In late 2004 and early 2005, besides the UN’s 3,751-page Investing in Development: A Practical Plan to Achieve the Millennium Development Goals, we have the British government’s 453-page Our Common Future: Report of the Commission for Africa, plus the latest update of the IMF and the World Bank’s 1,246-page PRSP Sourcebook.
The World Bank in 2001 discussed the frameworks produced by different aid organizations, with an output by one organization often serving as an input to another. “The UN Common Country Assessment, the Bank’s Economic and Sector Work (ESW), and the IMF’s analytical and technical assistance work would contribute to governments’ analytical base for PRSPs. [The World Bank] also welcomed the European Union’s decision to base its Africa, Caribbean and Pacific (ACP) assistance programs on the PRSPs.” In 2002 alone, the World Bank’s frameworks included those produced by the International Conference on Financing for Development in Monterrey; the G7/8 Summit on Africa and the Millennium Development Goals in Kananaskis; and the Johannesburg Summit on Sustainable Development. After a bit of a breather, 2005 brought more summits and frameworks, with the Blair Commission for Africa; the Gleneagles, Scotland, G8 Summit on Africa and the Millennium Development Goals, in July; and the UN Millennium Summit on the Millennium Development Goals in September.
The proliferation of summits and frameworks confirms the prediction that aid agencies will skew their efforts toward observable output (these summits and frameworks get a lot of press attention). The frameworks and summits also confirm the prediction that aid agencies will embrace collective responsibility, as the summits are occasions for joint commitment to general worldwide goals, and the frameworks of different agencies are mutually dependent.
Aid agencies are rewarded for setting goals rather than reaching them, since goals are observable to the rich-country public while results are not. An unintended side effect of the increased activity of NGO issue lobbies has been to expand even further the set of goals that foreign assistance has been trying to achieve. Since no issue lobby takes into account the effect on other issue lobbies of its demands on the scarce aid and administrative resources of agencies, each lobby overemphasizes its goals. This is analogous to the “tragedy of the commons” problem in which too many cows overgraze pastures held in common. To make things worse, each separate aid agency has felt the political pressure to add all of these goals in response to its own rich-country constituency. This is because bilateral aid agencies each have their rich-country publics with multiple goals, and a multilateral agency like the World Bank is fair game for lobbies worldwide. Although this book stresses the virtues of feedback and accountability, it is feedback from the intended beneficiaries that is the desideratum; feedback from rich-country lobbies that don’t represent the poor could make things worse rather than better.
The end result is that aid agencies are like Yosemite Sam, firing at random in all directions. Managers at the top feel pressure to promise everything.
For example, World Bank president James Wolfensohn set out his Comprehensive Development Framework in 1999, with a checklist of fourteen items, each with multiple subitems. To his credit, President Wolfensohn recognized that development was complicated. However, as a checklist for World Bank action to address this complexity, it is unworkable. The long list included “capacity building,” “property, contract, labor, bankruptcy, commercial codes, personal rights laws,” “internationally acceptable accounting and auditing standards,” “lessons of practice and history from indigenous peoples and communities,” “a strategy for sewerage,” [reducing] “the use of wood and fossil fuels,” “wind-up radios without batteries,” [preserving] “historic sites, artifacts and books, but also the spoken word and the arts,” “integrated solutions to rural development,” and “appropriate laws.11 The Johannesburg Summit on Sustainable Development in 2002 upped the ante even further by recommending 185 actions by rich and poor countries, including “efficient use of cow dung.”
The UN Millennium Project developed yet another framework in 2005 with the help of 250 development experts, commissioning thirteen reports from ten task forces. All this helped the project to come up with its framework, with its eighteen indicative targets for the eight MDGs, its ten key recommendations (which are actually thirty-six recommendations when you count all the bullet points), “a bold, needs-based, goal-oriented investment framework over 10 years,” seventeen Quick Wins to be done immediately, seven “main investment and policy clusters,” and ten problems to be solved in the international aid system.
Meanwhile, the aid agencies drive the recipient governments and their own frontline workers insane when they declare each objective to be priority number one. Reaching as many poor as possible would dictate that greater effort go to goals with low costs and high benefits, and that little or no effort go to goals where the costs are very high relative to the benefits. It would recognize that doing more on one goal implied doing less on another goal—politicians and bureaucrats are terrified of the word “tradeoff.”
Aid bureaucracies are like my children, who, when asked to choose between a chocolate bar and ice cream when they were young, would say “both.” The aid agencies do a little bit on each goal, which forgoes the gains from specialization and leaves low-cost/high-benefit activities underfunded. It follows that the aid community’s “do everything” approach thus fails to reach as many people in need as it could. Aid agency managers do talk about setting priorities, but their behavior says otherwise—the political incentives to do token amounts of everything are too strong.
In contrast, the free-market Searchers for the rich provide specialized goods and services that meet consumer needs, not all-inclusive “frame-works” that do everything for the consumer. Consumers pay the cost of asking a product to meet additional goals, and so there is no “tragedy of the commons” excess demand for goals on any one product. Consumers face tradeoffs between alternative products, choosing the one that gives the highest satisfaction for the lowest price.
Economists since Adam Smith have also stressed the efficiency gains from specialization, which suggests that organizations and individuals should focus on a few things and not do others. Since firms can meet consumer goals more cheaply by specializing and having limited objectives, the free market also tends to produce specialized suppliers. You would never go to a dentist who was also an auto mechanic and talk show host. Yet the market has no trouble meeting the multiple objectives of providing consumers with dentistry, auto repair, and talk shows. This is because the decentralized market coordinates through the price system the specialized supplies of each of these services.
Rich democracies also feature bureaucracies that are more specialized than those in foreign aid. Each interest group can concentrate on the bureaucracy addressing their issue. Local governments handle local issues, national government national ones.
Part of the solution is changing the rich-country political marketplace that aid agencies face. If Western governments and NGOs really want to make poor people’s lives better, it will take some political courage to admit that doing everything is a fantasy. The rich-country public has to live with making poor people’s lives better in a few concrete ways that aid agencies can actually achieve.
Good Observables
Some of the glossy reports produced by aid agencies are worthwhile. The World Bank and the IMF have a happier intersection of the visibility imperative and the needs of poor countries in their research-based efforts. Both institutions have large research departments devoted to studying development issues, staffed by researchers whom the outside academic community respects professionally. They publish extensively in competitive academic journals. This is an example of the bottom-up staff observing professional norms, accountable to the outside world for their efforts, with the power and motivation to perform well. This book draws heavily on the work of IMF and World Bank researchers.
Outside of the research departments, there are many other outposts of professionals in the aid agencies devoted
to rigorous analysis of development problems. Such professionals produce many valuable reports and studies on development. The judgment of the outside world provides an incentive for them to publish something useful.
The key publication of the IMF is the World Economic Outlook. This is a high-quality analysis of the state of the world economy and its prospects. It is widely covered in the business press when it comes out.
The flagship report of the World Bank each year is the World Development Report. The 2004 World Development Report studied the determinants of government delivery of services such as health and education. Shanta Devarajan, director of the World Development Report 2004, said, “Services can work when poor people stand at the center of service provision—when they can avoid poor providers, while rewarding good providers with their clientele, and when their voices are heard by politicians—that is, when service providers have incentives to serve the poor.12 The 2002 World Development Report was on institutions for prosperity. Roumeen Islam, director of the World Development Report 2002, has written about the need to adapt institutions to local conditions and traditions, as well as the need for donors and governments to get feedback from the citizens. These examples show that some Searchers in the World Bank are aware of the need for feedback from the poor.
Both the IMF and World Bank produce reports on individual poor countries, which are available on their Web sites. Together these reports make up the world’s best supply of information on the economic situation of individual countries—most of them are ignored by the American press.
Low-Maintenance Development
Unfortunately, the incentives to produce observable output also create mismatches of the aid agencies’ services and the poor’s needs. As exemplified by the Tanzanian story that opens the chapter, the downside of the agencies’ success at visible road building is their failure on (less visibly) maintaining those roads. For decades, aid reports bewailed the neglect of operating supplies and maintenance after infrastructure projects were completed. Donors consistently refuse to finance maintenance and operating supplies, with the idea that this is the responsibility of recipient governments, even though there is intense client demand for these goods.
Besides the visibility bias toward new construction, the underfunding of maintenance reflects the elusive goal of “sustainability” (best summarized by that tiresome cliché about giving a man a fish versus teaching him to fish). Donors envision the local government taking over the project, which they think is necessary to make it last.13 This intuition was once appealing, but the decades of evidence show that that dog won’t hunt. As Michael Kremer of Harvard and Edward Miguel of Berkeley argue, trying to make the project “sustainable” usually guarantees that it will not be “sustained.” Since we have already seen the weak commitment of many governments to development, and the inability of donors to transform governments, the takeover of the project usually doesn’t happen. But donors keep flailing away at this infeasible but inflexible objective.
This is another example of how having a grandiose instead of a modest goal makes things worse rather than better. By aiming at the unworkable goal of “sustainable projects” (meaning new projects combined with changing the government’s behavior so it can take over those projects), the donors failed at the simpler tasks of providing well-maintained roads, children with textbooks, and clinics with medicines.
Here is one way to make aid work better: aid donors should just bite the bullet and permanently fund road maintenance, textbooks, drugs for clinics, and other operating costs of development projects. Politically dysfunctional governments that don’t do maintenance can concentrate on other things.
The World Bank’s periodic reports on Africa show they know about the low-maintenance problem but are prevented by their grandiose goals from fixing it: “Vehicles and equipment frequently lie idle for lack of spare parts, repairs, gasoline, or other necessities. Schools lack operating funds for salaries and teaching materials, and agricultural research stations lack funds for keeping up field trials. Roads, public buildings, and processing facilities suffer from lack of maintenance” (World Bank, 1981). “Road maintenance crews lack fuel and bitumen…teachers lack books, chalk…health workers have no medicines to distribute” (World Bank, 1986). “Schools are now short of books, clinics lack medicines, and infrastructure maintenance is avoided” (World Bank, 1989). “Typically, 50 percent of the rural road network requires rehabilitation” (World Bank, 1995). “Many countries suffer chronic shortages of current funding, especially for operations, maintenance, and nonwage inputs” (World Bank, 2000).
World Bank researchers Deon Filmer and Lant Pritchett estimate that the return on spending on instructional materials in education is up to fourteen times higher than the return on spending on physical facilities, but donors continue to favor more observable buildings over less observable textbooks.14 This has undercut the donors’ success on increasing educational enrollments noted earlier. Quantity of education has gone up, but quality remains low.
Coordination
From the earliest days of aid, the emphasis of all participants has been on coordination of all the aid agencies. After reading the literature, one can hardly say “aid” without adding “coordination.” One reason that aid bureaucracy is so excessive is that multiple aid agencies are all trying to do everything, which means they are duplicating each other (each aid agency has the incentive to take on multiple goals to satisfy its own constituency). In 1969, an aid commission said, “A serious effort is necessary to coordinate the efforts of multilateral and bilateral aid-givers and those of aid-receivers” (Pearson Commission, 1969). Thirty-six years later: “The multilateral agencies are not coordinating their support” (UN Millennium Project report, 2005).
These continued calls for coordination and complaints about lack of coordination illustrate that everyone knows it is desirable but is unable to change anything to achieve it. Of course, the Planners’ answer is a Plan:
[The government should negotiate] an external assistance strategy …that explicitly identifies the priority sectors and programs for donor financing…. More detailed external assistance strategies can then be developed for key areas through sectoral working groups in which representatives of major donors and line agencies participate…. Agreeing on financing priorities for individual donors within the framework of a global external assistance strategy, rather than through bilateral agreements..15
This suggestion worsens rather than improves one of the main problems with multiple, uncoordinated donors—the huge strain the donors put on the few decision-makers in the recipient government. The donors pour a huge flow of aid money, donor missions, and projects into a funnel. The narrow part of the funnel is the administration in the recipient government. To do another plan to coordinate all the previous plans would demand even more of this administration.
Coordination plans have failed to achieve coordination for four decades. Coordination is impossible under the current aid system, when every agency reports to different bosses who have different agendas. Once again, we see the Planners flailing away at an insoluble problem. Some of the recommendations already made about focusing on solvable problems—such as donor specialization and bypassing government—would alleviate the coordination hornet’s nest.
Collateral Benefits, Collateral Damage
The agencies are less effective at helping the poor not just because of little voice or feedback from the intended beneficiaries but also because there are noisy rich clients—the rich countries that actually pay the bills. Since aid agencies need to please the electorate in rich countries, the agencies often strive to produce side effects for rich countries at the same time they are transforming the Rest. Thus, rich-country donors restrict some part of aid to purchases from their own country’s exporters (“tied aid”). The United States requires recipients to spend the aid receipts on products from American companies for about three quarters of its aid.16 Other donor nations have similar restrictions (although the sh
are of tied aid is not as high as that of the United States). Tying of aid lowers its value to the recipient because it restricts choice on what products can be purchased and from whom. Technical assistance to poor countries is even worse, since rich countries typically insist that their own nationals be the technical advisers. Hence, a good part of technical assistance aid is simply flowing back to some rich-country consultant handing out the kind of deep insights that come from two weeks’ acquaintance with a poor country. (Tying of aid shows rich-country hypocrisy, but this hypocrisy is not the reason why aid fails to raise growth—see chapter 2.)
Aid agencies are also attentive to the need to reward political allies of the rich countries with aid. The frequency with which a recipient country votes with the donor in the UN, and whether the recipient is an ex-colony of the donor, affects how much aid that country gets.17 After September 11, 2001, agencies gave new aid to allies in the war on terror, such as Central Asia, Pakistan, and Turkey.
Evaluation
If a bureaucracy has a rich donor mandate vague goals for it and is not accountable to its intended beneficiaries, the poor, then the incentive for finding out what works is weak. Although evaluation has taken place for a long time in foreign aid, it is often self-evaluation, using reports from the same people who implemented the project. My students at NYU would not study very hard if I gave them the right to assign themselves their own grades.
The World Bank makes some attempt to achieve independence for its Operations Evaluation Department (OED), which reports directly to the board of the World Bank, not to the president. However, staff move back and forth between OED and the rest of the World Bank; a negative evaluation could hurt staffs’ career prospects. The OED evaluation is subjective. Unclear methods lead to evaluation disconnects such as that delicately described in Mali.18 “it has to be asked how the largely positive findings of the evaluations can be reconciled with the poor development outcomes observed over the same period (1985–1995) and the unfavourable views of local people (p. 26).”
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