Owen abroad

Archive for the ‘Multilateralism’ Category

Paul Collier’s last book, The Bottom Billion, proposed that there are four “traps” in which the poorest countries can become enmeshed (a conflict trap, resource trap, geography trap and governance trap).   He vividly explains why he thinks that “business as usual” will not lift these countries out of poverty, creating the prospect that 58 countries, home to the poorest billion people, will fall further and further behind the standards of living of the rest of the world.

At a conference at Wilton Park this week a number of people gathered together to review progress since the Africa Commission and Gleneagles Summit in 2005, and to discuss the prospects for a transformation in Africa over the coming years.  One participant (one of the authors of the Africa Commission report) argued that the Commission set out a comprehensive action plan which, if implemented across the range of its recommendations, could address these traps and lead to real progress.

I am not so sure. I think there is a fifth trap facing Africa which is more chronic and pervasive than any of the four traps identified by Paul Collier. It is the “unfair rules” trap, and I think it makes it very hard for Africa to make much progress on the other four.

Development and an improved standard of living for people in developing countries will come not from aid but from industrialisation and economic growth.  We do not know exactly how to ensure that these economic transformations occur, though there is much we can do to create the conditions in which it is more likely.  (Aid can help create the conditions for growth, and can help people to live better lives while the process is under way).  But as the world economy becomes more integrated and more globalised, many (though by no means all) of the determinants of a country’s opportunities for economic development are determined by international institutions, systems, rules and agreements.

The “unfair rules” trap is that the rules of the game are determined by the rich for the rich.  And the consequence for the poorest countries is that they are having to fight uphill to create conditions for their development; so they continue to fall behind the rest of the world economically.  Their relative lack of economic power reinforces their lack of political influence internationally and so makes it harder for them to influence the institutions and rules which contribute to their continued economic marginalisation.

This “unfair rules” trap takes many forms.  There is a myriad of complicated rules and institutions that affect a huge swathe of economic and political life.  These international agreements range from highly political – such as the global allocation of the right to emit greenhouse gases under the post Kyoto framework for climate change – to the deeply technical such as phyto-sanitary standards which unnecessarily limit exports of groundnuts from Africa to Europe.

On BBC World this weekend there is a debate among a group of African leaders in which Linah Mohohlo, the Central Bank Governor of Botswana, points out that new global rules are currently being devised to promote financial stability – an issue that affects every country in the world – without any participation by Africans.

Consider our attitude to property rights.  Rich countries have attached considerable importance to the establishment and global enforcement of intellectual property rights, which enable their firms to secure revenues from the use of their intellectual property. They have, for example, pursued this through the WTO.  Whatever you think about intellectual property rights, there is no doubt that they can be expensive for developing countries, both because of the huge revenues that flow from Soweto to Seattle and because of the restrictions imposed on access to vital knowledge rich products such as pharmaceuticals, software and business practices.    But consider a parallel property right: the right to emit greenhouse gases.  Like intellectual property rights, emission rights are an institutional construct designed to bring about an improvement in economic efficiency (by rewarding innovation in the case of IPRs, and by taxing polluters in the case of emissions rights).   Emissions rights, if properly designed, fairly allocated and enforced around the world, would entail a reallocation of wealth from rich countries to poor countries.  But while the rich world is happy to insist on the importance of intellectual property rights (of which it is a seller) it is unwilling to consider the establishment of property rights over assets for which it would be a buyer.  In the run-up to the summit in Copenhagen, there was no serious discussion of the idea that every citizen should be entitled to an equal share of the atmosphere, and that anyone wanting to occupy more than their fair share should pay compensation to those who are using less. The discourse is limited to the realpolitik of what rich countries are likely to accept.

Of course, it was ever thus.  Nobody should be surprised to hear that the rich and powerful set the rules, and that these are not always to the benefit of the poor.  But within nation states this dilemma is partly addressed through the political process.  Universal suffrage has made it impossible for national institutions, laws and regulations completely to ignore the interests of the poor; though of course there is still a long way to go before the interests of the poor are given the attention they deserve.

But the international system does not benefit from the equal representation implied by universal suffrage within nations.  In some international institutions, power is formally one-dollar-one-vote.  In many others  this is not the formal position, but it is true in practice.  The global political system does not rebalance economic power between nations in the way that political processes can within nations.

To address Paul Collier’s four traps will require concerted international action – for example, to take steps to prevent the corruption and patronage that is associated with extraction of natural resources, to limit the sale of arms which fuel conflict, or change trade rules in ways that improve Africa’s prospects of trading with the rest of the world.  That is why the trap of “unfair rules” is so profound: for as long as Africa remains politically weak in the international system, it is hard to envisage how the international cooperation is required will be brought about.

I find it hard to see how a transformation can be brought about unless we find a way to address the problem “unfair rules”.  For as long as Africa remains economically disadvantaged, it is marginalised in the setting of rules and governance of global institutions.   This in turn profoundly affects its ability to escape Collier’s four traps, and so limits its prospects for development, and thus locks in the growing divergence from the rest of the world.   Africa seems to be likely to be caught in the jaws of this trap for as long as there is no political process that allows African countries to obtain more power and influence within these international institutions than their relative economic weaknesses entails.

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.

Last month the OECD published aid data from donors for the period up to and including 2007.  With my colleagues at Development Initiatives, we have done an analysis of the figures for the House of Commons International Development Committee. The full memorandum (as .pdf) is here.

Here are some key points:

• Donors promised to increase aid by 2010.  Half way to that target, if donors had been increasing aid at a constant rate to meet their commitments:
  - Global aid in 2007 would have been $18.4 billion higher
  - Over the last three years donors would have spent an additional $29.5 billion
  - This would have lifted approximately an extra 15 million people permanently out of poverty.
• The G7 also promised in 2005 to double aid to Africa. Half way to that target:
  - G7 aid to Africa has increased by only $3.3 billion, less than a sixth of the promised increase.
  - If aid had been increased at a constant rate towards the target, aid to Africa would have been more than $6 billion higher in 2007.
• It is becoming clear that Italy, Germany, Portugal, Greece and France are not going to meet their promises
• The financial crisis is a potential “quadruple whammy” for developing countries. The value of the existing aid commitments has fallen (because they are expressed as a share of GDP), donors are increasingly unikely to meet those commitments, the financing needs of developing countries have been increased by the downturn, and there will be be substantial declines in non-aid flows to developing countries such as foreign direct investment, remittances, and equity investment.

In industrialised countries the fiscal “automatic stabilisers” tend to increase spending in recession, which both dampens the macroeconomic effects of the downturn and channels additional funding to services that face additional costs. By contrast the institutional arrangements for providing finance to developing countries tend to mean that finance is reduced just as needs are increasing, which amplifies the economic downturn, increases economic instability and jeopardises poverty reduction and service delivery.

Because everyone is so concerned with the financial situation, little attention has been paid to the other aspects of the World Bank and IMF meetings last weekend.

The Development Committee Communique says:

An additional Board seat for sub Saharan Africa on the Bank’s Board will be created.  DTC voting shares in IBRD and IDA will increase, giving special emphasis to small members.  … There is considerable agreement on the importance of a selection process for the President of the Bank that is merit-based and transparent, with nominations open to all Board members and transparent Board consideration of all candidates.

These are very welcome steps towards making the World Bank more accountable; but they are small steps so it encouraging that the communique refers to further reforms to come. (Bank President Zoellick  has established a new High Level Commission chaired by Ernesto Zedillo to look at improvements to governance.)

I suspect that there is an inwardness to the phrase “there is considerable agreement on the importance of …”.  This looks to me like a carefully-chosen form of words that masks a failure to agree stronger language that would firmly commit the Bank’s shareholders – particularly the United States – to an open competition for the Bank’s President in future.  Nonetheless, it is a step forward.

Not according to Blake Lambert and Wendy Glauser who write about Canadian NGOs:

Part of the reason NGOs have difficulty meeting their overall goals is that they often end up measuring day-to-day results rather than long-term progress. As Andrew Mwenda, a Ugandan journalist and political economist who’s currently on fellowship at Stanford University, puts it, they measure “inputs rather than outputs.” If an NGO is planning to free up women’s time from domestic labour, for example, instead of measuring how much time they are spending cooking and cleaning, they might typically count how many women attended their last job-training session. “An NGO will say it’s trained 50 farmers in agricultural techniques,” Mwenda says, “but it won’t say whether that has led to an increase in production.”

I don’t think this is a problem confined to NGOs. The problem that many NGOs share with us in government is that there is no feedback loop from those whom we are supposed to be helping. Our accountability is to our donors (or taxpayers) who do not have first hand knowledge of whether we are delivering what we should.

More at Blake Lambert’s blog.

The Government has consistently refused to set up a statutory inquiry into the way that many thousands of haemophiliacs were put at risk by the supply of contaminated blood products. (The new inquiry by Lord Archer of Sandwell is an independent inquiry, not a government inquiry, and has no powers to subpoena witnesses or evidence.)

But it announced yesterday that there will be an official inquiry into the alleged removal of human tissues from the bodies of former Sellafield employees.

I just don’t understand this obsession with the treatment of dead bodies. Dead bodies don’t have rights. I really don’t care if human organs are taken out of dead bodies. What’s more, if these body parts can be used to identify causes of and cures for disease, then I think we should encourage scientists to use them.

How can we possibly think it is more important to investigate what happened to dead bodies than to find out whether somebody has negligently infected living people?

Among some bloggers (such as Tim Worstall), and now on the BBC, it is becoming fashionable to say that Nicholas Stern's analysis of the economics of climate change overstates the case for intervention to prevent climate change, because it overstates the value we should attach to the income of future generations. 

In simple language, the claim is that Stern does not properly take into account the principle that an extra pound of consumption is worth less to you as you get richer.  This means that future generations – who are expected by everyone to be much richer than we are – will value an extra pound of consumption less than we we will. If you take account of this, we should attach less weight to the possible costs to future generations when we compare those to the immediate costs of making the adjustment.  (For a technical version of this critique, you may want to read this piece by Byatt, Castles, Goklany, Henderson, Lawson, McKitrick, Morris, Peacock, Robinson and Skidelsky.)   I am undecided on whether this is an important weakness in Stern's account, and I wish that the report had contained a more systematic analysis of the sensitivity of his conclusions to different assumptions about discount rates (there is some of this in the new Technical Annex to the Postscript).

But even if you do conclude that Stern overstates the case for action now to prevent future costs, there is an important distribution effect that is masked by the aggregate numbers that Tim Worstall and others quote.   The likelihood is that the main beneficiaries of the anticipated economic growth will be in rich countries, as they have been through the twentieth century, while the costs of climate change will be borne disproportionately by the poor.   If it turns out, as predicted, that agricultural productivity in Niger collapses as temperatures rise in sub-Saharan Africa, leaving 12 million people with nothing to live on, it will be little consolation to them that people in Western Europe and North America are living much better as a result of the economic growth that the high carbon consumption has permitted.   

So this is the challenge to those who take the view that the overall numbers do not make the case for action against climate change:  are you prepared to support the massive transfers in resources that will be required from those who enjoy the growth to those who suffer its consequences? 

Here is my ha'porth, for the record.  

It is no excuse to say that your religion requires you to discriminate against gays.  We would not tolerate the same argument to justify discrimination against people on grounds of race.  

Nor is it a defence for the churches to say that it is OK for them to discriminate because there is another agency that does not.  As somebody said, it is like telling Rosa Parks that she should get off the seats-for-whites-only bus and wait for the fully integrated bus coming along behind.   

This is not mainly a point about public services and public funding. As Evan Harris MP points out, there is a problem with contracting public services out to "third sector" organisations if they then expect to be able to impose their prejudices on how those services are delivered.  But even if the churches were delivering these services at their own expense, they should not be allowed to discriminate against blacks, gays or anybody else.

Frankly, I'm amazed that this is even a matter of public debate. 

The World Bank's Independent Evaluation Group has launched its Annual Review of Development Effectiveness.  It is an honest, and somewhat depressing, account of what the Bank has achieved.  According to the Washington Post:

Among 25 poor countries probed in detail by the bank's Independent Evaluation Group, only 11 experienced reductions in poverty from the mid-1990s to the early 2000s, while 14 had the same or worsening rates over that term. The group said the sample was representative of the global picture.

"Achievement of sustained increases in per capita income, essential for poverty reduction, continues to elude a considerable number of countries," the report declared, singling out programs aimed at the rural poor as particularly ineffective. Roughly half of such efforts from 2001 to 2005 "did not lead to satisfactory results." During that period, new World Bank loans and credits aimed directly at rural development totaled $9.6 billion, or about one-tenth of total bank lending, according to the group.

Comment:  I suspect that many people will use this report to confirm their prejudices.  If you are an aid sceptic, and you do not read the report carefully, you might conclude that this shows that the money spent by the World Bank is wasted.  But this is not what the evaluation finds.  It finds that many reforms of development assistance that are being implemented around the world  are likely to be effective.  The evaluation finds:

• growth alone is not enough: growth delivers poverty reduction more effectively when it occurs in sectors and regions where most of the poor live and work;
• satisfactory project outcomes alone do not ensure country sector impact: what matters is the long term development of in-sector and cross-sector strategies that complement each other;
• pressure to show results quickly can divert attention from the quality of results;
• achieving and maintaining results requires public sector institutions that are accountable to domestic stakeholders, not donors;
• the long time required to achieve many of the intended results underlines the importance of continuity and predictability of donor engagement;
• results depend on the commitment and ownership of recipient governments.

These recommendations are consistent with the progressive aid agenda, increasingly being implemented by the World Bank, DFID and some other development agencies.  It is, however, an agenda that is sometimes under attack from sceptics of government aid, many of who minstead recommend a project-based approach, in pursuit of short-term, more measurable targets.  This so-called bottom-up approach is often at the expense of the long term, cross-sectoral institutional improvements that really drive sustained and systemic change.

Finally, kudos to the Bank for publishing a thorough warts-and-all analysis of its weaknesses as well as successes. 

More from Ezra Klein,  Washington Post.

Very interesting debate in this month's Prospect between Hilary Benn (Britain's Cabinet Minister with responsibility for International Development) and Bill Easterly, a critic of government aid.

For me, the money quote from Hilary Benn is this: 

All functioning governments have essential features in common: a capacity to do things, good financial and information management, clear lines of accountability and freedom from corruption, to name just a few. We owe it to the world’s poor to help their governments to develop these capacities. Strong economic growth and fair trade are simply the fastest and most effective ways to get people out of poverty, and both of these require governments to work properly.

Muhammad Yunus and the Grameen Bank have been awarded the 2006 Nobel Peace Prize. 

This is a powerful statement by the committee (which is appointed by the Norwegian parliament) of the role of poverty reduction in promoting peace.

As the Grameen Bank has shown, access to financial services such as credit can make a huge contribution to improving the lives of the poor. 

Microfinance has become a very popular cause in international development, especially among the large private foundations of North America.  Supporting microfinance appeals to the notion that we should give the poor a hand up, not a hand out.  It appeals to our sense that we should find ways to unleash the entrepreneurial spirits of those who are unfortunate enough to have been born in poor countries. 

But there remain important questions about microfinance.  There remains very little systematic empirical evidence of the impact of microfinance on the incomes and well-being of the poor.  Grameen's main measure of its success – its repayment rate – is impressive but tells us little about what impact microfinance has actually had.

In my view, it is impossible to argue with the view that the poor benefit, probably substantially, from access to affordable financial services, including credit, savings, insurance and remittances.   But as I argued here in November last year, it does not follow at all that it is a good idea for donors and foundations to subsidize microfinance.  After all, the Grameen Bank was developed without donor assistance.

So many congratulations to Muhammad Yunus for his well deserved award, and to the Nobel Peace Prize committee for recognizing the power of economic growth in poor countries to promote peace.  But let's think carefully before we all climb on to the microfinance bandwagon. It is not clear that subsidizing microfinance is a high priority for helping the developing world to grow its way to prosperity.

More at Pienso, Marginal Revolution and NextBillion. Update: Also Mark Thoma, Audemus

Nick Kristof has a review in the current New York Review of Books of recent books by Jeff Sachs, Bill Easterly, Ruth Levine, Robert Calderisi, David Leonard & Scott Straus about the effectiveness of aid.

Coincidentally, G and I went to a presentation by Bill Easterly this morning, here in London to promote his new book.

I agree with Easterly that:

• we need a range of entrepreneurial, small-scale activities to innovate and test new ideas;
• we need more thorough and independent evaluation of aid; (see here for an analysis of the evaluation gap)
• aid should be more accountable to the people it is intended to help;
• we should stop interventions which do not work;
• and we should scale up interventions which do.

But I also fundamentally disagree with Easterly:

•  there is abundant evidence that more aid is positively correlated with growth in developing countries; Easterly cites a misleading sample of technically inadequate papers to the contrary;
• we need planners as well as searchers: once good ideas have been developed and tested, they should be scaled up and this requires coordinated plans;
• the country-led approach which Easterly derides has not yet been fully tested, but early indications are positive.  The forty years of failure which he criticizes were years in which donors pursued aid interventions much more like those he advocates than the policies they pursue now.

Finally, none of the books that Kristof reviews does justice to the role of the private sector in development.  We need to understand better the range of policies and interventions that would help to foster private sector development, and not stifle it.

A new paper by  Jorg Faust at the German Development Institute looks at whether rich countries that have more accountable and democratic institutions have more development-oriented foreign policy:

… the results do support the main hypothesis presented here, namely that the level of democratic voice and accountability in OECD countries is one crucial factor explaining the variance of the overall quality of development promotion in those countries.  Beyond, these finding also suggest that  a rising level of democratic voice and accountability increases the overall coherency of these countries' foreign policies with regard to development promotion. … Rich countries with stronger democratic institutions produce foreign policies which are at the same time more compatible with the concompassing interests of the rich countries' society while at the same time more adequate to promote development in poorer countires.  

This is an important finding.  It is consitent with the view that policies pursued by rich countries which damage development – such as restrictions on trade, limits on migration, constraints on technology transfer, corruption or arms sales – reflect the power in those countries of special interest groups to protect and promote their causes at the expense of economic development in poor countries.   As the rich countries become more democratic and accountable, so the voice of our collective interests in global peace and security and in global equity are more overcome those interest groups.

Ruth Levine at the Global Health Policy Blog rightly points out that the emergence of Extreme Drug Resistant TB is a further example of the way that our interests, in rich countries, are increasingly intertwined with the interests of poor countries.

Recent reports about the emergence of Extreme Drug-Resistant TB in South Africa are disquieting reminders of fundamental concerns in international public health: fragile health systems in developing countries, stretched to the breaking point as they struggle to respond to health needs today, have the potential to incubate infectious diseases that are tomorrow's global threat. While the new strains of TB that are untreatable with any of current medications affect only small numbers at the moment, the insurgent microbes cannot be ignored.

As George Bush said in another context, we have to fight it over there so we don't have to fight it over here.

See also Christine Gorman at the Time Global Health blog

I am sure that you are all avid readers of Public Finance magazine.

You’ll be fascinated to hear that this week’s cover feature is my article calling for the establishment of a service-oriented architecture for IT systems across the public sector.  Here is an extract to titillate your tastebuds:

The priority for government should be an IT strategy that organises the individual functions in government applications into interoperable, standards-based services that can be shared, combined and reused quickly to meet business needs. For example, once the government has developed a procurement system or a payroll module, these should be used and adapted by other business units.

This would catalyse significant changes:

• Public services would organise services to correspond to citizen experiences, such as starting a business or moving house, rather than the functions of government
• The frontline service, not the IT department, would design and create applications directly
• Organisations would not bet their future on a single, long-term IT development – instead they would implement change in smaller steps using small, reusable, interlinked modules
• Systems would be designed to change to meet future needs rather than being tightly coupled to today’s processes, and
• Instead of settling on a single, homogenous technology, the government would adopt a variety of different technologies appropriate to the needs of the services.

A common, government-wide structure, based on components, applications and data that could be reused and shared, would reduce development time, cost and risk. Frontline services would control their own processes, which would allow them to respond flexibly to changing needs and develop increasingly customer-centric services.

The article is a shortened version of my chapter in a new IBM publication, Capability, Capacity and Reform, Insights from government leaders on delivering transformational government.

This post comes from the new Microsoft blog post editor.

My initial impression is that it will make blogging much easier for people used to Microsoft Word.  It is astoundingly easy to set up – for this blog, which uses WordPress, all it needed was my username and password.

But speaking personally, I much prefer the Performancing add-on for Mozilla Firefox, which makes it all too easy to knock together a traditional link-quote-comment blog post.

If it turns out that the intelligence services and the police have indeed foiled a plot to commit mass murder on a scale never before seen in the UK – and I have no reason to believe that it won't – then we owe them our thanks and gratitude.

We are quick to criticize when things go wrong, such as the killing of Jean Charles de Menezes and the shooting of  Mohammed Abdul Kahar in Forest Gate in June.  Perhaps I am reading a biased sample blogs, but I have not seen a corresponding flurry of recognition of the success of intelligence gathering, investigation and international cooperation that has prevented the destruction in mid-air of nine passenger aircraft.

Similarly, in today's FT, there is a grudging editorial, complaining about the disruption at the airports and recalling past errors: there is no hint of congratulations for the success that the law enforcement agencies have achieved.  Nor does today's Guardian leader offer any thanks.

Well I think that is humbug.  Well done, men and women of the law enforcement agencies.  We owe you. 

SaharaReports.com reports that the Nigerian Minister of Foreign Affairs, Mrs. Okonjo Iweala, who was formerly the Finance Minister, has resigned from the Cabinet, citing “deep personal clashes between her and the president”.

If so, that is very bad news for Nigeria.  She earned the confidence of donors and played a crucial role in negotiating the debt relief deal (the world’s largest ever debt relief package).

The Prime Minister, House of Commons Hansard Debates, 18 March 2003

I have never put the justification for action as regime change. We have to act within the terms set out in resolution 1441—that is our legal base.

The Prime Minister, speech to the World Affairs Council in Los Angeles, 1 August 2006

The point about these interventions, however, military and otherwise, is that they were not just about changing regimes but changing the values systems governing the nations concerned. The banner was not actually "regime change", it was "values change".

What we have done therefore in intervening in this way, is far more momentous than possibly we appreciated at the time.

Quite so. And perhaps not in a good way.