How ethnic profiling explains Dani Rodrik’s fondness for industrial policy

Airline passengers recently ejected an innocent Muslim family from an airplane because they were afraid the family were terrorists. Similar reasoning explains why Dani Rodrik favors industrial policy as a key to success. Before getting overly critical of Dani, whom I admire a lot, let me confess I have frequently committed the same type of reasoning error myself, and so does virtually everyone else. But it’s still wrong.

All of us are making the amazingly common mistake of REVERSING CONDITIONAL PROBABILITIES. The airline passengers perceived from media coverage that the probability that IF you are a terrorist, THEN you are a Muslim is high. Unfortunately for the poor family, the passengers confused this with the relevant probability, which is the chance that IF you are a Muslim, THEN you are a terrorist (which is extremely low even if the first probability really is high, because terrorists are very rare).

So here is Dani Rodrik on success and industrial policy: “the countries that have produced steady, long-term growth during the last six decades are those that relied on a different strategy: promoting diversification into manufactured … goods” (cited in Economist’s View).

So Dani concludes, “What matters [for growth in developing countries] is their output of modern industrial goods” and that developing countries will have to get busy with “real industrial policies.” Finally, “external policy actors (for example, the World Trade Organization) will have to be more tolerant of these policies.”

Unfortunately, Dani is also REVERSING CONDITIONAL PROBABILITIES. Dani’s evidence is based on what he believes is the high probability that IF you have had steady growth for six decades, THEN you had industrial policy. This is interesting, but this is not the right probability in deciding whether to choose industrial policy, which is “IF you have industrial policy, THEN what is your chance of steady growth for six decades?”

This second, correct, probability would seem to be pretty low, since many other countries -- especially African and Latin American -- extensively tried industrial policies over the past six decades with low and erratic growth as a result. Attempts at forcing investments into industrialization led to a huge pileup of debt in Latin America in the 1970s, which erupted into a debt crisis in 1982 and subsequent lost decades, when the productivity of the investments proved to be low. The more extreme results in Africa include the Ajaokuta steel mill in Nigeria which went through $6 billion but never produced a bar of steel, or Tanzanian manufacturing, which had NEGATIVE growth of output per worker despite heavy capital investments. (For more on this see this paper.)

I am really going through a MAJOR Mlodinow slash Kahneman phase about how economists (present company included) misinterpret data. To all of you who I am tormenting with this stuff, I promise to move on to something more constructive soon, like maybe another edition of our popular series Notes from the Field.

Top 10 reasons to test “War, Guns, and Votes” for data mining

With a previous post on data mining, let’s examine one recent book as a possible candidate for tests of whether data mining could be a problem. Here are the top 10 reasons I chose this book:

10. Oodles of regressions were run

Author each morning

wondering whether, during the previous evening, Pedro, or Anke, or Dominic, or Lisa, or Benedikt, or Marguerite has cracked whatever problem we had crashed into by the time I left for home.

9. Oodles of control variables were tried

...range of possible causes drawn from across the social sciences. In addition to various characteristics of the economy, these include aspects of the country’s history, its geography, its social composition, and its polity.

8. Weird conclusions about war

mountains are dangerous...

7. Sample was sliced up to get results

Globally we find no effect of ethnic polarization. But in Africa ethnic polarization sharply increases risk.

6. Very flexible specifications to get results

If coup risk is high, military spending reduces risk…if coup risk is low, military spending increases risk...

5. Previous results with same methodology didn’t pass the new data test

Our previous results got overturned by the new data.

4. Reverse causality makes every interpretation questionable

I’ll let Nathan Fiala handle this one.

3. Overconfidence in such statistical research as definitive

The ideas in this book are all founded on statistical research.

2. Author previously announced he was data mining:

Table 1 presents the preferred reference model of conflict duration with eight variations. The reference model is reached after a series of iterations in which insignificant variables are deleted and variants of economic, social, geographic and historical explanatory variables are then tested in turn.

1. A lot depends on the results

The book often won’t let Africans vote, but it will let them experience Western military intervention.

Stories from around the web

First do no harm In today's FT supplement "The Future of Capitalism," Gary Becker and Kevin Murphy urge caution on government interventions designed to resuscitate the global economy. In the rush to do something rather than nothing, we run the risk of maiming the only system that can deliver growth to those parts of the world that have so far missed out on the gains of global capitalism. (The previously published online version is here.)

Moyo vs. Maathai: the next big debate in development?

On Slate.com, Frank Fukuyama argues that despite obvious differences, Dambisa Moyo and Wangari Maathai actually “have more in common than their authors may admit":

Both women see sub-Saharan Africa's fundamental problem not as one of resources, human or natural, or as a matter of geography, but, rather, as one of bad government. Far too many regimes in Africa have become patronage machines in which political power is sought by "big men" for the sole purpose of acquiring resources—resources that are funneled either back to the networks of supporters who helped a particular leader come to power or else into the proverbial Swiss bank account. There is no concept of public good; politics has devolved instead into a zero-sum struggle to appropriate the state and whatever assets it can control.

Keeping a watchful eye on the Gateses

Here and on this vigilant blog.

Can Twitter be a force for good in development?

Or is it just for self-serving or fraudulent celebrity positioning? Does anyone have some good counter examples to share?

Breaking News from the Onion: Ugandan Ambassador Seizes Control of the UN and Declares himself Secretary-General for life

Reporter: It’s extremely tense, Brandon, there’s no telling what a madman like Mtambe will do! As Secretary-General he has the ability to do anything, from outline the UN’s year long goals, to propose agenda items for consideration by the Security Council!

Anchor: I can’t imagine what it must be like for those ambassadors inside, having no idea what this maniac will decide to place on the preliminary list of matters to be included in the provisional dockets.

Reporter: It’s terrifying!

(Via Michael Kleinman)

How much is too much?

People had a lot to say to Chris Blattman’s question of whether development agencies should fly business class. One argument in favor of business class is that if development professionals aren’t well-compensated with perks and high salaries, aid agencies will lose out on the best talent and be stuck hiring third-stringers. Maybe these high salaries and deluxe perks are simply the price the market will bear for the most talented workers in the aid profession. But how much is too much? At what point does this outcome offend our sense of fairness and proportion? Canadian ICT blogger Steve Song poses a similar question about profits from Africa cell phone companies. When Kenyans are spending 50% of their disposable income on mobile communication from a part-government-owned provider with monopoly power, is it really a win-win situation?

Finally, a thoughtful post from Alex De Waal on the inverse relationship between violence and media attention.

Perhaps the most effective international measure to keep down lethal violence is the simplest: paying attention. And maybe everything else is secondary, including exactly what that attention is, and what is threatened in consequence….But if the intent is to solve the political problem generating the violence, then a different strategy is surely needed–one that is based on political analysis and diplomacy.

Confused American liberals and conservatives need to get out more

Two recent discussions, one by the “conservative” Gary Becker (brought to my attention by Economist’s View) and the other by the “liberal” Alan Wolfe (which I saw at Cafe Hayek) BOTH seem confused about their own political creeds. This is apparently because of the peculiar way the US political system deals with people who like individual liberty. Becker claims them for the “conservatives” and Wolfe’s “liberals” are happy to get rid of them. One good thing about being a development person is that you travel the world and get to talk politics with a bunch of different nationals. You realize the global definition of liberal and conservative is different than the American one and a lot more commonsensical. So commonsensical that even dictionary.com gets it mostly right: A Liberal is “favorable to progress or reform, as in political or religious affairs.” A Conservative is “disposed to preserve existing conditions, institutions, etc., or to restore traditional ones, and to limit change.” So, for example, Conservatives in Latin America are associated with the old-guard Catholic Church and in Islamic countries with traditional sexual mores and roles for women. Liberals in both places are more enthusiastic about more recent religious practices and sexual and gender norms.

Neither definition says anything about individual liberty. Liberals could violate liberty in their eagerness to change things that individuals DON’T want to change, and conservatives could violate the liberty of individuals who DO want to change.

So Becker (of whom I am otherwise a big fan) faults conservatives for – being conservative. They and Miss California are not flexible enough on “gays in the military, gay marriage, abortions, cell stem research.” Yes, that’s what happens when you prefer – as Conservatives always do -- state-enforced tradition to values that the current generation of individuals might freely choose.

Wolfe says that liberty-loving Hayek would “seek to straighten out the crooked timber of humanity by forcing everyone into a mold established by the market.” To Hayek, who wrote an article called “Why I am not a conservative,” the “market” was just one of many arenas where individuals were free to choose, sometimes overturning tradition, other times choosing to stick with tradition, and in yet other cases making gradual progressive changes. So Wolfe’s statement is logically nonsensical, something like “Hayek would force everyone into a mold where they could be whatever they want.”

African men call for UN to protect white women

(Mother’s Day Edition)

OK that didn’t really happen, but just think how white men would respond if it did.

What happens of course is the reverse: white men offer themselves as saviors of African women.

One random example: Stephen Lewis the former United Nations Special Envoy for HIV/AIDS in Africa (2001-2006) said that UNAIDS “utterly and tragically failed to protect the women of Africa” and he is calling for a new UN agency for women to supply the missing protection.

And it matters not whether we’re talking about sex trafficking, or female genital mutilation, or child brides, or honour killings, or the absence of property rights, or the absence of inheritance rights, or the absence of laws against rape and sexual violence, or the need to guarantee economic autonomy, or the dismal limits of political representation … in each and every case, and countless more, the world cries out for a women’s agency to intervene.

I of course agree that all of these things are horrific tragedies, and that oppression of women, and violence against women, is one of the most terrifying violations of individual freedom that we see in the world today.

But what would work pragmatically to better the situation? White men who run aid agencies or offer themselves as advocates for African women have to think through some hard questions.

(1) Is a direct outside intervention to save African women likely to be effective?

Doesn’t an effective intervention require the cooperation of African men? How likely is that to be forthcoming if African men are marginalized and ignored as the outsiders intervene in sensitive gender relations? Especially if African men are stigmatized through over-generalization as war criminals and rapists (or the slightly more tame stereotype as wife-beaters who spend all the household money on alcohol?)

(2) How credible are white men calling for gender equality in Africa when we don’t have it at home?

Maybe we should put rats in charge of foreign aid research

Laboratory experiments show that rats outperform humans in interpreting data, which is why we have today the US aid agency, the Millennium Challenge Corporation. Wait, I am getting ahead of myself, let me explain.

The amazing finding on rats is described in an equally amazing book by Leonard Mlodinow. The experiment consists of drawing green and red balls at random, with the probabilities rigged so that greens occur 75 percent of the time. The subject is asked to watch for a while and then predict whether the next ball will be green or red. The rats followed the optimal strategy of always predicting green (I am a little unclear how the rats communicated, but never mind). But the human subjects did not always predict green, they usually want to do better and predict when red will come up too, engaging in reasoning like “after three straight greens, we are due for a red.” As Mlodinow says, “humans usually try to guess the pattern, and in the process we allow ourselves to be outperformed by a rat.”

Unfortunately, spurious patterns show up in some important real world settings, like research on the effect of foreign aid on growth. Without going into any unnecessary technical detail, research looks for an association between economic growth and some measure of foreign aid, controlling for other likely determinants of economic growth. Of course, since there is some random variation in both growth and aid, there is always the possibility that an association appears by pure chance. The usual statistical procedures are designed to keep this possibility small. The convention is that we believe a result if there is only a 1 in 20 chance that the result arose at random. So if a researcher does a study that finds a positive effect of aid on growth and it passes this “1 in 20” test (referred to as a “statistically significant” result), we are fine, right?

Alas, not so fast. A researcher is very eager to find a result, and such eagerness usually involves running many statistical exercises (known as “regressions”). But the 1 in 20 safeguard only applies if you only did ONE regression. What if you did 20 regressions? Even if there is no relationship between growth and aid whatsoever, on average you will get one “significant result” out of 20 by design. Suppose you only report the one significant result and don’t mention the other 19 unsuccessful attempts. You can do twenty different regressions by varying the definition of aid, the time periods, and the control variables. In aid research, the aid variable has been tried, among other ways, as aid per capita, logarithm of aid per capita, aid/GDP, logarithm of aid/GDP, aid/GDP squared, [log(aid/GDP) - aid loan repayments], aid/GDP*[average of indexes of budget deficit/GDP, inflation, and free trade], aid/GDP squared *[average of indexes of budget deficit/GDP, inflation, and free trade], aid/GDP*[ quality of institutions], etc. Time periods have varied from averages over 24 years to 12 years to to 8 years to 4 years. The list of possible control variables is endless. One of the most exotic I ever saw was: the probability that two individuals in a country belonged to different ethnic groups TIMES the number of political assassinations in that country. So it’s not so hard to run many different aid and growth regressions and report only the one that is “significant.”

This practice is known as “data mining.” It is NOT acceptable practice, but this is very hard to enforce since nobody is watching when a researcher runs multiple regressions. It is seldom intentional dishonesty by the researcher. Because of our non-rat-like propensity to see patterns everywhere, it is easy for researchers to convince themselves that the failed exercises were just done incorrectly, and that they finally found the “real result” when they get the “significant” one. Even more insidious, the 20 regressions could be spread across 20 different researchers. Each of these obediently does only one pre-specified regression, 19 of whom do not publish a paper since they had no significant results, but the 20th one does publish their spuriously “significant” finding (this is known as “publication bias.”)

But don’t give up on all damned lies and statistics, there ARE ways to catch data mining. A “significant result” that is really spurious will only hold in the original data sample, with the original time periods, with the original specification. If new data becomes available as time passes you can test the result with the new data, where it will vanish if it was spurious “data mining”. You can also try different time periods, or slightly different but equally plausible definitions of aid and the control variables.

So a few years ago, some World Bank research found that “aid works {raises economic growth} in a good policy environment.” This study got published in a premier journal, got huge publicity, and eventually led President George W. Bush (in his only known use of econometric research) to create the Millennium Challenge Corporation, which he set up precisely to direct aid to countries with “good policy environments.”

Unfortunately, this result later turned out to fail the data mining tests. Subsequent published studies found that it failed the “new data” test, the different time periods test, and the slightly different specifications test.

The original result that “aid works in a good policy environment” was a spurious association. Of course, the MCC is still operating, it may be good or bad for other reasons.

Moral of the story: beware of these kinds of statistical “results” that are used to determine aid policy! Unfortunately, the media and policy community don’t really get this, and they take the original studies at face value (not only on aid and growth, but also in stuff on determinants of civil war, fixing failed states, peacekeeping, democracy, etc., etc.) At the very least, make sure the finding is replicated by other researchers and passes the “data mining” tests.

In other news, anti-gay topless Christian Miss California could be a possible candidate for a new STD prevention campaign telling all right-wing values advocates: “abstain, or the left-wing media will catch you.”

The vortex of vacuousness

A tragic law of global poverty is that the efforts of many well-meaning and accomplished people somehow get sucked down into meaningless activities and empty rhetoric. Yesterday’s Wall Street Journal carried an oped by uber-heavyweights Madeline Albright and Colin Powell about how we should not forget about the world’s poor during the crisis. Their solution – another summit! Addressing the previously unappreciated shortage of summits by the UN, the World Bank, the International Monetary Fund, the G-7, the G-20, U2, and Bob Geldof, there is a two day summit starting today of something called the Initiative for Global Development (IGD) National Summit 2009 in Washington DC.

The closest thing to novelty about this summit is that the IGD includes (and was started by) leading business executives, some of whom apparently want to learn from diplomats and aid bureaucrats how to make compassionate statements about global poverty with no content. So Carly Fiorina on the IGD website proclaims “Reducing global poverty is in our nation’s best interest, and a sustained collaboration between the private sector and the government is needed in this regard.” (Presumably she had to be a tad more specific to get things done at HP.)

The IGD has been around since 2003, and includes a lineup of really big names from the worlds of business, government, and aid. Chairpersons Albright and Powell were able to distill all of this experience and talent in their signature Journal oped yesterday into new ideas like “we have to focus our efforts where they can have maximum impact, and draw on the strengths of the public and private sectors alike.”

(Maybe we should subject this statement to the NOT test for meaningful content we discussed in a previous blog post: Briefly consider whether there is anyone arguing “we need to focus our efforts where they can have MINIMUM impact, and draw on the WEAKNESSES of the public and private sectors alike.”)

The IGD helpfully provided Aid Watch some background materials on the 2009 Summit, which has the subtitle “Business leaders advance a bold strategy to reduce global poverty.” They acknowledge the critical need for foreign aid reform, so “Congress and the administration should work together to define a coherent strategy for U.S. foreign assistance and streamline its implementation.” (Reader exercise: apply the NOT test to this statement.) They only get a bit more specific when they endorse the ritual call for a doubling of foreign aid.

Something that sounds slightly more promising is that the IGD summit invited some 20 African CEOs of private businesses. Let’s hope they can get the things that real businessmen want, new deals and investments, in return for being subjected to two days of summiteering. Maybe a few CEOs at IGD are starting to get a glimmer of insight – business leaders should not imitate aid bureaucrats, it should be the other way around.

Cry from the field in Nepal

by Scott MacLennan, veteran NGO leader resident in Nepal A few weeks ago I was again trekking the Tamang Heritage Trail with a group of medical volunteers. We stopped for the night in the village of Thambuchet which is a short distance from Chilime. There I found a brand new government building that is supposed to be a birthing center. The government has a big push on to stop home births and get the people to use government facilities. So, it's a really nice building. Problem is that it has never been equipped with anything and has no staff.

Ward 9 in Pokhara, Nepal affords another good lesson. Under UNICEF, the municipal day care center was disgraceful. The barely six-foot high tin roof made the children's home into a sauna during the monsoons. There were no toys or resources for teaching. There was no toilet and the children defecated on the front lawn. Little in the way of funding ever made it to the center. There were too many bureaucratic mouths to feed further up the management (verification) ladder. The NGO that now helps support this day care center in partnership with local government has transformed it on a shoestring budget.

Much of the part of Nepal where I work has phantom projects. Empty health posts and newly built birthing centers without staff or equipment are not uncommon. These are all development assets on someone's balance sheet. The government counts them as part of its national health program. The international community has, at the risk of sounding too critical, for the most part been quite willing to allow this to go on. So long as the donors and the government can say they have this, or they have that, regardless of the reality of existence, everyone seems happy. The verification part of this industry thrives on the non-reality of it all.

Only small NGOs it seems are able to actually get out in the field and get their hands dirty making things happen. Past a certain size (what is that size?) the demands for official looking papers, reports, audits and the like overshadow the demand to actually provide aid. Large donors are just too caught up in the appearance of good business and good government. Form without substance.

Doing an inventory of small NGOs working in the various districts, then giving out small amounts of funding ($10,000-$20,000 a year) probably gets the most done. Skip the audits and heavy-duty report writing and verify with a small team equipped with a camera. A picture is worth a thousand words (or reports) it's there or it isn't and the camera tells you. NGOs with barely enough budget to survive have little motivation and opportunity to corrupt the process. They are community members themselves and the community can police its own quite effectively. Nearly anyone living in a small community in Nepal can tell you in short order who is working for the good of the community and who is lining their own pockets. Snap photos, ask the locals and you'll know for sure that your aid dollars did something.

That's my two cents from the field. I run The Mountain Fund, a very small NGO attempting to keep it real in Nepal. Photographic proof in my newsletters and please, stop and ask the locals about me. Oh, yes, I am taking over the empty birthing clinic and will raise the funds to equip and staff it myself. About $10,000 a year and I will send photos.

Thanks, Scott MacLennan

Stories from Blogs We Like

Maybe Also Fight Deadly Diseases that Don't Make Headlines: “Neglected Tropical Diseases are devastating, debilitating and deadly parasitic and bacterial infections that adversely affect the poorest 1.4 billion people worldwide living on $1.25 a day.” From the Global Health blog at Change.org. High Tech Sunshine on Violence: Extending the idea to other African conflicts of using cell phones and a web site that was already used to “map reports of violence in Kenya after the post-election fallout at the beginning of 2008.” Could we try this with monitoring big aid projects? From the Freakonomics blog.

The Lysistrata Approach: Kenyan women deny their husbands sex until they resolve nation’s political standoff. From Chris Blattman’s blog. Would this work in Zimbabwe?

Dani Rodrik Asks: Why do poor nations continue to be enthralled with capitalism? His answer: “I am afraid one cannot rule out the possibility that poor nations are yet again falling behind the curve.”

My answer: “The previous times we scrapped capitalism because of a short time crisis didn’t work out too well.”

Where's Waldo? Find the missing USAID Head! From Views from the Center at the Center for Global Development.

Unlike Congress, Mexican Government is Competent: Actually had a decent response to Swine Flu. From Tyler Cowen’s Marginal Revolution.

Growing Movement in UK and US to make Public Data, well, Public: I don’t think USAID has heard about this yet. From World Bank’s PSD blog.

Freedom is a Work in Progress: US Supreme Court now hearing the case of a 13 year old girl strip-searched by school officials without notifying her parents. School’s assistant principal was looking for illegal drugs LIKE ADVIL. “Savanna, who was an honors student with no disciplinary record, was found not to have any dangerous over-the-counter painkillers in her underwear.” From Wronging Rights.

World Bank AIDS Drive crowds out other health programs – but fails to make progress on AIDS

A report released today by the World Bank’s own Independent Evaluation Group faults the Bank for allowing AIDS to drive out many other programs to improve health. To make things worse, the Bank’s AIDS effort itself failed to accomplish much – only 29 percent of AIDS projects (and only 18 percent of AIDS projects in Africa) had a satisfactory outcome – while other efforts were much more effective (89 percent satisfactory project rate for other communicable diseases). Despite the poor results on AIDS and better results on malaria and TB, AIDS accounted for 57 percent of Bank projects on communicable disease during 1997-2006 (the period covered by the evaluation), compared to 3 percent for malaria and 2 percent for TB.

The report notes the large share of health funding earmarked for AIDS tended to pull scarce resources in the local health system such as nurses and doctors away from other health problems. Within overall constrained donor budgets, AIDS financing tended to crowd out projects that support overall health system reform, despite the urgency of the latter issue to get any good results on any health outcome.

“A case in point is Malawi: because of constraints in the availability of Bank budget for supervision, IDA funds were available for the health {sector-wide reform} or … AIDS… but not for both. The Bank opted to drop support for the health {sector-wide reform} and continue support for HIV/AIDS.” (p. 40) The Bank did this even though a lot of other donor funding was already earmarked for AIDS.

Another victim of the AIDS emphasis was nutrition. The share of projects with nutrition objectives dropped by half; Bank support for nutrition reached only a quarter of countries with high stunting. This is particularly sad because many nutritional interventions are relatively cheap and easy to administer (for example, nutritional supplements, which had a big payoff in the PROGRESA program in Mexico).

The AIDS crowding out troubled the independent Advisory Panel that IEG asked to comment on the report. At a time when international AIDS funding was surging, the Panel said, “we were surprised that the Bank did not provide a countervailing trend…there was a fall in nearly half in the share of projects with objectives to reform the health system.” (p. xxvv)

Given what looks to be irrational behavior, my guess is that the Bank made these choices for purely political reasons. It is extremely sad that such politics caused the Bank to neglect many other treatable and preventable health tragedies, without any countervailing benefit even for AIDS victims given the poor performance of the Bank’s AIDS projects.

Congress to USAID: Stonewalling is SO over

Yesterday from a deliriously happy press release of Publish What You Fund:

Congressman Howard Berman (D-CA), Chairman of the House of Representatives Foreign Affairs Committee, today introduced the Initiating Foreign Assistance Reform Act of 2009 (HR 2139), a bipartisan bill designed to increase accountability and improve the effectiveness of U.S. foreign aid

The bill:

instructs federal agencies to make aid information on a detailed country-by-country and program-by-program basis in a comprehensive, timely, comparable, and accessible fashion.

Could we dream that USAID would one day provide aid-watching citizens with basic information, as opposed to treating them like enemy combatants? That USAID could be more like its British cousin DFID, that instead of us spending weeks in getting a simple question still not answered, we could get an answer in 5 minutes?

That this could even change USAID’s behavior, so that egregious waste and diversion of funds are no longer seen as a good reason to keep doing business as usual?

As always, a timely response from USAID on these questions would be welcome.

Bono and Foreigner

The long and remarkable reign of the celebrities in foreign aid shows no sign of abating. On a May 1 CNN special on TIME magazine’s new selection of the world’s 100 most influential people, according to a press release, “George Clooney — a four-time honoree — will sit down with U2 frontman and activist Bono to chat about fame and politics.”

In a desperate attempt to give some balanced perspective, let me be fair and point out that Bono’s organization, ONE.org, is supporting something I totally agree with, a campaign called Publish What You Fund (PWYF), which believes “Everyone can request and receive information on aid processes; Information on aid should be timely and accessible; Information on aid should be comparable; the right of access to information about aid should be promoted.” A million Amens to that. All you Bono fans, please agitate on behalf of PWYF.

I also confess that I LIKE the music of U2 and find many of their anthems to be genuinely inspirational. When I told my kids this, unfortunately, they pointed out that my credentials as a rock critic are pretty shaky. They know that I also like the band Foreigner.

Response to "Can Starbucks Buy A 'Saving Africa' Image for a Nickel?"

We sent our blog post on the Starbucks RED campaign to Starbucks last week and offered them space to publish a response. Here is their answer from Vivek Varma, Senior Vice President of Public Affairs: I suppose I should begin by thanking you for the opportunity to comment. It would have been nice to receive a call first so that the confusion in the Professor’s blog could have been addressed.

But let me layout the facts as we see them:

• Starbucks launched its partnership with (PRODUCT) RED in December 2008 with a selection of beverages that contributed five cents to the Global Fund from each drink purchased. All beverages turned (RED) on World AIDS Day and the company has since introduced the STARBUCKS (PRODUCT) RED Card, which contributes five cents from every purchase to the Global Fund. Starbucks has a multi-year relationship with (RED) and will introduce various (RED) products throughout that time.
• Your estimation of (RED) revenues generated is wrong. The fact is Starbucks has more than 12,000 stores in the U.S. and Canada and the (Starbucks) RED website and barista analysis has led you to an inaccurate conclusion of how many people have bought Starbucks (PRODUCT) RED products. As of March 2009, Starbucks customers have generated contributions equal to approximately 4.2 million daily doses of antiretroviral medicine through the purchase of select (Starbucks)RED products.
• To date, (PRODUCT) RED partners and events, including Starbucks, have generated over $130 million for the Global Fund to invest in AIDS programs in Africa. One hundred percent of this money is channeled to Global Fund-financed grants – no overhead is taken out.
• It is important to consider the collective power of these contributions since each partner brings something different to the table. Larger brands, with lower price point items, will garner more volume while smaller brands may help spread the message to niche audiences and new consumers, all the while raising money and expanding the base of people who are aware of the crisis of AIDS in Africa and willing to do something about it.
• While you call for Starbucks to report its results independently, The Global Fund reports contributions on an aggregate, not per partner, basis. You can always view aggregate contributions on the Global Fund web site at www.theglobalfund.org under pledges and contributions.

I hope this gives proper context to the Starbucks (RED) partnership. I must say it’s disappointing to read the Professor’s cynicism about NGOs and corporations that attempt to contribute to the crisis of AIDS in Africa. We can all do more, of course, but this particular blog is a miss.

We can make bad news look worse…and for Africa, we can make even good news look bad

Lost in the confusion of the Spring Meetings this weekend in Washington was the release of the IMF/World Bank Global Monitoring Report (GMR) 2009, the annual song of woe about lack of progress towards the Millennium Development Goals. You would think the current supply of bad news was adequate for our needs, but the GMR has long made a specialty of portraying the poor nations as bleakly as possible and this year’s report was no different. We learn:

1. We face a “development emergency”, because “The triple jeopardy of the food, fuel, and financial crises is pushing many poor countries into a danger zone, imposing rising human costs and imperiling development prospects.” This statement seems oblivious to the reality that the three nicely alliterated crises have moved in opposite directions – the financial crisis has brought food and fuel prices back down to pre-food and fuel crisis levels, as their own Figure 1.2 on page 26 shows.
2. The annual GMR ritual requires stating that Africa is worst: “At the regional level, Sub-Saharan Africa lags on all MDGs, including the goal for poverty reduction.” As I previously complained in a now published academic paper, arbitrary choices on how to define the MDGs make Africa look worse than it would look in other equally plausible formulations of progress. In particular, some of Africa’s achievements on health, education, and water are portrayed as “failures”, even when they match or exceed other regions or the historical rate of progress of the rich countries. Lastly, the GMR gives Africa little credit for once again surpassing 5 percent GDP growth in 2008, continuing a growth spurt in the new millennium that just happens to be the highest growth in Africa’s history.

Yes, things are tragically bad for many poor peoples right now. But making them look even worse than they are, although helpful for mobilizing support for aid agencies, is disrespectful towards the real achievements of those same poor.

Kenyans seek to prosecute manufacturer of wedding dresses made out of malaria nets

A report in the Kenyan newspaper the Daily Nation:

Mosquito net manufactures are teaming up with the provincial administration and village elders in several parts of Kenya in an effort to apprehend and prosecute people who use the products for purposes other than covering beds.

According to Dr Elizabeth Juma, who is the head of malaria control under the Ministry of Public Health and Sanitation, there has been evidence of people turning the nets into fishing gear especially in Nyanza Province. Now a different group has discovered another lucrative business venture, and are using the nets to make wedding dresses.

Perhaps net education might have a bigger payoff than prosecution. Net promoters seem to consistently underestimate the challenge of spreading the scientific knowledge about the risks of getting malaria from mosquito bites. Traditional views of disease persist. As the Nation article tersely concludes:

Apart from individuals converting the nets into business tools, there are other beliefs in the country which are setbacks in fighting malaria.

Peter Sellers makes unexpected appearance at G-7 meetings

In today’s NYT:

Headline: World Finance Leaders Meet, and Cautiously Glimpse ‘Green Shoots’ of Recovery

“American and European officials embraced a hopeful new buzz phrase — the “green shoots” of recovery.”

My wife immediately noticed the exact parallel to the classic 1979 movie “Being There.” A mentally-challenged gardener played by Sellers winds up by accident in Washington elite circles and is quickly embraced as a sage as he mumbles gardening platitudes about spring-time growth, at a time when the economy is in recession. By the end of the movie, he is being mentioned as a presidential candidate.

Random Snippets and Miscellany

The FT has a great special section on malaria today (tomorrow is World Malaria Day). Their very sensible editorial says: “...malaria is becoming an industry in its own right. That brings responsibilities, including rigorous evaluation to ensure money is well spent.” There are plenty of other grounds for hope, let’s hope also that somebody will step up to hold this industry accountable. In another article, FT writer Andrew Jack quotes activist Louis da Gama: “The biggest problem has been lack of baseline data. The risk is that you underestimate the problem and overstate the success.” Unfortunately, a few paragraphs earlier, Mr. Jack repeats the old claim that Rwanda, Ethiopia, and Zambia have sharply reduced national mortality from malaria, which this blog pointed out was based on fake WHO data that the WHO subsequently withdrew. Even a second round of discussion on this blog did not suffice to clear this up, although the facts are not in dispute. Sigh.

A mass email went out to journalists yesterday from The Centre for Development and Population Activities: “Expert Refutes Bestselling "Dead Aid"; Available for Background and Interviews”. The available expert was Carol Peasley, President & CEO, The Centre for Development and Population Activities. Among the expert arguments refuting “Dead Aid” (from Peasley's piece in the Huffington Post) was that “Child deaths [in Malawi] have been reduced by nearly 100 percent (from 221 per thousand in 1990 to 120 in 2007).” I guess the expertise being made available did not include math.

Can Starbucks Buy a “Saving Africa” Image for a Nickel?

I was curious about what the going rate is these days for attracting customers who want to save Africa. Five cents was a little lower than I expected.

How much money is flowing to Africa from this? Aid Watch’s exclusive investigation consisted of asking about seven Starbucks cashiers around Greenwich Village how often they processed the Starbucks Red card, with its payoff of five cents for Africa per use. All except one cashier said it was rare to see them, maybe 1 or 2 in an 8-hour day. The one exception said they saw them about 10 times a day. So we have a payoff for Africa of between 5 and 10 cents per day per Starbucks cashier, with one outlier of 50 cents a day. This sample is obviously ridiculously unscientific, but perhaps it can attain the status of an anecdote.

The only excuse for my pitiful attempt at estimating RED card revenues is that I think it is really up to Starbucks to disclose to its customers how much money is really flowing to the Global Fund for AIDS in Africa. We are in luck -- Starbucks has a cool (RED) web site that actually documents in real time how many people are buying with the (RED) card (11,115!), how many Starbucks products they are buying (87,257), and how many days of AIDS medicine that translates into (10,146!).

OOPS, sorry, I misunderstood it. This is just a record of how many people have signed up online worldwide (11,115) to join the Starbucks RED campaign, how many Starbucks products they have pledged to buy, and how much that translates into in days of medicine. There is no verification that anyone actually buys the card or keeps their pledge. Even if they did, this would translate into a rather underwhelming contribution of $4,362.85 to the Global Fund. It’s not Starbucks’ fault that their customers don’t show much interest in the RED card, but Starbucks benefits even so.

Bill Gates celebrated the RED campaign as an example of what he sees as world-systemic change towards “creative capitalism,” where companies will respond to “reputational” philanthropic incentives as well as conventional profit ones. Yet if companies can obtain the RED branding, the Saving Africa reputation, for virtually nothing, just how strong is the incentive to give?

Self-Esteem in Africa

by Moussa P. Blimpo (the author is a Ph.D. candidate in Economics at NYU from Togo.) A prominent university professor in the US goes back to his home country in Africa with his American Master’s student who wanted to get some field experience. The professor is unable to schedule a meeting with a key political leader whereas the student does get a meeting with the African leader.

Last summer, in a heated discussion with some friends and graduate students at the University of Lome in Togo, a pre-doctoral student says: I need to find a white guy on my committee.

In 2000 when I got to France to start college, I asked to take one year of prerequisite courses before I started the normal 4-year math degree because I believed that my high school diploma from Togo was not on par with the French equivalent. Fortunately my brother attended the same university and he convinced me then that we actually cover more materials in Togo than the French.

By and large, it seems that Africans have a negative bias toward their own capability and the aptitudes and that of other Africans. This bias is present at all level of the African society. There are many possible explanations for this:

1. It seems to most that white people made most modern scientific advancements and discoveries in human history and this is subconsciously promoted through our normal schooling.
2. A rational choice and statistical discrimination: Given the rampant corruption and the resulting mediocrity of the decision makers and the servants, any foreigner is de facto assumed to be able to do better.
3. Legacy of slavery and or colonization: Just as recent research has suggested a relation between trust and slavery, it is likely that many other social attitudes and perceptions persist.
4. The continued presence of the predominantly white aid workers and the importance and attention given to them by the leaders. Local scholars are marginalized in favor of westerners who work under the banner of the international organizations. For example, it is much easier for any World Bank consultant to meet with and to be listened to by a minister or to appear on national tv in Africa than professors in African universities.

This attitude could be a big impediment to the much-needed innovation in African societies. Spreading technologies is great in that it avoids reinventing the wheel. But in my view, many innovations respond to contextual needs and demands. Therefore, homegrown innovations to solve day-to-day challenges are a must to development. My view is that point 2 and 4 are the dominant. Readers’ thoughts are welcome.

USAID Responds to 'Life in the Aid World'

Kudos to the USAID press office for replying to us quickly when we sent them our post on the USAID Inspector General’s report of misuse of funds in Afghanistan. They replied with this statement: The USAID IG severely criticizes the United Nations Development Program (UNDP) and the UN Office for Project Services (UNOPS) for their management of the Quick Response Program in Afghanistan, conducted between 2003-2006. We recognize that Afghanistan is a difficult place to work, but we still expect all of our partners to maintain recognized standards of accountability and transparency.

We have implemented additional control and oversight mechanisms to ensure this type of activity does not occur again. We are also seeking reimbursement for $7.6 million of unsubstantiated UN expenses.

Q) How much money was lost to "contractor abuses"?

USAID is seeking reimbursement of $7.6 million in funds drawn-down by UNDP in 2007 that have not been fully substantiated. A bill of collection for that amount was referred to the U.S. Treasury for action.

At present we are working with the UNDP and UNOPS to fully account for the funds. USAID's Acting Administrator met with UN leadership in New York on Monday, April 13, 2009 to discuss this issue and the way forward.

Q) What programs does USAID still have with UNDP/UNOPS? What measures has USAID taken to ensure accountability and quality of work?

Now we have three active grants with UNDP and one with UNOPS. The active awards for UNDP include support for the 2009 Afghan Presidential elections.

UNOPS: Kabul School Construction Program – This program has been well managed from the beginning and is working well. Access to the schools here by inspectors and USAID staff has helped keep this program accountable with good quality of work.

Q) What changes have been made to the USAID/UNDP/UNOPS relationship?

USAID committed to continue working with UNDP to resolve questions over $7.57 million in unaccounted for USAID funds and to improve collaboration between these agencies in Afghanistan and elsewhere. Mr. Melkert pledged UNDP’s full cooperation with USAID in reforming UNDP’s project management practices, improving financial accountability and in recovering any missing QIP funds.

Q) What changes has USAID put into place as a result of the IG report?

Over the past year, USAID has adopted significant safeguards to protect U.S. taxpayer resources. Safeguards on our UNDP projects include:

- Amending the traditional Letter of Credit (LOC) method of financing by requiring additional financial documentation and USG review and approval prior to each disbursement;

- Mandating the hiring by UNDP of an additional dedicated financial management staff member on the project;

- Requiring that all USAID funds be separately tracked and reported on a monthly basis; and,

- Increasing technical oversight by Mission staff.

In addition, the Kabul Schools Program, implemented by UNOPS, has been carefully overseen by USAID. This program is under the advance/liquidation method of financing (as opposed to the traditional letter of credit), thus providing USAID with greater financial management oversight. Additionally, USAID has two full-time staff overseeing the Kabul Schools program. These engineers are at the worksite at all times when work is being performed.

Q) Is UNDP managing the 2009 Afghanistan Presidential elections?

The 2009 Afghan elections are being managed by the Independent Election Commission of Afghanistan with the assistance of the UN. USAID is working with the UN in preparing for those elections. It is critical that the upcoming elections be perceived as independent, so the donor community has agreed to pool funds in a UNDP-managed project to support the elections. USAID is participating in this pool, but is imposing significant additional safeguards on UNDP.

Summary of IG Report

• In August of 2007, the USAID/Inspector General’s office received an anonymous complaint about abuses by the UN with regard to grants in Afghanistan. The subsequent investigation by the IG office was completed in the summer of 2008, and confirmed several serious problems with financial management and overall performance.
• UNDP withdrew an approximate $6.7 million in 2007-after the Quick Impact Project ended and without consultation with USAID. No supporting documentation was provided to explain the reasons for these withdrawals.
• UNOPS has provided a letter accounting for approximately $1.9 million of the amount drawn down in 2007.
• Due to the refusal of the UN to cooperate with the investigation of the USAID, questions remain unanswered with regard to the overall conduct of UNDP and UNOPS in Afghanistan.
• On February 5, 2009, USAID referred three Bills of Collection against UNDP and UNOPS to the U.S. Treasury Dept for a total of $7.6 million dollars. As of March 3, 2009 those Bills of Collection had been referred to a private collection agency which has 270 days to do collection efforts.