In her column last week, Rasna Warah offered a critique of “traditional donors” in Africa, and heralded a new approach, led by China and embodied most recently by Turkey.

What is this “new development aid paradigm?” The model emphasises, in her words, “mutual trade benefits and infrastructure development.”

This is in contrast to the Western focus on “humanitarian aid and governance issues.”

Warah is a seasoned aid critic, and has written passionately and keenly about Somalia.

It is undoubtedly true that Western donors have shifted their attention over time from heavy infrastructure investment to a focus on governance (but also “softer” development areas like health and education).

And it is also true that infrastructure and investment are among the vital ingredients for economic growth.

Yet Warah resorts to a series of contortions in criticising the “traditional donors” and holding up the Chinese model.

These are mostly the result of a blithe attitude toward history. We are told that it is Chinese investment in infrastructure that is driving the continent’s economic growth.

But productive investment is not possible without stable macroeconomic conditions and stable institutions.

Improvements in macroeconomic management in many parts of Africa in recent years have created the conditions for rapid Chinese investment.

Africans themselves deserve most of the credit for these advances, but traditional donors have also played a role in providing technical assistance to government finance ministries and other agencies.

Warah’s graver historical omission is to ignore the fact that traditional donors, too, once focused primarily on infrastructure investment.

As William Easterly writes in The Elusive Quest for Growth, the “idea that aid-financed investment in dams, roads and machines would yield growth goes back a long way,” all the way back to 1946 (and even earlier, if one counts the Soviet planners of the 1920s).

In the 1950s and 1960s, western development economists spoke of closing the “financing gap” to allow developing countries to invest in big infrastructure that would lead to a development “take-off.”

Yet, by the 1980s, these notions had lost favour with academic economists, and by the late 1990s, traditional donors were emphasizing very different types of aid.

Why? Easterly emphasises some of the perverse incentives of providing aid for big infrastructure: It tends to dampen the incentives for the recipient countries to save their own resources for investment.

His evidence suggests that when aid was provided to fill the investment financing gap from the 1960s to the 1990s, it led to virtually no increase in investment, as countries shifted their own spending toward consumption. The “take-off” never arrived.

Instability

Easterly also discusses a different set of problems with the theory in the context of the failures of Ghana’s big push: persistent political instability and violence undermined the implementation of plans to build industries on the foundation of Ghana’s Volta dam project.

Obviously, a lack of competent and stable political institutions can make it impossible to reap the benefits of heavy infrastructure investment, even if it is done well.

Traditional donors may not be very good at providing governance assistance (a point Warah does not make), but their concern with governance and the quality of institutions is not pulled from the ether.

It is based on experience of financing big projects all over the world that have yielded few results.

This has happened not only because of political instability, but because of corruption and mismanagement.

The basic point is as simple and obvious as the one that critics have been making about the discovery of oil in Turkana: Sudden inflows of money are often used poorly, whether they come from natural resources or aid.

No governance, no growth. Easterly provides a nice detail about Hong Kong and Nigeria: both increased their capital stock per worker by 250 per cent between 1960 and 1985. The differences in outcome are impossible to miss.

One of the principal components of “traditional” donors’ contemporary arsenal of “governance” aid is supporting civil society to play a more active role in monitoring government’s use of resources and holding officials to account.

The conviction is that, unless citizens develop a new relationship with their own governments, it does not matter what kind of relationship donors develop with aid-receiving countries.

Big money for investment is not going to lead to growth in zones of impunity.

It is more fruitful to think about how we combine China and Turkey’s emphasis on big investment and trade in developing countries with the West’s concerns about technical competence and citizen engagement than to portray these as two divergent approaches that cannot be married.

Content (what financing is for) and process (how financing is given and managed) are both core elements of development.

Warah is right that we must learn from the new kids on the block, but we should not be forced into false choices.

Dr Jason Lakin is a programme officer and research fellow at the International Budget Partnership. lakin@cbpp.org