Aid Conditionality: a dual self model

I am currently revising this paper, that I presented at the CSAE and RES conferences around Easter. The thing I’m trying to explain is why donors find it difficult to enforce conditions on their aid, given that they themselves agreed these conditions. Previous research has gone a long way to explaining it, but has typically taken as given the part where the aid contract is agreed, which hampers the ability to explain contradictory behaviour a lot. In the paper I try to explain the seemingly contradictory behaviour (i.e. agreeing conditions but not enforcing them) using a dual self model. The favourite way of explaining this, which I can’t put in the paper, is here:

A Nice little clip from Yada Yada Yada Econ
(I don’t seem to be able to embed this, so go to the site to watch it)

If you ignored the video, then the unfunny version is that Jerry Seinfeld is night guy – getting up early in the morning after a late night is morning guys problem. This is a dual-self model, as talked about by a whole host of economists. To borrow Jerry Seinfeld’s terminology, the donor that agrees the aid contract is night guy, and the morning guy is the donor that has to enforce the aid contract. However, it is emotionally quite difficult to withhold aid from poor countries – but hey that’s morning guys problem. Night guy doesn’t predict this difficulty, and so carries on making tough contracts that don’t get acted upon. Unfortunately, I really can’t embed the video in the revised version of the paper, so it will only get this far.

Another piece which won’t make it into the revised paper is a host of quotes from the Lord’s select committee on aid. Select committees in the UK parliamentary system are very topical at the minute (see the judgement that Rupert Murdoch being unfit to run a company), but they are very dry affairs. So I was surprised to find such good quotes in them, from some key people, that illustrate the difficulty in enforcing aid conditions. A case in point:

In a period of 35 years, we really should have learned to read the signs and to act on them, and I think we have a very, very short term view, unfortunately, in our foreign policy and our aid policy.”

This is Sir Edward Clay, famous for taking the Kenyan government to task on corruption while he was the British High commissioner there. His point is that being tough is difficult in the short term but it buys you more power in the long run. But typically donors think short-term and don’t punish recipients.

Then we have an interesting little exchange about the mechanics of how a decision is made regarding how to change aid in the face of poor governance/corruption/etc

Lord Tugendhat: What is the procedure in the department whereby you would decide that country X is not cutting the mustard on a sufficient number of these and that you should suspend, withhold or at any rate not dish out in the normal way your aid? Would it be the Secretary of State who decides? How would it be done?

Rachel Turner (Director, International Finance Division, Department for International Development): It would be the Secretary of State. We tend to articulate this as a four-step process if we are concerned about performance on one of these partnership principles. The four steps are fairly straightforward. The first is that we signal concerns to the Government and we intensify dialogue around them. We might delay all or part of a disbursement. In our annual report each year, we publish any specific delays to disbursement because of concerns about a partnership principle. We may change the way in which we deliver aid. We may take aid away from the Government and route it through NGOs or other sorts of partnerships. Finally, we may stop aid to the Government and/or to the country. So we have that four-step process.

So, a four step process with the last step being withholding aid, and the decision is made by the secretary of state. This is interesting because while certain statements may be made about how and when aid would be cut off, it is unclear from most documents who makes the final decision.

Here is another interesting exchange about whether donors can actually withhold aid, which could be taken straight from the theoretical models of the difficulty of withholding aid:

Baroness Kingsmill: And could we withhold aid if that was not forthcoming?
Max Lawson (acting Head of Advocacy, Oxfam): My personal feeling is that, in almost every instance, withholding aid achieves the opposite of what you want to do. I am watching with horror at the slow-motion car crash that we are seeing in Malawi at the moment , where the President, who had been doing a great job, has basically, as far as we can see, gone a little bit mad and is very sick. We are seeing a situation where he is getting very, very intransigent and he is looking across the borders at Zimbabwe and is thinking and acting in a very similar way. We are withdrawing our aid, as the UK, and all this is succeeding in doing is making him more angry, so that he is impinging swingeing cuts on his population to pay for that. I really worry that quite often a kneejerk reaction, and the removal of aid entirely, only hurts the poorest people… It is about weighing the different rights up against each other…

And yet another interesting exchange illustrating the same thing.

Lord Lipsey: It is more than just complicated, isn’t it? If you withdraw the aid, you may have a dual effect. Yes, you punish the person who has been ripping off the money but you also punish the people who were benefiting from the project. If, out of the money going to an education project, 80% was getting through and 20% was going into the pocket of the civil servant responsible for that bit of education, you would be making the beneficiaries of  the 80% suffer if you stopped the aid.
Laurence Cockcroft ( Member of  the Board of Trustees, Transparency International UK) : That is part of a broader argument. There is frankly not a ready answer to that question. In informal discussions with many people in the countries that we are concerned with, I found an extraordinary willingness to be tough with those at the top who are milking the system, but that is a slightly different point.

It is rare to get such a good insight into the thought processes of the people whose decisions you are trying to model, and so these quotes are really useful background. Unfortunately I don’t have the space for all of them, or the guts to include Jerry Seinfeld in the paper.

Ex Ante Conditionality is hard to enforce (at least for humans)

One of the key points in my World Development article on aid allocation is that aid allocation is not sensitive to policy/governance in recipient countries (at least in the volume of aid). This came to mind when I was reading Chris Mullin’s book, which are essentially his diaries of his time in and out of ministrial power in the new labour government circa 2000. He spent a few months being the second minister at DfID and there is a telling little description of him visiting Kyrgyzstan. They had just imprisoned an opposition leader but are generally relatively well governed and open. Chris sits down with the premier, and after being very impressed has a moment of doubt ( days later):

Have the cunning Kyrgyzis done just enough to entice Western aid while at the same time, just below the surface, business continues much as usual? Corruption is rife.

I have three reflections. First, the 2nd minister at DfID gets a lot of attention in Kyrgyzstan. There is a worry that aid distracts governments from responding to their citizens because they need to spend time keeping donors sweet. That is certainly on display in Chris’ account. Second, the joke in ‘Yes, Minister’ (a bbc series about politics) is that we have incompetent and ill-informed ministers who think they are running the country, and a well informed civil service who know they are. It is odd to note that ministers with no special knowledge have real influence on policy areas that are new to them. Third, how crazy is it that the opinion that a western leader forms about someone over a coffee (Chris was impressed the premier passed the translators their coffees) will actually affect aid committed to that country? It is only human, and fascinating to read, but still. Judge for yourself:

Surely this decent man can’t have been responsible for whatever unpleasantness occurred during the election?

and later

 Later, someone says, ‘We’ve all been conned by Akaev’s charm.’ But is it as simple as that, I wonder? Perhaps it is beyond the wit of anyone to rescue so impoverished a state from the grip of the Stalin system.

Western Governments and Good Governance

I’ve read a few pieces recently about bad governance, asking western governments to take note of a local situation. See this post on Rwanda where the author despairs of the government’s authoritarian bent:

I am trying hard but I really do not see how Kagame’s government can be rationally defended.

Or this letter by Easterly and various high profile NGO types on Ethiopia:

America and its Western allies have aligned themselves closely with Ethiopia’s government in the fight against radical Islamists in the Horn of Africa and in efforts to prevent a repeat of the 1984–1985 famine. Worthy as these goals are, we should not allow them to blind us to Prime Minister Meles Zenawi’s increasingly authoritarian bent—as exhibited by his regime’s 99.6 percent election victory in 2010 and most recently the decision to prosecute Eskinder as a terrorist, along with seven other dissidents.

Or see this news piece where Youssou N’dour, the Senegalese singer and presidential hopeful, says:

“I appeal to the whole world, to those who are not yet clear on this: We need to tell him [President Wade] the truth… Tell him clearly, Obama, Sarko, Cameron, Merkel, et cetera, tell him that the fundamental law, that which governs Senegal, does not allow him to stand. That he must not force it because it is better to be safe than sorry. I say this because generally they (these leaders) stay out of it until there are problems. We don’t need that in Senegal, it is a country of peace.”

David Booth from the ODI had a piece in the guardian a while ago looking at governance and aid. Let me repeat my two penny worth: western governments aren’t good at responding to bad governance by cutting aid. They find it difficult to withhold aid from poor countries when they can see the good it is doing. I think it is also important for people to hear how convincing the argument that ‘governance must be understood relatively’ can be.  Tony Blair on the excellent development drums sounds very compelling. I disagree, but you should feel the weight of the arguments to understand the problem donors have.  It is difficult for donors to consistently withhold aid in the face of bad governance as there is always doubt about whether it is the right course of action. I argue that pragmatic selectivity is more feasible: alter the type of aid not the volume. This means that recipients do have an incentive to reform, while being more realistic about the limits of donor action.

USA follows UK in adding gay-rights to list of aid conditions

A few weeks back, in the first proper post on this blog, I discussed the UK’s decision to make gay rights a key factor in deciding aid receipts. I noted that

1. Aid volumes aren’t responsive to different levels of policy/human rights (Clist 2011)
2. This means adding another thing to be worried about is plain silly.
3. However, the UK are being quite clever, by threatening to alter the type of aid that countries get
4. They can to that (Clist, Isopi and Morrissey 2012)

Well, the US have come out and said that they also want to add gay rights to the list of aid conditions (guardian, bbc and nytimes). First, let’s look at some reaction from Rick Perry’s campaign:

  “Promoting special rights for gays in foreign countries is not in America’s interests and not worth a dime of taxpayers’ money”

NB: he’s falling further behind in the race for the republican nomination. I’m not sure what special rights he means here, as I thought that these were just fairly straight forward rights. Next, Bill Easterly:

“Great: aid to respect rights for gays in poor cos. Next step: respect rights for straights in poor cos”

on twitter (and versions using full words on facebook and G+ no doubt).

My thoughts? Well, the news reports are inconclusive about what this actually means. I certainly wouldn’t expect the US to suddenly vary aid in response to gay rights when it is fairly insensitive to general indicators of policy, and even poverty. Which means one of two things. One, it could be about domestic politics (see Rick Perry quote). Two, this is about part of the on going policy influence that is difficult to measure and so, almost inevitably, widely overestimated or underestimated by various people.

Donors seem to try and use aid to promote multiple contradictory aims, and fail to notice this. Most recipients of aid have noticed this however, and will duly ignore the threats. Which means this news story is probably one you can ignore.

 

Gay Rights Join list of Aid Conditions: Liberals Torn

So, the UK is angry that in Uganda homosexual acts are illegal: bbc article. And David Cameron, showing his liberal side, has talked tough and threatened to cut general budget support to Uganda unless they change this. Where do we start? This is a typically tricky issue for liberals, as they are choosing between the rights of a sovereign country to decide their own laws, and the rights of gay people in those countries. It seems most commentators have come down on the side of the rights of gay people, but neither position is particularly comfortable.

First, obviously we don’t like the idea that homosexual acts are illegal. Sometimes it ends in prison, more often there is violence or a threat of violence towards gay people. This normally isn’t state-backed, but the general feeling is that governments turn a blind eye towards violence towards gay people.

Second, aid conditions have a long and inglorious history. Aid donors justifiably want value for money, and so ask for certain promises. These have included everything from very specific technical financial processes to a very general promise to improve human rights. But do these conditions work? Not really, no. There are a lot of donors, a lot of noise and in the end donors simply don’t want to punish the poor because their governments make decisions they disagree with. They don’t have the stomach for it. Choosing recipients on what they’ve already done (ex post conditionality) rather than promises of what they might do (ex-ante), may seem a more plausible option. But the evidence isn’t good there either (Clist 2011).

But this case is somewhat different. It is a reaction to a very specific piece of law/policy in one country. A good example of this kind of conditionality is the Tanzanian air traffic cotrol system that the Labour party fussed about in 2001, without really coming to a strong conclusion. The internal dialogue illustrated how difficult it is to draw your line in the sand. Back in the present day, I agreed with most of what Jonathan Glennie had to say on the subject: let’s not impose yet more conditions on aid. My reason is that donors are unable to enforce the ones they already try to enforce. He takes a much more liberal viewpoint (“donors should not set themselves up as moral arbiters”), and embraces the liberal panacea: let the UN decide what constitutes good/bad human rights. Hmm. I can’t see the UN having more stomach to punish bad recipients than the UK. They aren’t exactly a body renowned for decisive leadership.

So, what is my take on this? I actually think DFID are being quite sensible in their implementation. If you read the articles carefully, you’ll note that they don’t threaten to cut aid. They threaten to change the type of aid. There is good evidence that donors do already vary the type of aid in response to policy/governance (Clist et al 2011, Knack et al 2009 and hey, why not, my phd’s penultimate chapter). I call this pragmatic selectivity: accepting that you can’t change the volume of aid in response to policy, but you can change the type of aid. But if donors want to have policy input, they need to decide on some priorities. While aid is an important part of recipient budgets, it is spread over many different donors, which dilutes their influence. Owen Barder has expressed similar pessimism over the effect of aid on policy in various places. Diluting influence further by focusing on ‘15 key criteria’ means you end up having no influence. The donor that prioritises everything priorities nothing. A little bit more pragmatism/humility would be good.