Politics of Aid Allocation Redux

Vreeland's paper and an AidData blog post gave the impression that it was about $71 million per year for two seats on IO boards. But, it turns out the Swiss almost certainly got more for their money than we thought.

April 12, 2011


Yesterday I was working on a paper with Chris Marcoux and my student, Claire Peters.  The paper is about institutional reform and aid allocation at the Global Environment Facility (GEF)and will be presented at the First Annual Conference of the European Political Science Association.  During this conversation I learned something about the price of getting a seat on the Executive Board of an IFI or, in the case of the GEF, the "Governing Council."


Loyal readers of the First Tranche will recall that last week I was singing the praises of James Vreeland and his new paper, "Foreign Aid and Global Governance."  He shows that the Swiss government gives more bilateral foreign aid to those developing and transition countries that vote to give Switzerland a seat on the IMF and World Bank Executive Boards.  Vreeland even estimates a price for the two seats (around $71 million in 2008).


In any description of an economic exchange you need to know the amount of money paid and also what the consumer receives in return for the payment.  Vreeland's paper, and my blog post, gave the impression that it was about $71 million per year for two seats on IO boards.  But, it turns out the Swiss almost certainly got more for their money than we thought.  In fact, they might have gotten many more unobserved things, but one thing I know they got was a seat on the GEF Governing Council.


It turns out that the multi-country constituency that elects the Swiss representative to the Council is almost identical to the group of countries represented by the Swiss at the World Bank and the IMF -- Azerbaijan, Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan, and (the only "new" member of the constituency) Kazakhstan.  (In the conclusion of his paper Vreeland actually explains the addition of Kazakhstan to the traditional constituency as an effort to compensate for the coming reduction is Swiss voting shares at the Fund and the Bank.)  Turns out that group of countries acts in concert within more than just the "big two" Bretton Woods organizations.  So, now we know the Swiss get at least three seats for their aid allocations to this bloc of countries.  Of course, none of this undermines the logic of the "trade" that is at the heart of Vreeland's paper, but it does encourage me to think harder about what is being traded.


The other fact that lends support to the general logic of Vreeland's argument -- that Switzerland is trading aid money for seats on IO governing boards -- is the fact that at the GEF there are 14 seats reserved for developed countries, 16 seats for developing countries, and 2 seats for "countries in transition."  However, while almost all of the other transition countries are represented by individuals from countries in transition, the transition countries that are members of the Swiss bloc (the "Stans" and Azerbaijan) are represented by Switzerland!  This is a trans-organizational trading coalition and, who knows, it might extend beyond these three organizations.


Finally, while some representatives who vote on the GEF Governing Council have day jobs as Executive Directors at the World Bank or the IMF (for example, India's ED at the World Bankalso represents a South Asian constituency at the GEF), the Swiss have appointed two individuals to serve as EDs at the Bank/Fund and have appointed different individuals to the GEF Council -- the folks serving on the GEF Council actually have an environmental portfolio within the Swiss government.  This observation is consistent with Vreeland's broader argument about how seriously the Swiss take their role as global governors in the area of global finance.  It appears the same may be true about global environmental issues.


While this is all very exciting to a student of IOs and foreign aid, the greatest thing about this paper we are writing is NOT that it is teaching me about the politics of representation and accountability within multilateral development agencies.  No.  The greatest...thing...ever: The paper will be presented at a conference held in Dublin, Ireland!  And the venue....the Guinness brewery.  I am not making this up.  I will attend a three day academic conference in a brewery. There is a God and he does love me.