Can we improve aid through evolution rather than planning?

January 6, 2010

     By Duncan Green     

networks-200_r3Finally got round to reading ‘Beyond Planning’ Owen Barder’s CGD paper on aid reform. Owen’s a former DFID bigwig turned Ethiopia-based consultant and blogger. Here he writes like a true economist, which can be pretty heavy going, but the paper is worth persevering with. He can also write like a human being, for example in this thoughtful and human defence of aid on Open Democracy.

Owen sees a lot wrong with the current aid system, but he’s an aid reformer rather than simply an aid sceptic. He identifies a series of system failures as the underlying reason why attempts to improve the quality of aid often fail: ‘The political economy of aid agencies is driven by incomplete information and multiple competing objectives and confounded by principal-agent and collective-action problems…. A particular challenge for aid is that there is a broken “feedback loop” connecting the intended beneficiaries and decision-makers.’

He reckons that aid reform has to start by changing its rules and incentives, or else the systemic problems of the aid system will block any progress on aid practice: ‘we are reaching the limit of how much progress can be made by international statements of intent and coordination meetings. ….These constraints cannot be overcome by wishing that they did not exist. Progress does not require “thinking outside the box”: rather we have to understand the box and take steps to reshape it.’

Reshaping the box means starting with Bill Easterly’s critique of planners and exploring two alternatives to planning as a means to coordinate multiple players – markets and networks (hence the graphic at the top of this post – Owen says these are the only 3 options – can anyone suggest others?). He pulls aspects of all three together in a proposal for what he calls ‘collaborative markets’, ‘governed by collective regulatory agreements and complemented by symmetric and accessible information. Specific measures to move towards a collaborative market could include unbundling funding from design and implementation of aid programmes, to create explicit markets for aid delivery; improving international competition in the supply of development services; new standards for aid transparency; mechanisms to allow aid beneficiaries to provide feedback about the services they receive; penalties for negative spillovers (such as entry fees to discourage proliferation) and subsidies for positive spill-overs (such as independent and rigorous evaluation); and the establishment of a more effective regulatory mechanism, backed if necessary by treaty.’

He sees salvation in harnessing the forces of evolution (mutation, selection and amplification – see previous blog) to improve the quality of aid: ‘reforms should build incentives to innovate evolution 2and improve, and to screen out unsuccessful institutions and approaches.’ To achieve this, ‘Reform should focus not on a grand new design of the aid system, but a set of technical and apparently innocuous reforms which, over time, create stronger political pressures for evolutionary improvements in the aid system.’

What difference might it make in practice? Owen sets out a ‘menu of measures to provoke discussion’ that includes:

Network-like measures as part of a collaborative market such as an international decentralized mechanism for sharing aid information and independent evaluations, or feedback mechanisms for beneficiaries (communities or governments)

Market-like measures such as untying all aid, signing explicit contracts for aid delivery and ‘unbundling’ funding from delivery (likely to become just back-door privatisation, I imagine), an ebay style market for technical assistance and a focus on results e.g. cash on delivery and vouchers.

I think the interesting aspects are his central challenge – how do we create an aid system that allows evolution (of policies, institutions etc) in a world of imperfect knowledge – and his insistence that unless we change the political economy of aid, there’s no point in aid agencies promising to do better in future – the structure of the aid system creates a political equilibrium which determines how aid works. The only option is to change the structure, and so the equilibrium. Otherwise donors will just bang on about how much they support developing country ownership, but the system will drag them back to a ‘donor knows best’ practice.

Introducing evolutionary forces takes him down the path to vouchers, cash on delivery and market mechanisms, about which I have some concerns (see previous blog), but not completely – he sees roles for planning and networks too.

I guess it comes down (as usual) to what constitutes development. Is it primarily about empowerment, institution building or service delivery? And should aid focus on all three or mainly concentrate on one? Owen seems implicitly to think aid is best suited to service delivery, and has a rather technocratic/new labour enthusiasm for using market mechanisms to deliver it. That may be a suitably modest aim for aid, but a) such mechanisms have a pretty chequered history where they’ve been tried in countries like the UK and b) service delivery is only one aspect of development.

Final word to Chris Roche, an aid wonk at Oxfam Australia: ‘I think Owen is spot on re a) the need for feedback from ‘primary stakeholders’ or rights holders – they are not beneficiaries! – and b) the need for evolutionary, emergent and non-linear approaches to change rather than the linear grand design approach (though we can see grand design element such as the MDGs as ‘stabilising points’ around which emergent change can coalesce). 
Where I think he is wrong is a largely market based philosophy for creating incentives based on New Public Management theories of expanding choice more than voice. There is some evidence to suggest that reputational threat is one of the major incentives that aid agencies – and particularly NGOs – actually respond to. If this is the case then more effort needs to be put into providing primary stakeholders with the ability to create that reputational threat and thus really strengthen their ability to sanction poor performance (much of the discussion about transparency etc may increase ‘answerability’ and is a necessary step but is does not create the ability to sanction). This in turn requires some quite fundamental organisational change with in aid agencies, as well as establishing more citizen to citizen links possibly using new social media.’

Update: detailed response from Owen to this post on his blog

January 6, 2010
Duncan Green