What would the poor say The Big Picture on Aid Accountability

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What would the poor say?The Big Picture on Aid
Accountability

• William Easterly
• NYU

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Why so presumptuous and difficult a question!?

• We should judge aid by whether the poor
  themselves say they are better off or not because
  of aid.
  
• Aid agencies would be more likely to make poor
  better off if they knew what would the poor
  say?, and were rewarded for satisfying
  beneficiaries.
• Its obviously not so easy to know what would
  the poor say?
  
• But the success of free societies are built on
  discovering social mechanisms to get feedback
  from the general public that gives a signal of
  what people say, AND to reward positive
  feedback and punish negative feedback.
• Two common mechanisms competitive markets
  democratic accountability

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Development and market competition
Richer
Possible problems with reverse causality have
been somewhat addressed in published papers
Poorer
Pro-competitive regulation
Anti-competitive regulation
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Development and Accountability
Richer
Same caveat about reverse causality
Poorer
More voice and accountability
Less voice and accountability
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Controlling for Per Capita Income
Better government service delivery
Worse government service delivery
Worst Voice and Accountability
Best Voice and Accountability
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Features of successful systems built on what
would people say?

• Transparency (suppliers disclose information)
• Feedback (signals from users and commentators
  give you an idea of what would people say)
  
• Accountability (somebody has the POWER to make
  you change behavior if people say bad things
  about you)

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Good behavior encouraged and Bad behavior
discouraged by what would people say?
We will be remembered in spite of ourselves.
The fiery trial through which we pass will light
us down in honor or dishonor to the latest
generation. We, hold the power and bear the
responsibility.
Somebody who apparently didnt know somebody may
be looking
Conscience is the inner voice that warns us
somebody may be looking. H.L. Mencken

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Examples of 3 successful systems in rich
countries (in each of these we have methods for
answering what would the customers say?)

• Knowledge
• Private Goods
• Public Goods

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These Systems built on Freedom

• We will see a common theme in successful systems
  they rely on many different types of freedom
  academic and scientific freedom, freedom of the
  press, freedom of dissent, economic freedom,
  political freedom
• The problem with the aid system is that it often
  ignores or represses these freedoms
  
• JS Mill on individual liberty if everybody
  worked for the state, there would be nobody left
  to criticize the state. Are we too close to this
  situation with the aid state?
• The institutions of a free society make it
  possible to answer what would the people say?
  Can we imitate this in aid to know What would
  the poor say?

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Knowledge

• Transparency
• Centralized Textbooks, Encyclopedias by Publicly
  Known Authorities
  
• Decentralized Many independent scientific
  journals, books, media outlets, Wikipedia
  (academic freedom, freedom of the press, freedom
  to dissent)
• Feedback
• Vetting and peer review by other experts
• Scientific FreedomANYBODY can disprove ANY
  authority using scientific method
  
• Decentralized people with local knowledge make
  corrections of false information (especially
  about themselves!)
  
• Accountability
• Knowledge consumers use reliable knowledge
  sources, dont use unreliable knowledge sources
  
• Consequences for professional reputation of
  mistakes or bad research
  

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Aid System

• Transparency
• Centralized database OECD DAC aid database
  missing many crucial statistics, e.g. US aid
  tying (next slide)
  
• Decentralized no system for collecting huge
  amount of dispersed information on projects,
  programs, organizations, evaluations.
  
• Feedback
• Dont have scientific freedom for research inside
  aid organizations
  
• Little peer review of aid projects by independent
  aid professionals
  
• Little attempt at hearing from poor intended
  beneficiaries themselves to get accurate
  information about their own situation
  
• Accountability apparently no penalty for
  missing data, censorship of academic freedom, no
  independent peer review, not asking the poor for
  information. Perhaps some reputational incentives
  for good research and data.

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How much US aid is tied? missing data and mass
confusion
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How much US aid is tied? missing data and mass
confusion

• A document on the USAID website in 2003 states
  "The principal beneficiary of America's foreign
  assistance programs has always been the United
  States. Close to 80 of USAID's contracts and
  grants go directly to American firms..." This
  document has now disappeared from the USAID
  website.
• The USAID challenge if we could all agree on a
  public request for the newly transparent US
  government to report aid tying, how long will it
  take until they do so? Day zero today, February
  6, 2009

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Private goods in markets

• Transparency firm advertises what it sells
• Feedback (What would the customers say?)
• Consumer choice
• Firm surveys customers, begs them to answer how
  are we doing?
  
• Independent consumer reports rate best and
  worst
  
• Online decentralized reporting on quality
• Accountability firm goes out of business if
  customers are dissatisfied

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Aid system

• Transparency inadequate information on what
  services aid agency is trying to provide where,
  when, and to whom
  
• Feedback
• Poor seldom given a choice of alternative aid
  goods.
  
• Aid agencies do not seem to be begging the poor
  to do surveys on how are we doing? (see Voices
  of the Poor in next slide)
  
• No analogues to Consumer Reports or yelp.com
  (if they are appropriate?)
  
• Accountability
• Aid agencies dont go out of business
• Dont give anything analogous to money-back
  guarantees (to taxpaying donors or to
  recipients)
  
• Maybe some reputational incentives again.

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Voices of the Poor (World Bank)

• Three volumes, 1142 pages, interviewing 20,000
  poor people around the world.
  
• Asked them their views about national government,
  NGOs, banks, police, courts, warlords,
  municipalities, private enterprise, moneylenders,
  churches, mosques, temples, shrines, trees,
  stones, and rivers
• but never asked their view of the World Bank!

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Public Goods in Democracies

• Transparency (Freedom of Information Act)
• Feedback (What would the voters say?)
• Voters vote against politicians with major public
  goods failures (e.g. Katrina)
  
• Politicians commission polls of what voters think
  on public goods issues
  
• Independent media
• Opposition politicians
• Independent academics do evaluations, provide
  other expertise
  
• Accountability
• Politicians or heads of agencies lose power if
  voters are unhappy, if opposition, press, and
  academic criticism sticks
  

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Aid system

• Transparency
• no Freedom of Information Act
• One rare case of aid and government transparency
  in Uganda on transfers to local schools did show
  positive effect of transparency (Reinikka and
  Svensson)
• Feedback
• Aid is like a one-party state, it lacks
  opposition politicians
  
• Not enough independent media or enough
  independent academic evaluations (latter are
  increasing but still cover tiny fraction of aid)
  
• Accountability
• There was only one thing that historically caused
  an aid official to lose power is giving a big
  raise to your girlfriend.
  

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The Argument against the Great Aid Consensus,
lets all work together

• Successful accountability systems rely on
  dissent, opposition, debate
  
• successful accountability systems contain an
  threat to your very EXISTENCE disproven
  hypotheses disappear, unpopular firms go out of
  business, unpopular politicians find their
  political careers are over.
• so lets not presume a right to exist of any
  given aid agencies.

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A New Declaration of Independence for Aid

• whenever any form of government becomes
  destructive to these ends, it is the right of the
  people to alter or to abolish it, and to
  institute new government, laying its foundation
  on such principles and organizing its powers in
  such form, as to them shall seem most likely to
  effect their safety and happiness.
• we here highly resolve that this aid system
  shall have a new birth of freedom--and that
  development of the people, by the people, for the
  people, shall not perish from the earth."