Short Abstract:
Risk is inherent to development assistance where outcomes are uncertain and contexts unpredictable. This session encourages reflection on the new politics of risk and uncertainty in aid. Papers will focus on the political bargains struck to minimize risk and maximize rewards in development.
Long Abstract:
Risk is inherent in foreign aid-giving where outcomes are uncertain, contexts change in rapid, unpredictable ways, and the potential for negative externalities are real. A growing recognition of uncertainty, the uniqueness and fluid nature of context and the difficulty of ex-ante prediction lie behind various big ideas concerning the best ways to manage development assistance, including problem-driven approaches, political economy analysis, risk outsourcing to third-parties and policy entrepreneurship. Collectively, these approaches indicate greater acceptance of the complexity of development work, with higher tolerance of risk by donors and unpredictability in the organisation of development. In doing so, it is assumed donors can be more responsive, innovative, flexible and savvy and that these qualities are conducive to effective development.
Paradoxically, as these management trends are mainstreamed, the prevalence of donor surveillance architectures that penalize high risk/high reward ventures grows. As domestic consistencies press for greater public accountability of expenditure and draw attention to high profile failures in development, risk management has become an attractive value proposition for donors. Risk science displaces trust in professional judgment in favour of defendable processes of control and reduced exposure. Compliance functions at headquarters centre on limiting risks through safeguard policies, fiduciary and procurement controls. Meanwhile the need to account for decisions and results lies behind an expanding sub-industry within donor countries.
This panel encourages reflection on the new politics of risk and uncertainty in aid, with the hope of examining the political bargains struck to minimize risk and maximize rewards in development assistance.
Accepted papers:
Session 1
Navigating trade-offs: Risk and uncertainty in democracy promotion
Susan Dodsworth
(University of Birmingham)
Nic Cheeseman
(University of Birmingham)
Paper short abstract:
This paper uses the experience of the Westminster Foundation for Democracy to identify two trade-offs that democracy promoters confront. It examines where and when different trade-offs are worth making, exposing tensions between risk management, innovation and attempts to adapt to political context.
Paper long abstract:
This papers examines how those who provide aid to political institutions - in particular, to parliaments and political parties - minimize risk and maximize rewards in delivering that aid. As is the case for other development practitioners, democracy promoters face increasing pressure to work in more politically-savvy, context sensitive ways. Political economy analysis has become standard. Yet translating that analysis into practice has proved difficult; prominent academics describe an 'almost revolution' in which development aid has confronted, but not fully come to terms with, politics.
This paper helps to explain why that revolution remains partial. It breaks new ground, drawing on the body of practice accumulated by the Westminster Foundation for Democracy. This is made concrete through internal programme documents (proposals, reports and evaluations) and interviews with key members of staff. On the basis of that material, this paper identifies two trade-offs that democracy promoters must confront and proposes an analytical framework that can be used to identify where, and when, different trade-offs are worth making. In presenting that framework this paper explores tensions between the management systems of donors, which seek to minimise risk, and their exhortations to democracy promoters to adopt more innovative and context-sensitive methods.
This paper contributes to current academic efforts to understand the internal dynamics of international development actors. It also provides concrete evidence of the gains that can be made when those who undertake democracy promotion - traditionally an area of development where transparency has been lacking - make their experience public knowledge.
Economic Expertise, Selectivity, and the Politics of Aid Effectiveness: The Case of Governance Indicators in US Development Finance
Jigar Bhatt
(Columbia University)
Paper short abstract:
The paper takes as its case an aid effectiveness model (the US Millennium Challenge Account) that benchmarks countries using governance indicators. In its attempt to manage risk and ‘depoliticize’ aid allocation, this approach creates politics of its own with wide-ranging implications.
Paper long abstract:
This research investigates how economic expertise influences development governance through a case study of aid-effectiveness at a recently established US aid agency. It aims to make a theoretical contribution by addressing the asymmetrical treatment of experts in the planning and development literature. When experts fail, politics has triumphed over rationality. When experts succeed, the credit goes to rationality, not politics. By turning the focus to economists' styles of reasoning and expert tools, this research treats experts' success as having political effects of its own. Doing so allows us to treat economist-led, results-based development not as a process of depoliticization, of technical solutions prevailing over political interests and values, but as an explicitly political project that can format power relations and reshape the development process.
The paper takes as its case an aid-effectiveness and risk-reduction model at the US Millennium Challenge Corporation (MCC). The paper discusses the method of benchmarking countries using governance indicators. Unlike structural adjustment's more direct and absolute approach to policy reform, governing aid by indicators is a more indirect form of governance that ranks countries' 'policy environments' relative to their peers. This method's influence on the executive branch's planning process, bureaucratic relations, distribution of aid funding, and US foreign policy will be discussed. Primary data from interviews with professionals in the US global development community, official government documents, and secondary country-level data support the paper's findings.
Reducing Risks and Safeguarding People Amid Complexity, Uncertainty and Change
Chad Dear
(US Agency for International Development)
Caleb Stevens
(USAID)
Paper short abstract:
This paper will highlight the principles underlying USAID's new Guidelines on Compulsory Displacement and Resettlement and contextualize them within the ongoing organizational culture change within the Agency, specifically around complexity, systems approaches, innovation and risk management.
Paper long abstract:
Decades of experience and research make clear that, without proper management, impoverishment risks related to development-induced displacement and resettlement (e.g. landlessness, homelessness, joblessness, and others) will manifest as adverse social impacts that undermine development organizations' programmatic objectives and violate the fundamental ethical principle of 'do no harm.' Multilateral Development Banks, bilateral aid organizations, and private financial institutions have developed and implemented safeguard policies on land acquisition and involuntary resettlement as early as 1980 which detail what proper management entails. Specifically, safeguard policies and guidelines outline well-known methods for identifying, avoiding, minimizing and mitigating risks. Building on decades of experience and research across the development aid landscape, the US Agency for International Development will soon publicly release its own "Guidelines on Compulsory Displacement and Resettlement in USAID Programming." Simultaneously, USAID, like many other aid organizations, is increasingly acknowledging the need for agile approaches to be effective in the complex, uncertain, and changing systems in which the Agency operates. Further, there is greater emphasis on innovation and increasing risk tolerance in order to achieve the audacious goal of eradicating extreme poverty in the coming decades. This paper will highlight the principles underlying USAID's new Guidelines and contextualize them within the ongoing organizational culture change within the Agency, specifically around complexity, systems approaches, innovation and risk management.
Results-based financing and risk: one approach does not fit all
Maria Ana Jalles d'Orey
(Overseas Development Institute)
Paper short abstract:
This research explores how risk aversion and risk management varies under different RBFA schemes, depending on the type and the size of the agent and the contract that is pursued.
Paper long abstract:
Results-based financing approaches (RBFA), in which donors disburse funds only after predefined results are achieved, are quickly growing more important and being used more often in development cooperation.
One of the key components in RBFA is the extent to which the risks are transferred from principal to recipient. While in traditional input-based approaches to aid the risk is mostly supported by the principal, RBFA are designed so that some or all of the risk is transferred to the agent. The level of uncertainty associated with the achievement forms the basis of the principal-agent problem.
The risk aversion of agents will also influence the cost of contracts and whether a RBFA should be used in the first place. The literature suggests that smaller agents or organisations will be more risk averse as the transfer will constitute a higher proportion of their budgets and their activities are more concentrated and volatile.
This research explores how risk aversion and risk management varies under different RBFA schemes, depending on the type and the size of the agent and the contract that is pursued. By unpacking risk dynamics this research aims to go one step further than just contributing to the debate of whether traditional or results based aid should be used, but rather to which type of agent results based financing approaches might be optimal.