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

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…)