In American and European history, arguments over taxation--the power of the purse--have been key in the development of democratic institutions. Ideally, paying taxes stimulates demand for accountability, and accountability is a foundation of good governance. But many developing countries generate relatively little revenue from domestic taxation, financing government instead through a combination of natural resource rents, tariffs, and--particularly in Africa--foreign aid. These revenues bypass elected parliaments, rendering them unable to impose constitutional checks and balances.

Is this one of the reasons for the disappointing performance of a number of the new democracies in the developing world? Does aid inevitably cause political and institutional damage in recipient countries, or are there ways to mitigate its effects? As development policy shifts from the critique of donor agencies to the performance of political institutions in poor countries themselves, a better understanding of this transformation becomes urgent.

These and other important issues will be discussed by Robert Bates, the Eaton Professor of the Science of Government at Harvard University; Nancy Birdsall, president of the Center for Global Development; Deborah Bräutigam, an associate professor of international development at American University; and Mick Moore, a research fellow at the Institute of Development Studies. AEI resident fellow Mauro De Lorenzo will moderate.

This event is part of AEI’s conference series on entrepreneurship, development, and aid.