Here is part of my piece on the Guardian website today welcoming moves from the US and Europe towards a global standard for publishing aid information:
Go to the website of any aid agency and you’ll find a cornucopia of information about the good work that it is doing. The problem is that it doesn’t publish this information in a usable form. Visibility is not the same as transparency.
Members of the US Congress rightly complain that they cannot get a complete picture of US foreign assistance, which is delivered by 26 government agencies. As Congress has discovered, to get a complete picture of what the US is doing you need up-to-date, comprehensive data from each aid agency in a common format that enables it all to be added up, reconciled and compared. It is very welcome that the US government is putting a system in place to do this.
Now put yourself in the shoes of ministers or parliamentarians in a developing country. They face the same problem as members of Congress, writ large. Aid to their country is channelled through bilateral aid agencies, multilateral organisations and thousands of NGOs. Aid goes from one organisation to another – minus a “haircut” at each stage – before any services are provided to anyone. How can officials or MPs get useful, up-to-date, comprehensive information about all this spending and all these activities? Certainly not by trawling through thousands of separate donor websites.
A perennial question in development economics is whether economic growth, by itself, is enough to reduce poverty.
The question came up in the most recent edition of Development Drums. Claire Melamed argued that the fact that so many of the world’s poor now live in middle income countries (which, by definition, have experienced a reasonable amount of economic growth) suggests that growth by itself is not enough to reduce poverty. Andy Sumner, in the same programme, said that there is some evidence that economic growth tends to increase inequality in societies that are already unequal, whereas the benefits will be more broad based in societies in which the starting point is more equal.
This graph by Maxim Pinkovskiy and Xavier Sala-i-Martin is very interesting. It shows the growth rate and the number of people living on less than a dollar a day in sub-Saharan Africa. The data are notoriously incomplete, but on the basis of these estimates, as the authors say (apologies for the econ-speak): “Poverty seems to co-move with GDP almost perfectly.”
Graph by Maxim Pinkovskiy and Xavier Sala-i-Martin
This graph implies pretty strongly that if you want to reduce poverty in Africa, you should concentrate on economic growth.
The entire article is well worth reading for its upbeat assessment about both growth and poverty reduction over the last fifteen years. They say:
The sustained African growth of the last 15 years has engendered a steady decline in poverty that puts Africa on track to meet the Goals by 2017. If peace is established in the Democratic Republic of Congo, and it returns to the African trend (which is what happened to other African nations that were formerly at war), Africa will halve its $1/day income poverty rate by 2013, two years ahead of the 2015 target.
Moreover, African poverty reduction has been extremely general. Poverty fell for both landlocked and coastal countries, for mineral-rich and mineral-poor countries, for countries with favourable and unfavourable agriculture, for countries with different colonisers, and for countries with varying degrees of exposure to the African slave trade. The benefits of growth were so widely distributed that African inequality actually fell substantially.
Andy Sumner has published a new paper which argues that the global poverty problem has changed because the countries in which most of the world’s poor liver are no longer classified as low-income countries (LICs). In 1990, about 93 per cent of the world’s poor people lived in LICs. Today, there are still about 1.3 billion poor people, but about three-quarters of them live in what are now classified as middle-income countries.
This shift has profound implications for development policy. It highlights the importance of ensuring that growth reduces poverty. It raises questions for the allocation of traditional aid, and about the legitimacy and effectiveness of intervention by outsiders to influence the distribution of income within other countries.
In a new episode of Development Drums, I discuss these issues with Andy Sumner and Claire Melamed (Head of the Growth and Equity Programme at ODI). We discuss what the new data tell us, and what it means for aid and development policy.
You can listen to Development Drums on your computer at the website (http://developmentdrums.org) or download it (from here) to your MP3 player. Alternatively, you can subscribe to Development Drums on iTunes free of charge (search for “Development Drums” in the iTunes store).
Shanta Devarajan asks if we have found Development 3.0
Shanta Devarajan, the World Bank Chief Economist for Africa, describes in an important new blog post the evolution of development policy in terms of changing ideas about market failures and government failures. In the 1950s and 1960s, he says, development was about addressing market failures by providing public goods, addressing externalities, and redistributing income to poor people. Starting in the 1970s, attention shifted to government failures such as weak capacity, rent-seeking, political patronage and corruption. Today, he says, many of the most egregious failures have been addressed, but the remaining failures directly hurt poor people.
On Shanta’s view, these failures arise from two kinds of imperfection in the public sector: that governments have difficulty monitoring and enforcing performance (leading to absentee teachers, clinics without drugs, etc) and imperfections in the political system which prevent it from serving the poor.
Shanta says that changes in technology and the rise of civil society can change all this:
Our understanding of government failure has coincided with two other developments. One is the rise of civil society’s voice in public discourse. The second is the technology revolution in poor countries. There’s a message here. Can we use technology and the voice of civil society to address these government failures? Rather than imposing conditions, we can empower poor people to monitor service providers. With some 80 percent of Africans having access to a cell phone, it is not difficult to have parents (or the students themselves) send an SMS message if the teacher is not in school, or there are no drugs in the clinic or the purported road maintenance program is not happening. This could do more for helping governments and donors get value for money than all the fiduciary controls we put in place. While we are at it, why don’t donors (including the World Bank) use technology to have the beneficiaries monitor and supervise development projects?
Can this work? Is social accountability a new model for development?
There is increasingly good evidence that transparency and accountability make a significant difference, in some cases surprisingly transformational. There is an increasingly impressive collection of individual case studies, rigorously evaluated, which demonstrate the effectiveness of this approach. For example, Jacob Svensson and Martina Björkman conducted a randomized field experiment in Uganda to test the effect of increasing community-based monitoring. They found that when communities more extensively monitored providers, both the quality and quantity of health services improved, including reducing infant mortality by a third.
There have, however, been no significant comparative studies bringing this evidence together. Until now. Rosemary McGee and John Gaventa have just published an extensive review of literature and experience across the field. There is a lot of material to digest, but here is the core of what they find:
…there are a number of micro level studies, especially in the service delivery and budget transparency fields. These begin to suggest that in some conditions, the initiatives can contribute to a range of positive outcomes including, for instance,
- increased state or institutional responsiveness
- lowering of corruption
- building new democratic spaces for citizen engagement
- empowering local voices
- better budget utilization and better delivery of services.
Reading the study, my conclusion is that we know rather more about the impact of greater accountability than we know about what we can do to bring that accountability about.
I currently work on transparency, because I think makes an important contribution to the ability of citizens to hold governments and donors to account and so improve service delivery and accelerate poverty reduction. There have been some good examples of how this can work in practice, which are summarised in Appendix 1 of this cost benefit analysis for the International Aid Transparency Initiative (page 23 of this pdf; disclosure: I’m a co-author). The most famous example is this study of the impact of information on funds flowing to schools in Uganda which found a strong relationship between transparency and funds flowing to schools, though the evidence was subsequently challenged. So while there is increasingly good evidence to confirm the intuition that transparency plays an important role, we need to understand a lot better how, and in what circumstances, transparency works, and particularly to understand better what else needs to be in place.
One issue on which Shanta is clearly right is that role that technology can play in supporting greater accountability. We know that technology does not end poverty, but we are seeing more and more examples of how technology – especially mobile telephony and text – has enabled and supported changes from mobile banking to wholesale agriculture markets. Just as technology underpins changes in markets (think of newspapers, or bookselling), so it can underpin changes in political economy and social accountability.
So is this, as Shanta says, Development 3.0?
Development is a long, slow, uncertain process and the road is bumpy and winding. Transparency and accountability are not a one bound and we are free solution, any more than the ‘big push’ or the Washington consensus which Shanta labels Development 1.0 and 2.0 respectively. But this time there is an important difference. The ‘big push’ and the Washington consensus were blueprints for a better world. Social accountability, by contrast, does not start with a preconceived idea of how resources should be used or services should be delivered: it seeks to change the dynamics of the system to make it more responsive and more likely to converge by itself on solutions which better serve poor people in developing countries.
A big challenge will be whether development agencies themselves are able to adapt. Their models for project cycle management are based on a top-down view: you specify the world you are trying to create (the “goal”) and then you articulate a series of outputs and activities which you expect will bring this about. It will be a big change – intellectually, organisationally and culturally – to modify their systems, incentives and procedures to a world in which donors work instead to help the citizens of developing countries to determine their goals and priorities and build their own systems to achieve them.
If what Shanta is calling Development 3.0 means that instead of offering a one-size fits all solution we should work to close the broken feedback loop so that communities themselves can find the answer, then I think this may indeed be a change of perspective on development worthy of a major version number.
Tim Harford had an interesting article in the FT in August arguing that we are better off in most walks of life if there is experimentation and a multiplicity of approaches.
But how do we value diversity in the aid business, when the prevailing consensus, embodied in the Paris Declaration, is that proliferation of aid agencies is a growing problem which is making aid less effective?
The aid system could in principle benefit from the emergence of new kinds of donors (specialised multilaterals such as GAVI, new donors such as China and Brazil, philanthropic foundations such as Gates, private non-profits such as Marie Stopes) working alongside conventional bilateral and multilateral aid. Different kinds of organisations could bring particular strengths which complement each other’s work.
However, in practice these different types of organisation do not seem to be playing to their strengths. Like kids playing football, everybody follows the ball instead of holding their position on the pitch.
Proliferation is a significant problem
We will come to the benefits of diversity among donors. But first let’s acknowledge that proliferation is causing real problems on the ground. Developing countries are having to deal with a large and growing number of partners, each with separate agendas, priorities, and requirements. Meetings, reports, milestones and systems multiply. Skilled staff are hired away to serve in local agency offices or NGOs. Funding is fragmented and unpredictable, which means that developing countries are often unable to bring together the scale of long-term, predictable finance needed to undertake significant institutional reform and service delivery. Donors lose influence, because they undermine each other; and yet developing countries are not able to keep track of, let alone exercise sufficient ownership and control over, an increasingly fragmented system of aid delivery. Public accountability is impossible, since nobody has a clear view of what resources are being used, by whom, or for what purpose. Donors face rising administrative costs when agencies proliferate, and the costs of coordination and harmonization rise exponentially with the number of aid agencies.
Here are three real life examples of the problems that are caused by the proliferation of aid agencies:
- In Vietnam, it took 18 months and the involvement of 150 government workers to purchase five vehicles for a donor-funded project, because of differences in procurement policies among aid agencies. (source: Knack/World Bank)
- In 2007 alone the EU countries launched 22,000 new aid projects inn developing countries, with an average budget of €0.7-1 million. The total costs of preparing new projects by EU donors (not the money needed to fund them, just the administrative cost of putting them in place) is estimated at between €2-3 billion per year. (source: EU)
- In the aftermath of the tsunami disaster a local doctor in Banda Aceh, one of the most affected areas, wrote: “In February, in Riga (close to Calang) we had a case of measles, a little girl. Immediately, all epidemiologists of Banda Aceh came in, because they were afraid of a propagation of measles among displaced people, but the little girl recovered very fast. Then, we realized that this was not a normal case of measles and we discovered that this girl has received the same vaccine three times, from three different organizations. The measles symptoms were a result of the three vaccines she received.” (source: Djankov et al)
(For more examples of proliferation badness, take a look at ‘The Governance of the aid system and the role of the EU’ by Owen Barder, Simon Maxwell, Mikaela Gavas and Deborah Johnson.)
Different types of agency could make different contributions
These problems are caused by a growing number of aid agencies doing broadly the same thing. That proliferation imposes substantial costs on donors and on recipient countries and this makes aid much less effective. The question is whether there are also benefits to having this large number of agencies, compared to delivering the same amount of money through fewer channels.
In principle a greater variety of different types of donor, if they focused on their specialisms, could strengthen the aid system, because they can make different kinds of contribution which could complement both existing donors and each other.
Here are some ways in which different types of donor can make different contributions:
- Philanthropic foundations, such as Gates, Ford, Hewlett and Rockefeller, are still tiny in comparison to government aid agencies, but they are increasingly important in particular sectors, notably health. In their recent book, Philanthrocapitalism, Matt Bishop and Mike Green argue that the growth of philanthropic giving should be welcomed, because these foundations bring a “businesslike approach to solving society’s problems”. According to this view, philanthropic donors bring new attitudes and ways of working. Foundations are frequently founded by successful entrepreneurs, so they may be more inclined to operate along business principles, such as making decisions based on evidence, tightly controlling overheads, adopting new technologies, and focusing more sharply on results. They may be willing to take more risks and accept more failures in return for bigger success than risk averse governments. Foundations may be more able and inclined to work closely with the private sector, which plays a key role in development, which official agencies have not found easy to do. Because foundations do not depend on public support for future funding, they may be willing to support unpopular causes, or investments which do not easily capture the public imagination (e.g. supporting statistical systems in developing countries).
- New government donors such as China and Brazil are playing an increasingly important role (though the Economist was wrong to suggest that Brazil’s aid budget is comparable to that of Canada and Sweden). This has caused concern among traditional donors, who worry that their implicit cartel is undermined by donors that are less concerned about governance and human rights, and that are prepared to be more open about its desire for access to raw materials and minerals. These new donors do not feel constrained to follow the DAC development model, and in many ways developing countries prefer the approach which tends to respect the sovereignty and ownership of developing countries. These donors rarely poach skilled staff; and they do not overstretch developing country governments with meetings, reports and workshops. They are also willing to invest in sectors that the DAC donors have moved away from, such as infrastructure, irrigation and university scholarships.
- The number of private charities is also growing, funded both by institutional donors and by private giving. Here in Ethiopia there are about 3,500 NGOs, spending about $1.5 billion a year (compared to the Ethiopian government budget which is about $4 billion a year). Private aid through charities tends to focus on supporting communities and individuals rather than governments. It tends to be more opportunistic and closer to the ground. These organisations can bring about results more directly although it is harder to bring about systemic change this way.
- Specialised multilateral global organizations – such as the Global Fund against AIDS, TB and Malaria (GFATM) – continue to grow in number. In principle, they can bring apply specialist skills and expertise, they can learn more systematically and spread knowledge more quickly, they can bring together a number of different donors, the public and the private sector to work in a more joined-up way on a particular issue, and they can raise money from the public because they can be more specific about what they do.
This changing landscape could benefit the aid system …
In an ideal world, if these different development actors played to their strengths, and stuck to their specialities, this growing diversity could strengthen the international aid system as a whole. Foundations could act like venture capitalists: taking bigger risks, and backing it up with rigorous evaluation and evidence, but leaving long-term financing of scaled up successes to official aid donors. Official aid agencies could focus on long term funding and resource transfer, and they could provide sustained support for institutional change and capacity. Private aid could focus on achieving community and individual level results. Specialised global organizations could provide particular expertise not available through generalist support. The growing number of official donors could build up expertise in particular countries or topics, and specialise in these, and they could respond to evidence generated by foundations and NGOs about what works, by taking those activities to scale.
If these actors could all focus on their strengths, and if the aid system enabled them to work together well, these changes in the development landscape might substantially improve the effectiveness of development assistance.
… but in practice it does not work like that
That’s all very well in theory, but most people working in the aid business will tell you that back on planet earth, it doesn’t work like that.
Rather than differentiate, development organisations have strong incentives to converge. So instead of specialisation we get duplication. The philanthropic foundations say that they have a more entrepreneurial, risk-taking approach; anecdotal experience suggests that in many cases they prefer the implicit validation of being part of a multi-donor group. (This may be a form of political correctness: agencies seem to think that the Paris Declaration on Aid Effectiveness requires that they be part of a shared funding arrangement rather than doing anything alone.)
For example, consider the bandwagon on restoring funding of health systems. Increasing the funding of health systems is something of which all right-thinking people should approve. The arrival of the big global health initiatives, particularly GFATM and GAVI, coincided with a collapse in funding for health systems which led to many unnecessary deaths in developing countries. Donors are now seeing that the shift away from health systems to vertical funds was an error (one which was predictable and predicted), and the pendulum is swinging back to funding health systems. The institution with the mandate and greatest capacity for supporting developing countries to strengthen their health systems is the World Bank. So why are the Global Fund and GAVI being allowed on the health systems bandwagon? The logic of establishing these specialised multilateral agencies was that they would bring particular depth and expertise to specific activities which would be available from more generalised aid agencies. If we offer competition to World Bank concessional loans in the form of grant finance through GAVI and and the Global Fund, most developing countries will look to these institutions instead. As a result of the proliferation of health funds offering grant finance for health systems, the core role and capacity of the World Bank is eroded, and we put at risk the benefits of specialisation by GFATM and GAVI. Similarly, the International Finance Facility for Immunisation (IFFIm) was set up to enable donors to secure the benefits of front loading spending on vaccination, for which there is a clear economic rationale. Now it is proposed that it should also finance health systems: if there is an economic rationale for using IFFIm on health systems, I’d like to hear about it.
What’s missing?
The growing number and diversity of development organisations could be a source of strength in the aid system, if different organisations could stick to their specialities and if they worked in an aid environment which enabled them to work together effectively.
In competitive markets, firms tend to focus on their strengths, because this is how they make the biggest profits. Firms that diversify into another line of business either need to make a success of that new work, or they will start to make losses and eventually decide to withdraw or they will go bust. So appropriate specialisation is the consequence of individual decisions by profit-maximising firms, and not a result of a collective compromise.
Unfortunately, the political economy of aid encourages the opposite behaviour. The “operating system” which supports the work of aid agencies creates pressures against specialisation. For example:
- Organisations which work collaboratively and holistically across a wide range of activities are likely to attract more donor funding than organisations which are effective in a particular niche. One reason for this is that many donors either don’t have, or don’t systematically use , information about impact and cost effectiveness when they make resource allocation decisions – so there are rewards for aid organisations getting involved in as many activities as possible, and no penalty if this mission creep makes them less effective.
- Lack of transparency and access to information about who is doing what means that organisations cannot make sensible individual decisions about how they can increase their own impact with finite resources and avoid duplication.
- There are no mechanisms by which innovative ideas can be pioneered by foundations or NGOs and, if they are successful, taken up and taken to scale by official donors and multilateral funders. There too little venture capital to support innovation; too little rigorous analysis of what actually works; and the mechanisms for taking successful programmes to scale are too unpredictable and capricious.
- Donors, NGOs and foundations are all under pressure from well-meaning activists to be engaged in everything everywhere. For example, last year the Lancet criticized the Gates Foundation saying that it should “do more to invest in health systems and research capacity in low-income countries, leaving a sustainable footprint”. DFID is criticised for a perceived lack of investment in agricultural research. In a sane world it would be perfectly sensible for the Gates Foundation, which has very little in-country presence, to fund technological research in health and agriculture, but not to invest in health systems in developing countries; and for DFID, which has an extremely professional presence on the ground in developing countries, to invest in developing country systems but not to spend money on research, in which it has no discernible comparative advantage. We could have the same total spending on both research and systems, managed by organisations specializing in those activities and reducing coordination and transaction costs. But development activists and politics apparently make such a division of labour impossible for both organisations.
- The Paris Declaration on Aid Effectiveness and Accra Agenda for Action are being implemented in ways which create strong peer pressure on donors to collaborate and harmonise, to engage in pooled funding and joint activities, rather than to diversify and specialise. Where there are efforts towards a better division of labour (e.g. this EU initiative), the approach is based simply on getting down the numbers by committee, rather than creating incentives which push development agencies towards focusing on the areas in which they have a comparative advantage.
What should we do?
The proliferation of development organisations, which could be a great strength, is instead becoming a growing handicap for the aid system, because the system is not well adapted to taking advantage of that diversity and encouraging appropriate specialisation.
Some possible measures that might address this are:
- a step change increase in transparency about aid. The International Aid Transparency Initiative offers the promise of this, as it will provide up-to-date, detailed information about aid projects in an accessible form.
- agreement to an international standardized system for describing and measuring outputs and unit costs, to facilitate cost-effectiveness comparisons across development organisations;
- explicit use of unit costs and cost-effectiveness in aid allocation decisions, in a way that penalises organisations which are engaged in activities in which they are relatively ineffective
- the development of a mechanism for “venture capital” funding with an associated process for scaling up success;
- self-restraint by development activists who do more harm than good by trying to push every development organisation to be involved in everything.
As ever, I’d welcome further suggestions in the comments section.
I don’t think it is possible to determine statistically whether aid makes a lot of difference to how quickly a country develops. But there is a very good case for aid on different grounds: that it enables people to live better lives in the meantime.
Though the effects of aid on development are uncertain, there is a huge amount that industrialised countries can do – or not do – which affects how quickly countries develop. The policies of rich countries on trade, investment, migration, the environment, security and technology can make a huge impact on how quickly poor countries are able to develop.
Yet we tend to judge industrialized countries too much according to how much aid they give, and too little to how they behave in all these other ways.
The Center for Global Development provides an essential service by ranking the rich each year so we can see how we are doing. They use a series of quantitative measures on all these dimensions to create a composite picture of how a country’s policies affect development. The 2010 results are now in.
The overall rankings in the 2010 Commitment to Development Index
For people in the UK who feel smug about the UK’s approach to development, the Commitment to Development Index makes pretty sobering reading. The UK is in 16th place, out of 22 countries in the index.
The UK has fallen ten places since 2005, when it was in joint fifth place, after only Denmark, Sweden, Netherlands and Norway.
The UK is one of only three countries to have got worse rather than better since the index began in 2003. (The other two are Denmark – which started at the very top, and Switzerland.) And this isn’t a point about the change of government: Britain was 16th last year too.
Given that the UK has a relatively generous and effective aid programme, why does it come so far down the league of overall impact on development?
In short: arms exports.
The Commitment to Development Index uses three measures of a country’s security policy. It tallies the financial and personnel contributions to internationally mandated peacekeeping operations and humanitarian interventions. It rewards countries that base naval fleets where they can secure sea lanes vital to international trade. And it penalizes arms exports to undemocratic nations, on the grounds that putting weapons in the hands of despots can increase repression at home and the temptation to launch military adventures abroad.
The UK is by far the worst of the the 22 nations in the index on selling arms to poor and undemocratic governments. UK arms exports, weighted for undemocratic and unaccountable states, are four times worse, as a share of GDP, than the next worst arms exporter, the United States.
The bars shows the scores from 2003 to 2010in each of the 7 dimensions
As well as being stand-out bottom of the pack on arms exports, the UK does badly on migration policy, because it takes too few unskilled immigrants and students for its size; and technology policy both because Government R&D spending is unduly focused on defence, and because the UK tends to pursue intellectual property rights policies that are not in the interests of poor countries, such as allowing patents on plant varieties, and pushing to incorporate into bilateral free trade agreements “TRIPS-Plus” measures that restrict the flow of innovations to developing countries.
Critics of aid often argue that we should focus more on helping countries to develop, rather than what they call ”handouts’ to poor countries. In that context, they usually mention the need for more open trade with developing countries. That is certainly important. The Commitment to Development Index suggests that they should also be advocating changes in UK policy to: reduce arms sales to undemocratic countries, accept more unskilled immigrants, increase the number of foreign students, remove patents on plant varieties and stop arguing for TRIPS-plus.
The UK gets credit for its environmental policies, mainly because it has done relatively well on limiting carbon emissions and because of high petrol taxes. Global warming has a disproportionately negative impact on developing countries, so these measures have an important impact on developing countries.
Many British people are proud of the UK’s commitment to reducing poverty in developing nations, and Britain’s model of an independent development agency within Government led by a separate Cabinet Minister is widely admired. But is it working? Judging by the scores in the 2010 Commitment to Development Index, the UK is doing a better job at securing and spending a rising aid budget than it is at getting the rest of government to pursue development-friendly policies.
A Robin Hood is superficially attractive because it seems to offer:
- higher taxes on the wealthy
- a curb on speculation and market volatility
- more money for aid and global public goods.
But as I explained in February the Robin Hood tax isn’t a very good way to achieve any of these perfectly reasonable objectives. They would be much better pursued separately.
This analysis was confirmed by this new research published today by Neil McCulloch at the Institute for Development Studies. He finds that:
- a significant proportion of a foreign exchange tax would be passed on to consumers (so it would not be not a tax on the wealthy);
- most empirical evidence shows that higher transactions costs are associated with more, rather than less, volatility.
He also finds that a financial transaction tax is feasible and that a tax on foreign exchange transactions could raise £7.7 billion in the UK, or $26 billion if implemented worldwide.
Unexpectedly, he then concludes that the UK Government should implement a currency transaction tax.
If the Robin Hood tax is not a tax predominantly borne by the wealthy, nor will it reduce market volatility, what’s the case for it?
If we want to increase our spending on aid and global public goods – which I support – we should do so by way of making the case in the public spending process. Development activists should not try to bypass the systems of democratic control of spending priorities, nor should they advocate taxes which do not make good tax policy on either distributional or microeconomic grounds.
Suppose you had $1 million to spend on tackling climate change. How would you spend it to get the best bang for your million bucks?
Would you spend it on stopping the slash-and-burn of forests? Perhaps on switching to nuclear energy? More energy-efficient buildings? Building cleaner power stations?
According to a recent paper by David Wheeler and Dan Hammer, climate change experts at the Center for Global Development, the answer is (drum roll): you would do much, much better to spend your money on a combination of family planning and girls’ education in developing countries.
This table, based on data in their paper, shows how many tonnes of CO2 would be abated for your $1m:
| Intervention | Tonnes of CO2 saved |
| Family planning & girls’ education combined | 250,000 |
| Family planning alone | 222,222 |
| Girls education alone | 100,000 |
| Reduce slash and burn of forests | 66,667 |
| Pasture management | 50,000 |
| Geothermal energy | 50,000 |
| Energy efficient buildings | 50,000 |
| Pastureland afforestation | 40,000 |
| Nuclear energy | 40,000 |
| Reforestation of degraded forests | 40,000 |
| Plug-in hybrid cars | 33,333 |
| Solar | 33,333 |
| Power plant biomass co-firing | 28,571 |
| Carbon Capture and Storage (new) | 28,571 |
| Carbon Capture and Storage (retrofit) | 26,316 |
The logic, of course, is that if there are fewer people on the planet, then we will generate fewer greenhouse gas emissions. Population policies are important because there are many people in developing countries who want smaller families, but don’t have access to the family planning services they need to achieve this. Education is important because educated girls want (and are more able to insist on) smaller families. That’s why these interventions are important and cost effective, both individually and especially when done together.
Win – win
This approach is particularly attractive because, in addition to helping to slow global warming, there are other, very significant benefits for the citizens of developing countries of access to family planning and to education for girls.
The other day I reported here that if donors invested about $180 million a year to provide modern contraception to every Ethiopian woman who wants it, this could set off a virtuous circle of rising income per capita, lower desired family size, greater use of contraception, lower numbers of children, and so rising income per capita. My back of an envelope calculation found that a decade of access to modern family planning would have roughly the same effect on incomes in Ethiopia as the entire international aid programme in Ethiopia does today.
As well as environmental and economic benefits, there are important social and health benefits for women and their families, which strengthen the case for these investments over and above the cost-effectiveness figures shown above.
Making choices
Of course in an ideal world we would do all of these things. But although it is inconvenient to acknowledge it when you are busy trying to save the world, resources for averting climate change are limited. We should make informed choices to reduce carbon emissions in the most cost-effective and sustainable way we can with the resources available, to secure the biggest and broadest benefits. These figures from the Center for Global Development imply that investment in family planning and girls’ education would be a far better investment than the UN Reducing Emissions from Deforestation and Forest Degradation (REDD), which aims to spend $30 billion a year on incentives for developing countries to reduce deforestation and forest degradation.
We would get three or four times as much bang for our buck – in terms of climate change benefits – from population policies and girls’ education as we would from even the most cost-effective investments in forestry (stopping slash-and-burn), and in addition we’d get the broader economic and social benefits for the people of developing countries.
So why isn’t this, in fact, where we are spending the climate change money? Something to do with the power of industry in the environmental lobby? (Update: See Eliot’s comment below)
(The figures in the table above are calculated from Table 2 and and Table 5 of The Economics of Population Policy for Carbon Emissions Reduction in Developing Countries, David Wheeler and Dan Hammer, Center for Global Development Working Paper 229)
This is a presentation which I gave recently asking what development policy can learn from evolution.
The main conclusion is that as would-be change-makers, we should not try to design a better world: we should concentrate on building better feedback loops.
You can view and listen to the presentation by clicking the image below. This narrated presentation lasts 18 minutes (beware: as soon as you click you’ll hear my voice, so don’t do this if you are in a meeting!).
Alternatively, you can download the presentation as a pdf file here. But this won’t make as much sense, as there are a couple of videos in the presentation.
If you like this presentation, you may also like my previous narrated presentation about aid effectiveness after Paris.
Please let me know what you think in the comments below. Am I right that we should focus more on feedback loops?
Some people, especially working on the front-line of delivering aid programmes, are uncomfortable with the idea that aid should be more strongly linked to results. Some point out that there is no evidence that government officials and aid workers will respond to incentives (see this article by Ngaire Woods and Paolo de Renzio); indeed, the very idea seems to impugn the character of development professionals. Others are concerned that an increased focus on results will add to the bureaucratic burden of form filling and reporting which plagues the life of front-line staff (see this essay by Andrew Natsios, former USAID Administrator.) On his blog yesterday, Simon Maxwell lists four further concerns which he says give rise to uncomfortable “seat shifting” about results : that the evidence won’t really be used; that linking aid to results relies on a simplistic, deterministic view of development; that it risks focusing too much on results which can be measured, rather than deeper but less observable changes; and that a results-based approach fails to take account of the complexity of how aid transactions actually feed through into activities.
These are serious and important concerns. In particular, if measuring results is simply bolted on to the existing systems for the allocation and management of aid, the danger is that we add to bureaucracy with little real benefit. But if better measurement of results is used instead by aid agencies to simplify the way they manage aid programmes, rather than just adding new reporting, then the results agenda creates the opportunity to reduce bureaucracy, decentralise decision-making, increase country ownership, increase the focus on outcomes that really matter, step away from linear, deterministic thinking about how results are achieved, focus more on relationships and institutions, and really liberate development workers to work on what really motivates them – delivering change on the ground – and less on managing the bureaucracy at home.
This post sets out how a focus on results might unlock changes in the way aid is managed, which could lead to significant improvements in aid effectiveness.
The UK coalition government yesterday announced its spending plans for the next four financial years (to 2014-15). These spending plans are subject to scrutiny and approval by Parliament, though the tradition in Britain is that the spending plans are usually approved without significant amendment.
Overall, this spending review is a seismic political event, which will be talked about for many years to come. It will reduce planned spending by £81 billion ($130 billion) a year, and remove about half a million public sector workers from the government payroll.
In that context, the coalition government’s decision to increase international development spending is remarkable. Here is the Chancellor of the Exchequer, George Osborne:
I can also confirm that this Coalition Government will be the first British government in history, and the first major country in the world, to honour the United Nations commitment on international aid. The Department for International Development’s budget will rise to £11.5 billion over the next four years. Overseas development will reach 0.7% of national income in 2013.
This will halve the number of deaths caused by malaria. It will save the lives of 50,000 women in pregnancy and 250,000 newborn babies. Whether working behind the counter of a charity shop, or volunteering abroad, or contributing taxes to our aid budget, Britons can hold their heads up high and say – even in these difficult times, we will honour the promise we make to the very poorest in our world.
The chart below, which shows aid as a share of national income since 1960, shows that this really is historic. Britain will, for the first time, meet the international aid target of 0.7% of national income, joining Denmark, the Netherlands, Norway and Sweden.
UK ODA as share of GNI since 1960
In cash terms, Britain’s official development assistance (ODA) will increase by 50% over the four years to 2014. Most of this will continue, as now, to be channelled through the UK Department for International Development (DFID), whose budget will increase by 47% in cash terms (37% after taking account of inflation).
The increase will occur mainly in 2013, when British aid will increase by a third from £9.1bn to £12.0 bn.
| 2010 | 2011 | 2012 | 2013 | 2014 | |
| Total UK ODA* (£bn) | 8.4 | 8.7 | 9.1 | 12.0 | 12.6 |
| ODA/GNI (%) | 0.56 | 0.56 | 0.56 | 0.70 | 0.70 |
To get a sense of the political priority that development has been given in this spending review, consider that the National Health Service will increase by just 1.3% in real terms over the same four years; and many government departments face reductions of 20% to 30%.
The Daily Express opposes foreign aid
This is a considerable act of political bravery on the part of the Conservative-Liberal coalition. Today’s Daily Express (see right) is among the British newspapers demanding that, in the context of a spending review in which many public services face declining budgets, aid should be cut too.
The government has defended aid on the grounds that it is both morally right, and in Britain’s interest. They have also said that they will step up efforts to ensure that the aid budget is both transparent and effective. Chancellor George Osborne said that the aid budget is “protected from cuts but not from scrutiny.” The announcements included:
- A significant reduction in the admin budget. Running costs (a definition of back-office costs used by the OECD DAC) will be reduced to 2% of total spending by 2015, half the global donor average of 4%.
- A new Independent Commission for Aid Impact will assess all ODA spending to ensure best value for money and effectiveness.
- DFID will end bilateral aid to China and Russia.
Andrew Mitchell, the Secretary of State for International Development, is quoted as saying:
We are proud of the fact that we are keeping our promise to spend 0.7% of GNI on aid. However, in the current financial climate, we have a particular duty to show that we are achieving value for money. Results, transparency and accountability will be our watchwords and will define everything we do.”
Of course, the development experts have quibbles and concerns, such as whether aid will be spent disproportionately in support of Britain’s security priorities, and how DFID will manage a fast rising aid budget while staff numbers are being reduced. These are, in my view, reasonable questions to ask; and I will be among those continuing to ask questions about whether and how aid spending can be used most effectively; but it seems churlish today to focus on these issues rather than the big picture of a substantial demonstration of political and financial commitment to overseas aid.
The coalition government should be congratulated for their commitment to the UK’s overseas aid programme, and for their efforts to improve the transparency, accountability and effectiveness of aid to have the maximum possible impact improving the lives of people in developing countries.
For more commentary, see
- Lawrence Haddad from IDS
- Claire Melamed from ODI
- Julian Borger in the Guardian on the implications for foreign policy
Peter Gill's new book, Famine and Foreigners
Peter Gill talks on the latest Development Drums podcast about his new book, Famine and Foreigners: Ethiopia Since Live Aid.
The Ethiopian famine of 25 years ago killed more than 600,000 people. Peter Gill was the first journalist to reach the epicenter of the famine in 1984 and he returned at the time of Live Aid to research the definitive account of the disaster, A Year in the Death of Africa .
Twenty five years later, Peter Gill has returned to Ethiopia to tell the story of what has happened since then in Ethiopia. His book draws on interviews with leading Ethiopians and with foreign aid officials. He interviewed Prime Minister Meles Zenawi and the leading development economists, Joseph E. Stiglitz and Jeffrey Sachs. Most important of all, Gill has traveled throughout the country and interviewed many of Ethiopia’s citizens.
In this edition of Development Drums, I ask Peter to recall what happened in the famine of 1984, and how Ethiopia has changed in the quarter of a century that followed.
You can listen to Development Drums on your computer at the website (http://developmentdrums.org) or download it (from here) to your MP3 player. You can subscribe to Development Drums on iTunes free of charge (search for “Development Drums” in the iTunes store).
The British Government is testing the idea of Social Impact Bonds. Social Finance, the organisation which developed the idea, describes them like this:
A Social Impact Bond is a contract with the public sector in which it commits to pay for improved social outcomes. On the back of this contract, investment is raised from socially-motivated investors. This investment is used to pay for a range of interventions to improve the social outcomes. The financial returns investors receive are dependent on the degree to which outcomes improve.
This idea is being tested to pay for a project which aims to cut re-offending by prisoners in Peterborough. Here it is described in the Financial Times:
The £5m bond is being used to fund the St Giles Trust, a third-sector organisation with a record of reducing reoffending by up to 40 per cent. It engages with offenders in jail and then supports them once out – something the probation service does for those on longer sentences but not for short-term prisoners.
If St Giles fails to cut reoffending at Peterborough, investors will get nothing back. If the reoffending rate reduces by 7.5 per cent they start to get a return. As it rises, the justice ministry will pay more, up to a maximum 13.5 per cent a year.
… The justice secretary was careful yesterday not to paint the social impact bond – “a small scheme, although I would hope to have it on a much bigger scale across the country if we can make it work” – as the big answer to that. But payment only for results would be a key part of his green paper on reducing reoffending, he said.
Kenneth Clarke talks to inmates at Peterborough prison
The logic of these bonds is that the private sector invests in schemes if they are convinced it will deliver certain kinds of results. But because the results are social benefits, they don’t generate cash which can be used to provide a return to investors. So the government steps in to translate the social impact into a financial return for the investor. It is this government promise to turn social impact into financial returns which unlocks the possible engagement of a much wider range of organisations in finance and delivery of social outcomes.
The concept is explained at more length in a publication by Social Finance, Towards a New Social Economy. Social Finance’s role has been to get the contract put in place, and then attract capital into the fund. They are not themselves an investor in social impact bonds: their goal is to develop ways to enable finance to work better in social areas, both to raise more money and to allow it to be more effective. According to the FT:
If this is a revolution in social financing, it will not happen overnight. It will take three to four years for absolute proof the Peterborough project works, “but we believe there is the potential for hundreds of millions of pounds, even billions, of investment for social change through these sorts of structures,” Mr Eccles says.
Could something like this work in development?
One way this could work in development is as follows.
"I have a cunning plan"
A group of donors could make a binding commitment to pay a certain amount for particular outcomes, such as the number of kids who complete school, or every household to get access to clean drinking water. (This is the kernel of the Cash on Delivery idea proposed by my colleagues at the Center for Global Development.) Suppose you are a Minister in a developing country with a great plan for getting kids into school. If the donors have promised to turn social results into financial returns, could you then persuade private investors – perhaps social investors or development finance institutions - to front up the money to enable you to implement your plan? (If not, might it be that you need a better plan?)
If your education scheme works, and the outcomes are achieved, donors hand over the money and investors get a financial return. If your scheme doesn’t work, donors don’t hand over the aid, and your investors don’t get their money back. Donor aid budgets are spent elsewhere. You might have a little less luck raising money next time you have a cunning plan.
In general, a promise by donors to turn social returns (such as more kids vaccinated, reduced maternal mortality, more access to clean water) into a financial return might unlock a bigger range of sources of short-term financing for development. Possible financiers might include private sector institutional investors in search of commercial returns, social investors, high net worth individuals, foundations, development finance institutions (such as the World Bank and African Development Bank), or perhaps socially conscious individuals who want to put in a small amount of cash through an online service, with the expectation of just getting their money back, and nothing more, if the development results are achieved. As well as (perhaps because of) the greater diversity of sources of finance, this might unlock more innovation and diversity in how those results can be achieved.
This could lead to a big change in the aid relationship and the role of aid agencies. At the moment donors bundle together two potentially separate roles:
- providing finance for development;
- selecting among approaches for meeting development goals and supporting and monitoring their delivery.
The social impact bond approach would enable those two potentially distinct roles to be unbundled. Donors could concentrate on identifying results for which they are willing to pay, putting a suitable price-tag on them, and ensuring that measurement of results is fair and accurate.
Once donors have made a commitment to turn social results into financial returns, developing countries could turn to a much wider range of organisations to help them design and deliver services, and a much bigger range of sources of short-term finance. It would be up to the countries themselves to decide which social objectives to target, and how they wanted to go about doing it, subject to the discipline of being able to convince an investor (but not necessarily donors) that their plan makes sense. This approach would respect country ownership and prioritisation, and yet ensure that aid money was used only where it was really delivering results.
No substantial consideration has yet been given to whether and how social impact bonds might be used in the context of international development. The closest analogy so far has been the International Finance Facility for Immunisation, but in that case there is no link between performance and the payout to investors. In domestic policy, the Peterborough project to reduce re-offending is the only example so far of social impact bonds, though others are planned.
Those of us who are interested in international development should track the progress of these experiments and, if they are a success, think about how we might adapt the idea of social impact bonds to attract more diverse finance into development, as a way to improve the effectiveness with which aid money is used to reduce poverty.
Last week’s UN meetings in New York prompted a flurry of papers, speeches, documents, announcements and articles about development in general, and the Millennium Development Goals in particular. There seem to be three emerging development narratives which are not obviously completely compatible. I’ll summarize them here, and in a later post I’ll look at whether there they can be brought together into a coherent synthesis.
Narrative 1: Glass half full: we need a big heave
The dominant story from the summit was that development can be achieved if the world would only come together with a big heave. On this view, the glass is half full. We have made good progress towards the MDGs (supported by the new MDG report card by ODI; and their excellent new Development Progress Stories website); and with more money, we can do more. Jeff Sachs, whose Millennium Villages Project exemplifies the idea of a big, coordinated push, called in the FT for aid to be scaled up through pooled donor funding, “to scale up what has been proven to work”. (Oddly, he chose the Global Fund rather than the World Bank as his example of effective multilateral institution.)
The new report of the Commission for Africa advocates a further big heave
A new Commission for Africa report, Still Our Common Interest, agrees. The original 2005 report was probably the most authoritative (certainly the most weighty) argument for a big heave; and it concluded (among other things) that donors should treble their aid to Africa. The updated 2010 report reiterates that view, celebrates the progress that has been made, and calls for donors to increase their aid, including – very oddly – a proposal for a new Global Fund for Education.
Probably the biggest announcement this week, which sits squarely in the big heave narrative, was for a new UN Global Strategy for Women and Children’s Health. As I argued here the other day, the focus on women and children’s health is welcome, but this is no strategy: it is another list of spending commitments, which the UN press release says is worth $40 billion. The only interesting feature of it is that it lists commitments by private companies and NGOs as well as official donors. All very big heave; all very retro.
Narrative 2: More accountability leads to better institutions
While the UN institutions and the NGOs promote the big heave, donor governments, particularly the US and UK, are beginning to tell a different story which focuses on the need for more transparent and accountable institutions, both in developing countries and in the international development system. This was most evident in President Obama’s speech which announced a new US development strategy. President Obama explicitly distanced himself from the big heave:
“This is the reality we must face — that if the international community just keeps doing the same things the same way, we may make some modest progress here and there, but we will miss many development goals.”
Both the US and the UK government argue that the efforts of donors should be measured not by what is spent, but by what is achieved, both by aid and by other policies. Cynics might think this is preparing the ground for aid cuts in the face of tight government budgets, though this does not appear to be the motive of the UK government which has committed to increasing aid to 0.7% of GDP by 2013.
The emphasis in the new US policy on growth as the permanent path out of poverty is not as new as the President’s speech implies; but the renewed emphasis will be welcome to those who think that the importance of growth is sometimes forgotten. As Lant Pritchett writes:
The “development is about more than growth” backlash, which had important elements of truth, easily got carried away into “development isn’t at all about growth” and it is good to see economic growth back front and center of development objectives.
A more novel feature of the new US policy is the emphasis on investing in systems and institutions, for service delivery, public administration, and other government functions, and the importance of country ownership. This is new for the US. For many European donors it is this reasoning that brought them to give more of their aid through governments as budget support, so this new US approach will be seen as a welcome conversion.
What is striking about this narrative is the emphasis it puts on transparency and accountability as ways to make institutions work better. President Obama set out the argument in his General Assembly speech the following day:
The arc of human progress has been shaped by individuals with the freedom to assemble and by organizations outside of government that insisted upon democratic change and by free media that held the powerful accountable. … In all parts of the world, we see the promise of innovation to make government more open and accountable. Now, we must build on that progress. And when we gather back here next year, we should bring specific commitments to promote transparency; to fight corruption; to energize civic engagement; and to leverage new technologies so that we strengthen the foundation of freedom in our own countries, while living up to ideals that can light the world.
This emphasis on accountability seems to resonate closely with the approach of the UK Government. The UK International Development Secretary, Andrew Mitchell, set out a similar argument in his first major speech, in which he emphasized outputs and outcomes rather than inputs, and launched the new UK Aid Transparency Guarantee. Paul Collier and Jamie Drummond, writing in the Guardian, make a similar point about the need for transparency and accountability in the use of natural resources.
The 32 page outcome document, Keeping the Promise, sets out the usual long list of activities which “with increased political commitment .. could be replicated and scaled up for accelerating progress”. But experienced communiqué watchers (like Lawrence Haddad) also detect a new theme: the need for more citizen-led monitoring of delivery. For example, the outcome document calls on donors to:
[Work] towards greater transparency and accountability in international development cooperation, in both donor and developing countries, focusing on adequate and predictable financial resources as well as their improved quality and targeting; …. To build on progress achieved in ensuring that ODA is used effectively, we stress the importance of democratic governance, improved transparency and accountability, and managing for results.
Until now, I think many people working in the development community have seen transparency as an add-on, at best a way of retaining public support for aid while they get on with figuring out how to use the aid money wisely (and at worst an annoying additional bureaucratic burden). Perhaps I am tempted to read too much into these speeches, because my day job is working towards more transparent and accountable institutions, but it was striking to see Raj Shah, Administrator of USAID, talking about the use of new media to build an online platform to help the government to reach its development goals. I think it is now clear that, for the US and UK at least, transparency and accountability will play a more central role in their development strategies, both as drivers of change in developing countries, and forces for improvements in the effectiveness of development agencies and institutions.
A sign that this narrative is beginning to take shape is that it is already under attack. In an interesting article in The New Republic, David Rieff is sceptical of the idea that donor nations can offer a path out of poverty:
The problem is not with the analysis but rather with the president’s implicit claim that we know how to offer peoples and nations such a path. … The stark fact is that only if one fetishizes the idea of civil society as a kind of universal ideological solvent, and believes that, in tandem with scientific innovation, the road to our collective salvation is now open to us, can such optimism be justified.
An interesting feature of this narrative is that it emphasizes the need for a wider range of instruments (known either as beyond aid or – ghastly term – policy coherence). For example, in his speech, President Obama said:
Development is helping nations to actually develop — moving from poverty to prosperity. And we need more than just aid to unleash that change. We need to harness all the tools at our disposal — from our diplomacy to our trade policies to our investment policies.
Andrew Mitchell’s speech in June said something similar:
21st century development is a complex tapestry of trade, investment and enterprise, climate change, economic growth, debt relief, financial services, intellectual property and advancing new technologies.
Bill Easterly argued in the pages of the FT that trade, not aid, is needed to promote development. I’ve argued elsewhere that we don’t know very much about whether and how aid promotes economic and development, but we do know that it enables people to live better lives while that transformation is taking place. So it may be that these beyond aid policies are the best hope for promoting development, while aid should focus primarily on improving lives in the meantime.
Narrative 3: The challenge is increasingly inequality, not absolute poverty
In my view, by far the most interesting and important paper to be published around the summit was The World’s Poor Aren’t Where We Think They Are, by Andy Sumner from IDS. Here’s the key conclusion:
In 1990, we estimate that 93 per cent of the world’s poor people lived in low income countries. In contrast, in 2007 we estimate that three-quarters of the world’s approximately 1.3bn poor people now live in middle-income countries (MICs) and only about a quarter of the world’s poor – about 370 million people live in the remaining 39 low-income countries, which are largely in sub-Saharan Africa.
The paper also shows that just 12 percent of the world’s poor live in fragile low-income countries. Take a look at this Guardian data visualisation tool.
Data visualisation by the Guardian
This change in the reality on the ground has profound implications for development policy, and my sense is that the discussion in New York is not yet grappling with these issues. Readers of Paul Collier’s book The Bottom Billion will recall his analysis that the world’s poorest people lived in about 50 very poor countries which he said were stuck in a series of poverty traps. Policy should be focused on helping those countries to escape that trap. But if three quarters of the world’s poor live in middle income countries, the challenge is to reduce inequality in these countries. The figures suggest that the biggest causes of poverty are not lack of development in the country as a whole, but political, economic and social marginalisation of particular groups in countries that are otherwise doing quite well.
It is not clear that additional resources from abroad are an important part of the answer to this. At The Guardian, Jonathan Glennie says:
The world needs to find new ways to help other countries respond to persistant poverty and increasing inequality. The era of aid as we know it is ending. Let’s hope that a new era of development cooperation takes its place.
For some people this suggests that we should reconceptualise development as the ability of all the world’s citizens to live decent lives, rather a problem of economic industrialisation of poor countries. This view has the advantage of focusing on people and communities, rather than countries. A recurring theme of the Chronic Poverty conference, which took place just before the MDG Summit, was the right of all citizens to a basic standard of living, and there is growing interest in the possible role of various kinds of social protection (social safety-nets, conditional and unconditional cash transfers, family grants and so on).
Similarly, a new report from Phil Vernon and Deborrah Barksh at International Alert asks us to get “beyond the MDGs”. They call for a
… a new narrative, based on a vision of a world in which people can resolve their differences without violence, while continuing to make equitable social and economic progress, and without lessening the opportunities for their neighbours or future generations to do the same. This vision would be both enabled and recognisable by five core factors: equal access to justice, political voice, security, economic opportunity and well-being. These would in their turn be underpinned by a self-reinforcing set of values and institutions.
On this view, poverty is a problem of political and economic marginalisation which can affect communities within industrialised, industrialising and low income countries. It calls for a different kind of policy agenda, which is as much to do with empowerment and political voice as the transfer of resources and investment in public services.
Conclusion
These seem to be three quite different views of development. There is a substantial gap between advocating a big heave of more aid to ignite a cycle of industrialisation in the poorest countries, a focus on more transparent and accountable institutions in developing countries and in the development system, and political change that protects the rights of society’s most marginalised groups in whatever country they happen to live.
But while there are tensions and trade-offs, these views are not intrinsically contradictory, and in a subsequent post I’ll look at how these three narratives can be stitched together into a coherent whole.
This is very cool. A team of researchers from Development Gateway and AidData have worked with the World Bank to add detailed subnational geographical information to all of the Bank’s active projects in the Africa and Latin America region. This isn’t just pins in a map showing the country where the money is spent: they have looked through the project documentation to find out as far as possible the geographic coordinates of the actual locations where aid the activities take place.
This video by AidData explains brilliantly what geocoding means, and why its important. Take a look:
Serious kudos to the World Bank, Development Gateway and AidData for doing this work. Geocoding is going to have a huge impact on improving the accountability and effectiveness of aid. By geocoding these World Bank projects manually, the team has demonstrated that geocoding aid is feasible. As Development Gateway’s Steve Davenport says in the video: “This is not that difficult”.
If the new standards for publishing aid information that are being designed by donors under the International Aid Transparency Initiative include appropriate standards for geo-coding of all aid activities, then it won’t be necessary for these projects to be coded by hand in future. The people funding the projects would geocode their projects from the outset, and this information would be included in the data feeds, so everyone will have more comprehensive, more accurate and more precise about who is doing what, and where.
If you want more background, aidinfo’s paper Show Me The Money explains how geo-coding, traceability and transaction level details make a powerful combination for improving the effectiveness and accountability of aid.
H/T: my colleagues at aidinfo
I was in Paris last week for meetings about aid transparency. At the International Aid Transparency Initiative meeting, signatories and the Steering Committee members agreed a very important step forward. Donors comprising more than half of global official aid agreed the details of what will be published under phase one of the IATI initiative.
More details are on the aidinfo.org blog. In short, the donors agreed
- Data will be published more quickly, with an agreement that information will be published as soon as possible, and at a minimum, quarterly. More timely information is a top ask of stakeholders in developing countries.
- Data will be published in a common, open format, so that it is readily accessible, comparable and easy to find.
- More detailed aid data will be published, increasing its relevance to users.
None of this is going to be easy for donors. It will require some investment in collecting better information and quality assurance, and it will require a significant change of culture as they move to the assumption that the details of all aid projects will be publicly available automatically. But we know that the benefits hugely exceed these costs. So kudos to the donors for taking this important first step on the road to comprehensive aid transparency.
Two particular highlights of the meetings from my point of view were:
- The five country pilots demonstrated the feasibility of automatic electronic data exchange between donors and developing country governments, and for the creation of data in standard IATI format; and
- The developing country representatives at the meeting were clear and vocal in their insistence that donors should publish details of how they are spending aid.
There is a long way to go, and there is a comprehensive work programme for phases 2 and 3 of IATI. But last week donors took an extremely important first step for which they deserve credit.
Read more on the aidinfo blog.
Aid sceptics like to say that the west has spent trillions of more than a trillion dollars on aid to Africa since independence. See for example Dambisa Moyo in the Wall Street Journal or The Catholic Herald. Bill Easterly makes the same claim on page 4 of The White Man’s Burden. This claim is often made by people who argue that aid does not work.
Though the point is often made, it it isn’t true. According to OECD DAC statistics, since aid began in the 1960s donors have given a grand total of $502 billion to sub-Saharan Africa, which is worth about $866 billion in today’s prices. (Table 29; excludes debt relief.)
This is not trillions of dollars – not even one trillion dollars.
The G-20 countries have, over the whole history of aid, given less aid to sub-Saharan Africa than they spent on fiscal stimulus in the single year of 2009.
(This fact comes from my recent article, An Open Letter to Aid Skeptics, in the latest edition of the Center for International Relations Forum journal (pdf).)
Two interesting new articles start with the premise that the aid system needs to be overhauled, and then reach radically different conclusions about what this means in practice.
First up, Roger Riddell says we need a radical rethink of foreign aid:
The gap between what it does and what it could do is widening fast. … The central problem of the aid system is that there is no system. … Almost since official aid was first given, politicians have both warned of aid’s systemic problems and proposed alternatives. These include raising aid funds through an automatic compulsory mechanism based on the ability to pay; pooling aid resources and allocating them on the basis of need; and, if there are grounds for believing that the recipient government is unable or unwilling to use the aid funds transparently, “ring-fencing” the aid in a fund to be administered independently.
Most of these good ideas have been eclipsed by the focus on increasing aid levels. A common response to anyone advocating these solutions to aid’s systemic problems is the counter-argument that they are part of the very nature of the aid system, and that it is naive to suggest that it can be changed. They warn that if governments are unable to decide for themselves how to give aid and then check on its use, then they simply won’t provide it.
There are two ways to respond to these arguments. One is to point out that that aid’s systemic problems are getting worse and fast and frustrating progress on the core objective of ending extreme poverty. Resolving key systemic problems would probably have a greater effect on extreme poverty than expanding the amount of aid given. The other is to draw attention to high-level discussions where the sorts of changes needed to fix aid are being presented as politically viable.
The authors of Philanthrocapitalism, Mike Green and Matt Bishop, also think that the aid system needs reform, but they have a very different view of the direction of travel:
Like it or not, we have to find new ways of making the aid money go further and find new ways of financing development that do not depend on the political will of a few rich countries. Philanthrocapitalism, by tapping the expertise, creativity, money and other resources of the private sector, has to be central to a new development strategy. First, to pilot and test ideas to make aid smarter and more effective. Second, to leverage more private capital – full for-profit, ethical investment and donations – to fill the gap.
As we have argued before, this means thinking about aid not as the exclusive preserve of government but as a partnership with philanthrocapitalists, rich and less rich alike. This challenge is urgent and the rich countries are being slow to take it up - Britain’s new government, in particular, seems set on business as usual (although there are plenty of disgruntled voices on the right who would like to see an axe taken to the aid budget).
Both arguments start from the view that the challenges to aid are the result of political pressures in donor countries. Roger Riddell argues for a more centralised, technocratic aid system which can be isolated from undue political influences. Mike and Matt want to see much greater involvement from a range of other actors, especially the big philanthropic foundations.
I think they are both partly right, and both partly wrong.
Roger Riddell is right to say that the systemic problems of aid are the result of politics; and he is right to disagree with the pessimistic idea that these problems are insurmountable. But he wants to address these problems but putting the aid system at arm’s length. I don’t think this is a viable solution: it wishes the problem away. It is like saying that we can solve the global climate change problem by handing over control of energy policy to an international panel of wise people. The politics matters, and we can’t make them go away by asking technicians to give us the answer; so we have to figure out how to change the politics.
The aid system today is characterised by aid institutions (official aid agencies, international organisations and charities) trying to mediate between the preferences of the people who give them money and their view of the interests of people in developing countries. Aid agency staff typically want to do as much as they can for people in developing countries: if you ask most aid agency staff who their “client” is, they will tell you it is the world’s poor, not their own taxpayer. But they feel they can’t do many of the things they would like to do (such as improve the allocation of aid, reduce conditionality, make long-term commitments, scale back paperwork and process, focus more sharply, untie aid etc) because they have to take account of the preferences of the people whose money they are spending. They see themselves as a firewall, serving the interests of the poor by protecting the aid programme as best they can from what they consider ill-informed or selfish wishes of their taxpayers. This behaviour is not confined to official donor agencies: many NGOs say one thing to their supporters, and do something quite different (think, for example, of the difference between what Kiva actually does and what most people think that it does). In my view, trying to deliver effective aid despite public opinion is fundamentally misconceived and unsustainable; this model is beginning to fray at the edges, and could well fall apart.
The alternative approach is for aid agencies to recognize that the public wants to see aid used as effectively as possible; and to build an informed conversation about how that can be achieved. The stakeholders see the issues from different perspectives: for example, the public sees the benefits of spreading its aid across many countries and sectors, while aid agency staff see the ineffective duplication this creates. The solution to this is to share information and build a common view, not to try to disempower the public. If the aid bureaucracies believe that long-term commitments of aid to strengthen national systems is more effective in the long run than the series of smaller ad hoc projects that the public seems to prefer, then they should produce the analysis and evidence and persuade their stakeholders. Both Roger and I believe that more aid should be given to the poorest countries; he believes that this decision should be taken out of the political process, while I believe we have to win the public round by explaining why that would be better.
In the long run, public opinion will determine how much aid is given, to whom, and by what means: we cannot and should not try to sidestep the argument by putting the administration of aid beyond the reach of public opinion. The only sustainable way to make aid more effective is to change the political pressures by producing persuasive evidence and analysis. If Roger’s approach is to insulate aid from political pressure, my approach would be work to align those political pressures with more effective aid by making aid more transparent and accountable.
By contrast, Mike Green and Matt Bishop want to improve aid, and attract more resources, by making more use of the expertise and money of the private sector. I agree with them that there is huge potential for the growing diversity in the aid system to improve the effectiveness of development system, if different organisations focus on the contributions that they can make. Foundations could act like venture capitalists: taking bigger risks but leaving long-term financing of scaled up successes to official aid donors. Private aid could focus on achieving community and individual level results. Specialised global organizations could provide particular expertise not available through generalist support. The diversity of official donors could provide innovation rather than a monoculture of ideas. Official aid agencies could focus on long term funding and resource transfer, and support for institutional change.
Unfortunately it is not clear that all these different actors really are focusing on their strengths, and there is nothing in the aid system that pushes them to do so. The foundations do not display the higher risk appetite that we would expect them to have (despite their rhetoric). The approach of official aid agencies to the division of labour does not appear to be intended to drive specialisation (from which the benefit of division of labour derives) but simply to limit spread. Diversity of approaches and innovation are essential, but this must be accompanied by mechanisms which kill off bad innovations and take good ideas to scale; otherwise the effect is simply to add to costs and fragment systems.
In their book, Philanthrocapitalism, Mike Green and Matt Bishop give several examples in which philanthropic foundations have made significant and worthwhile contributions. The role of the Rockefeller Foundation in promoting the Green Revolution is a compelling example. But from these successes they extrapolate a wildly rose-tinted view of the work of foundations. As with official aid, there are successes and failures; there are good practices and bad.
My impression is that, at their worst, foundations are much less effective, and behave even worse than official donors. For example, I have seen:
- massive unpredictability and volatility of foundation grants; many foundations make grants worth 5% of their capital asset value each year, which is the minimum imposed on them by US tax authorities. In years when asset prices are volatile, many foundations pass on this volatility to grantees – they do not (as they could, if they chose) use their capital to smooth out the grant-giving and make it more predictable and stable. In 2009 I know of some foundations which imposed in-year cuts exceeding 25% on their grantees, leading to cuts in services and imposing huge costs in developing countries just at the time when the world economic crisis created needs for additional funding;
- reinventing the wheel and failure to learn – it is one of the advantages of foundations that they can be innovative and unconventional; unfortunately, both the benefactors and staff of many foundations suffer from an inflated sense of their own abilities, and foundations often repeat basic mistakes that have been made for many years, rather than building on the experience and wisdom of organisations that have made these mistakes before;
- capriciousness and personality-driven priorities – both the staff and benefactors of foundations get ideas into their heads from which they cannot be dissuaded. There are many examples of ludicrous decisions and instructions from foundation staff to grantees based on nothing more than their prejudices or personal preferences.
Of course, official aid agencies also suffer from these problems to some extent. But they also benefit from a degree of public accountability which puts them under pressure to be more effective. I think Matt Bishop and Mike Green underestimate the problems that foundations suffer as a result of their lack of accountability. In many cases benefactors became rich in markets; and they often trusted their instincts. But when they got a judgement wrong they were soon punished by the market, and they were able to change course. Now that they are philanthropists, they do not have any such feedback. When they make the wrong decision, everyone is too afraid to tell them, for fear of losing the opportunity to apply for the next grant. There is no mechanism for identifying and rewarding their most effective staff; nothing that forces foundations to concentrate on what they are really good at.
In many ways we have the worst of all worlds: with some notable exceptions, foundations do not in practice take enough advantage of the opportunities that their lack of accountability give them (for example, taking bigger risks, or supporting unpopular causes) but they do suffer from the weaknesses that lack of accountability imposes on them.
So I think Mike and Matt are right to say that development relationships should not be the exclusive preserve of government, and that is should increasingly be an effective partnership with philanthrocapitalists, NGOs, private sector organisations and individuals. But without some more effective governance arrangements in the aid system, we will not reap the potential benefits of this partnership. We need stronger pressures for the different partners to make their specific contributions effectively, which in turn demands greater transparency and stronger accountability for all organisations.
Both articles start from the premise that the aid system needs to be improved; on this I think we all agree. But Roger’s solution – putting aid beyond politics – is unlikely to be effective, and is undemocratic. If we believe that politics constrains effective aid decisions, we should square up to trying to change the politics, not trying to insulate ourselves from it. And Mike and Matt’s answer – passing the baton to very rich Americans – is no answer either. These stakeholders certainly have a contribution to make, but to be effective their contribution must be part of a system that is likely to get the best from all partners working together, and holds everyone to account; otherwise we risk having all the disadvantages of the free market with none of the benefits of market discipline.
Disclosure: the organisation for which I work receives grants from the Gates Foundation and Hewlett Foundation.
A new Oxfam paper, written by the excellent Jasmine Burnley, looks at 21st Century aid. Here is a good summary paragraph:
“We are now at a crossroads. On the one side, is politically motivated or ineffective aid – much of which still exists today. On the other, and looking to the future, is aid fit for the 21st century. Twenty-first century aid is liberated from rich countries’ political incentives and is targeted at delivering outcomes n poverty reduction. Twenty-first century aid innovates and catalyses developing country economies, and is given in increasing amounts directly to government budgets to help them support small-holder farmers, build vital infrastructure, and provide essential public services for all, such as health care and education. Twenty-first century aid is transparent and predictable. It empowers citizens to hold governments to account, and helps them take part in decisions that affect their lives. In recent years we have seen more of this good 21st century aid but we need to see a lot more still, and soon.”
There is a lot to like in this paper:
- the combination of making the case for more aid, and for making improvements in how it is delivered;
- the emphasis on making aid more predictable, transparent and accountable
- the focus on helping to support the evolution of effective institutions, particularly state institutions
- a whole chapter devoted to addressing the critics of aid
- the call for developing countries to do more to end corruption and increase transparency and freedom of expression
- a clear case for giving more aid to reach the Millennium Development Goals.
It is an interesting straw in the wind that the paper does not dwell on the Paris and Accra agendas for aid effectiveness. I see this as growing recognition that while the objectives of of those declarations are laudable, the top-heavy, committee-led process for achieving them is unworkable and ineffctive. I wonder if transparency and accountabilty would have featured so much in a paper written even one or two years ago.
Yes, and …
Writing a paper about everything in development would have been an impossible task, even for someone as talented as Jasmine. So when I say that there are points I would have liked to see made more prominently, or done differently, I do not mean this as a criticism of the paper, but rather some nuances and reflections that I would like to add.
First, there is only a brief acknowledgement (p15) of the importance for development of policies other than aid. My view is increasingly that the most important levers for industrialised countries to help accelerate development are changes in policy (eg trade, climate change, migration, intellectual property, corruption); and that contribution of aid is likely to be modest. Even so, I think aid makes a huge difference to improving people’s lives while development is happening, and that this is reason enough to increase and improve it.
Second, I would have been interested in some reflections on how the role of aid should change in the face of broader changes. What are the implications for the way we use aid of of the rise of philanthropic foundations? What difference is made by the emergence of new donors such as China? What is the role of business, corporate social responsibility and social entrepreneurs? How does aid fit with other financial flows, including remittances and direct investment? My own view is that we should focus aid more sharply on reaching the parts that other flows won’t reach: the poorest countries, the chronic poor and marginalised within those countries, and investments with no immediate financial return, but the paper could have put aid more clearly into this context.
Third, I think those of us who want to see more and better aid should recognise more explicitly the serious challenges that the aid system now faces. As Duncan Green says “the pro-aid camp is fearful of giving fuel to the enemy if it acknowledges the failings of aid.” The paper suffers from a certain amount of self-censorship of this kind. There are scattered references to the problems, such as this:
“Aid that does not work to alleviate poverty and inequality – aid that is driven by geopolitical interests, which is too often squandered on expensive consultants or which spawns parallel government structures accountable to donors and not citizens – is unlikely to succeed.”
I would have liked a more thorough examination of these (and other) problems. We have to acknowledge that some of these problems are getting worse, not better. (In places it reminded me of the way that some politicians appear on TV when things are going badly wrong, with a talking point that says “things are pretty good, though of course we could do even better; but we really need to get our message across better”.)
On his blog, Duncan Green makes much of the point that this paper sets out the case both for increasing aid and for making it work better. I don’t think this is as unusual as he suggests (“More and better aid” was one of the demands of Make Poverty History, for example). But I do agree with him, and with Jasmine, that this is the right position.
Despite those quibbles, I thought this was a very good paper. It explains the debate about aid clearly, and it sets out very well coherent and plausible agenda for why aid should be increased, and how it should be improved. But I’m not sure who Oxfam thinks will read it, and unfortunately I doubt if it will change anybody’s mind in either direction.
I’ve been gratified by the number of people who have contacted me (by email, twitter and on facebook) to say how much they liked one of the slides in my recent presentation on aid effectiveness.
The slide borrows a format from Wired Magazine – it shows what I think is expired, tired and wired in foreign aid.
Of course, some of this is a bit exaggerated but I think it makes the point. As I argue in the presentation (you can click it then jump forward to slide 20), the items in the Wired column aim to put power in the hands of citizens in developing countries, and to enable them to put pressure to improve the services they get and the way that the aid system works.
Further suggestions please in the comments below, preferably in the Wired | Tired | Expired format.
Some rights reserved