Aid budgets are limited by the amounts that rich countries are willing to allocate for foreign assistance. There are limits to the generosity of parliaments, finance ministries and taxpayers. At the same time, in developing countries there is not enough money to pay for everyone’s basic needs for food, water, shelter, health and education.
Because the total resources available are less than the needs, it is very important how they are used. If poor decisions are made about the allocation of precious aid resources, the result can be additional suffering and death for millions of people.
This post why I think that attempts from outside to argue for aid to be earmarked for particular causes can lead to unnecessary deaths and suffering. Aid works, but it could work better, and many sectoral advocates are not helping.
A striking example is the amount of money donors earmark for spending on HIV and AIDS here in Ethiopia.
Government spending on health in Ethiopia comes to about $4 per person per year. According to OECD/DAC data, foreign aid for health in 2007 added about $5.15 per person to the government’s resources, bringing the total of government and aid resources to about $9 – $10 per person per year. (As an aside: health spending per person per year in the UK is about $2,000 per person per year; in the US it is about $4,500.)
According to the World Health Organisation (WHO), in Ethiopia about 65% of the population (52 million people) live in areas at risk of malaria. Malaria is the leading cause of health problems, responsible for about 27% of deaths; and malaria epidemics are increasing. The HIV/AIDS prevalence rate among adults is 2.1% (2007) – that’s about 1.6 million people living with HIV.
Of $5.15 per head provided in aid for health to Ethiopia in 2007, about $3.18 per head was earmarked for HIV while about $0.26 cents per head was allocated to malaria control. Given the relatively low burden of HIV, earmarking 60% of health aid for HIV is excessive relative to other needs for health spending.
Of course it is right that we should try to make sure that everybody with HIV has access to medicines to keep them healthy, and we should work to prevent spread of the disease. But we should also make sure that people have bednets and drugs to stop malaria, provide childhood vaccination to prevent easily preventable diseases, ensure access to contraception and safe abortions, and, above all, enough funding to provide basic health services that would save thousands of lives and suffering. Yet we are not willing to provide enough money to do all of this. It is in this context that it is damaging to earmark 60% of health aid to HIV.
This excessive funding of HIV relative to other health needs is damaging in at least three ways.
First, aid money is not being spent in ways which would yield biggest impact. Take this analysis from the Open Budgets Blog:
Using these estimates, it would cost an additional US$29.7 million to treat all of the 540,000 kids who died from pneumonia/diarrhea in Nigeria and Ethiopia. Were this money to come out of the HIV budget, it would reduce the number of HIV patients that could be provided treatment by about 61,240. So, using these admittedly very rough estimates, our current allocation of resources from the pot of money for disease treatment suggests that we value the life of a person with HIV at 8.8 times the value of the life of a child with pneumonia.
Another way of looking at this is that reallocating resources from HIV to treating pneumonia and diarrhea in Ethiopia and Nigeria alone would have saved nearly half a million additional lives in one year.
Second, the misallocation of aid money sucks scarce resources (administrators, doctors, political attention) from other programmes which would have more impact. As Rakesh notes:
In Tanzania, I have seen any number of health centers which lack water and toilets, where women cannot deliver their babies safely, but which has a new building with 4 air conditioners and 2 Land Cruisers and weekly workshops on AIDS.
I wrote about this problem in 2007 after visiting a clinic in Burkina Faso which had been starved of medical workers by the recruitment drive by the local PEPFAR-funded clinic. And Laurie Garrett wrote in Foreign Affairs about the impact on basic health facilities of funding linked to specific diseases.
Third, the misallocation of aid money creates perverse, possibly lethal, incentives. Here in Ethiopia the existence of huge amounts of aid money for AIDS chasing too few people with HIV means that there is a kind of welfare state emerging for people with HIV. It is not perhaps the welfare state we see in many European countries, but it is much better resourced than is available for people without HIV. As well as free health care, people living with HIV are supported to find work, and their children get free education. NGOs fall over themselves to get people living with HIV and their families onto their lists.
The result is that some Ethiopians emerge from being told the results of their voluntary HIV tests in tears because they don’t have the disease and so do not qualify for this assistance. The quality of life for them and their families would be better if they did; and their life expectancy could well be higher, given the access to health services that would be unlocked. There are even rumours here in Addis Ababa that some people are deliberately getting themselves infected, so that they can give their children a better start in life.
I have used the example of HIV because the misallocation is particularly egregious here in Ethiopia (as it is in some other countries in sub-Saharan Africa). But I do not want this to be misunderstood as an attack on AIDS activists, or on funding for HIV in particular. Some of my best friends – indeed, some members of my family – are AIDS advocates and they are among the most committed and well intentioned development advocates. If they had been listened to earlier, a great deal of suffering in sub-Saharan Africa and elsewhere could have been avoided; and the path to development would not have been so long and arduous for the countries most affected by AIDS. These advocates are merely one group among many making the case (and earmarking funds) for their cause.
Look, for example, at this recent paper by ODI on education (funded by the Hewlett Foundation) which complains that while funding for basic education has grown in real terms it has not grown as a share of total aid. The paper is all about how education advocates can do more to “capture” the global stage and compete with health spending. (“Capture” is their word, not mine). And I am not picking on education either. There are endless demands from activists to commit more money to agriculture, microfinance, water, maternal mortality and a long list of other important issues.
The development industry seems to be riddled with people whose main job is to divert money to their good cause. The advocates are united by a strong belief in the priority that should be given to their sector (education, water, AIDS etc). They convince themselves that they are speaking for real interests of the poor, which they consider to be unaccountably neglected by everyone else. Within many aid agencies there is a permanent state of low intensity bureaucratic warfare for resources, sucking up the time and attention of staff as they fight to defend and expand funding for the causes they work on. They deliberately stoke up pressure in private alliances with civil society organisations – many of whom they fund – to raise the political stakes through conferences, international declarations, and publications with the aim of committing funders to spend a larger share of aid resources on their issue. Territory is captured and held by way of international commitments in summit communiques. But for the aid budget as a whole these are zero sum games, and everyone would be better off – and many lives would be saved – if it stopped.
The advocates might defend themselves by saying that they are trying to bring more money into development, not to reallocate aid from one cause to another. But as they know, or ought to know, that is not how development budgets work. The UK commitment to spend $15 billion on education by 2015 does not advance by one day the path to UK aid reaching 0.7% of GDP. Either the commitment is meaningless, because that much money would have been spent on education anyway; or it has resulted in a reallocation of aid within a fixed total to education from something else which would otherwise have been a higher priority.
The earmarking of funds within a fixed total takes money from one good cause and puts it into another. If the money moves to a lower priority, the result is additional suffering, more deaths, a longer journey to economic development, and the need to give more aid, for longer, than if choices were driven by locally-determined, well-informed, evidence-based decisions about needs and priorities.
Here in Ethiopia, the Minister for Health is very clear sighted and articulate about the health priorities for his country, and the need to allocate resources to building effective basic health systems. Within the limited resources it is able to control, the Ethiopian health ministry makes intelligent decisions about priorities, understanding the variations within the country as well as between countries. They have much more detailed and specific understanding of the issues that affect people here than well-meaning activists in Europe or America. Furthermore, it is their country and their path to development, not ours.
What do we need to do differently? I set out in a recent CGD Working Paper the need to address the political economy of aid.
First, we should be much more rigorous and systematic about defining and measuring results from aid so that well-informed choices can be made. There is a huge and expensive industry of “monitoring and evaluation”, most of the results of which is worth less than a pitcher of spit. We should dismantle it, and use a fraction of the money to fund a smaller, more sharply focused, more rigorous, international, independent collection of real evidence about the cost effectiveness of development interventions. (Tentative steps in this direction are, of course, being fiercely resisted by the trade union of evaluators.)
Second, we should try to stop earmarking aid; we should make more use of results to demonstrate that aid is effective. The Paris and Accra agendas for aid effectiveness, which have been agreed by all the donor nations, require donors to respect the development priorities of aid recipients. But there has been almost no change on the ground in this direction. One step towards doing this is to put in place simple but rigorous ways to measure and attribute results, so that donors can be confident about (and can explain to taxpayers) how their aid has been used. If we cannot produce compelling evidence about what aid has achieved, it should be no surprise that ministers and taxpayers want to determine in advance how the money will be spent.
Third, we should stop creating global funds, and merge or close the ones we have got. The existence of bureaucracies whose raison d’etre is to spend money in a particular sector or in a particular way creates incentives to promote resource misallocation because it protects jobs and institutional budgets.
Fourth, we must massively increase the transparency of past, present and future aid, so that informed decisions can be taken about how resources are allocated (not just between countries and sectors but within them). Under current arrangements, donors publish details of their aid up to 23 months after it has been spent. Donors need to publish detailed information about their current and planned future activities so that governments, donors and the private sector can identify the gaps where additional resources would have most effect.
Fifth, we should, as a development community, heap scorn and opprobrium on anyone caught advocating for more resources in their sector. We need stronger social norms in development that frown upon this kind of anti-social behaviour.
You may think that this is all a bit over the top. Arguments about the architecture of aid may sound rather abstract and rarified, but aid is a scarce, precious resource and it is no exaggeration to say that if we spend it badly, the result is the avoidable deaths of literally millions of people.