Creating a Sustainable Future
Aid – What Approaches Work and When?
Understanding poverty at the local level
Randomized control trials enable donors and governments to use evidence as a basis for making policy decisions and have the potential to improve the effectiveness of aid dramatically. The Poverty Action Lab (PAL) has conducted 240 trials in forty countries, and the evidence emerging from them begins to provide a detailed understanding of the problems facing the poor as well as the most effective solutions.
Often these are straightforward solutions to everyday problems of communication and convenience, understood by people on the ground. For example, PAL found that water quality improved when free chlorine dispensers were placed within easy reach of community water sources; that students stayed in school longer when parents were given information on the higher wages earned by graduates; and that teachers were more motivated when students were offered merit scholarships.
Fertilizer was underused in much of Africa, which didn’t make sense. So researchers investigated and found that many farmers don’t use fertilizer, even though they know it would improve their harvest, because they can’t save the money they earn from a harvest long enough to be able to spend it on fertilizer when it’s needed for planting. Fertilizer shops often don’t have fertilizer after the harvest when farmers have money to buy it, and it is inconvenient for farmers to keep coming into town to see if there’s fertilizer in stock. When there is money in the house, things always come up and the money disappears; and if there’s no money available, urgent matters are re-evaluated and alternatives found. As noted in their book Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty Banerjee and Duflo noted that a farmer put it exactly: “When we have the money, they don’t have fertilizer. When they have fertilizer, we don’t have money.” Once an innovative program called The Savings and Fertilizer Initiative was set up offering farmers an opportunity to buy fertilizer vouchers right after the harvest, the number of farmers using fertilizer increased by 50%. One study showed that it increased farmer’s net income by more than 50%.
The views of most experts on poverty and development fall into two main categories. There are those, who, like Jeffrey Sachs of Columbia University, believe that some countries are in a “poverty trap” – in other words, that the poor cannot get out of poverty because there are not enough chances for advancement – and as a consequence they need a “big push” to get out.
Sachs argues that if public investment and foreign aid are large enough, they will boost household incomes, spurring savings and boosting local investment and encourage external investment by improving infrastructure. In 2006 he initiated the “millennium village project”, choosing 14 places in rural Africa with about 500,000 people and made them the subjects of a $150m project run by his university and African governments.
According to an article in The Economist in 2011, “If the aim of the project is to boost income, investment and economic diversification, it is not clear that these goals are being achieved. For $60 per person per year (which increases the income of the poorest villagers by well over 25%) the project has improved village life only a little more than it would have improved anyway. … So far, the project provides little evidence that ‘big push’ development—advancing on all fronts, flags flying—is better than the alternative: gradual, step-by-step changes to remove specific barriers to growth.”
Economist Bernadette Wanjala of Tilburg University in the Netherlands, raised further doubts about the project. She interviewed 236 randomly selected households in Sauri who had been offered the benefits and 175 randomly selected ones who had not. In a study with Roldan Muradian of Radboud University, she concluded “the first group had raised their agricultural productivity by an impressive 70%. Yet she found that the impact on household income was ‘insignificant’, and that there had been little extra saving or investment. The villagers had grown more food—and eaten it. They became better nourished, which was positive, but this did not affect the wider economy.”
The negatives resulting from large aid investments, as William Easterly and others have noted, often appear to outweigh the positives. Large investments of foreign aid tend to harm governance by increasing the size of the government sector, which increases corruption. For example, large sums are expended on fraudulent procurement and graft falsely identified as “development expenditures.” These large amounts also encourage a level of aid dependence that has a retarding effect on growth and development, since there is no perceived pressure to reform while money is flowing in.
Without testing the poverty trap theory on a case-by-case basis it’s not possible to really know the situation, although according to the Easterly in a working paper published by the Center for Global Development as early as 2005:
“the description of poverty traps, Big Pushes, and takeoffs as a justification for foreign aid receives scarce support in the actual experiences of economic development. The paper instead finds support for democratic institutions and economic freedom as determinants of growth that explain the occasions under which poor countries grow more slowly than rich countries. ... development happens when many agents have the institutional environment that allows and motivates them to take small steps from the bottom, as opposed to development happening from a Big Push planner at the top…”
Once a problem is understood, and, as Easterly suggests, if all parties are engaged from the bottom up, holistic approaches can be successful. By 2012 Malawi had suffered from four years of drought, but not everyone suffered thanks to an effort by a Catholic Relief Services Consortium and USAID. They worked with about 20 percent of the population in eight of the drought-prone districts, offering “a comprehensive program that integrated a variety of activities to address food insecurity: conservation agriculture, treadle pump and gravity-fed irrigation, alternative drought-resistant crops, reforestation, watershed revitalization, fish farming, nutrition, HIV/AIDS prevention and care, sanitation, fuel saving stoves, and village savings and loans.” Farmers planted different crops like chilies, which can survive with less water and are worth five times more than corn. In the 2011 marketing season, farmers in the program sold, as a group, pigeon peas, birds’ eye peas, chilies, rice, sesame and cow peas for more than 34 million Malawi Kwacha—the equivalent of almost $129,000. And the positive results had a ripple effect – neighbors copied these farming practices on their own land. Innovations like these can help end famine and reduce the need for emergency aid. Farmers were able to expand and innovate: they were able to set up fish farms and create village savings and loans associations enabling families for the first time to buy essentials like food, medicine and clothing.
The Economist print edition dated August 1, 2015 reported on a seven-year, six-country study of more than 10,000 households which provided assets like cows, goats or chickens to the very poor and training on how to look after them. They also gave temporary income to support the families involved to help them resist the inevitable temptation to eat their potential source of income. This model, which included visits from program workers to reinforce the training and bolster confidence, was followed by local NGOs in Ethiopia, Ghana, Honduras, India, Pakistan and Peru. The NGOs also provided a safe way for participants to save money.
The results were promising. At the end of the programs, roughly two years after participants first enrolled, their monthly consumption of food had risen by around 5% relative to a control group. Household income had also risen, and fewer people reported going to bed hungry than in control households. The value of participants’ assets had increased by 15%, which suggests that they had not improved their diets by eating their chickens, etc. Rather, each person in the program spent an average of 17.5 more minutes a day working, mostly tending to livestock—10% more than their peers. (The impact did still vary by country, being weakest in Honduras and Peru and strongest in Ethiopia.) Even more striking, the program had strong, lasting effects on consumption and asset values even for the poorest tenth of households it reached—the poorest of the poor.
Perhaps most important, when the researchers went back and surveyed households a year after the program had ended, they found that people were still working, earning and eating more. Were these gains to persist an additional year, the researchers estimate that the program would have benefits of between 1.33 and 4.33 times what was spent on it. (The only exception is Honduras, where it did not break even, in part because the chickens that many people chose to receive kept dying.)
Many aid policies have failed not because of corruption or bad intentions, but of ignorance, where the model employed was inaccurately conceived, or the implementation strategy used didn’t work in the specific community. Careful evaluations of relatively modest interventions are helping researchers find what works and identify many cost-effective programs which improve people’s lives, such as deworming, dietary supplements, and vaccinations. Knowledge of local conditions, experimentation, independent evaluation, accountability, and feedback are key to finding the appropriate solutions, since every community has specific needs and priorities which aid organizations need to address. A good example is PROGRESA in Mexico: it pays mothers to keep their children in school and take them to health clinics for check-ups and nutritional supplements. The program both reduces illness and increases school enrollment; children are better able to concentrate and more eager to learn knowing their mothers’ benefits depend upon their staying in school. Once the success of this program became apparent, it spread to other parts of Mexico. Researchers in Kenya found that attendance was 25 percent higher when preschools provided free breakfast; another rather obvious study showed that students did better on tests once they were provided with textbooks.
Some programs are replicable while others are not, and even with those that are, the local environment dictates how.
Intestinal worms infect 2 billion people worldwide causing anemia and listlessness, and children are especially at risk. In Kenya, when International Child Support asked the parents to pay a few cents for deworming their children, almost all of them refused. The Kenyan government now has a program for deworming all children ages 2–14 who attend school. Investment in deworming programs is not expensive and in some cases is the only way that children will get the treatment they need.
Sleeping under insecticide-treated bed nets can halve the number of people who get infected with malaria, which caused 1 million deaths in 2008. At that time, one fourth of the children who died in Africa did so because of Malaria, so providing these nets universally seemed obvious. Nevertheless the implementation of the effort had to be studied in comparable groups to find the most effective delivery solution for each situation. For example, it was generally believed that people are always more likely to use something they have paid for and that if things are too cheap, they are not valued. But several studies show that people do use things they get for free. In one study comparing people who purchased subsidized bed nets and those who got them for free, between 60 and 70 percent used them in both situations. Another study in Kenya found demand was low until the cost was brought down substantially, and highest when clinics offered them for free. Another found that the percentage of people willing to buy a bed net increased only slightly as income rose.