Aid Thoughts

Digesting the difficult decisions of development

Archive for category Governance

It’s good to be the president

Dec 23

Posted by Matt in Africa, Aid, Development, Governance | Comments off

history

Since the unexpected death of Bingu wa Mutharika, I’ve been rather hopeful for Malawi. While Mutharika had an incredibly promising start, his second term was marred with paranoia, aggression and growing signs of dynasty-building and patronage politics. Thanks to a heart attack, we were graced with Joyce Banda, the country’s first female president, who appears to be both modest and incredibly pragmatic, while naturally eschewing the big bwana syndrome while has characterized so much of Malawian politics.

Banda’s sudden appearance on the global scene has excited a lot of people. Perhaps unfairly, many consider her to be Malawi’s best chance of rising above the seemingly-endless cycle of dashed expectations. The Guardian recently ran a behind-the-scenes piece on her which, while captivating and well done, only serves to further entrench these hopes.

To a large extent I share these expectations, and was happy to hear that Banda had decided to sell off the presidential jet and cut the presidential salary to less than what an Oxford post-doc makes in a year. Then I chatted to my mother the other day, who pointed out to me that while watching a BBC show on the posh London hotel Claridge’s, she had spotted Ms. Banda’s husband, having booked for 11 nights with his entourage of fifteen people (it happens at about the 11 minute mark here). Indeed, it appears that Ms. Banda also stayed at Claridge’s during her first state visit to the UK, during which she made the announcement about selling off her jet. While rates for a basic room at Claridges are roughly £400, its suites (which the programme suggests the Bandas stayed in) can be as expensive as £3,000 a night. The doorman proudly quips “it is Mr. President,” referring to Joyce Banda’s husband, noting he had been to Claridges before.

Perhaps the Banda’s get a special a discount, or the donors ponied up the cash for their London stay, or perhaps Richard Banda has a good pension from serving as Malawi’s Chief Justice. Maybe it’s reasonable to expect heads of state to enjoy a little luxury. Still, it’s awfully good to be the president (or at least the president’s husband).

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Get your assumptions out in the open

Oct 4

Posted by Matt in Economics, Governance | Comments off

Oxfam has just released a new report calling for a moratorium on land deals in developing countries. Well worth a look – this should be subject to a robust debate. Lacking the time for more substantive analysis* (see end), let me turn to comparative advantage and look a little closer at one their killer facts:

Indeed Oxfam’s calculations suggest that the land acquired between 2000 and 2010 has the potential to feed a billion people, equivalent to the number of people who currently go to bed hungry each night.

Sounds like a lot of people. The defence of this calculation is tucked away in the footnotes:

The country and area of individual land deals for the purposes of agriculture, forestry, and livestock, covering a total of 40.3 million ha, were obtained from http://landportal.info/landmatrix/get-the-detail/database.csv (downloaded 25/07/12). The potential annual cereal production on acquired land was then calculated for each country by summing the product of the area of each deal and the average national cereal yield (data source: http://faostat3.fao.org (downloaded 25/07/12)). The food energy available from the potential cereal harvest on acquired land in each country was calculated by multiplying the potential production volume by the kcal available from one tonne of cereal in the given country (obtained by dividing the annual food energy supply by the annual food supply quantity, in both cases for cereals excluding beer (data source: Ibid.)). The number of people that could potentially be fed from acquired land in each country was then calculated by dividing the potential annual supply of food energy by the product of 365 days and 1,800 kcal (the FAO’s global minimum daily energy requirement per capita). National totals were then summed to arrive at a global total. On the assumption that the vast majority of the land acquired in the past ten years could be used to grow food, whether or not investors intend to use it in that way, and that the publicly available data is a reasonably representative sample of the total database, a conservative estimation was made that if about 40 million ha could feed about 240 million people, then 203 million ha is likely to have the potential to feed more than 1 billion people

So there’s an assumption here that the land being sold could, if left alone, supply food with the same yield as current production in the country it was purchased. I think this depends on assumptions over the availability of labour to farm this land if it were left free and the marginal product of labour (i.e. would we expect average yields to increase if people left some farms to take up the free land). Oxfam seems to be relying on a pretty optimistic opportunity cost to these land deals – that the counter-factual is a world in which this land sprouts average yields instantly and international food distribution gets the food to the right people who need it.

Of course Oxfam’s calculations may not be considering the counter-factual of no land deals – instead they might just be pointing out the value of the land, in terms of feeding potential, is quite high. This notion is reinforced by the fact that a large chunk of the land deals are for the purpose of growing food to feed people in other countries. A debate about the impacts of these land deals should also consider the impacts on the hungry in investing countries, as they are part of this one billion figure. Anyway, I’d like to hear your comments about the underlying assumptions.

Klaus Deininger, Rabah Arezki and Harris Selod have a recent paper showing that land deals more likely to happen in countries with poor land governance and tenure security. While the Oxfam report does point this out, the violation of the rights and lack of compensation paid to displaced landholders might be a more solid starting point than numbers generated primarily to alarm people. Then again, I suppose that’s the goal of these reports.

*Apologies for the lack of posting – I’m currently in the last couple of months before submitting my PhD, so expect I’ll be able to return full-force by the end of the year.

Dar es Salaam and the megacity

Jul 31

Posted by Matt in Africa, Development, Governance, History | 5 Comments

Joe Boyle at the BBC has written an interesting piece on the rapid growth of Dar es Salaam.  It’s a fairly pessimistic read, starting out hopeful but then sketching the city as under-siege from  informal hordes, only to find salvation in Singapore-style urban planning.

The UN estimates that 70% of Dar es Salaam’s population live in informal settlements; there are no slums in Singapore.

Slum clearance would be vital to any regeneration project. It would involve rehousing possibly hundreds of thousands of people, and the extra headache of clarifying the legal status of the land that has often passed down through generations of families without any legal paperwork.

Most of my work in the last two or three years of my PhD has been focused on the slums of Dar. I’ve written about my views of slum formation on this blog before: I do think they represent a missed opportunity, but I’m not sure that slum clearance is the answer. While there is something appealing about wiping the slate clean and doing things properly, the Tanzanian government doesn’t have a history of well-managed land expropriation, often botching both the relocation and compensation of those displaced.

In one of the neighbourhoods where our land titling project is running, over 200 homes have been marked for demolition by the local authority due to their proximity to a river (which was the source of major flooding in December). Ostensibly, all houses within a certain distance are to be bulldozed, but glancing around it’s clear that the targeting has been a little haphazard, and many people are still holding out under the assumption that the actual clearance might not happen for months or years.

There’s little discussion in Boyle’s piece about an alternative route: giving the residents of slums good reasons to embrace formality. We often look at the informal property market as being inherently dysfunctional, but it’s amazing just how well they do work in allocating a scarce resource to incoming migrants. The government would undoubtedly (I think) prefer everyone to have formal titles, so they can be identified, taxed, and regulated. But what slum-dwellers need to see is a formal system which gives them protection from unnecessary expropriation, lets them buy and sell with relative ease, and gives them access to the sort of public goods and infrastructure that taxes should buy you. Over the last decade, the government tried to get everyone to buy-in, advocating a cheap, renewable tenure system which would required everyone to pay land rent, but it failed to deliver on the pro-quo of infrastructure and services.

The slum clearance route would do this bluntly, by pushing people into planned housing and trying to do the same with newcomers, but I think formal systems which are put in place without good incentives for everyone to invest in them are bound to fail. Boyle’s article discussed the creation of a new master plan for Dar es Salaam as a means to curb slum formation. It might be worth noting that the last master plan was updated in 1979, just before several decades of absolutely massive informal growth.

Finally, I’m also a bit perplexed by the comments of Taweza’s Rakesh Rajani:

He says Tanzania could face a similar conflagration to Kenya in 2007, when thousands of people were killed in post-election violence.

Rajani undoubtedly is more in touch with the average Dar es Salaamer than I am, but I still find such a prediction hard to swallow. Yes, there are tensions, both today and historically, especially with young men (David Brennan’s article on the Tanu Youth League makes for some good reading), but the sort of violence Rajani is afraid of needs both a spark and incentives to keep the flame alight. I don’t know if I see either in Dar es Salaam, although I am typing this from my desk in Oxford.

Hat tip to @AndreaScheible for the BBC link.

 

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Ex-president

Jul 25

Posted by Matt in Africa, Elections, Governance, History | Comments off

One evening, back in 2010, I found myself stuck in Dar es Salaam’s soul-destroying evening traffic. I was trapped on Ocean Road, which leads from the ferries crossing the harbour past the presidential grounds. Often clogged with government workers and ex-pats trying to escape to the peninsula and beyond, the local street sellers have long-since adapted to this particular group, often selling international magazines (the Economist!) and informational maps and posters. It is here that I picked up my 2010 African Leaders Calendar poster, which devotes 90% of its space to African heads of state and 10% to anything calendar related.

I never put the poster up – it always sat on a shelf behind my desk in the department. It started seeming terribly out of date after the Arab spring and the second Ivorian civil war, so I started crossing presidents off when they were no longer in office. Not as part of some macabre hit list, but just to keep track of who had left. Out of the 56 countries represented, about 12 heads-of-state are no longer in power. The reasons for an X are myriad – failed re-elections, retirements, untimely deaths, revolutions and coups. Not always, but often, an X represents a shift for the better – or at the very least change.

Today I crossed off Professor John Evans Atta Mills, president of Ghana, who died yesterday. It’s not totally clear what illness Mills died of, possibly a complication of his throat cancer. I’ve written before of the tendency for African president to unexpectedly fall off their perches, felled by common ailments of the elderly such as cancer or strokes.

Two and a half years have seen an attrition of about 20%s. How long until that number hits 100%? At the top of the poster sit two of the stalwarts: Museveni and Kagame. I fear it will be quite some time before this calendar is finished.

By the way, if anyone can get their hands on either the 2011 or 2012 posters, let me know.

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UK Aid, accountability and optimal logo placement

Jun 27

Posted by Matt in Aid, Governance | 3 Comments

DFID has just produced a new version of its UK Aid logo. While there is general grumbling about the jingoistic addition of the Union Jack and its similarity to the USAID logo – the current iteration is not vastly different than the original – introduced three years ago (one of the first things I blogged about) by the previous government.

These sort of emblems have always made me uneasy. When I worked as a civil servant in Malawi, my printer was branded with a “from the American people” sticker (as was my USB stick). The presence of the sticker made me feel like I should be worshipping some unseen god who delivered me office supplies which only ran on 120 volts.

Douglas Alexander, DFID’s last minister under the Labour government, once said that he wished every DFID-funded classroom would have some notice telling children and their parents that the UK was responsible, and that this would help accountability. The rest of us ridiculed that idea, dismissing it as a Trojan horse for self-promotion.

However, perhaps Mr. Alexander was correct in his assumption that emblazoning everything with “UK Aid” could – in theory – increase accountability. If DFID funded something which utterly failed, then it would be incredibly obvious to everyone around. Just one photo of a derelict Union Jack-stamped school would make for pretty poor press. This might create incentives to make aid more effective.

Yet, if the folks at DFID realize this and are rational – instead of trying to be more effective, it’s much easier just to be more careful with sticker placement. Put stickers on high-profile, “successful” ventures (think bags of food rather than say, good governance) and avoid putting stickers on anything that looks like it might fail. So DFID won’t need to be more effective, just more discerning with their stickers.

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A Cost-Effective New Initiative That Puts Power in Poor People’s Hands

May 18

Posted by Guest in Governance, Political Economy | 2 Comments

By Daniel Altman

One of the ideas making waves in global development has been that poor people know better than anyone else how to improve their standards of living.  Some experts have recommended replacing conditional cash transfer programs (rewarding poor people for behaviors such as vaccinating their children) with unconditional cash transfer programs (just giving money to the poor).  But to make real change happen, there is a more direct route.

The poor will only be able to raise their own standards of living if they have power.  Giving them a few dollars here and there may help them to invest in small businesses or improve their access to education, but they still won’t become powerful agents of change.  Perhaps not by coincidence, many poor people live in countries where power is centralized amongst a small elite.

Poor people will only be able to change their lives in a long-term, sustainable way if they have real power in their societies.  Clearly, no government or foreign donor is willing to give them enough money, without any conditions, for this to happen.  Yet there is another, comparatively inexpensive way to do it.

A new development initiative would just give guns to the poor.  As evidence from around the world has suggested, guns are a fast track to power.  Several developing countries have conducted randomized controlled trials of this concept by giving guns to poor villagers in a non-systematic way.  In almost every case, villagers with guns have been empowered to change their living standards much more than villagers without guns.

This kind of initiative has shown promise even in wealthy countries such as the United States.  Here, poor people with guns are disproportionately powerful in society, wielding influence at both the local and national levels.  Moreover, many gun owners have come to believe that their living standards are higher than they actually are, adding psychic benefits to the concrete benefits of gun ownership.

With funding for development programs becoming scarcer every day, the emphasis must be on cost-effectiveness and accountability.  Just giving guns to the poor scores highly on both of these criteria.  After all, what better way to guarantee accountability than at the end of the barrel of a gun?

Daniel Altman is founder and president of North Yard Economics, a non-profit consulting firm serving developing countries, and an adjunct associate professor of economics at the Stern School of Business.

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In which Malawi’s government decides to uphold the constitution

Apr 8

Posted by Matt in Africa, Governance, Political Economy | Comments off

Say hello to Malawi’s first female president and Africa’s second female head of state. This post could also be titled “Exogenous governance shocks, Malawi edition.”

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In which Malawi’s government decides to ignore the constitution

Apr 7

Posted by Matt in Africa, Governance, Political Economy | Comments off

Update: despite earlier signs that the Government would try and block her constitutionally-mandated succession, Joyce Banda has been sworn in as the new president of Malawi, so crisis averted (well, for now). 

It has been over a day since Bingu wa Mutharika suffered a heart attack, and while the Government has still refused to release official confirmation that he has died, the public instead received a chilling indication that Mutharika’s regime will not go out without a fight.

As Kim Yi Dionne pointed out yesterday Malawi’s constitution clearly specifies that the Vice President is first in line for succession in the event that the president dies or is incapacitated. Malawi’s VP, Joyce Banda fell out of favor with the ruling party DPP some time ago, making the prospect of her assuming power unpalatable for Mutharika and the rest of the president’s Cabinet

For a long time the Government remained silent, both on the state of Bingu’s health (despite an alarming number of reports that he is dead, perhaps even before he made it to the hospital) and on the matter of his succession. This has made everyone uneasy – stalling on the Government’s part suggests that they are planning an strategy to block Banda’s succession. Perhaps to put a little bit of pressure on the Government to behave, both the British and American governments announced that they expected Banda to assume the office ASAP.

That silence was broken today when a subset of the cabinet, led by Information Minister and all-around-nefarious-person Patricia Kaliati, announced that Joyce Banda was ineligible due to her behavior while in office (video here – hat tip to Kim), including starting her own political party (which she did after she was thrown out by Mutharika). While they did not announce who the actual successor would be and would not reveal any information about Bingu wa Mutharika himself, this is a clear indication that the Government plans to circumvent the constitution.

It’s getting late in Denmark, so I’ll just offer a few thoughts before signing off:

Normally, I am wary of donors getting to involved in the decisions of recipient governments which are democratically elected, for fear that donor commitments will crowd out the natural accountability generated at the polls. This is quite different – we have a government which is very clearly going to choose to abandon its democratic principles and the international community might have the ability to make that decision too painful to bear.

Here are some options: donors could immediately and credibly rally behind Joyce Banda, not necessarily because she is the best candidate for president, but because Malawi’s constitution makes it clear that she is is the successor. Credible support can come in the form of donor dollars – no government which does not respect this succession should receive aid – the aim should be to make the decision very, very stark for the DPP. If this was combined with the threat of an odious debt sanction – where no new contracts signed by the Government will be enforced in courts, the squeeze might be even tighter.

What donors should not do is fall back on simple rhetoric about accountability. It has to be a clear choice – money flows if Banda succeeds. Money stops if she doesn’t. For it to be credible, donors need to be prepared to walk away – I fear that they won’t be.

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On the death of presidents and ignoring the averages

Apr 6

Posted by Matt in Africa, Development, Governance, Political Economy | Comments off

"Perhaps this is an awkward time to talk about the line of succession"

While it is still unclear exactly what has happened, it is looking more and more likely that Malawi’s president, Bingu wa Mutharika, has either died or been severely incapacitated by heart failure.

As Kim Yi Dionne points out, the constitution clearly identifies the vice president , Joyce Banda, as successor. This is where things get a little awkward, as Kim points out:

Shortly after Mutharika and Banda won office (by large margins), President Mutharika had plans for his brother, Peter Mutharika to succeed him in office. Banda was marginalized and eventually expelled from the ruling party. She was also removed from ministerial posts and government attempted to have her removed from office (which is unconstitutional). Facing antagonism from the government, she later formed a new party, the People’s Party.

Whether or not the top brass at the the DPP (Bingu’s party) decide to swallow this bitter pill and embrace Banda remains to be seen.

An equally interesting question which has been bothering me all morning: why hadn’t anyone considered this in advance? Bingu wa Mutharika was a frail 78 year old whose increasingly autocratic rants were seen by many as a sign of impending dementia. The probability that he would die or become severely disabled during a five year term were significant enough to warrant some extra planning.

This isn’t an infrequent occurrence – looking back ten years reveals a startling number of African presidents falling off their perches: Zambia, Chad, Togo, Guinea, Guinea-Bissau, Gabon and Nigeria all had presidents die of poor health whilst in office, all from heart attacks, strokes or cancer. Most of these led to periods of political uncertainty and instability. Even the near-misses are problematic: Mwai Kibaki’s stroke in 2003 led to a substantial shift in both policy and personality – Michela Wrong suggested it drastically hampered the government’s ability to deal with corruption.

Unless the Government of Malawi soon reveals some cunning plan to prevent Joyce Banda from becoming president, it will be obvious that they never really considered this as a potential outcome. Was this sheer stupidity or hubris? Perhaps presidents can’t imagine their own deaths, so do little to prepare for it. There are a few shining outliers out there that might be biasing the results: both Teodoro Obiang in Equatorial Guinea and Mugabe in Zimbabwe have shown a remarkable ability to endure, despite cancer and general evilness.

Voters often associate old-age with wisdom and power, substantially more so in countries like Malawi. Yet these preferences constantly expose political systems to new risks. During the US elections in 2008, an actuarial firm rightly pointed out that John McCain only had a 75% chance of living through a full 8 year term. Despite these unnerving numbers (especially considering who would have been next in line), very little was made of McCain’s age-related morbidity or mortality.

As a 61-year-old-woman, Joyce Banda’s prospects of reaching the end of the current presidential term without succumbing to illness, senility or death are significantly higher than Bingu’s evidence successor, his 72-year-old brother Peter Mutharika. If the Government does find a way to thwart the constitution, and Bingu’s wishes are granted posthumously – likely guaranteeing his brother two terms in office – Malawi’s chances of suffering yet another presidential death rise substantially.

For all debts public and private

Mar 14

Posted by Matt in Governance, Political Economy | Comments off

"You see, THIS is what happens when we lose our credit line to the Hutts"

Odious debt is a fairly simple legal concept: public debt accrued by illegitimate regimes should not be passed on to successive governments. As described by the folks at the Center for Global Development, one of the best ways to make sure this happens is for the institutions responsible for enforcing international contracts to declare that all future loans to the current regime are unenforceable. Faced with the prospect of a higher chance of default by the current government  (and an automatic default by the next), potential lenders would be dissuaded from doing business, thus preventing excessive debt.

In response to the growing violence in Syria, CGD’s Kim Elliot and Owen Barder have revived the idea (here and here), not just as a method for preventing excessive debt, but as a way of putting more pressure on the current regime – if Assad’s remaining lines of credit are dropped, then we might expect his position to crumble even faster.

Let’s break the idea down a little further. There seems to be an implicit model working in the background here, and I think it looks something like this: a rational investor knows the best deal it can get from the Galactic Empire is a rate of return of r on a loan. Based on this, the investor decides how much to loan, conditional on its outside options. The investor knows that, even if the Empire falls to the Rebel Alliance, it is still guaranteed its return r.

Now, assume that an outside party has declared all future debt incurred by the Empire as unenforceable. If the Rebel Alliance wins (with probability P), then the investor won’t receive any return at all, and now there is also a smaller chance the Empire will pay them back even if it remains in power (this probability of repayment E). The investor’s expected rate of return is now significantly lower [(1-P)Er < r], so it will disinclined to lend as much – and might even choose to disengage completely.

This is all pretty intuitive and sensible – although there a few reasons why it might not be that straight forward. These should be thought more as possible (general) caveats rather than criticisms:

 

  • Expectations over the value of P are important here – we can expect the impact of an odious debt declaration to be stronger as it looks more and more likely the Rebels will win. Fortunately, the Syrian army might already be signalling its views on P.
  • It’s very likely that the probability the Empire stays in power is a function of the amount of money lent to it – that is, potential investors know that they can directly affect P when choosing how much to lend. While most assumptions over the functional form of P would lead us to the same conclusion, I’m still a bit worried that there could be identifiable thresholds here (if we lend them enough for a Death Star, the probability of winning converges to 1). This is why it is really important that odious debt declarations only affect future contracts (as the CGD suggests) – we don’t want investors given the incentive to prop up bad governments so they can avoid sunk costs.
  • Another assumption is that there is symmetry in the way contracts are enforced: in reality, the financial and legal institutions responsible for international; contract enforcement are much more likely to be binding when a legitimate government takes over and wants to rid itself of odious debt, but the same is not necessarily true if the illegitimate government wins. When dodgy governments (or firms) trade with others of the same ilk, different, more informal mechanisms are likely underlying enforcement. These types of governments are inherently riskier anyway, so potential investors might already be relying on these alternative mechanisms. Again, these wouldn’t reverse the expected results, but they might dampen it.
  • Related to this point – we assume that countries that do business with awful regimes are only interested in profit. Once you add in preferences for that regime staying in power (democratic governments don’t usually buy as many weapons + it’s good to have another evil dictator in the neighborhood), the picture gets even murkier.

Caveats aside, I’m excited that this idea is finally getting the attention it deserves.

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