Still Waiting for Developed Countries Commitments and Action on Food Crisis

In the lasts months, International Organizations as well as NGOs multiplyed ewquests for additional foundings both in the short and in the long term in order to fight against food crisis negative impacts on the South.

World Bank was probably the most active institution. They propose an interesting action plan that couple both emergency intervenctions (mainly through financing food vauchers that are less distoritves than in-kind food aid) as erll as medium term investments and aid to improve productivity in the South. Mr. Zoellick call it a New Deal for the food crisis.

So far, so good. This time solutions proposed seems to be pragmatic and not biased toward a so-called neo-liberal ideology (as in the 80s and 90s). What is more, the debate with other organizations provide some other needed policy changes as, for example, more "policy space" for developing countries, the need to increase climate adaptation aid, etc.

The problem it that as Mr Diouf (FAO Secretary General) says these kind of programs have been created by the FAO (among others) many years ago. The problem is that founding by developed countries was not enough to implement them.

Once again, in this current cisis, developed countries do not answer quickly by providing new founding. They simply put on the table some small grants in order to demonstrate to theyr citizens that they are doing something.

We need to change the system by reducing the dependency of the UN and other international institutions on developed countries "special contribution" (in fact, "compulsory" contribution are quite low and allow only to run these institutions). The ideas to found a global development program with a small tax on airplanes tickets or on financial transactions need to be further explored and implemented.

food crisis ODA North-South relations agriculture aid

A proposal for a co-development contribution index: for an effective assessment on developed and emerging countries role in sustainable development

The Center for Global Development developed an interesting index to measure the developed countries commitment to development. It is based not only on aid but also on trade, investment, migration, environment, security and technology transfer contributions: it is truly comprehensive. This tool is very useful and innovative. It contributes to raising the pressure on developed countries and to advocate for an increasing contribution to development.

Nevertheless, I have some key elements that a development contribution ranking should imperatively include:

1. Considering their increasing role in the international economy and politics, such a ranking could take into consideration also the impact of emerging markets (including in their own development).
2. In order to improve the ranking, building index for every dimension is not very transparent and effective. I think it will be better to transform all contributions in monetary terms. The index will be based on monetary contribution on development calculated in percent of GDP.
3. Both positive and negative contributions will be taken into account.
   

This index will be very useful to understand the real impact of every developed and emerging country on development. It will pose number of methodological problems but it will be more effective for advocacy and more transparent.

To calculate this raking I propose the following elements (it is only a raw thought that need to be further developed) to be taken into account in the calculations:

• Aid Contribution = Aid flows – food aid negative impacts – debt interests – aid that does not contribute to development.
• Trade contribution = Trade opportunities used (notably for manufactured goods and advanced services) – losses due to protectionism – losses due to subsidies (both on world and developing countries markets) – negative externalities of liberalization measures promoted by developed countries (also through WTO, World Bank, IMF and other institutions).
• Investment contribution = Investment flows – negative impacts of Transnational Companies – developing countries money in foreign banks
• Migration contribution = remittances – losses due to emigration of skilled workers – losses due to death of emigrants (caused by developed countries restrictions) + gains of temporary workers + gains in term of skilled workers that return in their developing country.
• Environment contribution = aid for environmental goals (e.g. GEF) – cost of environmental degradations caused by rich countries and their transnational companies (e.g. pollution of companies and climate change) – cost of policies to protect the environment imposed by developed countries.
• Security contribution = aid to conflict resolution and prevention (included cost of military intervenction that contributed to avoid or stop a civil war) – exports of arms to developing countries – cost of wars against developing countries (included embargos).
• Technology transfer contribution = value of technology transferred – copyrights and licenses cost – cost of property right imposed to developing countries (including cost of implementaing IPR policies)– cost caused by developed countries policies that limit access to technology.
  

By adding up these elements, we can find the value of a country contribution to development. I guess that many countries will have a negative score. This index will be difficult to calculate but it will be very useful to better understand both why asymmetries exist and how we can reduce them.

Sustainable Development Index ODA trade and development

Why Education Development Programs tends to be useless?

Development aid community has been investing large amount of resources (even if they decreased the last decades according to Heyneman, 2006) to improve the education sector in developing countries. Education development programs often fail to improve growth and economic development. This post aim is to give some thought, based notably on Erik. S. Reinert ideas, to understand the reasons of this failure.

The Millennium Development Goal number two states:

Ensure that all boys and girls complete a full course of primary schooling

Of course, this is a very important goal from an ethical point of view. Nevertheless, when we invest resources in a goal we need to assess if it will create a sustainable development path and if it is the most effective investment, from a developing country that lack of resources, to achieve development goals.

In this case, our assessment is that primary education is not the most effective way to start a sustainable development path. In fact, as Heyneman (2006) underlines:

The source of the problem lies within the development education community itself. The development education community chose to adopt a simple ideology with respect to Basic Education-for-All at the expense of many other important education sector objectives.

According to this author, the reason is that many donors lost interest because they need to focus only on primary education. In fact, often this paradigm is translated in investing all the education resources in primary education without investing in universities.

Also in this case, a general MDGs criticism is pertinent. As Chris Blattman pointed out in a post:

These goals, while laudable, are humanitarian rather than development goals. To reach middle income status and a sustainable social safety net, the least developed countries will require manufacturing jobs, a growing services and technology sector, rising real wages, and a broadening tax base. Such transformation has been historically urban, and historically narrow and unequal, at least at first.

If we look at the reality, a country with all people with only primary education will never succeed. In fact, this is a country with only low skills workers that will continue to work in decreasing return industries (as agricultural commodities and sweatshop). Such a country will totally depends on transnational companies to create jobs. The problem is that this kind of strategy without a link with national industry development: it is a recipe for failure. A country to achieve development should have very diversified workers. What is more, a country to develop should have high-educated people with new ideas, entrepreneurship, and skills. Only these kinds of workers can start new profitable business, create jobs and increase a country wealth.

We see, for example, that India succeeds to develop in high profitable sectors because they invested in valuable high education. They had a chance to have smart decision-makers that in the 80s refused to follow the World Bank advice to renounce of their universities and focus their resources in primary education. If they followed this advice, we have never seen the "Bangalore Miracle".

This does not mean that it is enough to invest in high education (and in particle primary education) to achieve development. A country should also provide work opportunities for its graduates. If it is not the case high education will only increase migrations that will profit developed countries.

Education should be part of a broader development strategy. The problem is that, as Heyneman shows, education development community evaluate its success or failure on their sectoral objectives criteria (increase of educated people). What is needed, however, is to assess the impact of these programs on their sustainable development contribution. It is useless to have more educated people that are still poor because they have any job opportunity.

References

Heyneman S. P. (2006), The Effectiveness of Development Assistance in Education: An Organizational Analysis, Journal of International Cooperation in Education, Vol.9, No.1, pp.7 -25

Reinert Erik S. (2007), How Rich Countries Got Rich... and Why Poor Countries Stay Poor, New York, Carrol And Graf

development aid foreign international education ODA political economy heterodox

Is Official Development Assistance Effective to Boost Growth? Palliative vs. Development Economics

Practitioners often flaunt official Development Aid (ODA) as the panacea to fight against poverty and boost development. For these reason, many practitioners, NGOs and the United Nations pledge and claim for more aid (0,7% of the GDP of developed countries).

Even if these practitioners are driven by good intentions the results of ODA in the last fifty years are extremely disappointing. In fact, if we look at the ODA impacts on growth we see that, as Rajan and Subramanian demonstrate, “there is no robust positive relationship between aid and growth”.

I propose in this blog some reasons that can explain this failure that it is mainly caused by the last thirty years policies:

• ODA, notably multilateral, was used in the 80s and 90s to promote Washington Consensus policies. Liberalizing trade provoked in many countries the destruction of their industrial sector (1). The outcome was the slowdown of growth, unemployment and increase of poverty. These impacts were amplified by privatizations and “less-state” policies.
• There are also some external factors that reduced growth and create poverty. The more important ones were probably: debt service, oil prices, global economic crises and huge increase of developed countries agricultural subsidies. However, the last two elements are linked to policies adopted by developing countries.
• ODA, mainly provided by bilateral donors, often follow the political and economic interest of the donor. For example, ODA tends to maintain the colonial division of labour with developing countries producing only raw materials and handicraft. What is more, ODA now deals more with emergency situations than with development.
• ODA is more focused on what Erik Reinert (see the “interesting to read” section on this blog) call “palliative” economics than development economics. In fact, aid community prefers to try to solve the worst negative impacts of development failures in developing countries (as increase of disease, health care, poverty in very peripheral areas, etc). They chose to treat the symptoms of the disease instead of its causes.

Source

I could conclude that ODA is useless and we need to simply eliminate it. Nevertheless, I think that we can reform it. ODA can become a genuine instrument for development.

The following changes, some of them already discussed by the ODA community, can contribute to this objective:

• ODA should be linked by a real ownership of developing countries that should use it as a tool in broader development strategy. Donors discuss on this issue but they are very far to achieve it. For example, PRSP have been criticized because developing countries poorly choose how to spend resources.
• Donors should spend less money in “palliative” policies and more in development policies. We should invest more in industrialization and advanced services development. In fact, only by developing these sectors a country can have enough resources to invest durably in health care and education. Furthermore, as Reinert, demonstrate only the development of an industrial sector can help to durably improve farmers living conditions. Donors often continue to implement the same kind of project. What is needed is to think outside the box notably to use new technologies for development.
• Donors invest a huge amount of resources in the so-called “good governance”. This is a waste of money. In fact, if we look at the most successful former developing countries (as Korea, Singapore, etc.), they were not good examples of “good governance”: there were corruption, rent-seeking, authoritarian governments, etc. Nevertheless, they succeed and after reaching a level in their development, they choose to implement democracy, human rights, anti-corruption policies, etc. Implementing these policies in LDC is a waste of money and could be counterproductive in terms of development. In the early phases of development, there is only a good- or bad-for-business governance.
• National decision-makers are the most well placed to design a development strategy and to choose what and when policies should be implemented. International experts, with few exceptions, tends to propose (and often to impose) one-size-fit-all approaches based on econometric models. We should adopt a new approach on development. Rodrik call this approach experimental. We need to learn more form past experiences and from our (of a developing country decision-maker) mistakes. We should learn more on experiences of successful countries than form econometric unrealistic models. What is more, each country has its specificities and a one-size-fit-all strategy did not exist.
• We should use more tools that history demonstrate that they are effective. For example, it is better to improve South-South integration than North-South Free Trade Agreements. In general, we need to better understand how the successful Marshal Plan worked in Europe and replicate it in the developing worldthrough ODA. I will explain its main characteristics in another post.

In conclusion, ODA donors should assess the failure of development aid and think seriously on how to improve it. They should surpass old (and new) ideological thinking and adopt a more experimental approach that takes into consideration past experiences and assessments of development results. Development and not palliative measures should be the focus of ODA. We need better development economics scholars that can think outside the box and criticize past and current policies. We also need to think on aid and its inter-linkages with global governance and international engagements. In fact, it is useless to promote cotton industry in Benin if the US gave huge subsidies to their cotton farmers.


Foot Notes

(1)For more information on trade and development issues look at my previous post.

Economics North-South Relations ODA development aid foreign aid