Recently, I’ve noticed support for a few new innovative solutions in fundraising for development. Duncan Green supports a Tobin Tax for development (a small tax on international currency transactions which when aggregated across many transactions, would result in a large windfall for development), and reports that Pittsburgh G20 provided a small, qualified triumph in getting it on the agenda. Another item that’s been in the news is the ‘plane ticket tax’ for development, which Matt reported on. These are of course, on top of the existing G8 commitments on increasing aid for development made at Gleneagles a few years back.
This all begs a question: where is the analysis that tells us that the constraining factor in reducing poverty is aid funding? I can’t think of any really robust, legitimate analyses that say what is really holding us back is not having enough money to spend on development activities. Nor can I think of any shout-from-the-mountaintop successes that have roll-outs languishing on the proposals shelves because the funds simply can’t be found.
The argument for more money is not based on an analysis of the constraints to development. Rather, it seems to be based on a feeling that we can give more, we can forego more; and given how much people are suffering, we really ought to. It’s a commendable and moral impulse. It’s also wrong. Before we start appealing for more money much more needs to be gotten out of money we currently do have. Getting this the wrong way round may actually hamper efforts for development, rather than help.
At the risk of pissing off the fundraisers on the one hand, and the ‘no shit, Sherlock’ brigade on the other, I propose a short list of what comes before asking for more money below.
1) Coordinate Country Aid Allocations Internationally
At present, most donors appear to make their funding decisions based on the assumption that their aid is the only aid (as Matt has pointed out before). If all donors decide to fund the same countries, the marginal benefit of each additional unit of aid there will plummet, while in other countries it remains very high. Better coordination will ensure we get the most out of our aid.
2) Understand the Biggest Problems
I recently pointed out that a great deal of economic analysis of Africa, and by consequence much of the policy that has been recommended, labours under the misapprehension that most African countries are capitalist, and need their systems fine-tuned to harness the power of capitalism. In fact, if you spent a while looking at the underlying structure of the economy (ownership; access to capital; resource spread) you’ll find that many are mixed economies with capitalist and pre-capitalist characteristics that need to transform into capitalisms. Diving into the aid market without examining your preconceptions can lead to a lot of wasted money.
3) Coordinate Sector Allocations at the Country Level
Donors cluster. This has been the case for a very long time, and despite all of our talk about division of labour and specialisation in aid, it’s not changing nearly fast enough. The effect of this is massive over-funding in certain sectors while others gasp for aid. An old colleague of mine in Malawi calls these neglected sectors ‘donor orphans’, in comparison to the ‘donor darlings’ of HIV/AIDS, Governance and so on. Economics (and indeed basic common sense) tells us that we need to focus on constraining factors. Clustering prevents this, and means a lot of aid focuses too narrowly to support the overall development of the country. It’s like a patient turning up to hospital with two bad gunshot wounds: if all the doctors focus on the one in his shoulder, they might patch it up beautifully. Meanwhile, he’s dying from the wound in his stomach that they’re neglecting.
4) Coordinate Projects at the Country Level
Sometimes, even when sector allocations are reasonably well coordinated, within a sector you’ll find two donors doing the same thing, without any additive effects. In other cases, you’ll find three worthwhile projects in different regions running at the same time, requiring the same scarce resources. I remember being told of a situation in Malawi where the same two civil engineers (excellent ones, by all accounts) were employed in three regions on three different projects concurrently. They were too thinly spread to give any their full attention and all three projects wound up over-running. This could have easily been avoided if the projects had been better sequenced.
5) Make Sure What You’re Funding Has an Impact – and Learn From It
File this one under ‘I can’t believe I have to say this’. Yet everyone who works in aid has seen donors give large sums of money to pointless, frivolous or damaging projects. Equally badly, many projects don’t undergo any proper evaluation or monitoring. In my opinion, unless a project is solely for alleviating suffering short term (and this should only be done for humanitarian crises) they should be designed and monitored to maximize the chances of them having a long term effect. This means you need to go back and look at the effects two, three, even five years after the project has finished and see if the effects are still visible. Whether or not they are, you should learn something – which should then inform your future planning.
6) Use the Money Efficiently!
Another no-brainer, but it is a recurring problem in donor-funded projects: inflated consultants fees, expensive goods and materials, excessive administrative burdens; all are common. Today’s Aid Watch post is by Frank Wiebe, Chief Economist at the Millennium Challenge Corporation. He argues that all aid should be measured against a Cash Transfer standard: if less than 73% of the original value of the project gets to the recipient, it should be trashed. I don’t buy this, because some activities with a major long-term impact may require significant management oversight, and a well-managed project is a valuable thing, but the sentiment is spot on. We need to make sure that even if only 50% of the money reaches the recipient, those things we are spending on are done to a high a standard of value-for-money as possible.
Given that all of these things are painfully obvious, why are so many of us still chasing money before dealing with them? I think there are two reasons. Firstly, many people want to help, to do something tangible for those in less fortunate situations. Giving or raising money is easy, tangible and direct: one has either directly given the money out of their pockets or raised it through advocacy. That feels a lot more concrete than making a smaller contribution to the global efficiency of aid, which in any case is something that not everyone can do. There are only so many reasonable jobs in development and only space for a finite amount of advocates.
The second reason is more cynical: plain laziness. It’s probably easier to raise money than fix the systemic problems in aid; and most people probably think that spending $100 million inefficiently is still more useful than spending $30 million and getting good value for it.
I disagree. Strongly. I believe that getting things right will improve static and dynamic effects of aid and make a much bigger difference than raising more money will. The problem is, with new money always flowing in it’s very difficult to motivate this change.