Aid budgets are limited by the amounts that rich countries are willing to allocate for foreign assistance. There are limits to the generosity of parliaments, finance ministries and taxpayers. At the same time, in developing countries there is not enough money to pay for everyone’s basic needs for food, water, shelter, health and education.
Because the total resources available are less than the needs, it is very important how they are used. If poor decisions are made about the allocation of precious aid resources, the result can be additional suffering and death for millions of people.
This post why I think that attempts from outside to argue for aid to be earmarked for particular causes can lead to unnecessary deaths and suffering. Aid works, but it could work better, and many sectoral advocates are not helping.
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A striking example is the amount of money donors earmark for spending on HIV and AIDS here in Ethiopia.
Government spending on health in Ethiopia comes to about $4 per person per year. According to OECD/DAC data, foreign aid for health in 2007 added about $5.15 per person to the government’s resources, bringing the total of government and aid resources to about $9 – $10 per person per year. (As an aside: health spending per person per year in the UK is about $2,000 per person per year; in the US it is about $4,500.)
According to the World Health Organisation (WHO), in Ethiopia about 65% of the population (52 million people) live in areas at risk of malaria. Malaria is the leading cause of health problems, responsible for about 27% of deaths; and malaria epidemics are increasing. The HIV/AIDS prevalence rate among adults is 2.1% (2007) – that’s about 1.6 million people living with HIV.
Of $5.15 per head provided in aid for health to Ethiopia in 2007, about $3.18 per head was earmarked for HIV while about $0.26 cents per head was allocated to malaria control. Given the relatively low burden of HIV, earmarking 60% of health aid for HIV is excessive relative to other needs for health spending.
Of course it is right that we should try to make sure that everybody with HIV has access to medicines to keep them healthy, and we should work to prevent spread of the disease. But we should also make sure that people have bednets and drugs to stop malaria, provide childhood vaccination to prevent easily preventable diseases, ensure access to contraception and safe abortions, and, above all, enough funding to provide basic health services that would save thousands of lives and suffering. Yet we are not willing to provide enough money to do all of this. It is in this context that it is damaging to earmark 60% of health aid to HIV.
This excessive funding of HIV relative to other health needs is damaging in at least three ways.
First, aid money is not being spent in ways which would yield biggest impact. Take this analysis from the Open Budgets Blog:
Using these estimates, it would cost an additional US$29.7 million to treat all of the 540,000 kids who died from pneumonia/diarrhea in Nigeria and Ethiopia. Were this money to come out of the HIV budget, it would reduce the number of HIV patients that could be provided treatment by about 61,240. So, using these admittedly very rough estimates, our current allocation of resources from the pot of money for disease treatment suggests that we value the life of a person with HIV at 8.8 times the value of the life of a child with pneumonia.
Another way of looking at this is that reallocating resources from HIV to treating pneumonia and diarrhea in Ethiopia and Nigeria alone would have saved nearly half a million additional lives in one year.
Second, the misallocation of aid money sucks scarce resources (administrators, doctors, political attention) from other programmes which would have more impact. As Rakesh notes:
In Tanzania, I have seen any number of health centers which lack water and toilets, where women cannot deliver their babies safely, but which has a new building with 4 air conditioners and 2 Land Cruisers and weekly workshops on AIDS.
I wrote about this problem in 2007 after visiting a clinic in Burkina Faso which had been starved of medical workers by the recruitment drive by the local PEPFAR-funded clinic. And Laurie Garrett wrote in Foreign Affairs about the impact on basic health facilities of funding linked to specific diseases.
Third, the misallocation of aid money creates perverse, possibly lethal, incentives. Here in Ethiopia the existence of huge amounts of aid money for AIDS chasing too few people with HIV means that there is a kind of welfare state emerging for people with HIV. It is not perhaps the welfare state we see in many European countries, but it is much better resourced than is available for people without HIV. As well as free health care, people living with HIV are supported to find work, and their children get free education. NGOs fall over themselves to get people living with HIV and their families onto their lists.
The result is that some Ethiopians emerge from being told the results of their voluntary HIV tests in tears because they don’t have the disease and so do not qualify for this assistance. The quality of life for them and their families would be better if they did; and their life expectancy could well be higher, given the access to health services that would be unlocked. There are even rumours here in Addis Ababa that some people are deliberately getting themselves infected, so that they can give their children a better start in life.
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I have used the example of HIV because the misallocation is particularly egregious here in Ethiopia (as it is in some other countries in sub-Saharan Africa). But I do not want this to be misunderstood as an attack on AIDS activists, or on funding for HIV in particular. Some of my best friends – indeed, some members of my family – are AIDS advocates and they are among the most committed and well intentioned development advocates. If they had been listened to earlier, a great deal of suffering in sub-Saharan Africa and elsewhere could have been avoided; and the path to development would not have been so long and arduous for the countries most affected by AIDS. These advocates are merely one group among many making the case (and earmarking funds) for their cause.
Look, for example, at this recent paper by ODI on education (funded by the Hewlett Foundation) which complains that while funding for basic education has grown in real terms it has not grown as a share of total aid. The paper is all about how education advocates can do more to “capture” the global stage and compete with health spending. (“Capture” is their word, not mine). And I am not picking on education either. There are endless demands from activists to commit more money to agriculture, microfinance, water, maternal mortality and a long list of other important issues.
The development industry seems to be riddled with people whose main job is to divert money to their good cause. The advocates are united by a strong belief in the priority that should be given to their sector (education, water, AIDS etc). They convince themselves that they are speaking for real interests of the poor, which they consider to be unaccountably neglected by everyone else. Within many aid agencies there is a permanent state of low intensity bureaucratic warfare for resources, sucking up the time and attention of staff as they fight to defend and expand funding for the causes they work on. They deliberately stoke up pressure in private alliances with civil society organisations – many of whom they fund – to raise the political stakes through conferences, international declarations, and publications with the aim of committing funders to spend a larger share of aid resources on their issue. Territory is captured and held by way of international commitments in summit communiques. But for the aid budget as a whole these are zero sum games, and everyone would be better off – and many lives would be saved – if it stopped.
The advocates might defend themselves by saying that they are trying to bring more money into development, not to reallocate aid from one cause to another. But as they know, or ought to know, that is not how development budgets work. The UK commitment to spend $15 billion on education by 2015 does not advance by one day the path to UK aid reaching 0.7% of GDP. Either the commitment is meaningless, because that much money would have been spent on education anyway; or it has resulted in a reallocation of aid within a fixed total to education from something else which would otherwise have been a higher priority.
The earmarking of funds within a fixed total takes money from one good cause and puts it into another. If the money moves to a lower priority, the result is additional suffering, more deaths, a longer journey to economic development, and the need to give more aid, for longer, than if choices were driven by locally-determined, well-informed, evidence-based decisions about needs and priorities.
Here in Ethiopia, the Minister for Health is very clear sighted and articulate about the health priorities for his country, and the need to allocate resources to building effective basic health systems. Within the limited resources it is able to control, the Ethiopian health ministry makes intelligent decisions about priorities, understanding the variations within the country as well as between countries. They have much more detailed and specific understanding of the issues that affect people here than well-meaning activists in Europe or America. Furthermore, it is their country and their path to development, not ours.
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What do we need to do differently? I set out in a recent CGD Working Paper the need to address the political economy of aid.
First, we should be much more rigorous and systematic about defining and measuring results from aid so that well-informed choices can be made. There is a huge and expensive industry of “monitoring and evaluation”, most of the results of which is worth less than a pitcher of spit. We should dismantle it, and use a fraction of the money to fund a smaller, more sharply focused, more rigorous, international, independent collection of real evidence about the cost effectiveness of development interventions. (Tentative steps in this direction are, of course, being fiercely resisted by the trade union of evaluators.)
Second, we should try to stop earmarking aid; we should make more use of results to demonstrate that aid is effective. The Paris and Accra agendas for aid effectiveness, which have been agreed by all the donor nations, require donors to respect the development priorities of aid recipients. But there has been almost no change on the ground in this direction. One step towards doing this is to put in place simple but rigorous ways to measure and attribute results, so that donors can be confident about (and can explain to taxpayers) how their aid has been used. If we cannot produce compelling evidence about what aid has achieved, it should be no surprise that ministers and taxpayers want to determine in advance how the money will be spent.
Third, we should stop creating global funds, and merge or close the ones we have got. The existence of bureaucracies whose raison d’etre is to spend money in a particular sector or in a particular way creates incentives to promote resource misallocation because it protects jobs and institutional budgets.
Fourth, we must massively increase the transparency of past, present and future aid, so that informed decisions can be taken about how resources are allocated (not just between countries and sectors but within them). Under current arrangements, donors publish details of their aid up to 23 months after it has been spent. Donors need to publish detailed information about their current and planned future activities so that governments, donors and the private sector can identify the gaps where additional resources would have most effect.
Fifth, we should, as a development community, heap scorn and opprobrium on anyone caught advocating for more resources in their sector. We need stronger social norms in development that frown upon this kind of anti-social behaviour.
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You may think that this is all a bit over the top. Arguments about the architecture of aid may sound rather abstract and rarified, but aid is a scarce, precious resource and it is no exaggeration to say that if we spend it badly, the result is the avoidable deaths of literally millions of people.
Over on Huffington Post, Seth Berkley and Orin Levine make a plea for the United States to consider an Advance Market Commitment for an AIDS vaccine:
Traditionally it has taken up to 20 years for new vaccines to reach children in developing countries. The AMC can fix this inequity. Through the pneumococcal AMC, and with the support of the GAVI Alliance which administers it, children in Rwanda and the Gambia are benefiting from pneumococcal vaccines even before children in wealthy countries such as Austria and Japan. What’s more, the mechanism is spurring development and deployment of two newer vaccines that extend protection against strains of pneumococcal disease most common in the developing world. Thanks to such advances, the accelerated use of pneumococcal vaccination is projected to save 5 to 7 million lives by 2030.
The idea (which is mainly down to Michael Kremer at Harvard) is simple: donors promise in advance that if somebody invents and delivers a vaccine that meets certain requirements, then donors will pay for it to be bought in large quantities. That promise may provide sufficient certainty for the private sector to invest in developing new products, and to build large-scale manufacturing facilities. Take a look at this video to see what a difference Michael’s idea is already making.
From a public policy point of view, a nice feature of this schemes is that if it doesn’t work, it doesn’t cost anything. If you make a promise to purchase an AIDS vaccine when one is developed, but scientists are unable to crack the puzzle, then you have not spent a dime. You are only committed to buying an AIDS vaccine when it is developed – which, let’s face it, you would have done anyway. By making a firm commitment in advance, you change the incentives for the private sector. (The economics is set out here in an article in The Economists’ Voice.)
This scheme is designed to tackle an economic problem that runs deep in most market economies. We typically set up incentives for firms to innovate by promising them a temporary monopoly (through patents) if they are successful. This enables a firm to charge a premium for a limited period to recoup its investment and to compensate it for the risk it has taken. But this scheme only works if the consumers are willing and able to pay that premium. (And even then, it has a social and economic cost because it excludes consumers too poor to pay the premium). The scheme doesn’t work at all for products most of whose consumers are very poor – such as people who get malaria or who need cassava plants that are resistant to attack by the mosaic virus. That’s why firms spend ten times as much hunting for a cure for baldness as they do hunting for a cure for malaria. The Advance Market Commitment makes investment in those products much more attractive to the private sector, because now there is an opportunity to charge a premium (paid by the donors) even though the ultimate consumers are poor.
We will be in a better position to judge the effectiveness of the pneumococcal AMC when kids are actually getting injections paid for under the AMC. An important test will be whether we see pharmaceutical firms returning to the development and large-scale production of vaccines for developing countries (and there are some early signs that this is happening).
But the Pneumococcal AMC has already taught us that it is possible to navigate the legal, financial, commercial and political waters to put in place a legally-binding multi-donor commitment to buy a future product. This is the result of outstanding work done by the Center for Global Development (in which I am proud to have played a small, walk-on part). Early nay-sayers complained that an AMC was theoretically attractive but impossible in practice. CGD played a critical role by developing a practical way of implementing the idea, which opened the door to the implementation of the pneumo AMC.
Now that it has been shown that an AMC is technically possible, we should be looking at:
- designing an AMC for an “early stage” vaccine such as AIDS;
It is occasionally said that an AMC works for a late stage product – ie one that has already been largely developed but needs incentives to get it produced – but that it would not be appropriate for products still requiring substantial research and development. There is no logic to this argument. The original modelling for an AMC was done for an early stage vaccine, and I have never seen a cogent case against using the approach (alongside conventional government funding for basic research) for products at an early stage of development. - how to get the United States involved
This approach – of providing incentives for private sector entrepreneurship and risk taking to be involved in products for developing countries – ought to appeal to US policy-makers, and I have never understood why the US stood aside from the first AMC. There are some technicalities involved making commitments in the US budget process but these are not insurmountable. Let’s hope the US will be part of the next AMCs. - using the AMC approach for other health products
In principle, the AMC could be used to encourage the development and manufacture of a range of other health products such as drugs, diagnostics and surgical instruments - using the AMC to promote other forms of other research and development
we should consider whether the AMC might be a good approach for donor funding of other forms of research and development for products mainly used in the developing world, such as new agricultural varieties, solar energy products, and ways of providing clean water. - the possibilities for other forms of “pull” incentive for research and development
The AMC is not the only possible pull mechanism to incentivise research for products needed in developing countries. For example, donors might set up schemes to buy out patents, prizes or other rewards for success (e.g. payments linked to DALY’s averted or social rates of return). We should look again at the costs and benefits of these different ways of getting the private sector involved.
On his first day in office in 2001, President George W. Bush reinstated the so-called Mexico City Policy — known to critics as the global gag rule. It prevents the US government from giving money to organizations that provide counseling and referral for abortion, lobby to make abortion legal or more available in their country, or perform abortions except in cases of a threat to the woman’s life, rape or incest (even if those activities are funded by somebody else).
On Development Drums this week, we heard about the impact of the global gag rule on women in Africa, in an interview with Dana Hovig from Marie Stopes International. (Full disclosure: my partner works for MSI.) My expert guests were sceptical that Barack Obama would give priority to reversing the global gag rule any time soon.
But this weekend, we have heard that Obama is preparing to reverse some key decisions that President Bush took using executive authority, including on stem cell research, oil and gas drilling and – according to the Washington Post, the New York Times and Bloomberg – the global gag rule:
President-elect Barack Obama will reverse U.S. family-planning and AIDS-prevention strategies that have long linked global funding to anti-abortion and abstinence education, a public-health adviser said. Obama “is committed to looking at all this and changing the policies so that family-planning services — both in the U.S. and the developing world — reflect what works, what helps prevent unintended pregnancy, reduce maternal and infant mortality, prevent the spread of disease,” Wood said.
These seems like a good time to raise the profile of this important issue, to make sure that reversing the global gag rule is on the list of decisions for President Obama to take in his first day in office. The Center for Reproductive Rights has written to Barack Obama calling for the repeal of the global gag rule. Now is the time to make as much noise as possible about this to generate political support for an early decision to reverse this policy.
For more information about the global gag rule, listen to the interview with Dana Hovig in Episode 6 of Development Drums (about 30 minutes in to the podcast).
I’m impressed by the idea of the Welbodi Partnership, a charity supporting the Ministry of Health and Sanitation in Sierra Leone:
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?
Bill Clinton has finally been persuaded that investment in health systems is more important than funding “vertical” initiatives for particular diseases:
“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.
According to Hugh Williamson in the FT the 8 richest countries are stepping back from the commitment they gave in Gleneagles to increase aid:
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).
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