Sunday, July 31, 2005

African politics

Richard Dowden has high praise for Mathew Lockwood's book on Africa The State They're In:

"Is there something that works in every other developing country but not - apparently - in Africa? Lockwood has come up with the missing piece of the jigsaw. It is African politics. The reason that - South Africa apart - sub-Saharan Africa has not developed is that it has not been in the interests of the controlling elites to develop it.

...Of all the other books on the state of Africa this year, none has come close to confronting this fundamental truth. Jeffrey Sachs, for example, seems blissfully unware of the realities of African politics. The Commission for Africa report comes close but still makes too much use of that neutral word 'governance' to evade the brutal core of Africa's political problem.

...only Africans can develop Africa. 'The international community can play only a minor, supporting role in this drama' says Lockwood.

...what is to be done? The dilemma is that the majority of poor people in Africa live in badly run - though often rich - countries that are held back by their political structures. Aid to these countries helps to preserve the status quo. It is a dilemma that no one has the answer to, not even Lockwood. He recommends setting an aid safety net for Africans and basing more aid on incentives: give aid to governments that hit targets for health, education and economic performance."

There are at least three issues here which in my view need further sustained and focussed debate, supported with proper resources and commitment of expertise in such a way that non-specialists can play a part as citizens. (I may sound excessively idealistic, but I do think that if we don't try, we and a lot of other people are fxxxxd)

First, that "minor role" of the international community. Dowden concludes his review of Lockwood's book with a reference to the first-do-less-harm principle - not least, ending unnecessary arms sales and tackling corruption by western-based companies in Africa. This is something he and colleagues have scrutinised in their RAS report "What about the damage we do to Africa?"
(see my 18 July post). More, please.

conditionality in aid. Richard Dowden, Matthew Lockwood and others are of course well aware of/know much more than me about the challenges surrounding various efforts in this regard. (When Matthew Lockwood wrote an article outlining his case for The Guardian back on 24 June, I wrote to ask him what he thought of the US government's Millennium Challenge Account and an analysis of it that had quite recently appeared in The Economist. His response was informative. Matthew is now moving on to other issues such as practical work relating to climate change, but others of his calibre are needed to engage the wider public on this matter).

Third, politics as Africa's fundamental problem. This generalisation looks more useful than some others, and I'm not saying it's not right enough, but I do think it needs to be tested more against specifics. Dowden says Sachs is blissfully unware of the realities of African politics. But I'm not sure that's completely fair. Sachs is not a political ignoramus, and his case as to why Africa is so poor takes account of levels of corruption (a reasonable first order proxy for bad politics). Sachs points out that Bangladesh has higher levels of corruption than Ghana (on the TI index) but has achieved higher rates of growth. His thesis is that corruption is a problem but that health and geography are more fundamental, and can only be tackled with increased outside aid (child immunisation, roads etc).


Caspar Henderson said...

Aid to Africa

The $25 billion question
Jun 30th 2005
From The Economist print edition

Years of mistakes have taught donors a bit about how to spend aid money better

THE itch is unremitting. Scratching brings little respite, but leaves lasting scars. A sufferer's skin will lose pigment, and his vision will begin to fail.

Onchocerciasis—riverblindness—which once infected tens of millions of Africans living near the rivers that gave it its name, is caused by parasitical worms, carried from person to person by blackfly. The worms work their way through the skin and behind the eyes, blinding the most unfortunate of their victims.

No longer a scourge, riverblindness is now an icon: a symbol of what aid to Africa can accomplish. The campaign to fight the disease, launched in 1974, now spans 30 countries, counts on 26 donors, and benefits from worm-killing drugs donated by Merck, a pharmaceutical giant. By 2010 it will have cost $735m, according to a recent report by a team from the World Bank and the African Programme for Onchocerciasis Control.

The campaign has saved the sight of 600,000 people in west Africa and opened up 25m hectares of fertile, riparian land—a new frontier to plot, settle and sow. It achieved this despite one of Africa's other afflictions, bad politics. A military coup in 1978 threatened the campaign's air bases in Ghana, from which it carried out its aerial spraying of blackfly breeding grounds. In 1985, Burkina Faso and Mali fell out, closing their border. On both occasions, the campaign survived. But even aid's triumphs flirt with disaster.

The Big Push

Sagas like these explain why the aid business suffers from a kind of manic depression, as Phyllis Pomerantz, a World Bank official, puts it in her recent book on the industry. In the 1990s, it endured listless donors and woeful budgets. But now the mood and the money are both on an upswing. Last year, the aid budgets of the big OECD donors increased to more than $78 billion, the highest dollar total ever.

Tony Blair, Britain's prime minister and chairman of the G8 summit, which meets in Gleneagles in Scotland from July 6th-8th, has put Africa at the top of its agenda. In March the Commission for Africa, which he set up, called for another $25 billion of aid to the continent each year for the next three to five years. In January, the United Nations unveiled the results of its Millennium Project, which called for a doubling of aid worldwide. Based on a study of particular countries, this is its best guess at the cost of meeting the Millennium Development Goals around the world. These goals—set in a burst of enthusiasm almost five years ago, with a deadline ten years hence—include halving poverty and hunger, arresting disease and environmental degradation, helping new-born babies survive infancy and educating them in childhood. In September, the UN will meet again to check on progress.

At the present rate, Africa south of the Sahara will meet none of these goals. In many countries in the region, income per head has yet to regain levels reached in the 1960s. Life expectancy is in decline (see chart). According to Jeffrey Sachs, who led the Millennium Project, tropical Africa is caught in a poverty trap. Simply put, it is too poor to grow. The region is uniquely burdened by disease (its people account for 85% of malaria's annual death toll of 1.2m and 75% of the 3.1m deaths from AIDS last year). It is also disfavoured by geography (less than a quarter of sub-Saharan Africans live within 100km of the coast). As a result, it can attract and amass too little capital to support a growing population. Short of capital, it is too poor to save: its gross national savings were just 16% of GDP in 2003, whereas in East Asia they were 42%. And without sufficient saving, the region cannot overcome its shortage of capital. To escape, Mr Sachs says, Africa needs a “big push”, which is to say big sums of foreign money. Only large amounts will do. This is development economics as rocket science: mix the fuels in the right quantities, and Africa's earth-bound economies will reach escape velocity.

On what might these sums be spent? Mr Sachs has plenty of ideas. In his recent book, “The End of Poverty”, he describes a visit to the villages of Sauri, Kenya, which his university, Columbia, has taken under its wing. He envisages a complete economic makeover for the villages. Leguminous trees planted alongside crops would fix nitrogen in the soil and raise cereal yields. The village clinic, padlocked and unused, would be re-opened. In the local school, the children would enjoy a full free meal to ease hunger and sharpen concentration; the adults would learn how to bore wells and harvest water. A village truck would carry goods to market and the sick to hospital. What should be done in these eight villages, Mr Sachs says, should be done on a continental scale.
The big push is an old idea. In the 1950s and 1960s, the World Bank lent money for large capital projects, such as dams and mines, to help poor countries fill the gap between their need to invest and their ability to save. Aid fuelled investment, which fuelled growth. Or that was the idea. If it had borne fruit, Zambian incomes would long ago have surpassed $20,000 per head, reckons William Easterly, a former Bank economist now at New York University. In fact, despite decades of aid, they are still less than $500. According to Mr Easterly, the West has spent $450 billion on foreign aid to Africa over the past 40 years. If that has not filled the gap, what will?

The Bank's thinking has now moved on. It worries less about filling a financial gap and more about improving a country's “investment climate”—the policies, regulations and institutions that can be kind or inhospitable to the spirit of capitalism. A new UN report reckons that Africans hold 40% of their financial portfolios overseas. Were Africa able to attract this money back, its private capital stock would increase by about two-thirds.
Size can matter in development. Some schemes to save mankind work on a grand scale, or not at all. The fight against riverblindness had to wipe out blackfly larvae across great swathes of west Africa, lest treated watercourses suffer a reinvasion of flies from elsewhere.

To be effective, the drugs it distributes must be taken by two-thirds of a village for up to 20 years.

But what is true of a particular aid effort need not be true for the entire continent. Unless Africa is trapped as Mr Sachs supposes, one need not feel bound by the precise sums he recommends. There need not be a specific quantity of aid below which it will do little and above which it will make all the difference. Sadly, one cannot name a magic number—$25 billion, $50 billion, or otherwise—that will push Africa over the threshold to prosperity.

Which is not to say such sums are wildly generous. The Commission for Africa's plea for $25 billion represents just 0.08% of the 22 richest donors' national income; the Millennium Project's ambitions require donors to raise their worldwide spending from just 0.25% of GDP to about 0.5% by 2015.

America's post-war Marshall Plan for Europe, which Gordon Brown, Britain's chancellor of the exchequer, cites as inspiration, called, on average, on more than 1% of America's national income (albeit for only four years).

Big money's dangers

But though a fraction of G8 income, these sums are huge relative to the size of the African economies they would help. About a dozen African countries already depend on aid for a fifth or more of their national income. In the mid-1990s, Mozambique relied on it for more than half.
Raghuram Rajan and Arvind Subramanian of the International Monetary Fund worry that pushing too much aid into these countries too fast might bid up their real exchange rates, undermining the competitiveness of their export industries. They find some evidence that large aid flows retard the growth of manufacturing sectors, such as textiles and apparel—the vanguard of the industrial revolution in many countries, from Britain to Vietnam. But most of all, aid sceptics worry that aid is too easily converted into spoils at all levels of African society.

Not surprisingly, donors are often tempted to bypass governments altogether, importing their own teams. Many also enlist the help of “grassroots” non-governmental organisations (NGOs), which often sprout up, like plants in the sunlight, solely to bathe in this foreign money. This approach can yield results in the short run. It is also often the only option in countries riddled with corruption. But it can also cannibalise the state institutions on which any country must ultimately depend. A state without responsibilities will never be a responsible state.

Even if Africa's governments had the best will in the world, could they use such big sums of money? Aid wonks use sponge metaphors: a country can “absorb” only so much aid, even if the money flows as freely as water. Donor money helped Malawi's primary schools scrap their fees in the early 1990s. But the schools soon succumbed to “access shock”: 1.2m extra pupils sitting at the feet of teachers working double or triple shifts.

If donors think ahead only two or three years, such “capacity constraints” argue for spending less: why pay for every child to go to school, if there is no one to teach them? But over a longer time-span, these constraints argue for spending more: why not train the teachers, as well as paying the fees? By 2001, for example, Malawi had more than 27,000 extra teachers. The World Bank estimates that a country such as Niger needs to train about 8,000 teachers a year from now until 2015 to meet its needs. It currently trains just a tenth of that number.

For the impatient, the Millennium Project offers a host of “quick wins”, relatively simple fixes that demand little of state machinery. Many of the gravest threats to public health, for example, can be fought without hospitals, highly trained clinicians or expensive medical equipment. “Barefoot doctors” will do. Besides, well-shod, well-trained doctors tend to disappear overseas. A third of Ethiopia's doctors left the country between 1988 and 2001, according to the World Bank.

The moral of bednets

Top of the list of quick wins are mosquito bednets, impregnated with insecticide. They cost less than $4 and cut the risk of infants dying by 14-63%. The appeal is obvious and immediate. At the World Economic Forum in Davos this year, a speech on malaria by Benjamin Mkapa, Tanzania's president, prompted Sharon Stone, a Hollywood actress, to stand up, pledge $10,000 for bednets on the spot, and challenge her fellow audience members to do the same.

Sadly, this impulsive generosity will not be instantly gratified. Nets cost more to distribute than to make. Misguided policies can make matters worse. Nigeria, for example, has on various occasions imposed tariffs of up to 40% on imported nets to protect its own netmakers. Demand for the insecticide, with which many Africans are unfamiliar, cannot be taken for granted (less than a fifth of nets are retreated regularly) nor can demand for the nets themselves. The Monitor, a Ugandan newspaper, reports that a government official last month warned villagers not to turn their nets into wedding gowns.

So where are Ms Stone's nets now? In fact, the Tanzanian government has a sensible policy of not giving bednets away. To do so might crowd out the commercial sellers of bednets, who distribute them more efficiently than the public sector—and can be relied on to keep selling them, provided they can make a profit, long after celebrity donors have lost interest. Instead, the government hands out vouchers to pregnant women at antenatal clinics, covering much of the cost of the nets in the market.

The dilemmas of distributing bednets illustrate some general problems of aid. Donors muster resources, but they fail to align the incentives of the people providing them or benefiting from them. The grand macro-solutions often neglect the nagging micro-foundations.

The staff of rural schools and clinics, for example, have scant reason to do their job well. A study in Uganda led by Barbara McPake, of the London School of Hygiene & Tropical Medicine, found that in the typical public clinic, 76% of drugs “leaked” on to the private market, more than a quarter of them prescribed to “ghost” patients who did not exist. Donors, Ms McPake points out, would rather subsidise drugs than pay salaries. Hence health workers make their own money by selling the drugs for themselves. If they did not, the clinics might not have survived at all.

Clinics also levied “informal” charges on their patients, sometimes five to ten times the formal rate. Expectant mothers had to pay for the polythene sheet on which they gave birth; afterwards, they had to wash and return it. Patients who could not pay were routinely abused and occasionally assaulted. The authors heard of a newly delivered baby being “confiscated” until payment was made. Not surprisingly, the poor avoid public clinics if they can—which is just as well, because doctors staff them, on average, for fewer than 13 hours a week.

Such problems mostly surprise and appal donors. But they are predictable and systematic. A cadre of economists, such as Michael Kremer at Harvard, Abhijit Banerjee at the Massachusetts Institute of Technology (MIT) and the Bank economists who wrote last year's World Development Report, are busy working out how to solve them. Some have tried to fix these problems by giving nurses, doctors and teachers incentives to do better. Others hope to solve them by giving patients and parents the power to demand more.

Slow wins

An ingenious example of the first approach is provided by Seva Mandir, an old-established charity in Rajasthan, in India. It runs one-man schools in tribal villages, but discovered that teachers failed to show up one-third of the time. In response it did not withdraw funding, but instead gave teachers a camera to photograph themselves and their pupils at the start and end of the school day. The pictures carried date and time stamps that could not be faked. The more such photographs teachers could produce each month, the more they were paid. Esther Duflo and Rema Hanna of MIT show that teacher absenteeism dropped to 18%, increasing the number of child-days of schooling by a third.

Monitoring, when not done by cameras, is a classic collective-action problem. Everyone benefits from a monitor's efforts, but only the busybody himself bears the cost. Overcoming this problem explains part of the success of Ceará, a state in Brazil's poor north-east, in cutting infant deaths. As Judith Tendler of MIT, tells it, the state government hired health field workers on merit and invited rejected candidates to monitor the new recruits, with a view to taking their place if they fell short of the high standards expected of them.

Could poor people themselves demand more of the institutions, schemes and campaigns cooked up to help them? In a few, blessed parts of the world, the poor already know their entitlements and how to press for them. In the Indian state of Kerala, where infant mortality is half that of countries nine times richer, doctors who neglect their duty reportedly risk a beating, and clinics left unmanned attract crowds of angry protesters.

Outsiders can help to strengthen the hand of the poor, at modest expense. The World Bank is particularly proud of its efforts to track spending on Ugandan primary schools. Between 1991 and 1995, it discovered, only 13% of funds allocated for schools ever reached them. “Ghost workers” gobbled up about a fifth of the money meant for teachers' salaries. These striking findings were widely published by schools and local newspapers: parents could find out how much money had been earmarked for a school, and how much had actually reached it. As a result, in 1999 and 2000, about 80-90% of funds reached the schools. The Bank's survey, which cost $60,000, helped plug a leak in school spending worth over $18m.

Tales of corruption, grand and petty, sap the will of donor governments and their taxpayers, who feel their generosity betrayed. But the poor, like everyone else, further their interests as best they can. They do not sit idly by, waiting for a big push. They struggle and cope; some hustle and scheme. It is often only such tenacity that gets them by.

The politicians who meet in Gleneagles on July 6th need not shrink from asking their taxpayers to be generous. But generosity is not the only virtue donors must show. They must also be free of illusion, lest they succumb too quickly to disillusion. The aid industry needs fewer manias and less depression.


“West Africa: Defeating Riverblindness”, by Jesse B Bump, Bruce Benton, Azodoga Sékétéli, Bernhard H Liese and Christina Novinskey. Prepared for World Bank Conference on Scaling Up Poverty Reduction, Shanghai, May 2004
“Aid Effectiveness in Africa”, by Phyllis R Pomerantz. Lexington Books, 2004

“Ending Africa's Poverty Trap”, by Jeffrey Sachs, John W. McArthur, Guido Schmidt-Traub, Margaret Kruk, Chandrika Bahadur, Michael Faye and Gordon McCord. Brookings Papers on Economic Activity No.1, 2004

“The End of Poverty: Economic Possibilities for Our Time”, by Jeffrey Sachs. The Penguin Press, 2005

“Can Foreign Aid Buy Growth?”, by William Easterly. Journal of Economic Perspectives No.3, 2003
“What Undermines Aid’s Impact on Growth?”, by Raghuram G Rajan and Arvind Subramanian. IMF Working Paper, June 2005

“Kenya, Lesotho, Malawi and Uganda: Universal Primary Education and Poverty Reduction”, by Roger Avenstrup, Xiaoyan Liang and Søren Nellemann. Prepared for World Bank Conference on Scaling Up Poverty Reduction, Shanghai, May 2004
Global Monitoring Report 2005. World Bank and IMF, April 2005

“The Economics Of Malaria Control”, by Kara Hanson, Catherine Goodman, Jo Lines, Sylvia Meek, David Bradley and Anne Mills.

“Scaling-Up Insecticide-Treated Netting Programmes in Africa: a Strategic Framework for Co-ordinated National Action”. Roll Back Malaria, 2002

“Informal Economic Activities of Public Health Workers in Uganda”, by Barbara McPake, Delius Asiimwe, Francis Mwesigye, Mathias Ofumbi, Lisbeth Ortenblad, Pieter Stree and Asaph Turinde. Social Science and Medicine Vol. 49, 1999

“Randomized Evaluations of Educational Programs in Developing Countries: Some Lessons”, by Michael Kremer. American Economic Review, May 2003

“Addressing Absence”, by Abhijit Banerjee and Esther Duflo.

“2004 World Development Report: Making Services Work for Poor People”. World Bank, 2004

“Good Government in the Tropics”, by Judith Tendler. The Johns Hopkins University Press, 1997

“Improving the Health of the World’s Poorest People”, by Dara Carr. Health Bulletin, No.1 2004

Caspar Henderson said...

A choosier approach to aid
Apr 21st 2005
From The Economist print edition

Is America's Millennium Challenge Account too challenging for its own good?

THE island republic of Madagascar, off the east coast of Africa, boasts exotic flora, endangered fauna and a rare distinction: it is the only country so far to get any money out of America's much-heralded Millennium Challenge Corporation. The corporation is itself an unusual species. It is an institution that promises to give money, out of a fund called the Millennium Challenge Account (MCA), only to honest governments pursuing sound economic policies that impress it with a proposal of their own devising. So far, it has been remarkably picky. Unveiled by George Bush in 2002, it made its first grant, of $110m, only on April 18th.

The more established aid agencies have not always been as cautious. For example, the World Bank and the African Development Bank are still owed about $40 billion by 30 or so poor countries that are chronically unable to repay. In the few days before Madagascar received its new money, the legacy of these old loans was still playing on the minds of the finance ministers of the G7 rich nations meeting in Washington, DC. Once again, they failed to settle on a plan to write off “as much as 100%” of the bad loans on the multilateral lenders' books.
In the past, America has also showered its official aid on countries that either did not greatly need it or did not much deserve it. The country's main aid body, the United States Agency for International Development, must often play second fiddle to the State Department, which is keen to see money flow to strategic allies—such as Israel, Egypt, Jordan and Pakistan—that are either poorly run, or not that poor.

The MCA offers a fresh approach to American giving. It takes its inspiration from a group of World Bank economists, principally Craig Burnside and David Dollar, who argued that aid only works in countries pursuing sound economic policies: their research concluded that if a poor country has high trade barriers, a misaligned exchange rate, unstable prices and weak public finances, it is infertile soil for aid. Although their results have been disputed, a slightly weaker version of their argument commands a broad consensus: aid may do some good even in basket cases, but it certainly works better in countries with honest governments and sound policies.

The MCA is based on no fewer than 16 different indicators of a country's honesty and soundness, including its credit rating, its treatment of civil liberties, its spending on health and education, and how long it takes to start a business. The indicators are necessarily crude—they cover 70 eligible countries, and some of the statistics are rough at best—but they are at least public, unlike the grounds for the backroom judgments made by other aid agencies. It is thus harder for lobbying and politics to bias selection, but not impossible. Steven Radelet, of the Centre for Global Development in Washington, reckons that Georgia made the list of 16 approved countries only because the Bush administration wanted to back its new government. A worthy aim, he says; but it should be financed by the State Department, not the MCA.

Implicitly, eligible countries are competing with each other for MCA funds. On all of the indicators except inflation, the standards are relative, not absolute: countries are asked to do better than their peers. For example, a country cannot qualify for aid unless it ranks in the better half for corruption. The indicator of corruption is based on figures compiled by Daniel Kaufmann and Aart Kraay, of the World Bank. But they themselves worry that their gauge is simply too broad to make the necessary distinctions. In a ranking of 61 poor countries for which data were available in 2000-01, they could be 90% certain that Sudan and Burundi were correctly classified in the bottom half of the table. They could not be so sure of any of the other 28 countries that would fail to make the cut.

According to the World Bank's Global Monitoring Report, published earlier this month, the poor world is dividing into “aid orphans”, bereft of any patron, and “aid darlings”, doted on by competing agencies. The danger is that the MCA's all-or-nothing, in-or-out criteria might make this polarisation worse.

Discriminate and devolve
That said, a highly selective approach can have its advantages. A donor that is picky about which countries it helps need not be as fastidious about how its money is spent. America asks governments to pitch their own home-grown projects for MCA money, demanding only new ideas and measurable results.

Britain's aid ministry, the Department for International Development, has taken this a step further. It is careful about which governments it supports, but quite laisser-faire about how its money is used. In some countries, as much as half of the aid it provides is not set aside for any specific scheme at all. It is instead provided to a ministry, such as health, or the general government budget. The functions of the state, after all, cannot always be parcelled into eye-catching $110m packages.

On April 26th, the Senate is due to begin hearings on the MCA. The initial goodwill the idea enjoyed is giving way to some scepticism. By the normal standards of aid money, cash has been awfully slow to flow out of the MCA. Some of this criticism is warranted. America was quite quick to pick the countries it wanted to help, but it has been very sluggish in approving their projects. But some of the disquiet misses the point. Giving aid in a systematically selective way does two things. It maximises the return to the aid that is given. But it also encourages governments to reform so as to qualify for aid in the future. This second effect might be most powerful in countries denied money.

The success of the MCA will not be measured by the number of dollars it hands out, but by the changes that it brings about in the countries it supports. Sometimes in the aid industry, withholding money can be as important as bestowing it.