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 5: Inequalities, Economic Growth and Poverty Reduction

Ashok Chakravarti

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


SELECTIVITY AND SOVEREIGNTY The inability of aid to promote growth over the past five decades, and the failure of economic reform efforts in the past 20 years to bring about the establishment of a favourable environment for sustainable growth, have left international donors and development finance institutions, such as the World Bank, in a state of confusion. They have had to contend with several new factors that have emerged in the international climate for aid. First, the validity of aid as an instrument of development is being increasingly questioned. Symptomatic of this scepticism is the ‘aid fatigue’ observed amongst most donors. Secondly, with the demise of the Cold War, it is no longer necessary to give aid to obtain the support of regimes with a dubious track record of handling their own internal affairs. Thirdly, there is now widespread recognition that certain preconditions for growth need to be present in a country before any resource transfer from abroad can have any positive developmental effect. For instance, even the World Bank (2001a) in its study on Aid and Reform in Africa accepts that, in a country with poor social and economic policies and no political movement to change, aid cannot promote structural reform and development. In view of these factors, it has been necessary for donor organizations and their intellectual supporters to formulate new approaches to development assistance which, while being based on past experience, provide greater guarantees that they will be more successful in the future. The vast aid bureaucracy...

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