Archive for the ‘Incentives’ Category

Monetising nature

“Finally, conversion of complex landscapes into numerical and monetised metrics instrumentalises peoples and non-human natures so that these conform to a homogenising system in which money is the mediator of all value. This can displace local eco-cultural knowledge, practices and values which may be more benign for biodiversity, thereby reducing options for transferring maximum socio-ecological diversity to our descendants.”

That is Sian Sullivan on writing on Financialisation, Biodiversity Conservation and Equity: Some Currents and Concerns (emphasis in the original).

It is both an important point and also rather stating the obvious. (Important, because in our enthusiasm we are apt to forget the obvious rather too often.) However, I think such analyses sometimes miss the point in failing to fully consider the counterfactual.

We cannot put anywhere as much of nature as we would like into protected areas, and even where we can someone needs to pay for their running costs. So how can we incentivise management of other parts of the world to promote conservation and environmental issues? More to the point how can we do so efficiently and cost-effectively?

Monetisation is often not simple – just ask any REDD project proponent – but once completed you are tapped into the only globally understood system for valuation of products and services and for trade of said values.

The environmental movement is not sufficiently resourced to undertake entirely bespoke conservation in every place of interest. Monetisation may be a crude tool, but it is brutally efficient, in both positive and negative senses. It may also be the only tool available to deliver wider scale conservation.

Hat tip: Just Conservation

When the threat of war may be good for us

So Jeffrey Sachs doesn’t entirely agree with Acemoglu and Robinson in their diagnosis as to Why Nations Fail.

“The authors incorrectly assume that authoritarian elites are necessarily hostile to economic progress. In fact, dictators have sometimes acted as agents of deep economic reforms, often because international threats forced their hands.”

Sachs goes on to give a few examples, none of which post-date the fall of the Berlin Wall and Fukuyama’s End of History, unless you count the Chinese miracle, but my understanding is that that has its roots earlier. With the exception of a couple of relatively small and particularly unstable bits of West and Central Africa, I doubt that many dictators today are that fearful that economic stagnation could lead to their defenestration at the hands of their neighbours’ armed forces. Which leads me to wonder, could the collective enforcement of world peace by the UN and various regional groupings (EU, ASEAN, AU etc) have a negative impact on economic development? (It also means that both Sachs and Acemoglu and Robinson could be right.) Put alternatively, has removing the threat of invasion removed one of those critical feedback loops that Owen Barder talks about when he describes development as an outcome of a complex system? (An argument I highly commend, check out the podcast too.)

What happened to the power in empowerment?

I’ve just been listening to the latest but one Development Drums podcast, in which Andrea Cornwall and Prue Clarke discuss with Owen Barder where now for the gender movement in development. At one point Andrea Cornwall queries what happened to the power empowerment, accurately critiquing much of what goes by the name of empowerment in development as being almost entirely emasculated of any real shifts of actual power.

Professor Cornwall suggests that the bureaucratic nature of Big Aid is the culprit, that bureaucracies have trouble grappling with such issues. It is certainly in the nature of big bureaucracies to hoard power, but I would be inclined to point the finger elsewhere. Towards the end of the podcast, the discussion veers closer to my diagnosis without ever quite coming out and saying it. As for me, j’accuse the locus of international aid that puts it firmly within the diplomatic sphere.

Back when aid began as a quasi expiation of post-colonial guilt, I imagine it made sense to empower the newly independent governing states just launched. Then in the 1970s and 80s when aid focused a lot on capital inputs, new roads, tractors and power stations to go with those shiny new industrial policies the state to state model would have still been the most appropriate. But in the 21st century, when much western aid focuses instead on softer concerns like governance and participation, and service delivery in sectors such as health and education which aim to boost human capacity, such a model seems utterly out-dated.

Alas, most bilateral aid agencies are either part of the donor country’s foreign ministry or clearly subsidiary to said ministry, whilst the multi-lateral agencies are all ultimately controlled by diplomats. Indeed, donor country governments often justify aid budgets to their electorates in terms of self-interest and improving relations with international partners, i.e. that some quid pro quo may at some point be asked for and given. The US appears only to be one of the most brazen in its demand that every donation be prominently stamped as a gift from the American people, with humanitarian philanthropy apparently a poor second in political motivations for international giving amongst most donor governments. When the act of giving – those high profile pledges of funds – gains far more attention than any actual outcomes of giving, is it any wonder that aid agencies struggle to deliver meaningful development?

Coming back to the challenge of empowerment, the problem, as I see it, is that as soon as you define aid as a government to government transfer, your capacity to achieve any significant transfers of power are almost negligible. Turkeys do not vote for Christmas, and the prestige of a presidential jet, alas, nearly always appears to be higher priority than the provision of clean drinking water to a developing country’s people.

I suppose there is an argument which says that all the official government aid is a bribe to provide cover to the funding given directly to civil society groups which otherwise are liable to get painted as nefarious agents of foreign powers or other euphemisms of the dictatorati. Working as I do in community conservation, I try to remember – as I lament all the money wasted through largely ineffectual official bilateral and multilateral projects in this sector – that without such colossal greasing of the wheels it is extremely unlikely our small NGO would have ever even got off the ground. But, if that is the case, it would be nice to see rather more honesty about the processes and what they are expected to achieve. Channel money for empowerment and governance initiatives primarily through NGOs and other civil society groups, accept that official state aid will be primarily be spent on salaries and physical assets, and seek to work with that flow rather than against it. Whatever you do, please do not ever pretend that sending some senior officials on the next foreign junket (aka international workshop on governance best practice) is even remotely empowering for anyone who actually needs empowering.

You never know, we might just succeed in empowering the empowerment movement …

Does demanding contributions from local beneficiaries work?

Here’s a question for all you development research types (especially the randomistas).

A lot of community-level capital development projects these days seem to involve a requirement that the beneficiary community make a contribution towards the development. Sometimes this is in the form of free labour, other times it is financial. So, for example, a new bore hole and pump may cost around $20,000; the donor will pay the bulk but ask that the community stump up $1,000*; communities that cannot or will not stump up do not get the new well. The theory, as I understand it, is that if the community have had to stump up then they will value the development more, be more likely to take care of it etc, and the development project will be more successful as a result.  Conversely also, communities who do not stump up are assumed to not sufficiently want a new well, and thus the money is better spent elsewhere.

The second part of that theory has the obvious flaw that some communities may simply be unable to afford $1,000, but still it is a very seductive idea for directing aid to those areas which will benefit from it and value it most, and also increasing the likelihood of sustainability. If I were in charge of a programme offering such capital development grants I think I’d incorporate the requirement in my programme’s design.

But, does it really work? Or does the requirement for a local contribution simply slow down disbursement, miss out some needy communities altogether, and save the donor a negligible amount of money (unless so few communities can afford the contribution they don’t even spend the entire programme’s allocation)?

In particular I wonder whether if the community had to pay $1,000 for the new well then they might only value it at $1,000. Such a valuation might not even be completely irrational if the community sees other neighbouring communities also getting the new well for the same price (i.e. the wider programme effectively establishes the local price), and, following previous practice by the same and other donors  in the area, the community may consider it a reasonable chance that if in 5-10 years time the pump is broken, some donor will offer to repair it for another token contribution of $1,000.

Moreover, assuming this is now a ‘community-owned’ well it is unlikely that it provides value to any one individual of over $1,000, especially when labour is so cheap, and the primary water fetchers (women) have less political influence, and thus individual incentives for maintenance may be dulled. Cohesive, well led communities can of course overcome these challenges, but they are the exception that proves the rule of the tragedy of the commons from which communal investments often suffer. And investing in local community governance is a long, expensive undertaking which does not sit well alongside a quick in-and-out capital development programme.

Has anyone ever done any research on this issue? The relatively long time periods required to judge sustainability might be one challenge, but I could also imagine how it might be possible to measure earlier proxy indicators of likely success within a couple of years of installation. Anecdotal  evidence of success in NGO projects is not without interest in this area, but it might suffer from a question of attribution in relation to this measure versus other forms of support that the NGO provides as part of the integrated package.

Please enlighten me in the comments.

* I’m not a water engineer. These prices may be completely unrealistic. The exact numbers are not important to my basic point.

The Charges against Big Aid

Terence, the Waylaid Dialectic, tears a couple of fair sized strips off Jonathan Starr’s self-righteous polemic about Big Aid. Terence’s points are well made, but I think not the whole story.

For a start, stripping away the pomposity, Starr is surely right when he says Big Aid has an accountability problem. As I and many other bloggers have remarked time and time again, our ‘customers’ are not the same people as those who pay the bills and that leads to massively misaligned incentives. Starr thinks he’s solved this by charging for his Somaliland school’s services, but (as Terence points out) since that only covers a fraction of the true costs – most of which are subsidised by volunteer teachers providing their time for free and him donating a pile of cash – I am not convinced he’s closed that case.

Still, for those of a certain political persuasion, the suggestion that our governments may be throwing millions of dollars at an unaccountable bureaucracy with a poor record of delivering its stated target results will be a like a red flag to a bull. International aid is surely not the only programme funded by Western governments to be susceptible to such a charge, but nonetheless we need to be able to justify aid spending in economically straitened times, and at present I do not think we can do so convincingly for large portions of government aid budgets.

Part of the problem, I think, is what Terence alludes to at the end of his piece when he states:

“Some aid fails because it’s bad. But a lot of aid is actually pretty good. And the reason why it still fails, when it fails, is only sometimes to do with the qualities of the people and organisations delivering it. More often, failure stems from the simple fact that the problems aid is being asked to solve are frequently close to intractable.”

There are two responses to calls for cash to be spent on problems that are “close to intractable” (aka wicked problems): (a) conclude that any investment of resources is highly unlikely to yield any results and thus refrain from any attempt to tackle said problems, or (b) determine that such problems are too important to be just ignored, and that it is fair and reasonable to take a few risks and try a few different approaches to see what might work. (Whatever you do, just don’t equate big problems with the need for big amounts of cash!)

Whilst some donors may decide that approach (a) is what best suits them, we can surely also support the idea that taking option (b) can also be a good idea. The problem, as I see it, is that we are very rarely upfront about the risks of failure. Far too much of the conservation and development industry is extremely reluctant to admit to failure (or even just disappointing results); glossy brochures proclaim an unending procession of success stories.

So by all means we should try to tackle these almost intractable problems, but we should be honest about our expectations of success in advance (sensible risk management), and we should also balance our portfolio with a good number of projects which follow more tried and trusted routes.

ps. Disclaimer: I helped setup and run what must surely be the most ‘perfectest’ of NGOs (according to Terence’s classification), so may not be regarded as entirely neutral in the basis for my above-stated views.

Blame it on the speculators, why don’t you?

Catching up on what’s been on the Guardian’s Development Matters blog, I’m surprised that no-one else has yet chimed in on the dodgy economics on show by Christian Aid’s Alex Cobham when he points the finger at pension funds for helping drive up world food prices. Now I’m not an expert economist, so I will gratefully defer to anyone who can point out that the error in the following.

One of the basic principles of economics is that prices rise when demand exceeds supply, but then these price rises should stimulate further production thus taking the edge off price rises. So before we get to the pension funds, we have to ask ourselves, are there external factors driving up the price of food globally, to which we answer yes: rising populations, increasing prosperity (richer people eat more and eat more protein which takes a significantly larger land area to produce per unit than arable crops) and climate change are all at work, meanwhile yield improvements are tailing off a bit. This is why rich Arabs and others are buying up large tracts of Africa, and equally why the pension funds are investing in agricultural commodities.

The more important question, in my mind, is why has production not responded to these clear price signals? Farmers are better able to respond to incentive price increases than suppliers of other commodities: new mines and oil rigs take a while to come on stream, whereas farmers can easily up production the following year. Global food prices have been high for a few years now – albeit with plenty of volatility – long enough for farmers to respond. That they haven’t done so sufficiently suggests to me that there is something wrong with the operation of global food markets, which there is; they must be the most highly subsidised in the world and are also subject to various price controls and periodic export bans by twitchy governments.

That is not to say farming is not a risky business: it is, and global price volatility is ample evidence of this. However, commodity derivative markets can actually help a poor farmer who is weighing up whether or not to invest in additional seed or fertiliser this year: they allow the farmer to enter into a contract now to deliver at a fixed price later. (Since bad weather can easily wreck the best such laid plans, the farmer would be well-advised to buy some insurance too.) This is one thing often forgotten about financial derivatives: most (I hesitate to say all) were first devised to ameliorate risk for producers and consumers, not for the benefit of speculators.

However, in the developing country where I live and work, the state controlled marketing boards and cooperatives are extremely poorly run. I suspect very few people working in them even have any idea as to what a commodity derivative is, let alone how they could use them to support their farmers. It is a fine idea to provide floor price support to farmers, but these cooperatives do so so inefficiently that one really has to question their raison d’être. Simply closing them down over night without any replacement, as happened in some countries under IMF-led structural adjustment strictures during the 1990s, would probably leave farmers bereft of any support, but allowing them to be replaced gradually by private sector players, who at least have clear commercial incentives to boost production, would seem a sensible option to me, with governments reduced to a buyer of last resort to provide a guaranteed floor price protection that should insulate farmers from the worst kind of exploitation by the ‘evil’ middle men of agricultural commerce.

Although there may be fortunes to be made and lost along the way, speculative bubbles that do not have any foundation in market fundamentals will play themselves out in time. Moreover pension funds are not your average speculator; they tend to invest for the long run. If they thought there was a problem of over-supply in world farming they simply would not invest. Global agricultural markets must be massive; that speculators – whoever they may be – can have an impact speaks to me more of a tightness in supply coupled with artificial narrowing of the market by price controls and export restrictions.

I doubt that full market liberalisation is the optimal solution to agricultural commodity price volatility, and in any case it is clear that politically this is currently out of the question. But a lot could be done to make markets operate more efficiently, and to allow developing country farmers to benefit more from rising demand. Blaming pension funds and other speculators, however, is akin to shooting the messenger. Christian Aid should be capable of better than this kind of base populism.

Bad news brings in the wonga

We’re all familiar with the unfortunate fact of life that bad news tends to be much more newsworthy than good news, e.g. this recent example.

This is doubly true for NGOs, as Karen Rothmeyer points out. (H/T: Tom Murphy) We depend upon bad news to bring in the money. So, although we do like to trumpet our successes, the mantra is always about how much more there is to do.

Got a choice of statistics to use? Just use the one which portrays matters the worst, and a molehill can be turned into a mountain over night. Have I ever done this? Yes, although I don’t think ever as badly as the case of the inflating population statistics for Kibera slum in Nairobi that Rothmeyer reports. Do I feel guilty? A bit. Would I do it again? Probably, since all our competitors are doing it, we need to do so too if we are going to continue to receive funds for our programmes. This is one time where being principled doesn’t get you very far.

It is a tragedy of the commons of information: we’d all be better off if everyone was scrupulously honest, but at the individual or organisational level the incentives are all in favour of scare-mongering. Africa, and other supposedly ‘impoverished’ places are caught in the middle: impoverished of good news stories about them.

The same is true in conservation: the IUCN Red List catalogues all species that are “facing a high risk of global extinction” (description provided by Google), and yet its lower risk categories, Near Threatened and Least Concern, cover species that are not exactly at a high risk of extinction. Still, I regularly hear people bandying around numbers of ‘red-listed’ species in their particular habitat, and I always wonder how many of them are classified NT or LC.

This bias towards bad news, I think, can be particularly problematic when it drives global prioritising and funding decisions: the result is that money ends up chasing problems rather than solutions.

When not to feed a starving child

A while ago I blogged about how I conceived of a certain Logic of Compassion which linked immediate humanitarian assistance, to which – I implied – no-one could object, and the much longer term focused work in which I am involved. But now Linda Polman, in her polemic War Games (The Crisis Caravan in North America), which I’ve just finished reading, is suggesting that it might not always be a good idea to feed a starving child or help that victim-of-war amputee.

The basic argument goes roughly like this: as Amartya Sen pointed out, there has never been a famine in a democracy, and in most famines there is enough food, it’s just in the wrong place and/or too expensive for most local people. Ethiopia has received large amounts of food aid in recent years, but it has also fought one of the most pointless wars of all time with Eritrea over the town of Badme. All aid is, in one way or another, fungible; feeding the starving Ethiopian children absolves the Ethiopian government of its responsibilities in this direction, allowing them to spend more money on arms instead.

Polman goes much further, suggesting that humanitarian aid is frequently manipulated by autocratic regimes and rebel forces. This makes it next to impossible to maintain strict neutrality, and it is extremely naïve to attempt to do so. The poor themselves have also deciphered the perverse incentives at work: amputees will discard their local prosthetic limbs in the hope of getting a better one from the US, then discard that one since now no-one will feed them for free.

Like Matt at Aid Thoughts, I am a little bit wary of Polman’s reliance on anecdotal evidence, but find her basic argument quite compelling. However, that kind of work is at the extreme end of the aid/development spectrum (albeit a pretty huge wedge), and the complete opposite of the long-term capacity building and community support work that I do, so I don’t feel very well positioned to comment.

If my foundation is so poor does that make the Logic of Compassion just a house of cards? Not really, but I think it does highlight a critical concern that is often missing from development and conservation planning: it is all very well to identify a problem, but you need to identify a solution and be confident of being able to achieve it before charging in. Governance standards in the target area will be a key constraint on the viability of any proposed solutions. This is something that could easily be forgotten when calls are made for urgent humanitarian assistance.

Furthermore, in responding to a humanitarian emergency, finding out exactly what help is needed is always going to be a top priority; unfortunately this too easily translates into establish a country/field office first then work out what to do. The overheads are incurred first, and then the programmatic expenditure follows afterwards, which means there had better be some programmatic expenditure to justify all those up-front overheads, and hence the clamour for everyone to get funded.

All of this presents us with a real moral maze. Starving children, if  left unfed, will die. Do we want this on our consciences? Who is to decide which starving children to feed, and which do not deserve feeding? In so far as I can draw any conclusions, it seems to me that these essential moral dilemmas will never go away while there exist unprincipled dictators and warlords prepared to take advantage of this situation, but the humanitarian assistance community could do a helluva lot better in banding together to combat the worst manipulations *, and I pity them in dealing with the hordes of happy-clapping DIY aid enthusiasts who really would be better off just staying at home and donating some money.

* Maybe / hopefully things have improved since the examples that Polman cites. Like I said: I wouldn’t know since I work at the opposite end of the aid spectrum, but stories from Haiti, e.g. this, don’t fill me with much confidence despite there being people who really do want to do better.

Getting Paid to Help Yourself

As I mentioned in an earlier blog post, we regularly pay community representatives small per diems to turn up to meetings about the project. This is not just for meetings for which they may need to leave the comfort of their homes and travel to, but also for meetings actually in the villages where they live. In common with other organisations and projects we were initially extremely reluctant to pay these allowances – one shouldn’t have to pay people to participate in projects which are designed to help them – but fairly early on we concluded our progress would be greatly facilitated if we did, since otherwise we were faced with the first hour of every meeting being taken up by a renewed discussion as to why we were not paying per diems. Also other organisations and projects operating in the same area were paying per diems*, and we rather suffered by comparison (especially if there were multiple events happening at the same time).

Quite apart from the practical considerations, there are various ways to view this situation:

1. Our beneficiaries are busy farmers who would otherwise be working out in their fields, and/or

2. They are skeptical about the as yet unrealised benefits of our project, and are reluctant to give up their time for something that might not work, and/or

3. They are greedy ingrates who know if they don’t cooperate our project will fail, so we’d better pay up.

I think there is some truth in all three views. Certainly if we hadn’t paid up it is debatable whether we would have achieved the things we have. The communities also can, and do point out that our staff (and the staff from our local government partners) are paid per diems for their work, per diems which are 5-10 times what we pay community representatives. From time to time, a particularly pushy individual or group may even press us to increase the rate of payment. Going by local rates of pay in the villages, we are more than adequately compensating people for their time, and such requests do rather come across as naked greed. On the other hand, such payments make up a pretty small fraction of our total outgoings; for the most part we can afford such increases.

The real difficulty will come when we try to wean the communities off such payments, which is the argument most often deployed against making any kind of payments in the first place. The good thing is that at least some of the community representatives we work with recognise and are already looking forward to the time when they are making enough money for them to cover their own allowances.

Per diem culture is deeply engrained here and, despite the regular laments, is unlikely to go away any time soon. In many ways it is only fair that community members should get in on the act, especially when we bring them our project (rather than the other way round). It doesn’t automatically fatally undermine project sustainability; communities can recognise when the good times have ceased, and still continue with something they think is worthwhile, but it can make it rather difficult to evaluate the motivations of project beneficiaries during a project’s lifetime. It also torpedoes any romantic notions the wet-behind-the-ears development worker may have that the beneficiaries they so want to help, actually want to be helped badly enough that they’ll do so without needing to be paid for it.

However, it is not necessarily at odds with recent development thinking. Cash incentives (known as Conditional Cash Transfers) such as those developed by Brazil for sensible decision making by households (e.g. to send your children to school, or getting them immunized) are proving quite effective (if not quite the panacea that some think) and are rapidly gaining in popularity. Thus whilst left-leaning development theorists decry any development projects that have not been requested, and preferably designed, by the intended beneficiaries, pragmatists are getting results by combining their paternalist insights with hard cash incentives. Maybe Western government should consider paying their overweight citizens to go to the gym?

* Many organisations and projects deny that they pay any kind of allowances, but round here they all do it, under one guise (e.g. ‘refreshments’) or another.

What’s wrong with ICDPs? (Part One)

In my introduction to this blog I criticise Integrated Conservation & Development Projects (ICDPs) without going into much detail, but recently I have been queried on the subject, so here’s the fuller explanation. ICDPs first started appearing about 20 years ago and were a response to the criticism that traditional conservation projects did not take into account the needs and livelihoods of  local people, despite those same people often being central to the problems that the conservation projects sought to address. Poverty was often identified as a root cause of habitat destruction or unsustainable exploitation of natural resources, so conservation practitioners were challenged to try to alleviate this poverty. Unfortunately, as the mainstream development sector knows all too well, poverty alleviation is a deuced tricky thing to pull off, and a bunch of conservation biologists whose primary concern was the critically endangered <insert flagship species> were not likely to succeed where others had failed.

That, of course, is not a reason to abandon hope. If poverty really is the root cause of a conservation problem, and there is enough money behind solving the conservation problem, then it ought to be possible to make at least some serious inroads into local poverty concerns. The bigger error was in designing projects in which the only real integration between the conservation and development work was in the project title. (And presumably some overlap in intervention sites and resource commitments.) So, to take an example, the project might urge the community to protect a local forest, and offer a ‘bribe’ to gain the community’s support in the form of support for alternative income generating activities (which didn’t need forest land or resources) and/or new village infrastructure such as a new school. Now I don’t know about you, but if I was a poor farmer who was given an extra means of earning income, and/or a better school for my kids, I might be grateful, but if that small patch of forest was still the cheapest, easiest and closest source of firewood, then I would still go there to collect my wood fuel. In order to keep the project staff happy I might make some marginal attempt to utilise other sources and/or refrain from blatantly marching out of the forest with a pile of firewood when project staff were around, but unless you directly incentivise me to get my firewood elsewhere I am unlikely to change my practices*. And if you incentivise me negatively I am unlikely to have such a rosy view of your project any more, whilst both positive and negative incentives may well not be sustained beyond the end of the project, assuming they are dependent on external funding.

The fundamental error was committed at project design stage when the conservation and development elements were decoupled. For poverty alleviation to make a meaningful contribution to conservation, it has to be directly in the interests of local people to follow the conservation path. Hence why I have much more faith in the various flavours of Payment for Ecosystem Services strategies (watershed, REDD and biodiversity protection can all be directly rewarded), and community management of hunting concessions (e.g. the much discussed CAMPFIRE project in Zimbabwe). Also in forestry, FSC certification and bee-keeping can be combined with participatory forest management to deliver real benefits to forest conservation, whilst in fisheries, no-catch zones have been shown to increase catches overall by giving target species safe areas in which to reproduce. (Though convincing fishermen of this fact can be rather more difficult.) All of these approaches also contain within them some of the necessary ingredients to address the sustainability problem. But ICDPs as originally developed belong in the dustbin.

* This is the same kind of problem which face anti-corruption drives. Low pay may be a major cause of corruption in the first place, but simply raising peoples’ pay now is unlikely to put them off a lucrative additional earner.

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