Owen abroad

Archive for March, 2009

BraveNewTraveler describes the six characters you’ll meet at every expat bar.

It’s never hard to find your way there – all you need to do is follow the American music which is old enough to feel stale without being old enough to feel hip and look for a chalkboard sign advertising a European football match.

It is pretty funny (take no notice the censorious commenters who say that it is too cynical). I find it all too easy to recognise (and laugh at) myself:

1. The Overpaid Aid Worker

You can easily pick out this character by the imported beer on his table and the way he litters his speech with acronyms: USAID, NGO, MFI, MPP.

If it’s a weekday night, he might nurse his beer while tapping away on his MacBook, shooting off emails to his friends in D.C., or maybe to the alumni listserve of a bastion of East Coast higher education.

This year he’s empowering women in Latin America, but two years ago he was working on democracy promotion in Bangladesh, and next year it’s off to Thailand to oversee microfinance development.

Is there any world problem this whiz can’t solve on a two-year contract, armed only with his cushy salary, company car, and housing stipend?

Before you get a chance to answer that, though, he will: there’s “real progress” being made at the “grass roots level” with his current initiative. Another European microbrew, please!

Hat tip: @bloodandmilk on Twitter

This is a summary of a longer (8 page) review which you can read in full here.

Dead Aid should have been an interesting and challenging book. Moyo is originally from Zambia, she has degrees from Harvard and Oxford, and she has worked at the World Bank and at Goldman Sachs.

Disappointingly, while the book is about some important questions, it makes no useful contribution to the debate. Moyo’s arguments and her use of evidence are at best lazy, and at worst mendacious.

There are three parts to Moyo’s case. She says that aid has demonstrably failed. Second, she says that aid has contributed to poverty. Third, she says that there are other, more effective ways of accelerating development.

Moyo’s evidence that aid does not work amounts to no more than this: Africa’s growth has decreased while aid has increased. This is a strangely naive argument – it is like saying that because the US spends $2 trillion a year on health care, mainly on the sick and dying, and yet people still get sick, we can conclude that health care does not work. The evidence linking aid to growth is handicapped by the weakness of our statistical tests, but if anything it does seems to show that aid is correlated with growth.

Many reasonable people believe that bad aid can be harmful. The conceptual arguments for this tend to be more persuasive than the evidence, but there is certainly a case to be made. Sadly, Moyo does not make it. She just asserts that aid causes corruption, bottlenecks, losses of competitiveness and erosion of accountability. This last concern, in particular, merits thorough consideration which it does not get here. Moyo does not support any of this with any evidence, and – more alarmingly – she misrepresents the academic literature to pretend that it supports her conclusions.

Even if Moyo had succeeded in making the case that aid can be harmful, her story would require her to make two further arguments. First, she would have to show that the harm outweighs the good. Second, she would have to show that donors could not improve the way they give aid and so minimize the harm while retaining the good. Moyo skips both issues, jumping from her view that aid can do some harm to the conclusion that donors should declare that they will stop giving aid over the next five years.

Moyo proposes other ways that developing countries can move forward, by raising money in capital markets, attracting foreign direct investment, reducing restrictions on trade and promoting financial services for the poor. It does not appear to worry Moyo – or perhaps it does not even occur to her – that the evidence for the impact on growth of foreign investment and improved financial services is no better than the evidence for the benefits of aid. As with aid, we can show that there are gains for the direct beneficiaries, but unlike aid, nobody has yet shown any correlation between these measures and overall growth and development. (By contrast, there is good evidence for the development benefits of trade.) Nonetheless, they seem reasonable enough policies – and they are already being widely pursued. What Moyo proposes is conventional wisdom in development economics. Moyo’s book does not make a convincing case for these approaches to be adopted as an alternative to aid, rather than working alongside it.

Moyo has the front to accuse people working in the aid industry of promoting their own interests, and then – as an investment banker at Goldman Sachs – to advocate instead that the poorest countries should be encouraged to borrow more in private capital markets.

There is a debate to be had about aid, but Moyo’s book, sadly, does not advance it. Dead Aid is poorly researched, badly argued, mendacious in its use of evidence, and pedestrian in its suggestions for alternatives.

(For more detailed arguments and references, please read this  longer version of this review.)

Dambisa Moyo’s book, Dead Aid, has had a lot of attention in the media.

I’ll post my own, excessively long review of the book here on the blog.  In the meantime, here are some other reviews:

Broadly unsympathetic

• My review
• Adekeye Adebajo in Business Day
• Michael Clemens in Finance And Development
• David Roodman at CGD
• Briefing note by the One Campaign
• Paul Collier in The Independent
• The Economist
• Zambian Economist (highly recommended)
• Madeleine Bunting in The Guardian
• Parminder Bahra in The Times

Broadly sympathetic

• Michela Wrong in The Spectator
• Patrick French in The Sunday Times
• Matthew Rees in The Wall Street Journal
• Sonia Shah in The Nation

Bill Easterly and Laura Freschi at Aid Watch lay in to British Government aid for giving financial support directly to governments:

In 2007, the UK gave 20 percent of their total bilateral ODA in the form of budget support to 13 countries: Tanzania, Ethiopia, Pakistan, Ghana, Uganda, Mozambique, Vietnam, Malawi, Zambia, India, Sierra Leone, Nepal, and Nicaragua.

Of this list, only Ghana and India were classified as “free” by the annual Freedom House ratings on democracy (according to either the 2007 or 2008 rating). For the 11 other countries that did get British budget support, how much is there “country ownership” when the government is not democratically accountable to the “country”?

… There is nothing that says you have to give aid meant for the poorest peoples directly to their governments, if the latter are tyrannical and corrupt. With the examples above, which side are UK aid officials on, on the side of poor people or on the side of the governments that oppress them?

With all due respect to Aid Watch, I don’t think they have got this right.

For example, they say:

Ethiopia’s autocratic government, which is inexplicably the largest recipient of UK budget support in Africa, won 99% of the vote in the last “election”.

Nice point, except:

a. according to the official results of the 2005 election, the ruling party won 59.8% of the votes; the Coalition for Unity and Democracy got 19.9% and the United Ethiopian Democratic Forces got 9.5%.  I have no idea if those accurately reflect how people voted, but it is nonsense to say that the government received 99% of the vote;

b. the UK does not give budget support to the Federal Government of Ethiopia. Through the Protection of Basic Services scheme, which was introduced after worries about the election, the UK Government provides finance to local government (albeit through the existing financial transfer mechanism via central government).  As well as funding health and education, the project includes significant components to increase transparency and accountability of federal and regional parliaments.

Aside from getting the facts wrong, Aid Watch seem to be criticising this form of aid by slinging mud rather than by way of a proper analysis of the advantages and disadvanges. We should be asking what benefits arise from giving aid through government, and what harm may come from it. Aid Watch acknowledge the possible benefits: lower transaction costs, more coherence in development policies, building capacity of government. There is another crucial possible benefit: putting money through government budgets is also a way to make the government more accountable to its own citizens, rather than to a bunch of foreign donors.

But Aid Watch don’t try to spell out what the harm might be if aid is given to governments with unpleasant records on human rights or corruption.  I personally think there is a case to be made against giving money to many governments, for example if there is reason to believe that the money will not be spent on poverty reduction, or if it will sustain in power a government which might otherwise be booted out of office.  But let’s set out these reasons coherently, and let’s try to assess their importance relative to the possible benefits. Aid Watch seems to suggest that guilt-by-association is enough to damn the whole enterprise.

As it happens, the governments mentioned in this piece (Ethiopia, Vietnam and Malawi) all make demonstrably good use of the money they have received.  Here in Ethiopia the expansion of public services such as free education and publich health workers financed by Protection of Basic Services is transforming the quality of lives across the country; and Vietnam has made quite staggering progress in bringing down poverty.  Personally I think there are important questions to be answered about the quality of democracy in both countries: but that doesn’t mean I want to kill some of the citizens of those countries, or deprive them of basic services, by giving less effective aid.

The British Government’s approach of giving some aid in the form of budget support (too little, in my view) is motivated by evidence that in some circumstances this is an important way of building more effective, responsive and accountable institutions.  Developing countries don’t want to receive aid forever, any more than industrialised countries want to give it forever.  Building effective and accountable public services is a way of financing the delivery of public services in the short run, while at the same time making it more likely that countries have an exit strategy from aid in the long run.

That is not preferring governments to poor people: it is preferring poor people to giving aid in a way which maximises the publicity you get and covering your back but doing little to build accountable and sustainable public services.

Giving aid as budget support should not be promoted ideologically: it should be used where the advantages (in terms of better service delivery and the long term benefit to accountability and institutions) outweigh the disadvantages (such as the risk of sustaining a bad government in power).   Equally it should not be opposed ideologically.  Budget support has not been shown to be at any greater risk of corruption or of fungibility than other forms of aid (these are the two main arguments that are offered against budget support).   It should be assessed case-by-case.  Where it can be used, it represents a very powerful mechanism for both the short term benefits of service delivery and the long term benefits of institutional development.  Where it cannot be used, donors should be focusing on what they can do to help create an environment where it can be used in future.

If Aid Watch want to be taken seriously as an aid watchdog, then (a) they’d better get their facts straight and (b) they need to do some proper analysis of the costs and benefits of different choices for aid delivery in different contexts, rather than simply asserting that it is wrong to give aid to and through governments of which they disapprove.

Incidentally, last year Easterly and Pfutze (“Where Does the Money Go? Best and Worst Practices in Foreign Aid.”) ranked the UK as the best bilateral donor.  That doesn’t mean that the UK is perfect, by any means, and it doesn’t mean that they get every judgement right; but it does suggest that UK aid officials might not deserve the allegation in this blog entry that they prefer poor governments to poor people.

Declaration of interest: I used to work for the UK Department of International Development.
(Updated 23 March.)

Update: Kudos to Aid Watch. They have given me space on the Aid Watch blog to post this reply (the same as the post above) on their blog.  You might also want to check out the comments there.

I went to London for the DFID conference on 9 and 10 March on “Securing Our Common Future”.

The latest Development Drums – a podcast about development issues – includes an interview with DFID Permanent Secretary Minouche Shafik and a discussion about the Conference with Nancy Birdsall and Simon Maxwell.

Scarlett Lion writes about girls in Liberia.

This is how Janice Pratt begins addressing her peers. She’s a slight girl with a strong voice that says to anyone willing to listen: I’m going to be someone.

I am always struck whenever I travel in developing countries how similar people all around the world are in their ambitions and dreams.

Paul Collier, one of today’s most influential development thinkers, talks about his new book, Wars, Guns and Votes on the new edition of Development Drums.  He also talks about his previous bestselling book, The Bottom Billion.