(First published as a blog post on the Center for Global Development’s Views from the Center.)
On Friday the Governors of the European Bank for Reconstruction and Development (EBRD) will decide who will be the Bank’s next President. I’ve interviewed four of the candidates and the interviews are now online for you to listen to, and you can read the transcript here.
In September 2009, the leaders of the G-20 meeting in Pittsburgh called for the
“the heads and senior leadership of all international institutions [to] be appointed through an open, transparent and merit-based process.”
Despite this commitment, over last few months European Ministers have been horse-trading behind closed doors to try to get one of their nationals into a number of jobs which are up for grabs: as well as the Presidency of the EBRD, Ministers have to find a new Chair of the Eurogroup, someone to head the Eurozone’s permanent bail-out fund, and a new member of the board of the European Central Bank. But European Ministers have not been able to reach agreement, so for the first time ever the EBRD Governors have not been presented with a fait accompli. Five candidates will be in London this Thursday to be interviewed for the role, and the Governors are expected to make a decision by the end of the week.
At the Center for Global Development we believe this appointment should not be based on nationality, in some gigantic trade-off between unrelated institutions, but on the basis of merit and substance. We hope to make our own modest contribution to this by offering a public forum for the candidates to discuss their vision for the future of the EBRD.
Over the last couple of days I interviewed the four candidates who accepted our offer. We’ve put the interviews together in a Development Drums podcast. You can listen to this online, or download the podcast to your MP3 player, either from the Development Drums website or free in iTunes. You can read the transcript here.
The four candidates who agreed to be interviewed are: Thomas Mirow (at 03:58), the incumbent who has completed one four year term as President and is seeking re-election for the second term; Jan Krzysztof Bielecki (at 17:40), former prime minister of Poland; Suma Chakrabarti (35:45), a senior British civil servant; and Bozidar Djelic (at 47:43), the former deputy Prime Minister of Serbia. The fifth candidate, Philippe de Fontaine Vive Curtaz, is vice president of the European Investment Bank and did not choose to participate in this process.
In the interviews, the candidates talk about the implications for the EBRD of the planned expansion to the Southern and Eastern Mediterranean. They respond to criticisms of the EBRD for not doing enough on gender. And they talk about how their own professional background equips them to be an effective leader of the institution.
The interviews reveal some striking differences of view between the candidates. For example, the candidates offer quite different opinions about the extent of change that will be needed in the organisation to fulfil its new mandate in North Africa and the Eastern Mediterranean. Candidates also had quite different views about how they would respond to the criticism of the EBRD’s approach to women.
Given the differences in substance between the candidates revealed by these interviews, nobody should be in any doubt that the choice of the next president of the EBRD will have important real world consequences.
Listen to the interviews online, find Development Drums in iTunes, or read the interview transcripts.
Nominations for the head of the World Bank have now closed, and there are three candidates:
- Jim Kim, nominated by the United States; President of Dartmouth College, former head of HIV at the World Health Organization, and a founder of Partners in Health;
- Ngozi Okonjo-Iweala, nominated by Nigeria, South Africa and Angola; finance Minister of Nigeria, former foreign Minister of Nigeria; former Managing Director of the World Bank
- José Antonio Ocampo, nominated by Brazil; a professor at Columbia University; former UN under-secretary for economic affairs; former Finance Minister of Colombia.
That means that for the first time ever there is a genuine contest. In previous years other shareholders were faced with the choice of accepting or rejecting the US nominee. This time round, with three serious candidates to choose from, it is not clear that the US nominee has to win. The other shareholders should now take a moment to consult, and assess which candidate they think is best for the job; and it is very important that they should do so in an accountable way, for the sake of the integrity of this appointment and for the future of the governance of international institutions.
Should merit or nationality determine which person becomes President of the World Bank?
In the past, the head of the World Bank was nominated by the United States, and has been a US citizen, under a so-called ‘Gentleman’s Agreement’ reached shortly after the Bretton Woods conference in 1944. This does not reflect, as is sometimes supposed, the fact that the US alone has sufficient voting power to veto an appointment. The origin of this arrangement was that the US Treasury Secretary at the time, Frederick Vinson, convinced John Maynard Keynes that it was necessary for the World Bank to have an American at its head to secure the confidence of Wall Street, which was to be the main supplier of capital to the Bank in the early years. Of course today capital markets are global, and this rationale for US leadership of the World Bank no longer applies. In return for the leadership of the World Bank, the US gave up their claim to appoint the Managing Director of the IMF.
An appointment requires an 85% super-majority of the votes of the Board [UPDATE: I now believe that this appointment can be made by simple majority]; this means that the US can veto an appointment, but it also means that a candidate could be blocked by a coalition of three European directors plus the nominating constituency of one of the candidates; or by any four of the directors from the UK, France, Germany, Spain, Italy, Sweden and Switzerland. In other words, if the European shareholders choose to act together they have at least as much power as the United States to block an appointment.
In the past when there was only one nomination, it made little sense for any other country to oppose the person on offer – since that would mean getting off on the wrong foot with the new World Bank President and annoying the US administration to boot. Opposing the nominee would mean having to mount an invidious attack on the individual that the US government had nominated. So any US candidate had unstoppable momentum.
But with three candidates on offer, all this changes. If the European shareholders were to make it clear right away that they do not regard this as a done deal, and that it has not been stitched up already in private conversations between officials, then the dynamics change completely. Anyone can win, and that means that it no longer makes sense automatically to back the American nomination. That would make it both possible and necessary for each of the shareholders to consider the candidates on merit.
The world needs more effective global economic governance more than ever. This appointment can make an important contribution to that: as well as giving direction to an economically significant institution, the President of the World Bank has a seat at the table of G-20 meetings alongside the heads of state of the most powerful nations.
In the past, these decisions have been made by governments negotiating privately, with no public accountability for the choices they make. Europeans blamed the US for having nominated Paul Wolfowitz in March 2005, but their own governments did not exercise their power to prevent his appointment. The consequence of this lack of accountable decision-making was a series of poor appointments (such as Strauss-Kahn at the IMF and Wolfowitz at the World Bank) and the exclusion of highly qualified alternatives, to the detriment of the reputation and authority of both institutions.
These deals behind closed doors for posts in key institutions based on nationality are an obstacle to effective global governance. Right now the UK will be offering to support Jim Kim for the World Bank in return for US support for the UK candidate for the EBRD, Sir Suma Chakrabarti. But that is no way to make either appointment. Jim Kim should not be appointed because of his nationality; nor should he be precluded on that basis. Let all three candidates be judged on their merits against the criteria of who has the best qualifications for the post.
The United States and the European governments have all said that they favour an open, merit-based competition. A good step would be for shareholders to set out publicly what they consider to be the ‘merits’ required for the post. Do the governments agree with a CGD survey some years ago whose respondents ranked the criteria as (in order): efficient manager, experience of international organisations, knowledge of development, political and diplomatic experience, and banking and finance?
Having set out what they consider to be the main requirements for the job, the member governments should say publicly which candidate they plan to support. They should set out the case for their favoured candidate, which they can do without criticizing the other nominees. It may be clear quite quickly which of the candidates is best qualified for the job; or further discussion may be required.
Such a focus on qualifications will make it harder for appointments to be made in future on the basis of nationality. Governments would find it harder to acquiesce in the appointment of inferior candidates, based on some tawdry trade-off, if they have to set out the basis for their choice and be held to account for it domestically. Using transparency and accountability in this way would help to improve the governance and effectiveness of our global institutions.
Of course, much of the public has never have heard of the President of the World Bank and they are unlikely to be much interested. But there are some who will care, as befits international financial institutions which are ever important for the stability of the world economy. Furthermore, the average British household contributes more than £30 a year to the World Bank, and that alone entitles them to some involvement in the decision about how their representative on the World Bank board will vote on their behalf. The British government has a very good record of promoting transparency and accountability of the development system; they should put that into practice for this appointment.
The fact that there is, for the first time, a contested election, and no automatic presumption that the US nominee must win, creates an important opportunity to improve the way our global institutions are managed. Shareholders can act now to ensure that this really is an accountable and transparent appointment based on merit, and so start the world down the road of cleaning up the way we make these important international appointments.
I am a generally a fan of both the World Bank and of Google, but we should all be worried about their recent deal.
The intention is good: it is to promote crowd-sourcing of maps, to improve planning in disasters and to improve the planning, management and monitoring of public services. This is an important goal, which is now being made possible by new technologies and the spread of the internet. The deal is sufficiently important for World Bank Managing Director Caroline Anstey to write about it in the opinion pages of the New York Times:
Under the agreement, the bank and its development partners — developing country governments and U.N. agencies — will be able to access Google Map Maker’s global mapping platform, allowing the collection, viewing, search and free access to data of geoinformation in over 150 countries and 60 languages.
This is all consistent with an admirable push in the World Bank towards ‘democratising development‘, including becoming more open about its own activities and promoting open data. Indeed, this effort has come to be a defining achievement of Robert Zoellick period as World Bank President. As Sebastian Mallaby said in the FT the other day,
Where [the World Bank] once imposed prescriptions on the Third World, it now shares knowledge with respected clients from the new world. Where it once hoarded data, it now displays it on the web. … One decade ago, the Bank was routinely accused of indifference to the views of local people. Today Mr Zoellick talks of empowering the most humble netizen to provide feedback on projects.
So what is the problem with the deal? The problem is the way the data is licensed: once any data goes in to Google Map Maker, it all becomes the property of Google. If governments and citizens choose to use the Google Map Maker platform to contribute their information, then the data will only be available through Google’s own mapping system, and the data will be available under conditions specified by Google. At least, that is what we believe: ironically, given that both the Bank and Google are trying to market themselves as leaders in transparency and openness, they have refused to publish their agreement. The Bank has said that they ‘want a blanket permission from Google to provide NGOs, humanitarian groups, and other non-commercial entities with the data whenever they need it’ – though we do not know if this has been written into the agreement (and if so in what terms) or is just wishful thinking. Even if this concession were secured, it would not be enough. Open data offers opportunities for everyone – not just NGOs and governments but social enterprises and businesses too, and they should all be allowed to use the data which governments and citizens have contributed.
There is an alternative platform – Open Street Map – which proved its value in the aftermath of the Haiti earthquake. Data in Open Street Map is all available to everyone to use for any commercial or non-commercial purpose. So if the data were contributed to Open Street Map, it could be used by Google Map Maker, but not the other way round.
The World Bank defends itself by pointing out that the deal is non-exclusive – that is, everyone is free to give data to anyone else as well as to Google Map Maker. But that misses the point. Citizens will in practice contribute to one platform. If an organisation as prominent and powerful as the World Bank encourages governments and citizens, and UN organisations, to use Google Map Maker, then that becomes a de facto global standard.
I have no problem with Google, or any other company, making commercial use of this data. I have no ideological objection to the profit motive. On the contrary: having businesses looking for ways to make the best use of the data is a great way to generate innovation and improvements. We want businesses to try to make money by competing to serve the customer better – by providing better tools and services to access and use data. But we don’t want businesses to try to make money by restricting access to the information, which is a public good in every sense of the word, because this reduces, rather than improves, services for the public. By entering into this partnership on these terms, the World Bank is backing closed instead of open; monopoly instead of competition; corporate fat cats instead of upstarts.
I do not think that Google is evil (not yet, anyway). I admire what Google has done to make mapping available more widely, and to promote crowdsourcing of maps. While I was living in Ethiopia, they put online some of the best available maps of many of Ethiopia’s towns and cities, drawing in large part on citizen cartographers. But the fact that I am broadly sympathetic to Google does not mean that they should have sole control of this data.
The World Bank is trying to do the right thing. Their approach to opening up their own data has been exemplary. Caroline Anstey’s article in the New York Times makes a powerful and persuasive case for open data. But the article makes a stronger case for working with Open Street Map, whose work in Haiti she specifically praises, than it does for a partnership with Google.
The World Bank has been listening to the concerns that have been raised, and it sounds as if they have realised that they have made a blunder. They have recently met with key groups in Washington and, according to Nathaniel Heller from Global Integrity, they are going to take ‘concrete steps’ to address these concerns. We don’t know what these are going to be, but it seems to me that there are only two possible satisfactory resolutions. The first possible solution is for Google irrevocably to change the terms of the license for all the data in Google Map Maker to allow commercial and non-commercial use. I think that is unlikely (which should tell us something about Google’s assessment of the possibility that they may want to do something in future with their control over the data). If Google will not do that, then the second solution is for the World Bank to terminate the agreement and instead encourage citizens and governments to contribute to Open Street Map, or some other genuinely open system. Google Map Maker can then use that data if they wish, like everyone else. Anything but these alternatives is likely to be an unsatisfactory fudge. Furthermore, the full terms of the agreement must be published.
The UK Government is increasingly a world leader in promoting open, reusable data, transparency and accountability. As a major shareholder in the Bank, and one of the largest contributors of funds for the World Bank’s concessional lending, I hope the UK Government will put pressure on the World Bank to accept that this agreement does not satisfy their aspirations for open data, and instead to promote genuinely open sharing of mapping information which, as both Google and the World Bank rightly say, could make a significant contribution to humanitarian relief and to development.
Further reading:
- Caroline Anstey – Empowering Citizen Cartographers
- Patrick Meier (Ushahidi) - Google Inc + World Bank = Empowering Citizen Cartographers?
- Brian Timoney - World Bank Empowers Citizen Cartographers to Enrich Google in Developing World
- Global Integrity – Why We’re Worried about Google’s Deal with the World Bank
- Jon Mitchell – World Bank Assumes Control of Google Map Data
- Nathaniel Heller - Google, the World Bank, and Public-Private Data Partnerships
In two weeks there will be a huge international meeting on aid effectiveness in Busan, South Korea. Ban Ki-moon and Hillary Clinton will be among the two thousand delegates who gather together to discuss improvements in how aid is delivered. Though David Cameron and Barack Obama said (in a joint statement) that they would ensure that Busan “transforms the way bilateral aid is delivered around the world”, it looks increasingly as if the meeting will, as Simon Maxwell notes on his blog, produce “a bark but no bite.” Though it is full of worthy intent, there is little in the latest (fourth) draft of the Busan Outcome Document which suggests that it will result in more changes in donor behaviour than did the communiques from previous summits in Rome (2003), Paris (2005) and Accra (2008).
Two key pieces of background evidence have just been published which provide the backdrop to the discussions in Busan. First, the Broookings Institution and my colleagues at the Center for Global Development have published an updated Quality of Official Development Assistance index (QuODA), which scores donors on the effectiveness of their aid. Second, Publish What You Fund has published an Aid Transparency Index ranking donors according to how much information they make available about the aid they give.
CGD and Brookings Quality of Aid Index (QuODA)
QuODA is an assessment of the quality of aid provided by 23 donor countries and more than 100 aid agencies. It uses 31 indicators grouped in four dimensions that reflect the international consensus of what constitutes high-quality aid:
- Maximizing Efficiency
- Fostering Institutions
- Reducing Burden
- Transparency and Learning
QuODA itself does not provide an overall ranking of donors. The reason is that your view about the overall effectiveness of a donor will depend on how much weight you place on each indicator. But for what it is worth, here is how the ranking of donors looks if you give equal weight to each of the four QuODA dimensions:
Donors may quibble about which of the indicators are important, though all the indicators reflect solid academic research and experience about what makes aid effective, embedded in the international consensus about aid effectiveness to which they have signed up. For anyone wanting to focus on particular indicator and dimensions of effectiveness, the data are published online in an interactive web tool.
My two observations about this are:
- almost every donor has something to be proud of (nearly every donor is in the top half in at least one dimension) but all donors have considerable room for improvement;
- the multilateral agencies do better, on the whole, than the bilateral agencies; this may be because they are less susceptible to pressures from national donor politics; the World Bank, in particular, scores extremely well across the board
The Publish What You Fund Pilot Aid Transparency Index
The PWYF Aid Transparency Index, published today, dives deeper into whether donors publish adequate information about the aid they give. They analyze 58 organisations on 37 dimensions of transparency, mainly relating to whether information is available about particular projects and activities.
The World Bank tops the transparency index too. Indeed, there appears to be a strong correlation between aid transparency and aid effectiveness more generally. The chart below plots the PWYF transparency scores against the average of the three dimensions of QuODA which do not relate to transparency.
This correlation between aid effectiveness and transparency could come about for three reasons:
a. common causes: well-governed and well-managed aid agencies are likely to be both more effective and more transparent;
b. effectiveness causes transparency: aid agencies that are ineffective and know it are likely to want to be secretive; agencies that are effective are likely to want to tell the world more about what they do;
c. transparency causes effectiveness: agencies that are open and transparent are less likely to make decisions to use aid ineffectively because they will be held to account by politicians and the public.
Conclusions
The good news from both the QuODA index of aid quality and the PWYF Aid Transparency index is that it is possible for donors to live up to the goals they have set themselves to make aid more effective and more transparent. Most donors do well on some indicators, and yet are a long way behind the best on others. The bad news is that there is a long way to go before donors overall live up to the pledges they have given.
Time will tell whether yet another conference, and yet another communique, will make any more difference to donor behaviour than have the last three. However, there does now seem to be welcome momentum towards putting more information about aid into the public domain, and we may hope that this will, over time, provide both the information and political pressure needed to make aid more effective. If Busan succeeds in giving a big push to aid transparency, that may be the biggest contribution it can make towards the ambitious goal of ‘transforming’ aid.
I really believe that this is how some organisations and government departments view knowledge sharing:
(h/t Ian Thorpe)
Primary school close to our house in Addis Ababa
Living in Ethiopia for the last three years, I saw aid working every day. I saw children going to school, health workers in rural villages, and food or cash preventing hunger for the poorest people. The academic debates about aid effectiveness seem surreal when you are surrounded by tangible, visible evidence of the huge difference aid makes to people’s lives.
But on the whole the sceptics are not disputing that kids are going to school because of aid. They are asking what effect that has on the country as a whole. Does it lead to economic growth? Does it drive up the exchange rate and so damage competitiveness? Do governments become dependent on donors and so less accountable to their own citizens? Does aid keep the bad guys in power?
It is possible that aid is effective in terms providing people with basic services, and at the same time that it is not effective at increasing economic growth. It is even possible that aid simultaneously does short-run good (better services) and long-run harm (worse institutions).
It was this difference between perspectives which made me want to respond to the call for evidence in an investigation into aid by the Economic Affairs Select Committee of the British House of Lords. This committee, which includes some well-known economists and other public figures, is examining the ‘Economic Impact and Effectiveness of Development Aid’.
My written submission is here. It is just six pages long. ( I’m very grateful to Stephanie Majerowicz for her help putting this together.)
The submission begins by trying to address the question of what aid is for, which seems to be the source of much of the confusion about whether aid works. Aid is often regarded as having two purposes: humanitarian aid to alleviate suffering usually in an emergency, and development aid to promote economic growth and sustained prosperity. But this is a false dichotomy: most aid falls into neither category. About two thirds of British bilateral aid is spent on improving services such as education, health, water and sanitation. This aid is not a temporary humanitarian response to an emergency, but a long-term contribution to the provision of key services and an investment in the institutions needed to provide them in the future. The success of this aid is not best measured by whether it leads to growth in the short or medium term, but by the improvements it brings about in the quality of people’s lives.
The submission then reviews the evidence about whether aid leads to economic growth (answer: we don’t know) and whether aid improves people’s lives (answer: yes it often does). The more interesting question is not whether aid works, but which aid works.
But there are also possible adverse effects of aid, and these are potentially serious. The submission suggests that these may be mainly a consequence of how aid is given and that they can largely be eliminated if donors give better aid. But that requires donors to overcome domestic political obstacles to reform of aid.
The evidence finishes with ten suggestions for how to make aid work better. They are:
- Spend more through the multilateral system
- Make aid more predictable
- Make aid transparent, accountable and traceable
- Build the accountability of governments to their parliaments and citizens
- Focus on results and use this to simplify aid
- Invest more in global public goods, especially new technologies
- Focus aid on people in chronic poverty, and on women and girls
- Leverage the private sector
- Use innovative finance to increase the productivity of aid
- Learn more and fail safely
It is a good discipline to be concise, but it is not possible to do full justice in six pages to the nuances of these issues. I have tried address the big questions with what I hope are balanced and dispassionate judgments. I hope you will let me know in the comments if you think I’ve got these right.
Read the full submission here.
This blog post was also published on CGD Views from the Center.
The latest edition of the Development Drums podcast is now online. It was the last one I recorded before leaving Ethiopia.
Deborah Brautigam, a scholar renowned for her work on China-Africa relations, discusses her book, The Dragon’s Gift: The Real Story of China in Africa.
There has been a lot of nervousness about China’s growing engagement in Africa, especially among traditional donors; this discussion may make you think differently.
You can listen to Development Drums on your computer at the website or download it to your MP3 player. You can also subscribe free of charge to Development Drums on iTunes.
If you enjoy Development Drums, you may also enjoy the Center for Global Development’s Global Prosperity Wonkcasts, which are shorter and snappier than Development Drums. You can listen online, subscribe to the feed or subscribe free on iTunes. The Guardian newspaper also has development podcasts (feed & iTunes).
From La Vidaid Loca comes this excellent diagram which sets out the difference between what we are good at, what we want to do, and what is important:
Image from La Vidaid Loca
Hat tip to Stephen Jones.
I’m back from holiday, so here is the promised second of a pair of posts reflecting on three years of working on aid transparency. In the first post I talked about eight lessons mainly about why different kinds of aid transparency are important. In this post, I’m going to look at the next steps, particularly focusing on how we can provide meaningful transparency for citizens in developing countries.
There is a lot of detail below, so for busy readers here is a summary of the proposed ten steps for aid transparency.
1. Donors cannot achieve meaningful user-centred transparency just by putting project data on their websites. Users need information which comes from many different organisations simultaneously. Yet it is not realistic to try to maintain lots of different manually-updated databases which collate information for users. The answer is for organisations to publish online all the information they have about aid projects and programmes, in a common, reusable format, which can then be used as the basis for user-centric databases and applications. The International Aid Transparency Initiative (IATI) is the best chance for a generation of creating such a public infrastructure for information about aid. All donors, foundations, international organisations, NGOs and aid contractors should implement the IATI standard as the key first step to meaningful, user-centred aid transparency.
2. Any organisations which do not implement IATI voluntarily should be pushed to do so by the organisations and people who fund them. For example, official aid agencies should require every organisation to whom they give a grant or contract to implement IATI as a condition of handling public money. Citizens should refuse to put money into a collecting tin if the charity is not implementing IATI. Governments should consider making IATI compliance a precondition for charitable status and tax relief. Developing country governments should make IATI compliance a precondition of local registration by international NGOs.
Google has a policy that it should eat its own dogfood
3. Donors, foundations and NGOs should ‘eat their own dogfood’ – that is, any information on their website and any analysis and data that they publish about aid should use be based on the publicly available data infrastructure. This will give the organisations an incentive to ensure that the information they make available through IATI is up-to-date, comprehensive and accurate and that the system is fit for purpose.
4. Once donors and foundations are (a) publishing their data through IATI and (b) using IATI for their own websites and analysis, they should consider (c) helping other users, especially in developing countries, to make the best use of this information. But donors’ priority should be getting their own house in order by publishing their information in a reusable format, since this is something only they can do, and using that public data infrastructure themselves, before they help others to do so.
5. One of the highest priorities for new information about aid is that all aid spending should be classified in future according to the recipient country budget classifications as well as agreed international classifications. The Technical Advisory Group for IATI should agree the mechanism for this as soon as possible.
6. It seems so obvious that it shouldn’t need saying, but aid would clearly be more effective if we had more information about the future plans of donors, foundations and NGOs. Homi Kharas, in Measuring the Cost of Aid Volatility, estimates that the cost to aid recipients of historic unpredictability of committed aid flows is at least 15 percent. It could be much higher. Finance ministries, line ministries, the IMF, other donors, NGOs and the private sector would all do a better job with their money if they knew what was planned by others. Organisations should publish whatever they know about their future aid plans, generally (with some possible exceptions such as for procurement) at the level of detail they know it. This is likely to be the hardest part of IATI for many organisations, as few have mechanisms to keep systematic track of their forward spending plans.
7. A global system of traceability in aid, enabling money to be tracked from taxpayer to services delivered, via multiple layers of multi-donor funds, international and local NGOs and private sector contractors, is less difficult and expensive to implement than you might think. Traceability of aid would bring about a huge step forward in efforts to make aid more effective and less prone to corruption and waste, and for building public support for aid. Done right, it could also substantially alleviate the reporting burdens of aid recipients, NGOs and implementing agencies, and reduce donors’ costs of monitoring compliance. Priority should be given to implementing this part of the IATI standard.
8. Donors, foundations, NGOs and implementing organisations should start recording and publishing detailed geographical information about aid projects and programmes using the newly-agreed IATI standard format for geocoding of aid, and they should require their implementing partners to do the same.
9. Some donors and agencies have defined, or are in the process of defining, their own internal standardised output indicators. Organisations should now make a big effort to reach an international agreement on a common set of standardised ouput indicators to facilitate international comparability across organisations. This information can be reported through IATI.
10. When we connect feedback from citizens in developing countries to a rich public data infrastructure about aid, we will have a much more realistic inderstanding of the impact and effectiveness of aid. That day is coming sooner than most of us realise.
You will doubtless think me guilty of hyperbole when I say that the emergence of an open, international infrastructure for development information has the potential to transform the development business, much as the internet has transformed so much of our society, and for similar reason. I’m sorry that this is an absurdly long blog post, but I hope it will convince you of the amazing opportunities which are there if we seize them.
I’ve spent the last three years working on aid transparency. As I’m moving on to a very exciting new role (watch this space for more details) this seems a good time to reflect on what I’ve learned in the last three years.
This is a self-indulgently long essay about the importance of aid transparency, and the priorities for how it should be achieved. Busy readers may want to read the 8-point summary below. And for a very clear and concise introduction to the importance of aid transparency, take a look at this video by my (former) colleagues at aidinfo.
The 8-point summary
Here are what I think are the eight most important things I’ve learned in the last three years about transparency in general, and aid transparency in particular:
- To make a difference, transparency has to be citizen-centred not donor-centred.
Citizen-centred transparency would allow citizens of developing countries to combine and use information from many different donor agencies; and provide aid information compatible with the classifications of their own country budget. - Today’s ways of publishing information serve the needs of the powerful, not citizens
Existing mechanisms for publishing aid information were designed by the powerful for the powerful. Until the aidinfo team started 3 years ago, nobody had ever done a systematic study of the information needs of all stakeholders, including citizens, parliamentarians and civil society, let alone thought about how those needs could be met. - People in developing countries want transparency of execution not just allocation
There are important differences between the information requirements of people in donor countries and people in developing countries. Current systems for aid transparency focus mainly on transparency of aid allocation, because that is what donor country stakeholders are largely interested in, and not enough on transparency of spending execution, which is of primary interest to people in developing countries. - Show, don’t tell
Citizens in donor nations are increasingly sceptical of annual reports and press releases. In aid as in other public services they want to be able to see for themselves the detail of how their money is being used and what difference it is making. They increasingly expect to engaged, and are less willing to be passive funders leaving the decisions entirely to ‘experts’. Donor agencies – whether government agencies, international organisations or NGOs – will have to adapt rapidly to become platforms for citizen engagement. - Transparency of aid execution will drive out waste, bureaucracy and corruption
There is, unfortunately, quite a bit of waste, bureaucracy and corruption in the aid system. There is good evidence that this kind of waste is rapidly reduced when the flow of money is made transparent. Corruption and waste prosper in dark places. - Social accountability could be Development 3.0
The results agenda in aid agencies is currently too top down and pays too little attention to the power of bottom up information from the intended beneficiaries of aid. Increased accountability to citizens may be the key to unlocking better service delivery, improved governance and faster development. - The burden of proof should be on those who advocate secrecy
We have published a compelling business case for greater transparency, with all the uncertainties this kind of analysis entails. So where is the business case for secrecy, which would be far harder to quantify or defend? Why does nobody even ask for it? Why is the (inevitable) uncertainty in this kind of analysis allowed to count against the case for transparency, when the same uncertainty would deal a much greater blow against the case for secrecy? - Give citizens of developing countries the benefit of the doubt
Transparency is necessary but not sufficient for more effective aid. But the fact that transparency alone will not solve every problem should not be an excuse for aid agencies to shirk their responsibilities to be transparent. Nor should we be too attentive to vested interests in the aid industry telling us that transparency is not enough. Citizens of developing countries will be more innovative and effective than some people give them credit for when we give the information they need to hold the powerful to account.
That’s the summary. If any of that whets your appetite and you want the long version, read on. In my next post, I’ll look at the ten steps that development organisations should take towards aid transparency. Continue reading
Development advocates have to make the case for aid and development policy. They are right to say that development is in the national interest of the donor, but it may be a mistake to put this at the centre of the argument. Most people don’t need to be convinced that development is desirable; they need to be convinced that aid works.
Development is in our national interest
It is increasingly the conventional wisdom that it is in the national interest of industrialised countries to promote development in the rest of the world. US Secretary of State Hillary Clinton made a speech saying so a year ago at the Center for Global Development:
… development was once the province of humanitarians, charities, and governments looking to gain allies in global struggles. Today it is a strategic, economic, and moral imperative – as central to advancing American interests and solving global problems as diplomacy and defense.
The UK Foreign Secretary, William Hague, also argues that development is a key part of Britain’s strategic and security interests (for example, here and here).
We’ve come a long way over the last twenty years. In January 1991 my father, then a British High Commissioner, sent a despatch to the then Foreign Secretary in London to mark the end of his last post in Africa, arguing that it was in the UK’s national interest to pay more attention to Africa’s development. His despatch said:
There is an overwhelming case on financial grounds alone for acting sooner rather than later, collectively, to provide the resources required for removing most of the debt burden from African countries (provided that they are committed to active economic reform), for arresting environmental degradation, and for restoring the physical and human infrastructure sufficiently to permit diversification of economic effort and its re-direction into areas that will eventually become self-financing – as well, incidentally, as making a more positive contribution to world economic activity.
At that time, the foreign policy establishment was very suspicious of any argument based on ethical or moral imperatives: it believed that foreign policy should be based on narrowly-defined national interests. In 1980 the Brandt Report had argued that it was in our “mutual interest” to pay attention to development and inequality, but in the decade that followed Britain’s aid programme, and our attention to developing countries, had declined. Twenty years ago, when my father was making a case for paying more attention to development based on our national interest as well as our values and moral obligations, his view was regarded as so subversive that the foreign office limited the circulation of the despatch. Today it is received wisdom which is regularly the basis of speeches by the US Secretary of State and the British Foreign Secretary.
We should celebrate the fact that there is, belatedly, recognition among policymakers that promoting development is in our national interest, as well as being the right thing to do. But I am concerned that we are letting the pendulum swing too far, by placing this argument at the centre of the public case for aid. We should use every argument at our disposal for doing the right thing, of course; but if we focus too much on aid being in our national interest, we are danger of undermining the effectiveness of aid and of failing to address the real concerns of sceptical citizens.
The nature of public doubts about aid
If I had a nickel for every time someone said to me, “I don’t think we should spend money helping starving people because I don’t give a toss about them,” I wouldn’t have any nickels at all.
The foreign policy establishment may have been sceptical about focusing on the ethical dimension of foreign policy, but the public never was. Neither the British nor the American people lack compassion for their fellow human beings. My father’s prescient efforts to awaken policymakers’ interest in development were made several years after Live Aid, which had showed that the public needs no lessons in generosity.
I readily concede that the public is often sceptical about aid. I have witnessed focus group discussions which anybody who is interested in development would find alarming, anyway at first. In such a discussion, the person who says “charity begins at home” will initially get lots of support. But as the discussion goes deeper, it turns out that they are sceptical not because of any indifference to the plight of others, but because they are not convinced that aid works. In many such groups you’ll hear Bauer’s famous remark that aid is “poor people from rich countries giving money to rich people from poor countries.” Many people are worried that aid ends up in the Swiss bank accounts of despots and dictators, or of corrupt consulting and construction firms. Yet when the same focus groups are given evidence of the benefits of particular aid programmes, their mood changes sharply, and they soon ask: “Why don’t we give more aid like that?”
The idea that “charity begins at home” clearly resonates with many people. In part the phrase expresses the idea that we have stronger social ties and obligations to people who live in our neighbourhood than we do to people on the other side of the world. But few people really believe, on reflection, that we should pay no heed to people dying of hunger or for lack of medical facilities just because they are far away. Perhaps “charity begins at home” resonates for another reason: we can observe at first hand whether the effort we make to help our family and neighbours is actually working, whereas with foreign aid we can’t, and we have a sneaking suspicion that this means that it isn’t.
The most popular critique of aid in recent years, Dead Aid by Dambisa Moyo, does not challenge aid on the grounds that the plight of the poor is not our concern. It is a poorly argued book in many other respects, but it would be wrong to accuse Dr Moyo of callous indifference. Indeed, all the famous aid sceptics, from P. T. Bauer to Bill Easterly, explicitly accept development as the objective: they simply question whether foreign aid is a good way to achieve it.
The dangers of relying on national interest
So perhaps the public does not need to be persuaded that development matters, but needs instead to be convinced that aid makes a difference. Even so, it seems reasonable to say that we should use every argument at our disposal for aid: we should appeal to the public’s self-interest as well as their moral values, and we should at the same time set out the evidence that aid works.
But there are two big risks to this approach which should lead us to think carefully about the balance of how we make the argument.
First, if we promote aid principally on the grounds that it supports our security and commercial interests, we should not be surprised when people expect that this is how aid should be used.
In the long term our national interest coincides with our moral urge to promote development and to reduce poverty. But in the short term there is often a trade-off between development and poverty reduction on the one hand, and our commercial, security and strategic interests on the other.
During the Cold War a huge amount of aid was wasted currying favour with despots for geo-strategic reasons and accordingly propping up failing industries and businesses. Even today, less than 40% of aid is spent in the poorest countries. This makes a kind of sense if your aim is to increase your influence in emerging economies and in fragile states like Pakistan and Iraq. There are many poor people in these countries, but all the evidence suggests that these are not the places in which aid is most needed and can do the most good. A significant portion of aid (though none of the UK’s aid) is still tied to firms in donor nations. This makes sense if the aim is to support the donor’s commercial interests but not if the aim is to have the greatest possible impact on the reduction of poverty. It is legitimate and proper for donors to want credit for their aid, to enhance both their international reputation and their image and influence in the recipient country. But this goal leads donors to give too much aid through bilateral aid programmes, on which their national flag can be stamped, and too little through more efficient multilateral institutions and other shared funds, resulting in unnecessary duplication, overheads and transaction costs.
We do not have institutions that can protect our long-term national interest in development and poverty reduction from the pressures to use aid to pursue these short-term strategic, security and commercial interests. In a world of short time horizons, our immediate interests tend to prevail over our longer-term goals. So the more we justify aid chiefly on the grounds of national interest, the greater the danger that our short-term national interest will dictate the way aid is used, with negative consequences for the effectiveness of aid and for our longer-term interest in poverty reduction.
If the public were unsure whether they cared enough about global development to give aid, then it might be worth deploying aid in ways which are most obviously in the national interest, even if that required sacrificing some of its effectiveness. (For many years, the Danish government justified tying aid to Danish suppliers on precisely these grounds.) But if the public is already convinced that development is important, and their doubt is primarily about whether aid is effective, then it makes no sense to use aid in less effective ways in an effort to win greater public approval.
The second reason why we should be cautious about focusing too much on our national interest when justifying aid is that we are in danger of setting ourselves up to fail.
Take an example which is, literally, close to home for me. School enrolment here in Ethiopia has risen from a quarter of all children fifteen years ago to more than four fifths of children today. About a third of Ethiopian children – 8 million boys and girls – are at school as a direct result of foreign aid. My house in Addis Ababa is a few hundred metres from the local primary school, so I see boys and girls going past my window to school every day.
If the British public could see as I do how their aid money is being used, they would, like me, be encouraged and touched by the good that aid does. This is a direct, demonstrable benefit of aid, and one which appeals to the British sense of justice and empathy for our fellow human beings. It would soften the heart of the hardest sceptic.
Kids going to school near my house in Addis Ababa. A third of Ethiopia's education system is financed by aid.
Why then is there such widespread doubt that aid works? In part it is because people at home cannot look out of their window and see it working. But it is also because we have made extravagant claims about what aid will do. Even if it is true that aid leads to faster economic development, and that it thereby reduces the risk of global health contagions, organised crime and drug smuggling, this would be impossible to demonstrate statistically. (It would be like trying to show that the EU has prevented war in Western Europe since 1945: plausible, very probably true, but unprovable.)
People are right to be doubtful about the validity of some of the more grandiose claims for what aid can achieve. Perhaps it seems too modest to say that we pay for millions of children to go to school, and for people to have access to clean water and basic health care. But this is a reality which we can prove beyond any doubt; and for most taxpayers it will seem well worth the modest amount of money we spend on it. And it is probable, even if unprovable, that all this works in favour of our own long-term interests as well.
The public and the politicians who represent them will inevitably devote only a modest amount of time to thinking about development. If we use up scarce bandwidth making an argument with which few disagree – that poverty matters – we waste the opportunity to make the argument of which they are yet to be convinced: that development policy and aid can and do make an important difference to the lives of the poor.
The aid that was used to prop up Mobutu in Zaire during the Cold War may have served a foreign policy interest, but it did little or nothing to reduce poverty and raise living standards in that country. Money used today to buy food aid may be a convenient subsidy for American and European farmers but if we bought the food locally we could feed twice as many people with the same money and at the same time support the growth of sustainable agriculture in developing countries. The more we use aid to support our strategic and commercial interests, the less effective that aid is likely to be in the fight against global poverty, in which we have an important long-term interest.
It is in our national interest to see faster development and the end of global poverty, and we should not be shy about saying so. But we should think twice before using this as the central plank of the case for more effective development policies and more aid. People do not need to be persuaded to care about global poverty: they do need to be convinced that there is something we can do about it. Just reminding them that it is in our national interest to promote development fundamentally misses the point. The more we defend aid mainly on the basis that it is in our national interest, the more likely it is to be bent to our short-term commercial and strategic interests, the more ineffectively it will be used, the harder it will be to demonstrate its benefits, and the greater the justification for public scepticism. Give the public some credit: they don’t need to be persuaded to care about poverty. Aid does work: and the first and most pressing task is to demonstrate to the public with persuasive evidence that this is so.
On the Oxfam blog, Max Lawson has an excellent guest post telling the story of how Malawi has used an extensive programme of fertilizer subsidies to generate seven years of economic growth, reduductions in poverty and child deaths.
Max cites a forthcoming paper by Andrew Dorward and Ephraim Chirwa (ungated version here). Dorward and Chirwa argue that:
Malawi’s agricultural input subsidy programme addresses a low maize productivity trap that leads to food insecurity and poverty, and constrains economic growth and, paradoxically, diversification out of maize and agriculture. This low productivity trap arises as a result of severe seasonal credit constraints affecting very large numbers of poor, food deficit farming families, together with thin and high risk, high margin input and maize markets. The key successes of Malawi’s subsidy programme arise where it relieves both affordability and profitability constraints to increased staple crop productivity from increased input use, and in doing this both raises land and labour productivity and improves food security for large numbers of poor households through some combination of increased real wages and reduced food prices.
The only part of Max’s post that I disagree with is his remark that ”we should leave our economic theory at the door and instead focus on what works empirically.” As Jonathan points out in the comments, economic theory tells us that government intervention may be an appropriate response to market failures. While recognising the success of the programme so far, we should not stop asking whether the same results could be achieved more cheaply and more sustainably with some other, even better approach.
A more relevant challenge is: why did some donors oppose this programme, and what have we (and they) learned from that error?
Dr Bingu wa Mutharika fought and won the 2004 election on a platform of guaranteeing food security. HIs proposals for a targeted subsidy was overturned by the Malawi Parliament in favour of a universal subsidy, which was introduced in 2005.
Election Poster for Bingu wa Mutharika
Donors are – on paper – committed to respecting government ownership and supporting the governments’ development programme. Yet despite clear national commitment, endorsed in a democratic election, donors generally opposed the introduction of fertilizer subsidies, consistent with the World Bank’s position throughout the 1980s and 1990s. The donors argued against the government’s proposed scheme because they thought it would be too expensive; it was insufficiently targeted on the poor; it would undermine private sector development; and because they doubted the capacity of the government to implement it.
When Malawi introduced its programme in 2005, the IMF and the US Government opposed it outright, on the grounds that it would damage the private sector. The World Bank, EU and UK Department for International Development adopted a more nuanced position: they argued that instead of a universal programme there should be “smart subsidies” which should be tightly targeted to reduce the costs, and that the programme should include an explicit exit strategy. DFID eventually supported the programme after extracting an agreement from the government that it would use private fertilizer suppliers. Some of the Scandinavian donors and UN agencies supported the programme from the outset, partly influenced by the apparent success of a local Millennium Villages Project.
The apparent success of the Malawi fertilizer subsidies is primarily a story about the Malawi government, not donors; though the scheme could not have been afforded, especially through the 2008 price hike, without donor funding. But it does give rise to two questions about donor policy and behaviour.
First, are donors still labouring under too simplistic a view of the role of government in the economy? Donors continue to be sceptical of agricultural subsidy programmes (which is rank hypocrisy, given the subsidies they provide their own farmers). This seems to be partly because we have an insufficiently rich analysis of the nature of the market failures and how they are best addressed; and partly because donors still suffer from the sustainability delusion, which requires them to oppose perfectly sensible government policies and programmes for which there is no identifiable exit. If the UK government were only allowed to implement inherently time-limited policies there would be no National Health Service.
Second, how should donors reconcile their own views of a policy with their commitment to respect country ownership? Donors are committed to support developing countries’ own development strategies. But what happens if they disagree either with the thrust of those policies, or with particular details? Should they refuse to finance them? Should they act as “critical friends”, identifying the shortcomings of the policies and seeking to get them changed? Should such opposition be private or public? How is that consistent with respecting country ownership? If they do try to change the policy how are they held to account when – as was apparently the case in Malawi – they are wrong?
I’d like to suggest two ways in which donors can better respect country ownership. First, where they have an opinion about a policy, they should produce publicly their analysis and evidence, to allow this view to be discussed as part of the public debate, rather than exert political and economic power behind closed doors. Second, there should be a version of the Salisbury Convention in aid: if a government is pursuing a policy for which it has an explicit mandate in a reasonably democratic election, the donors should not try to undermine it.
UPDATE: Smart commenters below ask two questions. First, is it premature to say this has been a success, until we have a year of bad rains? Second, were the donors as hostile as my blog post suggests? If you have insight into either question, please leave it in the comments below.
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.
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.
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.
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?
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.
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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.
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