IFILL: … I want to get — try to get you both to answer a question that neither of your principals quite answered when my colleague, Jim Lehrer, asked it last week, starting with you, Sen. Biden. What promises — given the events of the week, the bailout plan, all of this, what promises have you and your campaigns made to the American people that you’re not going to be able to keep?

BIDEN: Well, the one thing we might have to slow down is a commitment we made to double foreign assistance. We’ll probably have to slow that down. We also are going to make sure that we do not go forward with the tax cut proposals of the administration — of John McCain …

So “the one thing” that can be put on hold is Obama’s previous commitment to double foreign aid? 

It isn’t clear how this fits with Obama’s sponsorship of the Global Poverty Act, which would require the next President of the United States:

to develop and implement a comprehensive strategy to further the U.S. foreign policy objective of promoting the reduction of global poverty, the elimination of extreme global poverty and the achievement of the Millennium Development Goal of reducing by one-half the proportion of people worldwide between 1990 and 2015, who live on less than $1 per day.”

According to Obama’s website:

With billions of people living on just dollars a day around the world, global poverty remains one of the greatest challenges and tragedies the international community faces,” said Senator Obama. “It must be a priority of American foreign policy to commit to eliminating extreme poverty and ensuring every child has food, shelter, and clean drinking water. As we strive to rebuild America’s standing in the world, this important bill will demonstrate our promise and commitment to those in the developing world. Our commitment to the global economy must extend beyond trade agreements that are more about increasing corporate profits than about helping workers and small farmers everywhere

2. The National Gallery of Scotland wants the tax-payer to buy some paintings from the Duke of Sutherland. Why don’t we apply Nice-style cost-benefit analysis here? Would £100m spent on art really produce £100m worth of increases in quality-adjusted life years (by improving the quality of life, not length of course)? And if we don’t apply such reasoning, why not? Why is the restrictive CBA of Nice only applied to drugs, rather than to all public spending?

Exactly right. And, in particular, why don’t we apply this form of cost-benefit analysis to international development spending?

The wisdom of Buzkashi riders, passed on from generation to generation in Afghanistan, says that ‘when you discover that you are riding a dead horse, the best strategy is to dismount’. However, in the UN and NGO community a range of far more advanced strategies are often employed, such as:

• Changing riders;
• Appointing a committee to study the horse;
• Arranging to visit other countries to see how others ride dead horses;
• Lowering the standards so that dead horses can be included;
• Reclassifying the dead horse as ‘living impaired’;
• Hiring outside contractors to ride the dead horse;
• Harnessing several dead horses together to increase the speed;
• Providing additional funding and/or training to increase the dead horse’s performance;
• Doing a productivity study to see if lighter riders would improve the dead horse’s performance;
• Declaring that as the dead horse does not have to be fed, it is less costly, carries lower overhead, and therefore contributes substantially more to the mission of the organization than do some other horses;
• Rewriting the expected performance requirements for all horses;
• Preparing a workshop with paid attendants on the subject of Experience gaining in riding dead horses in post war setting;
• Preparing a second workshop on environmental hazards caused by horse shit, and the advantage on using dead horses since they do not shit therefore are of no hazard to the environment.

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• Untie all aid, including technical assistance, and publish information on which providers get contracts in practice.
• Tell recipients what donors are spending through a concrete set of standards for transparency.
• Make all evaluations public, regardless of their results, by entering them into a prospective registry.
• Pay for outcomes not inputs, by piloting a Cash on Delivery aid contract with interested recipients.
• Let recipients use technical assistance to buy what they need by piloting with interested recipient(s) an arrangement giving recipients full flexibility in what consulting and training to buy, and financing a platform for recipients to give and see each other’s feedback on the services offered by multiple providers.
• Give recipients ironclad predictability of the future aid flows to which they commit by allowing recipients to arrange with an intermediary to receive a guaranteed cash flow, and sign over the donor’s actual flows over some agreed period to the intermediary.

I like these suggestions partly because they are each sensible in themselves. But the main reason I like them is that too much of the discussion about Accra has focused on rather narrow and technocratic measures to address particular items in the Paris Declaration. These ideas from CGD are more far-reaching: proposals such as greater aid transparency (which is what I spend most of my time working on) or on paying for outcomes (instead of micromanaging how money is spent) are ways to change the whole nature of the relationship between donor and recipient in the way that Paris envisages.

My only complaint is that they should have called the paper “a little less conversation”. After all, as Elvis said:

A little less conversation, a little more action please
All this aggravation ain’t satisfactioning me
A little more bite and a little less bark
A little less fight and a little more spark
Close your mouth and open up your heart and baby satisfy me
Satisfy me baby

The Welbodi Partnership was established to support the provision of paediatric care in Sierra Leone, where child health statistics are the worst in the world.

The cool thing - as Tristan points out - is that:

they work directly with the Ministry of Health and Sanitation to improve the hospital, instead of running their own hospital, as many NGOs like to do. This way, they deliver services and build capacity in the country’s health system.

There are far too many NGOs who, for respectable reasons, set up parallel services. The result is duplication and waste, and foreign-funded NGOs often deplete capacity from already hard-pressed government systems. The Welbody partnership approach seems to combine the best of both worlds.

Does anyone know of other NGOs taking this approach?

A prerequisite for effective ownership and efficient aid delivery, at the core of the Paris Declaration on Aid Effectiveness, is to map the rising complexity of multilateral development finance, to help identify areas for consolidation, address fragmentation and poor co-ordination at country level, and help identify comparative advantages for institutional role assignments among multilateral agencies. Such mapping identifies overlaps - leading to reduction of multilateral remit or proposals for consolidation; rivalries - leading to clarification of roles; and absences of co-ordination - leading to the design and implementation of co-ordinating structure.

I don’t think that mapping comparative advantage is the way forward. In the real world, firms do not try to analyze comparative advantage: they focus on maximising shareholder value and the ones that don’t succeed go bust or get taken over. Focusing on comparative advantage is the outcome of effective decisions, not the input. The problem in the aid industry is that there is no feedback mechanism to drive organisations towards their comparative advantage. The solution to this is to create stronger incentives - such as measuring results, greater transparency, funding outputs rather than inputs and increasing accountability - to force organisations closer to their comparative advantages. The “Gosplan” approach has been tried in development and it doesn’t work.

Major operators such as Difid, the British government arm, and USAid play a cat-and-mouse game with the government (GoE) because Meles is sensitive about external pressures in an environment in which domestic critics are almost silenced and expatriate websites blocked. Yet donor aid contributes at least 20% of GNP to a precarious economy, so cash can’t be turned away.

Donors are aware of their power and responsibility. With the Ethiopian opposition parties in disarray (1) they are the only real curb on Meles. Big-time donors (the World Bank via the International Development Association, UNDP, the US, the UK, international NGOs) work through GoE to agreed MDG objectives set out in the government’s plan for accelerated and sustained development to end poverty (PASDEP). Cash goes to approved projects administered by Ethiopians.

I do wonder about the role donors should play when the domestic political opposition does not exist or, as in this case, is in disarray. It is tempting for donors to step in to the gap and provide the necessary checks and balances. But in the end this undermines the space for parliament and opposition parties to hold the government to account.

So my view is that donors should avoid playing this role: not because I don’t think it is important to hold governments to account but because I do.

under the pretext of making aid more effective the Paris Declaration project is a form of collective colonialism by Northern “donors” of those countries in the South that (because of their weakness and vulnerability and psychology of “dependency”) may allow themselves to be subjected to it at the Accra September Conference.

This is massively overstated, but there is a kernel of truth here. Donors have the money, the choice and the power, and however progressive individual officials want to be, that power relationship is translated into institutional mechanisms such as the Paris Declaration.

That said, the Paris Declaration is the best opportunity for a generation to change that power relationship, by committing the donors to improving their behaviour as donors, including several measures which could, over time, rebalance the power.

I will be at the Accra September Conference and will report on whether we make progress.

“That’s increasingly in the last few years what our foundation has been focused on - what is the most cost-effective way to mobilise a national health system,” Mr Clinton said.

“You can get the universal treatment - the money’s there now, if we spend it most effectively.”

“But we don’t have the health care systems to reach out to people, get them tested and diagnosed in a timely fashion, get them on treatment and do the regular follow-ups.”

Well good. This is what the aid experts have been saying for years. It is why many of us opposed the establishment of funds like the Global Fund for AIDS, TB and Malaria and PEPFAR in the first place. But politicians like to announce things that they think their public will understand, and big disease-specific initiatives are the kind of thing that seems to fit the bill.

They show how unpredictable such aid flows are. The paper finds that the average absolute difference between aid promised and aid given was equal to 3.4% of each sub-Saharan African nation’s GDP between 1990 and 2005.

The paper is pretty interesting. It reiterates the difference between volatility and unpredictability; volatile-but-predictable aid (eg lumpy payments for a large infrastructure) is rarely destabilizing and is not problematic. It also reminds us of the positive reasons why we might want aid to be unpredictable (eg because project implementation is slow or because the government’s commitment to poverty reduction becomes uncertain) which they distinguish from negative reasons for unpredictability, such as bureaucratic delays, changes in donor political climate, or fickle interpretation of conditions.

The empirical findings are pretty striking. On their samples:

• on average annual aid disbursements deviated by 3.4% of GDP from aid commitments in sub-Saharan Africa (there is a trend decline in this deviation, to 2.8% in recent years, but it is still a massive economic disruption to a country to have that degree of unpredictability)
• no all unpredictability is a shortfall: sub-Saharan Africa received on average 1% of GDP more aid than was committed;
• up to 40% of the variations can be explained by changes in country circumstances; the remaining 60% is unexplained (the authors’ hypothesis is that this unexplained component is fickle donor behaviour such as administrative delays)
• budget aid disbursements fall short by about 1% of GDP from projections, representing about 30% of budget aid promised on average. Budget aid is less predictable than local tax revenues.
• Governments adjust to budget aid shortfalls by accumulating more internal debt and reducing investment spending; the losses in investment spending are not reversed in good times: budget aid windfalls lead to higher government consumption and some reimbursement of domestic debt. Thus the overall consequence of unpredictable budget aid is increased government current spending and reduced government capital spending compared to providing the same amount of aid predictably;
• if you believe (with Easterly etc) that public investment is positively and reliably correlated with long-term growth, then this means that lack of predictability of budget aid has a quantifiable and significant negative impact on long-term growth and poverty reduction.

I was struck that budget aid appears to be more predictable than other aid (though still woefully unpredictable). The mean absolute deviation in budget aid (1% of GDP, using the IMF projections) is much lower than the mean absolute deviation in overall aid (3.1% of GDP, using the DAC data). This is contrary to the conventional wisdom, which is that budget aid is more unpredictable than projects.

I also thought that Celasun & Walliser underestimate the harm done by unpredictability of budget aid. They focus on the resulting shift from government investment to government consumption, which may have costs (though I do not entirely share the fetish for investment over consumption). The costs of unpredictability go much wider: for example, within current expenditure, predictable aid could be used to restructure public service wages; whereas unpredictable aid is more likely to be used to buy in consultants to fill the gaps. There are also macroeconomic costs that are not included here (for example, higher borrowing leads to higher government interest payments, and also to higher interest rates which crowd out private investment). The agencies that give this unpredictable aid would complain like mad - and rightly so - if they did not have predictable budgets from their own Treasuries; so why would public services in developing countries be any different?

For the purposes of this paper, “predictability” is defined in a short-term sense (the gap between commitments for a given year, 0-6 months ahead, and disbursements that year). It is clearly a huge problem that in-year disbursements deviate from commitments by as much as 3% of GDP on average, and it is a problem which donors should do something to fix. But there are other dimensions of predictability – such as the ability to budget 3 or 5 years ahead – which may be just as important, or more so, and which are not discussed in this paper. My belief is that 3-year commitments which are sufficiently solid to be programmed in the budget are worth much more to developing countries than ten-year partnership agreements which are insufficiently reliable for them to be able to programme; if so, we should be emphasizing firmer commitments rather than longer time horizons.

While short term (in-year) unpredictability is a serious problem, the best solution to this may not lie in persuading donors to behave better (on which we have achieved little) but in helping to promote institutions that could help developing countries to smooth out the flows. This might take the form of insurance markets or mutual pooling arrangements, as well as improving access to financial markets. It may also be worth exploring the idea that donors could establish escrow accounts (“bathtubs”) through which aid would flow. Tackling medium term predictability, by contrast, probably does require changes in donor behaviour.

And finally, as you would expect, I strongly agree with Celasun & Walliser in highlighting the importance of greater transparency of aid data.

Once again the G8 has come up tragically short on climate change and a host of urgent problems affecting poor people in developing countries.

Meanwhile, over at Project Syndicate, Jim O’Neill says the G7 and G8 should be reformed by reducing European voice:

For example, why is there an international economic organization such as the G-7 without China, which is poised to overtake Germany as the world’s third largest economy and since 2000 has contributed almost as much to global economic activity as the entire euro zone? Most global economic issues today cannot be solved without policy steps in China. Indeed, how can the G-7 have the audacity to make repeated public comments about the currency of an outside country and hope for a positive response? It is almost farcical.

Meanwhile, France, Germany, and Italy are all in the G-7, even though they share the same monetary policy and currency. It would be better if the ECB and the EU finance ministers adopted a common position ahead of G-7 meetings, then allowed their joint view to be represented by a single Council representative and the ECB’s president. Because ministers meet before each G-7 meeting, this would be an easy procedure to introduce.

I think it is unlikely that the failure of the G8 to make sufficient progress on key questions such as climate change, Africa and food prices is because the European voice was too strong; the problem seems to be that the US, Japan, Russia and Canada are in denial about what is needed.

But the call for reform of the G8 is right, and it is an issue that the UK should be particularly focused on. The UK is likely to see its authority at the top tables of international diplomacy decline over time: institutions like the G7 and the Security Council will either be reformed to reflect the changing balance of global power, which means our voice will be reduced, or they will be more and more marginalized (we are already seeing this happen) and replaced by new, more relevant institutions .

Our interest now is seeing to it that new institutions are developed that protect the interests of the less powerful and smaller countries, which we are gradually becoming. If we do not invest in those reforms while we have influence, we will regret it later when we no longer have the opportunity to shape the new order.

Mr Brown’s four-point plan for the annual G8 gathering includes a $60bn boost for health care in developing nations, to recruit more health workers; extra money to meet shortfalls in a $1bn fund to stop 72 million children missing out on a primary education; and a food-crisis package. [Ed: I make that a 3-point plan?]

Say what you like about Mr Brown’s domestic political standing (I personally can’t see what he is supposed to have done wrong, apart perhaps from dismantling our civil liberties) but he continues to put real energy and passion into international development. Since I think that is two orders of magnitude more important and urgent than anything in British politics, that is enough for me.

A government source quoted in the same article gets it exactly right:

“It would be very stupid to give up on Africa because of the economic downturn – a big strategic error to save a relatively small amount of money. If we invest in agriculture in Africa, we could bring down the price of food. Half of the food produced rots before it gets to the market. It could become the breadbasket for the world.”

tax credits for U.S. companies promise more aid, less waste, and the hope of better institution-building than government-to-government assistance. The next question is how a system of tax credits should be designed — which sorts of investments should qualify for credits, which countries should be eligible to benefit from them, and what the total size of the program should be.

Though the argument is based on utterly false premises, there may be some merit in the idea.

The authors claim that most aid is not spent prudently because it goes on “debt service, consultants and humanitarian emergecies …. mismanagement and corruption” while “American markets reward companies if they use capital efficiently”.

It is true that about 7% of global aid goes on humanitarian relief - and so it should. Following the floods in Burma, and the earthquake in China, or the failure of the harvest in Somalia and Ethiopia, it is right that some aid is targeted at alleviating the resulting human suffering. It is also true that about 18% of aid is used for debt relief - which frees developing countries from servicing debt, and so allows them to spend that money on investment in economic growth and for social services. And consultants are often part of technical assistance (which is 21% of aid): this is righly criticised for being less effective than it should be, but most of us think that sharing knowledge is nevertheless an important and desirable part of foreign assistance. So to denounce these as not “prudent” is plain ignorant.

That said, we may be missing a trick. We tend to think that where markets fail, governments must provide. But we would get much more bang for our buck if we used aid to sweeten the deal for private firms, tipping an “uneconomic” investment (in terms of private returns) in services for poor people into an economic one. Paying the margin to make an investment worthwhile, rather than meeting the entire economic cost of the service, could enable limited aid budgets to go much further.

What we need to avoid, as ever, is state subsidies that create fat, lazy incumbent firms that are free from innovative and dynamic competitors.

Leaders of the Group of Eight rich nations are set to backtrack on their landmark pledge at the Gleneagles summit in 2005 to increase development aid to Africa to $25bn a year. A draft communiqué obtained by the Financial Times, due to be issued at the group’s July summit in Hokkaido, Japan, shows leaders will commit to fulfilling “our commitments on [development aid] made at Gleneagles” – but fails to cite the target of $25bn annually by 2010.

To be fair, the only evidence for this given by the FT is that the draft G8 summit makes no reference to the figure. In some ways this may seem pedantic - failing to repeat the number is not the sane thing as renouncing it - but for those of us who watch summit language carefully, this is a significant ommission. If the countries meant to to keep their promises, they would make a virtue of it by restating the commitment. The only possible reason for dropping the language is that they no longer believe they will live up to it.

In some ways, however, this is more worrying:

In a further retreat, the G8 is set to abandon its Gleneagles promise to provide universal access to Aids treatment and prevention by 2010. The pledge has been a benchmark around which health campaigners and others have been organising their work, especially in Africa.

Universal access to AIDS treatment is a much better target than the aid target. In principle, we should be setting targets for what we plan to achieve, not targets for how much we plan to spend (which creates perverse incentives to spend more, rather than achieve more value for money).