Comments

Hi Hugh, Thank you for thought-provoking comment, one aspect of which is in need of a response. You write that: "So which matters more – individual wealth or aggregate national wealth? Of course it depends on what we are trying to measure. Per capita GDP is more important when we are measuring individual welfare, and of course that counts. But national wealth is important when we are interested in the capacity of a country to achieve national goals. In my line of work – defence – it is important as a measure of the country’s capacity to build armed forces. But is also helps us understand a country’s capacity to fund other national priorities – including, for example, education. My piece in The Age a couple of weeks ago that prompted Stephen’s reply mentioned the Indonesia school program. My point was that Indonesia is wealthy enough as a country to build schools for itself, so out funding for schools simply diverts Indonesia’s own spending to another, presumably lower, priority." GDP may be more relevant in assessing defence capabilities, when what matters is the absolute size of one's army vis a vis one's opponent's army, but in education surely what matters most is GDP/Capita, which reflects a country's wealth with respect to the actual size of the task confronting it. Indonesia may have quite a lot of money available to spend on education but it also has many, many more students than Australia, which makes its task harder. Also, in this comment, and in previous comments you make bold claims about aid fungibility -- i.e. "so out funding for schools simply diverts Indonesia’s own spending to another, presumably lower, priority" -- yet the certainty of your claims here is not in line with the actual empirical evidence on the matter, which is ambiguous. Fungibility is a theoretical possibility but, on the ground, the available evidence suggests that it is not a practical inevitability. Finally, you fall into the trap of talking about a state, in this case Indonesia, as if it were a homogeneous unit, as opposed to an amalgam of competing groups whose success or not in accessing resources is a reflection of their relative power. Elites in Indonesia may prioritise military spending but I rather suspect the poor place much higher value in education, and benefit from it a lot more. Yet the poor are also relatively disempowered, and so are unlikely to be able to shift spending priorities with related to domestic revenue. Should we really punish them for this by ceasing to fund their schooling? I'd suggest that instead there is a perfectly legitimate role for aid here: targeting funding to enhancing their welfare. cheers Terence

Hugh states that Australia's "funding for schools simply diverts Indonesia’s own spending to another, presumably lower, priority." I think this merits reconsideration, as while aid often does displace public spending, this is not always and not necessarily in a bad way. A classic example of this is the Rockefeller Foundation's investments in agricultural productivity in Asia. As this article in the WSJ (http://online.wsj.com/article/SB118556810848880619.html) states, "The Green Revolution's benefits reverberated well beyond food, allowing developing nations like India to set aside fears of famine and focus more on building modern economies by investing in other industries." It's not inconcievable that AusAID's school-building efforts enable the Indonesian government to refocus its public expenditure in a similarly productive way. Furthermore, it seems unlikely that a self-interested and relatively functional democratic government like Indonesia’s would stop investing in its voting poor just because AusAID put a few million dollars into Indonesian schools. As Stephen Howes' post (https://devpolicy.org/bigger-but-poorer-something-to-get-used-to/) points out, more than half of Indonesia's population is obviously poor. Any government that wants to stay in power will have clear incentives to keep poverty reduction a high priority, whether AusAID is building schools or not.

Maxim seem to be doing some good work on aid. See their recent Devpolicy blog post here - https://devpolicy.org/specialising-in-effective-aid/

The more comprehensive the reporting the better, but no need for so much detailed monthly monitoring and reporting that no-one actually has time for any output!

Surely it is a key question to ask (if not the only question) what the link is between economic growth and the achievement of poverty outcomes and the Millennium Development Goals. As ODI's Claire Melamed and others have argued this depends on the degree to which 'the opportunities and benefits created by growth support the human development of the poorest people'. This includes an 'equitable distribution of the benefits of growth, in the form of progressive taxation and pro-poor public spending on health, education and social protection'. See http://www.odi.org.uk/resources/details.asp?id=4892&title=millennium-development-goals-equitable-growth-policy-brief Is part of the debate really therefore about what type of economic growth brings about pro-poor change, and the degree to which aid supported pro-poor public spending also contributes to that growth?

I don't agree with Hugh that overcoming poverty necessarily means overcoming income poverty, therefore I can't agree with him that 'the key question for the effectiveness of the aid program ... is: how much does aid help economic growth?'  For example, if a person survives, gains an education and goes on to live a longer, more healthy and fulfilling life as a result of aid assistance, have they been assisted to overcome poverty, even if their country's GDP has not increased?   I also think Hugh, with the PNG reference, is commenting on an extreme example of poor aid performance and that there are many examples of aid helping to build better ‘nets’ – just look at the improving health and education services of almost every other developing country in our region.   I do agree, however, that the Review has failed to clarify how best to use aid.  This is partly because of the need to balance all the humanitarian, economic, security and feel-good objectives of the aid program. We will always have compromises as a result of these competing demands.   But I think it is also because the Review failed to look at the question of which types of aid intervention are most effective – arguing instead that aid effectiveness was only a product of the recipient, the donor and the interaction of the two.   This ignores the clear evidence that aid can be very effective at providing services (such as health, education, water and sanitation) and at boosting the incomes or welfare of the poor, but that it is a far less reliable tool to boost economic growth or transform governance directly (for example see Charles Kenny’s book Getting Better).   The Aid Review set out a useful process and set of guidelines to better manage the aid program, but it did not provide all of the answers.  It is now time, as the Government develops its 4 year aid plan and new country strategies, that we incorporate the evidence on which types of aid are the most effective to ensure that we maximise the return on this investment and make sure we can help as many poor people as possible overcome poverty.

Great discussion. From a quick read of the review document and Government reponse, I find it puzzling that environmental sustainability and climate change did not seem worth mentioning. And while the strong endorsement of "predictable, multi-year funding" is extremely welcome, the documents read as if sectoral and general budget support was not part of the international development framework at all. If we are serious about country ownership, avoiding fragmentation, and improving the administration and delivery systems for the essential services that save lives, then surely we have to be looking carefully into providing more aid as budget support. Regarding the points made in this post, I largely agree that the focus on essential services and saving lives is a good way of framing the first priority of the aid program. However, @Chris, I think the point you make at d) is strong. What counts as spending to save lives is not always obvious, immediate or easy. I think that the relatively poor progress on the maternal health MDG highlights both Garth's point that insufficient funds are being invested *and* Chris' that the inter-related and negatively-reinforcing systems of poor governance, discrimination, lack of access to services and infrastructure are part of the story of "health" for women. @Chris, I'm not sure that I see the force of your objection in c), though. How is arguing for greater emphasis on "health" and "saving lives" necessarily abdicating responsibility for leading a process of education and transformation in Australian understanding of and attitudes towards development issues? Surely it could just serve as an (intellectually and emotionally) accessible doorway to enter into that journey of discovery?

I too have written on this at Inside Story, responding only briefly to Hugh White's comments; see: http://inside.org.au/cause-and-effectiveness/ Michael

Hugh White's article is generating some great constructive debate on the issue! Have a look at Annmaree O'Keeffe's <a href="http://www.lowyinterpreter.org/post/2011/07/20/Theres-more-to-development-than-money.aspx" rel="nofollow">critique</a> on the Lowy Interpreter for another opinion on the importance of Australia's aid program.

Hi Satish, Thank you for an interesting blog post. And for what promises to be an interesting paper. I look forwards to reading it once I'm back in Canberra. At this point I just want to highlight what appears to be a minor shortcoming of your work - something that is common to a lot of papers that examine the determinants of aid allocation. This is that you appear to have (and please correct me if I'm wrong) regressed total aid to a country (the dependent variable) against quality of governance (one of the independent variables). Yet, I would argue that the more appropriate comparison is total aid delivered to the government of a country (DV) vs quality of governance (Indep Var). I suggest this because there is a strong correlation between poor governance and poverty. Meaning that from a poverty targeting perspective it makes sense to give aid to poorly governed countries, even while we might doubt the wisdom of giving aid to the governments of these countries. When Sarah Bermeo undertook an exercise disaggregating aid into flows to governments and flows delivered outside governments she found that, on average, donors did actually give less aid to the governments of poorly governed countries, often compensating for this by giving more aid to NGOs etc. She also found that this strategy paid dividends in terms of poverty reduction. Her working paper is here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1681104 cheers Terence

Garth, I still think you've reduced the problem too much to one of resources -- specifically a target for aid to health. It also seems to let AusAID off the hook too easily: achieving a spending target is much easier than actually saving lives, which would require AusAID to present compelling evidence on the impact of aid. (And the Aid Review cites evidence of instances where spending targets have actually undermined aid effectiveness.) A good interpretation of Owen Barder's analysis is that aid works, but that it could work a lot better, which is why he provides a useful ten point plan on how to improve the effectiveness of aid: 1. Spend more aid through the multilateral system. 2. Make aid more predictable. 3. Make aid transparent, accountable and traceable. 4. Build the accountability of governments to their parliaments and citizens 5. Focus on results and simplify aid 6. Invest more in global public goods, especially new technologies 7. Focus aid on women and girls and chronic poverty 8. Leverage the private sector 9. Use innovative finance to increase the productivity of aid 10. Learn more and fail safely This list could also useful for a discussion of how Australian aid can save more lives..

In response to Garth’s article and in the spirit of healthy inter NGO debate I think it is worth noting the following risks in running this type of argument: a. it potentially undermines the case that developing countries and their citizens, rather than donors and aid advocates, should be in the driving seat regarding sectoral spend, b. the focus on saving as many lives as possible can play into an impatient, non-strategic, unsustainable agenda. If this approach was really driving the aid program why not simply spend all of the of the aid budget on emergencies, now? c. the idea that this is the sort of program that will garner the ‘greatest support’ from the Australian public seems to abdicate responsibility to take Australians on a educational journey and to enhance their understanding of effective development, and their (positive or negative) contribution to it, as well as their deeper engagement in promoting positive social change, d. it could contribute to a fragmented approach to development. Fixing maternal mortality in PNG is not just a matter of support to the health sector, as important as that it, it is also a matter of gender inequality and associated gender based violence, it is a matter of governance, corruption and weak civil society, it is a matter of poor infrastructure, and a just distribution of mining royalties etc etc. A narrow short term sectoral focus on health is not going to address these social economic and political determinants of the problem. Haven’t we moved beyond a stale debate about whether its aid vs trade (Hugh White in today’s Age), or whether its health vs economic development? Chris Roche, Oxfam Australia