Enclosure of the Commons - 21st Century Edition

• May 12th, 2007  (4) Comments

I was pondering for a presentation on Thursday why it is that inequality between countries has grown so markedly over the last 100 years. There are many reasons why the richer countries have grown, but it is harder to explain why poor countries do not catch up as quickly as they did during the previous 2,000 years.

A candidate explanation of why poor countries catch up more slowly now is that rich countries have taken steps which slow down the transfer of technology. By tightening intellectual property rules and expanding those restrictions to an increasing proportion of economic value, rich countries are, in effect, yanking up the ladder behind them.

I see today that James Surowiecki makes a similar point in the May 14 edition of The New Yorker:

The great irony is that the U.S. economy in its early years was built in large part on a lax attitude toward intellectual-property rights and enforcement. As the historian Doron Ben-Atar shows in his book “Trade Secrets,” the Founders believed that a strict attitude toward patents and copyright would limit domestic innovation and make it harder for the U.S. to expand its industrial base. American law did not protect the rights of foreign inventors or writers, and Secretary of the Treasury Alexander Hamilton, in his famous “Report on Manufactures,” of 1791, actively advocated the theft of technology and the luring of skilled workers from foreign countries. Among the beneficiaries of this was the American textile industry, which flourished thanks to pirated technology. Free-trade agreements that export our own restrictive I.P. laws may make the world safe for Pfizer, Microsoft, and Disney, but they don’t deserve the name free trade.

Does this matter? I think it probably does. David Houle wrote last month about the growing economic importance of information in the value of economic production:

In 1975, at the very beginning of the Information Age, 16.8% of the market capitalization of the S&P 500 was from intangible assets. By 1995, that number had grown to 68.4%, and in 2005 it was up to 79.7%, where I imagine it will level off in the years ahead. In the historically short time of thirty years there has been a fundamental shift in the concept of value, not unlike the transition from the land values of the Agricultural Age to the production values of the Industrial Age.

The twentieth century has seen a new enclosure of the commons - robber barons have built fences around the key economic assets of the community, and they have got rich charging people for using them. In the past, when mankind learned how to get more food from the land (e.g. learning about irrigation, crop rotation or seed soaking) these ideas were not protected by patents. When we learned how to improve our health (e.g by improving access to clean water, or using antibiotics) these ideas were not protected by patents. When we learned how to organize factories, or build roads, or design windmills - all these ideas could be transplanted and adapted by poorer countries, so that they too could benefit from them.

Now at the start of the 21st Century, many of the key technologies that drive economic value are locked away by patents and intellectual property rights - agricultural technologies, business software, vaccines to prevent disease. As a result, the poor can no longer simply adopt these techniques and adapt them for themselves.

The cruel irony is that it would do us no harm to allow others to share in the benefits of our innovations. We worry about intellectual property rights because we want to protect our ability to recover the costs of innovation from the rich: the poor (who cannot afford to reward us for our cleverness anyway) are just innocent bystanders.

Ageing Groover from Vancouver

• May 12th, 2007  Add comment

Much to the derision of my younger colleagues, we went to see Bryan Adams at Wembley Arena last night.  (I went with James - my oldest schoolfriend - who was reluctantly dragged along by his wife Becky.  G is in Tanzania.)

I had low expectations - I wasn’t sure that I would recognize many of the songs, and I’ve always thought the song from Robin Hood  was a dreadful dirge.  And it was much better than I expected.  Adams looks much younger than 47 - perhaps the results of his vegan diet - and he rocks pretty good.  I prefer his older stuff - especially songs from the 1984 album Reckless - but perhaps that merely reflects my age rather than the quality of the music.  I have to confess, I even thought Everything I Do was pretty good live.

Are Sachs’s Millennium Villages Projects scalable?

• April 25th, 2007  Add comment

Tyler Cowen on Jeff Sachs’s Millennium Village project

In my view Sach’s [sic] work is admirable and will do much to improve the lives of a small percentage of Africans. But I do not think it is scalable. First, I believe the candidate villages are cherry-picked for possible improvement. Armed conflict remains a huge problem on the continent. Second, one key non-scalable ingredient is Sachs himself. His reputation is worth a great deal to him, and these projects will receive scrutiny and study; he has strong incentives to make sure everything goes as well and as honestly as possible. That incentive vanishes once we implement such ideas on a bigger scale and through other institutions. File this one under “Wonderful but oversold.”

Barack Obama on US Aid

• April 25th, 2007  (3) Comments

In a speech to the Chicago Council on Global Affairs, Barack Obama has promised to double aid by 2012 if he is elected President:

For the last twenty years, U.S. foreign aid funding has done little more than keep pace with inflation. Doubling our foreign assistance spending by 2012 will help meet the challenge laid out by Tony Blair at the 2005 G-8 conference at Gleneagles, and it will help push the rest of the developed world to invest in security and opportunity. As we have seen recently with large increases in funding for our AIDS programs, we have the capacity to make sure this funding makes a real difference.

No commitment to reform the institutions of US Foreign Assistance, however (unlike John Edwards).

Things I learned again yesterday

• April 23rd, 2007  (1) Comment

G and I both ran the London Marathon yesterday, on a beautiful warm day.  G had a good run - starting at a sensible pace, running even splits, and finishing in 3:28:01.  I ran like an idiot - going off way too fast at the start, and (inevitably) hobbling home after my wheels came off at about 18 miles, for a total time of 3:04:09.

I learned some lessons again that I should have learned before:

• You can’t run a marathon well without training for it.   G and I both relied on our background fitness. But really we needed a tailored combination of long runs, speedwork, aerobic fitness, and strength.  Getting the right mixture is much more important than running in the park every day.
• If you go off too fast at the start, you will pay for it later.  It is much better to go off slowly and then speed up.  It is claimed that every 10 seconds a mile you run too fast in the first half will cost you a minute a mile in the second half.  And it is much more fun to be overtaking people in the last ten miles than to be overtaken.
• You can’t run as fast when it is hot.
• You’ll go through some rough patches in any marathon.  Don’t quit: they will pass.  I had a stitch twice, and several segments when I had to walk, and I still ran fast enough to qualify for the Boston Marathon.

NGOs - are they effective?

• April 21st, 2007  (6) Comments

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.

A tale of two inquiries

• April 19th, 2007  Add comment

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?

World Bank on effectiveness of aid

• April 14th, 2007  Add comment

The head of evaluation at the World Bank writing in the Guardian blog about the effectiveness of aid:

For donors, this means going beyond the push for free-standing projects and the tracking of individual project successes, to supporting better coordination and linkages. For developing countries, it means being in the driver’s seat in recognizing and capitalizing on the most important synergies that additional financing from multiple donors can bring.

The Economist on improving the quality of aid

• April 6th, 2007  (1) Comment

The Economist highlights the importance of improving the way aid is given:

Because the aid they receive is such a capricious, volatile commodity, governments dare not make full use of it. They could hire legions of extra teachers, clinicians and civil servants, but only if they are prepared to fire them when the aid spigot is closed. They could put AIDS-sufferers on anti-retroviral therapies, but only if they are willing to discontinue treatment once the money stops.

The article explains why the Paris Declaration on Aid Effectiveness is such an important step towards reducing the costs of aid to beneficiaries and donors alike, and so greatly improving the effectiveness with which aid is used.

It is a rare pleasure to read this well-informed comment about the need for donors to align their aid with the systems they are trying to support, to make aid more predictable, less likely to undermined domestic accountability and to duplicate each other less.

Being Paul Wolfowitz’s girlfriend

• April 5th, 2007  (5) Comments

According to Murray Waas:

Employees of the World Bank have been “expressing concern, dismay, and outrage” regarding favoritism shown by the bank and the Bush administration towards the one-time girlfriend of World Bank president Paul Wolfowitz, according to an internal memo circulated within the bank by the World Bank Group Association, which represents the rights of the bank’s 13,000 employees.

Tradable missions permits for aid agencies?

• March 24th, 2007  (5) Comments

One of the unconscionable practices in international aid is the “mission” - a team of experts from donor countries who fly out to the developing country to supervise the way that aid is used. For large aid projects, these mission teams - sometimes composed of eager but inexperienced development workers - will demand meetings with senior officials from the recipient country government, often including Cabinet-level ministers.

These missions are a major burden on developing countries. Each mission ties up many hours of ministerial and official time. The policies pressed on governments are often contradictory, lack evidence and have little or no legitimacy in local policital processes. That is why donors promised in the Paris Declaration on Aid Effectiveness to reduce the burden of missions.

Yet in the 18 months since that declaration there were 11,000 missions to 31 countries surveyed by the OECD - an average of about 350 missions per country per year. Each mission lasts about a week, so on average each country will have about 5 donor missions in country at any one time. This is a huge cost to the scarce administrative capacity of developing countries: costs which are imposed by well-meaning donors but borne by the recipient government.

The costs of missions can be thought of as a negative externality - which suggests that developing countries should adopt the polluter pays principle as a way to control the burden. Using the analogy of cap-and-trade in environmental pollution, developing countries could issue tradable missions permits. Here is how it could work:

• Developing countries would each decide how many donor missions they can absorb in total each year. Suppose that a country decides to accept 50 donor missions a year (a seventh of the number they now receive on average!). The government would then issue 50 tradable missions permits, which they would sell to donors in an online auction.
• Development agencies designing aid programmes that require a donor mission would have to include in their budget the cost of buying one of these permits, either in the auction or in a secondary market. This would mean that the budget of the aid project would include explicitly not only the cost to the donor of providing the resources, but also the cost to the recipient that the project will impose. The donor thus bears the full cost of its decisions.
• Donors would have an incentive to coordinate their programmes and send joint missions, since they could then share the costs of mission permits.
• Donors would also have a financial incentive to decentralize their operations to resident staff, rather than sending missions from HQ.

The key to making this work would be for developing countries to be rigorous in limiting donors’ access to ministers and officials to teams holding a mission permit. There would be strong pressures - including financial - on them to accept an additional meeting without a mission permit. This could be avoided to some extent through the visa regime (visiting staff from donor agencies would have to quote their mission permit number), but to some extent the donors would need to police the system themselves.

In general, it seems to me that many of the challenges in the development industry relate are the consequence of negative externalities of donor decisions. As the number of donors increases, the prospects for solving these problems through coordination and committees seem more and more remote - and we should look instead to decentralized, market-based mechanisms to align incentives to deliver better results.

Should we cap and trade, or tax, to reduce carbon emissions?

• March 17th, 2007  (1) Comment

If we want to reduce carbon emissions, should we cap the total and then allow trading, or should we impose a tax on all carbon emissions? Organizations and Markets looks at the economics. Here is the conclusion:

So the final score is: Permits get a moderate edge on political economy/public choice issues; taxes have a big advantage on institutional/governance issues; and taxes deliver a big can of whipass on traditional economic efficiency concerns. So conditional on accepting the weak case for CO2 emissions control, the Pigou people have a strong case against the cap-and-trade brigade. Maybe they should start making it.

One issue that is not covered here is the distribution between countries. From the point of view of developing countries, cap-and-trade (with equal per-capita emissions targets) presumably has a large advantage over taxing emissions, in the absence of a mechanism to redistribute the revenues from rich countries (which will collect the taxes) to poor countries (who bear most of the costs of adjustment to climate change).

Hat tip: Economist blog. Also Greg Mankiw

Global Poverty - will it be a US election issue?

• March 17th, 2007  (2) Comments

US Presidential hopeful John Edwards has set out a plan for fighting global poverty:

As president, John Edwards will fundamentally transform America’s approach to the world. As part of his $5 billion initiative, he will bring high-level attention to help people in three priority areas: primary education, preventive health, and greater economic and political opportunity.

He proposes a Cabinet level post to tackle global poverty (which the UK introduced in 1997) and promises a new Global Development Act to consolidate and simplify the US foreign assistance system.

Comment: It would be good news for development if this becomes an issue in the US Presidential elections.

More at CGD.

Back from Lanzarote

• March 16th, 2007  Add comment

Two weeks in Club La Santa in Lanzarote. Feeling fitter, more tanned, and (oddly) a little heavier than when we left.

Community work for immigrants?

• February 27th, 2007  (1) Comment

According to the Press Assocation, Gordon Brown is going to suggest that migrants should be obliged to carry out community work:

Immigrants should undertake community work before they are granted UK citizenship, Gordon Brown is due to say. The BBC reports that Mr Brown is expected to tell a seminar on Britishness the move would help newcomers settle.

And according to The Independent they will need to prove that they can speak the language:

Spouses hoping to migrate to the UK should face English language tests before being allowed to join their partners, a commission advising the Government has suggested.

I wonder what the 750,000 Britons now living at least part of the year in Spain would make of these suggestions?

Scottish Executive Aid Programme Has High Admin Costs

• February 27th, 2007  Add comment

According to Nyasa Times:

Nearly a third of the £2m spent on Scotland’s Malawi programme has gone on running costs, rather than helping those in need, BBC Scotland has found.

The amount is about five times the running costs for similar work carried out by a Westminster department [DFID].

The details followed a BBC request under the Freedom of Information Act.

The Scottish Executive insisted value for money was still being provided and said that costs were likely to be higher at the beginning of the project.

Food miles

• February 25th, 2007  Add comment

Take a look at Clive writing about Food Miles:

Food miles are useless. There is no doubt that transport intensity in the food supply system has been increasing - driven by forces of globalisation, consolidation in retailing, larger shops with more choice meeting demand for year-round supply, car-based shopping etc. But “food miles” are barely useful in capturing or articulating any of this interesting complexity.

Absolutely.

Online identities

• February 25th, 2007  Add comment

A new, open source, distributed identity management service called OpenID is making waves in the online community.  We need user-centric, trusted identity management system, and this could be it.

Giving birth in Burkina Faso

• February 25th, 2007  Add comment

On Friday I visited a school, clinic and vocational training centre in Burkina Faso in a village in Bazega province, about an hour south of Ougadougou.

La Fondation pour le Développement Communautaire de Burkina Faso supports government schools and clinics, and it operates an agricultural training college. The programme in schools aims to increase school standards and performance, in part by providing health care for the children while at school.

The school was pretty good; though there were 85 children in a class, with just one teacher (and no assistant) and a total of 20 textbooks. The children were sharing desks and benches, and learning by rote; but at least they were in school and the teachers seemed genuinely interested in them.

The work of FCD in the schools - which is funded by the EC taxpayers - is impressive. By administering de-worming tablets in school, they have reduced the incidence of intestinal worms, increased school attendance and improved graduation rates. (There is robust evidence from elsewhere in Africa that deworming is one of the most cost-effective ways to reduce school absenteeism. If you are a taxpayer in a country that contributes to the European Development Fund you should be proud.)

The health clinic nearby was more disturbing. The photo to the left is where mothers give birth (about 1-2 a day). As you can see, the facilities are rudimentary. This is a clinic only an hour from the capital of Burkina Faso, so you would expect that it would be a bit better resourced.

A number of people we spoke to offered the same explanation for the parlous state of the clinics. Much of the money and some of the best staff are diverted to disease-specific programmes - such as for AIDS and malaria - and this is starving the basic health system of funds. (Laurie Garrett writes about this problem in the current edition of Foreign Affairs magazine.)

Sadly I had to return to London for work, so I couldn’t stay for the Le Festival Panafricain du Cinéma et de la Télévision de Ouagadougou (FESPACO).

Ougadougou is a very relaxed, easy city to visit, and has a great nightlife, as well as an agreeable climate.

Salutory fact of the day

• February 20th, 2007  (4) Comments

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.

Odious debts and vultures

• February 18th, 2007  Add comment

The British High Court has ruled that Zambia has to make substantial payments on its debt now held by Donegal International, based in the British Virgin Islands. Donegal International is a so-called vulture fund - that is, a financial organization that buys at a discount bonds that are very unlikely to be repaid, and then tries to sue the issuer for the full amount.

Ordinarily, I would be in favour of allowing markets to trade securities, and for companies to be able to enforce contracts against governments. Well-functioning and liquid secondary markets help to reduce the cost of capital when it is originally borrowed, and the subsequent trading at below par enables debt and risk to be priced.

But there is an obvious market failure here: it is the collective action problem of dealing with defaults. We have a solution for companies: when a company can no longer meets its debts, it goes bankrupt. This is an orderly procedure to ensure that the creditors receive their share of the debtor’s assets. In particular, bankruptcy prevents free riders from holding out for full repayment of their debts once other creditors have settled. But as Walter Wriston famously remarked, countries don’t go bust. Once a country’s debts become unsustainable, it is in everyone’s interests to restructure those debts. If there is no collective mechanism for restructuring, then creditors will scramble to be repaid at the first sign of trouble, which is in nobody’s interest. And if free-riders hold out for full repayment, then there will be less money for the other creditors and less prospect of an equitable and sustainable settlement. That is why we have the London Club (for private creditors) and Paris Club (for public creditors). But the Vulture Funds hope to free-ride on these collective mechanisms, and seek the repayment of debts in full once the other creditors have bailed out the country and restructured its debts.

There is a possible solution to this, which is related to the idea put forward by Michael Kremer and Seema Jayachandran. First, laws in creditor countries such as the UK and US could be changed to disallow seizure of a country’s assets for non-repayment of so called ‘odious debt’. In other words, we could change the law so that odious debt contracts are legally unenforceable. Second, foreign aid to successor regimes could be made contingent on non-repayment of odious debt. This would encourage successor governments to repudiate odious loans, which will encourage banks to refrain from originating them.

Who would determine what debts are odious? Kremer and Jayachandran suggest that we give a mandate to an international institution such as the UN or the IMF to declare a regime odious. For example, Mr Mugabe’s government in Zimbabwe would be declared odious. Any organization considering lending money to that government would know that the debts would be legally unenforcable. In addition, I suggest that we agree that any outstanding sovereign debts of a country that receives HIPC debt relief would also be automatically declared to be odious. This would mean that lenders today would be wary of making any sovereign loans to a country that might in the future run into a debt crisis.

An automatic mechanism to make debts unenforcable if they were lent to a government that was corrupt or incompetent, or if they contributed to a debt crisis, would impose a much stricter market discipline on lenders to make them think twice before making such loans; and it would also close down the free-riding activities of vulture funds.

Romania lent $30m to Zambia in 1999, when Frederick Chiluba was President of Zambia. Chiluba is under multiple charges of corruption and bribery. If those charges are made to stick, then the country’s debts which were incurred under his regime should, in my view, be declared odious and unenforcable in international courts. And that would mean that the vulture funds would not get paid.

What do they teach head teachers these days?

• February 18th, 2007  Add comment

I heard Des Smith on the BBC this morning. He said:

“I was literally hung out to dry by Tony Blair”

It seems he said the same to the Scotsman.

I find it hard to believe that he was literally hung out to dry. Metaphorically, perhaps?

You would think a former head teacher would know what ‘literally’ means.

BBC downloads to be restricted to Windows

• February 17th, 2007  (3) Comments

The BBC is considering changing its “listen again” service to include Digital Rights Management so that it can only be used by people using a recent version of Windows:

The only system that currently provides this security is Windows Media 10 and above. Further, the only comprehensively deployed operating system that currently supports  Windows Media Player 10 and above is the Windows XP operating system. As a result of these DRM requirements the proposed BBC iPlayer download manager element therefore requires Windows Media Player 10 and Windows XP.

This means that those of us who use an Apple Mac, Linux or an older version of Windows will not be able to listen to programmes stored on the BBC site. 

This will screw me up: I use Linux to download programmes from the BBC site and convert them to MP3 files so that I can listen to them on my MP3 player on my way to work.

If you think the BBC’s proposals are a bad idea, please respond to the consultation saying so.

Hat tip: Glyn Moody

The Economist on Ghana and on vaccines

• February 16th, 2007  Add comment

This week’s Economist has a stupid article about vaccinations for diseases in poor countries. The print edition (page 67) says:

Amid the figures cited in Rome, one stood out. It was Ghana’s per capita health budget, calculated by the World Bank at $31 per day.

If only! Ghana’s public health budget is in fact $31 a person a year. Total public and private health expenditure in Ghana is just 27 cents a day.

It is striking to me that the journalist thought that $31 a day stood out - presumably as being a very low level - even though it is overstated by a multiple of 365. How much more does it stand out when we consider the real figure? It also just goes to show that even a journalist working on this story has no idea even what the correct order of magnitude is for health care expenditure in a developing country. (Update: the online edition has been nearly corrected, I see - though it should now say that this is the public health figure, which is about a third of the total spending on health).

That wasn’t the main reason the article was stupid, however. It peddles some half-baked criticisms of the scheme which could easily have been answered, if the journalist had bothered to do some homework.

So here are the answers which the journalist could have got if he or she had bothered to read any of the documentation:

Q. “Some sceptics have questioned whether this “jerry-rigging” of markets can work.”

A. You say “jerry rigging”, I say “correcting two market failures”.

Q. “This test … is skewed: a general vaccines for pneumococcal disease exists … and the only challenge is to tackle some extra strains”

A. The vaccine that exists protects against the strains common in America and Europe, but not the strains common in developing countries. The reason that there is no vaccine to protect against those strains is that the market for such a vaccine is not sufficiently large or certain. And the existing vaccine is not being produced for use in poor countries. Based on past experience of introducing new vaccines, such as Hib and Hepatitis B, there will be no vaccines in those countries before about 2023. So without an advance market commitment, there will be neither the development of an appropriate vaccine, nor will it be produced and sold in developing countries. And that means that more than 1.6 million children will continue to die every year from Streptococcus pneumoniae. So much for “the only challenge is to tackle some extra strains”.

Canadian Senate challenges future of CIDA

• February 16th, 2007  Add comment

The Financial Post reports that the Canadian Senate has challenged the future of the Canadian development agency

“Given the failure of the Canadian International Development Agency (CIDA) in Africa over the past 38 years to make an effective foreign aid difference, the government of Canada should conduct an immediate review of whether or not this organization should continue to exist in its present non-statutory form,” says the Senate foreign affairs committee in a report that was two years in the making and heard from hundreds of witnesses. …

The report’s top recommendation is for the government to create an Africa Office that would include aid workers, diplomats and security staff with the goal of stimulating economic development. Unlike the current distribution of labour, 80 per cent of its staff should work in Africa.

The Senate recommends that if it continues to exist, CIDA needs clear objectives that can be monitored.