International Public Goods and the Case for Foreign Aid

Abstract

Abstract During the 1980s and 90s, aid programs increasingly became a kind of surrogate national government, with outside agencies (usually led by the Bretton Woods institutions) attempting to foster the provision of public goods at the local and national levels. In this vision the International Monetary Fund (IMF) and the World Bank would lead reform on behalf of the national polity because the government receiving the aid was too weak, too corrupt, too prone to backsliding or too incompetent to mobilize the needed actions on its own. Thus, during the 1980s and especially in the first half of the 1990s aid was closely tied to policy conditions to ensure that the aid was linked to appropriate policies and the appropriate provision of public goods by the national government. In principle, if the aid was not used in the way agreed with the outside agencies, it would be cut off. We know from a large number of studies and frustrating case histories that this model is deeply flawed. A new approach to aid is needed. In our view donors should get back to basics, to ensure that aid really delivers public goods that otherwise will not be provided either by markets or recipient governments in the absence of the aid. Without a doubt, there is one hugely neglected area of public goods: goods that can only be provided effectively at the level of the region (defined here to mean a grouping of neighboring governments) or on a global scale. The first category may be called “regional public goods” and the second category “international public goods.” This chapter focuses on regional public goods, partly because international public goods are covered in other chapters and partly because very little work has been undertaken on the actual and desirable levels of public goods provision at the regional level.