The Guardian development blog is running a series of end of year reflections on development, including one by me. Many of the articles are upbeat about progress in developing countries, but pessimistic about the short term economic prospects for the industrialised world and for global cooperation to tackle shared global problems.
The series so far includes:
- Duncan Green from Oxfam, who contrasts progress in developing countries over the last year with the gloom of the ‘formerly rich’ countries of the G-8.
- Calestous Juma from Harvard, who identifies regional integration and better links with the diaspora as key drivers of Africa’s growth.
- Shanta Devarajan from the World Bank, who is cautiously optimistic, especially in the light of increased demand by Africans for their governments to be accountable.
- Linda Raftree from Plan, who also emphasizes progress towards more inclusive and open societies.
- Kevin Watkins from Brookings and UNESCO, calling for “a properly financed global fund for education like those that have delivered such striking results in the health sector“.
- Jonathan Glennie from ODI and the Guardian, who is pessimistic about the prospects for international cooperation in the face of rising protectionism and nationalism as a result of poor economic prospects in the US and Europe.
- and my contribution, reproduced below, which gives a positive account of progress in many countries in Africa over the past year, and emphasizes the importance for developing countries of better global decision-making.
Last week’s UN meetings in New York prompted a flurry of papers, speeches, documents, announcements and articles about development in general, and the Millennium Development Goals in particular. There seem to be three emerging development narratives which are not obviously completely compatible. I’ll summarize them here, and in a later post I’ll look at whether there they can be brought together into a coherent synthesis.
Narrative 1: Glass half full: we need a big heave
The dominant story from the summit was that development can be achieved if the world would only come together with a big heave. On this view, the glass is half full. We have made good progress towards the MDGs (supported by the new MDG report card by ODI; and their excellent new Development Progress Stories website); and with more money, we can do more. Jeff Sachs, whose Millennium Villages Project exemplifies the idea of a big, coordinated push, called in the FT for aid to be scaled up through pooled donor funding, “to scale up what has been proven to work”. (Oddly, he chose the Global Fund rather than the World Bank as his example of effective multilateral institution.)
The new report of the Commission for Africa advocates a further big heave
A new Commission for Africa report, Still Our Common Interest, agrees. The original 2005 report was probably the most authoritative (certainly the most weighty) argument for a big heave; and it concluded (among other things) that donors should treble their aid to Africa. The updated 2010 report reiterates that view, celebrates the progress that has been made, and calls for donors to increase their aid, including – very oddly – a proposal for a new Global Fund for Education.
Probably the biggest announcement this week, which sits squarely in the big heave narrative, was for a new UN Global Strategy for Women and Children’s Health. As I argued here the other day, the focus on women and children’s health is welcome, but this is no strategy: it is another list of spending commitments, which the UN press release says is worth $40 billion. The only interesting feature of it is that it lists commitments by private companies and NGOs as well as official donors. All very big heave; all very retro.
Narrative 2: More accountability leads to better institutions
While the UN institutions and the NGOs promote the big heave, donor governments, particularly the US and UK, are beginning to tell a different story which focuses on the need for more transparent and accountable institutions, both in developing countries and in the international development system. This was most evident in President Obama’s speech which announced a new US development strategy. President Obama explicitly distanced himself from the big heave:
“This is the reality we must face — that if the international community just keeps doing the same things the same way, we may make some modest progress here and there, but we will miss many development goals.”
Both the US and the UK government argue that the efforts of donors should be measured not by what is spent, but by what is achieved, both by aid and by other policies. Cynics might think this is preparing the ground for aid cuts in the face of tight government budgets, though this does not appear to be the motive of the UK government which has committed to increasing aid to 0.7% of GDP by 2013.
The emphasis in the new US policy on growth as the permanent path out of poverty is not as new as the President’s speech implies; but the renewed emphasis will be welcome to those who think that the importance of growth is sometimes forgotten. As Lant Pritchett writes:
The “development is about more than growth” backlash, which had important elements of truth, easily got carried away into “development isn’t at all about growth” and it is good to see economic growth back front and center of development objectives.
A more novel feature of the new US policy is the emphasis on investing in systems and institutions, for service delivery, public administration, and other government functions, and the importance of country ownership. This is new for the US. For many European donors it is this reasoning that brought them to give more of their aid through governments as budget support, so this new US approach will be seen as a welcome conversion.
What is striking about this narrative is the emphasis it puts on transparency and accountability as ways to make institutions work better. President Obama set out the argument in his General Assembly speech the following day:
The arc of human progress has been shaped by individuals with the freedom to assemble and by organizations outside of government that insisted upon democratic change and by free media that held the powerful accountable. … In all parts of the world, we see the promise of innovation to make government more open and accountable. Now, we must build on that progress. And when we gather back here next year, we should bring specific commitments to promote transparency; to fight corruption; to energize civic engagement; and to leverage new technologies so that we strengthen the foundation of freedom in our own countries, while living up to ideals that can light the world.
This emphasis on accountability seems to resonate closely with the approach of the UK Government. The UK International Development Secretary, Andrew Mitchell, set out a similar argument in his first major speech, in which he emphasized outputs and outcomes rather than inputs, and launched the new UK Aid Transparency Guarantee. Paul Collier and Jamie Drummond, writing in the Guardian, make a similar point about the need for transparency and accountability in the use of natural resources.
The 32 page outcome document, Keeping the Promise, sets out the usual long list of activities which “with increased political commitment .. could be replicated and scaled up for accelerating progress”. But experienced communiqué watchers (like Lawrence Haddad) also detect a new theme: the need for more citizen-led monitoring of delivery. For example, the outcome document calls on donors to:
[Work] towards greater transparency and accountability in international development cooperation, in both donor and developing countries, focusing on adequate and predictable financial resources as well as their improved quality and targeting; …. To build on progress achieved in ensuring that ODA is used effectively, we stress the importance of democratic governance, improved transparency and accountability, and managing for results.
Until now, I think many people working in the development community have seen transparency as an add-on, at best a way of retaining public support for aid while they get on with figuring out how to use the aid money wisely (and at worst an annoying additional bureaucratic burden). Perhaps I am tempted to read too much into these speeches, because my day job is working towards more transparent and accountable institutions, but it was striking to see Raj Shah, Administrator of USAID, talking about the use of new media to build an online platform to help the government to reach its development goals. I think it is now clear that, for the US and UK at least, transparency and accountability will play a more central role in their development strategies, both as drivers of change in developing countries, and forces for improvements in the effectiveness of development agencies and institutions.
A sign that this narrative is beginning to take shape is that it is already under attack. In an interesting article in The New Republic, David Rieff is sceptical of the idea that donor nations can offer a path out of poverty:
The problem is not with the analysis but rather with the president’s implicit claim that we know how to offer peoples and nations such a path. … The stark fact is that only if one fetishizes the idea of civil society as a kind of universal ideological solvent, and believes that, in tandem with scientific innovation, the road to our collective salvation is now open to us, can such optimism be justified.
An interesting feature of this narrative is that it emphasizes the need for a wider range of instruments (known either as beyond aid or – ghastly term – policy coherence). For example, in his speech, President Obama said:
Development is helping nations to actually develop — moving from poverty to prosperity. And we need more than just aid to unleash that change. We need to harness all the tools at our disposal — from our diplomacy to our trade policies to our investment policies.
Andrew Mitchell’s speech in June said something similar:
21st century development is a complex tapestry of trade, investment and enterprise, climate change, economic growth, debt relief, financial services, intellectual property and advancing new technologies.
Bill Easterly argued in the pages of the FT that trade, not aid, is needed to promote development. I’ve argued elsewhere that we don’t know very much about whether and how aid promotes economic and development, but we do know that it enables people to live better lives while that transformation is taking place. So it may be that these beyond aid policies are the best hope for promoting development, while aid should focus primarily on improving lives in the meantime.
Narrative 3: The challenge is increasingly inequality, not absolute poverty
In my view, by far the most interesting and important paper to be published around the summit was The World’s Poor Aren’t Where We Think They Are, by Andy Sumner from IDS. Here’s the key conclusion:
In 1990, we estimate that 93 per cent of the world’s poor people lived in low income countries. In contrast, in 2007 we estimate that three-quarters of the world’s approximately 1.3bn poor people now live in middle-income countries (MICs) and only about a quarter of the world’s poor – about 370 million people live in the remaining 39 low-income countries, which are largely in sub-Saharan Africa.
The paper also shows that just 12 percent of the world’s poor live in fragile low-income countries. Take a look at this Guardian data visualisation tool.
Data visualisation by the Guardian
This change in the reality on the ground has profound implications for development policy, and my sense is that the discussion in New York is not yet grappling with these issues. Readers of Paul Collier’s book The Bottom Billion will recall his analysis that the world’s poorest people lived in about 50 very poor countries which he said were stuck in a series of poverty traps. Policy should be focused on helping those countries to escape that trap. But if three quarters of the world’s poor live in middle income countries, the challenge is to reduce inequality in these countries. The figures suggest that the biggest causes of poverty are not lack of development in the country as a whole, but political, economic and social marginalisation of particular groups in countries that are otherwise doing quite well.
It is not clear that additional resources from abroad are an important part of the answer to this. At The Guardian, Jonathan Glennie says:
The world needs to find new ways to help other countries respond to persistant poverty and increasing inequality. The era of aid as we know it is ending. Let’s hope that a new era of development cooperation takes its place.
For some people this suggests that we should reconceptualise development as the ability of all the world’s citizens to live decent lives, rather a problem of economic industrialisation of poor countries. This view has the advantage of focusing on people and communities, rather than countries. A recurring theme of the Chronic Poverty conference, which took place just before the MDG Summit, was the right of all citizens to a basic standard of living, and there is growing interest in the possible role of various kinds of social protection (social safety-nets, conditional and unconditional cash transfers, family grants and so on).
Similarly, a new report from Phil Vernon and Deborrah Barksh at International Alert asks us to get “beyond the MDGs”. They call for a
… a new narrative, based on a vision of a world in which people can resolve their differences without violence, while continuing to make equitable social and economic progress, and without lessening the opportunities for their neighbours or future generations to do the same. This vision would be both enabled and recognisable by five core factors: equal access to justice, political voice, security, economic opportunity and well-being. These would in their turn be underpinned by a self-reinforcing set of values and institutions.
On this view, poverty is a problem of political and economic marginalisation which can affect communities within industrialised, industrialising and low income countries. It calls for a different kind of policy agenda, which is as much to do with empowerment and political voice as the transfer of resources and investment in public services.
Conclusion
These seem to be three quite different views of development. There is a substantial gap between advocating a big heave of more aid to ignite a cycle of industrialisation in the poorest countries, a focus on more transparent and accountable institutions in developing countries and in the development system, and political change that protects the rights of society’s most marginalised groups in whatever country they happen to live.
But while there are tensions and trade-offs, these views are not intrinsically contradictory, and in a subsequent post I’ll look at how these three narratives can be stitched together into a coherent whole.
My article on OpenDemocracy today discusses whether aid works.
Some supporters of aid have made what seem to me to be extravagant claims that aid should aim to bring about economic and social transformation of developing countries, so accelerating economic growth and industrialisation. But this is a very high bar to set. Aid may well help to increase the probability of economic take-off but there are lots of other conditions that need to be in place for the transition to an industrialised market economy to happen, and aid is not a sufficient condition (nor, probably, a necessary condition) for it to occur. Even if aid does play an important contributory role, it would be statistically very hard to demonstrate a link between aid and economic growth.
Although the effect of aid on economic growth is uncertain, there can be no doubt that aid makes a huge difference to people’s lives. Aid provides food, health care, education, clean water, financial services, and modest incomes which transform the lives of the people who receive them. You can see this both in individual families – like the girl I met in northern Amhara, pictured here, who has health care and education because of aid – and in the overall statistics, which show that there has been a vast improvement in the quality of life on almost every measure other than income.
Aid may not always transform societies, but it does enable people to live much better lives while those transformations are taking place. And that represents a huge increase in the sum of human welfare.
I believe aid could and should work much better. Living in a developing country, I see all kinds of waste and inefficiency in the aid system that makes me angry. But it makes me angry because I also see how much difference aid makes when it is used well. I would like to see aid becoming much more transparent and accountable, so that it becomes subject to evolutionary pressures to improve.
This means, by the way, that I do not subscribe to the view that the aid system should be regarded as temporary. In the UK we hope that people will be on unemployment benefit temporarily before they are able to get back to work, but we don’t expect the system as a whole to come to an end. So I think that we should expect that at least for our lifetimes, it will be right and necessary that we transfer income from the richest people in the world to the poorest people in the world. I do not know which countries will be rich, on average, in fifty years time, and which will be poor; but I expect that the world will still need, and I hope it will still have, a permanent system to help those temporarily in need wherever they happen to be.
Aid would work better in future if we accept that we will need a permanent system to provide temporary help to those who need it, and set about designing a better system to do that.
Related reading:
- Phil Vernon at openDemocracy (to which my article was a reply)
- Roger Riddell at openDemocracy
- Ranil at AidThoughts
- Chris Blattman – Could Aid Slow Growth
The Independent reports Bob Geldof’s recent trip to Ethiopia:
Though 35 per cent of Ethiopian children are malnourished, and 40 per cent are stunted when they start school, the number who die below the age of 5 is down 40 per cent on what it was 15 years ago. A shocking 381,000 children died from preventable causes last year but there is clear progress. Cases of malaria have been reduced by two-third since 2006, with the number of deaths halved thanks to the government spraying a million houses and the Global Fund and the Gates Foundation distributing a massive 20 million bednets.“Who says aid doesn’t work,” spluttered Geldof as he leaves the clinic.
Here is a new paper by Channing Arndt, Sam Jones, and Finn Tarp on whether aid leads to economic growth. The econometrics are done carefully, and it finds that aid inflows of about 10 per cent of GDP lead to an increase in economic growth of about 1 percentage point. (Reassuringly, this is also broadly consistent with a common sense calculation of the sort of effect that aid ought to have.) They also find evidence of bigger, more positive effects of aid, consistent with positive effects of aid on productivity.
I’m not a fan of these aid-growth regressions, because they are technically difficult to do well (see David Roodman’s article on the problems.) But they are important for one reason: they are a more systematic way of doing the popular “folk regression” offered by authors such as Dambisa Moyo and Bill Easterly. When Moyo and Easterly point out that countries that have had high levels of aid have also suffered from slow growth, they are implicitly pronouncing on whether there is a statistical relationship between aid and growth. But of course you would expect to see a lot of aid going to poor countries (rather as ambulances tend to be present at the scene of road accidents) so these simplistic comparisons do not tell us very much about the effect of aid on growth. The more careful question to ask is whether, other things being equal, aid leads to higher or lower growth, and that is what this kind of statistical analysis investigates. It is good to have confirmation that the folk regressions are wrong and that aid does, as best we can tell, lead to economic growth.
There are a few other interesting things about this paper:
- the paper uses the same data as the infamous and oft-cited Rajan and Subramanian paper which claimed that there was no effect on growth (which I criticised at the time here) and finds that, if the regressions are done more carefully, those findings were not correct;
- the effect of development aid on growth is probably understated by this analysis because it includes all aid (unlike the paper by Clemens, Radelet, and Bhavnani, which subtracts humanitarian aid and other aid which is not intended to lead to economic development and finds – as you would anticipate – much larger effects of aid on growth from the subset of aid that is actually intended to promote development);
- there is no sign of diminishing returns to aid in this analysis. (This is an unusual finding – generally studies have needed to include a diminishing returns term to generate a statistically significant relationship between aid and growth).
- the study uses donor-specific fixed effects (the only study to do so, as far as I am aware). I’m looking forward to looking at these in detail, as the estimates will give us an insight into which donors are the most effective.
(h/t Chandan)
Update: David Roodman, whom I regard as an authority on these matters, thinks that I am wrong and Bill Easterly is right.
Over on Huffington Post, Seth Berkley and Orin Levine make a plea for the United States to consider an Advance Market Commitment for an AIDS vaccine:
Traditionally it has taken up to 20 years for new vaccines to reach children in developing countries. The AMC can fix this inequity. Through the pneumococcal AMC, and with the support of the GAVI Alliance which administers it, children in Rwanda and the Gambia are benefiting from pneumococcal vaccines even before children in wealthy countries such as Austria and Japan. What’s more, the mechanism is spurring development and deployment of two newer vaccines that extend protection against strains of pneumococcal disease most common in the developing world. Thanks to such advances, the accelerated use of pneumococcal vaccination is projected to save 5 to 7 million lives by 2030.
The idea (which is mainly down to Michael Kremer at Harvard) is simple: donors promise in advance that if somebody invents and delivers a vaccine that meets certain requirements, then donors will pay for it to be bought in large quantities. That promise may provide sufficient certainty for the private sector to invest in developing new products, and to build large-scale manufacturing facilities. Take a look at this video to see what a difference Michael’s idea is already making.
From a public policy point of view, a nice feature of this schemes is that if it doesn’t work, it doesn’t cost anything. If you make a promise to purchase an AIDS vaccine when one is developed, but scientists are unable to crack the puzzle, then you have not spent a dime. You are only committed to buying an AIDS vaccine when it is developed – which, let’s face it, you would have done anyway. By making a firm commitment in advance, you change the incentives for the private sector. (The economics is set out here in an article in The Economists’ Voice.)
This scheme is designed to tackle an economic problem that runs deep in most market economies. We typically set up incentives for firms to innovate by promising them a temporary monopoly (through patents) if they are successful. This enables a firm to charge a premium for a limited period to recoup its investment and to compensate it for the risk it has taken. But this scheme only works if the consumers are willing and able to pay that premium. (And even then, it has a social and economic cost because it excludes consumers too poor to pay the premium). The scheme doesn’t work at all for products most of whose consumers are very poor – such as people who get malaria or who need cassava plants that are resistant to attack by the mosaic virus. That’s why firms spend ten times as much hunting for a cure for baldness as they do hunting for a cure for malaria. The Advance Market Commitment makes investment in those products much more attractive to the private sector, because now there is an opportunity to charge a premium (paid by the donors) even though the ultimate consumers are poor.
We will be in a better position to judge the effectiveness of the pneumococcal AMC when kids are actually getting injections paid for under the AMC. An important test will be whether we see pharmaceutical firms returning to the development and large-scale production of vaccines for developing countries (and there are some early signs that this is happening).
But the Pneumococcal AMC has already taught us that it is possible to navigate the legal, financial, commercial and political waters to put in place a legally-binding multi-donor commitment to buy a future product. This is the result of outstanding work done by the Center for Global Development (in which I am proud to have played a small, walk-on part). Early nay-sayers complained that an AMC was theoretically attractive but impossible in practice. CGD played a critical role by developing a practical way of implementing the idea, which opened the door to the implementation of the pneumo AMC.
Now that it has been shown that an AMC is technically possible, we should be looking at:
- designing an AMC for an “early stage” vaccine such as AIDS;
It is occasionally said that an AMC works for a late stage product – ie one that has already been largely developed but needs incentives to get it produced – but that it would not be appropriate for products still requiring substantial research and development. There is no logic to this argument. The original modelling for an AMC was done for an early stage vaccine, and I have never seen a cogent case against using the approach (alongside conventional government funding for basic research) for products at an early stage of development. - how to get the United States involved
This approach – of providing incentives for private sector entrepreneurship and risk taking to be involved in products for developing countries – ought to appeal to US policy-makers, and I have never understood why the US stood aside from the first AMC. There are some technicalities involved making commitments in the US budget process but these are not insurmountable. Let’s hope the US will be part of the next AMCs. - using the AMC approach for other health products
In principle, the AMC could be used to encourage the development and manufacture of a range of other health products such as drugs, diagnostics and surgical instruments - using the AMC to promote other forms of other research and development
we should consider whether the AMC might be a good approach for donor funding of other forms of research and development for products mainly used in the developing world, such as new agricultural varieties, solar energy products, and ways of providing clean water. - the possibilities for other forms of “pull” incentive for research and development
The AMC is not the only possible pull mechanism to incentivise research for products needed in developing countries. For example, donors might set up schemes to buy out patents, prizes or other rewards for success (e.g. payments linked to DALY’s averted or social rates of return). We should look again at the costs and benefits of these different ways of getting the private sector involved.
The UK Department for International Development is to be commended for encouraging some of its staff to maintain a blog to explain to the public what they do.
In Bangladesh, Adam Jackson has posted some interesting reflections on his visit to a health programme (in which DFID supports the government) and a Chars Livelihood Progamme.
Our health review team visited a District hospital where mothers who would never normally have access to safe delivery facilities had very recently given birth thanks to a voucher scheme funded by DFID and a number of other donors. Fifty miles away in the Chars I and the other workshop participants visited a village and met a number of women – some of the most vulnerable people on the planet – who had been given assets of their choice (typically a pair of cows) and had their homes raised on clay plinths above the seasonal flood level, as well as a range of other support to enable them to become self-sufficient. … Both of these programmes contribute to the Millennium Development Goals, and produce results that few people interested in the welfare of the poorest would argue with.
Adam makes the excellent point that both programmes work, albeit to achieve different kinds of objectives. Working through Government may be slower and more uncertain, but in the long run it is an investment in Government systems which, in the end, Bangladesh will need as it becomes more prosperous and no long relies on foreign aid. The Chars programme reaches people more quickly, but does not contribute to building lasting institutions. Clearly, both programmes have an important place, and donors need to be better at understanding that we are working towards multiple objectives and need many different types of instrument.
We need to understand better than we do: (a) how much immediate development benefit do we give up, if any, and how much institutional improvement do we gain, by working through governments? and (b) can providing services through parallel channels such as NGOs actually do harm to the long-run evolution of national institutions, for example by hiring away skilled staff, or by reducing the focus on and accountability of government institutions which should, in the long run, be playing those roles?
Adam’s call for rigorous, transparent evaluation is welcome. I would add that it should be independent and more focused on impact and less on process than current evaluation.
… I lost my young sister. She died of HIV-related complications. She should still be alive today since she was on ARVs.
But ARVs go hand in hand with good nutrition. My sister could not afford proper daily meals since she was looking after a large extended family. Besides her three children, she was looking after six double orphans that our elder brother left behind.
Her story is commonplace in Zambia. The HIV and AIDS pandemic can be mitigated by people having proper access to medicines and food. Both have become bigger problems in the current world economic crisis.
It is such situations that prompt those of us in civil society to redouble our efforts to do more advocacy work, asking our governments, in Africa, not only to be accountable to the people, but to prioritise issues of poverty and unemployment in their economic policy frameworks.
Our governments, though, are also limited in their capacity to cope with the severe effects of the global economic crisis. This is where the rich countries come in. They should remain committed to their aid promises.
Bill Easterly and Laura Freschi at Aid Watch lay in to British Government aid for giving financial support directly to governments:
In 2007, the UK gave 20 percent of their total bilateral ODA in the form of budget support to 13 countries: Tanzania, Ethiopia, Pakistan, Ghana, Uganda, Mozambique, Vietnam, Malawi, Zambia, India, Sierra Leone, Nepal, and Nicaragua.
Of this list, only Ghana and India were classified as “free” by the annual Freedom House ratings on democracy (according to either the 2007 or 2008 rating). For the 11 other countries that did get British budget support, how much is there “country ownership” when the government is not democratically accountable to the “country”?
… There is nothing that says you have to give aid meant for the poorest peoples directly to their governments, if the latter are tyrannical and corrupt. With the examples above, which side are UK aid officials on, on the side of poor people or on the side of the governments that oppress them?
With all due respect to Aid Watch, I don’t think they have got this right.
For example, they say:
Ethiopia’s autocratic government, which is inexplicably the largest recipient of UK budget support in Africa, won 99% of the vote in the last “election”.
Nice point, except:
a. according to the official results of the 2005 election, the ruling party won 59.8% of the votes; the Coalition for Unity and Democracy got 19.9% and the United Ethiopian Democratic Forces got 9.5%. I have no idea if those accurately reflect how people voted, but it is nonsense to say that the government received 99% of the vote;
b. the UK does not give budget support to the Federal Government of Ethiopia. Through the Protection of Basic Services scheme, which was introduced after worries about the election, the UK Government provides finance to local government (albeit through the existing financial transfer mechanism via central government). As well as funding health and education, the project includes significant components to increase transparency and accountability of federal and regional parliaments.
Aside from getting the facts wrong, Aid Watch seem to be criticising this form of aid by slinging mud rather than by way of a proper analysis of the advantages and disadvanges. We should be asking what benefits arise from giving aid through government, and what harm may come from it. Aid Watch acknowledge the possible benefits: lower transaction costs, more coherence in development policies, building capacity of government. There is another crucial possible benefit: putting money through government budgets is also a way to make the government more accountable to its own citizens, rather than to a bunch of foreign donors.
But Aid Watch don’t try to spell out what the harm might be if aid is given to governments with unpleasant records on human rights or corruption. I personally think there is a case to be made against giving money to many governments, for example if there is reason to believe that the money will not be spent on poverty reduction, or if it will sustain in power a government which might otherwise be booted out of office. But let’s set out these reasons coherently, and let’s try to assess their importance relative to the possible benefits. Aid Watch seems to suggest that guilt-by-association is enough to damn the whole enterprise.
As it happens, the governments mentioned in this piece (Ethiopia, Vietnam and Malawi) all make demonstrably good use of the money they have received. Here in Ethiopia the expansion of public services such as free education and publich health workers financed by Protection of Basic Services is transforming the quality of lives across the country; and Vietnam has made quite staggering progress in bringing down poverty. Personally I think there are important questions to be answered about the quality of democracy in both countries: but that doesn’t mean I want to kill some of the citizens of those countries, or deprive them of basic services, by giving less effective aid.
The British Government’s approach of giving some aid in the form of budget support (too little, in my view) is motivated by evidence that in some circumstances this is an important way of building more effective, responsive and accountable institutions. Developing countries don’t want to receive aid forever, any more than industrialised countries want to give it forever. Building effective and accountable public services is a way of financing the delivery of public services in the short run, while at the same time making it more likely that countries have an exit strategy from aid in the long run.
That is not preferring governments to poor people: it is preferring poor people to giving aid in a way which maximises the publicity you get and covering your back but doing little to build accountable and sustainable public services.
Giving aid as budget support should not be promoted ideologically: it should be used where the advantages (in terms of better service delivery and the long term benefit to accountability and institutions) outweigh the disadvantages (such as the risk of sustaining a bad government in power). Equally it should not be opposed ideologically. Budget support has not been shown to be at any greater risk of corruption or of fungibility than other forms of aid (these are the two main arguments that are offered against budget support). It should be assessed case-by-case. Where it can be used, it represents a very powerful mechanism for both the short term benefits of service delivery and the long term benefits of institutional development. Where it cannot be used, donors should be focusing on what they can do to help create an environment where it can be used in future.
If Aid Watch want to be taken seriously as an aid watchdog, then (a) they’d better get their facts straight and (b) they need to do some proper analysis of the costs and benefits of different choices for aid delivery in different contexts, rather than simply asserting that it is wrong to give aid to and through governments of which they disapprove.
Incidentally, last year Easterly and Pfutze (“Where Does the Money Go? Best and Worst Practices in Foreign Aid.”) ranked the UK as the best bilateral donor. That doesn’t mean that the UK is perfect, by any means, and it doesn’t mean that they get every judgement right; but it does suggest that UK aid officials might not deserve the allegation in this blog entry that they prefer poor governments to poor people.
Declaration of interest: I used to work for the UK Department of International Development.
(Updated 23 March.)
Update: Kudos to Aid Watch. They have given me space on the Aid Watch blog to post this reply (the same as the post above) on their blog. You might also want to check out the comments there.
Interesting idea from Homi Kharas at the Brookings Institution
That is why the G20 should consider declaring a development emergency for 2009. They should urge aid agencies to take every step possible to accelerate the disbursement of already approved funds. They should support staff and managers for taking risks to speed up the flow of money. Their representatives on the boards of these agencies should monitor progress. Poor countries need the money, and they need it now. Rich countries have already paid for this. Now they just need to demand speedier results.
I can see how that would help in the short run (though presumably the financial crisis may be leading many aid agencies to do the exact opposite – shifting expenditure “to the right” is one way that donor countries may be coping with fiscal effects of the crisis.
But I can’t see how that would help in the long run. What we need is an automatic fiscal stabiliser that increases aid to poor countries in a crisis. One way to do this would be set up entitlement programmes – safety nets below which nobody can fall – and accept that the cost of these programmes will automatically go up when the economy turns down.
Here is a very interesting article by Minouche Shafik, the Permanent Secretary at the UK Department for International Development. (For our cousins elsewhere, a Permanent Secretary is the most senior civil servant in a government department, ranking somewhere just below a Minister).
Minouche makes two key points: first, social protection schemes seem to be working quite well; and second, that poor people suffer much more from volatility and shocks than others – and there is growing evidence of the permanent harm that they suffer following a temporary shock. That makes a pretty compelling case for widespread use of social protection to put a safety net under people so that temporary shocks do not reduce a family to poverty for not just one but sometimes two generations.
There is a new paper by John Page and Jorge Saba Arbache (here) which finds that child mortality, for instance, goes up when growth is low, but doesn’t come back down when growth accelerates agan. Primary school completion rates and life expectancy similarly go down when growth is low but don’t recover in periods of high growth. The paper also finds that aid goes down during decelerations, adding to the volatility.
Minouche also says something I agree with and something I don’t agree with.
Here is what I think is dead right:
… attempts to orchestrate a tailored response to protect the most vulnerable will almost always lag behind the need.
This suggests the need for an automatic safety net response so that social protection kicks in automatically in the face of a shock. I would like to see social protection schemes become “demand led” – that is, donors would agree the entitlement criteria with governments, and if, in the face of an economic shock, there are more people who fall below that threshold, then the amount of funding from donors should automatically increase. This would help to make aid counter-cyclical, instead of pro-cyclical.
Here is what I don’t agree with:
DFID does not see the money we have committed to social protection as a welfare programme, although clearly for some households it will provide this function.
Why not? I think there is a strong case for having a permanent welfare programme, which transfers money from the rich to the poor. We should see aid not as a matter of temporary charity but the beginnings of a global system of social justice. (I wonder if Minouche’s choice of words – attributing this view to “DFID” rather than herself, suggests that she secretly agrees?)
A new book The Trouble with Aid: Why Less Could Mean More for Africa
In the latest edition of the Development Drums podcast, I talk to Jonathan about his book. He explains why he thinks that we need to take a more complete view of the positive and negative impacts of aid, and he disagrees with my view that aid can be made to work better.
In a speech to the Chicago Council on Global Affairs, Barack Obama has promised to double aid by 2012 if he is elected President:
For the last twenty years, U.S. foreign aid funding has done little more than keep pace with inflation. Doubling our foreign assistance spending by 2012 will help meet the challenge laid out by Tony Blair at the 2005 G-8 conference at Gleneagles, and it will help push the rest of the developed world to invest in security and opportunity. As we have seen recently with large increases in funding for our AIDS programs, we have the capacity to make sure this funding makes a real difference.
No commitment to reform the institutions of US Foreign Assistance, however (unlike John Edwards).
Employees of the World Bank have been “expressing concern, dismay, and outrage” regarding favoritism shown by the bank and the Bush administration towards the one-time girlfriend of World Bank president Paul Wolfowitz, according to an internal memo circulated within the bank by the World Bank Group Association, which represents the rights of the bank’s 13,000 employees.
According to Nyasa Times:
Nearly a third of the £2m spent on Scotland’s Malawi programme has gone on running costs, rather than helping those in need, BBC Scotland has found.The amount is about five times the running costs for similar work carried out by a Westminster department [DFID].
The details followed a BBC request under the Freedom of Information Act.
The Scottish Executive insisted value for money was still being provided and said that costs were likely to be higher at the beginning of the project.
On Friday I visited a school, clinic and vocational training centre in Burkina Faso in a village in Bazega province, about an hour south of Ougadougou.
La Fondation pour le Développement Communautaire de Burkina Faso supports government schools and clinics, and it operates an agricultural training college. The programme in schools aims to increase school standards and performance, in part by providing health care for the children while at school.
The school was pretty good; though there were 85 children in a class, with just one teacher (and no assistant) and a total of 20 textbooks. The children were sharing desks and benches, and learning by rote; but at least they were in school and the teachers seemed genuinely interested in them.
The work of FCD in the schools – which is funded by the EC taxpayers – is impressive. By administering de-worming tablets in school, they have reduced the incidence of intestinal worms, increased school attendance and improved graduation rates. (There is robust evidence from elsewhere in Africa that deworming is one of the most cost-effective ways to reduce school absenteeism. If you are a taxpayer in a country that contributes to the European Development Fund you should be proud.)
The health clinic nearby was more disturbing. The photo to the left is where mothers give birth (about 1-2 a day). As you can see, the facilities are rudimentary. This is a clinic only an hour from the capital of Burkina Faso, so you would expect that it would be a bit better resourced.
A number of people we spoke to offered the same explanation for the parlous state of the clinics. Much of the money and some of the best staff are diverted to disease-specific programmes – such as for AIDS and malaria – and this is starving the basic health system of funds. (Laurie Garrett writes about this problem in the current edition of Foreign Affairs magazine.)
Sadly I had to return to London for work, so I couldn’t stay for the Le Festival Panafricain du Cinéma et de la Télévision de Ouagadougou (FESPACO).
Ougadougou is a very relaxed, easy city to visit, and has a great nightlife, as well as an agreeable climate.
The African Union has once again refused to appoint Sudan's President, Omar al-Bashir, as its Chairman. Compare this to 1975, when the AU's predecessor, the Organization of African Unity, appointed a murderous buffoon, Idi Amin, as its President.
We often complain that Africans need to stand up for better governance and for human rights. So full kudos to the AU for doing so.
Tim Worstall also picks this up.
Many progressives here in the UK have a stereotyped view of US politics (roughly speaking: 'Democrats good, Republicans bad'). These assumptions have been reinforced by negative perceptions of the Bush presidency. And so there is an assumption that the Democrats are more likely to pursue policies that are good for developing countries, such as increasing foreign assistance, or opening markets. But that is a one-dimensional view about US politics and American attitudes to foreign assistance . As Todd Moss shows in an updated note:
Under President George W. Bush U.S. assistance to Africa has sharply increased, reaching $4.2 billion in 2005, nearly four times the level of 2000. This rapid growth is partly a result of a renewed sense that aid can fulfill humanitarian objectives and be a useful foreign policy tool—which helped encourage the creation of two major new aid programs, the Millennium Challenge Corporation (MCC) and the President’s Emergency Plan for AIDS Relief (PEPFAR). But the conventional wisdom says that the party of Jimmy Carter and Bill Clinton is a better friend to Africa than the GOP. Thus the scale of recent aid—and President Bush’s overall enthusiasm for Africa—caught many aid activists by surprise.
The Republicans have in the past spent more on aid than the Democrats: Todd estimates that, based on past averages, the success of the Democrats in the mid-terms will cost Africa about $800 million.
I think we forget the importance of the evangelical movement in the Republican coalition; and that the churches have continued to press for more aid for the developing world. Furthermore, on trade policy, the Republicans are routinely less protectionist and less mercantilist than the Democrats.
All of which shows that we should not make simplistic assumptions about politics in other countries.
After two wonderful years in Berkeley, working for the Center for Global Development, I am returning to the UK civil service to the Department for International Development. I shall be Director of Global Development Effectiveness, responsible for leading the teams that work with other donors and institutions to improve the international system for development, tackling corruption, improving financial accountability, trade policy, coordinating our involvement in the G8 and other international agreements, financing and scaling up aid, and managing for results.
This is likely to mean that I'll have to change how I blog; but I'm hoping to go on blogging about development in some form.
So that is why it has been quiet around here – we've been busy making arrangements to move back to London. I'll miss CGD and Berkeley but I'm looking forward to being back in London and at DFID.
There is more to the fight against global poverty than aid.
The Make Poverty History campaign in 2005 focused on trade, debt and aid. But even that is just picking some high profile targets.
Developing countries get a lot of advice – mainly unsolicited – about what they should differently, on almost every topic from growing more maize to improving the telephone system. Some of the advice is good and governments would do well to heed it, if they can. Some of it is not good: our prescriptions may be ignorant, self-serving or ideologically motivated.
As we lecture others on what they should do differently, it behoves us to look long and hard at our own behaviour. To what extent do our own countries – by action or inaction – contribute to the problems of global poverty? Rich countries impact on the prospects for development in poor countries in a wide variety of ways. The current trade talks have drawn attention to the importance to the global system of trade rules, which disadvantage some producers in poor countries. Reforms of trade could do much more to alleviate poverty in poor countries than many years of aid. But what about our other policies? We complain about corruption, but it is usually our own companies that pay the bribes, and our banking secrecy laws that shield the recipients. We produce more than our share of the world's pollution, but it is poor countries that bear more than their share of the costs of global warming, from desertification in sub-Saharan Africa to flooding in Bangladesh. We use patents to promote R&D into our own problems, even though they prevent the spread of life-saving new technologies. We encourage free flows of investment to where the profits are highest, but discourage free flows of people to places where they can earn a living to support their families. We call for an end to conflict in poor countries, but sell arms to the combatants, and buy the diamonds and minerals that bankroll the armies.
The Center for Global Development (full disclosure: I am proud to say that CGD is my employer) produces an annual report that analyzes each rich country's total contribution to the fight against poverty.
The 2006 report has just been released, and the results are in the September edition of Foreign Policy magazine as well as on the CGD website.
The Netherlands tops the 2006 index, overtaking Denmark which fell back to second place. They were followed by Sweden, Norway and New Zealand. The UK was 12th, one place ahead of the US and in the bottom half of the league. Japan was last among the 21 countries, mainly because its barriers to exports from developing countries are the highest, because of rice tariffs, and because its foreign aid is the smallest as a share of income.
A striking finding of the 2006 survey is that, despite the rhetoric that 2005 would be the Year of Development, there has been little progress across the range of policies that affect prospects in poor countries. Indeed, Netherlands has moved into first place because Danish aid has been cut despite strong economic growth.
The UK comes top in two of the seven components, thanks to policies that promote investment in poor countries, and an outstanding environmental record. The aid program, managed by DFID (disclosure: my past and future employer), is internationally respected, though less generous relative to national income than the Scandinavian countries. Overall, however, the UK finishes in the bottom half of the league table, weighed down by extensive arms sales to undemocratic governments and tight immigration policies.
Blogged at:
- Center for Global Development Blog (from the horse's mouth)
- Foreign Policy blog
- Michael Stickings
- Pienso
- ThinkMojo
- Andrew Brown
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