Markets and aid

I am grateful to Oxfam’s Duncan Green for his fair and thoughtful review of my paper about improving aid, Beyond Planning: Markets and Networks for Better Aid.

I’m glad that Duncan and Chris, his Oxfam colleague,  endorse a key argument of the paper, which is that the development industry will improve through evolutionary change rather than grand design; and that a driver of this change will be better mechanisms feedback from the citizens of developing countries about what is working. The paper points out that this kind of evolutionary change comes from variation and selection – and that the aid business does not have enough of either to ensure evolution towards more effective aid.

Duncan and Chris  have reservations about the word “beneficiary” to describe the people in developing countries whom aid is intended to support.  I think that is a good point, and I’d be happy to use a different word if we can find a suitable alternative (I don’t think that “primary stakeholder” or “rights holder” takes the trick, since neither is sufficiently specific about who we mean).

I don’t want to put words in Duncan’s mouth, but I detect from his review that he is more sceptical than me about the value of markets. He dismisses without much fanfare the  the idea of giving more choice to the, er, “intended beneficiaries” (aka primary stakeholders and rights-holders):

Where I think he is wrong is a largely market based philosophy for creating incentives based on New Public Management theories of expanding choice more than voice. … This in turn requires some quite fundamental organisational change with in aid agencies, as well as establishing more citizen to citizen links possibly using new social media.’

That is an unfair characterisation of my view: I am in favour of choice AND voice.  A large part of the paper, especially when talking about networks, is precisely about how citizens can have more voice, and I talk explicitly about citizens links through new social media.  But there are huge problems to overcome in achieving this, because the “intended beneficiaries” are geographically and politically remote from decision-makers in aid agencies, which means their voice is dimly heard, if at all.

While I agree with Duncan on the need to ensure that people have voice, I find it surprising that he (in common with many people who regard themselves as progressive) is so reluctant to give choice where possible as well.   Duncan’s (excellent) book is called From Poverty To Power – and I believe that giving people direct control of resources and allowing them to choose what services they want, and from whom, can be one of the most important ways of empowering people.  Duncan calls this a “technocratic/new labour enthusiasm for using market mechanisms” – but the idea of giving the poor more direct control of resources goes back long before New Labour:  Oxfam’s honorary President, Amartya Sen, got a Nobel prize for his 1982 book, Poverty and Famines: An Essay on Entitlement and Deprivation, which argued that it would be better to give people money than food in a famine.

I have not swallowed the New Public Management story hook, line and sinker, but I do believe that there have been positive experiences (for example, from the publication of league tables, and the distinction between purchaser and provider).  While I think we should learn from new public management, my paper describes in some detail the shortcomings of a market-only approach, especially as it relates to foreign assistance.  I hoped my paper would be an elegant synthesis of some of the best (and proven) tools of this school of thought with lessons from other approaches, especially the use of complementary mechanisms of networks, voice, regulation and planning.

The aid industry has almost entirely evaded the reform of public services over the last decade.   There is no measurement of results; no distinction between purchaser and provider; no customer choice.  Presumably the lack of reform is partly because the shortcomings of the industry are felt by people with no political power or voice in the political systems of donor countries. The incumbent service providers are politically powerful, well organised, and deeply conservative about any change that affects their interests.  The aid system has, over time, drawn to it people who are sceptical about the value of markets and choice, saddling developing countries instead with five year plans and long coordination meetings.  No politician in a donor country is enthusiastic to take on these vested interests, in order to improve services for people they will never meet and who have no vote in the election.

13 comments on “Markets and aid”

  1. Dear Owen,

    I shared your paper amongst my colleagues in order to stimulate a debate about our strategy for the future.
    In this regards, I would like to link your paper to the very actual discussion on the speech of the US Secretary of State, between Chris Blattman and Easterly (The Other Clinton). The current paradigm amongst donors is very much focused on coordination instead of just stopping the funding of overlaps. The Good Humanitarian Donorship initiative says it is all about effectiveness, while in fact the indicators are only measuring the unproven political correct proxies for effectiveness such as money spend on coordination. Ocha is spending now nearly 200 million USD per year, only on coordination, while the big tree UN humanitarian aid organizations have nearly no overlap and spend together more than 80 % of the budget: there is really not much to coordinatie.
    When I try to discuss the findings of your work amongst likeminded donors, the interest to challenge the current paradigm is low to say the least.

  2. A brief word from a non-economist and non-specialist in development who nevertheless takes an interest in the specialists’ debates (and not only out of paternal pride): I timidly venture to suggest that you specialists pay a penalty when your language becomes too arcane for ordinary people to follow and your debates consequently become increasingly introverted. A decision to abandon the term ‘beneficiaries’ for the ultimate consumers of aid, substituting some term of art such as “primary stakeholders” or “rights holders” would for that reason seem to me retrograde. If the children who attend a school that wouldn’t exist but for aid don’t benefit from it, there’s something weirdly wrong with either the aid or the school; and if they do benefit, then according to common sense they are beneficiaries. The tendency of specialists in every field, not just development or aid, to appropriate ordinarily understood terms and bestow a different meaning on them is an obstacle to wider understanding and hence, in some ways, to the transparency that we all presumably favour. Orwell on jargon should be required reading for economists and the devotees of development and aid. Otherwise you might as well conduct your discussions in Ge’ez.

  3. Choice and voice is right, of course. No one could argue with that. But what are the specific mechanisms by which choice will be exercised? No matter how loud the voices, in a dominant party system – like that of Tanzania’s – there is no real possibility that choice can be exercised. Meanwhile, hundreds of millions (or billions, choose your currency) of aid are being stolen. Simply stolen. And donors – led into budget support by DFID – are complicit in this crime. Let us know if you need examples.

    http://www.twitter.com/tanzaniawatch

    Owen replies: I certainly think that if you have evidence of theft, or another crime, you should publish it right away.

    My starting point for giving people more choice would be that we should give more aid in the form of cash directly to the poorest people. I think this is a good presumption and where this is not our preferred way of giving aid, we should explain why not.

    I also think that we should look much more closely and positively at vouchers. But this idea causes the European left to get very agitated.

  4. I totally agree with Brian’s point that it’s not helpful to use jargon such as ‘primary stakeholders’ or ‘rights holders’ when we’re talking about those who are supposed to be receiving aid. Apart from the jargon aspect, are these people primary stakeholders in practice?

    On the other hand, I do have reservations about the use of the term ‘beneficiaries’, partly because we have so little information about whether those who are supposed to benefit from international aid actually do so! I tend to use ‘aid recipients’ as a more neutral term. Don’t know if this is a helpful alternative but it’s my offering, for what it’s worth.

    Tasneem: the paper actually refers to “intended beneficiaries”, which goes some way towards your point about who actually benefits.

  5. Owen thanks for this detailed response to Duncan’s blog and my comments within it. From this it is clear that we seem to agree that Voice and Choice are important, but we seem to disagree about the relative emphasis or balance between them. This, as the post from Tanzania suggests, maybe something that needs to be determined by context rather than more generally. But there are of course a number of reasons why people in aid agencies are sceptical about the role of markets including some recent well known market failures, and the way they are often rigged in favour of the powerful. This is not to deny the role markets can play in providing choice in some areas – as Amartya Sen suggests being against markets is like being against conversation – but that they do express the underlying power and social relations from which they emerge. Voice in essence is a means of expressing political choice, which may indeed be more important than choices expressed through markets in some situations.

    None of this denies the fact the aid system is in need of reform, and that there are vested interests at play, and that finding ways for those that that aid agencies seek to benefit to really sanction poor performance is challenging. But I am not sure that being sceptical about markets, or indeed less skeptical about markets, is really the critical determinant of whether aid agencies are less, or more, likely to be open to change and reform.

    On the question of ‘beneficiaries’ I take the point that there are also problems with rights holders and primary stakeholders as descriptors, but at the risk of picking a fight with you (and your dad), I think it’s important to say that how people are ‘labelled’ by others matters. Joy Moncrieffe and Ros Eyben at IDS Sussex have done some useful work on this – see http://www.ids.ac.uk/go/idsproject/how-international-aid-labels-people, as Geoff Wood did before them. So whilst I agree that yes, it is often the role of specialists to create arcane language that non-specialists can’t follow, its also the case the we need to avoid creating labels that are potentially disempowering, or indeed misleading.

    So what about simply using the word People? i.e. the People agencies seek to benefit – instead of ‘beneficiaries’ or People living in Poverty instead of ‘the poor’. Whilst this is not ideal – it’s a bit clumsy and a bit longer – at least it’s easily understood and has the merit of recognising our common humanity as what defines us, rather than ‘others’ being categorized as passive recipients of our assistance.

    Best wishes

    Chris Roche

  6. Chris

    Many thanks for your thoughts on this.

    I absolutely agree that language is important; and I like your suggestion of “people living in poverty”. This seems to me to be better than both “primary stakeholders” and “intended beneficiaries”.

    We agree too that “voice” and “choice” are both important. My paper argued that neither markets nor networks nor planning can, by themeselves, solve the problems of aid; and that complementary measures from all these approaches are needed. And it tried to move beyond the trite assertion that we need a mixture to some specific and detailed analysis of the contributions that each can make. I think we need to be purposive about choosing a combination of markets, networks and regulation to make the aid system work better, not simply agree that all are needed and then hope for the best. My paper was intended to move that conversation forward by making specific suggestions of the way that markets, networks and regulation could be combined. Duncan’s response, which might be paraphrased as “he likes markets too much – I think voice is also important”, did not seem to engage with my attempts to understand what combination of these approaches is likely to work.

    Kind regards
    Owen

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Owen Barder

Owen is Senior Fellow and Director for Europe at the Center for Global Development, a Visiting Professor in Practice at the London School of Economics, and an Associate of the Institute for Government. Owen was a civil servant for a quarter of a century, working in Number 10, the Treasury and the Department for International Development. Owen hosts the Development Drums podcast, and is the author Running for Fitness, the book and website. Owen is on Twitter and