The launch of Aid 2.0

Rwanda_HatAndreas Perez de Fransius, Peace is Profitable Contributor, discusses a new approach to international aid for developing countries. 

Mentions of the European Union (EU) currently conjure up images of financial distress and bailouts. While facing such challenges, this much-maligned institution is currently debating how its international development cooperation can complement the individual efforts of its 27 member states. As the world’s leading provider of Official Development Assistance (ODA), this is one area in which Europe is still a superpower.

A welcome source of new ideas is the European Centre for Development Policy Management (ECDM), a self-styled independent “think and do tank.” In a recent blog entry, its deputy director, shines some welcome light on African views on the development agenda. Among the numerous interesting topics that Mr. Geert Laporte brings up, some of the most relevant concern national ownership, governance, and the need for economic diversification.

Few sectors are as prone to fads as development cooperation, and the current one includes a relentless focus on progress towards the Millennium Development Goals (MDGs) and bypassing local government structures to provide measurable results. African leaders are right to be critical: while the MDGs are in many ways laudable, they give little space for national priorities. Furthermore, they do little do tackle the need for economic diversification. Finally, the ways in which they are implemented may actually compromise governance and democracy.

Although setting eight worldwide goals can be welcome in order to focus attention and raise resources in the rich world, they do not account for the diversity of challenges in developing countries. They also do little to empower poor countries to build local economic structures that provide jobs, produce value-added goods, and ultimately steer poor countries away from over-dependence on extractive industries. In terms of governance, rich donors often stilt the domestic political debate by moving “discussions” to closed-door meetings in which donors tell local governments what they should prioritize. In such situations, who can blame voters from becoming disillusioned and thinking that their vote will have little influenced?

A more enlightened approach has been spearheaded by some of the world’s leading development economists, such as Dani Rodrik, Ricardo Hausmann and Andres Velasco, all affiliated with Harvard University at different times in their careers. By launching Growth Diagnostics they have developed a methodology centered on unlocking the key constraints to economic growth in each country, rather than providing across the board solutions.

In a recent article in the Financial Times, Hausmann proposed an innovative tool for Aid 2.0 that would allow goals and proposed solutions to emerge from different stakeholders in each country. Professor Hausmann refers to this as a Wikipedia-approach whereby an online tool ”can help donors and recipients find each other based on their shared interests”.

By merging technology with sophisticated analysis this is just the type of idea that can help aid become truly useful. What’s needed is to identify local priorities and support emerging solutions emanating from the countries themselves. That’s what true empowerment is all about.