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Key Text Death Without Taxes: Democracy, State Capacity and Aid Dependence in the Forth World

Author: M Moore
Date: 1998
Size: 19 pages (10 KB)

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Summary

What are the effects of high aid dependence on state-society relations? Can governments that obtain most of their income from overseas be accountable or responsive to their own citizens? This study, from the Institute of Development Studies at the University of Sussex, concludes that aid has become a problem in some countries because of a conjunction of circumstances: high levels of dependence; an inheritance of weak states relatively independent of their citizens for political or fiscal support; modes of dispersing aid that fragment fiscal sovereignty and undermine budgetary accountability. However, aid does not necessarily undermine democracy.

In recent years, the governments of many of the poorest countries (the Fourth World) have become heavily dependent on unearned income. This dependence has been magnified over the last two decades by a shift of foreign aid to poor, small countries. Aid now accounts for almost half the income of the typical government of a low-income country, compared with a quarter two decades ago. State incomes can be located on a continuum according to the degree to which they are earned. The state of "earnedness" depends on (a) the bureaucratic and organisational effort put into revenue raising by the state and (b) the degree to which there is effective reciprocity between citizens and state, i.e. real services in return for tax contributions.

The exercise of citizen influence over state revenue and expenditure lies at the heart of effective democracy. The greater the dependence of the state on earned income, the more likely are state-society relations to be characterised by accountability, responsiveness and democracy.

The anti-democratic effect of dependence on aid is exacerbated by the fact that aid is in recipient countries by a multiplicity of donors who are effectively in competition with one another for activities to fund.
This competition, and the variety of procedures and policies adopted by individual donors, makes it impossible for the recipient governments to engage in effective central budgeting.
Consequently, their citizens and legislatures are unable to exercise effective democratic control over the ways in which these states raise and spend money.
By the means they use to promote development, aid donors are undermining the values of democracy and good governance that they are otherwise trying to promote.

What should be done about the adverse consequences of high aid dependence in Fourth World countries? To some extent, the situation is being resolved in the decline of aid levels worldwide. That might, in turn stimulate Fourth World governments to look more seriously at the prospects for increasing their own revenues.

This does not necessarily mean that poor people will become poorer at the expense of governments.
In many Fourth World countries, poor people pay all kinds of illegal levies to agents of the state at road blocks and in government offices.
These flaws could and should be rechannelled into public accounts. Aid donors should help in reconstituting local revenue systems.
However, the biggest contribution of donors would be to stop playing the game of competitive individualism.
They should cease funding projects because they conform to the donor countries aid policies.
They should pool aid funds into budgetary support for those Fourth World governments that make and keep credible commitments to pursue policies that meet common-sense standards of developmental effectiveness.

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Source: Moore, M., 1998, ‘Death Without Taxes: Democracy, State Capacity and Aid Dependence in the Forth World’ in Robinson, M. and White, G., (eds) The Democratic Developmental State: Political and Institutional Design.
Author: Mick Moore , M.P.Moore@ids.ac.uk