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Rethinking US Foreign Assistance: SFRC Development Assistance Hearing Preview: Moss on Amping Up US Development Finance—and More

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 20 May 2013 22:48:52 +0000

As budget hearings wind down, the Senate Foreign Relations International Development Subcommittee is holding a complementary hearing titled "Different Perspectives on International Development Assistance" and CGD's own Todd Moss is testifying. Also testifying are Bill Lane from Caterpillar and John Murphy from the Chamber of Commerce.

Different perspectives indeed. It's great to see that Chairman Kaine (D-VA) and Ranking Member Barrasso (R-WY) are conceiving of US development assistance as much broader than the traditional foreign aid structure.

What can we expect from Todd?

It's no secret that US development assistance, particularly our foreign aid architecture, is dated and often painfully dysfunctional. I expect Todd to give a candid assessment of where the US is at on what Under Secretary for International Affairs Lael Brainard called the “Spaghetti Chart” of US foreign assistance before she headed into the Administration. But I also expect him to offer some solutions, particularly on a much-needed amp up of US development finance. And I hope we'll hear from him on just why development assistance is so important for the United States--an analysis that is easily lost in a difficult budget environment.

It's worth tuning in here to watch the hearing at 10:30 Wednesday.

Authors:

Beth Schwanke

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Global Health blog: DoD and Global Health: Time for a Dose of Development Realism

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 20 May 2013 17:58:44 +0000

I recently had the opportunity to participate on a panel hosted by the Kaiser Family Foundation on DoD’s role in global health—check out the webcast and their excellent report, which identifies three major categories of DOD’s work in global health: 1) force health protection and readiness, 2) medical stability operations and partnership engagement, and 3) threat reduction. While I find the first and third categories relatively straightforward and welcome the ancillary benefits for global public health of DoD’s own health-related work (e.g., infectious disease research or military to military HIV prevention programs), it is the second category which alarms me.

U.S. Army Sgt. Renisha Perry teaches tooth brushing in Djibouti. Photo Credit: U.S. Air Force

Medical stability operations are generally the activities of the Geographic Combatant Commands to provide technical assistance and other health-related activities to build trust, prevent conflict, and increase the capacity of partner governments. DoD’s argument goes something like this: since health is part of a community’s overall well-being, improving local health services supports the extension of good governance while making extremist groups less attractive to citizens. Or stated even more broadly by Dr. Kathleen Hicks, principal deputy undersecretary of defense for policy, in her presentation at Kaiser, “The physical health of these poorer populations can have a profound impact on social and economic health. Expanding on this concept, actions to improve the health of a fragile state may prevent it from becoming a failed state."

Ever the skeptic about DoD’s value-added in development, I see six problems with medical stability operations:

Weak premise. There is no empirical evidence to suggest that improvement of local public health or delivery of health services to marginalized communities is relevant to preventing fragile states from becoming failed states or communities from providing support to violent extremist groups. Yes, effective governments are more legitimate in the eyes of their citizens, but the link between improving this one aspect of social service delivery and preventing states from failing is tenuous at best. Experience shows that improving citizen security, justice, and jobs are far more important to breaking cycles of violence. Engaging youth, reforming education, mitigating conflict, and countering extremist ideology are far more relevant to countering violent extremism [PDF].

Mismatched timelines. Effective development cooperation is a long-term proposition requiring local ownership, sustained engagement, and mutual accountability. DoD humanitarian activities—health or otherwise—are typically one-off, short-term, drop-ins of cash, technical assistance, or direct service delivery, resulting in fleeting improvements at best, inadvertent harm at worst. Development aid provided in accordance with internationally-accepted principles can produce results, even in unstable and insecure environments like Afghanistan. Aid projects to meet short-term security goals are much less likely to succeed in delivering either development or stabilization objectives, as my colleagues at CGD have documented.

Development naiveté. Even with its corps of highly trained medical specialists, the US military is not equipped to build indigenous institutional capacity to deliver services effectively, no matter the desire to render the state more legitimate in the eyes of its citizens. Development is a complex process not largely influenced by exogenous forces, however well intended. While aid can play a supporting role, it is far more challenging than merely transferring knowledge, providing resources, or building infrastructure. National security objectives for public health administration may be very different than development objectives, e.g. prioritization of communities based on perceived support for insurgency versus prioritization based on needs.

Coordination challenges. The United States’ civilian foreign assistance agencies spend more on global health than nearly any other sector of foreign assistance, second only to peace and security. In FY 2012, this amounted to more than $9 billion in assistance. (Health typically accounts for 60-70 percent annually of USAID’s development programs in Africa, for instance.) DoD, by the Kaiser Family Foundation’s best estimate, spent at least $580 million on global health related activities in FY 2012, though it is impossible to know the actual total or what part of this went to medical stability operations. While improvements have been made in aid coordination between DoD, State, and USAID, significant challenges remain in coordinating programs and budgets.

Mixed messages. Delivery of health services to civilian populations is a civilian role, not a military one, even in poorly governed or otherwise insecure areas; only in grave emergencies for finite periods of time is it appropriate for the military to step in (e.g., immediately after a massive natural disaster). The provision of normal health services through the US military or counterpart military forces or even direct US military engagement with national ministries of health and local health officials may send mixed messages about the role of military in society. This is particularly important in many fragile African states where the balance between civilian and military roles is not clearly delineated. A perceived or actual failure on the part of the civilian authorities is not justification for the military to step in and assume the role. This is how coups happen.

Ulterior motives. Most problematic is that DoD’s engagement in medical stability operations, or building partner health capacity, is not really about improving public health in remote and needy places; it is about preventing or mitigating terror or insurgencies that cause instability and are perceived to threaten US national security. DoD is explicit that gaining access to (and influence over) relevant populations and building relationships that will lead to better intelligence on insurgent threats is the first priority. And ultimately, DoD’s war-fighting focus render its motives suspect, with or without active intelligence operations. This is where DoD efforts in global health are far more harmful than helpful, as its activities destroy the trust humanitarians and development professionals depend upon to vaccinate children, deliver food, assist with educational reform, support livelihoods, or help mitigate conflict. Not only are aid workers killed out of suspicion of collecting intelligence, vaccination campaigns and other life-saving assistance are also thwarted or denied. The chilling effects are far-reaching and very hard to reverse.

If providing humanitarian aid and promoting development is in the United States’ national interest, then it should be done by those best-suited to do the job—civilian development experts. DoD should instead focus on its value added to development: promoting physical security so that civilians can do their jobs.

Authors:

Kate Almquist Knopf

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Rethinking US Foreign Assistance: DoD and Global Health: Time for a Dose of Development Realism

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 20 May 2013 17:58:44 +0000

U.S. Army Sgt. Renisha Perry teaches tooth brushing in Djibouti. Photo Credit: U.S. Air Force

Ever the skeptic about DoD’s value-added in development, I see six problems with medical stability operations:

Weak premise. There is no empirical evidence to suggest that improvement of local public health or delivery of health services to marginalized communities is relevant to preventing fragile states from becoming failed states or communities from providing support to violent extremist groups. Yes, effective governments are more legitimate in the eyes of their citizens, but the link between improving this one aspect of social service delivery and preventing states from failing is tenuous at best. Experience shows that improving citizen security, justice, and jobs are far more important to breaking cycles of violence. Engaging youth, reforming education, mitigating conflict, and countering extremist ideology are far more relevant to countering violent extremism [PDF].

Mismatched timelines. Effective development cooperation is a long-term proposition requiring local ownership, sustained engagement, and mutual accountability. DoD humanitarian activities—health or otherwise—are typically one-off, short-term, drop-ins of cash, technical assistance, or direct service delivery, resulting in fleeting improvements at best, inadvertent harm at worst. Development aid provided in accordance with internationally-accepted principles can produce results, even in unstable and insecure environments like Afghanistan. Aid projects to meet short-term security goals are much less likely to succeed in delivering either development or stabilization objectives, as my colleagues at CGD have documented.

Development naiveté. Even with its corps of highly trained medical specialists, the US military is not equipped to build indigenous institutional capacity to deliver services effectively, no matter the desire to render the state more legitimate in the eyes of its citizens. Development is a complex process not largely influenced by exogenous forces, however well intended. While aid can play a supporting role, it is far more challenging than merely transferring knowledge, providing resources, or building infrastructure. National security objectives for public health administration may be very different than development objectives, e.g. prioritization of communities based on perceived support for insurgency versus prioritization based on needs.

Coordination challenges. The United States’ civilian foreign assistance agencies spend more on global health than nearly any other sector of foreign assistance, second only to peace and security. In FY 2012, this amounted to more than $9 billion in assistance. (Health typically accounts for 60-70 percent annually of USAID’s development programs in Africa, for instance.) DoD, by the Kaiser Family Foundation’s best estimate, spent at least $580 million on global health related activities in FY 2012, though it is impossible to know the actual total or what part of this went to medical stability operations. While improvements have been made in aid coordination between DoD, State, and USAID, significant challenges remain in coordinating programs and budgets.

Mixed messages. Delivery of health services to civilian populations is a civilian role, not a military one, even in poorly governed or otherwise insecure areas; only in grave emergencies for finite periods of time is it appropriate for the military to step in (e.g., immediately after a massive natural disaster). The provision of normal health services through the US military or counterpart military forces or even direct US military engagement with national ministries of health and local health officials may send mixed messages about the role of military in society. This is particularly important in many fragile African states where the balance between civilian and military roles is not clearly delineated. A perceived or actual failure on the part of the civilian authorities is not justification for the military to step in and assume the role. This is how coups happen.

Ulterior motives. Most problematic is that DoD’s engagement in medical stability operations, or building partner health capacity, is not really about improving public health in remote and needy places; it is about preventing or mitigating terror or insurgencies that cause instability and are perceived to threaten US national security. DoD is explicit that gaining access to (and influence over) relevant populations and building relationships that will lead to better intelligence on insurgent threats is the first priority. And ultimately, DoD’s war-fighting focus render its motives suspect, with or without active intelligence operations. This is where DoD efforts in global health are far more harmful than helpful, as its activities destroy the trust humanitarians and development professionals depend upon to vaccinate children, deliver food, assist with educational reform, support livelihoods, or help mitigate conflict. Not only are aid workers killed out of suspicion of collecting intelligence, vaccination campaigns and other life-saving assistance are also thwarted or denied. The chilling effects are far-reaching and very hard to reverse.

Authors:

Kate Almquist Knopf

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Global Health blog: Who Runs the (Global Health) World?

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 20 May 2013 15:50:21 +0000

This is a joint post with Rachel Silverman.

In her classic 2011 anthem, Beyonce posited that it was girls “who run the world.” Yet in the world of global health, we worry that Beyonce may be mistaken – from our observations, it appears that women remain severely underrepresented in top leadership positions.

It may seem counterintuitive that the world’s top advocates for women’s health and equity would be missing women leaders within their own ranks. Women’s welfare is perhaps more prominent than ever before in global health circles, as partially evidenced by this week’s massive Women Deliver conference and the Lancet’s corresponding thematic issue on gender. But gender equality issues have been our mind lately, with the new book published by Sheryl Sandberg (a member of the CGD’s Board of Directors) on women in work and leadership and Anne-Marie Slaughter’s article on women’s roles last year. And Foreign Policy published a list of “the 500 most powerful people on the planet” of which a measly ten percent were female, along with another piece noting how few think tanks are run by women. From our own experience within the global health ecosystem, it’s hard not to notice the relative paucity of women at the top ranks of academia and global health institutions, despite obvious female majorities in global health student bodies and among junior researchers.

Many global health funding agencies (namely, the Global Fund, GAVI, UNITAID, PEPFAR, PMI, the World Bank, and UNAIDS) have never in their histories had a top-executive who is female. (Granted, UNICEF, UNFPA, PAHO, and WHO are exceptions and are also older institutions.) Given the important role of academia in shaping global health, it’s also notable that only five of the top 20 schools of public health in America (per the US News Ranking) are led by female deans, and that the vast majority of their global health departments are chaired by male professors (see addendum table). Deanships and chairs aside, as one looks at the names in top-ranked faculty lists, it is clear that even tenure-track faculty within global health departments are largely men (see here and here for example).

And what’s remarkable – and well known at least to public health students and professionals – is that despite the differential in sex ratios in global health leadership, the student body in many public health graduate programs and mid-level staff in most policy/advocacy groups have a large female majority. At Harvard and Johns Hopkins, for example, female students account for 71% and 67%, respectively.

It may be that this imbalance needs time; that if we simply wait then today’s female students and junior staff will naturally evolve into tomorrow’s tenured faculty, deans, and global health leaders. But exactly how long before such a transition will occur? Given current trends at the bottom, we might expect such a “demographic transition” towards gender equity to happen quite quickly – say 5 to 8 years – unless there are other factors besides time hindering the gender balance. Notably, in several global health departments, non-tenure track research scientists and associates appear to be majority female, while tenured faculty skew male. It could be that hiring and promotion within tenure-track positions is biased against women, either explicitly or implicitly (i.e. women are pursuing tenure at the same time they are starting families), or that it is a legacy phenomenon from male-dominated times of old, one that will abate as the older cohort gradually retires.

But rather than wait passively for this desired “cohort effect” to gradually improve gender balance, the world of global health should take this issue head-on to determine what the root causes are behind this imbalance, and what needs to be changed within each individual institution.

As a start, global health agencies along with universities, departments of global health, and associated consortia should consider commissioning a report to rigorously examine whether gender imbalances are occurring – what percentage of staff at different levels are female and how many women are there are in top leadership positions? If imbalances are observed – and particularly if the gender balance of leadership does not match the composition of more junior staff or student bodies – institutions would be well served to investigate the factors underlying those disparities and take practical steps to address it. Not simply as a token effort, but because we genuinely believe it to be a problem when the viewpoints of educators and leaders lean heavily towards one gender, particularly when so much of global health focuses on the wellbeing of women and girls. These institutions could take a page from MIT, a school focused on science and engineering, which pioneered a breakthrough study on gender inequality in 1999; more than a decade later, significant progress was reported.

While women may never “run” the global health world (and nor should they, as men offer equally important and valuable voices), equitable and balanced global health leadership is itself a noble goal – one that is feasible within our lifetimes if key institutions demonstrate thoughtful and genuine leadership in this space.

The authors thank different administrators at various schools of public health for advance comments on a previous version of this piece. Victoria Fan (@fanvictoria) is a research fellow and Rachel Silverman (@rasiiii) is a research assistant at the Center for Global Development.

Authors:

Victoria Fan

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Development blog: Is a US Carbon Tax Hopeless – Forever?

cgdev.rss@cgdev.org (CGD RSS feed) — Fri, 17 May 2013 21:44:01 +0000

Recently I participated in a roundtable on the future of carbon markets at the Center for American Progress. The discussion, co- sponsored by Climate Advisers, was co-chaired by former U.S. senator Tom Daschle and former EPA administrator Carol Browner, and included CAP chair John Podesta. Jim Kim, the president of the World Bank, made opening remarks. In other words, the participants included lots of insiders who know a thing or two about how Washington works—and doesn’t.

The discussion was wide-ranging, and because Mr. Kim was there, a good part of it was focused on the World Bank. If you want to know how I think the World Bank could make a world of difference on climate, see this outside-the-box proposal for the bank to lead on creation of a new global climate agency.

What struck me most, however, was the lack of any serious discussion of the sine-qua-non for a real global market: how to get the United States to put a price on carbon emissions. It’s almost impossible to imagine jumpstarting a robust global carbon market when there is still no charge in the United States for pumping heat-trapping gasses into the atmosphere.

Why particularly the United States? It is true that China’s emissions have recently surpassed those of the United States in absolute terms. But the United States runs a close second, is responsible for a much larger share of the excess carbon already heating the planet, and has four-to-five times the per capita emissions of China.

Pricing carbon emissions is not only sound economics but an idea whose political time might just be about to come. As Eduardo Porter noted his New York Times this week

…a carbon tax fits conservative orthodoxy. It is a broad and flat tax, whose revenue can be used to do away with the corporate income tax — a favorite target of the right. It provides a market-friendly signal, forcing polluters to bear the cost imposed on the rest of us and encouraging them to pollute less. And it is much preferable to a parade of new regulations from the Environmental Protection Agency.

Porter points to a new libertarian think tank, R Street, created by Republican thought leaders who abandoned the climate skeptic Heartland Institute, that explicitly favors carbon taxes. Another sign that carbon taxes aren’t necessarily anathema on the right: last November the American Enterprise Institute joined with Brookings, Resources for the Future and the IMF to host a thoughtful discussion on the issue.

Depending on how the revenue is used, a carbon tax could close the U.S. fiscal deficit in a flash. Or it could be revenue-neutral, with the proceeds returned to taxpayers in one form or another, perhaps thus avoiding objections from Grover Norquist and other anti-tax campaigners. Such a rebate, for part of the revenue, is already included in draft legislation by senators Boxer and Sanders.

Given all this, I asked the politicos at CAP: how about it? What are the prospects for the United States to put a price on carbon? No way, they said. Hopeless.

Meanwhile students at US universities are getting on the Bill McKibben 350.org campaign bandwagon, and pushing the investment committees of their boards to move to fossil free investing. For investors perhaps that might ultimately be a good push. Not only is the market failing in the classic sense (because pollution is a public “bad” so no surprise there). Investors in fossil fuel companies may also be mispricing the risk of companies’ reserves of “unburnable fuel” (see this article in the Economist), ie overvaluing the “reserve replacement ratio” . That could represent another market failure—the market assumes everybody else is overvaluing reserves. . .shades of the housing bubble.

A carbon tax would be far more effective and faster in impact than divestment from fossil fuels. In the meantime, it’s hard not to applaud the student activism – perhaps the only hope for my children and grandchildren.

Authors:

Nancy Birdsall

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Global Health blog: The Global Fund Opens Up

cgdev.rss@cgdev.org (CGD RSS feed) — Fri, 17 May 2013 20:25:25 +0000

This is a joint post with Denizhan Duran.

The Global Fund to Fight AIDS, TB and Malaria recently made it easier to find out where their money is going with the launch of a new, online grant portfolio portal. This welcome and timely tool comes amid the Global Fund’s ambitious replenishment process that asks donors for $15 billion over the next three years to fight HIV/AIDS, TB and malaria – a considerable amount that totals twice the Fund’s average annual disbursements over the past decade. So we’re pleased to see the Global Fund take such a significant step to show stakeholders how these investments are being spent and what they are achieving. And as avid users of Global Fund data ourselves, we’re particularly pleased to see a few features of this new tool.

First, the new portal is easy to use. This may sound simplistic, but historically it required a very cumbersome process (i.e. sifting through hundreds of PDFs, extracting data and manually entering values into spreadsheets) to find the answers to some very basic questions like: how much progress have grants made towards their targets, or how much money has been spent on a particular intervention. Now, there are individual landing pages for every grant (such as this one), which include a list of service delivery areas, charts showing disbursements versus budgets versus expenditures, and grant performance over time and across certain indicators. This ease of use will benefit all stakeholders including donors, civil society and grant recipients.

The portal also signals a new focus on country-level results. The Fund generally emphasizes its top-line results as impact and has shied away from reporting country-level results. But the new portal has country pages (such as this one) that show how many people are receiving AIDS treatment, how many TB cases were detected and treated, and how many bednets were distributed at the country level.

Of course, it’s always possible to make this reporting better and more useful for everyone. I’m dreaming of a spreadsheet which aggregates information that the Global Fund already presents in these pages, as well as more data that is already reported across their documents. Wouldn’t it be great if, by a single click, one could access expenditures by service delivery area and by key populations, as well as progress towards every individual goal of the grant? Being able to track money benefits everyone as we strive to maximize impact, and it’s encouraging to see that the Global Fund is on the right track.

Authors:

Amanda Glassman

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Development blog: Seeing Like a State in Africa: Data Needed

cgdev.rss@cgdev.org (CGD RSS feed) — Fri, 17 May 2013 15:49:21 +0000

I'm a little late to this, but recently Chris Blattman set off an interesting debate by criticizing Bill Gates' recent interest in the quality of GDP statistics in Africa. Chris worries that Gates is falling into the trap of "seeing like a state" -- i.e., from the top down, obsessing over national statistics -- rather than a bottom-up entrepreneur who, presumably, couldn't care less about aggregate GDP numbers.

As part of a working group looking at “Data for African Development” together with the African Population and Health Research Center in Nairobi, I'm here to defend the idea of "seeing like a state" in 21st century Africa. I just think Bill Gates is doing it wrong.

Seeing like a State vs Seeing like a Donor

I don’t mean to pick on Bill Gates. Most other donors do likewise. What they promote is not seeing like a state – i.e., collecting data to answer policymakers questions – but rather "seeing like a donor". Countries are the unit of analysis and need to be lined up into comparable data points. And African governments are paid to collect statistics whose main raison d’etre is populating a World Bank or UN database.

Consider education in Kenya. Donors need to allocate aid across countries, so they end up looking at maps like the one on the left below, which shows net primary enrollment rates for 52 African countries from the World Bank's 2010 World Development Indicators. This is a great map for a donor sitting in Washington, because it allows them to evaluate Kenyan and Tanzania performance in primary schooling (by one very crude metric) on a comparable basis.

But the map on the left is pretty useless for Kenyan policymakers. Why should they care how they compare to Egypt? They need to know which schools need new textbooks and which ones need new teachers. They get that from the country's Education Management Information System (EMIS), three times a year, for all twenty-thousand government schools in the country.

Ken Opalo trolled Chris’s original blog post quite beautifully with a counter-post titled, “Does Chris Blattman hate state capacity?” (The answer was “no”.) But Ken made a strong case that governing a place like Kenya would require both reliable data, and more disaggregated data – possibly linked to the recent devolution of power to counties.

International comparability be damned. Governments need disaggregated, high frequency data linked to sub-national units of administrative accountability.

Back in here in donor-land (DC), the mood is very different. There are currently a lot of proposals floating around to collect more internationally-comparable household surveys – for instance, as part of the post-2015 MDG agenda. The Gates Foundation is funding tailored surveys on agriculture and family planning across the region. USAID runs a different set of agriculture surveys for its "Feed the Future" initiative. The World Bank and various UN agencies have their own competing and often duplicative surveys, all of which get foisted on national statistics bureaus. But these small-sample one-off surveys answer very few of the questions that domestic policymakers are asking -- largely because they're too aggregated, too infrequent, and not linked to sub-national units of administrative accountability.

Lest you think this all sounds very top down and Soviet, it turns out seeing like a state is not so different from seeing like a citizen. What is it that citizens are demanding in the movement to open data platforms? People want to know how their school (or clinic, or local council) compares to the one down the road. They want the map on the right – which is in fact now publicly available at kenyaopendata.go.ke.

So the lesson here is that donors need to back off, abandon household surveys, and focus on strengthening administrative data systems. Well, not quite.

Big, Dumb Data?

There's just one problem: the real-time, local-level information coming out of the Open Data Portal appears like it might be, sort of, well, how should I put this… systematically wrong.

Marc Bellemare recently posted a nice critique of the recent enthusiasm for “big data” from a social science point of view. I want to take issue from a policy perspective.

In the Ministry of Education’s administrative data, primary enrollment rates appear to be steadily rising, with a big jump upward in 2003 when Kenya abolished all school fees in government primary schools. But survey data paints a very different picture. Independent figures from the Kenyan National Bureau of Statistics (KNBS) and the Demographic and Health Survey (DHS) show enrollment rates that are completely flat over time. There’s no sign of any increase whatsoever, even when school fees were abolished. (See the graph below. The fact that the level of the blue line is higher than the green line probably tells us more about differences in the two surveys, which use slightly different methodologies. Comparing apples and apples shows no rise in either case.)

So why does administrative data reported by schools differ so much from survey data reported by parents?

Amanda Glassman and I have a working paper forthcoming on this question, looking at these discrepancies between administrative and survey data in education and health across Africa. Here's a spoiler: when the Ministry of Education abolished primary school fees, it radically changed the incentives for truthful reporting by head teachers. There are some safeguards in place to try to avoid outright lying, but at the end of the day, schools get allocated more teachers and more funding if they report more pupils. So schools have an incentive to exaggerate their numbers. Parents, in contrast, don't. Incentives, incentives, incentives. The same point applies, Amanda and I hope to show, when you ask agricultural extension workers to report how much maize was grown in their village, or nurses how many patients they saw. Incentives to misreport plague administrative data systems.

This, rather than the need for more duplicative household surveys, is the big challenge facing African statistics. Right now governments face a trade-off between high quality survey data of limited relevance, and low quality administrative data that actually fits their needs. It doesn’t have to be this way. But to overcome the trade-offs donors are going to have to back off with their pet survey projects, and stats bureaus across Africa will need to exert some renewed independence, and stop serving as research consultancies for donors.

Thanks to Amanda Glassman for helpful comments on this post.

Authors:

Justin Sandefur

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Global Health blog: Meet the Global Health Family: A Cheat Sheet

cgdev.rss@cgdev.org (CGD RSS feed) — Thu, 16 May 2013 20:25:39 +0000

This is a joint post with Rachel Silverman.

Through our Value for Money working group, we’ve spent much of the past year immersed in the world of global health funding agencies. With so many new agencies, particularly in the last quarter century (Figure 1), understanding the intricacies of the global health family can be daunting, even for the most devoted observers.

Figure 1: Timeline of Selected Entrants to the Global Health Family, 1902 – 2006

Source: Meet the Global-Health Family

Download the cheat sheet here.

For our own reference (and yours), we thought it would be useful to compile a “cheat sheet” on global health funding agencies. We used the public websites of global health funders shown in Figure 1 (supplemented by IHME’s Financing Global Health) to compile key “stats” for large global health players. Our compilation is available online as a background brief. We include:

Table 1: The basics: who, what, when, where, how
Table 2: Who gives, and how much (contributions)?
Table 3: Who’s in charge (governance)?
Table 4: The ABCs of global health agencies

We hope that this resource provides a useful overview for novices and veterans alike who are trying to make sense of the complicated global health landscape and architecture. Let us know if you have any feedback or suggestions – either below as a comment or by email – to make this resource more useful or accurate!

Victoria Fan (@fanvictoria) is a research fellow and Rachel Silverman (@rasiiii) is a research assistant at the Center for Global Development.

Authors:

Victoria Fan

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Development blog: New Findings: Seasonal Foreign Agricultural Workers Create American Jobs

cgdev.rss@cgdev.org (CGD RSS feed) — Wed, 15 May 2013 21:09:49 +0000

Michael Clemens released a groundbreaking (pun intended) new CGD working paper today titled The Effect of Foreign Labor on Native Employment: A Job-Specific Approach and Application to North Carolina Farms. Too busy to wade through the research methodology? Skip instead to this report, International Harvest: A Case Study of How Foreign Workers Help American Farms Grow Crops – and the Economy, also written by Michael and released today by CGD and the Partnership for a New American Economy.

As House Judiciary considers Rep. Goodlatte’s (R-VA) new Agricultural Guestworker Act, HR 1773, Senate Judiciary carries on its markup of the Gang of 8’s comprehensive immigration reform bill, and we wait (perhaps indefinitely) for a House version of a comprehensive bill, Michael’s research has two major findings with important implications for comprehensive immigration reform:

(1) Seasonal foreign farm workers add dollars to the US economy—creating American jobs.

Michael’s economic analysis is a case study of North Carolina farm industry, based on data from the North Carolina Growers Association. Michael finds that in 2012, the 7,000 foreign farm workers added somewhere between $248 million and $381 million to North Carolina’s economy—creating one additional American job for every 3-5 seasonal foreign farm workers.

(2) Few US-born Americans take these temporary farm worker jobs, meaning that these foreign workers aren’t displacing Americans.

Michael finds that despite high unemployment in North Carolina (500,000 unemployed Americans in 2011), extensive advertising, and wages that are required by law to meet local wage rates, only seven American workers actually accepted these seasonal jobs and then stuck with them until the end of the season. That’s right: seven as compared to around 6,500 foreign workers that year.

It’s hard to dispute that seasonal foreign farm workers are good—and needed—for the US economy given these findings.

But are H-2A programs also good for the foreign workers?

Yes. Michael’s earlier work with Lant Pritchett and Claudia Montenegro finds that these jobs are an economic opportunity of a lifetime for most migrants—“estimating that the typical Mexican low-skill worker can earn three times as much in the US as in Mexico, even after accounting for international price differences.” Here’s Michael’s great summary of why foreign workers benefit from guest work opportunities entered in the Congressional Record by Rep. Tim Walberg (R-MI).

You might also be interested in a few other brief pieces of Michael’s work on the economics of immigration reform:

Michael and Lant’s brief on temporary workers (ie, the new W-Visa in the Senate bill), which shows that a well-designed program is a win for the US middle class, US low-skill workers, US border security, and for workers from developing countries.
Michael’s assessment of the methodological problems with the Heritage Foundation report claiming that regularizing unauthorized immigrants will cost American taxpayers trillions of dollars.
An interview with Michael by the Washington Post’s Dylan Matthews on the economics of immigration, in which Michael asserts that the real wage impact of immigration on Americans is “definitely positive, with no doubt whatsoever.”

Authors:

Beth Schwanke

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Global Health blog: Plugging in to Global Health: The Proliferation of Mobile Apps

cgdev.rss@cgdev.org (CGD RSS feed) — Wed, 15 May 2013 18:23:34 +0000

This is a joint post with Kate McQueston.

Mobile applications – or ‘apps’ – seem to be the latest craze in mobile technology for global health programming. The proliferation of these apps is converging around growing interests in open (and big) data, so you don’t have to look far to find creative ways they are being used to collect and display data in the development sector.

More on mobile technology for health from CGD:

Mobile users can download apps that map USAID’s portfolio and Development Expertise Clearinghouse (DEC) evaluations. And USAID’s 2012 Hack for Hunger event helped create an open data app from Gareem and Palantir which alert farmers about food security warnings. A few other apps from USAID which are not yet available include Family Choices, which aims “to enhance the perception of a girl’s place in and value to her family,” 9-Minutes, where the user experiences the ‘adventures of nine months of pregnancy” and Worm Attack!, which focuses on the “strategic use of deworming pills”– although the target audience for these aren’t exactly clear yet. Still, USAID was awarded the “best government policy for mobile development” earlier this year for establishing a dedicated mobile solutions team to bring these kinds of apps to underserved communities.

USAID isn’t the only organization that has started to apply mobile applications in their programming. Last year the WHO introduced its first app – a mobile version of its Global School-based Student Health Survey which collects information on the health and behaviors of adolescents – and more recently issued an app to help parents keep track of children’s vaccinations. The World Bank also offers 17 different mobile apps on its website, from the World Bank Gender DataFinder to Doing Business at a Glance.

Apps for global health have a short history – IntraHealth claims to have released the first global health app just last year (see full archive of global development apps here). So how important will they will be to the global health community?

The history of mHealth more broadly has shown that this convergence of mobile technology and data can have major implications for development—from tracking population movements to replacing traditional data sources. And the potential audience (and data sample) is enormous. In 2011, there were almost 6 billion mobile cellular telephone subscriptions globally (three quarters of the planet’s population).

But there are certainly cautionary lessons that can be learned from the surging popularity of mHealth—now an estimated $2 billion dollar business this year. Despite mHealth’s popularity, few (if any) programs have been able to scale up past the pilot phase and become integral part of health systems. Similarly, the problems that have hindered the success of mhealth in terms of coordination across funders and implementers will likely also be a challenge for global health apps—potentially limiting the efficiency and effectiveness of investments in these technologies. While mobile apps seem promising, it remains to be seen if they will be able to overcome many of the same issues mHealth have faced.

Have any global health or development apps that you’d recommend? Let us know in the comments section below.

Authors:

Amanda Glassman

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Development blog: Post-2015: Taking Zero Goals to the Body Shop

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 14 May 2013 19:41:40 +0000

Up to now, the High Level Panel on the Post-2015 Development Agenda (sadly still not widely AKA the HiPoPoDomAe) has done a pretty good job of displaying public collegiality. But in the lead-up to today’s Panel meetings in New York, that began to break down. A story in the Guardian suggested that drafts of the report have been described as “absolutely awful" and “a bit of a car crash.” One big reason for dismay, according to the Guardian: the report drafts don’t include nearly enough in the way of specific language on eradicating $1.25/day poverty, hunger and avoidable child mortality –all by 2030.

I’ve written before on this blog about the plausibility problem with zero goals –many of the proposed targets for 2030 would require historically unprecedented progress from those countries furthest away from zero today. If countries with high under-five mortality in 2010 halved mortality between 2010 and 2020, then did it again in the next decade, 28 of them would still miss the proposed zero goal for avoidable child deaths in 2030, for example. That’s a real issue for Africa –set up for failure by the first set of MDGs, it would be set up for failure once again by zero goals in the post-2015 period.

But there’s another way to view zero goals –as not ambitious enough. Take eradicating $1.25/day poverty. Clearly we won’t have done with development and declared the end to history when the poorest person on the planet lives on $1.26 a day. That’s just not enough to ensure a decent quality of life. It is only around one tenth of the US poverty line. And while a zero goal of 2% for under-five mortality would require stunning progress to achieve by 2030, it would still mean countries reaching that goal in 2030 would have a mortality rate about three times higher than the US does today.

In short, the proposed zero goals fall somewhere messily in between targets (which should be realistic) and ideals (which should be idealistic). Perhaps that’s no surprise. Given that 2030 appears to be a widely agreed end-point, the ‘zero’ goals all have to be shoe-horned to fit that time frame. So even if (perhaps) getting to 3% $1.25/day poverty by 2030 is plausible and (maybe) 2% under-five mortality might be considered an acceptable floor, $1.25 is too low an ambition for any income floor and 2030 is implausibly soon for every country to reach 2% under five mortality.

My colleague Lant Pritchett has suggested creating development ideals (the whole world over on $12.50 or more a day, as it might be). Perhaps these could be presented alongside 2030 targets (3% under $1.25 a day by 2030). That way, one goal doesn’t have to do the work of two very different concepts. But, for the time being, a crash looks like the best way to avoid the zero bandwagon rolling too far, too fast.

Authors:

Charles Kenny

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Global Prosperity Wonkcast: On Journalism and Global Development--Nicholas Kristof

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 14 May 2013 17:22:17 +0000

My guest on the Wonkcast this week is New York Times columnist and two-time Pulitzer Prize winner Nicholas Kristof. Nick’s incisive reporting on the lives of poor and vulnerable people—especially girls and women (see, for example, Half the Sky)—has led millions of his readers to empathize with people facing difficulties they could otherwise hardly imagine.

Since 2006 the NYT has run a “Win aTrip with Nick Kristof” contest, in which the lucky winner, often a new college graduate with no prior experience overseas, accompanies him to places like eastern Congo and Darfur. I think it’s a brilliant way to connect Americans with the reality of life in poor countries. I’m happy that since 2010 CGD has supported the contest by screening thousands of applicants, presenting Nick with a short list of finalists from which he picks the winner (see here, here and here).

With the backing of the New York Times, Nick has been remarkably successful in getting Americans to read and care about global poverty. But as a recovering foreign correspondent who did most of my reporting before the rise of the Internet, I worry that the media revolution—and the collapse of the old advertising-driven journalism business model—means that the today’s media consumers are even less well informed than a decade ago.

I asked Nick to join me on the Wonkcast discuss the current state and future prospects for international reporting, hoping he will reassure me.

No such luck.

“I am deeply concerned about the collapse in coverage of global news,” Nick tells me. “It’s particularly striking in the case of television but also in newspapers and news magazines. The [New York] Times is a bit of an exception because we see ourselves as having a comparative advantage of continuing to cover the world, as other people drop that coverage.”

“Your average news consumer is much less exposed to international stories, and those that they are exposed to are particular, segment stories: the selection of a new Pope, the crisis in the Korean peninsula. It tends not to be development stories and I think this is going to be a real blind spot in the US and also, to some degree, globally.”

“Can think tanks like CGD help to fill the gap?” I ask.

“I think that think tanks are filling some of the vacuum, whether it’s the Center for Global Development or the Human Rights Watch monitors. They are providing really serious, long-form [content], what we would think of as news coverage…The problem is that it’s not reaching the general public,” Nick says.

“If you were interested in what’s happening in Syria, you could find some amazing coverage from Human Rights Watch or Amnesty International but our average news consumer is not going to see that on the evening news or on the Today show.”

“But what about social media?” I ask. Advocates for new media often argue that people have more access to news than ever before. News is shared on Facebook and on Twitter. People are inundated with information.

“Here’s how I see it,” Nick replies. “There is indeed much more news available because of the Internet. So if you are an interested news consumer you can find much more about the world than you ever could before. For those people, the Internet and social media are just fantastic. It used to be that if you were interested in, say, Kenya, then there really wasn’t going to be very much in the New York Times, the Washington Post, or the Wall Street Journal. These days you can read the Kenyan newspapers online. So in that sense, it’s just terrific.”

“But if you’re looking at lowest common denominator, I’d say that news consumption is shrinking. People aren’t getting much news from social media because they’re following Justin Bieber; they’re not following NPR.”

“And I think one of the basic problems is that news organizations used to feel like they filled a special role, that they had an obligation to provide spinach in their broadcasts, to tell people things that maybe they didn’t really care about,” Nick says. “These days, given the crisis in the financial model and journalism, news organizations are dropping the spinach and it’s all dessert.”

Some highpoints from the rest of the interview:

Why ABC decided to not renew a $1.5 million grant from the Bill and Melinda Gates Foundation to improve coverage of global health and development. (Spoiler alert: the stories won prizes but ABC discovered that viewers weren’t watching. They were leaving the TV to get snacks or go to the bathroom).
What Fox News and MSNBC have in common: a dearth of international coverage.
What to think about VICE, the youth-oriented media darling that sent Dennis Rodman to North Korea, and its edgy approach to getting people interested in global affairs.
Nick’s own efforts—including the Win-a-Trip Contest and On the Ground blog—and the frustration he sometimes experiences in finding an audience for his global development stories.

Nick suggests that the crisis in journalism is likely to get worse before it gets better. But ultimately he ends on a hopeful note: the old guard newspapers, new magazines, and television outlets, he says, will eventually find a better business model. “Content is important enough that we will find ways to pay for it,” he says.

I hope he’s right.

My thanks to Catherine An for providing a draft of this blog post, and to Alex Gordon for editing the Wonkcast.

Authors:

Lawrence MacDonald

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Rethinking US Foreign Assistance: Hitching the Global Development Council and President Obama's Policy Vision

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 14 May 2013 16:57:27 +0000

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President Obama’s Global Development Council was envisioned in the September 2010 Presidential Policy Directive on Global Development and established by executive order in February 2012. This memo ahead of the Council’s inaugural meeting offers the chair, director, and members several ways to focus the Council’s mandate and inform US global development policy. Its first meeting was slated for May 17, 2013, but has been postponed.

To: Mohamed A. El-Erian, Chair, President’s Global Development Council

CC: Richard C. Blum, Member

Esther Duflo, Member
Sarah Beardsley Degnan Kambou, Member
James M. Manyika, Member
William K. Reilly, Member
Steven Schwager, Member
Smita Singh, Member
Secretary of Defense Chuck Hagel, Non-Voting Member
Secretary of State John Kerry, Non-Voting Member
Secretary of the Treasury Jacob J. Lew, Non-Voting Member
USAID Administrator Rajiv Shah, Non-Voting Member
MCC CEO Daniel W. Yohannes, Non-Voting Member
Jayne Thomisee, Executive Director

From: Sarah Jane Staats, Director, Center for Global Development Rethinking US Foreign Assistance Initiative

Re: Hitching the Global Development Council and President Obama’s Policy Vision

The Opportunity: America’s well-being is linked to the lives of others as never before. President Obama’s newly created Global Development Council shows the administration is eager to use development policy to tackle inequality, conflict, hunger, and disease to promote prosperity and security around the world and at home. When the Council meets for the first time this week, it will need to answer two questions: how can it inform US global development policy, and on what issues?

The Action: When the Global Development Council meets on May 17 it should identify three to five key moments when President Obama, with the advice of the Council, can make a development difference. Among the immediate possibilities: the June G-8 summit in the United Kingdom, the September G-20 summit in Russia, the UN General Assembly meeting, and President Obama’s upcoming trip to Africa.

The Global Development Council can’t cover every issue; it should focus its attention on a few specific areas and be clear about what it will do and what it will not do. One of these five approaches could help the Global Development Council walk President Obama’s policy vision down—and across—the aisle:

Something Old: Finish What the PPD Started. Select one or two promises from the President’s US Global Development Policy that require action across the government and craft an implementation strategy. For example, propose explicit choices about where to invest and how; concrete actions the administration could take to leverage the private sector, philanthropic, and nongovernmental organizations; or a plan to strengthen US leadership and engagement in the multilateral development institutions. Alternately, the Council could focus on next steps for the Partnership for Growth initiative, which aims to put the PPD principles into practice in Ghana, Tanzania, El Salvador, and the Philippines. Administration-endorsed implementation strategies could substitute for another full global development strategy process during Obama’s second term.
Something New: Go Big (Migration) or Bright (Energy). If the president is looking for something new, or the next President’s Emergency Plan for AIDS Relief (PEPFAR), try migration. President George W. Bush’s PEPFAR announcement was possible because of an extraordinary alliance of interests: domestic activism, international advocacy, a sea change in evangelical Christian views, and a political moment. New technology—specifically the development of antiretroviral drugs—played a big role, too.

Migration has almost all the same features: a broad domestic constituency, a development and economic case for reform, a shift in evangelical Christian views, and it is a major US election issue. While there might not be a technology solution, technology firms (including Facebook CEO Mark Zuckerberg’s new FWD.us political group) are becoming some of the biggest advocates for revamping migration policy. A development-friendly migration policy would be a clear way of using the “full range of our development tools and policies” as promised in President Obama’s Global Development Policy. And including development benefits in US migration reform legislation needn't require a huge price tag; on the contrary, it could actually help the US economy and boost tax revenue.

A more traditional but also worthwhile issue—previewed by former Deputy National Security Advisor Michael Froman in a CGD speech and with growing support from colleagues at CGD and ONE—would be to focus on reliable generation, transmission, and distribution of energy in sub-Saharan Africa. Electrifying sub-Saharan Africa, where nearly seven out of ten people do not have access to reliable energy, could have a tangible human benefit, increase economic growth, and increase demand for US business products.
Something Borrowed: Big (and Open) Data. Open data is a major theme of President Obama’s administration, visible most recently in a new open data policy. And the White House praises the use of big data in government decision-making, drawing heavily from business experience where big data is part of almost every industry function. The administration’s Foreign Assistance Dashboard was launched two years ago to be the one-stop-shop for US foreign aid data (big and open). The Global Development Council could identify ways President Obama and the Council can 1) encourage the 22 US agencies and departments involved to report their data and 2) start using the data to inform development policy decision-making.
Something Blue (and Red): Use the Bully Pulpit to Champion Development. The Council’s third explicit mandate is to “increase awareness and action in support of development.” The Council members are in ideal positions to champion development—from business, academic, and nonprofit perspectives—from their districts and beyond, including on Capitol Hill where more than half of Congress is new since the last major development legislation creating PEPFAR and the Millennium Challenge Corporation was passed. A new partnership with Congress on development is vital to ensure President Obama’s development policies outlast his administration. The Council could use vibrant and visible communications tools to communicate with and solicit feedback on its development policy priorities.
A Sixpence in Your Shoe: Make Sense of the Aid Budget. The PPD vows to “focus,” “make hard choices,” and “reallocate resources in support of those efforts that yield the greatest impact” but did not take on major structure or budget reforms as part of the initial process. The FY2014 budget request shows shifts in foreign aid allocations: a food aid reform proposal and a reduction in USAID’s presence in 11 countries, eliminating some small foreign aid programs. The Council could help the administration go further by proposing a parallel US foreign aid spending plan, including possible increases in multilateral versus bilateral investments, to inform President Obama’s next budget request and Congress’s deliberations.

Authors:

Sarah Jane Staats

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Development blog: Pakistan’s Elections: A Victory for Development? (And What the US Should Do Next)

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 14 May 2013 00:04:58 +0000

This is a joint post with Alexis Sowa.

Last weekend marked the first time in Pakistan's 60-plus year history that a democratically elected government completed its term. This is a major achievement for Pakistan. It also raises the possibility of a new chapter in US-Pakistan relations because a new civilian government led by the PML-N (Pakistan Muslim League Nawaz, the winning party) might prove to be surprisingly open to US help in addressing Pakistan's huge development challenges.

This is true despite Nawaz Sharif's anti-American rhetoric during the election campaign, and despite the party's insistence in 2011 that USAID close its provincial office in Lahore, the capital of Punjab, the country's most populous and prosperous province, which the PML-N controls. How can that be?

The PML-N has done a better job of delivering services to the people of Punjab than the other parties running Pakistan's other provinces. One example is education where, with strong provincial leadership and support from donors like DFID and the World Bank, the Punjab has made impressive progress. Punjab is also one of the few provinces where the incumbent provincial government was not thrown out, due at least in part to the delivery of improved services to its people. Maybe progress in Punjab bodes well for a renewed effort nation-wide.

This matters because Pakistan, even when it had growth, did not have development. Though richer than Bangladesh in average income, its social indicators are much worse. In Pakistan only 61 percent of girls aged 15-29 can read, compared to almost 80 percent in Bangladesh, despite GDP per capita levels that are 50 percent greater.

This is not to suggest that US-Pakistan relations will be smooth sailing. Pakistan is a nuclear power with a terrorism problem at home and millions of unemployed and frustrated young people. There will be risks to a development partnership - as there have been in the last five years. But they are risks well worth taking. With a newly elected civilian government in place, and the military apparently willing to stand aside, the United States has a good opportunity to renew the strategic dialogue on development challenges begun with the prior government.

The administration should take two steps right away:

First, it should ask the Congress for a no-cost extension from five to ten years of the strategic partnership established under the umbrella of the Kerry-Lugar-Berman legislation (see here for Senator Lugar's recent support for this idea).
Second, the White House should ask the State Department for a review of lessons of the last five years regarding the US development strategy and program in Pakistan (for our lessons and report card on the "strategy", go here).

Our recommendations in a 2012 report included: extending KLB; reducing annual aid spending, where the United States is handicapped compared to other donors without drones; channeling more aid money through other donors who have shown proven results (and don't have the drone problem); and putting more effort into working with Pakistan's government on trade and investment, and with Pakistan's experts on its daunting technical, financial, and (above all) political challenges in critical reforms of its tax, energy, and agriculture sectors.

Nawaz Sharif, a Punjabi capitalist, is expected to push for increased trade and improved relations with India - an important partnership that could help jumpstart Pakistan's stagnant economy, and one the United States could encourage. The United States could also work more with the provincial governments, including in Punjab and in Khyber Pakhtunkhwa, where the party of former cricket star Imran Khan is the likely victor, giving the fledgling PTI party a chance to prove its capacity to govern.

The US Congress and the American people should not underestimate the resilience of Pakistan as a country and a society. While Nawaz Sharif won a solid victory, the close race for second place between Imran Khan's rookie PTI party and the incumbent and entrenched PPP signals that an increasingly urban and young population wants to upend the ossified, traditional power centers of Pakistani society. Pakistan has a large, highly competent, and well-educated, urban middle class - millions of Pakistanis working in the media, academia, public service, and civil society organizations. What they want is a stronger and more rules-based civilian government.

Moreover, there has been some progress in the last couple of years. The devolution of powers and budgets to the provinces that started in 2010, though chaotic and inefficient in the short term, represents a necessary step toward making government more local and accountable - something Americans can understand. There is reasonable hope that the trade deal with India will spur investment in Pakistan and ease the tensions that have hurt both countries - and hurt Pakistan relatively more. And this election gives renewed hope that Pakistan is developing the institutions and civil society engagement required of a functioning democracy, one that is capable of meeting the needs of its people. That would be good for Pakistan, of course; it would also be good for America.

Authors:

Nancy Birdsall

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Development blog: It Takes Two to Quango: Does the UK’s Independent Commission for Aid Impact Duplicate or Add Value?

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 13 May 2013 16:13:43 +0000

The United Kingdom has been a stalwart funder and innovator in foreign assistance for almost 20 years. In 2011, it created the Independent Commission for Aid Impact (ICAI) to report to Parliament on the country’s growing aid portfolio. ICAI is a QUANGO in Brit-speak – a quasi-public non-governmental organization - with a 4-year mandate which is undergoing review this year. Recently, I took a look at the reports it has produced to see whether the organization is fulfilling its role in holding the country’s overseas development aid programs accountable. I found one fascinating report which shows what ICAI could be doing and many more reports that made me wonder whether ICAI is duplicating work already within the purview of the agency, Department for International Development (DFID), which accounts for most of the UK’s foreign assistance programs.

The world of impact evaluation has changed dramatically over the last ten years and I’ve been worried that political and bureaucratic pressures to water down evaluation systems would erode this wave of commitment to study, learn and respond to findings on aid programs. This was a key concern in CGD’s report on When Will We Ever Learn. So in 2011, when I first heard about ICAI, I wrote “…by establishing ICAI, the UK has gone further than most countries in establishing independent external oversight for aid programs, thereby raising the visibility of evaluation work and the standards of evidence.”

One of the first ICAI reports that I read seemed to fulfill this goal. Two years after DFID completed an impact evaluation of the Western Orissa Rural Livelihoods Project (an anti-poverty program in India), ICAI commissioned researchers to return and assess the quality of the evaluation, the reliability of the information, and the sustainability of the results. This study (in newly renamed Western Odisha) was a brilliant way to check on the project itself (did poverty really decline?) as well as provide insights regarding the way DFID conducts the impact evaluations that should serve as the basis for learning and adaptation. In this case, they found delays in the initial baseline survey, problems with the quality of the questionnaires, and errors in the associated cost-benefit analysis which underestimated the program’s likely return.

The report was quite candid about these findings but to my surprise none of these points were highlighted in the report’s three recommendations. Instead, the ICAI report concludes with three broad recommendations unrelated to evaluation or specific to anti-poverty programs. It calls for better long term planning, attention to sustainability in project design, and more transparency. These are perfectly reasonable admonitions. But in practical terms, what do they mean? In retrospect, projects always look like they should have planned for problems in implementation and sustainability. Furthermore, how would you know if DFID were implementing those recommendations?

By contrast, the evidence this team collected would have allowed ICAI to make much more specific recommendations about the rigor and use of DFID’s evaluations. Some of the findings could be tracked as a way of improving the learning cycle. A simple point noted in the report is the need for conducting baseline surveys in a timely fashion – this would be a powerful and relatively easy to monitor recommendation.

The ICAI report on a health program in Zimbabwe – which describes its methodology as “desk-based research and a two-week visit to Zimbabwe in September 2011” – is more typical of the studies that assess individual projects. In fact, of the 14 studies on the ICAI website that look at individual projects, 12 relied on short visits, interviews, and secondary information while only two involved significant primary data collection (the other relied on a cross-section of interviews in Nigeria). The remaining seven studies on ICAI’s site look at DFID’s relationship with other multilateral agencies (World Bank, Asian Development Bank, EU Aid, UNDP and UNICEF) based on literature reviews, short visits and interviews; explain ICAI’s approach to Value for Money; and assess DFID’s strategy for reducing corruption.

Some of these studies are nicely done but most of them look like the kinds of operational and quick project completion reports that are common within aid agencies and it isn’t clear why an independent commission is required to do them. Meanwhile, ICAI has generated a stream of recommendations, which I’ve been told has led DFID to generate a voluminous stream of new guidance – with little notion of whether it is read, is used or has much effect.

What an independent commission really can do is hold an aid agency accountable for having a strong evaluation and learning system in place. Is good evidence generated, and is it being used? The Western Odisha study was explicit about improvements needed in evaluation – including providing adequate resources and time relative to the study goals – and in learning – noting that lessons from this program had been applied across India but have not informed similar program’s in other countries.

Other countries should learn from the UK’s experience and think about setting up a Quango, but make sure it’s focused on the right things. DFID is mandated to evaluate and learn. Instead of duplicating that function, ICAI could hold them to account for doing it better.

Thanks to Ted Collins for research assistance on this blog.

Authors:

William Savedoff

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Rethinking US Foreign Assistance: Rethink Roundup

cgdev.rss@cgdev.org (CGD RSS feed) — Fri, 10 May 2013 16:16:40 +0000

Lots of Rethink-relevant news and announcements lately. Here’s our roundup:

White House issues exciting new open data policy.
MCC launches evaluation catalog with metadata (microdata forthcoming) from its independent evaluations. First up: food security.
The end of extreme poverty? The question, some data, and why it isn’t enough.
Kerry, Shah and Vilsack (the State-USAID-Department of Agriculture triumvirate) urge the United States to get with the times on food aid.
Rep. Gerry Connolly (D-VA) gives the foreign assistance act rewrite another go.

Authors:

Sarah Jane Staats

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Development blog: More Russian Arms Sales to Assad: Time for Preemptive Contract Sanctions from the Friends of Syria?

cgdev.rss@cgdev.org (CGD RSS feed) — Fri, 10 May 2013 12:33:16 +0000

Bills, conferences, bilats, and condemnations abound: Assad must go. But as Secretary Kerry wrapped up a meeting on the crisis in Syria with President Putin this week, news leaked of yet another Russian arms deal with Syria.

The latest reported deal (in part financed through the Russian foreign-development bank, the VEB) sells ground-to-air missile systems to the Assad government. The Wall Street Journal reports that these batteries “would significantly boost the regime’s ability to stave off intervention in its civil war.”

Several of my colleagues here at CGD have been supporting preemptive contract sanctions (PCS) as one of the policy prescriptions needed to prevent these types of arms deals from moving forward. If PCS were to be implemented by say, the US and the EU, any new contracts with the Assad regime would not be recognized in those countries’ courts.

To be clear, this particular deal is alleged to have been inked in 2010. So, even were preemptive contract sanctions issued against the Assad government today, it wouldn’t have a chilling effect on this particular contract.

However, implementing PCS is still hugely relevant and could chill these types of deals in the future—preemptive contract sanctions should be added to the agenda at the next Friends of Syria meeting expected in South Korea June 5-6.

Here’s why the US and EU should implement PCS against the Assad regime:

PCS would have a chilling effect on future contracts with the Assad regime. If I can’t get my contract enforced in a US or EU court, I might think twice about entering it. That’s not to say that PCS would prevent all new contracts—or ongoing ones such as this Russian deal—but it should at least put a dent in the arms and finance deals helping Assad hang on.
PCS would demonstrate much-needed US and EU support for the opposition—but without needing to pick favorites.
In addition to this sign of immediate support for the Syrian opposition, PCS would also prevent the next Syrian government from being saddled with Assad’s debts still being incurred. The successor government would not be forced into paying for the contracts signed after PCS are enacted that helped Assad kill his people (or face losing international financial markets access).
PCS would close a ridiculous loophole—currently, US and EU courts can be called upon to enforce contracts between the Assad government and other countries’ citizens. But those same transactions (and benefits of those transactions) are prohibited for US and EU countries and citizens because of our existing sanctions regime.

It was a relief to see the Friends of Syria February communique out of Bulgaria that refers to FOS readiness to “work with a future government of Syria to the extent possible to address Syria’s debt in accordance with internationally established processes.” And let’s hope the Paris Club is thinking about this. But why are we waiting for Assad to fall to get started?

Authors:

Beth Schwanke

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Development blog: A To Do List for Brazil’s Azevedo at the WTO

cgdev.rss@cgdev.org (CGD RSS feed) — Wed, 08 May 2013 21:40:43 +0000

Congratulations to Ambassador Roberto Azevedo from Brazil, who will be the next Director-General of the WTO. Ambassador Azevedo campaigned for the WTO position as an insider who could hit the ground running and that is exactly what he will need to do. He also said that being an insider would help him in rebuilding trust among the members and he will need to get started on that immediately—even before he takes over on September 1.

Just three months after he takes office, Avezedo will have to go to the ministerial in Bali and try to find a way out of the Doha Round trap. My preferred alternative is to salvage whatever is possible and declare victory. If no agreement comes together, however, it will be time to officially bury the Doha Round, and that will take strong leadership.

Whatever happens in Bali, Azevedo will then have to find a path forward for the organization. There are a number of difficult issues that he will confront, including proliferating regional agreements and the need to reconcile trade and climate change measures (among many others). On the former, it is not yet clear whether the “mega-regionals,” transpacific or transatlantic, will succeed in breaking new ground on regulatory and other new issues where the WTO is purported to lag. So the wisest course on this particular issue may be to wait and see what happens.

On climate change and other environmental matters, Azevedo seems to be in favor of watchful waiting. He is on the record, in our wonkcast and here, indicating that the current rules are flexible enough to handle many of the issues that are likely to arise and, perhaps, new rules are not needed. I am more sympathetic to that view than is my colleague Arvind Subramanian, but the recent appellate body ruling against certain parts of Ontario’s green energy policy will no doubt stoke the debate.

Whatever the substantive agenda, Azevedo will also have to tackle institutional issues. On that, I agree with what Azevedo said in the CGD wonkcast about democracy not being the major problem facing the WTO:

The more democracy, the more credible the system is. Is it more difficult to operate in a democracy? Yes, you have to take on different views, but the fact that the negotiations are more diversified doesn’t mean it isn’t possible to have an outcome, and when we do have an outcome it’s much more credible and more longer lasting.

But he also said that the organization needs to find a negotiating dynamic that can accommodate the diversity of members so that “each one will contribute according to what they can give” (emphasis added). But that’s not how the WTO works and as I argued previously here, there needs to be more differentiation among developing countries in terms of what they are expected to contribute. Brazil and China should not be treated more or less the same as Kenya or Sri Lanka. A Director-General from Brazil might be ideally placed to take on this tough issue—like Nixon going to China.

Authors:

Kimberly Ann Elliott

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Development blog: The Magically Vanishing Slice of Pie: Shockingly Bad Methods behind the Heritage Foundation’s Estimates of the Fiscal Costs of Unauthorized Immigration

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 07 May 2013 19:35:13 +0000

Robert Rector and Jason Richwine of the Heritage Foundation have written a report claiming that regularizing unauthorized immigrants in the United States will cost American taxpayers trillions of dollars. Neither Rector nor Richwine are trained economists and the methods that they use to arrive at this number are not economic analysis.

There is widespread condemnation of Rector and Richwine’s work across Washington. Conservative analysts, in fact, have been the loudest in slamming Rector and Richwine’s inferior methods. When the American Action Forum, Americans for Tax Reform, the Cato Institute, and Rep. Paul Ryan (R-WI) are roundly trashing Rector’s methods, the problem is not Rector’s politics; it’s his methods.

The long list of errors made by Rector and Richwine has been ably discussed by Alex Nowrasteh of the Cato Institute, so I will not repeat them. I will focus on the single most egregious, baffling mistake that Nowrasteh does not discuss at length. Rector and Richwine simply omit any analysis of the chief way that both unauthorized and regularized immigrants benefit public coffers: by creating the economic activity that is the basis of all fiscal revenue.

Rector and Richwine include no analysis of the impact of unauthorized immigrants on the US economy. They just assert without basis that those 8 million workers only add 2% to US GDP, because their wages amount to 2% of US GDP. Then comes this statement:

“[T]he immigrants themselves capture most of the gain from expanded production in their own wages. Metaphorically, while unlawful immigrants make the American economic pie larger, they themselves consume most of the slice that their labor adds.”

Unless either Rector or Richwine have access a secret source of information documenting that all unauthorized immigrants spend their income exclusively on goods and services produced by other unauthorized immigrants, the above idea is impossible.

In the real world, unauthorized immigrants who earn money in the United States spend the large majority of their income on US-produced goods and services. Those goods and services are produced by Americans. Of the people who own the grocery stores, restaurants, phone companies, and apartment buildings where unauthorized immigrants spend their incomes, almost none are themselves unauthorized immigrants. The large majority of unauthorized immigrants’ incomes go directly into fueling the US economy; it does not magically disappear like the eaten slice of pie in Rector and Richwine’s metaphor. And not only does each of those dollars add a dollar to the US economy, it adds more than a dollar—because the grocery store owner, too, spends it. And so on. These effects are among the fundamental concepts taught in introductory economics courses.

Second, and separately, Rector and Richwine’s analysis omits the effect of unauthorized workers on the productivity and profitability of the firms and farms and families who employ them—above and beyond the wage. Labor’s share of income is roughly half in the US economy broadly, and that’s certainly lower for unauthorized workers, who have less negotiating power than other workers. That means that unauthorized workers add value to the US economy amounting to at least double their wages.

Additionally, that direct effect also is augmented by multiplier effects, because owners of capital likewise spend most of that additional income on US-produced goods and services, whose providers do the same, and so on. Large portions of that income likewise enter public coffers through various excise, income, and property taxes. There is no inkling of this analysis in Rector and Richwine; they casually dismiss these colossal effects with their metaphor of the magically vanishing pie slice.

Rector and Richwine’s methods are equivalent to analyzing the economic impact of General Motors by 1) totaling up the wages of GM employees, ignoring the effect of those workers’ work on the incomes of GM shareholders, and 2) asserting that even that sum has no broader economic effects, because it all goes to GM employees, assuming they never spend it on anything made by other people. GM workers would then have no benefit the US economy, and therefore provide nothing to public coffers besides what they themselves pay in taxes.

Rector has a history of this lack of rigorous analysis. Six years ago, he did the same thing, producing without methodological basis exaggerated estimates of the cost of regularizing people who had entered the country illegally. He did some arithmetic that yielded a cost to US taxpayers in the trillions of dollars. Back then, the respected and non-partisan Center on Budget and Policy Priorities debunked Rector’s opinions, demonstrating that the “the effect of the immigration bill on future deficits is likely to be close to zero.” The non-partisan Congressional Budget Office likewise showed that Rector’s omissions were fatal to his conclusions, since the fiscal benefits of immigration reform were at least enough to offset the costs of regularizing unauthorized workers. Now, six years later, Rector is back with the same methods.

Conservative politicians and voters considering whether to support current immigration reform proposals have a right to know the genuine fiscal impact of those proposals. The Congressional Budget Office has not done that analysis for the 2013 Senate bill yet, but it has published this statement on how such analysis should be done by any qualified analyst. It describes how a full accounting would need to include numerous ways that immigration reform would raise fiscal revenue by stimulating the overall economy—such as through “the impact on private saving, capital flows, and interest rates, and the resulting effect on wages”.

Rector and Richwine’s methods reject any such technically sound, nonpartisan method. Once the Congressional Budget Office releases proper nonpartisan analysis by qualified technical analysts, the policy debate should proceed on that basis.

Authors:

Michael Clemens

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Global Prosperity Wonkcast: How to Avoid Another Bangladesh Factory Disaster - Kimberly Elliott

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 07 May 2013 14:08:27 +0000

The recent collapse of a factory building in Bangladesh that killed hundreds of people making clothing for export has shined a harsh spotlight on the lack of worker protection in such low-income developing countries. But my guest on this week’s show, CGD senior fellow Kimberly Elliott, says that the disaster is unusual only in its magnitude.

Workers engaged in the production of goods for rich country markets endure dangerous working conditions daily, suffering countless smaller, yet nonetheless fatal accidents, as well as illnesses and deaths caused by poor ventilation and exposure to lint, soot, and dangerous chemicals, Kim says. Manufacture of garments is especially prone to such abuses, she adds.

“This is an industry that’s very low wage, very low skill, highly mobile, and highly competitive, so the incentives are for factory managers to cut costs as much as they can,” she says.

“Buyers are looking around the world for the lowest prices they can find, and unfortunately we as consumers are complicit, because we’re looking for the cheapest clothing we can find.”

The collapse of the factory building in Bangladesh killed hundreds of people.

Kim, an expert on global trade and labor standards, says that consumers alarmed by these practices can exert some pressures for improvement, by writing to manufacturers, participating in protests, and joining campaigns for better working conditions. But avoiding garments from Bangladesh would hurt the very people that such efforts are meant to help.

“I think the worst thing consumers could do is overreact – that is, look for a Bangladesh label and say, ‘I’m not going to buy this at all.’” Kim says.

Yet this is exactly what some retailers are doing. Disney pulled out of Pakistan after a factory fire last September killed more than 200 people. News reports say that Disney is now preparing to stop buying garments in Bangladesh. Kim says that Disney’s action alone may be a useful “shot across the bow” – a sort of wake-up for Bangladesh to begin enforcing its own labor laws—but it would be terrible if the rest of the industry followed suit.

“This is three million jobs – a huge part of manufacturing in Bangladesh. It’s primarily female workers who are in these factories and they’re taking these jobs by choice – this is not forced labor – because it’s better than any other alternative they have,” she explains. “The alternative is getting married at 14 or 15 and starting to have kids at a very young age. So you don’t want to lose all these jobs.” (See also NYT Room for Debate).

A better approach, Kim says, would be for the United States and other countries that import Bangladeshi garments to encourage Bangladesh to join the Better Work program, a joint effort of the International Labor Organization (ILO) and the International Finance Corporation (IFC), the private sector arm of the World Bank.

“The program is really aimed at being a win-win. It’s trying to improve labor conditions in factories by working with governments and industries in a way that improves labor conditions and – simultaneously – the productivity of workers. Healthier, happier, better-rested workers are also more productive workers,” she says.

In Cambodia, for example, a Better Work program has helped to improve enforcement of labor standards while keeping the country competitive. Cambodia has used the Better Work program to attract buyers who hope to avoid the public relations fallout of workplace disasters such as those that occurred in Pakistan and Bangladesh.

Kim says that the United States could encourage Bangladesh to start a Better Work program and otherwise strengthen the enforcement of labor standards by offering duty-free, quota-free access to US markets in exchange. While the US has extended preferential trading terms to many developing countries, garments are often exempt. Some 90 percent of Bangladesh’s exports to the United States are apparel and these face an average tariff of 15 percent.

Offering to eliminate the tariff is potentially “a big carrot,” Kim says. “My proposal is to offer Bangladesh and the other poor Asian countries duty-free, quota-free access to the US market contingent on taking some serious steps – like the Better Work program – to improve working conditions.” (African countries already have such access under the Africa Growth and Opportunity Act (AGOA).

Individual firms might have a hard time exerting this kind of pressure on garment factories, because they’re all competing against each other. But an across the board offer from the United States would be extremely appealing. I suggest it seems like a no-brainer.

“That’s right,” Kim said. “And this would create an immediate 15 percent reduction in the factory’s costs because they wouldn’t have to pay the tariff.” That cut in production costs could help to cover the costs of improving worker safety, she says.

Other high-income countries – like Japan and members of the EU – have already instituted similar duty-free, quota-free preferences for developing countries, she says.

The stumbling block in the United States so far has been opposition from the US textile industry, Kim says.

What’s needed, she adds, is strong leadership from the US president, the office of the US Trade Representative, and particularly from Congress – which has the authority to write the legislation that would allow for duty-free, quota-free access for developing countries in exchange for better labor standards that could finally make disasters like the Bangladesh factory collapse a thing of the past.

My thanks to Catherine An for providing a draft for this blog post, and Alex Gordon for editing the Wonkcast.

Authors:

Lawrence MacDonald

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Global Health blog: Experimentation for Better Health: Lessons from the US for Global Health

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 06 May 2013 19:56:32 +0000

This is a joint post with Rachel Silverman.

In recent weeks, the public health world and political pundits alike have been abuzz about results from the “Oregon Experiment,” a study published in the New England Journal of Medicine that finds no statistical link between expanded Medicaid coverage and health outcomes such as high cholesterol or hypertension. Limitations of the study aside, the Oregon Experiment is a good example of the importance of rigorously testing all US health programs, rather than just assuming ‘more care = better health’. The Innovation Center at the United States Centers for Medicaid and Medicare Services, created under the umbrella of the Affordable Care Act, represents a new and encouraging approach to address this problem, an approach that we think has important lessons for global health.

As a quick introduction, the Innovation Center is using structured, institutionalized innovation and experimentation to search for a better way. Through its iterative and risk-tolerant experimentation with a range of payment models for US government-funded healthcare programs, the Innovation Center aims to improve health and health-care at lower costs for Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). And while “institutionalizing innovation” may sound like an oxymoron, the Innovation Center suggests that there can be tremendous benefits to doing so.

First, institutionalization can facilitate a systematic approach to trying new ideas and models, potentially with more discipline and rigor than ad hoc experimentation. Recognizing that innovation is less about a stroke of genius and more about careful and systematic hard work and persistence, the Innovation Center focuses on tackling any given challenge (e.g. lower costs while improving quality of care) by piloting a wide range of plausible new models and approaches. It implicitly recognizes that certain challenges, such as controlling health-care costs, are so complex that there is likely to be more than one viable solution.

A second benefit is that institutionalization of innovation can, to some extent, protect against the disincentives of failure. It is a well-known cliché that failure is an inevitable companion to innovation and invention. Yet failure is often discouraged or punished, particularly within governments and the non-profit sector, even though we all know that failure is necessary to improve. For example, many are citing the “Oregon Study” as confirmation of their own pre-existing assumptions about the broad inefficacy of government spending, rather than as evidence to inform tweaks and modifications of the program. Rarely do institutions readily welcome such vulnerabilities – but if innovation is institutionalized, there may be more space and protection to take risks with a high probability of failure but tremendous upside potential. Indeed, the Innovation Center is somewhat analogous to a venture capitalist for Medicare and Medicaid; it is willing to put down seed funding up front on a broad portfolio of high-risk, high-reward challenges, with the expectation that it (i.e. the US government) will accrue the enormous benefits if even one innovation succeeds at scale. Moreover, an institution focused on innovation will have a nuanced understanding of what is meant by ‘success’ and ‘failure’—that it is not simply black and white, but rather a continuum. Large failures are less likely with accumulating daily success which require strong measurement and information systems for constant learning.

A third benefit is that, at least when housed within a large implementing organization (such as the Centers for Medicaid and Medicare), the scale-up of successful models to the national level is more easily attainable. One ongoing challenge of innovation and experiments is that even with a successful idea or model at the pilot stage, scale-up may be impossible without an existing institutional structure. Many good or great ideas never reach scale for lack of institutional adoption or dissemination. By explicit linkage within a larger organization, and by giving the larger organization a mandate to adopt and scale-up evidence-based practice, the potential for systematic change is far more likely.

The very existence of this humble, still-young Innovation Center has much to offer and teach the global health community –including countries and governments who seek to improve their national health systems. For example, as South Africa works towards developing a national health insurance program, it will undoubtedly need to experiment to figure out what insurance arrangements will work best in the country – and it should consider establishing an innovation center for this purpose. Similarly, as India pursues a strategy to improve child survival, the country could experiment with a set of interventions to drive improvements in its worst-performing districts. Many other countries pursuing universal health coverage or specific health goals will need to experiment and learn systematically from trials and errors.

The Innovation Center also has much to teach the global health funding agencies such as the Global Fund and PEPFAR. For example, the recent multi-country experiment of the Affordable Medicines Facility for Malaria (AMFm) seems to be a one-off experience for the Global Fund and global health donors. But much was learned from this experiment, and there could be tremendous positive potential from regular experimentation within the Global Fund’s core institutional model. Under the leadership of the Global Fund’s Executive Director Mark Dybul, wouldn’t it be terrific if the Global Fund could experiment with a range of different payment schemes or other global-level financing strategies, and then incorporate the most effective models into its worldwide grant-making? For example the Global Fund could experiment with its results- or performance-based financing (see here and here for related options) to drive greater effectiveness and efficiency of its investments.

With a budget of $10 billion through FY2019, the Innovation Center is small potatoes relative to the ~$500 billion annual budget for the Centers for Medicaid and Medicare Services. But the $10 billion is quite a significant sum to enable large-scale research, with big sample sizes and multiple study arms. In contrast, the Global Fund’s total disbursements in 2011 were a relatively paltry $2.7 billion (per IHME estimates; total development assistance for health was $28 billion). The difference in scale is potentially important, and will help to define the scope of experimentation within an analogous innovation center in the Global Fund.

The bottom line is that while the Innovation Center is an incredibly encouraging model for those of us who believe in evidence-based, forward-looking health practice and constant learning – and for those who believe American health expenditure can and should lead to better health. We hope global health funders are paying attention.

Victoria Fan is a research fellow and Rachel Silverman is a research assistant at the Center for Global Development.

Authors:

Victoria Fan

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Global Health blog: Is Health Insurance Good for Health?

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 06 May 2013 19:13:19 +0000

This is a joint post with Victoria Fan.

The New England Journal of Medicine recently published the results of “the Oregon experiment” based on the 2008 US Medicaid program expansion in Oregon. The study is one of very few randomized control trials on publicly-subsidized health insurance that exists to guide health policy, and found what some commentators considered a disappointing result: while health care utilization increased and households were protected from financial hardship, expanding Medicaid coverage had “no significant impact on measured physical health outcomes over a 2-year period.”

Should we be surprised? To date, there are few countries that have demonstrated a causal link between health insurance/coverage and physical health status using a randomized trial, and many of the studies that find a linkage used observational, or non-experimental, methods (see here and here for comprehensive reviews of the literature). For example, a 2012 observational study found that the Thai health insurance program reduced infant mortality by 6.5 per 1000 live births.

But in many studies there are no detected associations between expanded health insurance or risk pooling with population health outcomes. For example, an update on an experiment in Mexico on the Seguro Popular public insurance program finds out-of-pocket spending dramatically reduced, but impact on health status remains elusive.

For studies with null results, the absence of evidence does not mean an evidence of absence. There are many reasons why detecting a causal effect between insurance and health outcomes is complex and challenging. Methodologically, detecting changes in health status in a short time period provided from an academic study is very difficult. Mortality is a rare event, requiring large sample sizes to detect change (which is probably why the Oregon experiment did not measure it), while morbidity is still relatively infrequent (which the study did measure) – but also not so easy to change even with health insurance (just think about the last time you tried to lose weight, stop smoking, or reduce your blood pressure!)

In addition to methodological difficulties, the mechanism between health insurance and health status operates through increasing the utilization of health care, holding individual, household, and social and community factors constant. If insurance does indeed increase utilization, but does not have an impact on health outcomes amenable to efficacious clinical interventions, then there are many other factors that could be at play: poor clinical quality on the provider side; poor adherence or compliance of medicines by patients of treatment; or other unobserved behavioral variables on both sides.

Moreover, while this may seem obvious, changes in utilization and associated health outcomes need to be directly related to the benefits offered under an insurance scheme. In other words, changes in physical health may have more to do with the scope and content of benefits plans, the structure of and incentives associated with provider payment and quality oversight mechanisms, and the amounts of premiums and co-pays – and much less to do with the mere accessibility and availability of services through insurance. Hence it holds that insurance may be a necessary but not a sufficient condition for improving health outcomes.

Indeed, these various possibilities are mentioned by the Oregon experiment authors. Compliance and treatment-seeking behaviors were likely critical; for example, the study found that there was no effect on the use of hypertension medications and hence, not surprisingly, no statistically significant change in blood pressure in the experimental group.

Physical health measures aside, one particularly encouraging finding in the Oregon experiment is that within just two short years there was a detected impact on mental health and several measures of self-reported health. While it is easy to disregard self-reported health measures, there are many studies out there that show a strong correlation between self-reported health and long-run mortality (see here, here, and here for example) – and these studies are the reason why such mental health measures are often used when it is impossible to detect mortality changes.

So what are the lessons for global health? In the drive to universal health coverage, as championed by the UN and others, we should remember the evidence base is still developing, and that key interventions delivered with quality as well as people’s own behavior and incentives are important factors that will drive health status improvements in the short-term. Countries should not shy away from embarking on robust experimental and quasi-experimental studies (e.g. through a lottery) as they expand pooled funding for health including through insurance – and in doing so they can learn a great deal to improve their health programs.

Authors:

Amanda Glassman

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Development blog: Evaluate India’s Direct Benefits Transfers

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 06 May 2013 15:15:11 +0000

This is a joint post with William Savedoff.

Earlier this year, Nancy Birdsall and I laid out why India’s new cash transfer program is superior to current in-kind subsidy programs on which the government spends $26 billion a year with no discernible impact on poverty. While not a panacea, the new program has a lot going for it – cash transfers have been shown to work for poverty reduction in many settings, the program uses a biometrics-based system to identify beneficiaries and process payments, and the country has experience in implementing similar programs like the JSY – a cash transfer conditional on a facility birth.

All that is good news, but the new program will not be influential on India’s broader subsidy policy and its misused budget unless it is rigorously evaluated and –if results are promising- scaled up. The program, known as the Direct Benefits Transfers (DBT), is the subject of extensive debate in the press and public life – where for years the interest groups that benefit from food, fertilizer and kerosene subsidies have resisted major changes. The government has been repeatedly accused of pre-electoral pandering (see here, for example), risking the further politicization or possible cancellation of the program if the party in charge of the national government changes.

If instead, India’s policymakers were armed with independent information on the net impact of the DBT on the conditions that the program seeks to alter –nutrition, consumption, asset accumulation and other aspects of well-being among the poor- and could compare those outcomes to business-as-usual results, there would be a fighting chance for the program (if effective) to subsume ineffective in-kind subsidies and improve the well-being of the poor. Cash transfer programs have been rigorously evaluated all over the world, and these evaluations have played an important role in adjusting implementation strategies to enhance impact, and –in Mexico- had much to do with the survival of the effective Oportunidades conditional cash transfer program during two periods of political transition.

India can do this too. And since DBT is set to be the largest cash transfer program in the world, India would be creating a truly global public good in knowledge.

So far, DBT has been rolled out in 16 states and remains small-scale in Indian terms, though enormous in everyone else’s book –16 million beneficiaries in a country of 350 million eligible poor. The next phase of enrollment is set to start in mid-May, so we ask: is there any chance to randomize the roll-out in districts before then? Or ahead of the next phase of roll-out? Just this would enable the Ministry of Statistics or a university to field a baseline and follow-up survey to assess impact.

This is an enormous opportunity not to be missed. All the methodological issues have been hammered out before. The new enrollment phase is about to begin. A clear answer regarding the program’s impact will either save India huge amounts of money in the future or provide credible evidence to preserve the program if it is good. The Indian Government should seize this opportunity now.

Authors:

Amanda Glassman

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Rethinking US Foreign Assistance: Foreign Assistance Dashboard Tweaks and New Data

cgdev.rss@cgdev.org (CGD RSS feed) — Thu, 02 May 2013 15:38:34 +0000

If you haven’t looked at the Foreign Assistance Dashboard lately, I’d suggest you do so. The government’s online platform and (eventual) one-stop-shop for storing and visualizing US aid data has some new features. There are new displays of existing data, plus the first set of USAID and MCC quarterly financial data. These tweaks and more timely information are a step in the right direction, but more US federal agencies need to leap onboard and start adding their data to the mix.

Launched in December 2010, the Foreign Assistance Dashboard is intended to serve as the clearinghouse for all US foreign assistance data. State Department’s F Bureau is in charge of coordinating, collecting, coding, and visualizing data from all 22+ agencies that disburse aid—no small feat. And while the project is still a work in progress, kudos to State for continuing to upgrade the site.

Here’s the list of new features:

Improved infographics on how funding from the primary foreign aid agencies (State, USAID, and MCC) is budgeted, obligated, and spent by sector (new version, old version).
An upgraded FAQ page adding some visual and organizational coherence to the long list of commonly asked questions on US foreign assistance (new version, old version).
Quick links to important policy documents on the United States’ commitment to aid transparency (new version, old version).
Data details on which agencies have what kinds of data published for what years(new version, old version).

Old Version

New Version

Beyond the new visuals, the Dashboard also incorporated its first quarterly update of FY2013 data from USAID and MCC. Last fall the White House issued OMB guidance requiring agencies to report aid data to the Dashboard on a quarterly basis (see pg. 5 section 3.2). USAID and MCC are the first to provide up-to-date data on their first quarter FY2013 obligations and disbursements as they currently stand. Bravo!

While the Dashboard information is still limited to financial data, the “timeliness” of the quarterly updates is important so users can track, throughout the year, how agencies allocate assistance. The challenge, of course, is that quarterly data from just two agencies doesn’t paint a complete picture of where and how the United States gives aid. I hope, though, that while USAID and MCC are leading the way, that other agency updates will soon follow. Perhaps Treasury or Department of Defense will be next? Even State?

Authors:

Will McKitterick

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Global Health blog: From Audits to Results: A Needed Paradigm Shift in Health Aid

cgdev.rss@cgdev.org (CGD RSS feed) — Thu, 02 May 2013 15:10:26 +0000

This is a joint post with Amanda Glassman.

The World Bank’s Africa Health Forum: Finance & Capacity for Results during its 2013 Spring Meetings brought together ministers of finance and of health from 30 African countries in a unique opportunity for mutual listening between countries and partners. One recurring theme in forum and in the first panel was that results-based financing (RBF) – where financing is conditioned on achievement of results in health – is a key approach to driving value for money. In short: RBF = more money for more health. (You can watch the recorded ministerial discussion here.)

The reasons for doing RBF are persuasive, not only for donor agencies but also for countries. Indeed, several ministers in the forum voiced with remarkable consistency their support of RBF – even in countries deemed as ranking low in ‘governance’ or ‘capacity’. By linking payments to specific outcomes, RBF makes a donor more accountable to its constituencies and also increases the mutual accountability between the donor and the country by focusing the contract terms on shared goals and verified results.

The Alphabet Soup of Results-Based Financing:

There are many forms of programs and financing that pay on outcomes. The alphabet soup of acronyms includes at least P4R, PBF, PBR, P4P, FCPR, DIB, SIB, AMC, TrAID+, RBP, RBA, and OBA. While related, these terms are defined and used by different authors differently (see here and here for various definitions). Learn about CGD’s cash-on-delivery (COD) initiative here, which can be seen as a unique form of results-based aid. See also CGD’s value for money initiative here.

This latter point on mutual accountability is a reason why RBF represents a paradigm shift in global health and development aid – from what might be called the ‘auditing and accounting paradigm’ to ‘performance and results paradigm’. Whereas the decision rules for withholding funding in the accounting paradigm can be quite arbitrary, the decision rules for withholding funding in the performance paradigm are much more explicit. And the explicitness of rules in the contract creates mutual accountability of both the donors and the countries.

In the auditing and accounting paradigm of aid, it has been traditionally thought that donors achieve accountability of its funds through expenditure and receipt tracking – that is, the evidence of receipts and purchases of inputs (e.g. salaries, health commodities, transportation, etc.). This approach often entails large transaction costs for reporting and does not necessarily improve results on shared goals e.g. health outcomes.

Perhaps more worrisome, however, is that this approach lends itself to a kind of unidirectional accountability focused on countries: failure to perform perfectly makes recipients subject to occasionally random decision rules by donors on what is deemed as ‘corruption’ or misuse – and hence a lack of accountability of donors. One could argue that the Global Fund to Fight AIDS, Tuberculosis and Malaria – and the countries it supports – were the victims from the exaggerated ‘badness’ of the small, rare findings made from auditing (see here).

RBF thus represents a means for mutual accountability because it not only ensures accountability to donors of country behavior and performance, but it has the potential to increase accountability to countries of donor behavior and predictability of financing. By linking payments to results in health, RBF can potentially reduce the occasionally random decisions made by donors to stop or start funding, often (but not always) based on accounting paradigm.

On top of that, RBF also promotes accountability of governments to their citizens. By requiring the independent verification of results, RBF encourages governments to do more than boast increases in budgets, and it gives service providers an incentive to show up to work and actually provide services. In short RBF can produce a cascading effect of aligning incentives from the top to the point of care.

But shifting from the ‘auditing and accounting paradigm’ to ‘performance and results paradigm’ presents a number of obstacles, most related to entrenched donor beliefs and practices. For one, donors are used to defining ‘results’ as receipts or ‘expenditures’ rather than results in health, and judge success by the money they spend rather than the results they buy. Donors too are afraid of audits finding a rare event that in turn would affect their future revenues – and a focus on performance does not deter such audits. Donors can be wary of focusing on results because they feel that they cannot genuinely account for what they contributed, and they fear that by paying for results, countries may be profiting double. Also, many bilateral agencies cannot withstand the uncertainty of making disbursements linked to performance rather than on disbursements made on receipts. These arguments have been presented extensively (and rebutted) before.

The ‘accounting and auditing paradigm’ is not mutually exclusive from the ‘performance and results paradigm’. But without trying the ‘performance and results paradigm’, the donors put at risk whether they are buying results in health or buying receipts.

The World Bank’s recent Africa Health Forum highlighted that the World Bank has somehow overcome these historical obstacles, and stands to be a trailblazer in RBF. With support from the Norwegian and British governments, the World Bank has supported 17 African countries with national RBF programs or ongoing pilots, and another 15 under advanced planning or discussion through the Health Results Innovation Trust Fund (HRITF) (as well as a handful of countries outside of Africa). While funding channeled through HRITF still represents a small fraction of total World Bank funds, it leverages mainstream IDA financing creatively and signifies an early disruptive innovation. The World Bank is also making it easier for all health sector operations to focus on results payments and dispense with cumbersome input-tracking by using the new Program for Results (P4R) Financing (also see here for recorded discussion on P4R at CGD).

Other donor agencies such as PEPFAR and the Global Fund need to take the courageous steps to a much needed paradigm shift – and potentially learn from, if not build on, HRITF’s effective platform. Learning will ensure that approaches to RBF can evolve and become stronger and more effective. In applying and constantly learning from RBF, donors may even be able to overcome the prevalent forces of ‘paralytic risk aversion’ that have long plagued these bureaucracies.

Source: The World Bank, 2013

Victoria Fan is a research fellow and Amanda Glassman is senior fellow and director of global health policy at the Center for Global Development. The authors thank Soji Adeyi, Bill Savedoff, Monique Vledder, and Jenny Ottenhoff for excellent comments.

See Using Results-Based Financing to Achieve Maternal and Child Health - Progress Report 2013 for more information on HRITF.

Authors:

Victoria Fan

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Global Health blog: Who’s Blowing Smoke on Energy Poverty and the Global Disease Burden?

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 30 Apr 2013 12:40:39 +0000

Me, perhaps. In my last post on why President Obama should make electricity his signature Africa policy initiative, I claimed:

Energy Poverty is deadly. The latest estimates show 3.5 million premature deaths per year—more than AIDS and Malaria combined—from household air pollution from solid fuels. Many Americans may take electricity for granted, but it’s unnecessarily a life-and-death issue for too many people who have no options other than burning wood or other biomass.

As one adept reader (Andrew Noymer at UC-Irvine) rightly pointed out, the 3.5 million deaths I cite are global, but my post was about the lack of electricity in sub-Saharan Africa. So, in the interest of clarity, here are the data on premature deaths from The Lancet, by disease and disaggregated by subregion:

Premature Deaths, 2010

Source: A comparative risk assessment of burden of disease and injury attributable to 67 risk factors and risk factor clusters in 21 regions, 1990–2010: a systematic analysis for the Global Burden of Disease Study 2010. The Lancet. 2012 Dec 13; 380: 2224–2260.

Therefore, HIV/AIDS and Malaria in Africa, at roughly one million deaths per year each, are both estimated to be twice as deadly as indoor air pollution. These numbers are all horrifying. And I still believe that energy poverty should be considered an urgent public health issue because:

Indoor air pollution is killing nearly half a million Africans per year. WHO estimates more than 70% of Africa is still reliant on the use of solid fuels for cooking and heating, which is a major contributor to respiratory and cardiovascular diseases.
Health clinics need lights and fridges. Up to 50% of health facilities—serving an estimated 255 million people—are consistently without electricity. Many rural clinics rely on kerosene for lighting and charcoal for sterilization of medical equipment which not only leads to indoor air pollution but also increases risk of infection for patients and the spread of diseases. Some 60% of refrigerators used in health clinics have unreliable electricity, compromising the effectiveness of life-saving vaccines and other pharmaceuticals.
All the indirect effects on health. Lack of electricity also contributes to poor health outcomes indirectly by preventing the economic opportunities that can boost incomes and pull people out of poverty.

There are many, many reasons why access to electricity should be considered a top development priority—and why President Obama should make reducing energy poverty his legacy in Africa. Preventing unnecessary deaths of thousands of poor people seems like a pretty good one on its own.

This blog benefitted from comments from Victoria Fan, Amanda Glassman, Stephanie Majerowicz, and help from Jessica Carsten.

Authors:

Todd Moss

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Rethinking US Foreign Assistance: Foreign Aid in Congress: Five Contradictions

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 29 Apr 2013 13:54:14 +0000

I was pleasantly surprised by the House Foreign Affairs Committee hearing last week on the FY2014 USAID and MCC budgets. I expected a remix of the partisan spats I watched two years ago. Instead, there was impressive congressional turnout plus serious questions and thorough answers. There was even some friendly competition between USAID and MCC. But five contradictions come up anytime foreign aid is on the Hill and the latest budget hearing was no exception.

It's worth watching the webcast to catch the high notes: calls for rethinking how and where and why the United States provides foreign assistance; concerns about the fragmented aid architecture; praise for the MCC approach to selecting and working with countries and evaluating programs; support for USAID's procurement, staffing and food aid reforms; and applause and pressure for USAID and MCC to share more and better data.

1. Foreign aid must support national security, but don't give it to anyone who doesn't like us. Republicans and Democrats alike say foreign aid must support national security interests. But more often than not, someone will also say the United States should not give aid anywhere there is hostility to the United States (this came from Rep. Dana Rohrabacher (R-CA) yesterday, but it's not the first time I've heard the sentiment, nor will it be the last). But how can the United States use aid to improve national security if it only gives it in places already wholly supportive of the United States?

2. Cut foreign aid spending, but not on x. Reducing federal spending is the name of the game on Capitol Hill. Everyone wants to see cuts as long as it isn't in their preferred sector or country or initiative. The debate between the administration and Congress on priorities is part of the process. But the attempt to please everyone results in a little bit of money in a lot of places and often not much to show in the way of results which, it turns out, isn't in anyone's interest.

3.You are responsible, but who is in charge? Hearings are designed to conduct oversight; government witnesses are expected to defend their budgets, programs and results. But as Rep. Lois Frankel (D-FL) asked yesterday, "Who is in charge of development in the world?" Is it Defense? State? USAID? MCC? And if almost all of the aid budget is pre-allocated to presidential initiatives and congressional directives, how responsible is any agency head for overall spending choices or changes?

4. Brand it, damn it. The last time I heard so much about branding US foreign assistance with the American flag, Rep. Henry Hyde (R-IL) and Rep. Tom Lantos (D-CA) were in charge of the House International Relations Committee. It was back in full force last week. Rep. Brad Sherman (D-CA) called for a "big flag on the bag" and Rep. Ted Yoho (R-FL) echoed the call. There are benefits to well-marked aid (in response to humanitarian emergencies, for example). But there are times when brand competition (between US government agencies and multiple NGOs and/or contractors) is just silly and other times the flag is counter-productive or dangerous to the people running the programs and receiving the benefits (think democracy and human rights programs or food aid in Syria; see also contradiction number 1 above). My former colleague Ruth Levine says to rebrand America, unbrand aid.

5. 85 percent of constituents want to cut foreign aid; 15 percent approve of Congress. Even when foreign aid budgets were growing and the United States was creating new agencies like the MCC and the President's Emergency Plan for AIDS Relief, I'd sit in conversations with congressional staff who would say "you know I care about these issues, but they really don't sell in my district". Today, I hear it in starker terms, like "the only area Americans agree we should cut from the federal budget is foreign aid" (Americans also think foreign aid makes up 25 percent of the federal budget and think it should be more like 10 percent, but it’s really closer to one percent). Yesterday, it was Rep. Yoho who said 85 percent of the people in his district want to end foreign aid. Rep. Gerald Connelly (D-VA) said he hears this all the time at town hall meetings. I can't help but think congressional approval is also 15 percent. Maybe we can set aside numbers that don't really tell us very much and get on with things?

I know there are lots of reasons these contradictions exist, but if we could get past them--or even agree to set them aside--the administration might have more space to make difficult but necessary choices about where and how it invests development dollars. In return, Congress and the taxpayers might finally get the evidence they need that US development dollars get results and support America's economic, moral and security interests.

Authors:

Sarah Jane Staats

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Rethinking US Foreign Assistance: Foreign Aid Remix: Yohannes and Shah Head Back to the Hill

cgdev.rss@cgdev.org (CGD RSS feed) — Wed, 24 Apr 2013 16:08:25 +0000

MCC CEO Daniel Yohannes and USAID Administrator Rajiv Shah are heading back to Capitol Hill Thursday to testify together before the House Foreign Affairs Committee. I expect Yohannes and Shah will sing different parts of the same tune: the United States is prepared to do more with less as it strives to fulfill the administration’s global development vision. But it should also be a remix of their joint hearing two years ago with questions on how Congress should prioritize among US development programs. Shah and Yohannes can hit some new high notes on how their agencies are being selective with aid dollars, sharing more aid data and doing better evaluation. They should also be clear about the differences between USAID and MCC. And let’s hope the committee members can avoid the low notes from two years ago when partisan spats (including some in Latin) marred what could have been an important development policy conversation between the executive branch and Congress.

Here’s a quick refresher on the issues and a reminder of what portion of US aid dollars USAID (35 percent) and MCC (2 percent) managed in 2011.

_{Source: U.S. Overseas Loans and Grants (Greenbook). FY 2011 economic assistance obligations. http://gbk.eads.usaidallnet.gov/ *Other includes: Peace Corps, Department of Interior, Department of Labor, United States Trade Development Agency, United States African Development Foundation, Inter-America Foundation, Environmental Protection Agency, Department of Justice, Department of Commerce, Department of Transportation, Federal Trade Commission, Department of Energy, Department of Homeland Security, Overseas Private Investment Corporation. (Thanks to Sarah Rose and William McKitterick for compiling data.)}

Authors:

Sarah Jane Staats

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Rethinking US Foreign Assistance: Kerry on US Development Investments: Doing More with Less

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 23 Apr 2013 17:37:35 +0000

The $52 billion FY2014 international affairs budget request is a small investment with big returns for the United States and the world, Secretary of State John Kerry said in congressional hearings last week. The request is the same amount Congress allocated in FY2013 and a four percent cut from FY2012. Kerry told members of Congress that the State Department and USAID are prepared to do more with less.

During his eight-plus hours of testimony, Kerry answered national security and foreign policy questions on everything from Pakistan to US trade with Africa. On the overall development approach, he said:

When it comes to shoring up our economic health and protecting our national security, I believe our development work is one of our strongest assets. So let me be clear; development is not charity, it's an investment... Eleven of our top 15 trading partners were once beneficiaries of U.S. foreign assistance. You just can't afford to pull back from what that lesson tells us. South Korea, that I was just in, 15 years ago was an aid recipient. Today, it's giving aid around the world. That doesn't mean we can't work in better, more efficient ways.

Kerry added that US development investment are just "one penny on the American taxpayer dollar" and said the FY2014 budget request aims to get an even better return including through an overhaul of US food aid. Secretary Kerry also hinted at contracting reforms in the President’s Emergency Plan for AIDS Relief. (My colleague Sarah Jane Staats mentions some of the other ways the administration proposes doing more with less in the FY14 budget.)

I’ll be listening to hear more about these reforms (and others?) during the next round of FY14 budget hearings with Rajiv Shah from USAID, Daniel Yohannes from the Millennium Challenge Corporation, and Jacob Lew from the Department of Treasure (see schedule below).

Upcoming Budget Hearings

Wednesday, 4/24

9:30 am
Jacob Lew, Dept. of Treasury, Int. Programs
House Appropriations Committee

10:00 am
Rajiv Shah, USAID
Senate Foreign Relations Committee

1:30 pm
Rajiv Shah, USAID
House Appropriations Committee

Thursday, 4/25

10:00 am
Rajiv Shah, USAID & Daniel Yohannes, MCC
House Foreign Affairs Committee

Authors:

Jenny Ottenhoff

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Global Prosperity Wonkcast: US Immigration Reform and Guest Workers – Michael Clemens

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 22 Apr 2013 23:58:56 +0000

Last week, a bipartisan group of US senators known as the Gang of Eight introduced comprehensive immigration reform bill that includes a provision for increased temporary, low-skill work visas. CGD senior fellow Michael Clemens, a leading expert in migration, labor mobility, and development, has welcomed the proposal as good for development.

He and Lant Pritchett argue in a new CGD brief that the visas are a four-way win: for the US middleclass, US low-skill workers, border security, and for the migrant workers themselves. But he adds that

the proposed increase is too modest to address the huge, un-met demand for low-skill workers in the United States.

“I would call [The W Visa program] a modest program,” Michael says. “This is an incredible opportunity for people outside the country to benefit from the US labor market, and an incredible opportunity for the American economy to benefit from low skill labor, as it always has.”

Increasing the number of temporary work visas during a time of continued high unemployment is politically difficult. Why, some Americans ask, should we let more people cross US borders to find employment when so many US citizens can’t find jobs?

The answer, Michael says, is simpler than you may imagine. And he has the numbers to prove it.

“The US economy will need a lot of low-skill workers over the next decade,” Michael explains.

Even if all 1.7 million Americans who are expected to enter the labor force by 2020 took up low-skill jobs, he says, that still would be insufficient to meet the anticipated demand for just one subset of low-skilled work: home-based care, which is expected to require 1.9 million new workers during the same period.

“So there are only two options,” Michael says. “The jobs are not going to get done, or people from other countries will do them. The economy massively needs low-skill labor --make no mistake about it.”

Adding more authorized, low-skill immigrants to the US economy would bring many other concrete benefits to US citizens as well, Michael explains. Unfortunately, many of these benefits are not easily seen.

“The migrants that come here to work are also consumers, and they buy things,” Michael explains. “Migrants also help keep entire industries alive. Certain subsectors of agriculture would not be viable without migrant labor picking them.”

Some people argue that such workers are being exploited. Michael says this should be considered in light of the alternatives available if they had stayed in their home countries.

His research (see here and here ) shows that low-skill migrants who come to the US to work multiply their earnings by ten times or more when they cross the border to perform work such as picking crops, cleaning houses, or helping to care for children or elderly people in their homes.

“In many US states, minimum wage is $9.70 an hour. The minimum wage in Mexico is .57 an hour,” Michael says. “That’s the kind of economic opportunity we’re talking about. We’re talking about a life changing re-valuation of the labor of hard-working people.”

To learn more about many benefits of increasing the number of legal, temporary workers in the United States, read the brief. To understand more about the intersection of immigration reform politics and CGD’s work, see Beth Schwanke’s recent blog posts (here and here). Or just dive in and listen to the Wonkcast.

My thanks to Alex Gordon for editing the Wonkcast and providing a draft of this blog post.

Authors:

Lawrence MacDonald

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Global Health blog: World Immunization Week: Leaders and Laggards

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 22 Apr 2013 22:04:28 +0000

This is a joint post with Denizhan Duran.

Immunization saves millions of lives, is among the most cost-effective health interventions ever developed, and has attracted a great deal of attention and funding from public and private donors in recent years. Indeed, global health leaders have committed to making this the ‘Decade of Vaccines’ with the vision of delivering universal access to immunization by 2020, and the World Health Organization has put out a Global Vaccine Action Plan (GVAP) to serve as a blueprint to achieving this goal.

The plan – which was endorsed by 194 countries – has ambitious goals and indicators such as eradicating polio by 2018, meeting 90% coverage targets in every region, and exceeding the Millennium Development Goal on reducing child mortality by 2020. But achieving these goals is contingent upon closing a funding gap that is estimated to be $23 billion in the next decade.

So three years into the ‘Decade of Vaccines’ and on the occasion of World Immunization Week, we ask: how will all 194 countries be held accountable to these goals moving forward?

In the journal Vaccine’s Decade of Vaccines supplement – a collaboration featuring 30 articles on different aspects of vaccination - we propose a way to rank and compare countries in terms of their commitment to vaccination. We look at a multitude of indicators on performance – as measured by coverage, stability and equality – as well as financing and institutions – as measured by spending per capita and having a technical advisory group which provides evidence-based support on vaccine introduction. In addition to looking at recipient countries, we look at how much donors contribute to global vaccination efforts (research and development, contributions to GAVI and Global Polio Eradication Initiative).

We find that many populous middle-income countries, such as India, Nigeria and Indonesia, are lagging behind: together, these countries are home to 12 million unvaccinated children, which is over half of the total number of unvaccinated children. We also find that many middle-income countries finance their own vaccination programs, and spend more per infant, mainly because they pay more per vaccine. Many of these countries are also lacking institutions such as technical advisory groups, or multi-year plans, to ensure better vaccination planning and outcomes. In terms of donors, we find that Norway, United Kingdom and Ireland contribute the largest share of their GDP into these initiatives.

The geography of vaccination: sub-Saharan Africa and populous MIC lag behind in terms of performance. Source: Glassman et al, 2013

The financial constraints faced by lower middle-income countries as they move towards full immunization is set to exacerbate as many will cross GAVI’s graduation threshold of $1,500 income per capita, losing both financial support and –after a five-year transition period- access to GAVI’s lower prices. An article in the supplement provides an overview of these issues, suggesting that more financial support is not the answer, but instead greater political will and technical assistance.

What could be done? Technical assistance and market shaping both carry huge potential: just last week, the GAVI Alliance secured a 30% price reduction for the pentavalent (five in one; DPT, Hep B, HiB) vaccine in India. A more permanent solution could be a pooled procurement scheme between middle-income countries, where they purchase together to secure lower prices, or simply the extension of GAVI prices to countries that graduate or have income per capita close to graduators, as in the Philippines.

Almost 200 countries have signed on to the Global Vaccine Action Plan, but this plan will only achieve its targets if immunization is perceived as a truly global effort and the laggards – concentrated in middle-income countries – are incentivized to perform better, and are given a hand.

Authors:

Amanda Glassman

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Rethinking US Foreign Assistance: Budget Bonanza: What You Need to Know on Foreign Aid, Food Aid, and the IMF

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 16 Apr 2013 14:42:43 +0000

Statutory deadlines and sequester disarray aside, we at last have President Obama's FY2014 budget request. It's not the grand vision that most budget requests are—instead, it's being touted (or derided) as a budget of compromise, particularly on the domestic front. Unlike a normal budget process, we already have the House and Senate budget resolutions, so this is broadly more about a longer-term fiscal agreement than about influencing specific FY14 funding numbers.

Related Blog

It’s Half-time at the Global Fund

The president's request was $48.2 billion for the International Affairs base budget (the Overseas Contingency Operations, more commonly known as OCO, request brings it up to $52 billion). This is nearly the same as the levels enacted in FY13 and a four percent cut from FY12. The House set base spending for IA at only $38.7 billion; the Senate at $45.6 billion. So we'll need quite a lot of compromise between the House and Senate before we see an appropriations bill signed into law—and all before the new fiscal year starts on October 1st.

My colleagues take a look at what will matter from the president's request moving forward:

Sarah Jane Staats gives us an overview and says the international affairs budget was carved by the smart scalpel she’s been looking for, rather than the sequestration ax. The emphasis on selectivity, evidence-based decisions, and multilateralism is putting the 2010 Presidential Policy Directive on Global Development in action. She also takes a look at what’s missing.

Kim Elliott tells us the food aid reform proposal is a step in the right direction, if not the wholesale reform she and others at CGD have supported. Forty-five percent of the emergency food aid budget will be available as cash, which will mean increased flexibility to best address hunger and malnutrition in particular circumstances. She brings us through the kind of decisions that will need to be made on how to deliver this flexible food assistance, as well as what the reform could mean for upcoming trade negotiations (hint: it’s good).

Scott Morris is relieved the IMF quota request makes it in. He writes that he's hopeful Congress will be convinced that the IMF does matter for US jobs and national security. And, if you’re an aspiring budget nerd like me, you’ll appreciate his explanation of the history of the CBO scoring issue.

A few other things of interest:

More support for trade and investment in developing countries. OPIC, which self-finances and has returned billions to the US Treasury over the past three decades, would get up to 33 percent more in administrative expenses—this would support $5.7 billion in new financing. USTDA would get $15 million more in funding. But apparently we haven’t gotten over the Commerce Department merger plan. Can we please leave the development-related agencies out of it?

Global Climate Change Initiative.* The request is for $837 million--disappointing for an administration that has said climate change action is a priority. As my colleagues at Climate Advisers tell me, the $909 million for GCCI touted as a six percent increase over the FY12 numbers appears to include all of the funding requested for the Global Environment Facility (GEF), rather than the usual half--remove that, and you get $837 million. Not surprisingly, there’s silence on how the US will help fund the Green Climate Fund but I do welcome the emphasis on the multilaterals.

Social Impact Bonds, or, in USG speak, “Pay for Success.” Let’s hope the Pay for Success model, which would receive increased funding under this request, can be scaled up in the future to include development projects. Like SIBS, funding for DIBs projects would initially be provided by private investors, who are then paid back (with a return) by donor governments like the US if evidence shows that the programs achieve pre-agreed to outcomes. Check out our efforts on DIBs here. Working Group report coming soon…inclusion in the budget request next year?

See more from our friends over at USGLC breaking all the numbers down.

We'll be watching the budget hearings closely and crossing our fingers for something resembling regular order on the FY14 appropriations cycle.

*This paragraph has been corrected from the original post, which cited incorrect funding numbers.

Authors:

Beth Schwanke

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Global Prosperity Wonkcast: Illicit Financial Flows and the Three Ts of the G-8 Agenda – Alex Cobham

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 16 Apr 2013 13:11:24 +0000

The day before we recorded this Wonkcast news broke of an agreement between the United Kingdom, France, Germany, Italy, and Spain to pilot “multilateral automatic tax information exchange.” My guest, research fellow Alex Cobham, explains why this is so important, why financial secrecy and international tax law seem suddenly to be at the top of the global economic policy agenda—and why this could be especially good news for developing countries.

Alex, who joined us recently as a CGD research fellow based in our European office in London, is an expert in trade, tax and transparency—the so-called “Three Ts” that UK prime minister David Cameron has said will be his priorities during the 2013 UK presidency of the G-8. I tell Alex that while Cameron’s plan to push on these issues is understandably news in the UK, I haven’t seen much evidence that the issues are gaining traction in the United States.

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Expert profile: Alex Cobham
Policy Paper: What’s Yours Is Mine: New Actors and New Approaches to Asset Recovery in Global Corruption Cases

“Give it time,” Alex replies. “It’s an agenda that’s been building slowly and it’s finally starting to be appreciated—not only for developing countries but for places like the UK and the US.”

To explain why trade, tax, and transparency matter so much for developing countries, Alex offers a story about research he conducted for the World Bank, and the findings with respect to Zambia which were featured in the Why Poverty documentary Stealing Africa.

A few years ago Zambia was on the brink of crossing into middle-income status, but eight out of ten people still lived on less than $2 a day and Zambia was—and remains—heavily reliant on earnings from the country’s main export, copper. For complex reasons involving the three Ts, Zambia has reaped only a fraction of the potential benefits from its copper exports.

“In 2008, if Zambia had received the price for its copper that Switzerland declared on re-exporting the exact same copper, then Zambia’s GDP would have nearly doubled,” Alex says. In fact, the vast majority of the copper never even transits Switzerland.

What seems to have been happening is this—though the process is far from transparent: A Zambian company, or a Zambian subsidiary of a Swiss company, sells the copper it mines to a Swiss-registered company at prices greatly below the market value. The Swiss-registered company then resells the same copper at world prices (and in some cases declares a price far above the world price), taking the difference as profit in low-tax Switzerland, and in the process depriving Zambia of both export earnings and tax revenue on the sale.

Despite the efforts of a new Zambian government to strengthen enforcement of trade and tax laws, Alex says, this sort of tax evasion continues to be rampant. “Zambia is still losing an enormous amount of corporate tax revenue,” he says. Although there are now controls on export prices, other avenues of profit shifting remain. Of the many copper mining companies in the country, only two have declared profit in the last two years, a time of booming copper prices. “Prices are at the highest they’ve ever been,” Alex says. “If these companies aren’t making a profit now there’s no reason for them to be in Zambia at all.”

This Zambian case is but one example of trade mispricing, a widespread problem that is attracting growing attention across the globe, Alex says. In recent blog posts on tax haven secrecy and anonymous company ownership, Alex explains how these problems are exacerbating the fiscal problems of rich countries. “That’s why we’re starting to see interest in this,” Alex says. “It’s not just a development issue; it’s an issue for all of us and I think we’re going to see real progress in the next year or so,” he adds.

The promise of progress is exciting, especially given the scope of the problem and the impact it has on developing countries. Though estimates of the size of illicit flows through mispriced trade vary widely—the practice is after all secret and illicit by nature—Alex suggests that illicit outflows from developing countries are about eight to ten times larger than official development assistance (ODA).

I’m astonished. On one hand, many development advocates focus their efforts on maintaining and increasing foreign assistance, arguing that foreign assistance is both the right thing to do and the smart thing to do. Yet on the other hand, there is a lively debate among development economists—and a general lack of consensus—about whether or not aid boosts growth or otherwise helps countries to develop (for a recent chapter on this debate, see this award-winning CGD paper.

But if what Alex is saying is true, then foreign assistance is but a tiny fraction of the wealth that flows out of developing countries through financial secrecy jurisdictions often under the control of the very countries that pride themselves on being generous aid donors—for example, the UK has responsibility for Crown Dependencies and Overseas Territories including Jersey, Guernsey, the British Virgin Islands, and the Cayman Islands.

I ask Alex: “Does this mean we in the rich world are assisting it the pillaging of developing countries, even as we pride ourselves on giving aid?”

Historically, Alex says, that isn’t far from the truth. Taking the UK as an example, Alex explained that 30 to 40 years ago, the UK encouraged small island states under its control to pursue the tax haven route to economic growth, fearing that without growth the islands would always be dependent on the UK. What happened, he says, was the opposite: the City of London, the UK financial hub, became very dependent on the large financial flows coming through those island states.

A similar relationship exists today between India and Mauritius, Alex says. Unilateral efforts to increase transparency could lead to short-term volatility for a number of developed and emerging countries, he says.

Given the interests at stake, I ask, is there any hope for reform? After all, recent US history shows that the financial sector has been extremely effective in fighting off unwelcome regulation, even after overly risky practices set off at financial crisis that placed the global economy in jeopardy and required billions of dollars in public funds to bail out struggling financial institutions.

Alex replies that he is nonetheless optimistic. “What we’re seeing now is a combination of the problem being very well recognized in developing countries, and rich countries increasingly feeling fiscal pressures themselves,” he says. “This combination of interests … has the potential to overcome … all of the interests on the other side.”

Alex points out that some of America’s biggest companies—he named Google, Amazon, and Starbucks—have recently been criticized for the impact of their tax practices. US-based multinationals in total declared nearly half their profits in five tiny jurisdictions with limited transparency and advantageous tax rules: Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland. This sort of activity, he says, is prompting public criticism and pushing rich countries to reconsider international tax rules.

The solution? A further movement towards unitary taxation is one option we discussed. Under this approach, a multinational company would be treated as a single entity and it’s global earnings would be taxed based on the location of economic activity, rather than where it may choose to declare profit. Other options and solutions are being considered by the Organisation for Economic Cooperation and Development (OECD) and the G-8, Alex tells me.

Looking ahead, Alex tells me he plans to delve deeper into these issues, in blogs and forthcoming research. Stay tuned.

My thanks to Alex Gordon for editing the Wonkcast and Catherine An for providing a draft of this blog post.

Authors:

Lawrence MacDonald

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Rethinking US Foreign Assistance: A Welcome Half Loaf on Food Aid Reform

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 15 Apr 2013 21:27:04 +0000

The Obama administration’s proposal for food aid reform is evolutionary, rather than revolutionary, but it is still a big step in the right direction. Overall, the administration estimates that the proposal would allow roughly the same level of funds for food aid to reach an additional 4 million people, and do so more quickly in emergencies.

The essence of the reform is that 45 percent of the emergency food aid budget will be available as cash that can be used for local and regional purchase, cash transfers or vouchers distributed to households, or financial (rather than in-kind) donations to the World Food Program. As the administration emphasizes, the key to increased food aid effectiveness is having the flexibility to choose the delivery mode that will best address hunger and malnutrition given the nature of the situation, the type of food needed, available supplies and prices, and local market conditions. The other half will continue to be subject to requirements that the food be purchased in the United States and transported on US-flag ships.

The second key element of the proposal would end the practice of monetization whereby private voluntary organizations (PVOs) receive US commodities that they sell in developing countries to raise money for their projects. The administration wants to move $250 million of the funds previously allocated for this round-about and hugely inefficient mechanism, to the Community Development and Resilience Fund (CDRF). The administration says that the CDRF will be used to directly fund similar programs implemented by many of the same partners.

While the details have to be fleshed out, it is already clear that the political debate will be just as lively as when Andrew Natsios proposed something similar as head of USAID under President George W. Bush. No doubt anticipating that, the most striking thing about the speech on April 10 by USAID Administrator Raj Shah was the effort to reassure groups reaping benefits from the current system that they will still get their cut:

“We commit to maintaining our purchase of American food…
“We commit to supporting our NGO partners…
“We have included in specific support [$25 million] in the proposal for the American flag shipping industry….”

But Shah then went on to cite a series of facts to support the arguments in favor of reform—i.e., how reducing the inefficient and nontransparent subsidies currently going to these groups will allow more of the roughly $1.5 billion in US food aid to get to the hungry and destitute in developing countries faster. It may not always be true that more is better and faster is better, as the kids on the AT&T commercials proclaim, it is usually better when it comes to food aid.

There is a great deal of research that underpins the proposed reforms, each with insight on how greater flexibility could make US food aid more effective and efficient. A number of studies quantify the benefits of flexibility in terms of the timeliness and cost effectiveness of food aid. There are also a few studies that can be helpful in identifying the circumstances under which different delivery modes are more likely to be effective, though far more research is needed on that.

But the first question to consider is whether food or cash (or a voucher) is the best response to a given food security problem. Then, if cash transfers or vouchers are not appropriate, where to purchase the food is the next question. Local or regional purchase will almost always be quicker than shipping food from the United States, though geography obviously matters. In addition to differences in transportation and shipping and handling costs, the type of commodity needed also affects overall costs.

A statement from ACDI/VOCA argued that local and regional purchase (LRP) is not necessarily faster than shipping food from the United States because of the poor infrastructure and regulatory barriers in many countries. But those same obstacles face US-sourced food aid once it leaves local ports, which is after it has spent weeks crossing the ocean. The GAO analysis of LRP found that it saved an average of 14 weeks on shipments to Africa, while the independent evaluation of the US LRP pilot program found an average savings of 10 weeks. A Cornell University study also found that using LRP, or cash transfers or vouchers, generally saved an average of 13-14 weeks. The Cornell study looked at transactions in nine very different countries and there were smaller differences in delivery times for nearby countries (Guatemala) or those on major shipping routes (Bangladesh), but the delays were longer than the average for many land-locked countries and those not on major shipping routes, such as many of the major food aid recipients in Africa.

Second, the studies find that LRP, cash transfers, or vouchers are generally more cost effective than in-kind US food aid. Overall, the GAO report found that food purchased locally was 25 percent less costly than US in-kind food aid, and 34 percent cheaper in sub-Saharan Africa. But other studies also find that the commodity purchased, and whether it is processed or not, matters a lot. The LRP pilot evaluation found that commodity costs were generally lower in the United States, but the transportation, shipping and handling costs were large enough that purchasing cereals and pulses (peas and beans) locally or regionally cost roughly a third less, on average, than buying them in the United States. The Cornell University study found somewhat larger cost savings for cereals and a bit less for pulses. The results are more mixed for vegetable oils and fortified and blended foods and the administration has indicated that it intends to focus its US food aid sourcing “on the higher value, more nutritious products that are so critical to improving child nutrition and saving lives”. The table summarizes results from these two studies:

So timeliness and cost-effectiveness are important criteria for deciding how to deliver food assistance, but local market conditions are also critical. Just as there are concerns about monetization disrupting local markets through supply shocks that suppress prices for local producers, local purchase could do the opposite if markets are not sufficiently flexible. In various formats, Jenny Aker raises questions, offers guidelines, and issues a plea for good monitoring and evaluation to help donors choose among these food aid tools; see here on locally purchased versus imported food aid, here on food versus cash (or vouchers), and here on cash versus vouchers.

Finally, food aid reforms that end monetization could contribute to a positive outcome when trade ministers meet in Bali this December. During the Doha Round of trade negotiations, US negotiators wanted the European Union to give up the use of export subsidies to dispose of agricultural surpluses; European negotiators insisted, in turn, that the United States should reform food aid practices, including monetization, that have features akin to export subsidies. With commodity prices high, the European Union is not using export subsidies, but a formal agreement would still be useful to lock in their elimination and US food aid reform could be the key. An agreement on export competition in agriculture could also incorporate new disciplines on export restrictions of the type that exacerbated the food price spikes in 2007-08.

Of course, this reform will require adjustments. But a half billion dollars in sales is trivial for an agricultural sector that exported more than $120 billion on average over the past four years, produced far more than that, and reached record levels of household income. And the administration's proposal to provide $25 million in direct subsidies for the maritime industry is far more transparent and efficient than penalizing the hungry in developing countries by continuing the current system. Implementing the reform effectively will also require careful market analysis and monitoring, but these steps are very welcome and long overdue.

Authors:

Kimberly Ann Elliott

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Global Prosperity Wonkcast: Interview with WTO Candidate Amina Mohamed

cgdev.rss@cgdev.org (CGD RSS feed) — Thu, 11 Apr 2013 20:36:26 +0000

My guest on this Wonkcast is Amina Mohamed, Assistant Secretary-General of the United Nations Environment Programme (UNEP), and one of the nine candidates to become the next director general (DG) of the World Trade Organization (WTO). Mohamed tells me she is extremely familiar with the DG selection process, as she managed it eight years ago while working within the WTO. Now that Mohamed is herself a candidate, she says that she is well-qualified to lead the WTO and confident to let her track record speaks for itself.

She tells me her most significant contribution to the WTO was helping to negotiate the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS agreement).

“This was a very humbling experience for me because it was negotiated at a time when Africa was going through an HIV pandemic,” Mohamed explains. “For the amendment, we were focusing on issues that relate to the compulsory licensing and importation of generic drugs -- specifically for HIV/ AIDS, malaria and tuberculosis, and these were issues that were of great concern to Africa.”

Mohamed tells me the negotiated TRIPS agreement was historic for several reasons. The agreement made affordable lifesaving drugs for people who previously could not afford them. In addition, prior to the TRIPS negotiation, a trade related treaty had never been amended.

I ask Mohamed if her experience amending the TRIPS agreement provided lessons for breaking the stalemate on the Doha Development Round of trade talks, which were designed to bring benefits to the least developed countries. Her answer: “Yes.”

“The WTO is not about dogma and fragility,” Mohamed says. “It can adapt and be flexible, and we can make the compromises we need to make to make sure we create progresses, address concerns, and rise to the occasion.”

In regards to the Doha Round, Mohamed tells me the negotiations should be inclusive and transparent, and members sitting around the table need to feel their voices matter. She also expresses a concern for the tendency to hold frequent mini-ministerials outside of Geneva. The professional trade negotiators with access to their home governments are stationed in Geneva, so it makes sense to do most of the work there, she argues.

Later in the interview, I note that Mohamed’s statement to the WTO General Council was the only statement to mention the WTO role in climate change.

“The WTO has to be part of global problem solving, and climate change is an issue of global concern… It affects the flow of goods and services,” she explains.

Specifically, Mohamed tells me she favors a special trade liberalization of environmental goods and services, above and beyond other goods.

“There was a meeting that took place on liberalization of environmental goods and services in Russia,” she explains. “A lot of the major players there agreed on a list on a list of products they could convince members of WTO in Geneva to move forward on.”

I ask Mohamed what her main priority would be if selected as the next DG.

“Negotiations. The WTO was established in order to set rules and open markets. That was the diamond standard that the WTO set for itself and we should not move away from that so that for me has to be the top priority.”

Mohamed also explains that other stakeholders should be involved in negotiations – including civil society and business. She tells me she is already working with WTO members to establish a business advisory council to meet these ends.

We end the Wonkcast by discussing the relationship between the WTO and the growing proliferation of bi-national and regional Free Trade Agreements (FTAs). Mohamed says these newly-negotiated FTAs should operate on a basis of non-discrimination, and they should not delegitimize the WTO by creating new dispute settlement mechanisms.

The full interview is available above. This is the seventh in a planned series of Wonkcasts with candidates to become the next director general of the WTO. To learn when new interviews are posted, sign up for our weekly Development Update.

My thanks to Alex Gordon for editing the Wonkcast and for providing a draft of this blog post.

Authors:

Lawrence MacDonald

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Global Prosperity Wonkcast: World Bank and IMF Spring Meetings – Nancy Birdsall and Todd Moss

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 09 Apr 2013 16:11:52 +0000

The World Bank and the International Monetary Fund (IMF) are the twin giants in global development and economic and financial stability, shaping the agenda for other international organizations and for governments across the world. What new issues face these institutions in a rapidly globalizing world? How are they responding? In this week’s Wonkcast, recorded in the run-up to the institutions’ Spring Meetings, we consider these questions.

My guests are Nancy Birdsall, founding president of CGD, and Todd Moss, vice president of programs and senior fellow.

On the day of this recording, World Bank president Jim Kim had just delivered an address at Georgetown University in which he set forth his vision for the World Bank, including setting a 2030 target date for an end to extreme poverty around the world.

I start by asking Nancy for her thoughts about the speech—and why demonstrators who once railed at the World Bank and the IMF during the Spring Meetings, and the Annual Meetings in the fall, have been mostly notable by their absence in recent years.

“The World Bank and the IMF have both changed. They’ve adjusted quite dramatically in the last ten years but particularly in the last couple of years,” Nancy replies.

“Jim Kim, in his speech today at Georgetown, talked about inequality – and he used the word injustice – which is a really different way of thinking about the problems in the global system. Of course, the other thing that’s changed is the rise of the emerging markets, and their more insistent demands for changes at the IMF and the World Bank. We are in a very different world,” she says.

This different world may require that the IMF and the World Bank change even faster than in the past.

I ask Todd about the future of the International Development Association (IDA), the concessional window of the World Bank that lends to the world’s poorest countries. In his Georgetown speech, Kim said that he would seek an aggressive replenishment for IDA, a promise that has been made by each new World Bank president.

Todd says it would be better to begin a discussion about how the role of IDA must change, as many recipient countries enjoy solid economic growth that will soon lift them above the IDA income ceiling.

“The soft loan window has eligibility criteria – usually income – and a lot of countries are bumping up against that threshold,” Todd explains.

“There are now 81 [IDA] eligible countries. We estimate that within the next 10 to 15 years, that number will come down to 31 countries; 25 of those countries will be in sub-Saharan Africa. That is a radical departure from what the world looked like a few years ago and from what it looks like today.”

In the face of this rapidly changing client base, what’s next for IDA? A CGD working group report, Soft Lending without Poor Countries: Recommendations for a New IDA, suggests several alternatives, from shrinking IDA to redefining its mission, for example, to include financing solutions to problems that transcend national boundaries, what economists call global public goods—most notably the threat of runaway climate change.

Nancy welcomes recent outspokenness on the issue from Kim and IMF managing director Christine Lagarde. Both leaders have urged international action, and both institutions have released major reports: Turn Down the Heat: Why a 4 Degree C Warmer World Must be Avoided, from the World Bank, and a March report from the IMF that found global energy subsidies—almost entirely for fossil fuels—are a staggering $1.9 trillion—about 2½ percent of global GDP or 8 percent of government revenues.

While each country waits for the next to take the first step in addressing this global problem, Nancy says the World Bank can lead by creating new grant instruments—perhaps funded in part by IDA—to push progress on this increasingly urgent issue facing the planet.

(On a more ambitious scale, Nancy and I have co-authored a brief, based on her longer policy paper, suggesting that the World Bank consider creating an entirely new arm to help address non-finance aspects of the global response to climate change.)

In our whirlwind tour of World Bank/IMF issues, we turn next to the seemingly arcane topic of IMF quota reform, a change agreed by all other major countries but held up by the inability so far of the Obama administration to get agreement from the US congress.

Nancy explains that IMF member countries pledge a certain amount of their reserves to the IMF, which the Fund then lends to countries in financial distress. The amount of each country’s pledge, or “quota,” is commensurate to the country’s influence within the IMF.

IMF members have agreed to double their capital commitments to the IMF, to give it the resources needed to address global shocks such as the 2007-2008 financial crisis. As part of the deal, the quotas were adjusted so that big emerging markets countries like China, Brazil and India would have larger quotas and, in turn, greater influence and votes in IMF proceedings, in keeping with their increased role in the global economy.

Todd and I discuss briefly why the US alone has yet to approve these changes. Nancy underlines why this matters, a point she explained in a recent blog post.

“It’s embarrassing for the US as a fading leader in international development and it’s a failure in safeguarding international financial stability,” she says.

“What this does is expose the dysfunction of our political system at a time when we are losing our leadership at the global level – which is bad for the US, bad for American interests, and bad for the rest of the world.”

This leads naturally to our next topic: the creation of a BRICS bank, a new multilateral institution led and financed by Brazil, Russia, India, China, and South Africa. Why do these countries want to create a new development bank? Would it compete with or complement existing institutions?

Todd says that frustration the BRICS countries feel about the existing institutions is at least part of the motivation. Nancy agrees, adding that the a smaller-than-expected recapitalization of the World Bank (resulting from US unwillingness to back more ambitious funding) and an unmet desire for a stronger focus on infrastructure may also be part of the explanation.

It’s a fast and wide-ranging conversation that covers a lot of ground. I hope you will listen!

My thanks to Alex Gordon for editing the Wonkcast and Catherine An for providing a draft of this blog post.

Authors:

Lawrence MacDonald

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Global Prosperity Wonkcast: Interview with WTO Candidate Herminio Blanco

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 01 Apr 2013 23:09:42 +0000

My guest on this week’s Wonkcast is Herminio Blanco, Mexico’s former minister of trade and industry, and one of the nine candidates to become the next director general of the World Trade Organization. Minister Blanco tells me the WTO is facing several challenges, and his experience negotiating numerous trade agreements including NAFTA, combined with more than a decade of experience in the private sector, equip him with the skills needed to push the WTO forward.

“The rules for the WTO were drafted 20 years ago, and as you know, the way of doing business has changed substantially,” Minister Blanco explains. “The network of free trade agreements that exist in the world, and very importantly the Trans Pacific Partnership (TPP), present big challenges for the WTO.”

Minister Blanco says his experience in the business sector gives him a different perspective on how the WTO can help to ensure that the investments businesses make will help to generate employment and prosperity for countries with lower levels of development.

“What I’ve learned from business is that we need to be able to invest and have transparency in rules for trade and investment,” Minister Blanco says. “I think it’s fundamental that the rules in the WTO are modern, so the organization keeps on being the benchmark for agreement on world trade.”

I ask Minister Blanco what he would do about the stalled Doha development round of trade talks if elected director general.

“My view is that it’s very important to get a substantive resolution to the Doha agenda,” he says. “I believe these negotiations should bring a call of attention to countries [represented] in Geneva… it’s time to be more flexible and it’s time to start moving.”

Minister Blanco also tells me the least developed countries stand the most to lose from a failed Doha Round. Therefore the larger countries should be more flexible, so the smaller countries can receive the benefits for which the Doha Round was intended.

Minister Blanco has outlined his program into a short and medium-term horizon, and a third portion he calls inclusiveness in integrating regional trade agreements. As part of his short term horizon, Blanco would like to see results from the trade ministerial in Bali this December. He tells me negotiators in Geneva are working on a promising trade facilitation proposal that could unlock billions of dollars in trade.

“The package will decrease obstacles for import and export in many countries,” he explains. “It’s an attempt to clean the borders of all the inefficiencies. That negotiation could be a very good signal of progress being made in Geneva.”

As part of a medium-term agenda, I ask Minister Blanco what role the WTO has in the international policy response to climate change, for example, how should the WTO regard the possibility countries that put a price on carbon imposing border tax adjustments on those that do not?

“I think it is important to protect the high values of humanity, one of them being the environment. But not to do it by putting obstacles that may go against the commitments of different countries within the WTO,” he tells me.

Minister Blanco ends our interview by discussing—and commending—the WTO director general selection process, a topic that CGD senior fellow Kimberly Elliott also discussed—somewhat more critically-- in this recent blog post.

The full interview is available above. This is the sixth in a planned series of Wonkcasts with candidates to become the next director general of the WTO. To learn when new interviews are posted, sign up for our weekly Development Update.

My thanks to Alex Gordon for editing the Wonkcast and providing a draft of this blog post.

Authors:

Lawrence MacDonald

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Global Prosperity Wonkcast: Interview with WTO Candidate Roberto Azevedo

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 26 Mar 2013 16:00:19 +0000

My guest on this week’s Wonkcast is Roberto Azevedo, the permanent representative of Brazil at the World Trade Organization (WTO) and one of nine candidates to be the next Director General (DG) of the WTO. Ambassador Azevedo has spent more than 15 years involved with the WTO and tells me his deep experience qualifies him to lead it into the future.

“To lead the WTO, you need to be a DG that operates at both the negotiating table level and also at the political and strategic level, and I have been doing this since 1997,” he says. “I believe I know the problems, I know the history of the negotiations and the sensitivities, and what we need now is leadership that is familiar with the problems of the organization, and can find solutions.”

Ambassador Azevedo’s agenda for the WTO focuses on three pillars – the first being the implementation of existing agreements. He tells me this WTO function keeps the trade system running smoothly and is one of the most important aspects of the organization because it ensures members are complying with their obligations and provides a forum for them to exchange differing views.

The second pillar is the WTO’s mechanism for resolving trade disputes and disagreements among member countries. Azevedo has voluntarily sat on adjudication panels three times, and tells me the system is effective and satisfactory.

The final pillar takes into account the evolution of the WTO, and what to do about the stalled Doha Development Round of trade talks, which has notoriously failed at reaching a consensus among member countries. I ask Ambassador Azevedo: should the WTO fix the Doha round or bury it?

“I don’t think burying it is an option. It’s going to be there, and if we want to move on with the organization, we need to find a solution for it,” he says. “I don’t think we should be discouraged. Is it going to be difficult and complex? Yes, but it can’t be any other way.”

In order to move forward with the Doha round, Ambassador Azevedo tells me the members have to inject confidence and trust into the system by identifying a small number of issues that could be agreed upon. He says the members are likely to find consensus on trade facilitation – the procedures and controls governing the movement of goods across national borders.

I ask Ambassador Azevedo what his views are, as the permanent representative of a large trading power such as Brazil, on the dynamics between larger countries like his own and smaller, least developed economies.

“I think the larger economies are very sensitive to the least developed economies, and they have been acting in a way which tries to push an agenda that helps the least developed countries,” Ambassador Azevedo says. “What we have today is a WTO with almost 160 countries of various shapes, sizes, and levels of development. What we have to do is find a dynamic of negotiations that accommodates all of them. We need to figure out how to have everyone interact in a positive and constructive way.”

Looking past Doha, I ask Ambassador Azevedo if the WTO has a future role in trade-related aspects of county efforts to slow climate change, for example, in ruling on the acceptability of countries that price carbon imposing border tax adjustments on imports from counties that do not. The answer is complex, Ambassador Azevedo says.

“The problem is figuring out how to impose border adjustments which will address climate change and (yet) not distort demand and competition among WTO members—and how to do it in a way which does not become veiled protectionism. It’s extremely complex to do it in a non-discriminatory way,” he explains.

While Ambassador Azevedo noted his interest in addressing climate issues within the WTO, he emphasizes that unlocking the Doha Round may be the most important task for the organization.

“The Doha Round is really where the WTO system has a problem, and development hinges on the multilateral system functioning -- especially for the smallest economies,” he says. “They need the multilateral system to work. If I can contribute to that, I would be very honored.”

The full interview is available above. This is the fifth in a planned series of Wonkcasts with candidates to become the next director general of the WTO. To learn when new interviews are posted, sign up for our weekly Development Update.

My thanks to Alex Gordon for editing the Wonkcast and providing a draft of this blog post.

Authors:

Lawrence MacDonald

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Global Prosperity Wonkcast: Protecting Forests with Global Forest Watch 2.0 – David Wheeler and Nigel Sizer

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 18 Mar 2013 19:22:36 +0000

My guests on this week’s Wonkcast are David Wheeler, senior fellow emeritus at CGD, and Nigel Sizer, director of the Global Forest Project at the World Resources Institute (WRI). They joined me after a presentation for CGD staff of Global Forest Watch 2.0, a real-time forest monitoring system that draws from David’s work on the Forest Monitoring for Action initiative (FORMA) here at CGD.

The ability to monitor the status of tropical forests worldwide could be a game-changer in efforts to slow and eventually halt forest clearing. Among the many benefits would be a reduction in the greenhouse gas emissions that are driving climate change.

“Forests are extremely significant when it comes to climate change,” Nigel explains. “Forest loss and degradation accounts for a significant percentage of global greenhouse emissions -- somewhere between 10 to 15 percent. So if we’re going to reduce emissions, clearly that’s one of the things we have to deal with.”

Global Forest Watch 2.0 uses improved satellite data and enhanced computing power to deliver regularly updated maps of tropical forests around the globe. “What we can do is bring that technology together and enable everyone around the world to have up-to-date, accurate picture of what’s happening to tropical forests,” Nigel explains.

David tells me he began constructing FORMA—the datasets and algorithms that underpin Global Forest Watch 2.0—several years ago when he realized that the available information on tropical forest clearing and degradation was scattered, inconsistent, unreliable and, most troubling for efforts to protect the forests, years out of date.

“I have always operated on the principal that the data is always out there somewhere, in either public or private hands, and the key to moving forward is to locate the information and then try to negotiate an arrangement with the proprietors to reveal the essence of that info that would be useful in a sector like forests,” David explains.

“In this case, there was a satellite dataset, but it had never been used in this way for this purpose, so we set about doing that.”

FORMA data also informs CGD’s Forest Conservation Performance Ratings -- a system of color-coded ratings for tropical forest conservation performance that can be implemented for local areas, countries, regions, and the entire pan-tropics.

The most recent ratings, published in a new CGD working paper by David, Dan Hammer and Robin Kraft, are quite alarming. Forest clearing continues to accelerate, and large scale logging is even occurring in officially protected areas in some of the world’s largest national parks.

I ask Nigel if Global Forest Watch 2.0—which delivers information from FORMA and other sources to a global network of governments, NGOs, and other actors concerned about forests—can put a dent in this disheartening trend.

“We are confident that Global Forest Watch 2.0 has the potential to be a game changer,” he says. “It fundamentally addresses a key component of governance—transparency—enabling people to communicate with each other around an agreed set of consistent information about what’s going on.”

Armed with this information, development agencies, governments, civil society, and others can shift their strategies and mobilize in different ways as the information becomes available, he explains.

The data could also be used to create pay for performance mechanisms, where rich countries or other donors financially reward developing countries for preserving their forests. David tells me that this could be done through an open offer to developing countries working to improve their performance on forests.

“The idea is that in each country you would establish a timeline toward very low forest clearing in some future date. Then over time you would watch progress toward that goal,” David explains. “You could provide financial rewards…There would be compensation to people who have suffered losses from holding their forests intact.”

We end the Wonkcast by discussing the role of the private sector in halting forest degradation. In response to consumer demand, large multinational corporations like Walmart and Nestle have recently pledged to reduce and eventually eliminate the sourcing of materials from land that was recently cleared of forests. Nigel tells me Global Forest Watch 2.0 can help hold these corporations accountable to their promises.

“We can help them measure what they’re doing and hold their feet to the fire,” he says. “These are very measurable commitments. As time goes by we’ll be able to do a better job in seeing how they're doing.”

David tells me these pledges from the private sector could have a large and positive impact on forest conservation. As more and more private corporations begin implementing forest-friendly policies, they’ll push for their competitors around the world to be subject to similar constraints. “Others will pay careful attention because there will inevitably be political pressure for them to conform,” David says.

My thanks to Alex Gordon for editing the Wonkcast and providing a draft of this blog post.

Authors:

Lawrence MacDonald

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Microfinance Open Book blog: Cross-Post: The Rush for the Entrances in Myanmar

cgdev.rss@cgdev.org (CGD RSS feed) — Thu, 14 Mar 2013 21:04:55 +0000

On CGD's Voices from the Center, I just reviewed a good report on the coming aid boom in Myanmar.

Authors:

David Roodman

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Global Prosperity Wonkcast: Interview with WTO Candidate Taeho Bark

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 12 Mar 2013 17:15:13 +0000

My guest Taeho Bark, the Republic of Korea’s trade minister and candidate to be the next director general of the World Trade Organization (WTO), has witnessed the power of trade transform his country into a high-income, dynamic trading entity.

“Korea was one of the greatest beneficiaries of a liberal trading regime,” Minister Bark tells me. “It’s time for Korea to make a contribution to the international organization which is governing international trade.”

Aside from personal conviction, Minister Bark tells me his experience as a professor, researcher, and practitioner of trade policy, qualifies him to lead the WTO.

As trade minister, he has participated in regional trade negotiations with Colombia, Turkey, China and Japan. I ask him if these frequently negotiated bilateral and regional trade deals are eroding the multilateral agreements that are at the heart of the WTO. His answer: No, but the WTO needs to do more to ensure they don’t.

“The regional and multilateral trade deals must be complementary to each other,” he explains. “And the WTO must do more work in terms of monitoring regional trade deals in the future.”

I ask Minister Bark about another area of trade contention – the Doha Round of development trade talks. Is the pessimism surrounding the failed talks warranted?

“Somebody described the Doha Round and the WTO using 3 words: frustration, fatigue, and irrelevance,” he says. “So that describes how Doha and the WTO are situated recently. But we made a strong commitment to do this kind of multilateral trade negotiation because we want to see developing countries getting benefits out of trade liberalization. We have to come up with results, and that’s why we trade ministers are working very hard in Geneva to deliver something at the next round of talks in December in Bali, Indonesia.”

I ask Minister Bark what he sees as the most promising deal for the next Doha round in December. He tells me it’s likely the negotiators will come to a consensus on trade facilitation – the procedures and controls governing the movement of goods across borders.

“Many developing countries want to modernize their customs clearance procedures but it takes money,” he explains. “We can focus on trade facilitation, and persuade developed countries to help financially to achieve better outcomes. This is one of the most important issues to be delivered in Bali.”

As I’ve mentioned in previous Wonkcasts with director general candidates, the WTO is faced with a set of new issues, including dealing with carbon tariffs and export bans. I ask Minister Bark what he would do about these over-the-horizon issues.

“Since the WTO was born, we have had a special committee on trade and environment,” Minister Bark explains. “There are so many different interests and positions, so certainly [carbon border adjustment fees] will be a new issue to address.”

While Minister Bark conveyed his commitment to dealing with future trade issues, he tells me his number one priority would be to encourage more candid dialogue among WTO members, the director general, and ambassadors.

“Otherwise we can’t move ahead and gain consensus on difficult issues,” he says. “To rebuild trust in the Geneva environment is the first thing I would do. It may take some time, but it is the basis you must go back to if you have prolonged problems.”

We end the Wonkcast by discussing both the potential advantages and disadvantages that uniquely face a candidate from South Korea. I note that on one hand Korea is uniquely situated to be an intermediary between developed and developing countries, and perhaps between the West and the rapidly industrializing emerging powers in Asia. On the other hand, the current secretary general of the UN is Korean, and the head of the World Bank is a Korean-American. Are other countries willing to have the WTO also lead by a Korean?

“I’ve received a lot of similar comments,” Minister Bark responds. “The WTO is very different from the UN, and to some extent, the World Bank. I understand the concern of geographical allocation, but the first criteria should be qualification and merit. I can give you several examples of same-country citizens who are the heads of international organizations.”

The full interview is available below. This is the fourth in a planned series of Wonkcasts with candidates to become the next director general of the WTO. To learn when the interviews are posted, sign up for our weekly Development Update.

My thanks to Alex Gordon for editing the Wonkcast and providing a draft of this blog post.

Authors:

Lawrence MacDonald

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Microfinance Open Book blog: Four Arguments against the Elimination of Child Labor

cgdev.rss@cgdev.org (CGD RSS feed) — Fri, 08 Mar 2013 14:55:36 +0000

Don't get me wrong: sarcastic headline aside, I'm not in favor of the exploitation of children. However, I feel moved to speak against a recent push, I guess led by Hugh Sinclair, to insert a ban on child labor into the lending policies of microfinance institutions (MFIs), microfinance investors, and such accrediting programs as the Smart Campaign and the Seal of Excellence. The concern behind this movement is serious: that microcredit is financing, thus increasing, the exploitation of children. So the cause it leads to is understandable: a push for policies to break any such link.

My challenges to this proposal are four:

Legality. Hugh argues that child labor is wrong because it is illegal in many countries with microfinance. Excellent point! In fact, most microfinance clients are engaged in illegality one way or another: squatting on city land to build houses the width of a queen-sized bed, failing to pay taxes on their meager earnings, failing to register their tiny businesses with the authorities... So to expunge microfinance of scofflawery, we need to shut it all down. Seriously, Hernando de Soto showed how, at least in Latin America, elites have purposely complicated the law in order to make formality---legality---a privilege rather than a right. Being poor means you are almost automatically illegal. Thus legality is a wobbly compass microfinance.
Ethics. We are all descendants of children who survived to adulthood only by laboring, whether as farmers or herders or gatherers. Only with their labor could the family subsist. I look forward to the day when there is no child on earth for whom this is the best choice. But we are not there yet. And we are not as close as you might think. Going by the numbers, the world has made great progress getting kids into school. However, a huge number of these children aren't learning very much. So how quick should we be to tell parents struggling under circumstances far different from our own what the right choice is? Many of them agree with you on the value of education. Whether it is best to put their children in the schools they can afford today is another matter.
Evidence. The effect of microfinance on child labor is an empirical question, whose answer will probably vary by context. On the hand, microfinance sometimes stimulates at-home businesses, leading parents to pull kids out of school and employ them at home. On the other, it gives parents a new way to finance school fees, providing them the discipline to set aside money each week for this purpose.
The evidence, like the ethics and the legal argument, is ambiguous. A good non-randomized study in Thailand found credit to increase child labor. One in Guatemala found the opposite. (Hat tip to Hugh for both.) The randomized studies, which I trust more, have mostly found little impact. In Hyderabad microcredit availability did not lift or lower the number of kids in school. In Manila, loans made no difference for the average response to "Any Household Member Helping in Family Business?" Ditto, essentially, in Mongolia. In Morocco, children worked 5.05 hours/week in areas with more microcredit versus 4.88 in areas without, a difference that is not statistically significant; meanwhile the number of children per family in school was slightly but statistically higher in the microcredit treatment areas, at 0.76 instead of 0.73.

An exception appeared in Bosnia & Herzegovina. Among less-educated, and presumably poorer families, microcredit caused more 16--19-year-olds to work at home, where "home" often meant "farm." As I blogged before, it is not easy to second-guess poor families in the midst of a major economic crisis if they use credit to invest in their farms, perhaps in more livestock, and put these near-adults to work.
Principals and agents. Now, one could retort that even if microfinance does not press children into labor on average, it still must do so sometimes. After all, how comforted would you be if I told you that microcredit does not increase slavery on average? And microfinance increases child labor in some cases, then one can argue that MFIs should vow never to finance such exploitation, and that microfinance investors must demand such vows in return for funds.
I do hope that microfinance officers don't leave their ethics at the home, that if they find a child laboring in great duress, and they know that a loan would make things worse, then they will not lend. But in general, microfinance, especially group microfinance for the lower-income clientele, has succeeded by not taking much interest in clients' business. Monitoring clients takes time, time costs money, and higher costs lead to higher interest rates. Anyway, trying to determine what people do with their loans or savings withdrawals is often a fool's errand because of fungibility. Moreover, as Hugh's book dramatizes, reality tends to diverge from rhetoric as one moves along the microfinance investment chain---from individual investor, to investment fund, to MFI headquarters, to field practice. MFIs may say they have banned loans for child labor, and MFI investors may buy that reassurance rather easily---but should we believe them? It will be a great achievement if a program like the Smart Campaign can reliably monitor and certify microfinance field practice as being transparent and non-coercive. I think it is a goal too far to certify what is being done with microfinance in each household. Microfinance investment funds promising to rid their portfolios of child labor will be setting the stage for hypocrisy.

This issue exemplifies a larger problem in international aid and philanthropy. A donor that enters a country with plans to make loans or drill wells or build roads cannot understand, much less control, many of the consequences of those interventions. Often local political structures undermine intentions: bed nets meant to be donated to the poor are pilfered and sold to the highest bidder. Pouring microloans into an Indian slum will perturb the paths of thousands of families. In some, more children will walk out the door each day, headed for the local schoolhouse. In others, more will be enslaved at looms (though I do wonder how much of the most vile child labor occurs in household-level enterprises). In the face of diversity and uncertainty of the outcomes, donors can either proceed or not. I think they'll do best to base their choices on the evidence---which looks pretty good in this case---and a general theory about how the intervention contributes to development. Roads, for example, do harm as well as good, but in many cases clearly more good. Similarly microfinance (if the credit is administered in moderation) is a generally useful service that can give people more control over their lives. Some will use that control for ill, but that doesn't make giving the poor more options a bad idea.

Apologies to Jerry Mander, author of Four Arguments for the Elimination of Television.

Authors:

David Roodman

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Microfinance Open Book blog: The Nine Ladies Snap Back

cgdev.rss@cgdev.org (CGD RSS feed) — Fri, 08 Mar 2013 00:26:45 +0000

The nine client-members on the board of the Grameen Bank, all women, have made a sassy public response to the interim report of the commission investigating the Grameen Bank. (Hat tip to the Grameen Foundation.)

I have to admire the pointed prose:

The Commission even records in their report that we do not participate in board discussions. They complain that even the learned representatives of the Governments did not participate in the discussions either. What a great board! None of the members participate in the discussion, but the bank still wins the Nobel Peace Prize! A non- speaking board has created the most admired bank in the world! Why does the Commission underestimate us? Could it be because we are poor and because we are women!

I was a bit disappointed that they prefer to play the gender card, pointing out that the commission is all male, to addressing the substance of the interim report. Truly the two sides are talking past each other.

But Asif Dowla's recent comment helped me appreciate one thing the board members wrote:

Most of us never went to school, but that did not mean that we did not know how to run our business and run Grameen Bank. We managed the bank better than anyone else in the banking world. We did not let our bank become a corruption-ridden bank, like the government banks are.

Maybe they are not finance wizards, but they are sterling board members by historical Bangladeshi standards in one sense, as Asif explained:

One has to compare Grameen’s governance with governance in state owned and private banks in Bangladesh. The state owned banks board membership are handed out to people not because they are “experts in law or finance”, but because they are supporters of ruling political party and the membership is a form of patronage and payoff. Until recently, the board members of private banks were full of people who were defaulting on loans from state owned banks! In many cases, the directors of private banks were taking loans from their own banks!

Authors:

David Roodman

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Microfinance Open Book blog: A Concrete Abstract

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 04 Mar 2013 19:22:37 +0000

Business training programs are a popular policy option to try to improve the performance of enterprises around the world. The last few years have seen rapid growth in the number of evaluations of these programs in developing countries. We undertake a critical review of these studies with the goal of synthesizing the emerging lessons and understanding the limitations of the existing research and the areas in which more work is needed. We find that there is substantial heterogeneity in the length, content, and types of firms participating in the training programs evaluated. Many evaluations suffer from low statistical power, measure impacts only within a year of training, and experience problems with survey attrition and measurement of firm profits and revenues. Over these short time horizons, there are relatively modest impacts of training on survivorship of existing firms, but stronger evidence that training programs help prospective owners launch new businesses more quickly. Most studies find that existing firm owners implement some of the practices taught in training, but the magnitudes of these improvements in practices are often relatively modest. Few studies find significant impacts on profits or sales, although a couple of the studies with more statistical power have done so. Some studies have also found benefits to microfinance organizations of offering training. To date there is little evidence to help guide policymakers as to whether any impacts found come from trained firms competing away sales from other businesses versus through productivity improvements, and little evidence to guide the development of the provision of training at market prices. We conclude by summarizing some directions and key questions for future studies.

That's from What are we learning from business training and entrepreneurship evaluations around the developing world?, a new working paper by two leading development researchers, David McKenzie of the World Bank, and Christopher Woodruff of the University of Warwick.

Authors:

David Roodman

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Microfinance Open Book blog: Much Grameen Bank Investigation, Signifying What?

cgdev.rss@cgdev.org (CGD RSS feed) — Wed, 27 Feb 2013 12:35:58 +0000

The machinations around the Grameen Bank over the last two years have a had a paradoxical, dreamlike quality. Harsh words have been spoken by mighty leaders. Eminent dignitaries have rushed to the defense. Court battles have been fought. Crimes have been alleged. The mighty Muhammad Yunus has fallen. The government has wrested away the power to replace him. Someone was even tortured. Yet through it all, as in a nightmare in which you are running fast but not moving, the Grameen Bank has hardly changed. Yes, Yunus is no longer the Managing Director, but no permanent successor has been picked, so his longtime deputy Mohammad Shahjahan is filling the seat for now. Yunus continues to be Yunus, speaking around the world about social business. Atop the Grameen Bank home page, Yunus and a borrower are still seen accepting the Nobel Prize. There has been no run on the Bank. The products appear not to have changed. And the fraction of the loan portfolio considered to be at risk of nonrepayment continues to crawl upward, reaching 10.9% at the end of last month.

In short, it is still unclear whether catastrophe---corrupt political meddling, sweeping loan forgiveness, or a bank run---will befall the Grameen Bank or whether it will thrive beyond its founder, as all involved profess to hope.

On February 9, the second commission appointed in recent years by the government to investigate the Grameen Bank released an interim report. Where the fist commission's report focused on themes in the Tom Heinemann documentary---Did Grameen charge high interest? What happened to that Norwegian aid money?---this one sticks mostly fundamental to legal questions. Is the Grameen Bank a public institution or do its 5 million-plus shareholders, mostly poor women, own it? Was it legal for the Grameen Bank---or at least its top people---to have created a web of related companies? Did the governing board exercise appropriate oversight?

After a close reading of the ordinance that created the Bank, board minutes back to 1983, and other documents, the Commission arrives at controversial conclusions. The nine female member-borrowers on the Grameen Bank's board should resign immediately. The Bank should un-invite 90% of its members by buying back their shares. The remaining 10% should elect new board members, with only those who have completed 7th grade eligible to run. The license to operate a digital mobile network held by Grameenphone, Bangladesh's largest phone company, should immediately be suspended---but as a matter of practicality, the firm should keep operating. All these conclusions rest on what are, if not technicalities, then purely legal issues. For example, as the Grameen Bank grew, it needed authorization to sell shares to more members; the report says that share expansions in 1991 and 1994, unlike in 1986, were merely approved by the Ministry of Finance and not effected by amendment of the Ordinance. Therefore they were illegal and all shares sold in excess of of the 1986 limit---90%---should be bought back. Similarly, the Bank's support for some other Grameen organizations, given through loan guarantees, was illegal because those organizations strayed from the Bank's official mission to serve landless poor in rural areas. Are you indignant yet?

I learned a lot from the careful analysis in this interim report, and I think it contains valid criticisms and questions about how the Grameen Bank was run. In particular, and unsurprisingly for a successful founder-led institution, it appears that the Board was ineffectual and that Muhammad Yunus ran the bank with a free hand. The highly touted female borrowers who constitute the board's majority could not be expected to understand the octopus-like complexity of the Grameen family of companies, assuming they were apprised of it. And they certainly could not be expected to perform appropriate oversight. In the event, they hardly ever said anything at the meetings beyond pleasantries.

But I think the best way to understand the report is to start with what it does not say and does not change:

After this report, as before it, there is no suggestion that Yunus was corrupt, or that any of the alleged illegalities were perpetrated for purposes other than the social good. This in a country known for corruption petty and grand. (A possible exception has to do with the alleged failure of the Norwegian phone company Telenor to comply with an agreement to sell Grameen Telecom 16% of Grameenphone. But nothing in the report implicates people at the Grameen Bank in connection to this.)
After this report, as before it, it was clear that the Grameen Bank suffered from ills typical of successful founder-led organizations, notably the inability of the board to impose accountability. And it was clear that the founder's departure creates both challenges and opportunities.
After this report, as before it, the government can do whatever it wants to the Grameen Bank, because Prime Minister Sheikh Hasina commands an overwhelming majority in Parliament. The report's rationales for government intervention were hardly required. Hasina awaited no such investigative findings before changing the rules last summer to take control of the process for picking Yunus's successor.
And, on that point, after this report, as before it, the Grameen Bank is less independent of a historically corrupt and unstable government than it was for its first 29 years.

Here are some key points from the report, with commentary:

The Grameen Bank is a public institution, created by a special law. Even if Bangladeshi women own almost all the shares, the Bank is not private property. In reasserting control, the government has not seized private assets. The shares entitle holders only to participate in elections of board members, and perhaps to dividends---and probably not even that. I find these arguments largely convincing. I do wonder whether they go too far in interpreting the Ordinance's dispensation that the "annual profit...shall be utilised in such manner as the Board may determine" as barring dividend issuance. ("Utilise," the report's argument goes, doesn't encompass giving the money to others.) I do buy that the Grameen Bank is a public institution whose governance happens to give clients a say in the selection of the majority of the board. That doesn't change the fact the the government just, um, emasculated the board by taking away its most important function, picking the director.
The Grameen Bank has illegally strayed beyond the ends and means set forth in the Ordinance. The Ordinance opens this way:
Whereas it is expedient to establish a Grameen Bank to provide credit facilities and other services to landless persons in the rural areas and to provide for matters connected therewith or incidental thereto...

Later, the text defines "landless" as owning less than half a hectare of land, or total assets worth less than a hectare. The commission's lawyer-members read this to say that Grameen should not be engaged in, say, microcredit in the cities or solar energy in the countryside. Yet you see how the text fuzzes the boundaries of Grameen's aims ("matters connected therewith or incidental thereto"). And even if those fuzzy words are ignored, it must be recognized that strict respect for the law's limits is impractical and inefficient. If you want to make loans to poor people in Bangladesh, you should want to keep interest rates down, which means limiting costs, which means lending on a mass scale, to all people poor enough that they are willing to accept the inconvenience of group microcredit. It means not devoting staff labor to tracking clients' land holdings in real time. This is why the Grameen Bank has long lent to people over half an acre, why that has never bothered me, and why, if the law literally means what the commission says, it is an ass.

Similarly, the commission questions the legality of the support that the Grameen Bank has given to other organizations with "Grameen" in their names. I think the main objection is to loan guarantees. In these arrangements, a separate organization---imagine Grameen Healthcare Services---borrows money from some other bank. To reassure the other bank as to creditworthiness, the Grameen Bank provides a guarantee: if Grameen Healthcare Services defaults, the Grameen Bank will repay, and then can try to recover its money from Grameen Healthcare Services. Now, providing guarantees is something banks do. But can Grameen do them? Giving guarantees is not in section 19's list of permitted functions, so maybe not. However, the list ends with this clause, which the Commission does not mention:

generally the doing of all such acts and things as may be necessary, incidental or conducive to the attainment of the object of the Bank.

Again, the ordinance seems to give the Bank a lot of discretion. Now, the commission may well be right that some of Grameen's activities have strayed beyond the spirit of the law. But given the flexibility of the law and social purposes of the activities---Grameen Shakti has brought solar power to a million families----I don't see cause for indignant finger-wagging.
The nine elected ladies are a sham. The commission argues that they are selected more than elected, with heavy involvement of Bank staff in each step. Qazi Nazrul Huque describes it nicely in this comment. In a hierarchical process, all the Center leaders, Grameen clients who each represent about 40 peers, who are served by a given branch convene to select one from among them to represent the branch. Branch representatives do the same at the area level, then the zone, then the region level. Each of the nine regions chooses one board member. In the Commission's telling, Bank staff play major, and perhaps heavy-handed, role in the nominations. There is no direct, secret ballot of the 5.6 million shareholders, nor even of the the 540,000 whom the Commission says hold shares legally. Meanwhile, the board members clearly are unqualified to assess the prudence of the Grameen Bank's complex operations. The report says the "election" of board members
....was a powerful marketing tool, which resonates throughout the world. It has been used to cloak the hollowness of an elective procedure, which has placed as many as four electoral stages between the borrower-shareholder and the post of a Director of the Board. Worse, the description of this process by an ‘elected’ Director as recorded in the Bank’s Board meeting exposes the exploitation of an emotive slogan.195 There is need to make the participation of the borrower-shareholder more direct and meaningful so that the needs of the landless and poor women is more honestly addressed.

I imagine that the tension between democracy and competence is common in cooperative financial institutions. Probably the solution is to balance the board between elected representatives and selected, highly qualified ones, and to arrange for candidates to be more qualified than most who vote for them.
Certain dealings between Grameen Telecom (the nonprofit Grameen company), Grameenphone (the commercial mobile operator controlled by Telenor), and the government look shady. You figure that any process in which the government of Bangladesh sells a private company a potentially valuable asset---in this case, a license---involves some kickbacks. Beyond that, I have not tried to understand the details, which are complex and incomplete. Maybe someone else can explain.

So overall, I find the report interesting and serious, if with occasional flares of bias, archness, and naivete about social science (there is no credible evidence that "but for this mismanagement within Grameen Bank...more people could have been helped"). Strengthening rule of law is essential to Bangladesh's political and economic development. So I'm glad these lawyers advocate for it. But one must consider context before precisely equating any illegality with immorality. In 2011, the report says, a Bangladeshi court found that all laws passed under the martial law regime lasting from March 24, 1982, to November 11, 1986---including the Grameen Bank Ordinance and its first round of amendments---were null and void! All these years, the Grameen Bank was illegal, you see. When then argue about whether it was exactly within the law's limits? And under martial law just a few years ago, the current Prime Minister languished in jail for corruption.

The poverty of most Bangladeshi's being urgent, the eagerness of outsiders to work with the Grameen Bank being great, and the dangers of dependence on the government being obvious, it is understandable that Muhammad Yunus and others at the Grameen Bank pushed the limits of their independence in searching for ways to make a difference. I think that is the right way to view the situation even if, in retrospect, we judge that they sometimes strayed too far from the law.

Authors:

David Roodman

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Microfinance Open Book blog: Will the Next Microcredit Implosion Happen in Chiapas?

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 19 Feb 2013 20:38:53 +0000

In November 2009, some guy nobody had heard of, Daniel Rozas, wrote an article asking whether there was a microcredit bubble in south India:

The spark that sets off a large-scale delinquency crisis can be anything and could come at any time – a rapid drop in economic growth, a populist political movement, a religious decree, or a collections effort gone bad. One can’t control the spark, but one can control how much fuel that spark can ignite.

Eleven months later the government of Andhra Pradesh ambushed the microcredit industry within its borders. Rozas became the Roubini of microfinance.

Now Daniel is worried again, this time about Chiapas, in Mexico, or maybe Mongolia or Cambodia:

So is Chiapas the next Andhra Pradesh? At the surface it seems that the comparison doesn’t hold. Chiapas is not the crucible of Mexico's microfinance market in the way that Andhra Pradesh was. A crisis in Chiapas would hurt the local lenders badly, but direct damage to the large lenders operating across the country would likely be limited.

However, Chiapas also differs from Andhra Pradesh in a way that is more concerning. India’s huge states (Andhra Pradesh alone is nearly the size of Mexico) are separated by language, caste, religion, as well as local media – differences that are especially strong among the poorer, less educated social segments that comprise microcredit customers. This regionalism played an important role in containing the Andhra Pradesh crisis within the state – a pattern also seen during an earlier repayment boycott in the Indian state of Karnataka.

But in a country like Mexico, with a strong national media, a common language, and fewer social barriers, it’s not hard to imagine a payment boycott in Chiapas easily spreading to other parts of the country, as was the case with the crisis in Nicaragua.

Of course there are no certainties in this business. But, as he did last time around, Daniel brings data to the table. So you can see what you think.

Authors:

David Roodman

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Microfinance Open Book blog: The State of Microcredit

cgdev.rss@cgdev.org (CGD RSS feed) — Wed, 06 Feb 2013 22:22:51 +0000

If I had had the stamina, I would have inserted into my book a chapter on the history of the microfinance movement.

Central to that story would have been the work of Sam Daley-Harris. He was drawn into activism in the late 1970s by the, well, cult-like est movement and associated Hunger Project, which had the grand goal of eliminating world hunger by 1997 (and apparently didn't do much practical to achieve the goal). In 1980, Sam founded the more practical, and at least as disciplined, grassroots lobbying group Results, which in the early 1980s persuaded the U.S. Congress to increase funding for Oral Rehydration Therapy and the UN's International Fund for Agricultural Development (IFAD). These were remarkable feats for a mostly-volunteer, start-up nonprofit.

As it happened, IFAD was an early funder of the Grameen project in Bangladesh. An IFAD documentary on Grameen brought microcredit to Sam's attention in 1985. He later introduced Muhammad Yunus to the American Congress and press. As I recall, a story in the Christian Science Monitor led to a segment on 60 Minutes in 1990. Yunus was catapulted into fame in the US and beyond. Sam matched that publicity coup by organizing the Microcredit Summit in Washington, DC, in 1997, whose headliners included First Lady Hillary Clinton and Bangladesh Prime Minister Sheikh Hasina. (I think FINCA founder John Hatch first suggested the Summit.) At the event, a grand goal was announced: bringing microcredit to 100 million by 2005.

The Summit and the ensuing, permanent Microcredit Summit Campaign have been a major force behind the global microfinance movement, combining savvy publicity with behind-the-scenes lobbying for funding. Each year the MCS has released a painstakingly collected tally of microloans worldwide. After the 100 million goal for 2005 was met, the campaign issued two goals for 2015: 175 million of the poorest with microcredit and 100 million people lifted out of extreme poverty (under $1.25/day).

Two days ago I participated in a public conversation for the launch of the 2013 report. Joining me were host Larry Reed, moderator Susy Cheston, Wendy Abt, and Alexia Latortue. Speaking at the event, I admit, forced me to read the report more closely than in the past. Herewith a few thoughts.

I enjoyed the report. It is a short, clearly written sampler of current thinking in the microfinance world, covering such topics as economic psychology and "graduation programs," which assist the poorest with a package of services and assets that will, it is hoped, reduce their poverty and prepare them for microfinance.
The most striking finding is that in 2011, for the first time, the number of microloans fell---and sharply. The graph is below. Most of the decline happened in Andhra Pradesh, but also some in Bangladesh (which I don't know how to reconcile with the Mix Market's finding of little change in 2011).

Yet the report's cover and title de-emphasize this arresting drop. The title, "Vulnerability," connects to a quote in the report from India microfinance veteran Vijayalakshmi Das. Identifying with microfinance institutions (MFIs), she said, "we are as vulnerable as our clients." That is, MFIs will be fragile as long as prey upon the vulnerabilities of the poor. They lost sight of their clients' interests and paid the price. It's a compelling formulation, and resonates as we try to understand what went wrong in Andhra Pradesh, and why the global total fell. But I wonder if it is the whole truth. In the U.S., payday lenders seem to be making a steady profit off a clientele whose finances are far less steady. In Mexico, so is Compartamos.
Broadly, the interests of merchant and customer conflict on some margin and coincide on others. Many MFIs could gain by raising interest rates, and hurts clients. Yet clearly MFIs will go bankrupt if all their clients do.

None of that is new. MFIs have always said that they were succeeding by helping their clients succeed. What is new is that in India, it came to appear that were not, in some cases. So what we need to learn from India is not that MFIs should remember their clients' interests, but how the MFIs came to collectively work against the interests of some of their clients.
An implication of the vulnerability theme is that some of the loans in Andhra Pradesh, and by implication elsewhere, were harmful. With microcredit, more is not always better. That cuts against the historical messaging of the MCS, with its goals and tallies and its fusing of a goal for outreach with one for poverty reduction. The general impression has been that expansion is urgent and equatable with poverty reduction.
The text thoughtfully covers both mobile money and graduation programs. I found the discussion subtly asymmetric, cautious about high tech and more hopeful that graduation programs represents the best path for MFIs wanting to reduce the vulnerability of clients and themselves. One need not choose sides, and the report properly captures many nuances in these topics. But I'd argue that if anything the report gets things backwards. Mobile money is delivering useful financial services to tens of millions of people in a businesslike way. In my view, that is true to the spirit of microfinance. As for graduation programs, they appear in randomized trials to be helping people too. This is great. But to my limited knowledge, it's not clear that the financial services that are part of these packages or become available after are key to this impact. So is it perhaps provincial to call them "graduation" programs, if by that is meant graduation to microfinance? Maybe giving very poor people carefully chosen goods and services is a good way to help them, regardless of whether it leads to greater microfinance use. Would we describe the U.S. food stamp program as a graduation program meant to increase financial access?
I think microfinance has succeeded mainly by streamlining, not adding expensive extras. If adding the extras helps people and donors are willing to fund it, that's excellent. Whether it's microfinance, I don't know. So while I applaud the pragmatic creativity of BRAC in developing the approach and the rigor of Ford and CGAP in evaluating it, I fear that casting it as a species of microfinance at once belittles it and exaggerates its promise for mainstream MFIs.

As usual, it is the friction of disagreement that most excites me to write. Yet there is much I like in the report and I encourage you to peruse it.

Authors:

David Roodman

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Microfinance Open Book blog: Cross-post: Cato Tops New CGD Index of Think Tank Profile

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 14 Jan 2013 20:25:17 +0000

On CGD's main blog, Julia Clark and I just posted a ranking of noted American think tanks based on their ability to generate public profile: press mentions, academic citations, web traffic, and social media followers. The effort is aimed at providing some healthy methodological competition for another ranking of think tanks, this one looking at institutions around the world, which experts have mostly criticized. If the criticisms are right, the other index may be distorting funding decisions and think tank behavior from Croatia to Kenya.

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David Roodman

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Microfinance Open Book blog: Ich bin ein Über-Geek

cgdev.rss@cgdev.org (CGD RSS feed) — Tue, 18 Dec 2012 21:19:11 +0000

One popular statistical software package in academia is Stata. CGD has always used it, and thus so have I. As my colleague Mead Over pointed out, Stata's business model is an interesting mix of private and public goods provision. The private corporation profits by cultivating a public free-software community on top of its core product. Stata sells you the main program, which includes commands to perform all sorts of analyses. People outside the company write add-on commands and share their code freely, all in return for...the satisfaction and prestige of seeing others use their work.

Stata has worked over the years to reward such sharing. One step was the founding of the Stata Journal (and before that the Stata Technical Bulletin) to give academics a venue to leverage their coding labors into career-boosting publications. A more recent step was the institution of an annual award for the best contributions to that journal in the previous three years. The first award was announced today. The recipient is: me.

The prize is awarded to David Roodman specifically for two outstanding papers in this journal:

How to do xtabond2: An introduction to difference and system GMM in Stata (Roodman 2009b)

Fitting fully observed recursive mixed-process models with cmp (Roodman 2011)

The titles alone are exciting I know! Ungated CGD versions here and here. My two papers were fortuitously timed for the period of this first award.

Born in Indianapolis, Indiana, in 1968, he grew up in Hanover, New Hampshire, and Binghamton, New York. Roodman’s formal education ended in 1990 with a Bachelor’s degree in theoretical mathematics from Harvard College. After years at the Worldwatch Institute and on a Fulbright in Vietnam, he arrived at CGD in 2002 knowing little about econometrics. He discovered that a great way to learn econometrics is to code it. His contributions to the Stata community since then were motivated by a desire to replicate and scrutinize complex, influential studies in development economics, which led him to write xtabond2, cmp, and other packages; and motivated by a pedagogic bent, which led him to document the packages and their mathematics in the Stata Journal.

I am humbled and happy about the award.

I wrote the first program as part of my appraisal of the literature on whether foreign aid causes economic growth. (See the technical Anarchy of Numbers and this non-technical guide for the perplexed.) At the encouragement of David Drukker of StataCorp, I then wrote my paper about the program.

As I blogged in 2009, the second paper documents a program I wrote in order to replicate the Pitt & Khandker study of the impact of microcredit in Bangladesh. It's the most beautiful program I've written. Philosophers argue about whether mathematical ideas are discovered or invented. The concept of this program, cmp, is so elegant that I feel like it was there waiting to be discovered.

I echo the end of the award announcement:

As editors, we are indebted to...a necessarily anonymous nominator for a singularly lucid and detailed précis of Roodman’s work.

I've followed an unusual track at CGD, teaching myself econometrics by coding it, doing so primarily in order to be an annoyingly demanding consumer of econometrics, trying to decide which studies to believe, abrading some people along the way. I feel fortunate to have had the opportunity to grow and contribute in this way, to realize my peculiar latent potential. But especially in the early years, I also felt bashful about this strange path---real economists are trained to produce research not just be annoying consumers of it---even as I felt compelled to cut that path. The validation is appreciated.

Of course, writing cool code is not the same as improving lives, which is CGD's reason for being. I only hope that the tools I have made, through their use in the hands of others, have in some small way advanced social science, especially as it relates to helping the world's poor.

Authors:

David Roodman

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Microfinance Open Book blog: Perennial Pitt & Khandker

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 10 Dec 2012 15:29:31 +0000

There's been a lot of back and forth between Jonathan Morduch and me on the one hand and Mark Pitt and Shahidur Khandker on the other over their influential non-randomized study that finds that microcredit reduced poverty in Bangladesh. The latest entry in this perennial series came last month as a World Bank working paper by Pitt and Khandker.

As you would expect when the same people write about the same things, the new paper shares much with its predecessors. It is written emphatically, seeming to raise profound concerns; I don't find it that persuasive; and yet it has taught me something. Perhaps the most succinct rebuttal is that the paper does not refute the fact that if you drop the 16 data points with the most extreme (highest) values on household spending, less than 0.5% of the sample, the finding that microcredit increases household spending completely goes away. The new paper spends much more space challenging our hypotheses (what PK call "claims") about why this happens than whether it happens. But for real-world implications, the whether matters more than the why.

Here, I will explain my thinking in more detail. I'll try to keep section openers jargon-free, but no promises otherwise. If this post bewilders you, then you will know how I felt when I decided years ago to understand the debate over PK, which Jonathan initiated.

Section 1 of the new reply is an introduction. Section 2 does not deal with substance.

Section 3 criticizes an alternative to PK's main statistical method, which we use in part of our paper. The alternative was first proposed by PK in 1998 (footnote 16) and first applied to the PK data by Pitt in 1999 in his attempt to rebut Morduch (1998). PK now describe the method as "outlandish" and "extraordinarily artificial." To me, the theoretical critique and the demonstration through simulations both appear flawed. And even if they are correct, they mainly go just to that "why" question, not the "whether."

PK (1998) propose estimating impacts via two-stage IV in which the instruments are interactions between included controls and each of the two dummies for female and male credit availability. Pitt (1999) implements this as 2SLS. We do classical linear LIML instead, solely in order to stay conceptually closer to PK's nonlinear LIML. But this distinction matters little. In fact the associated under- and weak identification tests, whose availability substantially motivates use of the estimators, are identical. Both also have the virtue of being known to be robust to non-normality in the errors. PK's theoretical attack on the method they once used to defend themselves can I think be distilled to this:

Consider the system of structural equations:

y = x1 + x2 + x3 + e

x1 = z1 + u1

x2 = z2 + u2

where e, u1, u2 are potentially correlated error terms; x3 is an exogenous control; z1, z2 are uncorrelated with e; and z1, z2 are strong explanators for x1 and x2, making them strong instruments for x1 and x2 in the y equation. 2SLS is appropriate for estimating the coefficients on x1 and x2; it would put x3, z1, and z2 in the first-stage equations for x1 and x2. However, the exogenous control x3 is a weak instrument because its expected coefficients in the first-stage equations are 0. (Its first-stage coefficients correspond to π_fx and π_mx in the PK (2012) exposition.) And z1 is a weak instrument because its expected coefficient in one of the equations, the x2 equation, is zero; and vice versa for z2. (These correspond to π_fm and π_mf.)

The above argument is wrong because a) the exogenous control x3 cannot be a “weak instrument"; b) z1 and z2 are collectively strong for x1 and x2 even if z1 is weak for x2 and z2 is weak for x1.

PK attempt to illustrate their contention that the linear estimators are fatally flawed by weak instruments. However, these and subsequent simulations deviate from the PK estimation framework in two ways that greatly and unrealistically weaken instruments in themselves. First, treatment quantity (how much is borrowed) is simulated with a zero-centered distribution rather than being always positive as in the real data. As a result, treatment averages zero for treated and untreated, and the availability of credit by gender, the key instruments in PK, are perfectly weak. (In the data and code file, in Table1&9groups3a_liml.do, lines 22--33 define teh zero-centered female and male treatment quantities.) And second, also unlike in PK, these dummies enter as controls rather than instruments! In a classical treatment impact assessment, this is equivalent to looking at the impact of treatment while controlling for rather than instrumenting with intent-to-treat. This too should weaken the remaining instruments. (In the same .do file, note the appearance of "treatm treatf" in the second stages of the specifications in lines 71 and 83.)

I think what this first simulation set actually demonstrates is a problem PK don't emphasize, and which I of all people should have taken more on board. The linear approach generates a lot of instruments, which causes overfitting bias, toward OLS. I think when we revise, we should add exactly-identified regressions, instrumenting only with the credit availability dummies, not their interactions with the controls. Tests on a Pitt (1999) simulated data set demonstrate the minimal bias (but inefficiency) of this method (see Appendix of our first paper). I think it was a mistake not to apply it to the real data earlier.

Exactly identified LIML or 2SLS regressions (they coincide), which are relatively free of overfitting bias and robust to deviations from normality, show no impact of microcredit on household consumption. See 3rd and 5th columns, which are new:

Section 4 helpfully spots a bug in our code. It then devotes almost 3 pages to its potential implications---rather than fixing it to see if it makes a difference, and rather than acknowledging that I informed Mark Pitt this summer that it doesn't.

I forgot to factor in the sampling weights in the lines that compute the skew and kurtosis of the second-stage errors and test whether they deviate from normality. The fix actually strengthens our findings of non-normality: skew in errors in the replication regression rises from 0.64 to 0.71 and kurtosis from 4.78 to 5.12. (Add "[aw=weightpk]" clauses to the "sum ey, detail" and "sktest ey" lines in this.) This is to be expected since PK undersampled ineligible (less poor) households and overweight the sample to compensate. This accentuates the long right tail in the household consumption data.

All code has bugs. And most bugs once found can be made to look really dumb, especially by a good lawyer. If in one place in the complicated computer program for your study of childhood obesity, you typed an H instead of a W: you used height instead of weight. Equating height and weight goes against millennia of medical science, not to mention common sense. One can demonstrate with theory and simulations how it can produce all sorts of wrong results. And no justification is provided for this strange theoretical construct!

Seemingly, it would be easier to just fix the problem and see if it matters. Seemingly this is also the thing to do if one's priority is getting the science right.

Section 5 confronts our finding that the PK estimation method is bimodal, tending to generate two contradictory results---microcredit increases or reduces household spending. The section argues that such bimodality is neither unusual nor a problem. The argument here seems flawed in three ways, one minor and two major.

The minor flaw is that the computer simulation code that shows the normalcy of bimodality doesn't actually demonstrate the presence of two local maxima the way ours does (see Figure1conloop3negt.do in the code and data file). The code loops over various possible impact coefficients for female and male credit, equating the two, each time maximizing the likelihood while constraining the estimated impacts to these values. It is a graph of constrained likelihoods over a subset of possible values for the constrained parameters. But I fix this is and found that the two peaks indeed correspond to true local maxima when the likelihood search is unconstrained. So the double-peaked graph is conceptually flawed but meaningful.

The first major problem was already mentioned. The simulations unrealistically deviate from the PK set-up in ways that weaken the instruments. One deviation is in the hypothesized data-generating process: amount borrowed averages zero. The other is in the estimator: credit availability is a control rather than instrument. When these two problems are fixed, the bimodality goes away. Compare this to PK's double-humped Figure 1:

So instead of challenging Jonathan and me by showing that bimodality is the norm, PK's simulations corroborate us by associating bimodality with econometric degeneracy.

The other major problem is an elision of the distinction between bimodality in the likelihood and bimodality in the estimator. It is absolutely the case, as PK say, that ML does not require unimodality of the likelihood for consistency. If a particular mode is highest with probability 1 as sample size goes to infinity and the ML search always detects this mode, the estimator will be consistent. However, multimodality in the estimator is inconsistency prima facie. It's a matter of matter of definition, not theory. (Some narrow counterexamples for completeness: the estimator could be asymptotically bimodal such that the mass of all but one mode goes to zero in probability, or such that the modes become infinitely close. But the data do not suggest such scenarios.)

And we do present evidence of bimodality in the estimator, via bootstrapping. Using the best method we've found for detecting multiple modes, we found 65% of the mass of the ML estimate of the impact of Grameen lending to women to be below zero. But I recently discovered a subtle bug in that code: the right number, I now believe, is 36%:

So a one-tailed test of whether the impact is positive yields significance only at p=0.36. PK address our bootstrapping only in footnote 26, where they say it "lacks any econometric justification." For justification, they can refer to authoritative texts.

It's possible that the estimator is asymptotically stable, contrary to our finite-sample evidence. Perhaps 5,218 observations on 1,798 households is not large enough for asymptotic behavior to kick in. That brings us to theory. Econometric theory tells us that the PK estimator is consistent when the assumptions implied in its likelihood are correct, notably normality of the errors. It may well be robust to certain violations of these assumptions, such as the non-normality we detected, but no one has proven as much. Thus PK are correct that "RM’s concern with bias [actually, inconsistency] arising from non-normality draws no support from econometric theory." But the opposite holds: neither does theory reassure. And I thought that in econometrics, estimators were presumed inconsistent until proven consistent. It takes chutzpah to defend an estimator by saying no one has proved it doesn't work.

PK offer some hand-waving about why their estimator is probably robust to non-normality. The arguments are reasonable, but illustrate the danger of hand-waving, for they are wrong. These simulations demonstrate. We are correct that the classical linear estimators are strictly more robust to non-normality than PK's, and thus provide a useful check.

Section 6 returns to the linear estimators that PK first proposed and used (and which again relate primarily to the "why," not the "whether").

There is some semantic confusion here---linear LIML is not a way of doing 2SLS, and parameter and moment covariance matrices are not the same. But the main upshot is that our first linear regression, in which there are six instrumented variables, credit by gender and lender---is underidentified. It is "the equivalent of sirens blaring and red lights flashing to proclaim that something is terribly wrong with the estimation." Actually, our paper notes the underidentification (see the under-ID test in the table above) and does not rely on that regression for inference. We fix it by pooling credit by lender, which eliminates the underidentification, as shown above (the p values on the test plunge to 0.000).

Moreover, as that table newly shows, and contrary to PK, instrument weakness is not an irreducible source of trouble. In the exactly identified estimates, the instruments appear strong; the impact of microcredit on poverty still does not. It appears now that the instruments are not weak in the overidentified regressions, at least those that pool across lenders. Rather, instrument proliferation is distorting the test of instrument weakness. Adding instruments should increase instrument strength even if the test of strength says opposite. This finding does contradict our earlier thinking a bit, and I'll return to it.

The section also provides an unusual interpretation of the linear estimates, combining the point estimates from LIML with the "perfectly valid" standard errors from 2SLS. In fact, the LIML and 2SLS regressions return the exact same weak instrument diagnostics, so it's not clear why one is more valid than another. At any rate, it is an unorthodox move and a thin reed on which to rest a defense of PK.

Section 7 is interesting. It strips away components of the PK estimator to isolate the source of identification. What it still does not do, however, is use the formal language of probability to state and defend the conditions needed for identification of causal effects. PK, for example, have never motivated the assumption that variation in the availability of credit by gender is exogenous. They also have not explained why credit availability is a good instrument in a nonlinear IV set-up despite our demonstration (Table 4) that credit availability is correlated with the second-stage error.

Summary

Contrary to appearance, the new PK paper confirms rather than refutes the conjecture that bimodality in the PK estimator is a sign of weak instrumentation. The paper does not overturn the finding that dropping a handful of systematically picked outliers collapses the two modes into one near zero. It does not change the fact that linear estimators that are robust to demonstrated deviations from the likelihood model produce estimates close to zero. It does not change the fact that the PK estimator is demonstrably inconsistent in the face of such deviations. It does not address the bootstrap evidence that the estimator is inconsistent on the real data.

But we have learned from this round. Most important is the discovery of a paradox: PK now provide a laboratory demonstration of how weak instruments make their estimator bimodal, confirming one of our hypotheses; yet the friction with them led me to run exactly identified linear regressions that revealed the instruments to be strong in that context, cutting against our hypothesis.

This forces us to revise whatever tentative insight into the nonlinear PK regressions that we derive from the linear analogs. I would not now hypothesize that the PK instruments are weak in the usual sense, across the full sample. Nevertheless, as Jonathan and I noted in 2011, the PK result disappears when dropping villages where both genders can borrow and, symmetrically, persists strongly when restricting to just those villages. So the PK result seems to emanate from this subsample, in which the female and male credit availability dummies are identical, making them weak for explaining distinctive variation in the endogenous variables, credit uptake by gender. It seems as if instruments being weak only within a subsample, while irrelevant for linear estimation, can distort a nonlinear one---at least when there are outliers. This is why I continue to conjecture that the outliers and instrument weakness are interacting: fix either and the bimodality goes away.

Perhaps someone else can formulate a sharper explanation for the instability of the PK estimator; our conclusions about the credibility of the PK findings remain regardless.

Authors:

David Roodman

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Bretton Woods Non-Commission: Bretton Woods Non-Commission Wrap-Up

cgdev.rss@cgdev.org (CGD RSS feed) — Mon, 19 Jul 2010 16:33:26 +0000

Postings to this blog are now closed. But efforts to modernize the Bretton Woods institutions to better meet the challenges of the 21st century continue, here at the Center for Global Development, within the institutions themselves, and in the international development community more broadly. I invite you to learn more about CGD’s work on the International Financial Institutions and the Future of the World Bank in particular, or check out the past postings to the Bretton Woods Non-Commission blog below.

I also thank my colleagues who participated in the Non-Commission and encourage readers to visit them at their sites:

New Rules for Global Finance Coalition: http://www.new-rules.org/ (Jo Marie Griesgraber)
G-24: http://www.g24.org/ (Amar Bhattacharya)
Brookings Program on Global Economy and Development: http://www.brookings.edu/global.aspx (Colin Bradford)
Ted Truman: http://www.iie.com/staff/author_bio.cfm?author_id=122
Ralph Bryant: http://www.brookings.edu/experts/b/bryantr.aspx
Domenico Lombardi: http://www.brookings.edu/experts/lombardid.aspx

Authors:

Nancy Birdsall

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Bretton Woods Non-Commission: Fixing World Bank Governance: Four Steps

cgdev.rss@cgdev.org (CGD RSS feed) — Fri, 04 Dec 2009 23:45:43 +0000

The report of a high-level commission chaired by former Mexican President Ernesto Zedillo and tasked with generating ideas and momentum for reforming the World Bank’s governance was published in October 2009. Johannes Linn summarizes the report well here (and then complains that its remit was too narrow). The report was launched at a CGD event which Lawrence Macdonald moderated (he critiqued World Bank president Robert Zoellick’s response to the report here).

Building on the recommendations of the Zedillo report, I suggest four priorities below for reformat the World Bank. I then add one worry about an issue the report failed to grapple with.

IBRD should go 50/50 (voting shares), with developing countries rising not from 44 to 47 percent (as recently endorsed by the G-20) but to 50 percent. The 50/50 allocation should be tied to the planned capital increase. It’s the borrowers that want a bigger bank. Many have surplus reserves and could put in more paid-in capital; perhaps non-borrowers with big fiscal problems like the U.S. could increase their contributions in the form of callable capital (which would not require budget appropriations). Need the paid-in ratio be the same for everyone? By the way, the Inter American Development Bank (IDB) has been a 50/50 bank since 1994. The effect there has been more than symbolic (greater legitimacy and ownership have affected the agenda and the budget) but by no means has constituted a revolution -- for good or ill.
IDA governance. IDA should have a separate governance structure from IBRD. The Commission recommends a voting arrangement for IDA more tied to recent contributions, but is not explicit about separating IDA from IBRD governance. Here lies a possible bargain with the UK and other Europeans: they keep more votes and chairs at IDA but give up some chairs at IBRD (where they have 8 of 24 now). IDA should also be 50/50, including only donors and IDA recipients. Middle-income countries like China and Brazil could join the donors by contributing to IDA directly.
Presidential selection. The G-20 and the Zedillo Commission have spoken: it is time to end the grip that the U.S. and Europe have on selecting the heads of the World Bank and the IMF respectively. On this issue, I advocate double majority voting – a majority of weighted votes, and a majority of countries. This method would enhance institutional legitimacy since small, poor countries could, if they formed a coalition, be able to block a candidate they didn’t like – just as the U.S. can (and could) do all by itself. That way an elected president would have serious and broad support, thus enhancing his or her legitimacy – and therefore the effectiveness – of the institutions. Meanwhile the U.S. Congress still needs to be reassured that the U.S. would retain a de facto veto on any candidate.
Global public goods. As I argue in a recent speech, a new wing at the World Bank should be a huge priority. Its governance should be shaped by three principles. First, periodic member contributions should be related positively to per capita income and to emissions per capita. Second, developing countries as a group should have influence equal to that of developed countries, whether through 50 percent of weighted votes or other voting rules. Finally, in legal and operational terms, the new entity should be as distinct or even more distinct from the main lending arm of the bank as the Multilateral Investment Guarantee Agency (MIGA) and the International Finance Corporation (IFC). And why not put the new wing in Beijing or New Delhi? Developing countries have $3 trillion in reserves. Surely they would welcome an opportunity to lend to or capitalize a substantial GPG Trust Fund. Better for them and for the global economy that some of those reserves be intermediated through a legitimate global institution. The Climate Investment Funds are already governed under a 50/50 arrangement and a GPG or Climate Fund should be similarly set up. To start, it should be at least $3 billion with at least $1.5 billion from advanced developing countries.

Finally, I have one deep worry: The Commission calls for greater flexibility and speed and for reduction of the “hassle factor” in Bank operations. But at the same time it wants increased attention to environmental, social, anti-corruption safeguards, both internal and in all lending operations that have piled up like barnacles on World Bank operations. How to reconcile these two fundamentally conflicting demands? The Commission should have pushed for more emphasis on independent, periodic ex post audits of ongoing programs and projects, and for the Bank to exit (projects and countries) that fail audits.

In general, the Commission failed to deal with the Bank’s obsession to lend (ignoring the problem of procyclicality), its focus on disbursements, the lack of ability to exit once the Bank is engaged in a country, the limited incentives to innovate, and the willful pretense that all risks – fiduciary, waste and corruption, environmental and so on – can be managed ex ante.

Authors:

Nancy Birdsall

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