Tesla : all your patents are belong to us

Tesla will open up all its patents, free to use with only one condition: ” Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

I would argue that this is a first shot in a technological war – litigation by other means – and not a nice act of altruism by Tesla. This opens up an exciting chapter in technological innovation. The citizens and cities craving for better air quality can only be happy about this.

The companies that use Tesla its patents are not allowed to sue Tesla when it uses their patents. However, the car makers who use Tesla’s patents could still sue each other. As Tesla is the technology leader and has a “wall of patents” on electric car making, low-cost carmakers wanting to go electric can adapt Tesla technology at low-cost in R&D.

However, Tesla does not compete with low-cost carmakers. Tesla is market leader in the technologically fast-moving sector of high-tech luxury cars with a clear brand recognition. By pooling patents with other innovative technology driven brand car makers (such as BMW) the speed of innovation is stepped up. By pooling R&D and division of labour, the cost of innovation goes down. So when the cars come to the market, the innovation is for the market leaders already yesterdays’ news.

Tesla is confident they have technology the others will want to adapt as a standard, so they are the king of the hill. A market is created where the technology leaders pooling with Tesla compete on the knife’s edge, pre-patent, while the car makers who don’t contribute much R&D compete on price, driving prices of cars down and acceptance of the electric car up in large segments of the market.

What with the car makers who don’t pool their patents with Tesla? Being part of a smaller ecosystem, their relative R&D costs will rise. They might even choose to stay carbon based. They still could licence Tesla technology though.

In the fast developing market for innovative technology driven luxury brand cars, the Tesla effort is a declaration of war to other luxury brands: innovate fast on electric cars, or be a has been.

For car makers aiming for mass production cars, they get access to a goldmine of innovation, on condition they accept to live in the Tesla world. A world where Tesla is not only a car maker, but also the market leader in standards for charging, battery replacement technology, etc. Just like Google is the search company giving away Android for free, Tesla is the car company entering the market of service standards. It is like Bill Gates said: open source is like a virus, making all IP open source it touches.

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The Olympics I don’t watch

Although I have a  TV, with lots of channels including sports channels , I don’t watch the 2014 winter olympics in Sochi .

Some of my reasons:

  1. I cannot see the athletes I know and I see a lot of coverage to no interest to me
  2. So I lost interest in winter games some time ago, especially as I come from a country with little winter.
  3. The blatant, competitive nationalism it embodies is repulsive to me. Especially because it is not my countries’ nationalism.
  4. The wasteful spending irritates me. The money flows baffle me.
  5. I find the presence of presidents who don’t respect the basic human values abhorrent, and they get airtime before, during and between events as if they had legitimacy
  6. The choices being made on the Olympic games prove that sport is not foremost on their mind.
  7. I did not start yet on the moral reasons why I should not look.

Some additional information on the points

  1. The Olympic Committee is soaked in Stupendous wealth because they sell exclusive broadcasting rights to national broadcasters. In this country, only the national rights holder will have the right to broadcast on internet, cable and air. This means also that they show only the sports and series that are of national interest. As I lived in a number of small countries all over the world, and I am now in another small country, the chances are slim that I see anybody I know. The broadcasting does not incite to internationalism, to the contrary, it narrows the view of the public to only its own athletes, while pretending they look at the “Olympic Games” as they are. As an American you can live with it (most events have Americans).
  2. So every four years, my interest waned a bit more, until it arrived on the current level.
  3. The Olympic games don’t preach a “this land is your land” nationalism. The Olympics, the setup, the presidents and politicians attending, even the publicity, all preach an exclusive, competitive nationalism. An approach of  “us against them”.  It is what researchers call an imagined community. There is nothing that really binds you with those athletes. You don’t know them personally. You don’t know whether they merit to win. You don’t know the story of their competitors. Why, you are probably not even from the same city, so you don’t have a real link with the places where this athlete lives. It is the sort of romanticising of imagined common identities that brought us some very dark moments in our history. Why don’t we compete on other aspects of our identity? Height? Blood group? first letter of our last name?
  4. The wasteful spending irritates me. The main cost of the Olympics falls on countries who are tricked to think it is important (nationalism, investment for future? who knows) to build an oversized infrastructure for sports nearly nobody plays. This is not at all innocent. The economical estimations are questionable. They are also rather financial estimations (looking at cost and benefit) , than economical  (what alternative investments could be made?).
  5. Apart from the athletes, there are also VIPs. Presidents, prime ministers, kings, princes. Apart from the problems with nationalism, I notice some unsavoury figures, who are known for doing “bad” things.  These people distract me from the sports. Did we not create an international criminal court? What baffles me even more is that these people are presented on the same level as the elected leaders of democratic countries that respect human rights. Does this mean that our leaders feel they belong to the same group as these other people? Or do our leaders just bestow legitimacy on them? If you live under one of those thugs, seeing this will make you doubt your future.
  6. In “The Dictator’s’ Handbook” they use the Olympic Committee as an example of an institution gone awry. The way the institution selects its members and leaders, you cannot expect clean governance.  This was so before Sochi. Sochi just brought it to a new level.
  7. This brings us to the moral reasons. These have been quite well covered: according to the Olympic Committee the universal values are subservient to having a spectacular sporting event. Olympics can support leaders, but other leaders should not use the event to criticise, Homosexuality, Chechnya, Pussy Riot, etc.

Any more reasons?

 

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Thinking fast and slow about disaster preparedness

Book: Thinking, Fast and Slow Author: Daniel Kahneman

Getting back to my notes from “Thinking Fast and slow” by Daniel Kahneman, I am still amazed by the diversity of new insights the book provides on how (most) humans think .

Some findings are also relevant for the current thinking in humanitarian assistance on disaster risk reduction (D.R.R. for the incrowd): an important part of the book is dedicated to the human approach to risk, which is not in line with statistical analysis nor economical reasoning.

When talking about risks, the greatest risk seem to be a disaster with a huge humanitarian impact. The book deals specifically with the approach to catastrophic risk by humans, in contrast to the Homo economicus or the statistician. As the political agenda of the humanitarian sector moves towards more investment and more attention to disaster risk reduction and disaster preparedness it might be good to look at his insights. I will heavily rely on quotes from the book.

Humans tend to be very bad at estimating risks and probabilities. We make decisions based on stories, not on a balanced analysis.

“ We pay more attention to the content of messages than to information about their reliability, and as a result end up with a view of the world around us that is simpler and more coherent than the data justify.”

“ Many facts of the world are due to chance, including accidents of sampling. Causal explanations of chance events are inevitably wrong.”

When working in Humanitarian assistance, your mandate is to save lives, alleviate suffering and maintain dignity when the local government is unable or unwilling to act or is overwhelmed. Roughly 80 % of the work will be in complex crises, the crises that are caused mostly by human interaction, like civil war, usually exacerbated by some bad luck on the side of the natural causes. However, it is the big natural disasters, giant floods or tsunamis and earthquakes that catch the imagination. Within the natural catastrophes, there is a rise in small disasters, with a limited number of victims, that is passing mostly under the radar. DRR is in the first place aimed at these 20 % of the investments, as we do now how to prevent natural disasters to become human catastrophes, but do not really know how to prevent civil war.

As humanitarians, we are tempted to argue that you will save more lives by preventing the catastrophes, and so it might be within our mandate after all. But are we sure of this? The question Kahneman asks is: will humanitarians be the right people to judge the importance of investments on disaster risk reduction compared to other priorities for the society (such as the army, education, etc.)

When you do not ignore the very rare events, you will certainly overweigh them.

The humanitarians are focused exactly on the very rare events and it is their explicit job to advocate for increased attention on these rare events. But what happens when we manage to put a risk squarely on the agenda? Some quotes picture a scenario with ever increasing importance to DRR:

Your judgment of probability was ultimately determined by the cognitive ease, or fluency, with which a plausible scenario came to mind. (Disaster risk reduction seems very plausible just after a catastrophe)

Adding irrelevant but vivid details to a monetary outcome also disrupts calculation.(The figures on the risk are intermingled with media pictures of the human suffering during the catastrophe)

The work of disaster prevention is more complicated by the human approach to “worry” and “regret” :

Reducing or mitigating the risk is not adequate; to eliminate the worry the probability must be brought down to zero.

Here again, people buy more than protection against an unlikely disaster; they eliminate a worry and purchase peace of mind.

So how to go about deciding on the importance of risk reduction within the complete spectrum of priorities?

The dilemma between intensely loss-averse moral attitudes and efficient risk management does not have a simple and compelling solution.

Especially just after there was a disaster or a near disaster:

The typical short-term reaction to bad news is increased loss aversion.
The taboo tradeoff against accepting any increase in risk is not an efficient way to use the safety budget.

There is an important risk of overinvestment in disaster risk reduction, leading to a framework that is just not affordable for the country:

The intense aversion to trading increased risk for some other advantage plays out on a grand scale in the laws and regulations governing risk.

Perhaps the humanitarian sector should see themselves just as one actor with a set of specific skills: humanitarian action, perhaps statistics on probabilities and risk analysis. As an inside actor they might be badly placed to take multiple roles and study, plan and finance the DRR approach:

Nothing in life is as important as you think it is when you are thinking about it.

Because as humanitarians we always think about disasters, we are not the best judges when it concerns the allocation of the scarce resources of partner governments or partner communities to DRR. A more humble approach, where the humanitarians leave the planning explicitly to the local partners and only add some seed money and knowledge might be indicated. The world is always risky for the poor, even when there is no disaster: illness, unemployment, accidents, land loss, localized weather phenomena, can be higher on the agenda of the poor family than well known disaster risk.

In summary:

Nothing in life is as important as you think it is when you are thinking about it.

This is also a stark warning for the humanitarian community to keep full attention to the core mandate of saving lives when governments are unable to act. For the moment a lot of the attention is drawn towards DRR away from access, Humanitarian Law and humanitarian delivery to everybody in need. It might be necessary to pay attention to DRR, but it is sure that the focus on it by the humanitarian community has negative effects for the core mandate, as the most scarce resource in humanitarian action is management attention. Is DRR really worth it? It seems to me that this is a political question that should be answered by the local communities, and not by external humanitarian actors.

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Thinking, fast and slow and the transparency agenda in development

I was reading “Thinking, fast and slow” by Daniel Kahnemann. It is a very good book. It challenges conventional wisdom and is so full of meaning that it asks for a regular reread to discover more hidden treasure.

He explains how humans actually think, and not just how we think we think. He doesn’t really believe these insights will change anything: he considers it mostly an enrichment for water cooler discussions. As our illogical ways are hard-wired, even when we know we are illogical, we can not help it but to proceed on the beaten path. The Homo sapiens and Homo economicus are 2 entirely different species.

However, this will not stop me from trying to apply some of his insights.

One theme from the book of direct relevance for development work is our relationship with data. I will touch on 2 aspects: how to predict success of an intervention and how to convince people an intervention is a success.

Apparently, a conviction is formed when the story behind the conviction is convincing. Now apparently a story is convincing when it is in the first place coherent. Real life stories however (what some people call the reality) are never very coherent: a lot of things happen that blur the story. People have lots of reasons, not just one, and the one they tell you might not be the one that is relevant. So to be convincing, only the coherent data should be presented. Otherwise, the conviction will be weaker.

The prime example of this effect is of course the diplomatic cable: a coherent and short analysis is explicitly required. Clarity and conciseness are cardinal virtues. A political decision taken on the basis of this kind of analysis will of course be convincing. Meanwhile the simplifications in the analysis yielding to the demands for a coherent story can lead to important errors. Only the elements mentioned in the cable will be taken into account. Kahnemann says: “what we see is all there is”. This might be why sometimes bad choices are made in foreign affairs.

Closer to the development world is the International Aid Transparency Initiative.

The International Aid Transparency Initiative (IATI) aims to make information about aid spending easier to find, use and compare.

Those involved in aid programmes will be able to better track what aid is being used for and what it is achieving. This stretches from taxpayers in donor countries, to those in developing countries who benefit from aid.

Improving transparency also helps governments in developing countries manage aid more effectively. This means that each dollar will go as far as possible towards fighting poverty.

From what was explained above, we understand that the transparency towards the taxpayers will not lead to more trust in the expenditures and trust in the whole venture of development aid. To the contrary: the full exposure to all the data will probably lead rather to more distrust, because the simple story we need to convince of the good aid does, will get complicated. For every straight success story, there will be more lots of maybes, and too many unfortunate failures. Full disclosure is perhaps necessary for moral reasons and to keep the practitioners honest, but will not lead to more trust by the public.

More to the core of our work is how we predict the success of an intervention. Experts, it seems, can be very good at analysing complex situations, but most of them seem unable to predict what will happen next. His prime example concerns newborn babies. Before, it was the gynecologist who would decide how to care for the newborn. When they started to base the decision on simple indicators that can be gathered by every nurse, infant survival started to improve. Apparently, when the feedback loop is not immediate, statistics and simple indicators are more accurate in guiding what to do than experts. The anaesthetics get direct feedback from their work, and develop very good gut reactions, less so the gynaecologists when deciding on what to do with the newborn.

This seems to be very relevant for the approval process of projects and other interventions. The approval process is normally a mixed bag of expert analysis and some indicators. The indicators are not really chosen because they predict success, but because they measure political priorities, such as the mainstreaming of women’s issues and environmental awareness.

Experts who analyse projects for approval are seldom around when the results are obtained, and evaluations happen even later, too late to inform the next phase. Moreover, as political priorities shift, chances are that, even when the results are good, attention shifted a long time ago and we won’t continue the project.

This is a typical situation where, according to Kahnemann, expert advice is next to worthless. An alternative should be to use simple indicators that are known from the statistical analysis to predict success.

We know about some of the main elements that can predict success in development: proven interventions (de-worming etc, the whole CRT stuff) interventions done by trustworthy partners, and interventions tackling in a serious way the main issues at stake. Most of these elements are quite straightforward, and could form the basis for a simple analysis based on indicators. But not a lot of elements are available for analysing the substance of the project.

And here the IATI comes in. We just don’ t have the statistics on interventions to go beyond the most simple results predictions. IATI should strive to offer these statistics asap.

Perhaps humanitarian assistance, with its short feedback loop, the urgency to get the results right and existing standards, would be a good place to start.

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The hunger games, the Paris agenda and political sciences.

I read the 3 parts of the Hunger Games trilogy in only a few weeks. A book that captivates so well its readers cannot be all bad.

What amazes me most  is how “fantasy”writers seems to be better at captivating the realities of the power relations, social interactions and power impact analysis than the drafters of international agreements, like the Busan outcome document. What is real and what is fantasy?

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The silent revolution: is the electric bike a black swan?

The media and the public are staring at the lacklustre growth in the sales of the electrical car, and meanwhile it seems they miss the revolution happening under their nose.

For mobility in the city or the suburbs, the ideal traffic jam-beating device is not the electric car with limited radius. The electric car just solves the exhaust problem, but not the traffic jam. The added value is slim compared to the cheaper gas-guzzlers.

The electric bike extends crucially the use of the bike as preferred option. In a hilly city, biking just becomes this bit easier. For mid-life crisis professionals, it lets you work out without breaking a sweat, while commuting to work. In a clogged city, bikes are as fast as a car. If you feel comfortable biking 6 miles, the electric bike takes you double this distance, to the suburbs, home. This is why some cities do subsidise the purchase of electric bikes. Taking into account the cost of traffic jams and pollution, this is probably a good investment.

The drivers for this change are not the young and chattering classes. It is the silent majority. The pensioners who want to keep getting somewhere while they keep in shape. It are the people who have a house and a family, and start worrying about their health and lifestyle, and the world their kids will live in.

This is the group that normally delivers the momentum for sustainable policy change. Cities on the East coast and the West Coast are getting bike friendly fast, meaning better and faster commutes for bikers . In Europe the infrastructure is changing so fast all over the place that cars drivers are sometimes feeling excluded.

Taking this movement further the electric bike could be a catalyst for livable cities and more concentrated living. Preparing the ground for a quantum leap in carbon economy. The ideal commuter car is a bike. transforming not only the commute in a breeze, but also the suburb and the city in a place with better air, space and green. It takes little space, makes little noise and produces no pollutants. It uses nearly no energy, compared to the competition.

The technology that is still not good enough for cars is very well adapted for bikes. A battery charge brings you easily 40-50 km away, and a recharge is less difficult than with a car. After 80 km of biking, you need a little snack, don’t you? Moreover, the research for cars is bringing fast relief for bikes: better, lighter batteries, faster engines.

The radius of electric bikes makes it the preferred mode of transport for slow tourists in hilly areas, like the Dales or even the Alps.

Already there are more electric bikes than cars driving in China. Up to 30 million bikes are cruising the cities. This creates a mass market, so electric bicycles can be jump-started cheap in the rest of the world. Globally, sales are expected to grow importantly over the next decade. In Europe in some countries up to 53 % of the commuters claim they would be interested in replacing their current commute by public transport or car, by the electric bike.

The most important factor in my assessment is the eagerness the elderly take up the electric bike. Reasonably fit pensioners are the backbone of the electorate in many countries, and the really love their bikes. They will demand their safe roads and bike stalls all over the place.

What do you think?

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Busan Aid Effectiveness, Power Impact Analysis and the Rights Based Approach

The use of big words and capitals in capitals

I just used a title where most of the words seem to call for capitalization. It just shows how the development bingo is still in full swing, and we take ourselves so seriously. It is also typical of the kind of message coming from the centralised decision making processes. In development speak: from capital.

Busan has transformed from a city in Korea known from crossword puzzles to a development milestone. I lump this milestone to the latest trend: just like in the sixties we talk about power relations again, power in the sense it was analysed in the Marxist political thinking. Only now this analysis is called political science. The Rights Based Approach is where the empowerment thinking has been hiding while the OECD-led government ownership approach has been running the donor capitals.

Busan Power Impact Analysis

The main gist of Busan is the strengthened “country ownership”. This is good right? It depends of how you see the world. Do you think that countries are people too? Countries don’t have ownership, people in countries have. Who exactly in the development countries and in the donor agencies get more power?

When looking at the Busan outcome document with the instruments offered by the Dictators’ Handbook, we see a document that strengthens the power of the undersigning parties. The reinforcement of the central power, in practice, the president or the minister of finance of the recipient government, is the overarching theme of the outcome document. Now power relations are seldom win-win. More central power means automatically less power for the “others”. From the Handbook (another capitalization) we know that for the Dictator this power allocation is crucial and deliberate. We know also that every leader is a frustrated potential Dictator. This transfer of power to the central recipient’s government seems very risky from the donors’ side if development is the goal and not just international relations. Using the tools from the Handbook, and for the sake of simplicity, it seems like the right thing to conclude that we can use “country ownership” and “wishes of the president” interchangeably.

The Handbook explicitly warns for putting individuals in “gatekeeper” positions, where they can keep everybody else hostage to their designs. Busan promotes this practice and calls it country ownership, while in fact it strengthenes the powers that be, not “we the people”. In a democratic country, this is not a problem, as there are checks and balances. But where exactly the lack of democracy is the problem (as is underlined in the rest of the outcome text), this principle can be expected to block every democratization effort.

Now why would the donors do this? Different hypothesis can be construed and accepted or rejected using the Handbook’s tools:

  1. The objective of development assistance is not helping the poor but advancing the interests of the donor. Meaning of course in the first place good relations with the recipient country, trade advantages, and the odd joint public events and lip service to themes dear to the donor’s heart like gender and reproductive health. This reasoning is an example from the Handbook itself.
  2. Donors are just gullible, and really believe third world leaders are there only to help the poorest. As donor bureaucrats have their own politicians too, it seems not realistic that such ideas would get a lot of traction
  3. Donors think that the rest of the Busan document will manage to steer the leaders to better behaviour. This is a plausible explanation, and seems to be confirmed by the circus surrounding the Paris and Busan agenda.
  4. The Busan agenda, like the Paris agenda before, gives a few strong donors a central bagaining position  at the table, and authorizes small donors to be at the high table too to free ride on the tails of the bigo ones without more than a semblance of expertise. This seems a strong argument. The World Bank has a near monopoly of negotiations with the national governments on budget aid issues, with only DFID having some clout to match their capacity in some countries. Smaller donors can play with the big boys without really having much capacity for doing so. Everybody wins.

Arguments 1 and 4 seem convincing, while argument 2 is heavily used for the public sphere and argument 3 keeps the conscientious bureaucrats motivated at their job. Especially for them there is more to Busan than country ownership alone. However, from the Handbook, we know that every conditionality fails that is not enforced automatically. So it will not happen.

A set of additional principles (conditionalities by another name) will guide the actions and might balance the first principle: Focus on results, inclusive development practices, transparency and mutual accountability.

The results agenda has not been the panacea everybody hoped for.  While the MDGs have given a sense of direction, Paris nor Accra have been very useful to promote this agenda. Indeed, results are best measured on the lowest level, while Paris and Accra rather operate on the aggregate level. Measuring aggregate results is not easy. In most development agencies,  there is an important passive resistance against the “results craze”. Moreover there is a tendency of eliminating power elements from the equation. This could lead to a “sustainable poverty” approach: there are some basic MDG results, but not enough to lead to real empowerment of the poor or even of the middle class. Of course if evaluation is serious and integrated in the way things work, there will be a pressure for improvements. The track record is scary: donors in general hop from paradigm to paradigm, with scant attention to evaluations coming too late or leading to doing the wrong thing righter. More importantly, there is a also preference for political re-engineering instead of just correcting practices step by step, often in line with the electoral cycle at the World Bank or in the UK.

Inclusive partnerships are vague. They seem to fit the description of elections under Lenin in the Handbook: there is no real binding process, and it can be used to divide and rule an ragtag of stakeholders.  It authorizes the President, according to his wishes to set up the processes for participation that fits his purpose. Moreover, the “inclusive agenda” on its own is a more complicated concept than it seems. Does it mean that also the powerless, women, poor, minorities should be included? Or does it mean there should be a consensus approach where real challenges to the conventional wisdom (the wishes of the president) can be sidelined? Is there room for oppositional thinking, with genuine representation, or do we have unelected or self-elected groups vying for attention? The way the inclusive partnership approach works in real countries who have been receiving budget aid without having a multi-party democracy, like Rwanda and Uganda, can shed a light on this.

Transparency and accountability to each other is a fun principle. Transparency is nice and does not hurt anybody, but the added value of just publishing the data is limited. I would agree that it could be the basis for the work of different groups in the civil society to put pressure on the President.What works here of course is not the transparency in itself but the documented pressure.  Transparency could also be the basis for the President to know what everybody, including pesky civil rights groups are up to and are funded for. Mutual accountability is a strange concept. Money goes from the donor to the President. Accountability works the other way. As there is no power in the other equations (to the respective citizens, the intended beneficiaries, constituents and shareholders), we can ignore them. However, this principle introduces the “intended beneficiaries” which might be a weak basis for a rights based approach. The principle might also open the door for conditionality on the basis of some form of participation, but this will be very difficult to enforce, as there is no real definition of what accountability to the intended beneficiaries might mean. As we know, with Dictators, just like with children, it is important to be specific on what exactly is expected from them. And they rarely voluntarily part from power.

When moving thorough the rest of the document, all the right noises on democratic governance, anti-corruption, gender, evaluation,  and other issues are made. It also is rather detailed in its requests for data, monitoring and evaluations. At the same time, a strategic comprehensive and planned approach to development as a whole is promoted. In the reality of the field, these streams are rather exclusive: the iterative approach needed for a really inclusive and democratic process with good evaluations along the line, does not go well with comprehensive 5 year plans on a national level. The approach rather leads to what Aid on the Edge calls “ official views”. The different, and often mutually competitive goals and methods of work make the outcome document difficult to enforce and give a lot of room for politickering, except for the central part:

  1. Country ownership (meaning according to the wishes of the President)
  2. Through the promised transparency: full control on what happens by whom where.

Competing paradigms: Human rights based or country ownership based

The paradigm in UN-development activities is a human rights based approach, where rights are owned to individuals. This is why the MDG- approach becomes effective: you check whether any individual baby got its right to life, aggregate data, and check the result, count the children denied their right to schooling. The rights based approach respects country ownership, or rather country responsibility, but the development activities are aimed at the “one and indivisable” individual human rights. Each right has its own advocates fighting for this right, and its own budget for strengthening the advocacy. UNICEF for children’s rights, Oxfam for the right to food, UNHCHR for Human rights, ILO for labour rights, and so on. The wishes of the president are not above the rights of the individual.

The OECD approach is a government centered approach, with a centrally planned or coordinated working method, steered from Paris to Accra and further to Busan. In essence, it does not deal with “aid effectiveness”, although it uses the term, it only deals with streamlining procedures for government to government procedures. The wishes of the President are above the rights. It ignores the fact that, from the french revolution on, every advance in governance has happened by  wrestling power from the government, not by strengthening them. it is the accountability structure that strengthens institutions.

In this sense Busan is a “means oriented approach” although it uses the term “results based approach” throughout the text. The main question is: does Busan support the human rights based approach, which is essentially empowering, or does it work against it? Asking the question for every single intervention under Busan goes a long way to find the answer.

Finally, the Busan Outcome seems to be an effort by the major development players to force a global “official view” on the others that suits their interest. This view will compete with an innovative, evidence based approach to reaching the global “official goals”.

 

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David Brooks and the Art of Linear Thinking

In The New York Times, David Brookstackles the Fertility Implosion, the fact that , when women have access to reproductive rights and reproductive health services (like general health services but also anticonception) on average, they don’t like to spend their life as baby factories. This seems to lead in every country to a fall in the number of babies, which in the long run (when the last babies of the fertile years become pensioners, so in some 60, in the future probably rather 70 years) leads to a shrinking workforce.

His starting point is the falling fertility in the Arab countries.

Then he moves further to lament the cost of and aging population, the Grey Tsunami coming over us, with as notorious examples the Chinese, European and Indian.

As a final warning he talks about the declining fertility in the US.

I don’t want to write a long post on this, but as this reasoning combines top down planning of the most cherished choices of individuals with a lack of scientific knowledge, I would like to call immediately Godwin’s law and eugenetics. Talking about diminishing fertility rates while only showing it as an issue, not an opportunity is for me an important misrepresentation:

  1. Being the master of your own fertility is a basic human right. Writing, talking about fertility without referring to this right in a tone of “we are in danger” incites to social engineering without respect for this right.
  2. It is not the fertility of women going down, it is the average fertility rate: the number of children they choose on average to have. Biology stops being destiny. Is it ethical to start manipulating the wishes of people?
  3. The major cause and effect of this decline is the empowerment of women. Is there a misogynist agenda here? Instead of having 8 children from the age of 16, woman do sometimes chose to study, take a few years off for children, and with all respect, do with their life what they want including raising children. The women with a good degree will be way more productive than the unschooled from before the empowerment.
  4. Some 16 years after the fertility declines there is a window of opportunity for a booming growth: young people enter the workforce, and there is no need to scale up a lot of services like health and education anymore, just to keep up with population growth. It takes another 40 years or more before they reach retirement. The Asian Tigers fully enjoyed this window. The Arab countries might be there in only a few years. Please include this fact also in your reasoning.
  5. Retirement financing is indeed a problem of adaptation, but not a problem that cannot be tackled. It is rather a problem of planning and saving for a rainy day, than a substantive problem. Indeed, David, planning for it is a good idea.
  6. Linear thinking does not come close to predict the future. The population is not a mass of people all doing exactly the same. Women abused and raped by their husband would have a fighting chance of not bearing child after child in the new world, but the same reproductive health services help loving couples to get the children they want or single women to fulfil their wish to be a mother. Subcultures that are more child friendly, like loving parents, back to earth ecologists or orthodox faiths (not a scientific list), will out-breed the others. Without going into details: when looking into the population in detail, some groups will show a rising fertility, while others a declining fertility rate. Over time this leads to the numbers inching up again, problem solved. Why doesn’t Brooks refer to Sweden?
  7. Perhaps one of the major concerns is how society changes if children are really wanted. When looking at the countries who are further up the curve, like Sweden and other Scandinavian countries, this might not be bad at all. Societies like this seem to attach more importance to the quality of life. The parents want their children to grow up in a nice world. However, this might be due to other factors than only demographics.just think about it: people who don’t like children in a society die out in a society where you get children only when you wan them.

There must be more, but hey, I am angry.

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Peak Oil, the problem or the solution?

I was reading the three futures black swan posting by Paul, and wondered whether Peak Oil would really be such a disruption to the way we work. It seems indeed that Peak oil is now mainstream in the public debate, but the consequences of it are rarely thought through. The camps seem to be divided between believers, predicting catastrophe, and unbelievers. Even in the most oil-dependent country in the world, the discussion on energy policy seems mostly superficial. In this it reminds me of the Climate change debate. It seems that there is scant real planning for the future going on, just doomsayers and deniers.

The debate going on, it looks like even normal economic concepts, like demand and offer, are forgotten.

A marginal revolution

Wikipedia defines Peak oil as the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. I would like to use a different concept. The peak production as defined above depends on the price, and we could imagine prices to be higher, so much higher that a lot of now uneconomical fields go into production. So “ peak oil” is in fact only defined at a certain price. Of course, in the end production will eventually have to go down, but it will go down first because extraction is not cost effective at the price people are ready to pay for it, not because there is no oil left anymore. In the end, oil will never run out, only the price will rise so high nobody will buy it anymore.

For this blog, I will use the definition of peak oil as the price of oil where major alternatives become as viable as oil itself. Within this definition, peak oil is reached for different uses at different prices. Taxes and subsidies are equally part of the picture.

Most of these alternatives need investments and constant demand, making them a bad bet when prices are just fluctuating, leading to peaks and troughs in demand for the new resource (while for oil these investments are in place). It is not worth investing in the alternatives that risk to be uneconomical for most of the years to come. However, once the prices move to a long term high, the picture changes.

For home heating, peak oil is already reached: for a price of 100 US$ a barrel, it is apparently worthwhile to build a passive house in a temperate climate, as people are doing so in droves. So the energy bill of the house for heating becomes approximately zero. You only have to calculate the depreciation of the system. Even for older houses, insulation is cutting the bill with up to 3/4. The move from petrol-based heating (gasoline) to gas or even heath pumps (nuclear) is general, thanks to a little subsidy left or right. Indeed, this is taking into account the subsidies, but as heating oil in general is not taxed like other goods, this argument cuts both ways.

For decentralised electricity production the use of solar power in sunny countries with a low cost of roof space and a high cost of energy transport, might already be reached. Wind energy is not far behind. When prices are high, the use of bio-fuels seems to be economical in countries with a good year round vegetable production potential.

For centralised electricity production nuclear energy seems to be an alternative I am reluctant to support, and as much as a loath it, coal is still around.

For fueling cars the production of bio-diesel based on palm oil seems to be economical at high price points (perhaps 120 USD/barrel, we saw it already happen a few years ago), but in the long run the use of electricity as a plug-in option for hybrids or as a full electrical option seem relevant. The problem with electricity seems to be more the infrastructure and the upfromt investment cost than the economical use of energy (just like with the passive houses). Indeed, if highways would be standard providing a “third rail” like for subways, we would be wondering who authorized the use of dangerous inflammable technology like the internal combustion engine.

Overall, there are many alternatives for oil, and more to come, each of them economical from a different price point. The most promising for the moment is energy savings (house insulation, less consuming cars, less car use, etc.). However, as prices rise, innovation will explode.

In the long run, under constant incentives from prices and government propaganda, the silent hand of alternative choices shows up: what about changing a house with 4×4 in the countryside for an apartment in a livable city and all the money for holidays you can imagine? What about just using a plastic case instead of aluminum?

Lack of price elasticity is worse than high prices.

For the moment, the price of energy is linked to oil: the other energy sources, coal, nuclear energy, wind-energy, bio-fuel, solar energy, sell their energy on a market where the price is more or less set by oil.

It seems like oil production is on average rather stable, while prices are not.

*

 

Total global oil production, in millions of barrels per day, annual 2002-2010 (data source: EIA)

With an economy at full swing, the demand for oil grows and so do prices, as production lags. If suddenly oil prices go up, there is a problem. More fuel economical machines are not installed on the spot: the demand for oil stays fixed until some buyers drop out of the market and essentially close shop: a crisis. Prices of products go up, demand for products goes down: crisis. Less demand for fuel.

Also when oil production is under thread (you know, the Middle East), prices will skyrocket, with a serious risk of a recession. As oil production is not very flexible, prices will go up suddenly and come down crashing.

The roller coaster ride in the price evolution are a systemic risk to the global economy. But also to the national economy and the household. I did not do any simulations, but it seems reasonable to put that the economy would be able to hum on more nicely at a predictably and steadily rising price.
This calls for a policy by the government to protect the economy by diminishing the risk posed by petrol price peaks.

Peak oil and global warming.

So what do we do?

We can chose to ignore global warming AND ignore the whole peak oil debate.

In the case of global warming, this will probably not help, as the scientific consensus on it is quite huge and, moreover, if you visit the Alps you can see the glacier’s decline. At a certain stage the warming will impose itself. it will be way to late to stop any of it, but in any case, there will be a need for investments in air-conditioning, roof insulation, storm and water works. Meanwhile, we could expect the oil prices not to come down at the 20 US$/barrel anytime soon, as the whole world seems to be getting out of poverty. With a fast growing demand, even with unlimited reserves, it will be difficult to pump fast enough. As most of the oil sits in dangerous countries, the current roller coaster of prices seems to be inevitable.

A policy trying to limit the impact of oil shocks would even in this case be good policy. Just drilling more would not change the prices a lot, but making the economy as a whole less dependent on oil, or energy if possible, would. What are these measures? The same as what you would do if you believe in global warming.

What kind of society?

If we know global warming is coming and oil prices are expected to go up, an active policy to go for oil and coal independence is urgent.

With the current technology, it might be possible to nurture decentralised systems or go for evermore centralisation. Solar panels on the roof or fusion energy.

Or we could hedge our bets. We don’t want to nuclear power providers get into a powerful position like the Arabs are, so the development of more diffuse power production is a necessity to balance the centralised powerhouses.

Indeed, big oil, big energy and big finance have a similar track record. They wield enormous power. They are able to resist reform, even if the systemic risk becomes too high. Democratic control is often failing.

Concluding, as any response to the increasingly unstable petrol prices will take time, I would agree with Paul that the first ten years of Peak oil will be rough.

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Geo-engineering: ready or not, here we go

Climate change is a reality, and it means humans are in charge of the climate now.

Putting carbon in the air used yo be a simple process called cooking, now it is geo engineering, as we know it changes the climate.

Fine tuning our energy use and milk consumption to diminish global warming, is geo-engineering.

Painting mountains white, is the same process of geo-engineering, but using more parameters.

The genie is out of the box. We have to take responsibility.

If only it was so simple that we needed only to look at our carbon consumption. It is a very wide field, with lots of hard choices to make.

We can cut carbon by making heating for the poor more expensive, or we can paint our roads or roofs white. Some choices will have consequences for the most vulnerable, others are untested and might have unintended results. What balance do we want between moral outcomes, environmental risks and social impact?

In the end, these choices should be made as a policy choice, and should not be forced upon us by events.

The last thing we need is a principled stance on what instruments to use while ignoring the moral consequences of the other choices.

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Development: The dictator’s handmaiden; Is bad aid almost always good politics?

I have just finished reading the Dictator’s Handbook, by Bruce Bueno de Mequita and Alastair Smith. I immediately reread some chapters. The book gives you an insight you feel you have known all along, but you just could not act upon it because you don’t want to be seen as a spoil sport, cynic and nutcase.

From reading the book, I think adding a power impact assessment (PIA) before committing to development interventions is necessary.

The book makes a very convincing case that political economy, driven by personal interest, is the major motivation for leaders and potential leaders (surprise). The main objective of a leader is to get and keep power. Good public policy is not more than a distraction in this pursuit.  Leaders ignoring their main objective, will have only a short stint at the top.  So the leader will try to get as much loot from the state and its subjects as possible, and pay just enough to his essential backers for them to stay loyal to him. The rest is preferably stashed away for bad times. She must try to rely on as few possible backers as possible, who should each always need to scramble to keep her favor. The formula is really quite simple, but please, just read the book, I will limit myself to ponder some consequences of this reality of power ( “the world like it is, and not how we would like it to be”) on development assistance.

Easterly is an optimist
The Handbook gives a very black view of the world. We all know a politician or leader who would never act this way. The book however comes close to predict the real choices made by most of the world leaders who manage to stay in power (unlike the gullible friends of ours).

This means that development money that is embezzled by the leader and its cronies is not a bug, it is the main feature of cunning leadership. The whole government ownership agenda is very misguided in this light. It is probably true that the local government knows best what can work and what not. However this is not very relevant if the interest of the local leader in development funding is limited to the use of these funds to help her to stay in power.
Indeed: if the objective of the able leader is to keep the money and distribute it only to his essential backers,  anybody who is not an essential backer will not get anything.

It is also a positive message: understanding this mechanism makes it possible to use strategies to change the incentive structure and change the system.

Forget Paris.

Some types  of development assistance will be very much in demand by autocratic leaders.

  • Infrastructure leads to  excellent corruption and patronage possibilities. Moreover, in the form of big dams, it gives the dictator absolute power on who gets power and who does not.
  • Military support is even better. You can pay your essential generals and distribute bribes. Paying the rank and file is optional: they can “harvest” their own salary from the population.
  • Basic services are necessary to keep the population just intelligent enough to work hard. This is only important in countries without natural resources or without big aid flows. Anything beyond primary education will only lead to emancipation and other trouble. The leaders love basic services provided by NGOs: it authorizes the leader to spend less on the poor and more on themselves. Moreover, it transforms education from a right that the government is accountable for, to a gift from a foreign benefactor.
  • Disaster relief provided through the government services. It authorizes the dictator to embezzle most of it, while giving the rest only to the essential coalition.
  • Dept cancellation will only lead to the dictator strengthening her hold. Dept cancellation should be more conditional to democratic reform, or even better, used after democratic reform happened.  Apparently dept cancellation only works in democracies anyway.

The writers seem to have written the Handbook from a very serious concern to improve the effects of development assistance for the real world, not for the world we would all love to live in.

Their main piece of advice on development is to go for “cash on delivery”. Pay a non-inclusive government only for goods and services it has delivered, not for the process. Indeed even simple processes as capturing a terrorist bring in more loot for the cronies if they are dragged on eternally.

From poverty to power

The main lesson  I take from the book is the need to expand the coalition in power. If the leader has to rely on a wider coalition to stay in power, the kleptocracy deludes into a state delivering public services for most of the people. Indeed by growing the coalition needed to reign, there is a tipping point when it is cheaper for the leader to provide public services than to pay a bribe to the ever-growing number of essential backers.

The book goes in detail on the issue of inclusive governance structures, and ways that are used to limit the power of the public to hold leaders accountable. It proves that the nuts and bolts of the democratic system we use matters, and this as well for governing a country as for a public company or even a club.
While in a democracy a Government theoretically needs the backing of more than half of the voters, in reality this is often much less. The writer explores how the leader can find innovative ways to limit the number of people with actual power in different systems. In a multiparty first past the post-system a group can grab power with as little as 10 % of the total population backing them, just by gaming the system.

All this means that we need a radical emancipation strategy to deliver on development, where expanding the essential coalition in a country is seen as the main goal of interventions. Delivering services in non-democratic countries will not lead to a long-term development agenda; widening the coalition to include the middle class and the poor does. If some services must be delivered, theoretically the cash on delivery system should work.

To take home
Power and incentives matter. In the real world, they might matter more than the moral high ground. However, just like the rational choice is too simple to explain all economics, rational dictators are probably too simple to explain power. It is a start, and it would help us to be less gullible.
This is why I propose to add to each intervention a Power Impact Assessment (PIA), just like an environmental impact assessment.

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Planning for collapse: making development interventions too big to fail and vulnerable to systemic risk.

The financial collapse in 2008 following the collapse of Lehman Brothers was enthusiastically prepared by the political and economical decision makers. In the 70s and 80s, in the name of more efficiency and free marked, regulations were more and more seen as a restraint on the development of companies. With less regulation, the market would be more efficient with less transaction costs. The firewalls between savings and investment were torn down, as the memories of the thirties were deemed irrelevant and “this time it is different”. Indeed economic growth followed. Financial markets seemed more efficient. The business cycle seemed to have disappeared.

Companies became more and more interlinked and financial products became more sophisticated. Risk was shared among more actors, all of them with a AAA rating. The risk vaporised in the system. Until it suddenly was there again. The dew point was reached. And the lack of firewalls took down the system, including some governments who believed the hype, like in Iceland and Ireland. As I am not an economist, I would like to refer to Tim for a better explanation of the crisis. His explanation in his book “Adapt” is enlightening and suits my point well.

So the financial system became so integrated that risk became systemic. All actors were linked up so much that the failure of one hurt all of them. The financial innovation went so fast and the system became so complex that nobody could assess the overall risk anymore.

Development is a risky complex system.
Development is a risky business. Success is elusive and failure frequent. Moreover the “transaction costs”, the difference between what the donor wants to give, and what the ultimate recipient gets, is high. There are important inefficiencies: unaccountable partners, overlaps, gaps, lack of results, lack of knowledge what works and what not, not forgetting stubbornness in repeating things that failed over and over again like swedow.

The way to make changes in a complex system is best described by “do no harm”: a prudent and evolutionary approach. Make small changes, and with a short feedback-loop check on the effects on the system as a whole. Make another change. Innovations should be never too big too fail. Innovation should be tested before bringing it to scale. Indeed, this is our world, our ecosystem. We should not take systemic risks with the lives of poor. As it is impossible to predict what will work or not, it is better to have a lot of initiatives and not to pre-empt the outcome.

A development system based on these principles should be expected to be very conscious of the risks that go with large-scale intervention, and focus on the value chain from innovation to bringing to scale.

The development system that exists however has the Paris agenda and the humanitarian cluster approach. The 3D approach (development, diplomacy and development), linking relief to development and integrated missions. The items on the international agenda are aiming to link the different systems to each other. Does this lead to more efficiency or to unacceptable systemic risk?

Some examples where this clustering of agendas seems to have led to collapse due to systemic risk: :

  • In Afghanistan the West has tried the 3d approach, it did not seem succesful.
  • In Uganda, donors have linked themselves into a budget aid logic, meaning that to punish the parliament for a gay law, children will probably not get their vaccine anymore.
  • Madagascar textile lost their jobs, because the duty free regime for their country was withdrawn after the politicians squabbled too much.
  • In DRC and Sudan, the UN integrated missions make the UN-humanitarian agencies de facto not neutral, affecting their efficiency in a serious way.
  • In Somalia the mixing up of the humanitarian and anti-terrorism agenda was an element in the current crisis.

From these examples I would like to conclude that systemic risk for the whole aid effort in a country can exist if agendas are lumped together. If an approach does not work, the most logical explanation could be that the approach is not a good one, and different options must be explored. The alternative narrative, that it did not work because we did not try rigorously enough, seems dangerous.

An alternative: nimble aid (agile aid, mindful aid)
Nimble aid would consist of independent interventions, each very limited in its objectives and conscious about the unpredictability of externalities. Like a bird in a flock, each programme would be able to steer itself in full consciousness of the effects it has on its environment. It is the evolutionary approach to development. If every objective is diluted in a wider technocratic programme, nothing is really happening. Trying to be responsive in a wider programme just leads to more meetings and more lemming thinking on development.

Vaccination programmes in humanitarian settings do just that: saving the life of thousands of children, leading to healthier and more productive lives for the beneficiaries. An effect that can be traced over up to 100 years.
New agricultural practices are tried one by one on a small scale, until there is one that works well, and everybody adopts it. Like the use of maize in Africa, long before colonisation, and varieties resistant to plagues now.

It is a development agenda which is less ambitious in the short term, but revolutionary in the long term.

A prerequisite for this approach to work is information sharing. Not information about what happened, but information on what is happening. So all actors know what others do by reading this information and can adapt their interventions to what is already happening around them. The actors can only correct their actions if they know what is happening around them. This is very much like obliging public companies to publish essential information , development actors should to post essential information on their activities. Information sharing should not be confused with going to meetings nor coordination.

Keeping the firewalls
In the consensus thinking, a compounded indicator will tell you about success of failure (like the human development index). This means that each value, each objective is not important enough to fight for on its own. You want to raise the overall index. In a nimble approach there is a tension between overall goals and each objective. There is a specific programme assuring that child mortality is down. Even if the government does not have the institutions or intentions to do it themselves yet. Good child mortality work will always strengthen the local institutions when the objectives are both long-term and short-term.

This is why I would like to argue to keep the firewalls between the values that are important. This does not mean to work in an ivory tower, It means that there are some objectives you just don’t negotiate away.

Moreover: fund what works
There is a lot of evidence on interventions that do work, even on a large scale. Getting rid of funds is not a problem for the agencies even if they would limit themselves only to evidence based interventions. Just a few examples that work in some circumstances if done well:

  • Basic economical infrastructure
  • Basic health services
  • Cash support for the poorest
  • Water and sanitation
  • Most humanitarian interventions if done according to the Sphere Standards.

And so much more. In the cases of decent accountable local institutions, even some forms of budget aid seem to work.

In conclusion

Of course, coördination and coherence are important. But they are only means for reaching results. Sometimes other means, like innovation or competition, might work better. When coherence becomes an objective of the aid, however, the level of systemic risk for the development system might just be too high.

Finally, transparency will always be beneficial for planning interventions, as well in a coherent as in a competitive environment.

 

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Admitting Failure: Join the Posse (Only for real Men)

I am all in favour of evolution in development practice and thinking, where normally, it is more important to cull downright dismal failures than to select only the best, as evolution needs variability to work its magic.

Admitting mistakes or difficulties is also part of every professional relationship between partners. Part of the reputation of ICRC is generated by its tendency to speak rather bluntly about its own capacities in private, while the toeing of the party line by the staff of other organisations (say UNICEF) lessens the confidence in the organisation. However, when looking at the public image, it might be the other way round. It might seem that, when you need direct funding from the broader public, admitting failure is not the best practice.

I have some serious questions on the trend to focus on admitting failure. I will focus on elements:

  1. Who can admit failure?
  2. What does this failure say about the respect organisations have for beneficiaries?
  3. The posse rides again, where do we ride it to?

Who can admit failure?
When I look at who is leading the charge in “admitting failure”, it seems to me that big failures can be admitted by organisations who interact mostly with a more sophisticated donor public: governments (World bank) or better informed people (who supports engineers without borders?). For these organisations it seems to me to be fully in line with the analysis of Marc: it is just something to run with the posse, without a real cost. It is signaling credibility. However, if they need a separate thematic line to treat with failure, what have their (transparent) evaluation and monitoring departments been doing until now? An aspect that cannot be addressed with the failure approach is the recognition that systems are inherently complex.

When other organisations publish failures, it is closer to a “lessons learned” story: we know this works, we applied it there, we overlooked this element, it did not work). What is being talked about by these organisation is not failure, but evaluation and short feedback loops, in order to be able to correct early in the project. Small NGOs don’t have official evaluation strategies, they just learn their lessons the hard way, and take them on board.

Admitting failure looks very much like extremely badly conceived monitoring and evaluation when described this way. Indeed I fear this failure posse might interfere with the other posse towards professional and transparent evaluation and results measurement. The World Bank should know better.

Please some respect
The stories about failure often describe projects that were implemented and afterwards it seemed not to work, because of a simple aspect not taken on board. The Merry-go-round water pump is the case in point. I notice that the evidence base of this project was weak, and implementation at a large scale happened before a decent assessment was made.

This echoes the discussion on the Millenium Villages in the Guardian where do-gooders rush into implementation of everything they think will help the villagers, claiming it would be immoral to let them wait until an evidence base is established. I sympathise with them, but a minimum of monitoring must be possible between a pilot or startup phase and full-blown execution. Of course, the victims of all this activism are poor, and poor are by definition powerless. The organisation can just move on, looking for fresh victims. There are enough of them : “the poor will always be with you”. With enough failure, we can assure they stay that way.

The posse rides again: where to ?
Failure looks to me like the spin off from a good tendency. The tendency to professionalism, to stop looking at the world as it should be, but as it is. The need for evaluations and feedback loops. The need for research and evidence base. The need to document what works and what not. Part of this professional approach is that failure is just another piece of transparent information from every actor.

However, like we saw the “program approach” coming instead of making good projects, it might be that the Posse on Failure attracts more riders than the one of professional information and risk management.

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CSR and Public – Private partnership: before, we used to call this propaganda, corruption or tender procedures.

This my contribution to the first Aid Blog Forum on Corporate Social Responsibility.

When I look at the different contributions on CSR, the negativity of the academia and practitioners oozes from my screen. For good reason. Who pays the piper calls the tune. And the tune  set by a private partner is seldom purely “needs based”. There will be need for visibility and publicity (CSR is mostly about signallingand branding, Marc Bellemare). The moneyshark will come with his own ideas of what is important and what not (please add at least a micro credit chapter). And you will have to say yes.

What annoys me most is the blurring of the lines. How fast does CSR become single sourcing? How much of what we call CSR can be classified as propaganda, how much are the lines of good procurement procedures blurred by it?

Corporations have an identity, with different concentric circles. In the outer segment, we see branding and marketing. These signal the view of the corporation as they want us to see them. At the core, there is the real identity: cutting corners or maintaining quality even if business is slow. Some companies treat their employees well, some don’t. I could well imagine that CSR fits in the core of a company. When a soccer club sponsors UNICEF, I might believe it is. When a clothing giant campaigns on HIV/AIDS, it looks like marketing to me. It degrades the Cause and puts everything at the service of the bottom line.

Just like developing countries are victim to fickle donors looking for visibility,  CSR campaigns that are aimed to be marketing will sell the soul of their partners, and run off with the next posse.

humanitarian action should act like an insurance including preventive care. It should not depend on the media when aid comes, it should be send when you hit rock bottom. Of course, this kind of assistance acts before children are dying. Very seldom star-based initiatives support flexible funding to UN-bureaucracies. However, this is what we probably need. Prevention is more efficient. Needs based allocation is better than media based allocation. We have standards for servicing the affected populations we can be held accountable to.

Institutional philanthropists and some CSR companies do support such an approach. Most private donors however, don’t. In humanitarian assistance, most CSR seems to follow the flow, and create political incentives against Good humanitarian Donorship. Bono criticized countries for not giving “as much as IKEA” to the Horn of Africa. As far as I know, Ikea does not contribute to the Central Emergency Response Fund.

Somewhere, we must draw the line.
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Humanitarian needs and the way we fund the Horn of Africa

Some important annual milestones for needs based humanitarian donor budgeting just passed: the publication of the 2011 Global Humanitarian Assistance Report and the Mid Year review of the OCHA Consolidated Appeals.

The GHA report analyses the available data on humanitarian funding. It informs you on the reality of funding, in contrast with the fluidity of donor declarations and promises. Donors with a high media visibility might turn out to have low commitments . As an operator in the field, it tells you who funds what where. Compared to other sectors, funding seems to move in a direction where, according to the GHD consensus, more efficient humanitarian assistance is possible. The mid year review gives a snapshot of the needs and funding shortfalls in the different crises, as it is reported through the UN-system.
One of the aims of both documents is to get a better allocation of resources, to have more predictability and better match the donor budgets with the needs.

Indeed, the unspoken consensus on humanitarian assistance is that humanitarian assistance is a moral imperative, a human right, stronger than the “human rights”. When the shit really hits the fan, we will come and help you out. You can count on it. Everywhere. Anywhere. You will get at least what is promised in the Sphere standards. We will not let you sink lower. Your life and dignity will be protected.

Therefore, humanitarian assistance should be organised more like an insurance than like a charity. What is the current mechanics of humanitarian funding, and how is the political economy now, and what should change to become more like an insurance?

The mechanics: The budget cycle
The donor budget cycle starts for most government donors in march of the year before. The first draft of annual (or rolling multi annual) budget is prepared before the mid-year review is received. The only data on needs available are those from the year before. The budget is approved around November in countries with a working government, meaning before Common Appeal is even shared. The input for the budget cycle comes from the common appeal for the year before the budget. Even the review comes too late. The budget cycle is conducive for stable, long term investment in an insurance like scheme, with stable funding.

The mechanics: sudden disasters: the additional funds delusion
When a sudden overwhelming disaster strikes funding of the humanitarian budget is redirected to this new need. Most donors provide with a reserve of 20 % of their budget for sudden onset disasters.
Calls will be placed to liberate “additional funds”. These funds will come in the first place of course from the budgets within the same programme: the allocations for flexible funding or for complex crisis response that was not yet paid in the same year.These other crises will be “forgotten”: all attention goes to the media hog.
If the situation is politically overwhelming, the head of the humanitarian department will have a good hand to fight for additional budgets from other programmes. These will normally be development budgets. Unspent development funds will be transferred to humanitarian assistance. It is extremely rare budgets from outside the development sphere (e.g. unemployment benefits) get transferred to the humanitarian budget for a crisis.

Political economy for budgeting based on sudden disaster spending
This approach leads to an incentive structure for the level of the humanitarian budget that runs against the consensus on humanitarian assistance as a right:
The visibility of complex crisis and predictable funding is limited
The politically experienced needs are mostly in sudden onset disasters.
When it comes to “important crises” the voted humanitarian budget is irrelevant. You could as well accept the need for flexibility, and scrape the money together when disaster strikes. It will make you look good.

The political economy of spending in sudden onset disasters pushes against the principles of Good Humanitarian Donorship and pushes the long term budget provisions down.
Why would you have a high humanitarian budget if you can have a cabinet meeting with media coverage and add from other budgets when there is a political need? In this reasoning, the humanitarian needs are secondary.
It is indeed remarkable that countries with a “presidential” approach to humanitarian spending have lower annual budgets, but also have troops on standby when CNN is filming.

It is normal that the public and even most politicians think humanitarian assistance happens meanly in natural disasters, while in reality 80 % of the funds is spent in complex crises, mostly in civil war zones.

However, something more is at work. I like to call it the incredible moral fibre of the humanitarian donor and agency administration. In some countries, the flexible funding of needs based allocation mechanisms is and stays well funded. Moreover, disaster preparedness and prevention get a good funding, inspite of the political economy.

An alternative approach? Funding instruments
The humanitarian operations by the main actors have moved fast towards an accountable system trying to deliver services according to standards.

Donors should fund instruments that build up reserves and allocate towards the most important needs today in the shifting humanitarian crises. These instruments should be accountable and look for efficiently delivered effectiveness.

There is already an interlocking system with enough redundancy that does just this:
The CERF, DREF and ICRC core funding act as a global system of insurance for humanitarian needs. They can act in sudden disasters and fund forgotten long-term crises.
Most humanitarian agencies have a flexible fund for allocation according to needs. The UNICEF thematic fund for humanitarian assistance, IRA at WFP, SFERA at the FAO, etc.
ECHO acts like one giant needs based fund, with good management practices, oversight and quality control.
There are country level pooled funds and Emergency Response funds.

Apart from funding “needs based”instruments a donor will have to keep some hands on presence in crises that are perceived as important: human solidarity must be done and must be seen to be done. This should not obscure that working through insurance-like mechanisms is far superior when talking about efficiency and effectiveness.

However, there is little political gain in funding these instruments: when the list comes out of donor support for disaster relief, the budget will be spent, and there are no more funds available for bringing your country in the spotlight. Responsible donors and agencies manage however to keep up this kind of funding.

One fund or interlocking systems ?
Politically, the creation of one big fund seems interesting. . It would simplify the message and management for the donors. One check every year. However, in order to have an innovative, learning system, with enough redundancy to pick up the slag when one actor fails, a further development based on interlocking and sometimes competing mechanisms seems indicated.

Insurances need assurances: blank checks or value for money?
However, there is one issue with these instruments: most of them start from the hypothesis that all actors in humanitarian assistance deliver quality and value for money. Comparative evaluations and competitive bidding on value for money are rare. Most attention goes to effectiveness, not to efficiency within a certain quality standard for effectiveness. The instruments for creating instruments for assurance on value for money exist however: there are standards for service delivery and accountability, that could be used for diving prices down and quality delivery up.

These assurances will be the cornerstone towards an insurance-like system

Including preparedness and prevention
Like every insurance, there should be in-build incentives for preparedness and prevention spending, as one of the most efficient humanitarian approaches.

Pushing Good Humanitarian Donorship
The gatekeepers for information should brainwash the politicians and the general public by highlighting the positive contribution of flexible accountable and needs based instruments. The current practices by the main humanitarian actors are more geared towards monetising sudden onset crises, hoping it sticks into the general budget. This should be an active approach, worth a significant portion of the budget.

Some possibilities are obvious:
Ocha should, for every crisis, mention first the contributors to CERF; the same could be requested from ICRC for core and IFRC for DREF. There should be an effort also by teh EU to highlight the importance of flexible funding above ad hoc funding.
Pressure should be as little as possible on “additional funding” the pressure should be to increase the budget for needs based funds. Even pressure for flexible funding to agencies does not have the necessary flexibility to respond exactly to the needs.
The overall budget should be used in rankings. This is why GHA is so important. Rankings per crisis are important, but should be presented always with overall rankings.
To move to an insurance thinking, contributions could be presented preferably as a part of the GNP or per capita, instead of on an absolute basis.

What matters for increasing the humanitarian budget?
An increase in the humanitarian donor budget will not be directly caused by an increase in humanitarian needs. It will depend in the first place on the importance a donor country gives to humanitarian assistance in general. It will be based on the conviction that Humanitarian assistance is a right. It will depend on conviction of the politicians and the general public that assistance should be given more, and that the money is well spend.

This means that the moral case for assistance must be promoted until it becomes a consensus, first in each country, second globally.

It also means that vetting humanitarian partners is necessary. An insurance type of coverage is only possible with decent standards. Standards for service delivery, accountability and evaluation make it possible to compare the operations of the different actors, Multilaterals and INGOs. It does not mean that data or evaluations will convince anybody, it means that those advocating the moral case can do so from the high ground, knowing the tax payers’ money will be well spent.

The biggest enemy for this approach could be the NGO, or multilateral that can make a killing with ad hoc funding.

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Markets in everything: 2021: the secondary market for development products.

Francis Watanabe is project portfolio manager for the government. He acquires development interventions on the secondary market, to add to his portfolio on early child development. Innovators, like the Gates Foundation or Oxfam, or even local governments, start up their interventions, and after the first rated evaluation sell them off to the highest bidder on the secondary market. Interventions from a reliable provider, with a good results projection and long life span are in high demand. Buyers normally will pay for all the investments and overhead, and are prepared to pay the innovator for the further project management. The management fee for high yielding projects can be set quite high. Private sector innovators with a good success rate can earn a good living, and in some sectors, like micro-finance, most innovators are from the private sector. In early child development however, most innovators are former NGOs or foundations.

Watanabe is expected to reach a very good results/cost ratio for his portfolio, better than the average from the donor group, so he cannot just rely on market data. He also has to research on the latest scientific findings and try to identify upcoming new techniques or new innovators. He can also improve his ratings by identifying local champions in difficult environments. Real bargains can be concluded when other countries decide to switch to other priorities, and they offload their old portfolio.

Thanks to the secondary market approach, most donors have managed to improve the development results of their work with a factor two or even three, all on a stable budget.

It seems like this market approach just had to happen when the different building blocks for the system were available:

  • In order to have a functional market, knowledge asymmetry should be solved as much as possible. The transparency drive in development funding provided the information needed. The International Aid Transparency Initiative lead to the availability of data on every intervention by every actor in a comparable way. IATI started just did this.
  • The results based approach lead to a system where interventions should deliver on the promised results.
  • Standards in results reporting and impact evaluations led to the rating of projects for a specific development outcome. Independent rating agencies emerged from evaluation and audit consultancies.

The acceptance of the Sphere standard as the absolute poverty line set a baseline and brought it all together.

The real breakthrough came with the sphere standards, setting concrete lines for absolute poverty. Donors wanted to spend the bulk of their money on palpable morality & evidence based interventions for the poor, instead of for vague institutional goals or long term elusive economical growth.

Inevitably once the results based approach was accepted, coördination and partnership moved from the agenda. Indeed, as ownership and the “do no harm principle”were part of the basic set of principles, debating coördination and partnership was not necessary any more. Any intervention bypassing ownership issues would get a bad rating for sustainability. Partnerships and coördination became more organic: it had to serve the development goals. Pragmatically the operators moved from partnership to competition and back again, according to the needs of the beneficiaries.

However, still a hefty 30 % of the interventions happen outside of the system. This is normal, as most of the interventions that don’t cover basic services are more difficult to assess on their results potential and their value would be too difficult to estimate. Indeed: important work still happens in the rule of law, security, democracy, governance and economic development. However, a secondary market for this type of projects still seems a few decades away.

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The Black Rabbit and Permaculture

I have been very quiet on my blog lately, as I was totally absorbed by my garden. It is the first time in many years I am living in a home with a real garden where I can grow my produce and I enjoy every minute of it. As I vaguely remember being an agricultural engineer, with some solid experience with small-scale farming systems in Latin America and Africa, I was excited to get on with it. although I must admit that there has been a lot of sowing and growing, but not yet a bountiful harvest.Apparently, the thinking in agriculture from those traditional smallholders has seeped into me. Central is the quest for maximize the use of available resources (land, harvest residue, water) instead of just keeping them organised. .As leeks will be far apart for most of their growing season, why not growing radish, cress or even carrots in between them? Can I diminish the evaporation from the beans by growing a row of corn around them? Mulching with lawn clippings or with wood chippings? What about damage of blackbirds, snails, slugs, Cabbage whites?
Why should I grow dwarf beans when I can have beanstalks? I am also trying just to accept my loss when plague strikes, and apply some tricks to save water. The limits of my environment show starkly, and I should get some pesticides or fertilizer if I want to get really impressive results. But why should I.  I enjoy the constant experimentation, without a trace of RCT.Just now I learned that there seems to be a movement applying these central-African approaches: permaculture.

However, this kind of thinking doesn’t go down well in my more traditionally minded environment. My chaotic patches of multiple-layered inter-cropping systems are just not done. Uniform plots wit mono-cultures and straight lines are the rule.

On top of this new obsession with gardening, I started to sport again, as my tendonitis finally abated. No marathons for me any more, but I am building up to do some “sprint triathlons”. OK, that is only one eighth. This morning I was biking on a lonely bike-path along the canal, when I was surprised to see the rabbits lost all their fear for cyclists. It was there I saw the Black Rabbit. Just one black rabbit among its grey brothers and sisters. It might be the one who got away. Perhaps the group has lost the “wild”factor through interbreeding with tame animals. I wonder what will happen when the hunting season arrives. Although, I guess humans don’t hunt from bicycles.

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The Sphere Project: Minimum Standards in Humanitarian Response and the Poverty Line.

The Sphere standards and humanitarian efficiency.

The latest edition of the Sphere Handbook was presented on the 23rd of June, and the more I read it and think about it, the more relevant I find this standard.

“The Sphere Handbook is a voluntary code and self-regulatory tool for quality and accountability[...] The Handbook does not offer practical guidance on how to provide certain services [...] it explains what needs to be in place in order to ensure a life with dignity for the affected population.”

The standard is based on the experiences in the field of some of the main actors in Humanitarian assistance, and prefers localization above rigid compliance. It sets practical service levels on everything from protection, coördination, water, sanitation and hygiene, food security and nutrition to shelter and health services, but it leaves it open to the actors to decide how to reach these service levels, leaving room for innovation and improvisation. The “do no harm”principle refers explicitly to the strengthening of local institutions.

Although it is a voluntary code, a generally accepted standard is a god-send for evaluators. Suddenly interventions of different organisation can be compared against the same standard. While in the past evaluations were rarely comparing the efficiency and effectivity of different actors, this becomes feasible. Although the Sphere standards are voluntary, they will become the yardstick against which to measure outcomes.

It is difficult to underestimate the potential effect of having a common standard for evaluating outcomes in driving the quality and efficiency of humanitarian interventions. NGOs will be able to prove how much better their cost/benefit ratio is when compared to multilateral agencies. iNGOs will be able to prove the need for international staff to reach the required quality. Where efficiency and quality gains are possible, the policy for outsourcing and in-sourcing will be scrutinized.

The Sphere standard will be a “living” standard, but it should be rigid enough to drive the accountability an innovation processes.

Looking at the past months, I am surprised to find only limited enthusiasm with the results-based crowd for the Sphere standards.

The Sphere standards and the development paradigm

The sphere standards belong squarely in the humanitarian paradigm. Humanitarian assistance is a moral imperative. The aid is aimed at saving lives, alleviate suffering and preserve human dignity. The support should be given in a neutral and impartial way.

Mentioning the Sphere standards in relation to the development paradigm is not considered appropriate. Indeed: development is seldom framed as only a moral imperative. It rests on the crossroads of different values. The definition of development aid is vague and mixes values (gender equality, human rights,…) with economical development (poverty reduction, infrastructure,…) and governance. Often, in the presentation of development cooperation, poverty alleviation is linked to economic results and even to direct interests for the population in the North, such as getting rich by having more markets or the need to limit immigration. By definition, the actual development interventions are not the result of a single moral imperative, but the result of a political compromise between the needs of the population, the needs of the different local institutions and political powers, and the needs of the international actors.

Within the development paradigm, as there is always an interplay of factors, it is difficult to focus the intervention every actor on its comparative advantage. Institution building is particularly difficult, and national governments are supposed to deliver sophisticated services before they even can deliver the basic functions of the state, like security and the rule of law. Foreign donors try their hand at poverty alleviation, institution building, governance and economic growth, sometimes with little to show for.

In some failed states, this means that the only basic services available are those provided by the humanitarian actors, while development assistance focuses on elusive institution building goals. The poorest of the poor, living with less than Sphere standard level services, are out in the cold. However, the moral imperative to help these poor still stands. The moral imperative ruling humanitarian assistance, should protect everybody in a situation that normally leads to humanitarian interventions, even if the state would like to build institutions one day.

The necessity to assure that the poor receive this basic level of services is recognised by Paul Collier in the Bottom Billion, where he advocates for alternative service delivery mechanisms, and the added value for focusing aid on the poor is highlighted by Owen Barder in his presentation to the British House of Lords.

With the Sphere standards, there exists a framework to prioritize assistance according to the needs to the poorest, based on a moral imperative. Once the conditions improve, the more complex development priority setting could take over.

The Sphere standard as an absolute poverty line

The current international poverty line (was it US$1.25 or 2?) is only used as an indicator for poverty. If you are below this line, it doesn’t really help you. Being poor is not leading to any specific action of the international community. On the other hand, there are also the Millennium Development Goals that set benchmarks for overall government action, but little that tells a poor what he could expect as services.

Moving to the Sphere standard for service delivery to the poor, would create instantly a well defined program. It would also solve the moral issue concerning the pockets of poverty in middle income.

Is it necessary to put the Sphere standard on the agenda in Busan? I think so.

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Is rent-seeking effective development practice?

I must admit, I only now read “The undercover Economist”. It made me look with new eyes to the set-up of my environment: development and humanitarian assistance. It made me also look again at some behaviour of development actors in the

Rent-seeking is a natural tendency in the economy: It is always easier to try to make more money without producing anything than going through the effort of competing on the delivery. Typical examples of rent-seeking are protection rackets, cartels and monopolies, regulation or corporatist behavior to keep other entrants in the market out.

Rent-seeking is something we link normally to “corrupt third world bureaucracy”.

However, to what degree is rent-seeking behaviour embedded in the development thinking? Are organisations and institutions better understood when we accept that they maximize income and power instead of doing good according to their mandate and expertise? I will try to highlight some consensus thinking that carries risks for promoting rent-seeking behaviour. In order to decide whether this risk translates in real live rent seeking behavior, a more thorough study would be necessary.

I will touch briefly on 3 elements: the role of the gatekeeper and coördinator, government assistance and humanitarian assistance.

Development and humanitarian aid thinking is being dominated by some initiatives that claim to boost efficiency through the promotion of principles. Do these principles favour innovation and competition or do they strengthen entrenched powers and lobbies?

In most of these efforts, coördination and the role of the coördinator is central. OECD is leading the Paris Agenda on the global level, while the World Bank is leading the budget support efforts in the field. This gives both organisations indeed the possibility to boost their influence, power and ultimately, resources. The discourse of e.g. UNDP on their place at the table for sector wide approaches is telling: it looks like the benefits of being bestowed with the central role are important. The danger for rent seeking behaviour by these central players is important. However, it is not easy to separate a “well deserved leadership role” from the role of a rent-seeking gate-keeper: in most cases the well deserved leadership role could make some rent-seeking possible, with overall positive effects. However, the way the World Bank used flawed research to promote its role in the past is hinting that rent-seeking cannot be excluded.

In the humanitarian reform, the central place of OCHA and the UN-system is officially recognized, while there is de-facto competition from the NGO-sector, the Red Cross movement and MSF.

The OCHA headquarters extra-budgetary expenses increased from 20.5 millions in 2005 to 70 millions in 2009. The overall assessment is that OCHA became a lot more responsive and efficient in that period. However, this is a huge increase, that could have been used elsewhere in the humanitarian system.

The Paris Declaration is the father of all aid efficiency efforts. Only five principles underpin the Paris Declaration. Absent are poverty or governance results. The focus is on the process of aid transfers. By prioritizing the process an not the results, it entrenches the power relations within the described process. A declaration more geared to results would leave more leeway for innovation, in instruments, partnerships and processes.

The Paris Declaration starts from the absolute ownership by developing countries. This squarely puts the monopoly on strategies in the hands of the programme country government. Not the population, nor the Parliament. On a lot of issues this is normal (e.g. security, elections, even education). However, on other issues crucial for development, other actors might be better placed: banking, industrial development, even some forms of private education. Moreover, in some areas where government is the duty bearer, they might be able to limit themselves to a normative role. By putting the ownership fully in the hands of government, the Paris declaration limits the need for getting the backing and legitimacy from the parliament and the population. So it would not be surprising to see the governments getting Paris Type Assistance to have little problems to keep power, just like any petrol based government. This principle is even more risky when considering the number of governments without a popular mandate or without proper feedback systems. It is a fact that poverty alleviation is not a central thought for most governments in the world, not even in the North.

The second principle is that donors align behind the country government objectives and use local systems. Of course, when dealing with core government services, and the local systems are not broken beyond repair, this seems to be a good idea. However, development assistance is more than core government services and local tender procedures are often very much “tied” to national providers that are not always the most efficient or lead to a higher price, as the local market can be rigged.

Harmonisation is the next principle, with different aspects: donor countries coordinate (read: form a cartel, often lead by the member with the highest capacity such as the World Bank or DFID). On the other hand: the simplification of procedures and sharing of information are weapons against rent-seeking.

The other two principles, results and mutual accountability are possibly a protection against rent-seeking: if results are measured and acted upon, this feedback loop would lead to more results, and the increased accountability would equally improve the effectiveness.

The Paris Declaration obviously protects the signing parties, governments and important multilaterals from competition, while including a few guarantees against abuses.

Good Humanitarian Donorship is the other important “principles” document. The principles are legion: 23 principles, many of which are clearly putting results for the beneficiaries central: Principles 1 to 3 states what the results should be, for whom, and how we assure the beneficiaries get the results.

The general principles mostly strengthen this results oriented drive: promoting the humanitarian law, timely, needs based funding, involving of the beneficiaries in the humanitarian response, etc.

A risk for rent seeking resides in the needs based allocations: as it are the humanitarian actors who write the needs assessments and run the programmes afterwards, the manipulations of needs assessments is an obvious danger. Moving to a cartel-like approach with joint needs assessments will not solve this risk. An independent needs assessment or review is needed.

Principle 10 supports and promotes the central and unique role of the United nations in providing leadership and coördination, the special role of the Red Cross and the vital role of the UN, Red Cross and NGO’s in implementing the humanitarian action. Why the leadership to the UN and not to the Red Cross? Why do we give the lead on water provision to UNICEF and not to an NGO? Should there really be a lead? It is important to limit rent-seeking that the different competing actors are explicitly kept on board. Due to the mandate and legitimacy of the UN-system with all governments, this central role can be argued, but should also be earned in every crisis again.

Coherent action is needed in the logistics-intensive urgent operations. An hierarchical, army-like structure comes to mind. However, a regulated monopoly could be more effective than the current vague formulation, authorizing to harvest contributions for coördination, without the means to be held accountable. A privileged position is created, without a strong accountability structure.

Without any doubt, a lot of the improvements in the humanitarian system have been facilitated by principle 10. However, there is a risk for rent-seeking if the accountability is not properly in place.

As the main principles, numbered aptly numbered 1 to 10 are overwhelmingly gearing towards results, rent seeking might be more limited within the GHD-approach than in the Paris approach.

The good practices in donor funding however contain some obvious dangers for rent seeking: funding becomes all but guaranteed for the different humanitarian organisations, and depends solely on the needs of the beneficiaries, not on the efficiency of the execution. New requests are not met by prioritizing, but by new funding.

As an antidote, the standards, accountability and learning principles strengthen the oversight and innovation. Oversight and innovation makes it easier to identify rent-seeking and break entrenched interests.

The role of the civil society is generally recognised in development thinking. In humanitarian assistance the NGOs are even given a “vital role”.

Concluding, in the GHD principles, there are risks of rent-seeking, mostly by creating gate-keeper and coordinator functions. In the Paris Declaration this behaviour seems to most entrenched, and a further study whether this actually leads to rent-harvesting by these gate-keepers would be necessary.

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Robin Hood Tax: I voted for it before I voted against it.

I am in favour of a financial transaction tax, because we can.

Indeed, we all know nothing is sure except for death and taxes, so I honestly think that if financial transactions can be taxed, we should at least try.

For the moment, labour is heavily taxed, while we surely want more work. Consumption is heavily taxed, while most people like to consume, and according to classical economic theory, consumption is a good thing. This is why we are always looking for things to tax, to lift the burden, mostly from labour. If we tax financial transactions, how much can we rake in for financing the global or national commons, before the tax will affect negatively the economy? Or would there be an ideal level, where up to a certain point, taxing financial transactions diminishes volatility while not affecting liquidity to a degree it damages the economy? Most articles and blogs I read seem to argue that financial transactions can be taxed, and up to a certain point, the total effect of taxing these transactions would even be positive, like taxing gambling, leading to less negative externalities. So I definitely think we should tax financial transactions, but we should be cautious and have good feedback systems in place, so we can raise the level until the optimal utility for society is obtained.

What should we use this tax for? This tax should be used to finance the budget of the government that raises the tax. It should be diluted in the total budget, because it is necessary to limit the pressure to raise this tax to a level that is defined not by the carrying capacity of the financial system, but because of the funding needs of one department or sector. We could consider the tax can finance the national government or global governance.

This tax cannot be seen under the same rules as pollution: “the polluter pays” means you pay to redress damages. Most financial transactions don’t do any damages (remittances, foreign direct investment, etc.), while some speculative transactions can do damages or at least don’t bring much added value to the overall economy.

So using the financial transaction tax to diminish the overall tax burden is a good policy, up to a level probably with less externalities than taxes on labour or consumption.

But what if we allocate the financial transaction tax to climate change adaptation or development? The group setting the tax level would be the environmental lobby, craving for income, balanced by the financial sector wanting to limit this transfer. I would be surprised if the result of this power struggle would deliver optimal results for the environment or the financial sector.

The environment and development should be financed as much as needed and affordable; while the financial transaction tax should be as high as useful to maximise its benefits. The two should not be directly linked.

A few more links on Robin Hood:

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