The implications of aid as a financial flow amidst global imbalances

Without denying the potential for publically-funded redistribution, as is done by market-advocates, we must acknowledge that the existing international aid architecture has largely failed in its purpose of inducing any significant degree of wealth redistribution between North and South, except in certain geopolitical special cases. Moreover, the fundamental reasons for this failure will most likely extend to current considerations of Finance for Climate Change. This failure is examined here through the lens of understanding Official Development Assistance as a financial flow within the context of global financial imbalances in the post-war period, as a means to reflect more broadly on recent debates regarding aid effectiveness in developing economies. The central focus of this conceptual examination is on what might be called the dilemma of monetary transformation in the transfer of foreign to domestic resources. This dilemma is poignantly illustrated by the dominant (albeit usually misconstrued) emphasis in the contemporary aid literature on the need and potential of aid to finance social expenditures in the Global South, such as on health and education spending or cash transfers. From the perspective of the monetary dilemma posed here, such emphasis ironically results in increased impulses among donors to meddle by way of conditionalities in the sovereign space of domestic political deliberations in recipient countries regarding the uses of government expenditure.