My shop is finalizing the preparations for a two-day brainstorming session on the future of European aid. It is a good occasion to open the floor to its participants (and beyond: as always anyone should feel free to join in!) to reflect on the way Europeans envisage their development policy

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I recently came across a post by Nancy Birdsall on a new instrument promoted by the Center for Global Development, called ‘Cash on Delivery’ aid. In a way (Nancy, whose Center is a partner of ID4D, might wish to correct me if I am wrong, or complete if need be) it is conceptually close to ‘output-based aid’, except that governments rather than non-governmental actors are in charge of delivering the output, and that aid comes as a form of reward upon delivery rather than a direct payment of the costs incurred. The novel philosophy in this approach is that donors are as ‘hands-off’ as possible - leaving it up to recipient countries to find the most appropriate ways to reach given objectives. In a nutshell, under this type of program donors would commit ex ante to pay a specific amount for a specific measure of progress on a specific objective. In education, for example, donors could promise to pay 100€ or so for each additional child who completes primary school and takes a standardized competency test.

I find this concept appealing in three important ways:

- first, it is serious about ownership: by targeting a specific goal but not interfering in the policy choices, it leads governments to think through the most appropriate ways to reach this objective in their specific national context. Experience has shown that donors don’t always know best.

- second, it shifts incentives away from inputs (how much money do we give?) towards outputs (what concrete results do we achieve?), and clearly places the onus of results on governments. If pilot projects are set up, they will teach us important things about how public choices are made within governments, and to what extent they influence performance. For one thing, there is likely to be more public scrutiny and debate on the decisions made to ‘win’ the challenge - which may be a positive result in itself.

- this leads me to a third interesting dimension, which is the underlying ambition of changing the structure of the incentives. Cash on delivery works on supply-side incentives. Other initiatives (targeted at young girls in India, but also at public school students in Washington DC!) have worked on education through the demand-side, by paying children to attend and get good grades. Comparing the successes of demand-side and supply-side incentives in the field of education could teach us a lot on the determinants of progress.

Yet I also have my concerns (aside from obvious technical difficulties of finding agreed and verifiable benchmarks of ‘success’, which are important to think through but can probably be overcome):

- how will the governments attain results if aid isn’t there in the first place? This is a typical ‘chicken and egg’ problem: some countries do not have the budgetary space to ‘invest’ in the big push that would be needed to attain the objectives initially. These programmes would therefore need to be complementary to existing programs (such as the Fast Track initiative in education).

- secondly, Cash on delivery is a form of (ex-post) conditional aid. As a reward to good performers, it risks imposing a double penalty on populations whose governments are incapable of delivering. And by penalizing ‘poor performers’, it makes the implicit assumption that they are responsible for their bad results. Although this may be the case, it cannot be taken for granted. Like many good ideas, it should therefore probably be consumed moderately; we cannot hope to apply it uniformly and across the board.

In any case, this is interesting new stuff, which definitely merits to be discussed in the columns of this blog. Dear fellow blog members, guest commentators and readers, the floor is yours!

JMS

My apologies for not writing for nearly a year. I foresaw in my last two blogs that we were entering an intensive busy period in the WTO negotiations. The talks did indeed keep me busy this year, not least before, during and after the meetings in July that were so close to a breakthrough. What none of us foresaw was all the other issues that would come up during the year, culminating in the global financial crisis …

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During the past two months we have seen Governments commit more than USD 3000 billion towards stabilizing financial markets. A further USD 2000 billion have already been announced for economic stimulus packages. Never in the history of humankind has so much money been allocated with so little preparation and strategic analyses.

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Like earthquake aftershocks, the on-going repercussions of the stock market plunge triggered by the US subprime mortgage meltdown continue to shake financial and banking institutions. Governments and multilateral organisations alike are devoting all their energy and ingenuity to fighting this crisis, shelving the handling of other crises till later. However, while the financial markets panic, the food and energy crises remain and their effects, of structural origin, are likely to be exacerbated by the financial turmoil. Indeed, as a result of incoherent investment, insufficient competitiveness and trade imbalances, food and energy production no longer suffices to cater for the needs of the world’s ever-increasing population. The slightest provocation, whether climactic or political, could trigger price hikes and trade restrictions. And yet, because of the financial crisis, substantial return-hungry capital is now available together with the instruments of globalisation to assist its circulation. In other words, the stage is set for more speculative bubbles to inflate at the slightest whim or event. Harvests have been good and, like oil prices, cereal prices have dipped. However, they could surge quickly, foiling producers’ forecasts and upsetting measures to instil the long term stability required by investment.

It is even possible that the first signs of growth could fuel speculative conduct, as investors anticipate renewed consumer spending.

The challenge is therefore two-fold. On the one hand, we need to achieve a better balance between supply, trade and demand by improving the structure of local and world markets. On the other, we need to regulate capital movements as investors hunt for quick returns.

Attention should not focus exclusively on financial issues. Though regulations are necessary, they will only handle part of the problem and probably not the most important part at that. Food and energy production also needs to be rethought on a global scale and that includes implementing measures to stimulate development on the basis of models that are both sustainable and equitable.

Failing this, crises will simply continue to erupt, ever faster and ever more brutally, until the imbalances lead to intolerable inequalities, the large-scale destruction of public goods and ultimately to a situation where a coherent system is no longer even conceivable.

May those who proclaim that improving capital market mechanics is all that is needed to solve these problems reflect a little, because they too will be swept up with the others in the debacle.

Exchange with the members of the blog, live from the 3rd edition of the European Development Days, Europe’s first meeting of development cooperation practitioners and decision-makers that will take place in Strasbourg on the 15-17 November. On this occasion, laptop computer will be available on the French Presidency stand so you will be able to participate to the debate. The members present in Strasbourg will come to the stand to react in live to your comments. Come and share your thoughts on the topic.

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Demographic growth, industrialisation and the increase of demand resulting from higher living standards is exerting growing pressure on the world’s natural resources. The effects of climate change are also showing their first impacts on some of the regions of the world that are least equipped to manage them. How can these pressures be handled on the long run? What role can public policies play to tackle this rising challenge?

On the occasion of the 6th AFD/EUDN conference on “Population and natural resources: managing pressure”, I evoke in this brief video clip the dual challenge of mounting environmental pressure and demographic explosion in Sub-Saharan Africa – that I think has not sufficiently made its way at the front of the development community’s preoccupations. I also attach some of my recent publications on these two topics, as well as a recent study on the trends of African demographics. I am looking forward to reading your thoughts and experiences on this crucial issue.

Jean-Michel

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Over the last 18 months or so there has been a major surge in the spread of public understanding on the subject of climate change, particularly in respect of human actions being a cause for changes in the earth’s climate system. However, this increase in awareness has not yet translated into action at the global level to bring about a reduction in the emissions of greenhouse gases (GHGs), the increased concentration of which has now increasingly affected the earth’s climate. The impacts of climate change are particularly harmful for some of the poorest societies on earth.

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Although the United Nations always has crises to solve, delegates at this year’s UN General Assembly (UNGA) in New York seemed to have an exceptional number on their plates. With America’s financial turmoil creating a bleak backdrop, the gathering seemed to hum with palpable angst about the future. One world leader after another strode to the podium to tell how high food and fuel prices were devastating the poor in their countries – and threatening to reverse economic growth and the significant gains we have made in fighting poverty. UN Secretary-General Ban Ki-moon warned

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Some time ago I met with leaders of several NGOs from a ‘Debt and Development Platform’. The quality of our exchanges gave me the idea to continue our discussions on debt here with you.

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