Easterly 2.0

Bill Easterly has just started a blog called "Aid Watch." And although Bill has bad judgement with respect to sports teams, you should subscribe to his blog if you want clear thinking about how to fix the international aid system.  Judging by the large number of comments on his first two posts, this blog is going to be very popular, and for good reason.

Bill is a former colleague at the World Bank.  More importantly, he is the author of The Elusive Quest for Growth and White Man's Burden, two must-reads for people who want to get a quick (and entertaining) overview of the history of international aid, why it has underperformed, and what must be done to re-orient it.

Bill is also the editor, more recently, of Reinventing Foreign Aid, a collection of essays by some of the leading thinkers and doers in the field.  Get that book, read the executive summary first, and then dip into selected chapters that are of particular interest.  (Full disclosure:  Mari Kuraishi and I also wrote a chapter called "Competing with Central Planning" in that book, and GlobalGiving is mentioned in White Man's Burden.)

One of the reasons Mari and I left the World Bank to start GlobalGiving is that people were not satisfied with the once-a-year physical Development Marketplaces we started there.  One woman from South Africa asked us: "Why can't you also start a secondary marketplace that operates 24/7 365 days a year?"

Think of Bill's blog as his own 24/7 marketplace of ideas.  I hear rumors from an inside source that he is now thinking about writing his next book.   If so, you can get a heads up on his new ideas - and even participate in debating and honing them - through his blog.  

[GlobalGiving]

5 elements of a new aid system

The race for who will head the large US aid agencies is heating up. Everyone seems to agree that changes to the system are needed. But are we up for real change, or will we settle for  marginal shifts in emphases and organization? I fear that the changes will be marginal, when we need something more fundamental.

Earlier I proposed the 2/3 : 1/3 rule. Under this rule, 2/3 of all aid money would be allocated through bottom-up, market-based mechanisms, and only 1/3 would be allocated via top-down, centrally planned mechanisms. Today the ratio is reversed, which is one reason the productivity of aid is so low.

"Market mechanism" does not necessarily mean "private sector," although it does mean that the private sector and community/civic groups would have equal standing with official aid agencies and large non-profits.

Market mechanism means that the best qualified people and organizations - from any arena - are eligible to carry out the five core elements of any aid (or philanthropy) program:

1. Decide on what problems need to be addressed
2. Decide what the best approaches or solutions to these problems are
3. Fund the initiatives or projects that embody these solutions
4. Implement and supervise the projects on the ground
5. Evaluate the impact of the projects, and how that evaluation is used

The key is to open-source the above elements, and then reward success.  Big official agencies either provide most of these elements in-house, or they rely on a small group of "beltway bandits" to do the work.  And the rewards for success and failure are very muted. 

That may have made sense at one time, when the pool of money and expertise was very limited.  But the world has changed radically in the last fifty years, and now it is time for the aid system to change as well.

[GlobalGiving]

The 2/3 : 1/3 Rule

With the new administration coming to power in the US, there is a flurry of new proposals on how to reform the aid system. However, few of them propose real change. Instead, there are proposals to increase aid to such and such issue or country. Or to strengthen such and such agency - or to appoint a strong new leader.

Few of these proposals get at the root of the problem. As Bill Easterly has pointed out, we have spent more than $2 trillion in aid over the past fifty years with not enough to show for it.

The problem is the centrally planned, expert-driven, top-down nature of the current aid system. Just like under the Soviet regime, this approach does get things done. But the quality is bad, shortages are common, and the people have little say in what gets produced.

So let me propose the 2/3 : 1/3 rule. Henceforth, 2/3 of all aid resources will be allocated through an open-access, bottom-up, market mechanism, while 1/3 of the resources will be allocated through existing top-down approaches.

I will write more about how the marketplace system would work in coming posts and columns.

[GlobalGiving]

What percentage of your brainpower are you using?

Last week I posted a trailer of the documentary of Bill Easterly's White Man's Burden.

Below is a clip where I talk about how much brainpower is wasted in top-down hierarchical systems like the World Bank:




[GlobalGiving]

The Clint Eastwood of International Development

Check out the trailer for the coming documentary for The White Man's Burden, a book by Bill Easterly. The movie is coming out in 2010, and I urge you to read the book in 2009 if you have not already.




[GlobalGiving]