Aid and Governance in Vulnerable States

Abstract

Bangladesh and Pakistan had very different experiences with aid after 1971. Politics in Pakistan was less inclusive in terms of opportunities for intermediate (middle- and lower-middle-) class political entrepreneurs, and the dominance of military aid to Pakistan exacerbated the problem by allowing the top leadership to continue to rule without sharing much power with these classes. This not only had negative effects on the evolution of Pakistan’s politics but also slowed down the growth of a broad-based manufacturing sector. In contrast, in Bangladesh the less centralized organization of political power and less concentrated forms of aid allowed intermediate-class political entrepreneurs to improve their access to resources and created opportunities for many of them to enter productive manufacturing activities such as the garments industry. Differences in patterns of aid can help to explain significant differences in economic and political outcomes in the two countries. These experiences challenge conventional ideas about the relationship among aid, good governance, and security. Designing aid policies so that aid can assist developing countries in improving their economic and political viability requires a better understanding of the complex relationships between aid and the political economies of recipient countries.