Aid, Institutions and Development

Aid, Institutions and Development

New Approaches to Growth, Governance and Poverty

Ashok Chakravarti

In spite of massive flows over the past 50 years, aid has failed to have any significant impact on development. Marginalization from the world economy and increases in absolute poverty are causing countries to degenerate into failed, oppressive and, in some cases, dangerous states. To address this malaise, Ashok Chakravarti argues that there should be more recognition of the role economic and political governance can play in achieving positive and sustainable development outcomes.

Chapter 4: The Role of Donors and Recipient Responses

Ashok Chakravarti

Subjects: development studies, development economics, economics and finance, development economics, politics and public policy, regulation and governance

Extract

In this chapter we shall consider what role the World Bank, the International Monetary Fund (IMF) and donor staff in general have played in the failure of aid. Subsequently, the chapter will present an assessment of the World Bank/IMF approach to development in the context of recent changes in economic thought and the theory of the second best. The chapter also considers the role of the World Bank in development research, and what impact this has had on aid and development strategies. Although the IMF is, strictly speaking, not a donor, its programmes also need to be considered. This is because, with the World Bank, it effectively leads much of the behaviour of the donor community, and, together, these two institutions are the most influential source of advice on all growth-related issues for developing countries. In consequence, their approach, strategies and programmes have a critical impact on the development effectiveness of aid. It is therefore necessary to discuss the basis of Bank/IMF advice, conditionalities and support, and undertake an assessment of whether financial flows from these two organizations have achieved their stated objectives. THE WORLD BANK AND THE INTERNATIONAL MONETARY FUND The World Bank’s support for development through advice and direct assistance has been based on the presumption that aid finances investment and growth. Before 1980, all the lending was in the form of projects, with a particular sector or area being favoured depending on the flavour of the times. For instance, after 1973, rural development projects, consisting of a...

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