59 Reforms Later

Some books just fall into your hands at just the right time, and for me Matt Andrews’s The Limits of Institutional Reform in Development was just such a book. If you’re wondering why international institutions are so damn bad at helping developing countries govern themselves better, it really belongs on your reading list.

But actually, the facts reported are as much of an eye-opener as the argument. The sheer number of internationally-backed institutional reforms your average developing country has gone through startled me. Andrews cites the case of Honduras, which has undertaken fifty-nine separate World Bank backed reforms since 1988. Fifty-nine!

They cover just about everything. Banking, trade, privatization, civil service reform, public financial management, civil service payments, procurement, competition, external auditing, procurement monitoring, results-based management, anti-corruption, participatory budgeting, merit-based hiring and performance based compensation. Several of these, like civil service reforms, are “hardy perennials” that seem to crop up again decade after decade.

The bloat is multidimensional. And notice: that’s just the reforms backed by the World Bank, before we even start talking about the agendas pushed by IMF, IADB, WTO, USAID,  DFID, etc. etc.

It goes without saying that, 59 reforms later, Honduras is just as badly governed as before.

In Andrews’s telling, this volume of partner-driven reform activity is by no means unique to Honduras. The Bank requires all sorts of developing countries to jump through various reform hoops before it’ll approve a loan, so all kinds of countries makes a show of approving the desk-based portion of reforms as a signalling mechanism, with no real commitment or intention to really follow through.

That part sounds about right, though it does rather beg the question of why the Bank keeps falling for it again and again. Then again, bank staffers are compensated for the number of reforms “satisfactorily adopted”, not by the number that actually work, so maybe it’s not that big a mystery.

But to me the bigger question is normative. Readers know I don’t usually have much truck with handwringing about neoliberal imposition. But that probably betrays my biases as a guy from an upper-middle-income country with lots of oil that’s seldom had to jump through hoops to qualify for a desperately needed loan. But c’mon, Honduras is averaging well over two semi-imposed, voluntary-in-name-only reforms per year!

Can this really be right?

At the very least it looks like a colossal waste of resources. Who can put a cost on the wasted bureaucratic energy spent on approving reforms nobody ever seriously intended to implement?

But at worse, it looks like a hijacking of basic governance processes. At that pace of imposition, what can “democracy” really mean for a country like Honduras? And what chance for Honduras to strike out creatively and find its own ad hoc solutions for its own unique problems when all its institutional energy has to be devoted to dreaming up fake paper reforms designed to do nothing beyond get that next tranche of loan released?

The opportunity cost to outsider driven reform is enormous. Because whatever it is you’re doing when you’re chasing that next loan tranche, what’s clear what you’re not doing: Problem-Driven Iterative Adaptation.

 

Factories are Pro-Poor: A Meditation on Huajian in Ethiopia

A guest post by Frances Pontemayor

Can there be something less glamorous than a factory? Industrialization is gritty, sooty, sweaty – it just doesn’t align with the “tragically beautiful” poverty that development practitioners in Europe and North America dream of fighting with organic farms and $50 laptops. But at what point do implicit (never explicit) aesthetic preferneces start to blinker us from what really works?

Take the Huajian Shoe Company. It’s one of China’s leading shoemakers. I’m sure you’ve never heard of it, but if you’ve ever bought a pair of Naturalizers, Clarks, Guess or Tommy Hilfiger shoes, you’ve probably worn shoes made at a Huajian factory.

In January 2012, Huajian became one of the first Chinese manufacturing companies to launch large-scale operations overseas, opening a big-time shoe factory just outside Addis Abeba, in Ethiopia. The company produces 2,000 pairs of shoes everyday and employs over 1,750 workers at its factory.

With the media attention on the conditions of Chinese factories and all that horrible pollution, the knee-jerk reaction to Chinese factories in Africa is just more fuel to Western NGO’s white-knight complex.

“Race to the bottom!” “End modern day slavery!” said every development mission statement ever. How could we let these Chinese neocolonialists ruin all the hard work they’ve trying to accomplish for the last six decades?

To be clear, helping Ethiopia develop is not a goal of Huajian, anymore than it’s the benevolence of the butcher, the brewer, or the baker that we expect our dinner from. Business is business; development is the byproduct.

Given the rising costs of labor and appreciation of the RMB, the company chose Ethiopia because they needed to shave some costs.  The country has a fairly well developed local scene for leather inputs suppliers, and labor costs are much lower. When it comes down to it, they just wanted to make some shoes that Westerners will want to buy, even cheaper than they could make them in China. Does that offend your sensibilities? Look down; what shoes are you wearing again?

Huajian’s move to Ethiopia comes with a cherry on top: thanks to AGOA, exports from Ethiopia to the US and UK markets come tax-free.

Huajian Shoe Company on its own won’t make Ethiopia into Denmark. Of course. But it will help make it a more dynamic and productive economy.

Ethiopians working at a Huajian factory are vastly more productive than their counterparts in non-export oriented manufacturing companies. That may sound like a recondite fact, but we know that in the long-run average wages track average productivity, and there’s just no way to raise average productivity that doesn’t involve shifting people from low-productivity jobs to high-productivity jobs.

In the case of Huajian, the company has even gone above and beyond in sending a number of workers to China for training, giving these workers even more specialized skills.

But even in the short term, there are definite benefits: Huajian workers become integrated into the formal economy. They get dorm-style housing and food provided by the company. The management model has been described as “military-style” and yes, hours are long and the work is boring. Still, it’s easy to caricature management’s approach, and that’s not necessarily fair either: in China, Huajian’s boss made a point of giving out his cell phone to all 30,000 company workers so they could reach him directly if that was necessary.

More importantly, they get paid regularly, predictably, which is already a huge improvement on the uncertain, unpredictable earnings of informal sector workers.

Formal workers spend have cash to spend on their children’s tuition fees or books, healthcare, things for their house (possibly a cook stove that everyone keeps talking about), or at a restaurant to celebrate. And those shopkeepers and restaurant owners will then go out and spend their money. Money, even if in small increments, will flow throughout the economy, generating the kind of multiplier effects on community well being that so many pro-poor development projects talk about and so few actually achieve.

More people in the formal economy means more a bigger tax base for the Ethiopian treasury. Tax revenue feeds into infrastructure, into education, into social welfare. And the hard currency earned by Huajian’s export orientation finances imports of foreign manufacturing technologies to upgrade leather-making equipment, or more efficient irrigation systems for their farms.

The point is the Ethiopian government can use this money, their hard earned, pulled-up-by-the-bootstraps money, on whatever they feel would continue the cycle of wealth and to overcome aid dependence. Whether you’re a teenager or an African governments – no one wants to be managed by someone else.

Somewhere down the line, Huajian’s local managers will think to themselves: “Hey, I think I could run my own factory with all this know-how I’ve gotten from Huajian, and possibly make the production even more efficient!” This new class of entrepreneurial managers, with their local networks and priceless knowledge built over the years of running a factory will eventually lead to more factories being built. This kind of spill-over effect that takes hold as knowledge embodied in workers diffuses throughout an economy is anything but glamorous. But no country has ever really developed without it.

With more factories comes more revenue, and not just for the managers (now owners), but for their newly hired workers, who are also moving from low-productivity to high-productivity occupations and putting upward pressure on wages. The whole cycle is renewed anew, and before you know it, Ethiopia is developing the kind of export oriented industrial cluster that’s marked more or less every fast development experience of the last three centuries.

Somehow, though, when we think of development work we think of the kinds of “pro-poor” micro-interventions that make life more bearable for poor people even as they remain within low-productivity sectors. That’s not development. That’s managing life in poverty. Development is boring. And more often than not, it starts in a factory.

 

You Might be Through With the Gender Gap, but the Gender Gap Isn’t Through With You

Researchers have long known there’s a gender gap in African agriculture: woman-run farms are less productive than similar farms headed by men. The reasons for this disparity have been only hazily understood, though. To the extent that researchers had looked into it, they’d tended to focus on the level of farm inputs: farms headed by men seem to have access to more pesticides, more fertilizer, more and better land, more and more productive labour. So long as that’s the case, it’s no real surprise why woman farmers produce less.

It’s not just about the level of inputs used. Even after adjusting for the level of inputs used, women get less bang for the input buck.

But new research out today by the ONE Campaign jointly with the World Bank paints a more nuanced and, in some ways, much bleaker picture. It’s not just that farms led by men use more inputs, it’s that they use those inputs better.

Using newly available household level data from the Living Standards Measurement Study – Integrated Surveys on Agriculture (LSMS-ISA – all the data is freely available on the World Bank website, btw, so go and play), a team of researchers led by the bank’s Mike O’Sullivan and ONE Campaign’s Arathi Rao set out to decompose the sources of the agricultural gender gap in six African countries. Again and again, they find statistical evidence that it’s not just about the level of inputs used. Even after adjusting for the level of inputs used, women get less bang for the input buck.

What’s interesting here is that this isn’t just true of physical inputs like fertilizers and seed. It’s especially true when it comes to labour. Female-headed households are composed of fewer people than male-headed households, so there’s less labour around the house to begin with. They find that in Northern Nigeria and Uganda female-headed households also hire fewer farm workers than male-headed households, contributing to the gender gap. Elsewhere, like in Niger and Tanzania when women do hire farm hands those labourers are often less productive than when men are doing the hiring, which again boosts the farm gender gap. Similarly, extension services lead to bigger boosts in productivity when they’re made available to men, contributing to the gender gap in Ethiopia and Uganda.

Obviously, a multivariate regression can’t explain why these effects are there. Maybe cultural norms make it harder for women to supervise hired labourers than for men to do so. Maybe women who run farms spend so much time looking after children their agricultural productivity suffers. Maybe there’s some implicit gender bias in the way extension services are provided that makes them more useful to men than they are to women. There are major knowledge gaps at play with these issues, it’s not really possible to say at this point.

What the research makes clear is that a simple strategy of making sure women farmers have access to the same level of inputs as their male counterparts won’t erase the significant gender gap in farm productivity documented all over Africa. Some creative policy-making will be needed. Maybe women farmers need vouchers to hire extra seasonal workers. Maybe village day-care centers can free up their time to work more effectively on the farm. Maybe extension services need to be rethought to address the specific problems women farmers face. Maybe women need special encouragement to plant higher value crops.

A whole lot of experimentation is going to be needed to suss out which of these interventions can really make a difference and which can’t. And this, if nothing else, looks to me like the future of this line of research: RCTs. Lots of RCTs.

 

LivingGoods: Waking Up to the Distribution and Marketing Bottleneck

Anyone who’s worked in Africa has had that moment of realizing that capitalism doesn’t quite work the way they sold it to us in the textbooks there. Tons of markets are monopolistic or oligopolistic, but more are just plain disorganized, with a crazy jumble of providers each operating at an unsustainable scale, failing to compete effectively with each other.

Oddly, what’s true for African SMEs is true for international NGOs in Africa too.

Which is one good reason to get excited by Living Goods – a social enterprise now operating a network of Avon-like distributors for NGO-goods in Kenya and Uganda. As their website explains,

In Africa today, outside of a few major cities, there are no chains or franchise networks. That means thousands of small sellers are utterly lacking in buying power. Moreover, existing distribution is built on layers of re-sellers. A little drug shop 20 kilometers from a trading center typically buys from a small local distributor, who contracts with a regional distributor, who in turn buys from a national wholesaler who purchases from a manufacturer or importer. Each layer in this Byzantine network tacks on profit margins and transaction costs that are ultimately born by the poor clients. As such, market retail prices can reach up to 350% of the manufacturing cost. Living Goods harnesses the buying power of its agent network, removing supply chain inefficiencies to deliver cheaper prices to consumers and bigger margins for our micro-franchisees.

It’s the kind of initiative that gives me hope that the failure of aid in Africa need not spell the failure of development, or even the failure of western involvement in Africa’s development. Because the last few years have seen incredible ferment in these kinds of initiatives: business-oriented, aimed at boring-as-hell-problems, focused on livelihoods and rigorously tested.

Whether LivingGoods and the Avon model is the right solution or not, I can’t tell. (Though probably the RCT they’re using can tell.)  But what’s clear is that if the right solution exists, you’ll only ever find it via experimentation. And experimentation is what these guys are all about.

Aid, Oil and a Question of Magnitudes

As Blattman likes to say, our views are inevitably influenced more than we’d like to admit by the one or two countries we know most. In my case that’s Venezuela, which is where I’m from, and a country I’ve long blogged about. The growing protests there this month have seen me return to that beat, temporarily.

Needless to say, you don’t write about a place for 12 years without it powerfully affecting your understanding of development.

A smallish (30 million people) middle income country sitting on top of an ocean of oil, Venezuela’s experience neatly puts international aid flows in perspective.

On average, over the last 10 years, Venezuela has taken in roughly $100 billion in oil revenues each year. A trillion dollars total, give or take. That’s within spitting distance the total overseas development aid from all OECD countries to all middle-income and poor countries. All of it going to a single, not-especially-poor, not-especially-large country run by a government whose entire basis of legitimacy is its militant determination to make people’s lives better.

If there was some simple mechanism whereby throwing money at a government deeply concerned with poverty would make it go away, surely Venezuela would have eradicated poverty a long, long time ago. And yet our social performance over the last 15 years has been middling, at best. Sure, poverty fell, as did infant mortality and illiteracy, but none of this happened markedly faster in Venezuela than in other countries in the region that didn’t get a massive oil bonanza.

After a decade-long petroboom, Caracas – my hometown – is still ringed by some of the most violent slums anywhere in Latin America. Hunger is still a problem in rural communities. One squandered trillion dollar oil-boom later, a government of undoubted political commitment to the poor has demonstrated just to what extent good intentions are not enough.

Recent trends are threatening even the advances that were made at the height of the oil boom. A disastrous anti-business policy stance, alongside some truly reckless fiscal policies have left the country facing very high inflation and mounting shortages. Here, to give you a sense, is what you have to go through to make a cake in Caracas these days. As mass demonstration rock the country, the oil bonanza of the last 15 years seems increasingly distant.

It takes seeing the Venezuelan case up-close-and-personal to realize the basic good sense of Angus Deaton’s critique: there is no amount of money and no volume of good intentions that can make up for the impact of a bad policy regime.  A sharp look at Venezuela, Nigeria, Indonesia and the other developing petrostates should make this obvious.

Somehow, it doesn’t.

Time to Sprinkle Some Pixie Dust on those Cookstoves

At their worst, improved cookstoves can look very much like classic development bloat: a high-minded idea cooked up by comfortably well-off researchers in rich countries to address to what they think should be the priorities of the global poor, even though that bears little relation to what the global poor really want.

For sure, studies of improved cookstove take-up can make for some depressing reading.

Everybody talks about the culture clash between the aid worker and the aid recipient, but who worries about the culture clash between the aid worker and the his brother-in-law who works in Marketing back home?

Here’s more or less how it seems to go: earnest young development workers trudges out to god-forsaken African hellhole. Earnest young development worker hands out stoves. Earnest young development worker gives a meticulously research-based talk on how good they are for your health. Earnest young development worker trudges back. Six month later, evaluation team trudges out to same village. Evaluation team finds stove gathering dust in a corner of the hut.

Plenty of reasons have been put forward for why this happens: from ignorance to sheer cultural stubbornness/resistance to change to time-inconsistent preferences to the fact that it takes too damn long to boil water for tea with the things. But one really really obvious explanation seems MIA from the discussions: development interventions are just horribly tin-eared about marketing.

In some ways, this is puzzling.

On Cookstoves, there’s no need for hyperbole

Improved Cookstoves are all the rage. Drawing the kind of A-List backers – from Hillary Clinton and Mary Robinson to Michelle Bachelet and Julia Roberts – that used to gravitate towards microcredit and water wells, cleaner cookstoves are indubitably flavour of the month. And with the dire health and environmental impacts of breathing all that smoke from indoor fires, it’s no wonder the development community is going all in.

Some researchers call the low take-up rates for improved cookstoves “puzzling“.  To me, they’re anything but.

There’s just one problem: a lot of recipients don’t use them. In study after study, demand is weak and adoption rates are dismal. At times even when they’re given away for free, families use them only sometimes, if at all. Obviously, the Third World is a big place, so Clean Cookstoves do better in some places than others. In some studies, improved cookstoves lead to positive health outcomes, but in other settings health impacts prove elusive, with studies often throwing up equivocal, contradictory results.

The long and the short of it is that clean cookstoves seem to be considerably more popular in Washington and Geneva than in Senegal or Orissa.

Some researchers call the low take-up rates “puzzling“.  To me, they’re anything but. Clean cookstoves are perceived as the solution to a problem you may have a looooong time in the future by people whose time horizons are brutally compressed by the daily grind of extreme poverty. Is it really surprising that their value is discounted down, in many cases, to zero?

In some of the wonkier corners of development academia, people are nodding thinking “ah yes, hyperbolic discounting.”

But that’s not what I mean. You don’t need to reach for some exotic discounting function to understand beneficiaries’ indifference for clean cookstoves. There’s, quite literally, no need for hyperbole.

Are We Helicopter-Parenting the African State?

Development people have a strange, double-thinky relationship with Angus Deaton’s argument against development aid. Deaton is too senior in the aid world to be dismissed, but his critique is too devastating to be fully internalized. It’s as though part of us knows if we get too deep into this we’re going to find out some things we’d rather not know, so we prefer to know-and-not-know at the same time, a weird Orwellian move that does nobody any favours.

Facing up to the gory details of aid dependence is one of the last great taboos of the development world.

Deaton’s beef is with Western Paternalism: the never explicit, always just-below-the-surface tendency to treat African states like children, abrogating the paternal role for the West.

Trouble is, through aid paternalism, the West has become the very worst kind of parent: a meddling, hyperindulgent, over-involved helicopter parent that constantly undermines his charge. It’s this idea – that we’re locked into a messed up codependency that undermines everyone involved – that reviewers of Deaton’s new book invariably balk at.

And I can see why: on a micro-level, it’s a hard pill to swallow. We see African states patently unable to run a minimally effective health system. We see millions dying of easily preventable diseases, and we find it intolerable. So we go and run the hospitals for them.

So, does that kind of aid “work”? Think of it like this:

A helicopter parent sees his 19 year old son is plainly unable to tie his own shoelaces and goes and ties them for him. Perhaps he makes some peremptory attempt to show the 19-year old how he might go about tying his own shoelaces in future, but the kid has little reason to pay very much attention – the way the relationship is structured, he knows full well dad will still be there to tie his shoelaces when he’s 24, or 30, or 55.

Did dad’s aid “work”? Well, if your metric is “total laces tied”, it certainly seems to work. Is this a reasonable definition of success, though?

It’s when he talks about aid’s impact on state capacity that Deaton is at his most scathingly convincing. Western aid discourses continually fret about the level of African state capacity – “capacity building” as a buzzword is getting buzzier and buzzier – while also pursuing policies that relieve African states of any compelling reason to become more capable. 

Nicholas Van de Walle gets at this poisonous little dynamic brilliantly in his aging, but still useful “African Economies and the Politics of Permanent Crisis, 1979-1999.”

In Van de Walle’s telling, donors are blind to how easy it is for African state elites (we’re talking the 100-300 most powerful people in any given country) and African presidents to play them like a fiddle, using aid to keep their deeply screwed up, extractive political systems going indefinitely. He has great fun describing how “adjustment programs” (along with their accompanying “Social Dimension of Adjustment” aid sweeteners) came to be a permanent condition lasting decades on end in some African countries, to the crazy extent that you could publish a book only half-ironically titled “Burkina Faso: A Tradition of Adjustment”.

M-KOPA: The Venn Diagram Intersection of Solar, Microcredit and M-PESA

When I was a student in England, I remember I had to pay for my electricity using a delightful bit of low-tech English innovation: a pound-coin meter. Rather than get a bill in the mail, my electric supply was hooked up to a coin machine that took very literal one-pound coins. That would buy you a few days of juice. When the coin ran out, the lights went off.

M-KOPA is a Gates Foundation-backed (read=way cool) Kenyan start-up that’s pioneering a very, very high tech twist on this intolerably low-tech old English idea.

In effect, they sell you a solar-powered home electric system, complete with lights, a cel-phone charger and a radio, all on credit. (A more powerful variant that can run a TV is in the works.) You pay Kes 2,999 down-payment (about $35), you pay 50 shillings (about 58 US cents) a day for just under a year (360 days), all via your M-PESA enabled phone. Stop paying, and the system shuts down. Start paying again, and back it comes.

But there’s a twist…a twist whose beauty maybe only English coin-meter sufferers will truly grasp: after a year, the system is yours. To keep. After one year you get free power for life (or, well for as long as the solar panel holds out.)

The system costs less than what households are typically spending on kerosene for lighting. In the first 15 months, they’ve sold 50,000 of them.

M-KOPA is genius on so many levels. But let me just go over a few:

What crop insurance actually looks like in Africa

Formal crop insurance of the type Kilimo Salama is pioneering remains rare in Africa – some research suggests it will never catch on. But does that mean farmers don’t hedge against bad weather? Hell no.

It’s just that, in a lot of Africa, crop insurance goes by a different name: sorghum.

It’s a Catch-22: When the rains fail and your maize doesn’t come through, you end up eating sorghum. When the rains are good and both your maize and your sorghum patches come through, all the buyers want is the maize, so you end up eating…Sorghum.

Legendarily drought resistant, sorghum (and its close cousin, millet)  is the typical East African farmer’s Plan B. Everyone would prefer to eat maize – Kenyans’ ugali fixation is famous – but maize is finicky. It has to rain enough at the right times of the year and it has to be cool enough at the right time of the night for the harvest to come in. If it doesn’t, you’re in trouble.

But the kind of moderate drought that can mess up your maize harvest won’t put a dent on your Sorghum field. So even if you have very little land to begin with, chances are that you’re going to plant a bit of sorghum. You never know, and in bad rain years, that patch of sorghum can be the difference between your family eating and starving.

Sorghum may be Africa’s most planted, least loved grain.

See, maize is easy. Everyone wants maize. Maize value chains are well established, industrial buyers are mature businesses, local people like it. It’s no problem selling maize. But sorghum?