How to Protect Foreign Aid? Improve It
A Bloomberg National Poll says that more than 7 in 10 Americans think that Congress can find major savings in the federal budget by slashing foreign aid. It’s a new poll, but this is old news.
Americans want to help others, but they’re skeptical that foreign aid can do much good.
If Americans are asked whether they want to help bring health, water, education and other crucial resources to poor people around the world, they say yes, by overwhelming majorities. But Americans are skeptical that foreign aid accomplishes these things.
The truth is, much of foreign aid works. Hundreds of millions of people around the world are better off because wealthy countries pay to vaccinate children, dig wells, build roads and buy schoolbooks. But some foreign aid is wasted, stolen or spent on projects that don’t really help people.
The facts about foreign aid are crucial to drive home to the American public today, as the political debate over the budget has led many Republicans to single out foreign aid as a target for cuts. (Frank James, who writes a blog at NPR, suggests a novel way to spread the word, using Charlie Sheen’s Twitter account.)
But let’s talk about on-the-ground practical solutions, The Center for Global Development, a Washington think tank led by Nancy Birdsall, has an intriguing idea that might help. It could make some forms of foreign aid more effective, less corrupt and more responsive to what people need. And in doing so, it could capture more public support for something that improves, and often saves, the lives of millions.
The idea is called Cash on Delivery: instead of rich countries paying for all the little pieces that go into a poor country’s program, they pay only when something good comes out. Aid would get transferred when there are measurable, provable results.
Today, rich countries pay for what goes into a poor country’s program. Why not pay when something good comes out?
As for the question of whether the program succeeds, we might find out later how many teachers were hired or schools built — or we might not. But we would not attempt to measure whether our aid actually resulted in more children finishing school — in fact, it would likely be impossible to prove such a link. And if the money was squandered or stolen, the only possible penalty would be a cutoff of future aid.
How would this project work with Cash on Delivery? The United States and Malawi would draw up a five-year contract that specifies a set of payments and what Malawi must do to get them. These would be made public. The contract would set a baseline: perhaps the number of children expected to finish school next year. The year after that, and every year for five years, Malawi would receive $20 for every child who finishes school up to the baseline number — and, as an incentive to do even better, $200 for every child over that number. The results would have to be accurately measured by Malawi – since school records are often spotty, Malawi would administer a standardized test and count the number of students who took it, and make those results public by district or even school. Those numbers would be verified by independent auditors. There could be steep penalties for lying.
By basing aid on performance, cash on delivery could reduce waste and corruption.
No one is suggesting that Cash on Delivery should replace traditional aid. For one thing, it has yet to be tried — the British Department for International Development is going to be the first. It is working with Ethiopian schools on a program to give payments directly to secondary schools for each extra girl who finishes.
But in certain situations Cash on Delivery might turn out to be a useful alternative to traditional aid. And its advantages may go beyond a more effective use of dollars: it might increase political support for foreign aid.
Paying for results is attractive. People don’t have to worry that the money has gone into some government official’s pocket, as taxpayers in wealthy countries won’t be sending money unless there are results. “This focuses on a few simple outcomes that people can understand,” says Birdsall. “You can say to the taxpayer: mortality fell by this amount.”
It could also help to create more accountability in poor countries. In most aid-dependent countries, citizens have no idea how much governments are getting in aid and how they spend it. Cash on Delivery sets clear goals and requires that all information be public. The idea might also lead to more sustained progress, as the strategies would be fully devised and implemented by local officials based on what they think would work best. It would also alleviate the sense that a country’s problem was fixed by outside intervention; local officials and citizens could claim ownership of the solution.
Experimentation in foreign aid is valuable — and rare.
Public bureaucracies are not naturally innovative, and the tendency to stick with the pretty-good is especially strong when people see programs as under siege, a feeling that is fairly constant in the foreign aid business. Because there is such a small political constituency for foreign aid and it is so vulnerable to cuts, many people who work in it feel the best course is not to raise questions about its effectiveness — even if they share those questions themselves.
Cash on Delivery as the Center for Global Development imagines it is yet untried, but other forms of pay-for-results are being used. Perhaps the program closest in spirit is one run by a nonprofit group called the Global Alliance for Vaccines and Immunization (GAVI), which has prevented more than 5 million child deaths by increasing vaccination rates and bringing new vaccines to poor countries. GAVI employs a variety of creative financing mechanisms, including a pay-for-results plan that has been used in 53 of the world’s poorest countries. The goal is to increase the number of children who complete the three-dose series of DTP (diphtheria, tetanus and pertussis) immunizations. For every child immunized above the baseline, the government gets $20. The plan lasts at least five years. For the first two years, the government gets a fixed amount of money. The pay-for-performance kicks in during year three.
The program has helped many countries to increase their vaccine coverage. An evaluation by Abt Associates of the program’s first five years concluded it had a “significant positive impact.”
It is, however, a work in progress. “It worked, but we need to be cautious and not see it as a magic bullet,” said Julian Lob-Levyt, who was head of GAVI until recently.
“We underestimated the management skills needed.”
Related More From Fixes
Read previous contributions to this series.
There are other programs that pay for results, and on Friday I’ll look at what we can learn from them, what Cash on Delivery might be used for, and some of the roadblocks that may await it.
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Tina Rosenberg won a Pulitzer Prize for her book “The Haunted Land: Facing Europe’s Ghosts After Communism.” She is a former editorial writer for The Times and now a contributing writer for the paper’s Sunday magazine. Her new book is “Join the Club: How Peer Pressure Can Transform the World.”