This article first appeared in Norrag News, in a special edition with lots of interesting articles looking at “Value for Money in International Education: A New World of Results, Impacts and Outcomes”.
“The way to get things done is not to mind who gets the credit.”
- Benjamin Jowett, English Clergyman (1817-1893)
It seems perverse at first to oppose measuring the results of overseas aid. It would make sense if you work for a merchant bank which is trying to rip off its clients, as was recently alleged about Goldman Sachs by a former employee. If your business relies on your customers being less informed than you about the value of what you are selling them, you can see why even a little sunlight may be dangerous.
But foreign aid is not like that. Everyone I meet who works on development is motivated by the desire to make a difference for people in the developing world. So why is there so much anxiety among serious and sensible people about the idea that we should measure and make public the results of aid? There are seven common criticisms of the so-called ‘results agenda’.
First, it may add to bureaucratic overload. Collecting information about results is yet one more central reporting requirement, in a system that is already overburdened with forms and procedures.
Second, it may make aid less strategic. The need to produce quantifiable results may tend to make donors prefer a short-term investment in something which can be measured instead of an investment which which may have more significant, longer-term but less quantifiable benefits. Do we want to spend more on bed-nets today, if that is at the expense of investing in a country’s capacity to manage its own health system in future?
Third, it may impose the wrong priorities. We know that aid works best when it truly responds to the priorities of developing countries themselves. But if donors are trying to target a handful of results indicators – such as the number of children in school – then this may reduce their flexibility to get behind government programmes.
Fourth, it may ignore equity. If we reduce aid programmes to numerical totals, we may neglect the people in deepest need, who are often the hardest and most expensive people to reach.
Fifth, it may create perverse incentives. We have seen in our own public services how poorly designed targets can distort choices in unhelpful ways. A target to increase school enrolment may lead governments to pay too little the quality of education, for example.
Sixth, it may inhibit partnership. Aid is more effective when donors work together with developing country partners and with the private sector. The necessity of being able to quantify and demonstrate the results of each aid programme makes it harder for everyone to get together in a common cause.
Seventh, the results information is all bogus anyway. Claims about results must rely on assumptions about the counterfactual. Even the most rigorous impact evaluations do not reliably tell you what will happen when a slightly different project is implemented in a different context. Effects may be described within the boundaries of the project itself, but it is much harder to understand the broader effects of aid on the political economy of the country or its macro-economy. In the absence of a common framework for attribution, every one of the organisations through which the same money passes claims all the results of the programmes which it finances, leading to massive double-counting and exaggeration.
Underlying all these seven worries is a sense that the push to measure results is insulting to the development profession. Years of training and experience of working in difficult and nuanced situations cannot be replaced by an information system which reduces each aid project to a few numbers. Nor do aid professionals need targets to incentivize them to make the most of the budgets under their control: that’s the entire raison d’etre of their professional work.
All these concerns are valid and important; and yet I remain a strong supporter of the results agenda in aid, and (for the most part) I admire the way it is being implemented by the British government and others. I believe that Andrew Mitchell is implementing the results agenda in DFID in a sensible way which pays attention to these risks.
We must set against these concerns the reasons why the results agenda is important.
First, we cannot sustain rising aid budgets in the face of growing public scepticism unless we can demonstrate to the people who pay for aid that it is making a difference. In March the ONE campaign published an important summary of results which are expected from UK aid between now and 2015. The numbers were put together for ONE by the reliable aid data geeks (and my former colleagues) at Development Initiatives. By bringing together information from across the aid programme and simplifying it into a small number of summary statistics, they make a more compelling case for aid than anything we have seen in recent years.
Second, we have a duty to the world’s poor to use money as effectively as we can. Sadly aid budgets are still too small to live up to the commitment made by world leaders to ‘spare no effort’ to reach all the Millennium Development Goals, and that means we have to make hard choices. Because the need is so great, almost everything we do with aid will make a positive difference, and it is easy for this to breed complacency. People making choices about aid should not merely try to do good, but try to do the very best they can so that they help as many people as possible as much as possible. If the differences between aid projects in the impact for each pound spent were small, we could be somewhat relaxed about spreading aid across many different activities, all of which would bring some benefit. But as the moral philosopher Toby Ord points out, some interventions are as much as a thousand or ten-thousand times more cost-effective than others, and that means we ought not succumb to the temptation to do a little of everything.
Third, measuring results is the key to unblocking the dysfunctional political economy of aid. Ineffective aid is more than a nuisance or a waste: it threatens to undermine the whole project. We can see the natural pressure on politicians to tie aid to domestic firms; to retain discretion to move aid about to respond to the most recent headline; to do a little of everything everywhere, to appease commercial interests and project the national image as widely as possible; and to spend aid on photogenic projects rather than supporting countries through the slow process of institutional and political change. By contrast the costs of tied, unpredictable, proliferated, projectised aid are invisible, because we do not adequately measure results. With tangible pressures to be dysfunctional, and in the absence of plausible evidence of the costs, it is no surprise that donors have made such little progress implementing the commitments they made in Rome, Paris and Accra to make their aid more effective.
Fourth and finally, measuring results is the most plausible response to complexity. There is a growing understanding that development is an emergent characteristic of a complex system. This means that it cannot be reduced to a series of smaller, more tractable problems to be solved independently. We have to support developing countries to experiment, to test new ideas and approaches, track the overall effects, and then be ready to help them to adapt as they find out whether they are heading in the right direction. (This point is well made in a recent Development Drums podcast featuring Tim Harford talking about his book, Adapt: Why Success Always Begins With Failure). On this view, measuring results must be an alternative, not an addition, to the convoluted plans, milestones and monitoring that can inhibit the flexibility of many aid projects.
How can we resolve the tension between four good reasons for getting better at measuring results, and seven valid concerns expressed by many in the development profession?
It is helpful that there is agreement about ends if not means. Nobody doubts the value of being able to demonstrate to taxpayers that their money has made a difference; of improving how aid is spent; of overcoming vested interests in ineffective aid; or of creating a stronger feedback loop to support evolutionary complex change. The concerns all relate to how that will happen.
Furthermore, we should recognise that the seven concerns about the results agenda are about risks which have, so far, largely not materialized. For example, while it is possible that focusing on results could lead some decision-makers to under-invest in strategic, long-term interventions, there is no suggestion yet that this is actually happening. Before the recent DFID bilateral aid review, several people working in DFID expressed privately fears that the money would flow mainly to superficial but easily-measurable projects with little transformational or systemic benefit; all told me afterwards that those fears had proved unfounded. DFID has made intelligent, nuanced choices about what to support, and through which aid instruments, which suggest that they have not lost sight of the key objective of long term, sustainable, systemic change.
Nonetheless, the point of identifying and articulate risks is to manage them. There are important steps which donors can take to protect themselves from these proper concerns about how the results agenda might be implemented. I propose here a dozen steps which donors could take which would help them to secure the goals of the results agenda, while reducing the risks that many development professionals have identified. They are divided into three parts: reduce bureaucracy, remain strategic, and increase rigour while remaining proportionate.
Reduce bureaucracy
- Use reliable results measures to replace, not supplement, existing procedures for tracking how aid money has been used. In practice that is likely to require a bottom up review of what additional reporting is needed, if any, once good results measures are in place, and getting rid of the rest.
- Put in place a simple, transparent framework to be used by donors, multilateral institutions, NGOs and other implementing agencies for attributing results to different contributors to a common activity, to avoid double counting and to eliminate the incentive for each donor to ‘go it alone’.
- Agree a global set of standardised output and outcome indicators as part of the International Aid Transparency Initiative reporting standard, to reduce the burden of reporting on developing country governments and implementing agencies, and to enhance cost-effectiveness comparisons. Then donors should impose a self-denying ordnance that they will track and report results only if they are either an indicator chosen by the developing country itself or if they are one of the globally-agreed standardized indicators.
- Trust development professionals by giving them more freedom to design and implement programmes to achieve the agreed results, including the freedom to adjust them in real time without needing to seek approval.
Remain strategic
- Put in place a transparent, simple, common framework for taking account of expected future results (e.g. from investments in capacity), so that strategic, long-term and risky investments are properly valued.
- Where there are concerns about equity, transparently include this by specifying the premium for marginalised or under-served groups. For example, if you think it is more important to educate girls than boys, say so, and include girls explicitly at a higher weight than boys in the results measures.
- Make choices about portfolios, not each aid project individually. A portfolio enables donors to invest in riskier, high-return projects (because the risks are diversified across the portfolio) which they might not support if they consider each project separately. Focus on portfolio performance in reporting (while also providing detailed information about projects individually for those who are interested).
Increase rigour while remaining proportionate
- Do fewer, better evaluations. There are still far too many mediocre process evaluations of individual aid projects; these should be substantially scaled back, with part of the savings going in to a smaller number of larger scale rigorous impact evaluations. The net effect of this will be to save money and bureaucracy, while generating more useful knowledge.
- Reduce the evaluation capacity in each aid agency, putting part of the savings into shared global capacity to do more rigorous and independent impact evaluations. Evidence about the impact of social interventions is a global public good, so donors should work together to fund and produce it collectively.
- Put in place a global register of impact evaluations, in which all impact evaluations must be registered when they begin, drawing on the precedent of clinical trials. Such a public register would, at almost no cost, reduce publication bias, prevent unnecessary duplication and spread learning.
- Recognise that not every intervention should be evaluated. It should often be sufficient for an intervention to set out transparently the existing, rigorous evidence on which it is based.
- Put in place an Institute for Development Effectiveness, modelled on the National Institute for Health and Clinical Effectiveness (NICE) to examine impact evaluation evidence and provide independent and transparent guidance on cost-effective interventions. Set a ceiling (say, £10m) above which a programme cannot be funded unless it is supported by an existing independent, published, relevant, rigorous impact evaluation which has been quality assured by the Institute for Development Effectiveness. In the absence of such evidence, a project above the ceiling should go ahead only on a trial basis and only if it includes a rigorous impact evaluation to fill the identified knowledge gap.
Large aid agencies are beginning an uncomfortable transition. In the past they have seen themselves as experts to whom the public has delegated the important job of managing the support we give to the developing world. Their job was to act on behalf of citizens who were disempowered by lack of information. In the 21st century aid agencies will play a quite different role – in fact, almost the opposite of how they have seen themselves in the past. They must become a platform through which citizens can become involved directly in how their money is used. Some aid agencies will not survive this change: those that do will be the ones which seize the opportunity to provide transparent, trustworthy, meaningful information which empowers citizens to make well-informed choices. Putting in place a comprehensive, honest results framework is the first step along that road.
The development world talks a lot about ‘the results agenda’. Of course everyone is in favour of results, but this superficial consensus may disguise important differences of opinion.
I was reminded of this yesterday in Berlin, when I was took part in a discussion of ‘Results and Accountability’, at a meeting organised by the centre-right think tank, the Konrad Adenauer Stiftung and the development finance agency, KfW. My presentation was on ‘mutual accountability’, an idea of which I am increasingly sceptical. (No doubt I will write about that here in due course.)
The panel before mine was about ‘results’; and I was struck that different people were using the term ‘results agenda’ to mean quite different things. Here’s what I think they are, and why the differences may be important.
First – using results to justify aid to taxpayers. This is the results agenda we hear most often from politicians – both the ones who lead development agencies, and members of parliament. They make the excellent point that taxpayers want to know that their money is making a difference to people in developing countries – and that good evidence about results is essential to persuade an increasingly sceptical public. My impression is that many development professionals grudgingly accept that reporting results for this reason is a necessary evil, though many people would prefer not to have to do it.
Second – using results to improve aid. There are some development professionals who are concerned that while aid may have positive effects overall, we do not get the biggest possible benefits because we do not have enough evidence about what works and what does not work, and we are not sufficiently energetic about allocating aid to the programmes and projects which have the biggest impact.
Third, using results to manage aid agencies. Some leaders of aid agencies want to use results to contain the tendency of some organisations to spread themselves too thin, to sprawl across countries and sectors. A stronger focus on results enables them to re-focus the activities of the organisations they lead. This is something I hear a lot from the senior managers in aid agencies, though from few other people.
Fourth, using results to manage complexity. Many of the problems we are trying to solve involve supporting the emergence of successful complex systems – social and political institutions, economic change and the formation of various kinds of social capital. These complex processes cannot easily be broken down into a series of steps which will predictably lead to the outcomes we want to see. Instead these solutions evolve: taking small steps, finding out what moves in the right direction, and building on progress. The aid industry’s habit of reducing everything into a series of processes and activities which can be planned, tracked and reported not only fails to support this evolution, it can stifle it by preventing both the innovation and the adaptation that evolution requires. Focusing mainly on results can enable the aid business to resist the tendency to plan and prescribe, and so create space for the emergence of sustainable local institutions and systems.
So what?
If you have read this far, you may be wondering whether these differences matter. Surely we should be glad we all want the same thing, even if our reasons are different?
The problem is that these four motivations for focusing on results take us in broadly the same direction, but not to the same destination.
For example, if an aid agency is concerned mainly about the first results agenda (demonstrating results to sceptical citizens) then it is not going to be tremendously excited about being honest about its failures. Yet recognizing failure is an essential component of the second results agenda (improving the way aid is used). Which motivation is uppermost in our minds will affect how much effort we put in to identifying and learning from investments that do not succeed.
The four motivations have important implications for time horizons too. There is a widespread fear among aid professionals that focusing on results for the purpose of having a good story to tell to taxpayers will tend to drive aid agencies towards results which can be achieved and measured in the short run – such as giving people bednets – at the expense of longer term improvements in institutions and incentives. Yet these longer term investments may have a bigger and more sustainable impact overall, even though there may be little to show for them immediately.
While I think this is a reasonable fear, I have not been persuaded that any of the aid agencies who are leading the charge on the results agenda are so far guilty of this kind of short-termism. Aid agencies can and do emphasize the likely future benefits of investments today, so there is no overriding reason why they should focus only on results which can be measured immediately. We should remain vigilant about this, but I do not agree with those who think that this risk invalidates the entire results agenda.
The different motivations also have differing implications for whether the results agenda is to be layered on top of existing processes of accountability, or should largely replace them. If you want a focus on results because you think this creates space for local ownership, to enable donors to support the emergence of local solutions and institutions, then we should be thinking about ‘post-bureaucratic aid’. Our existing systems have tended to lead to excessive outside prescription and micromanagement; and in principle they should not be needed if we can observe directly the results about which we really care. If on the other hand our interest is merely to increase our accountability to taxpayers, then all we have to do is pile better measurement of results on top of everything else we already track.
What can we do?
The four motives for focusing on results do point in the same direction: we have to do a better job of providing evidence for the results chain.
Aid agencies should be able to account for the inputs they have provided, and provide a reasonable estimate of their share to the outputs that are produced. They should also be able to point to rigorous evidence from impact evaluations which demonstrates that these outputs can be expected to produce the intended outcomes and impact, and they should be able to provide a quantified estimate of the impact of the outputs they have funded. These outcomes and impact can – and in my view should – be long-term, institutional improvements and not just short-term gains.
My view is not that there should be an impact evaluation of each and every project which an aid agency supports. (I also don’t believe that a doctor should conduct a randomised control trial every time she prescribes a medicine. What I want to know is that every medicine that is generally prescribed has been previously proven to be effective and safe by a rigorous study.) All activities on which significant amounts of aid are being spent should either be justified by existing rigorous, independent evidence from previous programmes, so enabling the agency to provide an ex ante quantified estimate of the impact of providing the expected outputs; or the programme should be run at first on a smaller scale and accompanied by a rigorous impact evaluation to gather such evidence for the future.
A combination of systematic, independent, rigorous impact evaluation and end-to-end transparency would provide information about results which can address all four motivations for the results agenda. It enables taxpayers to see how their money is being spent and what it is achieving, and enables them to press for that money to be redirected so that it has greater and greater impact. It will put pressure on development organisations to focus on the interventions in which they will have most impact, and to streamline their processes. The combination of end-to-end transparency and trusted measurement of impact can replace the burdensome controls and micromanagement which aid agencies have felt obliged to put in their place.
Although there is a model of managing for results which ticks the boxes of all four motivations, it does not follow that aid agencies will necessarily move in that direction. If we leave the focus on results to people who are mainly motivated by the first agenda – explaining to the taxpayer what difference their money has made – then there is every possibility that they will design systems which do not meet these other concerns. The danger is that aid agencies may not be sufficiently energetic in using information about results to improve the impact of aid; they may focus on short-term gains and ignore long-term impact; and they may add reporting results to the many existing procedures instead of using rigorous results measurements as the basis for radical simplification. I don’t think this is happening in practice, but it is a risk we must guard against, and one way to do that is to recognise and value all four of the motivations which lie behind ‘the results agenda’.
<Pedants’ corner> To an old fashioned grammarian like me, there is no plural of the word ‘agenda’. It is already plural, and the singular is ‘agendum’. Because, you know, we all still talk Latin in Britain. So I don’t like to say that there are four “results agendas” even though that was the title of one of my powerpoint slides yesterday. Hence the odd sounding title of this blog post. Oh, and while we are at it, you cannot ‘deliver’ results: you achieve them. </Pedants’ corner>
Busan was an expression of new geopolitical realities, but despite high level representation, it has done little to shape the future of development cooperation. I think there were perhaps four important outcomes from Busan, in addition to which I noted five other topics of discussion which may prove important in future.
The southern port city of Busan in South Korea was a fitting host for a meeting on aid effectiveness. Busan was the port through which humanitarian aid arrived sixty years ago, to help the people of a country ravaged by war. Korea’s reconstruction and development was financed in part by international aid. Beginning in 1952, American aid alone averaged about $3 billion a year (in today’s prices) and USAID had up to five hundred staff in Korea. Busan is also at one end of the Gyeongbu Expressway, the cornerstone of Korea’s first five year plan and regarded by many Koreans as one of the most important early ingredients the country’s successful industrialization. When the road linking the country’s main population centres with the port was planned 40 years ago, Korean national income was just $142 a person a year. The World Bank and other donors refused to finance the construction, regarding it as an excessively grandiose project for a country so poor. So President Park Chung-hee used a quarter of the nation’s budget, topped up with some reparations from Japan, to pay for it instead. National income quadrupled in the seven years following the construction of the road.
Today Busan is a bustling, prosperous city, home of the fifth largest port in the world; and the Gyeongbu Expressway is scheduled to become part of the Asian Highway, a planned network of routes connecting Korea with Japan, China, Southeast Asia, India, Pakistan, Iran and Turkey.
Korea exemplifies much of what we know about development: the fundamental importance of economic growth and industrialisation; the need for investment in economic infrastructure; the importance of good and effective leaders; the primary role played by the country’s own resources; the additional contribution that aid can make both to improving people’s lives and to investing in development; and the capacity of aid agencies to be wrong, especially in the poverty of their aspirations for developing countries.
Busan delegates wait for Starbucks to open at the conference centre in Busan
So Busan was a suitable place for about 3000 government officials, policy wonks, NGOs and a smattering of private sector representatives to discuss how the aid system could be made more effective. This was the fourth in a series of meetings, which have toured Rome (2003), Paris (2005) and Accra (2008).
I’ve been involved in all this since 2002, motivated by my involvement in a series of studies in Ethiopia, Rwanda and Senegal. Though we represented donor agencies ourselves, our report was outspoken in its criticisms of donor behaviour. We found that “the aspiration of a government-led process for implementing the PRS [poverty reduction strategy], with a nationally led process for monitoring, review and renewal of objectives, has yet to be realised. Instead, donors have continued to focus on their own timetables, their missions, their conditions, and have demanded information to suit their requirements.” Our reports on the experience of developing countries were part of the evidence which led to the Rome Declaration on Harmonisation the following year. Yet despite the best efforts of many good people, the problems we identified ten years ago are, if anything, even worse today.
Since 2003 these summits have grown in size and attracted increasingly senior representation. Among the roughly three thousand people in Busan were Ban Ki-moon, Hillary Clinton, Tony Blair, a brace of Presidents, a Prime Minister, and hundreds of ministers and senior officials. If this group did not have the authority to make progress on improving aid, it was difficult to know who would. Negotiations on the communique began back in July and were concluded with the publication on the last day of the meeting of the “Busan Partnership for Effective Development“.
Now that the dust has settled, and many words have been written, it seems to me that there were four significant outcomes from Busan.
The Bexco Conference Centre in Busan
First, the beginning of a new global partnership. This is the result of Busan which the OECD and traditional donors have been most keen to emphasize. It was not clear right up to the last day whether China, and perhaps other new donors, would be willing to agree to the declaration; and much of the last day was spent refining and agreeing to this key disclaimer which had to be included to persuade China to sign: “The principles, commitments and actions agreed in the outcome document in Busan shall be the reference for South-South partners on a voluntary basis.” With this disclaimer the new donors are not bound to any particular commitments to improve their aid, but it must be a step forward everyone accepts the need of these new donors to be part of the conversation. Note that there was no need to weaken the specific commitments of traditional donors as a price of China’s agreement, since China was never likely to sign up to these commitments anyway. For example, the October draft would have committed all the donors who had signed the Accra Agenda for Action to “untie all aid by 2015″ – this was taken out of the Busan agreement in the final days at the request not of China, who would not have been bound by it, but of the United States.
Second, the new deal for fragile states. A group of 19 fragile and conflict-affected countries, known as the g7+, has been working with donors on how to improve peacebuilding and statebuilding efforts in these situations, beyond the aid effectiveness agenda. The main idea has been to focus on five themes: legitimate politics, justice, security, economic foundations, and revenues and services. The resulting “New Deal for Engagement in Fragile States” was endorsed at Busan. For more information see this article by ODI’s Alasdair McKechnie, and this blog entry by Fernanda Faria at ECDPM.
Third, significant progress on transparency. Since Accra, transparency has shifted from the periphery to the centre of the discourse on aid effectiveness. Secretary of State Hillary Clinton earned a round of spontaneous applause for her announcement that the United States would be signing the International Aid Transparency Initiative, taking the membership of IATI up to 75 percent of global aid. Donors committed to draw up plans within a year, explaining how by 2015 they will publish electronically full details of all current and planned future aid projects in a common, open standard. Stephanie Majerowicz and I have written elsewhere about the contribution that the Open Government Partnership may have made to this progress. It also owes a great deal to leadership by the UK and Sweden, and the World Bank and EU, as well as civil society organisations Publish What You Fund, Development Gateway and aidinfo.
Fourth, significant changes in the international governance of the aid system. This may be one of the most important outcomes of Busan, yet it has so far attracted little comment. The Busan agreement abolishes the Working Party on Aid Effectiveness, which is technically a sub-committee of the OECD DAC but in practice has become a sprawling network of committees and meetings which had come to represent a broader group of stakeholders than the donor club in which it had been incubated. In its place will be a new “Global Partnership for Effective Development Cooperation”, to be supported by the OECD and UNDP. Though it may seem impolite to point this out, this change relegates the DAC back to the role of a caucus of traditional official donors, representing a dwindling proportion of aid, in defiance of its aspirations to lead reforms of the global governance of development cooperation. Even more significantly, Busan turns its back on the requirement of unanimity which has underpinned agreements on the aid system for the last 50 years. The DAC makes decisions by consensus, giving all its members a veto so that it moves only at the speed of the slowest ship in the convoy. But that is not how Busan envisages progress in future. The implementation of Busan will take place through a series of ‘building blocks‘ which are described as “voluntary, practical and actionable game-changers in the global dialogue on aid and development effectiveness.” This model was apparently conceived in in the light of the experience of work on transparency – the issue on which most progress has been made since Accra – which was taken forward by a coalition of the willing in the form of the International Aid Transparency Initiative. Stepping outside the DAC structures enabled a group of donors, foundations and civil society to work together without the constraint of an implicit veto of reluctant partners. Busan marks a shift in the global governance of development cooperation from consensus in the DAC to the ‘variable geometry’ of building blocks. The declaration highlights the ”opportunities presented by diverse approaches to development cooperation”. There are new commitments for all donors on transparency, and the declaration calls for “a selective and relevant set of indicators and targets through which we will monitor progress”. (It is hard to see how these targets will be agreed in the coming months given that no consensus could be reached in the run-up to Busan.) But beyond exposing their behaviour to public scrutiny, there is little else to which donors have specifically committed. This evolution of the architecture for the global governance of development cooperation towards progress by more flexible coalitions of the willing has obvious parallels with the direction in which the global governance of climate change is also moving.
In addition to these four outcomes on which progress was made, I noted five other themes being discussed in Busan which were not translated into significant progress, but which may be issues to watch for the future. These were:
- everyone wants a shift from aid effectiveness to development effectiveness - the importance of this change in perspective was emphasized by many people, especially the delegations from Africa. It is intended to mean focusing more on non-aid policies, and talking more about development outcomes. Everybody said they were in favour of such a shift, but this does not seem to have had much effect on the Busan agreement.
- there is greater recognition of the role civil society. The Accra meeting in 2008 was notable for the involvement of civil society in the meeting. Busan went further by including a civil society representative in the drafting committee, which led to specific recognition (in para 22) of the role that civil society plays in the development process, especially in enabling people to claim their rights and in service delivery.
- everyone is talking about ‘the results agenda’. I actually think there are at least three results agendas, not wholly consistent with each other. My CGD colleagues hosted a side event on results, which in my (not unbiased) view was one of the better discussions in Busan. But overall there was not much progress on results from Busan, other than calling for developing countries to put in place specific results frameworks at country level. I anticipate that one of the most important ‘building blocks’ after Busan will be on how the development system can do a better job of identifying relevant results, and how to avoid the risk that a focus on results leads to misallocation of money, for example away from longer term and institutional changes towards short-term and easy to measure results.
- the notion of mutual accountability is evolving. As Nancy Birdsall pointed out on the CGD blog, there seems to be less focus on ‘mutual accountability’ between donors and developing countries, and more attention to accountability of donors to their taxpayers and of aid-recipient governments to their own citizens in their use of aid.
- there is more talk about the private sector. There were lots of meetings about the private sector and its role in development, but I got the impression that it was mainly discussions between governments, development finance institutions, and some government affairs and corporate social responsibility representatives of firms from industrialised countries. I saw no sign of any businesses from developing countries being part of the discussion. I wonder what anyone really involved in business would have made of Busan.
I’m glad to see more people taking development effectiveness seriously, and impressed that the UN General Secretary and US Secretary of State felt it worth their while to attend. I also agree that it is important to build broader coalitions, and to think strategically about development and not just aid. But I also regret that, as a consequence, these meetings are gradually losing the focus on more technical issues about how aid is delivered. In 2003, the signatories to the Rome Declaration committed themselves to amend their “individual institutions’ and countries’ policies, procedures and practices to facilitate harmonisation”. Yet in 2011 in Busan, the President of Rwanda, Paul Kagame, gave a masterclass in aid effectiveness, in which he observed
Developing countries spend more time and energy agreeing on procedures and accounting to donors and an ever-increasing number of related non-state actors than in actual development work, often responding to endless questioning that no answers can fully satisfy.
As Busan has shifted the discussion away from the nuts and bolts of how aid is delivered, and pushed much of the specific discussion of aid effectiveness to country level, it is not clear to me that there is any place left to address the concerns about donor agency policies which President Kagame so eloquently expressed.
In years to come, I expect that we will look back on the Busan agreement as a reflection of changing realities, including the growing range of different kinds of donors and shifting geopolitical power. I think it less likely that we will look back on Busan as having done much to shape those realities.
Further reading:
Aid Alert: China Officially Joins the Donor Club By Nancy Birdsall (President of CGD), December 5, 2011
Busan HLF4: The will and the way By Brian Atwood (Chair of DAC), December 8, 2011
Busan has been an expression of shifting geopolitical realities By Jonathan Glennie (ODI / Guardian), December 2, 2011
A View from Busan By Andris Piebalgs (EU Development Commissioner), December 5, 2011
Reflections on Busan By Judith Randel (Development Initiatives), December 9, 2011
Beyond Aid to Open Development By Alan Hudson (ONE), December 6, 2011
Moving towards open development By Sanjay Pradhan (World Bank), December 1, 2011
Busan: Yes we could By Patrick Love (OECD), November 30, 2011
An unnoticed but crucial development summit By Manuel Manrique (FRIDE), December 4, 2011
Busan: A Bang or a Whimper? By Alan Hudson (ONE), December 2, 2011
Busan: Why Aid Effectiveness Matters By Jessica Espey (Save the Children), December 1, 2011
Busan Forum: Aid promises come tumbling down By Sanda Van Damm and Jennifer Martin (Oxfam), November 29, 2011
Verdict still out on whether Busan is a good deal for poor countries By Oxfam, December 1, 2011
Two-speed aid effectiveness By Stefan Leiderer & Stephan Klingebiel, December 7, 2011
‘Value for money’ or ‘Results Obsession Disorder’? By Marcus Leroy (ex Belgian Development Cooperation), December 7, 2011
A killing embrace of diversity By Reinier van Hoffen, December 6, 2011
Towards more effective aid By Axel von Trotsenburg (World Bank), December 1, 2011
Written Ministerial Statement: Outcome of the Busan High Level Forum on Aid Effectiveness By Andrew Mitchell (UK Secretary of State), December 7, 2011
Three-way-learning. The South-South Agenda in Busan, By Han Fretters (World Bank), December 1, 2011
Aid architecture debate surfaces new ideas, appetite for dialogue By Axel van Trotsenburg (World Bank), December 2, 2011
This joint post with Stephanie Majerowicz first appeared on the Views from the Center blog at the Center for Global Development
“The defining division these days is increasingly: open or closed? Are we open to the changing world? Or do we see its menace, but not its possibilities?”
—Tony Blair, A Global Alliance for Global Values, September 2006
It is easy to be cynical about international summits and their carefully drafted communiqués. But they sometimes matter more than people expect. (If they didn’t, why would government officials put so much time and effort into negotiating the text?) Even if the text is often a bland compromise, these meetings can help to move an issue forward, by locking in a new consensus which forms the platform for further progress.
We saw how this works at this week’s High Level Forum on development effectiveness in Busan, South Korea. In a speech notable for a thinly veiled warning about aid from China, Secretary Clinton made the welcome announcement that the US would join the International Aid Transparency Initiative, which entails the publication of the details of all US aid projects. This decision has given a major impetus to the international movement for aid transparency, which has been one of the important outcomes of the Busan meeting. According to US administration insiders, this decision was in part a consequence of an earlier international initiative, which has not had as much attention as it deserves: the Open Government Partnership (OGP).
The OGP is an effort to create a club of nations committed to good governance and transparency. It was launched a few months ago in New York, at a side-event of the UN meetings, by 26 heads of state, the culmination of months of work by the White House and eight partner governments.
David Eaves (an open government enthusiast from Canada) sees the Open Government Partnership as more than just another meeting. The OGP, he says:
…is much more than a simple pact designed to make heads of state look good. I believe it has real geopolitical aims and may be the first overt, ideological salvo in the what I believe will be the geopolitical axis of Open versus Closed. This is about finding ways to compete for the hearts and minds of the world in a way that China, Russia, Iran and others simpley cannot.
The Economist blog is less convinced: in their view “this is really nothing new or major” especially because the partnership includes “such beacons of openness as Russia and Pakistan.”
We’ve warmed to the Open Government Partnership after some initial skepticism. The architects never had the grandiose ambitions that David Eaves suggests: rather they wanted to do something which might encourage small, tangible improvements in the way governments promote transparency and good governance. The idea is to provide a network of support to reformers across the world pushing for open government, to enable them to share ideas and lessons, and to strengthen their hand by demonstrating to sceptics that they are part of a broader international movement. It brings government’s domestic achievements to the international spotlight to encourage reforms and reformers. By that modest yardstick, the initiative is a step in the right direction.
Why were we skeptical at first? Partly for the reasons set out by the Economist: the standards for joining the OGP (and the implicit endorsement that it confers) are not very exacting. What kind of transparency club has Russia and Azerbaijan as members? More importantly, we felt that an international initiative would have most value if it focused on transparency of cross border flows such as payments by companies for minerals, cross-border transactions between multinational companies and their subsidiaries, aid transparency, and cooperation between tax authorities. It is in tackling transnational problems that an international coalition makes most sense. But there was little political appetite for starting with these difficult international problems, and the OGP has focused mainly on encouraging its members to implement policies which promote transparency domestically.
But although the OGP has not focused on improving the transparency of international flows, there are already signs of how it can work to put pressure on its members to be more open. It has apparently contributed to the announcement this week that the US would join the International Aid Transparency Initiative, bringing the US into line with other OGP members. Furthermore there is now a debate bubbling up in the UK about the Extractive Industries Transparency Initiative which requires governments publicly to disclose their revenues from oil, gas, and mining assets, and for companies to disclose the payments they make. President Obama announced at the launch of the OGP that the US would itself become a member of the EITI. As a result, the UK is now under pressure to follow suit. Although the UK was a supporter of EITI from its inception, it has never joined itself (partly because of opposition from the Business Department): a position which will be more difficult to sustain if and when the US fulfills President Obama’s commitment to join. That is exactly the kind of international peer pressure which OGP is designed to generate.
So the OGP is, to misquote Churchill, a modest initiative with much to be modest about. It was not conceived as the opening salvo of a new battle, but as a small step to encourage and support those countries round the world who want to move towards greater openness and transparency. There are some welcome signs that it is already making a difference. It may eventually lose momentum, especially as the politicians who put it together move on, and it may become too diluted by the undemanding criteria for membership. We hope not.
This blog post first appeared on the aidinfo site.
More than two thousand delegates have gathered today in Busan, South Korea, for the fourth installment of a succession of meetings aimed at making aid more effective.
There has been significant progress since the meeting in Accra in 2008 towards improving transparency of aid. This is important because it’s a pre-requisite for achieving all the aid effectiveness principles. Jamie Drummond from the ONE campaign explains this very well in the Huffington Post.
The challenge is to provide information to people at country level. Our existing aid information systems are mainly designed to enable donors to share information with each other, not to meet the needs of people in developing countries.
But the information needs at country level are hugely diverse, both between and within developing countries. Within governments, the information needs of the finance ministry are different from the needs of line ministries. The needs of parliamentarians, civil society, media and citizens are all different again. It is impractical for donors to try to meet the needs of every niche interest with their own subset of the data in a particular format.
뜻이 있는 곳에 길이 있다 (where there’s a will there’s a way)
Here’s the technical bit: the way to serve all these different needs for information without massive duplication and bureaucracy is to separate the data from the interface. An open, standardised, detailed, shared data layer can support a whole range of different applications, tailored to specific users.
That is why it is so exciting that the open data revolution is coming to aid. In 2008, in a side-meeting in Accra, a coalition of willing donors, developing countries, foundations and NGOs made a declaration which launched the International Aid Transparency Initiative. A lot of that data is now being published – countries accounting for nearly half of global aid are now publishing through IATI, and that proportion will grow in the coming months.
If you are in Busan this week, and you want to know how IATI works, the IATI secretariat will be doing a briefing at 5pm on Wednesday, in room KW202 (I’m making a guest appearance to show off some beta software, so do come along and laugh at me when it doesn’t work).
천릿길은 한 걸음부터 (A 1000-li journey starts with one step)
Transparency by itself does not lead to more accountability, less waste, or better coordination. That happens when people are able to use the information. The extent to which they are able to do so depends on their context, including the political and administrative climate. Open data won’t automatically make organisations responsive, but will greatly reduce the difficulty and cost for citizens of taking the data and turning it into something meaningful and useful.
With an open aid data platform now in place, huge opportunities are being opened. We can use the standard to introduce traceability of aid as it passes from organisation to organisation. We can improve the quality and detail of the data that is collected and publish it through these systems.
Reporting of aid data should be not just by donors but by NGOs, private sector implementing agencies and foundations. The mechanisms for sharing information can be extended beyond aid to other kinds of resources for poverty reduction. We can add detailed geo-coding, to enable aid projects and programmes to be mapped, and better coordinated. We can begin to compare across aid programmes and across countries. We can mix aid information with other data from other sources.
The twenty four donors who have signed IATI should be congratulated for their efforts to make data available. The payoff from that effort will come when we all start to use the data to understand aid better: to see what is working and what is not, and to hold the aid system to account, so leading to improvements in the effectiveness of aid. IATI removes the most significant barriers to entry for a wide range of diverse applications.
The next step is to nurture and encourage an ecosystem of civil society groups, parliamentarians, researchers, think tanks, academics, governments, private sector organisation, media and hackers, all accessing and using the information in different ways, and using this as a platform to push for improvements in how resources for poverty reduction are used. The new Open Aid Partnership is an example of an initiative of this kind: the door is now open for many more.
We can now look forward to the day when we take for granted the ubiquitous availability of aid data. We will soon forget that it was ever a struggle to find out about aid projects in a developing country, or to follow the money through NGOs and implementing partners. Having laid these important foundations, we will be able to move on to much more important and exciting innovations which support people in developing countries to use and repurpose this information and use it to change their world.
Will the largest aid donors hide behind China to excuse their inability to make substantial improvements in foreign aid? How can Busan balance the desire to be more universal with the pressing need for real changes in the way aid is given?
Much of the development policy world converges on Busan this week for the High Level Forum on Aid Effectiveness. This is the fourth in the series after Rome (2003), Paris (2005) and Accra (2008). The Guardian has a good ‘explainer’ about the issues being discussed.
Behind the scenes here in Busan, the trade-off is between getting everybody on board, including new providers of south-south cooperation such as China, India and Brazil, and pushing the boundaries towards more effective aid from existing donors.
Liberian children hold Chinese flags before the arrival of China's President Hu Jintao
Busan offers the possibility of a globally inclusive agreement, especially bringing in the important providers of south-south cooperation such as China and India, and non-traditional donors such as foundations and the private sector. But a broad consensus may only be possible if the text is sufficiently watered down. New donors are unlikely to sign up to an agreement which seeks faster improvements in development assistance by setting more explicit and demanding targets than were agreed in Paris and Accra. Most would not be willing to sign up even to long-established effectiveness principles such as untying aid, more predictability, and greater transparency and accountability. Nor are they likely to agree to be bound by any kind of monitoring or enforcement regime.
Many of the organisations involved in Busan have a strong institutional interest in emphasizing the benefits of a ‘big tent’ agreement:
- Individual DAC donors will be glad to talk up the importance of drawing new players into the process. They can trumpet this as a big step forward, especially to domestic audiences which feel threatened by China’s growing global role. They can pretend to be disappointed that it has required them to accept a rather bland communique which steps back from their existing commitments, while being privately relieved to have been let them off the hook for the improvements in aid to which they have agreed in the past and which they have shown themselves unwilling to make.
- A dialogue with new donors could give a new raison d’être to the DAC, an OECD body which is otherwise staring into the abyss of obsolescence. The DAC is a club of traditional government donors which constitute a dwindling proportion of global aid; nobody any more believes that an exclusive group of donors should set the rules of the aid system; and anyway DAC members themselves have failed to implement the principles they have agreed. It is not lost on the 150 staff of the DAC that hosting a dialogue between traditional and emerging donors could give the DAC a new lease of life.
- The Korean hosts will be looking ahead to how the Busan conference will be remembered. Building the bridge to new Asian donors would be a natural legacy. Korea has itself only recently joined the DAC and they would be very glad to shift the discussion away from compliance with a (largely European inspired) aid effectiveness agenda towards the value of a broader dialogue with emerging donors and the private sector.
- China would be happy to have a declaration which validates their approach to development cooperation, but they do not regard this as important. They are apparently sending a small, low-key, delegation of about six people to Busan, and it is rumoured that they will either not sign the outcome document at all, or that they will sign as a developing country but not as a donor. China believes that different rules should apply to ‘south south cooperation’, so in principle they do not regard any of this discussion as applicable to the aid they give. In any case, China gives very little actual aid (as defined by the DAC) – probably less in total than Switzerland. The vast majority of China’s involvement in developing countries takes the form of quasi-commercial trade credits which are not included within the scope of these aid effectiveness discussions.
Given these strong institutional interests which favour getting China on board, it is no surprise that the latest (5th) draft of the Busan Outcome Document is a largely anodyne document with few additional commitments by donors. The UK Aid Network has a concise update about this here. Unless this changes in the next few days, Busan will be remembered as the conference at which traditional donors retreated from the explicit, time-bound commitments and monitoring arrangements which they agreed in Paris in 2005.
There is one group of stakeholders with something to lose from this: the people of developing countries who are the intended beneficiaries of aid, whose voice is not strongly heard in the discussions. They are the people who lose out when aid is wasted because it is unpredictable, untransparent and unaccountable. It is their services, not the aid bureaucracies, which suffer when there is duplication and burgeoning bureaucracy. It is their businesses which are damaged by tied aid. It is their governments which become answerable not to their citizens but to an unaccountable group of donors. A decision to accept a weaker, more universal agreement in Busan will satisfy the donors, but the poorest, most vulnerable people in the world will pay the price.
As Gideon Rabinowitz of the UK Aid Network pointed out last week, the Accra communique was similarly disappointing at a similar stage before the 2008 conference. That time round, a group of European development ministers arrived in Accra and insisted on significant improvements, causing outrage among other participants, not least the bureaucrats who had sat through endless drafting meetings over the preceding months only to find their work had been nugatory. But this year, those donors seem to be much less inclined to use any of their economic or political capital pushing for improvements in aid. So it will suit them to emphasize the importance of a new agreement which includes China, and hide behind this as an excuse for their own inability to summon the political will to make aid more effective.
There is, however, another approach which could both and secure broad international agreement and still lead to substantive improvements in aid effectiveness. We should learn from what has happened since the Accra High Level Forum in 2008, in particular on transparency which is the issue on which there has been most progress. Donors accounting for half of global aid are now publishing their aid data through the new International Aid Transparency Initiative, IATI. But this has not been achieved by the official DAC processes which are limited to moving at the speed of the slowest ship in the convoy. Instead, a coalition of willing donors has worked alongside the official process to agree and implement an international aid transparency standard.
There is a lesson here as we consider how to move forward from Busan. A possible approach is to accept an outcome document setting out principles which represent the ‘highest common factor’ among all the participants, which is buttressed by (and which could endorse and launch) various coalitions which are willing to move forward more quickly on particular issues (e.g. predictability, using country systems, and so on). These coalitions can then be pathfinders, leading by example and exerting peer pressure on other donors. Taxpayers in donor countries can put pressure on their governments to join these coalitions, so that their aid also benefits from the improvements which the coalitions are bringing about (in the way, for example, that the Canadian NGO Engineers Without Borders has put pressure on the Canadian government to join IATI.) There is more hope of achieving real progress through a series of path-finding coalitions than by investing all our energy in a universal agreement which is acceptable to everyone and satisfies nobody.
In two weeks there will be a huge international meeting on aid effectiveness in Busan, South Korea. Ban Ki-moon and Hillary Clinton will be among the two thousand delegates who gather together to discuss improvements in how aid is delivered. Though David Cameron and Barack Obama said (in a joint statement) that they would ensure that Busan “transforms the way bilateral aid is delivered around the world”, it looks increasingly as if the meeting will, as Simon Maxwell notes on his blog, produce “a bark but no bite.” Though it is full of worthy intent, there is little in the latest (fourth) draft of the Busan Outcome Document which suggests that it will result in more changes in donor behaviour than did the communiques from previous summits in Rome (2003), Paris (2005) and Accra (2008).
Two key pieces of background evidence have just been published which provide the backdrop to the discussions in Busan. First, the Broookings Institution and my colleagues at the Center for Global Development have published an updated Quality of Official Development Assistance index (QuODA), which scores donors on the effectiveness of their aid. Second, Publish What You Fund has published an Aid Transparency Index ranking donors according to how much information they make available about the aid they give.
CGD and Brookings Quality of Aid Index (QuODA)
QuODA is an assessment of the quality of aid provided by 23 donor countries and more than 100 aid agencies. It uses 31 indicators grouped in four dimensions that reflect the international consensus of what constitutes high-quality aid:
- Maximizing Efficiency
- Fostering Institutions
- Reducing Burden
- Transparency and Learning
QuODA itself does not provide an overall ranking of donors. The reason is that your view about the overall effectiveness of a donor will depend on how much weight you place on each indicator. But for what it is worth, here is how the ranking of donors looks if you give equal weight to each of the four QuODA dimensions:
Donors may quibble about which of the indicators are important, though all the indicators reflect solid academic research and experience about what makes aid effective, embedded in the international consensus about aid effectiveness to which they have signed up. For anyone wanting to focus on particular indicator and dimensions of effectiveness, the data are published online in an interactive web tool.
My two observations about this are:
- almost every donor has something to be proud of (nearly every donor is in the top half in at least one dimension) but all donors have considerable room for improvement;
- the multilateral agencies do better, on the whole, than the bilateral agencies; this may be because they are less susceptible to pressures from national donor politics; the World Bank, in particular, scores extremely well across the board
The Publish What You Fund Pilot Aid Transparency Index
The PWYF Aid Transparency Index, published today, dives deeper into whether donors publish adequate information about the aid they give. They analyze 58 organisations on 37 dimensions of transparency, mainly relating to whether information is available about particular projects and activities.
The World Bank tops the transparency index too. Indeed, there appears to be a strong correlation between aid transparency and aid effectiveness more generally. The chart below plots the PWYF transparency scores against the average of the three dimensions of QuODA which do not relate to transparency.
This correlation between aid effectiveness and transparency could come about for three reasons:
a. common causes: well-governed and well-managed aid agencies are likely to be both more effective and more transparent;
b. effectiveness causes transparency: aid agencies that are ineffective and know it are likely to want to be secretive; agencies that are effective are likely to want to tell the world more about what they do;
c. transparency causes effectiveness: agencies that are open and transparent are less likely to make decisions to use aid ineffectively because they will be held to account by politicians and the public.
Conclusions
The good news from both the QuODA index of aid quality and the PWYF Aid Transparency index is that it is possible for donors to live up to the goals they have set themselves to make aid more effective and more transparent. Most donors do well on some indicators, and yet are a long way behind the best on others. The bad news is that there is a long way to go before donors overall live up to the pledges they have given.
Time will tell whether yet another conference, and yet another communique, will make any more difference to donor behaviour than have the last three. However, there does now seem to be welcome momentum towards putting more information about aid into the public domain, and we may hope that this will, over time, provide both the information and political pressure needed to make aid more effective. If Busan succeeds in giving a big push to aid transparency, that may be the biggest contribution it can make towards the ambitious goal of ‘transforming’ aid.
This joint post with Rita Perakis first appeared on the CGD blog.
Has the aid industry introduced the reforms it agreed in 2005 to make aid more effective? No, according to the survey published last week by the OECD DAC. In this blog post we reflect on why this matters, and what it means for the forthcoming summit in Busan.
The development sector is in a mess. Developing countries have to deal with a large and growing number of partners, each with separate agendas, priorities, and requirements. Meetings, reports, milestones and systems multiply. Skilled staff are hired away from governments and from business to serve in local agency offices or NGOs. Funding is fragmented and unpredictable, which means that developing countries are often unable to bring together the scale of long-term, predictable finance needed to undertake significant institutional reform and service delivery. As just one example – in Vietnam, it took 18 months and the involvement of 150 government workers to purchase just five vehicles for a donor-funded project, because of differences in procurement policies among aid agencies.
None of this is news, nor is it disputed. The donor club of industrialised countries, the DAC, says:
“poor co-ordination and unpredictable aid waste funds that should be eradicating poverty in the world’s poorest countries.”
Six years ago developed and developing countries committed themselves to fixing these problems. The Paris Declaration on aid effectiveness set out five principles to make aid more effective, and a set of thirteen measurable targets which they aimed to reach by 2010.
Last Thursday, the Development Assistance Committee of the OCED (the DAC) published the results of the monitoring survey. The DAC is not known for hard-hitting criticism of its members. But even this mild-mannered organisation feels compelled to call the results ‘sobering’.
Of thirteen measured targets to improve the effectiveness of aid, just one has been met. What was this one milestone which donors were able to reach? They lived up to their commitment to talk more to each other (“Strengthen capacity by coordinated support”).
The DAC reports that the areas of progress have been largely on the part of developing countries. These include putting in place sound national development strategies and results frameworks, and improvements in public financial management systems. According to the report, the areas of little or no progress are overwhelmingly on the part of donors: aid is still not on recipient countries’ budgets, is no more predictable, and is becoming increasingly fragmented.
When developing countries fall short of targets set for them by donors, we say they are ‘off track’ and start to talk about cutting off their aid. What happens when donors fall short of targets they have set themselves?
The DAC points out that although the overall results are disappointing, some good progress has been made in some places. That’s true, and it is interesting that there is no obvious pattern. For example, though Tanzania is highly aid dependent, it appears to have been effective at imposing more discipline on donors. Some of the results suggest that the survey leaves too much room for interpretation: for example, Japan’s relatively strong performance against the Paris indicators is difficult to reconcile with perceptions on the ground.
The Paris indicators are not a direct measure of aid effectiveness. They are measures of progress towards goals which are thought by the Paris signatories to be associated with better aid. But that connection is tenuous: for example, though Tanzania has done well at pushing donors to comply with the Paris principles, nobody seems to think that aid in Tanzania now delivers more bang for the buck than aid elsewhere (rather the opposite, if anything).
It should be no surprise that progress towards the Paris principles has been slow. The aid system represents a compromise between the interests of donors and recipients, mediated by organisations and agencies with interests of their own. For example, donors have not been willing to make aid more predictable. That’s because there is political value to them in being able to dispense or withhold aid according to the latest fad or political pressure, and aid implementing agencies enjoy having the power of day-to-day control. Though retaining this discretion is estimated to reduce the overall value of aid by 15-20 percent, the political and institutional benefits to donors apparently outweigh the disadvantages of supplying less effective aid – perhaps because the people who suffer from ineffective aid don’t have votes in donor countries. Making an international commitment to fix this could help a little, because it adds very slightly to the political cost of lack of predictability. But the political cost of failing to meet this commitment is evidently too small to make a difference to the political calculation. That’s what we see in the monitoring survey: the proportion of aid that is classified as predictable has risen from 42% in 2005 to – drum roll – 43% in 2010: some way short of the target of 71% by 2010.
Can the forthcoming summit in Busan in November change this? It is hard to see how yet another conference with yet another communiqué will change these underlying political dynamics. The latest news is that Ban Ki Moon and Hillary Clinton are both planning to attend. Does the political weight of a communiqué increase in proportion to the size of the motorcades at the summit?
The political constraints which lead to ineffective aid are genuinely difficult to overcome. This should be ‘sobering’ to donors as a measure of their inability to fix long-standing and well-documented problems. But it should also be ‘sobering’ to those same donors who travel around the world pressing developing countries to implement reforms in the face of much more substantial political constraints. If donors cannot implement something as simple and uncontroversial as coordinated country missions or common procurement rules, why do they expect developing countries to be able to implement changes in land tenure or public enterprise reform?
We should give credit to the DAC for getting an agreement to reform, putting in place a monitoring system, recording the progress that has taken place, and stimulating the debate about aid effectiveness. But it is neither desirable nor sustainable that the donor club should be responsible for tracking the donors’ performance against their commitments. A more independent watchdog would surely have reported donors’ failure to meet 12 out of 13 targets with a greater sense of outrage.
Finally, all this is becoming increasingly anachronistic. The Paris principles are most obviously relevant to countries that are low income and stable. But there are now just thirteen of those: most of the world’s poor now live in middle income countries and fragile states. The DAC represents the donors who are members of the OECD, but does not include China and other emerging powers, foundations, private giving and NGOs, many of whom do not share the DAC’s view about what makes aid effective. The challenge for Busan is to define the role of aid in helping to build a sustainable, resilient and inclusive global economy.
On Friday the World Bank London office had a meeting on ‘the Future of Aid’. The meeting was, according to the tortuous language of the invitation, “conducted in an informal manner with interested stakeholders from governments, civil society, private sector, media and academia with a view to explore new ideas on how best to explore cooperation between European actors and the World Bank Group in addressing these challenges.”
Annoyingly the meeting was held under The Chatham House Rule which means I am not allowed to report who said what. (Tangential thought: I am considering ignoring this in future if the invitation does not make it clear that this is the basis on which the meeting is being held.) I am allowed to tell you that the group included people from ODI (Simon Maxwell & Andrew Rogerson), a co-author of Philanthrocapitalism (Mike Green), DFID (Paul Healy Healey & Laura Kelly), the EBRD (Erik Berglöf, Gaspard Koenig & Hans Peter Lankes), and representatives from KPMG (John Burton), ActionAid (Lucia Fry), Save the Children UK (Jessica Espey & Kate Dooley) and BOND (Joanna Rey).
It turned out to be an interesting discussion.
First, there was considerable pessimism about the public’s appetite for aid. Opinion polls depend heavily on how you ask the question, but a common theme seems to be that the public’s concern for poverty and development is stable and quite high; while the public’s confidence in government aid is falling rapidly. There are several reasons why these may be diverging, which are not mutually exclusive. Declining support for aid spending may be the effect of the economic downturn; it may reflect a trend towards public distrust of bureaucracies; it may be the long term consequence of aid’s failure to live up to its supporters’ excessively grandiose claims of what it can achieve. There was some debate about whether a greater focus on ‘results’ could reverse this. Hardly anyone seriously argued that declining public support is merely a temporary consequence of the economic downturn which will reverse automatically when incomes start to grow again.
A second interesting theme was the tension between more effective aid, and aid which donors are willing to provide. It is possible that as the system shifts towards greater recipient country control of how aid is used (as envisaged under the Paris Declaration), so support for aid in donor countries declines. If you can’t use aid to promote your economic, commercial, security and strategic interests, then you might not want to give it at all. Bertin Martens memorably pointed out that the end of structural adjustment programmes in the 1980s (under which donors attempted to impose various policies on recipient countries) was followed by sharp decline in aid in the early 1990s. If you see the aid relationship as an equilibrium between the interests of the donors and the interests of the recipients, and if the Paris Declaration is an effort to move away from this equilibrium by reducing the power of donors and increasing the power of recipient countries, then perhaps declining aid budgets today are a consequence these modest moves away from the equilibrium. There is almost no public support for budget support (a form of aid which embodies many of the Paris principles) and budget support may now in retreat – so perhaps the aid system was temporarily pulled from its equilibrium by Paris, and may now be heading back to it again. In other words, there may be a choice between an abundance of somewhat ineffective aid which balances the interests of recipients and donors, and aid which is less conducive to the interests of donors, more effective at reducing poverty, but much less abundant. Aid agencies have a stronger internal interest in abundance than in effectiveness, and so will tend to support a return to the equilibrium in which aid is popular and plentiful, but not tremendously effective.
The third theme was the most interesting. Mike Green recalled an idea from Empire, a ghastly book published in 2000 by Antonio Negri and Michael Hardt, which suggested that activists may organize themselves as a ” post-modern posse”. Mike suggested that, in the absence of effective mechanisms for global governance to provide public goods in a rules-based system, we are left tackling these problems in temporary coalitions, or posses, which come together outside formal structures and without formal legitimacy. Examples range from the coalitions of the willing which come together to support military intervention, to the vertical funds which have proliferated in the aid industry. (Mike was not suggesting that this was desirable, but pointing out that this may be what happens in a second-best world without effective global institutions). This idea clearly resonated with the group, which recognised the applicability of the metaphor as a description of today’s development system. (Update: more on the ‘posse’ idea from Mike Green and Matt Bishop here.)
My own view, for what it is worth, is that:
- we should consciously reposition aid as support to those who are most marginalised to provide them with access to key services such as food, water, health and education, and move away from the idea that the purpose of aid is to accelerate economic development;
- that’s not because economic development isn’t an important objective; but it may not be the best use of aid;
- the main things that industrialised countries can do to promote economic development in the developing world may be changes in other policies ‘beyond aid’ such as trade, climate change, migration, climate change, cooperation on tax, tackling corruption and illicit financial flows; and arms sales;
- some organisations which profess to be interested in development are too heavily focused on aid and not enough on how we can improve these other policies.
This blog post was first published on the CGAP Microfinance blog.
It seems extraordinary that after 50 years of international aid, there is still no consensus on whether it works. Zambian economist Dambisa Moyo (Dead Aid) has argued that aid is not only ineffective, but is actually detrimental to development. Bill Easterly (The Elusive Quest for Growth) says that ‘trillions of dollars’ of aid have had little effect. Others, notably Jeff Sachs (The End of Poverty) and Roger Riddel (Does Foreign Aid Work?), have argued that there is plenty of evidence of the success of individual aid projects, and that it has brought about substantial improvements in people’s lives. If we cannot even agree on whether aid works at all, how can we address the more important and nuanced questions such as how to make that aid more effective?
At the heart of this disagreement is not a dispute about the impact of aid but about what we mean when we ask whether ‘aid works.’
Microfinance is an example which mirrors the issues in the wider aid industry. Microfinance has often been touted as a bottom up solution to poverty. The Nobel Peace Prize 2006 was awarded jointly to Muhammad Yunus and Grameen Bank “for their efforts to create economic and social development from below.” Give people access to credit, the story went, and they will be able to invest in businesses of their own. Instead of needing long-term support, the poor will be able to stand on their own two feet. The Acumen Fund promises “Dignity not Dependence. Choice not charity.” This attractive prospect is one reason that microfinance has been so successful in raising donor funding, especially from foundations and private giving.
Following dozens of studies of microcredit and microfinance, there is little credible evidence that microcredit itself lifts people out of poverty. The two good randomized controlled trials find no impact of microcredit on poverty (though to be fair they have not yet been running for very long). As the evidence has challenged these grandiose claims, some in the microfinance industry have chosen to defend aspirations which are both more humble and more plausible. First, there is growing recognition that much else besides access to credit is needed to enable poor people to run a successful business, and so microfinance can at best make a contribution to a wider set of circumstances needed for development. Second, there is recognition that, even if microfinance is often used for consumption rather than investment, it is still a significant improvement in people’s lives if they have more control over their finances and are better able to deal with uncertainty and volatility in their incomes. Third, microfinance may lubricate the process of experimentation and failure whichmay help successful firms and enterprises to emerge.
The rest of the aid industry would also benefit from a more nuanced account of its objectives. We often talk about aid as if it falls into two categories: humanitarian aid and development aid. But in reality this is a false dichotomy: most aid falls into neither category. More than 60 percent of aid is a long-term contribution to the provision of key services such as education, health, water and sanitation, and an investment in the institutions needed to provide them in the future. Improving people’s lives is a realistic and laudable goal. Measured against this more humble (but still very important) objective, there is plenty of evidence of the success of aid. Aid has helped to abolish smallpox, to increase the number of children in primary school, and to give families access to clean water and improved sanitation. Charles Kenny (‘Getting Better’) has convincingly argued that when measured by almost every standard other than income, the quality of life has improved substantially in developing countries. Foreign aid has made a significant contribution to these improvements.
It is tempting to make the bolder claim that investments in education and health also improve growth and development in the long run. Perhaps they do – but, as with microcredit, the evidence for this relationship is weak. Why is it not sufficient to say that people everywhere should have access to these services – including financial services – whether or not this leads to long-term transformation of their economy and society?
Everyone wants developing countries to escape aid dependency, and most people recognized that this requires sustainable growth and jobs. Because this is such a compelling objective, the development industry has been tempted to justify aid on these grounds. But the evidence from opinion polls and focus groups suggests that the public is willing to support aid which demonstrably meets immediate human needs irrespective of whether this contributes to long-run growth. By setting excessively ambitious objectives for aid, the industry risks alienating the public from their emotional connection with what aid can achieve, and asks to be measured by standards that it is unlikely ever to be able to show that it meets.
There are many flows of finance to developing countries which will contribute to investment and growth, including direct investment, portfolio capital flows and remittances. The main drivers of growth will come from the country itself through private and public investment. Aid is a small proportion of the finance for developing countries. But it is a precious resource because, unlike other sources of finance, it can help meet the needs of the most marginalized communities, women and girls, and people living in long-term chronic poverty. If we want to see aid used effectively, we should demand that it is used for these purposes for which it has a unique contribution to make. Just because growth is a priority does not mean it is a priority for aid.
Measured against reasonable claims about what aid can achieve, it is demonstrably effective. As we have seen with microfinance, the industry damages rather than enhances its case by overstating what aid can achieve. By setting realistic objectives, we can both make aid more effective, and demonstrate the difference it makes.
Primary school close to our house in Addis Ababa
Living in Ethiopia for the last three years, I saw aid working every day. I saw children going to school, health workers in rural villages, and food or cash preventing hunger for the poorest people. The academic debates about aid effectiveness seem surreal when you are surrounded by tangible, visible evidence of the huge difference aid makes to people’s lives.
But on the whole the sceptics are not disputing that kids are going to school because of aid. They are asking what effect that has on the country as a whole. Does it lead to economic growth? Does it drive up the exchange rate and so damage competitiveness? Do governments become dependent on donors and so less accountable to their own citizens? Does aid keep the bad guys in power?
It is possible that aid is effective in terms providing people with basic services, and at the same time that it is not effective at increasing economic growth. It is even possible that aid simultaneously does short-run good (better services) and long-run harm (worse institutions).
It was this difference between perspectives which made me want to respond to the call for evidence in an investigation into aid by the Economic Affairs Select Committee of the British House of Lords. This committee, which includes some well-known economists and other public figures, is examining the ‘Economic Impact and Effectiveness of Development Aid’.
My written submission is here. It is just six pages long. ( I’m very grateful to Stephanie Majerowicz for her help putting this together.)
The submission begins by trying to address the question of what aid is for, which seems to be the source of much of the confusion about whether aid works. Aid is often regarded as having two purposes: humanitarian aid to alleviate suffering usually in an emergency, and development aid to promote economic growth and sustained prosperity. But this is a false dichotomy: most aid falls into neither category. About two thirds of British bilateral aid is spent on improving services such as education, health, water and sanitation. This aid is not a temporary humanitarian response to an emergency, but a long-term contribution to the provision of key services and an investment in the institutions needed to provide them in the future. The success of this aid is not best measured by whether it leads to growth in the short or medium term, but by the improvements it brings about in the quality of people’s lives.
The submission then reviews the evidence about whether aid leads to economic growth (answer: we don’t know) and whether aid improves people’s lives (answer: yes it often does). The more interesting question is not whether aid works, but which aid works.
But there are also possible adverse effects of aid, and these are potentially serious. The submission suggests that these may be mainly a consequence of how aid is given and that they can largely be eliminated if donors give better aid. But that requires donors to overcome domestic political obstacles to reform of aid.
The evidence finishes with ten suggestions for how to make aid work better. They are:
- Spend more through the multilateral system
- Make aid more predictable
- Make aid transparent, accountable and traceable
- Build the accountability of governments to their parliaments and citizens
- Focus on results and use this to simplify aid
- Invest more in global public goods, especially new technologies
- Focus aid on people in chronic poverty, and on women and girls
- Leverage the private sector
- Use innovative finance to increase the productivity of aid
- Learn more and fail safely
It is a good discipline to be concise, but it is not possible to do full justice in six pages to the nuances of these issues. I have tried address the big questions with what I hope are balanced and dispassionate judgments. I hope you will let me know in the comments if you think I’ve got these right.
Read the full submission here.
This blog post was also published on CGD Views from the Center.
The interesting question in development is not whether aid works or does not work. Not surprisingly, the answer is that some aid works and some doesn’t. A more interesting question is: what kind of aid works best?
Nick Kristof has a good article (if a little simplified) in the New York Times today about randomized trials, which he describes as ‘the hottest thing in the fight against poverty’. This new wave of rigorous evidence about impact is helping us to understand which policies and programmes in developing countries work well (whoever pays for them) and which do not.
I especially enjoyed his digression about the importance of economists:
When I was in college, I majored in political science. But if I were going through college today, I’d major in economics. It possesses a rigor that other fields in the social sciences don’t — and often greater relevance as well. That’s why economists are shaping national debates about everything from health care to poverty, while political scientists often seem increasingly theoretical and irrelevant.
Economists are successful imperialists of other disciplines because they have better tools. Educators know far more about schools, but economists have used rigorous statistical methods to answer basic questions: Does having a graduate degree make one a better teacher? (Probably not.) Is money better spent on smaller classes or on better teachers? (Probably better teachers.)
I suspect not everybody will agree with this.
I’m back from holiday, so here is the promised second of a pair of posts reflecting on three years of working on aid transparency. In the first post I talked about eight lessons mainly about why different kinds of aid transparency are important. In this post, I’m going to look at the next steps, particularly focusing on how we can provide meaningful transparency for citizens in developing countries.
There is a lot of detail below, so for busy readers here is a summary of the proposed ten steps for aid transparency.
1. Donors cannot achieve meaningful user-centred transparency just by putting project data on their websites. Users need information which comes from many different organisations simultaneously. Yet it is not realistic to try to maintain lots of different manually-updated databases which collate information for users. The answer is for organisations to publish online all the information they have about aid projects and programmes, in a common, reusable format, which can then be used as the basis for user-centric databases and applications. The International Aid Transparency Initiative (IATI) is the best chance for a generation of creating such a public infrastructure for information about aid. All donors, foundations, international organisations, NGOs and aid contractors should implement the IATI standard as the key first step to meaningful, user-centred aid transparency.
2. Any organisations which do not implement IATI voluntarily should be pushed to do so by the organisations and people who fund them. For example, official aid agencies should require every organisation to whom they give a grant or contract to implement IATI as a condition of handling public money. Citizens should refuse to put money into a collecting tin if the charity is not implementing IATI. Governments should consider making IATI compliance a precondition for charitable status and tax relief. Developing country governments should make IATI compliance a precondition of local registration by international NGOs.
Google has a policy that it should eat its own dogfood
3. Donors, foundations and NGOs should ‘eat their own dogfood’ – that is, any information on their website and any analysis and data that they publish about aid should use be based on the publicly available data infrastructure. This will give the organisations an incentive to ensure that the information they make available through IATI is up-to-date, comprehensive and accurate and that the system is fit for purpose.
4. Once donors and foundations are (a) publishing their data through IATI and (b) using IATI for their own websites and analysis, they should consider (c) helping other users, especially in developing countries, to make the best use of this information. But donors’ priority should be getting their own house in order by publishing their information in a reusable format, since this is something only they can do, and using that public data infrastructure themselves, before they help others to do so.
5. One of the highest priorities for new information about aid is that all aid spending should be classified in future according to the recipient country budget classifications as well as agreed international classifications. The Technical Advisory Group for IATI should agree the mechanism for this as soon as possible.
6. It seems so obvious that it shouldn’t need saying, but aid would clearly be more effective if we had more information about the future plans of donors, foundations and NGOs. Homi Kharas, in Measuring the Cost of Aid Volatility, estimates that the cost to aid recipients of historic unpredictability of committed aid flows is at least 15 percent. It could be much higher. Finance ministries, line ministries, the IMF, other donors, NGOs and the private sector would all do a better job with their money if they knew what was planned by others. Organisations should publish whatever they know about their future aid plans, generally (with some possible exceptions such as for procurement) at the level of detail they know it. This is likely to be the hardest part of IATI for many organisations, as few have mechanisms to keep systematic track of their forward spending plans.
7. A global system of traceability in aid, enabling money to be tracked from taxpayer to services delivered, via multiple layers of multi-donor funds, international and local NGOs and private sector contractors, is less difficult and expensive to implement than you might think. Traceability of aid would bring about a huge step forward in efforts to make aid more effective and less prone to corruption and waste, and for building public support for aid. Done right, it could also substantially alleviate the reporting burdens of aid recipients, NGOs and implementing agencies, and reduce donors’ costs of monitoring compliance. Priority should be given to implementing this part of the IATI standard.
8. Donors, foundations, NGOs and implementing organisations should start recording and publishing detailed geographical information about aid projects and programmes using the newly-agreed IATI standard format for geocoding of aid, and they should require their implementing partners to do the same.
9. Some donors and agencies have defined, or are in the process of defining, their own internal standardised output indicators. Organisations should now make a big effort to reach an international agreement on a common set of standardised ouput indicators to facilitate international comparability across organisations. This information can be reported through IATI.
10. When we connect feedback from citizens in developing countries to a rich public data infrastructure about aid, we will have a much more realistic inderstanding of the impact and effectiveness of aid. That day is coming sooner than most of us realise.
You will doubtless think me guilty of hyperbole when I say that the emergence of an open, international infrastructure for development information has the potential to transform the development business, much as the internet has transformed so much of our society, and for similar reason. I’m sorry that this is an absurdly long blog post, but I hope it will convince you of the amazing opportunities which are there if we seize them.
I’ve spent the last three years working on aid transparency. As I’m moving on to a very exciting new role (watch this space for more details) this seems a good time to reflect on what I’ve learned in the last three years.
This is a self-indulgently long essay about the importance of aid transparency, and the priorities for how it should be achieved. Busy readers may want to read the 8-point summary below. And for a very clear and concise introduction to the importance of aid transparency, take a look at this video by my (former) colleagues at aidinfo.
The 8-point summary
Here are what I think are the eight most important things I’ve learned in the last three years about transparency in general, and aid transparency in particular:
- To make a difference, transparency has to be citizen-centred not donor-centred.
Citizen-centred transparency would allow citizens of developing countries to combine and use information from many different donor agencies; and provide aid information compatible with the classifications of their own country budget. - Today’s ways of publishing information serve the needs of the powerful, not citizens
Existing mechanisms for publishing aid information were designed by the powerful for the powerful. Until the aidinfo team started 3 years ago, nobody had ever done a systematic study of the information needs of all stakeholders, including citizens, parliamentarians and civil society, let alone thought about how those needs could be met. - People in developing countries want transparency of execution not just allocation
There are important differences between the information requirements of people in donor countries and people in developing countries. Current systems for aid transparency focus mainly on transparency of aid allocation, because that is what donor country stakeholders are largely interested in, and not enough on transparency of spending execution, which is of primary interest to people in developing countries. - Show, don’t tell
Citizens in donor nations are increasingly sceptical of annual reports and press releases. In aid as in other public services they want to be able to see for themselves the detail of how their money is being used and what difference it is making. They increasingly expect to engaged, and are less willing to be passive funders leaving the decisions entirely to ‘experts’. Donor agencies – whether government agencies, international organisations or NGOs – will have to adapt rapidly to become platforms for citizen engagement. - Transparency of aid execution will drive out waste, bureaucracy and corruption
There is, unfortunately, quite a bit of waste, bureaucracy and corruption in the aid system. There is good evidence that this kind of waste is rapidly reduced when the flow of money is made transparent. Corruption and waste prosper in dark places. - Social accountability could be Development 3.0
The results agenda in aid agencies is currently too top down and pays too little attention to the power of bottom up information from the intended beneficiaries of aid. Increased accountability to citizens may be the key to unlocking better service delivery, improved governance and faster development. - The burden of proof should be on those who advocate secrecy
We have published a compelling business case for greater transparency, with all the uncertainties this kind of analysis entails. So where is the business case for secrecy, which would be far harder to quantify or defend? Why does nobody even ask for it? Why is the (inevitable) uncertainty in this kind of analysis allowed to count against the case for transparency, when the same uncertainty would deal a much greater blow against the case for secrecy? - Give citizens of developing countries the benefit of the doubt
Transparency is necessary but not sufficient for more effective aid. But the fact that transparency alone will not solve every problem should not be an excuse for aid agencies to shirk their responsibilities to be transparent. Nor should we be too attentive to vested interests in the aid industry telling us that transparency is not enough. Citizens of developing countries will be more innovative and effective than some people give them credit for when we give the information they need to hold the powerful to account.
That’s the summary. If any of that whets your appetite and you want the long version, read on. In my next post, I’ll look at the ten steps that development organisations should take towards aid transparency. Continue reading
On the Oxfam blog, Max Lawson has an excellent guest post telling the story of how Malawi has used an extensive programme of fertilizer subsidies to generate seven years of economic growth, reduductions in poverty and child deaths.
Max cites a forthcoming paper by Andrew Dorward and Ephraim Chirwa (ungated version here). Dorward and Chirwa argue that:
Malawi’s agricultural input subsidy programme addresses a low maize productivity trap that leads to food insecurity and poverty, and constrains economic growth and, paradoxically, diversification out of maize and agriculture. This low productivity trap arises as a result of severe seasonal credit constraints affecting very large numbers of poor, food deficit farming families, together with thin and high risk, high margin input and maize markets. The key successes of Malawi’s subsidy programme arise where it relieves both affordability and profitability constraints to increased staple crop productivity from increased input use, and in doing this both raises land and labour productivity and improves food security for large numbers of poor households through some combination of increased real wages and reduced food prices.
The only part of Max’s post that I disagree with is his remark that ”we should leave our economic theory at the door and instead focus on what works empirically.” As Jonathan points out in the comments, economic theory tells us that government intervention may be an appropriate response to market failures. While recognising the success of the programme so far, we should not stop asking whether the same results could be achieved more cheaply and more sustainably with some other, even better approach.
A more relevant challenge is: why did some donors oppose this programme, and what have we (and they) learned from that error?
Dr Bingu wa Mutharika fought and won the 2004 election on a platform of guaranteeing food security. HIs proposals for a targeted subsidy was overturned by the Malawi Parliament in favour of a universal subsidy, which was introduced in 2005.
Election Poster for Bingu wa Mutharika
Donors are – on paper – committed to respecting government ownership and supporting the governments’ development programme. Yet despite clear national commitment, endorsed in a democratic election, donors generally opposed the introduction of fertilizer subsidies, consistent with the World Bank’s position throughout the 1980s and 1990s. The donors argued against the government’s proposed scheme because they thought it would be too expensive; it was insufficiently targeted on the poor; it would undermine private sector development; and because they doubted the capacity of the government to implement it.
When Malawi introduced its programme in 2005, the IMF and the US Government opposed it outright, on the grounds that it would damage the private sector. The World Bank, EU and UK Department for International Development adopted a more nuanced position: they argued that instead of a universal programme there should be “smart subsidies” which should be tightly targeted to reduce the costs, and that the programme should include an explicit exit strategy. DFID eventually supported the programme after extracting an agreement from the government that it would use private fertilizer suppliers. Some of the Scandinavian donors and UN agencies supported the programme from the outset, partly influenced by the apparent success of a local Millennium Villages Project.
The apparent success of the Malawi fertilizer subsidies is primarily a story about the Malawi government, not donors; though the scheme could not have been afforded, especially through the 2008 price hike, without donor funding. But it does give rise to two questions about donor policy and behaviour.
First, are donors still labouring under too simplistic a view of the role of government in the economy? Donors continue to be sceptical of agricultural subsidy programmes (which is rank hypocrisy, given the subsidies they provide their own farmers). This seems to be partly because we have an insufficiently rich analysis of the nature of the market failures and how they are best addressed; and partly because donors still suffer from the sustainability delusion, which requires them to oppose perfectly sensible government policies and programmes for which there is no identifiable exit. If the UK government were only allowed to implement inherently time-limited policies there would be no National Health Service.
Second, how should donors reconcile their own views of a policy with their commitment to respect country ownership? Donors are committed to support developing countries’ own development strategies. But what happens if they disagree either with the thrust of those policies, or with particular details? Should they refuse to finance them? Should they act as “critical friends”, identifying the shortcomings of the policies and seeking to get them changed? Should such opposition be private or public? How is that consistent with respecting country ownership? If they do try to change the policy how are they held to account when – as was apparently the case in Malawi – they are wrong?
I’d like to suggest two ways in which donors can better respect country ownership. First, where they have an opinion about a policy, they should produce publicly their analysis and evidence, to allow this view to be discussed as part of the public debate, rather than exert political and economic power behind closed doors. Second, there should be a version of the Salisbury Convention in aid: if a government is pursuing a policy for which it has an explicit mandate in a reasonably democratic election, the donors should not try to undermine it.
UPDATE: Smart commenters below ask two questions. First, is it premature to say this has been a success, until we have a year of bad rains? Second, were the donors as hostile as my blog post suggests? If you have insight into either question, please leave it in the comments below.
Shanta Devarajan asks if we have found Development 3.0
Shanta Devarajan, the World Bank Chief Economist for Africa, describes in an important new blog post the evolution of development policy in terms of changing ideas about market failures and government failures. In the 1950s and 1960s, he says, development was about addressing market failures by providing public goods, addressing externalities, and redistributing income to poor people. Starting in the 1970s, attention shifted to government failures such as weak capacity, rent-seeking, political patronage and corruption. Today, he says, many of the most egregious failures have been addressed, but the remaining failures directly hurt poor people.
On Shanta’s view, these failures arise from two kinds of imperfection in the public sector: that governments have difficulty monitoring and enforcing performance (leading to absentee teachers, clinics without drugs, etc) and imperfections in the political system which prevent it from serving the poor.
Shanta says that changes in technology and the rise of civil society can change all this:
Our understanding of government failure has coincided with two other developments. One is the rise of civil society’s voice in public discourse. The second is the technology revolution in poor countries. There’s a message here. Can we use technology and the voice of civil society to address these government failures? Rather than imposing conditions, we can empower poor people to monitor service providers. With some 80 percent of Africans having access to a cell phone, it is not difficult to have parents (or the students themselves) send an SMS message if the teacher is not in school, or there are no drugs in the clinic or the purported road maintenance program is not happening. This could do more for helping governments and donors get value for money than all the fiduciary controls we put in place. While we are at it, why don’t donors (including the World Bank) use technology to have the beneficiaries monitor and supervise development projects?
Can this work? Is social accountability a new model for development?
There is increasingly good evidence that transparency and accountability make a significant difference, in some cases surprisingly transformational. There is an increasingly impressive collection of individual case studies, rigorously evaluated, which demonstrate the effectiveness of this approach. For example, Jacob Svensson and Martina Björkman conducted a randomized field experiment in Uganda to test the effect of increasing community-based monitoring. They found that when communities more extensively monitored providers, both the quality and quantity of health services improved, including reducing infant mortality by a third.
There have, however, been no significant comparative studies bringing this evidence together. Until now. Rosemary McGee and John Gaventa have just published an extensive review of literature and experience across the field. There is a lot of material to digest, but here is the core of what they find:
…there are a number of micro level studies, especially in the service delivery and budget transparency fields. These begin to suggest that in some conditions, the initiatives can contribute to a range of positive outcomes including, for instance,
- increased state or institutional responsiveness
- lowering of corruption
- building new democratic spaces for citizen engagement
- empowering local voices
- better budget utilization and better delivery of services.
Reading the study, my conclusion is that we know rather more about the impact of greater accountability than we know about what we can do to bring that accountability about.
I currently work on transparency, because I think makes an important contribution to the ability of citizens to hold governments and donors to account and so improve service delivery and accelerate poverty reduction. There have been some good examples of how this can work in practice, which are summarised in Appendix 1 of this cost benefit analysis for the International Aid Transparency Initiative (page 23 of this pdf; disclosure: I’m a co-author). The most famous example is this study of the impact of information on funds flowing to schools in Uganda which found a strong relationship between transparency and funds flowing to schools, though the evidence was subsequently challenged. So while there is increasingly good evidence to confirm the intuition that transparency plays an important role, we need to understand a lot better how, and in what circumstances, transparency works, and particularly to understand better what else needs to be in place.
One issue on which Shanta is clearly right is that role that technology can play in supporting greater accountability. We know that technology does not end poverty, but we are seeing more and more examples of how technology – especially mobile telephony and text – has enabled and supported changes from mobile banking to wholesale agriculture markets. Just as technology underpins changes in markets (think of newspapers, or bookselling), so it can underpin changes in political economy and social accountability.
So is this, as Shanta says, Development 3.0?
Development is a long, slow, uncertain process and the road is bumpy and winding. Transparency and accountability are not a one bound and we are free solution, any more than the ‘big push’ or the Washington consensus which Shanta labels Development 1.0 and 2.0 respectively. But this time there is an important difference. The ‘big push’ and the Washington consensus were blueprints for a better world. Social accountability, by contrast, does not start with a preconceived idea of how resources should be used or services should be delivered: it seeks to change the dynamics of the system to make it more responsive and more likely to converge by itself on solutions which better serve poor people in developing countries.
A big challenge will be whether development agencies themselves are able to adapt. Their models for project cycle management are based on a top-down view: you specify the world you are trying to create (the “goal”) and then you articulate a series of outputs and activities which you expect will bring this about. It will be a big change – intellectually, organisationally and culturally – to modify their systems, incentives and procedures to a world in which donors work instead to help the citizens of developing countries to determine their goals and priorities and build their own systems to achieve them.
If what Shanta is calling Development 3.0 means that instead of offering a one-size fits all solution we should work to close the broken feedback loop so that communities themselves can find the answer, then I think this may indeed be a change of perspective on development worthy of a major version number.
Tim Harford had an interesting article in the FT in August arguing that we are better off in most walks of life if there is experimentation and a multiplicity of approaches.
But how do we value diversity in the aid business, when the prevailing consensus, embodied in the Paris Declaration, is that proliferation of aid agencies is a growing problem which is making aid less effective?
The aid system could in principle benefit from the emergence of new kinds of donors (specialised multilaterals such as GAVI, new donors such as China and Brazil, philanthropic foundations such as Gates, private non-profits such as Marie Stopes) working alongside conventional bilateral and multilateral aid. Different kinds of organisations could bring particular strengths which complement each other’s work.
However, in practice these different types of organisation do not seem to be playing to their strengths. Like kids playing football, everybody follows the ball instead of holding their position on the pitch.
Proliferation is a significant problem
We will come to the benefits of diversity among donors. But first let’s acknowledge that proliferation is causing real problems on the ground. Developing countries are having to deal with a large and growing number of partners, each with separate agendas, priorities, and requirements. Meetings, reports, milestones and systems multiply. Skilled staff are hired away to serve in local agency offices or NGOs. Funding is fragmented and unpredictable, which means that developing countries are often unable to bring together the scale of long-term, predictable finance needed to undertake significant institutional reform and service delivery. Donors lose influence, because they undermine each other; and yet developing countries are not able to keep track of, let alone exercise sufficient ownership and control over, an increasingly fragmented system of aid delivery. Public accountability is impossible, since nobody has a clear view of what resources are being used, by whom, or for what purpose. Donors face rising administrative costs when agencies proliferate, and the costs of coordination and harmonization rise exponentially with the number of aid agencies.
Here are three real life examples of the problems that are caused by the proliferation of aid agencies:
- In Vietnam, it took 18 months and the involvement of 150 government workers to purchase five vehicles for a donor-funded project, because of differences in procurement policies among aid agencies. (source: Knack/World Bank)
- In 2007 alone the EU countries launched 22,000 new aid projects inn developing countries, with an average budget of €0.7-1 million. The total costs of preparing new projects by EU donors (not the money needed to fund them, just the administrative cost of putting them in place) is estimated at between €2-3 billion per year. (source: EU)
- In the aftermath of the tsunami disaster a local doctor in Banda Aceh, one of the most affected areas, wrote: “In February, in Riga (close to Calang) we had a case of measles, a little girl. Immediately, all epidemiologists of Banda Aceh came in, because they were afraid of a propagation of measles among displaced people, but the little girl recovered very fast. Then, we realized that this was not a normal case of measles and we discovered that this girl has received the same vaccine three times, from three different organizations. The measles symptoms were a result of the three vaccines she received.” (source: Djankov et al)
(For more examples of proliferation badness, take a look at ‘The Governance of the aid system and the role of the EU’ by Owen Barder, Simon Maxwell, Mikaela Gavas and Deborah Johnson.)
Different types of agency could make different contributions
These problems are caused by a growing number of aid agencies doing broadly the same thing. That proliferation imposes substantial costs on donors and on recipient countries and this makes aid much less effective. The question is whether there are also benefits to having this large number of agencies, compared to delivering the same amount of money through fewer channels.
In principle a greater variety of different types of donor, if they focused on their specialisms, could strengthen the aid system, because they can make different kinds of contribution which could complement both existing donors and each other.
Here are some ways in which different types of donor can make different contributions:
- Philanthropic foundations, such as Gates, Ford, Hewlett and Rockefeller, are still tiny in comparison to government aid agencies, but they are increasingly important in particular sectors, notably health. In their recent book, Philanthrocapitalism, Matt Bishop and Mike Green argue that the growth of philanthropic giving should be welcomed, because these foundations bring a “businesslike approach to solving society’s problems”. According to this view, philanthropic donors bring new attitudes and ways of working. Foundations are frequently founded by successful entrepreneurs, so they may be more inclined to operate along business principles, such as making decisions based on evidence, tightly controlling overheads, adopting new technologies, and focusing more sharply on results. They may be willing to take more risks and accept more failures in return for bigger success than risk averse governments. Foundations may be more able and inclined to work closely with the private sector, which plays a key role in development, which official agencies have not found easy to do. Because foundations do not depend on public support for future funding, they may be willing to support unpopular causes, or investments which do not easily capture the public imagination (e.g. supporting statistical systems in developing countries).
- New government donors such as China and Brazil are playing an increasingly important role (though the Economist was wrong to suggest that Brazil’s aid budget is comparable to that of Canada and Sweden). This has caused concern among traditional donors, who worry that their implicit cartel is undermined by donors that are less concerned about governance and human rights, and that are prepared to be more open about its desire for access to raw materials and minerals. These new donors do not feel constrained to follow the DAC development model, and in many ways developing countries prefer the approach which tends to respect the sovereignty and ownership of developing countries. These donors rarely poach skilled staff; and they do not overstretch developing country governments with meetings, reports and workshops. They are also willing to invest in sectors that the DAC donors have moved away from, such as infrastructure, irrigation and university scholarships.
- The number of private charities is also growing, funded both by institutional donors and by private giving. Here in Ethiopia there are about 3,500 NGOs, spending about $1.5 billion a year (compared to the Ethiopian government budget which is about $4 billion a year). Private aid through charities tends to focus on supporting communities and individuals rather than governments. It tends to be more opportunistic and closer to the ground. These organisations can bring about results more directly although it is harder to bring about systemic change this way.
- Specialised multilateral global organizations – such as the Global Fund against AIDS, TB and Malaria (GFATM) – continue to grow in number. In principle, they can bring apply specialist skills and expertise, they can learn more systematically and spread knowledge more quickly, they can bring together a number of different donors, the public and the private sector to work in a more joined-up way on a particular issue, and they can raise money from the public because they can be more specific about what they do.
This changing landscape could benefit the aid system …
In an ideal world, if these different development actors played to their strengths, and stuck to their specialities, this growing diversity could strengthen the international aid system as a whole. Foundations could act like venture capitalists: taking bigger risks, and backing it up with rigorous evaluation and evidence, but leaving long-term financing of scaled up successes to official aid donors. Official aid agencies could focus on long term funding and resource transfer, and they could provide sustained support for institutional change and capacity. Private aid could focus on achieving community and individual level results. Specialised global organizations could provide particular expertise not available through generalist support. The growing number of official donors could build up expertise in particular countries or topics, and specialise in these, and they could respond to evidence generated by foundations and NGOs about what works, by taking those activities to scale.
If these actors could all focus on their strengths, and if the aid system enabled them to work together well, these changes in the development landscape might substantially improve the effectiveness of development assistance.
… but in practice it does not work like that
That’s all very well in theory, but most people working in the aid business will tell you that back on planet earth, it doesn’t work like that.
Rather than differentiate, development organisations have strong incentives to converge. So instead of specialisation we get duplication. The philanthropic foundations say that they have a more entrepreneurial, risk-taking approach; anecdotal experience suggests that in many cases they prefer the implicit validation of being part of a multi-donor group. (This may be a form of political correctness: agencies seem to think that the Paris Declaration on Aid Effectiveness requires that they be part of a shared funding arrangement rather than doing anything alone.)
For example, consider the bandwagon on restoring funding of health systems. Increasing the funding of health systems is something of which all right-thinking people should approve. The arrival of the big global health initiatives, particularly GFATM and GAVI, coincided with a collapse in funding for health systems which led to many unnecessary deaths in developing countries. Donors are now seeing that the shift away from health systems to vertical funds was an error (one which was predictable and predicted), and the pendulum is swinging back to funding health systems. The institution with the mandate and greatest capacity for supporting developing countries to strengthen their health systems is the World Bank. So why are the Global Fund and GAVI being allowed on the health systems bandwagon? The logic of establishing these specialised multilateral agencies was that they would bring particular depth and expertise to specific activities which would be available from more generalised aid agencies. If we offer competition to World Bank concessional loans in the form of grant finance through GAVI and and the Global Fund, most developing countries will look to these institutions instead. As a result of the proliferation of health funds offering grant finance for health systems, the core role and capacity of the World Bank is eroded, and we put at risk the benefits of specialisation by GFATM and GAVI. Similarly, the International Finance Facility for Immunisation (IFFIm) was set up to enable donors to secure the benefits of front loading spending on vaccination, for which there is a clear economic rationale. Now it is proposed that it should also finance health systems: if there is an economic rationale for using IFFIm on health systems, I’d like to hear about it.
What’s missing?
The growing number and diversity of development organisations could be a source of strength in the aid system, if different organisations could stick to their specialities and if they worked in an aid environment which enabled them to work together effectively.
In competitive markets, firms tend to focus on their strengths, because this is how they make the biggest profits. Firms that diversify into another line of business either need to make a success of that new work, or they will start to make losses and eventually decide to withdraw or they will go bust. So appropriate specialisation is the consequence of individual decisions by profit-maximising firms, and not a result of a collective compromise.
Unfortunately, the political economy of aid encourages the opposite behaviour. The “operating system” which supports the work of aid agencies creates pressures against specialisation. For example:
- Organisations which work collaboratively and holistically across a wide range of activities are likely to attract more donor funding than organisations which are effective in a particular niche. One reason for this is that many donors either don’t have, or don’t systematically use , information about impact and cost effectiveness when they make resource allocation decisions – so there are rewards for aid organisations getting involved in as many activities as possible, and no penalty if this mission creep makes them less effective.
- Lack of transparency and access to information about who is doing what means that organisations cannot make sensible individual decisions about how they can increase their own impact with finite resources and avoid duplication.
- There are no mechanisms by which innovative ideas can be pioneered by foundations or NGOs and, if they are successful, taken up and taken to scale by official donors and multilateral funders. There too little venture capital to support innovation; too little rigorous analysis of what actually works; and the mechanisms for taking successful programmes to scale are too unpredictable and capricious.
- Donors, NGOs and foundations are all under pressure from well-meaning activists to be engaged in everything everywhere. For example, last year the Lancet criticized the Gates Foundation saying that it should “do more to invest in health systems and research capacity in low-income countries, leaving a sustainable footprint”. DFID is criticised for a perceived lack of investment in agricultural research. In a sane world it would be perfectly sensible for the Gates Foundation, which has very little in-country presence, to fund technological research in health and agriculture, but not to invest in health systems in developing countries; and for DFID, which has an extremely professional presence on the ground in developing countries, to invest in developing country systems but not to spend money on research, in which it has no discernible comparative advantage. We could have the same total spending on both research and systems, managed by organisations specializing in those activities and reducing coordination and transaction costs. But development activists and politics apparently make such a division of labour impossible for both organisations.
- The Paris Declaration on Aid Effectiveness and Accra Agenda for Action are being implemented in ways which create strong peer pressure on donors to collaborate and harmonise, to engage in pooled funding and joint activities, rather than to diversify and specialise. Where there are efforts towards a better division of labour (e.g. this EU initiative), the approach is based simply on getting down the numbers by committee, rather than creating incentives which push development agencies towards focusing on the areas in which they have a comparative advantage.
What should we do?
The proliferation of development organisations, which could be a great strength, is instead becoming a growing handicap for the aid system, because the system is not well adapted to taking advantage of that diversity and encouraging appropriate specialisation.
Some possible measures that might address this are:
- a step change increase in transparency about aid. The International Aid Transparency Initiative offers the promise of this, as it will provide up-to-date, detailed information about aid projects in an accessible form.
- agreement to an international standardized system for describing and measuring outputs and unit costs, to facilitate cost-effectiveness comparisons across development organisations;
- explicit use of unit costs and cost-effectiveness in aid allocation decisions, in a way that penalises organisations which are engaged in activities in which they are relatively ineffective
- the development of a mechanism for “venture capital” funding with an associated process for scaling up success;
- self-restraint by development activists who do more harm than good by trying to push every development organisation to be involved in everything.
As ever, I’d welcome further suggestions in the comments section.
Some people, especially working on the front-line of delivering aid programmes, are uncomfortable with the idea that aid should be more strongly linked to results. Some point out that there is no evidence that government officials and aid workers will respond to incentives (see this article by Ngaire Woods and Paolo de Renzio); indeed, the very idea seems to impugn the character of development professionals. Others are concerned that an increased focus on results will add to the bureaucratic burden of form filling and reporting which plagues the life of front-line staff (see this essay by Andrew Natsios, former USAID Administrator.) On his blog yesterday, Simon Maxwell lists four further concerns which he says give rise to uncomfortable “seat shifting” about results : that the evidence won’t really be used; that linking aid to results relies on a simplistic, deterministic view of development; that it risks focusing too much on results which can be measured, rather than deeper but less observable changes; and that a results-based approach fails to take account of the complexity of how aid transactions actually feed through into activities.
These are serious and important concerns. In particular, if measuring results is simply bolted on to the existing systems for the allocation and management of aid, the danger is that we add to bureaucracy with little real benefit. But if better measurement of results is used instead by aid agencies to simplify the way they manage aid programmes, rather than just adding new reporting, then the results agenda creates the opportunity to reduce bureaucracy, decentralise decision-making, increase country ownership, increase the focus on outcomes that really matter, step away from linear, deterministic thinking about how results are achieved, focus more on relationships and institutions, and really liberate development workers to work on what really motivates them – delivering change on the ground – and less on managing the bureaucracy at home.
This post sets out how a focus on results might unlock changes in the way aid is managed, which could lead to significant improvements in aid effectiveness.
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.
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