Owen abroad

According to Jeff Sachs in this week’s Time Magazine:

Aid per sub-Saharan African in 2002 was just $30. Of that modest amount, almost $5 was actually for consultants from the donor countries, more than $3 was for emergency aid, about $4 went for servicing Africa’s debts, and $5 was for debt relief operations. The rest, about $12, went to Africa.

Sachs goes on to say that the US gave about $3 per sub-Saharan African. Taking out the parts for US consultants and technical cooperation, food and other emergency aid, administrative costs and debt relief, the aid per African came to the grand total of perhaps 6 cents.

Over at Our Word is Our Weapon, Jim from North London writes a well-informed and interesting blog about current issues in international development, as well as various other issues of social policy. This week, Jim has rightly taken Tim Worstall to task for claiming that aid does not work. As usual, Jim is spot on – and his critique is witty, crisp and accurate. It is precisely because there is so much widespread scepticism about aid, and that it is so rarely challenged with the kind of authority that Jim has brought to the task, that I have decided to begin my occasional blog about aid effectiveness. I’m aiming to bring together evidence on the effectiveness of aid, ranging from individual projects up to measurements of the overall effectiveness of aid.

In 2004, 75 million Americans – 37% of the adult population and 61% of online Americans – used the internet to get political news and information, discuss candidates and debate issues in emails, or participate directly in the political process by volunteering or giving contributions to candidates. See the full report here. According to the commentary accompanying the survey:

As broadband connections proliferate and hum, the old mass audience for campaigns is being transformed into a collection of interconnected and overlapping audiences (global, national, partisan, group, issue-based, candidate-centered). Each online audience has a larger potential for activism than its offline counterparts simply because it has more communications and persuasion tools to exploit. This transformation makes life in the public arena more complex.

My forecast was wrong: Denmark did not block the the EU Council of Ministers from approving a proposed law which would allow patents on software. According to Groklaw, Bill Gates threatened the Danish Prime Minister with the loss of 800 software jobs if Denmark did not support the patents. Clearly Denmark was not so plucky after all. The website nosoftwarepatents.com explains the issues. Do you wish that SuperCalc had patented the spreadsheet? Or Wordstar had patented the word-processor? (If you think I am exaggerating, you may not know that in the US, Amazon has a patent on "one click" purchasing, that is, using cookies to keep track of an online shopping cart..) The European Parliament would need to approve this law. So far, they have not shown any signs of doing so. Now would be a good time to contact your MEP, and your MP, to ask them to vote against this proposal.

There have been several studies looking at whether aid results in economic growth, which all reach broadly similar conclusions. The most recent, and best study, is by my colleagues at the Center for Global Development. Like the other studies, it finds that aid has had a substantial positive impact on growth. On average, aid worth one percent of national income increases annual growth in the recipient country over the medium term by about a quarter of a percentage point a year. Because this higher level of income is maintained over time, $1 of aid leads to about $1.64 of additional wealth (measured as a net present value) for the recipients. Or, viewed as an investment in the growth of developing countries, the average rate of return from aid is at least 13%. It is true that, over the last thirty years, sub-Saharan Africa has received more than $200 billion in aid, and yet the continent has seen negative average growth, of about a quarter of a percent a year. But it does not follow that aid does not work. The analysis shows that, as a result of the aid, average growth was about 1 percentage point higher, each year, than it would have been without aid. In other words, Africans would be substantially worse off today, if it were not for the aid that they have received. The analysis finds that aid is somewhat more effective in countries with strong institutions; but aid is still effective (though less so) in countries with weak institutions. This study is in line with the consensus in a series of other papers looking at the relationship between aid and growth. This particular approach adjusts the aid figures to remove humanitarian and emergency aid, which would not be expected to be correlated with long-term growth, with the result that the relationship between aid and growth is found to be stronger (both larger, and statistically more robust) than some previous studies which used unadjusted aid data.

Plucky little Denmark plans to sabotage the EU’s sinister and unwelcome plans to introduce software patents. Another reason to be thankful to the Danes.

To celebrate their tenth anniversary, Yahoo! has created a web retrospective. Enjoy.

Over dinner the other night, some friends – all intelligent, well-informed, thoughtful and caring people – were expressing scepticism that foreign assistance actually works. They were concerned that aid is often syphoned off by corrupt elites, and ends up in private bank accounts in Switzerland. I suspect their views are fairly typical of how people think about aid. This gave me pause for thought. There is a significant body of evidence that aid works – both from analysis of individual projects, and large-scale analysis of the relationship between levels of aid and subsequent economic growth. It is remarkably consistent in finding not only that aid is effective, but that aid is one of the best economic investments that we can make. And yet there is a widespread view that aid is often wasted. One reason why people may believe that aid does not work is that there are so many people still living in poverty, despite the billions of dollars of aid that have been poured in. I think Jeff Sachs has it exactly right:

"It’s like trying to put out a forest fire with one hose. If the fire continues to spread, it doesn’t mean firefighting doesn’t work. It means we need more firefighters.”

I’m in no doubt that aid could be made much more effective, and progress towards improvements in foreign assistance is painfully slow. But the fact that there is room for improvement should not divert our attention from the evidence that aid is already very effective. I’ll try to bring together here some of the analysis on the effectiveness of aid, which I hope will help to inform the discussion. I would welcome any contributions or feedback on this.

In my day job, I am working on how we can accelerate research and development of new vaccines for malaria, AIDS and other diseases concentrated in developing countries. Alan Beattie has an article in today’s FT on the topic (quoting me.) You can read the full FT article here. This is the FT link (but it requires a subscription). If you want to know more, you can read about it on the Center for Global Development website.

It is traditional for the Managing Director of the IMF to be a European; and for the President of the World Bank to be an American (the current World Bank President, an Australian called Jim Wolfensohn, took US citizenship to get the job). Of course, the job should be advertised, and chosen through an open selection process. As The Guardian argued on February 1st, the job is too important to give to a political crony of the US Administration. Furthermore, World Bank staff travel round the world – apparently with a straight face – encouraging other countries to dismantle systems of political patronage and corruption in favour of open, transparent competitions. How much more convincing that would be if their own institution met the same standards. But the US administration is so-far unmoved by the idea of an appointment on merit: they show every sign of making a selection and deciding the new President entirely behind closed doors. I find it hard to believe today’s FT story (subscription only website) that Paul Wolfowitz – a neocon hawk who was one of the architects of the occupation of Iraq – is on the shortlist. Tthe US voting share in IDA is 14%, and in IBRD it is 16%. Which means that well over three quarters of the votes on the board is in the hands of Directors other than the US. In theory, then, the US could be outvoted by the other nations on the Bank board. In practice, everyone behaves as if the US has a veto. If the US were to propose someone unacceptable – and I think Paul Wolfowitz falls squarely into that category – there is a chance that the other countries would realize that they not only the power but also the duty to overrule the US nomination. And just possibly, they might get the taste for it, and start standing up to the US on other issues at the Bank and Fund boards. My personal prediction is that the US will nominate Randall Tobias, the US global aids coordinator, and former CEO of Eli Lilly, and that he will duly become the next President of the World Bank. You heard it here first.