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Submitted by Berhanu on
Dear Shanta, Thank you for taking up this issue, and here are my two cents. The Bank, we should all remember, peddles “ideas plus money” under the straitjacket mandate of Bank-to-Government aid. This effectively leaves out the model the exercise of “power” and the non-government sector. And so, we are continually subjected to debates between development bankers who pragmatically do not mind feeding the greedy to reach the needy, and their more idealistic critics who rightly note that feeding the greedy is often the surest way of entrenching structural obstacles to development. The long-term economic costs may very well exceed the benefits of reversible, policy-induced poverty alleviation. Why? It has become increasingly clear that (endogenous) mis-governance is the most binding constraint on African development as the continent’s brightest young men/women seek to capture that state because ‘political’ rent seeking is more rewarding than wealth creation in the underdeveloped private sector. Viewed in this light, PBS1 was the Bank’s realistic answer to the political crisis produced by the rigged 2005 parliamentary elections. Unwilling to suspend aid to a regime with a good record in providing aid-funded basic services, not to mention the role of a valuable political ally to the Bank’s biggest vote holders, it chose to go around the singly-party controlled central government and channel most of the money to districts (woredas). PBS 2 presumably continues this approach. Unfortunately for the donors, the ruling party overreacted to the apparently massive loss in 2005 by savaging civic organizations as well as ensuring a 99% victory in the 2008 district elections and the 2010 national elections. Even the most casual observer should now know that there are no such things as autonomous local governments and independent civic organizations in Ethiopia today. The state had already captured civil society in the 1970s by eliminating the political space for traditional/informal institutions of governance. So, what should the litmus test be: poverty reduction or a threshold of political accountability (forget democracy for now)? This is a Faustian bargain indeed. If you want to help the poor, as the Bank defines its mission, then all that matters is selectivity based on a country’s need for and effectiveness in poverty reduction. The reason the Ethiopian Government has done a decent job in providing basic services a pragmatic one (rather than resulting from Bank-mandated transparency, as Shanta seems to believe): delivering growth earns the party a modicum of legitimacy. Unlike the Chinese Communist Party it purports to imitate, though, aid-dependent poverty reduction has yet to morph into productivity-enhancing capacity building. PBS seems too feeble a foundation to support sustained growth mainly for political-economy reasons: the same aid (being fungible) also strengthens political rent seeking (party-owned companies, patronage-based private sector, privatization of the state apparatus, etc.). Is it then too much to expect Bank economists to be more courageous in spelling out more fully the negative externalities (unintended consequences?) of aid programs at least in their analytical reports?! FYI:,9