The UK is at sea

I’ve only just read the Economic Development Strategy which  Britain’s Department for International Development (DfID) launched in late January. It is the first document of its kind. Three aspects are striking, and they don’t blend well:

• The focus is on private-sector development, and DfID pledges to do more in support of companies. The general idea is that generating employment is the only way to really bring down poverty, so private-sector companies must be drivers of prosperity. As the strategy is explicitly defined as being an economic one, this focus makes sense. Moreover, it fits the worldview of British Conservatives, who are fond of free-market rhetoric and run the government in London.
• The strategy’s second main thrust, however, is that countries with fragile and collapsed statehood are in particular need of development. Accordingly, DfID pledges to spend 50 % of its funds in places that are haunted by violence and excessively weak institutions. This is an audacious stance because making markets prosper in such places is not only very important, but also very difficult.   
• Finally, the document makes ample use of the term Global Britain, insinuating that the United Kingdom will become more open after Brexit, its divorce from the EU, and hopes to play a stronger role in multilateral affairs. The paper implies that DfID policies, by boosting the private sector, will help foreign countries to become valuable trading partners for Britain. This should be read as spin-doctoring, trying to reach out to Brexiteers who are not enthusiastic about spending tax-payer money on foreign countries.

The DfID authors did a good job of spelling out why markets matter and what to do to improve  business environments. This case has been made many times, so the DfID authors probably found it easy to write down the main points. The document acknowledges that state institutions matter, but it implies  that DfID can shore up governance in passing, as a side-activity of boosting business. This is a standard, right-of-centre approach and not patently absurd.   

In practice, however, it is often necessary to shore up state institutions in order to promote markets. This is particularly so in countries that are affected by fragile statehood. Unfortunately, the DfID strategy does not elaborate in detail what should be done in such cases. The proposition that governance will improve as a consequence of stronger markets is unconvincing in this kind of context. Unfortunately, the strategy only defines a worthy goal. A good strategy would spell out what needs to be done.  It hardly makes sense to promise to invest 50 % of one’s funds in particularly difficult places without indicating how one wants to rise to those difficulties – and certainly does not make business sense.

In the past, DfID often downplayed the risks of investing development funds in crisis regions. A few years ago, Andrew Mitchell served as Britain’s secretary of state for international development, and he was fond of promising that every pound of British aid was being put to good use, so not a single pound would be wasted.

That was always a nonsensical exaggeration. Some projects will always fail, and for obvious reasons, failure rates are particularly high in crisis regions. So if Priti Patel, the current DfID secretary, is serious about the emphasis on fragile states, she cannot stick to Mitchell’s pledge, however alluring that pledge may seem. However one goes about trying to make business promotion the main plank of improving governance in fragile countries, the strategy will be risky.

Patel is not risk-averse, of course. She was an active Brexit proponent of the Vote Leave campaign last year. For obvious reasons, she now wants to spread optimism about Global Britain. This wish marks the DfID strategy, making it even more awkward.

The idea that Britain will become more open to trade is bewildering. The country is leaving the world’s largest multi-nation market. The British government seems desperate to conclude new trade agreements, without acknowledging that such deals require long negotiations and always result in renouncing sovereignty to some degree. Markets need regulations after all. It may be comforting to tell voters that countries in the developing world will become Britain’s partners – but no international development effort will turn East Africa or South Asia into something like the EU anytime soon.

The DfID repeats again and again that Britain will raise its voice in the context of the World Trade Organisation, the World Bank and the G20 on behalf of partners in the developing world. International observers will not be impressed. Britain’s voice was always heard in those contexts. It even had a strong bearing on trade issues, in which the EU trade commissioner represents all member countries.

Without Britain, the EU would probably have taken more protectionist approaches – and it may well do so without Britain. In the meantime, US President Donald Trump is not showing interest in open trade, but wants trade deals to benefit his own nation.

Britain is at sea. That message is not explicitly spelled out in DfID strategy, but you can read it between the lines.