The world’s poor aren’t where we think they are

Amid the whirlwind of papers published to coincide with the MDG Summit in New York this week, there’s one that you absolutely must read: this report by Andy Sumner from the Institute of Development Studies, which argues that most of the world’s poor people no longer live in poor countries (i.e. low income ones – which the World Bank defines as those in which annual per capita income is less than $995). Here’s the punchline:

In 1990, we estimated that 93 per cent of the world’s poor people lived in low income countries (LICs). In contrast, in 2007-08 we estimate that three quarters of the world’s approximately 1.3 bn poor people now live in middle income countries (MICs) and only about a quarter of the world’s poor – about 370m people – live in the remaining 39 low income countries, which are largely in sub-Saharan Africa.

Andy’s findings are a very big deal, because they directly affect the question of where the UK should concentrate its development resources – and strongly call into question a core pillar of DFID’s current approach.

When I arrived at DFID as a novice Special Adviser in 2003, the department was hugely enthusiastic about a target of spending 90% of the UK’s aid in low income countries (the so-called ’90-10 target’).

This was in turn based on research by two economists, David Dollar and Paul Collier, which argued that to get most bang for your buck with your aid, you should concentrate it on good-performing (as opposed to fragile) low income countries (see this 1999 World Bank paper of theirs for more). This argument got a warm reception among senior DFID officials and the main development NGOs - in particular because so many of them adhered to a development paradigm that emphasised spending money as the key means of delivering poverty reduction.

One corollary of the Dollar-Collier argument was that fragile or conflict-affected low income countries were seen as offering less good rates of return on aid. While DFID more or less bought that argument in 2003, it largely reversed its position after that as it internalised what conflict does to prospects for poverty reduction and development, particularly from DFID’s 3rd White Paper in 2006 onwards. (And, as Richard noted in a recent post, new International Development Secretary Andrew Mitchell looks set to continue that process.)

But the other corollary of the Dollar-Collier thesis was that middle income countries were also seen as less effective places to target UK aid – an issue that came to a head in 2003, when DFID came under huge pressure from Number 10 to increase massively its spending in Iraq, a middle income country.

Hilary Benn had been in post as Secretary of State for literally a few hours when he faced the decision of which programmes would have to be cut – and, by extension, whether DFID would maintain the 90-10 target. The NGOs we consulted were categorical: if DFID dropped the target, they would regard it as an act of war.

So with Number 10 demanding cash for Iraq on one hand and NGOs demanding the 90-10 target on the other, there was only one way to satisfy both: a veritable bonfire of middle income country programmes other than Iraq. Many programmes had their budgets slashed to the bone; many more had their offices closed altogether (see this Guardian coverage from the time).

Of course, all this was seven years ago, back in those strange days immediately after the invasion of Iraq. But bear in mind that 2003 proved to be the starting gun on a process that has continued since then, and which will soon reach its logical conclusion – when DFID closes its China programme. Andy’s research poses the question: is this actually what we should be doing?

Of course, the obvious counter-argument is that that it’s ridiculous for the UK to be sending aid to, say, China when China has its own aid programme in Africa. And if – like Dollar and Collier in 1999 (or, one might argue, like Bono or Jeff Sachs today) – you think development is primarily about spraying money at poor countries, then that’s entirely logical.

But the point is that there’s more to development that just disbursing aid money.  As I argued in a post last year (see also this one),

If we really want a full-spectrum approach to development, we need to place a bit less emphasis on aid and a lot more on political economy work in countries – the slow, steady process of using influence at the margins to work with progressive drivers of change towards pro-poor political outcomes in country.

That’s what DFID’s middle income country programmes were all about – and why it was such a tragedy to see them closed down. That’s why DFID needs to retain a sizeable staff presence in China, even if its budget there shrinks. And that’s why DFID’s people are as important as the size of its budget – and why it was so disastrous for DFID to lose one in six staff in “efficiency savings” under Labour, and why it will be nothing short of catastrophic if the same again happens under the current government.

Development policy needs to be about poor people, not just poor countries. Once we reframe our objectives in that light, we’ll find ourselves embarking on reconsideration of some fairly fundamental principles about how and where we do development.