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Owen Barder is a Vice President at the Center for Global Development, Director for Europe and a senior fellow. He is also a Visiting Professor in Practice at the London School of Economics and a Specialist Adviser to the UK House of Commons International Development Committee. Barder was a British civil servant from 1988 to 2010, during which time he worked in No.10 Downing Street, as Private Secretary (Economic Affairs) to the Prime Minister; in the UK Treasury, including as Private Secretary to the Chancellor of the Exchequer; and in the Department for International Development, where he was variously Director of International Finance and Global Development Effectiveness, Director of Communications and Information, and head of Africa Policy & Economics Department. As a young Treasury economist, Barder set up the first UK government website, to put details of the 1994 budget online.
There is much uncertainty now about how the UK will respond to Thursday’s referendum result calling for Britain to leave the European Union. The effects on developing countries—and development cooperation—will depend in part on what is agreed in the coming months and years. But here is some speculation about the possible threats that Brexit implies, and a (rather shorter) list of the possible opportunities.
Brexit will lead to direct effects on economic growth, trade, remittances, and aid which could have negative implications for developing countries:
A slowdown in the British economy will have negative implications for developing countries with close economic links to Britain, such as South Africa and Nigeria (and other, mainly Commonwealth countries), perhaps leading to slower growth of exports, inward investment, and remittances. If there is a broader negative impact on the global economy, for example because of a loss of economic confidence in the European Union, this would have commensurately bigger negative effects on a wider range of developing countries, potentially reducing exports, growth, investment, jobs and remittances, especially among commodity producers.
The UK’s commitment to spending 0.7 percent on aid may be abandoned if the fiscal position deteriorates and the government has to find further spending reductions, or wishes to switch public spending to programmes with a greater domestic multiplier to stimulate the economy. Depending on the political complexion of the next government, this could result in substantial contraction of aid spending, perhaps even down to a small humanitarian programme, and perhaps the closure of DFID. Even if the 0.7 percent commitment is maintained, lower GDP will reduce the aid budget compared to where it would have been. The immediate effect of the depreciation of sterling (6% against the dollar at the time of writing) will be that the value of the UK aid programme abroad has declined. This may create short-term problems for organisations with local currency or dollar liabilities but sterling-denominated grants.
The poorest developing countries will automatically lose their duty-free, quota-free access to UK consumers and the liberalised rules of origin, which they currently get under the Everything But Arms (EBA) agreement and the European Partnership Agreements (EPAs), assuming that the UK leaves the European trading bloc. Market access to the UK won't automatically be transferred if the UK leaves the Single Market, but the UK could make similar arrangements itself for some or all developing countries (though not, under WTO rules, for a hand-picked group of them). Uncertainty about future access to the UK market may immediately reduce investment, growth and jobs in developing countries with close economic ties to the UK.
The UK will be able to abandon fishing quotas, and will come under pressure from domestic fishing communities (especially in Scotland) to do so, which would contribute to the depletion of global fish stocks.
The UK will lose the legal basis for nearly all of its economic and financial sanctions—meaning it will either need to pass new UK sanctions legislation or those sanctions will disappear with the repeal of the European Communities Act.
As well as these direct effects on development, the UK after Brexit seems likely to have diminished global “soft power” which it has used in recent years to promote progressive international change—tackling issues like climate change, humanitarian aid reform, and corruption. There may be some people who think that an independent Britain will have more, rather than less, influence on the world stage because it will look less towards Europe and more towards the rest of the world. But in general, the UK has a progressive, liberal impact on European policies—promoting a more open, liberalised trading system; opposing agricultural subsidies; and pushing for generous, effective, poverty-focused foreign aid. There may be others who have a less rosy view than me about the UK’s positive influence on European development-related policies, or who think that the EU’s approach to development is largely irrelevant anyway. But overall, the risk is that Brexit will lead to a diminution in a progressive, pro-development global voice, in at least the following ways:
For the next few years, the UK will have very little bandwidth or negotiating capital for any international initiatives or global leadership (e.g., hosting big events on family planning, nutrition, vaccination etc): not least because much of the civil service will be devoted to negotiating the post-EU settlement, especially a raft of new trade deals; and no Minister will want to use up their scarce international political capital securing agreement to such initiatives.
The UK will no longer be within the EU arguing against agricultural production and export subsidies, and in favour of liberalisation of trade with developing countries, which may tip EU trade policy more towards protectionism and away from development-friendly trade policies. Nor will the UK be able to continue to push the EU into more ambitious targets for low-carbon growth in the future, on which it has a record of which to be proud.
The UK will no longer provide a strong voice within the EU pushing for measures to 1) increase transparency (e.g., country-by-country reporting, public registers of beneficial ownership), 2) reduce international tax avoidance (e.g., automatic exchange of information), and 3) reduce corruption. To the extent that the EU position on these issues matter, that may slow progress across the world.
The UK will lose its influence over the world’s largest multilateral aid agency (EuropeAid spends considerably more each year than World Bank), thereby reducing a mainly progressive voice on how and where this aid is spent. As a result, it is likely that more European aid will be spent in the European neighbourhood and less on the poorest countries in the world.
The UK risks losing influence and leverage over key partners, notably Turkey, with which it maintains its relationships in part through the EU. It may try to compensate for this by reallocating aid spending away from poor countries to these strategically important countries with whom it would otherwise gradually lose its ties.
The UK will no longer be part of European coordination meetings which agree a common position for key global forums such as the World Bank, World Health Organisation, etc., despite being by far the world’s largest funder of the multilateral development system. Both UK and European voices are likely to be weaker as a result.
Set alongside these threats, Brexit does offer some possible opportunities for more development-friendly policies, which we should identify and seize. For example:
If the UK sticks to the 0.7 percent commitment but does not spend it through the European Commission, there is an opportunity to target UK aid more sharply on the poorest countries and communities, or to shift this aid to more effective multilateral institutions than the European Commission (notably the World Bank).
The UK could offer preferential market access to developing countries, including duty-free, quota-free access and simplified rules of origin, if it leaves the European Singe Market. This won't happen automatically, and the UK would need to be careful to comply with WTO rules; but it could at least duplicate the market access currently available the Everything But Arms and European Partnership Agreements, and perhaps more (either to a broader range of countries or more open market access).
Though immigration to the UK may be lower overall, there may be increased opportunities for migrants to come to the UK from non-EU countries, especially Commonwealth countries such as Nigeria and India. That may increase the share of immigrants to the UK from developing countries, which is good both for the migrants themselves, and through increased remittances for their families at home.
The UK could unilaterally reduce or abandon agricultural and fishing subsidies, improving prospects for agricultural producers and fishing industries in developing countries. EU farm subsidies will be reduced if the UK’s net contribution to the EU is not replaced from elsewhere, which is also good for developing countries; though it is more likely that in the absence of Britain’s voice in Europe, agricultural support will increase.
The UK could adopt more scientifically-justified restrictions on GMOs—which may help increase the global food supply—and perhaps other phytosanitary standards which unnecessarily restrict developing country agricultural exports.
If Scotland votes to become independent, the Scottish government may pursue a set of development policies which look more like those of progressive Scandinavian countries than the existing UK position, promoting not only generous and effective aid but also a much greater commitment to policy coherence.
Overall, the list of threats seems greater than the opportunities. I didn’t vote for Brexit, but the British government is now faced with implementing the voters’ decision as effectively as possible. CGD will work with the British government as it navigates a future outside the EU to do what we can to limit the potential harmful effects on development, and to take advantage of as many of these opportunities as possible. We would welcome ideas and collaboration to do increase the chance of this happening in the coming months.
And finally: the Brexit referendum should be a stark warning to those who have benefited over the last two decades from globalisation and technological change. Unless the benefits of these profound economic shifts are shared with all citizens, in rich countries and in poor countries, those citizens will eventually overthrow the apple cart.
The European Union is a unique and inspiring association. We are alarmed that a narrow majority of the British people might choose to destroy that by voting to leave the European Union, undermining our ability to secure our foreign, economic, and international development interests. This would be harmful for Britain and for the rest of the world.
Europe has been caught off guard by recent asylum-seeker arrivals, prompting what some have called a threat to the survival of the European Union. However, we have shown that Europe has admitted and integrated much larger numbers of refugees in the past. So why have countries been so overwhelmed this time around?
One major hurdle has been assessing the validity of such large numbers of asylum claims. Under the Universal Declaration of Human Rights, every individual has the right to seek asylum from persecution. In some situations an individual’s motivations for movement—and their accompanying designation under international refugee law—are relatively evident. This is not the case for many recent arrivals in Europe.
Migration and asylum policies: Where to draw the line
Why does the motivation matter? Migration and asylum policies differentiate people according to their motives for moving. The UN High Commission for Refugees has declared that “migrants are fundamentally different from refugees”: refugees are forced to move, while migrants do so by choice. This distinction in policy, which may reflect public opinion about our obligations to other people under international humanitarian law, is unfortunately being tested by claims that many current asylum seekers are really economic migrants in disguise. They stand accused of using the language of seeking asylum to disguise fundamentally economic motives for movement.
However, the policy distinction does not stand up to scrutiny. Wars and economic collapse go hand in hand. Migrants fleeing war zones are likely to be both escaping violence and the accompanying devastation of sustainable livelihoods. For example, an Eritrean migrant may be escaping both forced conscription and destitution in the 15th poorest country in the world. Furthermore, different segments of a single individual’s journey could reflect changing motives. Our colleagues at the Overseas Development Institute have shown that migrants are highly flexible, changing routes to account for setbacks or improved information. A Syrian asylum-seeker biding her time in the Calais “jungle” could have fled widespread violence at home, qualifying her for asylum in many European countries. However, her desire to move to the United Kingdom, rather than stay in France, could be based on other, more voluntary factors such as perception of economic opportunities and societal characteristics. Migrants will often have a complex mixture of reasons for leaving their homes, and these motives and priorities may change during their journey as they seek a place of safety.
The intrinsic interconnectedness of persecution, conflict, economic collapse, environmental degradation, and natural disasters makes it impossible to separate these motives for migration.
Policy fails to address entangled motivations
This brings us back to Europe’s struggle to process recent asylum claims. The difficulty of disentangling individual motives is only compounded by the unprecedented scale of arrivals over the past year. Unfortunately, the prevailing policy response has utterly failed to address the needs of those on the move. The most recent example of this is the EU-Turkey deal, which caused alarm among migrant and refugee rights advocates—most notably UNHCR—who refused to participate in the agreement apart from helping Syrians resettle in Europe. The broad-brush mandate that all migrants arriving in Greece via boats from Turkey should be turned away not only assumes a uniform motive for movement, but deprives asylum-seekers of their legal right to lodge an individual protection claim under the 1951 Convention.
Given the European Union’s recent plans to reform the Dublin Regulation (the policy determining which country is responsible for adjudicating asylum claims), it is even more important to have a more nuanced understanding of the mixture of motivations for international movement. The status quo has only yielded disagreement and inaction.
The world has pledged to protect those facing persecution, but these commitments do not extend to those whose lives are equally threatened by other causes. This is wrong. As Alexander Betts of the University of Oxford argues, international protection should be available to all people forced to leave their home because of a threat to their existence for which there is no domestic remedy or resolution. Such threats include not only persecution, but also conflict, natural disasters, environmental degradation, and economic collapse—all drivers of forced migration impossible to disentangle, both in theory and in practice. Offering protection only to those with a well-founded fear of persecution forces us to police a distinction that has no basis in either ethics or reality, and leaves those who flee conflict, natural disasters, environmental degradation and economic collapse with no way to secure a basic threshold of fundamental human rights.
Without challenging the protections rightly accorded to those granted formal asylum status, the international community must come together to develop a protection framework for all “survival migrants” facing existential threats at home. Such an agreement must include both explicit definitions of responsibilities and robust institutional mechanisms to safeguard protection rights. We applaud the International Organization for Migration’s recent establishment of the Migrants in Countries in Crisis Initiative (MCIC) as an important step towards this goal. Though a perceived expansion of the right to international protection may be politically unpopular, it would set a more practical boundary for policy implementation and, more importantly, better respect the universal human rights of people fearing for their lives.
When it comes to development aid, you might think that there is a trade-off between head and heart: that more generous donors would be less serious about making sure that their aid is used properly. There are some examples of this: Luxembourg has a large aid programme which appears to be relatively less effective compared to its peers; whereas Ireland, which spends a lower proportion of its national income on aid, has the most effective aid programme among the donors we were able to evaluate.
But in a new CGD working paper, we find that these are indeed exceptions. In general, more generous donors tend also to be the most effective. One possible explanation of this correlation is that much of what we consider to be effective aid involves donors putting the interests of the intended beneficiaries of aid ahead of the interests of the donor country. For example, untying aid makes it more effective, but requires a greater degree of self-sacrifice on the part of donors than if their own contractors are given preference. Longer-term aid tends to be more effective, but gives the donors less room for varying its aid according to political or commercial expediency. Consolidating spending on more, larger projects lowers the serious administrative burden on cash-strapped countries and organisations, but means donors cannot influence (or stamp their logos on) as many programmes. Our analysis is consistent with the idea that if a country has the political context in which it is inclined to be generous to the world’s poor, that manifests itself both as a willingness to give more aid and a willingness to put the effectiveness of aid ahead of its shorter-term commercial and strategic interests.
Measuring the Quantity and Quality of Aid
In the Commitment to Development Index, aid is only one of seven components which we use to rank developed countries according to the extent to which their policies and behaviours promote development. (The others are trade, security, finance, migration, environment, and technology.) Within the aid component, as you would expect, we use measures of both quantity and quality of aid to score the donors. We have recently updated the way we do this, described in detail in our new paper. Aid quality is a score derived from the Quality of Aid Index (QuODA), which is produced jointly by CGD and our friends at the Brookings Institution. QuODA scores aid agencies along 31 different indicators (organised along four different dimensions) of what donors themselves say makes aid more effective, such as responding to country priorities, untying aid, using country systems, and making aid more transparent. We look at both the quality of the countries’ bilateral aid agencies, and the quality of the multilateral organisations through whom they choose to spend their foreign assistance. And for the quantity of aid, we use the internationally-recognised measure of Official Development Assistance (ODA) as a share of Gross National Income.
Figure 1: New Aid Component Scores and Aid Volumes (2012 data)
As the graph above shows, donors like the US and South Korea (in percentage terms, relatively ungenerous compared to other rich countries) tend to have the least effective aid, at least as measured by what the donors themselves consider to be important. Generous donors - notably the Nordics and the UK — tend also to be effective. And there is room for improvement: for any level of aid spending as a share of national income, there is significant variation in how well that aid is spent. Belgium and Ireland give similar levels of aid as share of national income, but according to our numbers Ireland’s aid programme is the most effective and Belgium’s is the least. This means that countries can (and should) both meet their international obligations to invest 0.7% of GNI as aid, but also work on improving the quality of the aid they spend at whatever level of spending is politically feasible.
What’s the trade-off between generosity and effectiveness?
Would a 10% increase in the effectiveness score compensate for a 10% reduction in our measure of the volume of aid? The short answer is that we do not know: there is no empirical basis on which to calibrate this. That is in part because donors don’t collect and publish much information about the impact of aid programmes, and partly because the aid effectiveness consensus is underpinned more by assumptions and anecdotes than by hard data. In the CDI we assume that quantity and quality are equally important in the sense that the variance between countries in aid quality counts for as much as the variance between countries in the amount of aid that they give. On this basis for combining scores, Denmark—which is neither the most effective nor the most generous donor but does reasonably well on both—pulls ahead of Luxembourg (the most generous) and Ireland (the most effective).
Figure 2: CDI Aid Component Break-Down
Finally, our figures suggest that aid is a “luxury good” in the technical sense that it tends to increase more than proportionately as incomes rise in donor countries. As a result, countries with higher incomes per head give a higher proportion of that income as aid (and do so relatively effectively). Outliers from this positive correlation between income and generosity and effectiveness are Switzerland, the US and Japan, all of whom are relatively tightfisted for rich countries; while Portugal, Ireland and the UK punch above their weight.
Figure 3: Aid Volumes and Income (2012 data)
Aid is likely to play a relatively small part in meeting the Sustainable Development Goals—but to the extent that it can play an important role, we all want aid to be both generous and effective. The impact of aid depends not only on the amount of money that is given, but whether it is used well.
In a recent TV documentary, Professor Hans Rosling suggested that middle-income countries (MICs) get three times as much aid per person in poverty as countries which are further back in their development.
Political pressure to spend more aid in fragile and conflict-affected states—and to spend more of the aid budget on refugees displaced by conflict—has led to concern among policy-makers that poor but relatively stable countries may now be under-aided.
So is aid being spent disproportionately in MICs? As you would expect, countries are diverse, and so too is the amount of aid they each receive. This makes it difficult to summarise the position with summary statistics such as “average.” The comparison is sensitive to the choice of average: are we thinking about the mean or the median person, and the mean or median country?
We show that the apparent under-allocation of aid to low-income countries (LICs) calculated by ODI, which is cited by Rosling, depends heavily on the choice of averages. The ODI calculation is based on the mean aid per poor person living in extreme poverty (PiEP) in the median country in each income group. A different (some might say more natural) comparison of mean aid per person in each income group gives the opposite conclusion.
As the table below shows, the mean aid per person living in extreme poverty in LICs is $109 a year, or 79% more than in MICs. The median person living in extreme poverty in LICs receives $105 a year, or more than nine times the median person in MICs. Aid to MICs is only higher than LICs if we look at the median country.
The distribution of aid across countries
The chart below shows the distribution of aid per person living in extreme poverty, with the poorest countries to the left and the richest countries to the right. Although some MICs receive more aid per PiEP than any LICs, one can see from the graph that in general, LICs receive more aid per poor person than do MICs.
Option one: total aid over number of PiEPs in the country group
Taking the total aid to an income group of countries and dividing by the number of PiEPs in that income group is equivalent to the mean allocation of aid to countries per PiEP, weighted by the number of PiEPs in each country. This measure demonstrates that a PiEP in an MIC is, on average, less supported by aid than one in an LIC. Similarly, an amount of aid dollars flowing to an MIC will on average be shared between more people in extreme poverty than the same amount of aid dollars flowing to an LIC. Mean aid measures for LICs and MICs, for example, can be visualised by adding the following shaded areas to the previous graph.
Option two: median person living in extreme poverty in each income group
While option one looks at the mean person in extreme poverty for each income group, using a mean for an income distribution can give too much weight to extremes at either end. For that reason, income statistics often look at the median person. This option finds the median person in extreme poverty in each income group, and for their country of residence, identifies the aid allocation per PiEP in that country. This paints an even more stark difference between low-income and middle-income countries. The median PiEP living in an MIC lives in India; the median PiEP in lower income middle countries is also in India, and the median PiEP living in a UMIC lives in China. These PiEPs are both only being supported by 11 dollars of aid per person. This compares with the 105 dollars being spent to support the median PiEP in an LIC, who lives in Mozambique.
Option three: aid to the median country
One might also want to take the country as the unit of analysis, rather than taking the aid dollar or the PiEP, for example when investigating country financing needs. Given that aid flows are very uneven, there is a danger that the mean for an income group might be distorted by extremes. As with the distribution of income among individuals, it may be illuminating to look at the median. As shown in the table below, the median MIC receives substantially more aid per PiEP than the median LIC.
In Rosling’s otherwise excellent BBC documentary Don’t Panic – End Poverty, he says (53:43) “[MICs] get about $300 of aid per person in extreme poverty.” He goes on to argue for a reallocation of aid away from MICs towards poorer countries. This is the measure of aid allocation that underlies his conclusion.
This result appears to be inconsistent with the other two measures of the distribution of aid. The reason for the difference is that this measure makes no allowance for population size. The median country within the middle-income group is determined by a large number of countries with relatively small populations of PiEPs. Although the median person in MICs lives in India (which has relatively low aid per person), the median country is Honduras (which is relatively highly aided per person).
But using median countries exaggerates the over-aiding of MICs. MICs as generously aided as Honduras accommodate only 12% of people living in extreme poverty in MICs.
It is however true that if aid were reallocated away from the most highly-aided MICs (some of which receive in excess of $1000 per PiEP per year), this could make an appreciable difference to people living in LICs. For example, if total aid per PiEP in MICs were capped at $360 (the value for Honduras), the resulting savings could be used to increase mean aid per PiEP in LICs from $109 per year to $150 per year. While significant, this amount of money at stake is nowhere near as much as you might imagine if you thought that MICs got three times as much aid per person as LICs.
The median country measure is informative if what we are concerned about is countries, and we are equally concerned about all countries (excluding those with less than 500,000 people or less than 1% of the population in extreme poverty). However, if we are concerned about how likely any given aid dollar is to be misallocated, or how likely any given person in extreme poverty is to be under- or over-aided, this way of analysing aid allocations is not as useful as other indicators of the distribution of aid.
There are good reasons not to be equally concerned about all countries: 49% of all the PiEPs living in an MIC live in India (409.2 million people in 2013). Adding just two more countries, China and Nigeria, brings the total to 77%. Assigning each of these countries the same weight in an analysis of aid allocation as, for example, Costa Rica (66,000 PiEPs) is not useful if we are interested in summarising the condition of people, rather than of countries.
Extended summary of three different measures
The picture changes if you think about people, not countries
One way to illustrate the misallocation of aid is to consider the global distribution of PiEPs by aid allocation. The graph below shows that that more than half of all PiEPs live in countries receiving less than $12 a year per PiEP in aid, while a tiny minority are supported by over $1000 a year per PiEP.
The ODI report Financing the Future usefully makes the point that some MICs are highly aided relative to most LICs. But while the number of countries in this position is relatively large, they have small populations, so this is not the position of most people in developing countries. Nonetheless, we agree that reallocating aid from some relatively highly-aided MICs to LICs would improve overall aid allocation.
But it would be a mistake to draw from this analysis, as others have done, the incorrect conclusion that MICs generally receive more aid per person living in extreme poverty than LICs. On what seems to us the most natural comparison, aid per person in extreme poverty is 79% higher in LICs than in MICs.
The three measures presented here are all based on figures from the Overseas Development Institute’s (ODI) background research for their Financing the Future report, available in Excel format. Many thanks to ODI for publishing this data to enable others to examine it.
Aid is defined here as country programmable aid plus humanitarian assistance (that is, excluding refugee costs, debt relief, student costs, and other aid that cannot be programmed by the recipient country). This data comes from the OECD DAC. Numbers of people in extreme poverty per country are calculated from the World Bank’s PovcalNet and World Development Indicators, with some use of IMF and UNESCO calculations to produce reasonable estimates for countries missing from PovcalNet, such as Afghanistan. Countries are excluded if they have fewer than 500,000 inhabitants or less than 1% of the population are in extreme poverty. This leaves a total of 90 countries. PiEP is defined on the old threshold of less than $1.25 per day in 2005 dollars adjusted for purchasing power parity. All figures are from 2013.
ODI has combined a variety of sources to permit an analysis of all developing countries, rather than excluding from the analysis those countries that are excluded from PovcalNet.
Europe doesn’t have a refugee crisis; it has a crisis of conscience. With so many fleeing conflict, disasters, and extreme poverty in search of a better life for themselves and their children—and who are likely to continue to arrive in Europe at previously unprecedented rates—this crisis is unlikely to be resolved anytime soon. Europe’s institutions have fallen woefully short in coping with these recent arrivals. Desperate, last-minute deals have been made and more are on the way. Both the EU collectively and individual European governments are struggling to keep up, often in the face of increasing tensions at home. And the World Humanitarian Summit—which seemed in principle to be an ideal opportunity to solve some of these problems—ducked the difficult political issues.
In a year of unprecedented policy focus on migration, any break in the political gridlock has been narrow and reactive, not to mention almost exclusively focused on deportation, resettlement, and obstructing irregular movements. We hope to add some longer-term, quantitative analysis to the outstanding work of our colleagues at the Overseas Development Institute and Oxford Refugee Studies Centre, among others, in pursuit of more practical, evidence-based policy proposals. Our migration team has kicked off a new research program on forced migration to better understand people’s motivation to flee their homes, and the implications this has for the legal migration framework. What space does the current system have to accommodate individuals who do not qualify for formal refugee status?
First, let’s clarify who we are talking about. Much attention has been directed toward differentiating between what many consider to be bona fide refugees and so-called ‘economic migrants’ (we’ll be looking in a later blog post at why this is a false dichotomy). However, both the media and policymakers continue to confuse another set of terms: asylum-seekers and refugees. This is about more than just semantics. Refugees are designated formal protection status by the UNHCR, and the global majority are not in Europe, but rather displaced across Turkey, Pakistan, and Lebanon, among others. The majority of those currently arriving in the EU are seeking asylum; whether potential host countries will grant them the protections of asylum is yet to be determined. The United States Citizenship and Immigration Services makes the distinction very clear: only individuals outside the US can apply for refugee status, while only those who have already arrived on US soil are eligible for asylum.
Asylum-seekers and refugees are distinct but not mutually exclusive groups. Some refugees are unlikely ever to seek asylum, for example, those who have lived in Kenya’s Dadaab camp for decades. Some asylum-seekers do not typically claim refugee status: one example is Eritreans fleeing forced conscription directly to Europe. However, it is possible to be both a refugee and an asylum seeker. For instance, Syrians previously resident in Jordan’s Zaatari camp are now seeking protection in Europe. It is also important to remember that the majority of people affected by crises are neither refugees nor asylum-seekers, but rather displaced inside their home country.
These two groups face different sets of constraints, on different timelines, supported by different actors—all of which are determined by different policy institutions. Consider Syrian asylum-seekers in Germany. The media says Germany accepted one million Syrian refugees in 2015. In actuality, just over one million people in total registered as asylum seekers in Germany last year. Approximately 40% of these were Syrians. Of this group, only 162,510 actually filed asylum applications. 101,442 decisions on Syrian asylum applications were completed during the year: all were positive. This is only 10% of the commonly-accepted number, not to mention an entirely different population from the nearly 4.5 million Syrian refugees residing in and out of camps in Turkey, Lebanon, and Jordan. In addition to these asylum seekers, Germany has also pledged to resettle 20,000 Syrian refugees directly from the region.
It is unclear what will happen to the 265,958 Syrians who registered as asylum seekers but did not file a formal application for asylum in 2015. Some may have still been waiting for an appointment with immigration authorities. In fact, the end of the year saw a 300,000-application backlog. Others may have moved on to other destinations. It is also possible that some remain in Germany in irregular status (i.e., they state intent to seek asylum but do not submit a formal application). Some of these asylum registrants may previously have been designated as refugees (in UNHCR camps or by third countries such as Turkey), while some may have fled directly to Europe in search of protection.
The discrepancy between these numbers has real implications for both public opinion and policy. Integrating refugees into society will impose much less of a strain on public coffers than commonly overblown numbers suggest (though the net fiscal gain is positive in any circumstance.) The data also raises important questions about asylum-seeker movements – of those who did not remain in Germany, where did they go and what will happen to them? Over the next few weeks we’ll be looking into a number of other misunderstood or underexplored issues related to asylum-seekers in the EU.
German asylum-seeker statistics kindly provided by UNHCR Germany via personal communication. Thanks also to Jeff Crisp, Theo Talbot, Carlos Vargas-Silva, and Alex Betts for feedback on and inspiration for various ideas in this series.
Nine thousand delegates gathered last week in Istanbul for the first World Humanitarian Summit. There was no shortage of great commentary in advance, all of which pointed to the pivotal role that the WHS could play in the future of humanitarian aid. And there was widespread consensus that we must do better: emergency aid is overstretched; delivery systems are often poorly matched to people's needs; refugee crises are overwhelming international organisations’ ability to respond; and lack of security for humanitarian workers signals a worrying trend of blurred battle lines that imperils both humanitarians and civilians.
How could the Summit have tackled these mounting problems? Depending on who you ask, the humanitarian system is either broke or broken.
If the system is simply broke, then the problem is that donors are simply not providing enough money. Last year, humanitarian agencies appealed for $15 billion more in funding than they received, a deficit which is set to grow larger this year. Donors currently spend about $25 billion a year on humanitarian aid—less than a quarter of all aid—and on this view, a relatively affordable increase in humanitarian aid would go a long way towards meeting the world’s obligations.
The alternative view is that the humanitarian system is broken—that is, in need of fundamental reform. The majority of humanitarian aid is spent on long-lasting crises rather than short-term emergencies, and the system does a poor job of helping people to move from dependence on humanitarian aid into safer, more productive lives. Large international agencies often fail to work with local governments and civil society partners. There are few independent needs assessments, and little rigorous evidence about what works. Agencies are mandated and organised to distribute supplies rather than give people control over their own lives and building markets by giving people cash. There is little information about what happens to the money: the humanitarian system is far behind the development system on improving aid transparency. We don’t even know how big the funding shortfall really is, since humanitarian agencies have every rational incentive to overstate needs, knowing that donors will only fund a portion of them; nor do we know how much more the humanitarian system could achieve if it were better organised. And conflicts are dangerously changing in character, threatening a greater number of civilians and increasingly targeting humanitarian staff.
In the absence of a consensus on whether the system is broken or merely broke, little progress was made on either issue at the World Humanitarian Summit. The so-called Grand Bargain was an effort to bring these two points of view together, acknowledging the need for systemic reform and for more money. But the overall result was a series of incremental, rather than transformational, improvements—and some absolute setbacks—along three dimensions of humanitarian aid: how to spend it, how to pay for it, and how to fix it.
How to spend it
Locally, transparently, and in cash. That sums up some of key commitments from humanitarian organisations and donors. One of the Grand Bargain’s few hard numerical targets is the shift to spending at least 25% of humanitarian spending through local organisations by 2020—which, if achieved, will be a dramatic increase from the small fraction that goes to them today. There is a clear and welcome call for greater transparency in how aid is spent, leveraging the International Aid Transparency Initiative, a simple electronic format for recording resource flows that many development organisations already use to help them transparently report on what, where, and when they are spending money.
There’s also been a strong endorsement of the need to give more humanitarian aid as cash transfers. We’ve worked with the Overseas Development Institute and others on collating the evidence. Not surprisingly, people are better than bureaucracies at knowing what they need and want. Markets are good at delivering those things (and can often do so much more efficiently than an international logistics system). And cash transfers are not ‘wasted’ on ‘sin goods.’
On this point, the Grand Bargain’s final language doesn’t match the impressive leadership from few forward-thinking organisations, like World Vision and the International Rescue Committee, both of whom pledged substantial targets for the share of their aid to be delivered as cash. Instead, it emphasizes 1) the need to further evaluate the evidence for providing cash transfers (when in fact this cash transfers are one of the most widely and rigorously evaluated modes of delivery in the history of humanitarian aid), 2) using cash alongside in-kind aid (often it should substitute for more expensive in-kind aid), and 3) ensuring that the delivery of cash is coordinated (thus sidestepping the need for a single organisation to deliver a single unrestricted payment to families, rather than dozens of organisations duplicating each other and requiring coordination).
How to pay for it
Reliance on single-year funding through humanitarian response plans for what are multi-year problems is a long-standing frustration in humanitarian aid, a fundamental misalignment of finance and purpose akin to trying to buy a home using a credit card rather than a mortgage. In 2015, only 13 (of 35) response plans had funding lasting more than a year, even though over half the countries that needed a response plan had had one for at least five years, and nearly a quarter of countries had had one for a decade or longer.
The Grand Bargain explicitly tackles this problem, promising to both increase “collaborative” multi-year funding from donors and reduce the number of earmarks that are applied to those funds, so that agencies get the kind of flexible financing they need to respond effectively instead of managing an endless portfolio of grants too small to make a dent in the problem, each of which carrying its own reporting requirements and administrative expenses. Although donors need to have their feet held to the fire to ensure that these promises stick, that feels like progress. (And though it is, in effect, one giant earmark, so did the announcement of a multi-billion dollar special education fund to pay for schooling for children affected by disaster or fleeing violence, a longstanding lacuna in humanitarian budgeting.)
While the big donors and agencies read prepared speeches to each other in one part of the conference, the side events next door was the venue for some of the most progressive, transformative thinking. Whether or not there’s actually a $15 billion shortfall, there’s no doubt that the system is not keeping up with needs. The result is an urgent push for innovation in how to pay for big parts of the humanitarian caseload, and agencies are increasingly turning towards insurance.
Side events convened by groups like the Insurance Development Forum highlighted an exciting future in which large organisations and vulnerable countries can insure themselves against a growing list of perils like drought and earthquakes. That would make money readily available when things go wrong, protect humanitarian funding for emergencies that can’t be insured, and ensure that vulnerable governments can plan effectively to tackle crises because they know the resources that will be brought to bear.
How to fix it
If the Summit was about finding solutions, then unfortunately it failed to address one of humanitarian aid’s core problems: the incidence of violent conflict. Research published last year found that although there were fewer armed conflicts in 2014 than in 2008, each one caused a death toll that was three times higher on average: in other words, for a complicated set of reasons we’re struggling to understand, conflicts are becoming much more lethal.
Of course, it was never realistic to think that a single summit could achieve real change in the number of protracted conflicts responsible for a large share of the humanitarian caseload. But to the extent that progress could have been made, the absence of even a core group of world leaders meant that real change was probably never in the works. In this sense, the WHS was about treating symptoms, rather than curing the disease. Chancellor Merkel led Germany’s delegation, but the UK was represented by its Secretary of State for International Development, Justine Greening, rather than Prime Minister David Cameron, and the US delegation was led by Gayle Smith, head of USAID, rather than Secretary of State John Kerry.
The absence of senior leaders also meant that real progress on refugees—one of Europe’s most bitter political discussions—was never really on offer. The outcome document from the section of the Summit dedicated to finding a way for countries to provide asylum to refugees and facilitate their integration lapsed into vague promises (“The Summit affirmed more political leadership was required for mediation, peaceful resolution and conflict prevention...”) rather than setting hard targets or measurable commitments.
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The Summit brought global attention to these important issues. Disruption and strong political leadership rather than gradual evolution are needed to create a system that can rise to modern challenges. But a meeting convened by the organisations most in need of reform and without a core group of senior political leaders was always going to struggle to be truly transformational. Political leaders need to confront the realities of paying for and integrating refugees. Donors should use their financing to demand transparency and efficiency from frontline organisations, including the local NGOs now poised to receive a greater share of it. And we must all support efforts to find peaceful solutions to violent conflicts.
Theodore Roosevelt said that good foreign policy should “speak softly and carry a big stick.” The World Humanitarian Summit—and its Grand Bargain—spoke softly. For the many problems addressed at the World Humanitarian Summit, now is the time for the main humanitarian donors to demand reform and delivery by wielding the big stick a little more conspicuously.
Approximately 15 million people are displaced outside of their home countries. Most refugees are not able to return home for many years, often more than a decade. But just 8% of these refugees are resettled safely to third countries. So without focused actions, today’s internationally displaced people are likely to be part of the growing “refugee caseload” for many years, neither able to return home nor able to settle permanently elsewhere. That not only deprives refugees of the ability to live full, productive lives, but is also overwhelming the world’s humanitarian aid budgets. Although the real value of global aid has grown 9% in the last five years, all of that increase (and then some) has been eaten up by the rising costs of humanitarian aid and refugees.
Instead of condemning more and more people to a long-term future as aid-dependent refugees, what if we turned the support they would receive from donors over many years into an endowment that would enable them to start a new life in a new country? By capitalising future humanitarian aid spending and borrowing on capital markets, we could invest in these people. This could simultaneously make it more politically palatable for countries to take in people fleeing violence, radically improve those refugees’ lives, and reduce long-run humanitarian costs for donors. That’s the basic thinking behind the Humanitarian Investment Fund, an idea that could perhaps help Kenya, for example, which this week threatened to close the Dadaab refugee camp, to see the 300,000 Somalis living there as an opportunity rather than a threat.
In the long run, refugees can make significant economic and social contributions to countries that choose to resettle them. But in the short run, facilitating their arrival and integration involves a cost to the government – resources like housing and language classes come with a price tag. Although costs decline as refugees integrate into labour markets, the issue remains one of the most politically challenging today. Newspaper coverage focuses on the (usually exaggerated) short-term fiscal effects and while ignoring the longer-term benefits that young, entrepreneurial workers can bring to aging workforces. This mismatch between short-run costs and long-term benefits creates an opportunity for financial innovation that can leave everyone better off.
Consider a Syrian living in Jordan. Like many professionals forced to flee their homes, she is probably relatively well-educated, but struggles to find formal employment. She can't go back: the risks are too great, and there may be precious little of her old life left to return to. The humanitarian response plan to accommodate Syrians in Jordan indicates that donors pay an average of $1,210 a year to support her. Instead of paying her that money year after year to maintain a (bad) status quo, we could invest in her up front by allowing her to resettle in a safe third country. This might result in a short-run cost for that country – but it would also generate long-term benefits.
Imagine a framework under which she is endowed with a sum of money to offset the (temporary) costs she and her future host government incur for her resettlement. Potential host countries anywhere in the world – perhaps those with labor market or demographic needs – can offer to accept her and receive the associated endowment.
This scheme might be particularly attractive to developing countries, which could especially benefit from both the voucher payment and the skills that refugees could contribute to their labor markets. For every refugee currently living overseas and supported by humanitarian aid, a fund could pay this one-off "voucher" to any country able and willing to accept them. By accepting the payment, the receiving country would be obliged to grant the refugee the same status it accords other migrants for whom it doesn't receive any payment. At a minimum, this would mean granting the right to work and access to public services (not currently guaranteed in all potential host countries). So returning to the example of the Kenyan government, which cites security concerns as its reason to close the Dadaab refugee camp, viewing the 300,000 Somali refugees as representing a potential investment in Kenya might change the political and fiscal algebra, or at least have better options for relocation.
We call this framework the "Humanitarian Investment Fund." What might it cost? We can get an idea by comparing the amount countries pay to support refugees overseas and the costs they report incurring when they resettle them. Looking at those differences in today’s money (net present value terms) and considering a scheme that would work for 100,000 refugees gives us a rough idea of the range of capitalisations we’re discussing. (We do this for OECD countries that report the first year costs for refugee resettlement, and leave out countries that don’t report this figure, like Australia, or reported an implausibly low figure).
For the median case, we estimate that 100,000 refugees could be resettled for about $4 billion dollars, or $40,000 per refugee. That’s squarely in the ballpark of problems that the global public sector can get its arms around. For example, if we were able to capitalise a $4 billion fund with a bond paying 2.5% a year, the nominal interest cost of permanently moving people off the global refugee caseload would be just $1,000 per person per year. And borrowing $4 billion dollars is not a high hurdle: in 2014, global aid commitments were just over $135 billion; the UN High Commissioner for Refugees’ 2014 budget was $3.6 billion (and that was only half funded).
More generally, these are conservative estimates for three reasons:
Quantity: Assuming 100,000 potential beneficiaries is an overstatement, at least to start. In reality, less than a tenth of refugees are designated eligible for resettlement. In 2014 in Jordan, only eight-tenths of one percent of the total Syrian refugee population was resettled overseas (6,084 of 623,112).
Price: Our calculations assume gently declining costs each year for a decade, tied to OECD countries’ first-year refugee costs. In fact, most refugees receive this level of benefits for only in their first year in most of Europe, between six months and five years in the US (it varies across an alphabet soup of programmes), and six months to three years in Canada. So we are being conservative in attributing this scale of cost to refugees for a decade, and only slightly optimistic in assuming that they decrease slowly over time, pricing in payoffs as refugees integrate into local labour markets (which could be much greater in practice).
Time: These figures assume that in the absence of this scheme, a person would spend 10 years on the international refugee caseload. In reality, we have a shaky idea of how long the average refugee spends in and out of camps overseas. The oft-quoted figure of 17 years, for example, turns out to be a zombie fact that has gained currency by virtue of repetition. The assumption of ten years is reasonable but ultimately just that – an assumption.
These numbers seem especially reasonable in light of the European Commission’s proposed scheme to fine countries as much as €250,000 for every asylum-seeker that they should admit, but refuse to. That scheme is intended to be a stick, punishing countries which fail to meet their commitments to share in the “burden” of hosting a small number of refugees. Our proposed system would instead operate as a carrot, creating healthy and fair incentives for countries to go above and beyond this minimum hurdle to the mutual benefit of all involved.
The program could be expanded to many more potential refugees – without reducing commitments to those already on the caseload – by pooling these costs and borrowing from capital markets, backed by donors’ promises to repay. This method of using private capital, repaid from future government budgets, builds on other successful financial innovations. For example, IFFIm is an international fund which borrows from capital markets to pay for vaccination programs, with donors repaying the costs of borrowing over time. IFFIm’s "vaccine bonds" borrow cheaply because donors are largely wealthy OECD countries with strong credit ratings.
The proposed system creates a "triple-win." Potential host countries would have more control over who they admit, and be able to alleviate up-front short term costs. Refugees would be able to escape the long-term destitution and disempowerment of refugee camps and dependence on humanitarian aid; with a job in a safe third country, they would be able to apply their skills and create positive spillover effects for their families and home communities. Donors would assume no additional expenses, transferring the long-run costs of a substantial and growing caseload of humanitarian aid into upfront resettlement investments.
A scheme like this would likely need to have at least three core features in order to be politically viable, and attractive for the refugees themselves. It would need to be
Voluntary: Both refugees and host countries must agree to participate. Under a matching system, refugees would make a list of places they would like to live, while host countries would be asked to identify who they would most like to admit, likely based on labor market needs and integration capacity. The fiscal voucher each refugee brings with them lowers the "relative cost" to potential host countries. (Countries could use the endowment to provide for local services where the refugees are resettled, perhaps reducing possible sources of friction with local communities.) This system would enroll refugees from their current country of residence (Syrians in Jordan), rather than individuals who have arrived in the EU seeking asylum, as proposed by Will Jones and Alex Teytelboym of the University of Oxford.
Additional: People eligible for this scheme would still have to qualify for refugee status in prospective host countries, even though they would be enrolled overseas. Refugee status granted to individuals overseas by UNHCR does not necessarily align with the criteria in place in host countries. To be eligible for this scheme, refugees would have to qualify under both UNHCR and host country rules.
Valuable: In order to earn the lump-sum payment, receiving countries would have to confer real benefits to their new arrivals. In particular, the receiving country would have to grant refugees the right to work and access to public services.
Refugees are a net financial win for receiving countries, paying more into public treasuries than they cost in services. The economic arguments in favour of accepting refugees from Syria – a middle income country before this crisis unfolded, with high levels of education and healthy civic social capital – is not complicated. As our colleague Lant Pritchett explains, Europe’s aging populations are living longer than ever, creating larger cohorts of pensioners and thereby placing increasing tax burdens on dwindling numbers of younger, productive workers.
But as our colleagues Michael Clemens and Justin Sandefur have discussed, “countries struggle to absorb refugee flows when those flows are sudden and concentrated in a limited area.” In other words, the greatest tension comes up front, when host countries scramble to find the time, money, and compassion to facilitate arrival and integration. Those difficulties are compounded by the fact that resettlement schemes are usually centrally-run while pressure on local services is local. This proposed framework slackens the immediate financial constraint, empowering governments and communities to determine where these funds are best spent – a fiscal release valve for some of these pressures.
There are a number of reasons that some countries are unwilling to accept refugees. Some of these may reflect simple-minded xenophobia. But a dab of financial chemistry could at least tackle the fiscal case against doing so, putting a thumb on the political scale in favour of compassion, and helping many people secure better, safer, and more productive lives.
Last year more than 83 million people in low- and middle-income countries were affected by natural disasters. We may not know when or where the next disaster will strike, but we know it will. So why do we still treat disasters like surprises? A new CGD report urges a different approach: make disasters predictable, using the principles and practices of insurance. Hear from four members of the working group in this week's podcast.
Why does poverty persist across so much of the world, despite billions of dollars in international aid and the efforts of development professionals? William Easterly’s answer, as proposed in his new book, The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor, is a lack of respect for liberty—not just on the part of governments of impoverished countries but also, more provocatively, on the part of the development experts.
As my friends know, I’m not religious—indeed, I fall into the ‘militant atheist’ category—but as my day job is trying to promote peace and prosperity around the world, I am often reminded of Reinhold Niebuhr’s famous ‘Serenity Prayer’:
God, grant me the serenity to accept the things I cannot change,
Courage to change the things I can,
And wisdom to know the difference.
This prayer was on my mind recently when I had the opportunity to respond to Rory Stewart MP, who was giving his first speech as Minister of State at the UK Department for International Development. He brings real expertise and experience to the role, having served in East Timor, Montenegro, and Iraq; and he travelled on foot through rural districts of Pakistan, Iran, Afghanistan, India and Nepal, a journey totaling around 6000 miles, during which time he stayed in five hundred different village houses.
Mr Stewart gave a wise speech about how Britain can play a role in global peace and stability. He called for policymakers to be modest and patient when they intervene in conflicts and in fragile states, and to act with greater self-awareness. I agree with everything he said.
There are good examples of successful humanitarian interventions, including, to various degrees, in Bosnia, East Timor, El Salvador, Kosovo, Liberia, Macedonia, Mali, and Sierra Leone. As Mr Stewart said, we should not be isolationist or pacifist, but we should be aware of just how difficult it is to intervene successfully in other countries.
But there is a complementary policy agenda which the Minister did not touch on. There are many decisions over which we do have control, or at least significant influence, which would help promote global peace and security, and secure greater, fairer prosperity both here and abroad. Yet somehow discussions about global peace and security seem to dwell on what we can do over there, not what we can do over here.
In my brief response to the Minister, I suggested twelve policies which are within our control which would help create conditions for stronger, more peaceful, more prosperous countries to thrive, and so reduce the risks of future conflict and instability. Here they are:
We could help tackle the resource curse—by requiring our citizens and companies to be transparent about what they pay for and from whom; and we could go further, as Leif Wenar suggests, by treating as stolen property the oil, minerals and other resources sold by governments that do not have the moral, political or legal authority to sell them on behalf of their population.
We could do more to promote economic growth, stability and jobs by investing in and trading with fragile countries. Countries like Pakistan, Afghanistan, Syria, and Somalia should have predictable, long-term, access to our markets, including in agriculture and services; we should ensure that companies who invest overseas are able to offset the taxes they pay overseas against their domestic tax liabilities; and we should use development finance to invest more in fragile states;
We could help countries to build up a social contract by including developing countries in the mechanisms which determine international tax rules and cooperation, and by shutting down tax havens and financial secrecy jurisdictions, so that countries can collect more tax from citizens and companies operating within their borders, and be less dependent on aid from outside;
We can address resource scarcity, which is a major driver of conflict, by increasing our investment in global public goods. For example we could accept the Lima Challenge proposing a partnership to do more to reduce deforestation. This would be hugely good value in terms of the cost per tonne of carbon saved. We could tackle overfishing, the pollution of our seas, and protect biodiversity. And we could put a price on carbon emissions, both to help stop climate change and to give the poorest countries a tradeable asset.
We could offer more opportunities to temporary and permanent migrants from fragile states, as a proportion of whatever limit we set on immigration, for example by enabling them to come here as students, offering seasonal agricultural workers’ visas and through global skills partnerships that educate them in skills that are in short supply here, like nursing and care for the elderly. That integration increases incomes and opportunities for families in fragile states, it spreads democratic ideas and values, and it is good for our own economy and society too.
We canpromote global values and norms, and increase global accountability including by the way we ourselves behave, e.g. through rules on controlling land mines and small arms, rules of war and prosecuting war crimes, supporting the international criminal court, standing out against the use of torture, or detention without trial, or capital punishment, and for open government, freedom of the press, and the rights of minorities.
We can do more to fight corruption and illicit financial flows, including by opening up public registers of beneficial ownership, by forcing UK overseas territories and crown dependencies to open up, and by announcing that the UK courts will no longer enforce contracts on behalf of anonymous shell companies or other anonymous parties.
We can invest more in UN peacekeeping, both in money and in troops. And we should consider Paul Collier’s proposal for a security guarantee, by which a democratically elected government could ask for a guarantee that if they are overthrown by a coup, the international community will step in, with force if necessary, to restore democracy.
We should have much tighter controls on arms sales—it is obscene that the UK is selling arms to Saudi Arabia which are used to bomb Yemen, which we then provide aid to rebuild.
We can reform international sanctions and prevent the accumulation of debt by odious regimes. For example, it is deeply short-sighted and hypocritical that when Assad is no longer in charge in Syria, the contracts entered into by his government will be enforceable in British courts against a legitimate successor government, even though those contracts are in breach of UK sanctions. (I worked in the South African Treasury when Nelson Mandela was President and we found that we had to pay the debts of the apartheid regime because those contracts could be enforced against the new government in international courts.)
We can work harder on the reform of governance of international institutions such as the World Bank, Security Council, the WHO to give all countries a stake in these institutions that we need to build and strengthen. It is a great shame that the UK acquiesced this month in the uncontested re-election of Jim Kim as President of the World Bank, rather than insist on the agreed policy of an open, merit-based process.
We can reform the international humanitarian architecture, over which the UK has direct power as one of a handful of key funders, but which we are reluctant to take on. Refugee camps are a breeding ground for resentment, conflict and terrorism, and we have all the evidence we need on how to improve it. Compacts, like the one the international community is developing with Jordan, could help migrants work legally, supporting the services they need by growing their local economies.
The Minister responded—rightly—by pointing out that there are domestic political constraints to all of these things. But there are domestic political constraints in developing countries too: that doesn’t stop well-meaning westerners from flying around the world telling governments that they need to get themselves a new judiciary, reform their state-owned enterprises or embrace federal autonomy.
I don’t believe that it is politically too difficult for the UK to close the tax havens in its overseas territories, or to stick to its promises to appoint the leadership of international institutions on merit; nor do I believe that these policies require a political lift of the same magnitude as we routinely expect of others. These reforms would be good for the majority of our own citizens too—while they require a bit of backbone to take on vested interests who benefit from the status quo, they could potentially bring about huge, long-lasting and sustainable benefits for the rest of us and for the rest of the world.
By all means, let’s have the serenity to accept the things we cannot change; but give us the courage too to change the things we can.
International aid works, but it could work much better. Reform efforts focused on better planning often ignore what constrains aid agencies and takes the bite out of their commitments. In this working paper, Owen Barder shows how forming a "collaborative market" around aid—one marked by transparency and collective regulation—would pave the way for more effective aid.
Making Markets for Vaccines: Ideas to Action presents the proposal from theory to practice, by showing how a commitment can be consistent with ordinary legal and budgetary principles. A draft contract term sheet is included, highlighting the key elements of a credible guarantee.
The UK House of Commons International Development Committee is undertaking a very interesting inquiry which happens to be right up our street. It is examining
what might come next in the UK's approach to development, including the coherence of policies which affect development, and the impact of the UKs non-aid policies on developing countries and ... the underlying government mechanisms needed to support any changes.
We have submitted written evidence for the Committee to consider for this inquiry. In the first of three memoranda, “Why Beyond Aid Matters” (PDF), we explain why we appreciate so much the IDC’s decision to focus on these issues, which are the focus of CGD’s Commitment to Development Index. We think these “beyond aid” policies are important for three reasons:
The benefits to poor people that can be brought about by even quite modest “beyond aid” policy changes are likely to be much larger than can be brought about through aid alone.
“Beyond aid” policies mainly address the underlying causes of poverty, while aid often addresses the symptoms of poverty and meets immediate humanitarian needs.
As well as being beneficial for development, most of these “beyond aid” policies would be good for the UK in the short run as well as in the long run. Aid, in contrast, costs the average British household about £428 (about $700) a year: so the long-run benefits come at a substantial short-term cost.
Take trade, for example. Greater market access for exports from poor countries increases the economic returns to starting or growing a business in a developing country and can thereby result in significant economic and development impact. A recent study of the possible impact of the “Doha Round” trade negotiations estimated that real income gains to low- and lower-middle- income countries from lower trade barriers in rich countries would be between $42 billion to $62 billion a year. Liberalizing trade can generate growth even in economies that are usually assumed to to be held back by constraints like lack of access to credit or poor infrastructure. In 2000, the US Congress signed the African Growth and Opportunity Act (AGOA), which provides duty-free access for selected countries to US market. It has been estimated to have increased exports from eligible African countries by $360 million a year.
Many changes to non-aid policies deliver mutual gains – opening our markets to exports from the developing world gives consumers access to cheaper and more varied goods while also benefiting firms in those countries, the employees those firms hired, and the governments to which they paid more in taxes. Trade liberalization is a good example of a policy which could have a very large impact on people in the developing world, tackle the causes and not just the symptoms of poverty, and also benefit the UK.
Overall, these kinds of non-aid policies, ranging from migration to trade, evaluated by CGD’s Commitment to Development Index (CDI) are a potentially very significant but vastly underused way for rich countries to improve poor people’s lives. We do not believe the simplistic slogan of “trade not aid” — these policies are not substitutes for aid: they are complements.
Our first submission to the inquiry: “Why ‘Beyond Aid’ Matters” (PDF), sets this out in more detail. It gives examples of the development benefits that could be achieved through changes to rich countries’ policies studied by the CDI. Do you have other good, evidence-based examples we should add to this list?
We will also soon publish our two other submissions. One looks at how the UK’s beyond aid policies measure up on CGD’s Commitment to Development Index, relative to its peers and how they have changed over time. The other offers an answer to the Committee’s rather pertinent question about whether DFID should remain a separate government department in the coming years.
It’s been three weeks since the UK voted to leave the European Union in the move popularly known as Brexit, and the consequences are still becoming apparent. Senior fellow and director of CGD Europe Owen Barder joins the podcast from London this week to take a balanced look at possibilities for the UK’s future, and consider implications for the country and the developing world.