Macro Aid: Applying Microcredit’s Group Liability Principle to Foreign Aid

This article proposes a novel form of foreign aid—macro aid. Under macro aid, developing countries that are aid recipients would be self-organized into groups and held collectively responsible for stolen or negligently wasted grants. If such abuse occurs, all developing countries in the group would no longer be eligible for any additional aid from the same funding source. Such shared responsibility would build powerfully constructive pressure among developing countries to not abuse aid. Moreover, the public nature of the program would enhance transparency, strengthen expectations, motivate citizens to demand that all group countries live up to the international attention, and shine a spotlight on aid agencies to prevent them from continuing to tolerate systemic corruption. Macro aid programs could also be set up within developing countries at the regional or local governmental level. Further, developing countries could voluntarily decide to establish macro aid groups to signal to domestic and foreign investors their resolve to reform. If such a high level of accountability is expected from the poor who are enrolled in microcredit programs that require group repayment, it is reasonable that the same level of responsibility and oversight should also be applied to groups of elite politicians in developing countries.