Thursday, February 14, 2008

"Step away from your busted-ass vehicle, and put your hands in the air!"

In this edition of The Occasional Ramble from Malawi: Further excuses for the extreme infrequency of updates; and we ask: who wants to be a development economist?

* * *

From our pathetic excuses department: The Maradona has been pretty busy, but certainly not so busy as to be unable to draft even a phoned-in, cribbed-from-the-New-York-Times post. Mainly, my lack of Rambling has been because the problems I’ve been encountering at work have been the same ones I’ve Rambled about already in the last couple of years. I’m reluctant to repeat myself, so I’ve been silent. That, plus I’m lazy.

Recently, though, a new thought has occurred to me (I know, an original thought – whatever next?). I’ve talked a lot over the last two and bit years about why Aid doesn’t work, or at least doesn’t work all that well. And recently, I’ve found myself becoming more and more open in my criticism of Aid, and finding that the vast majority of people I rant to agree with me. This leaves me with a rather basic question I’d never asked before:

If so many people agree that Aid isn’t working, why does it continue to be managed this way?

It has become increasingly apparent to me, as I’ve made contacts further and further up the Aid food chain, that the structure of Aid relations is determined not by individuals, or even by committees, but by institutions and structural relationships.

This is a pretty important statement for how we understand Aid, so let’s go into this a bit deeper. Take a bilateral donor agency, one that represents a specific Government and provides Aid to a number of Governments (or NGOs) in other countries for development. Lets say that the civil servant who heads up this agency is that rare breed, a competent, insightful, intelligent chap, who recognises the primacy of socio-economic transformation as a subject for attention in the development process (btw – I’m not just sexist. Almost all senior civil servants I’ve met are men). Now, we’ll give him $100 million of tax money.

Unfortunately, he can’t just spend it, in conjunction with the host Government, on consolidating land-holdings or stimulating some medium sized enterprises to wrest control of others and create a large enterprise. His first responsibility is not to the host Government, but to the taxpayers whose money he is about to spend. As a result, he must create a portfolio of activities that reflects their vision of what development is, and more importantly, what they are happy to see their money spent on. As a general rule, people don’t really like having money taken from them to make others rich, which is what Aid used for capitalist development would achieve. Never mind that it’s the best way to reduce poverty in the long term, the immediate use of the taxpayers money would have them baying for blood. Thus, health, education, gender rights etc. are pushed to the fore. All wonderful, important things, but not the basis for a self-sustaining economic development process.

There’s more: taxpayers also require results. Naturally. Someone takes my money to spend on ‘the greater good’, they’d better do a better job than I would have done myself. Our intrepid civil servant now enters the world of impact and outcome indicators. These lovely little things essentially seek to quantify the effect of each funding stream on the population it seeks to help. So, fair so far. But scratch the surface and we see another insidious effect: how do you show a direct link between expenditure on trade policy analysis and reform to economic growth and job creation? In practice the best an evaluation of a donor funded programme in this area can show is a correlation between the programme and improved results. And if the programme is doing good but coincides with, say, skyrocketing prices of oil, you may not even get that correlation. Thus, our civil servant, to best show taxpayers that their money is ‘getting things done’ focuses on what can be measured with proven causality: build a new school and count the number of children who graduate from it, or a new hospital and show how many new people are treated for malaria. Again, all very important, but only one aspect of what development requires.

So, we’ve seen how our civil servant is actually presented with a limited menu of options, given the institutional structure he finds himself in. He’s not unique – all his colleagues in the other bilateral agencies are faced with the same problems. So certain sectors are over-crowded and others too sparsely populated.

Without going into the same level of detail, Multilateral agencies are also constrained, but in a different way. They are not accountable to taxpayers directly, but rather to the various Governments who provide them with their funds. They have to justify their expenditure not against a public perception of what development is, but against the prevailing economic and social theory of development. Again, this distorts the way Aid is spent. I won’t go into the details, as it’s well covered in my archives, but the prevailing thinking doesn’t place nearly enough emphasis on the transitional aspects of development.

Most of the seasoned development workers I’ve met recognise this characterisation of the major Aid organisations. This brings me to a second question. Why do so many people work in development when there are such structural impediments to their effectiveness? Well, to be sure, there are a number of people who believe that the current structures work, and that sustainable economic development should take a backseat to immediate poverty reduction. They’re probably a minority, however, especially once you get to the policy-makers. So what of them? I think most of these people are just trying to do the best they can in difficult circumstances and trying, in their own way, to change these structures. But if efforts to change the structure of development organisations fail, eventually we will have to ask some very difficult questions. For example, what would happen if there was no Aid? Or at least no Aid agencies? It’s a thought experiment that I’ll reserve for a future blog.


Blogger Acacia said...

by 'development workers' i'll assume you mean those working for foreign NGOs. people continue to work in 'development' because as well as national goals, they also have personal goals and NGOs pay the hugest salaries.

i think you raise great points about the dilemmas faced by civil servants and multi-lateral agencies. i don't know much about big 'aid agencies', but i think that well designed, well funded private sector programmes (NGOs) could play a helpful role in supporting the existing government structures and thereby achieving a measure of sustainable development? no? the ministry of health is a good example. but i'm not sure where health fits in to sustainable economic development.

i think you are right that people (policy makers) are doing the best they can... and here in malawi so much depends on personalities and the quality of the person in the position.

1:07 AM  
Blogger the Maradona of Malawi said...

thanks for the comment. Definitely true about the salary structures - it's a problem for Government's as well, given that the best and brightest local staff are all angling for donor or NGO jobs.

A good, well funded NGO can definitely help in areas like health and education, which are extremely important. These areas, though, are relatively well catered for.

The big gap in development theory and practice is how to establish a viable economic structure (most probably capitalism). This requires a socio-economic transformation based on uneven resource transfers and resulting in uneven power relations. The big reason why this is a gap is that it can't happen painlessly and 'nicely', or at least it's not clear how to do it in that manner. Also, even if you're willing to accept some pain in the process of transformation, you must back it up with the right policies to ensure that the newly minted relationship based on resource allocations can be exploited to deliver economic growth.

This cannot be done by NGOs, or big donor agencies. It's something the Government must do, or encourage. It's not really an issue of money - it's about recognising the need for it and the ability and willingness to make unpopular decisions.

8:31 AM  
Anonymous Anonymous said...

Dear Maradona...firstly i agree with you when u say sustainable developement is not REALLY an option if we want to make money..and to be frank i think that if malawi is ever going to progress in the economic and yes capitalist sense then we have to find a way to wean ourselves of Aid/NGOs etc...this will in effect leave us in the deep end of the economic pool and we will have to sink or swim...surpirsingly history has shown that societies have a way adopting the 'spontaneous cycle' in such situations and natural systems- socio economic- then take shape in ways that will best fit and therefore most socio-economically benefit that particular country...i think it is purely a question of government policy whether this happens or not- i also think it should be radical- who cares if anyone gets upset- (we can learn something here from Mugabe) long as the manifesto is clear and organized...whats important in my opinion is the fact that a manifesto actually exists...even more important is the fact that it is OURS.

10:44 AM  
Anonymous Anonymous said...

someone less experienced grappling with the same issue

10:46 PM  
Blogger the Maradona of Malawi said...

Anon 1 - While I do believe ownership of the agenda is extremely important, I disagree on a couple of points. I think sustainable development is important - but the only way you can achieve it is through economic development and capitalism. Secondly - yes, be radical and implement a Malawian vision, without worrying too much about what others think - but only as long as its a rational vision for the long term prosperity for Malawi. Intransigence for its own sake, or to drum up popularity can do long term damage to a country.

Anon 2 - thanks for the link, it's interesting. I started reading it, but for some reason the page keeps closing on my browser. Will try again later.

11:26 AM  

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Friday, August 24, 2007

A Hard and Inconstant World

Time to make a change to the title of this page, perhaps? The Ramble is pretty well versed in self-deception (when I look in the mirror, I see a face that would put a young Paul Newman to shame), but this is indefensible, even for me. It’ll get worse before it gets better, too; I’m on holiday next month, and my Rambles may not come too frequently in that time.

Try to contain your depression, though - on the flip side, I’ve extended my stay here for a likely 12 months, so you’ve another year of infrequent mutterings to look forward to.

* * *

One of the arguments that I’ve made repeatedly in the last couple of years has been that to really understand the process of development and how we might stimulate it in places like Malawi, we first need to fully engage with the historical realities that characterized development processes elsewhere. Not to replicate them, mind, but to learn from them. It sounds trite to say, but too few people in this field think this way. There is an increasing trend in development economics to look to and appropriate from sociology, political science and even, to some extent, anthropology. But the holistic study of past development processes is still relatively uncommon. Sure, all economists can cite the examples of South Korea and Taiwan; but how many of us can talk with authority on their evolving socio-political make-ups during the process of development? It’s near-impossible to understand the economic changes they underwent, the policies they followed and their success except against this context. The logic of these policies often translates to other countries, until you start to look at the social and political structure, the power relations they reflect. If you ignore these you may apply policies to no effect or worse.

And before this? Can we not learn from English development? From American development, and German development?

I bang on about this time and time again, but many disagree with the emphasis I put on such knowledge. The main objection they raise is simple. The world has changed, and it’s now a far harder place to develop than it ever has been before.

* * *

It would be ironic if someone as concerned with the study of history as the Ramble is failed to recognise the fundamental truth in this. The world of the Industrial Revolution was profoundly different to that in which we live today. Equally, the context against which the East Asian Tiger economies expanded so rapidly is very different to the contemporary realities of Africa and South America.

Even a cursory examination supports this view. The global economic structure has changed enormously and at a growing pace over the last one hundred years. The extent, scope and ease of trade has changed beyond recognition. The means of production are more fluid than ever before; knowledge about trading conditions and economic potentialities are more extensive; access to foreign credit is greater. It is no longer the case that domestic entrepreneurs are best placed to expand and exploit opportunities for growth. This in turn has significant implications for the need to develop an indigenous capitalism (indeed, one can even question the need for one at all). Import substitution has worked, but only in some countries, and under specific conditions; and what’s more, its becoming harder – there’s more to substitute and consumer behaviours have changed just as much as producers in the new global economy.

Politically, too, the world is a very different place these days. The interactions of the economic superpowers with the developing world have changed enormously. Simple colonialism (if such a thing ever existed) is no longer a dominant form of interaction. However, it has been widely argued that through long term trends in primary commodity prices and the structure of the global capital markets (whose fluidity is not reflected in labour markets) the developed world has, if anything, increased its hold over the less developed; these economic changes increase the range of tools by which political influence can be established or maintained. What’s more, post-Cold War geopolitical priorities have changed the set of countries in which an economic vested interest is held, just as the Cold War was a divergence from previous geopolitical realities.

I could go on: the effects of globalized cultural influences on social values and behaviours in developing countries, and the further reaction this causes in Government is hardly insignificant. And I haven’t even mentioned one of the biggest changes of them all – the massive expansion and changing priorities of the aid ‘industry’, which has also had far-reaching effects on how we must understand the context in which we operate.

* * *

So change all around. But how much does all of this affect my argument on the importance of history? Sorry if this is an anti-climax, but not much. Firstly, it’s easy to overstate the actual impact of some of these changes (in particular, those who extrapolate trends in commodity prices into a system of exploitation by nations wear thin on my patience). Secondly, and far more importantly, the merit of studying historical processes is not to replicate them chapter and verse, but to learn the key lessons; the most important of these is that the though context and detail changes from one case to another, the development of a viable capitalism is as much a socio-political phenomenon as an economic one. Capital accumulation is the constant, but it looks different in different places, and to effect it, a great deal must be understood about the time and place in which you’re operating in. The knowledge of historical example helps us see what in particular we need to know about.

It won’t give answers for today’s development puzzles but it helps us ask the right questions. That’s the first step.


Blogger The American Geordie said...

You might like to have a look at the new book by Gregory Clark, A Farewell to Alms. He has a chapter called, "Why England? Why Not China, India, or Japan?" The answer, apparently, has something to do with the development of credit markets, literacy rates, the intermarriage of the wealthy with lower economic classes, and fertility. The arguments are logical, but there's no way to know if they add up to more than 50 percent of the truth.

11:06 PM  
Anonymous maresdelsur said...

There is also a book called the bottom billion, I think it is in a middle place between sachs and other guys...
In terms of governance and development I do agree history matters. Donors come to poor countries with a long list of things to do...I wonder if they ask themselves how this things happened in their countries

2:24 AM  
Anonymous Anonymous said...

Are you still there? Malawi is on the front page of the New York Times today. I wonder if you have any comments on the story:

Farmers explain Malawi’s extraordinary turnaround — one with broad implications for hunger-fighting methods across Africa — with one word: fertilizer.

Over the past 20 years, the World Bank and some rich nations Malawi depends on for aid have periodically pressed this small, landlocked country to adhere to free market policies and cut back or eliminate fertilizer subsidies, even as the United States and Europe extensively subsidized their own farmers. But after the 2005 harvest, the worst in a decade, Bingu wa Mutharika, Malawi’s newly elected president, decided to follow what the West practiced, not what it preached.

Stung by the humiliation of pleading for charity, he led the way to reinstating and deepening fertilizer subsidies despite a skeptical reception from the United States and Britain. Malawi’s soil, like that across sub-Saharan Africa, is gravely depleted, and many, if not most, of its farmers are too poor to afford fertilizer at market prices.

“As long as I’m president, I don’t want to be going to other capitals begging for food,” Mr. Mutharika declared. Patrick Kabambe, the senior civil servant in the Agriculture Ministry, said the president told his advisers, “Our people are poor because they lack the resources to use the soil and the water we have.”

The country’s successful use of subsidies is contributing to a broader reappraisal of the crucial role of agriculture in alleviating poverty in Africa and the pivotal importance of public investments in the basics of a farm economy: fertilizer, improved seed, farmer education, credit and agricultural research.

4:44 PM  
Blogger the Maradona of Malawi said...

Hi Anon - I am still here, but have found it very difficult to blog recently for a number of reasons. Will try get a full post out soon, though. I've been very slack about it, but have got the topic and text all in my head - just need to type it and post it!

I saw that article - a friend of mine sent it to me as well. I had a few problems with it. It's true that the fertiliser subsidy is a big success here, but there are two major criticisms that can be made of it:

1) It only makes a difference when there's rain. It doesn't change the fundamental problem of over-reliance on rain-fed and small scale agriculture.
2) It can never be a long term solution - it is making inherently unsustainable forms of agricultural organisation in developing countries sustainable in the short run. If the subsidy is stopped they move right back to the subsistence line,
3) It encourages short-termism in policy making and decision making.

Noone could argue that keeping people out of starvation is a bad thing. But we do also need to think about what the long term strategy should be, and how a fertilizer subsidy affects that.

1:56 PM  

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Sunday, July 22, 2007

Don't Worry, Be Happy...

The Ramble apologises profusely, yet again, for undue tardiness. I’d blame ‘circumstances’ once more, but a man must take responsibility for his inaction. I’ve been busy at work, and The
American Geordie
(well known to regular readers) came to visit, but the main reason for my lack of Rambling was sheer, unadultered laziness. I shall attempt to reform. That said, I am writing this as I watch the cricket, in the hope that Tendulkar can entertain.

* * *

As mentioned above, the AG came to visit, with a sociologist doing research in Johannesburg, giving me the opportunity to go to Zomba again, which was great. As ever, the plateau was gorgeous, despite the apparently accelerating pace of logging; the walking was confusing, thanks to a map that bore no relation whatsoever to the real world; and the birds were numerous, which became a small consolation in the sixth hour of our three hour walk. Drinking in the Wheelhouse, a bar that is slowly but surely falling off the pier which houses it and into the lake it overlooks was equally rewarding and less complicated.

* * *

During a discussion over dinner with the AG, the aforementioned sociologist and a few others, conversation turned inevitably to my increasingly strident views on the drawbacks and limitations of development support. We were a disparate bunch: the AG is an economist, while the Ramble is a non-practicing economist. As mentioned above, we had a sociologist in our midst, and also an aid worker with Unicef and the owner of a tourist lodge in Zomba. Unsurprisingly, the conversation became an argument, without any satisfactory resolution (bugger. Tendulkar, lbw Panesar). It did get me thinking, however. I’ve posted at length many times previously on the various problems with development support, but what do donors do well?

Most of the debate over dinner focused on this central question. No one disputed that the ways in which donors have operated over the last few years has generally been sub-optimal. But there were convincing arguments that donors have traditionally intervened to positive effect in specific areas, and beyond this, are increasingly administering their aid in more productive ways. There’s definitely something to both arguments.

Firstly, development support in health and education has generally been well administered, at least in Malawi. Health is one of the few areas in which donors have been willing to accept that to make any sustained difference to the country, they will need to support recurrent funding, specifically salaries. Beyond this, aid to the health sector has been firmly in support of the Government’s own strategy for improving health care, giving us the greatest say in the direction of policy. From an economic point of view, as well, expenditure in the health sector makes very good sense – a healthy and productive workforce makes will improve whatever form of economic organisation it exists within. Similarly, from the humanitarian point of view: one of the huge black spots on Malawi’s public health record is our high maternal mortality rate – expenditure in this area can only be a good thing. In education, similar arguments can be made, though at Malawi’s level of development, education is not particularly important from an economic point of view – why do you need to spell if your job is package tea leaves?

The second plus point on development support raised was the improvements seen recently in the modes of aid delivery used. I’ve mentioned this before: budget support, allowing Government direct and unfettered control of the resources provided, and pooled funding in support of sector strategies, providing Government with funds to finance a strategy without donors stipulating how it should be spent, are both increasing - a very welcome development from the Government’s point of view. At the same time donors are under more and more pressure, much of it exerted by Government, to move towards best practices in aid delivery, to become more and more unobtrusive. I’ve seen the benefits of this approach – more responsibility for Government in the administration of resources ensures that Government can more directly control their use, while also building capacity to spend effectively. This is definitely a positive trend.

Predictably, though, I don’t think it’s that simple. Firstly, while support to education and health is generally a good thing, and well administered, it’s not without its problems. Donors know that these are the areas in which their aid has been most effective. As a result, they have heavily skewed their spending patterns to concentrate where they can easily demonstrate results – health is far and away the best funded sector in Malawi. What’s more it’s not just the actual funding that is skewed to these areas, but the available funding as well. This serves to skew Government’s priorities as well, as we tend to chase these available funds. Important areas, as I argued last week, are not being pursued with sufficient vigour.

Secondly, while it cannot be disputed that aid is delivered in more unobtrusive ways than before, there is still a long way to go. There are still very restrictive accounting and auditing requirements associated with untied aid, understandably. However, these procedures would not be a priority for Government in the absence of this aid – it distorts Government activities. Secondly, the assessments that determine how much budget support the Government will be allocated by donors remains heavily skewed towards social sectors and governance, again providing a distortion to Government activities. This is particularly true of the governance indicators – democracy, while a good in its own right, has nothing to do with the improvement of material wellbeing, the primary concern of most Malawians.

None of this should be read as unduly harsh or critical. I genuinely do believe that there are success stories in development support. But even in these successes we should point out the flaws in the way things work. No country has developed because of aid yet. That’s not to say it can’t work – but if we want it to work, we need to constantly think critically about the way it’s administered. Both Government and donors are learning how to use aid as we go along. Blindly celebrating every half-success will not help us.


Blogger The American Geordie said...

Okay, so the only area of consensus seems to be public health. This makes sense to me, since stopping death and disease is a guaranteed reduction in misery.

You can still do it badly, of course, but let's think about how to manage the aid. I'm getting the feeling that Gates and the Global Fund are funding pretty much every promising project to stop the big three diseases: AIDS, TB and malaria. There must be other diseases whose ends would mean big potential welfare gains. And then there are all the basic things: clean water, hygiene, etc.

Surely all these things offer enough spending opportunities to shift much more (though I wouldn't say all) aid away from other, more questionable goals. Whether you then choose to confine yourself to initiatives that have succeeded in randomized trials (the Banerjee approach) is another question....

12:36 AM  
Blogger the Maradona of Malawi said...

AG I'm not sure I agree entirely. I think that part of the problem is the way that aid distorts Government's own expenditure. Rather than just focusing on the projects we know work, like a lot of HIV/AIDS funding, we should be coming up with ways of moving into other areas, to balance out the funding available. We should be looking at funding areas that will allow Government to generate more and more revenue and the economy to expand rapidly. Health helps, but it must be matched by spending in other areas, preferably by giving money to Government to spend on stimulating capital accumulation.

5:21 PM  
Blogger The American Geordie said...

Hmm, Mara, I think you're going to lose some potential allies there. Plenty of people agree with you that seeding entrepreneurship is a good idea; the folks are putting tons of money behind it, too. But I'm not sure how many of them think giving government the money is the right way to do it.

I do see some scope for helping government to build its legal and regulatory capacity, or perhaps paying civil servants more in order to reduce incentives for corruption. But how do you create capitalism? Government subsidies to small businesses and start-ups? I think a lot of the pro-capital-accumulation folks would say the process needs to be more bottom-up than top-down.

1:27 AM  
Anonymous Anonymous said...

Check out this article:
which begins:

Among the reports on a coffee table in the Carnegie Corporation’s reception area is one on the foundation’s efforts to help Zimbabwe overhaul its Constitution and government.

It gets straight to the point: “This is the anatomy of a grant that failed.”

Just a few years ago, it would have been astonishing for a foundation, particularly one as traditional as Carnegie, to publicize a failure. Today, though, many of the nation’s largest foundations regard disclosing and analyzing their failures as bordering on a moral obligation.

“There’s an increasing recognition among foundation leaders that not to be public about failures is essentially indefensible,” said Phil Buchanan, the executive director of the Center for Effective Philanthropy, which advises foundations. “If something didn’t work, it is incumbent upon you to make sure others don’t make the same mistake.”

A trend, maybe?

4:41 PM  
Anonymous Anonymous said...

Add html to the link that I posted. It got lopped off somehow.

4:43 PM  
Blogger the Maradona of Malawi said...

I tried posting earlier, but the internet ate the comment.

TDH - I agree with what you say actually, I think funding for Government should be for exactly what you mention. However, when there is a project or activity attempting to stimulate development of the private sector through specific activities, I do think it should be Government rather than a donor or charity doing it - for the simple reason that the donor/charity will eventually pull out and inevitably spends a long time learning-by-doing in project implementation.

beyond that, though, I do fully agree that capitalist development must be bottom-up. However, often capital accumulation needs to benevolence of Government, especially where concerns strategic use of subsidies or taxes - not necessarily for import substitution but for wherever economic potential exists but needs to be nurtured.

Anon - thanks for the link, it's a really interesting article. I hope this is the start of a trend, and it does seem like it is something that is being taken on my some donors. But only some. Too many evaluations I read are still blindly self-congratulatory and are helping no-one.

7:49 PM  

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Thursday, June 21, 2007

The Famished Government

In the beginning there was a river. The river became a road and the road branched out to the whole world. And because the road was once a river it was always hungry.

* * *

Now, anyone who's been reading the Ramble will know I’m not capable of prose of that quality. They’re the first lines of The Famished Road, by Ben Okri (if you’ve not read this, shame on you. After you’ve finished the Wretched of the Earth, go buy a copy of it).

They came to mind when I was discussing one particular aspect of the aid relationship. I’ve Rambled previously about why Governments don’t just reject aid that isn’t designed to carefully match it’s priorities. Back then, my focus was primarily on what it is about Government’s relationship with donors that makes it very difficult to reject aid. Put briefly, it was because we are worried about alienating the same donors who will be bankrolling the vast majority of our budget come July. Recently, though, we’ve been discussing this inability to say no to aid frequently in our meetings, and I’ve come to realize that there’s a much more basic (and, as ever, controversial) issue that remains unresolved.

One ‘truth’ in development that has remained more or less unquestioned in the last ten years, as development has come to occupy a more prominent role in international politics, has been that it is massively under-funded. Most of what you read concerns this: Gordon Brown’s plan for Africa, NGOs fund-raising, those ludicrously unhelpful statistics like ‘people spend more on cosmetics each year than would be required to eradicate world hunger’ (really? For how long?).

This is also reinforced by the tenor of most development economics, which argues by omission that the socio-economic fundamentals for a successful economy are in place, and what is now needed is fine tuning to make things run efficiently. Developing countries have now bought into this, aided by the persistent sidelining of the heterodox economics. The practical result is that many developing country Governments spend more time chasing funds than thinking about how best to use them. We spend our time in meetings with donors finding out what reforms would persuade them to give us more money, more directly. We spend weeks drafting strategies for these reforms and months or even years implementing them. Behind all of this is the desire for more money.

More money wouldn’t be a problem. But the process of chasing it is. We may have a team of six competent people working full time on trying to unlock the extra hundred million dollars available if we were at the cutting edge of financial management practices. But the same kind of effort is rarely spent on trying to work out what it is about the distribution of land, capital and other assets that is retarding the capitalist development that should be at our fingertips, with so much cheap labour available. This should be what we spend our time on first; and then we should start thinking about reforming all of our systems to suit donors. Actually, many of the most important reforms for stimulating capitalist development don’t require much money at all. What they require is political will and the willingness and ability to make unpopular choices.

Ultimately, let’s be serious. In a world without aid, where would Government’s efforts be going? Economic governance – accounting, audit, budgeting? Nope. Not for a long time. First up would be private sector development, increasing incomes across the board, increasing taxation. Only after all of this has been achieved and a significant volume of domestic revenue was being raised would the economic governance side of things be pursued with any vigour. I highly doubt that in the midst of the industrial revolution or during Japan’s initial boom in the inter-war period, anyone said ‘well, this is all good and well, but before we develop the economy, we should have a world-class accounting system’.

I do understand that donors need to account for where their resources go. Their electorate, that of a much more developed country, demands this. That is precisely why developing countries should stop chasing aid, and start rejecting it. We need some, especially humanitarian aid. But it cannot be allowed to remain the focus of Government activity.

* * *

There’s another, very different impact of the focus on the under-funding of development in the Western media. It fosters the idea among those who donate money or are concerned about international development that it is something that we can throw money at to solve. As I’ve said above, this is not true in the least. Live 8 and similar events were amazing in the way they encouraged so many people to consider the problems of development. But they would have been so much better if they’d focused more on the substansive problems underlying development and not the need to give money to buy a treadle pump for a village somewhere.

* * *

Quick poll, if anyone cares: if I had the choice to introduce a number of people to a new film that they might not otherwise see, should I choose Shanghai Triad or I Vitelloni? Advice gratefully accepted.


Blogger The American Geordie said...

I'm not qualified to answer your poll, I'm afraid.

I agree that plenty of people in the aid community have gotten in the habit of putting the cart before the horse. Fortunately the academic community is weaning itself off this thinking, and folks like Google and Gates seem to be clued in. Naturally, they can move much more nimbly than the calcified World Bank etc.

I would also argue that governments of emerging economies should be seeking simplicity rather than the state-of-the-art. About the only situation in which I would support a flat tax, for example, is in a case where the tax system is rudimentary and collection has historically been difficult (viz the new EU states). Simplicity makes administration and accountability easier.

One question to your point: If instituting fancy accounting rules really gets you $100 million, can't you use that money to hire people to work on the more important issues? Or are there too many flypaper restrictions?

10:10 PM  
Anonymous Palms said...

I'd point them in the direction of Road House myself. Swayze's first act of violence will make you stand up and applaud.

11:53 PM  
Blogger Olaf said...

I really like you blog, and hope that you are enjoying Malawi, and in the spirit of debate:

I suppose the one thing I really disagree with is that, in the absence of aid Government efforts would first and foremost focus on Private Sector Development. I can think only two reasons why this might be the case; the Government would have to seek alternative sources of revenue in order to provide social services and pay civil servant “wages”; or, the Government is so overburdened by the conflicting and irrelevant demands of Donors that it doesn’t have the time to think about developing a coherent strategy for private sector development; (ok, three reasons), that the Government isn’t in sufficient pain to make those tough decisions (like – “look we have law, lets enforce it” – tell that to Scooter Libby) which will ultimately lead to private sector development.

So, the point of my three examples is… would the absence of aid really result in such a large shift in Government policy, or would the country simply and slowly collapse as the Government fails to make the necessary changes and investments needed to encourage private sector growth. I see little reason why a Governments attitude with regard to my first to points would change in the presence of aid – surely they would realise that private sector development would increase revenue and be (at least) equally capable of developing a coherent strategy for private sector development. So it leaves me with the third point, that they are not in sufficient pain to be serious about development.

I am not sure why I picked that particular point... Academic argument I suppose... I like to see international aid as a necessary evil…

9:03 PM  
Blogger the Maradona of Malawi said...

Sorry for the silence again - will be posting this weekend.

To answer some questions:

TDH - $100m is an exaggeration, but in any case, the funds would most likely be tied to particular sectors, or attached to very rigourous accounting and audit - so Government would need to spend in those areas quite substantially.

Palms - we went with I Vitelloni in the end, it went down well. Though roadhouse would have worked too, if I recall correclty, the pro rassler Terry Funk is in it.

Olaf - I think Government here already recognises the importance of PSD, the problem is that the first focus tends to be on unlocking aid, at the expense of asking deeper questions like, why is it that the private sector and capitalism in Malawi is so under-developed? The problem is 1) Aid is tied to certain areas and conditions which would not normally be prioritized; 2) Aid delivery and development agencies focus overwhelmingly on the social sectors, which leads to a relative lack of debate on PSD (to give an example, in a recent annual review we had, the gathering of donors and govt was split for space reasons into two rooms, one for social development, the other for 'sustainable economic growth'. the social development room was packed to the brim, mainly with donors, while the growth room had about 15 people from Governemtn and another 5 donors); and 3) The rhetoric of development policy these days tends to focus on the need to improve productivity through education, health, etc, and remove inefficiencies from the private sector (e.g. streamlining credit delivery institutions). Educ and Health are important goods in their own right, but the fundamental constraints to economic growht here are to do with the structure of the economy. But there is no real forum in development economics which puts this at the centre of discussion; insteaad, policy debate everywhere focuses firmly on the areas already being funded so Governments tend to chase funding in those areas, because the big thinkers say if they spend right in these areas, they'll grow.

As the AG says above, this is changing in academia, though I'm not sure how much the fundamental approaches are being revised. Lets see if it creeps into the development agencies.

3:40 PM  

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Friday, June 08, 2007

What is to be done?

The gaps are getting shorter. Pretty soon the Ramble will be worthy of it’s name again!

* * *

Regular readers of the Ramble (assuming, that is, that there still exists such a thing these days) will have noted that I’ve become increasingly critical in the standard approach to aid. This approach is the one which takes the path of least political resistance with regards to the Western nations, focusing on the easy sells of education, health and water supply. Now, only a fool would dispute the importance of these issues, but as I’ve said again and again, the real issue in development is the development of capitalism. Once it’s established and functioning, these issues can be resolved from within the domestic resources of the country, through Government taxation and expenditure. I’m not saying in the mean time that we should ignore these issues; each can have an impact on the formulation of a capitalism, and they are goods in their own rights.

What we do need to do, however, is look very carefully at the means through which we seek to improve health, education and the like, and consider fully how these methods are likely to impact on the development of capitalism. This is a test most donors fail. For most, it’s simple enough to argue that a healthy and educated workforce is good for the economy and leave it at that. This is not in dispute. Even where the economic structure is not conducive to or harmful to the development of capitalism, a healthy and educated workforce will most likely make whatever form of economic structure that does exist more efficient. Even where donors do contribute directly to

But there’s a fundamental question that is often left unasked. What impact does the structure of aid delivery itself have on the economic forms in the country? There are two elements to this. Firstly, we have to consider how the aid itself changes the way in which the economy and Government functions, and secondly, how the organizations set up to administer the aid change the economic landscape.

Both have enough impact to fill several Rambles, but let me give a flavour of what their impact is here. First let’s briefly consider the impact of the aid organizations themselves. The most obvious way in which the organizations have an impact is in attracting many of the best and most able professionals away from Government, with the lure of better salaries, and away from the private sector, with the lure of a stable and regular income. This is obviously a problem, and most donors recognise it and are doing their best to mitigate it, in their own ways.

However, there is much less engagement with the impact of the aid itself. The money available entices Government to change its spending plans and behaviours to unlock the resources available. This is normally borne of a short-termist mindset. Poor countries’ governments are usually extremely resource constrained, so the feeling is that any additional resources are worth pursuing. This is not the case. When the effort taken to unlock the resources available take one away from the economic policies most likely to deliver long term dividends in terms of the self-sustaining dynamism they generate, it’s not worth chasing the short term gain of greater resources. Development assistance should be sought and unlocked where it coincides with the policy direction required for the generation and sustenance of a true capitalism – not wherever it is available.

(Of course, all of this presupposes that in the absence of any distortions caused by aid, governments would be pursuing those socio-economic policies most likely to bring about capitalism. I don’t believe this is the case, a problem to do with the way mainstream economics treats the process of development).

So, what is to be done? I don’t believe that the answer is to abandon all aid. There is already a tendency to move towards ways of delivering aid that remove the problems mentioned above. Direct budget support, lump sums which are paid to developing country Governments, is a big step in the right direction. In too many cases, the volume and timing of this support is still determined by the donors concerns, the ones which they want to report back to their home Governments. But it’s undeniable that the modalities of aid delivery are gradually improving.

What remains now is for the agenda on aid to be reoriented. There needs to be a conscious decision to make economic transformation, capitalism and wealth creation the ultimate central goal of the development process, and to orient the way aid is organised and targeted around this. Not all donors will be expected to fund this directly (indeed, it’s very difficult to fund at all; this will be the subject of a future post). But all, whether focused on private sector development or HIV, need to pay attention to this in planning their activities. Aid can be delivered in a way that doesn’t cause as many problems as benefits. It just takes honesty in assessing how aid is and can be delivered, and the courage to focus on a long term goal that is far harder to sell than social development that most donors currently place at the centre of their plans.


Anonymous Anonymous said...

Good to see you are back and in good form. I have missed your excellent and thought-provoking accounts of your experiences with foreign aid and the ways it is administered. Whatever happened to your car that went walkabout (or, should I say, driveabout)?

10:57 PM  
Blogger the Maradona of Malawi said...

Hi Anon, glad you're still looking over these pages, given my erratic presence. The car is still in Mozambique. Gradually, my will to fight the law (or more accurately) the police, and have it returned has been sapped. I've got a last couple of tricks up my sleeve and if they fail, I may be forced to concede defeat.

3:35 PM  

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Monday, May 28, 2007

“I think it’s turning back around… and I don’t think I like it…”

The Ramble hangs its head in shame. I wish I could blame work, but that’s not the only reason. I’ve been lazy and distracted recently. Friends left Malawi and I reacted to my spare time with less Rambling, not more, as I read more books, watched more films, and spread the gospel of cricket more widely. (To sum: The Magus is disappointing, In This World is outstanding, and even during the World Cup Malawi doesn’t care about cricket).

Then, last week something extraordinary happened. AC Milan won the champions league. So overjoyed was I that I immediately thought of writing here – only to remember, this loose collection of thoughts should be about development and political economy, not football. So cap in hand, and with suitable contrition, I have returned.

* * *

The last section was a little bit wilfully disingenuous. There’s another, good, reason why I haven’t Rambled much recently. I’ve come the point where my job has started to repeat activities that I did last year; as a result, I’ve felt that fertile new topics to Ramble on were thin on the ground. That said, I realised that one of the most interesting things I could Ramble about was now possible: progress.

Two major events have dominated the last couple of months: a joint review of donor and Government performance and the budget. Chronologically, the first was the repeat of the review workshop, emceed last year by a low-rent Jerry Springer. This joint review is meant to be means of promoting mutual accountability in development, with donors and Government assessing the portfolio of development activities and seeking improvements.

On the whole it was quite positive. We got better reports than last year, giving us some concrete information as to what resources went into each sector and what results all of this achieved. Despite this, though, it went some way to confirming two unpopular opinions I’ve come to form.

Firstly, true mutual accountability is impossible in development. Donors can hold Government accountable by letting it be known that assessments such as these inform their funding decisions for Malawi as a whole, and also for each sector individually. Government, however, cannot effectively turn the tables on donors – we can’t make any credible threat to them. Except in the case of truly spectacular under-performance, Government will not realistically ask them to leave the country. The only thing we can do is shame those who are performing badly by publicising their poor performance. This will only work when the donors in question care what the rest of the development community thinks of their performance and when they agree that their performance has been assessed in a fair manner. Without naming names, not all donors will meet these requirements.

At the same time, even donor attempts to hold Government to account are hampered by a civil service low on capacity. Some sectors failed to report effectively and are likely, in the long run, to see less funding because of this. It’s not that the civil servants involved don’t care: many of them do, deeply. But they simply aren’t enough qualified people to do this kind of work to a high standard, and still deliver the core functions of the Ministry. The facile answer to this is to ‘build capacity’. What this means is less clear-cut, however. More training results in the trained people leaving Government. Technical assistance is a stopgap measure. Funding increased salaries would make a difference, especially if it contributed to the hiring of better managers by Government, but donors won’t go near salaries – it’s too difficult to justify to their own electorates.

Despite these problems, mutual accountability is an important principle. If a development partner agrees to support Government’s development programme, that donor needs to know that the programme is effective. At the same time, donors have a responsibility to administer their aid in a manner that makes it as easy as possible for Government to use their aid to achieve desired results.

Which brings us to my second opinion that was strengthened through this review: poor countries do not develop because of aid. I’ve Rambled about this previously, so I won’t go into detail here. But the focus of most donors on the social sector at the cost of near-complete neglect of economic growth and private sector development was brought home starkly when our review split into two rooms, one to look at economic growth and the other to look at social development. About 80% of our development partners joined the social development room. It’s not just about funding – it’s about interest. And in my view, all donors – whether focused on governance, education, health, whatever – should be paying attention to how their activities can stimulate capitalism. It is only through capitalism that development can be sustained.

So progress since last year? We’ve done quite a lot in some sectors, like health, but in terms of really developing the country for the long term, I’m not so sure. And until economic growth is more of a priority across all sectors, I’m not sure how much more progress we will make.

* * *

And the budget? That deserves a post of its own sometime in the future…


Blogger The American Geordie said...

Totally agree on The Magus. Starts out promising and then goes the way of a bad acid trip. Not that I've any experience there, ahem.

Now, I'm another skeptic of aid leading to poverty reduction. As I've written on many occasions, virtually all of the progress toward the Millennium Development Goals has been achieved in China and India, two countries with little to do with the MDG institutions (and relatively little aid, at least on a per capita basis).

You can't just throw money at the problems. But I do think money is needed to improve public health and educate young children. That still leaves plenty of other projects that are probably wasteful. The new fad for entrepreneurially based growth, a la the Google Foundation, seems more promising.

A UN person was recently telling me excitedly about a sort of agricultural revolution in Malawi. This person said farmers have learned to use fertilizer and seed, and Malawi now has a food surplus. True?

8:30 PM  
Blogger the Maradona of Malawi said...

Hi AG, good to see you back here. First, on the use of Aid for education and Health, I do agree that these are very important. However, we have to be careful in how this aid is administered. In many cases, all of those people who would otherwise focus on capital accumulation and pursue wealth in the private sector choose to instead pursue a well-paid job for an Aid agency.

At the same time, we need to keep an eye on the ultimate aim - a self-sustaining economy that will produce the taxable domestic revenue to do these things itself, and that means fostering capitalism.

On the agriculture question, we do have a surplus, 1.2 million metric tonnes in 06/07, to be precise. How much this actually reflects use of fertiliser, seeds etc. isn't really clear. A large part of the reason has simply been that there has been a very good and sustained rainy season for two years running now. I'm still convinced that the long term way forward is large farms and consolidation, especially when we start looking forward to the day when agriculture can become primarily commercial, through agro-processing etc. But I must admit, my knowledge of the fine details of farming methods here isn't what it should be.

Finally, on The Magus, the thing that really got me about it was how trite it ultimately was. After 600 pages of the bad acid trip, you're led to believe there will be some kind of deep emotional truth at the end, or at least that Nicholas will learn something profound about himself. In the end it's just a bit 'so what? we knew that anyway', and he could have learnt the same things in a much simpler manner than that strange, strange masque. Give me 200 pages of Tanizaki anyday.

3:41 PM  

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Thursday, March 29, 2007

A Fistful of Dollars

This weeks Ramble is aware that A Fistful of Dollars came before For a Few Dollars More, but forgot when it published last week’s Ramble…

* * *

Last week’s Ramble ended mid-argument, and stimulated four post-length comments from opposing viewpoints. To recap, the basic thrust was that corruption itself is not necessarily a bad thing for development, defined in primarily material terms. It can, in fact, have a positive effect, if it acts to stimulate the socio-economic transition to capitalism. This all depends on the form of corruption seen.

Now, at this juncture, it’s probably helpful to clarify what I mean by the form of corruption. A lot of argument last week centred around kinds of different levels of corruption from the petty (policemen asking for a thousand Kwacha to let you pass a roadblock) to the grand (millions being siphoned off from the Government coffers). That’s not really what I mean. For one, the former kind of corruption is pretty much inevitable during development. It’s a by-product of high poverty and high inequality. I’m really talking about the second type of corruption. Within that, there are many different forms it can take, and some forms serve to power transition, while others keep a country mired in unproductiveness. Which type obtains in a given country depends on the social and political makeup of the country, and is the focus of this week’s Ramble.

Consider one of the examples last week, South Korea. As mentioned earlier, post-war economic development was powered by the Government’s policy of focusing subsidies (often with illicit incentives) on a select group of large conglomerates, who correspondingly grew extremely rapidly. A couple of aspects of this relationship are crucial for understanding why this contributed to rapid growth. Firstly, there was a small group of conglomerates upon whom Government could focus its rewards, allowing for fairly detailed intervention in the economy in the initial stages.

Secondly, and crucially, the power in this relationship was asymmetric. Government was in a position of unchallenged power vis-à-vis the Chaebol, a legacy of the war. Put simply, the Chaebol were seen as collaborators during the war. As a result, they had very, very little popular support. If they tried to lead an economic or political backlash against the Government they were never likely to get the kind of mass support they would need to win any significant victories. As a result, Government was in a position to offer subsidies (and accept bribes), but more importantly, it was in a position to remove these subsidies without political repercussions. This meant that if a conglomerate was unable to meet the targets that Government set, it could easily be disciplined through the removal of subsidies. So, to sum up: a small number of groups were able to access Government patronage, but on the Government’s terms; most grew rapidly, and those that failed to were removed from the Government’s patronage, and the resources available were focused on those who could deliver. The corruption that accompanied this facilitated the process of resource transfer to the productive and rapidly growing economic sector, but was not the root cause of growth – indeed, one can see it as almost incidental. (In the British example, it was far more central, but the basic structure of relationships involved was similar, though not the same).

Compare this with the situation that obtains in many African countries. The political structure is relatively young, as is the post-colonial socio-economic structure. In most cases, they are characterised by complex patron-client networks, in which a number of groups (often defined by ethnic and regional differences) vie for the patronage of a Government with a weak power base vis-à-vis these groups. As a result, the Government cannot cut the two-way, corrupt relationships that exist between them and any of these groups, as the spurned group frequently has the political power base to successfully challenge the Government (or more likely the individual MP concerned). As a result, the Government distributes its favours widely and accepts monetary returns from a number of groups. The element of the relationship that powered transition in South Korea is absent, namely the ability of Government to focus returns on a few groups and to effectively discipline these groups if they did not provide the returns required. The complex web of corruption and reward is an unproductive one on two levels: firstly, there is a static economic loss (one which, as MC pointed out last week, cumulatively adds up to a significant loss to the economy). Secondly, it not only fails to contribute to any economic transformation, but plays a part in the prevention of it.

So, there you have my take on corruption. The impact of corruption depends on much deeper factors, which are more important determinants of the path development takes, if it takes one at all.

I also mentioned that you can still argue for the eradication of corruption despite it’s potential ability to contribute to corruption. Quite simply, make the equity argument: I’m all for free and fairer societies. Just don’t pretend you’re improving the prospects of development by doing this. It’s dishonest. The direction of the impact of eradicating corruption is incidental to the act of eradicating it. I feel the same way about arguments on democracy – it’s a good thing in and of itself. But there’s no evidence to suggest it speeds up the process of development in material terms.

* * *

And a word on the cricket. Sri Lanka are still in with a chance. We’ve got a tough team, with a varied attack and a potentially explosive batting order. For us to win the whole thing, we’d need everyone to click at crucial moments, as opposed to a couple of bowlers and a couple of batsmen, as happened against South Africa. Malinga’s four in four was stunning, but he was still bashed around the pitch too much with the new ball. Murali was a class act as usual, but the batsmen were terrible. We need at least one big score from our top three in every game if we want to advance, and we’ll need everyone to fire if we’re to stand a chance against Australia. No chance of Punter’s men collapsing like Smith’s.


Blogger the Maradona of Malawi said...

I'm not gone! I'll be posting soon, but at the moment, crazy busy work is preventing me. Back soon.

10:35 AM  

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