Is competition between aid agencies a blessing or a curse? “If there is a market for aid, then it is a strange one,” according to Tim Harford, economist for the International Finance Corporation (IFC) and columnist for The Financial Times, and Michael Klein, IFC vice president and chief economist, in their new book, The Market for Aid. The book provides an analysis of the changing aid business and a look at what it would take to operate as a “market”—albeit one in which new aid agencies emerge, but old ones do not shut down. Harford and Klein held a panel discussion at World Bank headquarters in Washington, D.C., to coincide with the book’s June 16, 2005, release. The event was sponsored by the Bank’s infoShop.
Competition in the market for aid is increasing both among the aid agencies and with the private sector, Harford explained while summarizing the book during the event’s opening moments. “The truth is, it doesn’t have to be a problem,” he said. “It can be an opportunity if we work more at benchmarking and closing down the aid agencies that are not working.” Over the past 50 years, not a single aid agency that has entered the industry has exited, and the poor suffer as a result. Klein argued that the real problem is information. “At the end of the day, donors have to make a choice,” he said. “And it’s clear that we’re set to have more and more aid agencies. We must do a better job of providing information as to who is better at delivering.”
Panelist Sebastian Mallaby, columnist for The Washington Post, noted that harmonization has long been a repeated plea, but it has yet to occur. “Maybe it’s time to wake up—it isn’t going to happen,” he said. According to panelist Steven Radelet, senior fellow at the Center for Global Development, the real contribution of The Market for Aid is in turning the focus back on the donors. But Radelet strongly argued against the claim that grants do not encourage investment or economic growth.
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