Monday, 23 April 2012

Arguments against aid: Cheap tricks or Compelling evidence?

By Mick Moore

For much of the last 50 years, development studies practiced a conspiracy of near-silence against fundamental criticisms of development aid. Plenty of people wrote books and articles about how aid could be improved, but few questioned its fundamental value.

Easy arguments against aid: Are we addicted to cheap intellectual highs?

The dam broke only a few years back. We then had a small torrent of books arguing that aid is fundamentally a bad thing, more likely to undermine than to promote development – above all because of all the perverse effects it has on the incentives and behaviour of politicians and public servants in recipient countries.

Dambisa Moyo’s Dead Aid: Why aid is not working and how there is another way for Africa, the most publicised of these books, was in many respects one of the least convincing.

The aid business is large, diverse and complex. It is not hard to do as Moyo did: cite one example after another of failures, perversions and negative unintended effects of aid projects. But that does not add up to a convincing general case.

It is useful to bear in mind that many social scientists are addicted to some questionable habits: to digging out and publicising ‘shocking’ arguments about how the world is in fact very different from the way it appears to ‘ordinary mortals’. These arguments conclude that the consequences of our actions are often very different from our intentions.

Making such claims is a way of generating an intellectual high. One of Albert Hirschman’s wonderful little books, titled The Rhetoric of Reaction: Perversity, Futility, Jeopardy (1991) provides a useful corrective. Hirschman explains how opponents of progressive public policies routinely use a standard portfolio of arguments to assert that the actual effects of these policies will be very different from those that ordinary people anticipate.

Evidence of aid’s perverse effects: Can aid leave civil society organisations less able to do public work?

I am sceptical of claims that well-intentioned public policies will have perverse effects. If I am to be persuaded that aid has damaging effects, I want evidence.

Masooda Bano’s new book Breakdown in Pakistan: How Aid Is Eroding Institutions for Collective Action (2012) provides not only convincing evidence but some elegant, plausible and original argument. Her research was on the effect of foreign funding on citizen-led social and political organisations in Pakistan.

Bano zeroes in on the question of why citizens are willing to donate money or volunteer time to particular political, religious or welfare organisations. Her explanation is that they need some reason to believe that their money will be used properly and well. Without that trust, they will make their donations elsewhere.

Her research suggests that one of the most powerful general signals of the basic worth of any organisation dependent on public donations is the life style of the leader(s). If leaders are conspicuously seen to be making some personal sacrifices, and not profiting, then the organisation generally tends to be viewed as trustworthy. Many Pakistani organisations are able to do excellent public work (in education, health and welfare) because citizens  trust the leaders, see them as materially selfless and thus make voluntary contributions.

This is where foreign aid causes problems. Organisations that receive foreign aid are virtually obliged to be ‘professional’, and typically pay their leaders attractive salaries.

Aid donors think they are ‘strengthening civil society’, but all too often they are eroding trust. Pakistanis tend to see a clear dichotomy between social organisations that depend on local contributions and NGOs that are by definition foreign funded. They might be willing to work for NGOs for a salary, but are rarely willing to contribute to them voluntarily. They don’t trust them. Organisations that begin to take aid money quickly find that their volunteers and ordinary donors move elsewhere.

Masooda Bano has some suggestions about how these ill effects can be minimised. Considering how well rooted the book is in social science theory about collective action, it is rather a good read.

Monday, 16 April 2012

Global Drug Policy III: Some good news from the Cartagena Summit of the Americas

As national leaders from across the American continent gathered in Colombia´s magnificent colonial port city of Cartagena for the sixth Summit of the Americas (pdf, 500kb) on 14-15 April, they knew that one of the most pressing and controversial hemispheric policy issues was not on the event´s agenda. But it was also clear to them that precisely that issue - drug policy - would be among the hottest ´unofficial´ topics, next to Cuba´s full reintegration into the Inter-American system.

In the end, the summit failed to produce a final joint declaration, mostly due to divisions between the US and Canada, on the one hand, and the Latin American camp on the other over Cuba (which, as on previous occasions, was barred from attending). But the drug policy discussions that were held in public and behind-the-scenes are important.

Never before did the Americas (or the world, for that matter) witness such a bold, high-level exchange of viewpoints on illicit drugs, drug-trafficking and drug-related violence and crime. And never before did a group of Latin American heads of state challenge the prevailing, US-backed drug policy orthodoxy with such solid arguments, political acumen and determination to find alternatives.

President Santos opens space for evidence-based policy on drug trafficking

The summit’s host, Colombian President Juan Manuel Santos, deserves special credit for this achievement. On several occasions in the past few months, he stated publicly that his government was open to considering drug policy alternatives, highlighting that Colombia is among the world’s countries that has suffered most from drug-trafficking and the violence, crime and governance erosion it causes.

Santos avoided framing his approach through the unhelpful dichotomy of ‘legalization versus prohibition’. Instead, he opened up new space for evidence-based policy innovation. He also lived up to his reputation as a political tactician, tabling the issue at the Summit without putting it on the official agenda.

Other Latin American governments also argue for alternative drug policies 

A number of his Latin American counterparts have followed suit, though without displaying quite the same level of political skill.

Otto Pérez Molina, a retired intelligence and military officer who was recently inaugurated as Guatemala’s president, came out advocating for global drug market regulation. Felipe Calderón of Mexico argued that the US has the responsibility to cut demand for illicit drugs and to reduce the criminal profits of drug-trafficking networks that are wreaking havoc in his country and neighbouring Central America. Costa Rica’s Laura Chinchilla has been even more outspoken, going as far as to openly use the L word (legalization).

No silver bullet for addressing drug trafficking related violence and insecurity

Although the Latin American leaders’ positions broadly point in the same direction, a clear difference separate the Mexican and Central American approaches from Colombia´s stance: the Colombian position is more open-minded and less prone to getting tangled up in the political-ideological polarization that has characterized drug policy debate and practice in past decades.

In effect, the ´legalization versus prohibition´ rhetoric has paralyzed the debate and obstructed positive policy change.

Colombia is possibly also more prepared than some of its Latin American counterparts to acknowledge that drug policy reform is inevitably a highly controversial, difficult and gradual process and that there are no quick fixes or silver bullets.

An alternative strategy integrates drug with other governance and social policies

However, there is another, even more interesting angle to Colombia´s new approach to drug policy. Government officials understand that drug policy reform is paramount in its own right because the current counter-drug strategies are delivering sub-optimal or outright disastrous results.

But they also seem to have grasped that alternative strategies need to be closely linked to other efforts, including:
  • resuscitating the state’s legitimate and effective capacity to respond to the pressures of pervasive crime and violence
  • revamping national security and justice apparatuses and their governance
  • strengthening accountability and citizen-state relations
  • and, not least, generating equitable socioeconomic development (pdf, 8mb)

In short, to achieve a reduction of the serious political, social and economic problems caused by drugs, drug-trafficking and drug-related violence, alternative drug policies will need to be accompanied by other, complementary public policy interventions.

Colombia should lead on alternative drug policies, but it needs support

The Cartagena summit has helped set in motion a political process that may take us beyond the legalisation-prohibition divide and open up new space for policy innovation.

After decades of experiencing extreme hardship related to drugs and violence, Colombia is now poised to emerge as a regional leader in reshaping drug policy. But to do this successfully the country needs all the outside support it can get to develop the tools that are needed to carry out this Herculean task.

It is vital that President Barack Obama follows up on his statement in Cartagena, in which he said he wanted to engage in what he termed a ´legitimate debate´ about drug policy alternatives (other than legalization). His administration should put all its weight behind the new task group of the Organization of American States (OAS) which the leaders of the Americas agreed to set up to explore drug policy alternatives.

Keep an eye on the Governance and Development blog for more on Global Drug Policy.

Thursday, 5 April 2012

Embedding police in their communities is important in both the developing and the industrialised world

by David Leonard

In the past two weeks racial harassment by police and those assisting them have made headlines in the U.S. and the U.K. These events remind us of the importance of having police forces that are embedded in the communities they serve. My personal experience of police racial profiling in the U.S. as well as research on police reform in Sierra Leone and the Democratic Republic of Congo reveal common problems in policing in ‘developed’ and ‘developing’ contexts.

Two personal stories of policing and racial profiling

Two of my children are white and two are African-American. This created some stark comparisons as the children went through their teens in the politically liberal and racially integrated San Francisco Bay area.

James, one of our white sons, owned a Honda motor scooter and had a license to operate it. He was never stopped by the police while driving it. His black brother Chris once borrowed the scooter for a ride around the neighbourhood. He had a driving license, but not for a scooter, so he was driving carefully. The police pulled him over for a “check” and arrested him. They didn’t believe the scooter belonged to his family, but when his older white brother Ken turned up at the police station with a license but no proof of ownership, they were happy to release the vehicle to him.

On another occasion Chris was driving our Toyota Camry home and realised he was being followed by a police car. He was careful to stay well within the law. For this he was pulled over by the police for driving suspiciously; he is black and a Camry is a “white” car.

The police officers who stopped Chris may not have been personally racist. It almost certainly was statistically correct that black male teens rarely drive Toyota Camrys.

A Mexican-American friend of ours works as a highway patrol officer. She was told by other officers she should target other Mexican-Americans, particularly those who wore cowboy hats and drove pick-up trucks, in order to meet her quota for stopping traffic offenses. She was distressed to discover that such targeting actually worked; she could easily get her quota of unlicensed and drunken drivers this way.

The corrosive effects of conflict between police and marginalised communities

But even when statistically correct, racial stereotyping has corrosive effects on criminality and police effectiveness. In the US it is clear that harassment of African American young men convinces them that there is no point in attempting conventional success; the system is biased against them and is out to “get” them. In Chris’s case he dropped out of school after having done well and developed an “attitude”, which took him 15 years to overcome and return to university.

The response of targeted groups in turn convinces the police that their targeting is correct. The police tend to become yet more aggressive. This corrosive syndrome is especially bad in the US. One only has to read the newspapers to see that it is present in Britain and France as well.

When the connection between police and communities breaks down, both sides become right: marginalised groups think the police are out to get them; police expect these groups to behave anti-socially. These two rights produce a dreadful wrong.

Solutions are found not in technical fixes, but in embedding police in communities

Studies done around the world demonstrate that policing is most effective when officers and the communities know and trust each other. This means we must de-escalate police-community conflicts.

Britain’s “bobbies” are, or were, such an effective police force because they were unarmed, on-foot and alone. This led them to find creative ways to defuse dangerous situations and to build good community relations. (We now know that women officers are more effective on the beat than “power projecting” male officers for the same reasons.)

Research we have conducted on police reform in the Democratic Republic of Congo and Sierra Leone reveals illustrates the importance of embedding police in communities. Donors have been tempted to see policing in technical terms and to build “up-to-date” national police forces at the expense of traditional local ones. Too often, these “up-to-date” forces become projections of national state power. They act not to protect citizens, but to protect the government against its citizens.

The dangers of a police force divided from the citizens it is meant to serve are particularly great in socially-divided societies. Here, the police can easily be seen as reinforcing the dominance of one group over another. Police who are embedded in their communities are as important in the developing world as they are in the U.S., U.K. and France.

Police need to be positively embedded in the communities they serve. For this to happen, they need to come from these communities, know the people who live in them and have their confidence. “Technical” solutions, such as guns, police cruisers and radios tend make the divides between police and citizens bigger, not smaller.

Monday, 2 April 2012

Oxfam, Give the IMF a break!

by Mick Moore

I give international NGOs nine points out of ten for the ways  they campaign about tax and development. It is partly due to NGO’s efforts that some aid donors now accept that they should be aiming to make themselves redundant by helping to create more effective tax collection systems in developing countries.

More important, the campaigning NGOs – especially the Tax Justice Network and, in Britain, Action Aid and Christian Aid – have made it impossible for governments and inter-governmental organisations to ignore the extent to which the tax policies and practices of rich countries facilitate tax evasion and capital flight in poor countries.

Serious international policy discussions about these problems at least take place now. Some of the campaigning NGOs are involved at high levels, and are recognised to be sources of valuable technical expertise. For example, see the blog of Tax Research, LLP.

Most of the time, the NGOs are on the same side as the international organisations that have the authority to change ideas and policies at the global level, notably the IMF and the OECD. Indeed these organisations often cooperate.

Opposition to international tax reform is strong

And cooperation among NGOs and global institutions is vital. The opposition to international tax reform is very strong. Tax havens are not just small, remote island jurisdictions like the Turks and Caicos. They include many powerful OECD countries. Neither ‘the 1%’ (the world’s wealthiest people) nor most transnational companies really want to make information about their assets and transactions available to tax authorities.

Unless the reformers stick together, the current bubble of international interest in ‘tax and development’ could remain merely interest, without action.

Why do NGOs attack potential allies in tax reform?

It is a pity then that some of the campaigning NGOs continue sharply to criticise their potential allies, especially the IMF. Criticism is sometimes framed as broad opposition to a vaguely-defined ‘neo-liberalism’ that the IMF is said to embody.

More concretely, criticism takes the form of continual opposition to the IMF’s promotion of the value-added tax (VAT). But how many of us really understand VAT? It is certainly a complicated tax. But it is also rather a good one. And the reason most countries have adopted it is not because they have been cajoled by the IMF. VAT is useful because it is hard to evade, brings in a lot of money, encourages small enterprises to maintain more complete and informative accounts, and encourages economic efficiency.

So why do the NGOs, especially branches of Oxfam, campaign against VAT so militantly (pdf, 1 mb)? Their story is that VAT is a tax on consumption, and therefore is regressive: it falls most heavily on the poor. Oxfam would like all the emphasis to be on income, wealth and property taxes – the kinds of taxes that fall mainly on the rich.

I too would like to see the rich pay more. The IMF and plenty of tax specialists also agree for that matter. But this should not imply that we should abandon VAT, sales taxes or other taxes on consumption.

Why can taxes on consumption be a good option for developing countries?

Any good tax system includes a portfolio of taxes on income, property, transactions, international trade and consumption. There is no reason to oppose all consumption taxes.

One reason is that it is far from clear that VAT imposes a heavy burden on the poor. While Brazil’s VAT certainly does burden the poor, this is not the typical case. Like Britain, most countries that levy a VAT give reductions or exemptions for basic consumption items, especially food. The rather scant evidence we have suggests that, in developing countries, VAT is not generally a regressive tax that falls heavily on the poor.

The practical policy issue is not whether a particular tax is regressive or progressive, but whether it is more or less progressive than the feasible alternative sources of revenue (pdf, 300 kb). If a government abandons VAT and reverts to the only other relatively easy source of income – customs duties on imports and exports – the poor might in fact be worse off.

Let’s move from campaigns on VAT to campaigns on the real problems of international tax policy

VAT is not beyond criticism. But it is now a major part of the tax system of most developing countries, and could only be replaced at great cost and with great upheaval.

We could better spend our energy doing the things that NGOs and international organisations alike want to achieve. We could start by focusing on three things:
  • improving the exchange of information among national tax authorities
  • getting more information from transnational companies about the real locations of their activities and profits
  • stemming the worst abuses committed in and by tax havens
Let us unite around the big issues, and stop sticking pins into our allies.