By Simon Allison | From Daily Maverick

If we can agree on one thing, and almost everyone can, it is that foreign aid is the least effective method of financing for development.

Developing countries don’t like it because it always comes with massive strings attached, and because it’s unreliable: who can plan for the future when your budget is dependent on capricious electorates and fluctuating foreign exchange rates? Civil society doesn’t like it because it makes governments more accountable to donors than their own people, and encourages fat-cat elites who specialise in skimming off the cream, and most of the milk too, while failing to deliver on their promises. Developed countries – the ones handing over the cash – like the idea of helping those less fortunate than themselves, but often struggle with the reality: how to justify to austerity-Europe voters that 0.7% of GDP should be donated to the poor countries, only for them to repay the debt in boat people?

And it doesn’t work. In Africa, only two countries have a sterling record of turning aid money into real development, and those are Ethiopia and Rwanda. Both success stories have come at the price of political space and civil rights.

So why did the Third International Conference on Financing for Development fail to come up with any better ideas?

It’s not like there wasn’t an alternative. For months beforehand, and ad nauseum during the conference itself (‘Is Joseph Stiglitz speaking at another side event?’), civil society had been campaigning vociferously for domestic resource mobilisation. Don’t be put off by the jargon, it’s simple enough to understand: if developing countries really want to change their status, they’re going to have to pay for it themselves. Sad but true.

Developing countries, best represented by the G77 group of nations, got on board with this idea. They took it even further, demanding as a first step in this process that global tax rules be reformed so that big companies start paying tax where the money is being made. How is it, leaders asked, that a mining company makes all its profits in the Cayman Islands when all its operations are in Zambia? How did a big multinational operate declare a loss for 20 consecutive years in Nigeria without going bankrupt?

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