This paper critiques the prevailing international approach to fragile states. It highlights three errors contained in the influential report of the World Bank task force on Low-income Countries under Stress (2002) that need to be addressed: 1) low income as a condition of fragility; 2) the existence of country trajectories that enable states to be categorised according to type of fragility so as to guide development assistance; and 3) the ineffectiveness of aid in fragile contexts. Donors need new resource allocation models that: recognise that fragility does not end with graduation to middle-income status; enable more stable financing to fragile states; and reassess the cost-effectiveness of aiding fragile states.
The task force’s report has shaped the international development community’s fragile states paradigm. Many of the task force’s points remain highly relevant, but subsequent evidence has revealed that among them were three important errors. These are outlined below.
Low-income as a condition of fragility
The task force’s report made low-income a condition of fragility, and implied that satisfactory governance is a necessary condition for economic progress. This fostered the view that an income level beyond the low-income/middle-income threshold shows that countries are no longer fragile. However, while weak governance hinders development, some fragile countries have achieved certain development objectives or higher living standards. The World Bank’s latest fragile state classification does allow the inclusion of middle-income countries in restricted circumstances, but a systematic policy shift is needed. Few donors have a clear strategy on how to assist fragile middle-income countries.
Typologies of fragility and country ‘trajectories’
The report recommended a typology of stylised categories, defined in terms of a country’s development trajectory, under which fragile states could be organised to guide the World Bank’s approach. By 2004, these categories had been consolidated into: ‘deterioration’; ‘prolonged crisis or impasse’; ‘post-conflict or political transition’; and ‘gradual improvement’. In practice, however, such trajectories rarely exist: fragile states are, by their nature, changeable environments. Trajectories are most applicable in post-conflict countries, but only a minority of fragile states are in post-conflict transition. However, donors tend to overreact to negative events in a country, or to interpret short-term events in fragile states as signs of longer-term trends. The result is that aid flows to fragile states tend to be highly volatile, reinforcing rather than reducing instability. The New Deal for fragile states commits donors to more stable financing. However, this commitment is unlikely to be fulfilled unless donors improve their risk management and change the way they assess and react to events in partner countries.
Aid (in)effectiveness in fragile states
The task force stated that aid to fragile states is ineffective, and recommended instead the use of other instruments, such as technical assistance. However, the macroeconomic evidence cited by the task force has since been countered. In addition, the emergence of aid models better suited to fragile states has helped to address the political economy constraints that undermined earlier donor-partner relationships. Further, the performance ratings of aid projects in fragile states have increased: the gap between project performance in fragile and stable settings has closed.
There is therefore mounting evidence that aid to fragile states can work. Donors need new resource allocation models:
- Where donors make special allocations to low-income fragile states compared to low-income stable countries, an equivalent policy should distinguish allocations between fragile and stable middle-income countries.
- Donors should avoid trying to pin a trajectory on each partner country and instead concentrate on mitigating the instability inherent to fragile states by providing stable aid flows, supported by improved approaches to risk management. Aid commitments should be embedded in country compacts, which can serve as a useful tool for stabilising flows.
- The great potential for (well designed and managed) aid to help fragile states needs to be weighed against the costs of aid delivery. A more systematic approach to documenting and learning from interventions could enhance aid effectiveness.
