The United States may be the largest donor of foreign assistance in the world, but it ranks among the lowest in terms of quality and effectiveness of its aid, according to a report by the Center for Global Development (CGD), in cooperation with the Brookings Institution, that assesses more than 150 countries' foreign aid money.
"The true test of aid effectiveness is improvements in people's lives." But, people's lives depend on many things other than aid. Improvements take time, and the lags between aid interventions and improvement in lives are uncertain and different for different kinds of aid. Many donors are likely to be active in a country at any particular time, making it hard to attribute results to aid interventions by specific agencies, except over long periods.
Perhaps most important, the effectiveness of aid depends on all those involved in planning and executing aid projects, including the recipient government. When an aid project fails, it may be because of poor performance by the donor or poor performance by the recipient, or both.
Given these difficulties in relating aid to development impact on the ground, the scholarly literature on aid effectiveness has failed to convince or impress those who might otherwise spend more because aid works or less because aid doesn't work often enough.
Meanwhile public attention to rich countries' efforts to support development through aid ends up relying mostly, if not entirely, on the quantity of aid— despite what on the face of it are likely to be big differences across donors in the quality of their aid programs. And rarely has analytic work on aid effectiveness grappled with the actual practices of different donors—those over which they have control and which are likely to affect their long-run effectiveness in terms of development impact. How much of their spending reaches the countries or stays at home? What are the transaction costs recipients face per dollar provided by different funders? Which donors share information on their disbursements with what frequency and in what detail? What is the comparative advantage of aid agency x; what can we learn from the experiences of so many different agencies and approaches? What are the relative strengths and weaknesses of bilateral and multilateral agencies? Are agencies improving over time?