Haiti's Rise From the Rubble

Paul Collier recently wrote an excellent review of Paul Farmer's new book on reconstruction in Haiti, entitled, 'Haiti After the Earthquake' with some salient points about Farmer's approach to reconstruction and redevelopment. Farmer, whose work in health has been truly monumental (and will, most certainly, lead to a Nobel Prize at some point in his career), and has been well documented in Tracy Kidder's beautiful tome, "Mountains Beyond Mountains," does not, it seems, play the role of development expert as well as he does health expert. Farmer's recommendations involve the heavy reliance on a national government that was both unable and unwilling to provide services BEFORE the disaster struck; granted, which local ownership of the reconstruction process is a vital component in the medium-to-long term, the immediacy of the impact of the earthquake and the as-of-yet inadequate governmental response to the calamity demands innovative thinking. Thus, the "Interim Haiti Recovery Commission," described by Collier as, "...a potentially far-reaching innovation, one that could serve as a prototype for for aid in fragile states." The biggest challenge since the disaster has been the coordination of the NGO's that have sprung up in its wake; the dissonance caused by too many organizations working in too small of a space has inhibited progress instead of serving to propel reconstruction. Thus, the Commission: "The commission was set up to break the logjam of dysfunction, tell donors what to fund, tell NGOs what to do, and provide the necessary authorizations on behalf of the government. In the longer term, it will need to evolve into something fully Haitian that can supersede those parts of the state that are essential yet, realistically, beyond reform."
Collier had touched on this point in his book, "The Bottom Billion," with his Independent Service Authorities, set up as extra-governmental bodies to, in essence, get the job done on crucial tasks of governance. Thus, there is something to these external-bodies; and in meeting the largest critique, that of the vested interests enjoying the low-hanging pickings of corruption, milking on fickle, external development and humanitarian funds for personal gain,  inside the status-quo, Collier answers sagely, "...prickly assertions of soverignty are an inadequate response to reasonable concerns."

Collier, The Bottom Billion, and a Summation on Trade and Aid

On the role of the aid agencies:

“Aid agencies should become increasingly concentrated in the most difficult environments. That means that they will need to accept more risk, and so a higher rate of failure. They should compensate by increasing their project supervision, which means higher administrative overheads. They should become swift-footed, seizing reform opportunities at an early stage. They should intervene strategically, financing big-push strategies for export diversification. They should introduce governance conditionality. At present, the powerful force of popular opinion is driving agencies in precisely the opposite direction. They cannot afford failure. They have to be lean with low administrative expenses. They have to prioritize long-term social objectives rather than short-term opportunities for reform and growth. They have to give unconditional debt relief.”

On the role of trade policy:

“With trade policy, self-interest meets ignorance and duly manipulates it. Rich-country protectionism masquerades in alliance with antiglobalization romantics and third world crooks. The critical changes in trade policy-temporary protection of the bottom billion from Asia in our markets-are politically difficult not because they threaten any interests, but because they do not fit into any of the current slogans and so don't make it onto the agenda.

Collier, the Bottom Billion, and a Novel Approach to Corruption

A Novel Approach to Corruption in the Public Sector-The Bottom Billion-Laws and Charters

On the utilization of the press in combatting corruption in the public sector, obviously reliant on a free local press and an open environment free of politically-based intimidation, obviously not the case in many of the bottom billion societies. But nonetheless, certainly noteworthy.

“...only around 20% of the money that the Ministry of Finance released for primary schools, other than for teacher's salaries, actually reached the schools. In some societies the government would have tried to suppress information like this, but in Uganda, far from suppressing it, Tumusiime-Mutebile used it as a springboard for action. Obviously, one way would have been to tighten the top-down system of audit and scrutiny, but they have already been trying that and it evidently wasn't working too well. So Tumusiime-Mutebile decided to try a completely different approach: scrutiny from the bottom up. Each time the Ministry of Finance released money it informed the local media, and it also sent a poster to each school setting out what it should be getting...Now, instead of only 20% getting through to the schools, 90% was getting through....the media had been decisive-in this case reports in the newspaper. So scrutiny turned 20 percent into 90 percent-more effective than doubling aid and doubling it again.”

(150).

Collier, The Bottom Billion, and Independent Service Authorities

Independent Service Authorities

Collier suggests a solution to the problem of bad governance; the creation of so called “Independent Service Authorities.” “The idea is that in countries where basic public services such as primary education and health clinics are utterly failing, the government, civil society, and donors combined could try to build an alternative system for spending public money...The authority would be a wholesale organization for purchasing basic services, buy some from local governments, some from NGO's such as churches, and some from private firms. It would finance not just the building of schools but also their day-to-day operation., Once such an organization was put into place, managed jointly by governments, donors, and civil society, both donors and the government would channel money through it.” This is an extremely debatable idea, though from first inspection, a novel and wise one; I have visited the government health and education ministry buildings in some of the bottom billion societies, and the sights were terrifying, to say the least, not even to speak of efficiencies. In some of the worst nations in the world in terms of governance, this would be the only viable option-the civil services are so thoroughly disintegrated, that starting over is the only way of actually progressing, however, heartbreaking a thought this might be (simply sidestepping 50 years of post-independence “progress”).

And creating buy-in by the actual nations would be extremely difficult; the interests are intrenched, and bypassing these interests would require large political capital and guts by the top leadership. Collier compares his idea with that of one already implemented in many nations, that of the “Independent Revenue Authorities” which have been created in the last decades. “The function was taken out of the traditional civil service for precisely the reason that I want basic public services to be taken out of the traditional civil service-there was no realistic prospect of the traditional system being made to work. Why did governments go for the radical option on revenue but not on service delivery? The answer is depressingly obvious: governments benefit from revenue, whereas ordinary people benefit from basic services. Governments were not prepared to let the traditional civil service continue to sabotage tax revenues, because governments themselves were the victims. They were prepared to leave basic service delivery unreformed because the governing elite ot its services elsewhere.”

Collier, The Bottom Billion, and "What is Aid's Best Roll?"

And Thus, What is Aid's Best Role?

In terms of the different areas of poverty traps, (including the Conflict Trap, the Natural Resources Trap, Landlocked Trap, and the Bad Governance Trap), Collier notes that the one that is most promising for change, in relation to the input of foreign aid, is the last, governance (and policies). In terms of the relation between the actual donor agencies and the governments on the receiving end, Collier notes, “...aid agencies have very little incentive to enforce conditions: people get promoted by disbursing money, not by withholding it.” While this has been since adapted and changed to reflect more of the realities on the ground, the problem still persists. Changes in governance must not be simply promised in return for offers of aid; the changes must take place, must take root, and must be well-configured before the aid is distributed. This is the only practical way of dealing with this issue of distribution and conditionality. Collier further notes, “The key objective of governance conditionality is not to shift power from governments to donors, but from governments to their own citizens...why should we give aid to governments that are not willing to let their citizens see how they spend it?” Thus, aid levels should be directly tied to good governance, transparency, and positive changes on the ground for the citizens of these nations. However, a big hurdle in these reforms of governance comes with the lower and middle levels of the government itself, the civil service, which in many nations of the bottom billion, has been hollowed out and stocked with incompetence and corruption as a guiding principal. How, thus, to change the entire culture of a civil service, from the “serve thy self” motivation to actual performance-based efficiency, with little extrinsic motivation present to reward positive change? Can aid bridge this gap? If not, what can? I believe this is one of the biggest hurdles facing the developing world. An entire culture can only be changed from the top-down; getting the right talent in place at the top is extremely difficult in itself in an age of kleptocrats and octogenarian rulers; but even once this change has been made, extending their writ down to the lowest levels takes a huge paradigm shift in the entire culture of the nation, and as a microcosm of the nation, the civil service. In fact, Collier has looked into the effect of bringing in technical assistance, ie: foreign experts, and their effect on a country's turnaround; his research has shown that foreign experts are only going to help with situations in which there is a new leader, which is very specific in the nations of the bottom billion. “Technical assistance during the first four years of an incipient reform, and especially during the first two years, has a big favorable effect on the chances that the momentum of the reforms will be maintained. It also substantially reduces the chance that the reforms will collapse altogether.” These are all the smaller pieces of a vast pie: each needs to be considered and enacted in its own right to sustain a longer-lasting growth and development in these nations. The biggest problem with the current deployment of technical assistance to nations is that, “...technical assistance is supply-driven rather than demand-driven. The same assistance is poured into the same places year after year without much regard to political opportunities.” And thus, the agencies MUST understand that their work is fluid; that the human situations and the human capital that they are dealing with are fluid, changing, and prone to opportunity and downturn. They MUST be responsive to these changes to take advantage of the particular opportunities that present themselves, to make the most of a finite resource. 
Collier later critiques the motivations and the change-capacity of the agencies in "Aid to the Rescue?": Agencies operate with two-types of fair-shares rules. One is for countries: it is difficult to privilege one country over another, even temporarily, although if the Krugman-Venables thesis of agglomeration economies is right, then one of its implications is that such temporary concentrations of aid are likely to be efficient...So the present aid system is designed for incrementalism-a bit more budget here, a bit more budget there-and not for structural change. Yet we know that incrementalism is doomed because of diminishing returns to aid. Just doing more of the same is likely to yield a pretty modest payoff. For aid to promote structural change in countries requires structural change in aid agencies." 

Collier continues with the next aspect of aid coming under his statistical eye, that of money supplied for project or budget support. He notes, “Money early in reform is actually counterproductive. It makes it less likely that the reform will maintain momentum.” Thus, in the early stages of a post-conflict turnaround, the most effect assistance that can be given is in the form of technical assistance. A few years down the line, however, the tides turn, and budgetary and project support becomes much more viable. In summing this “sequence,” Collier notes, “Aid is not very effective in inducing a turnaround in a failing state; you have to wait for political opportunity. When it arises, pour in the technical assistance as quickly as possible to help implement reform. Then, after a few years, start pouring in money for the government to spend. Aid used in this way to support incipient turnarounds would be pretty high-risk. Even with aid many incipient turnarounds would fail. The payoff is high because the successes, when they happen, are enormously valuable.” And thus, a “turnaround fund” would be seen as the most likely source of funding for these transitions to occur, which the British government has already funded in the last number of years. (It would be interesting to contrast this statistical analysis with analysis of the opposite, or such a situation as what is currently going on in Malawi, where a negative shift in governance has caused a large pull out/suspension in donor funding and budgetary support.)

Collier, The Bottom Billion, and "Aid to the Rescue?"

“Aid to the Rescue?”

“Aid does tend to speed up the growth process. A reasonable estimate is that over the last thirty years it has added around one percentage point to the annual growth rate of the bottom billion. This does not sound like a whole lot, but then the growth rate of the bottom billion over this period has been much less than 1 percent per year-in fact, it has been zero. So adding 1 percent has made the difference between stagnation and severe cumulative decline. Without aid, cumulatively the countries of the bottom billion would have become much poorer than they are today. Aid has been a holding operation preventing things from falling apart.

Strong words in a nominal, yet forceful, defense of aid. From the viewpoint of the Easterly's of the world, quite radical, I believe; the knowledge that while far from perfect, the situation without the cumulative input of aid dollars would be much worse; which is both encouraging for aid, and discouraging the overall situations of the poorest countries in the world. However, Collier then introduces the concept of “diminishing returns” in regard to increasing the amount of aid to further increase the effectiveness of this growth boost in the developing world. According to Collier, “A recent study by the Center For Global Development, a Washington think tank, came up with an estimate of diminishing returns implying that when aid reaches 16percent of GDP it more or less ceases to be effective.” Thus, this needs to be seen as a strong guideline in the deployment of resources; the ability of a government to intake vast sums of foreign aid is limited in many ways; the absorption of these funds is often near impossible by many small aid garnering nations. In looking at the effectiveness of aid vs. budget support (aka: providing countries with money to use at their discretion in distribution), Collier notes that aid has been much more effective and value-adding, due to the aid agencies themselves. While far from perfect in their bureaucracies and regulations, the agencies do enhance the effectiveness of the financial transfer (102). “Given the bad public image of aid agencies...this is hard to believe, but there it is. The projects, procedures, conditions, and suchlike have been beneficial overall, enhancing the value of the money transferred compared with just sending a check and hoping for the best...Aid has tended to be more effective where governance and policies are already reasonable...(this) is actually pretty controversial...people quite reasonably do not like the harsh-sounding implication that the countries with the worst problems should get the least money” (102). Collier continues, “...the biggest deviation was that far too much aid was going to middle-income countries rather than to the bottom billion. The middle-income countries get aid because they are of much more commercials and political interest than the tiny markets and powerlessness of the bottom billion.”

And thus, the revolutionary statement emerges: Aid should be reserved for the most needy. It should not be used as a carrot in a geopolitical stage set. And yet, of course, when the history of aid is studied, this is exactly what the vast bulk of aid has been earmarked for over the years. Think of the unwitting countries caught in the crossfire during the Cold War. Countries taken over by ideological battles, aid recipients chosen because of simple political proclamations, not based on the theory that the most needy should get first. Is it even a possibility that aid could exist in a non-politicized manner, where the welfare of the poor is the sole determining factor in disbursement?