Tuesday, February 2, 2010

NGOs are not Government and development requires aid

Sadly, the well-intentioned and hugely ambitious Millennium Villages Project (MVP) looks set to go down the lines of similar previous efforts ("What began as a five year initiative to end extreme poverty and send the Millennium Villages on their way toward further economic development has now ballooned into at least a 10-year program with no clear end in sight"). Or did we err in the first place by putting unrealistic hopes on such experiments?

The objective of the MVP was to invest in five key sectors — business development, health, education, agriculture and infrastructure - by using external cash and expertise to enact locally developed plans for improvement and to help people in lifting "themselves out of the poverty trap and achieve the Millennium Development Goals (MDGs) in five years". Its larger goal was to showcase to the world how the MDGs can be achieved.

But unfortunately, after spending $5 million (cash and non-cash contributions) a year for five years on the Ethiopian village cluster around Koraro village with 67000 people, supplemented with the committed and concentrated efforts of some of the most famous development experts and aid workers, the aforementioned goals remain elusive. This is not to in any way underplay the obvious successes - a school, a health clinic, a market, higher crop yields, and healthier children - and the undeniable lessons and advantages that Korara would benefit from this experience. But they remain like small "data points" and anecdotes in the tortuous development pathway.

Nicholas Kristof has a series of superb reports by Jeff Marlow on Koraro's tryst with sanitized development that offers profound and definitive lessons for development experts and policy makers. Five years down the line Koraro continues to grapple with delivering health care, managing the transition from traditional agriculture to more remunerative non-farm activities, keeping children in school and improving learning outcomes, and sustaining and scaling up the many interventions after the MVP tapers off.

The well-intentioned efforts of non-governmental organizations and committed individuals are rarely meaningful complements, leave alone substitutes, for effective governments in addressing the development challenge. Most often, they provide the grist for isolated "feel-good" anecdotes whose premature proclamation of success are small drops in the large ocean of development challenges.

At best, these agencies and individuals can assist in increasing (with varying scales) the effectiveness of governments' development interventions. But for a handful of exceptions, their successes always come up short against the twin challenge of "sustainability and scalability".

History of development is littered with examples of attractive magic-pill solutions - "pick the best practices and scale them up in a systematic way", "teach people to fish", "structure incentives", "bring in the markets", "build local capacity, decentralize decision making, devolve financial powers, and manage linkages", "develop local development plans and implement them", "good governance", "seven best buys", "identify do-ers or internal change agents and leaders and support them", etc - failing to deliver the desired results.

Painful as it sounds, the development processes cannot be easily short-circuited. But encouragingly, it can be expedited by introduction of best-practices in market and governance systems and technology. We can even hope to leap-frog certain milestones in the path of social and economic development. But glossing over the fundamental requirements and focussing on the "magic-pills" will not get us anywhere.

Consider the long chain of development. The easiest part is to provide the basic physical and human infrastructure - schools, hospitals, clean drinking water, sanitation facilities, roads, electricity, agriculture storage failicites, banks, teachers, doctors, para-professionals, extension services and so on. However, even this has proved an insurmountable challenge for many countries, especially meeting the demand for human capital. The next challenge is to deliver on specific sectoral outcomes - learning outcomes and skill development, health care improvements, increases in agriculture productivity, universal access to credit etc. This is even more difficult, and its delivery would require an appropriate and area-specific mixture of administrative capacity and demand-side vigilance. Even assuming this is addressed, we still have the biggest challenge left.

A dynamic network of markets have to develop so as to efficiently facilitate the allocation of capital, labor, and technology across various economic activities that underpin a vibrant and productive economy. And well functioning markets require infrastructure, credit and labor market enabling frameworks, effective judicial processes and enforcement machinery, and transparent regulatory architecture. Further, in the absence of adequate capacity in market institutions and given widespread market failures, the role of government becomes critical in both facilitating the development of market itself and in optimally regulating and supervising them.

While the first two issues are a sine-qua-non for the development of an effective market structure, they are not a sufficient criterion. Even for countries (and areas within developing countries) that have surmounted the first two challenges, the third has proved elusive and time consuming. This challenge becomes all the more herculean for primitive agriculture economies that are commonplace across the vast majority of rural areas of the developing world. The transition from rudimentary agriculture to more productive farming and beyond to non-farm livelihoods, industrial manufacturing and services has to inevitably follow a process of gradual and appropriately phased evolution. And like all natural processes, once the low hanging fruits are plucked - as is increasingly the case due to the surge of globalization, liberalization and renewed global focus of the last two decades - achieving further improvements in outcomes becomes a much greater challenge.

The ingredients to the achievement of a functioning market eco-system are far too many and the admixture too varied for different socio-economic and political environments that its emergence can at best be a trial and error process of incremental development. In this process, the "magic-pills" can play an important facilitative role, especially in expediting the process and making the most effective use of scarce resources.

Let me take a simple example and illustrate the aforementioned challenges. First, we need schools with the basic minimum of facilities and teachers in place. Then it is required to get children to school and teachers to teach. The resultant educated workforce should then have access to adequate opportunities of gainful employment to utilize the skills they have learnt. This chain should expand and get amplified in a spectacular manner. All this needs money and more, and scarcity of resources is one of the critical constraints.

It is therefore undeniable that poor developing countries need aid and we should ignore the wasteful debate ("were aid cut, African governments would respond by turning to other sources of finance that would make them more accountable" Vs "this exaggerates the opportunity for alternative finance and underestimates the difficulties African societies face") about Dambisa Moyo’s red herring, "Dead Aid", and move on to what Mo Ibrahim succintly points out,

"The critical argument should not be about aid or no aid – no one can question the necessity of pure humanitarian aid as long as it satisfies basic good governance criteria. The argument should be about where to focus aid to achieve the best returns for donor taxpayers and aid recipients. I propose two areas to focus aid: the hardware of Africa, infrastructure and regional integration; and human software, in the form of education and health."

As this post illustrates, regardless of where the food comes from, the school feeding program works, and can be a vital component in achieving the objective of keeping children in school and improving learning outcomes. And financing school feeding program requires aid. And so does constructing schools and hospitals, hiring teachers and nurses, building roads and electricity networks, and developing those engines of growth - cities.

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