Category Archives: development

Links I liked

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Principled Aid Index: From ODI. The title is very promising. However, the Index is based on the use of proxy indicators that not always very relevant, and more often questionable than they should. Use with care as an instrument. Could it be used for improving our own cooperation? I hope to invite them to have this discussion.

Have Children’s Rights Campaigners lost their Courage?

Form Poverty to Power, the blog managed by Duncan Green of Oxfam, is one of the places to go to think about development. Children’s rights used to be central to much of what Belgium did. Twitterstorms have washed away much of the public support for the foundations itself of this engagement.

Understanding How DFID Makes Decisions – Landscape Report on the Role of Data :

Even at DFID the use of data to make better decisions is often neglected or even absent.  This report focuses on mapping what actually happens in reality, and can inform DGD to look into priorities where the use of data should be feasible, as it was done by others. Programme design, annual review and portfolio strategy could be done with high use of our data systems. Remarkable how higher level learning is less based on data analysis. +

Closing Civic Space: Trends, Drivers and what Donors can do about it

Again From Poverty to Power: the closing civic space. This might be one of the defining issues for the coming years in development. On the space of civil society hinges also the legitimacy for government to government aid, as promotes by the advocates of aid. I mean, the people who push for more aid are those who want more solidarity. They are less enthusiastic about funding autocrats.

Directed Improvisation: The China Model that Other Countries Can Learn From  

The article explaining the governance lessons from the landmark publication “How China escaped the poverty trap” by Yuen Yean Ang. It is valuable to experiment with as an approach to reform governance from within. The article advocates for goal oriented approach, with little micro-management on technical details and being realistic about the capacities: it is the current staff, with the current capacities that will do the trick.

Bill Gates says poverty is decreasing. He couldn’t be more wrong

Now and then there is an article which changes the whole picture of what is the reality. This article, and the subsequent discussion about it in the blogosphere is such an article. Look beyond the readily available numbers, and think about what they really mean.  Do a reality check.

GDP is rising: Why increase economic growth if you can manipulate the GDP?

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Some measures to stimulate “economic growth” don’t address underlying economic strengths and weaknesses. Instead they are skewed in order to manipulate – or “game” – the GDP indicator. The focus on GDP becomes a perverse incentive for short term bubble growth that benefits rent-seekers. Public debate on economic growth should focus on the underlying aspects of growth (ie. jobs, education, production) instead of doctoring the overarching measurement.

Economic growth is widely seen as a necessity for improving society, and GDP (Gross Domestic Product)  growth is taken as the main indicator for measuring economic growth. This article will focus on the abuse of   GDP, NGDP (Nominal GDP), and GNP (Gross National Product) as a perverse indicator and argue that it is not a useful as an indicator for economic growth beyond theoretical academic purposes. Indeed, when GDP growth is used as the measure of economic growth it transforms from being “just an indicator” to a goal. The goal of economic policy becomes an increase in GDP growth, as a proxy for “economic growth”, or even “economic development”. As a result, governments game the indicator, taking measures that lead to the GDP number to grow, without actual sustainable economic improvement. In this way GDP creates a perverse incentive to develop policies that lead to short term GDP growth, while undermining the long term perspectives for the economy and sustainable welfare.

Is gaming of the GDP a policy choice, or just driven by perverse incentives?

1. Indicators and goals

1.1. Briefings and media releases concerning the economic forecasts

I just read the economic forecasts for South-East Asia over the next few years from some major banks and multilateral institutions.

The organizations responsible for these documents have done a deep analysis, but the media and mainstream publications do not consider the details of these reports. The takeaways for the public are a focus on GDP it is forecast to go up by extrapolating from current GDP growth, adjusted to longer term trends.. The vital underlying economic analysis is deemed less important than the uphill tick of the GDP fetish.

Little media attention goes to whether China is getting out of the crisis or taking policy measures that make it worse in the long run. No comments are made on the reliability of the statistics for China. Little is said about how the 2 major growth countries in the region – Vietnam and the Philippines – increasingly build their GDP growth on remittances. When the GDP rises because of the remittances, it can lead to complacency, as everything seems fine. .

All eyes are fixed on the GDP numbers. As trust in a country depends on the expectations of the business community in that country, much is at stake. If GDP grows, business confidence goes up, leading to more Foreign Direct Investment, better conditions for trade, cheaper loans, etc.

A government is represented by its GDP grade in the world. The GDP is the indicator, the report card of a government and a country.

1.2. Perverse incentives: driving change in unexpected ways

Indicators work. Well chosen indicators are useful to get results . Measuring the number of children vaccinated against polio leads to fewer cases of polio, and eventually to the eradication of the disease. However, statistics can be falsified. Nurses can lie about the numbers of children vaccinated and doctors can fail to report cases. In the health system, the collection and use of quality statistics is of capital importance.

A perverse incentive is an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers. The targets set on indicators used for measuring performance are easier reached by “gaming” the indicator than by doing what was intended.

Performance indicators in the banking sector rewarded risky behaviour by linking risky behavior to pay. Selling mortgages to people who could not afford them looked good on paper, but it led to the banking crisis of 2008. Performance measurement in the private sector seems so often gamed by management and staff, that HR experts question its usefulness.

More often than not, performance indicators are invitations to cheat, by employees but equally by companies and institutions,  especially when financial consequences are attached to the Key Performance Indicator

Do performance indicators in the economy have the same effect? Could they be gamed?

1.3. Goodhart’s Law: When indicators become goals

Goodhart’s law is named after the economist who originated it, Charles Goodhart. Its most popular formulation is: “When a measure becomes a target, it ceases to be a good measure.”

The original formulation by Goodhart, a former advisor to the Bank of England and Emeritus Professor at the London School of Economics, is this:

“As soon as the government attempts to regulate any particular set of financial assets, these become unreliable as indicators of economic trends.”

Goodhart’s Law is specifically written for economic policy making: an indicator used for steering policy stops to be useful for steering the policy built on it, as people find ways to aim for the indicator without any positive effect for the underlying goal.

A very good take on Goodhart’s Law and GDP can be found on Phil Ebersole’s blog:

The aim is evidence-based policy. The result is policy-based evidence.

1.4. Aggregate indicators or disaggregated data

GDP is a typical aggregate indicator. It brings together information from all sectors, all layers of the population, all markets in an economy. This means that for policy purposes, the number is useless. Indeed, the different movements in each layer can mean different things: cutting 100 year old trees is GDP growth, taking a reusable bag to the shop shrinks it. Policy will seldom be general, so the underlying data should be used instead of the general number. However, if the aggregate indicator becomes the target itself, policy will be directed to move the general number. It will be aimed at the sectors in order to move the aggregate indicator, not specifically to have a sound policy for the specific sector. An aggregate indicator strengthens the effect of Goodharts’ law.

Due to the complex nature of economic growth it is impossible to attribute exactly the cause and effect of policy measure in the short-term. The effect on GDP is easier to measure. One of the underlying problems is the use of a composite indicator: Using one parameter with many degrees of freedom is not conducive to an informed public, policy, learning and steering. It leads to choosing the policy with maximum effect on the indicator rather than on economic development, which should be the real goal. Using disaggregated data on aspects of economic growth is more useful for measuring economic growth, and leads to less perverse policy incentives.

Confronted with the inadequacy of GDP to catch sustainable economic growth, former French President Sarkozy created a commission to study the question of indicators of economic growth. The report of this  Commission on the Measurement of Economic Performance and Social Progress, the “Stiglitz commission”, proposed to ditch the GDP and replace it with a dashboard approach, with a set of indicators instead of just one number.  

2. The GDP as a goal

2.1. GDP is a black box economical model

GDP is an economical model on its own. The model takes the different data from different sources, and spits out one number. The higher the number the better. It is based on a lot of assumptions and estimations. These assumptions give weight to some activities, and not to others, they are judgment calls. Estimating and including the rising quality of computers gives a seal of approval to digital progres but other improvements – like better schools results – are not included. So, when GDP is used as a target, the components that lead to the outcome are hidden. A growing GDP does not advertise the underlying assumptions and the improvement or deterioration of the non-measured aspects of the economy, nor whether this growth was sustainable or not. Growth coming from investment in residential housing, might mean the prices are driven up by speculative markets, or might mean that valuable additional houses are being build. In fact, for little elastic markets, adding infrastructure might lead to lower total market value, lower GDP when selling and buying. 

As the GDP number hides the underlying realities for everybody except the data crunching experts, it acts as a black box. The public does not really knows what caused the growth, except maybe after a crash, with hindsight. This makes it very tempting for policymakers to game the indicator and introduce policies that promote specific interests and balloon the GDP while not contributing to a sustainable economy nor social welfare.

2.2. Perverse incentives for gaming the GDP indicator

Geoff Edwards, in “Political Arithmetick: Problems with GDP as an indicator of economic progress” concludes:

GDP does not detect symptoms of fundamental economic malaise such as an unbalanced penetration of imports into strategic industries; the sinking of household and public savings into economically terminal consumption rather than infrastructure and asset regeneration; starvation of research or sunrise industries; rising defensive expenditure on remediating pollution or social decay; rampant speculation on asset prices such as real estate or the stock market; the accumulation of private or public debt; or the transfer of assets to foreign investors.

He concludes: “By misleading those responsible for public policy about the nature of desirable economic activity, GDP drives perverse economic policies throughout the industrialised and developing world.

By using GDP growth as the goal of economic policy, the policy makers have options. They can pursue policies that will lead to long-term sustainable growth, such as widening and deepening education. They can promote productive investment and infrastructure investment with long-term growth effects, such as the building of railways, ports or social housing. All these policies are known to promote GDP growth in the long-term, probably with the first effects during the legislature of the successor.

In order to grow GDP fast, and getting re-elected, other measures work faster, while benefitting only a subgroup of the society, a subgroup with a lot of lobbying power: stimulating a real estate bubble or a stock market bubble; giving a free rein to extractive industries, leading to the Dutch disease and less competitive industries.

The real estate market is a prime example: residential investment alone is generally around 5 % of GDP, while housing services average around 12 to 13 %. This is a 6th of total GDP. During the bubble years (2005-2006) the residential fixed investment in housing was 6% of the GDP, During the crisis (2008-2009) this fell back to 3-3.5 %. When “normal” growth of the economy is around 1.5-2.5 %, the role of the bubble in the growth of GDP is important.

The crisis of the seventies was about gaming GDP on the demand side. The crisis of 2008 was about gaming the supply side:

  • The post war governments created one of the major post war crisis by applying increasingly the Keynesian stimulus to generate growth during recession and boom. The initial stimulus in creating valuable infrastructure, was escalated to ever less efficient deficit spending. The infrastructure stimulus  raised the GDP, created employment, and made the developers filthy rich. 
  • The neo-liberal supply side economics since the Reagan years escalated in gaming the GDP with ever more irresponsible banking deregulation and risk appetite, until the crash followed. “Only the bonuses were real money”

There are clearly options for “gaming” the GDP instead of taking measures for sustainable economic growth. And it is clear that some groups have an interest to push for this kind of measures as it benefits them directly.

It is more difficult to prove whether this gaming is a policy choice, or just driven by the perverse incentives

3. Why bad behaviour is almost always good politics*: The hijacking of the policy agenda through GDP growth.

The measures that form the basis for long-term economic growth are known: efficient and maintained infrastructure, generalised education of good quality up to university level, rule of law and antitrust legislation, an inclusive society, so all talents can be used in the economy and consumption does not dry up.

In a time when interest rates are negative, investments in infrastructure, maintenance, education, all of these investments have a very high return on capital.

This is not the policy we see around us. Instead we see austerity measures.

On April 15th, I read two blogs, One by Brad DeLong, the other by Tyler Cowen. Both refer to the gaming of the GDP by the elites for short-term rent seeking:  

Brad De Long:

” […]

One way of looking at it is that two things went wrong in 2008-9:

Asset prices collapsed.

And so spending collapsed and unemployment rose.

The collapse in asset prices impoverished the plutocracy. The collapse in spending and the rise in unemployment impoverished the working class. Central banks responded by reducing interest rates. That restored asset prices, so making the plutocracy whole. But while that helped, that did not do enough to restore the working class.

Then the plutocracy had a complaint: although their asset values and their wealth had been restored, the return on their assets and so their incomes had not been. And so they called for austerity: cut government spending so that governments can then cut our taxes and so restore our incomes as well as our wealth.

But, of course, cutting government spending further impoverished the working class, and put still more downward pressure on the Wicksellian neutral interest rate r* consistent with full employment and potential output.

And here we sit.”

Tylor Cowen:

 

“[…]

The simplest China model for 2016 is this.  Due to the prevalence of SOEs and state influence in the economy, the country can in fact (for now) achieve almost any gdp target it wishes, at least within reason.  But it trades off the quantity of gdp for the quality of gdp, and this time — again — the Party opted for the relatively high growth figure.  That is bad news, not good news.

[…]”

GDP growth is apparently being gamed as a matter of course. It has become a silly goal and a bad indicator for real life economic growth.

From the examples it seems some groups are proposing the short-sighted policies for gaming the GDP on purpose, because they benefit from it directly. This gaming is facilitated by the fact that the GDP-indicator contains perverse incentives for the policy makers to choose the bad policy, leading to easy, instant GDP rise, inequality and bubbles, above the better policy, which would require a real political and economical strategy and would lead to rising economic welfare, but only in the long-term.

Does it really matter if it is a conspiracy?

The policy makers and the elites can claim to the public and themselves that they are doing it for the good of all, and they can prove it:  The GDP is rising.

 

Going for Zero

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This is a repost from Uneven Earth, a conversation about environmental justice.

 

The current approach to COP21 is not realist or moderate, but quite extremist as it postpones effective action. If we consider the real facts of climate change, moderation means fighting the fossil fuel economy on every level, everywhere, now.

by Sam Gardner

The multilateral approach to climate change: denial and delay

The intergovernmental process to fight climate change leads up to COP 21, the upcoming meeting in Paris. This time, unlike all the last times, hopes are high that an agreement will be reached. It should limit the greenhouse gas levels in the atmosphere to an amount that would cause a global warming to 1.5-2 degrees Celsius. Nobody knows if this is a safe level, but the intergovernmental process concluded it might be safe enough.

The negotiations follow a pattern you might expect in a negotiation game where everybody wants to bargain a good deal for themselves: poor countries want to maximize support, the rich want commitments from all the others, and there’s as little commitment on funding as possible.

National Contributions would only start in 2020. Another 5 years lost. Most participants agree with what is in the documents of the International Panel on Climate Change. Yet this knowledge does not translate into drastic measures. Action is limited to long-term negotiations on the international level and prudent changes on the national policy level. In the day-to-day choices we make to frame our lives, the urgency isn’t there – it’s not even on the radar. Roads for diesel or gasoline cars are still being built, public transport suffers from budget cuts, and coal power plant construction permits are still legal. Investments in sustainable energy and alternative transport are not guided by the climate change imperative but by economic, strategic, and political arguments. Fossil fuel is still subsidized in most countries. Natural gas is a midway investment to make the shift to fossil free more gradual. These investments will be guzzling gas for the next 30 years.

The current approach is seen as the reasonable and moderate pathway. Everything else is deemed unrealistic. As a result, emissions will continue rising above current levels for some time to come. But the total level of emissions required to stop heating the climate is less than zero.

Redefining moderation

If we keep going along this route, we will be in crisis mode within decades. The situation will be so urgent that all use of fossil fuel will have to be taxed at prohibitive levels or banned. Denial will be impossible. Major powers will consider climate change as an existential, military threat, and may be ready to respond to it militarily if need be. After all, a country’s carbon footprint goes down after being bombed.

In an environment of strict rationing, massive use of private fossil fuel-powered cars will be unacceptable. The new highways that are planned now will be redundant before they are fully operational. Even those that are built right now will depreciate faster than calculated. Coal power plants and buildings needing heating or air conditioning will be considered extravagant in a strictly rationed world. Waiting until the crisis is acute is irresponsible. We need to redefine what is realistic. Realistic planning is to go as quickly as possible – right now – to zero emissions. Every delay is irresponsible. In every part of the society, on every level of the administration, there are already people who fully realize what the crisis entails and have internalized it in their actions. However in general they are marginal: their “moderate”colleagues implore them to be “reasonable”. What we need is a mainstream acceptance that “There Is No Alternative” . Remember the Thatcherite revolution? Her – ruinous – thinking on economics was accepted as mainstream and labelled as the only option in only a couple of years. The same must happen with “going for zero” climate change thinking. Unfortunately, this time there really is no viable alternative to going for zero asap. It is at this point that we should redefine “moderation” and “realism”:

Moderation is to accept reality and what has to be done to avoid a global humanitarian crisis. Realism is to accept that any additional investment in a carbon world is a waste and a crime, and act accordingly.

The course we’re on now is the true extremism.

All current long-term fossil fuel-based investments (power plants, roads, ships, house heating) should be considered unacceptable, and should not happen. There are millions of options of how we could get to zero carbon, but There Is No Alternative to the fact that we need to go to zero now.

So we should redefine “moderation” and “reasonable” as: going to zero now.

Turning the tables

Are the engineers who design, the bosses who approve, the politicians supporting policy changes, the person buying a car, the family buying a house in the suburbs, consciously choosing to make the wrong decision? Greenhouse gas emission growth is not the fruit of a big evil master plan. It involves millions of individual decisions, an environment of decisions. To roll back emissions it will be these decisions that make the difference. The current approach to climate change is a negotiation where individual countries try to limit change for themselves and maximize it for the others. The incentive structure of these negotiations encourages minimizing change, rather than maximizing it. It does not create an environment that leads to exponential change beyond the agreed-upon indicators. The complicated interrelations of the economy, the climate, political power and society cannot be managed simply with top-down international agreements. Under the new definition of moderation, this is an extremist tactic, putting lives and livelihoods at risk. These are incapable of the imagination and flexibility needed to go to zero fast enough. The real change will be the result of the political economy at the local level.

The strategy: going for zero

We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender. (Churchill)

Every single decision matters. Like in wartime, the theater is everywhere. The battle against a coal power plant investment is never lost: construction could be planned, but the municipal permit can be revoked. The permit is given but the imminent domain procedure is not successful, it can be started and never finished as investors disinvest. It can be built and never used over environmental concerns. It can be taken out of production early. As every investment is composed of a chain of decisions that need to be taken one after the other, by tackling the individual decisions, accumulatively, change can happen faster, as changes are exponential rather than linear. Within a moral and long-term economical timeframe, every person anywhere must stop any investment in fossil fuel-heavy products now. Realism makes every person who has internalised climate change an ally. Office workers, like myself, will have to find alliances with politicians, communities, and action groups. Like-minded groups will need to work together bringing down the traditional barriers and creating a new normal. The objective is to stop every single individual investment in fossil fuel use. Most struggles will initially be lost. It is the war that counts. With every resistance it becomes more difficult to present business as usual as an option, as “moderation”.

Individuals will need the backing of a mass movement to find the strength to resist and to have access to the knowledge to make a case. As the powers that be in the energy sector will resist, other instruments, like manifestations, petitions, civil disobedience and boycotts will be necessary.

Every decision already taken can still be stopped, overturned, or postponed at every level. Losing a struggle is only a step in winning the war, and losing the war is beyond imagination.

Every person who is asked to sign, to design, to propose, to make concrete, to breathe the air, will need to act on the knowledge that it is not worth it to continue with the old model. Recognize that for the world, the children, votes and for their career, it is better not to do this.

The action plan for the Paris Agreement

Chances are there will be binding agreement concluded at COP 21. The agreement will confirm the climate crisis, and the commitment to keep the temperature rise to only 1.5-2 degrees. Attached to the agreement there will be Nationally Determined Commitments (NDCs) that will be insufficient. These NDCs will be irresponsible and amount to climate terrorism. The proposed measures should happen now, not in 2020.

The going for zero strategy should be the legitimate implementation of the Paris agreement. The agreed principles in the agreement should be strong and binding enough to form the legal basis to reject every unacceptable investment and go directly for zero. If the going for zero strategy is implemented, investments in alternatives have a future and fossil fuel-based infrastructure has none.

‘Going now for zero on every decision possible, will lead fast to tipping points where fossil fuel investments become less attractive economically, environmentally, and politically. An exponential change happens.

Postscript

As emissions plummet immediately, every cap and trade system would implode too.

Sam Gardner is a development and humanitarian professional with field experience in Central and South Africa, Central America and Asia.

Thinking fast and slow about disaster preparedness

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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.

Thinking, fast and slow and the transparency agenda in development

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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.

The hunger games, the Paris agenda and political sciences.

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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?

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

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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”.

 

Geo-engineering: ready or not, here we go

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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.

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

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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.

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

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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.