How International Aid Can Do More Harm Than Good: The Case of Lebanon

LSE IDEAS Strategic Update by Valentina Finckenstein

1. Questioning the effectiveness of international aid

The above casts considerable doubt on the efficacy of all these aid inflows.[2] It touches on the popular dispute that has been going on between practitioners and academics alike for decades — Is development aid actually helping? Critics insist on foreign aid producing mostly reverse effects for developing countries — despite intending to help, the rich world may actually hurt the countries’ economies and contribute to state corruption. This camp includes prominent voices like Economic Nobel Prize winner Angus Deaton, a fierce opponent of most forms of development aid.

2. Sustaining the unsustainable

The past year has revealed, more than ever before, that the Lebanese political and economic systems are unsustainable. There are several indicators that suggest that foreign aid has postponed necessary reforms. Knocking on their international friends’ doors to ask for money was the go-to-move every time the country was heading towards a new crisis. It became the main policy whenever financial instability was looming.

2.1 The delay of the economic crisis

The first big aid flows were funnelled to Lebanon in the aftermath of the 15-year Civil War ending in 1990. Reconstruction and aid projects were not a mere act of compassion: Donors could pursue their own strategic goals through carefully prioritizing regions, sectors and methods of aid disbursement. Funding development was one foreign policy instrument for external actors to strengthen and protect their allies on the ground.[5]

2.2 Prolonging the game of corruption

Foreign aid has also played a role in keeping this entrenched Lebanese political structure alive. Ministries often function as ways to redistribute the budgets to the voting base of the different confessional-political groups in Lebanon’s power sharing system. The various parties fill the gaps where the state does not provide social services, infrastructure, or education. As a result, they manage to sustain support and ensure re-election. Yet by filling them, they maintain structural deficiencies in Lebanese governance, creating a vicious cycle of disrepair and decay. By redirecting funds from the public budget towards their voters, they effectively hollow out the state, which in turn cannot provide any services to the citizens, therefore increasing the political capital of the confessional parties in power. Through political appointments in the public sector, civil service bodies turn into patronage departments. This dynamic creates a strong incentive to keep the state small in order to make a voter base dependent.

3. Creating the wrong incentives?

The readiness of donors to help out so easily and swiftly whenever the Lebanese government asked for it sent a clear signal. It fed into the Lebanese self-perception of exceptionalism — that the international community will never leave behind the bastion of free speech, diversity and democracy in the Middle East. The easy availability of money created a negative incentive for the government not to enact real reforms. In this way, international commitment to Lebanon increased confidence that the state would not fail, which in turn attracted further investors and lenders.

4. Next steps

About the author

Valentina Finckenstein is a Programme Manager and Research Associate at the Konrad Adenauer Foundation in Beirut, Lebanon. Her work focuses mainly on MENA security and geopolitics, resources and EU-MENA relations. Previously, she was a research associate for LSE IDEAS and worked for the Vice-President of the European Parliament Alexander Lambsdorff. She holds an MSc in International Relations from LSE.

Notes

[1] The Marshall Plan consisted of over 15 billion US-Dollars, approximately 142 billion US-Dollars at 2012 prices.

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LSE IDEAS is LSE’s foreign policy think tank. We connect academic knowledge of diplomacy and strategy with the people who use it.

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LSE IDEAS

LSE IDEAS is LSE’s foreign policy think tank. We connect academic knowledge of diplomacy and strategy with the people who use it.