How Covid-19 can change incentives for development cooperation

There is nothing new in accusing bilateral donors of repurposing foreign aid to serve their domestic national interests. Even before the current pandemic, donors had been slashing aid in exchange for middle-class tax breaks, twisting the definition of official development assistance (ODA) to allow for the inclusion of expenditures in wealthier countries, and tying aid to the uptake of domestic consultants. So, what happens now, as economic and social needs expand globally with every case of Covid-19 detected and every grave marked?

The initial vital signs of international collective action are not promising. British and Canadian politicians have come under flak for donating personal protective equipment to China just before domestic demand skyrocketed, even if this equipment was set to expire and the favour returned in kind. Russia is accused of using medical aid to fragment EU solidarity and further diplomatic ambitions in Italy. Meanwhile, US President Donald Trump upends global cooperation and dismantles its institutional architecture with every tweet and press briefing. Most egregiously, he defunded the only multilateral institution able to marshal both the transnational networks and political leadership required to detect, monitor and eventually stop this unpredictable pathogen.

Notwithstanding this weak response, Covid-19 can reinvigorate the rationale for financial and moral generosity towards non-citizens, bolstering the case for effectively allocated concessional public finance. However, it may also require uncomfortable changes of an industry that has long operated on the wings of an inter-connected, globalising world.

Viruses know no borders

Donor motivations are like tides that ebb and flow between the poles of charitable altruism and narrow self-interest. After the 2008 financial crisis, political leaders in the North defended aid with reference to 'mutual benefits' and 'win-wins' for both donors and recipients. Unfortunately, this narrative has been a politically expedient sleight of hand.

Mostly, this framing does not distinguish the kinds of wins obtained by parties to an aid transaction. For example, it mixes up the plausible benefits to everyone, everywhere, of cleaning up our planet, disarming warlords or immunising children with the more circumscribed national windfalls of a commercial contract or a new geo-political ally. Moreover, it does not explain who is supposed to benefit. Do states or citizens harvest promised dividends? Are the real beneficiaries those 'left behind' in our global economy or those bureaucratic and corporate elites collecting aid subsidies and its derivative employment opportunities?

The silver lining of the current pandemic is that it strengthens the logic of win-win arguments away from the parochial towards the principled. Tackling Covid-19 is a searing example of the 'good' in global public goods, and thus a necessary action if states are to restart national economies, partly reverse the de-globalisation it has set in motion and build stronger institutions to buttress the ambition of universal global development. A new approach identified as Global Public Investment (GPI) rests on this bedrock of principled 'win-wins', where providers and recipients accrue returns that service the true, representative common good.

And yet, we cannot assume a principled approach is shared among development cooperation providers just because a pandemic makes it more necessary. A vigilant approach requires empirical monitoring of what donors are actually doing to advance the collective global self-interest of a virus-free planet.

Is aid ‘back in'?

The compassion and care unleashed by the pandemic within individual communities is also reason to remain hopeful about our ability to consider the needs of others, and in many cases put them ahead of our own. A grassroots movement of caremongering now distributes food and supplies, runs errands for those unable to, and serves as a platform for an army of volunteer crafters. While small scale and highly localised, its emergence highlights citizen empathy and concern even in the face of non-negligible risks.

'Mutual aid' is the conceptual framing for this voluntary exchange of resources and services for reciprocal benefit and emotional 'win-wins'. Grassroot displays of social capital demonstrate the power of citizen solidarity, which political leaders can draw on as they reimagine the contours of cross-border giving post-pandemic. Recent polling data suggests there are universal moral sentiments of justice and obligation for fighting poverty at home that also resonated when fighting poverty abroad. GPI embeds these values in its approach to renewing the moral and reciprocal basis of development cooperation.

Interestingly, this surge of kindness is framed in terms of 'aid', an unpopular term in the phraseology of global development given its association with Western domination and superiority. The mutual aid movement, however, suggests the ethical basis of cooperation and collaboration remains strong. Practically, there are questions about whether the promise of 'beyond aid' flows that will grow development finance from 'billions to trillions' is even more unrealistic than it once was given unprecedented capital flight from the developing world. Moreover, the search for investment-grade opportunities in sectors and countries where widespread benefits accrue to those whose need for assistance is greatest is likely to be more challenging than in the past. For these reasons, we may in fact be witnessing the reincarnation of aid from its moral and conceptual deathbed. Looking ahead, it is possible that ODA budgets decline just as the legitimacy of aid as a scarce and valuable concessional resource is restored.

From changing narratives to changing practices

As aid renews its purpose and self-worth, in the context of this crisis it also remains one of the few functional instruments in the toolboxes of bilateral and multilateral donors. Border closures, moratoriums on air travel and country-wide lockdowns translate into heavy donor reliance on financial modalities to take concrete action overseas. And yet, this exclusively pecuniary approach cannot substitute for the most critical commodity in this crisis to date, namely a high-functioning, legitimate national government that holds the trust of citizens.

A state's ability to get financial resources where they are most needed, ensure citizen access to essential goods and services, and satisfy urgent health and social needs, indicates that systems, processes and responsive leadership may be the ultimate constraint to effective pandemic management and recovery. A reinvigorated purpose for ODA is only as good as the domestic institutions that can channel foreign generosity to where it is most needed and can do the most good. Against the backdrop of virus induced de-globalisation, GPI provides a platform from which operational adaptations appropriate for pandemic-era relations between overseas funders, states and citizen-recipients might be renegotiated.

At the very least, the crisis is likely to diminish opportunities for international donor paternalism, creating the conditions for devolving authority to local actors over humanitarian responses and development cooperation. With some luck, the result may incentivise political leaders and activists to come together as permanent and more accountable surrogates for the foreign experts now side-lined to the occasional Zoom call.

This blog is the seventh in a series on Global Public Investment and the future of foreign aid that aims to stimulate and contribute to the debate on new approaches to international cooperation and financing of global public goods, as we look to the decade ahead. The COVID-19 crisis is showing us that international cooperation is absolutely vital. What lessons can be drawn from the response to major global challenges such as pandemics and the climate emergency? How can international cooperation systems and public funding evolve to support sustainable development and global public goods? What should the priority objectives of a renewed international cooperation effort be? Which actors should be involved? Featuring voices from a diverse range of actors, providing their personal insights from across the globe, this blog series, co-hosted by Development Initiatives, United Nations University International Institute for Global Health and OECD Development Centre complements discussions hosted by Wilton Park on its series about the Future of Aid, with partners Joep Lange Institute and Coalition for Global Prosperity.