Breakdown in Pakistan
How Aid Is Eroding Institutions for Collective Action
Masooda Bano



TODAY, 30 PERCENT OF DEVELOPMENT AID is channeled through nongovernmental organizations (NGOs) or community-based collective action initiatives. A growing number of studies show, however, that aid is eroding rather than strengthening cooperation within these groups. Despite increasing evidence, systematic analysis of why aid could have this negative impact is rare. Collective action, whether at the state or the community level, is a result of decisions made at the individual level. Why would individuals who otherwise would choose to cooperate stop doing so when aid is provided? This is a serious dilemma. By providing a micro-level analysis of how aid impacts leaders’ and joiners’ incentive to cooperate, this book answers this question and presents an explanation of why aid erodes apparently altruistic and other-regarding behavior.

This research inquiry is a product of prolonged engagement with a number of case studies in which I have mapped leaders’ and joiners’ decision-making processes using survey data, and before and after comparisons. My preference to focus on micro-level decision-making processes was a direct response to the gap I found in existing studies on aid and NGOs. My focus on Pakistan, a country that currently receives one of the largest amounts of aid that the United States and the United Kingdom provide, makes this study timely for policy purposes.

Because this book is designed to show how aid erodes cooperative behavior, it focuses on analyzing the problems within the incentive structures currently offered by aid agencies. However, despite the obvious problems with the existing aid system, the conclusion I personally draw from this research is not that we need to do away with aid, but rather that we need to make a conscious effort to get the incentives right. In the book’s conclusion I present an example of how the findings from this research can be operationalized by drawing on an intervention I personally designed for a Quranic school integration program under the Department for International Development’s education sector support program in Nigeria. Nadia Naviwala, a former student of the Kennedy School of Government at Harvard University, has used the findings from this research to develop a number of proposals to channel aid to NGOs in Pakistan more effectively. For those who are interested in operationalizing the findings from this book, her paper Harnessing Local Capacity: U.S. Assistance and NGOs in Pakistan, available at the Web site of Carr Centre for Human Rights Policy, is a good starting point. Thus, although this book shows how aid is actually crowding out altruistic behavior because development agencies have started with wrong assumptions about the incentive structures that shape collective action decisions, it is very much about improving aid, not abandoning it. I feel the need to emphasize this point because although many individuals in developing societies do genuinely engage in community-based collective action and do solve many of their problems effectively, the challenges of development that one sees in many of these societies are too serious to allow the decision makers in more developed economies to withdraw. Pressure thus needs to be built for better utilization of aid, not for stopping it all together.

Here I would also like to acknowledge the many organizations and individuals who have provided financial, intellectual, and moral support for this project. I am grateful to the Economic and Social Research Council, the Oxford Department of International Development, the Aga Khan Foundation, and the Oxford Centre for Islamic Studies for providing financial support for this research. I have also greatly enjoyed my association with St Antony’s College and Wolfson College at Oxford. In addition I am grateful to Elsevier for giving permission to reproduce in Chapter 5 material from my article “Dangerous Correlations: Aid’s Impact on NGOs’ Performance and Ability to Mobilize Members in Pakistan,” published in World Development in 2008.

Intellectually, I am indebted to Sabina Alkire, Virginia Appell, Jawad Haroon, Kate Meagher, and Gavin Williams for reading parts or the whole of this manuscript and providing enormously useful comments. Jawad Haroon in particular mulled over each and every line of this work with unimaginable care, critically engaged with the arguments, and most important, having worked in the development sector in Pakistan, constantly reaffirmed the need to adopt the analytical approach that I have developed. I am also extremely grateful to the two reviewers of the manuscript whose comments greatly helped refine the arguments. In particular I am indebted to Margo Beth Fleming, my editor at Stanford University Press, for her great enthusiasm and confidence in this project.

Many friends have also provided wonderful support during this period. Adeel, Devi, Emma, James, Leah, Maysam, Proochista, and Tehnyat have been great companions. Emma has to be thanked in addition for being my ultimate editing adviser, and Leah for feedback on parts of the draft. Arif, Babar, Harris, Mazhar, Saman, and Talat have also supported me by their intellectual engagement with the subject of inquiry as well as by being very caring friends. However, none of this would have been possible without the support of my family. Bahi, Sadia Appa, Appi, and Mona and their partners and children provide that essential comfort zone to which I need to retreat after periods of intense activity, as do Ammi, Amna, and Noreen Khala, who always help put things in perspective. This strong support base has been central to sustaining the intellectual commitment required of a project of this nature.

Last but not least, of all my projects, this book owes a special thanks to Adrian Wood, and he knows why.

Masooda Bano
Oxford, May 30, 2011