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Nancy Birdsall is president emeritus and a senior fellow at the Center for Global Development, a policy-oriented research institution that opened its doors in Washington, DC in October 2001. Prior to launching the center, Birdsall served for three years as senior associate and director of the Economic Reform Project at the Carnegie Endowment for International Peace. Her work at Carnegie focused on issues of globalization and inequality, as well as on the reform of the international financial institutions.
From 1993 to 1998, Birdsall was executive vice-president of the Inter-American Development Bank, the largest of the regional development banks, where she oversaw a $30 billion public and private loan portfolio. Before joining the Inter-American Development Bank, she spent 14 years in research, policy, and management positions at the World Bank, most recently as director of the Policy Research Department.
Birdsall has been researching and writing on economic development issues for more than 25 years. Her most recent work focuses on the relationship between income distribution and economic growth and the role of regional public goods in development.
Birdsall is a member of the Board of Directors of the International Food Policy Research Council (IFPRI), of the African Population and Health Research Center, and of Mathematica. She has chaired the board of the International Center for Research on Women and has served on the boards of the Social Science Research Council, Overseas Development Council, and Accion. She has also served on committees and working groups of the National Academy of Sciences.
Birdsall holds a PhD in economics from Yale University and an MA in international relations from the Johns Hopkins School of Advanced International Studies.
Putting Education to Work in Egypt, by Nancy Birdsall and Lesley O'Connell. Prepared for Conference, Growth Beyond Stabilization: Prospects for Egypt, sponsored by The Egyptian Center for Economic Studies in collaboration with the Center for Institutional Reform and the Informal Sector, University of Maryland; the Harvard Institute for International Development, and the US Agency for International Development, February 3-4, 1999, Cairo, Egypt. March 1999.
"Intergenerational Mobility in Latin America: Deeper Markets and Better Schools Make a Difference," with Jere R. Behrman and Miguel Szekely, in New Markets, New Opportunities? Economic and Social Mobility in a Changing World (1999)
"The U.S. and the Social Challenge in Latin America: The New Agenda Needs New Instruments," with Nora Lustig and Lesley O'Connell, in The Search for Common Ground: U.S. National Interests and the Western Hemisphere in a New Century (W.W. Norton & Company, Inc., 1999)
"Deep Integration and Trade Agreements: Good for Developing Countries?" with Robert Z. Lawrence in Global Public Goods: International Cooperation in the 21st Century (Oxford University Press, 1999)
"No Tradeoff: Efficient Growth Via More Equal Human Capital Accumulation in Latin America," in Beyond Trade-Offs: Market Reforms and Equitable Growth in Latin America (1998)
"That Silly Inequality Debate," in Foreign Policy, May/June 2002
"Education in Latin America: Demand and Distribution are Factors that Matter," with Juan Luis Londoño and Lesley O'Connell in CEPAL Review 66, December 1998
"Life is Unfair: Inequality in the World," in Foreign Policy, Summer 1998
"Public Spending on Higher Education in Developing Countries: Too Much or Too Little?" in Economics of Education Review, 1996
Proponents of the Advance Market Commitment (AMC) were pleased to see the Washington Posteditorial supporting U.S. involvement earlier this week. It is not too late for the U.S. to be a major force in making AMCs work. A U.S. financial commitment would ensure continuing analytic and policy engagement with an initiative shaped by optimism about the potential to make markets work for people. There is much to be done to ensure this pilot for a pneumococcal vaccine works, and to put that learning to work for a comparable initiative for malaria and other killer diseases.
The ideas and the policy work behind this initiative, after all, came originally and primarily from the U.S. research and policy community over many years. I am personally pleased by the role that CGD has played in translating the concept of a market guarantee for a future vaccine into implementation, first worked out in detail by Michael Kremer (before he joined CGD as a non-resident fellow). In doing this, we collaborated with Michael in building on many earlier efforts to refine the idea and bring it to the attention of the policy community -- see for example a Financial TimesOp-ed by Michael with CGD Honorary Board member Jeffrey Sachs in 1999.
Liberian President Ellen Johnson Sirleaf described the achievements of her year-old government in recovering from a prolonged civil war and called upon the U.S. and other Liberian partners to drop the debt inherited from past governments, continue security assistance, and step up development assistance, especially road building.
"Slowly but steadily we are making our way back. We know we can create a new peaceful, open and prosperous Liberia," said Sirleaf, Africa’s first elected female head of state, at an event (video clips of Pres. Johnson Sirleaf and Rep. Jesse Jackson, Jr. are available on the event page) organized by CGD that marked the start of an official visit to Washington.
"We believe that Liberia can be an example…that war-torn dictatorships can turn around and become responsible members of the international community," she said. "We are willing and ready to make the hard decisions, to adopt the right policies, to put in the right systems, if you are willing to be with us and support us, politically, analytically, and financially."
While in Washington, Sirleaf will meet with representatives of Liberia’s international partners to describe its progress, outline its strategy, and discuss how the partners can support Liberia.
Sirleaf announced that CGD founder Edward Scott, Jr. would provide $1 million to assist Liberia in managing its reconstruction, by sponsoring five or six highly trained specialists each year for three years to work in key Liberian ministries to support senior officials and their staff (see press release). She also thanked CGD senior fellow Steve Radelet, who has been advising the Liberian government on its relations with the international donor community.
U.S. Congressman Jesse Jackson Jr. told the gathering that additional U.S. help is needed to ensure that plans for rebuilding the Liberian national army are fulfilled. All the outside assistance "will go for naught unless there is peace and stability," Jackson said.
CGD president Nancy Birdsall, who recently visited Liberia, praised Sirleaf's government for rapid progress in restoring order and rebuilding systems destroyed during the prolonged civil war. The Liberian government reports quarterly on revenues and expenditures, she said, but donor organizations working in Liberia have yet to provide similar information about their activities to the Liberian government, despite repeated requests, she said.
After describing Liberia's rapid progress, Sirleaf listed six areas of concern involving support from the U.S. and other partners. First, she said, there is a risk that as Liberia improves, the attention of the international community will turn elsewhere. “Although we have made progress our recovery is still fragile,” she said. “If we do not redouble our efforts our ultimate success is not assured. Now is not the time to level off assistance.”
Second, she said, two critical elements of Liberia's program are not yet fully funded: security and roads. The U.S., which has strong historical ties to Liberia (which was founded by former American slaves), has played a leading role in restoring security. But U.S. funding for training the new Liberian army of 2,000 has not been provided beyond March, she said.
Similarly, although roads are central to providing health and education services, and to revitalizing the economy, “our partners still do not put as high a priority on building roads as we would like to see,” she said.
Other concerns included delays in disbursement; an unmet need for budget support; and possible gaps in the transition from humanitarian relief to development aid. In health, for example, NGOs that have provided badly needed medical services are preparing to withdraw, although other programs are not yet ready to replace them.
Finally, Sirleaf appealed for an urgent resolution of Liberia’s debt problem. Liberia’s debt of $3.7 billion is equal to 3,000 percent of the country’s annual export earnings. The debt, she said, is mostly from bad loans to past governments. She appealed to the shareholders of the IMF, the World Bank and the African Development Bank to agree on a plan for debt relief that would not draw away donor resources needed for Liberia’s recovery.
On Thursday, Liberian Finance Minister Antoinette M. Sayeh, and Minister of Planning Toga G. McIntosh will report on the results of the Liberia Partners Forum at public event organized with CGD support. Register for the event.
Media Contact: Tony Kopetchny
Media Relations Associate
CGD Founder Ed Scott Donates $1 Million for Liberian Fellowships
Center for Global Development
WASHINGTON,D.C.(February 12,2007)- The government of Liberia and the Center for Global Development (CGD) announced today a new program to assist Liberia in managing its reconstruction. Each year for three years, the program will place five to six highly trained specialists in key Liberian ministries to support senior officials and their staff in advancing the rebuilding of the war-torn country.
The program, known as the Scott Family Liberia Fellows, was proposed by CGD's founding chairman, Edward Scott, and will be supported by a $1 million grant from the Scott family. Senior staff of the Center will provide overall guidance in the selection and activities of the fellows. The Scott Family Fellows will serve in Liberia for one year.
"I am very pleased to announce today that Mr. Scott and his family have agreed to donate generously one million dollars to assist Liberia by establishing the Scott Family Liberia Fellowships," President Ellen Johnson Sirleaf said at the start of a week-long visit to Washington. She said that the fellowships "will provide the opportunity over the next two to three years for approximately 15 well-trained young professionals to work in Liberia for one year, assisting some of Liberia's most senior government officials."
CGD president Nancy Birdsall recently visited Liberia together with CGD senior fellow Steve Radelet, who has been advising the Liberian government on its relations with the international donor community. Birdsall welcomed the new fellows program.
"Ed Scott recognizes in Liberia a rare opportunity to provide significant support to a dedicated, highly capable, democratically-elected government struggling to recover from horrific conflict with extremely limited resources," she said. "I have no doubt that the program will benefit Liberia and the young professionals who are selected to participate."
The announcement came at a public event organized by CGD and the Mortara Center for International Studies at Georgetown University ahead of the Liberia Partners' Forum, to be held in Washington this week.
During the Forum, Sirleaf and senior Liberian officials will meet with Liberia's major international partners. The officials will describe Liberia's progress, outline its strategy for the near future, and discuss the ways in which the partners can best support Liberia's efforts towards recovery and sustained development.
Liberia's 14-year civil war left the country in ruins. Following the inauguration of President Sirleaf in January 2006, the country has begun the long journey to recovery. The new government has resettled tens of thousands of refugees, begun training new security forces, increased government revenues by more than 40 percent, restored electricity and water to parts of the capital, substantially increased primary school enrollment, and begun to rebuild roads and other critical infrastructure.
CGD conducts research and engages in policy debates to help improve the policies and practices of the U.S. and other rich countries towards development. CGD senior fellow Radelet has been advising Liberia's President Ellen Johnson Sirleaf and her staff since her election and inauguration as Africa's first female head of state in January 2006.
I'm here in Liberia observing a post-conflict situation through a development lens. I'm struck by several aspects of the complex task of rebuilding after 14 years of civil war.
First, the trauma brought a more complete collapse than the notion of a "war" between two parties suggests. Unlike in the sectarian conflict of the kind suffered in former Yugoslavia and feared in Iraq - where the lines seem clearly drawn across a few ethnic groups -- Liberian civilians -- all of them but especially women and children -- were vulnerable for years to rounds of marauding, looting, pillage and rape. See CGD non-resident fellow Jeremy Weinstein's recent book, Inside Rebellion: The Politics of Insurgent Violence, to understand how different initial conditions generate different levels of destruction in what we call civil wars.
No doubt there are good published studies by serious students of pre-war Liberia that illuminate the roots of the trauma here. But an initial reading of dozens of official donor documents reveals surprisingly little attention to these deep-seated issues. There are vague allusions to inter-generational land conflicts, to the risk of renewed ethnic tensions, and to the troubles in neighboring Guinea re-igniting a regional war with shifting eruptions in Sierra Leone, Liberia, and Guinea. Even the International Crisis Group, the most detailed source, says little about the sources of inter-ethnic conflict and the relative social positions of various ethnic groups.
At least on paper, the donors are concentrating all their attention on what has to be done in the future. That is not surprising. But isn't it risky?
Second, two big public organizations here are performing. As the Millions Saved report concluded, international and other big public bureaucracies do work when the objective is clear and leadership is strong. The government, under the leadership of President Ellen Johnson-Sirleaf, has made extraordinary progress on multiple fronts since her election. One striking example: better financial management yielded a 50% increase in revenues in her first year in office. And the performance here of UNMIL, the UN-managed process of demobilization and rebuilding of professional security services, is impressive. As Mark Malloch-Brown, then UN Deputy Secretary-General said, the American public is not hearing enough from the Bush Administration about the good management the UN brings to "peace-building" in post-conflict states.
Third, the aid community has yet to rise to the challenge in Liberia. An outstanding President and an impressive Cabinet create an unusual opportunity to jump-start the development process. But the transition from major humanitarian relief programs to development work risks leaving some Liberians without health services, and the a small but capable government is coping with a mounting burden of multiple donors with multiple ideas and projects. Beyond UNMIL, there are 13 UN agencies, 18 multilateral and bilateral donors, two African regional organizations, and 320 international NGOs operating here. As they make the transition from post-conflict humanitarian programs to "development," will they work with and for government and strengthen nascent institutions - or inadvertently undermine their development? It's a legitimate worry - and one that this month's donor meeting (pdf) in Washington needs to begin to address.
You've probably heard of UNDP, the U.N. Development Programme, because it publishes the Human Development Report each year, which includes the influential Human Development Index. You must recognize the name UNICEF (the U.N. Children's Fund), and you might know about the FAO (Food and Agriculture Organization) and WHO (the World Health Organization). But can you tell me what ILO, UNAIDS, UNESCO, UNFPA, UNHCR, UNIDO, UNODC, and UNV are? All these acronyms represent U.N. agencies that deliver aid in Vietnam, each with its own budget, staff, and offices. (Though when I lived there, some shared buildings.) The same agencies operate in parallel in many other countries too, often with overlapping mandates and independent projects.
The Associated Press quoted UNDP Administrator Kemal Dervis on this inefficiency last week:
"In the business of public policy and foreign aid, excessive competition is actually very inefficient by encouraging the proliferation of small projects ... and actually hurts the effectiveness of these resources," Dervis said, citing a recent analysis by the Center for Global Development, an independent think tank.
Ten years ago, to deal with the problems created by having so many U.N. aid agencies, Secretary General Kofi Annan created a U.N. agency. The U.N. Development Group (UNDG) has no less than 28 member bodies, whose activities it is supposed to coordinate. As head of UNDP, Dervis chairs it. (Before assuming both posts 18 months ago, Dervis was a fellow at CGD, and before that, finance minister of Turkey.)
The UNDG evidently disappointed--unsurprising since it apparently had no control over budgets. But reform is in the air at the United Nations today, and Dervis just announced an interesting pilot initiative to pool funding for local U.N. organizations, starting with six of the twelve in Vietnam. Also slated for mergers are Albania, Cape Verde, Mozambique, Pakistan, Rwanda, Tanzania, and Uruguay. Time will tell whether the reforms will live merely on paper or will become real in the sense of strengthening incentives for U.N. offices to work together, combine projects, and minimize their impositions on overworked officials in recipient governments.
In justifying the consolidation program, Dervis appeared to refer to the CGD working paper, Competitive Proliferation of Aid Projects. There, I build a theoretical model that generates some intuitive prescriptions. The focus is on the adminstrative burden that aid projects put on strapped recipient governments--the meetings they must attend, the reports they must file, the "missions" to the "field" of visiting aid officials that they must host. The burden of this oversight activity is assumed to be proportionally larger for small projects. But it comes with a benefit too: closely watched projects run better, with the potential gains being largest where national governance is poorest. The model suggests that aid projects ought to be bigger where national governance is better (out of trust), where recipient resources such as tax revenue are tight (to avoid overloading the government), and where total aid is high (for the same reason).
Taking inspiration from the work of Stephen Knack and Aminur Rahman, the paper also shows that if donors are "selfish," caring more about their own projects than other donors' projects, they have an incentive to fund smaller, more numerous aid activities in order to attract the recipient's resources, whether matching funds or officials' time, to donor's own projects and away from other donors. Since aid agencies do not pay for these resources--economists would say a market is missing--they can ignore the costs the diversion imposes on other donors. The result is competitive proliferation, an arms race in which each donor divides its aid pie more finely in a fight for the recipient government's attention. The smallest donors, like many of those U.N. agencies, can come out ahead in the game, but overall development goes down.
Since this is a model, I quivered slightly at Dervis's apparent certainty that "excessive competition is actually very inefficient" in the real world. But good models systematize common sense. And it is a real cause for concern that Mozambique hosts as many aid projects as China, some 2,000 by my count. The worry that "donor darlings" are being killed with kindness is voiced in several CGD products, including the Commitment to Development Index aid component, which penalizes project proliferation; a paper by Sheila Herrling and Steven Radelet on the Millennium Challenge Account; and Nancy Birdsall's Seven Deadly Sins, which puts proliferation under the heading of "Envy." An important point in Birdsall's paper is that as easy as it is to poke fun at the inefficiencies of the U.N. system, the many bilateral donors--national government agencies--contribute to proliferation through their mere existence. One solution is for bilaterals to spend less through their own bureacracies and more through multilaterals such as the U.N., World Bank, and the Global Fund to fight AIDS, Tuberculosis and Malaria. And maybe small donor agencies, from Italy to Finland, should just close their doors.
Congratulations to CGD non-resident fellow Dean Karlan of Yale who is one of 13 young economists cited for their work on “real world problems” in a recent New York Times article, “The Future of Economics Isn’t So Dismal,” by David Leonhardt. Dean’s specialty is rigorous evaluation of microfinance programs in developing countries. I’m proud and happy to say that several of his path-breaking papers have just been released in the CGD working paper series. This is exactly the kind of work the world needs more, as highlighted in Ruth Levine’s recent CGD report with colleagues, When Will We Ever Learn?.
Unfortunately, academic economists typically lack the incentives (and too often the inclination) to provide policy context for their findings. So even when they’ve got good new nuggets of evidence-based wisdom they seldom become effective advocates. I guess that’s why we have think tanks...At CGD we are prepared to move on to principled advocacy when our findings warrant it--watch our new 14-minute movie for four recent examples, with testimonials from outside CGD. Or, if you prefer to read, check our work on making markets for vaccines, ranking rich countries on their development commitment, reducing poor-world debt, rescuing the World Bank, and the risks of overstating the real costs to development of the brain drain, some of which are also featured in the movie.
Leonhard has it right: economics need not be the dismal science after all.
Thanks to our friend Nick Seaver for posting on the Huffington Post one of the figures we created after playing around with some of the available stats on global income inequality. The idea was to get a very rough sense of what global income distribution looks like: Is it a bell curve? Where might an average American fit?
Ideally, we would have wanted income information on every person on the planet and then just line them up and see what it looks like. Of course, no such figures exist. The best we have is average income, plus some distribution data for large countries. So we took every country that was at least 1% of global population and disaggregated average incomes by decile (Iran and Japan by quintile), then added in every other country with their total population at the national average. This is far from perfect, we realize. But this may be less of a problem than it first appears because of the dramatic scale difference among countries: Given the relative enormity of China and India and the other big countries, counting all the middle class or millionaires in Togo (or, for that matter, in the UK) has almost no visual effect. Given those caveats, the picture here is one way to see what the figures look like. You can also view the graph (pdf) with the axes flipped in a normal histogram, plus a fuller explanation on what we did with the data. For a more thorough discussion of some of these issues, we recommend the work of economist Branko Milanovic (see, e.g., his figure on p 17 of this paper [pdf]) and the 2005 WIDER Lecture by CGD president Nancy Birdsall, The World is not Flat: Inequality and Injustice in our Global Economy (.pdf).
"giv[ing] more of a voice to less wealthy and poor countries;…find[ing] new ways to mobilize private sector financing; [and] addressing global challenges like epidemics, sustainable energy and post-conflict reconstruction."
These come close to three of the "five crucial tasks" we urged upon the then new World Bank president in our 2005 report "The Hardest Job in the World".
There are two other important tasks that the Times left out. One involves the Bank's work in the world's poorest countries: Mr. Wolfowitz should insist that Bank move away from one-size-fits all prescriptions and instead set country-specific priorities. (Maybe girls' education--not corruption--is Mali's most important challenge.) The other is for Mr. Wolfowitz to push all donors to commission rigorous independent impact evaluation of the development interventions they finance. The Bank's own Independent Evaluation Group has been remarkably forthright of late in its evaluations of the impact of the Bank's own efforts (see for example, the recent report on disappointing results in cutting corruption). But what is really needed is global leadership of the entire development community to ensure that the billions of dollars spent--not just by the Bank, but by bilateral donors and by the developing countries themselves--to improve people's lives actually work. Can it be that in the 21st Century we still can't get organized to learn systematically from our successes and failures? For more on why donors neglect impact evaluation and avoid independent studies--and what can be done about it--see CGD's 2006 report, "When Will We Ever Learn?" Improving Lives Through Impact Evauation.
Back in July of last year, I blogged on five steps for a practical agenda on how to move beyond vision and “get on with it.” Since then, the President’s Global Development Policy and the first Quadrennial Diplomacy and Development Review were released. Some progress has been made on a number of fronts, but overall, much more needs to be done to get beyond talk to action.
Here are the five steps and my assessment of progress:
Give the USAID administrator policy authority to inform and influence development issues within the State Department. Ensure he has visibility to shore up his political standing. He should be the spokesperson on Haiti, Feed the Future and on development programs in Pakistan, Afghanistan, Yemen and other strategically critical states.
B+. The QDDR endorses USAID’s new Policy, Planning, and Learning Bureau and the other components of USAID Forward, and gives the agency control of the Feed the Future initiative. It is not at all clear on USAID’s role in strategically critical states.
Give the USAID administrator budget authority, because without control over resources, policy input will have little real influence.
C+. USAID has established a budget office, but it is unclear that it will have any real authority. Budgets must still be approved by the F Bureau of the State Department proper.
Create an interagency development policy group chaired by the Secretary of State with the USAID administrator as the vice chair and with a seat on the National Security Council. The USAID administrator should sit and have a voice at the table where trade, climate, and immigration decisions are discussed. Same for currency policy with China, intellectual property tensions with India, and a host of other issues that impact development where it is crucial that decisions take into account the long-term U.S. interest in supporting the growth of viable and responsible states in the developing world.
Incomplete (and if no progress by July 2011, F). The President’s Policy Directive proposes an interagency committee and endorses the inclusion of the USAID administrator in NSC meetings, but the “as appropriate” seems like one caveat too many. On development issues, some one person has to be responsible and accountable for managing the Whole of Government enterprise.
By the end of 2011: Make USAID an independent agency, like the Overseas Private Investment Corporation and the MCC, with a board chaired by the Secretary of State to ensure coherence with overall foreign policy objectives. Make the USAID administrator the chair of the inter-agency development policy group.
Incomplete. I’m willing to wait and see, but this seems unlikely to happen.
By the end of the president’s current term: Ask Congress to create a cabinet-level agency for development, with a cabinet secretary of equal standing with his or her counterparts in the foreign policy troika of defense, diplomacy, and development. Move (yes, really) the responsibility for the multilateral development banks (but not the IMF) out of Treasury to this cabinet agency, as we recommended six years ago in our report “On the Brink: Weak States and U.S. National Security.”
F. It is clear that this is not where the administration is going despite the fact that it would be the clearest signal that development is on a par with diplomacy and defense.
President Obama is two years into his term. There has been some progress, especially on the rebuilding and reforms in place at USAID. But the next two years will be difficult, and the opportunity to work with Congress on a new assistance framework (to reflect the president’s UN speech on development) has pretty much been lost.
Longtime readers of this blog (every time I use a phrase like that I think to myself that there must be at least one of you...) will probably not learn much from the column, except about Tim's impressive ability to compress so much down to a few words, and about his dubious judgment, in giving me the last word. But the headline might catch your attention: "Perhaps microfinance isn’t such a big deal after all."
As with the Boston Globe story in September ("Small change: Billions of dollars and a Nobel Prize later, it looks like ‘microlending’ doesn’t actually do much to fight poverty"), ACCION International was swiftest to respond. (Here is ACCION's letter in the Globe.) Beth Rhyne, published a piece on the blog of ACCION's Center for Financial Inclusion, which she heads, entitled "Not a big deal? Microfinance is about inclusion." ACCION's new President and CEO Michael Schlein posted a comment on Tim's site:
Tim Harford’s article “Perhaps Microfinance isn’t such a big deal after all” is right – and wrong.
He’s right that microfinance has been oversold and is often described as the panacea that will bring an end to global poverty. He’s right to see the backlash coming. But he’s wrong to say it isn’t a big deal. It is.
To which Tim Tweeted:
Note to all microfinance enthusiasts: I DO NOT WRITE MY OWN HEADLINES
Probably Michael Schlein, Beth Rhyne, and their communications people know that. They didn't write for Tim's sake, but for all the readers they fear will get the wrong impression.
I had cause to reflect on the newspaper-writers-don't-write-their-own-headlines problem when the New York Times published Stephanie Strom's story on my blog post about Kiva. I worried that the title, "Confusion on Where Money Lent via Kiva Goes," seemed more negative than my own take on Kiva, that it made it sound like Kiva users' money was ending up in a secret bank account in the Cayman Islands.
So to the point foreshadowed in my own headline: In the blog age, it is archaic, even foolish, to deprive journalists in what Stephanie calls the "dino media" of a say in the titles to their own pieces. Most bloggers write their own headlines, so increasingly readers will assume dino media writers exercise the same control, and so attribute headlines to authors. Since those are the most important lines in a piece, the status quo can lead to serious misunderstandings about not only the message of a piece, but the authorship of that message. You think Tim wrote that, but he didn't. Illusions of P2P, anyone? Forget global warming and global poverty. This is my cause of the day: give columnists vetoes over the headlines that crown their prose.
As to the substance at hand, I mostly agree with the ACCION's defense of microfinance---which is if anything supported by Tim's column in his quote of me. (Disclosure: my boss Nancy Birdsall has joined the ACCION board.) Beth says it best:
Microfinance’s purpose is not to cure the world’s poverty ailments. Its purpose is to include otherwise ignored people into the financial sector. You don’t need an impact evaluation to tell you what a valuable role financial services play in your own life – and it is the same for the clients of microfinance. Low income and informal individuals who would otherwise be at the doorstep of a neighborhood loan shark are instead able to find loans, savings programs, and, in some cases, other financial services to help them manage cash flow, expand their businesses, cope with emergencies, or save for the future.
Michael Schlein's take I find less persuasive because it feels like selecting success stories while remaining silent on the inevitable failures, the poor people made worse off by unwise or ill-fated borrowing:
We know microfinance works because we’ve seen it in action, first-hand. We track individuals and families over a period of years, recording and bearing witness to the improved quality of their lives. We see it empower women, giving them access to the material, human and social resources necessary to make strategic choices in their lives; to establish or strengthen financial independence; to transform power relationships; to improve the stability and prospects of their family by directing more income toward education; and, particularly, to engender dignity and pride.
It looks to me like ACCION, more than other microfinance groups, is now primed for the fight over perceptions and expectations opened up by the randomized trials. Historically, ACCION was the strongest champion of the institutional conception of success in microfinance, the view that the goal should be the creation of dynamic, self-sufficient financial institutions. That view never sold as well as the image of microfinance as a proven tool to reduce poverty, as empowerer of women. After cashing in on the Compartamos IPO, which gave it both cash and a public relations problem, ACCION attempted to outdo other groups at their own game with such initiatives as lendtoendpoverty.org. Perhaps the new studies will send ACCION back to its roots, and bring along more of the microfinance movement this time.
With the overdue resignation of Paul Wolfowitz, a very difficult period has ended at the World Bank. What matters now is the selection of the next bank president. The high cost of rubber-stamping the choice of a single government should now be evident to all concerned.
I wish the Bush administration would announce its support for an open, competitive and merit-based process. If not, I hope that the Europeans and other member governments take responsibility for scrutinizing and if necessary vetoing any candidate who lacks the necessary management experience, understanding of development issues, and political smarts to lead the bank effectively. The issue should not be nationality; there are eminently qualified Americans and non-Americans.
This whole mess illustrates the need for change in how the nations of the world oversee the bank. To succeed in leading any change the next World Bank president will sorely need the legitimacy and broad support that only a widely accepted, merit-based selection process can provide.
In successive speeches yesterday at Georgetown University and today at the State Department, Secretary of State Condoleezza Rice has outlined a bold vision of “transformational diplomacy,” the goal of which she defines as
"to work with our many partners around the world, to build and sustain democratic, well-governed states that will respond to the needs of their people and conduct themselves responsibly in the international system.”
What’s motivating this policy shift? Transformational diplomacy reflects above all the administration’s conviction – hardened by 9/11 – that the main threats to U.S. national security and foreign policy today come from “weak and failing states” that are unable to exercise “responsible sovereignty.” (CGD recently released a working paper taking a closer look at this alleged connection see also: On the Brink: Weak States and US National Security). To help bolster weak and failing states, the administration needs a new diplomatic and foreign assistance culture, that ensures that U.S. diplomats not only “report” on the world but “seek to change the world as it is” for the better – as doers and implementers.
Transformational diplomacy has broad implications for U.S. development policy. At today’s event in the Ben Franklin room at State, Rice announced the long-awaited plans for reforming U.S. foreign aid. Contrary to previous rumors, the administration will not attempt to integrate USAID fully into the State Department. Instead, it will dual-hat the Administrator of USAID as the nation’s first Director of Foreign Assistance. Rice named Randall Tobias, who currently coordinates the President’s Emergency Plan for Aid Relief, to that position today. In that capacity, he’ll be responsible for coming up with a coherent foreign assistance strategy, overseeing all State and USAID foreign aid windows. (He will “coordinate” with MCC and PEPFAR, which will remain separate entities).
There’s lots to be said in favor of the reform effort announced today. It’s motivated by a laudable goal: to bring greater coherence and strategy to the fragmented foreign assistance apparatus – which now entails 19 separate aid windows that go well beyond development assistance to include military training, counter-narcotics assistance, and economic support to allies – and, more broadly, to ensure that the activities of USAID contribute to broader U.S. foreign policy and national security goals. The proposal may get rid of multiple lines of authority that complicate accountability and coherent policy, ensure that State/USAID are better stewards of taxpayer money.
At the same time, Rice painted in pretty broad strokes today, and a lot of difficult questions remain. We hope Steve Krasner, who has been leading Rice’s year-long review of foreign aid reform as Policy Planning Director at State, will answer at a CGD-sponsored event tomorrow. We’ll be looking for the answers to the following questions:*How much power will the Coordinator actually have? To be effective, Tobias will need significant authority, as well as the backing of Rice and the President himself. Will Tobias have authority to actually move monies around from different accounts? In previous weeks, the administration was rumored to be consolidating the 19-odd aid baskets into 5-6 separate windows that would be used for particular categories of countries (e.g., fragile or strategic states). Is this scheme still on the cards, and is it workable?*What implications does the reform have for poverty alleviation – and indeed the whole development enterprise? Rice’s speech did not even mention the goal of alleviating poverty. Rather, the focus was on whether various foreign assistance spigots can help improve prospects for democracy, governance and institutions in weak and failing states. For this administration, “aid effectiveness” means advancing the US freedom agenda and good governance worldwide, rather than “development,” per se. Is that a correct diagnosis?*How receptive is Congress to these proposals – and does it matter? Rice said that the new Director would be operating on the basis of “existing authorities,” but folks on the Hill are less convinced. Based on my conversations with Hill staff yesterday, there is bipartisan concern about the reactions of major constituencies to the politicization of foreign aid -- and about potential loss of Congressional oversight. Rice closed by saying she looks forward to working with Hill on question of “how to respond to development needs of weak and poorly governed states” -- but folks on the Hill are annoyed the administration laid little groundwork for these proposals.*How will the reforms correct the flaws in current U.S. development policy? In a recent CGD paper, CGD president Nancy Birdsall and colleagues outlined four weaknesses in U.S. development policy. The proposed reform helps in a couple of areas, particularly aid fragmentation and in addressing weak and failing states. But it does little to improve the mediocre performance of the US in non-assistance components of development policy, or to ensure a more effective use of multilateral institutions.
Our motto at CGD is “Independent research & practical ideas for global prosperity.” Translating ideas to action requires world-class policy research, effective outreach, and teamwork with colleagues in many global institutions, When everything goes right, my colleagues at CGD produce some real gems that command global recognition.
This just happened to CGD senior fellow David Wheeler, whose work with colleagues at the World Bank and United Nations Development Program has received the first annual prize for excellence awarded by the journal Climate Policy.
Another distinguishing feature of my colleagues at CGD is their passionate support for ground-level development projects in poor countries. In this vein, I’m happy to report that David and his co-authors are donating their prize money (1,000 euros) to Solar Aid, an NGO that promotes rural solar power development in East and Southern Africa.
Some readers might remember that Bill Gates Sr., along with Warren Buffett and other wealthy men, spoke out against the killing of the estate tax during the first Bush Adminsitration. He now has a new book out (Showing Up for Life). At a book launch this week, he said something like: People who get rich, like his son, should remember they are not just smart and hard-working. They are lucky -- for example to be born in the USA, to be the beneficiaries of society’s prior investments in infrastructure, other educated people with whom to collaborate, good government, and so on. In an interdependent world, the lucky have an obligation to help the unlucky (after all, we’re all in this boat together). If you get the book, read the foreword -- by Bill Gates Jr., and take a look at the story of how a hole in the fence led a boy (Pablo Neruda not the Gateses) from poverty to poetry.
Our colleague Arvind Subramanian argues in a Peterson Institute blog post that the biggest achievement of the London Summit may have been just the agreement that the G-20 would meet again. Here’s why I find the Summit cup half-full not as he suggests half-empty.
On the $1 trillion for developing countries being “only” financing and not spending: Let’s count in the next 24 months how many countries exploit their new SDR allocation and their additional access to IMF and multilateral bank lending: Candidates include Uruguay, Argentina, Peru, Turkey, Morocco, Kenya, Ghana, Tanzania and more. True: This will not constitute stimulus at the global level, but it is likely to help countries manage some countercyclical policy, sustaining lower interest rates than otherwise, avoiding fiscal cutbacks in school meals, pre-natal programs, and maybe even increasing spending on emergency work programs and other forms of social insurance.
And the $250 billion in trade financing for developing countries is hefty and literally stimulating. By keeping trade flows flowing, it will help avoid the fear that fuels protectionism.
On the Chinese and governance reform at the IMF: My guess is the Chinese, in return for their $40 billion loan to the IMF, got a promise of a substantial increase in their voting power at the IMF, and/or a promise that the next Managing Director at the Fund will not be a European. (I am still not sure what country or countries – the U.S. or the Europeans? – is resisting the words “without regard to nationality”. Anyway if the Europeans promised on the IMF, the U.S. probably did on the World Bank.) China’s $40 billion should be thought of as a down payment – and a signal they are ready to begin assuming their seat at the table of shared stewardship of the global economy. By the way, the SDR issuance may also have been a nod to their (China’s) Central Bank Governor’s call for more attention to a new global reserve currency – or perhaps it was a nod to UN Secretary General Ban Ki-moon’s recommendations based on the Stiglitz report.
And on stigma and the Flexible Credit Line at the IMF, I am more optimistic too. I think the Brazilians will request access soon – on a precautionary basis. Yes, it will take longer for Asian economies still resentful of the IMF approach during their late 1990s crisis to come around. But if I am right about Brazil and about the Chinese down payment on more votes and influence at the IMF, the stigma problem may soon seem like yesterday’s worry.
A Washington Post editorial today ( A Fight Over Corruption ) says that the new report by former Federal Reserve chairman Paul Volcker on the effectiveness of the World Bank's anti-corruption department, (the Institutional Integrity Department or INT)) "reserved its toughest language for the bank bureaucracy itself." The editorial then quotes from the report:
"For much of the Bank's history, the impact of corruption on development generally, and on the Bank's lending operations in particular, was not faced squarely . . . .There was then, and remains now, resistance among important parts of the Bank staff and some of its leadership to the work of INT."
Equating resistance to INT with alleged reluctance to combat corruption is an odd conflation of the present and the long-ago past, before Jim Wolfensohn raised the flag of anti-corruption in the early 1990s.
The Financial Times had an entirely different and better-informed take on the situation in its editorial (Zoellick's Challenge (registration required)) on Thursday, September 13:
"What is clear is that the anti-corruption unit had a dysfunctional relationship with the rest of the Bank". .. and
"Less sensible were Mr. Volcker's comments to the Financial Times, in which he seemed to endorse the line that World Bank staff were never serious about dealing with corruption."
So are World Bank bureaucrats serious about dealing with corruption, or do they see it "as a sideshow in the struggle to reduce poverty" to use Washington Post language? My guess is they are serious and more so today than ever. But they know all to well there is a tradeoff between a no-tolerance approach to anti-corruption, and "doing development"—a tradeoff that they feared Ms. Folsom, the controversial head of the department appointed there by Mr. Wolfowitz, refused to admit. This is NOT the kind of tradeoff that the Bush Administration saw for Iraq reconstruction, when it issued sole source contracts to Halliburton to get on with the job. This is the kind of tradeoff that Bank staff see when they are discussing a health project in India that will save children's lives—but fear there are untraceable and unverifiable patronage appointments that might infect the new effort. Or as the tradeoff they see when infrastructure companies become so afraid of ad hoc prosecution that they refuse to bid on much needed projects in Africa, as my colleague Vij Ramachandran has noted (Global Development: Views from the Center: Poverty Matters Most: A Comment on the Volcker Report).
Moreover the real issue is not the less than 1 percent spent in most borrowing countries on World Bank- financed investments. It's the other 99 percent that countries spend of their own taxpayers' resources—and in the poorer countries of other creditors' and donors' resources. As Dennis de Tray has said: "Ring fencing a Bank project is like putting a burglar alarm in one among thousands of houses. The bad guys will just go elsewhere but they will still be bad.." In other words, ring-fencing Bank projects from corruption is not an anti-corruption strategy.
Bob Zoellick has a chance to lead on this issue. He has been wise to try to satisfy the press that is hungry for a story, note that "stealing from the poor is not acceptable", endorse the reasonable recommendations of the Volcker report, and move on. Bank staff are likely to understand that approach. But now the real work begins: providing leadership inside the Bank on the bottom-line issue of dealing with the tradeoff—and protecting Bank staff from the useless and misguided accusations that they are not willing to face the corruption problem.
When that task is accomplished, perhaps the next President of the U.S. will want Zoellick's help in dealing with corruption in Pentagon contracts for Iraq.