Waylaid Dialectic

October 20, 2010

Personally I blame the MDGS…(infrastructure edition)

Filed under: Aid — terence @ 8:09 am
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Jonathan Glennie writes:

So this shift is long overdue. According to World Bank figures, in the first half of the 1990s the share of aid to Africa spent on infrastructure and economically productive projects (in sectors such as agriculture, industry and services) was 53%. Ten years later (in the period 2000–04) the proportion of aid spent in these areas had dwindled dramatically, to only 31%. Meanwhile, spending on social sectors (such as health and education) had risen as a proportion of aid to Africa from 33% to 60%.

But the real question donors should answer is this: why does infrastructure spending have to come back? Where did it go in the first place? There are thousands of papers on development written every year, calling for all kinds of strange things. But try as I might, I am yet to find one suggesting that a reduction in spending on infrastructure is a sensible way forward for any country, rich or poor. What then explains the reduction?

It appears likely the answer lies with the MDGs, or at least MDG-style thinking. I am a big fan of the MDGs, but I also accept they have sometimes skewed spending priorities. If you are set on reaching particular social development targets by certain dates, there is a strong temptation to focus spending on addressing them directly, at the cost of building and maintaining the infrastructure required for long-term growth.

Two points:

First, beware of percentages, if you look at page 12 of the report Glennie links to you’ll find that in absolute dollar terms aid devoted to infrastructure has increased. It’s just because total aid has grown that infrastructure spending has become lower in percentage terms. So it’s not really fair to suggest that infrastructure spending went anywhere “in the first place”.

Second, blame the MDGs if you want, but I’d suggest that infrastructure went out of fashion for a different reason: it’s difficult. When governance is poor in a country it’s very hard to manage the adverse impacts of infrastructure spending. With big projects there are always winners and losers, and in an ideal world you compensate the losers, but in the less than ideal world of developing countries, this can be very hard to do (The film Drowned Out showed this well). Also, when governance isn’t good, and local buy-in not great, infrastructure projects often run down quickly. So, if you’re an aid agency, there’s quite a good chance that dam you built will end up a white elephant that’s only covered in the media at all because of the environmental damage it did and the indigenous people it displaced. Quite rightly, aid agencies became kind-of reluctant to get involved in this sort of work and devoted the lion’s share of their increasing budgets elsewhere.

None of which is to say that aid shouldn’t go to infrastructure. It’s an integral part of development. But if ever there was an area where aid needed to be given carefully this is it. Let’s hope that if infrastructure really is coming back (in percentage terms) we’ve learnt the lessons those white elephants ought to have taught us, and that we don’t repeat the same old mistakes.

September 24, 2010

All the Views Fit to Print

Filed under: Aid,Trade — terence @ 8:29 pm
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More Aidwatch watching. Sorry…

Poor old Bill. Such is the life of a sceptic. While Jeffrey Sachs gets actual print column inches he’s reduced to the online edition.

Although having read his column, I’m inclined to think the FT may have been doing its print subscribers a favour.

I mean, the guy’s academic papers are great, and he clearly knows and cares a lot about development, but his polemics are excruciating. The FT missive being a case in point.

The problems:

1. He writes:  “Of the eight goals, only the eighth faintly recognises private investment, through its call for a “non-discriminatory trading system”. Which, although you’d never learn this from Easterly’s column, is because the first seven goals are not about means at all. They are measures of ends. And for what it’s worth teh aid (boo! hiss!) gets the exact same weighting as trade under goal 8 (have a look yourself).

2. He writes: “But current experience and history both speak loudly that the only real engine of growth out of poverty is private business, and there is no evidence that aid fuels such growth.” Except that there is evidence that aid leads to higher rates of economic growth. For example, here and here). It is true that the methodological issues associated with aid growth regressions mean that such evidence isn’t particularly reliable. But it’s evidence nonetheless. And the fact that we have difficulties finding more evidence may be as much a result of the difficulties inherent in cross country growth regressions, as a product of the limitations of aid. Complicated – yes. Uncertain – yes. But definitely not the same as “no evidence”.

3. Throughout the column he implies that almost all the campaigning effort associated with the MDGs has been about aid while there’s been near silence on trade. Once again, this just isn’t true. I mean have a read of Sachs’ book the End of Poverty. Trade is most definitely mentioned. Or have a look at the campaign platforms of MakePovertyHistory (NZ, UK) or the One Campaign. People campaign on trade. They really do.

4. And if you’re going to be pedantic about it, the econometric evidence that reducing remaining trade barriers would lead to sustained increased economic growth (different from static benefits) is, to be generous, about as strong as the evidence for an aid-> growth relationship.

Easterly laments the fact that aid sceptics get so little press. This is a dubious claim but let’s grant it for now. If it’s really so hard for Bill to make his voice heard, why, when he finally gets the chance, does he waste it with platitudes and erroneous claims? Why? I really have no idea.

[Update: More evidence for point 3 – Chris Blattman stumbles across Bono arguing Africa needs trade more than aid. Yes, Bono. Myopically aid focused advocates do. not. exist.]

May 27, 2010

Target Practice

Filed under: Aid — terence @ 8:15 pm
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Staying with Julie Bishop. In the same column (which, I repeat, isn’t that bad by the standards of the last week) she writes:

While this is of great concern regarding the application of the current aid budget of around $4 billion per annum, it should be borne in mind that the foreign aid budget will have to double (at least) to meet the United Nations Millennium Development Goal target of 0.5% of Gross National Income (GNI) by 2015.

MDG target? 0.5 percent? Here’s the relevant MDG indicator:

8.1 Net ODA, total and to the least developed countries, as percentage of OECD/DAC donors’ gross national income

No targets there. Presumably she’s talking about UN general resolution 2626 (which is 40 years old); except its target is 0.7% of GNI not 0.5. In a year’s time this Ms Bishop could quite conceivably be in charge of the Australian Aid programme.  This, I think, is just a little worrying.

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