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

“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.

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.

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.

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.

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.

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.

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:

1. Spend more through the multilateral system
2. Make aid more predictable
3. Make aid transparent, accountable and traceable
4. Build the accountability of governments to their parliaments and citizens
5. Focus on results and use this to simplify aid
6. Invest more in global public goods, especially new technologies
7. Focus aid on people in chronic poverty, and on women and girls
8. Leverage the private sector
9. Use innovative finance to increase the productivity of aid
10. 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.

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.

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.

Recap: two key themes

Two themes from my previous post are directly relevant to the next steps for aid transparency.

First, transparency needs to be centred on users, not organisations.  Only a few people are interested in the details of specific institutions. Most users want to know about all the resources and activities in their country, their sector or their community. They are mainly not very interested in the distinction between aid and other sources of finance. They want comprehensive information about resources from all organisations, whether or not it is classified as aid, so that they can monitor and influence how that money is allocated and used.  This means that it is not sufficient for each aid organisation to be individually transparent: the information has to be accessible in a form which enables users easily to see in one place comparable, consistent information from dozens of different organisations which they can add up and use.

Second, transparency should focus more on execution and not just allocation. Many parliamentarians, NGOs and academics in donor countries are primarily interested in how aid has been allocated across countries, sectors and activities. They often want to ensure that donors are living up to their promises. But in our analysis of stakeholder needs, people in developing countries repeatedly told us that they want to be able to see how money is actually being used. They want to know how much money is really arriving in their country or town; how much is taken in overheads and by whom; which organisations are contracted to provide particular services and on what terms; what outputs are produced; and what difference all this makes to people’s lives.

Organisation-centred transparency

Meaningful aid transparency cannot be achieved in the way that many aid agencies previously assumed.  While it is a welcome step forward that some aid organisations are now publishing online databases of all their aid projects and programmes, this does not meet either of the two key needs described above.  Agencies’ online project databases are an example of organisation-centred rather than user-centered transparency. As anyone knows who has tried to analyse aid spending in a particular place or sector, it is not feasible for a user to trawl through the websites of dozens of bilateral aid agencies, hundreds of multilateral agencies and thousands of NGOs, to identify the relevant activities.  Even if you could assemble all the details published by different donors, you could not create any kind of meaningful overview. Every project is described in different terms by different donors, in different currencies, languages and time-frames.  Often you can’t even tell whether donors are reporting contributions to the same project or describing different projects.  There is no way to remove double counting when money flows from one organisation to another. Nor do these project databases give us enough information about execution: they do not tell us how much money has arrived in the country, how much has been given to each subcontractor or implementing agency, or what outputs and outcomes have been achieved; and they don’t tell us anything about the agencies’ plans for future projects and programmes.

The magic database?

So user-centred transparency cannot be achieved by individual organisations putting their own project databases online, because that information cannot be aggregated across donors.  An obvious alternative is to build a database, or perhaps a few databases, to bring together comparable information from a variety of sources.

I’m writing this blog post in a café in Addis Ababa which is much frequented by ferenjis.  At the next table is Gary, a Canadian consultant who has been paid by CIDA and the World Bank on behalf of the donors to build a bespoke database of donor projects in the rural livelihoods sector in Ethiopia.  Gary has done magnificent work over the last year, visiting donor offices to collect information from each of them about what they are doing, and entering it manually into his database.  It has been an expensive exercise for donors but they already think it is has been well worth the investment to be able to have an overview of all aid-financed activities in the sector.

There are at least three other aid databases which already collect information about livelihood projects in Ethiopia. Yet Gary’s database does not draw information from any of them: he has had to construct it from scratch.  Why can’t he use the existing databases?  Because one of them is not publicly available, one publishes information with a 2 year lag, and the third was built three years ago and has not subsequently been maintained.   None of them meets exactly the needs for which Gary’s database has been designed.

Gary’s story is not unusual. There are probably other consultants like him in Ethiopia working in other development sectors, and there are hundreds more like him all across the developing world.  Donors are spending a lot of taxpayers’ money on consultants to do this kind of work again and again; and donor staff are also having to supply the same information repeatedly, in slightly different form each time, to each of these databases which one of them has commissioned.

It would be nice to think we could replace all this effort by building a small number of comprehensive and authoritative databases to meet all these different needs.  That would save everyone a lot of time and money.  But sadly it is not practical to build a one-size-fits-all database that does anything.  Any database primarily serves the perceived needs of the institution that built it, at the time it was built.

The OECD-DAC maintains the two aid databases which provide the most authoritative source of aid information.  (The DAC CRS database used to be the most comprehensive too, but in this respect it has been overtaken by AidData which contains everything in the CRS database and more).   The DAC databases were built for a particular purpose: for donors to share information with each other so that they can be held to account for meeting their promises. The DAC has never asked governments or citizens in developing countries what information they need about aid, because it is not part of their mandate to meet these needs. As a result, the DAC databases are not designed to provide even very basic information needed by developing country governments and stakeholders, such as the amount of aid which is actually spent in the recipient country, or donors’ plans for the coming year.

The introduction of country level aid management system in around fifty countries has been a welcome advance in recent years; but these too have only limited use.  They are generally designed to facilitate relationships between governments and donors, and they oftern serve this purpose perfectly well.  But there are many other important information needs which they do not serve. For example, they are not usually designed to be consistent with local budget classifications, so they cannot be used by finance ministries to support domestic budget planning.   Still less do they contain the level of detail needed by line ministries, for example to enable them to plan their activites to complement the investments made by donors.  Furthermore, the majority of country level aid management systems are not accessible by the public, so they do not meet any of the needs of parliaments, civil society, the media or individual citizens to enable them to hold governments and donors to account.

The education ministry in Cambodia told us that when they asked donors for detailed information about aid projects in the education sector many donors refused to supply the data on the grounds that they had already given a lot of aid information to the Cambodia Development Council database and they did not have sufficient resources to respond to multiple information requests. But the CDC database, which is among the best in the world for what it does, does not contain the level of detail needed by the education ministry, such as where donors planned to build schools or the type of text-books they proposed to supply.  These details were not needed by the Cambodia Development Council, and so are not included in the database, but are essential for the education ministry to manage their programmes well.

This is no criticism of the DAC database, or the aid management systems in developing countries. It just isn’t possible for a single database, either globally or for each recipient country, to meet the needs of every different stakeholder. That is why we end up with many ad-hoc databases built by consultants like Gary.   But if all those databases have to be built and maintained manually, the cost is prohibitive.

In the face of a growing proliferation of requests for data for different purposes many donors have, not unreasonably, decided they have to focus on priorities. They supply data to the DAC databases, because this is the donor club of which they are members.  They also generally supply data to the aid management systems, because these databases are clearly a priority for their partners in developing country governments.  For many donors, anything else they provide is on a ‘best endeavours’ basis – some donors do what they can to provide information in response to reasonable requests, but this manual exchange of information by fax and email, or by sneaker-net (i.e. a consultant going by taxi from one office to another) is slow, patchy and expensive.

This partial access to informatioin tends to reinforce existing power imbalances.  In 2008 civil society organisations from both donor countries and developing countries met in Accra and compared notes.  Representatives from northern NGOs reported that they generally could, with some effort and sufficient time, get information they needed from donor agencies in response to specific requests. By contrast the southern NGOs reported that when they asked donors for the same kind of information they often did not even enjoy the courtesy of a reply.

Meaningful aid transparency will occur when information is available in many different forms, in the detail and form required for particuar users, often combined with data from other sources. We can’t achieve this with a single international aid database, or a single database for each recipient country.  But if we build many separate bespoke, manually-populated databases to meet the needs of different users, we are left with a nightmare of duplicate reporting and inconsistent, incomplete and out of date databases which are too expensive and difficult to maintain.

A public data infrastructure

Fortunately there is a solution which – in common with many of the best solutions in life – lies somewhere in between.

If donors, foundations, international organisations, NGOs and implementing agencies publish all the up-to-date information they have about their aid projects, online in a common, machine-readable format, then it is possible for everyone to access that information easily, and to collate information from many sources, and to add up and compare across donors.  The reusable data format makes it possible to turn donor-centred information into user-centred information.

Once we have this information in a reusable format, any number of databases  and websites can be built quickly, and can be easily maintained.  Instead of spending a year building a database of livelihoods projects in Ethiopia, Gary could have done it in an afternoon; and the information would stay current automatically.

That is why the International Aid Transparency Initiatve is so important.  It solves the problem of turning donor-centred transparency into user-centred information. It is neither a new database, nor merely an encouragement to publish project details online.  It is an international public infrastructure for reusable data.  Donors accounting for for two thirds of global aid have now said that they will, during 2011, publish their data online in this common, reusable format.  (My former colleagues at aidinfo have done a very good short video explaining how IATI works.)

This will bring about a revolution in aid transparency.  If a country chooses not to open its aid management system to the public, that won’t be a problem any longer for citizens who want to know what is happening in their country, because it will be easy for anyone to build a copy of the database and populate it with exactly the same information from the same source.

More importantly, the creation of an international public data infrastructure for development unleashes possibilities which we could not even contemplate today. It will become easy to connect aid information to other kinds of data, such as government budgets, the distribution of poverty, or feedback from citizens.  It will unlock new analysis and insights, and allow different, less controlled, more user-centred ways of increasing accountability.

That’s why the most important step organisations can take towards meaningful aid transparency is to sign up to and implement the International Aid Transparency Initiative.  The UK has already started to publish its data in the IATI format, other donors are expected to do so in the near future.   Donors, foundations, international organisations, NGOs and private contractors should all follow suit voluntarily, or be required to do so by the people who fund them.  Government donors should make it condition of eceiving a grant or a contract that the organisation must itself implement IATI.  Bilateral agencies should not put money into an international organisation or multi-donor trust fund that does not comply with IATI.  Citizens should refuse to put money into a collecting tin unless that charity implements IATI.  And charities should not expect to continue to benefit from tax relief if they are not prepared to adhere to this international transparency standard.

Dogfooding

The raw information is not, by itself, very useful.  As well as pumping out data in a reusable format, it is right and understandable that many donors will want summarise and synthesize, to highlight key trends, draw out key lesssons, and tell their story.

As Ranil said on AidThoughts:

By all means, publish the data to allow people to interrogate it themselves. But also provide high-quality, penetrative analysis in a simple, easily understood form to support their understanding. They can always go beyond that if they wish.

I largely agree with this (notwithstanding Ranil’s suggestion to the contrary).   But I would add an important qualification: the principle of ‘dog-fooding’.

Donors should be mindful that the public increasingly expects the authorities to show rather than tell. Though most members of the public will never look at the information which underpins the summaries and narratives, they will trust the summaries more if they know that the underlying information is available for anyone who wants to check it and perhaps to construct an alternative interpretation.  So while donors should be encouraged to provide easy-to-understand analysis, they should also publish the raw data which supports it.

Furthermore, in the must-read paper Government Data and the Invisible Hand, Robinson et al from Yale proposed the following principle:

The new administration should specify that the federal government’s primary objective as an online publisher is to provide data that is easy for others to reuse, rather than to help citizens use the data in one particular way or another.  The policy route to realizing this principle is to require that federal government Web sites retrieve their published data using the same infrastructure that they have made available to the public. Such a rule incentivizes government bodies to keep this infrastructure in good working order, and ensures that private parties will have no less an opportunity to use public data than the government itself does. The rule prevents the situation, sadly typical of government Web sites today, in which governmental interest in presenting data in a particular fashion distracts from, and thereby impedes, the provision of data to users for their own purposes. [My emphasis]

This is a principle which can and should be applied to aid information.  If donor agencies were to agree that the information and analysis that they publish on their websites and elsewhere would be retrieved entirely through the publicly available IATI infrastructure, this would incentivise them to maintain their IATI data up to date and in good order; it would ensure that their analysis can be reproduced (and challenged) by others; it would increase public trust in the analysis; and it would reduce the risk of inconsistency between the summaries produced by donors and the analysis done by others.

Donors who resist the principle that they should ‘eat their own dogfood’ by using the publicly available data infrastructure for their own website and analysis have to explain why they think that the information they use is sufficiently important to be included in their analysis but should nonetheless not be publicly available for others to use.

The dogfood principle is famously practised at Google, which uses its own products internally, both before and after public release, to eliminate bugs and to make sure the organisation is always aware of the limitations of its products so that they remain focused on priorities for new features and improvements.

Helping citizens to use data

The Robinson et al paper quoted above argues that priority for government should be to publish reusable data, rather than to help citizens to use data in a particular way.

Perhaps it is reasonable to expect that the wealthy, educated citizens of America, supported by the technology of Silicon Valley, will be able to interpret and government data.  But is it sensible to expect that citizens, civil society organisations and parliamentarians in developing countries will be able to do the same?

Here’s Ranil again:

In recipient countries, both civil society and the Government needs to be helped to use the data available to work out how far the aid received in total and from each country deviates from their needs, and this again needs to be backed by a real form of accountability – and this is the hardest part of all.

I agree with this, of course.  The publication of raw data is no use unless citizens and their representatives are able to use it and to exercise real accountability over their governments, donors and service providers.  This will require investment in tools and technology and in capacity and skills, and we should expect a period of only partial success while we learn what works.

Perhaps I am more optimistic than other people because I believe that, once there is an infrastructure of publicly available reusable data, people will work out to use it.  I have a great deal of confidence in the energy and capacity of people in developing countries to sieze the opportunities of freedom when they can.

Perhaps I am too cynical in observing that many of the people – and Ranil is an exception to this generalisation – who argue most passionately for donor funding of capacity building and pilot projects and the like are also people who might expect to secure lucrative contracts from such efforts.

My anxiety about putting donors under too much pressure to focus on this is that it may reduce the priority that donors give to what only they can do, namely making available up-to-date, disaggregated, comparable, information about their aid projects.   If a donor doesn’t fund work supporting civil society groups to use aid information, then someone else can fill that gap.  But if a donor doesn’t make their information publicly available in a reusable format, nobody else can do it for them.

Furthermore, the most valuable contribution that donors can make to making it possible for citizens to use aid information is to reduce the costs of accessing and using it, by making the reusable data easily and cheaply accessible.   A modest investment which sharply brings down the costs for everyone of accessing data will have a much higher return than spending the same money enabling one particular group to assemble and use information for a particular purpose.

This means that I am in favour of encouraging donors to do what they can, with funding and expertise, to enable people to use aid information to increase accountability and so improve services; but I think it is a lower priority for donors than getting a comprehensive public data infrastructure working properly.

This means that donors should:

a. First, implement the International Aid Transparency Initiative so that there is as much information as possible freely available and meaningfully accessible to everyone;

b. Then use exclusively that public data infrastructure for their own websites, analysis and publications (the dogfood principle); this will create incentives for donors to ensure that the public information is up-to-date, comprehensive and accurate;

c. Then – and only then – invest in helping citizens to use the information in different ways.

This is a lexicographic ordering of obligations, meaning that no item on the list should be considered until the obligations above it have been discharged in full.

I do not mean to claim that helping citizens to use the data is objectively less important than getting the data out there; but I am saying that it is less important for donors to address this, since other entites can help citizens but only donors get the data published.

Budget classifications

By putting in place a public data infrastructure for development (namely IATI) we have opened up almost limitless opportunities to make more information more accessible at little cost to donor organisations and data users.  So now let’s ask how we should use these opportunities.

A key priority must be to make sure that aid information is categorised according to local budget classifications.  This has been agreed in principle in the IATI data standard, and the IATI Technical Advisory Group has identified several possible options for how it might be implemented.   The TAG should be asked to come to an agreement quickly on this so that donors can make it happen.  (The reasons why it is essential to be able to read aid information alongside national budget information were were set out in my earlier post so I won’t repeat them here.)

Information about planned future aid

The DAC databases are designed to keep track of what donors have spent, rather than future plans, reflecting their primary role of allowing donors to hold each other to account for keeping their promises.  Country aid management systems usually have more forward-looking information, reflecting their function as supporting the dialogue between government and donors.  But the forward looking information they contain is frequently patchy and incomplete.

Homi Kharas, in Measuring the Cost of Aid Volatility, estimates that the cost to aid recipients of historic unpredictability of committed aid flows is 15 percent.  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.   It seems so obvious that it is scarcely worth saying, but it is preposterous that a government cannot make an informed decision about where to supply new water points because they don’t know where donors and NGOs are already planning to provide services.  Lack of information about current and future aid spending leads to duplication and overlap in some places, and woefully under-served communities elsewhere.  We miss the synergy of complementary investments (investment in agriculture together with rural feeder roads, for example), and we create uncertainty for the private sector.

Furthermore, for people in developing countries, know what donors are doing and planning to do is a critical first step in injecting some local accountability.  The people we spoke to were not mainly interested in the past: they wanted to be able to find out what is planned and how they can become involved.

This is a challenge for many donors, for two main reasons.  First, aid projects often don’t get into their systems until they are into the implementation stage and beginning to disburse.  Before that, plans are often held as less structured information – such as in planning documents or email exchanges, and these plans are rarely collected into a central repository.  Finding a way to get this information systematically into IATI is therefore a non trivial task.

Second, some donors are worried about saying too much about their plans until they have considered their options in some detail, secured high-level or political approval within the agency, obtained approval from legislators who must appropriate the funds, and reached an agreement with the host country.  Donors do not want to announce the budget for a project before they put it out to tender,  as they don’t want the bids to congregate around the budget ceiling.

Neither of these problems is insurmountable, and given the importance of forward looking information we should aim to make it a priority to address them.  Concerns about pre-empting the decisions of the legislature seems to be a case of inventing obstacles (it is easy to include disclaimers, and governments talk about future spending plans all the time).  The genuinely hard problem is logistical: most donors don’t have much of this information is a reusable form.

The IATI mechanism is designed to enable users to collate information from many different sources.  This may be the solution for some organisations who do not keep forward looking information in their management information system.  These organisations may find it most practical to publish information about actual spending from their central finance system, while decentraliszing publication of planned spending to country offices or embassies.

The people and organisations who want information about future aid plans – such as developing country partners, NGOs and civil society organisations in developing countries – are not the most powerful stakeholders, and so it is no surprise that our existing systems are not designed to meet these needs.   Our systems are mainly designed to record and report past spending, because that is what donor countries have decided to monitor, and that is what they need to report to parliaments and auditors.

Organisations should adopt the principle (proposed to us by a statistician from a donor aid agency) that ‘if anyone knows it, everyone should know it’.  Though this is the part of the agenda that may require the most administrative change,  the benefits of sharing forward looking information are potentially huge.

Traceability

This is a simplified diagram by Homi Kharas of how aid flows. There are many more layers than depicted here.

When courier companies introduced barcode systems to track envelopes and parcels, they faced non-trivial implementation costs, but the savings have been enormous.   Barcode scanning has replaced a lot of manual recording, so streamlining administration, and has enabled companies to trace missing items easily.  It has provided management information to identify bottlenecks and so drive performance improvements. It has hugely reduced the companies’ customer support costs, since customers can see for themselves where packages have reached through self-service websites.  Perhaps more importantly, the fact that customers can track packages themselves has increased customer trust in courier companies, and some larger customers have integrated the tracking information from their courier company into their own management information systems.

A system of aid traceability is technically feasible, and while the implementation costs would not be negligible, the savings would be huge.  There is a placeholder for such a mechanism in the IATI standard waiting to be fleshed out.  My view is that this should be a very high priority.

How would it work? The underlying design principle is that each organisation disbursing money would report the details of its spending and that this would include the transaction identifier (or identifiers) corresponding to the source of funds for that spending.  For example, a multi-donor trust fund would publish each item of spending and include an attribution of that particular expenditure to the fund’s various income from donors.  Some spending would be linked to particular grant (e.g. where a donor had made a grant to the trust fund for a particular purpose), and other spending would be attributed pro-rata to various general sources of funding.

Once implemented, a system of traceability would not be a significant burden on aid recipients and implementing agencies. Each organisation and agency would be asked to publish information it already has: the source of the money it spends. If this is done consistently and the data published through IATI, it would enable any stakeholder to cumulate the information across the aid system and so obtain an overall picture of where aid is actually going.  It would be possible for the first time to trace money from taxpayer, through donor agencies, trusts funds, NGOs, governments and private contractors to implementation on the ground.  It will become possible to compare overhead costs and margins, to see whether supply chains are unnecessarily long, and to establish how much money actually reaches the intended destination.

The same traceability standard would also solve completely the problem of checking whether donors are living up to their multiple spending pledges on aid – for example to create new sources of finance for climate change.  (I’m largely hostile to these spending pledges, but that is a different matter.)  All a donor would need to do is designate each spending pledge as a different “source” of their money, and it would then be possible for anyone easily to trace whether each donor had in fact spent the money they promised and to see what had eventually happened to it.  This is a much simpler and more effective solution to ensuring that spending pledges are kept than the leading alternative, which is to set up brand new global funds for the sole purpose of enabling the money to be accounted for separately.  Traceability is a much cheaper, more efficient way to track spending pledges and prevent double counting.

Indeed, a standard for traceability could greatly simplify aid management and reduce the bureaucratic burdens of the aid system.  Intermediary organisations already have to provide information in considerable detail to their donors, to enable the funders to see how the money has been used and whether it has been spent in accordance with various constraints.  An NGO might have to comply with a rule from one funder its money is not used to finance capital equipment, and a different rule from a different funder that the grant is not used to finance travel to and from the United States.  (This is a real life example.)  So all organisations in receipt of grants or contracts are already having to apportion their spending across various sources of income so that they can show they have complied with the different obligations imposed upon them in grant agreements and conracts.  Traceability would greatly simplify reporting by NGOs and implementing organisations. Instead of manually completing forms and spreadsheets for each funder, they would simply publish the details of their spending electronicallly, with all their spending attributed to particular sources of income.  Donors would be able to access the information electronically through the IATI data infrastructure to confirm that their particular grants or payments were being used by grantees and contractors in the agreed way.  This would both simplify and streamline reporting by NGOs, contractors and other implementing agents, and streamline compliance monitoring by donors.

A system of tracability would also eliminate double counting by implementing agents.  I know a former MP from Mozambique who was asked to officiate at three separate opening ceremonies for the same school in his constituency, each with a different donor as the guest of honour to view the school for which – according to the invitation – they  had paid. Each donor was able to report to its headquarters that the money had been properly used for the purpose intended, and the result was this new school.

This scam is widespread in the aid industry and without traceability there is nothing in the system which prevents it.   Traceability would make transparent where administration overheads are too high.  It would show which organisations are not disbursing money, whether through incompetence or graft, and it would narrow the scope for corruption and waste.

The system of traceability proposed here would not require a central database or a complicated new set of reporting requirements.  All that is needed is that  implementing agents should have to identify the source of each transaction in a consistent way.  Donors could simply require this in their contracts and grant agreements.  Far from adding to the workload of NGOs and contractors, such a system could greatly reduce reporting and bureaucracy. And the IATI information infrastructure is ideallly suited to enabling these fragments of information reported by many different decentralised organisations, each individually meaningless, to be added up into a overall picture which is not only useful but potentially game-changing.

Geographical coding

The Ethiopian Government – one of the poorest countries in the world – has a GIS database of all the public health facilities in the country.  But there is no equivalent information about the location of health facilities provided by donors and NGOs.

World Bank health projects in Kenya overlaid on a map of poverty levels

The technology for geographical coding has changed out of all recognition in the last few years.  Everyone with a smartphone has the technology in their pocket to record the location of a piece of a school, a well or a clinic and to add it automatically to a database.

When aid projects in Nepal were geocoded, and then compared with a map of where poverty is most acute, the donors and government found there was no correlation. The aid projects were all concentrated around the offices of the NGOs and along the tarmac roads, far away from the people living remotely in mountains whose need is greatest.

AidData has a very useful summary of the benefits of geocoding and mapping.  More and more donors are seeing its value. I’m told that when the US Embassy in Yemen geocoded its projects it rapidly found that this was the framework they used most often for planning and mointoring their aid.  The Gates Foundation has similarly found it useful to geocode all its agricultural projects.  Yet neither organisation has chosen to publish this geographical information for others to use. The World Bank, working with AidData, has geocoded all of its active projects and made this information publicly available (see http://geo.worldbank.org/).   Their Mapping for Results programme is at the forefront in the development industry.  (I thought I saw a recent announcment by the US Government that it was moving to geocoding in ten pilot countries, but I can’t find any trace of that now.)

This is an example of increasingn returns to information.  The addition of geographical information to aid data enormously increases the value of the information that is already being collected.  Geographical information offers one of the most useful and intuitive way of organising information, and opens the way to new platforms for information sharing and gathering.

It is important that as more and more donors move to geocoding information, they do so in a consistent way.  That will increase the value of the information, and reduce the burdens on implementing organisations who will otherwise find themselves having to report the same information in multiple formats.  The IATI standard does not yet include a requirement to geocode data, but it does set out a common format for voluntarily doing so.

An important step towards meaningful aid transparency would be an agreement among all donors, NGOs, and implementing agencies to geocode all their activities from now on, and to publish that information through the IATI infrastructure.

Outputs and outcomes

The discussion so far has been mainly about spending, and the need to keep track of how money is spent.  But none of us thinks that is what is ultimately important. What we all really care about is what outputs are produced as a result of all this and what difference they make to people’s lives.

Some donor agencies have realised that it is very helpful to have standardised measures of outputs within their organisation. This enables them to compare performance across projects and programmes, and so learn what works best.  It enables them to identify wasteful or expensive programmes and put more aid into the most effective programmes.  It enables agencies to estimate totals of the outputs which their work is supporting across the world, which is useful as part of their accountability to taxpayers.

When the World Bank looked at the different ways it was measuring its textbook programmes, it found a vast range of different output measures (including, in one case, a text project whose outputs was specified in metric tonnes).   When one bilateral agency put together comparable measures of textbooks purchased by different programmes in different countries, it found that the difference in unit costs between the cheapest and the most expensive programmes was substantial – a discrepency of two orders of magnitude which could not be explained by differences of circumstance between the countries.  (Sadly this analysis was never published.)   We can only make these comparisons when we standardise measures of outputs.  In practice the process of arriving at standardised indicators has been fairly boring, but they have not been particularly difficult to implement.

Common output measures would be even more useful if they were standardised internationally across aid agencies. Then we could compare the cost effectiveness of different international organisations, including comparing bilateral donors, development banks and NGOs.   We could learn not only within aid agencies, but between them.

Internationally comparable output measures is, in my view, the most important step on the road to a sensible division of labour in the aid industry.   Specialisation will only increase the productivity of the system if organisations specialise in what they are good at, and we can’t know that until we have comparable measures of their cost-effectiveness.  When it is apparent to everyone how much it costs for different organisations to provide the same outputs, there will be public pressure on the worst-performing organisations either to raise their game or to focus instead on the things which they can do better.

There are inevitably squeals of protest from the aid industry about all this.  In part this is the modern equivalent of political pressure which led to the Calico Acts: vested interests resisting any kind of competition which might undermine their privileged position. Competition reduces the producer surplus, so you should expect incumbent producers to resist it.

But there are more creditable worries about introducing standardised output measures: that they may push donors to funding what can be measured rather than what is important, or that they will undermine the principle of country ownership by defining a rigid, global idea of what is ‘good’ in development.

I don’t find either objection persuasive.

I have no difficulty accepting that there many activities in development which have rather diffuse, difficult to measure and unpredictable benefits which are nonetheless worth doing because the potential benefits are large – I have, after all, spent the last three years of my life promoting aid transparency, which is an example of just such an activity.  But I don’t think the advocates of spending part of the aid budget in these ways should expect to be funded without having to make a robust case.  If we have good measures of the benefits of alternative uses of aid – such as vaccinating children – then someone who thinks that aid should be spent on capacity building or public sector reform should produce the evidence and analysis which justifies their view.   We should not be subject to levelling down, in which we refuse to do the best we can to quantify outputs whenever possible on the grounds that it might make other kinds of investment look relatively less attractive.

Nor do I believe that standardised output measures will undermine country ownership.  Aid donors already require recipients to provide a raft of information which they say they need for their domestic accountability.  Recipient governments, NGOs and implementing agencies would be overjoyed if donors could get their act together and ask for reports on the same, rather than slightly different, measures of output.

Some donors have shown that they understand this by moving to internal standardised output indicators. Before they become too attached to these, they should make a big effort to get international agreement to a common set of indicators which they are all willing to use. This would be a big step forward towards meaningful aid transparency, especially for those people whose primary interest is in understanding what aid achieves, and not simply in tracking how it is spent.

Citizen feedback

The aid industry has relied for too long on monitoring and evaluation by so-called experts, brought in from donor countries to conduct stakeholder interviews and review logframes.  The real experts on whether an aid programme is working are the people who are supposed to be benefiting from it.

Can we link information about public services to the aid programmes which funded them?

As we implement a public data infrastructure for aid, one of the most exciting new possiblities is that this will help us to find out, for the first time, information from citizens about their experiences of how aid is used and their priorities for the future.

The Maji Matone (‘Raising the Water Pressure’) programme in Tanzania  enables  citizens to use their mobile phones to give feedback on the state of rural water supply. The information is then forwarded to the relevant government authorities – thus enabling them to respond quickly – as well as to the media.  This kind of feedback is a great way to improve public services in developing countries.  But it will do nothing to improve the quality of aid unless this feedback about services can also be linked back to the specific aid programmes that supported those services.  If the information coming from Maji Matone about which water points are working can be mashed up with information coming from donors about which of those water points they paid for, then we can find out which donors’ provide the most useful and functioning water points.  It is ironic that the part of this jigsaw that is missing is not real-time  feedback from rural water point users in Tanzania, but the necessary information from donors to connect that feedback to their aid programmes, despite the money and technology at their disposal.  When donors move ahead with detailed geocoding, and publishiing that information through IATI, a big part of this problem will be solved.

The examples so far – from crowdsourcing in disaster relief to citizen report cards in health clinics – suggest that when citizens are able to get engaged, the benefits can be enormous.

A public data infrastructure for aid creates a platform which makes this possible on a large scale. Together with with growing access to mobile phones and the internet, it will change the power dynamics in the aid industry forever.  For the first time, it will be possible on a large scale for citizens to set priorities and give feedback about what is working in development.

Conclusions

The emergence of an open data infrastructure for development has huge potential to enable us to use aid much better.  I’ve proposed ten steps to improve that infrastructure, and to begin to take advantage of the opportunities it offers.   Here they are again, in short form:

1.  Putting a database of aid projects online does not result in user-centered, meaningful aid transparency unless the information is online in a common, machine-readable, reusable format.  Donors, foundations, international organisations, NGOs and aid contractors should implement the IATI standard.

2. Donors should require NGOs and and implementing agencies to implement the IATI standard as a condition of grants and contracts.  Citizens should demand it of charities.

3. Organisations should use the publicly available data infrastructure of IATI to power their websites and for other publications (the ‘dogfood principle’).

4. Helping citizen country citizens to use this data is important, but donors’ top priority should be getting their own data into the IATI system and using that public data infrastructure themselves.

5. Aid spending should be published categorized according to recipient country budget classifications (as well as the agreed international classifications).

6. Forward looking information about aid is administratively challenging for some donors, but hugely important.  If the donors have forward looking information then (apart from a few exceptions) they should publish it.

7. Donors should implement a global system of traceability in aid.

8. All organisations should start to record geographical information, in the agreed common format.

9. We need an international agreement on a common set of standardised ouput indicators.

10.  We need to connect feedback from citizens in developing countries to this public data infrastructure about aid.

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:

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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?
8. 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.

Aid transparency: worthy but dull?

Some of my family and friends have wondered why I have devoted three years to a topic which is so utterly dull as aid transparency.  (Most of them are too polite to ask.)  The answer is that I think this matters, very profoundly, for development and for aid.

In my heart I’m a budget wonk.  I’ve worked on budgeting in the UK Treasury and in the South African Treasury. My opinions on the importance of budget systems and how they can be improved can clear a room in seconds.

King Charles I was executed because he refused to accept Parliament's right to control tax and spending

Budget accountability is not just a technical question. England fought a civil war on the issue of Parliament’s ability to control tax and spending. It is the defining characteristic of legitimate government: if the British government cannot carry its budget in Parliament, it falls.  The power of the US Congress to control spending is at the heart of the relationship between the legislature and the executive in the US balance of power. In Australia, Gough Whitlam was sacked as Prime Minister on the pretext of his failure to carry supply in the Senate.

My obsession with the technical and political importance of the budget is why I first became interested in aid transparency.

Here in Ethiopia, donors and NGOs spend more than the government raises in domestic revenues.  Yet there is no way for a member of parliament, a journalist, a civil society organization or – heaven forbid! – actual citizens to find out what foreign powers are doing in this country.

Donor behaviour makes a mockery of the idea that the heart of government is the allocation and execution of the budget.

It isn’t only a question of legitimacy and sovereignty: for anyone who has worked on public budgeting it is also a practical question of getting the maximum value for money.

For example: a friend was working for the Health Ministry in Malawi. They were trying to work out where to invest in building new community clinics. They know where their own clinics are, of course: but have no way to find out where donors and NGOs have built, or will be building, new clinics.  So there is no way for them to assess which communities do not have a clinic nearby.  In the end they had to guess.

Parliamentarians, the media and civil society need to know how much money donors are paying to governments, and on what terms, so that they hold the government to account for how that money is used. They need to know how much money is being spent by donors outside the budget process, how can they have an informed discussion about the government’s budget allocations.

My interest in aid transparency came about initially from anger at the way donors undermine budget systems in developing countries, and I am no less angry about that today. How dare we urge countries to improve their budget systems and lecture them about the efficient allocation and execution of their budget while refusing to provide them with the information they need to do so?  How dare we demand more productive public spending, while providing none of the certainty and stability they need to get the maximum value? How dare we lecture developing countries on the need to be accountable while denying citizens and Parliaments the information they need to make an informed judgment about budget allocations?

The right to information for taxpayers in donor countries

Intellectually, I understand also the idea that citizens in donor countries should have access to information about how their money is being spent.

But to be honest, until recently I found it difficult to be motivated by this. It just never grabbed me emotionally. Foreign aid is such a pitifully small amount of money – about half of one percent of national income in most donor countries – that it didn’t seem to me a great priority for the citizens of those countries to be given a lot of information about it. And I certainly did not want to use up a big chunk of a small amount of money to answer questions from freedom of information advocates, if the consequence was that we reduced the amount of money going to people who really need it in developing countries, for example to give them access to food, water, health or education.

I’ve changed my mind about the importance of this, for three reasons.

First, I am increasingly convinced that citizens of donor countries are, in the end, the only people who can insist on aid working better.  Many of us would like aid to be accountable and responsive to the needs and interests of poor people.  But that isn’t how the power relationship works, at least not directly.  Whether we like it or not, aid will always be responsive to the people who pay for it – and that means the taxpayers of donor countries, as intermediated by their political representatives.  Fortunately, these people do genuinely want their aid to be helpful to people in poor countries, though they presently have little idea what that means in practice.  If we want aid to be more effective, we have to get information from the people in poor countries who are supposed to benefiting from aid into the hands of the citizens of donor countries showing them what is working and what is not.

Expedia gives customers comparable information compiled from many different sources.

Second, the zeitgeist in industrialised countries is changing.  Twenty years ago, citizens were happy to delegate to aid agencies and NGOs the responsibility of spending aid well, and to be told from time to time what had happened to their money.  That’s no longer true: people increasingly expect to be shown, not told, what has happened to their money, and they expect to be more involved in making choices. Information that was impossibly expensive to collect and access even a decade ago can now be published online as a matter of course, and that is what people expect from their public services.  Technology enables people to be involved in the management of their services day to day, and not just every five years.

Aid agencies in the 21^st century cannot continue to act like old-fashioned travel agents – respositories of expertise and information about options, to whom the money was given and decisions delegated. If aid agencies want to retain public trust, mandate and funding, they will have to become like Expedia – a platform on which citizens can see meaningful, comparable and reliable information and then exercise choices themselves. Unless aid agencies respond to these changing expectations, support for their work is likely to continue to decline, perhaps disastrously.

Third, the access to information movement is powerful, effective and smart. We in development have much to learn from the work they have done about the most useful ways for information to be made public, for rights to information to be asserted, and for the balance between freedom of information and privacy to be respected.  Their ideas about the need for open, reusable, mashable government data is hugely more advanced than any thinking on these issues in development circles.  (I found this paper on Government Data and the Invisible Hand especially interesting and helpful.)

Different information needs in North and South

The first thing the aidinfo team did was to pull together a comprehensive analysis of who needs aid information and what information they need.  We were surprised – indeed, a little shocked – to find that nobody had ever asked this question.

The OECD Development Assistance Committee has been collecting aid statistics for five decades, and it is the global centre of excellence on aid information. But they have a specific mandate: to share information among donors about donor efforts.  They have a database designed for this purpose.  But they have no mandate, capacity or resources to provide information about aid to people in developing countries. (This is not a criticism of the staff of the DAC, who carry out their task with great professionalism; it is a reflection on the nature of the way that powerful interests are able to define the priorities for transparency.)

We worked with actual and potential users of aid information in developing countries and in industrialised countries to find out, for the first time, what information they need.  We found a hugely rich and diverse set of people wanting information about aid.  You can find our case studies here.

For me, the most interesting lesson was the contrast between what we heard from people in developing countries and people in donor countries.

In donor countries, we heard much the same from everyone: they want detailed information about where aid is going.  International NGOs wanted to check whether donors had kept their promises, whether to increase aid overall or to fund particular programmes.  They wanted to highlight cases where aid had been allocated badly – for example, redirected from poor countries to more politically and commercially salient middle-income countries. Researchers and academics wanted information about allocation, mainly try to estimate the impact of that aid, or to provide evidence about the motives which drive aid allocations.   Ministers, parliamentarians and their researchers spoke despairingly of their inability to give a coherent account of where their country’s aid is going, or to show whether aid is being used for their citizens’ priorities.  All this is extremely important.

Yet none of the people we spoke to in developing countries mentioned any of this.  For people in developing countries the questions revolve around execution, not allocation, of aid programmes.  When a donor announces that they are giving aid to – say – a housing project in their country, what actually happens to the money? How is the contract tendered? How much money gets skimmed off by consultants and in donor overheads? How much money arrives in the country, and how much stays behind in the donor country?  Does any end up in the pockets of ministers and officials? Who decides what is built and where?  How much money actually gets spent on construction, how many houses get built, and where are they?

Key lesson: people from donor countries are mainly interested in aid allocation, people in developing countries are mainly interested in execution.

This difference in outlook partly reflects different experiences and expectations: people in industrialised countries tend to assume that a spending decision, once made, will actually be executed with a reasonable degree of efficiency.  That is not the assumption made by people in developing countries.  The difference in outlook also reflects different accountabilities: people in developing countries cannot hold industrialised countries to account for the choices they make about their aid priorities, but they can hold local players to account for how the money, once allocated, is used and what is delivered with it.  So that is what they want information about.

“We may be illiterate but we are not stupid”

We would like to tell you the story of $150m going up in smoke,” said the young villager. “We heard on the radio that there was going to be a reconstruction programme in our region to help us rebuild our houses after coming back from exile, and we were very pleased.”  This was the summer of 2002. The village was in a remote part of Bamiyan province, in Afghanistan’s central highlands, and several hours’ drive from the provincial capital—utterly cut off from the world. UN agencies and NGOs were rushing to provide “quick impact” projects to help Afghan citizens in the aftermath of war. $150m could have transformed the lives of the inhabitants of villages like this one.  But it was not to be, as the young man explained. “After many months, very little had happened. We may be illiterate, but we are not stupid. So we went to find out what was going on. And this is what we discovered: the money was received by an agency in Geneva, who took 20 per cent and subcontracted the job to another agency in Washington DC, who also took 20 per cent. Again it was subcontracted and another 20 per cent was taken; and this happened again when the money arrived in Kabul. By this time there was very little money left; but enough for someone to buy wood in western Iran and have it shipped by a shipping cartel owned by a provincial governor at five times the cost of regular transportation. Eventually some wooden beams reached our villages. But the beams were too large and heavy for the mud walls that we can build. So all we could do was chop them up and use them for firewood.”

Claire Lockhart, “The Failed State We’re In”, Prospect Magazine, June 2008

In donor countries we heard quite a lot about the need to hold aid organisations to account.  On this view, aid agencies and NGOs should be able to show exactly how their money is used, and for what.  Many organisations already put quite a lot of information on their websites so that their stakeholders can look at their activities in detail.

Yet from developing countries, we heard nothing at all about the need to hold individual aid agencies to account. Few people in developing countries are concerned with the performance of the World Bank, or of DFID.  They usually want to know, from all that money from whatever source, how much is likely to arrive in their community, or into their sector, and how they can influence how that money will be spent.

Many developing countries have their own aid databases. These are often developed by the planning ministry or Prime Minister’s offices. I was very surprised to learn that they are almost never designed to provide information compatible with the country’s budget system; and that most of them are not available to the public.  So while these databases are very important and useful for the purpose for which they are designed, to enable developing countries to manage their relationships with donors, they usually do not meet the information needs of important stakeholders such as finance ministries, line ministries, parliamentarians and citizens.

The aid information systems we have today reflect the interests and needs of powerful and vocal stakeholders: donors and planning ministries. They do not reflect the diverse needs of parliamentarians, civil society groups, the media and citizens.  They are donor-centred, not citizen-centred.  They do not enable users to add up information from many different donors.  They are focused on aid allocation, not the details of execution.

But we should not allow ourselves to be daunted by this diversity of needs for aid information. These are are all different perspectives on the same underlying information: namely how aid money is spent by different organisations and what it pays for.  And although this information has not been organized in a way which makes it easy to access or use, it is information that every organization has, somewhere in their systems.  After all, every aid agency and every implementing organisation knows who they have written each cheque to, and for what purpose.

Donors must resist the temptation to try to predict and prioritise these different needs. If donors try to meet all the diverse needs of all potential users of aid information, they will inevitably devote their finite resources to meeting the demands of larger and more vocal interests.  (That’s why we currently have data systems designed for sharing information between donors, and with planning ministries, but nothing to give information to parliamentarians, civil society or citizens.)

Instead of trying to serve the needs of particular users, donors should publish the underlying data in an accessible format so that everyone can access it easily and analyse it from their particular perspective.  (David Eaves has written a good article about this, set in the broader context of public information.)  Only donors can publish the information they hold: so that is what they should concentrate their scarce resources on. Once they have made the information available in an easily accessible form, many other organisations and individuals will be able to use that information to serve a variety of specific users. I’ll talk in a subsequent blog post about what this means in practice for aid transparency, and the (very welcome) progress that is being made.

Corruption, bureaucracy and waste

Lai Yahaya reckons donors agreeing to aid transparency is like turkeys voting for Christmas

At the ONE Africa Symposium on technology and transparency the other day, Lai Yahaya, one of the founders of TransparentAid, said that donors and NGOs would resist aid transparency because greater openness in aid was like turkeys voting for Christmas.

When I began working on aid transparency I thought the opposite.  I’ve seen aid making a huge difference in many developing countries, and I believed then (and believe now) that if more people could see the difference aid makes, they would be more supportive of it. I thought public support for aid would continue to atrophy, and perhaps start to hemorrhage, as long as aid agencies are not able to show the public how aid is being used.  Better communication in the form of more press releases and glossier annual reports would not be sufficient: people need to be shown, not told, what difference aid is making.  So I thought radical transparency was needed to convince a skeptical public that aid is not all lost in corruption, bureaucracy and waste.  On this view, resisting pressure for transparency would be suicide.

Living in Ethiopia over the last three years has changed my view a bit on this.  A lot of aid is hugely effective and it transforms people’s lives.  The aid-funded Protection of Basic Services scheme has enabled the government massively to scale up health and education services.  The aid-funded Productive Safety Net Programme has not ended bad harvests, but it has made the population more resilient, preventing the large-scale famines we watched on TV in the 1980s. As well as these hugely successful government-to-government aid programmes there is amazing work done by a wide range of NGOs, funded both by individual donations and from government aid budgets.

But there is a lot of garbage in the aid system too.  Donors are held up with red-tape and bureaucracy. They dump money into multi-donor trust funds which the World Bank charges a hefty fee to administer, from which money is never disbursed.  Money moves from donor to international organization to trust fund to international NGO to local NGO, minus a haircut at every stage, so funding which starts as a river becomes a stream and then just a trickle. There are appalling examples of waste.  Many of the people working for aid agencies in developing countries are hard-working and committed, but they face a constant struggle to do the right thing in the face of ludicrous demands and ineffective systems imposed on them from headquarters.

Aid is precious, and waste is egregious. 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.

If donors and NGOs were businesses in a competitive market they would have solved these problems by now, or they would have gone bust.  International NGOs (such as Save the Children and Oxfam) would not have half a dozen different national programmes operating independently here in Ethiopia: they would have consolidated them into one local office.  Donors are trying to harmonise and improve the the division of labour between them.  Some NGOs are outstanding, some are daft and some are downright harmful.  But change is slow for donors and NGOs because, in the absence of transparency, political constraints in aid are more powerful than business imperatives.

Transparency would change the imperatives and so help drive out waste and corruption. A 1996 study of school funding in Uganda showed that only 13 percent of the school grant from central government actually reached the schools; the other 87 percent was diverted either for private gain or by district officials for intermediate layers of bureaucracy. So the Ugandan government started to announce monthly transfers of funds in national newspapers and on the radio, and required primary schools to post information on in-flows of funds. When this information was made available to parents and teachers, the flow of funds improved dramatically, from 13 percent reaching schools in 1991–95, to over 80 percent of the money reaching schools in 1999 and 2000.

I was talking to the head of a small NGO here in Addis Ababa, whose funding comes mainly from the US Government.  I explained that under the transparency we were advocating, it would be possible to see in one place all the different things that different donors are funding in Ethiopia.  She was alarmed: “But that means we won’t be able to charge different donors for the same project”, she said. I said that seemed to me an advantage rather than a shortcoming of greater aid transparency.

An MP from Mozambique told me recently that he had presided over three separate opening ceremonies of the same school in his constituency, each with a different donor as guest of honour to be shown what they had funded. If there was more public information about what aid was funding, this kind of scam would be impossible.

The aid industry is far from perfect, and for as long as there are dark corners there will be corruption, bureaucracy and waste.  Overall I believe that aid works, but we can and must do much better.  When we see the true costs of the bureaucracy of aid, the costs of duplication and proliferation, and the shocking discrepancies between good organisations and bad ones, we’ll begin to see the most wasteful practices eliminated, and do a better job of funding the successful programmes. (Incidentally, in Ethiopia I think that is likely to mean putting more money through government and rather less through NGOs).

I am an enthusiastic supporter of aid. But I no longer think that aid transparency will prove to everyone that nearly aid is all efficient.  I now accept that there is more waste, bureaucracy and corruption than I wanted to believe, and this has strengthened my view that aid transparency is absolutely necessary to help to drive that out of the system.  But, unlike Lai, I continue to believe that unless donors become more transparent, and so do a better job of driving out the bad and making more space for the good, public trust in aid will continue to decline.  It is not transparency that will bring Christmas early, but secrecy.

Knowing what works: citizen accountability

John Githongo is a member of DFID's Independent Commission for Aid Impact

There’s a fashion among aid agencies for saying that we have to do a better job of finding out what works.  This manifests itself in greater emphasis on evaluation, especially on making more use of rigorous impact evaluation such as randomized control trials.  It manifests itself as linking funding more directly to results.  The UK has introduced the Independent Commission for Aid Impact, a step which I strongly support.

I think all this is essential to making the aid system work better.  I certainly don’t agree with the whining from aid industry insiders that measurement of results is burdensome or that it distorts decision-making in an unhelpful way. (I’ll write about that separately).

But I now believe that this approach, as it is being implemented, is too top down.  We can learn a lot from rigorous impact evaluations, and we need to do many more of them.  We need independent evaluation of aid agencies.  But there is something we need just as much, if not more: to know from the users of services themselves whether those services are effective and meet their needs.  Successful companies don’t decide their strategy according to impact evaluations, they respond to their customers.

I’ve become less sceptical over time of the idea of making aid and public services more accountable to the poor. A few years ago I was concerned that this might be a combination of political correctness and wishful thinking. It is hard to do, and it doesn’t reflect the realpolitik, which is that aid is always going to be accountable to the people who pay for it.

But we have growing evidence that greater accountability can make a huge difference to the quality of public services. In a randomized controlled trial in Uganda citizens gave feedback about health clinics through report cards and civil society meetings.  In the clinics where this happened, waiting time decreased; doctor and nurse absenteeism plummeted; clinics got cleaner; and fewer drugs were stolen. Most importantly, 33% fewer children under the age of five died. Improving accountability was much more effective than more expensive alternatives, such as paying for buildings, staff and medicines.

I’m on the board of Twaweza, an initiative based in East Africa which seeks to expand opportunities through which millions of people can get information and make change happen in their own communities directly and by holding government to account. One of their partners, Uwezo, aims to improve competencies in literacy and numeracy among children aged 5-16 years old in Kenya, Tanzania and Uganda by enabling parents to assess the progress of their children and increasing public accountability of education services.  Daraja is a Tanzanian NGO that aims to develop tools and encourage citizens to report waterpoint functionality in their areas. Twaweza supports Daraja to enable citizens to report which water points are working in real time, through text messaging; to share information about water point functionality to the public in accessible formats, primarily through the media; and to analyze and publicize responsiveness of the government to citizen notification.

As I’ve written elsewhere, I now believe (along with the World Bank Chief Economist for Africa) that social accountability can make services work better, and contribute to development.  The powerful combination of a growing civil society voice and changes in technology make it possible, perhaps for the first time, for poor people themselves to monitor service providers and government services.

This is a new field and the evidence base is not yet in place. The most recent and comprehensive review of the literature by Rosemary McGee and John Gaventa at IDS finds this:

…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

Reading this survey, my conclusions were that the evidence so far is largely circumstantial though quite persuasive, but that we know rather more about the impact of greater accountability than we know about what we can do to bring that accountability about.

Transparency and accountability

We have a lot to learn about the relationship between transparency and accountability. They are not the same thing. For one thing, transparency is not zero sum: if I make information available to one person, that does not reduce the information available to someone else. (The technical economic term for this is “non rival”.)  By contrast, accountability can be zero sum, or at least subject to trade-offs: if an organisation or service becomes more accountable to the citizens it serves, it may as a result become less accountable to other stakeholders such as the government, donors or the employees.  Till Bruckner made a similar point in a thoughtful post on the Devex blog.

We have many examples of how transparency can change power relationships and accountability. An obvious example is the publication of UK Parliamentary Expenses.  In this case, as in many others, vested interests attempted to limit the information that was published and to control the narrative. For example, MPs did not want to publish the details of the houses in respect of which they were claiming accommodation costs: they wanted to publish only the summaries of claims under each category. But it was the publication of precisely these details which led to the biggest public debate and, eventually, to criminal charges against some MPs, because it was the details which showed that some MPs were abusing the system.

If our aim is to increase the accountability of public services to the intended beneficiaries, and to drive out corruption and waste, we must be vigilant to ensure that the transparency we advocate challenges, and does not entrench, existing power relationships.  We should be sceptical when we hear that publishing the details would be ‘too much information’ to be useful, or that it would be ‘disproportionately expensive’.    These are precisely the arguments that vested interests use to try to limit transparency, to try to control the narrative, and to slow down the shift in power and accountability which greater transparency brings about.  If donor organisations claim that publishing this information is ‘too expensive’ the burden of proof should be on them to demonstrate that this is true.

I am all in favour of donor agencies summarising information to tell an accessible, compelling story about what they are achieving.  But they are not entitled to maintain monopoly control of the information. The same information should be available to everyone, to enable others to examine the evidence and to construct a competing narrative if they wish.

Our existing arrangements for publishing aid information risk reinforcing, rather than challenging, existing power relationships.  Donors provide information through the DAC databases, which are designed for donors to share information with each other about their efforts.  Less reliably, they also provide information to country-level aid management systems, which are designed to enable developing country governments to manage their relationships with donors and which are, for the most part, unpublished.  Aid transparency in the future must be designed to allows citizens and civil society groups from both donor countries and developing countries to access this information in a meaningful way, to enable them to hold both governments and donors to account.

The aid industry is falling over itself to point out that transparency by itself is not enough. For example, Duncan Green says:

Don’t just throw money at transparency and accountability initiatives and expect a revolution. Unless the domestic politics is right, especially linking state and civil society actors into accountability coalitions, it may not make that much difference.

In a technical sense, it must be true that greater transparency is a necessary but not a sufficient condition for greater accountability.  But while I do not claim that transparency alone will bring about an accountability revolution, I have a lot more confidence in the ability of people of developing countries to use information to change their own lives.

I dislike and distrust the argument we hear from the aid industry that it is not enough simply to give people access to information, for five reasons:

1. first, it is clearly the responsibility of donors to be transparent about what they do, and nobody else can publish this information for them. Donors should focus first on the parts of the problem that are their problems to solve.
2. second, the possible need for complementary interventions is used as an excuse to move slowly on transparency (on the grounds that transparency will not make a difference unless those other institutions are in place). This is a classic case of the best becoming the enemy of the good.
3. third, the burden of proof should be on those who advocate secrecy.  We have a compelling business case for transparency, despite the uncertainties.  But there is no business case for secrecy and nobody has ever asked for one.  The uncertainties would be just as great in either case, so why is the uncertainty allowed to count against transparency but not against secrecy?
4. fourth, the evidence suggests that transparency does work surprisingly well. We should give the resourceful people of developing countries the benefit of the doubt. Consider the example of transparency of school budgets in Uganda – there was no civil society capacity building programme, or any of the other stuff that NGOs say might be required, yet the amount of money reaching schools went from 13% to over 80% in a few years.  There is not yet a rich enough evidence base, but there do seem to be quite a few cases in which, once people have access to information they are able to use it to improve the services they receive without (shock! horror!) a logframe, an end-to-end theory of change or capacity building support from international NGOs.
5. fifth, this concern seems nakedly self-serving.  Much of the aid industry’s core business is “capacity building”, “linking state and civil society actors into accountability coalitions”, “stakeholder analysis”, “empowering marginalised communities”, “civil society support programmes” and so on. Just as journalists don’t like the idea of people using the internet to share information without it being intermediated by media organisations, because it undermines their sense of identity and self-worth and jeopardises their livelihoods, the aid industry doesn’t like the idea that simply giving people access to information might be enough to enable them to change their world.

I’m enthusiastic about organistions working to help communities in developing countries to access and use information as it becomes available, and especially to help them to add value to it by mixing it with information from other sources, and using it to demand better service and advocate change.  I’m proud to be on the board of Twaweza, and I think donors should allocate a modest budget to supporting this kind of work.  But I remain more optimistic than many of the vested interests in the aid business that, even if this kind of international support is not as forthcoming as they would like, transparency by itself will still make a big difference. My belief, which is supported by the (admittedly rather sketchy) evidence so far, is that once you liberate the information people will find ways to use it.

Conclusions

I’ve spent the last three years working on how greater transparency and accountability can improve the way aid works, and my thinking about these issues has changed.  In this blog post I’ve tried to explain why. We have, for the very first time, found out what information people want and what they would do with it.  We have thought about how they could get access to it. We have more and more evidence about the impact of transparency and accountability.  And more people have begun to think about this and work on it than ever before. We have, collectively, come a long way.

In a later post I’ll reflect on the (very impressive) progress that has been made on this agenda, and on the next steps.

To conclude, here is a recap of the 8 most important things I have learned:

1. To make a difference, transparency has to be citizen-centred not donor-centred.
2. Today’s ways of publishing information serve the needs of the powerful, not citizens
3. People in developing countries want transparency of execution not just allocation
4. Show, don’t tell
5. Transparency of aid execution will drive out waste, bureaucracy and corruption
6. Social accountability could be Development 3.0
7. The burden of proof should be on those who advocate secrecy
8. Give citizens of developing countries the benefit of the doubt

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.

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.

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.

Let’s deal first with the question of motivation.  In a recent post I reported Dan Pink’s claim that people are generally not motivated by money to do cognitive and creative tasks. This led Nandini to ask:

How do you reconcile these views with those in Cash on Delivery aid, where incentives are clearly being proposed to motivate government officials to get the job done?

I do not think that most people who work in development are in it for the money.  Most of the aid workers could earn much more, and live more comfortable and less stressful lives, if they did something else. Aid workers don’t want to get rich: they want to help make the world a better a place.  And though they are often teased for being self-righteous, it is a genuinely noble and admirable motive.

I also know many fine public servants in developing countries who are similarly motivated by service to their country. They often burn with national pride and want their country succeed. They want to address social injustice and poverty.  They are hard working and often paid very little. They too would be insulted by any suggestion that they are in it for the money.

That isn’t to say that there aren’t some officials in both developed and developing countries who are corrupt and greedy.  In some developing countries where civil service salaries are very low, some people are not fortunate enough to get over Dan Pink’s hurdle of “being paid enough that they don’t have to worry about money”.  For these people, money may be a motivator, but for reasons I’ve set out elsewhere, I think aid plays a relatively minor role in changing their behaviour.

If the people making these decisions are not motivated by money, what is the point of linking aid to results?  The answer is that incentives still matter. People who work in NGOs spend a big part of their time writing grant applications, and sucking up to donors, not because they enjoy it but because they want to increase the funding for their organisation.  Within aid agencies, people spend a lot of time doing things they don’t really value, because that is what they have to do to be allowed to spend money on the programmes they care about.   Clearly people working in development are  responding to incentives, not related to their own incomes but because they want to expand and sustain the programmes they think are important.  So incentives matter, and they do change people’s behaviour.

Incentives to be ineffective

Within the current aid system, donor agencies and their staff face powerful incentives to give less effective aid. For example:

• Some donors give “tied aid”, even though this is estimated to reduce the value of aid by 15-30%. Tied aid is a consequence of domestic political pressure. Some donors allege that tied aid necessary to maintain public support for their aid programme (e.g. US food aid).
• Conditions are often imposed on aid, not because anybody believes the conditions really make a difference to what happens – all the evidence suggests to the contrary – but they enable donor governments to claim that they are “doing something”.  Though we know aid works best when we the developing country has real ownership over their policies, in practice the aid system regularly undermines this ownership by setting conditions and imposing its own systems of accountability and control.
• Donors like to retain the flexibility to turn the aid tap on and off at short notice (a practice often disgracefully known as using a “short leash”) so that they can respond to domestic political pressures, even though the lack of predictability is one of the biggest impediments to aid effectiveness.

This behaviour is driven mainly by the proper and important need for aid agencies to show to their taxpayers that their money has achieved something. Because aid agencies have found it hard to show a clear link to results, sometimes for quite respectable reasons, a complicated bureaucratic culture has grown up to trace how inputs are used, to set milestones and benchmarks, to and to encourage very high levels of engagement with recipients about how they propose to go about spending the money. But this behaviour, while a completely understandable and rational response to the need to be accountable, reduces the effectiveness of aid.

If taxpayers (and their representatives: politicians) cannot observe the results of aid, in a far away country about which they know little, they will be inclined to insist on getting whatever second-best information can be assembled to satisfy themselves, and to demonstrate to taxpayers, that the aid has been well used.  The consequence is that aid is made less effective.   For example:

• There are political costs (and risks) to making long term aid commitments, and to untying aid, but in the absence of measures of results there is no political cost to the invisible loss of effectiveness that unpredictability and tied aid create.
• Donors know that country ownership is essential for aid to be used well, but they nonetheless feel that they have to impose their own systems to determine how aid will be used and to track implementation.
• There are political and strategic benefits to giving aid in every country and every sector; but in the absence of measures of results nobody knows how much inefficiency this proliferation creates, nor is there anything to force donors towards a better division of labour.

It is as though we plant a tree and then dig it up again once a week to see how the roots are doing; and then we wonder why it isn’t growing very fast.

We cannot wish this problem away.  It is right and inescapable that donors must be accountable to taxpayers.  Donors cannot avoid these pressures simply by making international agreements to do better in future (which is why those agreements are implemented only sketchily and slowly, if at all). Nor will they meet the need for accountability merely by improving their communications or changing the narrative.  A stronger link between aid and results looks to be the only sustainable way to solve this problem.

The risk of additional bureaucracy

The audit culture in aid is beginning to create a backlash among development professionals.   Earlier this month, the Institute of Development Studies organised a meeting to “take the first step towards resisting the audit culture of philanthropic foundations and government ministries.”  And in an important essay which is getting a lot of attention, Andrew Natsios (a former Administrator of USAID) wrote about what he sees as the most disruptive obstacles to development work in agencies such as USAID: layers and layers of bureaucracy.  He argues that an emphasis on measurement is at odds with the fact that transformational programs are often the least measurable and involve elements of risk and uncertainty.

And if that is how the staff of donor agencies are feeling, imagine how much worse it must be for hard-pressed officials in developing countries, and NGOs trying to keep their overheads to a minimum.

Some people have a reasonable fear that push for better measurement of results, and a better link between aid and results, is a further and troubling manifestation of this bureaucratic tendency.  There is a significant risk of additional bureaucracy if the need to measure results is simply bolted on to the existing systems. But if donors are willing and able to use the stronger link to results to simplify the way they manage aid, this offers the best – perhaps the only – opportunity to step away from “command and control” management of aid.

Will measuring results make the system better or worse?

The argument for greater use of linking aid to results is not based on the simplistic notion that we should motivate aid workers or officials in developing countries with monetary rewards (which I don’t believe).  Instead it is based on the idea that if we can tackle the problem of lack of information about results, it becomes possible – and indeed desirable – to allow decentralised decision-making by people on the ground who know much more about what is important and what works; so respecting country ownership, and liberating developing countries and aid agencies from much of the bureaucracy of the aid system.

Cash on Delivery aid is a possible example of this approach.  It is a market-like mechanism, in that the donors set a price that they are willing to pay for certain types of result, and they allow governments to decide for themselves whether and how to supply those results.  But it is rightly a long way from a pure market solution.  I would like to see it tested because I hope that if aid is linked explicitly to an independently-verified measure of the results that we care about, this might enable donors to change the way that they relate to recipient governments and the way they manage aid.   There should be no reason to agree milestones and benchmarks, no need to set targets; no need for policy conditions or inspections of public financial management.  There does not need to be a simplistic, linear model of how results are achieved, monitored at every milestone and benchmark.  Financial commitments linked to results could be long-term and predictable.  Developing countries could choose their own priorities, and take responsibility for their own progress.  Cash on Delivery might enable donors to respect country ownership, and the diversity of approaches countries will take, while still being able to report to domestic taxpayers what difference aid has made.

Simon Maxwell is right to point out that too much development thinking simplistically assumes that inputs are translated into outputs and outcomes, as implied by the logframe approach.  But this is surely a critique of the existing approach in which inputs, activities and outputs are obsessively described and tracked and rather too little attention is paid to the actual outcomes.  A results-based approach, by contrast, would enable the development partners to step away from deterministic models, to invest more in relationships and institutions, to be politically savvy and opportunistic, to learn as they go, and to deliver results in ways that are messy, unpredictable and imprecise but which actually work.

Simon Maxwell is also right to highlight the importance of institutions and capacity in developing countries.  Many existing approaches to development pay too little attention to this:  because of our need to track inputs and activities we tie up partner governments in red tape and try to direct proceedings from the outside or – worse – bypass government systems to deliver services through NGOs and the private sector.   This undermines institutions and systems.  By contrast, one of the motives behind Cash on Delivery is that it enables developing countries to figure out their own way to deliver results, and so to strengthen their own national institutions and policy making. Because in this model donors are focused only on results, they do not need to intervene intrusively in how countries make progress, so enabling the institutions of developing countries to draw in outside expertise they actually need, want and use; innovate; test ideas; set their own priorities; adopt their own approaches; and learn.

Sceptics are certainly right to ask if a results-based approach will focus on the wrong results: there is a risk that we will link aid to short term, measurable indicators instead of sustained institutional and economic change.  That is certainly a shortcoming of today’s aid system, which sets targets for all kinds of short term activities which may or may not be important (“set up an anti-corruption commission” or “reduce double shift working by teachers”) and creates a huge industry of people designing ways to monitor these indicators, while accepting with apparent equanimity that we lack even the most rudimentary information about the things we ought really to care about, such as whether corruption is being reduced or children are learning at school.   It is possible that, under the banner of results-based aid, we could simply reinforce this short-term interventionism by linking money to short-term indicators that donors currently believe might matter. But if we resist this bureaucratic temptation and instead link aid to results that really do matter – such as reductions in maternal mortality or improvements in access to clean water – then we reduce, not increase, the risk that the aid system is too focused on the wrong things.

Conclusions

The hypothesis is that by addressing particular information failure – lack of information about results – and if necessary dedicating some resources to it, we might be able to break away from the coping strategies which donors have had to adopt, which create a lot of pressures which make aid far less effective and which waste a lot of time and money on nugatory work.  But this will require some imagination on the part of aid agencies to think about how they can simplify their existing systems for managing aid when they link aid more robustly to results.  Development professionals are right to worry that if results monitoring is simply added to existing systems, the effect will not be greater simplicity but more complexity and bureaucracy.

In my view, it is disrespectful to aid workers and to officials of developing countries to suggest that they are motivated by money.  That is not the logic behind linking aid to results.  It also disrespectful to occupy so much of their time on bureaucratic administration, recording information about inputs and processes, milestones and benchmarks, when they would generally make a greater contribution if they were free to deliver development results.

Aid is made less effective by the incentives which aid agencies face, which they in turn transmit to their staff.  In large part, these unhelpful incentives are a consequence of lack of information about results.  If we can measure results better, and if we can use this to simplify the management of aid (and not simply bolt additional reporting on to existing bureaucratic processes),  this will enable more decentralised decision-making, respect country ownership, make the jobs of aid workers and government officials more rewarding, improve the effectiveness of aid, and so reduce poverty faster.

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.

“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.

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

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

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

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

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

Alternatively you can download the presentation as a pdf here.

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

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

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

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

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

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

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

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

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

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

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

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

And it happened in a few hours.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here is the summary version – the long version is below.

• To say that an asset is fungible means technically that one unit is directly convertible into another unit of the same asset.  But in development, people have come to use the term in a different, technically incorrect, sense.  They use it to mean that the recipient may respond to aid by changing the way they use their own resources, with the risk that aid “frees up” resources to be used in unpredictable ways.  (The tangential connection to the proper idea of fungibility is that aid may partly substitute for the other resources available to the recipient community.)
• Donors have two responsibilities which relate to this.  First, they should ensure that the aid they give is used for the purposes for which it was given.  Second, they should ensure that their aid is good value for money, which requires them to take account not only of the direct effects of aid, but also the indirect effects.   These indirect effects include the overall impact on resource use in the recipient community.  Resource reallocation is just one of the indirect effects, and it unlikely to be the most important.
• These two concerns are a close analogy to the general obligations in public financial management to ensure that public money is both properly spent and good value for money.  These are distinct concerns which are better not confused.   Aid can arrive safely and be used for the purposes intended even if the recipient community has made offsetting changes in its own resource use.  Being used for the purposes intended is a separate question from whether aid is achieving its broader goals and achieving good value for money: it is this latter question which may be affected by how it impacts resource use in the recipient community.
• Properly defined, neither fungibility nor liquidity of the aid affects the extent to which recipients can make offsetting changes in resource use.  The extent of offsetting changes is determined by whether recipients are willing and able to make choices about how to use their non-aid resources. The characteristics of the aid and how it is delivered make little difference to this.
• By mislabeling the question of broader resource use as an issue “aid fungibility” we create the misleading impression that the way we give aid is an important determinant of the extent and nature of the possible impact on overall resource use.  We create the impression that by choosing the right aid instrument, we can limit or prevent these effects.  In fact, aid could be entirely non-fungible and illiquid and still have big, unpredictable effects on resource allocation.
• There is a lazy assumption that these issues are more of a concern for aid given as budget support to governments.  Aid given in kind and aid given through NGOs is subject to the same issue of impact on overall resource use as aid given in the form of budget support.
• If donors are concerned about the indirect effects of aid on the allocation of government resources, then they should be looking for ways to strengthen the resource allocation process and to exercise more influence over the recipient’s budget allocations.  Giving their aid through NGOs is likely to have the opposite effect, since donors thereby exclude themselves from the dialogue about resource allocation.  Rather than try to bypass these issues, donors should increase their engagement in improving public financial management, supporting transparency and accountability to parliament, and providing aid through government budgets so that they have a locus to influence the recipient country’s use of resources.

A more detailed explanation follows.

What does “fungibility” mean?  What does “liquidity” mean?

An asset is said to be “fungible” if a unit of that asset is easily interchangeable with another unit of the same asset.  So a sack of barley is fungible (one sack of barley is pretty much like any other), but a bottle of wine is not fungible (because you would not readily exchange a bottle of Margaux for a bottle of Liebfraumilch).  Crude oil is fungible, diamonds are not.  Money is fungible – a $10 bill is just as valuable as another –which is of course a desirable characteristic of your medium of exchange.  For many assets, such as money, fungibility is a strength, not a weakness; this is implied by the Latin origin of the word, fungi, meaning “to perform”.

“Liquidity” is the first cousin of fungibility. If an asset is “liquid” this means it can be easily converted into another, different asset.  So although diamonds are not fungible, they are generally quite liquid because they can be easily sold and traded for other assets.

The indirect effects of a gift

For Christmas, my partner bought me Beatles CDs.  It was a very well-chosen gift. As a big Beatles fan I wanted these CDs and if she had not bought them for me, I would have gone out after Christmas and bought them for myself.  After Christmas, I bought myself a Florence & The Machine album instead.  I probably wouldn’t have bought this as well as Beatles CDs (since I implicitly ration myself on buying CDs).  So the overall effect of my partner’s gift, taking account of how my own behaviour was affected, is that I have a Florence & The Machine album I would not otherwise have had.

What then was my partner’s gift to me?  Was it Beatles CDs or was it Florence & The Machine?

It would be obtuse to say that my partner gave me a Florence & The Machine CD for Christmas. (I am not sure that she has even heard of Florence & The Machine.)  When we listen to the Beatles CDs, we both know that we are listening to her present.  I am more emotionally attached to my Beatles CDs because I know they were a gift from her.  The common sense view is that she bought me a Beatles CD, and that it arrived safely and was a very good gift.  The fact that I subsequently diverted my own spending from the Beatles to Florence and The Machine does not in any way detract from this.

A common example of this phenomenon is a wedding list. This is a custom by which a couple getting married place in a shop a list of the goods they would like to be given as wedding presents.  It is a very helpful practice because it means that the couple gets presents they actually like; it avoids duplication; and it ensures that they get gifts which fit together well (e.g. bed linen).   It also simplifies the task for their wedding guests. When we buy a gift from a wedding list we know that the chances are very high that if we don’t buy it, someone else will.  But that does not prevent us from looking through the list to find something that we would like to give.  The couple and we may remember in years to come what we bought them.  When we buy wedding presents, we don’t think that we are really buying the marginal gift on the list.

The same is true in aid. Donors can sensibly and truthfully identify the items for which their aid is being used, even if they know that , as a consequence of the aid, the recipient community is likely to change its own behaviour, including changing how it allocates its resources.  It is mischaracterization of this to say that this means that the aid has been diverted or misused.  The aid has arrived and been used exactly as intended.

That does not mean that donors should not be concerned about the indirect effects of aid, including what happens to the allocation of resources.  The indirect effects can be substantial and sometimes difficult to predict. For example, if we give food aid in kind, this may have the direct effect of providing food to a particular community, but it might have the indirect effect of undermining the livelihoods of local food growers.  There is evidence from some school feeding programmes that while the direct effect is that the schoolchildren get fed at school, in many cases the family compensates for this at home by reallocating food to less-fortunate siblings.   Rigorously analyzing and understanding all these indirect effects is an important part of understanding the overall impact of aid.   But recognizing that there are uncertain broader effects does not mean that we can no longer honestly say how our own aid has been used.

The (non-)relationship between fungibility and resource reallocation

I recently bought my partner a painting which we had seen in an art gallery in Ethiopia.  I knew that she liked this particular painting and if I had not bought it, she would have bought it herself.  Because I bought it for her, she had some money left over which she used to buy an Ethiopian ornament.  But a painting is not fungible: it is one of a kind.  Even though I gave her a non-fungible painting, she was able to adjust her own expenditure so that the overall impact is that we have an extra ornament in the house.

When we give aid, the recipient community may (consciously or unconsciously) reallocate their own resources, and this may or may not be a good thing.  But whether and how this happens is not at all related to whether the aid itself is “fungible” or “liquid”, nor whether it is provided in money or in kind.

In the example above, families were found to adapt to school feeding programmes by reallocating food within the family at home.  This would be true irrespective of whether the school feeding is financed by the government, through budget support, or directly delivered by an NGO, and irrespective of whether aid was provided in the form of money or food.  It occurs because families are able to reallocate food resources within the household.

Take another example: when countries are provided with aid to build a new road, they may choose to spend more of their own money in a different sector (e.g. on schools) or in a different part of the country.  This can be true whether the support is provided as budget support, in a sectoral programme or in the form of project aid.  Even if the road is built from imported materials by imported labourers, it is still possible for the country to use their own resources differently when they see that aid arrive.

In other words – and this is the crucial point – it is not the characteristics of the aid that determines these effects, but whether the recipient community wants and is able to reallocate its own resources in response.  Yet because our thinking has been influenced by the misleading notion of “fungibility of aid”, the policy debate tends to focus on changes to the way that aid is given as a mechanism to ensure that aid is spent as we intended.

The implications for donors, their fiduciary duties and aid effectiveness

Donors should be asking themselves two questions:

1. Has the aid we have given arrived and been used as expected? Being able to answer this is part of donors’ fiduciary responsibility to ensure that public money has been used for the purposes intended.
2. What are the wider consequences of this aid, including possible changes to how the beneficiary community uses their own resources?  Being able to answer this is important for ensuring that aid is used well, and it is part of donors’ fiduciary responsibility to ensure that aid is achieving good value for money.

A problem arises when these two distinct questions get mixed up.  We can be satisfied that our aid has arrived and been spent as we intended even if the beneficiary community has made offsetting adjustments to its own resource use.  (This is equivalent to knowing that the painting I bought for my partner really is hanging on the wall, even though I also know that the consequence of my having bought it is that she has bought an ornament.)  This interpretation of ensuring that our money has been used as intended is consistent with common sense and everyday usage, and it is consistent with donors’ fiduciary responsibilities.

This does not mean that we should be satisfied merely with knowing that our money has been spent as planned.  Donors have both a social and a fiduciary responsibility to ensure that aid achieves good value for money.  We should be interested – much more than we have been in the past – in the broader, long-run consequences of our actions.

There are many possible ways in which aid can have indirect effects which are not sufficiently taken into account in assessing whether to give aid, how to give aid, and for what purposes.  There may be effects on institutional capacity, exchange rates, relative prices, firms, domestic politics, power relationships and social attitudes.   The likelihood of domestic resource reallocation as a result of receiving aid is one among many indirect effects that ought to concern us when we provide foreign assistance, though it is probably not the most important of them.

Should we influence recipient country resource allocation, and if so, how?

In a recent blog post I have set out the reasons why I am less concerned than other people seem to be about the fact that recipient countries adjust their budget allocations in response to aid, so I will not repeat that discussion here.  Alanna Shaikh and Laura Freschi have interesting things to say on this issue as well.  I would add only that I am not naively assuming that every developing country is making rational, well-informed decisions in the interests of its poorest people; merely that it is better that they should be making resource allocation decisions than donors trying to do it from afar.

Notwithstanding my reservations, suppose that a donor decides to get involved in  resource allocation decisions in a recipient country, for example because the donor is concerned that budget allocations do not sufficiently reflect particular priorities or do not meet the needs of the poor.  For the reasons set out above, changing the way aid is given is not going to make the slightest difference to this.  It does not matter if the aid arrives as budget support, aid in kind or support to hundreds of tiny NGOs.  If the donor is concerned about resource allocation then what matters is the desire and ability of the recipient community to reallocate their own resources when the aid arrives.

In these circumstances, the donor should be considering how to improve the domestic system for resource allocation, how to make it more transparent and accountable and (if they think it appropriate) how they can be part of a dialogue with the relevant authorities about how resources are used.   If this is their goal, then giving their aid through NGOs is likely to have the opposite effect: the reallocation of aid will continue, but donors will have no locus for a dialogue about resource allocation in the budget.  If you want to influence budget allocations, you had better be giving aid to and through the budget.  Rather than try to bypass these issues, donors should engage more in improving public financial management, supporting transparency and accountability to parliament, and provide aid through government budgets so that they have a locus to influence the recipient country’s use of resources.

Almost every successful complex system became successful through a process of evolution.

Complex animals are the result of generations of evolution: of random mutation of genes (variation) and then survival of the fittest (selection).  That is how complex animals, superbly adapted to their environment, come into existence.   In market economies firms and products are launched  (variation). If customers like their products, and if the firms are efficient, they will grow; if not the firm will fail (selection). That is why well-functioning markets tend to have efficient firms which make products that customers  want.  Political movements spring up (variation) and do well if they are popular with the electorate (selection).

At the end of The Selfish Gene, Richard Dawkins invented the notion of a meme, an idea which tends to reproduce itself in a community such as a fashion, culture, value, melody or belief.  He describes how societies with successful memes (“Don’t marry your cousin”) tend to do better than societies with memes that do them harm (“Humans make a tasty dinner”).

The development system is a complex system, but it would be excessively kind to claim that it is a successful one.  There are many initiatives to design a new “aid architecture”  which are unlikely to succeed; and even if they did, do we really want to wait another half a century until we can agree the next new design?  What we need instead is to instill into the development system mechanisms that force it to evolve as circumstances change.

In development, we have quite a lot of variation but not enough selection.

There are too many, rather than too few, organisations and projects in development.  Here in Ethiopia, nine sectors have 20 donors or more (including health, governance, education, water, agriculture, infrastructure), and according to the DAC database there were 1 840 projects by aid donors in Ethiopia in 2007.  Globally the UN has more agencies working in development than there are developing countries, and there are more than a hundred global funds working in the health sector alone.

It isn’t just DAC donors and multilaterals that are proliferating.  In Ethiopia there are more than 3 500 NGOs, almost entirely funded from overseas. As with official aid agencies, some of these NGOs are outstanding.  Some are well-meaning but ineffective.  Some are charlatans and rent-seekers.  Ethiopians are shrewd judges of which are which.  But the ineffective agencies and NGOs and the charlatans, and some very duff projects, still get funded year after year.

I recently met a European bureaucrat sent to “build capacity” at the Africa Union, whose headquarters are here in Addis Ababa.   As we ran together in the hills above Addis where Ethiopian athletes train, he told me frankly that his project was a complete waste of time. No surprise: we have known the shortcomings of the way donors give “technical assistance” for more than forty years.  But there is nothing in the aid system that forces organisations to stop wasting money on projects that everybody knows will never work.

A slight disagreement with Bill Easterly

This is where I partly disagree with my friend and fellow blogger, Bill Easterly (or to be more accurate, I disagree with the following caricature of his view).  Bill argues in The White Man’s Burden that there are too many “planners” and not enough “searchers” in development.  He is robustly critical of anyone with anything resembling a grand plan, and consistently sceptical of the aid industry’s habit of herding towards the next big thing (microfinance, agriculture, etc).  He calls for more experimentation, and more small scale programmes grounded in local realities.

I’m all for lots of experimentation: an evolutionary process needs variation. But the evolutionary force missing in the aid system is not variation but selection.    For the evolutionary process to work, there has to be some process by which more resources are channelled to effective aid, and resources are taken away from things that don’t work.  If not a planner, then there has to be some sort of decision maker to make this happen.  Bill seems to agree with this in principle -  the AidWatchers prize for Best In Aid went to the “smart giving” movement which encourages private donors to give more money to effective organisations.  But if ever someone suggests that a particular approach appears to be work and ought to be scaled up, Bill pops up and accuses them of being a planner, or of diverting scarce resources to their pet cause at the expense of the myriad of other grass roots programmes being promoted by searchers.

While I agree with Bill’s robust scepticism, and his demand for more rigorous evidence, I think he focuses too much on the need for more “searchers” and does not sufficiently focus on the need for stronger selective pressures. I agree that we don’t want a plan, but we do need some way of doing more of what works, and doing less of what does not, and that in turn requires some sort of institutions to channel aid to priorities.  But Bill is apparently allergic to any sort of institution playing this role.

What would better selection look like?

There is a  movement which advocates a suite of sensible measures, including:

• a stronger focus on results, and less focus on announcements of spending
• more rigorous and independent evaluation, using randomised controlled trials where possible
• a stronger link between funding and results (for example, Cash on Delivery aid, EU MDG Contracts and the selectivity of the Millennium Challenge Corporation)
• promoting better giving to charities by the public (through  organizations like GiveWell, Philanthropedia and Great Nonprofits)

I’m in favour of all these things, and I would like to see more of them.  But they are all essentially “top down” mechanisms for selection, in which the pressure comes from wise outsiders who decide what is working.

Other complex systems do not rely on top down intervention to force selection (unless perhaps you believe in theistic evolution, in which change occurs through the external intervention of a benign deity.)  Tesco is not the largest supermarket in the UK because the government has conducted thorough monitoring and evaluation of its outputs and outcomes.   We do not used randomised controlled trials to decide which coffee shops should stay open.   Political parties win elections by getting votes, not because they have convinced a higher authority of the quality of their log-frames.

We should not exaggerate the market metaphor: development work is not exactly like a market, and anyway few markets operate well without some kind of central regulation.  But it isn’t neoliberal faith in markets to say we should look for more bottom-up ways to enhance selective pressure in development, so that the decisions are not made by benign deities from outside (even ones who know who to do randomised trials) but by the people who are supposed to benefit from the aid.

In a recent TED talk David Cameron spoke of a post bureaucratic age in government, in which citizens are able to improve services through greater local accountability.   More use of top down evaluation, with consultants flying in to conduct rigorous baseline surveys and measure results of treatment and control groups, however rigorous and independent, does not feel very ‘post bureaucratic’ to me.

There are increasingly many examples of bottom-up mechanisms towards better accountability in development, many of which are enabled by growing access to communications and technology.  Ingredients of this revolution include:

• social accountability movements such as Twaweza (listen to Rakesh Rajani interviewed here)
• giving cash to people in developing countries, for example through cash transfer programmes
• giving people vouchers for services, and letting them choose where they get that service from
• Advance Market Commitments, which reward firms for producing goods and services of value

Oddly, many of these efforts to empower the poorest to direct resources themselves are opposed by some people working in development who regard themselves as progressive.  It is hard to escape the feeling that this opposition may owe more to concern for their own job satisfaction than for the interests of the poor.

It is not a straight choice between top down and bottom up accountability: there are hybrid models.  An important trend in development assistance over the last decade has  been efforts to encourage greater accountability of developing country governments to their own citizens, so that aid given to governments is better used in the service of the poor. This is a big part of the thinking behind the combination of budget support and Poverty Reduction Strategies.   Creative ideas are now emerging for strengthening the feedback loop from the intended beneficiaries of aid programmes to the overseas decision makers (such as ALINE and Guidestar), so combining top-down selection with bottom-up information about effectiveness.  These long chain accountability mechanisms are important, but they seem to me to be a second-best to giving poor people themselves direct influence over how resources are used.

Conclusion

Complex systems become and stay effective through a process of evolution: this requires variation and selection.  The development system contains quite a bit of variation, but not enough selective pressure.  Proposals for more effective top-down selective pressure should be supported, but the real prize is finding better ways to increase selective pressure from the people whom these programmes are intended to support.

First up is Lawrence Haddad, with Six Ways to Improve Aid Effectiveness.  In summary, his six are:

• fix the broken feedback loop.
• communicate the successes and risks of aid in a less ‘public relations’ way.
• publish results of donor efforts to meet their commitments
• limit the number of donor transactions that recipients are expected to engage with.
• focus more on influencing other parts of donor governments.
• plan for aid exits, even if they won’t happen for 10-15 years.

I largely agree with these.  Within the aid system, I’d give top priority to fixing the broken feedback loop; and for development policy more broadly I’d focus on better influencing the other parts of donor governments.

The part about planning for aid exits is least convincing.  On the contrary, I think aid suffers from the pretense that it is temporary, with everyone having to claim that aid projects will catalyse permanent change.  Every programme has to be designed to look as if it will only require aid for a short time, after which it will be self financing.  This makes donors too reluctant to invest in excellent programmes which are likely to need sustained funding over many years.

And I’d add predictability – surely one of the most important improvements in aid that donors could easily make.  aid is made hugely less effective by lack of predictability. Homi Kharas has estimated that the cost of aid volatility is between 15 and 20 percent of the total value of aid, or about $16 billion a year. From the average recipient’s perspective, the deadweight loss is about 1.9 percent of GDP. Ironically, many of the drivers of lack of predictability (such as donor conditions) are intended to ensure that aid is effective, and have the unintended consequence of making it less so. This is the most requested improvement from developing countries, and it is something that donors could do relatively easily.

My own piece is up tomorrow.  You won’t be surprised to learn that I think greater transparency is at the heart of improving the aid system, as a way of driving the other changes that Lawrence and others identify.

This is very good stuff (and particularly commendable for the concise way it is written, without any of the usual development-speak).  I am particularly pleased to see transparency and predictability as the first two items.

I would add three things.

First, “reduce reliance on US contractors” is an anaemic recommendation.  The US should follow international best practice and untie all its aid.  In particular, the way the US and EU dump their surplus food in developing countries, driving local farmers out of business, is a disgrace.

Second, a quick way to improve the effectiveness of scarce aid resources would be to spend more money in the poorest and most populous developing countries.  Less than 40% of total aid is spent in less developed countries. Just shifting aid to the countries that need it the most would make a big difference to the impact of that aid.

Third, Congress needs to stop with the earmarking which is a huge driver of inefficiency in US foreign assistance.  Perhaps it is implicit in the final recommendation (make plans in the country, not in Washington) but it needs to be explicit.  The Bush administration did a pretty good job of preventing Congress from imposing earmarks on the MCC; this approach should be extended to the rest of US foreign assistance.

What are examples – some realized and some on the table but untested – for practical action in the interests of global prosperity? Where do good ideas come from? How do they get translated into action?

Nancy’s ten:

1. More AMCs for vaccines and green technology
2. Protect some aid from security and political objectives
3. Independent evaluation agency
4. More representative G-20
5. Visas for people from poor countries
6. Duty free, quote free access to all markets
7. Per capita distribution of net income from non-renewables
8. Reform of selection of heads of international agencies
9. World Bank to have a global public good window
10. Petrol tax in the US

Ever fizzing with ideas, Nancy throws in a few others: endow think tanks in low-income countries; increase capital at development banks; Climate Investment Funds to bring private investment money;  Cash On Delivery Aid; new insurance and risk management instruments at the multilateral development banks.

Well I agree with all those, of course (and not just because I’m a visiting Fellow at CGD!).   She asks for other suggestions.  Here are my ten:

1. Global standards for transparency and traceability of all aid to increase accountability and effectiveness
2. Climate justice – every person in the world to have equal, tradeable, carbon emission rights, capped overall at the level scientists tell us is safe
3. Global information sharing among tax authorities to prevent tax evasion
4. Unbundling of aid funding from aid delivery, complete untying and global standardised output and outcome indicators to enable cost comparisons
5. A global minimum income guarantee backed by cash payments to the world’s poorest people
6. Product traceability from sweatshop to supermarket using barcodes
7. A complete ban on exports of small arms
8. A standing, professional  UN peacekeeping force to be deployed by a reformed Security Council
9. Reform of intellectual property to permit free access in the lowest value markets
10. Increasing the share of aid to LDCs from 38% of global aid today to 90% by 2012.

Update 25 February: On Twitter, Nancy Birdsall (@nancymbirdsall) says: “@OwenBarder has 3 more actionable ideas (and 7 dreamy ones)”.  This is a good game: which of these does Nancy think are actionable and which are dreamy?  My guess is she thinks (1), (3) and (9) are actionable and the rest dreamy.   But what do you think?

I think they are all realistic – but then I’m with John Lennon: “You may say that I’m a dreamer, but I’m not the only one. I hope some day you’ll join us, and the wo-o-rld will live as one”.

.. the real issue at the heart of fragmentation is too little competition. Numerous donors only multiply monopoly costs, without bringing the benefits expected from competition.

This has implications for how the donor community tackles fragmentation. The current approach is institution-based. Donors and recipients meet in international meetings, and pledge to act. Progress is monitored by a multilateral institution (OECD’s Development Assessment Committee) that cannot constrain donors to implement their pledges, except through a delicate game of naming and shaming.

We wonder about the efficiency of this approach. To deal with a too heavy administrative weight by creating new administrations is somehow ironic. It remains to be proven that these new institutions will lower transaction costs and manage to implement a labour division that donors are often reluctant to effectively achieve. The problem with this approach is that it basically ignores why aid is fragmented. It does not attempt to change the incentives donors and recipients face, and so is unlikely to radically change their behaviours. In particular, it disregards the lack of competition that creates fragmentation.

I think this is exactly right. Fragmentation is a good example of a more general problem, which is that there are insufficient forces within the aid system to force it to evolve towards better arrangements. Evolution requires both variation and selection, and while fragmentation may be conducive to more variation, there are no forces that then drive out the bad and expand the good.

As the project’s first five years wind down, its ultimate goals remain elusive, and the five-year initiative has swelled to 10. The extension, naturally, will require more spending: The financial injections to date—over $5 million per year in a mix of cash and non-cash contributions—have not abolished poverty. Improvements in the five sectors targeted by the MVP are readily apparent, but their sustainability is still up in the air.

There are many people in the development set who are sceptical about the utility of the Millennium Village Project, for good reasons and for bad.  Village-level interventions have had a chequered past, and the conventional wisdom today is that development assistance should help to build capable and accountable states which can deliver services, from agriculture and education to security and health, and not provide these separately from the systems that are being established.

I don’t know as much about Koraro as Jeff, but G and I did visit the town, unannounced, one day when we happened to be driving past.  We struck up a conversation with a local shopkeeper which went like this:

O&G:                 What is it like being a Millennium Village?

Shopkeeper:    Very good. We have lots of things.

O&G:                 Does everything work well?

Shopkeeper:    No, not all of it.  But we are much better off now.

O&G:                 Who decides what to change? Do you have a village council, or is there an Elder who decides?

Shopkeeper:   It is all decided by a Professor in New York.

O&G:                 Really? Do you know his name?

Shopkeeper:   No. But he is a very famous man

I don’t have the same ideological objections to Potemkin Villages the Millennium Villages Project as some other people. As both Jeff Sachs and Nick Stern have arged, it seems plausible that there may be significant complementarities between interventions which mean that programmes work better if there are other successful programmes at the same time.  For example, there may be little value in increasing agricultural productivity to generate surpluses if there is no way to get those surpluses to market, which requires infrastructure.  That suggests that each community may need a big heave:  ensuring that all these things come in together may be more effective than a series of uncoordinated interventions spread thinly.

For me the most disappointing aspect of the Millennium Villages Project has been the steadfast refusal to subject it to rigorous evaluation.  (Their evaluation programme is described here.)  The most detailed study so far has been conducted by the Overseas Develoment Institute.  The problem is lack of a proper basis of comparison.  Ethiopia is changing quite rapidly, and Korkora would have changed with or without the Millennium Village Project. For example, there has been a 51 percent reduction in malaria cases in Koraro, Ethiopia. This has been touted as a success by the supporters of the project; and it sounds impressive until you find out that malaria cases have been more than halved across the whole country, not just in Koraro.  The improvement in the Millennium Village is apparently no greater than anywhere else in the country.

To evaluate the project, Millennium Villages need to be compared with some suitable control group, ideally through randomised controlled trials.   Ideally, the individual components of the project would also be randomised to test the hypothesis that the effects of interventions are complementary.  (It follows that I don’t agree with Chris Blattman’s view that it would be too hard.)

It would, as Chris says, be pretty surprising if the Millennium Villages Project does not make a difference. After all, it is spending money roughly equivalent to 100% of the villagers’ income. Furthermore, it has benefited from close personal attention from the Prime Minister, other ministers and officials, researchers and academics (and, of course, a famous Professor from New York).  A rigorous evaluation would help us to know how big that improvement is, and and what cost.  It might also give us insights into whether any particular parts of the progamme are particularly important.

And although more aid, even disbursed on short notice, might seem like a good thing, it’s difficult for governments to spend on useful things when they can’t predict what next year’s aid will amount to. For example, governments can’t hire teachers with a boost in aid this year, when they don’t know if they will have money to pay them next year.

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

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

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

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

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

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

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

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

… This is a work of self-flagellating simplicity, totally devoid of any thinking by leading African research centres or scholars, making the book often read like a Harvard Masters syllabus or a World Bank report. Moyo reveals her ignorance by incredibly charging that “scarcely does one see Africa’s … officials … offer an opinion on what should be done”. …

Moyo employs crude stereotypes of “tribal conflict” to depict African wars, and recklessly suggests that aid is “an underlying cause of social unrest, and possibly civil war”. Such an absurd link would, of course, involve a huge leap of logic, and the author’s ignorant blaming of Somalia’s civil war on competition for food aid completely ignores the decade-long homicidal campaign of US-backed autocrat, Siad Barre, which eventually led to rebellion in 1991.

Read the rest here.

My own review is here (pdf) – also critical, but less vituperative.

More reviews (including some which are less negative) of Dead Aid here.

Linking aid more closely to results is attractive from many different perspectives.  My own view is that linking aid directly to results will help to change the politics of aid for donors. Many of the most egregiously ineffective behaviours in aid are a direct result of donors’ (very proper) need to show to their taxpayers how money has been used.  Because traditional aid is not directly linked to results, donors end up focusing on inputs and micromanaging how aid is spent instead, with all the obvious consequences for transactions costs, poor alignment with developing countries systems and priorities and lack of harmonisation.  If we could link aid more directly to results, I think donors will be freed from many of the political pressures they currently face to deliver aid badly; and it would be politically easier to defend large increases in aid budgets.

Other people support Cash on Delivery aid for other reasons.  Ministers and officials of developing country governments see it as a way to access more money without the attendant costs of conditionality and foreign interference in domestic policy.  Some people see results-based aid as a way to restore the accountability of developing country governments to their own citizens, a social contract in which aid donors too often inadvertently interfere.  Especially in the US, some people believe that linking aid to results can create stronger incentives for developing country governments to deliver high quality public services.  Others support Cash on Delivery because it will improve the allocation of aid resources, since money flows to the places where services are being delivered and away from the places where money is being wasted. With all these complementary reasons there appears to be the possibility of a broad coalition of people in favour of moving ahead with testing whether Cash on Delivery aid can work in practice.

But there is one group of people for whom these ideas seem to be quite unsettling: development professionals in aid agencies and NGOs.

I recently wrote a response to a brief by CAFOD about some possible concerns about Cash on Delivery aid.  As I was doing so I realised that the questions asked by some development professionals reveal some discomfort about the possible impact of results-based aid on the quality and content of their jobs.  The “risks” identified in the CAFOD brief are not primarily about the consequences for development but rather risks to the privileged position enjoyed by professional staff in aid agencies and NGOs.

You can judge for yourself whether I am caricaturing the risks set out in the CAFOD paper, but they essentially amount to this: under Cash on Delivery aid money would flow to those governments best able to make use of it; governments would have freedom to decide which services to provide and to whom; governments would be able to decide how to use resources; governments would be accountable for their choices and the results; and progress would be measured according to internationally-agreed targets for impact rather than inputs and intermediate targets negotiated behind closed doors.

All these are necessary steps towards the internationally-agreed agenda for more effective aid set out in Paris and Accra, and necessary for the emergence of capable, accountable and responsive states.  Yet when a mechanism is proposed that tries to organise the aid system in a way that means these things could start to come about, these consequences are described as “risks”.

At the heart of these anxieties, it seems to me, is a question about what sectoral advisers in aid agencies are meant to be doing.  Take education advisers, for example (I am not picking on this group in particular, but it happens that the current proposals for Cash on Delivery aid are being developed looking specifically at education.)  Many people who work for aid agencies managing aid programmes for education are themselves education professionals, often former teachers.  Deep down (sometimes also on the surface) many of them want to be educators, not managers of aid programmes.  They want to be involved designing the curriculum, reforming the pedagogic approach, training the teachers, buying textbooks, or improving the education management information systems.  But it is the job of a community to educate its young, not foreigners.  As managers of aid programmes the staff of aid agencies should be ensuring that aid is delivered in ways that increase the accountability of central and local government to the nation’s citizens, keeping transactions costs to a minimum, delivering aid in ways which support the evolution of country systems and priorities, ensuring that the money is used for the purposes intended by the funders, and showing what results have been achieved.

In short, managers of aid programmes should be focusing on the effectiveness of aid, not education policy.  If governments need technical advice on education, they can procure that separately, and get advice from people who are more trained to build capacity and who are properly accountable for doing so, not get it as a bundled free offer-that-they-cannot-refuse from the people managing their aid.  If it works as intended, Cash on Delivery aid would change the relationship between donors and governments and would turn development professionals back into aid managers instead of would-be educators.  And it is this consequence which, I believe, some people find unsettling.

Many of my best friends are development professionals, and I know that everyone who works in development (well, nearly everyone) has the interests of the poor at heart. They often genuinely believe that they need to retain a degree of  influence to ensure that developing countries make the kind of progress towards development that they (and I) want to see.  There is quite a close parallel with the evolution of the attitudes of politicians, some of whom I also know well and have known since they were young, idealistic students.  Nearly all politicians enter politics for the noblest of motives: to contribute to the improvement of the society in which they live.  To a very large extent they retain those values through their political career. But over time there can be a gradual erosion of the distinction in their minds between their own interests and the service they give to others: some politicians gradually come to think that increasing their own power is the service of others, because they believe that they will exercise that power better than anyone else.

Politicians are, of course, at their most dangerous when they can no longer distinguish their own interests from the interests of the people they are meant to serve.  Similarly we should be concerned when we hear development professionals identifying themselves as speaking for the poor, and arguing that they must retain influence (i.e. power) – purchased by the relative wealth of their country – to promote strategies which the country would not pursue on its own.

To be fair, I also know some development advisers who are focused on improving the effectiveness of aid, who are rightly aghast when they are asked to double up by providing advice on how to manage an education or health system.   If I may be permitted a partisan aside, my observation is that DFID sectoral advisers tend to be more respectful of the need to promote effective country systems for policy-making and accountability than professionals from some other donor organisations (both NGOs and official aid agencies), and they are less likely to interfere in the country’s policies and strategies.

This may seem like an elaborate point to build from an innocuous and fairly sensible CAFOD brief about Cash on Delivery aid.  But the risks identified by CAFOD, and the questions that have been raised elsewhere, would apply to any system of results-based aid that makes substantive progress towards giving governments more freedom to choose how to deliver their development programmes and making them more accountable to their own citizens for their own success and failure.   I think these concerns actually reveal a deep-seated tension between the internationally-agreed agenda for improving aid effectiveness, and the views and interests of development professionals charged with designing and implementing those reforms in practice.

Some supporters of aid have made what seem to me to be extravagant claims that aid should aim to bring about economic and social transformation of developing countries, so accelerating economic growth and industrialisation.  But this is a very high bar to set.  Aid may well help to increase the probability of economic take-off but there are lots of other conditions that need to be in place for the transition to an industrialised market economy to happen, and aid is not a sufficient condition (nor, probably, a necessary condition) for it to occur.   Even if aid does play an important contributory role, it would be statistically very hard to demonstrate a link between aid and economic growth.

Although the effect of aid on economic growth is uncertain, there can be no doubt that aid makes a huge difference to people’s lives.  Aid provides food, health care, education, clean water, financial services, and modest incomes which transform the lives of the people who receive them.   You can see this both in individual families – like the girl I met in northern Amhara, pictured here, who has health care and education because of aid – and in the overall statistics, which show that there has been a vast improvement in the quality of life on almost every measure other than income.

Aid may not always transform societies, but it does enable people to live much better lives while those transformations are taking place.  And that represents a huge increase in the sum of human welfare.

I believe aid could and should work much better.  Living in a developing country, I see all kinds of waste and inefficiency in the aid system that makes me angry. But it makes me angry because I also see how much difference aid makes when it is used well.  I would like to see aid becoming much more transparent and accountable, so that it becomes subject to evolutionary pressures to improve.

This means, by the way, that I do not subscribe to the view that the aid system should be regarded as temporary.  In the UK we hope that people will be on unemployment benefit temporarily before they are able to get back to work, but we don’t expect the system as a whole to come to an end.  So I think that we should expect that at least for our lifetimes, it will be right and necessary that we transfer income from the richest people in the world to the poorest people in the world.  I do not know which countries will be rich, on average, in fifty years time, and which will be poor; but I expect that the world will still need, and I hope it will still have, a permanent system to help those temporarily in need wherever they happen to be.

Aid would work better in future if we accept that we will need a permanent system to provide temporary help to those who need it, and set about designing a better system to do that.

Read the full article here.

Related reading:

• Phil Vernon at openDemocracy (to which my article was a reply)
• Roger Riddell at openDemocracy
• Ranil at AidThoughts
• Chris Blattman – Could Aid Slow Growth

Because the total resources available are less than the needs, it is very important how they are used.  If poor decisions are made about the allocation of precious aid resources, the result can be additional suffering and death for millions of people.

This post why I think that attempts from outside to argue for aid to be earmarked for particular causes can lead to unnecessary deaths and suffering.  Aid works, but it could work better, and many sectoral advocates are not helping.

***

A striking example is the amount of money donors earmark for spending on HIV and AIDS here in Ethiopia.

Government spending on health in Ethiopia comes to about $4 per person per year.  According to OECD/DAC data, foreign aid for health in 2007 added about $5.15 per person to the government’s resources, bringing the total of government and aid resources to about $9 – $10 per person per year. (As an aside: health spending per person per year in the UK is about $2,000 per person per year; in the US it is about $4,500.)

According to the World Health Organisation (WHO), in Ethiopia about 65% of the population (52 million people) live in areas at risk of malaria. Malaria is the leading cause of health problems, responsible for about 27% of deaths; and malaria epidemics are increasing. The HIV/AIDS prevalence rate among adults is 2.1% (2007) – that’s about 1.6 million people living with HIV.

Of $5.15 per head provided in aid for health to Ethiopia in 2007, about $3.18 per head was earmarked for HIV  while about $0.26 cents per head was allocated to malaria control.  Given the relatively low burden of HIV, earmarking 60% of health aid for HIV is excessive relative to other needs for health spending.

Of course it is right that we should try to make sure that everybody with HIV has access to medicines to keep them healthy, and we should work to prevent spread of the disease. But we should also make sure that people have bednets and drugs to stop malaria, provide childhood vaccination to prevent easily preventable diseases, ensure access to contraception and safe abortions, and, above all, enough funding to provide basic health services that would save thousands of lives and suffering.  Yet we are not willing to provide enough money to do all of this.  It is in this context that it is damaging to earmark 60% of health aid to HIV.

This excessive funding of HIV relative to other health needs is damaging in at least three ways.

First, aid money is not being spent in ways which would yield biggest impact. Take this analysis from the Open Budgets Blog:

Using these estimates, it would cost an additional US$29.7 million to treat all of the 540,000 kids who died from pneumonia/diarrhea in Nigeria and Ethiopia. Were this money to come out of the HIV budget, it would reduce the number of HIV patients that could be provided treatment by about 61,240. So, using these admittedly very rough estimates, our current allocation of resources from the pot of money for disease treatment suggests that we value the life of a person with HIV at 8.8 times the value of the life of a child with pneumonia.

Another way of looking at this is that reallocating resources from HIV to treating pneumonia and diarrhea in Ethiopia and Nigeria alone would have saved nearly half a million additional lives in one year.

Second, the misallocation of aid money sucks scarce resources (administrators, doctors, political attention) from other programmes which would have more impact. As Rakesh notes:

In Tanzania, I have seen any number of health centers which lack water and toilets, where women cannot deliver their babies safely, but which has a new building with 4 air conditioners and 2 Land Cruisers and weekly workshops on AIDS.

I wrote about this problem in 2007 after visiting a clinic in Burkina Faso which had been starved of medical workers by the recruitment drive by the local PEPFAR-funded clinic. And Laurie Garrett wrote in Foreign Affairs about the impact on basic health facilities of funding linked to specific diseases.

Third, the misallocation of aid money creates perverse, possibly lethal, incentives.  Here in Ethiopia the existence of huge amounts of aid money for AIDS chasing too few people with HIV means that there is a kind of welfare state emerging for people with HIV.  It is not perhaps the welfare state we see in many European countries, but it is much better resourced than is available for people without HIV.  As well as free health care, people living with HIV are supported to find work, and their children get free education.  NGOs fall over themselves to get people living with HIV and their families onto their lists.

The result is that some Ethiopians emerge from being told the results of their voluntary HIV tests in tears because they don’t have the disease and so do not qualify for this assistance. The quality of life for them and their families would be better if they did; and their life expectancy could well be higher, given the access to health services that would be unlocked.  There are even rumours here in Addis Ababa that some people are deliberately getting themselves infected, so that they can give their children a better start in life.

***

I have used the example of HIV because the misallocation is particularly egregious here in Ethiopia (as it is in some other countries in sub-Saharan Africa). But I do not want this to be misunderstood as an attack on AIDS activists, or on funding for HIV in particular.  Some of my best friends – indeed, some members of my family – are AIDS advocates and they are among the most committed and well intentioned development advocates.  If they had been listened to earlier, a great deal of suffering in sub-Saharan Africa and elsewhere could have been avoided; and the path to development would not have been so long and arduous for the countries most affected by AIDS.  These advocates are merely one group among many making the case (and earmarking funds) for their cause.

Look, for example, at this recent paper by ODI on education (funded by the Hewlett Foundation) which complains that while funding for basic education has grown in real terms it has not grown as a share of total aid. The paper is all about how education advocates can do more to “capture” the global stage and compete with health spending. (“Capture” is their word, not mine).  And I am not picking on education either.  There are endless demands from activists to commit more money to agriculture, microfinance, water, maternal mortality and a long list of other important issues.

The development industry seems to be riddled with people whose main job is to divert money  to their good cause.   The advocates are united by a strong belief in the priority that should be given to their sector (education, water, AIDS etc). They convince themselves that they are speaking for real interests of the poor, which they consider to be unaccountably neglected by everyone else. Within many aid agencies there is a permanent state of low intensity bureaucratic warfare for resources, sucking up the time and attention of staff as they fight to defend and expand funding for the causes they work on.  They deliberately stoke up pressure in private alliances with civil society organisations – many of whom they fund – to raise the political stakes through conferences, international declarations, and publications with the aim of committing funders to spend a larger share of aid resources on their issue.  Territory is captured and held by way of international commitments in summit communiques.  But for the aid budget as a whole these are zero sum games, and everyone would be better off – and many lives would be saved – if it stopped.

The advocates might defend themselves by saying that they are trying to bring more money into development, not to reallocate aid from one cause to another.  But as they know, or ought to know, that is not how development budgets work.  The UK commitment to spend $15 billion on education by 2015 does not advance by one day the path to UK aid reaching 0.7% of GDP.  Either the commitment is meaningless, because that much money would have been spent on education anyway; or it has resulted in a reallocation of aid within a fixed total to education from something else which would otherwise have been a higher priority.

The earmarking of funds within a fixed total takes money from one good cause and puts it into another. If the money moves to a lower priority, the result is additional suffering, more deaths, a longer journey to economic development, and the need to give more aid, for longer, than if choices were driven by locally-determined, well-informed, evidence-based decisions about needs and priorities.

Here in Ethiopia, the Minister for Health is very clear sighted and articulate about the health priorities for his country, and the need to allocate resources to building effective basic health systems.  Within the limited resources it is able to control, the Ethiopian health ministry makes intelligent decisions about priorities, understanding the variations within the country as well as between countries.  They have much more detailed and specific understanding of the issues that affect people here than well-meaning activists in Europe or America.  Furthermore, it is their country and their path to development, not ours.

***

What do we need to do differently? I set out in a recent  CGD Working Paper the need to address the political economy of aid.

First, we should be much more rigorous and systematic about defining and measuring results from aid so that well-informed choices can be made.  There is a huge and expensive industry of “monitoring and evaluation”, most of the results of which is worth less than a pitcher of spit. We should dismantle it, and use a fraction of the money to fund a smaller, more sharply focused, more rigorous, international, independent collection of real evidence about the cost effectiveness of development interventions.  (Tentative steps in this direction are, of course, being fiercely resisted by the trade union of evaluators.)

Second, we should try to stop earmarking aid; we should make more use of results to demonstrate that aid is effective. The Paris and Accra agendas for aid effectiveness, which have been agreed by all the donor nations, require donors to respect the development priorities of aid recipients.  But there has been almost no change on the ground in this direction.  One step towards doing this is to put in place simple but rigorous ways to measure and attribute results, so that donors can be confident about  (and can explain to taxpayers) how their aid has been used.  If we cannot produce compelling evidence about what aid has achieved, it should be no surprise that ministers and taxpayers want to determine in advance how the money will be spent.

Third, we should stop creating global funds, and merge or close the ones we have got.  The existence of bureaucracies whose raison d’etre is to spend money in a particular sector or in a particular way creates incentives to promote resource misallocation because it protects jobs and institutional budgets.

Fourth, we must massively increase the transparency of past, present and future aid, so that informed decisions can be taken about how resources are allocated (not just between countries and sectors but within them).  Under current arrangements, donors publish details of their aid up to 23 months after it has been spent. Donors need to publish detailed information about their current and planned future activities so that governments, donors and the private sector can identify the gaps where additional resources would have most effect.

Fifth, we should, as a development community, heap scorn and opprobrium on anyone caught advocating for more resources in their sector.  We need stronger social norms in development that frown upon this kind of anti-social behaviour.

***

You may think that this is all a bit over the top.  Arguments about the architecture of aid may sound rather abstract and rarified, but aid is a scarce, precious resource and it is no exaggeration to say that if we spend it badly, the result is the avoidable deaths of literally millions of people.

I’m not a fan of these aid-growth regressions, because they are technically difficult to do well (see David Roodman’s article on the problems.)  But they are important for one reason: they are a more systematic way of doing the popular “folk regression” offered by authors such as Dambisa Moyo and Bill Easterly.  When Moyo and Easterly point out that countries that have had high levels of aid have also suffered from slow growth, they are implicitly pronouncing on whether there is a statistical relationship between aid and growth.  But of course you would expect to see a lot of aid going to poor countries (rather as ambulances tend to be present at the scene of road accidents)  so these simplistic comparisons do not tell us very much about the effect of aid on growth. The more careful question to ask is whether, other things being equal, aid leads to higher or lower growth, and that is what this kind of statistical analysis investigates.  It is good to have confirmation that the folk regressions are wrong and that aid does, as best we can tell, lead to economic growth.

There are a few other interesting things about this paper:

• the paper uses the same data as the infamous and oft-cited Rajan and Subramanian paper which claimed that there was no effect on growth (which I criticised at the time here) and finds that, if the regressions are done more carefully, those findings were not correct;
• the effect of development aid on growth is probably understated by this analysis because it includes all aid (unlike the paper by Clemens, Radelet, and Bhavnani, which subtracts humanitarian aid and other aid which is not intended to lead to economic development and finds – as you would anticipate – much larger effects of aid on growth from the subset of aid that is actually intended to promote development);
• there is no sign of diminishing returns to aid in this analysis. (This is an unusual finding – generally studies have needed to include a diminishing returns term to generate a statistically significant relationship between aid and growth).
• the study uses donor-specific fixed effects (the only study to do so, as far as I am aware). I’m looking forward to looking at these in detail, as the estimates will give us an insight into which donors are the most effective.

(h/t Chandan)

Update: David Roodman, whom I regard as an authority on these matters, thinks that I am wrong and Bill Easterly is right.

I’m envious of Tim’s ability to  express the ideas so much more succinctly and clearly than me.  He writes:

it might be easier to change the rules of the game to encourage real competition than to change behaviour

That’s my argument in a nutshell.

Tim also writes:

if you imagine a Howard Schultz of Starbucks attempting to “harmonise” the world coffee-bar industry, you can see how idiosyncratic the harmonisation agenda actually is.

In the paper I argue that more planning and coordiation among donors will not overcome the political constraints that prevent better aid.  The aid system is in a political equilibrium which we need to try to change; we won’t solve aid’s problems by trying to move away from the equilibrium.  This means making more use of market and network mechanisms to change incentives within the aid system. We need to stop thinking of grand new designs of the aid system and start putting in place mechanisms that force evolution in the right direction.

I’ve listed a set of measures, from the commonplace (untying aid, for example) to the unusual (tradable missions permits, or a tax on proliferation pollution) to illustrate the ideas.

I’ll be discussing the paper at the Overseas Development Institute (ODI) on Friday, and on a forthcoming episode of Development Drums.

I’m looking forward to comments and feedback.

The video is about the way that a civil society organisation in Kenya, MUHURI, has enabled a local community in Mombassa to hold their government to account.

(Disclosure: I work on aidinfo – a small research team which promotes the adoption of open standards for the publication of detailed information about foreign aid, to enable people in developing countries to hold governments and donors to account.)