The paradox of aid and donor self-interest

Many would agree on the importance of good institutions for development, including those that make government accountable to their citizens and protect economic and human rights. There is a well-known paradox of aid and institutions: aid is most needed in places that are poor because of bad institutions, but aid is least likely to be effective in the presence of bad institutions. In the last 20 years, the Global War on Terror and the emphasis on fragile states has worsened this paradox. The result was that in 2002-2019 compared to 1996-2001, annual aid flows to the quarter of aid recipients with the worst institutions increased 300 percent, while increasing only 35 percent for other aid recipients. Aid is not only less likely to be effective for reducing material poverty with this allocation pattern, it even leads under some circumstances to increased violence and violations of human rights.