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Archive for the ‘Development’ Category

Here is a  really nice animated talk by Dan Pink on what really motivates us.

For those who can’t play the video, he says that monetary incentives work for simple, straightforward tasks, but they don’t work at all well for tasks that require conceptual and creative thinking.  According to him, what motivates people is autonomy, mastery and purpose.

One conclusion I draw from this is that there are probably a lot more people than you might think who would be willing to spend a lot of time and effort helping to make the world a better place by reducing poverty, if we did a better job of enabling them to give their time and abilities.  According to Pink, what will motivate them is the challenge, the opportunity to develop mastery, and the knowledge that they are making a contribution to a purpose they believe in.  Those of us who work in development need to do some more thinking about how we can provide more platforms on which those contributions can be made, rather than just asking people to pay money in taxes or in donations.

In a more satirical vein, if you work in the aid business I think you’ll enjoy the “Hand Relief International” blog. Here’s the latest post, on innovation in development:

Speaking about thinking – I have been thinking about “innovation” a lot lately, as I noticed the word is all the rage these days. The challenge in our sector is how to “integrate innovation” in our language without changing much about the way things work.  … Passing innovation in a world dominated by career professionals with many years in the business and certain ways of doing things is a pretty tall order but then donor’s don’t really want to see much rocking of the boat happening either – that would force them to change their ways, which always makes them uncomfortable – they want to see the word used a lot, and they want to hear the occasional 300-words story about it, that can be put in a neat textbox in a report.

(Thanks to @AIDSPolicyProj for the link to the Dan Pink video)

There was an interesting article in last week’s Economist about the use of prizes to promote innovation. It was supportive of the idea in general, but it seemed to gloss over the economic  arguments.  I think it is a shame that the Economist did not take the opportunity to explain the economics of rewarding innovation, and in particular to explain in economic terms why our current arrangements do not do a good job of creating incentives for innovation that benefits developing countries.

You can think of patents as a kind of prize.  When you invent a new product, the government gives you the right to operate a temporary monopoly. This enables you to charge more than the marginal cost, and the premium is your “prize”. This arrangement has the huge advantage that it links your reward to the amount people are willing to pay for your invention, so it encourages innovations that people actually value.

This kind of prize as a reward for innovation may be fine for a new kind of vacuum cleaner, or for Lady Gaga’s latest album. But it has two big disadvantages which are especially relevant for people who live in developing countries.

First, the use of patents prevents some people from benefiting from the new technology if they are unable to pay the higher price.  If a company develops a drug for heart disease, or a more efficient form of solar panel, the patent will enable them to charge much more than marginal cost for their product. That’s how the inventor gets paid. But the result is that millions of people will not be able to afford that product – though they might be able to afford it at marginal cost. The temporary monopoly results in fewer people benefiting from new technologies than ought to benefit, in the sense that those people would be willing and able to pay the marginal cost.  This is potentially a big welfare cost to society as a whole. It means, for example, that people may die of heart disease because they can’t afford the high price of the drugs, even though they could buy the drug if it were sold at marginal cost; or they can’t use new fertilizers or seed technologies, even though the benefits to them of doing so exceed the cost.

Second, if we reward inventors by granting them temporary monopolies, we only create incentives to develop products for which there are likely to be enough consumers wealthy enough to pay a monopoly price.   Nobody will invent a vaccine against malaria, or a cassava plant that resists mosaic virus, based on the possible rewards they will get from charging high prices to its consumers.  So the patent system is a prize for people who invent cures for baldness, but not a prize for people who invent ways to prevent the spread of malaria.

For these reasons, other incentives, such as prizes, Advance Market Commitments, and similar mechanisms, may be effective either as alternatives or complements to the patent prize of a temporary monopoly, especially for technologies that would have benefits in developing countries.

The Economist quotes Tachi Yamada, the president of Global Health at the Gates Foundation, as suggesting that Advance Market Commitments or prizes may not work well for drugs that require a long time to develop:

Tachi Yamada of the Gates Foundation is a big believer in giving incentive prizes, but gives warning that it can take 15 years or more to bring a new drug to market, and that even AMC’s carrot of $1.5 billion for new vaccines may not be a big enough incentive. No prize could match the $20 billion or so a new blockbuster drug can earn in its lifetime. So, in some cases, says Dr Yamada, “market success is the real prize.”

This seems to reflect the suggestion that is sometimes made that Advance Market Commitments may not be appropriate for for early stage drugs, but the economics of this argument is faulty.

It is clearly true that the reward for bringing to market an early stage medicine, such as an AIDS or malaria vaccine, would need to be higher, both because of the greater uncertainty and risk of failure, and because the rewards are further in the future.  So an AMC for an early stage product would probably need to be larger than for a late stage product that just needs some tweaking for use in developing countries and some investment in bigger production facilities.  But let’s not overstate this.  The median total market size for new chemical entities that pharmaceutical companies actually bring to market is about $3-$4 billion.  Most medicines are not $20 billion blockbusters.  So $3-$4 billion is roughly the market size that the private sector considers sufficient reward to develop new medicines.   We don’t need to match the blockbusters.  An AMC of $4 billion might well be enough to incentivize the development of a malaria vaccine: and let’s not forget that if it turns out not to be enough, it won’t have cost the funders anything.

Furthermore, just as the firms discount the prize by the risk of failure, the funders should similarly discount the cost.  If there is a 25% chance that no vaccine will be developed (because the technology is uncertain) then firms will discount the “prize” – that is, the value of the committed market – when they make their investment decisions.  But in this case, the expected cost to the funders of a $4 billion pledge is $3 billion, and this is what they should include in their value for money calculation.  That means that even though the nominal amount that has to be promised for an early stage product needs to be higher for a given impact on R&D, to take account of the probability of failure, the expected cost to funders is not higher.

The same point can be put another way.  A high probability of failure makes all investment in R&D less attractive, but it does not make AMCs relatively less attractive than other forms of funding.  When the probability of failure is high, the expected return from each dollar spent encouraging innovation is lower. This is true if that dollar is spent up-front in the form of research grants of the kinds normally given by aid agencies and foundations (since the higher probability of failure reduces the expected benefits of the grant), or in the form of a prize or promised market (since the higher probability of failure reduces the expected benefit to firms, and so reduces the incentive for them to invest in R&D).  The effect is the same either way. Higher probability of failure is clearly bad, but it does not make AMCs relatively less efficient as a way to pay for research for early stage products.

Whether an AMC for an early stage product is good value for money depends ultimately on the value of the product.  If donors were to spend $4 billion buying a malaria vaccine for use in developing countries, it would be a hugely good investment, saving millions of lives a year at a fraction of the price of many other interventions. It would result in huge savings on trying to prevent malaria in other ways, or treat to treat malaria; and the resulting reduction in the burden of malaria would have huge economic benefits for developing countries. Given that there is no question that donors would want to spend at least $4 billion paying for a malaria vaccine to be used across the developing world, it is inefficient for them not to say so right away, and thereby create incentives for private sector investment in accelerating its development.  The risk of poor value for money in aid spending comes not from making the commitment, but from failing to do so.

When Dr Yamada says that “market success is the real prize”, he seems to be missing the point that market success is not a good way of rewarding innovation for developing countries.   If we rely on market success, in the form of a temporary monopoly, to reward innovation then we will exclude half the world’s population from being able to access technologies developed with rich markets in mind, such as drugs against cancer and heart disease, clean energy, new agricultural technologies, or new software.  And “market success” creates no incentive to develop technologies which primarily benefit the world’s poor such as a vaccine against malaria or a variety of cassava that resists the mosaic virus, because inventors know that the people in poor countries cannot afford the monopoly prices that would enable inventors to recover their costs.

This is very cool.  A team of researchers from Development Gateway and AidData have worked with the World Bank to add detailed subnational geographical information to all of the Bank’s active projects in the Africa and Latin America region.  This isn’t just pins in a map showing the country where the money is spent: they have looked through the project documentation to find out as far as possible the geographic coordinates of the actual locations where aid the activities take place.

This video by AidData explains brilliantly what geocoding means, and why its important. Take a look:

Serious kudos to the World Bank, Development Gateway and AidData for doing this work. Geocoding is going to have a huge impact on improving the accountability and effectiveness of aid.  By geocoding these World Bank projects manually, the team has demonstrated that geocoding aid is feasible. As Development Gateway’s Steve Davenport says in the video: “This is not that difficult”.

If the new standards for publishing aid information that are being designed by donors under the International Aid Transparency Initiative include appropriate standards for geo-coding of all aid activities, then it won’t be necessary for these projects to be coded by hand in future.  The people funding the projects would geocode their projects from the outset, and this information would be included in the data feeds, so everyone will have more comprehensive, more accurate and more precise about who is doing what, and where.

If you want more background, aidinfo’s paper Show Me The Money explains how geo-coding, traceability and transaction level details make a powerful combination for improving the effectiveness and accountability of aid.

H/T: my colleagues at aidinfo

If you read this blog, you might be interested in this job with the good people at Global Integrity. The post is based in Washington DC:

Project Manager – This position will play a key role in managing and supporting almost all of Global Integrity’s fieldwork in the coming years. Alongside other colleagues, this position will help to research and design new fieldwork methodologies and indicators; recruit and manage field teams of journalists and researchers to execute current and future fieldwork projects; perform analysis and quality control over the resultant data and reporting; and design and lead outreach and dissemination activities, including public workshops and capacity building activities. Like all colleagues at Global Integrity, this position will have the creative space to conceive of and lead new and innovative initiatives on a regular basis. We encourage good ideas and risk-taking.

I was in Paris last week for meetings about aid transparency.  At the International Aid Transparency Initiative meeting, signatories and the Steering Committee members agreed a very important step forward.  Donors comprising more than half of global official aid agreed the details of what will be published under phase one of the IATI initiative.

More details are on the aidinfo.org blog.  In short, the donors agreed

• Data will be published more quickly, with an agreement that information will be published as soon as possible, and at a minimum, quarterly. More timely information is a top ask of stakeholders in developing countries.
• Data will be published in a common, open format, so that it is readily accessible, comparable and easy to find.
• More detailed aid data will be published, increasing its relevance to users.

None of this is going to be easy for donors. It will require some investment in collecting better information and quality assurance, and it will require a significant change of culture as they move to the assumption that the details of all aid projects will be publicly available automatically.  But we know that the benefits hugely exceed these costs.  So kudos to the donors for taking this important first step on the road to comprehensive aid transparency.

Two particular highlights of the meetings from my point of view were:

• The five country pilots demonstrated the feasibility of automatic electronic data exchange between donors and developing country governments, and for the creation of data in standard IATI format; and
• The developing country representatives at the meeting were clear and vocal in their insistence that donors should publish details of how they are spending aid.

There is a long way to go, and there is a comprehensive work programme for phases 2 and 3 of IATI.  But last week donors took an extremely important first step for which they deserve credit.

Read more on the aidinfo blog.

Aid sceptics like to say that the west has spent trillions of more than a trillion dollars on aid to Africa since independence. See for example Dambisa Moyo in the Wall Street Journal or The Catholic Herald.  Bill Easterly makes the same claim on page 4 of The White Man’s Burden. This claim is often made by people who argue that aid does not work.

Though the point is often made, it it isn’t true. According to OECD DAC statistics, since aid began in the 1960s donors have given a grand total of $502 billion to sub-Saharan Africa, which is worth about $866 billion in today’s prices. (Table 29; excludes debt relief.)

This is not trillions of dollars – not even one trillion dollars.

The G-20 countries have, over the whole history of aid, given less aid to sub-Saharan Africa than they spent on fiscal stimulus in the single year of 2009.

(This fact comes from my recent article, An Open Letter to Aid Skeptics, in the latest edition of the Center for International Relations Forum journal (pdf).)

Two interesting new articles start with the premise that the aid system needs to be overhauled, and then reach radically different conclusions about what this means in practice.

First up, Roger Riddell says we need a radical rethink of foreign aid:

The gap between what it does and what it could do is widening fast. … The central problem of the aid system is that there is no system.  … Almost since official aid was first given, politicians have both warned of aid’s systemic problems and proposed alternatives. These include raising aid funds through an automatic compulsory mechanism based on the ability to pay; pooling aid resources and allocating them on the basis of need; and, if there are grounds for believing that the recipient government is unable or unwilling to use the aid funds transparently, “ring-fencing” the aid in a fund to be administered independently.

Most of these good ideas have been eclipsed by the focus on increasing aid levels. A common response to anyone advocating these solutions to aid’s systemic problems is the counter-argument that they are part of the very nature of the aid system, and that it is naive to suggest that it can be changed. They warn that if governments are unable to decide for themselves how to give aid and then check on its use, then they simply won’t provide it.

There are two ways to respond to these arguments. One is to point out that that aid’s systemic problems are getting worse and fast and frustrating progress on the core objective of ending extreme poverty. Resolving key systemic problems would probably have a greater effect on extreme poverty than expanding the amount of aid given. The other is to draw attention to high-level discussions where the sorts of changes needed to fix aid are being presented as politically viable.

The authors of Philanthrocapitalism, Mike Green and Matt Bishop, also think that the aid system needs reform, but they have a very different view of the direction of travel:

Like it or not, we have to find new ways of making the aid money go further and find new ways of financing development that do not depend on the political will of a few rich countries. Philanthrocapitalism, by tapping the expertise, creativity, money and other resources of the private sector, has to be central to a new development strategy. First, to pilot and test ideas to make aid smarter and more effective. Second, to leverage more private capital – full for-profit, ethical investment and donations – to fill the gap.

As we have argued before, this means thinking about aid not as the exclusive preserve of government but as a partnership with philanthrocapitalists, rich and less rich alike. This challenge is urgent and the rich countries are being slow to take it up - Britain’s new government, in particular, seems set on business as usual (although there are plenty of disgruntled voices on the right who would like to see an axe taken to the aid budget).

Both arguments start from the view that the challenges to aid are the result of political pressures in donor countries.  Roger Riddell argues for a more centralised, technocratic aid system which can be isolated from undue political influences.  Mike and Matt want to see much greater involvement from a range of other actors, especially the big philanthropic foundations.

I think they are both partly right, and both partly wrong.

Roger Riddell is right to say that the systemic problems of aid are the result of politics; and he is right to disagree with the pessimistic idea that these problems are insurmountable.  But he wants to address these problems but putting the aid system at arm’s length.  I don’t think this is a viable solution: it wishes the problem away.  It is like saying that we can solve the global climate change problem by handing over control of energy policy to an international panel of wise people.  The politics matters, and we can’t make them go away by asking technicians to give us the answer; so we have to figure out how to change the politics.

The aid system today is characterised by aid institutions (official aid agencies, international organisations and charities) trying to mediate between the preferences of the people who give them money and their view of the interests of people in developing countries.  Aid agency staff typically want to do as much as they can for people in developing countries: if you ask most aid agency staff who their “client” is, they will tell you it is the world’s poor, not their own taxpayer. But they feel they can’t do many of the things they would like to do (such as improve the allocation of aid, reduce conditionality, make long-term commitments, scale back paperwork and process, focus more sharply, untie aid etc) because they have to take account of the preferences of the people whose money they are spending.  They see themselves as a firewall, serving the interests of the poor by protecting the aid programme as best they can from what they consider ill-informed or selfish wishes of their taxpayers. This behaviour is not confined to official donor agencies: many NGOs say one thing to their supporters, and do something quite different (think, for example, of the difference between what Kiva actually does and what most people think that it does).   In my view, trying to deliver effective aid despite public opinion  is fundamentally misconceived and unsustainable; this model is beginning to fray at the edges, and could well fall apart.

The alternative approach is for aid agencies to recognize that the public wants to see aid used as effectively as possible; and to build an informed conversation about how that can be achieved.  The stakeholders see the issues from different perspectives: for example, the public sees the benefits of spreading its aid across many countries and sectors, while aid agency staff see the ineffective duplication this creates.  The solution to this is to share information and build a common view, not to try to disempower the public.  If the aid bureaucracies believe that long-term commitments of aid to strengthen national systems is more effective in the long run than the series of smaller ad hoc projects that the public seems to prefer, then they should  produce the analysis and evidence and persuade their stakeholders.   Both Roger and I believe that more aid should be given to the poorest countries; he believes that this decision should be taken out of the political process, while I believe we have to win the public round by explaining why that would be better.

In the long run, public opinion will determine how much aid is given, to whom, and by what means: we cannot and should not try to sidestep the argument by putting the administration of aid beyond the reach of public opinion.  The only sustainable way to make aid more effective is to change the political pressures by producing persuasive evidence and analysis.   If Roger’s approach is to insulate aid from political pressure, my approach would be work to align those political pressures with more effective aid by making aid more transparent and accountable.

By contrast, Mike Green and Matt Bishop want to improve aid, and attract more resources, by making more use of the expertise and money of the private sector.  I agree with them that there is huge potential for the growing diversity in the aid system to improve the effectiveness of development system, if different organisations focus on the contributions that they can make.  Foundations could act like venture capitalists: taking bigger risks but leaving long-term financing of scaled up successes to official aid donors. Private aid could focus on achieving community and individual level results. Specialised global organizations could provide particular expertise not available through generalist support. The diversity of official donors could provide innovation rather than a monoculture of ideas. Official aid agencies could focus on long term funding and resource transfer, and support for institutional change.

Unfortunately it is not clear that all these different actors really are focusing on their strengths, and there is nothing in the aid system that pushes them to do so.  The foundations do not display the higher risk appetite that we would expect them to have (despite their rhetoric).  The approach of official aid agencies to the division of labour does not appear to be intended to drive specialisation (from which the benefit of division of labour derives) but simply to limit spread.   Diversity of approaches and innovation are essential, but this must be accompanied by mechanisms which kill off bad innovations and take good ideas to scale; otherwise the effect is simply to add to costs and fragment systems.

In their book, Philanthrocapitalism, Mike Green and Matt Bishop give several examples in which philanthropic foundations have made significant and worthwhile contributions. The role of the Rockefeller Foundation in promoting the Green Revolution is a compelling example.  But from these successes they extrapolate a wildly rose-tinted view of the work of foundations.  As with official aid, there are successes and failures; there are good practices and bad.

My impression is that, at their worst, foundations are much less effective, and behave even worse than official donors.  For example, I have seen:

• massive unpredictability and volatility of foundation grants; many foundations make grants worth 5% of their capital asset value each year, which is the minimum imposed on them by US tax authorities.   In years when asset prices are volatile, many foundations pass on this volatility to grantees – they do not (as they could, if they chose) use their capital to smooth out the grant-giving and make it more predictable and stable.  In 2009 I know of some foundations which imposed in-year cuts exceeding 25% on their grantees, leading to cuts in services and imposing huge costs in developing countries just at the time when the world economic crisis created needs for additional funding;
• reinventing the wheel and failure to learn – it is one of the advantages of foundations that they can be innovative and unconventional; unfortunately, both the benefactors and staff of many foundations suffer from an inflated sense of their own abilities, and foundations often repeat basic mistakes that have been made for many years, rather than building on the experience and wisdom of organisations that have made these mistakes before;
• capriciousness and personality-driven priorities – both the staff and benefactors of foundations get ideas into their heads from which they cannot be dissuaded.  There are many examples of ludicrous decisions and instructions from foundation staff to grantees based on nothing more than their prejudices or personal preferences.

Of course, official aid agencies also suffer from these problems to some extent.  But they also benefit from a degree of public accountability which puts them under pressure to be more effective.  I think Matt Bishop and Mike Green underestimate the problems that foundations suffer as a result of their lack of accountability.  In many cases benefactors became rich in markets; and they often trusted their instincts. But when they got a judgement wrong they were soon punished by the market, and they were able to change course.  Now that they are philanthropists, they do not have any such feedback.  When they make the wrong decision, everyone is too afraid to tell them, for fear of losing the opportunity to apply for the next grant.  There is no mechanism for identifying and rewarding their most effective staff; nothing that forces foundations to concentrate on what they are really good at.

In many ways we have the worst of all worlds: with some notable exceptions, foundations do not in practice take enough advantage of the opportunities that their lack of accountability give them (for example, taking bigger risks, or supporting unpopular causes) but they do suffer from the weaknesses that lack of accountability imposes on them.

So I think Mike and Matt are right to say that development relationships should not be the exclusive preserve of government, and that is should increasingly be an effective partnership with philanthrocapitalists, NGOs, private sector organisations and individuals.  But without some more effective governance arrangements in the aid system, we will not reap the potential benefits of this partnership.  We need stronger pressures for the different partners to make their specific contributions effectively, which in turn demands greater transparency and stronger accountability for all organisations.

Both articles start from the premise that the aid system needs to be improved; on this I think we all agree.  But Roger’s solution – putting aid beyond politics – is unlikely to be effective, and is undemocratic.  If we believe that politics constrains effective aid decisions, we should square up to trying to change the politics, not trying to insulate ourselves from it.  And Mike and Matt’s answer – passing the baton to very rich Americans – is no answer either.  These stakeholders certainly have a contribution to make, but to be effective their contribution must be part of a system that is likely to get the best from all partners working together, and holds everyone to account; otherwise we risk having all the disadvantages of the free market with none of the benefits of market discipline.

Disclosure: the organisation for which I work receives grants from the Gates Foundation and Hewlett Foundation.

A new Oxfam paper, written by the excellent Jasmine Burnley, looks at 21st Century aid. Here is a good summary paragraph:

“We are now at a crossroads. On the one side, is politically motivated or ineffective aid – much of which still exists today. On the other, and looking to the future, is aid fit for the 21st century. Twenty-first  century aid is liberated from rich countries’ political incentives and is targeted at delivering outcomes  n poverty reduction. Twenty-first century aid innovates and catalyses developing country economies, and is given in increasing amounts directly to government budgets to help them support small-holder  farmers, build vital infrastructure, and provide essential public services for all, such as health care and education. Twenty-first century aid is transparent and predictable. It empowers citizens to hold governments to account, and helps them take part in decisions that affect their lives. In recent years we have seen more of this good 21st century aid but we need to see a lot more still, and soon.”

There is a lot to like in this paper:

• the combination of making the case for more aid, and for making improvements in how it is delivered;
• the emphasis on making aid more predictable, transparent and accountable
• the focus on helping to support the evolution of effective institutions, particularly state institutions
• a whole chapter devoted to addressing the critics of aid
• the call for developing countries to do more to end corruption and increase transparency and freedom of expression
• a clear case for giving more aid to reach the Millennium Development Goals.

It is an interesting straw in the wind that the paper does not dwell on the Paris and Accra agendas for aid effectiveness. I see this as growing recognition that while the objectives of of those declarations are laudable, the top-heavy, committee-led process for achieving them is unworkable and ineffctive.  I wonder if transparency and accountabilty would have featured so much in a paper written even one or two years ago.

Yes, and …

Writing a paper about everything in development would have been an impossible task, even for someone as talented as Jasmine.  So when I say that there are points I would have liked to see made more prominently, or done differently, I do not mean this as a criticism of the paper, but rather some nuances and reflections that I would like to add.

First, there is only a brief acknowledgement (p15) of the importance for development of policies other than aid.  My view is increasingly that the most important levers for industrialised countries to help accelerate development are changes in policy (eg trade, climate change, migration, intellectual property, corruption); and that contribution of aid is likely to be modest.  Even so, I think aid makes a huge difference to improving people’s lives while development is happening, and that this is reason enough to increase and improve it.

Second, I would have been interested in some reflections on how the role of aid should change in the face of broader changes.  What are the implications for the way we use aid of of the rise of philanthropic foundations?  What difference is made by the emergence of new donors such as China?  What is the role of business, corporate social responsibility and social entrepreneurs?  How does aid fit with other financial flows, including remittances and direct investment?  My own view is that we should focus aid more sharply on reaching the parts that other flows won’t reach: the poorest countries, the chronic poor and marginalised within those countries, and investments with no immediate financial return, but the paper could have put aid more clearly into this context.

Third, I think those of us who want to see more and better aid should recognise more explicitly the serious challenges that the aid system now faces.  As Duncan Green says “the pro-aid camp is fearful of giving fuel to the enemy if it acknowledges the failings of aid.”   The paper suffers from a certain amount of self-censorship of this kind.  There are scattered references to the problems,  such as this:

“Aid that does not work to alleviate poverty and inequality – aid that is driven by geopolitical interests,  which is too often squandered on expensive consultants or which spawns parallel government structures accountable to donors and not citizens – is unlikely to succeed.”

I would have liked a more thorough examination of these (and other) problems. We have to acknowledge that some of these problems are getting worse, not better. (In places it reminded me of the way that some politicians appear on TV when things are going badly wrong, with a talking point that says “things are pretty good, though of course we could do even better; but we really need to get our message across better”.)

On his blog, Duncan Green makes much of the point that this paper sets out the case both for increasing aid and for making it work better.  I don’t think this is as unusual as he suggests (“More and better aid” was one of the demands of Make Poverty History, for example).  But I do agree with him, and with Jasmine, that this is the right position.

Despite those quibbles, I thought this was a very good paper. It explains the debate about aid clearly, and it sets out very well coherent and plausible agenda for why aid should be increased, and how it should be improved.  But I’m not sure who Oxfam thinks will read it, and unfortunately I doubt if it will change anybody’s mind in either direction.

I’ve been gratified by the number of people who have contacted me (by email, twitter and on facebook) to say how much they liked one of the slides in my recent presentation on aid effectiveness.

The slide borrows a format from Wired Magazine – it shows what I think is expired, tired and wired in foreign aid.

Of course, some of this is a bit exaggerated but I think it makes the point.   As I argue in the presentation (you can click it then jump forward to slide 20), the items in the Wired column aim to put  power in the hands of citizens in developing countries, and to enable them to put pressure to improve the services they get and the way that the aid system works.

Further suggestions please in the comments below, preferably in the Wired | Tired | Expired format.

An international organisation working on development, which shall remain nameless, has asked some of its staff each to suggest three “megatrends” which they think will shape the context for its work most powerfully over the next five years. They’ve also been asked to give a subjective guess – on a scale of 1 to 5 – of how significant these trends will be, and how likely they are.

What are your answers? Mine are below.

Read the rest of this entry »

The Donors’ Assistance Group in Ethiopia (the country heads of 26 aid agencies working in Ethiopia) had an awayday yesterday, and I was invited to speak to them about the future of aid effectiveness.

The Deputy Finance Minister addressed the donor heads before me. In a very dignified way, he delivered the blunt message that the donors are not living up to their commitments in the Paris Declaration on Aid Effectiveness.  That was the perfect platform for my presentation which argued that aid effectiveness matters, that there are good reasons why the Paris Declaration is not going to bring about more effective aid, and that the donors in Ethiopia should work differently to improve aid effectiveness.

You can view and listen to my presentation by clicking the image below.  This narrated presentation lasts 20 minutes (beware: when you click you’ll start to hear my voice, so don’t do this if you are in a meeting!).

Alternatively you can download the presentation as a pdf here.

The donors seemed to find the ideas in the presentation interesting.  There was little dispute with the analysis that it is very hard to make progress on the Paris agenda as it is currently conceived, though some scepticism that it would be possible, in practice, to change the incentives enough to change behaviour.  There was also some instinct to blame the Ethiopian government for things that don’t work very well.  I didn’t really get the sense that they had taken to heart just how bad things are at the moment.

Please let me know in the comments what you think. Is Paris going to work?

Terrific post by Giulio Quaggiotto at the World Bank PSD blog on the trend towards more publication of data, rather than or as well as information and analysis (and as well as spin).  The key point is that organisations (such as government donors and international institutions) should focus on getting the data out there, rather than trying to intermediate it for their users.  Giulio says:

If resources are limited, focus your efforts on making your data open rather than in producing generic “lessons learned” documents (or other knowledge management products) that have little contextual value for practitioners on the ground. In a world where SMS makes it possible to connect with affected communities even in rural areas, those products will sound increasingly hollow.

In our work on aid transparency, we’ve heard a lot of staff of aid agencies insist that aid agencies have to package the data, otherwise it will be no use to anyone.  The charitable interpretation is that they want to make sure that information is useful; less positively, this impulse may come from the desire to avoid difficult questions that may arise from the raw data.

There is an excellent slide show by Chris Taggart at countculture on this latter point: the risk that open data will lead to the exposure of problems and to difficult questions being asked.

I do not have a problem with public authorities using data to present information and analysis that they think is useful and which will help build their reputation.  But they should publish the raw, underlying data as well.  Any services which they provide to information consumers – such as websites – should use the same data, and the same public access interface, as is available to everyone else.  So if someone else wants to set up a different website, telling the story in a different way or mixing it up with data from another source, they can do so.  There is no reason why the authorities should have privileged access to the data: it should be a common, universally accessible layer on which anyone can build their service or tell their story.

There is a particular challenge in publishing foreign assistance: the consumers of information want information from many different donor agencies and international organisations.  In most cases, citizens in developing countries don’t want to know what a particular organisation is up to everywhere; they want to know what all organisations are up to in a particular place or on a particular topic.  So information intermediaries serving these users need some way to pull together data from many different sources, and turn it into a single stream of comparable, consistent and coherent data.  To a large extent information intermediaries could  do this automatically, if the organisations publish enough detail about their activities to enable the data to be compared; but to some extent it requires that data is deliberately classified and structured to enable this kind of mash up.   A good example is the ability to trace aid from one organisation to another: a lot of aid passes through many organisations before it arrives at its intended beneficiary, and even if every organisation is transparent about all its spending, there is no direct way to track the aid through this chain.  That would need an agreed way of tagging the data so that we can all see how money flows through the system.

So for me, the key messages are:

a. publish the raw data, either instead of or alongside the information and analysis (and sometimes spin)

b. to the extent necessary, agree a minimal set of standards for the way the data are structured and the detail it contains to enable users easily to mix and mash the data so that they can use it. The International Aid Transparency Initiative has the potential to do this.

c.  Aid agencies should not feel that they themselves have to meet the needs of information consumers; they should provide financial support to information intermediaries who will access this data, mix it with other data, and provide locally useful and relevant information which meet a wide range of needs.   The more the donors make detailed, raw data easily available in a consistent format, the less financial support they will need to provide to information intermediaries enable them to use it.

Ravi Kanbur has written an interesting paper (pdf) about how he feels as someone who makes a good living from analysing and writing about poverty. Here is an extract, but it is worth reading the whole, thoughtful piece:

What is striking about the class of poverty professionals (of whom I am one) is that the good living (granted, not at the billionaire or millionaire level, but pretty good nevertheless) is made through the very process of analyzing, writing, recommending on poverty. To me, at least, this is discomforting and disconcerting. I feel slightly ashamed within myself when I turn up to a poverty conference (perhaps even one where I am the keynote speaker), having flown business class, staying in an expensive hotel and (sometimes) being paid handsomely for attending. I recall many years ago, when I was in my twenties, telling the anthropologist Mary Douglas about how I was starting to do consulting for the World Bank on poverty issues, and how important it was to do this work. “And it’s not too bad for one’s own poverty either, is it?” came her worldly, knowing, reply. The seeds of discomfort sown by that comment have germinated and taken root, and now won’t let go.

Ravi suggests that everyone working in development should reconnect with poverty through a poverty immersion:

each poverty professional should engage in an “exposure” to poverty (also known as “immersions”) every 12 to 18 months. I do not mean by this rural sector missions for aid agency officials, nor the running of training workshops by NGO staff. What I mean is well captured by Eyben (2004); these are exercises that “are designed for visitors to stay for a period of several days, living with their hosts as participants, as well as observers, in their daily lives. They are distinct from project monitoring or highly structured ‘red carpet’ trips when officials make brief visits to a village or an urban slum….”

A friend of mine from DFID did this recently and came back saying how valuable it was.  I am in favour of immersions, though I don’t think it gets close to addressing the problem that Ravi is grappling with.

This reminds me that in March 2008, the Conservative development spokesman (and, since yesterday, the UK Secretary of State for International Development) announced that all DFID staff would be required to undertake a week-long immersion living in a poorer community. Andrew Mitchell said:

These immersions will serve as a valuable ‘reality check’ from the usual round of meetings, paperwork and spreadsheets. It will help keep everyone at DfID focused on their core mission: serving and helping poor people to work their way, sustainably, out of poverty.

I hope that they will implement this proposal now that they are in Government, and I hope DFID’s new Ministers will consider doing an immersion themselves, perhaps during the summer recess.

(via Suvojit)

Bill Easterly writes about how much he loves his iPad. This is ironic for the man who sees the world divided between searchers and planners, and who complains about the grip of planners.   The iPad is a testament to control-freakery by one man on a grand scale. Steve Jobs controls the design down to the last detail – some of it sensible, such as the beautiful shape; and some of it daft, such as preventing users from changing their own batteries.  He limits consumer choice – you have to use iTunes, you can only use apps approved by Apple, no USB ports, you can’t use Flash etc – in the interests of guaranteeing what he believes is the best possible consumer experience.  And some consumers – including Bill Easterly, apparently – like to have decisions made for them in return for having something that just works.  Sounds just like Millennium Villages…

But Bill Easterly’s post got me thinking. One great thing about the iPad (and the iPhone, etc) is the way it works as a platform for apps.

It is easy to write an app for the iPad or iPhone.  The platform takes care of the complicated stuff – accessing the internet, accepting user input, drawing on the screen – leaving the application developer to focus on the specific functions of the application itself.

Wouldn’t it be good to have a common “platform” in development, on which specific “applications” could be run?   The back office stuff – accounting, auditing, public financial management, rigorous evaluation, human resource management, management of building and vehicles and other resources, information technology, knowledge management and sharing – could all be provided centrally, avoiding duplication and costs.  Specific aid programmes could be run as “apps” on that platform.

We are a long way from that now.  There are 9 separate Oxfams running projects in Ethiopia.  Four of them have offices in Addis Ababa (GB, US, Canada, Spain) and another five run projects in Ethiopia out of offices in other countries.  That’s just Oxfam.  Save the Children has – I think – seven offices in Ethiopia.  That’s before you start with the official donors, each with their own infrastructure, and galaxy of expat staff, offices, drivers, accountants, press officers, and gardeners.  There is no reason for all those functions to be duplicated everywhere.

Aid agencies are on a journey from being primarily administrative organisations – specialists in project management – into knowledge-based organisations.   They should be purveyors of ideas, analysis, evidence and influence, within developing countries, international institutions, and industrialised countries.  To do this, they need to focus more of their resources and management capacity on their core business.  One way to do this would be for them to cut those administrative costs by using a common, shared platform. They can then focus on the apps that go on top.

A shared development platform would reduce costs and waste, and increase the scope for innovation, flexibility and diversity, and it would enable aid agencies to focus on their real value added.  So will it happen? I doubt it.

What are good ways to get feedback from the intended benefiaries of an aid programme? Can we use text messaging and other technologies to crowdsource monitoring?

VirtualEconomics is an unusual blog because it is maintained by someone in the front line of designing and delivering an substantial aid programme in one of the big bilateral donor agencies: Matt is the head of economics for the UK aid program in India.

Matt is interested in how to get feedback from the people who are the intended beneficiaries of aid:

New technologies for crowd-sourcing significantly bring down the transactions costs for collecting and ‘mashing’ data from many stakeholders. Examples include SMS-based systems (e.g. Ushahidi’s crisis reporting), smart-phone systems (e.g. Kenyan crop insurance) and web-based systems (e.g. eMoksha’s Fix Our City). What other examples are there?

So a question for us all to consider, how would you go about designing a simple platform for the Papua New Guinea public to provide reliable feedback on whether kids have received their textbooks? What’s the best solution?

As well as Ushahidi, another promising approach is Daraja in Tanzania which is going to use SMS messaging to provide feedback about which water points are working (full disclosure: I am on the board of Twaweza which is a partner of Daraja).

With changing technology and attitudes, we seem to be on the brink of a revolution in getting information from prospective benefiaries of aid.  Do you know of any existing, working programs like, or promising new approaches?

I’ve closed the comments here: if you have suggestions, please add them to Matt’s post.

Christopher Fabian tells the story of something that happened yesterday.  Somebody came up with a not-very-good idea for foreign aid: “Let’s collect 1 million t-shirts from the US and send them to Africa.”

The idea was discussed on twitter and on the blogs (including Aid Watch, Aid Thoughts, Tales from the Hood, Amanda Maculec, Siena Anstis, Texas in Africa, and Project Diaspora).  A fuller list of reactions is here.   Christopher Fabian explains what happened next:

Within a day a development concept has been aired.  It has been discussed. Literature has been created around it. Sources cited. Histories referenced. A community built.

Real-time input, from “the field” has just become an actor in “aid/charity/development.”  Voices from places which otherwise would never be represented spoke.  People in “the place” (“Africa”) where the “aid” was going got to weigh in.  Experts who had not met each other were able to share experience, synthesize and create new literature on giving, aid, and development theory.

And it happened in a few hours.

I don’t know what the t-shirt guy will do. I don’t know what his motivations are. It doesn’t really matter, because I have just seen the avalanche start.

Imagine if a large organization could put out its project plans in a way that was as appealing to comment on as this.

Imagine if there was the same transparancy and accountability of ideas in development.

Imagine if there was the same involvement of donors and implementers – and (watch out!) the beneficiaries of projects.

Imagine if we could actually ask people in the developing world what they thought of projects before we started them.

And most importantly, perhaps, imagine if we could fail quickly enough at the beginning of a project to not pour in the resources, ego, and time that sometimes gives otherwise bad ideas an unstoppable, zombie-like momentum.

But wait.  We can.  And it just happened, right in front of you.

This is indeed pretty interesting: it is the first time that the appraisal an aid project has been crowd-sourced.

It would be even better, of course, if some of the intended beneficiaries had a say.

Subjecting projects to scrutiny by this particular crowd is not ideal: for who are the people doing the scrutiny?  The kind of people who comment on twitter and on blogs are not the intended beneficiaries. They are not even typical experienced aid workers (most of the people I know working hard in the field don’t have access to, or time for, twitter and blogs.)

Though on this occasion, the consensus in the crowd was pretty clear that this was a misconceived project.

For all that this is not the ideal crowd to provide scrutiny, it is better than making decisions wholly in private.  This invites the question: why aren’t all aid projects subject to this kind of scrutiny, before anyone spends any money on them?

The question of whether and how donors might try to create incentives for politicians in developing countries lurks behind many of the debates about how to give foreign assistance.  It has come up for me twice in recent days:

• First, I was talking on Thursday evening with a donor agency official in Tanzania, who was explaining to me that her agency gives budget support in order to exercise policy influence with the government of Tanzania
• Second, in the context of Cash on Delivery aid, several people have argued that the whole concept is flawed because it relies on the idea that a promise of more aid will create incentives for developing country governments, and this is unlikely to be true.

I think it is worth establishing two points about the use of aid to create incentives. First, donors are almost never able to use aid to create incentives that work for developing countries, and they probably should not try.  Second, I am in favour of piloting Cash on Delivery aid, not because I think it will create stronger incentives in developing countries, but rather because I think it will create better incentives for donors (and it might at the margin increase the accountability of developing countries to domestic stakeholders).

Why donors cannot create effective incentives through aid

It sounds straightforward to say that if a donor offers a lot of money for a developing country to change a policy or achieve a particular outcome, this should, at the margin, have some effect on incentives within the developing country and so increase the likelihood that this policy change will occur or the outcome be achieved.  People respond to incentives, right?

Yet there is a mountain of empirical evidence that aid conditionality does not work. (Check the references at the bottom of this post for details.)  There are two good reasons why donors cannot create effective incentives for developing countries.

First, donors do not make credible threats. Most donors have an organizational imperative to get the money out of the door.  Aid agency staff want to sustain their bureaucratic status by managing large budgets.  They do not, in practice, withdraw aid when developing countries do not comply with conditions.  Officials in the governments of developing countries know that donors rarely stop aid – indeed, it is much more likely that aid will not be disbursed because of donor maladministration. The Government of Kenya was able to include the same promise to reform agricultural policy in five successive World Bank loan agreements over fifteen years: the condition was never met, and the aid was always disbursed. If the threat is not credible, it creates no incentive.  Svensson (2000) set out the argument and the evidence in detail.

Second, the incentive created by aid is not strong enough to influence decisions of government officials.   Aid is used to deliver services within the developing country, and that has only a very indirect impact on the interests of a minister or senior official.  After all, most aid does not end up in the minister’s personal bank account.  Of course, other things being equal, most ministers and officials want to see their fellow citizens better off.  They might also calculate that more aid which improves service delivery will make them more popular and so more likely to hold on to office.  But these benefits are often much less direct and immediate than the political costs to them of reform.  A politician is not going to take on vested interests and risk being ousted from office just to increase the number of wells being dug in a rural area.  In other words, people do respond to incentives, but aid is not as big an incentive as you might think.

Consider the choices made by ministers in industrialized countries.  They too want to improve the economy, increase spending and improve public services for their citizens, for the same reasons as politicians in developing countries.  But they are constrained from implementing sensible economic reforms, or raising more money in taxes, by powerful vested interests. Responding rationally to the incentives they face, they choose carefully which vested interests they are willing to confront at any given time; and that means compromising on the services they can deliver and the amount of economic growth they can bring about.  The prospect of faster growth and better services does not lead them to make suicide runs at reforming agricultural subsidies, removing trade tariffs or increased taxes on the super-rich.  Developing country ministers are no different.  Rational ministers will not risk being ejected from office just to bring more aid to the country.

This is why conditionality based on cutting aid does not work, and it is why it is a great mistake for development agencies to allow their success to be measured in terms of the amount of policy reform they have brought about.  Aid works because it pays for essential services, not because it brings about policy change.

I am not sure that industrialised countries could not create meaningful incentives for politicians in developing countries: but I believe it would be much more effective to impose travel restrictions and visa bans, to uninvite Ministers from key conferences, or to sequestrate money accumulated in Swiss bank accounts, than to cut off aid.  These approaches would have the added advantage that they wouldn’t leave the poor to starve.

Incentives and Cash on Delivery

If I don’t believe that developing countries will respond very much, if at all, to aid-based incentives, why do I support Cash on Delivery aid?

Some have argued that this is a show stopping argument against Cash on Delivery.  Tom Harrison says that “the biggest issue with ‘cash on delivery’ is that it assumes that where governments do not provide key public services it is because they lack the incentive to do so rather than because they lack the capacity to do so”.  I agree with him that it would be a mistake to think that we can create incentives for developing countries to deliver key services; but I disagree that this is the assumption on which Cash on Delivery is based. And in a well-argued paper, Ngaire Woods and Paolo de Renzio criticize the idea of Cash on Delivery Aid, partly on the basis that “external actors may have limited leverage on domestic political realities and accountability”.  I entirely agree with them about this.

I don’t believe that most developing countries need incentives to deliver better education for their children, better health care or access to safe water.  I think in many cases that what they need is money.   The problem is that donors won’t give that money without a whole rash of conditions, milestones, benchmarks, policy dialogues, missions, evaluations and reports.  Donors are forced to impose all that paraphernalia because they need to demonstrate to their taxpayers that the money has achieved something. It makes aid costly for developing countries, and highly unpredictable. I believe that Cash on Delivery can cut through all that: by providing money on the basis of results, donors can put more money into countries that are willing and able to deliver more and better services, without imposing hassle on either donor or recipient.

The promise of Cash on Delivery might – just might – nuance the political incentives in developing countries a little.  If the media, parliamentarians and civil society know that cash is available for any country that delivers better outcomes, that may help them to put pressure on their government to do a better job.  The government will not be able to hide behind the old excuses of lack of money or the pernicious impact of donor conditions and foreign interference. They will have to explain to their own citizens why they have not been able to do more.

Furthermore, it is possible that I’m wrong, and that in some cases Cash on Delivery aid will provide a modest incentive for some countries.  Some of my friends think it might help, and I’ve never heard anyone make a convincing case that it would do any harm.

Conclusion

I think a reasonable position to take is:

1. Donors cannot, in practice, create incentives for developing countries through the promise of aid. That is why aid conditionality does not work.
2. It is absurd to measure the success of aid by the policy change it brings about. We should measure aid’s success by the services which are provided.
3. Cash on Delivery does not depend on the assumption that developing countries need incentives to provide key services.  There are good reasons for testing the idea even if you do not believe that incentives are needed or would work.

References:

Killick, T., (1998), Aid and the Political Economy of Policy Change, Routledge, London and New York.

Collier, Paul. (1997). “The Failure of Conditionality.” In Catherine Gwin and Joan Nelson, eds., Perspectives on Aid and Development. Policy Essay 22. Washington, D.C.: Overseas Development Council.

Devarajan, Shantayanan, David Dollar, and Torgny Holmgren. (2001). Aid and Reform in Africa. Washington, D.C.: World Bank.

Nelson, J.M., (1996), “Promoting Policy Reforms: The Twilight of Conditionality?”, World Development, Volume 25 Number 9, September.

Svensson, Jakob, (2000). “When is foreign aid policy credible? Aid dependence and conditionality,” Journal of Development Economics

The Wall Street Journal reports that Bill Gates may now see that we need to invest in health systems, not simply fight individual diseases:

That question goes to the heart of one of the most controversial debates in global health: Is humanity better served by waging wars on individual diseases, like polio? Or is it better to pursue a broader set of health goals simultaneously—improving hygiene, expanding immunizations, providing clean drinking water—that don’t eliminate any one disease, but might improve the overall health of people in developing countries?

The new plan integrates both approaches. It’s an acknowledgment, bred by last summer’s outbreak, that disease-specific wars can succeed only if they also strengthen the overall health system in poor countries.

We already knew that, right? The big philanthropic foundations pride themselves on trying new approaches, and not being constrained by conventional thinking. Great. But it is a pity when they have to reinvent the wheel themselves.

Tonight’s UK election debate between the party leaders focuses on foreign policy.  I expect there will be at least one question about international development.  If I were in the audience, I would ask this:

We understand that all the main parties are committed to increasing aid to 0.7% of GDP, with some relatively minor differences about how that would be used.  But if we are serious about development, we need to look beyond aid to address the circumstances in which developing countries are trying to establish economic growth and political stability.  Our other policies – for example, on trade, climate change or immigration – make a huge difference to how quickly poor countries can develop.  Will you, as Prime Minister, be willing to make changes to UK policies which are against the immediate interests of a group of UK citizens – for example, arms exporters or pharmaceutical firms – but which support our collective longer term interest in seeing a fairer, safer and more prosperous world?  If so, what concessions would you make?

The development policy discussion in the UK has focused too much on aid.  As I’ve argued here today, aid is important, because it helps to improve people’s lives while their countries are developing.  But I don’t think aid is the most important factor in accelerating development – for that it is much more important whether we adopt fair global polices on climate change, trade, agriculture, immigration, intellectual property, conflict, corruption and international governance.

The manifestos are largely quiet on how the political parties would address these issues, and they have not yet been pushed to address it.  I think this is because so many people who work in development are dependent for their income on aid, so they tend to judge parties’ policies by their willingness to increase it.  A worthy and notable exception is Alison Evans at ODI, who is always smart, who picks this up in her recent blog post on development in the election:

.. a crucial question is whether there is any a wider read-across from the manifestos to the international development agenda?  Development is not only about aid and there is a danger that the allure of the 0.7 debate can and will detract from a much wider set of policy concerns that impact on the prospects for growth and prosperity in developing countries.  Each of the manifestos cover growth, trade, immigration, security and climate change – all  areas in which the debate about international development policy and global poverty reduction is increasingly engaged – but  none of them spell out in any detail what this means for the way their governments would work on these agendas or how the funding would work. Where is the coherence between policies and between policies and implementation?

This is exactly the right question to ask (it is a pity that the post is entitled: “main parties pledge 0.7% for aid but how will it be spent?”). We have been assured that the three largest parties are committed to retaining DFID as a separate government department, with its own Cabinet Minister, and with a budget that rises to meet the UK’s commitment to increase aid to 0.7% of GDP.  But if they are serious about development then DFID will also need to have an important role right across the government, ensuring that the UK’s interests in development are taken into account when the government considers other policies from immigration to climate change.  That does not mean that the development interests should always trump the UK’s other national interests, but they should be considered and there will often be ways to adjust the details of the policy in a way that costs us little but has a huge impact on the developing world.

If we want to help to accelerate development, then some of the time we will need to put the UK’s broad, long-term interest in  building a safer, more equal and prosperous world ahead of the UK’s narrower and short-term commercial or political interests.  The most important international development question for the UK election should be: which of the political parties is willing to do that?

The development policy debate focuses too much on aid.  Aid policies may help to improve the living conditions of people in developing countries, but it is development policies that will result in lasting transformation. If we are serious about promoting long-term change, we should talk less about aid, and more about the other rich-world policies and behaviours that affect developing countries.

Rich countries have many reasons for wanting to help poor countries. The main three British political parties speak in their manifestos of Britain’s obligations to the developing world (Lib Dems); moral duty, common interest and poverty emergency (Lab); and enlightened self interest and commitment (Cons).  The combination of motives – moral concern for others and self-interest – is a strength of the development cause, not a handicap.

These motives translate into two broad classes of objectives for development policy:

• One view is that development assistance should help to accelerate economic and institutional change in developing countries. The idea is that temporary support from outside can be a catalyst for permanent changes in developing countries. As economic growth takes off, developing countries will no longer need our help.  This view is attractive both to donors, who do not want to go on giving aid for ever, and for recipient countries who do not want to continue to be aid dependent.  For shorthand we will call this the transformation objective of development assistance.
• Another view is that development assistance can improve people’s lives today. This is most obvious in the case of humanitarian relief, for which the objective is to provide food and shelter; but more generally a lot of aid is used to send children to school or provide basic health care.  On this view, the development process is long and hard, and one role for outsiders is to enable people to live better lives while this process is happening in their country. Let’s call this the solidarity objective of development assistance.

It is entirely reasonable for countries, organizations and individuals to care deeply about both the transformation and the solidarity objective, and they can coherently pursue both objectives at the same time.

From time to time, people try to make connections between these objectives, positive and negative.

The claim of a positive connection is the idea that spending money on health and education is an investment in the human capital of a country, and that this will, in time, lead to faster economic growth.  Some point to significant investments in education in fast-growing Asian economies as evidence that education spending will promote growth.  Others say that improving health will lead to a demographic transition, in which falling infant mortality leads to smaller family sizes and greater investment in each child.  Both of these stories are appealing, though unfortunately neither is very well supported by the evidence.

The possibility of a negative connection is that the things that donors do to support people in developing countries as a matter of solidarity may actually slow down the political, social, institutional and economic changes that the country needs for transformation.  It may sustain unaccountable governments in power; undermine the social contract between citizen and state; hollow out fragile government institutions; cause appreciation of the real exchange rate and so choke off exports; or create a culture of dependency that dims demand for social change.  Again, the empirical evidence for these (quite plausible) ideas is pretty thin (pace the claims of Dambisa Moyo).

Are we using the right tools to pursue our two types of objective: tying to catalyze transformation, and at the same time to help people live better lives?   I think we are focusing too much on aid and not enough on development policies.

It is quite straightforward to see that aid can help meet solidarity objectives.  It is used to provide clean water and food, and to finance public services such as health and education.  There is quite good evidence that it is effective, though there is much more to learn about how to do it better.

It is much less clear that aid achieves our transformation objectives. The statistical evidence linking aid to economic growth is, at best, uncertain (see The Anarchy of Numbers by David Roodman).  This does not mean that there is no relationship – it is much harder to demonstrate a statistical connection when there are few countries to observe, and so many factors as well as aid that are likely to affect whether a country achieves economic lift-off.  We can think of aid being to growth what venture capital is to start-ups: many investments will fail, but the huge benefits from the few that succeed may make the losses worthwhile.

I personally have my doubts that aid makes much difference to the prospects for economic and social transformation.  Countries change from within, through long, slow, organic processes, and it is hard to see how money and advice from outside can make much of a difference to that.  Consider our own history, and the decades and centuries that it has taken us so far to construct our social and political institutions.

If we are serious about promoting transformation, we need to look beyond aid to how we can change the environment in which developing countries are struggling to change their economic, social and political institutions. Transformation is much likely to take root if we create conditions in which it is likely to succeed.

What are the development policies that might contribute to this?

1. Trade policy – As well as duty-free, quote-free access for all developing countries to our markets, we have to dismantle the complex rules – such as rules of origin and phyto-sanitary standards – which make exports complicated.
2. Agriculture policy – We have to stop dumping subsidized agricultural over production abroad, especially as our aid conditions prevent developing countries from competing with us. We also have to stop using food aid as a welfare system for European and American farmers.
3. Climate change – If anthropogenic global warming is a reality, as is the consensus among scientists, then the harm we are doing to developing countries through climate change will become one of the most important obstacles to development.  Probably the most important thing we can do to accelerate development is to stop our own carbon emissions.
4. Conflict – We make and sell the guns that are used in conflicts in developing countries.  We buy the oil and minerals over which groups are fighting.  We sustain the unaccountable leaders in pursuit of our geo-strategic interests.   If we were serious about development, we would by now have stopped the Lord’s Resistance Army in Uganda – it would be a simple matter for a well-resourced army.
5. Immigration – In the 18^th Century, a third of Europeans moved to America, to the benefit of both continents.  In the 20^th and 21^st century we have introduced historically unprecedented restrictions on the movement of people – notwithstanding our rhetoric about globalization. These restrictions may be the single most important factor which explains why poor countries have not been able to converge on rich countries.
6. Intellectual property – Another constraint on the ability of developing countries to close the gap is that there are historically unprecedented constraints on their ability to appropriate technologies. For centuries, new agricultural techniques such as crop rotation spread through word of mouth.  During the industrial revolution, America and Europe were able to use technologies from Britain.  When Henry Ford invented the assembly line, the idea was rapidly adopted everywhere.  But today’s technologies – from business software to pharmaceuticals and biotechnology – are protected by patents that make it impossible for other countries to adopt.
7. Corruption – We often think of corruption as a problem of developing countries, but this ignores the fact that the money for corruption comes from, and often returns to, industrialised countries.  Rich western companies pay bribes, in return for access to contracts or minerals.  To his eternal credit, President Jimmy Carter introduced the Foreign Corrupt Practises Act, which made it harder for American companies to pay bribes abroad. But there is much more we could do, if we were prepared to take on the vested interests of our own multinational companies, to reduce corruption in developing countries.
8. International governance – In our own nations, we have long ago dropped the property qualification for representation; but internationally we do not think that it is strange that representation in our main institutions is based on wealth and power.  This matters because again and again, the interests of developing nations are ignored, or treated only as a footnote.  From banking secrecy to internet peering arrangement, the rules of the game are set by the wealthy in their own interests. Changes to these practices which would be irrelevant to most of us, but could make a huge difference to the prospects for development, are resisted by powerful vested interests from industrialized countries.

It is entirely reasonable that industrialized countries want both to promote transformation in developing countries, and to help people there to live better lives while that process is taking place.  Aid has been proven to be an effective instrument for meeting our solidarity objective, but it is far less clear that it is a significant driver of transformative change.  Our political rhetoric focuses on the idea that development policies should promote transformation.  Yet it seems unlikely that aid is the most useful tool we have for achieving this.  If we are serious about transformation we should invest  more time and effort in creating the global environment in which economic and social change are more likely to succeed, by changing our policies and behaviours on issues like trade, agricultural policies and immigration.

Many people who work in development are directly or indirectly dependent on aid. Government development agencies gain their bureaucratic position from the size of their budget.  International NGOs get a lot of their money from aid budgets or from private charitable giving.  Partly as a result, the debate about development too often shifts to aid: whether it works, how much is given and by what means.  These are important questions, but primarily for the important goal of helping people in developing countries to live better lives while they are waiting for, and helping to build, a more prosperous and fair society.  If we are serious about accelerating the transformation, it is our development policies, not aid policy, that we should be discussing.