The difficulty of aid

Acbar (the coordinating body for 94 NGO’s), a Kabul-based organization, will report today that aid to Afghanistan is “wasteful and ineffective.” (For their press release, go here.)

Why? In large measure, donor countries have been negligent in their aid. According to the report, the largest donor, the U.S., has managed to distribute only half of its pledged aid ($5B of $10.4B); although, other countries, like Canada, Japan and Italy, have been more efficient. In explaining the wastefulness of aid, the report points out some usual culprits like consultant salaries and corporate profits (accounting for an estimated 40% of total aid!?). Equally important, the report acknowledges that underspending is connected to the problematic conditions in Afghanistan: government corruption, lack of know-how in using donated resources and security issues. This accounts for why too much aid ends up funding political and military budgets rather than aimed at poverty-reducing measures. In turn, the recognition of these conditions demotivates donors.

These reflect many of the considerations Paul Collier discusses in his book, the Bottom Billion. Although Collier does not explicitly refer to Afghanistan as a bottom billion country, it meets the criteria he lays out: plagued by conflict, poor governance, being landlocked and the abundance of natural resources.

As Acbar and Collier both point out, we need not despair. The solution cannot be to withhold aid until, miraculously, conditions improve, because conditions won’t improve without aid (up to 90% of Afghanistan’s public spending is funded by aid). The solution is to use the aid effectively. This requires, among other things, studying and understanding the current conditions so as to know to whom, when and how much to give.

This may be too obvious to point out, but evidently knowledge does not form the present basis for aid distribution. We might wonder why. Is it that such knowledge is difficult (too difficult?) to acquire? Or does corruption play a role in ensuring that such knowledge does not see the light of day? Or?