Here’s a US development program working – stop it immediately!

“[O]pen trade and international investment are the surest and fastest ways for Africa to make progress,” President Bush said when he signed an extension to the African Growth and Opportunities Act (AGOA) in 2004. Originally signed into law in 2000, AGOA removes US quotas and duties for thousands of products coming from some 40 sub-Saharan African countries.

AGOA has led to an overall increase of 8% in non-oil exports to the US, according to recent research. And Madagascar has been one of the program’s clearest success stories. The island nation’s exports tripled in the first three years of the program, led by strong growth in the apparel and textile sector. This sector remains vibrant in spite of the huge encroachments by China on African textile competitiveness since 2005, as well as the more recent shrinkage in global demand: textiles still account for 60% of Madagascar’s total exports, and 100,000 people are employed in the formal sector alone.

So why is the US now threatening to revoke AGOA in Madagascar?

The US government is using AGOA as a political lever to force President Andry Rajoelina’s questionable government to hold elections within the year. The textile exporters association says that the loss of AGOA would lead to downsizing and possibly even the collapse of the entire industry. Tens of thousands of jobs, and tens of millions of dollars of investment stand to be lost.

A letter that Aid Watch obtained addressed to the association of Malagasy textile exporters from the US trade rep warns ominously: “The recent events in Madagascar will be taken into consideration as the U.S. Government begins its review of Madagascar’s eligibility for AGOA in the coming months. As you know, respect for the rule of law is a condition of eligibility outlined in the AGOA legislation.”

The reasoning seems to be that political instability and violations of democratic procedures hurt the Malagasy people, so the natural US government response is to—hurt them more by taking away their jobs?

But a look at the AGOA eligibility requirements shows there is some room for interpretation. There must be, if non-shining examples of democracy like the DRC, Guinea, and Guinea Bissau get to stay on the list while Madagascar is kicked off. It turns out that the AGOA FAQ page contains a disclaimer: “Progress in each area is not a requirement for AGOA eligibility” [emphasis added].

So the USTR is not required to take Madagascar off the AGOA list, and it should not. Attorney and global regulations enforcement expert Jason Poblete said via email that “a country-wide sanctions regime is not likely warranted” and recommended a more targeted approach, such as adding the coup leaders to the list of "specially designated nationals" restricted from doing business with the US.

Another time for invoking Amanda’s Love Actually test— better for the USTR to do nothing, stay home, and watch a movie.

I'm a Twit!

The final conversion of an absent-minded, balding, middle-aged male born in 1957 in West Virginia into a 21st century techie: I'm going to start Tweeting. Check out @bill_easterly

Is there any way that our efforts will end well in Afghanistan?

Great FT column by Clive Crook

The forthcoming civilian surge .... Most westerners in Afghanistan live inside a security bubble. If they leave their compounds at all – and many never do – they drive around in armoured Toyota Land Cruisers from one fortified location to the next. Again, the perception is that the foreigners’ security is all important, whereas ordinary Afghans can take their chances. Aside from their servants and guards, the foreigners mix mainly with each other. Among the Afghans I met, it was a universal perception that the western aid effort is feeding mainly itself, not the country. I heard many anecdotes to bear this out.

One dreads a civilian surge of highly paid westerners, spending all their time behind barricades in meetings with other westerners, drawing up work plans and draping themselves in red tape while dirt-poor Afghans look on in dismay. This would be worse than useless. Money, with strings, yes. Genuine technical expertise, where needed, yes. But for heaven’s sake spare Afghanistan a new surge of the self-perpetuating, self-consuming international aid bureaucracy.

Nation’s 12-year-olds protest Results-Based Management

Results-based management (RBM) is where you come up with indicators of results and try to get civil servants (national or international) to meet targets for these indicators. The emphasis on results would be welcome except for the ability of wily bureaucrats to manipulate the indicators in ways that do not improve performance. In development, RBM has already achieved results – another acronym to replace RBM: MfDR – Managing for Development Results.

The US already has RBM in the form of the No Child Left Behind Act, which rewards public schoolteachers when their students score high on standardized tests. Some of the pitfalls were revealed when I interviewed one of the customers --a 12 year old rising 8th grader in an average public school -- about how this was working out. She said “Teachers remind us everyday about the test, and they spend more time teaching us how to phrase answers to test questions than actually teaching us facts.” Finally, the nightmare was over: “And then after the tests were over and taken, they stopped teaching, and the rest of the year we watched stupid movies.” (Less anecdotally, academic evaluations find this Act to have had some payoffs for the worst schools, but note the idiocy of applying it universally to previously well-performing or even average schools.)

In development RBM, i.e. MfDR, the manipulation of indicators for performance is even more brazen and distant from the well-being of any real person. MfDR meetings agree on performance indicators that include – more MfDR meetings. Success on this indicator includes the Monterrey Consensus (2002), Rome Declaration (2003), Washington: First Roundtable on Development Results (2002), Marrakech: Second Roundtable on Development Results (2004), Paris Declaration (2005), Hanoi: Third Roundtable on Managing for Development Results (2007), Accra: Third High Level Forum on Aid Effectiveness (2008).

So, for example,

“The third day of the Third International Roundtable on Managing for Development Results provided a setting for each of 35 county delegations to meet as a team to sketch out initial thoughts on how to mobilize resources within their own countries to initiate and further implement some steps discussed in the context of each of the major themes discussed during the event. Each country team started a Country Action Planning Process, the results of which will help the donor community at the country level target resources at overcoming current gaps in capacity and also to provide input into discussions on managing for results and aid effectiveness at the Ghana high level forum (February, 2008).”

The World Bank has recently published the 3rd edition of its Sourcebook, “Emerging Good Practice in Managing for Development Results:

“Emerging best practice” included the World Food Program in Guinea Bissau and DR Congo:

“Toolkits with clear guidance on managing for development results, with a focus on results-based M&E, are available for WFP and implementing partners’ staff in DRC (Results-based M&E Toolkit, version 1, June 2004) and in Guinea-Bissau (Results-based M&E Toolkit, Version 1, June 2006). These toolkits reflect up-to-date MfDR concepts, principles, and good practices, and draw on results based M&E toolkits of other international organizations, including within WFP. The toolkit produced for WFP Guinea-Bissau is also available on the WFP website (www.wfp.org) as one of the few reference documents for other WFP offices worldwide. A copy of these toolkits is available upon request.”

A much more positive result of MfDR was the City Council of Nairobi setting itself a goal to increase immunization rates from 75 to 85 percent, and then they actually reached 88 percent. Alas, examples like this of actual people getting better off through MfDR are few in the Sourcebook. (Immunization may be one area less subject to manipulation and bureaucratization, where MfDR could have a positive impact.)

Elsewhere, MfDR seems like an exercise for bureaucracies to monitor themselves on -- being bureaucratic. Am I missing something?

Stop me before I Sachs again

Jeffrey Sachs strikes again.

I’m so sorry readers, I know this is getting really, really OLD. But Sachs unveils such a bizarre geographic theory of Africa’s poverty, with such misguided implications for aid policy, that I am forced to respond. I can’t help myself, the stakes are too high. Suggestions for corrective therapy would still be welcome.

At least now we have finally gotten away from personal attacks, so let me say that Sachs is an inspirational and hard-working intellectual. His ideas on Africa are only sometimes totally wrong, the other times they are only fatally wrong.

Summary in brief of Sachs’ geography theory: a region will be poor IF they are tropical, IF rainfed, IF landlocked, and IF they have the wrong mosquitoes – which, yes, fits many African countries. With enough IFs, you can fit ANY theory to any set of facts. If I am a short, balding, grey-bearded, bespectacled, white male economic development professor residing in Greenwich Village, I will be writing this post right now – it fits the facts.

Sachs also has a rather convoluted “aid works” narrative in this column. He says aid was high enough and went to the right things enough to achieve great things in Africa on health and education. So why didn’t it create economic growth? Because aid wasn’t high enough and didn’t go to the right things enough.

The other problem with Sach’s geography story is that it has already been refuted by other economists. The consensus among several academic papers is that destructive governments rather than destructive geography explains the poverty of nations. Acemoglu, Johnson, and Robinson (2006), Easterly and Levine (2003), and Rodrik, Subramanian, and Trebbi (2004) all tested the geography story against the institutions story and came down on the side of institutions.

So Robert Mugabe was a lot worse for Zimbabwe than the Anopheles mosquito. Corruption is more fatal for oil-rich Nigeria and Angola than latitude. Bad health has more to do with bad health systems than bad parasites. Other factors that Sachs mentions such as illiteracy and poor infrastructure are also symptoms of bad government services.

Of course, it is a lot easier to justify giving a lot of aid to African governments if they are helpless victims of geography rather than (mostly) just being – bad governments. Is this why Sachs insists on a bizarre geographic theory of Africa’s poverty and is oblivious to the bad governments that many courageous African dissenters have protested at great sacrifice? I don’t know, but I do know aid does a lot more good when it goes to poor individuals, and not to poor governments.

References

Acemoglu, Daron, Simon Johnson and James Robinson, “Institutions as the Fundamental Cause of Long-Run Growth”, in Aghion and Durlauf, Handbook of Economic Growth, 2005

Easterly, W. and R. Levine, “Tropics, germs, and crops: the role of endowments in economic development”, Journal of Monetary Economics, 50(1), January 2003.

Rodrik, D., A. Subramanian, and F. Trebbi, “Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development”, Journal of Economic Growth, vol. 9, no.2, June 2004

Sachs, Jeffrey, John Luke Gallup and Andrew Mellinger, "Geography and Economic Development,", International Regional Science Review, Vol. 22, No. 2, pp. 179-232, August 1999.

Stories from around the web

"US food aid is all in bags labelled 'From the American People'....it might be less misleading if it were labelled 'From the American People, mainly to the American People.'" World Bank employees give up on their own bureaucracy, use Wikipedia to find World Bank reports.

The Economist profiles Jacqueline Novogratz, "'The financial system is broken, yes, but so too is the aid system,' so 'a moment of great innovation' could be at hand."

Good Intentions are Not Enough Blog tells the WSJ what they can do with their bad advice on charity evaluation.

Serial Moyo attacker attacks again.

The UN goes on strike, nobody notices.

It’s going so badly, let’s do more of the same!

Efforts to curb corruption in Afghanistan are failing, says a new USAID report. Based on dozens of interviews and a comprehensive review of existing studies and polls, the report describes the sources of corruption, which include the huge volume and variety of international aid pouring into Afghanistan, 30 years of conflict that have weakened state institutions and disrupted social relationships, and Afghanistan’s role in the illegal opium trade. Afghanistan is now the fifth most corrupt country in the world (following a rapid ascent from number 42 in 2005) according to Transparency International figures.

The report allows that on the whole, efforts to fight corruption in Afghanistan are failing to do the trick: “Seven years after the fall of the Taliban government…corruption has become a system, through networks of corrupt practices and people that reach across the whole of government to subvert governance.”

But the report does not detail specific failings of any recent USAID or other donor-funded activities (nor are failings to be found among the success stories that pass for information on the Afghanistan country page.) Could USAID explain how concerted efforts are failing to defeat corruption as a whole when each individual project is successfully meeting its targets? (Curiously, the consulting firm contracted to write the report is also being paid to implement a four-year USAID project to fight judicial corruption in Afghanistan.)

One of the six recommendations for future action in the report is to provide more resources and support for the High Office of Oversight (HOO), the anti-corruption agency which has until now has shown an “apparent unwillingness” to go after high-level corruption. The report notes that “often the officials and agencies that are supposed to be part of the solution to corruption are instead a critical part of the corruption syndrome.” How is the solution to aid money being stolen to give additional aid money to those who are stealing it?

The report, which was released to little media coverage in March, comes at an inconvenient time for the Obama administration, which has recently announced plans to increase aid to Afghanistan and Pakistan, and to funnel more of that aid through the government as both a sign of increased trust and a way to build government capacity (see for example Ken Dilanian's article on the report in USA Today). In fairness to USAID, political pressure surely has a lot to do with the way aid money is spent in Afghanistan.

It’s great news that the international community is recognizing how bad corruption has become in Afghanistan and resolving to renew the fight against it. Efforts to build “governance capacities in transparency and accountability;” fight corruption where it impacts people in their daily lives; and change “the culture of corruption”—as the report proposes—are sorely needed. But given the sorry state of the status quo, there is a distressing use of the words “continue,” “increase,” and “expand” throughout the recommendations. If something hasn’t worked in the past, why do we assume that more of that same thing will work in the future?

p.s. When we called USAID's Afghanistan desk to get their perspective on the report's findings, we were told that our inquiries needed to go through the press office. Fair enough. But it's two days later and we're still waiting...

Reader survey results: probabilities, halos, and leaders

What a relief to talk about something other than my distinguished colleague Prof. Sachs.... over to you, Dambisa Moyo! Now back to real work: the reader survey generated a great response – thank you readers! It confirmed a well known psychology experiment, but also contained surprises I did not expect.

The question was which was more probable, (A) or (B)?

(A) a country succeeds at economic development, or

(B) a country succeeds at economic development with a wise and capable leadership.

60 percent of you readers voted A, and 40 percent chose B. (Interestingly, a small sample on my Facebook page voted in the same percentages on the same question.)

On one level, A is the right answer, because B is a subset of A. A contains all successes, both (1) those achieved with wise leadership, and (2) those achieved with any other means. B only contains (1), and so is less likely than A. Well known psychology experiments find the same thing -- that many people have what is called the “conjunction fallacy” (again from my continuing Mlodinow and Kahneman obsession) that would cause them to choose (B). A set of outcomes that fits a plausible story is thought to be larger than one unrestricted by ANY story, even though ANY restriction on the set of possible outcomes always makes that set less likely than an unrestricted set. An explanation usually trumps no explanation, even if it gets the probabilities wrong!

But on another level, the reaction of many readers made me aware of how I had phrased the alternatives too sloppily, which taught me something about how the language we commonly use is often fuzzy on exactly what probabilities we are talking about. I think many of those who voted B were interpreting the question differently: when is development success more likely? With good leadership (B)? Or when the quality of the leadership is unspecified, and so could be either good or bad (A)? Obviously (B). Neither our brain wiring nor our education is good enough to give us linguistic precision about probability and randomness. So my sloppy language created a coalition in favor of (B) between an incorrect answer and a correct answer! How many such coalitions exist on development issues?

There is another related bias that is, called the “halo effect,” often discussed in recruiting job candidates (and also the subject of a great business book). An interviewer who quantifies one positive trait in a candidate excessively assumes that the candidate also performs well on other traits. Later quantitative evaluation finds the traits are not as correlated as the interviewer (or any of the rest of us) assume. So, for example, a beauty queen is not as likely to be a nice person as you think (could this be an excuse to mention the hilarious Miss California parody by Lisa Nova?).

What does this have to do with development? Well, a country that performs well on GDP per capita is also assumed to perform well on having wise and capable leadership. The latter is hard to quantify, so in many cases, our halo effect bias never gets corrected.

So sloppy language about probability, the conjunction fallacy, and the halo effect all make us assume that if the country has a good economic outcome, there is also a good political outcome (wise and capable leadership), even if we have no independent evidence that the leadership is wise. We do this in all countries (and assume bad leaders in unsuccessful countries), and then we notice a strong association between quality of leaders and development success! Therefore (adding the correlation=causation fallacy for good measure, which has its own cartoon) good leaders cause success! This amounts to the most elementary fallacy of them all – circular reasoning – which is still amazingly common in development debates.

Now would anybody like to go back and reread the “Asian success mythology” discussion, and think from yet another angle about whether East Asian successes were due to wise and capable leaders? And maybe if the leaders were not so perfectly wise in East Asia, we don't necessarily want to imitate everything they did?

I guess the lesson in the end is to be precise about probabilities, and demand independent evidence on the whole "wise and capable leadership" thing, rather than just assuming it when things turn out well.

Am I attacking Sachs too much?

Dear Readers,

Let me respond to those concerned about the tone and divisiveness of this debate (and a little bit about my levity).

In the Huffington Post, my column says (please read both Sachs' and my column):

Jeffrey Sachs, the world's leading apologist and fund-raiser for the aid establishment, has responded here with a ferocious personal attack on Moyo and myself, "Aid Ironies."

Allow me to defend myself (I'll let the formidable Moyo handle herself). It's not so much my pathetic need to correct slanders, as if anybody cared. Sachs' desperation shows when he peddles what I will show he knew were falsehoods. Besides, the sight of two middle-aged white men mud-wrestling on African aid may entertain the audience.

First, in the intellectual world as in the legal one, the accused has a right to face his accusers and mount a proper defense.

Second, the purpose of debate is to facilitate the emergence of the best ideas and to shoot down the worst ideas. I'm not always so cocksure I am right, but it is clear to me intellectually that Sachs' ideas are wrong, and I will combat them accordingly. An artificial consensus that stops the process of shooting down bad ideas is not a healthy intellectual practice. Sachs himself seems to keep trying to shut down the debate. From my column at Huffington:

Instead of Sachs' attempt to shout down critics with slanders and falsehoods, let's have a climate of open debate in which we learn from past mistakes, the guilty suffer, the good are rewarded, and we can hope that aid does start to reach the poor.

Finally, about my occasional levity. I believe in the maxim I heard long ago: "Take your work seriously and yourself lightly." The levity is because I don't take myself too seriously (if I ever do, please let me know). I take the work very seriously indeed.

Let me know if I have addressed your concerns.

All the best, Bill

Sachs Ironies: Why critics are better for foreign aid than apologists

Official foreign aid agencies delivering aid to Africa are used to operating with nobody holding them accountable for aid dollars actually reaching poor people. Now that establishment is running scared with the emergence of independent African voices critical of aid, such as that of Dambisa Moyo.

See post from Huffington Post.

Sachs attack! Help!

Jeff Sachs uncorks a personal attack on me, grossly distorts my position to make me look bad, and he definitely knows this from POSITIVE aid statements of mine that he has quoted in the past, wow this gets more fun every year! Anybody have any inside contacts at Huffington Post to give me a chance to defend my lame self?

Reader survey

Dear Readers, Can you indulge me with a little survey? Please tell me which you think is more probable:

(A) a country succeeds at economic development, or

(B) a country succeeds at economic development with a wise and capable leadership.

Please answer ONLY whether you think (A) or (B) is more probable, with no elaboration, just post a comment on this post saying "(A)" or "(B)."

Thanks, Bill Easterly

The Three Worlds of an Aid Worker in Lagos

by Jeffrey Barnes, veteran aid worker I start my day in World One, the world of international flights, business class lounges, laptop computers, four star hotels and Internet. Although power in the country is expensive and infrequent, the hotel management has installed stand up air conditioners in all the public spaces, including the hallways, to ensure that the temperature is always low enough so that clients with three piece suits are comfortable. The hotel generator run constantly to maintain the chill, but this is only noticeable to clients when they smell the diesel fumes in the parking lot

After breakfast, my driver is waiting for me and drives out into the midst of World Two, the bustle and struggle of the city streets. Our trip to my meeting can take anywhere from 30 minutes to two hours. We have allotted one hour. I admire the nerves of my driver as I watch him navigate around the potholes, the taxis, the bikes and the pedestrians who jump in front of us. The hawkers congregate at the traffic choke points to sell—kitchen appliances, toilet seats, bootleg CD’s, fresh fruit, clothes, plumbing, tool sets, furniture, toys, rugs and more. The guys selling cellphone recharges are everywhere, with their long strings of cards. My driver needs a recharge, but first insists that the seller open the recharge and enter the code. It works, but the additional time reminds me of costs of doing business in a low trust environment. “Low trust environment” is development jargon for “everyone for himself” that is the core principle of World Two.

I notice a huge cloud of black smoke in a nearby residential neighborhood. I ask my driver what he thinks it is. He hadn’t noticed it. Later, I hear that the fire was caused by the explosion of an oil tanker that shouldn’t have been in a residential neighborhood. Several deaths, homes destroyed. Apparently tanker explosions don’t merit special attention when you are working the streets of World Two.

Surprisingly close to our one hour estimate we arrive at our destination in World Three—a large ministry of the state government. Although it takes a while to attract the attention of the receptionist who is busy reading her newspaper, my obvious status as a foreigner gives me rapid access to World Three and she directs us to our destination without questioning our purpose or demanding any credentials.

The elevators are not functioning and apparently haven’t been for some time. As we walk up the seven flights of stairs to our destination, I notice that the walls are amply decorated with posters for every conceivable campaign, every vertical program, every pet donor cause—World AIDS day, Roll Back Malaria, Campaign for expanded vaccination, Women’s Day, World Effort against TB, Millennium Development Goals, World Population Day, etc.

When we arrive at our destination, our contact is not there and her secretary seems uniformed of our arrival, in spite of repeated calls to set up and confirm the appointment. When our contact finally arrives forty-five minutes later, she greets us warmly and we discuss the conference we attended together. We discuss another team building exercise for her and her staff. Our conversation is filled with development buzz words, “capacity building”, “leadership development”, “public private partnerships”. Ultimately, the deal we are discussing is about helping the ministry with their internal processes. I wonder what difference it will make to those people working the streets in World Two.

After the meeting, we plunge back into World Two. The traffic has become even more chaotic. Enterprising drivers have added two more lanes by driving on the sidewalk, but the four lanes still have to merge into one as we access the other road, so traffic has slowed to a crawl. A tall man wearing a dirty white boubou limps over to me. He thrusts out both his arms in my direction. His left arm is amputated below the elbow and his right hand is extended in anticipation of my charity. I have no change, and I don’t dare reach for my wallet while we are stuck in traffic with the windows open. I gesture with empty hands and apologize for not being able to help him out. Instead of moving onto the next car as the others have done, he glares at me and thrusts out his arms again. His eyes speak to me: “Don’t you see I am an amputee? Didn’t you come here to help people like me? Why don’t you build my capacity to eat a decent meal? When is World Amputee Day?”

I have no answers. The car finally lurches forward. I am thankful to escape back to World One, but the questions remain. Why are these three worlds so disconnected? Can we international travelers of World One really make the comfortable bureaucrats of World Three more responsive to the struggling masses of World Two? Or are we just making them even less accountable?

Aid works! – well at least, for Chivas Regal

Douglas Alexander, British Secretary of State for Development, recently challenged me to stand with the poor and feel their pain at a public event sponsored by NDN. As a privileged politician, he has recently traveled to a few places where he has met some Africans and feels comfortable quoting them as representatives of the whole continent. He made clear that in fact Trevor Manuel, the Finance Minister of South Africa, was the voice of Africa (certainly not Dambisa Moyo.) His source for this fact was: Trevor Manuel. The voice of Africa then told Mr. Alexander, “We need aid and we need to spend it effectively.” Alas, even with his chosen representative, Mr. Alexander seems to have heard only the first three words of this quote without the rest.

Having spent the last ten years working among some of the poorest, most marginalized people in Africa in a remote area of South Sudan, I believe that poor people can and should be helped – I have no disagreement with Mr. Alexander on this. For example, Mr. Alexander interviewed poor people in World Food Program food distribution line in south Ethiopia, while I as an NGO worker have arranged WFP food for tens of thousands of people in a remote county in South Sudan. We both agree that starving people should be fed and aid organizations can effectively distribute food.

Where we part company is Mr. Alexander’s seeming indifference to how you help poor people (unfortunately all too common among aid officials). Aid can facilitate worthy projects or encourage greed and graft.

Regarding aid accountability, Mr. Alexander said he would make sure schools in Kenya have a poster on every school room door so that parents know how many teachers or classrooms DFID has funded. Mr. Alexander has accountability confused with self-promotion! What should happen is that the community adopts the school as their own, so that they govern and monitor the school themselves, and are accountable for the results (and then judge DFID by how much they facilitated this).

Surprising things happen when the locals are in charge. My husband has just returned from a visit to the schools our NGO sponsors in South Sudan, where he was surprised and impressed by the results of the last eight years – not so much of our NGO’s efforts but of the communities’ efforts. With minimal increase in financial support, the schools have doubled in size by their own choosing. Even though the demands are beyond our comprehension, so are the hearts of the school principals. They find it impossible to turn away any student that comes prepared to learn and we have given them the freedom to manage their own schools. The result is the schools have burst their buildings several times over and classes meet most of the year under trees. There are no doors to put posters on and the communities feel they have control over their own destiny.

Even more ludicrous was Mr. Alexander’s parting response to me, that the UK and US should be motivated to lift poor Africans out of poverty so they can consume more of our goods. His example was that China is the largest export market for Scottish Chivas Regal whisky, so Americans should help develop Africa to consume our goods. I wonder if he thinks more Africans consuming Jim Beam would be the outcome of a successful development strategy?

Find video of Mr. Alexander's full speech here, and the accompanying Q&A here (specifically, the question at 13:15 and the answer at 16:55).

Somewhere myself between accountability and self-promotion: Our NGO is called Servant’s Heart and you can check us out on our website.

When Doing Nothing Equals Increased Aid

Nice dialogue going on here with the blog that is the scourge of wicked human rights violators everywhere, Wronging Rights (a blog that is also wickedly funny). Among other things, I worried that one of the posts on Mahmood Mamdani by Amanda Taub might be using the classic way to attack critics of infeasible, utopian schemes everywhere, which is to demand that the critic come up with their own utopian scheme to solve all problems. Amanda came back with a complete disavowal of any such intention:

So, anyway: here at Amanda HQ you'll find a wholehearted embrace of doing nothing, when all of the proposed somethings to do are crummy. If a proposed policy doesn't pass my "is enacting this policy more likely to reduce suffering and end conflict than staying in to watch Love Actually again?" test, then I for one would vote for movie night.

Sorry, Amanda, I should never have doubted you – you have got it completely right (except could The Godfather be another option?)

It’s amazing how many politicians fail Amanda’s Love Actually Test. Suppose there is a terrible problem and there are only two options:

(A) Do nothing.

(B) Do something to make the problem worse.

All politicians choose (B) of course! Two random current examples are: (1) Run a “War on Drugs” to subsidize violent criminals and destabilize Colombia, Mexico, and Harlem, (2) drop bombs to kill innocent civilians so as to help terrorism recruiters and destabilize Afghanistan, Pakistan, and Queens. I am sure faithful readers can come up with more.

Here’s a brainstorm. Doing something to make things worse, that is equal to negative aid. If you change from doing something bad to doing nothing, that is equal to a decrease in negative aid. A decrease in negative aid is equal to an increase in positive aid. Therefore, doing nothing = positive aid. QED.

Hey politicians, here is a way to increase aid, get results, at reduced costs! Buy now while supplies last! Just go over to Amanda’s and watch Love Actually!

How to help the poor have more money? Well, you could give it to them

In 2007, people in the Western Province of Zambia lost their homes, their livestock and their crops when heavier-than-normal flash floods swept through their area. USAID’s office of disaster assistance stepped in with $280,000 worth of with seeds and fertilizer, training for farmers, and emergency relief supplies. Two NGOs working in Zambia, Oxfam GB and Concern Worldwide, tried a different approach: they handed out envelopes stuffed with cash—from $25 to $50 per month per affected family, with no strings attached. An evaluation found that common fears about cash transfers—that the cash infusion will cause inflation in the market, that the money will be squandered, or that men will take control of the money—were unrealized.

What did people buy with the money? The list includes maize, beans, salt, cooking oil, meat, vegetables, clothes and blankets, paraffin, transport, soap and body lotion, and lots of other mundane household items. They also loaned it to friends, used it to pay back debts, purchased health care, education and transport, and rebuilt their homes. Only a very small fraction of the money (less than .5%) was spent on “unproductive” items, like liquor for the men.

Unconditional cash transfer programs can be fast and cost effective. With no technical experts’ salaries to pay, and no trans-Atlantic shipping costs for US-produced food aid, more of the cash can go straight to the recipients (in the case of the Concern Worldwide project 27% was spent on program administration, while 73% was distributed in the cash transfers.)

Cash transfers also acknowledge that poor people are capable of making good economic decisions without the help of outside experts armed with needs assessment checklists. An evaluation of another Oxfam cash transfer program, this one in Vietnam (summary here), found that villagers made sophisticated investment decisions, choosing whether to invest in seeds and fertilizer, family coffins and tombs, cows and buffalo, home improvements, debt repayment, and /or community roads.

As Duflo and Banerjee document in their study on the economic lives of the poor, the rich often assume that poor people have few choices about where to spend their money. And this notion allows aid agencies to assume the paternalistic role of decision-maker for the poor. Yet Duflo and Banerjee note that subsistence accounts for a lot less than 100 percent and the “poor do see themselves as having a significant amount of choice.”

Cash transfers have plenty of potential drawbacks, as these studies also point out. Handing out large amounts of cash comes with its own set of logistical hurdles and could invite theft or corruption. And what if this approach puts women and children at a disadvantage, while men take and spend the cash? There are improvements to be made, in targeting the right population, and equipping people with better tools (like financial training and savings accounts) to help them make the most of the money. Two studies by Innovations for Poverty Action and the Poverty Action Lab at MIT in Morocco and Indonesia (both ongoing) should shed more light on when and how cash transfers can be most effective. (See also studies collected by the UK-based Overseas Development Institute).

When USAID provides blankets, seeds and fertilizer to flood victims, they are doing their best to decide for the victims what their most urgent needs are. With the cash transfers, the people can decide for themselves how to meet their most urgent needs. This gives people who have lost their livelihoods, belongings or loved ones a new feeling of control over their lives, builds money-management skills, and restores to them their power to make economic decisions. If you were in their shoes, which would you prefer?

Dani Rodrik’s moody industrial policies – the final questions

Dear Dani, Thanks for your reply to my post.I am a bit frustrated with your statement that industrial policy just has different effects in different countries. If we just say “it works” with good outcomes and “it doesn’t work” with bad outcomes, then there is no way of contradicting this with evidence. ANY policy could pass this test. This kind of “theory” fits past data but cannot predict future outcomes – how do we know what side of the bed industrial policy will wake up on tomorrow?

I know you don’t actually fall for this, but I don’t understand how you actually get around this problem with your “growth strategies” approach. If the effects of every policy are different in every country, what is your evidence base for recommending any particular policy in any country ever?

This jibes with the observation that tons of effort to replicate East Asian Tiger success elsewhere has not actually worked to produce Tiger-like success anywhere else.

Your work has done a lot to convince us all about our inability as “growth experts” to make general recommendations on how to raise growth. But then you seem to recommend more intensive use of “growth experts.” I would go in the other direction and find approaches to development that don’t require these clueless “growth experts,” like systems with a lot of local feedback and accountability – lots of political and economic competition with freedom of choice of consumers, investors, and voters.

Best regards,

Bill

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

by Dani Rodrik Hmmm. I think you misconstrue the nature of the debate and the argument. If my priors were that no Moslems are terrorists ("industrial policy never works") and then I found that some are, I would think the evidence pretty compelling and alter my priors. (With apologies for the nature of the analogy, but I am following Bill's line of thought...)

My point is to get people beyond their refusal to accept that industrial

policy could ever work, so we can actually debate the conditions under which it can or does. Now that would be a healthy debate!

BREAKING NEWS: Nation’s senior diplomat talks sense, inspires, is not babbling nonsense

On Wednesday night, US Secretary of State Hillary Clinton urged in a commencement address to NYU graduates to help “improve the world” AS INDIVIDUALS ACTUALLY DOING SOMETHING about hunger and extreme poverty.

[T]hese challenges … can no longer be seen just as government-to-government. There is a time and an opportunity, and with the new technologies available, for us to be citizen diplomats, citizen activists, to solve problems one by one that will give in to hard work, patience, and persistence, and will then aggregate to the solutions we seek.

Stunned aid watchers could not remember any previous occasion where a senior rich country diplomat talked about individual initiative as one possible solution to world poverty, or for that matter any previous occasion where any such official went beyond noncommittal platitudes about international action to achieve Millennium Development Goals.

Rumors are spreading throughout the old guard aid obstructionists at USAID that this remarkable woman might actually be their boss.