Nancy Birdsall and William Savedoff have an excellent piece over at CGD about one of the hidden pitfalls that lie in wait putting into practice a Cash on Delivery aid programme. In it they describe how targets, often a good thing for benchmarking performance, can fatally undermine implementation of COD. The problem boils down to this: if the donor government expects to disburse $2m through a COD programme and the recipient government expects to receive $2m through said programme, then it can be very difficult to deviate from that even though in practice one would expect variance either positive or negative, with negative deviation being the trickier but more likely scenario.
One can understand the recipient government’s situation; they would surely always want to get the full $2m even when, according to the agreed formula, their performance only merits $600k. But, what I find particularly disappointing is the tendency for the donor to want to disburse the cash any way. There are explanations of a sort: the donor has budgeted that amount, so returning it to their home treasury can mean reduced budgets in future, and maybe the desk officer find themselves in a tricky situation in their relationship with the beneficiary government, which is most easily resolved by giving in, and handing over the full amount. But none of these are very satisfactory. Pressure to disburse can be resisted with a little bit of backbone, and donor governments seem able to cope with varying budgets for things like unemployment benefit, so surely ought to be able to cope with aid budgets that fluctuate?
In my opinion the real issue, and one which fatally undermines so much of official development aid, is that the whole international aid system is constructed around the needs of the donors, not the recipients. Hence the desire to push out the $2m regardless. If we can agree that COD aid is at least an idea good enough to be worth trying, why are we trying to shoe-horn it into a rigid budgeting framework that will not support it?
The problem is that it is the act of giving which has come to be celebrated, not the outcomes of that giving. Politicians get the media coverage they crave when they announce the donation, not when (if?!?) the programme delivers on its promises. Why else the ridiculous focus on aid budgets reaching 0.7% of GDP?
If we wanted to design a system to actually deliver useful benefits to poor people world wide, rather than to reward donors, we would never come up with the system we have now. Cash on Delivery seems like an eminently sensible step in the right direction, but I fear that the required wholesale reform of the aid system is unlikely to occur before market forces and economic conversion over time remove it much of its original raison d’être, as has happened recently with the cessation of British government aid to India.
But in the meantime, if the mainstream media, in developing as well as developed countries, could learn a little self-restraint, and refuse to report any announcements of aid, just maybe we might start to have a chance …
Bottom Up Thinking 