Foreign aid to India when the problem is government failure
- From: Muhammad Javed Iqbal <kaleemjavediqbal@xxxxxxxxx>
- Date: Thu, 4 Sep 2008 23:47:25 -0700 (PDT)
Indian government at one hand claim that their country is growing at
a fast pace. But when it comes to foreign aid,
the same guys are in the front row with a beggig bowl. Tragedy is all
that aid does not go to the poor and hapless Indians, but is wasted
or usurped by the corrupt Indian functionaries.
Indian posters in Society Culture Pakistan boast that their country no
more recieves aid from foreign countries. The fact of the matter is
India is by far one of the largest recepient of International Aid:
Foreign aid when the problem is government failure
Posted by Shanta on Tue, 08/01/2008
Bangladesh Debt Relief Economic theory Education Governance Growth,
productivity, competitiveness Health India Infrastructure Investment
climate Poverty Regional Transportation Urban and rural development
While we received several, mostly supportive, comments on the post on
"The World Bank and poverty reduction in South Asia", one of them
hoisted me on my own petard:
Why do you guys give loans when you know the policies [pursued] by
these governments are - by your own assertions -...simply wrong? why
do you go about subsidising wrong policies, by...financing over-
staffed, over-spending, governments? especially budget support?
The comment highlights an important aspect of foreign aid in the
current era. Traditionally, foreign aid was aimed at correcting
market failures--building public goods, such as bridges (like the
Jamuna Bridge in Bangladesh pictured on the left) and dams, or
subsidizing goods with positive externalities, such as primary
education or immunization.
There was an alignment between the wishes of government and those of
the aid donors: both wanted to correct market failures.
More recently, though, another set of problems are confronting
development: government failures. These are when the government, for
various reasons, does not fulfill the functions it seeks to perform.
A classic example is the high degree of absenteeism among teachers (25
percent) or doctors (40 percent) in Indian public primary schools and
primary health centers, respectively. Now the preferences of the aid
donor and government may not be so well-aligned. The donor would like
to see better education and health outcomes, including less
absenteeism among service providers. Even if there are people in
government who would like to see this, the absentee teachers and
doctors are also public servants, and in some cases can be quite
powerful politically. In such a situation, what is the role of aid?
Correcting government failure is deeply political (these failures
didn't occur by accident), so aid donors can't "demand" that they be
corrected (even though sometimes they try!). Rather, the correction
will come from sufficient public pressure to reform the policies that
have been impeding poverty reduction. The role of aid in these
circumstances is not to "finance" a particular bridge or road, but
rather to help build the climate for reform by, on the one hand,
supporting public debate on these issues (by, say, publicizing
information about absentee rates in different districts) and on the
other, by focusing attention on the outcomes, such as educated and
healthy children, by making these the basis for aid, as a comment from
Nancy Birdsall and Kate Vyborny suggests.
M.
Javed Iqbal
.
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