Working Paper
Aid and Governance in Vulnerable States

Bangladesh and Pakistan had very divergent experiences with aid after 1971. Politics in Pakistan was less inclusive in terms of opportunities for intermediate class political entrepreneurs. In this context, the significant role of military aid to Pakistan had very negative effects on its political and economic evolution. In contrast in Bangladesh the less centralized organization of political power and less concentrated forms of aid allowed intermediate class political entrepreneurs to access resources and created incentives for productive activities. These experiences challenge conventional ideas about the relationship between aid, good governance and security: better policy requires understanding the relationship between aid and the political economies of recipient countries better.