitical questions (China v Japan; Russia v Europe; the disintegration of the 20th Century settlement in the Middle East).
  • One of the side effects of the UK’s extraordinary (and very welcome) commitment to reaching 0.7 is a marked reluctance to shake things up in any way – the risks of doing so are all downside (rocking boats, babies and bathwater etc). Understandable, but at some point, the UK will have to rethink its aid arrangements, if this discussion is anything to go by.

UK aid poster

My conclusion was that we do need a new way of thinking about the challenge of international development that goes beyond obsolete divisions of North-South, or ever-more complicated subsets of them (LDCs, LICs, MICs, fragile and conflict states, Small Island Developing States, all of which are contested and overlapping). One way to rethink would be to start with three different kinds of problem and think through the institutional arrangements best suited to each:

  1. National problems to which the answer is primarily money (some aspects of health and education, social protection, humanitarian emergencies) need a traditional aid spending ministry
  2. National problems to which the answer is something else (e.g. thinking and working politically, convening and brokering solutions, testing new approaches) need a new kind of approach that offers more expertise and less pressure to sign big cheques
  3. Collective action problems between governments (tax havens, climate change) and issues of policy coherence within governments (eg trade policy, migration) need a network approach across government departments, led from the top, rather than a separate ministry (‘global public goods are currently not represented in any line ministry’)

A further layer of complexity, and potential division of labour, is between national donors and the multilateral system. What aspects of this ever-wider spectrum of activity should DFID and its bilateral friends leave to the World Bank or UN?

If this post is a bit chaotic, that probably reflects the meeting. There was a lack of clarity/agreement on what (if anything) is broken in the current system, let alone how to fix it. But the conversation was definitely interesting enough to warrant a post.

April 9, 2014
Duncan Green