Book Chapter
Development Effectiveness

While we know a lot about how countries become prosperous, we have only begun to understand how aid contributes to economic growth and poverty reduction. The development record is mixed and no robust association between the volume of aid and development performance has been discovered. The limits of cross-country regressions have become clear: they do not throw much light on the reality of aid. But the novel mix of qualitative and quantitative methods fashioned by independent evaluators constitutes a serviceable approach to the assessment of aid effectiveness both at project level and at country level. In particular, a new brand of country assistance evaluations (CAEs) has demonstrated that success at project level matters even if it does not automatically translate into success at country level—the ‘micro-macro paradox’. Evaluations confirm that well-managed aid, using instruments that are tailored to specific country contexts, works. They show that budget support mechanisms and programme aid instruments have a role to play in certain circumstances while projects are the aid vehicles of choice in others. The popular notion that development effectiveness can be ensured through the targeting of aid towards countries classified as good performers by idealized sets of indicators has been discredited. Recent policy research suggests that, despite the risks involved, aid does the most good when it benefits the weakest and poorest economies and those most vulnerable to shock. But to achieve development effectiveness at country level, coherence of interventions is critical, as is judicious sequencing. Development operations should be (i) selected to fit within coherent country assistance strategies; (ii) aligned with the priorities of the country and (iii) coordinated with other policies and actions of partners. Ultimately, this is because the quality of aid matters as much as its quantity: aid is a transmission belt for ideas, a device to train development leaders, an instrument to build state capacity and a platform for policy experimentation and dissemination. The final proposition offered by this paper is that professionally administered aid works, but that it would work even better in concert with reforms of rich countries’ policies geared to levelling the playing field of the global market and to peace building and human security in the zones of turmoil of the developing world.