No subject
Wed May 12 19:43:56 PDT 2010
following rapid reform. Examples of reasons given for this slippage =
include wage increases that had to be given to civil servants and =
political opposition.=20
To me, these seem .quite genuine reactions to growing misery brought =
about by acute macroeconomic reforms. Donors react to slippage with cut =
backs particularly when they perceive 'inability' of the government to =
privatize. (p.9)
Any reform program has losers, we are further told. Because of that, we =
need objective decision-makers to minimize negative impacts. =
'Disinterested' economists then have an edge, because they can 'sell' =
the program both to winners and potential losers.(pp.10+11)=20
I find it hard to accept that there is genuine disinterest here. Good =
reformers do need consultative processes;.period; even in the absence of =
formal democratic structures.=20
I further find it objectionable that the Report trivializes the role of =
external economic shocks and pressures in bringing about and =
perpetuating economic hardship in African countries. In a put-down way, =
it is said that President Nyerere "believed" that to be the case. (p.11) =
Negating the negative effect of these external factors on national =
economies is borderline part of a dishonest analysis, I contend.
The Report concludes that donors have three basic instruments that they =
can use to encourage the adoption of "good economic policies" in =
developing countries: money, conditionality and technical =
assistance/policy dialogue.=20
It contends each of these made positive contributions in the 10 case =
studies. But donors used these instruments fairly indiscriminately and =
later, in the 1990s, did not provide appropriate debt relief. Using the =
wrong instrument at the wrong time proved wasteful and retarded reform. =
This, in concluding we are told, calls for "a better calibration of aid =
and reform".=20
Giving aid to countries with "poor " policies will not stimulate reform, =
will maintain the status-quo and will not be reflected in poverty =
reduction (!).
Finally, donors need to be more selective of the recipient countries =
they choose and the instruments they use and when. They should operate =
"on a small scale" with governments with poor economic policies, perhaps =
providing support to groups outside of government. Conversely, they =
should maintain high levels of finance in countries with sustained "good =
policies".=20
Money can help improve policies, but the key is to disburse it when =
actual policy improvements have already been achieved.=20
Surprisingly, and despite all the suffering they have caused, the Report =
regrets the fact that SAP loans became discredited as instruments; "they =
could have been useful"..if what is said in this Report would have been =
heeded.. (pp.33,34+35)
I find that I always learn from reading documents I do not agree with =
100%. In this and other cases, I think it will be the same for you.
Claudio, Hanoi aviva at netnam.vn
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<DIV><U><FONT size=3D2></U><U></U></FONT><B><FONT size=3D4>
<P align=3Dcenter> </P>
<P align=3Dcenter>AID AND REFORM IN AFRICA: </P>
<P align=3Dcenter>LESSONS FROM TEN CASE STUDIES, FINAL REPORT</P></B>
<P align=3Dcenter>World Bank, Aid Effectiveness Research, Development =
Research=20
Group (released March 27, 2001).</P>
<P=20
align=3Dcenter>[www.worldbank.org/research/aid/africa/release/aid.htm]</P=
></FONT>
<P>Welcome to a post-mortem of and a critical look at Structural =
Adjustment=20
Programs (SAPs) in Africa together with a proposed new recipe to make =
them=20
better, avoiding their (sometimes now judged clumsy) pitfalls. </P>
<P>The Report reviews aid and policy reform in ten African countries =
spanning=20
from the eighties to the nineties. The countries are arbitrarily divided =
into=20
four categories: </P>
<P>-Successful Reformers (Ghana and Uganda –and, interestingly, =
Vietnam added),=20
</P>
<P>-Post-socialist Reformers (Ethiopia, Mali and Tanzania), </P>
<P>-Mixed Reformers (Ivory Coast, Kenya and Zambia), and </P>
<P>-Non-reformers (Zaire and Nigeria). </P>
<P>All of them received large amounts of aid and all of them had =
SAPs.</P>
<P>Overall, I see the Report as an apology for market-based reforms, =
because the=20
authors truly believe them to be the best option. In doing the latter, =
the=20
Report tacitly calls on Western donors and on the private foreign =
investors to=20
rethink their strategies and to support countries that adopt =
WB-sponsored=20
macroeconomic policies.</P>
<P>Without having any qualms about the brilliance of this Report, the =
first=20
monumental problem I have with it is that it represents a typical =
<U>cold</U>=20
economists’ account and analysis of an indeed complex matter. </P>
<P>The <U>warm</U> analysis of the social consequences and costs of =
these=20
reforms is nowhere to be seen!! It is skipped as if it does not exist, =
as if it=20
doesn't count, as if it is unimportant. Passing-by, casual mentions of =
poverty=20
reduction on pages 4, 31 and 34 add to mere mockery. This shortcoming =
seriously=20
detracts from the Report’s ultimate moral authority. </P><B></B>
<P>The second problems I have with this Report relates to the =
authors’=20
definition of what constitutes "good policies". In an astonishing leap =
of faith,=20
they arrogantly tell us: "we know enough about development policies to =
make a=20
fair assessment of the quality of policies across countries and over =
time…the=20
notion that we are doing a reasonable job of measuring policy across =
countries=20
is supported by the fact that our broad measure of policy predicts =
fairly well=20
the GDP growth rates of the four categories of countries in our study". =
Absence=20
of high inflation, functioning foreign exchange and financial markets, =
openness=20
to foreign trade, effective rule of law and delivery of key services, =
plus tax=20
and sectoral policies that create good incentives for =
‘accumulation’, and the=20
public sector providing services complementary to private initiatives =
are given=20
as key elements of "good policy". (pp.2+3) For the Report’s =
analyses, this is=20
then all blended into a 0-4 scale or index in a way that remains =
unexplained in=20
the main text (trust us: "we know enough about development…"). =
</P>
<P>In short, "good policy" here clearly fits (and serves) the =
ideological=20
outlook of the World Bank. That, to me, detracts on the Report’s=20
objectivity.</P>
<P>The Report (controversially) concludes that aid is not a primary =
determinant=20
of policy, i.e. that variables under donor control do not consistently =
influence=20
the success or failure of reform; that aid does not buy good reform. We =
are=20
further told that policy is truly independent of aid and that the effect =
of aid=20
will increase with the quality of policies. Aid, in the authors’ =
eyes, did play=20
a significant and positive role in the ‘success’ of the two =
sustained reformers=20
(Uganda and Ghana). (pp.4+6)</P>
<P>The Report then goes on to regret that donors tend to concentrate =
their=20
assistance in countries with mediocre policies with the expectation that =
aid=20
<U>can</U> spur policy reform. But we are told that policy formation is=20
primarily driven by the domestic political economy where vested =
interests can=20
(and do) perpetuate poor policies. Therefore, no relationship between =
formal=20
democratic institutions and good economic policy could be found. =
Actually, large=20
amounts of aid to countries with bad policies sustain those poor =
policies=20
allowing the delay of reform, we read. Funds can (and do) actually =
sustain=20
corrupt and incompetent governments. Attaching conditions to the aid=20
(conditionality) has, in the Report’s view, not led to successful =
policy change.=20
It has often been wasteful and even harmful. If countries perceive =
donors want=20
to set policy, ministries become passive without disagreeing with the =
donors=20
since this will only serve to delay the arrival of the much-needed=20
resources.</P>
<P>Further, donors coordinate their work in a remarkably poor way and =
actually=20
do not discriminated effectively among different countries: they tend to =
provide=20
the same package of assistance everywhere and at all times; they also =
give less=20
aid per capita to populous countries. All this is explained by the fact =
that aid=20
in too many cases is a foreign policy tool rather than a tool for =
economic=20
development. It is often dictated by colonial relationships and/or =
voting=20
patterns in the United Nations and often ends up financing non-viable or =
even=20
non-development schemes. Alternatively, aid provides governments with =
the=20
breathing space they require to contain domestic opposition to market =
reforms,=20
or it fills the shelves of supermarkets to provide a psychological =
impression of=20
better things to come. Donors should definitely not provide aid before=20
governments are serious about reform. (pp.5, 6,12,21,26,27+29)</P>
<P>In the early stages of serious reform, we learn that leaders and =
technocrats=20
(self-servingly meaning those sympathetic to WB policy advice) actually =
welcome=20
conditionality to ‘bind’ the process of change. Later, once =
the reform movement=20
is well in place, conditionality becomes less useful and should be =
withdrawn,=20
because it limits participation and it disguises the ownership of =
reforms. But=20
the case studies show that, in a mistake, this has not happened and =
conditions=20
have become tighter, more numerous and their acceptance more important =
for=20
lending to be approved. (p.6,30+32) (In an oxymoron, on page 31, we read =
that to=20
be useful, conditionality must reflect measures that the government =
wants to=20
carry out…then why the conditionality?, I ask)</P>
<P>The composition of aid is important, we read. </P>
<P>In the pre-reform period, Technical Assistance (TA) and Policy =
Dialogue are=20
most supportive. </P>
<P>During rapid reform Financing and Conditional Loans are most =
important. </P>
<P>At a later stage of reform, sustained Finance remains crucial. (p.6) =
</P>
<P>Rapid reform leading to "good policy" occurs when all of the =
important=20
macroeconomic reforms have been completed, we are told. (Note the total =
absence=20
of any mention of the social realm). Then, countries are said to need to =
move=20
into "second generation reforms"; and which are these?…. =
privatization , civil=20
service reform, judicial reform, and budget reforms. (p.23) </P>
<P>One cannot avoid but asking: and what about structural reforms =
leading to=20
poverty alleviation, greater equity and the provision of services for =
the=20
poor…?</P>
<P>The Report repeatedly speaks about "poor policy" periods, always =
assuming=20
those to mean periods when World Bank-prescribed policies were not (yet) =
followed. Confirming the political nature of aid, it goes on to say that =
governments were estranged from the West during their "poor policy" =
periods.=20
</P>
<P>In the Report’s context, policy dialogue -eufemistically called =
"low-key=20
assistance" or "dialogue with foreign experts"- seems to be associated =
with the=20
license Bretton Woods IFIs and donors took to put high pressure =
(‘leverage’, the=20
Report says) on governments to adopt macroeconomic reforms, i.e. =
<B>replacing=20
state controls by market mechanisms, </B>the latter gratuituously =
assumed to be=20
superior. "When governments are sufficiently desperate… the =
promise of support=20
induces them to come to agreement relatively quickly on far reaching =
reform=20
programs". (p.24,26+35) </P>
<P>…so much for the conclusion above that aid is not a primary =
determinant of=20
policy. </P>
<P>The Report self-servingly claims that policy dialogue with the IMF =
and WB=20
played a critical role in the early years of "good policy" reform =
involving=20
small groups of dedicated technocrats and politicians and that TA =
(absorbing up=20
to 13-18% of all financial aid!) was later most helpful in pushing the =
early=20
reform agendas. It then recognizes that TA was sometimes ineffective , =
because=20
it was supply-driven from the donors side. (pp.15,16,20+35). </P>
<P>With hindsight I ask myself, is that what you call ‘buying =
yourself a reform=20
package’?</P>
<P>In procuring technical assistance, the report warns us that many of =
the=20
consultants "parachute in" giving mediocre advice even as countries =
complain=20
they need freedom to buy expertise as they see fit. TA, it is confessed =
further=20
on, is designed to provide ammunition to reformist technocrats; in that =
sense,=20
policy choices <U>are</U> driven by donor funding rather than the =
domestically=20
formulated policies: a nice contradiction here again with what is said =
earlier.=20
(pp.20+21)</P>
<P>Historically, there does not seem to be a systematic relationship =
between=20
structural adjustment programs and the extent to which African countries =
reformed, we read. It seems countries embraced serious reform only after =
they=20
exhausted all other options, and the last option for most often meant =
adopting=20
IMF SAP packages.</P>
<P>Most interestingly, reforms tended to occur following a crisis. =
("Necessary=20
but unpopular decisions had to be made quick before opposition to the =
reforms=20
could be mobilized"). This highlights the role of leadership, =
technocrats,=20
ideology, and institutions during such crises and, in order to lead to a =
"good"=20
reform process, TA has to have done its job. (pp.6, 7,8 +12)</P>
<P>From the case studies, it is clear that countries often slide back =
following=20
rapid reform. Examples of reasons given for this slippage include wage =
increases=20
that had to be given to civil servants and political opposition. </P>
<P>To me, these seem .quite genuine reactions to growing misery brought =
about by=20
acute macroeconomic reforms. Donors react to slippage with cut backs=20
particularly when they perceive ‘inability’ of the =
government to privatize.=20
(p.9)</P>
<P>Any reform program has losers, we are further told. Because of that, =
we need=20
objective decision-makers to minimize negative impacts. =
‘Disinterested’=20
economists then have an edge, because they can ‘sell’ the =
program both to=20
winners and potential losers.(pp.10+11) </P>
<P>I find it hard to accept that there is genuine disinterest here. Good =
reformers do need consultative processes;.period; even in the absence of =
formal=20
democratic structures. </P>
<P>I further find it objectionable that the Report trivializes the role =
of=20
external economic shocks and pressures in bringing about and =
perpetuating=20
economic hardship in African countries. In a put-down way, it is said =
that=20
President Nyerere "believed" that to be the case. (p.11) </P>
<P>Negating the negative effect of these external factors on national =
economies=20
is borderline part of a dishonest analysis, I contend.</P>
<P>The Report concludes that donors have three basic instruments that =
they can=20
use to encourage the adoption of "good economic policies" in developing=20
countries: money, conditionality and technical assistance/policy =
dialogue. </P>
<P>It contends each of these made positive contributions in the 10 case =
studies.=20
But donors used these instruments fairly indiscriminately and later, in =
the=20
1990s, did not provide appropriate debt relief. Using the wrong =
instrument at=20
the wrong time proved wasteful and retarded reform. This, in concluding =
we are=20
told, calls for "a better calibration of aid and reform". </P>
<P>Giving aid to countries with "poor " policies will not stimulate =
reform, will=20
maintain the status-quo and will not be reflected in poverty reduction =
(!).</P>
<P>Finally, donors need to be more selective of the recipient countries =
they=20
choose and the instruments they use and when. They should operate "on a =
small=20
scale" with governments with poor economic policies, perhaps providing =
support=20
to groups outside of government. Conversely, they should maintain high =
levels of=20
finance in countries with sustained "good policies". </P>
<P>Money can help improve policies, but the key is to disburse it when =
actual=20
policy improvements have already been achieved. </P>
<P>Surprisingly, and despite all the suffering they have caused, the =
Report=20
regrets the fact that SAP loans became discredited as instruments; "they =
could=20
have been useful"….if what is said in this Report would have been =
heeded….=20
(pp.33,34+35)</P>
<P>I find that I always learn from reading documents I do not agree with =
100%.=20
In this and other cases, I think it will be the same for you.</P>
<P>Claudio, =20
Hanoi &n=
bsp; &nb=
sp; =20
<A =
href=3D"mailto:aviva at netnam.vn">aviva at netnam.vn</A></P></DIV></BODY></HTM=
L>
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