Collier, The Bottom Billion, and "What is Aid's Best Roll?"

And Thus, What is Aid's Best Role?

In terms of the different areas of poverty traps, (including the Conflict Trap, the Natural Resources Trap, Landlocked Trap, and the Bad Governance Trap), Collier notes that the one that is most promising for change, in relation to the input of foreign aid, is the last, governance (and policies). In terms of the relation between the actual donor agencies and the governments on the receiving end, Collier notes, “...aid agencies have very little incentive to enforce conditions: people get promoted by disbursing money, not by withholding it.” While this has been since adapted and changed to reflect more of the realities on the ground, the problem still persists. Changes in governance must not be simply promised in return for offers of aid; the changes must take place, must take root, and must be well-configured before the aid is distributed. This is the only practical way of dealing with this issue of distribution and conditionality. Collier further notes, “The key objective of governance conditionality is not to shift power from governments to donors, but from governments to their own citizens...why should we give aid to governments that are not willing to let their citizens see how they spend it?” Thus, aid levels should be directly tied to good governance, transparency, and positive changes on the ground for the citizens of these nations. However, a big hurdle in these reforms of governance comes with the lower and middle levels of the government itself, the civil service, which in many nations of the bottom billion, has been hollowed out and stocked with incompetence and corruption as a guiding principal. How, thus, to change the entire culture of a civil service, from the “serve thy self” motivation to actual performance-based efficiency, with little extrinsic motivation present to reward positive change? Can aid bridge this gap? If not, what can? I believe this is one of the biggest hurdles facing the developing world. An entire culture can only be changed from the top-down; getting the right talent in place at the top is extremely difficult in itself in an age of kleptocrats and octogenarian rulers; but even once this change has been made, extending their writ down to the lowest levels takes a huge paradigm shift in the entire culture of the nation, and as a microcosm of the nation, the civil service. In fact, Collier has looked into the effect of bringing in technical assistance, ie: foreign experts, and their effect on a country's turnaround; his research has shown that foreign experts are only going to help with situations in which there is a new leader, which is very specific in the nations of the bottom billion. “Technical assistance during the first four years of an incipient reform, and especially during the first two years, has a big favorable effect on the chances that the momentum of the reforms will be maintained. It also substantially reduces the chance that the reforms will collapse altogether.” These are all the smaller pieces of a vast pie: each needs to be considered and enacted in its own right to sustain a longer-lasting growth and development in these nations. The biggest problem with the current deployment of technical assistance to nations is that, “...technical assistance is supply-driven rather than demand-driven. The same assistance is poured into the same places year after year without much regard to political opportunities.” And thus, the agencies MUST understand that their work is fluid; that the human situations and the human capital that they are dealing with are fluid, changing, and prone to opportunity and downturn. They MUST be responsive to these changes to take advantage of the particular opportunities that present themselves, to make the most of a finite resource. 
Collier later critiques the motivations and the change-capacity of the agencies in "Aid to the Rescue?": Agencies operate with two-types of fair-shares rules. One is for countries: it is difficult to privilege one country over another, even temporarily, although if the Krugman-Venables thesis of agglomeration economies is right, then one of its implications is that such temporary concentrations of aid are likely to be efficient...So the present aid system is designed for incrementalism-a bit more budget here, a bit more budget there-and not for structural change. Yet we know that incrementalism is doomed because of diminishing returns to aid. Just doing more of the same is likely to yield a pretty modest payoff. For aid to promote structural change in countries requires structural change in aid agencies." 

Collier continues with the next aspect of aid coming under his statistical eye, that of money supplied for project or budget support. He notes, “Money early in reform is actually counterproductive. It makes it less likely that the reform will maintain momentum.” Thus, in the early stages of a post-conflict turnaround, the most effect assistance that can be given is in the form of technical assistance. A few years down the line, however, the tides turn, and budgetary and project support becomes much more viable. In summing this “sequence,” Collier notes, “Aid is not very effective in inducing a turnaround in a failing state; you have to wait for political opportunity. When it arises, pour in the technical assistance as quickly as possible to help implement reform. Then, after a few years, start pouring in money for the government to spend. Aid used in this way to support incipient turnarounds would be pretty high-risk. Even with aid many incipient turnarounds would fail. The payoff is high because the successes, when they happen, are enormously valuable.” And thus, a “turnaround fund” would be seen as the most likely source of funding for these transitions to occur, which the British government has already funded in the last number of years. (It would be interesting to contrast this statistical analysis with analysis of the opposite, or such a situation as what is currently going on in Malawi, where a negative shift in governance has caused a large pull out/suspension in donor funding and budgetary support.)