Industrial Policy Showdown at World Bank: the policy that may not exist also may not work

The World Bank’s PSD Blog has a good discussion of the debate last Monday between Justin Lin (Chief Economist of the World Bank), Ann Harrison (Head of trade policy division at the Bank and well-known trade economist), and myself (random trouble-maker). The debate was very civil, and I am very grateful to Justin Lin for being so willing to debate his ideas openly (as opposed say to a former Chief Economist who forced me to seek political asylum to escape his enforcers :>) The debate basically boiled down to who is more likely to discover the country’s comparative advantage, the government or decentralized entrepreneurs.

(1) the argument for the government

-- according to Ann Harrison, there could be “latent comparative advantage” in industries with increasing returns – i.e., falling unit costs the more is produced. In these industries, they don’t have a cost advantage now because they are not producing much, but if they produced more they would have lower costs. A government could promote an industry to turn latent into actual advantage.

--according to Justin Lin, the market can handle static efficiency, but can’t handle the transition from one stage of exporting to another, like from lighter to heavier industry. All the government needs to do is look ahead at those countries ahead of it on the technological ladder and promote the next rung on the ladder to find the country’s true comparative advantage.

(2) The argument for many decentralized entrepreneurs seeking the next Big Hit

--If it's so easy for governments to do it, why do we have no success stories of imitating East Asian tigers?

--Ann pointed out that we have little evidence of any actual government policies aimed at finding “latent comparative advantage.” Even deeper than whether industrial policy works is the question of whether it even exists in the real world.

--there are almost 3000 manufacturing products to choose from, so how much guidance does the government get from looking ahead at a very broadly defined “technological ladder?” Entrepreneurs discovered such surprising Big Hits as Fiji exporting women’s cotton suits to the US and Egyptian exports of ceramic toilets to Italy.

--the central government has limited knowledge, limited skills, no direct rewards for finding winners, and lots of problems with corruption (Lant Pritchett reminded me of a recent paper that documented that we can’t even trust Indian civil servants to give out drivers’ licenses) as it tries to pick winners. Entrepreneurs have lots of local knowledge about their industry, specialized skills in that industry, abundant rewards for success, and will not steal from themselves.

--much of the “evidence” that industrial policy “works” is selectively picked from a huge amount of random variation. It focuses almost entirely on industrial policy successes and doesn’t document the much more numerous failures.

In the end, the question boils down to: does a poor country government have a comparative advantage in discovering a poor country’s comparative advantage?

The Imperial Origins of State-Led Development

Lenin said “Imperialism is the Last Stage of Capitalism.” Globalization protesters routinely link American imperialism to promotion of capitalism overseas. For example, Naomi Klein’s 2008 book The Shock Doctrine: The Rise of Disaster Capitalism draws a vivid connection between American interventions overseas (like the CIA overthrowing Allende in Chile, or today’s Iraq) and the promotion of free markets (“neoliberal economics”). It’s plausible that there are sometimes connections between military interventions and the economic interests of the intervener. Yet it is not so obvious that imperialism promotes free markets. Historically, the most egregious imperialism, such as the British Empire, actually promoted state-led development rather than free markets.

This is yet another insight of Suke Wolton’s book on the colonial invention of “development” that I discussed yesterday. Propagandists like Lord Hailey offered the necessity of state-led efforts to promote development as yet another justification for the continuation of British colonial rule during and after World War II. This is not so surprising – when the “state” is the colonial ruler, and you want to convince people that poor societies need the colonial ruler, then you want to emphasize the paramount role of the “state” in development. According to Hailey, the state’s “primary function” was the “improvement of the standards of living … in the Dependencies.” The government was the “most active agency for promoting social welfare and improving the general standard of living.” Private enterprise is never mentioned in the British colonial propaganda covered by Wolton.

So it was not such a surprise that the early development theories in the 40s and 50s, in the political environment created by colonial pro-state propaganda, said that countries could not break out of their “poverty trap” without a coordinated state effort at a “Big Push.”

What about imperialism and attitudes toward development today? One intriguing thing I wonder in the light of both today’s post, and yesterday’s post on colonial racism and paternalism, is the affection of today’s British public and academics for paternalistic and state-led theories of development somehow related to the British colonial past? As compared to the lack of sympathy for such theories among the American public and academics, when America lacks much of a colonial past and traditionally criticized colonialism?

Of course, the US has been no slouch as an imperialist lately. Yet today’s US imperialism does not obviously promote free markets. The US quickly abandoned a brief experiment with trying to create the perfect free market in Iraq (correctly derided by Naomi Klein) after the insurgency arose. Now in both Iraq and Afghanistan, there is heavy reliance on the aid-military-state complex to promote development. It is true that American companies have benefited from both interventions, but NOT from free market opportunities in either country. No, they grow fat on aid-government contracts.

So imperialism is not so clearly linked to capitalism and free markets after all; historically there has been a closer link between colonialism/imperialism and state-led approaches to development. People who like Imperialism are fond of a big military state presence, so it’s not so surprising that they are also fond of a big economic state presence.

How the British Invented “Development” to Keep the Empire and Substitute for Racism

During the early years of World War II, Japan won major victories (such as the capture of Singapore) against the British and threatened India. Japanese propaganda pointed to British racism and offered themselves as the defenders of non-white peoples. The British feared that non-white people in the colonies might side with the Japanese rather than their colonial masters. The British had to come up with a new justification for colonial rule to replace the unpopular and increasingly implausible idea that they were a superior race destined to rule inferior races. In response, they invented the concept of economic development.

This story is told in an undeservedly obscure book by Suke Wolton, 2000, Lord Hailey, the Colonial Office, and the Politics of Race and Empire in the Second World War, (I have this thing for obscure development history books; this one is ranked #4,399,430 on Amazon)

The Japanese charge of British racism was certainly correct. They were so racist they thought even nonwhites acknowledged their own inferiority, like when Julian Huxley referred to the natives’ “childlike belief in the white as an inherently superior being.” After World War I, the Americans and British shot down a League of Nations resolution for Racial Equality proposed by the Japanese. The Colonial Office said in 1939 “most Africans are still savages.”

But during the dark days when the British were losing World War II, the racism was no longer allowed to be so explicit. The Labor Minister in 1941 banned the N word for Africans and “coolies” for Indians. The Colonial Office further told the BBC that the N-word should be “discouraged” on the radio. A further breakthrough caused the BBC to drop the word “native.”

But something more positive was needed to put the Empire in a good light. A long-time colonial official, Lord Hailey came up with the idea in 1941 of redefining the Empire’s mission as “promotion of native welfare.” (I guess he didn’t get the BBC memo about “native.”) And he argued the colonies could only develop with Britain’s help (sound familiar?) In short, Hailey said:

A new conception of our relationship…may emerge as part of the movement for the betterment of the backward peoples of the world, which stands in the forefront of every enlightened programme for …postwar conditions.

To repress independence movements, however, Hailey made a distinction between political development and economic development: “Political liberties are meaningless unless they can be built on a better foundation of social and economic progress.” (A line that autocrats have been using ever since.) The Colonial Office thought many colonies “little removed from their primitive state,” so “they will probably not be fit for complete independence for centuries.”

Of course, changing the language from racist to economic development did not mean racism suddenly disappeared. As Wolton shows, “the white Western elites still believed in their fundamental superiority.” In the end, Wolton says, “The major powers would continue to be able to determine the future of the colonial territories – only this time the source of their legitimacy was based less on racial difference and more on their new role as protector and developmental economist.” After the war, even more officials went out to the Empire in what became known as the “second colonial occupation.”

Why does this history matter today? After all, the Empire fell apart much sooner than expected, and racism did diminish a lot over time. And I do NOT mean to imply guilt by association for development as imperialist and racist; there are many theories of development and many who work on development (including many from developing countries themselves) that have nothing to do with imperialism and racism.

But I think the origin of development as cover for imperialism and racism did have toxic legacies for some. First, it meant that the concept of development was determined to fit a propaganda imperative; it was NOT a breakthrough in thought by economists. Second, it followed that development from the beginning would stress the central role of Western aid to help the helpless natives (which shows up in the early development theories like the “poverty trap” and the “Big Push,” and the lack of interest in local entrepreneurs and market incentives). Third, the paternalism was so extreme at the beginning that it would last for a long time – I still think it is widespread today, especially after today’s comeback of the early development ideas in some parts of the aid system. And this history also seems strangely relevant with today’s “humanitarian” nouveau-imperialism to invade and fix “failed states” like Iraq and Afghanistan.

Membership in the development elites is far more diverse than in Lord Hailey’s time, but I fear that, to use Wolton’s words, “in the end, the elites still believe in their fundamental superiority.”

Won’t shut up about Afghanistan

Transitionland had a thoughtful response to my cri de coeur on Afghanistan yesterday. Among her recommendations for improving things: (1) Stop the air strikes that are killing civilians,

(2) Crack down on corrupt contractors to USAID,

(3) Stop supporting Afghan warlords who are homicidal and/or corrupt.

So, after years of experimentation, we can now start applying these subtle, complex lessons:

(1) Don’t kill,

(2) Don’t steal,

(3) Don’t give aid to those who do.

Oh no, I’m giving in to the Satirical Dark Side again. But shouldn’t we all be angry that things are so awful in our Afghan program that THESE are the things that need to be changed? The “why does nobody care?” question from the previous blog post is alive and well.

In fairness to all the aid workers in Afghanistan making idealistic personal sacrifices to work there (and in fairness to Transitionland): there ARE many good efforts by good people (including Afghans) who are helping Afghans help themselves.

But the big players like the US military and USAID are still screwing up big time, hence the presentiment of disaster.

This blog’s previous posts on this have not been that successful in generating much response, so maybe I should follow my own advice of stopping what is not working and give up on the Afghanistan cause. Of course, if I went only by volume of response, I would only be doing posts on naked supermodels.

I think there is a tragic paralysis on Afghanistan that needs to be broken by as many voices as possible shouting:

Why does nobody care?

Explaining Slavic female tennis comparative advantage mystery

A reader had a provocative explanation, posted as an anonymous comment on the blog post on the Slavic tennis women mystery:

Soviet-bloc eugenics. If you look at the biographies of the Russian tennis players, like Kuznetsova and Petrova, they are the product of the marriage of two Olympic athletes.

Nadia Petrova: Petrova's father Victor was a leading hammer thrower, while her mother Nadezhda Ilyina won a bronze medal at the 1976 Montreal Olympics in the 400 meter relay.

Kuznetsova: Her father, Alexander Kuznetsov has coached five Olympic and world cycling champions. Her father's protégés include her mother, Galina Tsareva, a six-time world champion and holder of 20 world records, and Svetlana's brother, Nikolai Kuznetsov, a silver medalist at the 1996 Summer Olympics in Atlanta.

Think about it. The Communists selected hundreds of young male and female athletes to train for the Olympics, and located them at training centers. Inevitably, many of them married. And their daughters grew up to be some fearsome athletes too. The reason they never win is that they were raised to be athletes, not champions. In the US, it's the real competitors who rise to the top out of nowhere, like Oudin

The question still might be why is the advantage more pronounced in women than men? My amateur guess is that the Communists were much better than Capitalists in developing female athletes, since the former wanted to maximize Olympic medals (who cares if they are male or female?), while the profit motive reined in the latter, and female athletics just doesn't pay very well in the free market. This legacy may still matter even after the Communists (mostly) disappeared.

Links to Make You Think

If a group of lions is a “pride,” a group of development professionals is a ________. More and more mzungus (whites) fall truly, madly, deeply in love with Africa. (via Scarlett Lion)

Book-burner to be new head of UN education and culture efforts (UNESCO)? We wonder if the UNESCO Sex Ed book that Chris Blattman satirized might be the first to go on the bonfire under new management.

None of the 48 Slavic women in the US Open made the semifinals. Do we need an even more complicated story that Slavic countries currently have comparative advantage in female tennis except they never win any majors?

"This power to help is just about as dangerous as hard power." - Kenyan Writer Binyavanga Wainaina on the Ethics of Aid, on America Public Media's program Speaking of Faith (via Texas in Africa)

Freakanomics probably doesn't need us to promote them, but they have a nice post on African entrepreneurs (thanks for the tip to Indego Africa's great Social Enterprising blog).

Africa desperately needs trade links: a pictorial essay

In all the debates about free trade, we can forget sometimes that international trade is not optional for a very small, very poor country. If there are any kinds of returns to scale at all in many sectors, and casual observation and much research suggests there are, then a tiny domestic market will rule out any serious domestic production in many, many sectors (is the Gambia going to be making refrigerators any time soon?) So trade will be a necessity, specializing in what each small, poor country can do, and importing everything else. And what continent is full of small, poor countries? Africa, of course. Then it’s all the more distressing that Africa does not have much in the way of trade links – shipping routes, air connections, Internet connections (for both communication and moving goods) – with the global economy. This is best seen in a series of pictures.

Lack of shipping routes going to Africa (except South Africa and Nigerian Oil):

Click here for a larger image.
Source: the excellent 2009 WDR “Reshaping Economic Geography” of the World Bank, Chapter 6

Scarcity of Airline Routes to Africa compared to rest of World (except South Africa):

Source

Scarcity of Internet Connections except South Africa (map of # of IP addresses in 2007):

Source

In short, Africa is disconnected from the global economy, which is very bad news for a continent that desperately needs international trade (the disconnection is both symptom and cause of the lack of trade). Lack of international trade = poverty for small economies.

This lack of trade links reflects many factors: rich country protectionism, domestic policies on customs & tariffs & foreign investment, poor port and road infrastructure, thus very high land transport costs within Africa, barriers crossing borders within Africa, Africa stereotypes that discourage foreign investors and out-sourcers, and so on.

There is some hope on the horizon for the Internet and communications issues, at least. High-speed fiber optic cables are connecting the east and west coasts of Africa to the rest of the world. And we all know about the famous cell phone revolution happening within Africa. Comparative advantage reflects your infrastructure quality and transport costs as well as your other endowments and experience. Perhaps the new broadband Internet connections will make possible all kinds of new businesses that economize on physical transport and use the Internet and cell phones instead. How about some kind of e-Africa.com, ready to open for business?

Supermodel vows to stay naked till USAID funds reach starving children

Supermodel Miranda Kerr posed nude on the cover of Rolling Stone, announcing she would not put her clothes back on until USAID funds reached starving children affected by the drought in East Africa. She criticized USAID for tying aid to purchases from American farmers and shipping companies, leading to delays of many months in food reaching famine victims, causing thousands of premature deaths. Oh, we can only dream. Sorry, this post is fake. The cover is genuine, but Miranda Kerr was actually trying to save the koala bear and said nothing about staying naked, USAID, aid tying, or the drought. I am experimenting with this (fake) blog post /Tweet to see what would work on blogs and Twitter to promote the Aid Watch motto, “just asking that aid benefit the poor.” Based on my Twitter experience, the main ingredients behind how much Tweets “succeed” in the philanthropy area seems to be some combination of two or more of the following: (1) Sex, (2) Celebrities, (3) Outrage (moral), (4) Suffering Africans, and (5) Satire (lame attempt to come up with memorable acronym for (1) thru (6): SCOSAS).

One inspiration for this search for success was Chris Blattman’s hilarious spoof of a UN sex guide, which I tweeted and retweeted over and over again this weekend. It became the biggest hit that I’ve ever tweeted on Twitter. This only featured sex and satire (of the UN), but Chris was so comic that was more than enough. Another big hit in my Twitter career of 3 months was tweeting a post by Alanna Shaikh protesting an AIDS advocacy ad that portrayed the naked female body as the home for the disease.

The biggest hits among tweets of Aid Watch posts: (1) Beyonce’s Secret for Greater Aid Effectiveness, (2) Satire on how to make an Advocacy Video about Africa, (3) Should starving people be tourist attractions? (4) "Didn't we try that in 1938? Why technical poverty fixes fall short?", (5) The tragedy of the Millennium Development Goals, (6) UN Human Rights and Wrongs. It’s based on this record that I came up with the SCOSAS list for Twitter success above.

Of course, it also helps to contrast with what was NOT successful. There was an anemic response to my tweets on NTYT column on getting out of Afghanistan, and Marginal Revolution on how African infant mortality and illiteracy look good in historical perspective. Tweets also fell flat on Aid Watch posts on (1) USAID funding Iraqi insurgents (2) MCC’s admirable openness to their critics, (3) mission creep at the IMF, (4) corruption killing USAID projects in Afghanistan. The Aid Watch post on aid tying appeared before I started Twitter, but also generated a fairly modest response. It’s striking how serious and important these posts are compared to the successful ones on Twitter. Outrage by itself (1) and (4) does not seem to be enough. (We also may have just done a bad job presenting the issues on these posts.) Of course, the successful tweets also covered serious issues, but needed extra SCOSAS pizzazz.

I can understand why my critics at Bill Easterly Watch (!?) justify relying on Angelina Jolie as aid spokeswoman, since she combines all the successful elements. But my big worry at Aid Watch is that relying on shallow sexy celebs to promote aid leads to a shallow aid message: just spend more aid dollars with no incentives for dollars to reach the poor.

Is there some way to grab attention for good causes without selling out to our society's worship of celebrity & sex?

Harvard President’s proposed fix for The University: more Bad Economics?

Drew Gilpin Faust writes on “The University’s Crisis of Purpose” in the current NYT book review. Most of the essay is superb, about not just justifying college education by its vocational payoff, but also the study of truth & beauty for their own sakes. I liked also this: “Universities are meant to be producers not just of knowledge but also of (often inconvenient) doubt…to serve…as society’s critic and conscience.” (wow, thanks for justifying my own approach towards the society of foreign aid!)

Alas, after that high point, the Harvard President recommends what is already everybody’s favorite form of social criticism: amateur economics!

As the world indulged in a bubble of false prosperity and excessive materialism, should universities – have made greater efforts to expose the patterns of risk and denial? Should universities have presented a firmer counterweight to economic irresponsibility? … Has the market model become the fundamental and defining identity of higher education?

I don’t think the President is talking about the technical study of perverse incentives in financial markets and regulation, such as those that caused the crisis. I’m not sure WHICH academics in WHICH department she is calling upon to supply shallow moralizing and bad economics (certainly not the superb Harvard econ dept or the great economists at the Kennedy School).

I don’t mean to pick on the Harvard President in particular, many heavyweight figures are dispensing sophomoric rhetoric ever since the crisis made it open season on economics. I'm just following her counsel to supply some inconvenient doubt about the social value of such rhetoric.

Slavic Tennis Women and Aid Agency Specializations

A recent post talked about the advantages of specialization in general, and for aid agencies in particular. But what should you specialize in? Obviously, in your “comparative advantage,” which is economists’ laborious jargon for “what you’re good at.” But where does comparative advantage come from and how do you find your own? These thoughts were prompted by watching US Open tennis on TV, where anyone who can read their –ova’s and –ieva’s is struck by the amazing predominance of Eastern European women in pro tennis. To be precise, 48 of the 128 women in the singles draw were Slavic (there’s a few Slavic men in the US open too, but it’s far more pronounced with women). Where does Eastern Europe’s comparative advantage in female tennis come from?

(Marginal Revolution asks a related question about where all the pretty Russian women (fashion models, tennis, etc.) suddenly came from, but here at Aid Watch we NEVER use cheap, sexist promotional tactics like discussions or pictures of beautiful women.)

National stereotypes are NOT OK, but SOMETIMES they MAY reflect SOME little underlying comparative advantage (which is obviously cultural rather than racial). According to a really old and lame joke, which OTHER people have made, and I am repeating here under duress only for educational purposes:

Heaven is where the police are British, the cooks French, the mechanics German, the lovers Italian, and it is all organized and run by the Swiss. Hell is where the police are German, the cooks British, the mechanics French, the lovers Swiss, and it is all organized and run by the Italians.

The classic economist’s explanation of comparative advantage is that it reflects what you possess in abundance relative to what you lack, compared to others. So a fertile-land-abundant country like the US has a big comparative advantage in agriculture –DUH.

Another (not mutually exclusive) explanation is that you develop comparative advantage by “learning by doing,” which is economists’ laborious jargon for “practice.” In Malcolm Gladwell’s entertaining new book Outliers, the explanation for Bill Gates’ success is that, by some accidents of fate, he happened to be one of the few 8th graders in the nation with almost unlimited access to a powerful computer in 1968. When you’ve been writing software since the 8th grade (plus possessing IQ in abundance, even if you lack everything else) you have a comparative advantage when you launch a software company 8 years later.

So some hints for aid agencies or NGOs deciding what is their comparative advantage is (1) what do you have in abundance compared to the others, and (2) what have you been practicing at already for 8 years?

And now let's crowd-source the question: how did Slavic women get a comparative advantage in tennis?

Our Critics Are Starting a Bill Easterly Watch

We received a request by Bryan Turner to submit a post on Aid Watch critical of this blog’s approach. Since we are in favor of debate, we accepted his proposal and here is the blog post he submitted yesterday--Eds. by Bryan Turner, founder and coordinator of Students To End Extreme Poverty and Youth Engagement Coordinator of Make Poverty History Canada

I actually agree with much of what Professor Easterly writes and he does some great things. I also believe that he could make more of a constructive difference in the debate on poverty alleviation than he is now.

Several colleagues and I from Students To End Extreme Poverty have launched a blog called Bill Easterly Watch: Just Asking that Bill Stop Blowing Over Straw Men. In our opinion, NGOs and governments should be accountable – and so should Professor Easterly.

Criticizing is at best one third of the equation, and typically the easiest third. Criticizing can be the first step in positive change. The next is figuring out – searching – what to do about it, the third is doing it, seeing what works and what doesn’t and if applicable how it can happen elsewhere.

The aid system is broken. That is the start, not the end. It’s easy to criticize, much harder to propose alternatives. If there were enough people focusing on the “solutions,” then criticizing alone would be sufficient -- but there are not. So unless you are proposing alternatives, evidence suggests you may be discouraging more people than you are encouraging.

If this is not the goal of Professor Easterly, then he should amend his approach.

I’ve spoken with countless people that cite Professor Easterly’s arguments as reasons for inaction, not just on aid but on the entire gamut of issues facing the world’s poorest.

We need internal and external emotional harmony to be happy people. If we believe we are good (which most of us do) we need to reconcile our actions with our exterior environment. What does this mean? Good people do not ignore 9.2 million children dying every year from poverty related causes. But if there is no infrastructure in place (which there isn’t) allowing people to make a difference, then people will become cynical about change. And if you criticize an approach without suggesting a feasible alternative, chances are people will give up on being involved.

We are concerned that some of Easterly’s arguments are not fleshed out, based on oversimplifications of complex issues and sometimes even miss the point.

For example: the dichotomy between searchers and planners is a false one and a lot of planning is born out of searching.

A second example: the criticism of celebrities. The transformation of aid that Easterly advocates won’t happen without a critical mass of informed citizens who are willing to take actions. Celebrity involvement can be crucial for getting people involved on an introductory level – usually the starting point for deeper engagement – facilitating a tipping point towards mass action.

A third example: You should not hold aid given for non development purposes accountable for development outcomes, but that’s what the $2.3 trillion ($15 per person per year) in wasted aid argument does. We want to talk about that.

Students To End Extreme Poverty is all about healthy debate, accountability, innovation, searching, and most of all, solutions. We believe, as is demonstrable, that aid can work, and there should be more of it that does work – more and better aid. We think this is something that, with a little bit more prodding, Professor Easterly can support as well.

Beyonce's Secret for Greater Aid Effectiveness

One of the oldest ideas in economics is gains from specialization. Adam Smith talked about it 233 years ago. All of us are good at a small number of things and suck at most everything else. The economy as a whole produces more because we each specialize in what we do best and then trade with everyone else. We see Beyoncé specializing in music videos, which she trades to Bill Gates for his specialized production of software. We will get more of both music videos and software from Beyoncé and Gates than if each (without the possibility of trade) had been forced to supply their own needs for software and music videos.

Beyoncé would be forced to take time away from videos to try to figure out her own software, and Gates would have to divert time from software to learning how to sing and dance in a swimsuit.

Economists are often congratulated for their impressive grasp of the obvious. Yet if this principle is so obvious, why is it routinely violated in the aid world? It’s gotten worse with the Millennium Development Goals. Each aid organization tries to meet all MDGs and each fails to specialize. Therefore some aid agencies are forced to supply things they are bad at – the equivalent of Gates’ music videos – for which there is no demand.

UNICEF is working on swine flu, the traditional province of WHO, who is distracted by trying to do development research, which is the traditional specialty of the World Bank, who is in turn distracted by a new emphasis on children, which is the strength of – just to complete the circle – UNICEF.

Even very small aid agencies fail to specialize – Luxembourg’s $141 million aid budget was divided among 30 different sectors (out of a possible 37). The tiny Luxembourg budget also went to 87 different countries.

With high overhead costs for each separate activity for each country, the ratio of overhead costs to funds for the activity gets extremely high, sometimes over 100 percent. UNDP has one of the very LEAST specialized aid budgets by country and by sector, and it actually does have a ratio of overhead costs to aid disbursed of 129%.

One suspects overhead costs devoured even more of program costs for the $20,000 Greece spent on worldwide post-secondary education, the $30,000 the Netherlands spent on promoting worldwide tourism to developing countries, the $5,000 Denmark spent on worldwide emergency food aid, or the $30,000 Luxembourg spent on conflict, peace, and security. (Remember, these small sums may have been split even further among country recipients.)

One could think of many political economy reasons why aid agencies resist specialization. From my casual experience in a large bureaucracy (the World Bank), the primeval bureaucratic instinct is to give a tiny piece of the pie to every possible lobby group (internal or external). But what’s most clear is that it shows aid agencies lack of accountability, because it is such a wasteful practice that also drives the aid recipients crazy with duplication of efforts by every aid agency in every sector in every country.

So please, aid agencies, go back to Adam Smith, and try to capture some of those enormous gains from specialization. And NGOs, kudos for doing a much better job than official aid at specializing at what you do best, and please resist pressures to have a piece of everything.

In which I don’t care about genocides that kill only .01 percent of the population

My WSJ review on Tracy Kidder’s book on the Burundian genocide survivor generated this comment from a reader (abbreviated here, the full version is posted as a comment on the blog): Mr. Easterly,

You point out that "only" 0.01% of Africans have been killed by war and genocide... each year... for the past four decades. This is only slightly higher than the percentage of Europeans who died in the Holocaust each year between 1940 and 1945, meaning that Africa has merely suffered something like a 40-year Holocaust.

In fact, 0.01% is significantly lower than the percentage of Americans killed each year in the second world war (0.08% or so, on average), a minor conflict barely mentioned in writings of the time. During the Vietnam conflict we were losing only about 0.002% of our population each year for about 16 years and people would barely shut up about it.

Thus I propose that we adopt 0.01% of the population as the Easterly Threshold, requiring that any discussion of a conflict failing to achieve this level of decimation include a disclaimer that most of the population has not, in fact, yet died. Where populations are suitably difficult for us Americans to distinguish from one another, this percentage will be calculated on an arbitrarily continental or sub-continental basis. This immediately puts the whole history of the 20th century in a much rosier light: using the Easterly Threshold, a group like the Khmer Rouge barely clears the hurdle, massacring just 0.012% of Asia's population in a year.

Regards,

Jonathan Custer

Lakeland, Florida (soon Birmingham, England)

Dear Mr. Custer,

Congrats on your tour de force demolishing my argument that nobody should care about genocides that kill only 0.01 percent of the population or less.

You force me to admit that if a genocidal soldier killed one of my own loved ones, I myself would get only moderate comfort from the statistic that this corresponded to an American death rate of only 0.000000333 % (1 out of 300 million).

Your argument is so skillful, let’s not get pedantic that my article never made the “only” argument; it actually said that the .01 percent statistic is also “of no comfort to Africans today who are victims of still much too frequent horrors; bless anyone who can stop the horrors or help the victims.”

I was foolishly hoping the .01 percent number might induce the casual reader to re-examine his belief that the typical African family consists of a wife-beating alcoholic male and starving refugee females raped by child soldiers, soon after massacred by the janjaweed just before they would have died of AIDS anyway.

On correcting stereotypes, consider the Willie Horton ad of the presidential election of 1988 of the George Bush, Sr. vs. Michael Dukakis. A political group allied with Bush ran an ad featuring a scary picture of Willie Horton (see also the video), a black man in prison for murder whom Dukakis granted a weekend furlough. He then raped a woman while on furlough. The ad is partially credited with winning the election for Bush.

I would argue that white voters over-reacted in their fears of black crime. The propensity of black males to commit crimes is lower than the general public thinks, and other whites, not blacks, commit most crimes against whites. According to your interpretation, my attempt to correct a stereotype means I don’t care about the victims of Willie Horton. So this is a good opportunity to clarify I am not, in fact, in favor of rape and murder. I'm not that keen on genocide either.

Actually, I can do two things at once: (1) argue against exaggerated stereotypes and (2) care about the victims of crimes regardless of whether they fit stereotypical patterns. But thanks for your argument forcing me to clarify this.

Satirically Yours,

Bill Easterly

Burundi-based aid worker pushes back further on Burundi stereotype

Dear Professor Easterly, A former colleague from Wellesley forwarded me your WSJ review of Tracy Kidder's Strength in What Remains.

I live in rural Burundi, and wanted to thank you for challenging the apparent depiction of this beautiful and complex nation as "a place of unrelieved poverty, violence, disease and human degradation." Burundi is certainly very poor, and I am working with the landless Batwa, by far the poorest of the poor. But I am more struck by affirmations of human dignity than I am by human degradation, and I live quite safely here as a single woman. Public health in Burundi is what one might expect in a nation still emerging from a long civil war, but even in healthcare, there are bright spots; e.g., a well-functioning national tuberculosis plan. As it happens, I was at the Village Healthworks clinic in Kigutu on Thursday for the funeral of Déo's father (I know one of his brothers), and was impressed with its facilities and programs.

I was struck by your question about whether anyone would ever write a book about the Ghanaian economist who uses his well-earned success in the west to contribute to a peaceful democracy at home. Will anyone ever write a book about Déo's classmate Jeanne-Odette Niyongere, who completed advanced training in France and is now a gynecologist on the Faculty of Medicine at the University of Burundi and married to an economist in the Ministry of Finance, with whom she is raising four children in a comfortable home in Bujumbura? Or about my Mutwa colleague Béatrice Munezero, who during the civil war founded a school for Batwa and other children at risk that has now reached the 8th Grade?

You refer to Déo's escape from the Hutu slaughter of Tutsis during the genocidal year of 1994. This gives the impression that Burundi's situation was much the same as Rwanda's at that time. Burundi and Rwanda are aptly described as "faux jumeaux" -- fraternal rather than identical twins in a strict translation of the phrase, but also siblings whose comparison tends to play one or the other false. Burundian Hutus did rise up and slaughter Tutsis in late 2003 after the assassination of the first democratically elected president, Melchior Ndadaye. Ndadaye, who was also the first Hutu president, was apparently tortured to death by members of the Tutsi-dominated army. This was the same army that in 1993 killed 300,000 Hutus in response to a suspected plan to topple the Tutsi-controlled government. Once it secured Bujumbura in late 1993, the army moved into Burundi's interior, where the killings of Tutsis had started, and began the indiscrimate slaughter of Hutus. One of my colleagues described late 1993 to me as follows: "When President Ndadaye was murdered, Hutus began killing Tutsis with clubs and machetes. A few weeks later, the army arrived with machine guns and grenades and began hunting men like beasts."

All this is to say that the situation in Burundi was and is very complex, and that Burundians know this and are free to talk about it. You may also be aware of this. I am grateful to Tracy Kidder for having written a book to put Burundi on the map for westerners, and to you for having so thoughtfully reviewed it. In the forest of books on Rwanda (of which there seems to be at least one for each of the thousand hills that usually figure in their titles), it's good to hear of a Burundian tree.

Sincerely,

Jodi Mikalachki

Education and Community Development Worker

MCC Burundi

In Which MSF Follows Our Fake Principles from Our Satirical Advocacy Video Guide

When we wrote a satirical guide to making advocacy videos about Africa, we didn't expect anyone to actually make a video using some of our (fake) principles! But the people at Médecins Sans Frontières (MSF) UK apparently did so, with their new controversial cinema ad campaign, entitled "Boy."* In the new ad, the camera is locked on a single shot: a concrete, bullet-ridden hut, with the graffiti images of war, the front door left open. We are somewhere in Africa. The only movement is the rustling of a plastic bag in the foreground and black smoke billowing from somewhere behind the building. The one-minute soundtrack, from start to finish, is a child desperately crying. The messages which appear slowly on the screen give a horrible meaning to the cries:

One of our doctors is treating a 5-year-old boy/

Militia have just raped his two sisters/

Then clubbed his parents to death /

We can’t operate without your help/

Visit msf.org.uk

You can see the ad here.

Once you recover from the punch to the gut, you note this ad is powerful and well-executed. This is no surprise since it was created by McCann Erikson, the ad firm that brought us "I'd like the teach the world to sing" and "There are some things money can't buy. For everything else, there's MasterCard."

The second thing that struck me is that there are no details, no information on whether this is the story of any one particular child, or which specific conflict has orphaned this boy. In the absence of detail, this “no place” becomes “every place” in Africa, the terrifying Dark Continent.

After watching this ad several times (I don't recommend you try this), I feel 1) deranged and 2) hopeless, as though nothing I could ever do, much less donate a few dollars to MSF, could possibly have any effect on the vast, incomprehensible suffering in the world.

I also don't learn much from this video about the work that MSF does other than that they operate on helpless children in horrific circumstances and need our money. What is the goal of the video? If bad videos are justified by effectiveness, then how is it measured?

I asked the head of communications at MSF UK, Polly Markandya.

She told me that the ad was not intended as a direct fundraising campaign—they deliberately avoided listing a telephone number on screen. Rather, the idea was to “try and raise awareness among a general public audience of the kinds of situations and atrocities which we witness daily in our work and which are so easily ignored by people living comfortable lives in the UK.” MSF is gauging the impact by visits to their website.

Another video on their website, called “Make Your Mark” is more informative and less emotionally manipulative than “Boy.” But, given its more conventional style, it probably hasn’t attracted nearly as much publicity. After all, we haven’t just devoted an entire blog post to that one. But was all the attention really worth such an exploitative video?

*Thanks to Twitterer @IdealistNYC for pointing us to this video.

**This video has recently stirred up a fair amount of controversy in the UK, which you can follow on these blogs.

Strength in What Remains: Healing in a Post-Genocidal World

An individual overcomes unbelievable odds, in a tale so implausible that it might well be rejected if it were a mere movie script, but it is a true story. In "Strength in What Remains," Tracy Kidder tells us about a member of the Tutsi ethnic group in Burundi named Deogratias, or Deo, who barely escapes the Hutu slaughter of Tutsis in a harrowing journey on foot out of Burundi and Rwanda in central Africa during the genocidal year 1994. Deo makes his way to New York City but arrives penniless and speaking no English. He sleeps on a scrap of floor in crime-ridden tenements, endures abusive low-wage employment and then finds himself homeless, living in Central Park.

Despite such unpromising beginnings, Deo goes on to earn a degree in organic chemistry and philosophy from Columbia University and then gets into Dartmouth Medical School. From Dartmouth, he takes time off to start a free health clinic back in Burundi—in his home village, a mark of his forgiveness for those who had tried to kill him and a sign of hope for Burundi's future.

Read the rest of the review of Tracy Kidder's book in today's Wall Street Journal, here.

Guess the source of this British aid document on Country Ownership

However able their government...many countries cannot finance out of their own resources the research and survey work, the schemes of major capital enterprise… which are necessary for their development.

Assistance from United Kingdom funds should be related to what countries can do for themselves…There is a need for machinery to provide complete coordination between the efforts of these separate departmental staffs so as to ensure that development proceeds on a balanced and comprehensive plan…With the requisite financial assistance once assured…Governments {would} prepare development programmes for a period of years ahead.

The whole effort will be one of collaboration...There must be ready recognition that conditions vary greatly from country to country, and that country governments, who best know the needs of their own countries, should enjoy a wide latitude in the initiation and execution of policies.

The answer is after the jump.

Here's a hint: I have omitted words as shown by ellipses but not changed any except one – I used the word “country” where the original document used the word “Colony”.

This document is The Statement of Policy on Colonial Development and Welfare, presented by the Secretary of State for the Colonies to Parliament by Command of His Majesty, February 1940.

Coat of arms of the British South Africa Company, circa 1940. Taken from halfpenny stamp, Southern Rhodesia 1940.

Giving Us Idiots More Credit than We Deserve

While not a complete idiot, I still find books in the "Complete Idiot’s Guide” series amusing and occasionally useful. So when The Complete Idiot’s Guide to Giving Back came out recently, I was curious to read the book’s recommendations.

The author outlines a process for deciding which causes to support, how much to give, and other factors to consider before giving a not-for-profit your hard-earned cash. Unfortunately, most idiots, and many other well-meaning people besides, will not read this book, but will respond to heart-wrenching pictures of children to decide which charity qualifies.

Even more unfortunately, reading this book isn’t going to make it much better. The author does counsel potential donors to devise and execute a giving plan. The chapter “Shopping for Charity” is particularly pointed in caveat emptor advice, interpreted here as "let the donor beware," but fails to provide enough guidance for idiots (or anyone else, for that matter) to truly evaluate the effectiveness of a charity.

On the other hand, the book encourages donors to look for more than just that warm and fuzzy feeling, and to ask questions about cause marketing: how much of an item’s purchase price actually goes towards the cause being promoted? Is there an upper limit on how much will be donated? Do the donations also have to cover corporate administrative costs?

We learn that the idea of cause marketing did not spring fully-formed from the heads of Bob Geldof and Bono, but rather got its start in 1971, when George Harrison and Ravi Shankar put on a concert to benefit Bangladesh. Sir Bob does deserve the credit for scaling up the concept, recruiting big-name rock stars for his 1984 project, Band Aid, and bringing us “Do They Know It’s Christmas” and “Feed the World,” which remained the best-selling single of all time in England until 1997. With his (RED) campaign, Bono refined the concept by leveraging his celebrity status to promote particular products, some of the proceeds of which go to the Global Fund.

The author directs readers to “Check out the Charity” but limits guidance to annual reports and IRS forms and how to identify a scam, providing insufficient tools to evaluate charities effectively. The author confesses that it is often challenging to unearth the amount actually donated to the designated cause. How well we know!

The book also fails to differentiate between charity at home and abroad. For example, the author’s advice on donating used goods may apply when the recipients of lightly used T-shirts and tennis shoes live halfway across the city, but the situation gets rapidly more complex if the charity plans to ship those goods abroad. The international landscape is more complicated than the scant references to issues like fair trade purchases and disaster relief imply. Looks like this blog still has a role to play.