An abundance of natural resources is both an opportunity and a challenge for developing countries. A number of resource-rich, low-income countries receive amounts of foreign aid that are similar to or larger than their actual or potential revenues from natural resources. A new policy research working paper by Octave Keutiben and me develops a growth model to look at some ways in which the donors may help governments of such countries to use their resource revenues productively and minimize the magnitude of risks created by resource rents. The paper’s key conclusion is that making aid countercyclical helps to achieve higher economic growth, and so does conditioning disbursements on enhancement of public capital.
I went to Bosnia and Herzegovina (BiH) last week to help Oxfam Italia develop advocacy and campaign skills among local civil society organizations. They have their work cut out.
Firstly, there is a crisis of trust between the public and CSOs, which are poorly regulated, often seen as little more than ‘briefcase NGOs’, only interested in winning funding, and under constant attack from politicians. Many CSOs seem pretty disillusioned, faced with a shrinking donor pot and public hostility.
I think there’s a strong case for the CSOs to take the lead in putting their house in order, practicing what they preach on transparency and accountability, and working with government to sort out the legitimate organizations from ones that have registered (there are some 10,000 in the country) but do nothing, (or worse).
Meanwhile, Oxfam is working with some of the more dynamic ones to develop the advocacy and campaign skills of what is still a maturing civil society network (after decades of state socialism, followed by a devastating war, and then an influx of donor cash that had mixed results). Two days of conversation and debate with some great organizations working on everything from disability rights to enterprise development to youth leadership identified some big issues and dilemmas:
Regular FP2P readers will be (heartily sick of) used to me banging on about the importance of ‘killer facts‘ in NGO advocacy and general communications. Recently, I was asked to work with some of our finest policy wonks to put together some crib sheets for Oxfam’s big cheeses, who are more than happy for me to spread the love to you lot. So here are some highlights from 8 pages of KFs, with sources (full document here: Killer fact collection, June 2014).
Natural resources are being discovered in more countries, both rich and poor. Many of the new and aspiring resource exporters are low-income countries that are still receiving substantial levels of foreign aid. Resource discoveries open up enormous opportunities, but also expose producing countries to huge trade and fiscal shocks from volatile commodity markets if their exports are highly concentrated. A large literature on the "resource curse" shows that these are damaging unless countries manage to cushion the effects through countercyclical policy. It also shows that the countries least likely to do so successfully are those with weaker institutions, and these are most likely to remain as clients of the aid system. A new World Bank policy research working paper by Anton Dobronogov, Fernando Brant Saldanha, and me considers the question of how donors should respond to their clients' potential windfalls. It discusses several ways in which the focus and nature of foreign aid programs will need to change, including the level of financial assistance.
Please Do Not Teach This Woman to Fish
Is there anyone out there who doesn't think small business is the lifeblood of any economy? From Washington to Warsaw, politicians and pundits just can't speak highly enough of plucky entrepreneurs. Even in poor countries, entrepreneurship is one of the most important forces underpinning economic growth, but the best way to raise living standards and reduce poverty is not necessarily to make everyone an entrepreneur. So why do so many costly development programs apparently ignore this fact? Once upon a time, people who wanted to fight poverty believed in direct approaches that solved identifiable problems one by one. If you wanted to make farmers more productive, you gave them fertilizer. If you wanted to boost manufacturing, you set up factories. To help both of these sectors grow and export goods, you built roads and ports. These kinds of investments quelled hunger and raised incomes in many countries. But recently, an indirect approach arose with promises of still greater benefits.
Where Next for Aid? The Post-2015 Opportunity
This joint ODI-UNDP paper looks at whether development aid will remain important in the post-2015 era, and asks how the old aid model should change in response to a dramatically new world and new sustainable development challenges. The paper suggests that the label “international public finance for sustainable development” – or IPF4SD – is a more accurate description of the types of interventions that need to be funded in the post-2015 era. This finance will also be needed over the long-term. The authors suggest ways in which these funds could reliably be raised over the long-term, as well as how the architecture which mediates IPF4SD could be improved.
I’m definitely not a stats geek, but every now and then, I get caught up in some of the nerdy excitement generated by measuring the state of the world. Take today’s launch (in London, but webstreamed) of a new ‘Global Multidimensional Poverty Index 2014’ for example – it’s fascinating.
This is the fourth MPI (the first came out in 2010), and is again produced by the Oxford Poverty and Human Development Initiative (OPHI), led by Sabina Alkire, a definite uber-geek on all things poverty related. The MPI brings together 10 indicators, with equal weighting for education, health and living standards (see table). If you tick a third or more of the boxes, you are counted as poor.
So I thought I would chip in to the debate on lessons learned. In my role supporting service delivery in South Asia, I have actually been asked, ‘what have we learnt?’ So I have been trying, but still failing, to come up with a satisfactory summary – not least because what constitutes a ‘lesson’ depends on the ‘evidence’ you value. Here is my (subjective) work in progress:
Speaking as a psychosocial practitioner-researcher, the World Bank's recent “Invisible Wounds” conference, which enabled a rich dialogue between psychologists and the Bank's economically-oriented staff, was a breath of fresh air. In most war zones, humanitarian efforts to provide mental health and psychosocial support and economic aid to vulnerable people have frequently been conducted in separate silos. Unfortunately, this division does not fit with the interacting psychosocial and economic needs seen in war zones, and it misses important opportunities for strengthening supports for vulnerable people.
A case in point comes from my work (together with Susan McKay, Angela Veale, and Miranda Worthen) on the reintegration of formerly recruited girl mothers in Sierra Leone, Liberia, and northern Uganda. These girls had been powerfully impacted by their war experiences, which included displacement, capture, sexual violence, exposure to killing and deaths, and mothering, among others. After the ceasefire, they were badly stigmatized as “rebel girls” and were distressed over their inability to meet basic needs and to be good mothers. The provision of economic aid alone would likely have had limited effects since the girls believed that they were not fit for economic activity (many saw themselves as spiritually contaminated and as having “unsteady minds”), and they were so stigmatized that people would not do business with them. Similarly, the provision of psychosocial assistance alone likely would have had limited effects because the girls desperately needed livelihoods in order to reduce their economic distress and be good mothers.
Guest post from Jon Lomøy, Director of the OECD Development Co-operation Directorate (DCD)
Official development assistance – or aid – is under fire. In The Great Escape, Angus Deaton argues that, “far from being a prescription for eliminating poverty, the aid illusion is actually an obstacle to improving the lives of the poor.”
Yet used properly, “smart aid” can be very effective in improving lives and confronting the very issue that Deaton’s book focuses on, and which US President Obama has called the “defining challenge of our time”: rising inequalities.
As a recent UNDP report shows, more than three-quarters of the global population lives in countries where household income inequality has increased since the 1990s. In fact, today many countries face the highest inequality levels since the end of World War II.
There is clearly moral ground for arguing that it is unjust for the bottom half of the world’s population to own only as much as the world’s richest 85 people. Above and beyond this, however, academics, think tanks, and international organizations such as the OECD have found that rising inequalities threaten political stability, erode social cohesion and curb economic growth.
It is not surprising, then, that reduction of socio-economic inequality has moved to the centre of global discussions on the post-2015 goals. The OECD, responsible for monitoring official development assistance (ODA) and other financial flows for development, is complementing these discussions by exploring ways to better use existing financial resources – and mobilise additional ones – to promote inclusive and sustainable development. This includes redefining what we mean by ODA, as well as looking at the ways it can best be used to complement other forms of finance.
Charles Kindleberger (h/t Gerry Helleiner) asserted that all reviewers can be counted on to say three things about a book: “It isn’t new. It isn’t true. And I would have said it differently.” Notwithstanding their internal contradictions, these statements summarize my thoughts on Bill Easterly’s latest book, The Tyranny of Experts.
It isn’t new. The main point of the book is that the rights of the poor have been systematically undermined, directly by governments, especially authoritarian ones; and indirectly by “experts”, who either prescribe technical solutions that ignore poor people’s ability to come up with their own solutions, or provide legitimacy to these autocratic regimes so that they continue to suppress the poor. Bill illustrates this point with three historical examples—China between the world wars, Africa at independence, and Colombia in the 1950s—where a combination of western (in some cases, colonial) interests and local elites conspired to keep the large majority of poor people poor for a long time. The analytical backdrop to these three case studies is the “debate”—a debate that never took place—between two Nobel-prize-winning economists: Gunnar Myrdal, who advocated government intervention to improve the lot of the poor; and Friedrich Hayek, who believed in protecting the individual rights of the poor as a means of their escaping poverty.