Owen abroad

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 Africaby Jonathan Glennie (the Christian Aid representative in Colombia) says that aid can do more harm than good.

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).

According to Murray Waas:

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.