The Samaritan's Dilemma: The Political Economy of Development Aid

287 Pages·2005·1.67 MB·English

by  Clark C. Gibson

THE SAMARITAN’S DILEMMA
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The Samaritan’s Dilemma:
The Political Economy of
Development Aid
CLARK C. GIBSON, KRISTER ANDERSSON,
ELINOR OSTROM, AND SUJAI SHIVAKUMAR
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Acknowledgments
This book is the product of more than four years of work by a team of researchers
who were, until June of 2001, all members of the Workshop in Political Theory and
Policy Analysis at Indiana University. The initial stimulus for doing this study was a
Request for Proposal sent out in November of1999 by the Department for Evaluation
and Internal Audit of the Swedish International Development Cooperation Agency
(Sida). In this request, Sida sought an analysis of incentives in the delivery of devel-
opment aid. We thought the subject matter so intriguing and potentially important
that we threw our hats into the ring, and were delighted to have been chosen by Sida
for this project in February of 2000.
Our final report—Aid, Incentives, and Sustainability: An Institutional Analysis of
Development Cooperation, Sida Studies in Evaluation 02/01 (E. Ostrom etal. 2002)—
was widely distributed to aid agencies and scholars in many countries of the world.
We were gratified to see it generate such interest that we received multiple requests
to broaden our initial study and rewrite the report as a book. You now hold the fruits
of this effort. We have spent the last 18 months broadening the theoretical scope
of the report while drawing on our empirical studies of Sida and Sida projects to
illustrate our general theoretical orientation.
The overall objective of this book is to introduce a new approach to the study of
development aid, an approach that puts the institutional incentives at the center of
the development process. We have written this book with the hope that students,
researchers, and other individuals who are interested or even directly involved with
development aid activities, will learn to apply this approach, and through it gain new
insights about the relationships between aid, incentives, and sustainability.
We develop our approach in three stages. First, we review and discuss the state-
of-the-art regarding the existing knowledge about incentives and aid. Second, we
develop a series of theoretical propositions about the origins of institutional incent-
ives among the different actors who operate within the development aid process.
Throughout the book, we draw on these ideas to identify multiple relationships
between aid, incentives, and sustainability that are relevant to all aid actors. Finally,
we apply and illustrate the theoretical propositions in concrete field settings in
Sweden, India, and Zambia.
During multiple visits to Sida headquarters, the Workshop team reviewed more
than 100 documents to assess the degree to which the role of incentives is discussed.
In Stockholm, we conducted 111 interviews including Sida staff members at all
levels, public officials at two Ministries, and consultants familiar with Sida projects.
In India and Zambia, we conducted an additional 66 interviews with Sida staff
members, recipient government officials, and project organizations associated with
the five projects chosen in India and Zambia. The methods used in that initial study
vi Acknowledgments
are described in E. Ostrom et al. (2002, appendix C). There we also reproduced the
interview forms that we used for structured interviews and the lists of persons
interviewed in Stockholm and related to the projects selected in India and Zambia.
We do not make specific references to particular individuals interviewed since we
assured each of them of the anonymity of their interviews with us. From these
interviews, we gained information on the perceptions ofSida staffand others working
closely with Sida regarding incentives and their concerns and consciousness of how
incentives are related to sustainability.
Why did We do This Study?
Our main motivation for doing this study, and for allocating some ofour own research
funds to it, is our deep concern with the long history offrustrated efforts to enhance
political and economic development of many of the poorest countries in the world.
In our prior “ground-up studies,” we had observed a number of instances in which
local efforts to create not-for-profit or for-profit organizations providing needed
goodsand services had been stymied by donor-funded projects of their own national
government (E. Ostrom et al. 1994; Shivakoti et al. 1997; Sowerwine et al. 1994).
Further, we were already engaged in a number ofstudies ofnational-level policy mak-
ing and its impacts on development processes (Andersson 2003, 2004; Gibson 1999;
Gibson and Lehoucq 2000; Shivakumar 2005), and were beginning work on the
impact of international assistance in the area of humanitarian aid (McGinnis 1999c).
The opportunity to work with one of the world’s leading development assistance
agencies—Sida—to examine how incentives could lead well-intentioned individuals
to produce results that at times were unintended and counterproductive, also appealed
to us. Sida, by simply commissioning this study, signaled that it was willing to consider
some of the most perplexing problems facing international development assistance
today. Further, Sida and other closely related agencies and researchers in Sweden had
already undertaken some path-breaking studies of how institutional structures lead
to the potential for perverse incentives (Bräutigam 2000; Catterson and Lindahl 1999;
Eriksson Skoog 2000; Sida 1999b). Indeed, it was important to us that our work on
this difficult topic—concerning theoretical developments, empirical findings, and
policy recommendations—would be taken seriously by the agency requesting the
original study. Indeed, in the meetings we have had with Sida after the delivery of
our original report, we were very impressed with the depth of their interest in our
approach and conclusions.
We hope that other international donors and the scholars who study development
will also find the expanded study of value to them. When individuals trying to do
good find themselves hampered in these efforts by the incentives they face, it is quite
important that one steps back to examine what these incentives are and how they can
induce behavior that slows down development rather than enhancing it.
We are deeply indebted to all ofthe individuals who gave us substantial time when
we talked with them or helped to dig out documents, data, and archival materials. At
the Workshop, we have benefited greatly by interactions with our larger team including
Acknowledgments vii
Professors Matthew Auer, Roy Gardner, Michael McGinnis, and Christopher
Waller (now at Notre Dame). We are glad that Matthew Auer could join Krister
Andersson in co-authoring Chapter 8 in light of his own extensive prior experience
and the large number of interviews he conducted in Stockholm for the original
study.We are also glad that Roy Gardner and Christopher Waller were able to revise
an excellent technical appendix from the original study for the broadened Chapter 5
of the current book. We thank Eduardo Araral, Sarah Kantner, Shaun McMahon,
Esther Mwangi, Amy Poteete, and Enrico Schaar for their useful input. Frank Van
Laerhoven drew on his own long experience in development assistance to provide
us with effective critiques of all of the chapters in the current book. And, without
Patty Lezotte, we could never have survived the fact that we are now separated
andlocated on the opposite coasts ofthe United States. She interpreted our confused
emails and made sense of our contorted files. Her editorial skills are famous, as is
her patience.
We are also appreciative of the welcomes we earlier received in Stockholm on
multiple occasions from Sida staff—Anders Berlin, Gun Eriksson Skoog, and
Ann-Marie Fallenius of UTV—and of the extensive help offered to us by Malin
Karlsson, Stefan Engström, and Wendy Fryer. We deeply appreciate the funding
provided to us by Sida at the time ofour initial study as well as by Indiana University,
the Ford Foundation, and the MacArthur Foundation for our broader research mis-
sion. We thank the many individuals throughout Sida who took the time to talk to us
andwho have given us extensive comments on our report. We also received excellent
comments on the initial report from Bertin Martens, Mary Shirley, and Ingemar
Gustafsson.
For the India case studies, we appreciate the help of Anita Ingevall and Farhad
Irani, Lars Lagging, and Elisabeth Ekelund at Sida in Stockholm. We are indebted
to Sida’s office at the Embassy of Sweden in New Delhi for many kind courtesies
extended. Owe Andersson, Jonas Lövkrona, and Ramesh Mukalla were generous with
their time and their wisdom in discussing a range of issues relating to incentives and
ownership. Also, in New Delhi, Rita Acharya, at the Indian Ministry of Finance and
Jagmohan Bajaj, formerly Finance Secretary to the Government of India, took time
to inform us on the conduct of bilateral aid.
For the Orissa project, we thank the Orissa Forest Department, in particular
P. R. Mohanty and S. C. Mohanty. Neera Singh of Vasundara helped us to under-
stand many of the complex issues involved in Orissa forestry. N. C. Saxena was, as
always, courteous and knowledgeable. For the Maharashtra project, we appreciate the
kind help of Carl-Göte Carlsson of ABB-India, Pramod Deo of the Maharashtra
Secretariat, and V. S. Patnai of the Maharashtra State Electricity Board.
The Workshop team that traveled to Zambia received crucial help from both Sida
staff and Zambian officials. Ambassador Kristina Svensson allowed her embassy
staff the time to help us with both the logistics of this study and to lend their
considerable expertise to our work; we would like to especially thank embassy staffers
Göran Hedebro, Marie Holmlund, Mulenga Muleba, and Torsten Andersson. In
addition to Sida staff, the number of individuals who gave us some of their valuable
viii Acknowledgments
time and insights include: Peter Aamodt (Zambia Chamber of Commerce and
Industry), Peter Agaard (CFU), Kuwana Akapelwa (ZESCO), Cyprian Chitundu
(ZESCO), Ian Fraser (Zambian Privatization Agency), Dutch Gibson (CFU), Andrew
Kamanga (ERB), Namukolo Mukutu (GART), Teddy Mwale (ZESCO), Jacob
Mwanza (Bank ofZambia), J. Mwenechanya, Olle Otteby (Sida consultant), Matthew
Phiri (ZESCO), Raphael Salasini (formerly ofERB), Chatis Vlahakis and team (CFU),
J. Zyambo (ZNFU), and Moses Zama (ERB). To these individuals, as well as the
other 40 people we interviewed in Zambia, we extend our deep thanks.
Even after such extensive help, we are sure that this book still contains errors. To
these, we claim complete ownership.
Contents
List ofBoxes xvi
List ofFigures xvii
List ofTables xviii
List ofAcronyms and Abbreviations xix
List ofContributors xxi
Part I. Introduction
1. What’s Wrong with Development Aid? 3
1.1. Rethinking development aid 3
1.2. Incentives, development aid, and the plan of this book 5
1.2.1. Perverse incentives in day-to-day interactions
1.2.2. Perverse incentives in the policy process
1.2.3. Perverse incentives in the development aid system
1.2.4. Perverse incentives in donor agencies
1.2.5. Cases in recipient countries
1.3. Five key concepts for the institutional analysis of development aid 7
1.3.1. Institutions (and their close cousins)
1.3.2. Incentives
1.3.3. Development, development aid, and development cooperation
1.3.4. Sustainability
1.3.5. Ownership
1.4. Promoting development 13
1.4.1. Missing money?
1.4.2. Missing institutions?
1.4.3. Collective-action situations and development
1.4.4. Ownership and collective action
1.5. Conclusion 18
Part II. Theoretical Foundations
2. Laying the Theoretical Foundations for the Study
of Development Aid 23
2.1. Introduction 23
2.2. An overview of the institutional analysis and
development framework 24