Aid to the Balkans: Addicts and pushers

Abstract

A vast empirical literature has yielded inconclusive general results on the impact of foreign aid on growth. Conditionality has not been linked with either improving performance or eliciting favoured policies by aid recipients on a sustained basis. Aid can even undermine, rather than help develop, the recipient's institutions. Aid recipients may then exhibit the symptoms of aid dependence ‐ benefited by aid in the short term but damaged by it in the long. However, most proposals are based on a grandiose project, which not only calls for aid but also strips countries of residual sovereignty, further enfeebles weak states and creates de facto new protectorates. The new paradigm has also affected to a certain extent the EU's official approach. Despite the lip service paid to ‘ownership’ of policies by aid recipients, the underlying principle of the regional Stability Pact launched in 1999 is that the countries of the region are incapable of achieving stability and progress on their own. However, the self‐interest of the Western countries will preclude worst‐case scenarios of the wilder social engineering schemes being proposed. Considerable official funding has been extended to the Balkans during the 1990s. The payback, in terms of promoting development, has been scant. Growth regressions indicate that external aid has had a very weak positive impact on the performance of transition countries.

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