Aid Targeting to Fragile and Conflict-Affected States and Implications for Aid Effectiveness

Donors must pay more attention to the multiple ways in which countries are fragile and the conditions that prevent them from exiting fragility permanently, such as lethal and pernicious feedback loops, rent seeking and failure to buy reform, two leading experts write in a recent paper.
While issues of aid allocation and aid effectiveness have received a lot of attention in the academic and policy literature, comparatively less has been written about these issues with respect to fragile states, DAVID CARMENT and YIAGDEESEN SAMY write in their working paper for the United Nations University World Institute for Development Economics Research. They combine the findings of quantitative analysis with specific country-cases to examine whether aid is targeted towards the characteristics that explain the evolution of states.
“By comparing the sectoral allocation of aid with the CIFP [Country Indicators for Foreign Policy] framework, we have shown that aid allocation does not pay sufficient attention to issues of legitimacy and authority, both of which are important for understanding why countries are fragile,” CARMENT and SAMY write in the paper titled “Aid targeting to fragile and conflict-affected states and implications for aid effectiveness”.
For those states where fragility is persistent, the authors find that elites who are resistant to change engage in damaging and self-interested behavior such as corruption and rent seeking. With a focus on symptoms rather than causes, policies are rarely successful because they do not get to the core of the fragility-trap problem, they state.
International and domestic incentives for leaders of trapped states to embrace reforms that affect their personal interests are often too weak. “Indeed, policies intended to induce reform are not only misplaced: they are often counterproductive.”
In addition to the dilemma that selectivity poses for fragile states, there is an extensive literature on conditionality associated with aid programmes, which the authors say reinforces their point that aid conditionality fails more often than not. “This is because it relies on causal explanations focusing on single structural factors such as economic development or political development, which by themselves are insufficient.” In many of these interpretations, fragility is usually associated with poor policy environments, aid absorption problems, conflict and poverty.
“We find that policies focused purely on structure will be misplaced if there is limited willingness to reform among leaders of trapped states. We emphasize the importance of state–society relations – specifically the role of legitimacy in underpinning the behavior of political, social and economic elites – in the formation of under-governed spaces, a coercive state apparatus and rent-seeking behavior, and in building a less resilient society overall.”
These assumptions are premised on claims regarding interactions between the superordinate elements of state authority, capacity and legitimacy, and not just economic development and democracy. For a state that has exited fragility, positive changes in authority that address societal wellbeing not only provide valuable guidance for government policy: they also reduce literal barriers to commerce and economic development (measures of capacity) such as restrictions on citizen movement and assembly (measures of legitimacy).
Responsiveness also induces governments to produce policies addressing popular concerns that are not growth-focused, such as wealth distribution and social programming, and which by extension increase state legitimacy.
“Our overall conclusion is that trapped states are most prone to lethal and pernicious feedback loops, the authors assert. In general terms, strengthening authority structures without appropriate resource distribution goes hand in hand with declining legitimacy. Capacity is skewed to maintaining control over the distribution of resources and rents in favor of entrenched and often unelected elites. Fissures based on ethnic cleavages, elite capture and rent-seeking behavior are met with coercive measures to maintain stability but come at the cost of further declines in legitimacy.
Lethal feedback loops occur when regime survival is tied to a declining rent economy leading to reduced capacity and control over territory, and ultimately collapse. Under-governed spaces increase over time, as patron–client politics and resources weaken simultaneously. Under these conditions, elites express only a minimal commitment to reform. This is because the centralization of state authority and the pursuit of development policies aimed at maximizing revenues and rents, rather than social welfare, produce a process which has non-elected institutions and elites dominating. “There is only a limited opportunity for elites to pursue reforms.”