"We" Davos Men will save the world

Bill Easterly responds to Bill and Melinda Gates' Annual Letter:

Mr Gates says there has been much progress, but that “we’ll need to apply human ingenuity and act on our compassion” to keep it going. Conversely, he equates the idea that “the world is getting worse” to the idea that “we can’t solve extreme poverty and disease”. For Mr Gates, apparently, much depends on what “we” do. But who are “we”, and who put us in charge? Mr Gates seems to have in mind the global elite whose most prominent representatives were this week assembled in Davos: political leaders, business executives, philanthropists, academics and functionaries from international institutions such as the World Bank. ... The progress that Mr Gates celebrates is the work of entrepreneurs, inventors, traders, investors, activists – not to mention ordinary people of commitment and ingenuity striving for a better life. Davos Man may not be ready to acknowledge that he does not hold the fate of humanity in his gilded hands. But that need not stop the rest of us.

Read the whole article in the Financial Times (Note to spotters of irony on Twitter: elitist paywall easily defeated by 1-minute free registration). Also, Chris Blattman grades the letter, giving the Harvard dropout an A-.

Are the Aid Donors Un-Developing Ethiopia?

Samuel Lowenberg has an article in the Lancet:

The World Bank, the US Agency for International Development (USAID), and the UK's Department for International Development (DFID) have consistently failed to act on allegations of human rights abuses in Ethiopia, including ones that are tied to their aid programmes, according to new reports...

The reports raise troubling questions over alleged abuses—including beatings, rape, and murder—connected to the government's villagisation programme...

The report by the Oakland Institute documents how officials from USAID and DFID, who were investigating claims of abuse, heard first-hand accounts from villagers recounting brutal treatment by Ethiopian authorities under the villagisation programme. But even after these reports the two agencies failed to act.

One renegade former World Bank economist comments:

In view of the long-running problems documented in Ethiopia, “the impunity of the donors astonishes me”.... Human rights are essential to development, so when a foreign donor finances a government that represses these rights, it does not help a country develop, it sets it back, he says.

Please read the whole article, it is essential reading for anyone who cares about development.

Live Twitter Commentary on World Bank's Dr. Kim Ending World Poverty

This commentary is mainly by me because I was too lazy to chase down all the other live Twitter commentary.

Watch the World Bank video and read the transcript.

See the tweets on Storify.

Do free and competitive elections make a democracy? Maybe not

By Lauren Bishop Tanzania looks an awful lot like a democracy. The East African nation has been holding multi-party elections since 1995, which international observers have deemed free and competitive. In Tanzania, votes are not miscounted, opposition parties compete actively, and the ruling party—the Chama Cha Mapinduzi (CCM), which has controlled the government since independence—seems to play by the rules.

But according to Bruce Bueno de Mesquita, NYU politics professor and DRI affiliated faculty member, Tanzania is in fact sliding down a slippery slope to autocracy, even as it maintains the trappings of a “transitioning” democracy. A working paper with Alastair Smith describes how Tanzania’s completely legal and institutionalized electoral laws are placing power in the hands of a small and increasingly entrenched elite.

During Tanzania’s transition to democracy, the ruling party wrote a constitution that gave itself a significant advantage. Tanzania uses first-past-the-post plurality voting, which tends to result in two major political parties—as in both the US and the UK. But in Tanzania, the government encourages the survival of many parties, offering subsidies to presidential and parliamentary candidates. This is our first eyebrow-raising clue that something is amiss.

This artificial proliferation of political parties, along with a complicated system of direct and indirect voting, results in a Parliament where the CCM needs only one-third of the seats to reach a majority. The indirectly elected seats must be filled by women, which makes Tanzania appear progressive, but because most of the women owe their jobs to the CCM, they act as loyal rubber-stamps for the party. Raise your other eyebrow now.

Since the electoral structure allows the CCM to gain much of its support through indirect votes and appointed seats, Bueno de Mesquita and Smith found that the number of direct votes required to win a district is a powerful negative predictor of whether the ruling party will bestow goods like roads and subsidy programs on that district. Even programs specifically intended to alleviate poverty are subject to this logic: Doubling the number of direct votes required to win a district would result in a 69 percent decrease in the chance of receiving vouchers for subsidized maize. What’s even worse is that poor, more crowded districts tend to require fewer direct votes than richer, sparsely populated ones, so poor areas get fewer subsidies, and rich areas get more roads.

Tanzania receives nearly 3 billion dollars in aid each year. How many of these aid dollars have helped build roads where they’re not needed and buy cheap maize for the rich? Donors beware: you may be bankrolling the ruling party’s position of power.

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Lauren Bishop is Online Projects Assistant at DRI, Economics Program Assistant at NYU Africa House, and an NYU MA student in International Relations.

Does Aid Promote Autocracy?

This is NOT the Nobel Symposium panel with Jeff Sachs and others, for which the video isn't available yet. It IS a 3-minute clip of a talk Bill gave at the Swedish think tank Timbro while he was in Stockholm. [vimeo https://vimeo.com/78370826]

Are Glasses the New TOMS Shoes?

By Lauren Bishop There has been a lot written about the TOMS Shoes buy-one-give-one (BOGO) model and its shortcomings, but what about other companies that boast BOGO? Take Warby-Parker, for example, the purveyor of hip eyeglasses that advertises “Buy a Pair, Give a Pair” at the top of their website. Must we now criticize Warby-Parker for their poor aid practices, too?

Despite their tagline, what the company actually does is donate money and glasses to partner organizations like the non-profit VisionSpring, which turns around and sells those glasses to people living on less than $4 dollars a day in Bangladesh, India, El Salvador, and South Africa.

VisionSpring does this by training their workers in basic business skills and eye exams, then sending them out into their communities to conduct free vision screenings and sell the glasses donated by Warby Parker. According to VisionSpring, it costs a rural customer between $6 and $11 to visit a doctor, purchase glasses, and pay for transportation, while VisionSpring customers get free exams in their own villages and can buy a pair of glasses for $2 - $4.

Both TOMS Shoes and VisionSpring take on the effects of poverty by distributing goods in low income countries. But VisionSpring also gives people jobs and an opportunity to improve their lot in a way which seeks to address the causes of poverty. As we’ve discussed before, TOMS can actually hurt local businesses that produce or sell shoes by flooding the market with free footwear.

Unlike rampant shoelessness, widespread lack of eye care is actually a major problem in the developing world. A study (pdf) in Sub-Saharan Africa found that over 80 percent of people between the ages of 5 and 93 who need glasses have never had an eye examination. An impact assessment (pdf) conducted by VisionSpring and the University of Michigan found that reading glasses improved wearers’ productivity and income. In general, having glasses allows adults to continue working despite deteriorating sight and helps vision impaired children succeed in school.

Shoes, on the other hand, are available even in the poorest corners of the world. In fact, many TOMS pictures and videos show children removing their own shoes to try on a TOMS pair. Giving away free shoes where footwear is sold locally may or may not improve school attendance, as TOMS claims it does, but it’s certainly not supporting independent business owners.

	TOMS Shoes	Warby-Parker
Step 1
Step 2
Step 3
Step 4

VisionSpring works to alleviate poverty by providing necessary employment. TOMS works to alleviate poverty by providing unnecessary shoes.

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Lauren Bishop is Online Projects Assistant at DRI and an NYU MA student in International Relations.

Not Knowing as the Place to Start

By John Schellhase Maurice Lim Miller’s innovative idea was that he didn’t know how to end poverty.

He had worked for years for non-profits in San Francisco. One night the mayor called him at home and invited Miller to his office to pitch whichever program he thought would help most. As he prepared for the meeting, Miller grew anxious. Whatever he and others had been doing wasn’t working: “The very first kids I had trained back in the early 80s,” Miller told NPR about his job skills program for at-risk teenagers, “I saw their kids now showing up for programs.”

Miller thought of his mother, a poor immigrant from Mexico who had found her own way out of poverty. He realized he wanted to put poor people in charge of the money usually spent on anti-poverty professionals.

The resulting Family Independence Initiative has no program. Self-organized groups of families set their own agendas, ranging from debt reduction to improved grades for kids to weight loss to home ownership. Families receive a laptop, a $160/month stipend, and additional funding from FII for every success they can demonstrate based on their own targets.

Though still in its early stages, FII’s outcomes look promising. According to reporting by the families themselves with a follow-up audit by FII, in two years the families earned on average 23 percent more, saved 240 percent more, and increased their home ownership by 17 percent.

This apparent success comes from a hands-off approach from FII’s staff. FII did not organize the groups, lead meetings, or give any direction about what to prioritize. Miller believed that outside direction was likely to undermine true innovation. Staff who couldn’t help themselves from offering advice were actually fired.

As Miller has written, “Trusting low-income families with money and connections, thus giving them control and choice in their lives, is what led to their success.”

What would happen if aid agencies and international NGOs extended the same trust to the families they work with in developing nations? Often, the arrogant assumption in development is that the poor can’t be trusted to know what’s best for themselves and their families. The last half-century of failed development projects, however, suggest that it is truly the rich outsiders who don’t know.

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Further reading about FII and their approach: Get Feedback (pdf) The Uphill Battle to Scale an Innovative Antipoverty Approach (pdf)

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John Schellhase is a Program Assistant at DRI and pursuing an MS in Global Affairs at NYU.

Why is the World Bank so much less accountable than Penn State?

The World Bank has also had its own scandal featured on the front page of the New York Times. The charge was that they financed a project in Uganda in which poor people had their homes, cattle, and crops destroyed as the project forced them off their own land.  The World Bank promised an investigation, which inspired us to post a clock beginning at the time of the promise.* The clock is now at 294 days, 17 hours, and 54 minutes. The investigation has been repeatedly stonewalled.  Unlike Penn State, no World Bank executives faced any consequences. Unlike Penn State, the victims have not been compensated. Unlike Penn State, no institutional reforms have taken place to make it less likely to happen again.

Why the different outcomes? I speculate the most single powerful difference is the state of public opinion as it affects the respective organizations' reputations. The level of public outrage at Penn State was uber-many times greater than outrage at the World Bank for the respective transgressions. The offenses were different of course, but that alone does not explain the difference in outrage.

It is great that there are more people in rich countries than ever before that care about poor Ugandans. But the level of caring is still way too faint to force the World Bank to be held accountable when it does wrong to poor Ugandans.

*Relevant updates, which were mostly no news, were posted at this site.

The most powerful argument against autocracy yet

The North Korea Disney show [youtube http://www.youtube.com/watch?v=_XRWqnD8HV8&w=560&h=315]

A theory of dictator kitsch: that's what you get when you have no mechanism for critical feedback (wait, I feel a metaphor for aid coming on!)

"Failed state" keeps failing as a concept to have any failed content

Africa is a Country gives a hard time to a 2012 Failed States Index. Here at the Development Research Institute, we are always glad when we can recycle an old "Failure of State Failure" post making the same point 2.5 years ago as something today. The basic problem is that "failed states" is either (1) a less well-defined way to express other more well-defined concepts like "civil war" or "lousy institutions" or (2) just has no coherent definition.

Maybe we can get unstuck by being more creative about the definition. How about "states that someone might like to invade?"

World Bank President Completes Record Democracy-Free Term

Here at DRI, we must concede our longstanding strenuous effort to get the individual who has been World Bank President  to say the word "Democracy" has ignominiously failed. His term ends this weekend. Alas, this is more than a game. Yesterday, the peaceful Ethiopian blogger Eskinder Nega was convicted of "high treason" and "terrorist acts"  for such nefarious activities as noticing there was an Arab Spring. (Nega should have followed the World Bank President's exemplary speech on the Arab Spring that omitted the word "democracy" even in a purely descriptive sense. ) The World Bank has given Ethiopia's government more than $2.5 billion (2007-2010) during Robert Zoellick's term.

Of course, President Zoellick did have to obey China  the 1944 Articles of Agreement, which forbids interference in "the political affairs of any member." But when Ethiopian rulers use the aid to give food relief to supporters and starve opponents, according to careful documentation by Human Rights Watch (HRW),  one begins to wonder if aid itself is political interference? Wouldn't suspending aid be more consistent with the Articles in that case?

At least the Development Assistance Group for Ethiopia (which includes the US, Canada, the UK, and the EU, together accounting for another $6 billion to Meles Zenawi over 2007-2010) sternly commissioned a field investigation into the HRW charges. Which has since quietly been cancelled. A 2009 secret US cable released by Wikileaks said that donors to Ethiopian leader Meles Zenawi were already “keenly aware that foreign assistance … is vulnerable to politicization."

Mr. Zoellick, you still have two whole business days to use some word form of democra____.    Maybe you could just casually mention the official name of North Korea?

You will not read this blog post today

There is widespread consensus that development in Africa is held back by the capricious policies of the government. I am referring, of course, to the US government. A crucial duty-free provision of the US African Growth and Opportunity Act (AGOA) will expire in September, killing off the African textile export jobs on which 200,000 families depend.

US government policy on Africa is capricious because nobody cares.

The NYT has not mentioned AGOA in print since 2010 and virtually all of its mentions over the last decade were in Nick Kristof columns; the last regular NYT news story on AGOA was in 2003.

The Washington Post last mentioned AGOA in 2009 in a story headlined:

Clinton Pushes Kenyan Leaders to Follow Through on Promised Reforms

Don't blame the newspapers: they cover what their readers want to read. (The specialized business press, FT (already linked above) and WSJ have done better covering the current crisis.) We had our own bitter experience with this when we lobbied hard to save AGOA jobs in Madagascar, with an impressive lack of success. Apparently none of the three readers of those posts had much ability to influence US government policy.

So my prediction is that this post today will have no readers and will have no effect whatsoever, unless enough of you non-readers get outraged enough about this non-effect to use your non-influence to save the day.

Universe of Development: The Prezi

Inspired by Cary Huang's breathtaking interactive graphic The Scale of the Universe, we give you The Universe of Development. Hover over 'More' and click full screen mode. Then use the arrows to navigate.

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List of sources.

Deaton v Banerjee, the short version

In March, Abhijit Banerjee and Angus Deaton, two of the most brilliant development economists of our time, squared off at DRI’s Debates in Development conference. Here's the four-minute version:

For Banerjee, co-author with Esther Duflo of Poor Economics, development experiments are valuable because they force researchers to think rigorously about causality, and help create an agenda for learning.

[vimeo https://vimeo.com/78374656]

For Princeton development economist Angus Deaton, identifying a causal effect is not so useful because it inevitably depends upon the interaction with other "helping factors."  More generally, blind trust in randomized controlled trials (RCTs) leads to overconfidence and lack of sufficient scrutiny of  potentially bad evidence.

[vimeo https://vimeo.com/78370828]

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So that was the short, short version, but if you've got a little more time, we have got a longer version. Continue Reading

What we discovered on a stroll to our local coffee shop

So we went to buy some coffee from La Colombe the other day...

and found out that all profits go to the Leonardo DiCaprio Foundation...

and that Leonardo helps projects that support help for our planet...

which Leonardo says helps the planet.

We found out even more about how Leonardo helping the planet helps the planet...

… but after all that, we were still not totally clear. Except for the part about tigers.

Save the Poor Beltway Bandits!

By William Easterly and Laura Freschi It is a rare day that we former Aid Watchers congratulate the US Agency for International Development on self-imposed changes that will actually help aid benefit the poor.

Today is not that day.

That day was February 6, when USAID changed its own rules to allow itself flexibility to buy more goods and services locally. Buying and contracting locally, rather than shipping goods from the US and contracting services through American companies, can be a cheaper and more efficient use of US aid dollars.  It can also help local economies thrive, and strengthen small businesses, local governments, and NGOs.

USAID plans to increase its funds spent through local actors to 30 percent by 2015, from 11 percent in 2011. Huzzah. This small but promising change means that hundreds of local nonprofits will no longer have to go through contractor middlemen. It means that where public financial management systems are strong and representative enough, more local governments can be helped with direct support rather than through experts employed by American contractors. It also means that the American companies (the so-called “Beltway Bandits”) that earn hundreds of millions of dollars in contracts each year from USAID stand to lose a little.

Naturally, these firms have accepted the prospect of this loss in revenue with equanimity, acknowledging that the reforms will improve outcomes for the proper beneficiaries of aid, and have set about adapting their business model to the new funding environment.

Haha, that was a joke. They’ve actually gone and hired a major Washington lobbying firm to kill the reforms in Congress.  Joining forces as the Professional Services Council and the public-facing Coalition of International Development Companies (from the website: “Did You Know…that funding through international development companies offers superior accountability and transparency?”) they have employed the Podesta Group, which, according to lobbying disclosure forms, has been hard at work “promoting the work of international development companies” in Congress at PSC’s behest.

And the Podesta Group has delivered: House Oversight and Government Reform Committee Chairman Darrell Issa (R-California) has told USAID he will seek to block these reforms, just in time for the markup of the international affairs budget beginning next week.

“This agency is no longer satisfied with writing big checks to big contractors and calling it development,” thundered USAID head Raj Shah in a speech in DC last year. The Beltway Bandits and their lobbyists only want him to take out the words “no longer” and then utter the remaining sentence.

More Governance in Government’s Governing

By William Easterly The new World Bank blog People, Spaces, Deliberation has already achieved one milestone: it covers exhaustively the field of “governance” with little or no usage of words that have historically been prominent in such discussions (see chart).

We were inspired by the new blog to translate one historical document that is now badly out of date and frame it as a practical roadmap for further engaging civil society:

Original	Translation
We hold these truths to be self-evident	The mainstream consensus among experts is
that all men are created equal,	All efforts should be inclusive,
that they are endowed by their Creator with certain unalienable Rights,	Development as a Multi-Stakeholder Initiative must be Broad-based and Community-driven,
that among these are Life, Liberty and the pursuit of Happiness.	Including Social Sector Goals, Participation, and the pursuit of Capacity-Building.

It’s called brain circulation, Europe, get used to it

By Tanja Goodwin Earlier this week, we pointed out the new wave of emigration from Portugal to its former colonies. As the number of emigrants has increased, so has the emigrants’ skill level. The new generation of migrants is no longer made up of blue-collar workers, but of teachers, advertisers, engineers and architects. “This amounts to a hemorrhaging of highly educated people—the very people [the euro zone’s weakest economies] will need if they are to take off when circumstances get better,” says Demetrios Papademetriou, president of the nonprofit Migration Policy Institute in Washington.

The specter of “brain drain” has haunted international organizations and think tanks for decades, threatening that emigration of skilled workers would leave poor countries short of the human capital needed to develop. After much research, this simplistic concept has been largely overthrown. Today, almost everyone recognizes the benefits arising from income gains to the emigrants, greater human capital in the source country, knowledge transfer and remittances. Almost everyone.

Academics got it: “The recent empirical literature shows that high-skill emigration need not deplete a country’s human capital stock and can generate positive network externalities.”

The World Bank got it: “Our results show large positive benefits of high-skilled migration for citizens of high emigration countries.” […] “The size of the net gains is so large, that these distributional impacts are likely to be of second-order in any welfare calculations.”

Even the UNDP got it: “In migrants’ countries of origin, the impacts of movement are felt in higher incomes and consumption, better education and improved health, as well as at a broader cultural and social level. Moving generally brings benefits, most directly in the form of remittances sent to immediate family members.”

The media did not: Major outlets were quick to call the recent increase in skilled emigration “Portugal’s ‘brain drain’ dilemma” (BBC podcast). CNBC offered this pessimistic take: “Some worry that with less talent in the country there is less chance that Portugal will be able to innovate its way out of the downturn.” Other articles report that brain drain is causing alarm—though this alarm seems to be mostly in the media. (One recent exception is this piece in The Economist).

“Brain drain” will ultimately not be bad for Portugal just as it has not been bad for Africa. And just as Europe would never suggest barriers to skilled migration, Africa will certainly not consider this either.

Returning to El Dorado

By Tanja Goodwin Expect to see controls on African migration increase dramatically any time soon. Oh, and just to clarify: that’s migration TO Africa, not FROM Africa.

Portuguese, facing high unemployment and their economy plagued by austerity, are flooding the shores of Angola and Mozambique. Angola has again become Portugal’s El Dorado as unprecedented numbers of Portuguese workers have flocked to the former colony: from 2006 to 2009 alone the number of visas issued for Portuguese increased from 156 to 23,000. Some already complain about difficulties in obtaining legal permissions to stay in Angola. The number of Portuguese workers settling in Mozambique has increased by more than 30 percent over the past two years.

It’s likely just a matter of time before some African countries limit their “green cards” to prevent European immigrants from stealing Angolan and Mozambican jobs. Undoubtedly, Africans will try to protect their cultural identities by banning Port Wine from their menus, for example. Immigration officials may soon be allowed to deny pregnant Portuguese women entry into Angola or Mozambique at their discretion to avert the birth of “anchor babies.”

At least African countries don’t have to fear that Portuguese will be living off their welfare programs. Portuguese seem to find well-paying jobs: Remittances sent from Angola to Portugal have increased more than seven-fold. In 2009, they even surpassed remittances sent from the UK.

500 years after Vasco da Gama’s first landing in Mozambique and Diogo Cão’s arrival in Angola, the Portuguese are heading south again. No doubt, their greeting manners have improved. This time they’re coming with resumes, not rifles.

Don’t Help me, Trust me – Your African Coffee Producer

By Tanja Goodwin At a recent speech at DRI, Andrew Rugasira described what happened as Good African Coffee, the business he founded in Uganda’s Rwenzori mountains, began to take off. As farmers began to produce higher quality coffee and see higher prices for their crops:

Something really extraordinary began to happen.  The values that we don’t really hear about in a lot of these development reports began to manifest: entrepreneurship, business exposure, dignity, esteem, the pride in producing a product that they knew was going into a market…

[vimeo https://vimeo.com/78374531]

Find Andrew's full speech and other video from DRI's conference here. 

While the role of beliefs and values as catalysts for economic growth may still be “underrated and underdebated,” development economists have recently begun taking a closer look.  As a new working paper by Chris Coyne and Claudia Williamson explains, higher levels of self-determination, mutual respect and trust allow impersonal market transactions to happen efficiently, and more market transactions improve economic specialization and productivity.

Since every pound of African coffee we buy in the US relies upon dozens of formal and informal contracts between farmers, packagers, exporters and retailers, the “culture of contracting” matters. And contracts rely on interpersonal trust between strangers each pursuing his or her own self-interest.

Trade sets off a positive feedback loop: In Uganda, the more local producers sell their coffee to strangers, the more they will trust new buyers. The more buyers receive good quality the more they will trust, and look for, coffee from Uganda. Trade induces more trade.

But does aid induce more trade? For Coyne and Williamson, aid flows tend to create dependency and weaken the incentives for people to engage in business and trade, economic activities that rely upon contracts. Where aid triggers rent-seeking activities like corruption or fraud, it is also likely to reduce trust among strangers.

Coyne and Williamson find empirical evidence that trade and aid affect values in opposite ways. This implies it’s the business relationships—not the handouts—that help African farmers in the long run. Yet for Rugasira, getting investors and retailers to look beyond Uganda’s image as war-torn playground of Idi Amin or Joseph Kony has been incredibly difficult. He concluded, “If we treat [African people] like entrepreneurs, people with dignity and self-respect…we might find that we have a different set of results.”