Does Foreign Aid Really Work?

By Roger C. Riddell | Go to book overview

14 Assessing the impact
of aid conditionality

This chapter discusses one of the most controversial issues in the debate about whether aid works: the relationship between the overall impact of development aid, the policy advice given by donors, and the policies pursued by aid-recipient governments. More often than not, donors have required recipients to pursue a given set of policies as a condition for providing aid. Has this been good advice?


Aggregate aid impact and the policy environment

In the late 1990s, a number of studies from the World Bank, most notably the publication Assessing Aid: What Works, What Doesn't and Why (1998), as well as studies authored by Craig Burnside and David Dollar (1997, 2000), became extremely influential in donor circles. In brief, these asserted that aid works (meaning it contributes significantly to aggregate growth) when targeted on countries with good fiscal, monetary and trade policies, and that aid does not work when targeted on countries with poor (fiscal, monetary and trade) policies. The studies went on to suggest that donor exhortations to recipients to alter policies made little difference, implying that if donors wished to ensure that their aid was effective, their only real option was to channel it to those countries with 'good' policies, and not to devote effort to trying to effect change in those with 'bad' policies. Ten years on, the donor community continues to be influenced by the broad thrust of these studies. Are these assertions about when and how aid works, and especially the primacy of (particular) policies, supported by the evidence?

At one level, the assertion that policies matter is not only uncontroversial but fairly self-evident. Indeed, it sounds almost tautological: aid is bound to work better when provided in contexts where it is likely to be more effective, and to work less well in more difficult or inhospitable environments. Similarly, you are not likely to influence someone who is not remotely interested in being influenced by you, as any parent of teenagers will tell you. Thus, to assert that policies 'matter' for aid to be effective is not particularly gripping news. However, the Bank studies were saying far more than this. They were arguing that aid only

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