Well it has been 10 years since World Bank established a taskforce to examine how we should approach fragile states. The project became special post 11th Sep 2001 terrorist attacks, as Western governments awoke to the threats posed by weak and unstable countries, and expressed a new willingness to engage with them.
The taskforce was led by Paul Collier and Ngozi Okonjo-Iweala, then two of the World Bank’s leading lights and today considered among the world’s foremost development experts. Their report had a profound influence both in shaping how fragility is perceived through a development lens and in defining the emerging fragile states paradigm.
So what are the changes since then? Chandy points to three areas:
- Recognize that fragility does not end with graduation to middle-income status. Where donors make special allocations to low-income fragile states compared to low-income stable countries, an equivalent policy should be employed to distinguish allocations between fragile and stable middle-income countries.
- Allow for more stable financing to fragile states. 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 stabilizing flows.
- Reassess the cost-effectiveness of aiding fragile states: There is an enormous potential for aid to help fragile states if it is properly designed and managed. This potential needs to be weighed up against an accurate sense of the costs of aid delivery. The effectiveness of aid flows to fragile states could be enhanced further by establishing a more systematic approach to documenting and learning from development interventions. This effort should be carried out under the supervision of the g7+ and focus on interventions with significant scope and scale.
Just as satisfactory governance is perceived as a necessary condition for economic progress, an income level beyond the low-income/middle-income threshold is seen as sufficient evidence that countries are no longer fragile. The reality is more complex.
Weak governance is undoubtedly a hindrance to development, yet some countries have managed to achieve certain development objectives or attain higher standards of living in spite of their fragility. Some countries that began poor have progressed so far as to achieve middle-income status, moving ahead economically of those with better policies and institutions. This phenomenon is not new. However, it has become harder to ignore in recent years as Pakistan and Yemen—two of the world’s most prominent and quintessential fragile states—have surpassed the low-income/middle-income threshold while appearing as unstable as ever. Other countries that have long been middle-income, such as Iraq, display all the characteristics typically associated with fragile states.
The theory is also being challenged by the growing divergence of standards of political and economic governance seen in the developing world. While much has been written about the rise of the autocratic developmental state, a less remarked upon phenomena is the growing number of countries that can claim to have mastered the basics of economic management, such as price control, public finance management and the enforcement of contracts and property rights. For instance, 20 years ago, 44 countries had rates of inflation exceeding 20 percent. Today the number is only four—much less than the number of countries plagued by conflict, corruption and weak capacity.
Low-Income Countries Under Stress