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Archive for the ‘Donors’ Category

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.

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What are the development policies that might contribute to this?

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

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

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

The World Bank is today launching a new website, data.worldbank.org, from which you can get a huge range of statistics and indicators about development.  In the past you had to pay to use World Development Indicators, or buy a CD-ROM.  From today you can  find, download, manipulate, use, and re-use the data compiled by the World Bank, without restrictions or payment.

Not only has the World Bank made this data available, it has created interfaces that enable programmers to access the data automatically (in technical language, they are providing an API).  That in turn means that individuals and organisations can create programmes, websites or visualizations that use the data and enable them to mash it up with other information.

This data does not yet included detailed World Bank project data.  But the World Bank is part of the International Aid Transparency Initiative, IATI, through which 18 donors are working together to put detailed aid data online.  When that is up and running, it will be possible to access aid data in the same way as the development information being put online by the World Bank today.

This is a huge step forward for open access to development data.  Well done the World Bank.

A new article published in The Lancet by Chunling Lu with Chris Murray, Dean Jamison and others, has caused quite a stir in development circles.  They use data on health aid and government spending on health to estimate that for every $1 given in health aid, the recipient government shifts between 43 cents and $1.14 of their own spending to other priorities. (If the aid goes to NGOs, by contrast, government health spending appears to increase.)

Even if the quantitative analysis is correct (which is by no means certain, given huge gaps in information), it is far from clear that this is a problem that needs to be solved. Furthermore, of the five recommendations in the paper, three are irresponsible sectoral special pleading which deserve to be rapidly dismissed.

This story has spilled over into the mainstream press (for example, in The New York Times) as a result of a sensationalist AP story headed “Health Aid Made Some Countries Cut Budgets“. The story breathlessly reveals:

After getting millions of dollars to fight AIDS, some African countries responded by slashing their health budgets, new research says. For years, the international community has forked over billions in health aid, believing the donations supplemented health budgets in poor countries. It now turns out development money prompted some governments to spend on entirely different things.  … “When an aid official thinks he is helping a low-income African patient avoid charges at a health clinic, in reality, he is paying for a shopping trip to Paris for a government minister and his wife,” said Philip Stevens, of the London-based think tank International Policy Network.

The language used by the authors is less inflammatory, but the opening sentence makes it clear they think there is a problem:

Government spending on health from domestic sources is an important indicator of a government’s commitment to the health of its people, and is essential for the sustainability of health programmes.

As summarized in their press release, the authors make five recommendations to deal with this alleged problem:

• adoption of a clear set of reporting standards for government health spending as source and spending in other health-related sectors
• establishment of collaborative targets to maintain or increase the share of government expenditures going to health
• investment in developing countries’ capacity to effectively receive and spend health aid
• careful assessment of the risks and benefits of expanded health aid to non-governmental sectors
• study of the use of global price subsidies or product transfers as mechanisms for health aid

The first recommendation is fine: I’m all for the adoption of reporting standards for spending by donors and by governments, and for those standards to specify the source as well as the destination of all spending. (The authors may not be aware of the progress that is being made globally on this under the International Aid Transparency Initiative).   It is also hard to be against investing in the capacity of developing countries to receive and spend health aid, though I wonder what this means in practice.  The other three recommendations are irresponsible, for reasons we shall come to below.

Let’s start with the problem we are trying to solve.  It is far from clear that the behaviour of developing countries described in the paper is anything we should be concerned about.  Of course health advocates who earn their living from health spending in developing countries are up in arms at the news that their various wheezes to capture a big chunk of available development finance and redirect it to their cause may not have been a complete success.   But those of us who take a more objective view of the relative priorities of different types of development spending can be more sanguine.

There are at least four reasons why the findings of the paper should not be a cause for concern.

First, it suggests that governments are reprioritising their spending in the light of the aid they are receiving. I think this is a good thing.    Exercises to find out what poor people actually care about, such as Voices of the Poor, routinely find that the poor place put a lot of value on security (of person and property), but this does not usually excite people who work in development.  Donors find it more attractive to finance health services than to pay for essential services such as a national statistical office or the efficient functioning of courts.  If we are willing to pick up the bill for health care then it is not only reasonable but desirable that developing countries should use the fiscal space we have created to invest more in important national priorities that don’t happen to be of interest to their donors.

Second, increases in aid for health may well come at the expense of other forms of aid which developing countries are right to try to offset.  (I say “may well” because of course we don’t know what would have happened to total aid if health aid had not increased so rapidly.)  Donor fads come and go: this year it is agriculture.  When developing countries see health aid rising, but the donors losing interest in infrastructure, the most sensible thing they can do is make an offsetting shift in their own budget allocations.  When the donor pendulum swings back again, recipient countries will have to make the corresponding shift in the opposite direction.

Third, as eloquently pointed out by Sridhar and Woods in the Lancet, the desire to force changes in the spending priorities of recipient countries runs directly contrary to the evidence about what makes aid effective, and a series of international agreements, especially the Paris Declaration (2005) and Accra Agenda for Action (2008). In the face of evidence that aid is most effective when there is ownership by the recipient country, donors and multilateral agencies committed themselves to align their aid with the systems and priorities of recipient countries.  It is not OK for health sector lobbyists to ignore this because they don’t like the priorities actually chosen by developing countries.

Fourth and finally, we say that we want to see capable, accountable and responsive states in developing countries.  Making, passing and executing budgets is the very heart of a capable and accountable state. That is why in the UK, as in many other western-style democracies, a government which cannot pass its budget (“carry supply”) is deemed to be unable to govern.  If resource allocation priorities are determined elsewhere, then the government is one in name only.  We cannot expect governments to be accountable to their citizens for decisions that they have not made.  If we want accountable states rather than puppet client states, we should rejoice, not complain, when they demonstrate a willingness to make choices of their own.

Sectoral advocates may say that we should not accept the priorities determined by developing countries, especially in countries in which there are weaknesses in democratic accountability or technical ability to execute budgets.   They might say that the government represents the interests of an elite, not the majority of the country’s poor.  Of course that may be true in some countries: but there is no reason to think that donors’ priorities, also driven by vocal lobby groups and vested interests, reflect the real needs of a country or its poorest people.  We should avoid getting into the situation in which well-heeled foreign academics and lobbyists from international NGOs with no accountability to people in developing countries are treated as a more representative voice of the poor than their own government.

What is most shocking about this paper is that it betrays a combination of ignorance of, or indifference to, decades of experience about what works in development.  The three most egregiously inappropriate recommendations amount to setting input targets, bypassing government by using NGOs, and giving aid in kind rather than in cash.  The paper’s authors should pause to reflect on the fact that progressive development thinking has fought a long, slow, painful campaign to shift away from exactly this kind of aid, and for very good reasons.  Aid that leads to long-term, sustainable change must be based on real ownership of the developing country and help build rather than undermine or marginalise national institutions.

To be fair to the authors, the press release is quite measured, and it begins by highlighting the commitment to health by developing country governments.  It also highlights the most important and sensible of their recommendations, the need for greater transparency.   But the paper also irresponsibly creates the impression, amplified by the Associated Press, that health aid has somehow been wasted, and that donors should try to address this in ways that would be a couple of steps backwards on the long slow road to more effective aid.

Clay Shirky, who writes about the social and economic effects of the internet, draws on Joseph Tainter’s book, The Collapse of Complex Societies, to describe why complex business models collapse:

Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn’t these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.  In such systems, there is no way to make things a little bit simpler – the whole edifice becomes a huge, interlocking system not readily amenable to change. … Furthermore, even when moderate adjustments could be made, they tend to be resisted, because any simplification discomfits elites.

There is obvious and direct relevance to the development system (thanks to @ryanbriggs for making this connection).

The problem starts, according to Tainter, because society’s elite members keep adding new layers of decision-making and complexity:

a group of people, through a combination of social organization and environmental luck, finds itself with a surplus of resources. Managing this surplus makes society more complex—agriculture rewards mathematical skill, granaries require new forms of construction, and so on.  Early on, the marginal value of this complexity is positive—each additional bit of complexity more than pays for itself in improved output—but over time, the law of diminishing returns reduces the marginal value, until it disappears completely. At this point, any additional complexity is pure cost.

This is an almost perfect description of the aid system as experienced on the ground by developing countries.  (I have often wondered if the common empirical finding of diminishing returns to aid is in fact the result of diminishing returns to the number of donors.)  We have more and more donor agencies (the UN has more agencies working in developing countries than there are developing countries).  The burgeoning number of donors impose more contradictory conditions, add transactions costs, drive up the price of scarce resources, and coordination costs grow exponentially.

The Paris Declaration and Accra Agenda for Action are an attempt by the donors to take marginal steps towards simplification in the face of a changing world.   Will this work?   I doubt it, for the reasons set out in my paper Beyond Planning: Markets and Networks for Better Aid.  Here is Clay Shirky’s summary of why marginal steps towards simplification usually fail:

There is, however, one element of complex society into which neither markets nor democracy reach—bureaucracy.  Bureaucracies temporarily reverse the Second Law of Thermodynamics. In a bureaucracy, it’s easier to make a process more complex than to make it simpler, and easier to create a new burden than kill an old one.

A few weeks ago, the country heads in Ethiopia of the European aid agencies met to discuss how they could simplify their work.  It was triggered by a letter of 4th February 2010 from Stefano Manservisi, the Director General for Development in the EU, to the heads of European aid agencies  calling for them to agree a “division of labour” in Ethiopia.  Of course, the meeting was an expensive flop: each donor showed up fully briefed to explain why it is essential that they continue to be involved in every sector.* Rather than streamlining their operations, donors have begun to discuss new layers of complexity, such as the designation of “lead” donors, “focal points” and “silent partners”, so that they can continue to operate as now but under the pretence of greater specialisation.  This was entirely predictable: the bureaucratic and political need to be involved in many sectors in every country is a far more powerful force than the intangible development benefits of simplification.

Where there is a clear need for more simplicity – such as in the delivery of health aid – the system is unable to merge or close institutions, to reduce the number of donors and simplify the way aid is delivered. Instead our response to complexity is to add yet more layers and institutions, such as the International Health Partnership.  Apparently none of the participants sees the irony of creating a new global partnership to tackle the problems caused by the existence of too many global health initiatives. As Tainter predicted: it is easier to make a process more complex than to make it simpler.

Senegal has 82 individual aid co-ordination forums.

Here is another example.  The rise of global health funds led to a collapse in the funding for health systems of developing countries.  Instead of giving money to countries to enable them to build up their network of primary health clinics and to train health workers, money was channeled to the Global Fund and GAVI to buy medicines and bednets.  PEPFAR would pay for brand new laboratories for AIDS, complete with lab technicians and doctors, while the next-door health centre could afford neither staff nor medicines.   The results was a worsening of health care.  How did the aid system respond?  Not by reducing the money flowing to global funds and putting the money back into government health systems using the existing channel of the World Bank: in the meantime the global funds had become too powerful and the bureaucratic capture was too great for that kind of simplification.  So instead these agencies have created a Health Systems Funding Platform, the purpose of which is to “… harmonize and eventually provide support through a joint system funding platform”.  These agencies are now involved in a series of conferences and meetings to figure out to harmonize their work on health systems.  It is obvious to everyone is that neither GAVI nor the Global Fund should be involved in this at all, but there is no way to get them out, or to shift their funding elsewhere, now that they exist.

In 2008 and 2009 I took part in an OECD DAC “Strategic Reflection Exercise” to consider “how to sustain and increase the relevance of the DAC and its subsidiary bodies in the changing development co-operation landscape”. Given the changing relationship between donors and recipient countries, the rise of new donors outside the DAC such as China and the Gates Foundation, the proliferation of global funds, and challenges to the aid model, this would have been a terrific opportunity to chart a new course for the aid system.   I argued that the DAC would remain relevant only if it underwent radical change, including expanding to include a much more diverse range of donors, becoming a partnership of donors and developing countries (and not merely a donor club), and taking on a stronger regulatory function with real teeth rather than just a talking shop with an ace statistical unit attached.  Of course, the bureaucrats from the incumbent aid agencies were not willing to contemplate any of this.  The resulting report consigns the DAC to oblivion in a changing world.

There are signs of coming collapse all around us.  The complexity of the system is accelerating, despite the good intentions of the Paris and Accra declarations, as the system struggles to cope with change.  Here is a graph showing the number of individual aid projects recorded in the AidData database:

Support for the aid system is beginning to haemorrhage;  Dambisa Moyo’s book, Dead Aid, though it is poorly researched and deliberately misleading, has captured a public mood.  More credible voices, like that of Andrew Mwenda, are speaking out against the aid system.   Donors see China’s rise as an aid donor in Africa as a threat, and huddle together to wonder how they can bring China into their system. (Of course, neither China nor the Gates Foundation is remotely interested in joining the system that donors have built for themselves).

So we may be on the brink of a collapse of the entire “business model”, as traumatic as the closure of newspapers in the United States (the UK is a year or so behind).   Perhaps we should see this as an opportunity, rather than a threat.  Collapse may be the appropriate response, an opportunity to build a new system from the bottom up.  As Clay Shirky observes, rather than trying to rescue the old system, we may be better off looking for new ways to achieve our goals:

When ecosystems change and inflexible institutions collapse, their members disperse, abandoning old beliefs, trying new things, making their living in different ways than they used to. It’s easy to see the ways in which collapse to simplicity wrecks the glories of old. But there is one compensating advantage for the people who escape the old system: when the ecosystem stops rewarding complexity, it is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future.

* In case you are wondering, it was not somebody from DFID who told me about this.

This post is a longer, more detailed companion to my article published today at the Atlantic Community.  You might want to read that first. Here I include a gratuitous but friendly swipe at a caricature of the views of Bill Easterly.

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

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

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

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

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

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

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

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

A slight disagreement with Bill Easterly

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

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

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

What would better selection look like?

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

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

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

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

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

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

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

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

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

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

Conclusion

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

Ray Offenheiser, president of Oxfam America, writes on the Modernizing Foreign Assistance blog that US foreign assistance should be more transparent, more predictable, reduce reliance on US contractors and NGOs, use local NGOs, use country-based rather than Washington-based planning, and focus on outcomes rather than outputs.

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

I would add three things.

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

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

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

On the CGD blog, Nancy Birdsall proposes “Ten Actionable Ideas … for a 21st-Century Global Development Agenda”

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

Nancy’s ten:

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

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

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

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

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

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

On January 13th, a leader in The Times and Kevin Watkins in The Guardian attacked the development policies of the UK Conservative Party, from opposite sides of the political spectrum.  The Times Leader says that the Conservatives are wrong to commit themselves to increase aid to 0.7% of GNI; and Kevin Watkins says that the Conservatives are wrong to want to reform the way aid is given.   Both attacks appear to be bone-headed efforts to make political mischief by undermining not just Conservative party policies but the mainstream consensus on development. Neither attack does credit to its perpetrator.

The Times criticizes the Conservative Party for their commitment to maintain the planned increases in development spending. The leader recycles discredited assertions about the negative effects of aid rather than offering solid analysis.  There isn’t a single reputable econometric study showing that aid causes harm through  exchange rate appreciations, corruption or slowing progress to democracy.   Peter Bauer, whom the leader article quotes, was criticising Cold War foreign assistance programmes which bear little resemblance to aid programmes today. Aid today is increasingly practical, targeted and measurable, just as The Times says it should be, and it works.

Britain was one of 147 countries which pledged we would “spare no effort” to meet the Millennium Development Goals. As The Times implies, we should not be judged on what we spend but on what we achieve. On this basis we are not yet doing enough to achieve the goals to which we are committed.  That is why it is important that Britain should continue to increase its world-class development programme, and press other nations to increase their spending too.  To resist this on the grounds that 0.7% is an arbitrary figure is a clever-sounding point for a debating society, not a reasoned argument against the commitment of all the main political parties to meet Britain’s international promises, and to press other countries to do the same.

From the other end of the political spectrum, Kevin Watkins in The Guardian seems to be determined to use development to score party political points – and to do so he has had to put himself in the strange position of arguing against the country-led approach to development which is supported by all main UK political parties.

Under the Labour Government Britain has helped build an international consensus that aid works best in support of a country’s own development strategy; that policies imposed from outside rarely work; and that governments should be accountable to their own citizens for their policies and actions.  Kevin Watkins rightly supports these points in other contexts. Yet he apparently won’t entertain the idea that other countries may have different views from his (and mine) about the best way to organise and fund public services.

I’ve read the Conservative Green Paper and it does not call for state services to be rolled back in developing countries. It says that governments should guarantee access to education for all their people; and that donors should fund that guarantee and support and encourage governments to choose whatever path enables them to expand education provision fast and effectively.  It does not propose or advocate market-based solutions in education: it says explicitly that the Conservatives would work with the public, not-for-profit and private sectors.

Kevin Watkins quotes the Green Paper saying “We bring a natural scepticism about government schemes“; this is the entire basis of his claim that “the Conservatives will use aid to roll back the state in key services“.  But it is clear when you read this sentence in context that the Conservatives are questioning the role of the government in aid, not planning to tell other countries how they should manage their public services.

There is now a valuable cross-party consensus on the need to use aid money to support countries’ own development priorities and programmes.  The challenge today is how to bring public sector reform to the aid business – including the possibility of some market-like disciplines to make aid more effective and accountable.  There are proposals in both the Government White Paper and the Conservative Green Paper to make aid more transparent and accountable and to link it more closely to results. Kevin Watkins might have used his space to tell us what he thinks about these ideas instead of trying to score party political points on development.

(By the way, I admire Kevin Watkins, but I’m not comfortable with the fact that a UNESCO official, paid from public funds, is using his position to make highly partisan and inaccurate attacks in the newspapers on the main UK opposition party. )

I’ve got no party political axe to grind: my interest is in supporting the best possible policies to accelerate development, so that the world is a fairer, happier and safer place for everyone.  It seems odd that the Conservatives should be attacked from both left and right for articulating development policies which seem to me squarely in the mainstream of development thinking.

The cross-party consensus that the UK’s development budget should continue to increase, and that British development policy is amongst the most effective in the world but nonetheless there is room for improvement, should be a matter of shared national pride, not scorn and sniping from whichever direction.  Let’s sustain that consensus, and not allow development policy to be used as a political football even in the heat of an election campaign.

Update: see Kevin’s reply in the comments.

If you want to raise money for international development you will eventually encounter a dilemma.  You want potential donors to be interested in their fellow human beings and to feel a connection with the people they are helping.  You know that you will raise more money, and sustain a longer-term relationship with your donors if they are getting constant feedback about the people they are helping and the difference your programme is making.  Your communications team tells you that statistics are not enough: you need “human interest” stories about individual lives.  You need photographs and life stories.

The consequence is that you have to invest time and money in generating that feedback; and you have to extract that information from the communities where you work in a relationship that verges on exploitation.  At the thin end of the wedge it may be nothing more intrusive bringing your visitors to a school and expecting a welcome ceremony – perhaps some songs by the children and a shared meal under an acacia tree.  Towards the thick end of the wedge it means talking up poverty, using words like “famine” where it might not be appropriate.   And it means asking children and adults to prostitute themselves by writing letters of gratitude to their sponsors.

Here is a description of a charity “Doing a world of good” that sends money to Ethiopia

… World of Good was born six years ago.  It’s a simple concept: For $25 a month, donors sponsor children chosen by an organization Asmare runs in the city of Gondar, at the base of the Simien Mountains in the northern region of Ethiopia. It differs from programs such as Save the Children in that the money goes directly into an individual child’s supervised bank account, instead of being pooled with other sponsors’ money and used for community projects.

When I started to read about World of Good, my first impressions were favourable.  Giving money directly to children to use as they wish sounds like an empowering and progressive approach.  But as I read more I become uneasy, and then quite nauseous:

Reerslev and Gerdes made a pact not to open the letters to sponsors without each other present. When the box finally gets here, the two find a place and a time to sit together, reading each one, making sure the children are not asking for specific things or making a plea to be adopted, which is forbidden by the charity’s rules. Mostly, the two women just read, and cry. They parse through heartbreaking stories of children whose parents have died from starvation or AIDS, who have quit school so they could walk into the dangerous forests on the outskirts of their ramshackle villages to gather cow dung or timber for firewood, who have been too busy trekking miles to the nearest water well to spend time learning to read. … One girl, Tigist, lost both of her parents and, before she joined the program, was a 12-year-old trying to survive completely on her own, eating out of trash bins. She wrote letters to her sponsors that said, “You are my family,” “You are my guardian angels.” Tigist, who is now 17, just graduated from technical school.

This is poverty porn.  The children are asked to write letters, but the letters have to be censored to make sure they don’t go too far (we are happy to send you money but you must under no circumstances ask to come and live in our country).  The children write letters praising their sponsors as angels.

This is not only wasteful of time and effort, especially of the time of the poor, it is degrading to those involved.  Why should children be forced to write letters describing their lives in return for money to eat or have an education?

My indignation is not reserved for the people at “Doing a World of Good”, who doubtless mean well.  I understand why they feel they need to do this: it helps them raise money and that in turn helps them to make a difference. Their behaviour is the result of a broader problem, with the citizens of rich countries, who seem to be unwilling to sacrifice a tiny part of their income to help a fellow human being unless they feel some sort of personal connection with the recipient.   This is charity of a Dickensien sort: not a system of social justice and protection, but throwing some coins to a beggar in the street and expecting to be lavishly thanked.

Quenching the apptetite for poverty porn is rational for each charity, NGO and aid agency: that is what they need to do to survive; but it is socially harmful.  We have to work harder to convince the public to make contributions without the titillation of letters from children or logos on lorries, but based on systematic and rigorous evidence of the difference that their contributions are making.

I am grateful to Oxfam’s Duncan Green for his fair and thoughtful review of my paper about improving aid, Beyond Planning: Markets and Networks for Better Aid.

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

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

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

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

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

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

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

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

The Center for Global Development is working on an idea which they call Cash on Delivery aid, in which donors make a binding commitment to developing country governments to provide aid according to the outputs that the government delivers. I think this is a good idea in principle, and hope that it can be tested to see whether and how it could work in practice.  The UK Conservative party have said in their Green Paper that if they are elected they will use Cash on Delivery to link aid to results.

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

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

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

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

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

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

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

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

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

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

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

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

A few years ago, Nancy Birdsall and I proposed that donors might consider a scheme to give aid to developing countries based on the services they actually deliver. For example, donors could promise to pay $100 for each additional child who completes primary school and takes a standardized competency test. The Center for Global Development has worked further on this idea, and rebranded it as “Cash on Delivery aid“.  CGD will soon be publishing a book setting out how the idea might work in practice.

The Conservative Party have said in their Green Paper on international development that they will pursue this approach if they form the next government in the UK. They say:

We will link aid directly to independently-audited evidence of real progress on the ground. Increasingly, we will pay ‘cash on delivery’: giving an agreed amount to a recipient government for every extra child they get into school or every extra person who receives decent healthcare. This will give British taxpayers confidence that their aid money is buying specific successful outcomes.

In October, CAFOD published a briefing note about Cash on Delivery aid which is a helpful summary of the proposal, and is also a useful compilation of some questions that have been raised about the idea.  It lists nine “risks” of Cash on Delivery aid which it says should be addressed.

I have written a response to the CAFOD brief which addresses each of the nine risks in turn.  I regard nearly all of the issues raised by CAFOD as features, rather than risks, of Cash on Delivery aid.

You can download my response to CAFOD here (pdf).

My article on OpenDemocracy today discusses whether aid works.

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

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

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

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

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

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

Read the full article here.

Related reading:

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

Here is a new paper by Channing Arndt, Sam Jones, and Finn Tarp on whether aid leads to economic growth. The econometrics are done carefully, and it finds that aid inflows of about 10 per cent of GDP lead to an increase in economic growth of about 1 percentage point. (Reassuringly, this is also broadly consistent with a common sense calculation of the sort of effect that aid ought to have.)   They also find evidence of bigger, more positive effects of aid, consistent with positive effects of aid on productivity.

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

There are a few other interesting things about this paper:

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

(h/t Chandan)

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

One of my favourite scorecards is the Commitment to Development Index produced each year by the Center for Global Development.  The 2009 index was published on Thursday.

What I especially like is that this analysis does not focus only on aid.  Too often, we measure the extent of our international solidarity by the amount of aid we give, and not by all the other important things that rich countries do (or don’t do) which affect developing countries at least as much as – probably much more than – giving them money.

Apologies for parochialism, but I was struck that the UK has fallen this year from 6th place to 12th place, out of 22 countries.   David Roodman, the uber-geek (and I mean that in a good way) who designed and runs the index, said this:

“The U.K.’s aid giving slowed in 2007, the latest year for which complete data are available, while its exports of arms to undemocratic regimes such as Pakistan and Saudi Arabia ticked upward.”

The UK scores in the Commitment to Development Index are depressed by the index’s judgement that there is insufficient rigor in tackling corruption by UK firms operating overseas, a high level of arms exports to undemocratic and poor countries, high agricultural subsidies, tight controls on immigration from the poorest countries, and restrictive intellectual property laws on plant types and data.

Officials from other  countries sometimes think the UK is a little too pleased with itself about development.  I wonder if they will think that, now that UK finds itself in the bottom half of the league table, having been overtaken by six countries (New Zealand, Spain, Australia, Austria, Finland and Canada), the UK should focus a little more on how its own policies affect the developing world.

Tim Harford at the FT has an article in today’s FT weekend magazine which endorses the ideas in my recent working paper, Beyond Planning: Markets and Networks for Better Aid.

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

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

That’s my argument in a nutshell.

Tim also writes:

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

My new working paper, Beyond Planning: Markets and Networks for Better Aid is on the Center for Global Development website in the innovations in aid series.

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

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

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

I’m looking forward to comments and feedback.