Tag Archives: evolution

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.

 

Not longer, but deeper commitments for more aid predictability

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It is a truth universally acknowledged, that one of the major problems in development is the unpredictability of aid. It is taken on face value that this can be reached by introducing long-term commitments, 3-4 years, and preferably beyond. It seems to me this is the wrong approach. Deepening commitments would lead to more predictability. If badly done, long-term commitments could lead to even less predictability.

Lessons from Egypt
William Easterly wrote a nice summary on why autocrats eventually fail to adapt to changing circumstances. They can deliver immobility which is often misread for stability. It is not: with the end of the reign comes inevitably the disruption and chaos: the necessary changes are too important to implement through mere evolution. Dinosaurs don’t evolve into mammals, they are too far gone on a path that was right under different conditions in another era. Long term immobility is not always good for development. Long term predictability should rather be an engagement than a cast in stone approach.

Lessons from the UK budget discussions.
The UK-civil servants don’t get nervous because the government’s budget is annual. This is strange: their salaries are approved annually by something unpredictable as a MP. Their whole livelihood depends on it, they have no plan B, and they don’t panic.

This is because most of the budget (perhaps something like 85 %, I made the numbers up, don’t quote me on them, you get the picture) is based on a sturdy consensus in the society, beyond parties. Another 10 % is deeply entrenched with the current majority. This leaves only 5 % discretionary spending. Those are the nervous people, mostly on a short term contract.

Typically, in the donor development budget, over a legislature, apart from the “assessed” or negotiated contributions to the World Bank, the EU and the UN, nearly everything is discretionary. Longer-term programmes are as discretionary as the short-term ones. Only a wide consensus on the development budget would move it away from this haphazard spending.

The European Commission creates their policy in such a participatory way. They bring on board input from assessments and evaluations, the 27 governments, the civil society and parliament, before proposing a way forward. And after only two years there is a mid-term review. A programme based on such a wide consensus has more chance to be predictable and long-term than a programme built on the wish of a single politician. Such a broad based program can be predictable, even if all the engagements coming from it are short term.

Stop-start development
With a longer term commitment to a country, near the end of the commitment period, a thorough assessment will take place.
Firstly the donor will asses whether they want to stay engaged in the country. The results of the current programme will inform this donor decision, together with factors beyond the country (herd thinking among donors, new themes coming up, other countries become a donor darling, etc. ).
Secondly there must be decided whether the sectors and regions of engagement will stay the same, and thirdly whether they will do the same things in the same way within the sectors.
The result is, from the viewpoint of the recipient in a specific intervention, mostly a lottery. The success or failure of the programme itself will play only a limited role in the decision whether to drop it.
The process can be compared to the end of a regime. It is often preferred to start from a blank slate than to build on what was done earlier.

The cost of continuity and the cost of disruption
For the poor in the third world, continuity is central to development results. Startup costs are notoriously high, there is a learning curve, and development results must not only be obtained, but also made permanent and institutionalised.
The political economy on the donor side is not in line with the needs of the poor. The political benefit of development results is notoriously low for the donor, while the political benefit from aid announcements is high.
As donors are spread thinly over a multitude of sectors, political visibility is obtained by announcing reforms and new programmes, not by pledging continuity of engagement, nor by highlighting results.

Unacceptable reporting requirements
Long-term commitments span 3 to 4 years. This means they sit astride on 2 donor legislatures, and 2 postings of donor officials. Donor reporting “should be” limited, as this leads to “too much transaction costs” (how much does it really cost to forward an internal report? Or even, to publish it on the Internet?). This means that in a 3 year program, the first report that arrives at the donors’ desk arrives after 15 months, and is not acted upon before the project is half way. As international agreements go, they are executed without too much questioning: the cost of concluding them was too high. Abandoning an agreement is not good. As development is innovative, this means that normally the project will not be reassessed and rewired for success after 6 months of failure. The project will only be reported on after 1.5 years, and will probably continue for the last 1.5 years after the first annual report was received as it is too late to save the project anyway. Depth of commitment means close monitoring, in order to understand and allow change as it is necessary.

The evolving consensus: don’t become a dinosaur.
A short feedback loop for the donor would help him to steer its commitments towards his “comfort zone”. The areas of division of labour where the donor finds an internal consensus that they are committed. Annually, the choices in who does what, where, could be reviewed and fine tuned. Evaluations should inform this process at every turn, but also the opinions of the opposition. Rolling programmes become the norm.

After some evolution, the programmes should stabilize around some areas of commitment, where this donor can act predictably. Other areas, where this donor cannot reach this consensus, should probably be left to other actors who can. Like in Humanitarian Assistance, where the Central Emergency Response Fund has the role of rapid response and gap-filling where there are unaddressed needs, the World Bank and other development partners could play this role in development.

In search of a deeper commitment: identities count.
Long term predictability can only exist if the donor country builds a deep internal consensus on what, where and how needs to be done by whom. This commitment must go beyond principles, as it is possible to do wildly different things from year to year within the same principles. It probably must be hands on. The example of the Dutch in a former era comes to mind. They used to be the one stop shop for engagement, expertise and funding on everything water.
Depth of engagement is not synonymous for micro-management. As donors stop spreading themselves thinly, they will understand better the need for local ownership for getting results. Donor support should evolve from the evil stepmother, nagging the partner at every step, to the fairy godmother, empowering the partner to accomplish what they long for, and live happily ever after.

It seemed like a good idea while we were at it: coordination instead of competition

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A few months ago, Owen Barder wrote a ground-breaking article: Beyond Planning, Markets and Networks for Better Aid. As a development practitioner, being confronted with the latest ideas on best practices from ODI and the daily chores of coördination, there seems to be little movement towards a more market based approach. Does the following story seems familiar?

Programming for success:
A country has retrenched its administration heavily, and when the country gets clogged up with traffic jams, mostly because of the potholes, it finds no engineers left to advise it. Something must be done.
The first step is to bring the construction firms together and ask them to propose the legal standards for road construction.The second step is to ask the same industry to prepare an annual investment plan for road construction, to be proposed to the government. An industry commission is created to prioritize when the government budget is not enough. However, if the traffic jams don’t diminish, budget will rise.
In order to keep the road building effective the following measures will be taken:

  • All companies in the industry should get a piece of the pie. No exceptions made. No strong companies sidelining weaker ones.
  • Companies should have their own technical or geographical niche. As overlap is inefficient it will be eliminated, coördination at all levels will be needed to make sure there are no gaps nor overlaps.
  • In order to be sure everything runs smoothly, all planning decisions are taking in consensus among all companies involved. Work should be coördinated at all levels.

As there could be some questions on accountability, it is agreed that the different regions of the country will be represented in the respective boards of the companies, and the same governments can delegate politicians to sit in the management.

What is illegal in business is a good idea in development

The practices described above have been used in different sectors, the energy sector and arms industry most notably.

However, it is only in the development and humanitarian sector these practices are seen as conventional wisdom. In a business environment this approach would be illegal.
An overview:

  • The government has the obligation to follow up on the expenses made, to assure the products were delivered. This cannot be done without a minimum of technical capacity.
  • An industry writing its own legal standards or its own investment plan is a clear conflict of interest. Sitting on the board and on being part of the management equally.
  • A cartel is created to cut the pie, competition is eliminated
  • Within specific niches, monopolies are created.

Perhaps we should be more active in searching for alternative approaches to the current partnerships in development.

Development policy and evolution: does the donor public request impact or action?

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Owen posted a very good presentation on evolution and development on his blog. Indeed, evolution, like the market, is an efficient way to find solutions to complex problems or to optimize resource allocation.

The subsequent discussion on his blog raised a few issues I would like to expand on, in addition to what I wrote before on evolution in development.

  • The evolutionary pressure is being steered by the public perception. Public perception evolves too. However, I do think this pressure is for the moment rather away from long-term results and towards short-term visible activity. Sorry.
  • Evolution works with selection of the fittest, not by coordinating, clustering and evolving the un-fit. The inclusive narrative for better aid might have to make room for an exclusive selection process. (see also “what don’t make sense in trade don’t make sense in aid”).
  • The path dependency of evolution can easily lead to sub-optimal results.
  • Every evolutionary process creates dinosaurs: creatures fit for the world of yesteryear. Who is your favorite development dinosaur?

This  entry is on public support for development results.

Is the public interested in results? I would not think so: for the donor public the perception of activity is more important than results. Indeed, it is easier to look professional than to be professional. If the donor public doesn’t experience the quality of the services you deliver, it is not economical at all to invest in real expertise and real results when you can invest in faking expertise and fake results. Most NGOs manage to look trustworthy enough to part people from their money. Not all of them are sufficiently accountable.

When disaster struck in Haiti on January the 12th 2010, it took less than 24 hours for donor countries to decide to send their rapid response teams to Haiti for search and rescue. This led to major congestion at the airport, and some spectacular saves by white knights in shining armour that were documented live on television. There were more than 222.000 death and 211 lives were saved by the international and national search and rescue teams. This would be 1 per thousand. There are no data available to me about people saved by their neighbours, as the efforts of Haitians were very much underreported on during this crisis. Would Haiti have been better off it they used the airspace for bringing in shelter, food, water?

In November 2010 a cholera epidemic struck, making more than 1000 victims, while there was clearly no adequate health services or humanitarian workers around. Oh yes, this one struck in West Africa, after the flooding there. The epidemic in Haiti, at the same time, with a few hundred victims got international coverage and full assistance of the international community.

“The public is genuinely moved by the suffering and wants to support poverty reduction” writes Owen in his post. However, as they don’t experience the services for poverty reduction , they are tending to ask for the second best: visible action. In this context, as the situation is still catastrophic, after years of aid, the current “professionals” are clearly not up to the job. Support for hands on volunteers or stars is a normal way out. As is the loathing of the aid establishment. While serious evaluations of the Haiti humanitarian intervention are rather positive (for a once in decades type of event), the public perception is negative. The concern of the public that the money is lining the pockets of agencies and governments, is a valid concern, but also a typical populist issue. In domestic politics this concern is seldom alleviated by information on audits or results. You don’t establish long-term trust with the public on basis of bureaucratic requirements, but on basis of  a long-term open communication strategy, or on basis of a charismatic communicator.

A logical response to the search for public approval is to deliver activity: approve more projects, do more field visits as a minister, or create high level events,  where the stars and politicians from all stripes come together to vow action. This is exactly what is often seen as the problem with Aid. In this context, the plans themselves decided on at the high level events are not relevant, as nobody will wait for the results on the hot topic of today anyway. Activity is also about moving on to the next big thing.

While populism on domestic issues runs sooner or later into the reality of undelivered services, this feedback loop is nonexistent in development, as the taxpayer pays for services for people far away.

If I am right about the political economy of the incentives for a short-term or top down approach, than the development community must start changing some parameters of the equation in order to work towards impact instead of the perception of activity. Change the environment to create evolutionary pressure in the other direction.

However the current reality is not as bleak as we could expect, so some things must be happening that work in favour of the support for a long-term impact geared approach.

The different actors are no blind victims to the incentives before them. Apparently, a lot of them are moral actors. Elected politicians can inform themselves and translate the short-term populist concern in a long-term commitment for results. The same is true about the activist journalists and stars with a long-term commitment, e.g. as UN-agency Ambassadors.

Like piloted by some of the more successful NGOs or agencies, there is a need for a professional outreach to the public. It seems to me that only approaches with this kind of outreach might have a long-term survival chance in the political arena. Even policies that are hugely successful, if they don’t communicate well, might be doomed.
This outreach should put the ad hoc issues and in a wider context. The approach of UNICEF or MSF comes to mind as successful to put a broad results based vision on the agenda. Meanwhile the donor governments seem to be hugely inefficient in explaining their policies to the wider public. The whole Paris agenda seems to be mostly ignored by the public, what seems to be a bad basis for long-term planning.