Reinventing foreign aid

580 Pages·2008·4.073 MB·English

by  Easterly, William

economics/international affairs
Reinventing Foreign Aid
R
edited by William Easterly e
i
The urgency of reducing poverty in the develop- “This book is topical, academically rigorous, and n
ing world has been the subject of a public cam- wide ranging. A high-quality collection!” v
e
paign by such unlikely policy experts as George —Christopher Scott, London School of Economics
n
Clooney, Alicia Keyes, Elton John, Angelina Jolie,
t
and Bono. And yet accompanying the call for “Enhancing aid effectiveness requires a holistic i
n
more foreign aid is an almost universal discontent approach. This outstanding book provides rich food g
with the effectiveness of the existing aid system. for thought, with expert contributions spanning
F
In Reinventing Foreign Aid, development expert the range from evaluation to institutional design o
William Easterly has gathered top scholars in the and new approaches in providing aid. A must-read r
e
field to discuss how to improve foreign aid. These for all scholars and practitioners interested in
i
g
authors, Easterly points out, are not claiming that making aid work.”
n
their ideas will (to invoke a current slogan) Make —Holger Wolf, School of Foreign Service,

Poverty History. Rather, they take on specific prob- Georgetown University A
lems and propose some hard-headed solutions. id
Easterly himself, in an expansive and impas- “This volume, edited by William Easterly, brings
sioned introductory chapter, makes a case for the together contributions from many of the lead-
“searchers”—who explore solutions by trial and ing lights in this field, providing a rich menu of
error and learn from feedback—over the “plan- perspectives not only on what has been learned
ners”—who throw an endless supply of resources through this new work, but also on how much E William Easterly
a edited by
at a big goal—as the most likely to reduce pov- remains to be learned.” s
t
e
erty. Other writers look at scientific evaluation —Peter Montiel, Fred Greene Third Century r
ly Reinventing
of aid projects (including randomized trials) Professor of Political Economy, Williams College ,
e
and describe projects found to be cost-effective, d
ito
including vaccine delivery and HIV education; r
consider how to deal with the government of Foreign Aid
the recipient state (work through it or bypass a
possibly dysfunctional government?); examine
the roles of the International Monetary Fund (a
de facto aid provider) and the World Bank; and The MIT Press
analyze some new and innovative proposals for Massachusetts Institute of Technology
foreword by Nancy Birdsall President, Center for Global Development
distributing aid. Cambridge, Massachusetts 02142
http://mitpress.mit.edu
William Easterly is the author of The Elusive
Quest for Growth: Economists’ Adventures and
Misadventures in the Tropics (MIT Press, 2001) and
The White Man’s Burden: Why the West’s Efforts
to Aid the Rest Have Done So Much Ill and So Little
Good. He is Professor of Economics at New York
University (Joint with Africa House), Codirector of
cover design by Jeannet Leendertse
NYU’s Development Research Institute, visiting
978-0-262-55066-6
Fellow at the Brookings Institution, and nonresi-
dent Fellow of the Center for Global Development
in Washington, DC.
Reinventing Foreign Aid

Reinventing Foreign Aid
edited by William Easterly
foreword by Nancy Birdsall
sponsored bythe Center for Global Development
The MIT Press
Cambridge, Massachusetts
London, England
62008MassachusettsInstituteofTechnology
Allrightsreserved.Nopartofthisbookmaybereproducedinanyformbyanyelectronicorme-
chanicalmeans(includingphotocopying,recording,orinformationstorageandretrieval)without
permissioninwritingfromthepublisher.
MITPressbooksmaybepurchasedatspecialquantitydiscountsforbusinessorsalespromotional
use. For information, please e-mail [email protected] or write to Special Sales De-
partment,TheMITPress,55HaywardStreet,Cambridge,MA02142.
ThisbookwassetinTimesNewRomanon3B2byAscoTypesetters,HongKongandwasprinted
andboundintheUnitedStatesofAmerica.
LibraryofCongressCataloging-in-PublicationData
Reinventingforeignaid/editedbyWilliamEasterly;forewordbyNancyBirdsall.
p. cm.
Includesbibliographicalreferencesandindex.
ISBN978-0-262-05090-6(hardcover:alk.paper)—ISBN978-0-262-55066-6(pbk.:alk.paper)
1.Economicassistance—Developingcountries—Evaluation. 2.Economicdevelopmentprojects—
Developingcountries—Evaluation. I.Easterly,WilliamRussell.
HC60.R353 2007
338.910917204—dc22 2007013993
10 9 8 7 6 5 4 3 2 1
Contents
Foreword by NancyBirdsall ix
1 Introduction: Can’tTake ItAnymore? 1
William Easterly
I THE POWER OF SCIENTIFIC EVALUATION—AND
WHY ISN’T IT DONE MORE OFTEN? 45
2 MakingAidWork 47
Abhijit Banerjee and Ruimin He
3 Use ofRandomization inthe Evaluationof Development
E¤ectiveness 93
Esther Duflo and Michael Kremer
4 It Pays to Be Ignorant:A Simple Political Economy ofRigorous
Program Evaluation 121
Lant Pritchett
II THE PROBLEMS OF AID-FINANCED DELIVERY OF
PUBLIC SERVICES: THE GORDIAN KNOT OF THE
STATE 145
5 Solutions When the Solution Is the Problem:Arraying the
Disarray inDevelopment 147
Lant Pritchett and Michael Woolcock
6 Donors and Service Delivery 179
RitvaReinikka
7 The Illusion of Sustainability 201
MichaelKremer and Edward Miguel
vi Contents
8 An Aid-Institutions Paradox? AReview Essay onAid
DependencyandStateBuilding inSub-Saharan Africa 255
Todd Moss,GunillaPettersson,and Nicolas van de Walle
III DYSFUNCTIONAL DONORS AND HOW TO REFORM
THEM 283
9 Why DoAid Agencies Exist? 285
Bertin Martens
10 Absorption Capacity and DisbursementConstraints 311
Jakob Svensson
11 Donor Fragmentation 333
Stephen Knack and Aminur Rahman
IV THE IMF AND WORLD BANK 349
12 The IMF and Economic Development 351
James Raymond Vreeland
13 The KnowledgeBank 377
Jonathan Morduch
14 Debt Relief andFiscal Sustainability for Heavily Indebted Poor
Countries 399
Craig Burnside and Domenico Fanizza
V IMAGINING NEW FORMS OF FOREIGN AID 415
15 Making Vaccines Pay 417
Michael Kremer
16 Can We Build aBetterMousetrap? ThreeNew Institutions
Designed to ImproveAid E¤ectiveness 431
Steven Radelet and Ruth Levine
17 Competingwith CentralPlanning:Marketplacesfor International
Aid 461
Dennis Whittle and Mari Kuraishi
18 PlacingEnterprise and Business Thinking at theHeart ofthe
War on Poverty 485
Kurt Ho¤man
Contents vii
VI IN CONCLUSION: THE BIG PICTURE 503
19 AvoidHubris:And Other Lessons forReformers 505
John McMillan
20 Seven Deadly Sins: Reflections on Donor Failings 515
NancyBirdsall
Contributors 553
Index 555

Foreword
Foreign aid in 2005 was higher than ever before in history, ataround $100 bil-
lion.Notonlythat,butitattractedanunprecedentedamountofattentionfrom
themediaand from politicians in2005and 2006. Such unlikely companions as
GeorgeW.BushandBono,TonyBlairandBobGeldof,BillClintonandBrad
Pitt, Je¤rey Sachs and Angelina Jolie, Bill Gates and Kofi Annan, all turned
their attention to the problems of poor countries and the potential for well-
intentioned people from rich countries to help address those problems by in-
creasing aid flows.
Yet at the same time that foreign aid was attaining unprecedented amounts
of funding and attention, the long-standing debate about what foreign aid
could, should, or would do grew fiercer and more contentious than it had been
inyears.
AttheCenterforGlobalDevelopment,wearededicatedtotheideathatthe
richworldcandobetterforthepoorworldthroughmoredevelopment-friendly
approachestotrade,migration,securityandotherpolicies,andmostobviously
through more e¤ective deployment of foreign aid. Webelieve the debate about
foreign aid has and will contribute to the hard struggle to make foreign aid
work better for the world’s poor. Bill Easterly, one of the center’s first senior
fellows in 2001–2002 and now a nonresident fellow, has made an outstanding
(andcontroversial)contributiontothatdebateinthepastdecade,includingthe
2005 publication of his best-seller (for a development book!) The White Man’s
Burden: Why the West’s E¤orts to Aid the Rest Have Done So Much Ill and So
Little Good.
Now in this book, he has brought together leading scholars and practi-
tioners in the field of foreign aid to address all sides of the debate in which
he has been already a major player. The chapter authors do not necessarily
agree with him or with each other. They bring diverse perspectives, argu-
ments, styles, and methodologies. What they share is a firm commitment to
ideas and evidence—to bringing useful knowledge and experience to bear on