Lots of people will agree withthe general message of the Center for Global Development’s Evaluation Gap Working Group report: there is a dearth of rigorous evidence that independently evaluates the outcomes of development projects.

More controversial will be their recommendation: that a new international entity be formed to address the shortage of meaningful knowledge being produced about the success and failure of development enterprises. Would such a council truly be independent? How would it be funded?

The problem that the report addresses is familiar to many in the development field, but we have yet to identify a credible mechanism to overcome the knowledge gap. This document’s proposal can serve as a starting point for debate about the nature of such mechanisms.

Pablo at PSD points to an William Easterly vs Jeff Sachs debate on foreign aid in the LA Times, while Jim at Our Word is Our Weapon notes that Easterly and Steve Radelet are still trading comments at Cato Unbound. Pablo bills the former as a Columbia vs NYU scuffle, and I’d like to note that the latter is an in-house match between Center for Global Development fellows.

Despite a number of folks billing these debates as showdowns, I see a consensus emerging:

Easterly: “The two key elements necessary to make aid work, and the absence of which has been fatal to aid’s effectiveness in the past, are FEEDBACK and ACCOUNTABILITY.”
Sachs: “The standards for successful aid are clear. They should be targeted, specific, measurable, accountable and scalable.”
Radelet: “We need clear, measurable goals, and aid programs should be constantly assessed against those goals by independent monitors.”

Apparently it’s difficult to get economists to agree about what “accountability” means in practice.

Pablo at PSD points to a NYT article reminding us what a hellhole Zimbabwe is:

“Zimbabwe has been tormented this entire decade by both deep recession and high inflation, but in recent months the economy seems to have abandoned whatever moorings it had left. The national budget for 2006 has already been largely spent. Government services have started to crumble… In February, the government admitted that it had printed at least $21 trillion in currency — and probably much more, critics say — to buy the American dollars with which the debt was paid. By March, inflation had touched 914 percent a year, at which rate prices would rise more than tenfold in 12 months. Experts agree that quadruple-digit inflation is now a certainty.”

Not everything is awful: neighborhoods and households financed by American dollars from foreign aid, charities, and remittances are suffering far less. And Robert Mugabe just completed a 25-bedroom mansion.

This month’s Cato Unbound focuses on foreign aid. I found Branko Milanovic’s criticism of William Easterly very compelling. Perhaps Easterly’s full-length book will contain nuances that accomodate Milanovic’s objections.

I found Deepak Lal’s essay surprisingly pessimistic:

That is why in a recent book I had argued that short of direct or indirect imperialism there seems to be little hope of overcoming the domestic political obstacles to the efficient utilization of foreign aid, particularly in Africa, where most of the current efforts of the “do gooding” brigade in the developed world are rightly concentrated. Given this political constraint, the best the rest of the world could do for Africa is to keep its markets open for the free flow of trade and capital, but otherwise leave Africa alone, to sort out its own problems.

In an essay that Jim will surely enjoy, Steve Radelet writes:

Take a closer look: $2.3 billion over 50 years is $46 billion a year, a modest amount for any global capital flow. And only about half went to low income countries, with the rest to middle-income countries like Israel that didn’t need it. So we have around $26 billion a year for all the low income countries. This works out to be a rip-roaring $14 per person per year in low-income countries. Much of that goes to consultant reports or is tied to purchases in donor countries where it gets much less bang for the buck. As a result the recipients actually get far less than these figures indicate. So let’s cut the grandstanding. It ain’t much. In Easterly’s judgment, based on his opening vignette, because poverty still exists in Ethiopia after it has received all of $14 per person in aid per year (Ethiopia happened to receive exactly the average amount), “aid doesn’t work.” Please! …

And here is the dirty little secret: most of the published research over the past decade has shown a modest positive relationship between aid and growth—not in all countries, to be sure, but on average across countries over time.

I think that Milanovic’s exposure of Easterly’s argument’s weaknesses makes Lal’s stance more compelling, but Lal’s essay contains insufficient evidence to refute Radelet.

I apologize the lack of blogging this month. The dry spell will continue until I complete my thesis at the end of March. In the meantime, let me recommend two interesting papers I came across in the course of my work:

Dani Rodrik – Why We Learn Nothing from Regressing Economic Growth on Policies – March 2005:

Government use policy to achieve certain outcomes.  Sometimes the desired ends are worthwhile, and sometimes they are pernicious.  Cross-country regressions have been the tool of choice in assessing the effectiveness of policies and the empirical relevance of these two diametrically opposite views of government behavior.  When government policy responds systematically to economic or political objectives, the standard growth regression in which economic growth (or any other performance indicator) is regressed on policy tells us nothing about the effectiveness of policy and whether government motives are good or bad.

Alessandro Nicita – Export led growth, pro-poor or not? Evidence from Madagascar’s textile and apparel industry – February 2006

Madagascar’s textile and apparel industry has been among the fastest growing in Sub-Saharan Africa. Fueled by low labor costs, a fairly productive labor force, and preferential access to industrial countries, Madagascar ‘ s exports of textile and apparel products grew from about US$45 million in 1990 to almost half a billion in 2001. The impact of this export surge has been large in terms of employment and wages, but less so in terms of poverty reduction. To address the concern of whether the poor benefit and to what extent, the author follows a new approach to identify the beneficiaries of globalization and to quantify the benefits at the household level, so as to understand which segments of the population benefit most and which, if any, are marginalized. The analysis focuses on the labor market channel which has been recognized as the main transmission between economic growth and poverty. The methodology uses household level data and combines the wage premium literature with matching methods. The results point to a strong variation in the distribution of the benefits from export growth with skilled workers and urban areas benefiting most. From a poverty perspective, export-led growth in the textile and apparel sector has only a small effect on overall poverty…

The IHT has a story summarizing the implications of nuclear power for India:

Almost a tenth of India’s economy was being murdered in the dark, strangled by power shortages. And then George W. Bush said, “Let there be light.” That, in a nutshell, is the thrust of a much-debated nuclear-energy agreement that the U.S. president pursued and concluded Thursday with Prime Minister Manmohan Singh of India in New Delhi…

An acute power crisis is all too visible. Computer software companies in Bangalore keep enough generator fuel to last them a week, or longer, in case the overburdened power distribution network breaks down. Households are buying “intelligent” washing machines that “remember” where they had stopped when power went out. That way, people don’t waste time, water and detergent by starting all over again after supply resumes. For Singh’s government, nuclear energy is fast emerging as the centerpiece of a strategy to ease the power crunch…

In their joint declaration, the two leaders agreed that India would separate its military nuclear program from the civilian one, and that it would voluntarily place the latter under the watch of the International Atomic Energy Agency. In return, Bush recognized India as a “responsible state with advanced nuclear technology” and promised to adjust U.S. and international laws, to give India’s civilian facilities unrestricted access to imported nuclear technology…

If India can use the accord to overcome its energy crisis, there is a lot that its fast-growing economy can buy from the rest of the world. That will be the ultimate economic prize for the global economy if it accepts India as a de facto nuclear-weapons state. Whether the prize is worth the risk of “tempting” states without nuclear weapons to give up their “self-restraint,” as Talbott puts it, is for Congress to decide. [IHT]

William Easterly plays curmudgeon once again; this time he has a piece in the Washington Post: “The West Can’t Save Africa.” It looks like a preview of his forthcoming book, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good

Ben Muse links to a pair of interesting World Bank papers about exports and development that were recently posted. Nicita (2006) evaluates the impact of Madagascar’s growing textile export industry upon its poor (in short, urban skilled laborers gain the most from the sector’s expansion). Djankov, Freund, and Pham (2006, pdf) examine the impact of administrative delays upon export volume (hint: rent-seeking opportunities greatly reduce exports).

In a speech [PDF] given at the Asian Development Bank titled “Planners vs Searchers in Foreign Aid,” William Easterly ripped the development establishment, especially the UN, IMF, and WB. He overstates his case in a few places, but many of his arguments are compelling.

A number of bloggers have linked to this NYT op-ed by Tim Harford. It’s good:

Imagine a dream scenario in which the trade ministers emerge from their negotiations this weekend holding hands and proclaiming an end to all agricultural protectionism. What then?

For, say, a banana picker in the Central African Republic, not a lot. The trade barriers at the borders of the rich world may have disappeared, but if our picker wants to sell his bananas abroad he first has to get them onto a ship bound for America or Europe. That takes 116 days, and an incredible 38 signatures – each one an opportunity for some official to collect a bribe. Something is rotten here, and not just the bananas.

Read the whole thing,