World Bank mustn't say "democracy," but "deploy troops" is OK

UPDATE: Wed, May 11: World Bank media chief David Theis responds (see end of comments section below) I finally read the World Bank's 2011 World Development Report, Conflict, Security, and Development. It shed new light on an earlier discussion I had by email with World Bank Media Chief David Theis last month, which I reproduce here, and then I add a new letter I just sent to Mr. Theis.

To World Bank Media Chief David Theis, April 7, 2011

David, I noticed that President Zoellick's speech yesterday on the Arab Democratic Spring did not actually mention the word "democracy" … The omission is quite startling given the topic, so I was wondering: is there a legal prohibition (such as from the articles of agreement) that prohibits the President from overtly using the word "democracy"? Bill

From World Bank Media Chief David Theis, April 8, 2011

Hi, Bill. Since you worked at the World Bank for 16 years, you probably know that our Articles of Agreement say that the Bank, which is owned by 187 member countries, “….shall not interfere in the political affairs of any member; nor shall they be influenced in their decisions by the political character of the member or members concerned.”

Here's a link to the Articles, if you need a refresher: http://go.worldbank.org/0FICOZQLQ0

Thanks very much,

David

New letter yesterday

To World Bank Media Chief David Theis, May 9, 2011

Dear David,

I have finally had a chance to read the 2011 World Development Report (WDR) on Conflict, Security, and Development. On p. 188, it says:

" External forces can ...begin to restore confidence ... They can also deploy troops to provide physical security guarantees against a relapse."

On p. 192, it talks again about the idea for external forces “to deploy peacekeeping operations to confront violence in a timely manner.”

Thanks for the refresher in your April 8 letter on the restriction that the World Bank “not interfere in the political affairs of any member.”

And thanks for explaining that any descriptive use of the word “democracy” on Arab revolts by President Zoellick would be such an interference in political affairs of a member state.

I was just wondering if you would consider a deployment of outside military troops to be less of an interference than using the descriptive word “democracy”?

Thanks for any clarification you can provide.

All the best. Bill

Mr. Theis kindly said he would check with the WDR team and get back to me.

More Tales of Two Tails

The following post is by Dennis Whittle, co-founder of GlobalGiving. Dennis blogs at Pulling for the Underdog.

An eloquent 3 year-old would have been better asking "What the dickens are you talking about?  Who is defining success?  Who says failure is bad, anyway?" - Joe

Earlier I blogged about aid cheerleaders and critics. Each camp argues about the mean outcome of aid rather than the distribution of impact among projects. Both camps agree that some projects have positive results and others negative. So why not try to figure out which projects work and focus our resources on them?

I got some great and insightful comments and a few nice aid distribution graphs from readers.  Here are some key themes:

1. The mean *does* matter if the distribution is random. In other words, if we can't predict in advance what types of projects will succeed, we should only spend more resources if the mean outcome is positive.
2. Many people believe that on average the biggest positive returns come from investment in health projects.
3. We should also look at the distribution of impact even within successful projects, because even projects that are successful on average can have negative impacts on poorer or more vulnerable people.
4. Given the difficulty in predicting ex-ante what will work, a lot of experimentation is necessary.  But do we believe that existing evaluation systems provide the feedback loops necessary to shift aid resources toward successful initiatives?
5. "Joe," the commenter above, argues that in any case traditional evaluators (aid experts) are not in the best position to decide what works and what doesn't.

Petr Jansky sent a paper he is working on with colleagues at Oxford about cocoa farmers in Ghana.  The local trade association was upset that they could not get pervasive adoption of a new package of fertilizer and other inputs designed to increase yields.  According to their models, the benefits to farmers should be very high.  The study found that - on average - that was true, but that the package of inputs has negative returns to farmers with certain types of soil or other constraints.  Farmers with zero or negative returns were simply opting out.

At first glance, these findings seem obvious and trivial.  But they are profound, in at least two ways.  First, retention rates are an implicit and easily observable proxy for net returns to farmers.  We don't need expensive outside evaluations to tell us whether the overall project is working or not.  And second, permitting farmers to decide acknowledges differential impacts on different people even within a single project.

What other ways could we design aid projects to allow the beneficiaries themselves to evaluate the impact and opt in or out depending on the impact for them personally?  And how would it change the life of aid workers if their projects were evaluated not by outside experts and formal analyses but by beneficiaries themselves speaking through the proxy of adoption?

What if NCAA Basketball Tournament Teams were coached by Development Economists?

Tomorrow night is the next round of March Madness, the annual NCAA tournament that started off with 64 college basketball teams, now reduced to the "Sweet Sixteen" . It is not widely known that some lower seeded teams in the tournament, who had to play much better teams, desperately sought advice from leading Development Economists.

A Columbia Professor said we already know the successful ingredients for a championship, just get lots of funding for the inputs to a victory. Each of his players was given a beautfiul new basketball but had no incentive to pass it or shoot it.

An Oxford Professor distributed “peacekeeping equipment” to his team, saying it was critical for his Good Team backed by the UN Security Council and the G-7 to win. The other team fled in panic, but was declared the winner by default by tournament officials.

An NYU Professor said a lower seed had never won the tournament and he saw no reason why it would be possible now. He and his team left for a vacation in Cancún.

Other Professors such as Duflo, Banerjee, and Karlan set up randomized trials for which plays work. Treatments included 3-point shots, driving layups, pick and roll, and passing to the open player, compared to a control group holding the ball still. The results were of considerable interest, but players got very confused trying to remember which study to cite and apply in each pressure-packed moment of the game. They did not make the Sweet Sixteen.

Hernando de Soto said the only thing that mattered was property rights. He called for secure titles to his team's land. This team defended its own half-court successfully, but they were forced to recognize the other team's rights also. There was not a lot of scoring.

Mohammed Yunus said it's all about microcredit. He suggested empowering his team's players with micro loans. This was a great success, as players all left the court to start small businesses selling beer and pretzels in the stands.

Finally,the team asking advice from George Mason Professor of Economics Peter Boettke made a Cinderella run into the Sweet Sixteen. What was his brilliant economics advice? Well, he chose not to give any, but he had actually played and coached basketball in high school and college.

Were the above characterizations inaccurate? Everybody can participate in the usual heavy betting on this tournament -- fill out your own brackets below to determine who will advance to the semifinals and then the finals, and who the final winner will be.

World Vision Super Bowl Shirts: the Final Chapter

Remember back in February when World Vision’s proud announcement that they were sending abroad 100,000 Super Bowl champion T-shirts emblazoned with the name of the losing team, as they have for the last 15 years, provoked aid blogger ire? We’ve been following the controversy—and occasionally piling on joining in—and here’s the latest. In an email to Aid Watch, World Vision disclosed that total transport and administrative cost per T-shirt was 58 cents, which is uncomfortably high relative to low market values (a quick spot check  produces estimates ranging from 20 cents to $1.20 for a T-shirt) in Africa's saturated second-hand clothing markets.

World Vision also sent us documents from two districts in central in Uganda* that received donated clothing, although NOT specifically the loser Super Bowl T-shirts that started this whole controversy. We learned that the donated clothing was used as part of World Vision’s health programs which aim to “improve access to better health services, safe water and sanitation.” Specifically, World Vision said:

Provision of clothing was done for women and children in extremely poor conditions to protect them from weather and to raise their self-esteem. Providing clothing also served to increase trust among the beneficiaries and encourage them to participate in other health services, including voluntary counseling and testing for HIV.

This led us to focus on the health and HIV/AIDS sections as we sifted through the documents for answers to two questions which arose in the debate.

First question we asked: Can World Vision show that they rigorously assess the need for gifts-in-kind in the communities where they work?

World Vision answered: Needs assessments are carried out by national offices, and the rigor of these assessments varies from office to office.

What the documents showed: World Vision sent us one program design document from the final phase of a 12-year, multi-sector program that ended in 2010, and one needs assessment from a neighboring region (WV couldn’t find the needs assessment for the 12-year project).

The needs assessment identified the most important problems faced by the community, and made recommendations how WV should deal with them. It did not discuss at any point the clothing needs of villagers, or how clothing donations might alleviate any of the problems mentioned in the 67-page report.

The program design documents, intended to “point out gaps that still exist in the community as expressed by the people,” made only one mention of gifts-in-kind. “Gifts in kind will be planned for on annual basis and this is meant to supplement the project fund in achieving project planned activities.”

The main report did not mention a need for clothing. However, I did learn that the region described is among those most heartbreakingly affected by HIV/AIDS, with high numbers of orphans and child-headed households, and after some digging I found an HIV/AIDS sub-report embedded within the main report that did mention clothing:

Most of these [orphaned children] lack care and support in terms of emotional coping, physical requirements like food, shelter, clothing, and limited access to basic social services like education and health.

Another embedded sub-report (actually a proposal for outside funding to support HIV/AIDS orphans in the area) was more specific:

Special needs will be identified for each of the selected families and the project will organize to procure and provide the essential needs for the children and guardians. These will include beddings, bicycles, clothing, cooking pans, washing basins and water tanks.

Our conclusion on the first question: No.

Second question we asked: Can WV point to any evidence that the 15-year distribution of Super Bowl T-shirts, or, more broadly, any distribution of clothing, has "facilitate[d] good, sustainable development"?

World Vision answered: No, “because the Superbowl clothing isn’t a program. It’s a donation. We evaluate the results of our programs…many of the programs where we use GIK have been enormously successful in facilitating good, sustainable development. Our evidence for that would be individual program evaluations from a variety of national offices.”

What the documents showed: WV sent us one annual report and program evaluations for each phase of the same 12-year project discussed above. After hours of reading, a picture emerged of a community decimated by the HIV/AIDS epidemic and valiantly struggling to provide support for the large populations of vulnerable children made orphans or adopted into already over-stretched extended families.

An annual report from 2006 gave the only specific accounting of the type of gifts-in-kind distributed:

GIK was received and distributed to children and these included 115 pairs of canvas shoes, 50 pairs of baby shoes, 900 T- shirts, 225 Gin trousers, 500 pairs of socks, 125 dolls and 200 blankets. This benefited 1615 children in the community.

In a report from the first phase of the project, evaluators noted that some villagers were able to sell eggs from a poultry project to buy clothes (this shows that clothing is available for purchase in the community, and probably not at prohibitive prices for most people). Clothing was also mentioned as an obstacle to achieving the program’s “Christian Witness” objective: the poor don’t attend church because “they lack good cloth to put on and feel not worth attending.”

Regarding World Vision’s ability to show success in facilitating sustainable development through their programming in general, the 2006 evaluation said “tracking changes…attributable to World Vision support” is “quite difficult” because over the course of the 12-year project priorities and goals shifted, and because early baseline measurements don’t match up with later evaluations.

Nonetheless, the final report attributed many positive health outcomes to project activities. For example, reduced malaria incidence; improved sanitation practices; and reduced prevalence of HIV/AIDS.

We don’t see any basis for attribution of these outcomes to World Vision, since the program was not designed in such a way to make such attribution possible. The resources provided by World Vision—clinics built, medicines supplied, HIV awareness courses given—are characterized as improving health outcomes, but also as very thinly spread over a large area with acute health needs.

As to sustaining project gains as WV funding ends, WV reported that local organizations have been trained in skills like proposal writing, resource mobilization and networking so that they can take over WV services. Villagers in the final survey said they learned “vocational, business management, leaderships, improved farming, HIV/AIDS care, positive parenting, and sanitation management skills,” all of which would provide a “pillar to further development in this area.”

Our conclusion on the second question: While we appreciate WV’s transparency in sharing these documents with Aid Watch, we have to conclude that the answer is no. There is no real evidence in these hundreds of pages of reports that the clothing donations are more than a minor afterthought to World’s Vision’s health programming (although gifts-in-kind are a major source of World Vision’s revenue). Given the aforementioned costs required to ship donations from the US abroad there is no development-related reason to continue this outdated, dependency-creating practice.

*World Vision asked us not to publish the names of the regions, or any other identifying information about the projects.

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Related posts:

In Zambia, Pittsburgh won the Super Bowl: Why is World Vision perpetuating discredited T-shirt aid?

World Vision responds to blogger questions

Stop! Tom Friedman said something smart, about Arab world, Afghanistan, Pakistan

This blog and this author have given poor Mr. Friedman grief in the past for babbling nonsense. So it's only fair that we give America's favorite random idea generator credit when he comes up with a surprisingly cogent paragraph:

When one looks across the Arab world today at the stunning spontaneous democracy uprisings, it is impossible to not ask: What are we doing spending $110 billion this year supporting corrupt and unpopular regimes in Afghanistan and Pakistan that are almost identical to the governments we’re applauding the Arab people for overthrowing?

Overlooking a few technical details -- such as Afghanistan and Pakistan NOT being almost identical to pre-revolt Tunisia, Egypt, or Libya -- the general idea seems vaguely correct. Why pour in US aid to finance a very unhappy political equilibrium?

Why we'll always have benevolent autocrats

Last Friday, Bill gave a talk at the School for International and Public Affairs at Columbia.  NYU-Wagner student Christopher Faris summarized the speech over on the Wagner blog, and gives a great run-down of the audience reaction at Columbia:

...Easterly argued that the theory of growth-boosting 'benevolent autocrats' (think China's economic boom) is, at best, not proven and at worst a compelling but flawed idea to which development practitioners hopefully cling - to everyone's detriment.

But the benevolent dictator is a powerful and compelling idea, dating back at least as far as Plato's Republic. Despite the carefully constructed argument and engaging delivery, the audience of ambitious internationalistas seemed unconvinced, if the questions were anything to go by.

Most questioners (professors and students) wanted to believe in the abiding power and potential for a benevolent technocrat to guide countries through transition; to protect the nation's economic well-being from the foibles of the electoral process; or in the cultural appropriateness of more autocratic leadership in some countries at certain points in their history.

All of which got me to thinking (with apologies to Carrie Bradshaw):

• Maybe international development students are committed to the idea that, through our education, ideas and energy, individuals can advocate for good policies and make the world a better place;
• Perhaps we want to believe in the power of strong, technocratic leaders, benevolently steering developing nations through the rapids of the global economy and pro-poor reform;
• Maybe, just maybe, we are all benevolent autocrat wannabes?

[Easterly's discussion of cognitive biases] added up to a pretty compelling argument against benevolent autocrat theory - or at least a strong case for us to be wary of buying it too easily...

But then came the questions. Once the SIPA professors finished, almost all were from international students (with a Latin and East Asian trend), and almost all betrayed an unshaken faith in benevolent autocrat theory.

So if Professor Easterly failed to convince, why? A few suggestions: because the biases he enumerated are indeed powerful shapers of thinking; because his audience was committed to the possibility of making a difference through their actions; because a more laissez-faire approach to international development is a tough sell to idealistic students.

But further: Easterly described what developing economies should aim for (to transition to innovation-rich modern economies, harnessing local knowledge, and with democratic political systems containing checks and balances against autocratic tendencies) but was light on details of how to do it. He offered a compass bearing but no map. Perhaps we, students and practitioners of development, want maps - especially at this thrilling time of autocrat-toppling. And we want to be able to help. We have a strong pro-action bias.

Mr. Faris generously skipped the possibility that the argument was just WRONG, but he has good insights into the resistance to the argument even if it's correct.

In Zambia, Pittsburgh won the Super Bowl: Why is World Vision perpetuating discredited T-shirt aid?

Editor's Note 4: 10:45am 2/15: @saundra_s reports there are now 36 bloggers that have posted on this (excluding WV itself or its staffers), of which 35 are against. One more against here from faith perspective. Now have a Twitter hashtag #100kshirts.

Editor's Note 3: 8:45am 2/15: heard from @WorldVisionUSA finally! got this direct message on Twitter: "Thanks for following WV! For even more opportunities to get involved, check us out on Facebook."

Editor's Note 2 3:30pm: still silence from the @WorldVisionUSA palace as more bloggers post and more protesters gather outside in Aid Twitter Square.

Editor's Note 10:16am: Sorry World Vision, Aid Watch committed a major factual error due to the incompetence of one of our alleged experts. This supposed NFL and zoological expert with the initials W.E. initially got the team wrong in the picture, it is the losing 2007 team Chicago Bears.

As it has for 15 years, World Vision took credit last week for accepting the donation of 100,000 unwanted Super Bowl T-shirts from NFL merchandisers to ship to poor people across the world.

The T-shirts are the result of NFL merchandisers printing championship shirts for both teams in the Super Bowl so they’re prepared to immediately sell to fans of the winning team, whichever one that turns out to be. The merchandisers get a tax deduction for donating the losing team’s shirts (saying that the losers actually won) to World Vision, and World Vision (according to their website) ships the shirts abroad, this year to Armenia, Romania, Zambia and Nicaragua.

(Saundra S has a great post explaining the financial incentives that keep this arrangement in place. Among other things, World Vision uses the shirts to fictionally lower its overhead cost ratios, great for bragging about its efficiency.)

To quickly reiterate some of the arguments against SWEDOW (Stuff We DOn’t Want) aid:

1. It’s not needed. Seriously, neither the developing world as a whole nor the specific recipient countries named by World Vision suffer an undersupply of T-shirts.
2. It’s not cost effective. The cost of collecting, sorting, shipping and distributing bulky, low-value items like a bunch of T-shirts does not justify the (very questionable) benefit. And don’t forget to include the opportunity cost, the lost chance to allocate those same, considerable resources to provide something better, like clean water or medicine. (A World Vision PR rep told the New York times in 2007: “Where these items go, the people don’t have electricity or running water.")
3. It can perpetuate local community’s dependence on free handouts and stifle home-grown economic initiatives, not to mention putting out of business local shirt sellers.

In comparison to the storm of protest that greeted aid neophyte Jason Sadler (aka the 1 Million Shirts Guy, aka Mr. Haterade) when he launched his idea to send a million T-shirts to Africa last year, the unexemplary behavior by aid behemoth and standard-setter World Vision has provoked far fewer critical posts.

Self-preservation-minded aid bloggers who work with World Vision might be  rationally self-censoring, and we've also heard reports that some bloggers received email requests not to blog about this topic.  This episode may reveal the current limits of the burgeoning power of by-the-people aid criticism.

Then again, this week has been an auspicious one for people-power protesting policies that should have been chucked in the bin of history long ago.  As the controversy spreads, World Vision can't avoid debating these policies with their supporters and critics. Will next January see World Vision bragging about its 16th year of sending loser shirts to poor people, or will people-power finally halt this disgrace?

Dear UK Government, why won't you let me retire as Official Sachs Critic?

UPDATE 3: FEB 8 4:50PM: Twitter War reveals that Millennium Village Blog accused Clemens and Demombynes of hard hearts towards suffering (search the blog for "suffering"). UPDATE 2: FEB 8 4:30PM: concluding coverage by @PSIHealthyLives @viewfromthecave of the Great Twitter War prompted by this post between @aidwatch and @earthinstitute, with collateral attacks on @m_clem, ending in a non-acceptance of debate by head of @earthinstitute.

UPDATE Feb 8 11:30am: sent comment with link to this post to DFID Independent Commission for Aid Impact. Spokesperson promptly responded, rejected my comment for consideration on technical grounds, but did warmly invite me to complete the anonymous online mass Survey Monkey. It probably doesn't mean much, unless the Independent Commission already learned the brilliant strategy of bureaucratizing the critics? I do feel a wee bit sorry for one of your Commisioners, the great John Githongo, who presumably did not risk his life so he could be reading anonymous results from Survey Monkey.

Nobody is more tired of the interminable Sachs-Easterly debate than one guy named Easterly...alas, I seem to be stuck in a kind of Critic Trap, in which the ideas criticized keep reappearing unchanged, requiring equally unchanged criticisms, keeping me in chronic peril of taking myself way too seriously.

So it was with great weariness I heard the news that the British aid agency DFID (otherwise probably the best bilateral aid agency) is close to financing a brand new Millennium Village in northern Ghana, near Bolgatanga. I had hoped for something better from the new UK government, which had seemed like an improvement over the Blair and Brown ("We know the answers, just double aid") team .

As it happened, I passed by the proposed MVP site last summer. The proposed villages are right on the main road in one of the most NGO-intensive places anywhere (see the sign below, in which NGOs apparently own the region).

The usual critique that selection bias of the Millennium Villages makes evaluation  impossible may be somewhat relevant given the political realities that (1) the current government chose the villages for the MVP, (2) the incumbents have frequently promised to do more for the North, (3) the MVP came along and may be a high visibility way to keep that promise, and (4) ergo, the government will likely do everything possible to make the project succeed, showing nothing about scalability for thousands of villages elsewhere. In short, this new MV may be about as informative as my feeding my own children is informative on whether child nutrition programs work.

And how good is the track record of the MVP taking evaluation seriously? Michael Clemens and Gabriel Demombynes posted the following on the World Bank Africa blog last Friday:

In a June 2010 report called Harvests of Development, the Project claimed that the impacts of the project included expanded cell phone ownership.  For example, the MVP claimed that increases in cell phone ownership at the Ghana site were caused by the project, in this extract from page 91 of the MVP report:

This claim has little basis, because cell phone ownership has been expanding at about the same rate all around the MVP site in areas untouched by the project. ....

But on Tuesday, months after multiple discussions we’ve had with MVP leaders on our research, a post on the MVP’s blog restated the claim that the increase in mobile phone ownership at the intervention sites was caused by the Project...

{The Clemens and Demombynes paper does the same cell phone analysis with the same results in the MV of Sauri, Kenya.}

They were responding to a blog post on the MVP web site on February 2, 2011 as follows:

Sauri looks back on five years of success

Infrastructure: ... The proportion of households owning a mobile phone has increased four-fold....

In short, independent observers made an irrefutable argument that a claim was invalid, the MVP heard the argument, seemed to accept it, and then repeated the previous claim unchanged.

Or in other words, if nobody is listening to any evaluations anyway, if I am bored and I am boring everyone else, why should I want to be Official Sachs Critic any longer?

Messrs. Clemens and Demombynes, you may want to check out a new job opening...

Development in 3 Sentences

I liked this formulation from the blog The Coming Prosperity, posted today as a link on Twitter:

If solutions are known, need $$. If solutions are knowable, need evaluations. If solutions are evolving, need entrepreneurs.

Consumer Warnings: This comes at the end of a long diatribe against You-Know-Who (associated with $$). I'm not sure the author is a reliable guide to other people's work, since Yours Truly is incorrectly associated with "evaluations." But I still like the 3 sentences above.

Please help us praise Millennium Villages...

UPDATE 4: 3rd nomination for positive. Day 3 of silence from MVP UPDATE 3: another nomination for positive evaluation (Michael Clemens paper), another energetic disavowal by the author (see comments below).  

UPDATE 2: oops, author of only nomination so far says it's not so positive-- see comments

UPDATE: received first nomination of positive review

On Twitter, @bill_easterly noted yesterday's Aid Watch post :

On Millennium Villages: this is not my own predictable response, this is independent guest post

Which immediately got the reply on Twitter:

intentional irony? your guest posts are as "independent" as any MV self-assessment

Aid Watch will let its guest posters defend their own independence, but in the meantime let's find another guest poster that will pass our critic's most stringent independence test. In short...

...could somebody please send us a strongly positive evaluation of the the Millennium Villages.

Our critic rightly notes that self-assessment is not what anybody is looking for, so  the only restriction is that the evaluators of course must not be part of the MV program themselves, i.e. must be independent.

This is not satire. Aid Watch would be very happy to hear from those evaluators of the MVs who have the strongest possible positive portrayal of the results of the MV intervention. We will post summaries of these evaluations without comment on Aid Watch.

UPDATE: received first nomination of a positive review of MVs: an article in Vanity Fair.

Killing microfinance to say they saved the poor

Vivek Nemana is an NYU graduate student and a student worker at DRI. It’s official: Indian politicians have agreed to regulate the private microfinance sector…by choking it in a tangle of bureaucracy and corruption.

As everyone from David Roodman (on this blog) to the Cambridge randomistas (in the FT) has been saying, Indian microfinance needs reform, not a roundhouse kick to the face. But now the state of Andhra Pradesh has passed an overbearing law which makes it illegal for MFIs to lend to people with multiple loans (which is 70% of rural households), or to lend to members of Self Help Groups without permission. State regulators may also shut down MFIs at any time for vaguely defined “sufficient reasons,” and lenders can only collect payments at government centers – an open corridor for corruption.

The head of Microfinance Institutions Network said: "The bill will make it impossible for microlenders to operate in the state and effectively put us out of business there."

Private microlending in Andhra Pradesh was successful because there was excess demand for credit that government-backed programs and non-profits were not satisfying. But with the for-profits squeezed out, their six million clients will be forced to return to more informal lenders such as village loan sharks.

In 2009 a similar incident happened in Nicaragua with uncanny parallels to Andhra, right down to the multiple lending and political involvement. The “No Pago,” or No Payment, movement resulted in the judge-ordered liquidation of a top microlender and a dragged-out microcredit crisis.

India was like a Petri dish for microfinance experiments, which meant that initiatives like self-help groups, mobile banking, and MFIs played off each other’s shortfalls. Eventually, the competition between the agents – if mixed with a healthy dose of regulation – might’ve fostered better, more effective systems of microcredit.

But this legislation is a discouraging blow to would-be microfinance entrepreneurs, who’ve been basically told that at any time the government might decide to shut down their businesses – and their ideas.

Investors in for-profit ventures might also be frightened away by the idea of losing money when politicians decide to tighten their grip around microfinance’s throat. In a worst case scenario, the new law could legitimize similar actions by politicians in other countries who are pandering for votes or have their own personal beef with microfinance. Some countries, like Peru, already have stable, well-organized regulation in place, but they’re exceptions.

On the other hand, what happened in India could be a wake-up call, as Tim Ogden argues, about the unrealistic expectations that donors, supporters and governments maintain about microfinance. If that’s the case, then clear-headed thinking about its flaws and benefits could pave the way for better regulation, better financial literacy programs and more effective, more diverse microfinance products.

Next week, Indian politicians plan to ban all Bollywood movies for “sucking the blood from the poor” because they charge for movie tickets.

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Photo credit: flickr

Aid Watch Rerun: A suggestion for the 1MillionShirts guy

NOTE FROM THE EDITORS: Over the holidays, we'll be publishing reruns of some of our posts from the first 2 years of Aid Watch. This post originally ran on April 28, 2010, and was one contribution to a controversy that erupted on the internet when aid workers got wind of an amateur aid effort called 1 million shirts. We will be back running new content starting tomorrow, January 4th.

Here’s the back story: A young American entrepreneur wanted to use his powerful social media profiles to do good. He hit on the idea of convincing people to pack up all their unneeded T-shirts, throw in a dollar for shipping, and send them - 1 million of them - somewhere in Africa. He partnered with two charities, applied for 501(c)3 status, and voila, a new cause was born: 1MillionShirts.

Yesterday, professional aid workers, academics, and researchers responded vociferously to this idea. Take a look at these blog posts for more details, but for our purposes we can break it down to two reasons why 1MillionShirts is a poor idea:

1. It’s terribly inefficient. One million T-shirts are heavy, and shipping and customs cost  a lot, likely more than it would cost to produce those shirts locally. Plus, cheap donated clothes flood local markets, undercutting local textile industries.
2. It’s just not needed. There are many serious health, economic, social and political problems challenging different African countries today, but lack of T-shirts isn’t one of them. This project idea, like many bad ones, clearly came from thinking “what kind of help do I want to give” rather than “what kind of help would be most useful to some specific group of individuals.”

So it’s safe to say that Jason, the  guy behind 1MillionShirts, is not an expert in giving aid to Africa. But maybe he IS an expert in something.

He is  an expert in reaching people through social media. We can conclude this because Jason makes his living from companies that pays him to wear their T-shirts for a day and spread videos, pictures, blog posts and tweets about it to their networks—see iwearyourshirt.com. As one of the testimonials on their website puts it, “They are funny, creative guys who really know how to promote you and your products by wearing your shirt.” Another one: “Gotta love a guy who wears a shirt, gets great exposure for the company whose shirt he’s wearing as well as himself, and who manages to turn it into a business.”

After Jason’s do-gooding was met with such a barrage of criticism, he apparently offered to axe the 1MillionShirts campaign if someone could come up with a better idea.

So here’s our suggestion: Why doesn't he use his own specialized expertise to help get the word out that giving cash is better than giving stuff. I bet if he put his mind to thinking about creative ways to spread that message, he could knock it out of the park.

And if the 1MillionShirts guy doesn't feel that spreading this important message satisfies their desire to do good in the world, he can still follow the advice of many people who devote their professional lives to thinking about problems like these, and donate cash to a trusted charity with local knowledge and experience working to solve some specific problem—just so long as it isn’t African shirtlessness.

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Update: Alanna Shaikh has written a definitive rebuttal to 1MillionShirts and Jason's reaction to criticism- see it here. Update 2: See also the open letter from Siena Antsis. Update 3: A perspective on the broader meaning of the 1MillionShirts fail from Christopher Fabian of UNICEF's innovation team. Update 4: This blog post has been edited at Jason's request to indicate that only Jason (and not Evan, with whom he works on iwearyourshirt.com) is involved in the 1MillionShirts campaign.

Aid Watch Rerun: The lure of starting from scratch

NOTE FROM THE EDITORS: Over the holidays, we'll be publishing reruns of some of our posts from the first 2 years of Aid Watch. This post originally ran on June 17, 2010. It is an acknowledged national characteristic that Americans believe in self-reinvention. One of our founding myths—inspired by the once unexplored and sparsely populated expanse of the North American continent—is the idea that you can head out of town, leave the encumbrances of the past behind, and start over in a new, unspoiled place.

What would happen if we brought this sensibility to development plans for poorer, more crowded nations? What if we already do?

The ingredients for Paul Romer’s solution to global poverty include an unoccupied tract of land, a charter to lay out a new set of just and commerce-promoting rules, and two or more sovereign governments. Just as Hong Kong was created as an island of prosperity by the British in China (only voluntarily this time), poor countries would lease a piece of their land to a richer, benevolent government or group of governments that would agree to administer the new city according to the rules of the agreed-upon charter.

From a new article in Atlantic Monthly by Sebastian Mallaby, we learn that Madagascar might have become the first testing ground for Romer’s charter cities idea—if not for a coup that ousted the Malagasy President in March 2009.

Madagascar’s government was anxious to attract foreign investment, and it understood that a credibility deficit held it back…Faced with this obstacle, the Malagasy authorities were open to unconventional arrangements. To boost investment in agriculture, they were ready to lease a Connecticut-size tract of land to Daewoo, a South Korean corporation, for 99 years…Romer’s proposal fit in with these adventurous ideas.…

Romer made his pitch for a charter city, and Ravalomanana responded that he wasn’t sure one was enough; if Romer could identify two rich countries willing to play the role of government trustee, it might be better to launch two parallel experiments. The president and the professor agreed that the new hubs should be open to migrants from nearby countries as well as to locals. They rose to examine a map of Madagascar on the study wall. Ravalomanana suggested building the first city on the island’s southwestern coast, which was largely uninhabited because of its dry heat. To Romer, the site sounded very much like the coastal locations that appeal most to the world’s affluent as vacation spots.

Ravalomanana’s government was toppled before any of these plans could go forward, in part as a result of violent protests over the perceived threat to national sovereignty represented by the Daewoo deal. As Mallaby points out, this failures suggests at least one flaw of the charter cities idea—that land ownership and sovereignty are explosive issues that may not be easily or peacefully negotiated away by leaders on behalf of their people. But Romer remains optimistic, and is talking to other African leaders, possibly ones with more staying power.

The charter cities idea appeals because it is bold. It promises a fresh start for people mired in the muck of old conflicts, inequality, and bad government. When Mallaby concludes “When African teenagers do their homework under streetlights, isn’t Romer right to think the unthinkable?,”  he is arguing that while there may be legitimate concerns about the ethics or feasibility of the charter cities, those concerns are made irrelevant by the overwhelming gravity and scale of global poverty and inequality.

In other words, big, desperate problems call out for big, radical solutions. Solutions that sweep away the detritus of past failure, promise to replace it wholesale with something new and better, and perhaps even alter the boundaries of the world as we know it.

The discussion about rebuilding Haiti has been full of ideas about the earthquake as an opportunity to ”start over,” “reboot,” “wipe the slate clean” and finally “get things right” (some stellar examples here). Two recent proposals brought the call for slate-cleaning back to Africa: We already blogged Professor Pierre Englebert’s suggestion in the NYT for the international community to “move swiftly to derecognize the worst-performing African states” like Chad, the DRC, Equatorial Guinea and Sudan, and in Foreign Policy, G. Pascal Zachary submitted that “no initiative would do more for happiness, stability, and economic growth in Africa today than an energetic and enlightened redrawing” of Africa’s colonial borders.

Call it the “let’s just scrap this mess and start over” approach to development.

Unfortunately, in earthquake-devastated Haiti as in troubled central Africa, the promise of starting from scratch is an illusion. It has always been true that no matter where you go, you take yourself with you—culture, history, habits, attachments and animosities come along like a skin you can’t shed. But these days there are fewer and fewer territories on our taxed and shrinking planet beyond the reach of someone’s determined claim.

These ideas share an overly-optimistic belief in a neutral, benevolent international community and its power to peacefully oversee imposed changes. All are tone-deaf to the very real degree of nationalism that does exist in basically all countries by now, regardless of whether they were misbegotten colonial creations or not. They also violate sovereignty as conventionally defined, which may be good or bad but is sure to provoke a nationalist reaction.

Early development economists working at the hopeful dawn of colonial independence believed that they really were starting from scratch. The last fifty years have shown us that they weren’t, and this has been—and remains—one of development’s biggest blind spots.

Aid Watch Rerun: And Now For Something Completely Different: Davos Features “Refugee Run”

NOTE FROM THE EDITORS: Over the holidays, we'll be publishing reruns of some of our posts from the first 2 years of Aid Watch. This post originally ran on Jan 28, 2008, and attracted a firestorm of comments, passionately for and against the idea. There will be a similar event again this year at Davos.

When somebody sent me this invitation from Antonio Guterres, the UN High Commissioner for Refugees, I thought at first it was a joke from the Onion. What do you think of the Davos rich and powerful going through the “Refugee Run” theme park re-enactment of life in a refugee camp?

Can Davos man empathize with refugees when he or she is not in danger and is going back to a luxury banquet and hotel room afterwards? Isn’t this just a tad different from the life of an actual refugee, at risk of all too real rape, murder, hunger, and disease?

Did the words “insensitive,” “dehumanizing,” or “disrespectful” (not to mention “ludicrous”) ever come up in discussing the plans for “Refugee Run”?

I hope such bad taste does not reflect some inability in UNHCR to see refugees as real people with their own dignity and rights.

Of course, I understand that there were good intentions here, that you really want rich people to have a consciousness of tragedies elsewhere in the world, and mobilize help for the victims. However, I think a Refugee Theme Park crosses a line that should not be crossed. Sensationalizing and dehumanizing and patronizing results in bad aid policy – if you have little respect for the dignity of individuals you are trying to help, you are not going to give THEM much say in what THEY want and need, and how you can help THEM help themselves?

Unfortunately, sensationalizing, patronizing, and dehumanizing attitudes are a real ongoing issue in foreign aid. David Rieff in his great book A Bed For the Night talks about how humanitarian agencies universally picture children in their publicity campaigns, as if the parents of these children are irrelevant. A classic Rieff quote: “There are two groups of people who like to be photographed with children: dictators and aid officials.”

Former World Bank President Wolfowitz with a few children

Alex de Waal in his equally great book Famine Crimes (and continuing writings since) writes about “disaster pornography.” He gives an example of a Western television producer in Somalia in 1992-93 who said to a local Somali doctor: “pick the children who are most severely malnourished” and bring them to be photographed.

Here’s a resolution to be proposed at Davos: we rich people hereby recognize each and every citizen of the globe as an individual with their own human dignity equal to our own, regardless of their poverty or refugee status. And Davos man: please give Refugee Run a pass.

Human Development Index debate…you still want more?

I suspect that we long ago exhausted the patience of our readers with our multiple rounds of debate on the Human Development Report's new methodology for its Human Development Index. At the same time, I feel an obligation to let the other side of the debate have their say as much as they want. So here is UNDP's new response to Martin Ravallion's response to UNDP's previous response to our original blog criticizing the new Human Development Index, as well, crazy.

Development is Uneven, Get Over It

UPDATE: out of 188 recorded songs on all Beatles albums, how many are now hits on iTunes? See end of post. This a 20 minute extemporaneous talk at UNICEF headquarters in New York on the topic of "Inclusive Growth". After the talk, there is a question, comment, and response session with the audience.  The full video is an hour, if you are really a masochist. (Try this link if the video player above doesn't work.)

To summarize the talk: success is intrinsically uneven, so development and growth is intrinsically uneven, not "inclusive". (See the earlier post about the fractal stubborness of uneven geographic wealth.) In this talk, I also mention how remarkably uneven success shows up in just about every field of endeavor. One way this shows up is in a "power law": there is such a strong negative relationship between the frequency of success and the scale of success that we have to use a logarithmic scale (i.e. a scale where every unit increase means multiplying by 10)  for both to be able to fit the extremes onto the graph, like the one below:

There is no evidence that large-scale redistribution programs can succeed without killing off growth, but targeting things like health and education to the poor has worked and could work even more. Lastly, the best thing of all you can do for "inclusive growth" is asserting the individual human rights of all, including women, gays, and religious, racial, and ethnic minorities. For more detail to fill out these ideas, please watch the video.

UPDATE: Answer to how many Beatles  hits out of 188 recorded songs on their 14 albums are hits today: 15. Even the most successful band in rock history could only produce a lasting hit about 8% of the time (please draw your own profound insights into the intrinsic unevenness of success and non-inclusive growth).

(Sorry about my really excessive Beatle-mania, it's a Baby Boomer thing, you wouldn't understand.)

PS highly imperfect methodology for measuring hits today: the popularity metre on iTunes gets maxed out for hits, all others (most showing zero popularity) are non-hits.

True Confessions: I'm still unable to conclude whether aid does more harm than good

Margaret Wente  in Toronto Globe and Mail perceives a growing backlash against humanitarian aid, that it may be doing more harm than good in Africa (she concentrates on seemingly everyone's (including ours) recent favorite example of Ethiopia). I'm quoted in the article accurately. Contrary to some perceptions (not in Wente's article) however, I have never made a general argument that aid does more harm than good, or called for aid to be abolished or even cut. I said aid "has done so much ill and so little good" in the subtitle to the White Man's Burden. The "ill" is well covered in Margaret Wente's column and is similar to the recent posts on this blog about aid financing autocrats and political repression, with similar examples in my book.  However, I have also given examples of aid successes, particularly in health (vaccinations!) It is very hard to conclude what the net effect of the ill and the good is, and I've never attempted to do so.

Instead I think the viable arguments are that (1) aid's record is sufficiently disappointing that it is unlikely to ever be the main driver of successful development, (2) if aid were more accountable it would do less ill and more good.

A tryst with TOMS

Vivek Nemana is a graduate student in economics at New York University and works for DRI. I remember wanting to save the world when I bought my first (and only) pair of TOMS Shoes. I was a freshman at NYU and involved in a handful of Save the Child Soldiers/Darfur/Fair Trade student clubs. With TOMS, just $50 of my (parents’) money would buy two pairs of shoes – one for me and one for a poor shoeless child somewhere – plus raise a few dollars for one of these clubs. Besides, those shoes were hip.

Looking back—and looking around me now at the high TOMS saturation on campus—I realize that TOMS Shoes is extremely well-marketed, extremely popular, bad aid.

TOMS follows a Buy-One-Give-One (BOGO) model where a customer pays for both pairs of shoes. But buying poor children $25 shoes is simply not cost-effective. Donating clothes to the poor in poor countries is not the same as, say, donating winter clothing to the homeless in New York. For one, shoes don’t cost $25 in the areas where TOMS donates; local shoe salesmen will sell footwear for much, much less. While TOMS insists their giving is considerate of the local economy, they don’t explain how. At its worst, local shoe merchants can’t compete with the continual influx of free shoes. (TOMS produces its shoes in China, Argentina and Ethiopia and gives them in 24 countries.) It’s funny how TOMS can call itself a “movement” and yet get away with offering very little information on the movement’s business practices or measured impact.

Consider how else you could spend those $25 you invested. If the aim of wearing shoes is to prevent soil-borne diseases such as hookworm, then $25 would go much further if invested in sanitation. You might give to an NGO that builds latrines, for example, which serve more people and last years longer than a pair of shoes. (For an extensive explanation of these and other problems with the TOMS model, read Peace Corps volunteer Zac Mason’s blog or the Good Intentions are Not Enough blog.)

So why did I buy TOMS that day? I’d venture that my personal reasons weren’t all that different from hundreds of other college kids like me. We come to college wanting to do good. At the same time, we want to buy cool things. So it’s exciting when these two come together, and we get the chance to give back as we consume. TOMS is literally a prime example of what Slovenian philosopher Slavoj Zizek calls “cultural capitalism”: you combine acts of goodwill with acts of consumption (Zizek sees this as a sort of personal redemption for being a consumer).

We buy TOMS Shoes or Fair Trade chocolate or poverty-fighting water bottles because we genuinely want to help. But in the frenzy of do-gooder consumption we stop thinking all the way through. We fail to ask how our money will help, and we overlook how our good deeds might actually do harm. We forget that what we want to do for others might not be the same as what they really need.

It’s too convenient to hand our credit cards to businesses that promise to do good; making a real difference also requires information, accountability and careful consideration. We talk extensively on this blog about NGO accountability. Shouldn’t customers ask the same of their favorite social entrepreneurs?

-- Photocredit: Flickr user loveandmusic18

Eyes Wide Shut: Philanthropy Action on the "Rescheduled" Sachs vs. Clemens/Demombynes debate

Tim Ogden at Philanthropy Action issues a petition for the "rescheduled" (quotes in original) Sachs vs. Clemens/Demombynes debate on evaluating Millennium Villages, which was supposed to happen last Wednesday, to be indeed, well, rescheduled.

He asks for all of us to be watching whether this indeed happens. Aid Watch is always in favor of more Watching, so we support Tim's petition.

Tribute to Center for Global Development (CGD)

Dennis Whittle has a nice post praising CGD. I couldn't agree more, even when not agreeing on every issue with Nancy Birdsall and the brilliant staff she has hired at CGD. I will always be grateful to Nancy from an intensely personal perspective. She courageously took me in at CGD when I had become persona non grata to the rest of the development establishment, after my first book came out in 2001. She took a big risk in giving asylum to a dissident viewed by many as divisive and dangerous, just as she was trying to launch CGD from scratch. That said a lot about what kind of person Nancy was and is, and she has deserved every bit of her subsequent success at making CGD the premier institution it is today.