What have the MDGs achieved? We don’t really know… Heretical thoughts from Matthew Lockwood

A second instalment in Matthew Lockwood’s series of valedictory boat-rocking blogs (his first was on fossil fuel subsidies) as he leaves the IDS Climate Change team for a new role in the UK energy sector. This time, he asks why the results agenda often stops short of being applied to the big picture stuff like the MDGs.

One of the interesting things about having come back to the international development field after some years away is the greatly increased emphasis on results, across all areas of activity, including not only projects and programmes, but also policy making, research, and advocacy.

Many people and organisations are interested in the results agenda, including the big foundations such as Gates, influential bloggers like Owen Barder, my boss Lawrence Haddad, and DFID’s Secretary of State, Andrew Mitchell. In his first big speech in office, in Washington in June 2010, Mitchell said “we’re also fundamentally redesigning our aid programmes so that they build in rigorous evaluation processes from day one.”

Like many others, I think aspects of the results agenda are important, reasonable and politically wise, although there are also some interesting critiques of the approach. But I also think that, if you really take it seriously, it throws up some challenges and dilemmas.

For me, this is clearest in the case of development’s big frameworks and policy directions. One prime example is the UN Millennium Development Goals (MDGs) and their proposed replacement with more development goals after 2015. As most readers will know, the MDGs are a set of human development goals, with subsidiary targets and indicators, formally adopted by the UN in 2000.

There is pretty broad agreement that progress towards meeting the MDGs is partial and uneven – some of the goals have been met or look very likely to be met, in some countries, while other goals (such as the target reduction in maternal mortality) may not. Asia, especially East Asia, has done better than Sub-Saharan Africa.

However, applying the results agenda to the MDGs is not simply a matter of asking whether the goals will be met. Rather, it is about asking whether the goals have been met as the result of the MDGs having been adopted. The purpose of having high level goals, including any that come after the current MDGs, is to create political will, the mobilisation of resources, policy change and delivery, all of which should bring about a positive change relative to what would have happened in their absence.

Many in the aid world would say that, of course, the MDGs have had a major impact, and that it is absurd to even raise the question. However, a rigorous assessment of the evidence suggests that it is actually quite hard to make a strong case.

First, the evidence that the MDGs may have made a difference is, at best, mixed. The most comprehensive and rigorous independent assessment is by Andy Sumner and Charles Kenny for the Center for Global Development. They look for significant differences in outcomes and impacts before and after 2000, when the MDGs were adopted.

The clearest effects were on aid levels (which are not an ultimate impact but an intermediate outcome). Compared with the previous decade, official aid increased in the post-2000 period, but not as a proportion of rich country GDP. More aid went to the poorest countries, including to Africa. There was a small shift in the share of aid going to the social sectors, on which the MDGs tend to focus, and this happened soon after 2000.

There is plenty of evidence of the influence of the MDGs on policy discourse, if this is measured by mention of the goals or their presence in donor policy documents, PRSPs and developing country government goals. However, the effects on actual policy change are less clear. Sumner and Kenny find it “hard to detect a trend” in low income country government spending on health and education. They also find no trend in the quality of developing country policy making, as measured by the World Bank’s Country Policy and Institutional Assessment ratings.

On the actual impact indicators themselves – such as income poverty, malnutrition and mortality rates, educational enrolment etc – Sumner and Kenny’s most relevant assessment is whether progress was faster pre- or post-MDGs, and whether progress post-MDGs has been faster than what would have been expected based on past trends. Again, results are inconclusive. The data “suggest that in no case is there an obvious sign of a significant break towards faster progress since 2000. Nonetheless there has been somewhat faster global progress on income, primary completion rates, child and maternal mortality over the post-Declaration period”. A study by Fukuda-Parr and Greenstein of country level data gives a similarly mixed picture. The comparison with predicted rates of progress based on historical analysis implies slightly better than expected outcomes post-MDGs on primary education and gender equality in education, but worse on maternal mortality.

Second, there is the problem of attribution. As Sumner and Kenny put it, “even ignoring the very limited evidence of faster progress since 2000 in the average (unweighted) developing country, it is a considerable step from ‘more rapid progress’ to ‘the MDGs caused more rapid progress’”. In other words, bilateral aid may have increased somewhat, some indicators have improved, but how do we know that these changes are due to the MDGs, and not to some other factor?

It is not possible to know what would have happened in their absence. This is not a case of running randomised controlled trials across a number of interventions. And as Richard Manning points out, it is hard to separate out the potential effects of the MDGs from the environment that produced them.

In some areas, such as vaccination or primary education enrolment in sub-Saharan Africa, the links between the MDGs, the mobilisation

and focusing of additional aid, and subsequent impacts seem convincingly close. But in others, the links seem less plausible, especially where there are also good alternative candidates that may explain changes in indicators better than the effect of MDGs. Poverty reduction in Asia, for example, is more likely to have been driven by the extraordinary period of sustained economic growth in China, than by a set of UN targets. It is also plausible that China’s growth will have pulled along a number of countries in its wake, including commodity exporters in Africa. The rapid reduction of poverty in Brazil is due in part to the development of social safety nets such as the Bolsa Familia. When I recently asked Romulo Paes de Sousa, Brazil’s former Deputy Minister for Social Development, and closely involved in the design of the Bolsa, whether it was the result of the MDGs, he dismissed this immediately, saying it was the outcome of a domestic debate that emerged from the minimum wage.

Yet despite the lack of clear, strong evidence of the impact of the Goals, and the difficulties of attribution, the MDGs are routinely hailed as a success. Most importantly, this success is asserted in the context of discussion about a new set of post-2015 development goals. When it was announced that David Cameron would be co-chair of the UN High Level Panel on post-2015 goals, Andrew Mitchell hailed the “huge progress that has been made through the Millennium Development Goals” and “the successes of the current goals”.

When challenged with the point that attribution is often difficult in cases such as these, and that you can’t compare counterfactuals, many proponents of the results agenda recognise the problem. However, their argument is that, in such circumstances, it is the duty of those proposing any particular approach to be explicit about their “theory of change” – that is, be explicit about the full chain of causal linkages you think is going to run from your intervention (here adopting international goals) and the impacts you hope for. Identify your assumptions. Assess the evidence for and against those assumptions, and weigh up the risks.

If done properly, this wouldn’t be just about ticking a box. The point of such an analysis should be to help understand how to make such goals more effective. It should look at why some goals were easier to meet than others (gender equity on education as opposed to access to clean water or reductions in maternal mortality) and in some countries than in others. It should look in a systematic and rigorous way in how the goals were used (or not used) and where there is evidence that they failed to lead to a result, explore alternative, potentially more effective “pathways to impact”.

The point here is not that the MDGs are somehow a bad thing, or that there should not be a new set of goals. In any case, it is not seriously in question that there will be further goals post-2015, of some form. Too much political capital has been invested in them for this to be the case, regardless of the ambiguity of the evidence base. The results revolution will not change the reality that some policies and initiatives are often inevitably driven by more than evidence, and that politics plays a major role.

Nor am I advocating a view that we should not try to measure impact or wrestle with the problem of attribution. What I am saying is that I think the example shows that really, really applying the agenda of results and evidence-based policy consistently and rigorously can be more difficult than the current discourse acknowledges.

Matthew Lockwood is a Research Fellow at the Institute of Development Studies at the University of Sussex. From October 2012 he starts work on a four year project on innovation and governance in the UK energy sector. 

African techno-euphoria and the origins of Kenyan mobile exceptionalism

I’m struck by one of those periodic waves of Africa techno-euphoria as I catch up on my post holiday reading (Google Reader, twitter, email, random subscriptions – is there no end to it?). The Guardian has pieces on how the web is changing Africa and 15 innovations that are transforming the continent. Meanwhile the Economist has a fascinating piece on mobile technologies in Kenya. Some highlights:

“In 2002 Kenya’s exports of technology-related services were a piffling $16m. By 2010 that had exploded to $360m. To its boosters, Nairobi is “Silicon Savannah”.

However, it differs from its silicon sisters in one crucial regard. From the start, its tech firms have designed their products for mobile phones rather than computers. Kenya is still a poor country; few of its people own laptops. But there are 74 mobile phones for every 100 Kenyans, well above the African average of 65. And nearly 99% of internet subscriptions in Kenya are on mobile phones.

Three factors helped Nairobi to become an African tech hub. The first is a supportive government. In 2005, when Bitange Ndemo was appointed as permanent secretary to the ministry of information and communications technology (ICT), Kenya was a technological backwater. Access to the internet was available only through satellite connections and was wallet-sappingly expensive. In 2009 Mr Ndemo brought the first of four undersea internet cables to the Kenyan coast. Prices plummeted and bandwidth exploded. Just under 12m of the country’s roughly 40m people now use the internet, a number that has trebled since 2009.

Second, Kenya has undergone a revolution since 2007, when M-PESA, a mobile-payments system operated by Safaricom, a phone company, was launched (see chart). Many start-ups use it as a base for their business. One team streamlined the payment of school fees through the service by helping institutions and parents keep track of upcoming and late deposits. Another offered an electronic version of Kenya’s popular informal savings groups. M-PESA has also inspired others. In May Google launched Beba, a pre-paid card for commuters using Nairobi’s local buses. Insiders say that this is a test run for a much larger cashless-payment system.

Third, since 2010 Nairobi has had a place, called the iHub, for local techies to get together and exchange ideas. The iHub has expanded to include a consulting arm, a research department and an incubation space called m:lab, which supports start-ups developing mobile applications.

Will Nairobi then compete with other emerging tech hubs such as Bangalore and Tel Aviv? Not at once, says Joe Mucheru, head of Google in Kenya. Nairobi has exported two notable innovations: M-PESA (which began life in London) and Ushahidi, a non-profit platform for crowdsourcing information during disasters. But most Kenyan tech firms are coming up with solutions to local problems. One team has built a service to help poultry farmers, who waste hours sitting around watching their chickens, keep track of their brood with text-message alerts. “We need to solve the nitty-gritty first and then we can invent new things,” says Mr Mucheru.

Yet this may ultimately be the key to Kenya’s success. “We have so many problems that can also be opportunities,” says Mr Ndemo. M-Farm, a service that gives farmers access to market prices for the cost of a text message and allows them to group together to buy and sell products, has won several supporters and awards. It is the sort of thing Kenya could export to other poor countries.”

Even taken with the necessary pinch of salt (tech fixes are seldom a pain-free substitute for sorting out inequality, injustice and exclusion), these are still fascinating developments. And I’m still waiting for a really convincing explanation of Kenyan exceptionalism: according to the accompanying editorial, Safaricom handles more than half the world’s mobile money transactions.

August wonkwar 3: Martin Ravallion v Ricardo Fuentes on inequality

August was wonkwar month here on the blog, with an epic exchange on private v public provision of education, featuring Kevin Watkins v Justin Sandefur. Then I got all cranky about a new paper on NGOs and development. And now a third, and final, exchange (much the most polite) as World Bank poverty guru Martin Ravallion (right) responds to Ricardo Fuentes’ recent post on inequality (and Ricardo responds to his response). First, Martin’s piece:

Equity and development: Oxfam versus the World Bank? Maybe not
I was pleased to read that Ricardo Fuentes, the new head of research at Oxfam, views equity as important for better development outcomes. Ricardo contrasts his views with those of the World Bank, and singles me out as a key protagonist. But Ricardo over-simplifies and even misrepresents my views, and the debate more broadly.

Ricardo characterizes what he sees as the old view that inequality is unimportant. He rejects the view that “income inequality is not relevant as long as the poor benefit.” My own work on pro-poor growth is cited as an example of this view.

It is true that I think that concerns about poverty–broadly defined–trump inequality as a characterization of overall development goals. But that does not mean that inequality is unimportant. As I have said often, along with other researchers, how much growth reduces poverty–how pro-poor it is–depends crucially on the initial inequality and what happens to inequality during the growth process. See, for example, this paper of mine from 12 years ago. As I wrote in the title of one paper, “Inequality is Bad for the Poor” (paraphrasing the title of a paper that Ricardo refers to, “Growth is Good for the Poor,” by colleagues in the Bank’s research department; believe it or not, debate is commonplace within the World Bank). In fact this idea goes back to my research in the 1990s.

To say, as Ricardo does, that “one of the major drawbacks of the early-2000s pro-poor growth approach of the World Bank was that they completely neglected the issue of fairness” is simply ludicrous. Since the 1990s it has been recognized that inequality– “fairness” if you wish–is highly relevant to progress against poverty.

Ricardo sees a change in attitudes to equity since 2000 or so, toward an emphasis on equity. According to him, “Even the World Bank, with its World Development Report 2006: Equity and Development, dramatically changed its position.” This is begrudging praise of sorts. But wait: the WDR was also making an instrumental case for equity, as a means of promoting better development outcomes, including more inclusive growth and (hence) poverty reduction. So the WDR might equally well be represented as saying that inequality is only relevant if it is good for development. Maybe Ricardo’s praise is unwarranted.

I readily grant that, prior to the 2006 WDR, the Bank (along with virtually the entire community of development economists) had not given nearly enough emphasis to the costs of inequality. Actually, that is still true. The 2006 WDR marked an important change, based on prior research, though there is more work to do. But it remains true that the WDR was also about the instrumental value of equity.

More recent evidence has re-affirmed that certain kinds of inequality are particularly harmful to pro-poor growth–both in generating less growth and in making that growth less poverty-reducing. My paper “Why Don’t we See Poverty Convergence?” argues that poverty itself may well be the key aspect of initial inequality that impedes poverty reduction. Thus we are now starting to understand how poverty can self-perpetuate, even with seemingly sound economic policies. 

In the end, I really don’t think there is that much disagreement. Maybe we should move the discussion toward how we can actually attain our shared goals of a world free of poverty. Sustainably promoting relevant dimensions of equity will be crucial, as will efficiency-enhancing reforms. More on both please from Oxfam’s well-intentioned new head of research.

Response from Ricardo Fuentes (left)
I am very pleased to read Martin Ravallion’s response to my blog post on inequality. Martin has of course been a key player in many intellectual debates on poverty, growth inequality and numerous other issues.

But his work, important as it is, is not the focus of my post. True, I cited his (and S Chen’s) definition of pro-poor growth [“By definition, “pro-poor growth” is growth that reduces poverty (Ravallion and Chen, 2003)”], because it has been very influential within and outside the World Bank. But the point I was making in citing their definition is the following: between 2009 and 2010 the richest 1 % in the US captured 93% of additional income. Let’s assume that the other 7 % was evenly distributed among the rest of the population (so that the poor also experienced a small increase in incomes and income poverty falls). This situation would be considered pro-poor under the above definition – but it also seems clearly unfair. This is where the definition is lacking. This dynamic is becoming unacceptable – as we can see from the Occupy movement and other public demonstrations as well as from higher echelons of power (for instance, in some of President Obama’s speeches.)

I agree that our disagreement is not major. If I should point to one difference, it is that I think that issues related to inequality are important in themselves, not only for their impact on poverty reduction. That’s where fairness comes in – we need more research on the direct effects of inequality on well being. Moreover, contrary to what Martin implies, I think that the WDR 2006 and the recent work of the World Bank on inequality of opportunity indeed deserve unqualified praise. It is true that the WDR 2006 didn’t develop the arguments about the intrinsic value of equity but they clearly raised them in page 7 of the Overview.

The World Bank will be an important voice when we try to answer the question “inequality of what?” It is great to see the World Bank working more on these topics. We shall doubtless engage in more discussions about this in the future.

In praise of the Edinburgh Festival

Please indulge me with this bit of off-topic blogging, because I’m just got back from a wonderfully restorative week at the Edinburgh Fringe, the world’s largest arts festival (this year, 25 days totalling over 2,695 shows from 47 countries in 279 venues). The format is a one hour maximum on performances, allowing you to hop easily (well, rush through the Scottish drizzle) between 3 or 4 shows in a day, based on your own personal cultural pick n mix. We concentrated on theatre and music and avoided the ubiquitous standup comedy.

The overall effect is extraordinary – a colonic irrigation/detox for the soul. For three weeks, Edinburgh becomes a Silicon Valley cluster/Olympic Games of the arts. From big theatres to pokey rooms in pubs, talent is flung carelessly at the audiences with abandon (‘Of course I can play ten instruments. And take the piss out of it at the same time’). Overall impressions from this year’s sample:

Authenticity. Lots of probing, honest and moving examinations of family, love and friendship

Plenty of Scottish texture from gritty Glasgow to haunting Hebrides

Some striking age hierarchies among audiences. Classical music drew the oldest clientele, comedy the youngest, with theatre somewhere in between and music according to genre (we saw two crazy Aussies perform the whole of Tubular Bells live in one hour – not surprisingly, most of the audience were my age, i.e. ancient)

I’m a great weeper, so with Edinburgh following on the Olympics, I’ve been at serious risk of dehydration for most of the summer. What got the highest ratings on my personal fringe lachrymometer? If any of these come to a venue near you, check out:

Mark Thomas, Bravo Figaro: the radical comedian gives an extraordinary personal account of his father, an east end builder turned opera lover

Beulah.  Sweet and wonderfully musical meditation on love and loss

And here’s another weepy highlight. Dick Gaughan’s rendition of the brilliant Robbie Burns poem Now Westlin Winds (this video is from 1983, but the song hasn’t change, even if the singer has….)

Thus with the summer (the what?) over, and emotional and spiritual flora restored (at least for now), it’s time to embark on a busy autumn. Trips to Ireland, Philippines, Bangkok and India. Lots of book launches for the second edition of From Poverty to Power, a hungry blog to feed, working with Oxfam staff on power analysis and theories of change, and (hopefully) getting started on the next book (watch this space). I’m a very lucky wonk.

And here’s the Guardian’s much more comprehensive (and pretty funny) highlights of the festival. If you’re within striking range of Edinburgh next August, may see you there.

Campaigning on education and the Robin Hood Tax (and wise counsel from Dilbert)

Keeping it visual and campaign-y today. First a nice 10 minute video on the role of civil society organizations in lobbying for better education (see previous education wonkwar debate if you want more analysis)

They certainly know a thing or two about campaigning in Germany, recently getting major German banks to drop commodity funds and (contrary to the stereotype) they even use humour, albeit in a rather disturbing way. Check out this new Robin Hood Tax video for a taster 

But if you think campaigning is just about ’speaking truth to power’, it’s probably worth pondering this Dilbert cartoon.

The hidden cost of hamburgers

The hidden cost of hamburgers. Do Americans really eat an average of 3 burgers a week? That must mean some are eating 10 or something – anyone got the distribution curve? [h/t Ricardo Fuentes]

Tackling a cinderella issue – lethal indoor pollution

In this guest post, Oxfam’s Ian Bray (left) looks at the latest developments in getting clean cookstoves to the world’s poor (and saving two million lives a year)

The recent massive electricity blackout across India received a great deal of media interest and comment. The coverage, with the exception of the ever excellent Onion, masked a deeper problem that for too long has been a Cinderella in the list of issues the aid world tries to address.

In India 500,000 people die each year because they don’t have access to modern energy sources. Globally nearly 2 million people, primarily women and children, die each year due to high levels of smoke in their homes from burning wood, animal dung or crop waste. It is a death toll greater than that of malaria. Yet while a great deal of effort has gone into tackling malaria, relatively little has been done on combating this ‘killer in the kitchen’.

One reason why this problem has not been so high on the development community’s agenda is a lack of knowledge about the crisis. So a quick romp through the issues:

Some 2.7 billion people, 39 percent of humanity, are reliant on biomass (wood, dung, crop waste etc) for cooking. Levels of smoke in the home from these fires are many times higher than safe recommendations. The smoke is a noxious mix of “carbon monoxide, particles, hydrocarbons, and nitrogen oxides.” It also “contains many organic compounds considered to be toxic or carcinogenic, such as formaldehyde, benzene, and polyaromatic hydrocarbons.”

The resultant health problems include acute lower respiratory infections, chronic obstructive pulmonary disease, lung cancer, pulmonary tuberculosis, low birth weight, cataracts, and asthma. In the countries with high mortality rates it constitutes the fourth greatest risk of death, disease and injury.

The burden falls heavily on women. They are not only exposed to massive levels of pollution in the home, but also have to walk miles carrying firewood. In many places this exposes them to the risk of violence.

Indoor air pollution is a problem caused by poverty. As people become wealthier they tend to cook on cleaner fuels such as kerosene, gas and electricity. The challenge is to find “ways to make people healthy before they become wealthy.”

Another reason why so little had been done is that there has not been sufficient scientific evidence to convince policy makers of the extent of the link between indoor air pollution and ill health. After a great deal of work that link is now generally accepted. Finally there is also little scientific evidence that relatively affordable technologies can reduce levels of smoke in the home that in turn leads to lower health risks. Last year the results of a study in Guatemala showed that simple chimney stoves could significantly reduce severe pneumonia in children.

And while the Guatemala study was in progress enter someone to take Cinderella to the ball: Hillary Clinton. In September 2010 she announced $50m seed money to the Global Alliance for Clean Cookstoves. The Alliance, which is a public-private partnership, has an ambitious target of introducing 100 million clean cookstoves by 2020. Indoor air pollution is now on the agenda, not all that high up, but there, nonetheless.

The technological solutions to the problem appear fairly straightforward and include using cleaner stoves, having chimneys or hoods to get the smoke out of the home and affordable cleaner fuels.

If only problems driven by poverty could be sorted by simple technology. Alas, it is never that simple.

The results of a recent seven year study in India showed that clean cookstoves that performed well in the laboratory performed badly in ‘real world’ settings. After an initial positive take-up, usage dropped off significantly and there was no effect on family health. The results were a blow to the Alliance but to its credit it took the findings on board, publicly at least. 

Besides getting the technology right the main challenge is to have solutions that are affordable, last long enough without breaking down, are easily maintained, and most important of all, desirable to the user. A tall order.

The next big hurdle is ‘going to scale’. With nearly 40 per cent of humanity requiring clean healthy ways of cooking that means a lot of stoves, and stoves that a suitable for each different setting. Can it be done?

China has been successful in introducing 175 million improved stoves and follow-up studies showed some 70 per cent were frequently in use. There have been some notable successful attempts in Sri Lanka and Kenya, but in general improved stoves programmes have not been all that successful. Learning the lessons from these relatively successful programmes will be key.

But ‘going to scale’ will not be easy. There are precious few examples of ‘going to scale’ in the development community. Micro-finance is one example, offering cash instead of in-kind aid may become another. But I can think of few others (do please suggest some).
Clearly there does need to be better evidence of what works, but the relatively poor performance of some improved cook stove programmes should not be used as an excuse for inaction. In the developed world it has taken many decades of massive public information campaigns to reduce cigarette smoking. The initial results of those campaigns were not encouraging. However governments stuck with it and found successful ways to reduce cigarette smoking. It will need similar level of commitments from governments to tackle indoor air pollution.

But who is going to push them in this direction? The Alliance may act as a catalyst for greater action and they have the ear of arguably the most powerful woman in the world.

But what of the members of the wider development community? I have always found it puzzling that many development agencies that are so genuinely committed to improving the position of women living in poverty have been so silent on this issue.

And here’s a TED talk on cookstoves

Africa’s other big BRIC – India

Some nice analysis of India’s African footprint in a new paper by Sumit Roy (right) in LSE’s Global Policy journal (ungated – props to them).

India’s exchange with Africa is rooted in the precolonial period with subsequent developments in the colonial and the post-colonial era. In the 18th century the territories were tied through migration and commerce. Indian links with business contacts in East Africa were utilised by traders through imports, exports and shipping.  India’s later ideological support unfolded through its challenge to racism. This is exemplified by Gandhi’s ‘Satyagraha’ movement in South Africa (1906-14) to fight for the rights of Indians. However, only the future will tell if Gandhi’s vision of the relationship will prevail and if “the commerce between India and Africa will be of ideas and services, not of manufactured goods against raw materials after the fashion of western exploiters.”

The basis of Africa policy by India, after its independence (1947), was laid down by the Prime Minister, Jawaharlal Nehru. This occurred on two fronts: first, the struggle against colonisation and racial discrimination in South Africa; second, to supporting People of Indian Origin (PIO) to confront similar problems. Over the last four decades, India has given more than US $2 billion in technical assistance to countries in the South, with the bulk going to Africa.  In the last decade a number of initiatives have also promoted trade with the African private sector. This coexisted with the public sector. Most of the imports consisted of agricultural products, minerals such as copper, and oil, while exports comprised textiles, pharmaceuticals and engineering products.

India-Africa links climaxed in the India-Africa Delhi Summit held in April 2008 with the participation of 14 African countries. The aim was to reinforce firm partnerships in the core areas of trade, energy and cooperation and on global issues such as the UN reforms, terrorism and climate change.  However, India’s own interests were made explicit by its Petroleum Minister, Murli Deora, who declared “Africa is pivotal to our energy security and we have decided to have a sustained engagement with them.”

The rhetoric within the Delhi Declaration and the Framework for Cooperation, both of which emerged from the summit, set out to enhance mutual development. Firstly, they included a political document covering bilateral, regional and international issues of shared interest (exemplified by UN reforms, climatic change, WTO and international  terrorism); secondly, they centred on cooperation in major areas to stimulate development (education, science and technology, agricultural productivity, food security, industrial growth, infrastructure health). India’s pledges were reiterated at the second India-Africa Summit in Addis Ababa, Ethiopia in May 2011 with goals of boosting trade from $45 billion in 2011 to $70 billion by 2015, providing an additional $500 million of aid to the $5.4 billion already promised, and building capacity. Despite these promised engagements India still lags behind China, whose trade with Africa is over $130 billion.

In terms of FDI, India, with strong historical ties with Eastern and Southern Africa, and a sizable diaspora, has exerted leverage by attracting new investment to Africa. This has been supported by its access to foreign reserves and its decision to lift regulations and controls on firms operating abroad. It has also been investing in new sectors including financial, food processing and light manufacturing. This has coexisted with the aggressive use of state-owned development banks to invest heavily in key sectors in countries like Nigeria and Sudan; a policy that India hopes will secure its strategic economic interests centred on Africa’s oil, gas and other natural resource-based industries.

Overall, Indian companies have been making major investments in copper mining, as in Zambia, and iron ore and steel refining, as in Liberia and Nigeria. Investment by Indian companies also extends to infrastructure. To illustrate, state-owned infrastructure and engineering companies RITES and IRCON have supported Africa’s rail and road development and its engineering companies. Furthermore, the recent investment pattern in Africa indicates future possibilities in industries, chemicals and pharmaceutical production, iron and steel mining, textiles, transport, banking and the retail sector. This has been led by major private (eg. the Tata Group and Mittal Steel) and public (e.g. RITES and IRCON) companies. Moreover, the Indian state has supported the public companies through credit (e.g. Exim). The hope of building critical human capital (health and education) has also been aroused by the creation of an Indian pan African e-network to link 53 African countries to Indian universities and hospitals.

If fossil fuel subsidies are so bad, why can’t we get rid of them? Time for some politics

My mate Matthew Lockwood (right) has decided (again) to abandon development and focus on UK climate change issues. In an earlier exit (from development to climate change) he wrote The State They’re In, a brilliant book on the political economy of African development. This time, as he heads for the exit, he is writing some valedictory posts on some of the biggest dilemmas he has worked on as head of the climate change team at IDS. He is always worth reading.

“In trying to put together the climate policy and development agendas over the last couple of years, one issue that I really think is very important but doesn’t receive enough attention from both policy makers and researchers is why it is proving so hard to reform subsidies for oil, electricity and coal in developing countries.

In recent years $500 billion a year or more has been spent globally on making high-carbon fuels cheap, with around 40% of that coming from developing countries, including some of the big emerging economies such as China, India, Indonesia and South Africa.

From a policy perspective, reducing fossil fuel subsidies is a no-brainer. To begin with, they are a kind of negative carbon pricing (i.e. a carbon subsidy). Moreover, the lion’s share of the benefits is captured by the middle classes rather than the poor. The IEA estimates that of $22.5 billion spent by India on fossil fuel subsidies in 2010, less than $2 billion benefitted the poorest 20% of the population. Such patterns are fairly typical – ratios for Indonesia, Thailand, Pakistan and South Africa were similar, and only slightly better for China. As a form of social protection, subsidies are very poorly targeted.

Subsidies take up fiscal resources that could be spent on public services or better targeted social protection. In some Indian states in the mid-2000s, as much as 50% of the state budget went on subsidies to (largely coal-fired) electricity. Up until 2009, Indonesia spent more on energy subsidies than on health, education, social security and defence combined.

Small wonder then that in the run up to this year’s G20 and Rio+20 summits on-line campaigning group Avaaz called for an end to “black subsidies”. The group wanted to see a “climate spring”, launching a petition that would persuade world leaders to phase out fossil fuel subsidies once and for all. Simples.

Or not so simples. Reform of subsidies has in fact been on the G20 agenda since the Pittsburgh Summit in 2009, but has proved difficult to achieve in practice, despite the fact that large rises in oil prices in recent years have ratcheted up the fiscal costs for governments.

Where attempts at subsidy reduction or removal have taken place, they have often been reversed within a few days (e.g. Ghana in 2008, Nigeria in 2012), postponed (Indonesia in 2012), or at best been highly partial (India since the 1990s). Fuel price rises often provoke violent street protests – the most recent example is Sudan, which follows a series of riots this year sparked off by reform attempts in Nigeria in January and Indonesia in March.

David Victor, a Stanford political scientist working with the Geneva-based Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development, argues that governments give subsidies as part of a political bargain – they are “a visible way to deliver benefits in exchange for political support”, and administratively cheap and easy to deliver compared to alternatives. Once a subsidy is there, it gets locked-in and often increased, as it becomes a key symbol of populist action by successive politicians.

The political role played by subsidies is then key to understanding how a reform package might be more successful. Victor suggests several lessons for reformers. One is that any reform strategy must begin with the political logic that led governments to create the subsidy – powerful interests that currently benefit have to be compensated or reform has to be inoculated from their opposition. A second is that transparency about the costs and purpose of subsidies usually aids reform. Another is that it is very helpful to have available or to develop better administrative tools for redistribution, to replace broad spectrum subsidies, which are a blunt instrument.

Thus, for example, Ghana’s 2005 reform of fuel subsidy reductions succeeded where previous efforts failed partly because good information about the costs and the incidence of subsidies was widely shared with key stakeholder groups like trade unions. In Indonesia in 2005, a new alternative form of compensation for poor households was introduced in the form of a means tested safety net which allowed subsidy reduction without major protests. The GSI has started to propose reform packages for specific countries based on this explicitly political approach.

But perhaps one of the most difficult issues in the politics of subsidy reform concerns the compensating measures that are widely seen as necessary to legitimise reform. Even though poor households capture only a small part of the direct benefits of subsidies, the effects of subsidy removal on their incomes is proportionately higher than for better off households. This is partly because of the indirect effects of subsidy reduction or removal – higher fuel costs increase the price of everything that is moved by road, including food. As a result, a key component of reforms is now the introduction of better targeted social protection for the poor. For example, in Indonesia in 2008, following unsuccessful attempts at subsidy reduction in 1998 that led to protests that ultimately toppled the government, a reform programme included a cash transfer scheme called Bantuan Langsung Tunai (BLT) to compensate for the fuel price increase. This was an ambitious scheme designed to reach about a third of the population. Current plans for further subsidy reform, due to be renewed in the autumn, include an updated version of BLT called BLSM. However, the BLT has proven controversial, in large part because the targeting process left the door open to corruption and politicisation of the benefit. Unlike a fuel price, which people can monitor easily, a non-universal benefit is inherently more open to discretion (and thus, corruption). Unhappiness about the history of BLT is now a big factor in resistance to the current round of reform.

A possible explanation of what is going on here comes from new institutional economics in the form of a “commitment problem”. If corruption is a major problem, promises to compensate people for the loss of fuel subsidies with a targeted benefit face a big credibility problem. People see that there is no incentive for ruling regimes to eliminate corruption and distribute resources fairly, and there is no impartial third party which can enforce the promise. This partly explains why Nigerian demonstrators held placards saying “Remove corruption, not subsidy”.

Thus in some situations, while there may be a set of ideal, or “first-best” designs for reforms, these may not be possible, and second-best responses will be more realistic. For example, if compensating targeted benefits are not a credible element of a reform package, then alternatives will have to be considered. These may include consumer food subsidies, which do often have drawbacks, but may not be as damaging as fossil fuel subsidies.

There is a real need for more research to look at the dynamics of reform from these perspectives. As oil prices rise, as the climate challenge grows, the pressure to resolve the fuel subsidy issue will only increase. It is of course a laughable cliché for an academic to say that “more research is needed”, but this really is an area where a better understanding of the political economy of reform could help bring about practical change that benefits poor people and the environment in a major way.”

Matthew Lockwood is a Research Fellow at the Institute of Development Studies at the University of Sussex. From October 2012 he starts work on a four year project on innovation and governance in the UK energy sector.

Intern wanted; Owen Barder, Elinor Ostrom and a falling cat on change, complexity and development; rapid welfare states in China and Mexico; Tyler’s evil exam question: links I liked

I need an intern to work with me to launch the 2nd edition of From Poverty to Power. Despite last week’s rant, I’m usually quite friendly, honest…..

Owen Barder introduces development in text and online, through a one hour presentation, starting with THAT toaster (right)

‘Colonial powers assumed we have the answers, and destroyed social capital. Aid agencies, unfortunately, do much the same thing.’ From Ben Ramalingam’s interview on complexity and development with the late Elinor Ostrom

Some astonishingly fast progress on building welfare states in emerging economies. China has enrolled 240m people into its rural pension scheme in the last 2 years. National coverage is now up from 30% in 2009 to 55%. And Mexico has achieved universal health coverage by enrolling 52.6m people in less than a decade . Doesn’t say anything about quality of course, but still….

Nightmare (but brilliant) exam question from Tyler Cowen

Theories of change slot. Here’s a low budget video of me discussing ToCs with Simon Batchelor after that workshop I blogged on recently. But this is much better: two students giving a class on theories of change, and a cat falls through the ceiling on top of them. Hope they were doing complexity and non-linearity….. Best wonky twitter comment from Brett Keller – ‘would be so much better if it were a lesson on quantum mechanics!!’ (geddit? Schrodinger’s cat – keep up!) [h/t Global Voices]

I’m off kissing the air (mwah mwah) at the Edinburgh Festival this week, but I’ve stacked up a few guest blogs to keep you busy. Just don’t expect me to reply to comments.