Development Economics

The Silver Bullet of Conditional Cash Transfers

There is a new paper from DFID (the British overseas development assistance authority) about the usefulness and effectiveness of conditional cash transfers.  I have written a few times about this topic in early 2011 and way back when in 2010 (see here and here) and have always been pretty bullish on the use of them as tools for poverty alleviation.  Conditional cash transfers effectively pay the poor in exchange for meeting certain requirements regarding healthcare and education.  Welfare programs for individuals and families are contingent on achieving certain targets.  For achieving a certain school attendance rate for children, a family will receive a certain amount of money.  For bringing your child to the doctor a certain number of times per year, you get money from the government. The advantage of these schemes is that they offset the opportunity cost of keeping your child in school, or the actual cost of bringing your child to the doctor.  So, by creating incentives around behavior modification, you can more effectively target the root causes of poverty.  Good decision-making becomes in the best financial interest of families, and mitigates the costs of neglect. What they do not address are systemic problems.  For example, within education, conditional cash transfers aren't going to build more schools, improve teacher training, reduce class sizes, or provide additional jobs for people once they get out of school.  Nor will they improve the quality of healthcare delivery or the caliber of physicians.  This gives some people pause.  This is from the report:

Well-designed and implemented cash transfers help to strengthen household productivity and capacity for income generation. Small but reliable flows of transfer income have helped poor households to accumulate productive assets; avoid distress sales; obtain access to credit on better terms; and in some cases to diversify into higher risk, higher return activities. These intermediate outcomes help draw poor people into the market economy on terms that allow them to benefit from and contribute to growth.… There is robust evidence from numerous countries that cash transfers have leveraged sizeable gains in access to health and education services…However, transfers have had less success in improving final outcomes in health or education.  Cash transfers can help the poor overcome demand-side (cost) barriers to schooling or healthcare, but they cannot resolve supply-side problems with service delivery (e.g. teacher performance or the training of public health professionals). Cash transfers therefore need to be complemented by ongoing sectoral strategies to improve service quality.
The whole notion of a silver bullet is a non-starter for me.   (more…)

Development Economics

Cutting Foreign Aid: How the Tea Party Is Hurting America

“We must address the root causes of terrorism to end it for all time. I believe putting resources into improving the lives of poor people is a better strategy than spending it on guns.” - Muhammad Yunus Today I went to visit a large-scale maize farmer in Wamale, thirty minutes outside of Tamale, the capital city of the Northern Region in Ghana and home to a predominantly Muslim population.  We had a discussion in the home of the village chief, who farms 200 acres of land.  On the wall of his palace (or compound), is a 2010 calendar with a picture of Ayatollah Khomeini on it and a poster about how to plant maize properly, with the insignia of USAID at the bottom.  This is an interesting test case into the relevance of soft power. With the new cuts from the US federal budget, the most politically-expedient entity - foreign aid - is slated to get the axe.  There is an interesting back and forth discussion between two experts on the subject - for and against - at NPR.  In an article titled "Cutting Foreign Aid Doesn't Help," Joseph Nye makes the case that slashing the aid budget is a bad idea:

It sounds like common sense, but smart power is not so easy to carry out in practice. Diplomacy and foreign assistance are often underfunded and neglected, in part because of the difficulty of demonstrating their short-term impact on critical challenges. The payoffs for exchange and assistance programs is often measured in decades, not weeks or months. American foreign-policy institutions and personnel, moreover, are fractured and compartmentalized, and there is not an adequate interagency process for developing and funding a smart-power strategy. Many official instruments of soft or attractive power — public diplomacy, broadcasting, exchange programs, development assistance, disaster relief, military-to-military contacts — are scattered around the government, and there is no overarching strategy or budget that even tries to integrate them. The obstacles to integrating America's soft- and hard-power tool kit have deep roots, and the Obama administration is only beginning to overcome them, by creating a second deputy at State, reinvigorating USAID, and working with the Office of Management and Budget. Increasing the size of the Foreign Service, for instance, would cost less than the price of one C-17 transport aircraft, yet there are no good ways to assess such a tradeoff in the current form of budgeting. Now, that progress may be halted.
Now, over to former UN ambassador Ken Adelman, who thinks that the "soft power" impact of foreign aid is overrated: (more…)


A Lesson about Statistics in Development from David Simon

David Simon, the creator of the greatest television show ever made, The Wire, is interviewed by Bill Moyers in Guernica magazine.  The topics vary, but one particular answer to a question about the relevance of "facts" in understanding the nature of a problem - or the progress and impact of the solution - resonated with me.

One of the themes of The Wire really was that statistics will always lie. Statistics can be made to say anything. You show me anything that depicts institutional progress in America: school test scores, crime stats, arrest reports, anything that a politician can run on, anything that somebody can get a promotion on, and as soon as you invent that statistical category, fifty people in that institution will be at work trying to figure out a way to make it look as if progress is actually occurring when actually no progress is. I mean, our entire economic structure fell behind the idea that these mortgage-backed securities were actually valuable, and they had absolutely no value. They were toxic. And yet they were being traded and being hurled about, because somebody could make some short-term profit. In the same way that a police commissioner or a deputy commissioner can get promoted, and a major can become a colonel, and an assistant school superintendent can become a school superintendent, if they make it look like the kids are learning and that they’re solving crime. That was a front-row seat for me as a reporter, getting to figure out how once they got done with them the crime stats actually didn’t represent anything.
I have not spent long in the world of development, but I have had a chance to understand the mechanics of this world.  I believe that my own project-  one that has taken an innovative market facilitation approach to agriculture economic development - is making the right moves.  But through conversations with career development workers who have been part of the system for a long time and have seen how the sausage is made at the highest levels, I have found that the same principle largely holds true in the world of aid and development. Typically, the way it works is that governments allot a certain amount of money to be used for development in countries chosen based on the strategic interest of the donor in the country and the broader region.  Aid is often used as a carrot to gain leverage in a country.  For food aid (much is which is necessary in certain cases), developing countries serve as a repository for food surpluses from the donor country.  The other day someone told me that a certain affluent Asian country (not China) is obligated to purchase rice from other countries as part of a WTO agreement.  This country is self-sufficient in rice and is an exporter itself, and the rice farmers in that country would be very angry if imported rice from other countries was brought in and sold to consumers.  So this country buys rice from other countries, as part of its obligation, and then ships it to developing nations, flooding the local market with cheap, low-cost rice.  In doing so, the local rice farmers become uncompetitive serving the domestic market, and are forced to sell at a loss or switch to another crop.  As the cycle continues, these recipient nations become more dependent on foreign food aid, as opposed to moving in the direction of self-sufficiency.  In addition, the local consumers gain a taste for imported rice, which may or may not be readily available or even well-adapted to local growing conditions.  The end result?  Dependency. (more…)

Development Economics

CNN is a Joke

CNN is supposed to be a serious news outlet.  To see its penchant for outrageous self-calls, one need look no further than its slogan, "the worldwide leader in news." Of course, it's not, and never has been.  If BBC and Al Jazeera are Hemingway, CNN is R.L. Stine (though CNN International, and specifically Fareed Zakaria, are pretty good).  But, the website component of CNN, makes the television network look like The Sun Also Rises. Its hard-hitting news stories, with titles like "Zsa Zsa Gabor to be a mother at 94?," and a section between the "Opinion" and "Travel sections called "The Royal Wedding," have led me to check my pre-conceived notions about the worldwide leader and take it with a grain of salt.  But something I read today was truly pathetic.  CNN has re-posted an article from Vice magazine, a hipster bible, with the following caption:

The staff at has been intrigued by the journalism of Vice, an independent media company and Web site based in Brooklyn, New York. is Vice's site devoted to the overlap between culture and technology. The reports, which are being produced solely by Vice, reflect a very transparent approach to journalism, where viewers are taken along on every step of the reporting process. We believe this unique approach is worthy of sharing with our readers.
For one thing, I can't stand hipsters.  But that is an aside.  The article is titled "Inside the Criminal World of Ghana's Email Scam Gangs." It details the rise of internet scamming in West Africa, and Ghana in particular.  The authors - in a hip, "I care about shit, but I don't give a fuck" kind of way - talk about something called Sakawa, which is a specific Internet scam:
In the same way that hip-hop went from a music style into a descriptor for everything from pants to dancing to potato chips, Sakawa (which originally referred to a specific credit card scam) now means pretty much anything involving money -- if you wear a bunch of flashy brand-name clothes you're dressing "Sakawa," if you've got a nice car it's a "Sakawa" car -- all of which makes sense considering internet scamming is the only way most Ghanaians can afford this.

Foreign Policy

The UN’s Successful Intervention in Cote D’Ivoire

I hear people badmouth the United Nations...a lot.  "What the hell is the point of a United Nations?  They don't actually do anything."  In the back of my mind, I always sort of disagreed, but wasn't really sure because I actually didn't have any tangible examples to back up my position.  The World Food Program maybe?  The UN High Council on Refugees?  I have always felt that an open and transparent forum to discuss global issues between countries, even if the best resolution they have to offer is usually non-binding, isn't a bad thing.  And, as a matter of principle, I disagree with with former US ambassador to the UN, John Bolton, on every single issue, from foreign policy to favorite season of the Wire.  He famously said in 1994 - a full decade before taking up the post of UN ambassador - this about the institution:

There is no such thing as the United Nations. There is only the international community, which can only be led by the only remaining superpower, which is the United States."[60] He also stated that "The Secretariat Building in New York has 38 stories. If you lost ten stories today, it wouldn't make a bit of difference."[
Such an asshole. But this week can be chalked up as a win for the institution, since Cote D'Ivoire's recalcitrant, thuggish big man former president, Laurent Gbagbo was sheepishly captured in his basement and is now going to be tried in the International Criminal Court. (more…)

Foreign Policy

Islam is a Religion of Peace

On long bus rides and flights (of which there have been many during the last 18 months of traveling through Asia and Africa, for a combined total of at least 200 bus-hours), I listen to podcasts.  It is a way of depositing knowledge into my brain while still admiring the scenery.  The one I listen to the most is an NPR podcast called "Intelligence Squared." It is described as "Oxford-style debating on America's shores." It is both intellectually-stimulating and fits well with my strict "Buy American" policy. Most recently, I made a 13-hour bus ride from Accra, the capital city of Ghana, which lies on the coast of West Africa, to Tamale, the capital city of the Northern Region.  In West Africa, the percentage of Muslims increases as you get closer to North Africa.  So, in order to stimulate the brain waves and get mentally prepared for being in a predominantly Muslim area, I listened to an episode of Intelligence Squared in which teams of two debated the following motion: "Islam is a religion of peace."  The debaters ranged from a former jihadist turn peace activist who realized, after going through a period of anger, that his interpretation of Islam as providing a mandate for militancy was all wrong.  On the other side of the debate, a Somali immigrant who had lived under the terrible influence of Al Shabab stressed the point that many passages in the Koran advocate violence and any interpretation of the religion must take this salient point into account.  It was an interesting debate. My personal opinion has always been that Islam is a religion of peace.  To pull particularly violent passages from the Koran and use them as evidence of Islam's fundamental commitment to violence is fair, I suppose.  But applying the same rubric to the Old Testament of the New Testament leads to the obvious conclusion that Judaism and Christianity are also not religions of peace.  And looking at Christianity's long history of violence, like the Crusades, leads to the same conclusion.  Another argument presented as evidence against the motion is that a religion is judged by the actions of its followers.  Even if most of the Muslims in the world are moderate in ideology and peaceful in nature, the actions of Jihadists and fundamentalist Muslims speak for the religion as a whole.  Again, looking at Sinn Fein in Ireland and the violence between Protestants and Catholics, or at the Jewish Defense League, which is effectively a terrorist organization, leads to the same inevitable conclusion.  So, in short, the arguments may be salient, but the ultimate conclusion is that no religion is one of peace.  (Actually, the bible has twice as many violent passages of the Koran, but, on a percentage basis, the Koran actually wins). (more…)

Development Economics

Product (RED) and the Dishonesty of Cause Marketing

There is a good blog post on Aidwatch, Big Willy Easterly’s cynical aid-takedown machine, about the role of celebrities in promoting development and their relative benefits.  This post is just Bill being Bill, railing against the status quo.  In this post, two guest bloggers, Lisa Ann Richey and Stefano Ponte, who have just authored a book about the topic, titled Brand Aid, discuss the problem of "cause marketing":

In the book, we examine what happens when aid celebrities unite with branded products and a cause. The resulting combination—what we call “Brand Aid”—is aid to brands because it helps sell products and builds the ethical profile of a brand. It is also a re-branding of aid as efficient and innovative, based on “commerce, not philanthropy.” In the case study of Product (RED), a co-branding initiative launched in 2006 by Bono, we show how celebrities are trusted to guarantee that products are “good.” Iconic brands such as Apple, Emporio Armani, Starbucks and Hallmark donate a proportion of profits from the sale of RED products to The Global Fund to finance HIV/AIDS treatment in Africa. In essence, aid celebrities are asking consumers to “do good” by buying iconic brands to help “distant others” —Africans affected by AIDS. This is very different from “helping Africa” by buying products actually made by Africans, in Africa, or by choosing products that claim to have been made under better social, labour and environmental conditions of production. In Product (RED), celebrities are moving attention away from “conscious consumption” (based on product information) and towards “compassionate consumption” (based on emotional appeal). To us, this is even more problematic than the risk of negative media attention that celebrities bring to development aid.
This reminded me of an article in the New York Times from 2008 about Project (RED), which revealed this tidbit of information about the project:
In its March 2007 issue, Advertising Age magazine reported that Red companies had collectively spent as much as $100 million in advertising and raised only $18 million. Officials of the campaign said then that the companies had spent $50 million on advertising and that the amount raised was $25 million. Advertising Age stood by its article.
I remember not being so surprised when I read this, but still a little ticked off.  My take on corporate social responsibility is that it can often be disingenuous, dishonest, or, as worst, deliberately misleading.  I like the idea of money in development that is not politically-motivated, which is also, frequently, dishonest and disingenuous.  I also like the idea of profit-oriented businesses with not much tolerance for wasting money allocating resources to some of these causes.  But I think it masks some of the real problems, which are systemic and global, and provides a cover for the perpetrators of those problems.  “Cause branding” is a relatively low-cost and easy investment for a business to make, without actually having to produce the results it needs.  For Starbucks, a $100 million campaign is pocket change, and to raise only $18 million to the Global Fund – an organization that has been recently skewered in the press for corruption and waste – is a travesty.  (My intention is not to villify the Global Fund, which has seen much of its funding put on hold because $34 million, or 0.3% of the total, was potentially lost due to corruption - which is pretty damn good considering the track record of other projects). (more…)


Market Facilitation and the Benefits of NGOs

I don’t usually write follow up posts, though I received a thought-provoking comment from longtime Develop Economies reader Ed Center on my post about the negative impacts of NGOs on economic development in Northern Ghana. It is worth quoting in full:

This insight then begs the question; why are you working for an NGO in Ghana? I have a friend in Cambodia who went to an excellent school that provides education and job skills to street kids. The thing is, he isn’t a street kid. He lied so that he could get a better education than is offered in the sad public school system. There are some excellent NGOs in Cambodia, particularly in education and heath, but does this cluttered network take the onus off the government and private sector to teach and care for the people? Do foreign NGOs crowd the space that local public and private sectors should occupy? Or without these NGOs, would my friend have gotten a crappy education? Without NGOs, do more babies die and more people go ignorant? And what is the strategy when the answer to all these questions seems to be yes?
It is true that I am currently working for an NGO doing agriculture economic development work here in Ghana. But it is worth noting that the project I’m working on takes the negative effects of its predecessors into account in its approach. It is a market facilitation project, which emphasizes making linkages in the private sector, and working with companies to develop business models that are more profitable and scalable. The underlying premise is that, beyond a lack of financial resources and technical capabilities, there are basic communication gaps between value chain “actors.” This requires some explanation. (more…)


Microfinance Documentary: “To Catch a Dollar”

In an example of the relatively smallness of the world, a new documentary called “To Catch a Dollar” about the Grameen Bank and Muhammad Yunus’ good works has just been released. I hadn’t heard about it before, but my old man sent me a link yesterday to a news outlet called As it turns out, the director, Gayle Ferraro, hails from my hometown of Westwood, Massachusetts, a small suburb located 20 minutes south of Boston, on exit 16B off I-95. I urge everyone to go out and see the documentary, support Muhammad Yunus in his struggles right now, and support my hometown of Westwood.

Yunus founded the original Grameen Bank in Bangladesh in 1976, operating under a more basic but similar microfinance system for poor women in rural areas, who used small loans to generate income for themselves -- by buying a goat to sell its milk or purchasing yarn to use for knitting salable scarves, for example. Such microloans have proven widely successful, and through its decades in operation, Grameen has established centers in more than 40 impoverished nations around the world. The launch of its U.S. counterpart in 2008 marked a new experiment in microfinance: Can a system that works so well in rural pockets of developing countries be effectively applied to America's urban centers? To Catch A Dollar explores this question, following the bank's early days in the Bronx. (more…)