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ARTICLE REVIEW ON GOOD GOVERNANCE AND AID EFFECTIVENESS: THE WORLD BANK AND CONDITIONALITY

 

 

 

ARTICLE REVIEW ON GOOD GOVERNANCE AND AID EFFECTIVENESS: THE WORLD BANK AND CONDITIONALITY

By Sintayehu  Girma

April 2020

 

 

1. General introduction

The term "good governance" is unsettled in its meaning. Through the 1980s and 1990s, donor countries and institutions trended to make aid conditional upon reforms in the recipient country, which was found largely ineffective in encouraging real policy changes. More recently, donors, such as the International Monetary Fund, the World Bank, and the United States, are increasingly insisting upon performance and good governance as a prerequisite for aid, a practice called "selectivity." This is a means of requiring a recipient state to demonstrate the seriousness of its commitment to economic and social reforms. There are no objective standards for determining good governance: some aspects include political stability, the rule of law, control of corruption, and accountability. High levels of poverty and weak governance are linked, making selectivity difficult to implement. For reforms to succeed, domestic support, ownership, and commitment are crucial, as are the recipient's cultural context (Nanda,p1).

Good governance is the buzzword of the time. The distengration of the former USSR has brought the new world order some call it the US order .Others call it is a disorder. The end of cold war in 1991 has brought the triumphs of liberalism and neoliberals particularly in the west.

In his famous book (the end of history and the last man) Francis Fukuyama

,has asserted that the demise of socialism has brought not only the end of socialist ideology but also the final destination of all human being is liberal democracy( representative government ,individualism, free market).The immense collapse of the Soviet Union, the last ideological alternatives toLiberalism had been eliminated fascism had been killed of the Second World War and Now communism has been imploding .in states like China, that called themselves   Communist, political and economic reforms were heading the direction of liberal order. (Mendad, 2018).

The triumph of neoliberals has also created a good opportunity to international financial and monetary system like the WB   to introduce new conditionality like good governance and to intervene more in the political sovereignty of developing nations.

According to the World Bank report of (1989), loan and aid are not reducing poverty and assure development because of bad governance. Then the solution is Good Governance

According to the bank good governance is “the manner in which power is exercised in the management of a country’s economic and social resources for development” (international fund for agricultural development, p.1).

The international for agricultural development further enumerated the elements of WB good governance as follows

(a) The form of the political regime;

 (b) The process by which authority is exercised in the management of a country’s economic and social resources for development; and

 (c) The capacity of governments to design, formulate and implement policies and discharge functions. (Lateef, P.1).

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From this we can understand the new definition and aspects of WB good governance are shifted from economic dimension to political dimension .it also allows the Bank to interfere in the domestic affairs of the sovereignty of the developing nations? Good governance to be effective it has to be sensitive to local culture and conditions.

There are also scholars that assert aid cannot solve the problems of developing nations. The WB itself is unfair in the distribution of loan and aid

There is no robust evidence that aid affects growth. Of course, this does not imply that aid is necessarily ineffective. Much of the aid is not given to affect growth in the first place. A large share is given as humanitarian aid following disasters. Parts of aid are given to fight terror, please political allies, or influence decisions in important international we conclude that political connections between donors and recipients are unhelpful in identifying the broader effects of aid on growth.Organizations. (Drehe ,2015.)

Dambisamoya in her book dead aid (2019) has argued that aid is not the solution rather it perputes corruption

Moyo's first book, 

Dead Aid: Why Aid Is Not Working and How There is Another Way for Africa (2009), argues that government-to-government foreign aid has harmed Africa and should be phased out. In the book she stated that in the past fifty years, more than $1 trillion in development-related aid has been transferred from rich countries to Africa. Then she questions if anything has changed (Wallis ,2006).

The Financial Times (2009) summarizedMayo’s book's argument, stating

Her critics say simplistic and even dangerous – analysis of complex problems. Limitless development assistance to African governments, she argues, has fostered dependency, encouraged corruption and ultimately perpetuated poor governance and poverty. Foreign development officials have a vested interest in this status quo, she believes: if aid succeeded in creating prosperity, they would be out of a job.( Wallis,p.1).

There are also who are argue that developing continents  like Africa  needs policy freedom some data  show that Africa lose much to the rest of the world than gaining.

 Based on a set of new figures, it finds that sub-Saharan Africa is a net creditor to the rest of the world to the tune of more than $41bn. Sure, there's money going in: around $161bn a year in the form of loans, remittances (those working outside Africa and sending money back home), and aid.

But there's also $203bn leaving the continent. Some of this is direct, such as $68bn in mainly dodged taxes. Essentially multinational corporations "steal" much of this - legally - by pretending they are really generating their wealth in tax havens. These so-called "illicit financial flows" amount to around 6.1 percent of the continent's entire gross domestic product (GDP) - or three times what Africa receives in aid.(Dearden,2017,p.1)

·         The fore we can assert that using good governance as a conditionality by the world bank does not guarantee that aid can bring growth and good governance

We conclude that there is no robust evidence that aid affects growth. Of course, this does not imply that aid is necessarily ineffective. Much of the aid is not given to affect growth in the first place. A large share is given as humanitarian aid following disasters. Parts of aid are given to fight terror, please political allies, or influence decisions in important international organizations. As we have discussed above, the motive can affect the outcome. Such aid thus cannot be expected to increase growth but should instead be evaluated with its own goals in mind.(Dreher,2015).

 

Development without democracy (Human right watch)

  As the result of the effectiveness of aid there  are who argue that the WB   conditionality’s should be replaced by new approach that does not compromise the sovereignty of the aid receiving nations .Carlos Santos is one of them. Santos, (2001, p.19) has argued that new approach is necessary. In his words

Conditionality is not the appropriate approach to strengthening good governance In Reforming the oversight of aid should lead to radically new approach to development assistance that are based on reciprocal obligation of the form of development compacts in which donors would cede greater control over the use of aid developing countries .what is needed a more radical approach in which they cede developing countries greater control over the use of aid ,within the framework of agreed upon objectives..(Santos, p.19).

In this article, review entitled as good governance and aid effectiveness: the World Bank and conditionality by Santos, wewill see the objective the focus of the article as well as the targets of the message delivered. Wewill also assess the timelessness of the message. The validity, the reliability of article will also assess. Finally, its implication for Ethiopia is included in the summary part.

2. Analysis

Even though multi polar world are growing, there are BRICS club that are competing for the international order.Thier influence is still lag behind the united states and its machinery like the WB.Good governance as the new conditionality of the WB as aid criteria has enabled to interfere in domestic affairs of developing nations Even aid has not brought development and good governance .that is why Santos proposed a new radical approach that is consensus oriented.

2.1- purpose

.The purpose of the article is to examine the WB approach of using good governance as a precondition as aid criteria is wise or not and is it successful or not. He said the conditionality is unjust.

He boldly examines the correlation between aid and good governance. The article writer has tried to persuade his audience by clearly stating that WB conditionality is not a best approach and replaced by new radical approach.

2.2 .focus

·         The focus is the correlation between aid and better governance.

2.3Audiences

·         The primary audiences are

·         World Bank group

·         Developing nation’s leaders

·         Other similar international financial  institutions

·         Scholars

·         Secondary audiences

·         Students of international finance

Media

2.4 .sources

To substantiate his arguments and to convince the audiences, Santos has used secondary sources of more than 35 different scholars. He shows the increasing number of WB conditionality and its burden and difficulty to implement.by using facts a and figures

2.5 Accuracy, reliability, validity of the article.

The article is accurate and reliable because he has used the WB facts and figure.. He also   used the working of more than 35 scholars. Santiso also a mixed method of research to make his article valid.His article is relievable and valid because there are so many articles that were wrote in similar title after r Santo’s article. For instance

World Bank's New Rules Condemned for Disregarding People and Planet (Knight, 2016).

2.6. Objectivity.

 The writer has used balanced way of writing. He has used official data’s of the WB.Santiso also used the saying of the bank officials of the bank such as Joseph Stiglizh.He also cited more than 35 scholars. His interpretations are based on figures and facts. His argument of the bank is acting out of its mandate catch the hearts and minds of the reader.

2.7 Currency.

The article is timely not only at the time of writing but also it is one of the points of discussion at present time. Good governance and aid conditionality   are point of discussion still among scholars, between the international financial institutions and developing nations, between the north and the south.

2.8. Coverage.

The article covered much area of good governance and aid conditionality. but some areas such as some elements  of good governance such as equity and inclusiveness are omitted. The historical background of the WB and its domination by the United States are not clearly acknowledged. Other drawbacks will be mentioned in the gap.

2.9. Strengths

.he has used the World Bank information and its official opinion to make the article balanced..he started using writing by trying to summarize the 5ws and 1 h in the beginning to grasp the attention of the readers. He presented his argument in the WB conference that was held in Paris in 2000 before the publication of his article. This allows the writer to inculcate major opposing argument. He boldly presented his argument by saying the WB as Washington consensusHe used both qualitative and quantitative methods mixed to compensate the weakness of each method.. He cited more than 35 scholars in a single article. He suggested the bank conditionality has to be replaced by new radical approach

2.10. Weaknesses

Santiso has said democracy and good governance are inseparable.however this is not theoretically and practically founded. There are democratic government but suffering from lack of good governance such as Italy. There are also efficient governments who have ensured relatively good governance such as china, which is number one economy in the world. During the peak of her economic development, Taiwan was undemocratic government but it was highly participatory government. Cuba is undemocratic but one of the most successful nations interns of HDI.Democracy has longest history good governance is the issue after 1990s.

He can also use the data of DambisaMoyodata Aid is not the remedy for developing continents like Africa.Moyo in her writing entitled as (dead aid: why aid is not working and how there is a better way for Africa), has argued that (In the past fifty years, more than $1 trillion in development-related aid has been transferred from rich countries to Africa. Has this assistance improved the lives of Africans? No. In fact, across the continent, the recipients of this aid are not better off as a result of it, but worse—much worse).According  to Moyo ,1 million dollar was transferred to Africa ,but at the end poverty rate had increased from 11 percent to 60%.the life expectancy of Africa had decreased  at peak time of aid.

He should also criticize the united of America because the bank is the policy agent of America. UnitedStates has a veto power in the bank because of her contribution to the bank. The United States use the bank as foreign policy instruments by giving much aid to pro-western and by blocking or reducing aid to the socialist camp.

.It was more convincing that since the north dominates the bank, it has to be replaced by approach that is more inclusive.

Santiso’s major drawback is he has failed to show is aid is not a  best means of attaining sustainable development and good governance. Good governance has to be local sensitive local conditions and cannot import. As mentioned in the introductory part more resources are elicited out of Africa than we get in terms of aid loan and trade balance.

Africa is not poor, we are stealing its wealth

It is time to change the way we talk and think about Africa (Dearden, 2017).

2.11 Implication for Ethiopia

The time is [ think global act local]

Santiso in his article has shown that using aid as precondition to ensure good governance is not effective method. He has also shown it is more of political rather economic dimension. These can a good lesson for Ethiopia. My beloved country implanting macro-economic reforms, which are so, called homegrown policy.privitization and liberalization are now the current issues in Ethiopia. But when we examine these activities, we are implanting neoliberals’ subscription such as the privatization of Ethiopian airlines which is one of the most efficient organization of Africa and the proud and brand of Ethiopians. We are liberalizing our economy without making the domestic private sector competitive. We are allowing entering MNC without developing the capacities of our regulatory institutions. In return, we have received billions of dollars from the WB and IMF.But as moyo said aid is not the solution. We have the resource but the problem is how to use it efficiently and effectively. Even we have to give priority to domestic private business and first conduct fair and fair election to be legitimate. It is better to implement home growth policy as we have started.

2.12. About the author

Carlos Santiso is the Director of the Digital Innovation in Government Directorate of the Development Bank of Latin America (CAF), based in Bogotá since September 2018. He is a member of the Advisory Committee of the World Economic Forum’s Future of Trust and Integrity Project, part of the Partnering against Corruption Initiative (PACI). He previously led the Innovation for Citizen Services Division of the Inter-American Development (IDB), which he joined in 2011 to manage the Institutional Capacity of the State Division based in Washington; served as Sector Manager for Governance at the African Development Bank (ADB) based in Tunis between 2007 and 2011; as a governance adviser to the Department for international Development (DFID) of the United Kingdom in Lima and Glasgow between 2002 and 2007; and as a senior program officer at the International Institute for Democracy and Electoral Assistance (IDEA) based in Stockholm between 1996 and 2000. He started his professional career at the Office of the Prime Minister of France in Paris in 1995-96. He has written extensively on digital government, democratic governance, corruption prevention, and foreign aid.(World Economic Forum, n.d.)

2.12 About the publisher (The Georgetown public policy review)

Established in 1995, the Georgetown Public Policy Review is the McCourt School of Public Policy’s nonpartisan academic journal, offering analysis and critical insight on today’s most pressing policy challenges. GPPR is a student-run publication, featuring articles from students, faculty, policy analysts, and practitioners across the globe. Our mission is to promote thorough and empirical work in our field, as well as provide an outlet for thoughtful and provocative pieces on current events and contentious issues. (gppreview.com,n.d)

3. Conclusion

Carlos Santiso clearly and evidently stated that good governance as aid conditionality is out of the mandate of the word Bank mandate .even the World Bank is itself is suffering from lack of good governance. The World Bank is nothing but an extension of the US policy. It was proved during the cold war. The head of the bank are always from the US. The US has veto power. Above all good governance is more of a political issue and sensitive to local conditions. Since good governance is a matter of more politics, it is highly related to the sovereignty of each nation.

In addition aid has not reduced poverty and sustainable development in Africa as DambisaMoyo said after the peak of aid poverty increased at alarming rate in Africa. Aid infringes human rights in Africa .in practice aid has used to suppress political opponents in Africa.

Ethiopia has a lesson to learn from santiso opinion. Recently Ethiopia is deregulating and privatizing the economy. We are implementing neo liberal paradigm boldly. The WB and IMF are giving billions of dollars loan and aid. Even sadly, we are on the way to privatize Ethiopian airlines, which is the brand of us. Are we ready and capable intuitionally to regulate this MNC, which will enter in Ethiopia? Are our domestic economy and business are competitive enough? As santiso said good governance is not the mandate of the WB and it has to be replaced by the new radical approach which is based on the consensus of aid and loan recipient.

“Justice without strength is helpless, strength without justice is tyrannical. Unable to make what is just strong; we have made what is strong just” Pascal, Pensees(1670).

 


References

About the Georgetown Public Policy Review,(n.d.).retrieved from gppreview.com

Dearden,N.(2017).Africa is not poor ,We are stealing its wealth. Retrieved from https://www.aljazeera.com/indepth/opinion/2017/05/africa-poor-stealing-wealth-170524063731884.html

 Dreher,A.(2015). Does foreign aid boost growth? Retrieved from https://www.weforum.org/agenda/2015/10/does-foreign-aid-boost-growth/

Lateef,S(2016).evolution of the world banks rethinking on governance Retrieved from http://pubdocs.worldbank.org/en/433301485539630301/WDR17-BP-Evolution-of-WB-Thinking-on-Governance.pdf

Menand,L.(2018). Francis Fukuyama Postpones the End of History. Retrieved from https://www.newyorker.com/magazine/2018/09/03/francis-fukuyama-postpones-the-end-of-history

Nanda,P.(2006)The good governance revisited. Retrieved from https://www.jstor.org/stable/25097772?seq=1#metadata_info_tab_contents

Wallis,w(2006). Aid opponent spreads theory far and fast. Retrieved fromhttps://www.ft.com/content/582916d0-46ee-11de-923e-00144feabdc0.

Whiteside,A..Deadaid: why aid is not working why there is a better way for Africa

Retrieved from https://www.researchgate.net/publication/38091995_Dead_aid_Why_aid_is_not_working_and_how_there_is_a_better_way_for_Africa

World Economic Forum.(n.d.). Retrieved from https://www.weforum.org/agenda/authors/carlos-santiso/

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