Foreign Aid

Coauthored with Shervin Ghaffari, intern in the International Institutions and Global Governance program at the Council on Foreign Relations. As civil war in Syria inches toward its four-year anniversary, the nation’s humanitarian catastrophe deepens. Some 7.6 million Syrians are now internally displaced, and another 3.3 million have fled to neighboring countries to avoid the complex three-way dogfight among Assad’s forces, the Islamic State in Iraq and Syria (ISIS), and Syrian rebels. In Lebanon the influx of one million refugees is straining the capacities of a country of only 4.4 million. Today, some 12.2 million Syrians, both inside and outside Syria, rely on emergency food aid. It thus came as a shock when the UN’s World Food Program (WFP) announced on December 1 that a lack of funds was forcing it to suspend aid to help feed and clothe Syrian refugees in Jordan, Lebanon, Turkey, Iraq, and Egypt. In fact, the WFP had been signaling for months that its program for Syria was in dire need of a cash injection from international donors. Last week, the United States donated $125 million to prop up the program until the end of the year, but it clearly wasn’t enough. The WFP stated that it needed an additional $64 million for December alone to support its system of prepaid voucher cards, which can be used at local stores to buy food and supplies. Without this lifeline, refugees will face the impending harsh winter without food, warm clothes, or heat. “This couldn’t come at a worse time," said UN High Commissioner for Refugees António Guterres. “I urgently appeal to the international community – support WFP now. Don’t let refugees go hungry.” The cutback is projected to hit 1.7 million Syrian refugees. Many have signaled that their best option now may be a journey back to war-torn Syria. Unless funds are found quickly, Syria’s “new level of hopelessness” might rise to new heights. The suspension of WFP aid to Syrian refugees is symptomatic of broader weaknesses in the current multilateral approach to delivering emergency relief. First, because humanitarian assistance is entirely voluntary, it is vulnerable to shifting attitudes in donor nations, particularly aid fatigue. After years of war and upheaval in the broader Middle East, major international donor governments and their electorates are weary of sending money overseas, particularly given competing domestic demands. Since 2001, donor nations have devoted hundreds of billions of dollars to humanitarian relief and nation-building in Afghanistan, Iraq, Pakistan, Libya, and elsewhere. The appetite to continue doing so is dwindling, particularly when—as in the case of Syria—it is clear that such aid is a mere palliative, unaccompanied by either a clear political strategy for a negotiated solution or a military effort to ensure the victory of one side. As the Syrian war grinds on interminably, there is bound to be dwindling support for providing endless “emergency” relief that only addresses surface symptoms. In other words, public support for addressing the consequences of war is contingent on there being an end in sight. Second, the current financial burden of providing humanitarian relief is unevenly shared. The United States has been by far the most generous donor government, having contributed approximately $2 billion to the WFP program, about five times as much as the next biggest donor, the United Kingdom. It is past time for other major donors, both established and emerging, to play their part. Most egregiously, France and China, two of the world’s largest economies, have given less to the WFP than has Ethiopia. The $64 million shortfall that compelled WFP to suspend its program is a “drop in the bucket” for either country. As long as nations like France and China abstain from pulling their weight, other nations will feel justified sitting out. Third, the humanitarian system is experiencing unprecedented demand on its limited resources. The last time this blog reported on the Syrian refugee crisis, there were three “level-3” emergencies around the world. Today, there are officially four: Syria, Iraq, South Sudan, and the Central African Republic (CAR)—not to mention the Ebola outbreak affecting West Africa. These simultaneous calamities not only distract attention from Syria, they also divert money. Iraq’s fight against ISIS has displaced approximately 2.1 million Iraqis. The civil war in CAR has led to at least 5,000 deaths and left 2.5 million people in need of humanitarian assistance. In South Sudan, 1.5 million people have been displaced and more than seven million are at risk of hunger and disease. The Ebola crisis, meanwhile, has claimed approximately 6,000 lives, according to recent reports. These competing crises are taxing the already strained resources of the WPF and other UN agencies. Rigid rules about how institutions can use funds only complicate matters. As Greg Barrow, spokesman for the WFP’s London office, explains, “Because many donations are allocated to specific programs and cannot be used elsewhere, there is a lack of flexibility in the system.” Although the scale of Syria’s crisis dwarfs the others, the WFP has little authority to reprogram the funds at its disposal. What can to be done to alleviate the humanitarian crisis, both in Syria and globally? The immediate priority is to provide WFP with the stopgap assistance it needs to resume its voucher program. The current suspension, which exposes already vulnerable populations to intolerable suffering, can be alleviated at modest cost. The WFP has embarked on a social media campaign in hopes of plugging the hole left by international donors, hoping that the world’s Twitter followers will mobilize action from derelict governments. The United States needs to complement this grassroots effort with high-level diplomatic muscle. U.S. Secretary of State John Kerry should press France, China, and other donors to step up to the plate immediately, to ensure that Syrian refugees survive the impending winter—and that nations that are hosting them in large numbers can sustain this burden. Simultaneously, the Obama administration must redouble its efforts to bring an end to the Syrian civil war—the only sure way to end the country’s humanitarian catastrophe. The administration has sought for some time to thread the needle in Syria, hoping in vain that a robust moderate opposition would emerge that could somehow triumph over both the Assad regime and ISIS jihadists. This strategy has enjoyed little success. Indeed, the focus on ISIS’ rise has directed U.S. and international attention away from Assad’s atrocities, allowing his campaign against the rebels and the civilian population to remain unchecked. Every airstrike levels buildings, destroys lives, and diminishes any semblance of normality. Without a political solution, which seems unlikely, Syrians will continue to swell in neighboring countries. External actors have sought to soften the blow on those affected, but their efforts are waning. Finally, the United States must work with other influential nations to place the global humanitarian enterprise on a firmer institutional and financial foundation. The multilateral response to the Syrian crisis suggests that humanitarian aid has an expiration date, that current voluntary funding mechanisms are inadequate, and that the WFP and existing UN organizations are easily overwhelmed by multiple calamities. The World Humanitarian Summit, to be convened by UN Secretary-General Ban Ki-moon in 2016, will provide a valuable opportunity for the United States to demonstrate its leadership in helping reform systematic and structural flaws in the current international aid regime. More immediately, the Obama administration should push for a special session of the UN Security Council to focus global attention on the disastrous security as well as human consequences of the global humanitarian crisis.

After almost a year of stalemate, Afghanistan finally signed a renewed bilateral security agreement (BSA) with the United States last Tuesday. The document, which allows 9,800 U.S. troops and 2,000 NATO troops to remain in Afghanistan in a training and advisory capacity after the end of 2014, was approved by newly-minted Afghan President Ashraf Ghani. Ghani’s predecessor, Hamid Karzai, had refused to sign the agreement since November 2013, casting grave doubts on the country’s future as the United States continued to draw down its military presence. Despite winning the presidency in a run-off vote in June, Ghani only took office on September 29 due to a protracted dispute with opposing candidate Abdullah Abdullah. Allegations of fraud in the vote counting dogged the election, delaying its resolution, and the negotiation toward a political settlement took months and no fewer than two visits from U.S. Secretary of State John Kerry. Once finally assuming office last week, Ghani signed the BSA a mere twenty-four hours later, making it the first major act of his administration. The bilateral security agreement has important implications for Afghanistan’s future; not only does it pave the way for Afghanistan to receive continued U.S. military training support and additional U.S. aid, but its enactment will also create increased confidence for other nations and private investors to provide development and economic assistance to Afghanistan. These implications are particularly significant for Afghanistan’s women and girls. The United States has already been actively involved in supporting avenues for women’s participation in the Afghanistan National Security Forces (ANSF).  The 2014 National Defense Authorization Act (NDAA) appropriated $25 million for the integration of women into the ANSF. Not only would greater inclusion of women into Afghanistan’s military enhance female employment opportunities, but it would also help create a safe public environment for women. Due to cultural sensitivity that requires women to be screened only by female security officers—for example, at polling stations during an election—female security officers are needed to allow women complete access to the public space. The funding from the 2014 NDAA supported the training of 13,000 female officers for this very purpose. More broadly, security is essential for women’s participation in public life; without it, women and girls are unable to leave their homes without risking their lives, limiting their ability to work, run for office, or seek an education. Additionally, increased development assistance, which will hopefully support greater access to education, employment, and health care, will cement and extend the gains Afghan women and girls have already made. Equally important to the bilateral security agreement, however, is Afghanistan exercising greater sovereignty over its future, both in terms of politics and security, as the U.S. military presence draws down. Ghani highlighted his insistence on maintaining and extending Afghan sovereignty in his speech at the signing of the BSA, specifically mentioning restrictions on foreign troops’ access to religious sites and laws governing foreign contractors. By ensuring that the Afghan government takes ownership of initiatives that support and empower women, these programs will be more likely to continue, even after the end of any U.S. involvement in the country. One such initiative—and one commentators on Afghanistan have previously called for—is Ghani’s campaign promise to appoint a woman to the Supreme Court. Inclusion of women at the highest levels of the Afghan government will both advance gender equality and strengthen the legitimacy of Afghan rule of law. The ongoing involvement of United States—albeit in a way that uses U.S. leverage to empower Afghans through policies that support sustainable and cost-effective programs—is critical to the continuing advancement of Afghanistan’s women and girls and the country’s prosperity and stability more broadly.

A few weeks ago, Yemen’s government took the bold – some might say foolhardy – step of winding down a fuel subsidy program that was costing it billions of dollars. Overnight, fuel prices in the country nearly doubled, sparking violent riots. For average Yemenis, the sudden end of one of the few tangible benefits they get from their government is bitter indeed, especially since 54.5 percent of the population lives below the poverty line. It’s no surprise that thousands of protesters have taken to the streets. But the change in policy didn’t have to occur this way. Fuel subsidies in Yemen have consumed more than 20 percent of government spending in recent years, straining public finances. The need to scale back the subsidy has hardly been a secret. But the government has done almost nothing to prepare the people for this change, to explain why it’s important, how grossly inefficient fuel subsidies are as a poverty alleviation tool, how regressive they are too, and to put in place alternative means of compensating those most hurt by the change. Yemen is not alone. Governments around the world are simply scared of leveling with their citizens about the true costs of fuel subsidy programs. The fear of consumer anger spooks them into inaction until fiscal pressures force them to remove price supports. But, as I argue in a new CFR publication, “How to Make Fuel Subsidy Reform Succeed,” there is an alternative. Rather than delay reforms until crisis erupts, governments should lay the groundwork for reform by directly communicating with citizens about the unintended consequences of fuel subsidies: about how they distort markets, strain government budgets, encourage overconsumption, foster corruption, and harm the environment. Perhaps most important from the perspective of the poor, governments should underscore that fuel subsidies do little to remedy inequality or stimulate development. While fuel subsidies are usually packaged as pro-poor, they are in fact highly regressive. The richest 20 percent of households in low- and middle-income countries use six times more subsidized fuel than the poorest 20 percent. To prepare for change, governments should clearly outline to consumers how they will implement alternative anti-poverty measures, such as targeted cash transfers, that can better protect the poorest in society from the hardships of higher fuel prices at much less cost. Having a targeted communications campaign to support reform plans is critical to the success of those plans, according to a 2013 International Monetary Fund study. Iran, which reformed its subsidy program in 2010, conducted a broad public relations’ campaign before reforms took effect; the government explained how consumers would be compensated for higher energy prices and the overall benefits to the country. Ghana’s efforts to phase out fuel subsidies were helped by publicizing an independent study that showed how the poor would benefit. The reality is that far too few governments recognize the value of laying the groundwork for reform. Moreover, there is no place for them to turn for a solution that combines technical expertise with marketing capabilities. This is reason to support the creation of a new public-private partnership, the Global Subsidy Elimination Campaign (GSEC). The agency would work with governments to execute country-specific communication programs to build the case for fuel subsidy reform among citizens; it could be housed within the World Bank but have its own board and budget – a model similar to that of the Consultative Group to Assist the Poor, giving the agency access to the Bank’s research capabilities while allowing it to act nimbly and independently. Over time, the GSEC’s marketing campaigns could be instigated by the World Bank in consultation with client governments or commissioned on a fee-for-service basis by richer countries. The U.S. should jump-start the establishment of the GSEC by providing half its initial funding. After all, curtailing subsidies is to the United States’ strategic benefit. Geopolitically critical countries such as Yemen and Egypt will not see robust economic growth and political stability in the absence of successful fuel subsidy reform. Funding could also come from others interested in the enormous potential of fuel subsidy reform. Such donors—including other countries, NGOs, the World Bank itself, and private foundations — should be motivated by an interest in poverty reduction and economic development, environmental concerns and strategic considerations. Host countries should be required to contribute at least 10 percent of their specific marketing campaigns as buy-in to the process. Of course, public awareness campaigns will work only if matched by credible government action to replace subsidies with other more effective investments, such as targeted cash transfers and productive health and education spending. But with governments spending more than half a trillion dollars a year on fuel subsidies, the upside of fuel subsidy reform is enormous. Even a 5 percent reduction in fuel subsidies would free up billions of dollars of public spending for more effective anti-poverty measures. The time is ripe to help governments make the case directly to citizens for fuel subsidy reform. To learn more, read “How to Make Fuel Subsidy Reform Succeed.”

For several years now I’ve been following the progress of an innovative new philanthropy: GiveDirectly. Its cofounders, Michael Faye and Paul Niehaus, started the organization in 2008 while doing their PhD’s in economics at Harvard. Their idea was simple. Given mounting evidence that cash transfers are among the most efficient and effective ways to address poverty (and that the poor know very well what to do with money), why not start a charity that skips the rigmarole of providing services to poor people in poor countries and just gives them cash? Satellite imagery allowed GiveDirectly to efficiently and objectively identify the poorest in their chosen test sites in rural Kenya–those living in huts with only thatched roofs. The spread of mobile payments via cell phones provided a reliable and inexpensive way to distribute money. Committed to measuring results every step of the way, GiveDirectly collaborated with Innovations for Poverty Action (IPA) to conduct a randomized control trial and have been transparent with the results. And so far, those results have been impressive: recipients increased their assets and income significantly; their food security and mental health improved; violence against women fell. GiveDirectly achieved these results with an expense ratio of roughly seven percent–far less than what most NGO’s spend. “We want cash transfers to be the benchmark against which everything else is judged,” says Niehaus. Not surprisingly, GiveDirectly has gone from success to success, winning accolades and raising millions from the likes of Google and Good Ventures. But despite these gains, and talk about scaling the organization to disperse billions, it wasn’t clear to me how they were going to evolve from reaching a few thousand recipients now to their lofty goal of reaching millions. With their announcement today of the formation of a for-profit spin-off company, I’m beginning to see the way. The new company is called Segovia after one of the largest aqueducts of the Roman Empire–an engineering feat that carried water for two thousand years. Segovia’s founders hope the name will evoke “good governance.” Essentially, the company will build out a technology platform to make cash transfers efficiently to millions of people, with its eye on governments and other institutions as clients. Undoubtedly, Segovia’s potential market is enormous. A World Economic Forum report estimates that government cash transfers to the unbanked in emerging markets are nearing $550 billion. India’s cash transfer program to workers alone is $14 billion. Already, approximately a billion people are reached by cash transfers in emerging markets, and that figure is only likely to grow as research continues to demonstrate their efficiency and effectiveness at poverty alleviation. Segovia’s goal is to partner with governments and other institutions to streamline those cash transfers–to make the process better, faster, cheaper. The same World Economic Forum report estimates that the potential savings of migrating government cash transfer payments onto a digital platform could be as high as $100 billion. This includes reducing the leakage, transaction, and administrative costs of existing programs and realizing the economic benefits of greater ease and safety for recipients. Michael Faye, who will head up Segovia as CEO, believes that the sophisticated modeling behind GiveDirectly, and the insights they’ve gained by working in the field on cash transfers, give them a distinct advantage in building out the platform and becoming the partner of choice for governments looking to more efficiently manage their cash transfer programs or to start one. Already, Segovia has put together an impressive management team. Chris Hughes, one of the cofounders of Facebook and now publisher and editor-in-chief of the New Republic, will serve as the company’s executive chairman. When we chatted recently about Segovia, Hughes stressed that he was planning to devote significant time to the new endeavor. The opportunity to push the world’s collective thinking on the potential of cash transfers, combined with the attractive market opportunity, is clearly a winning combination for Hughes. Investor Arif Naqvi, founder and CEO of the Abraaj Group, will also play an active role in Segovia–no doubt helping to open doors to governments around the world. GiveDirectly will remain a separate non-profit, albeit with close ties to for-profit Segovia. The charity will continue to be run by Paul Niehaus, who will also sit on Segovia’s board (and Faye and Hughes on GiveDirectly’s board), and it will be a minority shareholder in the new company. It will probably continue to function as an important idea lab, undertaking innovative test cases that governments would be reluctant to do without more data and proven results. Despite the cofounders’ best efforts to rationalize the decision to move into the for-profit space (namely, that a non-profit structure would hinder their work with governments and their march to scale), I’d be surprised if some controversy doesn’t accompany Segovia’s founding. There will be the inevitable brickbat of “selling out.” And with the higher financial stakes, there will certainly be deeper scrutiny of the unconditional cash transfer model which has already generated some grumbling. But I applaud the move. Other examples of non-profits spinning off into for-profits demonstrate that it can be an effective way to attract the capital and talent necessary to get to scale. Unconditional cash transfers are a big idea in poverty alleviation: if Segovia can help build the infrastructure to allow more efficient transfers, while scrupulously measuring impact and learning from those evaluations, the world will be better off for it. So what if a couple of economists get rich along the way?

The Human Sciences Research Council (HSRC) published the “South African National HIV Prevalence, Incidence, and Behaviour Survey, 2012” on April 1, 2014. It is the definitive survey of HIV/AIDS in South Africa to date, and is part of a series, with earlier surveys published in 2002, 2005, and 2009. The Survey is funded by, among others, the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR) and the Bill and Melinda Gates Foundation. It reports a good news/bad news story. The good news: over the past ten years, mother-to-child transmission of HIV/AIDS has declined from 70,000 babies per year to about 8,600 in 2012. There has been a decline in new infections among people in the demographic range of fifteen to twenty-four years of age. Blood samples indicate that about a third of those infected have received some antiretroviral treatment. The bad news is that 21.2 percent of South Africa’s population is infected, an increase of almost 2 percent since the 2008 survey. Condom use has fallen since 2008, down to less than 68 percent from 85 percent in 2008. And the age of sexual debut among young males has also dropped, from about 10 percent of boys before the age of fifteen to 16.7 percent. The highest rates of infection are among women between thirty and thirty-four years old, and men aged between thirty-five and thirty-nine years old. The rate of infections among women between the ages of fifteen and twenty-four is over four times higher than young men of the same age range. There is also significant variation among the provinces in terms of prevalence. Kwa-Zulu-Natal province is the highest with a 16.9 percent prevalence rate, and the Western Cape has the lowest prevalence at 5 percent. There is also significant variation among racial groups; black Africans have an overall prevalence rate of 15 percent, while whites’ prevalence is 0.3 percent. There is much food for thought in the report. How to account for the difference in prevalence rates among the provinces? KwaZulu-Natal has consistently had the highest numbers, since the disease first appeared. Why?  Durban, the largest city in KwaZulu-Natal is a major port. But, so, too, is Cape Town, the capital of the Western Cape. Is there a relationship between the high prevalence rates among younger women and what some see as an epidemic of rape? The differences in prevalence rates between whites and blacks must owe much to the continued widespread poverty of the latter. It is intuitive that prevalence rates will be higher among the unmarried than among the married, and the Survey confirms that. As Kerry Cullinan points out, “only a quarter of African people of marriage able age were married while over 70 percent of whites were married.” For a range of reasons, it is difficult for the very poor in South Africa to marry. HSRC head Professor Olive Shisana suggests that the higher HIV/AIDS prevalence rate reflects the growth in the number receiving anti-retrovirals. That seems to indicate that victims of the disease are living longer even while new infections continue. I find this credible.

As protestors from Kiev to Khartoum to Caracas take to the streets against autocracy, a new book from economist William Easterly reminds us that Western aid is too often on the wrong side of the battle for freedom and democracy.  In The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor, Easterly slams the development community for supporting autocrats, not democrats, in the name of helping the world’s poorest. Ignoring human rights abuses and giving aid to oppressive regimes, he maintains, harms those in need and in many ways “un-develops” countries. The Tyranny of Experts takes on the notion that autocracies deliver stronger economic growth than freer societies.  Easterly argues that when economic growth occurs under autocratic regimes, it is more often achieved at the local level in spite of the regime’s efforts.  In some instances, growth under autocracies can be attributed to relative increases in freedoms.  He points to China as an example of this, attributing the country’s phenomenal growth to its adoption of greater personal and economic freedoms, especially compared to the crippling Maoist policies of the past. Easterly also rejects the myth that dictators are dependable and that a certain level of oppression should be overlooked for the sake of economic growth and overall prosperity. Most recently, the violence and chaos following the 2011 Arab uprisings has made some nostalgic for the stable, if undemocratic, governments that kept civil unrest in check, allowing for a measure of economic development to take hold. Easterly stresses that instability and tumult in the wake of ousting a dictator is not the fault of an emerging democracy, but instead an understandable result of years of autocratic rule. The answer is not to continue to support autocrats in the name of stability, but rather to start the inevitably messy process of democratization sooner. Easterly is of course not the first to call attention to the importance of prioritizing rights and freedoms in the development agenda. Scholars from Amartya Sen to more recently, Thomas Carothers and Diane de Gramont, have also advocated for a rights-based approach to development. In Pathways to Freedom: Political and Economic Lessons From Democratic Transitions, my coauthors and I similarly found that economic growth and political freedom go hand-in-hand. Still, the hard questions remain: how to help those without economic and political freedoms?  And when should donors walk away from desperately poor people because their government is undemocratic? Easterly argues that the donor community should draw the line with far more scrutiny than it does today – not just at the obvious cases, such as North Korea, but with other undemocratic countries, such as Ethiopia, where human rights abuses are rampant. He debunks the notion that aid can be “apolitical,” arguing that it is inherently political: giving resources to a government allows it to control and allocate (or withhold) resources as it sees fit. The aid community should focus on ways to help oppressed populations without helping their oppressors. For example, scholarship programs, trade, and other people-to-people exchanges can give opportunities to people in need. At the very least, Easterly argues, development actors should not praise oppressive regimes or congratulate them on economic growth they did not create. Rather than being seduced by “benevolent dictators,” Easterly urges donors to focus their energy on “freedom loving” governments that need help. The Millennium Challenge Corporation is a step in the right direction but, as Easterly pointed out during the CFR meeting, MCC’s approach is undermined by other U.S. aid agencies, such as USAID, that continue to assist countries even when they don’t meet certain good governance and human rights standards. Easterly also emphasizes the need for aid organizations to be more transparent about where their money is going. Robert Zoellick made strides in this direction during his tenure as World Bank president. But more recent developments suggest that the Bank still has a way to go in becoming more open and accountable.  (Easterly noted that an initial invitation to speak about The Tyranny of Experts at the World Bank was later rescinded for “scheduling reasons.”)

Rather than building schools and clinics, or donating solar lights and cows, is the best way to fight global poverty simply to give poor people money? That’s the question a group of smart economists are testing, and their answers could stand the multi-billion dollar aid industry on its head. In an effort to unpack the promises and challenges associated with unconditional cash transfers (UCTs), I hosted a conversation at the Council on Foreign Relations last month with Paul Niehaus, an assistant professor at UC San Diego, and the co-founder of GiveDirectly, an innovative NGO implementing and evaluating a cash transfer program in Kenya; and Chris Blattman, an assistant professor at Columbia University and popular blogger whose research is also breaking new ground on cash transfers. The most common concern about UCTs is that recipients will squander the money on detrimental activities such as drinking, gambling, and prostitution. To test this theory, Blattman conducted a field study in Liberia and selected participants not known for financial responsibility - drug addicts, former combatants, criminals, and the homeless. The preliminary results defy expectation: the Liberian recipients did not blow their cash on guilty pleasures. Instead, they spent it on useful things like clothing and shelter, and bought wholesale goods to start their own small businesses. Few of the criminals-turned-entrepreneurs succeeded in keeping their businesses afloat -- likely due in part to the tough economic conditions in the post-conflict country, and the fact that, as microcredit programs have shown, not everyone is cut out to be an entrepreneur. Still, even with no strings attached, the Liberian participants generally made good efforts to invest in and improve their quality of life. One of the main arguments for UCTs is that they allow poor people to spend money on what they actually need, not what outside aid experts assume they need. Niehaus (who was just recognized as one of Foreign Policy’s Leading Global Thinkers of 2013) noted that metal roofs are one of the most common purchases of GiveDirectly recipients in Kenya – something he admits he did not anticipate. Metal roofs turn out to be a high-return investment – they are sturdier and last much longer than thatched roofs, improve families’ security and health, and allow inhabitants to collect rain water. UCTs empower the poor to prioritize their own investment decisions to chart their rise out of poverty. Both Blattman and Niehaus agree that UCTs are not a cure-all - conditionality can be an important element of some poverty alleviation efforts. For example, aid conditional on school attendance for girls can help boost enrollment in places where cultural and economic barriers limit girls’ education. In other cases, pairing cash with skills training and support can lead to better results. But Blattman and Niehaus’ studies are – appropriately – examining just how much these additional services cost. Blattman’s work in Northern Uganda sheds light on this topic. To start, the team gave unconditional cash grants to women and observed that many became petty traders and nearly doubled their earnings within eighteen months. When social workers added follow-on services – visiting the women to hold them accountable and provide technical advice – the results were even better, but not so much better to justify the cost of the services. Blattman’s bottom line: “just give more women more cash.” Based on his work with aid organizations, Blattman estimates that hand holding can cost around $500 per aid recipient – typically more than three times the amount of the actual cash transfer. Although recipients who receive training and follow-ups do somewhat better than those who do not, the alternative for the same amount of money is helping more people and leaving them to their own (productive) devices. So far, UCT programs have been conducted on relatively small scales – but that could soon change. Advances in technology have made it easier than ever to efficiently identify the neediest households and distribute cash to people in remote places. In Kenya, GiveDirectly cost-effectively uses satellite images to identify families with thatched roofs (a sign of poverty) and safely and efficiently delivers cash to them through M-Pesa, the country’s mobile-phone-based banking system (those without cell phones were given them). As I discussed in a previous blog post, the results of a recently released GiveDirectly impact evaluation are positive. Unconditional cash transfers led to increases in assets and incomes, up 58 percent and 33 percent respectively, and improvements in food security and women’s empowerment. Spending on alcohol and tobacco, meanwhile, did not increase. The study also shows significant improvements in recipients’ mental health. As Niehaus noted in a recent National Public Radio interview, “being poor is really stressful and that can make it hard to . . . plan and make good decisions.” At the recent CFR event, he emphasized that mental health benefits could be one of the most important long-term gains to come from UCTs – something his work will continue to study.

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is by Paul Callan, Andria Thomas, Sebastian  Burduja, Leticia Kawanami, and Adam Bradlow of or formerly of Dalberg Global Development Advisors. Here they review how the agreements of the Paris Declaration played out in practice.   The Paris Declaration, signed in 2005, was a milestone in the effort to improve aid effectiveness; donors agreed to give money directly, and with fewer strings attached, to developing country governments, who in turn promised to improve their management and use of aid. Six years after the agreement, the Paris Declaration Evaluation, conducted by IOD PARC from 2009-2011, found that donors had made almost no progress on their commitments and that some, but far from all, developing countries had improved their management of aid. At Dalberg, we used the results of the evaluation to track the progress developing countries made in strengthening their national aid systems and meeting their Paris Declaration commitments. We identified three Paris Declaration indicators for which developing countries were principally responsible: creating national development strategies and expenditure plans, strengthening public financial management systems, and monitoring results via performance assessment frameworks. In Chart 1, we plot changes in these three Paris indicators between 2005 and 2007 against changes in Official Development Assistance (ODA) inflows from 2005 to 2009. We found no clear correlation between stronger implementation of Paris commitments by developing countries and increased inflows of ODA, even though the data in Chart 1 allow for the possibility of a time lag between progress by developing countries and increases in ODA from donors. A few countries, including Honduras, Zambia, and Ghana, made significant improvements on Paris indicators between 2005 and 2007, yet their aid actually decreased over time. Meanwhile, for some other countries, such as Burundi and Kenya, whose performance on the Paris indicators disimproved between 2005 and 2007, ODA significantly increased. Despite asserting, in the Paris Declaration and elsewhere, that they want developing countries to use aid more effectively, donors do not appear to actually invest more in countries that do what is asked of them. Even without additional aid, making progress toward aid effectiveness should, in theory, improve a developing country’s use of resources and development. In Chart 2, we plot changes in Paris Declaration indicators between 2005 and 2007 against percentage change in the Human Development Index (HDI) between 2005 and 2010 in those countries. The data do not show any correlation. This suggests that improvements in the management of aid (and of a government’s own resources) are not enough to further development goals, at least in the short term. Of course, our analyses must be read with some caution, especially in the case of Chart 2. The three Paris indicators we measured might not fully capture the extent of improvements in a government’s management or use of aid. Development results also depend on many factors and often lag significantly behind improvements in government policies and institutions. In addition, donors must consider factors other than aid effectiveness, such as overall need or humanitarian crises, in deciding how to allocate aid. Nevertheless, it seems particularly counterintuitive that donors do not give more aid to developing countries that meet their Paris Declaration commitments. Failing to do so is potentially counterproductive: donors who do not hold up their end of the bargain and do not reward progress threaten to undermine the legitimacy of the Paris Declaration and other aid effectiveness agreements.

Polio numbers in Nigeria for 2013 are likely to be less than they were in 2012. Given the turmoil in northeastern Nigeria associated with the Boko Haram insurrection, this would seem to indicate real progress for the polio eradication program despite the insecurity of the region that the program operates in. However, the security situation in Nigeria, and elsewhere where polio is found, political, and religious obstacles continue to impede the eradication of the disease. Stratfor, citing the Global Polio Eradication Initiative, states that by mid-November there were fifty-one reported cases of polio in Nigeria, with a month and a half still to run in 2013. The date of the most recent case in Nigeria was October 8, 2013. The total number of cases in 2012 was more than twice as high, at 122. The three countries where polio is endemic are Pakistan (sixty-three cases to date in 2013), Nigeria, and Afghanistan (nine cases to date in 2013). The three account for a total of 123 cases out of a world-wide total of 341. Of the non-endemic countries, Somalia with 185 cases reported to date in 2013 had by far the largest case load. Syria had thirteen, Ethiopia six, and Kenya fourteen in 2013 to date. In a further development, Nigerian media reported on November 21 that the Dangote Foundation (Nigeria) and the Bill and Melinda Gates Foundation are collaborating to strengthen the childhood immunization program, with the goal of eradicating polio from Nigeria by 2018. In a sober assessment of polio progress, This Day cited a comment by a UNICEF and World Health Organization expert that West Africa and Nigeria continued to be at risk for an “explosive return of polio.” This Day observed that the principal barrier to vaccination in northeast Nigeria is violence. This Day’s assessment is that, “the key to ridding the country of this devastating disease is a return to routine immunization regime. As we ask for more intensified campaigns to kick out polio, there is also the need to return to the path of peaceful co-existence. The security agencies have a crucial role to play in this regard and so too do the religious and political leaders. It is evident that the campaigns to kick out polio cannot thrive in the midst of chaos.” The eradication of polio in Nigeria remains hostage to politics and violence.

What if I suggested that the best way to fight poverty is simply to give money to poor people, no strings attached? You’d probably say I was crazy. Just dropping cash on the world’s poorest might result in a temporary improvement in their quality of life, but only until the money runs out and then they would be back where they started. Or maybe you’d be skeptical of even that short-term improvement, since you’d think the lucky recipients would just blow the money on guilty pleasures like alcohol, tobacco, or worse. But over the past decade, lots of studies suggest that cash transfers are in fact an efficient way of actually tackling poverty. In the late 1990s and early 2000s, governments in Brazil and Mexico led the way with large conditional cash transfer (CCT) programs that provide small, steady sums to families (typically the mother) on the condition that they send their kids to school and take them to doctors. As health and education went up, so too did incomes; poverty rates went down. The newest twist on this idea is that perhaps cash transfer programs could be just as effective – and cheaper to implement - without any conditionality. GiveDirectly, an innovative new NGO, set out to test that theory. Working in Kenya, it has distributed cash grants to poor families through a mobile-phone based banking system called M-Pesa. GiveDirectly then commissioned a study to better understand the impact of these programs, and recently released the results. Evaluators Johannes Haushofer and Jeremy Shapiro of the Massachusetts Institute for Technology, in partnership with Innovations for Poverty Action (IPA), tracked GiveDirectly recipients in rural Kenya who had received an average of $513 each between 2011 and 2012. GiveDirectly has monitored results before, but this study used a rigorous research design to more accurately assess the program’s impacts. In the words of David McKenzie, an economist at the World Bank, the study was “very well designed.” The results seem promising: researchers found that there were significant improvements in the recipients’ financial and psychological well-being. For some, assets and incomes increased by 58 percent and 33 percent respectively. Food security and consumption levels of goods increased while spending on alcohol and tobacco stayed constant. In addition, the program seemed to improve the mental health and lower stress and depression levels of recipients. Researchers also found that there were positive spillover effects that boosted women’s empowerment, both in households participating in the program and in the community as a whole. Such short term gains are hardly surprising (presumably, windfall cash makes most people happier), but the long-term effects of unconditional cash transfer (UCT) programs remain unknown. Although the study found that spending on healthcare and education increased slightly, overall levels of health and school attendance did not change. According to The Economist, CCTs have their drawbacks, but “usually do a better job” than UCTs in reducing poverty because their health and education requirements benefit the next generation. Amanda Glassman of the Center for Global Development, however, makes the interesting observation that although CCTs in Latin America have led to higher school enrollments, “no program can find an impact on learning as measured in standardized tests.” Her bottom line is that requiring parents to send their kids to poor-quality schools doesn’t necessarily translate into the increased learning that is associated with greater wages in the labor market. I also think back to the important point that Harvard Professor Lant Pritchett made last year – that the purpose of conditionality in Brazil’s and Mexico’s CCT programs was not really to get more kids in school (school enrollment was already above 95%) but rather to make those programs more politically palatable. So where does this leave us on evaluating UCTs versus CCTs? Because unconditional cash transfers are a relatively new development tool, we still don’t have enough information to determine if these programs can actually get at the root causes of poverty or merely treat its symptoms. Regardless, the results of GiveDirectly’s study challenge the assumption that only conditional cash transfer programs are effective in improving living standards for poor communities. When given the choice, many poor people spend wisely, defying the stereotype that they will behave irresponsibly with cash and that donors and governments must make choices for them. And with an expense ratio of approximately 7% (significantly lower than most NGOs)  GiveDirectly’s unconditional cash transfer program at a minimum sets a new efficiency bar for poverty alleviation schemes.

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Natalie Bugalski and David Pred of Inclusive Development International. Here they discuss the World Bank’s Safeguard Policies review process. For the first time in over a decade, the World Bank is conducting an internal review of its Safeguard Policies, which aim to ensure that Bank projects do not cause social or environmental harm. Civil society groups are advocating for the Bank to bring these policies in line with international human rights and environmental standards and consistently apply them to all Bank operations. The Bank’s senior management, on the other hand, seems more concerned with making the Bank a more attractive lender that can compete with increasingly powerful state financiers, such as Brazil and China, by ensuring there are fewer strings attached to loans. However, this move would hurt the very people the Bank is supposed to help. The current World Bank Group president, Jim Yong Kim, has set two ambitious goals for the institution: eliminating extreme poverty by 2030 and boosting the incomes of the bottom 40 percent of the global population. In order to achieve these goals, Kim wants the Bank to be less risk averse and support more “transformational large-scale projects.” Kim refocusing the Bank’s strategy on its original mandate of reducing poverty is commendable, but many NGOs, including our organization, Inclusive Development International, worry that this will mean gutting the Bank’s binding social and environmental requirements and replacing them with more lax standards. In past decades, Bank-financed mega-projects, conducted without consulting local communities, caused a series of social and environmental disasters and sparked protests around the world. In response, with pressure from the U.S. Congress, the Bank adopted stronger policies to protect communities and ecosystems. During Congressman Barney Frank’s tenure as chair of the House Financial Services Committee, Congress also used its power of the purse to demand the establishment of the Inspection Panel. Over the past two decades, the Panel has enabled affected communities to hold the Bank accountable when safeguard policies are violated. Regional development banks have followed suit by adopting safeguard policies and accountability mechanisms of their own. In fact, several regional banks now have stronger standards than those of the Bank. One of the most glaring areas where the Bank has fallen behind is in protecting people affected by Bank projects from forced displacement and ensuing impoverishment. According to the Bank’s Independent Evaluation Group, at any one time more than one million people are affected by involuntary resettlement caused by active Bank projects. Displacement is often accompanied by violence and corruption, and threatens livelihoods, education, food security, and mental and physical health. Although the Bank has a resettlement policy aimed at avoiding these negative outcomes, gaps in the policy and its implementation have meant that local communities displaced by Bank projects continue to face adversity and human rights violations. The Nam Theun II Hydropower Project in Laos is an apt example of the need for human rights due diligence, and for ensuring the informed participation of people impacted by development projects. The construction of Nam Theun II displaced 6,200 indigenous people and affected more than 110,000 people downstream. In the closed society of Laos, there was no open and thorough consultation process in which people could raise objections to the project. The Bank and its partners largely ignored the repressive political environment and proceeded with the project without meaningfully consulting the affected communities and responding to their concerns. Today, according to the organization International Rivers, the local population is still struggling to recover their livelihoods after they lost access to critical natural resources. Development projects in Ethiopia further highlight why the Bank needs to adopt stronger human rights standards. Since 2006, the Bank has provided over $2 billion to help the Ethiopian government provide basic services to its citizens. However, under the guise of improving services for rural communities, the government has embarked on a mass relocation program affecting an estimated 1.5 million people. According to Human Rights Watch, the program has involved the violent, forced relocation of tens of thousands of indigenous peoples from their fertile ancestral lands to more arid areas, where promised basic services are often deficient or absent. In some cases, this has led to starvation and many victims of the program have fled to neighboring countries seeking sanctuary. There are clear links between this abusive government campaign and the Bank’s Protection of Basic Services project, as argued in a complaint brought to the Inspection Panel in September 2012. Yet the Bank has not applied its resettlement policy to this case, standing behind the Ethiopian government’s dubious claims that the relocation is “voluntary,” despite strong evidence to the contrary. In addition to the Safeguard Policies review, the Bank is also currently engaged in negotiations for the seventeenth replenishment of its International Development Association (IDA) fund, which provides concessional loans to low-income countries. Once this process is completed, Congress will be asked to approve the United States’ financial contribution to the IDA. This gives the legislature considerable influence to shape the Bank’s social and environmental protection policies for the next twenty years. Congress should use its leverage to encourage the Bank to harmonize its policies with international human rights standards. It is imperative that the hard-won gains of adopting binding safeguard policies and establishing an Inspection Panel to enforce them are not undone. Rather, the Safeguards Review and IDA 17 Replenishment negotiations should be seized as an opportunity to ensure that the rights of poor and vulnerable communities are protected and promoted in all Bank projects.

Last month, I wrote about the economic and social reforms that have boosted Africa’s growth, and the challenges the region still faces going forward. This week, David Smith of The Guardian wrote on a similar theme, questioning the popular narrative of “Africa rising.” Based on survey data, Smith argues that recent optimism about the continent is misguided: although there has been economic growth, it has not helped average Africans. Indeed, in some countries – including in South Africa, the continent’s largest economy - poverty rates are increasing. Smith cites a recent report by the Afrobarometer research project, which found that recent economic growth in the region is “failing to trickle down.” More than two in five Africans surveyed reported that they regularly cannot fulfill basic needs. Overall, the gains of Africa’s recent economic growth remain too skewed toward small groups of elites. This is not good news for democracy on the continent either, since research shows that the success of emerging democracies very much depends on whether democracy materially improves people’s lives. As I noted in my earlier post, economic and social reforms have occurred unevenly across the continent. To move forward and address rampant poverty, the region will have to overcome major challenges, particularly related to education and the growing youth bulge. The Afrobarometer report supports these claims: it finds that higher levels of education can help reduce poverty, as can access to resources such as piped water and electrical grids. The Obama administration’s commitment to “Power Africa” by doubling access to electricity in sub-Saharan Africa, where two thirds of the population lacks access to power, is good news on this front. The Afrobarometer report also points to deep frustration about lack of employment. Seventy-one percent of Africans surveyed were disappointed with their government’s ability to create jobs and reduce income inequality. Africa’s current mix of economic activity remains overly reliant on natural resources, so to boost employment, economies must diversify; and governments must better educate youth so that they can participate in an expanded economy. Otherwise, Africa’s wealth will continue to overly benefit elites.

In 2012, Latin America received more foreign direct investment than ever before. In a recent blog post, Shannon O’Neil describes the implications of this investment. She explains: Foreign direct investment is not an unencumbered good—stories abound about foreign-owned companies flouting domestic laws, exploiting labor, and degrading the environment. But it remains an important and sought after tool for economic expansion…when focusing on economic development more broadly, not all money is created equal. Read her full post here.

Doctors Without Borders recently announced that they will be leaving Somalia, due to an uptick in violence against medical personnel. John Campbell explains why, despite recent optimism about Somalia’s future, the country will not be stable anytime soon. He writes: The lesson here may be an old one: failed states in an environment of religious fanaticism fueled by clan and other rivalries, take a long time to recover. Read the full post here.