The cartel of good intentions: The problem of bureaucracy in foreign aid

Abstract

A group of well-meaning national and international bureaucracies dispensed foreign aid under conditions in which bureaucracy does not work well. The environment that created aid bureaucracies led those organizations to (a) define their output as money disbursed rather than service delivered, (b) produce many low-return observable outputs like glossy reports and “frameworks” and few high-return less observable activities like ex-post evaluation, (c) engage in obfuscation, spin control, and amnesia (like always describing aid efforts as “new and improved”) so that there is little learning from the past, (d) put enormous demands on scarce administrative skills in poor countries. To change this unhappy equilibrium, policymakers in rich and poor countries should experiment with decentralized markets to match those who want to help the poor with the poor themselves freely expressing their needs and aspirations.