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THIS ARTICLE COMMENTS ON MCKINLAY AND LITTLE'S ANALYSIS UNDER TWO HEADINGS: THEIR METHODOLOGY; AND THE EXTENT TO WHICH THEIR FINDINGS APPLY TO OTHER COUNTRIES & TO A MORE RECENT TIME PERIOD THAN THE 1960'S FROM WHICH ALL THEIR DATA DERIVE. THE ESSENCE OF THE ARGUMENT IS THAT MCKINLEY & LITTLE'S "RECIPIENT NEED MODEL" CANNOT BE REJECTED, & INDEED INCREASES IN RELEVANCE WITH TIME.

1. Introduction -- 2. The way forward : how do 'inclusive' alliances happen? -- 3. The fiscal politics of mineral development in Ghana -- 4. Zambia : democratisation without a 'social dividend'? -- 5. Bolivia : a 'hybrid' political economy? -- 6. The politics of inclusive fiscal policy -- 7. Conclusion : how can mineral-rich countries create 'developmental states'?

Economic aid to developing countries is an important -- and often controversial -- part of foreign policy for many Western nations. But how effective is such aid in achieving the objectives of the giver and the recipient? In this important study, Paul Mosley offers a challenging reassessment of the role of economic aid for nations on both sides of the equation. Mosley examines in detail the foreign aid programs of the leading Western powers with particular regard to the role of aid in international politics, and then examines the effectiveness of aid as a subsidy to exports, as an instrument of

Conditionality has long been used by the IMF, and more recently by World Bank and bilateral donors, as an instrument for improving the effectiveness of international finance. This collection of essays, by representatives of donors and recipients as well as independent observers, suggests that because of recipients' increased bargaining power, such an improvement has seldom resulted.

In accounting for the rather gloomy trend of the aid effectiveness literature over the last few years, one explanatory strand has been fiscal, suggesting in particular that aid flows in weak states have tended to erode the taxbase and the structure of institutions. We pursue this idea, tracing the link from politics to domestic tax effort and then using the influence of this on expenditure to explain the leverage of aid. Thus, we argue that in the long run, tax effort determines the effectiveness of aid, and this relationship operates simultaneously in some countries with the negative link in the opposite direction, from aid to domestic tax effort, as observed by Bräutigam and Knack (2004) and others. We find that tax effort and the ability of the state to diversify its taxation structure are important determinants of long-term growth and aid effectiveness, and in our model, we find that overall aid effectiveness is, in a 3SLS model, weakly positive and significant, echoing the findings of Arndt, Jones and Tarp (2009) and Minoiu and Reddy (2010); however, these findings are not robust when retested using the GMMapproach favoured by the literature. A more robust finding, and a key message for policy, is that a broadening of the tax structure in low-income countries is crucial in order to enable those countries to escape from the 'weak state - 3; low tax trap', and to make aid more effective.