Foreign Aid

Foreign Aid
Aside from the blunt forms of corruption that have become a major focus of the development community (theft, graft and other forms of "obvious" corruption), the undue influence of money is corrupting outcomes in the foreign aid regime in two other ways: (1) The undue influence of money in the system provides incentives for donors and aid agencies to ignore corruption and perpetuate a system that is failing to help the intended recipients, and (2) The perpetuation of the 'tied aid' system, wherein foreign aid must be spent on goods and services provided by the donor country, further dilutes the effectiveness of the aid system; financial rewards for domestic business corrupt the intended outcomes of the aid regime.

(1) Readings on Incentives for Donors (IFIs, NGOs) to Ignore Corruption


 * Nicholas Stockton, Preventing Corruption in Humanitarian Relief Operations (discussing incentives for ignoring corruption in humanitarian aid).


 * Corinna Kreidler, Corruption as an Internal Problem for Emergency Operations (same).


 * World Bank, Indonesia Country Assistance Report (internal World Bank Report discussing "unjustified penalties" on careers of individuals who report corruption in projects).


 * Government Accountability Project, Challenging the Culture of Secrecy: A Status Report on Freedom of Speech at the World Bank (same).


 * Steve Herz, Zero Tolerance? Assessing the Asian Development Bank's Efforts to Limit Corruption in its Lending Operations (discussing failure of Asian Development Bank in creating anti-corruption mechanisms for aid projects).


 * World Bank, The Wapenhans Report, Portfolio Management Task Force (1992) (pivotal World Bank report discussing the 'approval culture' which incentivizes employees to throughput money without adequate accountability mechanisms in place).

(2) Readings on "Tied Aid"


 * "Aid Abroad is Business Back Home: Washington Firms Profit From Overseas Aid," The Washington Post, Jan. 26, 2001, at A1. (profiling domestic businesses that receive significant profits for the foreign aid system).


 * CJ Jempa, The Tying of Aid (1991) (an authoritative overview of the tied aid system and its deleterious effects on the efficacy of aid).


 * Milner & Tingley, The Domestic Politics of Foreign Aid: American Legislators and the Politics of Donor Countries (showing that Congressional support of foreign aid is correlated to development contracts awarded to businesses within particular Congressional districts).


 * Fleck & Kilby, How Do Political Changes Influence US Bilateral Aid Allocations? Evidence from Panel Data (showing that Congressional support of foreign aid is not correlated to development contracts awarded to businesses within particular Congressional districts).


 * Reality of Aid Report 2002 (finding that 76% of US foreign aid was spend within the United States in 1992).


 * Rune Hagen, Foreign Aid and Domestic Politics: Implications for Aid Selectivity

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