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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.

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.

My day job is leading the aidinfo team working to improve the transparency of international aid. Why? Because we think that when aid is more transparent it will be more effectively used and it will help people in developing countries to hold their governments to account. We also believe that if taxpayers can see where aid is really going, and see what a difference it makes, they will support more of it.

So I was dead pleased to see this by David Cameron in today’s Guardian

Transparency tears down the hiding places for sleaze, overspending and corruption. Soon enough all MPs’ expenses are going to be published online for ­everyone to see: I and the rest of the shadow cabinet are already doing it. And if we win the next election, we’re going to do the same for all other public servants earning over £150,000. Just imagine the effect that an army of armchair auditors is going to have on those expense claims.

Indeed, the promise of public scrutiny is going to have a powerful effect on over-spending of any variety. A Conservative government will put all national spending over £25,000 online for everyone to see, so citizens can hold the government to account for how their tax money is being spent. And we will extend this principle of transparency to every nook and cranny of politics and public life, because it’s one of the quickest and easiest ways to transfer power to the powerless and prevent waste, exploitation and abuse.

Yes, yes, and thrice yes, as Mark Kermode would say.

What’s more, with current technologies, we can do this quite easily, and unleash the creative power not only of armchair auditors, but of millions of people who are not in armchairs but are directly experiencing the effects of that spending and who can help us to understand what is working and how it can be made to work better.

If we can’t get an agreement on cutting food tarriffs and limiting market-distorting agricultural subsidies now, while food prices are surging (see graph), then when we will ever?

You must read this article by Naomi Wolf in the Guardian

From Hitler to Pinochet and beyond, history shows there are certain steps that any would-be dictator must take to destroy constitutional freedoms. And, argues Naomi Wolf, George Bush and his administration seem to be taking them all

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?

I have just learned from DFID’s Chief Economist, Tony Venables, that the grain required to fill a 25-gallon SUV gas tank with ethanol will feed one person for a year.

Ed Prescott, the joint winner of the 2004 Nobel Prize in Economics, writes in the Wall Street Journal today (behind paywall):

Of all the thankless jobs that economists set for themselves when it comes to educating people about economics, the notion that society is better off if some industries are allowed to wither, their workers lose their jobs, and investors lose their capital — all in the name of the greater glory of globalization — surely ranks near the top. This is counterintuitive to many people (politicians among them), because they view it the government's economic responsibility to protect U.S. industry, employment and wealth against the forces of foreign competition. …

Protectionism is seductive, but countries that succumb to its allure will soon have their economic hearts broken. Conversely, countries that commit to competitive borders will ensure a brighter economic future… This lesson should not be lost on the U.S., the paragon of competitive growth, where politicians and policy makers are contemplating whether to construct more protective barriers. It is openness that gives people the opportunity to use their entrepreneurial talents to create social surplus, rather than using those talents to protect what they already have (or to protect rents, as economists like to say). Social surplus begets a rising standard of living, which begets growth, which begets social surplus, and so on. Rent protection stops growth cold and keeps people poor.

(Prescott also wrote a book, Barriers to Riches, which argues that the main cause of difference of income between countries are barriers to the adoption and transfer of technology.)

A man called Roy Jenkins, who calls himself  "Right Reverend", was given an uncontested platform on The Today Programme this morning to peddle his wicked superstitions.  He said that Kelly Taylor, the brave, terminally ill woman who is fighting for her right to die in dignity, should instead die a painful, lingering suffering death.  The reason he gave was that we do not have rights over our lives because we were created by God and that ending our own lives, or anyone else's, would defeat the purpose for which we were created.  He opined that Kelly Taylor's 'pupose' was to inspire us by her bravery and suffering.

My thoughts about this are:

• it is astonishing that anyone in the 21st Century could subscribe to mediaeval superstitions which suggest that people are 'created' by somebody who has a 'purpose' for each of us; these views are both irrational and wicked;
• we do have rights over our lives; if Mr Jenkins chooses not to exercise his that is fine by me, but he has no business preventing Ms Taylor from exercising hers;
• the BBC, as a public service broadcaster, has no business giving this kind of cruel superstition air time in the middle of their flagship current affairs programme.  They would not invite astrologers, or flat-earthers, or paedophiles, to lecture us uninterrupted; so why should Methodists or Moslems be any different?

Lord Nigel Crisp – who is also currently working on a review of DFID’s leadership capability – has called for a new system to help global health systems:

His report calls for an NHS scholarship scheme to help with training and recommends a set amount of aid funds to be set aside for health workers. It also says there should be a Global Health Partnership Centre to act as a “one-stop shop” offering information to individuals and organisations wanting to help global health systems.

I am not so sure. What developing governments need is systematic, long term investment in health systems. Capacity building should be based on a serious strategy for institutional development.  These volunteer schemes are sticking plasters, which risk diverting attention from addressing the underlying needs of the systems.

The Ideal Government blog comments on Gordon Brown's call for Government to make better use of the internet to have an open debate about globalisation and trade.  The Times quotes Mr Brown:

“We have not had these debates successfully. Why are we so much on the defensive on globalisation, why have we failed on the trade debate, why haven’t we persuaded people of the wisdom of what is being done on Iraq?”

Mr Brown said that the positive aspects of globalisation were not being communicated because voices on the internet focused on job losses and other downsides. It was a similar story on world trade, he added.

“One of the failures on trade is that we have not had the debate and on globalisation that we have not been prepared to have the debate,” Mr Brown said

There is not much incentive for government officials to use the internet to engage in these debates – and plenty of downside risks if we overstep the mark.  I wonder whether Mr Brown will do more to encourage it.

One of the most important and cost effective ways that rich countries can help poor countries is to invest more in R&D, especially in products that would benefit the poor (such as a malaria vaccine, cheap solar panels, or a cassava plant resistant to mosaic virus).   We do have large research programmes; and I took part yesterday in an interesting discussion about whether we should fund such research by paying the researchers directly, or whether we should create financial incentives for the private sector to invest its own money in looking for solutions.

My conclusion is that we need a judicious combination of "push" funding (e.g. subsidies to research institutes) and "pull" funding (e.g. guaranteed markets, or prizes).  Push funding is especially useful for R&D that produces basic science of general value which cannot be mainly appropriated by a firm through the sale of products; pull mechanisms are more efficient for R&D that is specific to a particular product.

David Wessell has an interesting article in the Wall Street Journal on January 25th the use of prizes to spur innovation.  I thought this was particularly interesting:

One surprise: The further the problem was from a solver's expertise, the more likely he or she was to solve it. It turns out that outsiders look through a completely different lens. Toxicologists were stumped by the significance of pathology observed in a study; within weeks after broadcasting it, a Ph.D. in crystallography offered a solution that hadn't occurred to them.

One of the merits of prizes over government-directed research is that they encourage engagement by a more diverse range of investigators than would be likely to be supported by cautious and risk averse bureaucrats.  This finding suggests that might be rather important.

Full text of WSJ article below the fold.

Read the rest of this entry »

The UK Government is going to consult more widely on its proposals for data sharing within government.

A national identity register that allows data sharing across government could be the technological underpinning of a huge improvement in the provision of government services.  (It is important that the technology will not transform the services: it is a platform on which government processes can change). 

Those of us who understand the technology and care about our civil liberties should not adopt a luddite stance of opposition: we should send a clear, consistent and simple message about the safeguards we need so that we get the benefits of joined up services without the risks to our freedoms. 

I propose the following five, readily understandable safeguards.  The government should commit itself to each of these, or offer an extremely good reason why not:

• government data should be stored in decentralized databases that can communicate with each other on a need to know basis, not in shared data warehouses;
• citizens should have access to all data held about them by government
• citizens should be able to see a complete log of every access to their personal data by all public servants
• an independent information security ombudsman should police the systems
• there should be no identity cards and no collection of biometric data

I mentioned earlier this year the need to be rational about "food miles" – that is, the pressure to buy locally produced food.

Interesting to see this article in the Metro today:

Too much attention is being paid to how vegetables and flowers imported by air from Africa cause greenhouse gas emissions, said Bill Vorley, of the International Institute for Environment and Development.

Cutting this trade could have an overall negative impact on African development, he explained. …

'Air freight of fresh fruit and vegetables from Africa accounts for less than 0.1 per cent of total British carbon emissions.

'Climate change is going to affect the poor in Africa harder than anyone else. These are the people who have done least to cause the problem. They should not be made to pay the cost of fixing it too.

There is a debate about whether we should buy food from poor countries – which helps farmers, but might damage the environment.  Well-meaning people are torn.

Ideally, the price of food in the shops would reflect the full social marginal cost of producing it and transporting it.  So beans from Kenya would be more expensive if they use up more of the world's resources – including carbon emmissions from transport - than beans from a Spanish hothouse.   If taxes were levied at levels and in ways that reflected externalities such as pollution, then we could let the market decide.

In the meantime, should we be buying food imported from Africa? I think we should, for three reasons.

First, it is not clear that food that has travelled a long way is worse for the environment than food grown locally.  For many products, the energy needed to grow food locally – such as tomatoes in a hothouse – is more than the energy needed to grown them where the sun shines, even when you take into account the energy needed to transport them.  Flowers grown in European greenhouses result in more CO2 emmissions than flowers grown in Africa and flown in.

Second, the energy needed to transport food is a tiny proportion of greenhouse gas emissions.  It is way less important than, for example, putting your appliances into standby mode, or making one fewer business trip a year.

Third, millions of people depend for their livelihoods – and that of their children – on growing and selling food and flowers for the UK market.  UK consumers spend a million pounds a day on food and vegetables from African farmers.  If we deny Africans the opportunity to trade their way out of poverty by refusing to buy their agricultural products, then we will consign another generation of Africans to poverty and handouts from the rich.  In Kenya, where half the population lives on less than 50p a day – Kenyan farmers can earn £1000 a year by growing fine beans.  Tanzanian famers earn twice as much selling baby corn to UK supermarkets as they do selling maize locally.

More than two thirds of Africa's poor depend on agriculture for their livelihoods.  In our determination to tackle climate change and reduce carbon emissions, let us start with sacrifices we can easily make ourselves, before we deny them the chance of a decent life.

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

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.

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.