Aid by Xavier Sala-i-Martin Columbia University New York, April 2007.

AidAidbyby

Xavier Sala-i-MartinXavier Sala-i-Martin

Columbia UniversityColumbia University

New York, April 2007New York, April 2007

Let me introduce...Let me introduce...

My GirlfriendMy Girlfriend

Empirical EvidenceEmpirical Evidence

It is Not clear that Development Aid has It is Not clear that Development Aid has positive effects (Easterly, Levine, Rodman positive effects (Easterly, Levine, Rodman 2003). 2003).

It may even have negative effects (Rajan It may even have negative effects (Rajan and Subramanian 2006)and Subramanian 2006)

Why?Why? CorruptionCorruption Misalocation of TalentMisalocation of Talent Culture of dependency and subsidyCulture of dependency and subsidy

The World of International The World of International Development AidDevelopment Aid

Many Players:Many Players: International Institutions (IMF, WB, United Nations, International Institutions (IMF, WB, United Nations,

OECD,..OECD,.. Development Ministries of rich countries (USAID, Sweden, Development Ministries of rich countries (USAID, Sweden,

etc).etc). NGOs (non-profit organizations)NGOs (non-profit organizations) Left-Wing radicals (antiglobalization people)Left-Wing radicals (antiglobalization people) Right-Wing radicals (including some churches)Right-Wing radicals (including some churches) Great Men and Women: Jeffrey Sachs, Kofi Annan, Great Men and Women: Jeffrey Sachs, Kofi Annan,

Desmond Tutu, Rigoberta Menchu, Subcomandante Desmond Tutu, Rigoberta Menchu, Subcomandante Marcos, the Pope, the Dalai LamaMarcos, the Pope, the Dalai Lama

Great Economists: Angelina Jolie, Bono, Tony Blair, Bob Great Economists: Angelina Jolie, Bono, Tony Blair, Bob Geldof, Al Gore …Geldof, Al Gore …

Well Intended people... But good intentions are Well Intended people... But good intentions are NOT enoughNOT enough

Mechanisms that Work Mechanisms that Work

MarketsMarkets Suppliers need to listen to customersSuppliers need to listen to customers Responsibility/Accountability if don’t Responsibility/Accountability if don’t

supply what’s wanted supply what’s wanted Why?Why?

Customer has something the supplier Customer has something the supplier wants (money)wants (money)

Firms Customers

Information

Products

Money

Mechanisms that Work Mechanisms that Work

Liberal DemocracyLiberal Democracy Listen to “customers”Listen to “customers” Responsibility/Accountability Responsibility/Accountability

Why?Why? Customer has something the supplier Customer has something the supplier

wants (votes)wants (votes)

Politicians Voters

Information

Policies

Votes

AfricanCitizens

AfricanBureaucrats

WBBureaucrats

Donors

X?

The Aid World

IDAIDA

This means This means We DON’T KNOW what worksWe DON’T KNOW what works ... and we don’t have incentives to ... and we don’t have incentives to

LEARN!LEARN! We don’t have incentives to SATISFY We don’t have incentives to SATISFY

CUSTOMERS (African citizens). CUSTOMERS (African citizens). We have incentives to SATISFY DONORS We have incentives to SATISFY DONORS

(rich citizens and rich governments)!(rich citizens and rich governments)! Perverse outcomes!Perverse outcomes!

IDA: Citizens of RICH IDA: Citizens of RICH World (Donors)World (Donors)

Donors have their own preferences Donors have their own preferences (which may not coincide with true needs)(which may not coincide with true needs) Sharon Stone and MalariaSharon Stone and Malaria Prostitution vs ARVsProstitution vs ARVs

Donors confuse Inputs and Outputs Donors confuse Inputs and Outputs (because they are satisfied with (because they are satisfied with SPENDING, not getting results)SPENDING, not getting results) Ten things you did not know about the WorldTen things you did not know about the World

Bank Bank Donors have GRAND utopian PLANS to Donors have GRAND utopian PLANS to

save the worldsave the world Jeffrey Sachs, Bono, Tony Blair and Angelina Jeffrey Sachs, Bono, Tony Blair and Angelina

Jolie vs Bill EasterlyJolie vs Bill Easterly

IDA: NGOsIDA: NGOs

Donors are not accountable (unlike Donors are not accountable (unlike firms or politicians)firms or politicians) Oxfam and Cashew Nuts Oxfam and Cashew Nuts

Donors only do things that are seen Donors only do things that are seen as “benevolent”as “benevolent” BUT Maybe the solution is investment, BUT Maybe the solution is investment,

sacrifice, hard work...sacrifice, hard work... Maybe Promotion of BUSINESS is the Maybe Promotion of BUSINESS is the

key!key!

Should we STOP IDA?Should we STOP IDA?

No.No. But we should do it in a way that But we should do it in a way that

allows us to LEARN.allows us to LEARN. The problem is NOT that we do not The problem is NOT that we do not

have ideas. We have plenty of ideas. have ideas. We have plenty of ideas. The problem is that we do not know The problem is that we do not know WHICH ONES WORK!!!WHICH ONES WORK!!!

Evaluation and LearningEvaluation and Learning

Some programs work in small scale in Some programs work in small scale in particular places (for example, AIDS clinics by particular places (for example, AIDS clinics by San Egidius company in Maputo, Mozambique)San Egidius company in Maputo, Mozambique)

Before they are “scaled up” we need to know Before they are “scaled up” we need to know whether they will work “in general”: some whether they will work “in general”: some programs will work in different environments programs will work in different environments and learning from experience may be helpful.and learning from experience may be helpful.

Knowing what works may lead efforts of many Knowing what works may lead efforts of many (NGOs, governments, IFIs, etc) in the correct (NGOs, governments, IFIs, etc) in the correct direction and not to waste resources on things direction and not to waste resources on things that do not work (or may be cost-ineffective).that do not work (or may be cost-ineffective).

Good Empirical Methodology for Evaluation: Good Empirical Methodology for Evaluation: RANDOMIZED FIELD EVALUATIONRANDOMIZED FIELD EVALUATION

Randomized Field Randomized Field ExperimentsExperiments

Programs targeted to individuals or Programs targeted to individuals or local communities, such as sanitation, local communities, such as sanitation, education, and health programs and education, and health programs and local government reforms, are likely to local government reforms, are likely to be strong candidates for randomized be strong candidates for randomized evaluations.evaluations.

Not all programs are (for example: Not all programs are (for example: effects of central bank independence on effects of central bank independence on inflation may not be)inflation may not be)

Randomized Field Randomized Field ExperimentsExperiments

Any impact evaluation attempts to answer essentially Any impact evaluation attempts to answer essentially counterfactual questions: counterfactual questions: How would individuals who did benefit from the program have How would individuals who did benefit from the program have

fared in the absence of the program? fared in the absence of the program? How would those who did not benefit have fared if they had How would those who did not benefit have fared if they had

been exposed to the program? been exposed to the program? Problem: Comparing the same individual over time will NOT, Problem: Comparing the same individual over time will NOT,

in most cases, provide a reliable estimate of the impact the in most cases, provide a reliable estimate of the impact the program had on him or her, because many other things may program had on him or her, because many other things may have changed at the same time that the program was have changed at the same time that the program was introduced. We therefore cannot seek to obtain an estimate introduced. We therefore cannot seek to obtain an estimate of the impact of the program on each individual. of the impact of the program on each individual.

All we can hope for is to be able to obtain the average All we can hope for is to be able to obtain the average impact of the program on a impact of the program on a group of individuals group of individuals by by comparing them with a comparing them with a similar group similar group that that was not was not exposed to the programexposed to the program..

Randomized Field Randomized Field ExperimentsExperiments

Critical objective: establish a credible comparison group (ie, a Critical objective: establish a credible comparison group (ie, a group of individuals who, in the absence of the program, group of individuals who, in the absence of the program, would have had outcomes similar to those who were exposed would have had outcomes similar to those who were exposed to the program). to the program). The comparison group gives us an idea of what would have The comparison group gives us an idea of what would have

happened to the program group if it had not been exposed, and happened to the program group if it had not been exposed, and thus allows us to obtain an estimate of the average impact on the thus allows us to obtain an estimate of the average impact on the group in question. group in question.

Generally, individuals who were subjected to the program and Generally, individuals who were subjected to the program and those who were not those who were not are very differentare very different::

programs are placed in specific areas (for example, poorer or richer programs are placed in specific areas (for example, poorer or richer areas)areas)

individuals are screened for participation in the program (for instance, individuals are screened for participation in the program (for instance, on the basis of poverty or on the basis of their motivation)on the basis of poverty or on the basis of their motivation)

the decision to participate is often voluntary. the decision to participate is often voluntary. Thus, those who were not exposed to a program are often Thus, those who were not exposed to a program are often not not

comparablecomparable to those who were. This is called: SELECTION BIAS to those who were. This is called: SELECTION BIAS We cannot decompose the overall difference into a treatment We cannot decompose the overall difference into a treatment

effect and a selection bias effect effect and a selection bias effect Ie, we cannot say if the increase in education of an education program Ie, we cannot say if the increase in education of an education program

is the result of the program working OR the reflection that the people is the result of the program working OR the reflection that the people who volunteered for the program were more excited about getting who volunteered for the program were more excited about getting educated!educated!

Randomized Field Randomized Field ExperimentsExperiments

One way to eliminate selection bias One way to eliminate selection bias disappears is to select the disappears is to select the treatment treatment group group and the and the comparison group comparison group randomly.randomly.

In this case, on average, we can be assured In this case, on average, we can be assured that those who are exposed to the program that those who are exposed to the program are no different than those who are not: are no different than those who are not: any statistically significant difference any statistically significant difference between them in the outcomes can be between them in the outcomes can be confidently attributed to the program. confidently attributed to the program.

Randomized Field Randomized Field ExperimentsExperiments

Better than “lab experiments” with Better than “lab experiments” with students because stakes are large students because stakes are large and the field experiment is about and the field experiment is about real life event (not a game played by real life event (not a game played by a student)a student)

Randomized Field Randomized Field ExperimentsExperiments EXAMPLE: An Indian NGO, Seva Mandir in India: EXAMPLE: An Indian NGO, Seva Mandir in India:

Problem: Schools are plagued by high teacher Problem: Schools are plagued by high teacher absenteeismabsenteeism. . Program: A second teacher, often a woman, was hired and randomly Program: A second teacher, often a woman, was hired and randomly

assigned to 21 out of 42 schools (Duflo and Hanna (2005)). assigned to 21 out of 42 schools (Duflo and Hanna (2005)). The hope was to increase the number of days the school was open, to The hope was to increase the number of days the school was open, to

increase children’s participation, and to improve performance by increase children’s participation, and to improve performance by providing more individualized attention to the children. providing more individualized attention to the children.

Teacher and child attendance were regularly monitored in program and Teacher and child attendance were regularly monitored in program and comparison schools for the entire duration of the project. comparison schools for the entire duration of the project.

Measuring Outcomes: Measuring Outcomes: The impact of the program on learning was measured by testing children The impact of the program on learning was measured by testing children

at the end of the school year. at the end of the school year. Results:Results:

The program reduced the number of days schools were closed: one-The program reduced the number of days schools were closed: one-teacher schools were closed 39 percent of the time, whereas two-teacher teacher schools were closed 39 percent of the time, whereas two-teacher schools were closed 24 percent of the time. schools were closed 24 percent of the time.

Girls’ attendance increased by 50 percent. Girls’ attendance increased by 50 percent. However, test scores did not differ.However, test scores did not differ.

DECISION:DECISION: Based on the pilot, the NGO decided NOT to scale up and use the money Based on the pilot, the NGO decided NOT to scale up and use the money

for something else!for something else!

Randomized Field Randomized Field ExperimentsExperiments EXAMPLE: Seva Mandir in India (again) EXAMPLE: Seva Mandir in India (again)

Problem: Schools are plagued by high teacher Problem: Schools are plagued by high teacher absenteeismabsenteeism. . Program: Program:

120 schools, 60 treated randomly. 120 schools, 60 treated randomly. The teacher is given a “tampering proof” camera that registers time and The teacher is given a “tampering proof” camera that registers time and

date of the picturedate of the picture Teacher has to take picture of himself WITH students at beginning and Teacher has to take picture of himself WITH students at beginning and

end of day.end of day. ““Valid” day is when beginning and ending times are separated by 5 hours Valid” day is when beginning and ending times are separated by 5 hours

or more and when there are enough students in the pictureor more and when there are enough students in the picture End of the month salary increases. Salaries in treatment group range End of the month salary increases. Salaries in treatment group range

from 500 rupees to 1300 rupees depending on valid days. Salaries in from 500 rupees to 1300 rupees depending on valid days. Salaries in comparison group are 1000 rupees regardless of attendancecomparison group are 1000 rupees regardless of attendance

Measuring Outcomes: Measuring Outcomes: School attendance of teacherSchool attendance of teacher

Results:Results: Absence rate was cut from 42% to 22%Absence rate was cut from 42% to 22% It completely eliminated delinquent behavior (less than 50% attendance)It completely eliminated delinquent behavior (less than 50% attendance) it increased “perfect score attendance” (in comparison schools, only 36% it increased “perfect score attendance” (in comparison schools, only 36%

of teachers had perfect record in treatment schools, 90%)of teachers had perfect record in treatment schools, 90%) Test scores of students in treatment schools increased of 0.17 standard Test scores of students in treatment schools increased of 0.17 standard

deviationsdeviations

Randomized Field Randomized Field ExperimentsExperiments Example: Progresa (Mexico) (now “Oportunidades”)Example: Progresa (Mexico) (now “Oportunidades”)

Problem: Low school and hospital attendance of poor girls in Mexican villagesProblem: Low school and hospital attendance of poor girls in Mexican villages Program: PROGRESA offers grants, distributed to women, conditional on Program: PROGRESA offers grants, distributed to women, conditional on

children’s school attendance and preventative health measures (nutrition children’s school attendance and preventative health measures (nutrition supplementation, health care visits, and participation in health education supplementation, health care visits, and participation in health education programs). programs).

In 1998, when the program was launched by Ernesto Zedillo (incidentally, an In 1998, when the program was launched by Ernesto Zedillo (incidentally, an economist!), officials made a conscious decision to take advantage of the fact that economist!), officials made a conscious decision to take advantage of the fact that budgetary constraints made it impossible to reach the 50,000 potential beneficiary budgetary constraints made it impossible to reach the 50,000 potential beneficiary communities of PROGRESA all at once, and instead started with a pilot program in communities of PROGRESA all at once, and instead started with a pilot program in 506 communities. 506 communities.

Half of those were randomly selected to receive the program, and baseline and Half of those were randomly selected to receive the program, and baseline and subsequent data were collected in the remaining communities (Gertler and Boyce subsequent data were collected in the remaining communities (Gertler and Boyce 2001).2001).

Measuring Outcomes: School attendance and hospital visitsMeasuring Outcomes: School attendance and hospital visits Outcome:Outcome:

Comparing PROGRESA beneficiaries and nonbeneficiaries, Gertler and Boyce Comparing PROGRESA beneficiaries and nonbeneficiaries, Gertler and Boyce (2001) show that children had about a 23 percent reduction in the incidence of (2001) show that children had about a 23 percent reduction in the incidence of illness, a 1 to 4 percent increase in height, and an 18 percent reduction in anemia.illness, a 1 to 4 percent increase in height, and an 18 percent reduction in anemia.

An average of a 3.4 percent increase in enrollment for all students in grades 1 An average of a 3.4 percent increase in enrollment for all students in grades 1 through 8. The increase was largest among girls who had completed grade 6: 14.8 through 8. The increase was largest among girls who had completed grade 6: 14.8 percent.percent.

Result:Result: The program was subsequently implemented in MANY countries around the worldThe program was subsequently implemented in MANY countries around the world

Randomized Field Randomized Field ExperimentsExperiments

Example: International Child Support Africa (ICSA).Example: International Child Support Africa (ICSA). Problem: low teacher attendance in KenyaProblem: low teacher attendance in Kenya Program: Program:

ICSA randomly chooses 50% of schools to participate in a ICSA randomly chooses 50% of schools to participate in a program. program.

They give prizes to teachers monetary prizes to teachers 4They give prizes to teachers monetary prizes to teachers 4thth to 8to 8thth grades whose students have “best grades” and “most grades whose students have “best grades” and “most improved grades”improved grades”

Prizes are about ½ of teacher’s monthly salaryPrizes are about ½ of teacher’s monthly salary Measuring outcomes: Measuring outcomes:

Teacher attendance and students’ gradesTeacher attendance and students’ grades Results:Results:

Teacher attendance in treatment schools was the same as Teacher attendance in treatment schools was the same as attendance of comparison group (there is a large fixed cost attendance of comparison group (there is a large fixed cost to attending school)to attending school)

Teachers in treatment schools devoted more time to prepare Teachers in treatment schools devoted more time to prepare their students to pass the tests and NOT more time to their students to pass the tests and NOT more time to education (teachers respond to incentives)education (teachers respond to incentives)

Randomized Field Randomized Field ExperimentsExperiments EXAMPLE: Seva Mandir and Children Immunization EXAMPLE: Seva Mandir and Children Immunization

Problem: Mothers do not take their children to the clinic for immunization Problem: Mothers do not take their children to the clinic for immunization (Shockingly, 1% of children are fully immunized at the age of 2)(Shockingly, 1% of children are fully immunized at the age of 2)

Surprising given that immunization is freeSurprising given that immunization is free It is thought that the problem is that clinic is far away and not always open (so cost It is thought that the problem is that clinic is far away and not always open (so cost

of long trip plus uncertainty may not compensate potentially large benefits) of long trip plus uncertainty may not compensate potentially large benefits) Program:Program:

Randomly select 68 of 135 villages and announce one day a month a health worker Randomly select 68 of 135 villages and announce one day a month a health worker will be there for sure (no travel involved for mothers)will be there for sure (no travel involved for mothers)

The health worker is given financial incentives to be thereThe health worker is given financial incentives to be there Of the 68 treatment villages, 34 are randomly selected to give a kilo of lentils to the Of the 68 treatment villages, 34 are randomly selected to give a kilo of lentils to the

mothers that immunize their children under 2 years of age mothers that immunize their children under 2 years of age Note: if the problem is “travel costs”, the main effect should come from installation Note: if the problem is “travel costs”, the main effect should come from installation

camps and lentils would have no additional effectscamps and lentils would have no additional effects Measuring Outcomes: Measuring Outcomes:

Immunization rates Immunization rates Results:Results:

Rates increase only slightly in treatment villages with immunization camp but no Rates increase only slightly in treatment villages with immunization camp but no lentilslentils

Rates increase DRAMATICALLY in villages where lentils are given. Rates increase DRAMATICALLY in villages where lentils are given. It turns out that the cost was not the travel cost. The problem is that mothers do It turns out that the cost was not the travel cost. The problem is that mothers do

not fully understand the benefits of immunization or have a very high discount rate not fully understand the benefits of immunization or have a very high discount rate (so that a small benefit of immunization today compensates the cost and a lower (so that a small benefit of immunization today compensates the cost and a lower probability of death 5 years down the road does not)probability of death 5 years down the road does not)

In SumIn Sum

One of the tragedies of aid over the One of the tragedies of aid over the last 50 years is that billions of dollars last 50 years is that billions of dollars were spent, the results were not were spent, the results were not positive … AND WE DID NOT EVEN positive … AND WE DID NOT EVEN LEARN WHY!!!LEARN WHY!!!

We should redirect our aid efforts in We should redirect our aid efforts in ways that, if they fail again, at least ways that, if they fail again, at least we learn why they failed so the we learn why they failed so the mistakes are not repeated.mistakes are not repeated.

It is time to STOP TEACHING and It is time to STOP TEACHING and START LEARNINGSTART LEARNING

EndEnd

Ten Things You Ten Things You Never Knew Never Knew

About the World About the World BankBankThe World Bank GroupThe World Bank Group

http://www.worldbank.org/http://www.worldbank.org/tenthings/tenthings/

The World Bank’s Priorities The World Bank’s Priorities Have Changed DramaticallyHave Changed Dramatically

Our work in more than 100 countries is Our work in more than 100 countries is challenging, but our mission is simple — to help challenging, but our mission is simple — to help reduce poverty. Over the past 20 years, our focus reduce poverty. Over the past 20 years, our focus has changed and so has our approach. We are now has changed and so has our approach. We are now dealing with newer issues like gender, community-dealing with newer issues like gender, community-driven development and the rights and role of driven development and the rights and role of indigenous people in development. indigenous people in development. Our support Our support for social services like health, nutrition, for social services like health, nutrition, education and pensions has grown from education and pensions has grown from 5 percent in 1980 to 22 percent in 20035 percent in 1980 to 22 percent in 2003. . Today, countries themselves are coming to us with Today, countries themselves are coming to us with their own plans for helping poor people, and we their own plans for helping poor people, and we have adopted new ways of working with them.have adopted new ways of working with them.

1. We are the World’s Largest 1. We are the World’s Largest

Funder of EducationFunder of Education Education is central to development. Education is central to development. We have committed We have committed

around US$33 billion in loans and credits for around US$33 billion in loans and credits for education, and we currently fund 157 projects in 83 education, and we currently fund 157 projects in 83 countriescountries. We work closely with national governments, . We work closely with national governments, United Nations agencies, donors, civil society organizations United Nations agencies, donors, civil society organizations (such as community groups, labor unions, Non Governmental (such as community groups, labor unions, Non Governmental Organizations and faith-based groups), and other partners to Organizations and faith-based groups), and other partners to support developing countries in their efforts to make sure support developing countries in their efforts to make sure that all children, especially girls and disadvantaged children, that all children, especially girls and disadvantaged children, are enrolled in and able to complete a primary education by are enrolled in and able to complete a primary education by 2015. A good example of our lending in this area is the India 2015. A good example of our lending in this area is the India District Primary Education Program, which specifically District Primary Education Program, which specifically targets girls in districts where female rates of reading and targets girls in districts where female rates of reading and writing are below the national average. writing are below the national average. Our support for Our support for this program has reached US$1.3 billion and serves this program has reached US$1.3 billion and serves more than 60 million students in 271 districts in 18 of more than 60 million students in 271 districts in 18 of the 29 Indian states.the 29 Indian states. In Brazil, El Salvador and Trinidad In Brazil, El Salvador and Trinidad and Tobago, the projects we support have helped local and Tobago, the projects we support have helped local communities increase their influence on the quality of communities increase their influence on the quality of education for their children by helping them to assess the education for their children by helping them to assess the performance of local schools and teachers.performance of local schools and teachers.

2. We Are the World’s largest 2. We Are the World’s largest External Funder in the fight External Funder in the fight

against AIDSagainst AIDS Each day, 14,000 people become infected with the HIV virus. Each day, 14,000 people become infected with the HIV virus.

HIV/AIDS is rapidly reversing many of the social and economic HIV/AIDS is rapidly reversing many of the social and economic gains that developing countries have made over the past 50 years. gains that developing countries have made over the past 50 years. As a sponsor of UNAIDS (the group that coordinates the As a sponsor of UNAIDS (the group that coordinates the international response to the epidemic), international response to the epidemic), in the past few years in the past few years we have committed more than US$1.6 billion to fight the we have committed more than US$1.6 billion to fight the spread of HIV/AIDS around the worldspread of HIV/AIDS around the world. We have also been one . We have also been one of the largest financial supporters of HIV/AIDS programs in of the largest financial supporters of HIV/AIDS programs in developing countries. We have promised that no country with an developing countries. We have promised that no country with an effective HIV/AIDS strategy will go without funding. In effective HIV/AIDS strategy will go without funding. In partnership with African and Caribbean governments, we partnership with African and Caribbean governments, we launched the Multi-Country HIV/AIDS Program (MAP), which launched the Multi-Country HIV/AIDS Program (MAP), which makes significant resources available to civil society organizations makes significant resources available to civil society organizations and communities. Many have developed original approaches to and communities. Many have developed original approaches to HIV/AIDS, which others are learning from and adapting to local HIV/AIDS, which others are learning from and adapting to local conditions. conditions. The MAP has made available US$1 billion to help The MAP has made available US$1 billion to help countries in Africa expand their national prevention, care countries in Africa expand their national prevention, care and treatment programs. and treatment programs.

3. We are the leader in the fight 3. We are the leader in the fight against corruption worldwideagainst corruption worldwide

Corruption is the single largest obstacle to development. It Corruption is the single largest obstacle to development. It increases wealth for the few at the expense of society as a increases wealth for the few at the expense of society as a whole, leaving the poor suffering the harshest consequences whole, leaving the poor suffering the harshest consequences by taking public resources away from those who need them by taking public resources away from those who need them most. Since 1996, most. Since 1996, we have launched hundreds of we have launched hundreds of governance and anticorruption programs in nearly 100 governance and anticorruption programs in nearly 100 developing countries. Initiatives range from requiring developing countries. Initiatives range from requiring government officials to publicly declare their assets government officials to publicly declare their assets and introducing public spending reforms, to training and introducing public spending reforms, to training judges and teaching investigative reporting to judges and teaching investigative reporting to journalists.journalists. Our commitment to fighting corruption has Our commitment to fighting corruption has helped to encourage an international response to the helped to encourage an international response to the problem. We also continue to make anticorruption measures problem. We also continue to make anticorruption measures a central part of our analytical and operational work. We are a central part of our analytical and operational work. We are committed to making sure that the projects we fund are free committed to making sure that the projects we fund are free from corruption, by setting strict guidelines and providing a from corruption, by setting strict guidelines and providing a hotline for corruption complaints. So far, about 100 hotline for corruption complaints. So far, about 100 companies have been banned from participating in projects companies have been banned from participating in projects that we finance. The World Bank Institute has also that we finance. The World Bank Institute has also developed a major knowledge, learning and data center on developed a major knowledge, learning and data center on governance and anticorruption. governance and anticorruption.

4. We Strongly Support Debt Relief4. We Strongly Support Debt Relief

In 1996, with the International Monetary Fund (IMF), we In 1996, with the International Monetary Fund (IMF), we launched the Heavily Indebted Poor Countries (HIPC) launched the Heavily Indebted Poor Countries (HIPC) Initiative— the first comprehensive effort to cut the debts of Initiative— the first comprehensive effort to cut the debts of the world’s poorest, most indebted countries. the world’s poorest, most indebted countries. Today, 27 Today, 27 countries are receiving debt relief that will amount to countries are receiving debt relief that will amount to US$52 billion over timeUS$52 billion over time. The HIPC Initiative, combined . The HIPC Initiative, combined with other types of debt relief, will cut by two-thirds the with other types of debt relief, will cut by two-thirds the external debt in these countries, lowering their debt levels to external debt in these countries, lowering their debt levels to below the overall average for developing countries. As part of below the overall average for developing countries. As part of the initiative, these countries are using government funds the initiative, these countries are using government funds freed up by debt relief for programs to cut poverty. For freed up by debt relief for programs to cut poverty. For example, Rwanda has set targets to hire teachers and example, Rwanda has set targets to hire teachers and increase the number of children who enroll in primary school. increase the number of children who enroll in primary school. Honduras plans to deliver basic healthcare to at least 100,000 Honduras plans to deliver basic healthcare to at least 100,000 people in poor communities. Cameroon is strengthening the people in poor communities. Cameroon is strengthening the fight against HIV/AIDS by, among other things, expanding fight against HIV/AIDS by, among other things, expanding education to promote the use of condoms by high-risk groups. education to promote the use of condoms by high-risk groups.

5. We are one of the largest 5. We are one of the largest international funders of international funders of

biodiversity projectsbiodiversity projects Since 1988, we have become one of the largest international Since 1988, we have become one of the largest international

sources of funding of biodiversity projects which protect our sources of funding of biodiversity projects which protect our world’s wide variety of animals, plants and other living things. world’s wide variety of animals, plants and other living things. Even though the loss of biodiversity is an international Even though the loss of biodiversity is an international concern, people who live in rural communities in developing concern, people who live in rural communities in developing countries feel the greatest effects since they are most countries feel the greatest effects since they are most dependent on natural resources for food, shelter, medicine, dependent on natural resources for food, shelter, medicine, income, employment and their cultural identity. For this income, employment and their cultural identity. For this reason, we have joined Conservation International, the Global reason, we have joined Conservation International, the Global Environment Facility, the MacArthur Foundation and the Environment Facility, the MacArthur Foundation and the Japanese government in a fund that contributes to the Japanese government in a fund that contributes to the protection of developing countries’ biodiversity hotspots, protection of developing countries’ biodiversity hotspots, which are the Earth’s biologically richest but most threatened which are the Earth’s biologically richest but most threatened places. Concern for the environment is central to our mission places. Concern for the environment is central to our mission to reduce poverty. Our environment strategy focuses on to reduce poverty. Our environment strategy focuses on climate change, forests, water resources, pollution climate change, forests, water resources, pollution management and biodiversity, among others. management and biodiversity, among others. Currently, Currently, projects we fund, that have clear environmental projects we fund, that have clear environmental objectives, amount to around US$13 billion.objectives, amount to around US$13 billion.

6. We work in partnership more 6. We work in partnership more

than ever beforethan ever before During the past six years, During the past six years, we have joined a large range of we have joined a large range of

partners in the international fight against povertypartners in the international fight against poverty. For . For example, to help reduce the effects of global warming, we example, to help reduce the effects of global warming, we worked with governments and the private sector to launch the worked with governments and the private sector to launch the new BioCarbon Fund and with the International Emissions new BioCarbon Fund and with the International Emissions Trading Association (IETA) to launch the Community Trading Association (IETA) to launch the Community Development Carbon Fund (CDCF). We are also working with Development Carbon Fund (CDCF). We are also working with the World Wildlife Fund to protect forests. With the Food and the World Wildlife Fund to protect forests. With the Food and Agriculture Organization (FAO) and the United Nations Agriculture Organization (FAO) and the United Nations Development Programme (UNDP), we sponsor the Consultative Development Programme (UNDP), we sponsor the Consultative Group on International Agricultural Research (CGIAR) which Group on International Agricultural Research (CGIAR) which mobilizes cutting-edge science to reduce hunger and poverty, mobilizes cutting-edge science to reduce hunger and poverty, improve human nutrition and health and protect the improve human nutrition and health and protect the environment. Through the Consultative Group to Assist the Poor environment. Through the Consultative Group to Assist the Poor (CGAP), we work with 27 other international and donor (CGAP), we work with 27 other international and donor organizations to provide access to financial services (such as organizations to provide access to financial services (such as loans and savings) for the poor, referred to as microfinance. A loans and savings) for the poor, referred to as microfinance. A partnership to defeat river blindness throughout Africa has partnership to defeat river blindness throughout Africa has successfully prevented 700,000 cases of blindness, opened 25 successfully prevented 700,000 cases of blindness, opened 25 million hectares of arable land to cultivation, and treats more million hectares of arable land to cultivation, and treats more than 35 million people a year for the disease. than 35 million people a year for the disease.

7. We are helping to bring clean 7. We are helping to bring clean water, electricity and transport to water, electricity and transport to

poor peoplepoor people While most people in the developed world take infrastructure (for While most people in the developed world take infrastructure (for

example clean water, electricity and transport) for granted, it is a example clean water, electricity and transport) for granted, it is a dreamed-of luxury in many parts of the world. Almost 1.4 billion people dreamed-of luxury in many parts of the world. Almost 1.4 billion people in developing countries do not have access to clean water. Some 3 in developing countries do not have access to clean water. Some 3 billion live without basic sanitation or electricity. Infrastructure is not billion live without basic sanitation or electricity. Infrastructure is not simply about the construction of large projects. It is about delivering simply about the construction of large projects. It is about delivering basic services that people need for everyday life, such as upgrading basic services that people need for everyday life, such as upgrading slums and providing roads to connect the poorest urban areas. slums and providing roads to connect the poorest urban areas. Infrastructure is also an important part of our efforts to help achieve the Infrastructure is also an important part of our efforts to help achieve the Millennium Development Goals. Delivering safe water has a direct effect Millennium Development Goals. Delivering safe water has a direct effect on reducing child death rates. Providing communities with electricity on reducing child death rates. Providing communities with electricity prevents women and children from having to spend long hours fetching prevents women and children from having to spend long hours fetching firewood for cooking and heating, and gives them more time for other firewood for cooking and heating, and gives them more time for other activities. Children especially are able to devote more time to activities. Children especially are able to devote more time to schoolwork. In Morocco, a road project we supported helped to increase schoolwork. In Morocco, a road project we supported helped to increase the number of girls who enrolled in schools from 28 percent to 68 the number of girls who enrolled in schools from 28 percent to 68 percent. Infrastructure also connects communities to the world around percent. Infrastructure also connects communities to the world around them. A rural electrification project in Ecuador is helping to improve them. A rural electrification project in Ecuador is helping to improve living standards and broaden opportunities by linking poor communities living standards and broaden opportunities by linking poor communities to telecommunications, electricity, the internet and business services.to telecommunications, electricity, the internet and business services.

8. Civil society plays a larger role 8. Civil society plays a larger role

in our workin our work The growth of civil society over the past 20 years has been one The growth of civil society over the past 20 years has been one

of the most significant trends in international development. of the most significant trends in international development. Civil society organizations (CSOs) — which include groups that Civil society organizations (CSOs) — which include groups that do not belong to government or the private sector such as, do not belong to government or the private sector such as, labor unions, NGOs, faith based organizations, community labor unions, NGOs, faith based organizations, community groups and foundations — are not only influential in the groups and foundations — are not only influential in the international development policy debate but have become international development policy debate but have become important channels for the delivery of social services and new important channels for the delivery of social services and new development programs. development programs. CSO involvement in projects we CSO involvement in projects we have funded has risen from 21 percent of all projects in have funded has risen from 21 percent of all projects in 1990 to about 72 percent in 2003. We are also 1990 to about 72 percent in 2003. We are also increasingly supporting CSOs by sharing more increasingly supporting CSOs by sharing more information and offering skills training. We also provide information and offering skills training. We also provide grants to CSOs to rebuild war-torn communities, provide grants to CSOs to rebuild war-torn communities, provide social services and support community development. Our social services and support community development. Our civil society staff in more than 70 offices around the civil society staff in more than 70 offices around the worldworld consult and work with CSOs on a range of issues from consult and work with CSOs on a range of issues from preventing AIDS and developing microcredit to fighting preventing AIDS and developing microcredit to fighting corruption and protecting the environment.corruption and protecting the environment.

9. We help countries merging from 9. We help countries merging from

conflictconflict We are active in 40 countries affected by conflictWe are active in 40 countries affected by conflict. We work . We work

with government and non-government partners (local and with government and non-government partners (local and international) to help people who have been affected by war, international) to help people who have been affected by war, resume peaceful development, and prevent violence from resume peaceful development, and prevent violence from breaking out again. Our work deals with a range of needs breaking out again. Our work deals with a range of needs including jump-starting the economy, repairing and rebuilding including jump-starting the economy, repairing and rebuilding war-damaged infrastructure and institutions, clearing landmines, war-damaged infrastructure and institutions, clearing landmines, helping people who fought in the conflict and refugees back into helping people who fought in the conflict and refugees back into society, and targeting programs at vulnerable people such as society, and targeting programs at vulnerable people such as widows and children. We have also developed tools and research widows and children. We have also developed tools and research to better analyze and understand the sources of conflict, and to to better analyze and understand the sources of conflict, and to promote economic growth and cut poverty in a way that reduces promote economic growth and cut poverty in a way that reduces the risk of future violence. Among the wide ranging projects that the risk of future violence. Among the wide ranging projects that we have supported are the reintegration of soldiers who fought in we have supported are the reintegration of soldiers who fought in the Great Lakes Region of Central Africa, rebuilding the Great Lakes Region of Central Africa, rebuilding infrastructure and helping communities in Afghanistan, dealing infrastructure and helping communities in Afghanistan, dealing with psychological and social trauma in Bosnia and Herzegovina, with psychological and social trauma in Bosnia and Herzegovina, rehabilitating street children in the Democratic Republic of rehabilitating street children in the Democratic Republic of Congo and protecting the property of Colombians who have been Congo and protecting the property of Colombians who have been uprooted by conflict.uprooted by conflict.

10. We are responding to the 10. We are responding to the

voices of poor peoplevoices of poor people Conversations with 60,000 poor people in 60 countries, as Conversations with 60,000 poor people in 60 countries, as

well as our day-to-day work, have taught us that poverty is well as our day-to-day work, have taught us that poverty is about more than inadequate income. It is also about lack of about more than inadequate income. It is also about lack of fundamental freedom of action, choice and opportunity. It is fundamental freedom of action, choice and opportunity. It is about vulnerablility to abuse and corruption. We believe about vulnerablility to abuse and corruption. We believe that people who live in poverty should not be treated as a that people who live in poverty should not be treated as a liability, but as a resource and a partner in the fight against liability, but as a resource and a partner in the fight against poverty. Our approach to reducing poverty puts poor people poverty. Our approach to reducing poverty puts poor people at the center of development and creates the conditions at the center of development and creates the conditions where they can gain increased control over their lives where they can gain increased control over their lives through better access to information and greater through better access to information and greater involvement in decision making. involvement in decision making. Today, we support a Today, we support a variety of community-driven development projects variety of community-driven development projects with funding of more than US$2 billion. Other ways of with funding of more than US$2 billion. Other ways of supporting poor people include community managed supporting poor people include community managed school programs, judicial reform and access to justice school programs, judicial reform and access to justice programs and providing citizens with the ability to programs and providing citizens with the ability to rate basic services, such as access to water, education rate basic services, such as access to water, education and health.and health.

In SumIn Sum Here is an example of an important Here is an example of an important

institution that prides itself of “Spending institution that prides itself of “Spending Resources” rather than “Achieving Results”.Resources” rather than “Achieving Results”.

Notice that, Notice that, even though they explicitly even though they explicitly say in the first slide that their goal is say in the first slide that their goal is simple:simple: “To Help Reduce Poverty”, the “To Help Reduce Poverty”, the pamphlet does not say EVEN ONCE pamphlet does not say EVEN ONCE anything about how the money spent anything about how the money spent has contributed to the goal. has contributed to the goal.

This is what economists would call: This is what economists would call: confusing inputs with outputs!!! confusing inputs with outputs!!!

In SumIn Sum

Aid agencies have little incentives to Aid agencies have little incentives to achieve results, because it is not clear achieve results, because it is not clear what “results” are, because it is not clear what “results” are, because it is not clear whose “results” they should satisfy and whose “results” they should satisfy and because it is often impossible to quantify because it is often impossible to quantify these “results”.these “results”.

Hence, they proudly report the “inputs” Hence, they proudly report the “inputs” (volume of aid), rather than “outputs” (volume of aid), rather than “outputs” (results).(results).

ReturnReturn