Bah humbug!

Just finished reading William Easterly's A White Man's Burden. In it he describes the unspoken system failure at the heart of the aid merry-go-round:

"I feel like a kind of Scrooge pointing out the ... tragedy [of ineffectual aid] when there is so much goodwill and compassion among so many people to help the poor ... the foreign aid bureaucracy has never quite gotten it - the central problem is that the poor are orphans: they have no money or political voice to communicate their needs or motivate others to meet those needs".

When you buy something in a market or make a vote in a democracy you are sending feedback to the seller or politican. This makes them accountable and pressures them into making decisions whic are your interest, rather than theirs. As the aid system is largely unaccountable the organisations the poor receive a dreadful service.

Since there is no direct line from the poor to the people making decisions, there is a principal-agent problem: aid agencies have too many objectives and each objective is the responsibility of several aid agencies. That is, no one faces the chop when the thing goes wrong.

Having described an all-too-familiar programme failure (this time by CIDA), Easterly writes:

Aid agency watches should tough on such disasters, if only with the aim of strengthening the accountability lobby in foreign aid... The way forward is politically difficult: truly independent evaluation of specific aid efforts... only outside political pressure on aid agencies is likely to create the incentives to do these evaluations.

In the end Easterly sees the way forward as being reliant on pressure from the people who stump up the cash for international develompent: taxpaying citizens.

Mobilize the altruistic people in rich countries to put heat on the agencies to make their money actually reach the poor, and to get angry when the aid does not reach the poor.

We're angry all right!

PS. Check out Easterly's ranking of aid agencies here.

Look harder, Lockhart

June's Prospect carried an article by Clare Lockhart, co-author of Fixing Failed States. She argues that the aid system has failed:

• It's wasteful since so much is spent on overheads
• Recipients cannot hold NGOs to account
• Projects are not thought through with business rigour
• Aid can undermine reconstruction through, for example, distortionary wages

In place of NGO bumph, she argues for greater funding of developing country government activities: "At the heart of the problem lies the failure of the aid system to invest in the restoration - or establishment - of a functioning government, market and civil society."

She's right the system has failed. But her analysis of why it's failed is wrong.

The heart of the problem is actually that the aid system is over-ambitious, unaccountable, opaque, unco-ordinated and not incentivised to succeed. Rather than striving to remake society, aid agencies should try to be effective in achieving specific well-defined goals (such as "Build a road from A to B").

Clare's approach is statist - she calls for "sustained commitments" to governments for "ten to 15 years or more". But, as she notes, aid currently failes to complete even relatively small-scale projects, like building schools (in Afghanistan only 6 out of 140 that had been promised delivered on time). how can it be expected to achieve something so much more ambitious?

What's her suggestion for keeping these externally-funded governments in check? Aid agencies to be made more accountable to beneficiaries.

But this will never happen as long as someone else is paying their wages. Instead, aid agencies must be made more accountable to donors and tax-payers - only we can really demand more.

Disasters at DEC

According to the FT, the Disasters Emergency Committee have stopped commissioning evaluations of how the money is spent. According to the article this "potentially raising questions over whether millions of pounds in donations are being used effectively." It certainly does.

NAO it is available

The NAO report mentioned in the post below is available here.