A developing issue of aid

The critical condition in Vanuatu once again has brought the issue of aid to the forefront of the global consciousness and with it the same old problems.

While the devastation reeked upon the country by Cyclone Pam has destroyed what little infrastructure the country, considered as one of the poorest in the world, it seems unlikely that the international community will do much more than symbolic handwringing.

Based on the economics principle of game theory to maximise stability in the international system it is better if all countries invest. If only one country invests then stability does increase slightly, although not as much as the accumulated investment of all. For an individual state therefore it makes sense not to invest as stability will still be increased. The issue arises however that if all states decide to not invest, thinking that the others will, then the level of instability will remain in the international system, and potentially in the face of such an emergency as in Vanuatu increase.

The barrier to effective aid therefore is that states will act in their own interests if they believe that another state will shoulder the burden, essentially free riding.

Over repeated games however if all states invest then it may occur to each state to decide that as stability will be increased whether or not they invest it makes sense for them to stop donating development aid and invest that money elsewhere. As each state only has the same information though this would logically lead to all  states stopping investment.

For a positive distribution of development aid to be determined using game theory players must be playing a coordination game, whereby they cooperate with each other while still potentially receiving different payoffs. When players in a coordination game have reached a mutually agreeable decision they will gain nothing by defecting from it. For the purposes of development and aid programmes this could mean that despite disagreement in putting together a proposal once it has been agreed upon all players will either remain with it or leave it all together. This has been seen in the way states have continue working towards achieving the Millennium Development Goals despite initial differences of opinion when they were being created.

An alternative form of game however can see individual states defecting from an agreement if they feel that they can increase their gains. Such a game may reduce the trust among other actors however and therefore make future long term cooperation harder. If all players in a game know that any of them may leave an agreement at any point if it benefits them then it can reduce the legitimacy of the agreement as a whole. This distrust amongst actors will prove a lasting barrier to global governance.

Vanuatu's problem, aside from the near whole scale destruction of its economy, is that it does not pose enough of a risk through instability to be of concern to much of the international community. It is unlikely therefore that there will be a coordinated effort among donor countries to provide a concerted and long term approach to development aid. The issue is instability is not strong enough to create an atmosphere of global governance, as few countries will feel their own interests are threatened by an destabilised Vanuatu. It would seem likely that it's richer neighbour Australia, fearing perhaps an influx of refugees among others, will be the only country to see the need to help, and even then it will only be through preservation of its own self interest.