Who chooses? a response to Jishnu Das

There was widespread admiration in my Twitter stream yesterday for an article by World Bank Senior Economist Jishnu Das slamming The Economist for its support for making cash transfers to the poor conditional. I am less convinced by it.

Jishnu finds it ‘ridiculous’ that the Economist could reach the conclusion that conditional transfers are attractive based on the following evidence:

School enrolment among families that got conditional grants rose by 41% on average in the various programmes; the increase among those that got unconditional grants was only 23%. If conditions were implicit or soft (eg, if recipients were simply encouraged to take children to school), enrolment merely rose by 25%. The big difference came when conditions were tough (eg, if school attendance was mandatory): that boosted enrolment by 60%, a big bang for the relatively few bucks involved.

As he sees it, without conditions, parents are able to take better account of their own priorities, favouring nutrition or healthcare over education, or simply spending the money on beer so they can relax after a long day at work.

Any imposition of conditions suggests that donors know better than parents and is an example of the ‘purely elitist’ mind-set that bedevils development. “Has our hubris really taken us that far?” he asks, despairingly. “What happened to respect for the poor?” Continue reading

What the World Bank Does Not Understand About “Doing Business”

World Bank Doing Business

In its 10-year history, the World Bank’s Doing Business Report has achieved enormous influence. The annual study, one of the flagship knowledge products of the World Bank, is the leading tool to judge the business environments of developing countries, generating huge coverage in the media every year. Several countries—such as Rwanda—have used it as a guide to design reform programs. For its part, the Bank has advised over 80 countries on reforms to regulations measured in the DB. Its influence stretches even to academia, with over 1,000 articles being published in peer-reviewed journals using data in the index.

But does it focus on the most important issues for companies in less developed countries?

Based on my own almost 20 years of experience doing business in places such as Nigeria, Turkey, and China, the answer is no. Continue reading

Do World Bank Country Classifications Hurt the Poor?

world bank country classifications

As the competition for president of the World Bank approaches its final stages, it is worth considering what changes ought to be brought in by the new person. One area in need of reform is the Bank’s system of country classifications. Although Robert Zoellick pushed the World Bank to open its much-prized treasure chest of data to the public during his five-year term as president, he did little to reform how the World Bank conceptualized that data. Changing how countries are classified would have a wide impact on the whole development community.

For instance, look at all the discussion in development policy circles about the sharp reduction in the number of low-income countries in recent years. Some believe this news should be trumpeted as a policy success. For others, the reduction suggests that there is a “New Bottom Billion” of poor people living in middle-income countries, forcing a change in donor focus. For yet another group, it indicates that foreign aid as a concept should be updated to blend more loans with grant money.

But has all that much changed? Does the World Bank country classifications accurately identify the countries in need of outside assistance? Continue reading

Let the Little Boys Die – Reaction to the 2012 World Development Report

The 2012 World Development Report has a stat that the World Bank is mighty proud of. I’ll let Bank President, Robert Zoellick tell the story:

Imagine if a city of almost four million people disappeared every year. A Los Angeles, Johannesburg, Yokohama. It would be hard to miss.

 Yet it goes largely unnoticed that almost four million girls and women “go missing” each year in developing countries.

It’s a shocking statistic. For comparison, AIDS and TB each kill around 1.7 million people a year – malaria a million. So why are so many women missing? What’s happening to them? And what does the Bank want to do about it?

Burrow into the report and the total drops a bit – to 3.882 million. A third of the ‘missing’ are from China, 30% from Sub-Saharan Africa, and 22% from India. The two big rising powers and the countries of the world’s poorest region clearly have some questions to answer.

The initial analysis follows a well-trodden path. According to the Bank, the largest group, 37%, are ‘missing at birth’. This is largely a problem for China and India (95% of missing baby girls). Many parents in these countries want sons rather than daughters, and are prepared to use ultrasound and abortion to make sure they get them.

It’s when we move onto infant mortality that the WDR gets into trouble. 617,000 of the missing (16% of the total) are girls who die before the age of 5, it reports. These girls die in much larger numbers than their brothers because they are neglected by their parents and are starved of healthcare by the prejudiced societies into which they have the misfortune to be born. Right?

Well no, not at all, as it happens.

Continue reading

On the web: a Pittsburgh G20 special

As the spotlight shifts from the UN General Assembly and world leaders converge on Pittsburgh for the G20, there’s been much debate about the prospects for success and the competing agendas of member countries.

– The core negotiations seem set to finalise agreement over a “framework for balanced and sustainable growth” – particularly critical from US and Chinese perspectives – that seeks to give the IMF a greater reporting role in policing global imbalances. The FT’s Money Supply blog offers a sceptical comparison of the leaked draft agreement with the IMF’s current role.

– As to the Europeans: Gordon Brown seems to be adopting a broader focus, calling in an NYT op-ed for “a new system of governance” to form the “next common economic goal”. (He also announced that UK Business Minister Shriti Vadera would be going on secondment to the South Korean government to help develop proposals on global financial architecture ahead of their G20 presidency next year.) For Angela Merkel, the “most important subject” is financial regulation; she argues that “we must not search for substitute issues”; and for Sarkozy too, the top priorities look to be bankers’ bonuses and agreement over capital requirements for banks.

Trade and protectionism are sure to form another important aspect of negotiations, particularly for China and India. VoxEU takes an interesting look at trends in world trade since the November 2008 Washington Summit,  highlighting how G20 states’ oft-proclaimed commitment against protectionism has been broken by member governments approximately once every three days since last year’s commitments. “No other statistic”, Simon Evenett argues, “better demonstrates the paucity of global leadership on contemporary protectionism”.

– Robert Zoellick, President of the World Bank, calls for the summit to focus on the world’s developing economies, highlighting the positive contribution they can make to the health of the global economy. Pittsburgh, he argues, can mark the advent of a more “responsible globalisation” founded on “multiple poles of growth”. Brazilian President, Luiz Inácio Lula da Silva, meanwhile, presents his take on the G20 grouping in the LA Times.

– Around the think tanks, finally: Brookings has an in-depth report focusing on some of the broader implications of the G20 agenda, from the protectionism issue to African and Latin American perspectives, as well as assessing the G20’s approach to climate change. The Carnegie Endowment, meanwhile, has an interesting take on Saudi Arabia’s approach to the summit, given its increasing exposure to instability in the financial markets and vulnerability to shifts in oil and food prices.

Elsewhere, Chatham House has analysis of some of the key short-term economic indicators, as well as long-term GDP forecasts – arguing that it is still to early too be coordinating exit strategies. The Canadian-based Centre for International Governance Innovation, meanwhile, takes a comprehensive look at some of the challenges facing the G20 as a forum for global economic governance, with contributions from policymakers and academics alike.

World Bank vs UNCTAD

Excerpt from the World Bank’s just-published World Development Report 2010 (which this year takes climate change as its theme – overview pdf):

Enshrining a principle of equity in a global deal would do much to dispel such concerns and generate trust. A long-term goal of per capita emissions converging to a band could ensure that no country is locked into an unequal share of the atmospheric commons. India has recently stated that it would never exceed the average per capita emissions of high-income countries. So drastic action by high-income countries to reduce their own carbon footprint to sustainable levels is essential. This would show leadership, spur innovation, and make it feasible for all to switch to a low-carbon growth path.

Hey, did the Bank just endorse Contraction and Convergence? Not quite. As I explained a few weeks back, converging to equal per capita emission levels is not the same as converging to equal per capita emission entitlementsthe difference being the small matter of whether poor countries get to benefit from emissions trading markets worth, oh, a few billion dollars. Shame the Bank missed that trick. Not so UNCTAD, on the other hand, as we saw a couple of weeks ago:

… if population size were to be given an important weight in the initial allocation of permits across countries, many developing countries would be able to sell their emission rights because they would be allotted considerably more permits than they need to cover domestically produced emissions.

Interesting coda: I was having lunch the other day with a senior official from an international agency that shall remain nameless.  I was saying I couldn’t figure out why low income countries didn’t get out there and demand quantified emission targets – allocated on the basis of immediate convergence to per capita convergence in emission entitlements. His answer: because they lack an equivalent to the OECD  – i.e. a think tank that supports them as a bloc.

Back in the 1970s, he continued, UNCTAD was increasingly showing signs of fulfilling this role; but it started to get too good at it, so major donor nations deliberately scaled back its funding. All the more welcome, then, to see UNCTAD punching above its weight on the biggest development issue of the 21st century.  Bravo.

(PS. You might think that the G77 performs the role of an OECD for poor countries, on climate as on other issues. But you’d be wrong, on two counts. First, there’s the point that G77 lacks a secretariat – in contrast to OECD’s small army of extremely smart people in Paris. But second and more fundamentally, there’s the point that however cohesive G77 might look like from the outside, the fact is that low and middle income countries have increasingly divergent interests on climate change.

Partly it’s a question of where climate finance goes: middle income countries want to see lots of cash being pumped into low carbon development programmes that will help them to grow and to access clean technology, whereas low income countries are far more concerned with adaptation.

But more fundamentally, it’s about the emission entitlements issue. Pretty much all low income countries have per capita emissions far below the global average – so if emission permits were shared out on an equal per capita basis, they’d be making real money.  Not so most of the major emerging economies – above all China, which already has per capita emissions above the global average, and would hence be a net purchaser of permits from the get-go, whenever the convergence date might be.  No surprise, then, that G77 skirts around the issue, preferring to lead on the need for developed countries to cut their own emissions and cough up more climate finance…)

Aid during the downturn

A few days ago the House of Commons International Development Committee released its latest report (entitled Aid Under Pressure: Support for Development Assistance in an Economic Downturn) and there are a few points which might be of interest to Global Dashboard readers.

As its title would suggest, the report focuses on the impact of the financial crisis on international development efforts. It opens on a grim note with the news that DFID estimates that by the end of next year 90 million more people will be living in extreme poverty as a result of the crisis. Moreover, the WHO believes that up to 400,000 additional children could die as a result. The International Development Committee adds that progress towards the MDGs may have been set back by up to three years.

A major point made in testimony given to the Committee was that initial expectations that the developing world would be insulated from the impact of the crisis have proven false. Whilst the contagion effect of the crisis has only directly harmed western economies, the indirect knock-on effects have applied pressure to transnational business flows worldwide. The World Bank reports that of the 107 counties it categorises as ‘developing’, 40% are ‘highly exposed’ to the downturn.

Unsurprisingly-though quite rightly-the International Development Committee’s response to all this is to insist on the importance of maintaining ongoing aid commitments, as agreed at the G20 summit in July.

Aside from that, the issue of tax havens is highlighted and it would seem that the British government is increasingly committed to making progress in this respect. Gordon Brown in particular has been forthright on this issue, but his government seems somewhat hamstrung at present and we shall have to await developments.

In the wake of the London Summit, institutional reform is back on the agenda. The need to overhaul the IMF and World Bank, particularly in regard to apportionment of votes within those organisations needs to be a priority for the post-crisis politics of global governance. Indeed, reform has been presented as a condition for the boost to IMF funding that the G20 agreed upon earlier this year. Broader questions of operational versatility are also important. In these respects, the Committee’s report is strong on good ideas and analysis, but light on suggestions for how Britain can help bring about the desired changes. For that perhaps we need to wait for the DFID White Paper due later in the summer.

On a seemingly superficial note, the Committee proposes that DFID’s name be changed and puts forward ‘British Aid’ and ‘DFID UK’ as possibilities. The intention, it seems is to increase the ‘visibility’ of UK international development spending. Of course, DFID does a lot more than aid, so I think we can immediately dismiss the first suggestion. As a reserved Brit, the idea of being so brash as to use ‘UK’ on international development work is too reminiscent of the US tendency to splash the Stars and Stripes on aid parcels. It seems… immodest, somehow. But it might be a good idea all the same – US aid is part of its soft power and in the same way, the work of the Department for International Development has the potential to be a significant contributor to British attempts to win ‘hearts and minds’, particularly in countries like Afghanistan. After all, the Committee’s report points out that DFID is the largest donor to the World Bank’s International Development Association. Maybe blowing our national trumpet more boldly isn’t such a bad idea. Though one wonders if there isn’t a snappier name out there somewhere – suggestions welcome, of course.