Wiping Out Poverty with a New (Old) Aid Strategy

Imagine you are an aid agency with a new mission, set at the highest level: end world poverty. Two come to mind. How are you to achieve such a noble but audacious goal? 

The first thing you’d want to do is define the target: what is meant by ‘poverty’? Perhaps you’d suggest that it was living on a little more than a dollar a day, or watching your children dying from preventable illness.  Perhaps it is some combination of limited absolute or relative consumption –living on less than $1.25 a day or in the bottom 40 percent of the income distribution, as it might be.  Or maybe you’d go further and suggest that poverty was multifaceted, and only a range of indicators (perhaps as many as 169) could really capture what it was to be satiated or deprived.

Next, you’d want to think about how to maximize the impact of your aid spending on reducing your chosen definition of poverty. Of course, that is complicated. Not least because you’ve chosen more than one thing you are worried about: absolute income and health in one case; absolute and relative income in another; and income, health, education, housing, security and a lot else beside in the third. Somehow you are going to have to weight your goals so you can maximize outcomes for a given expenditure. Maybe you’d decide that each child who dies under the age of five is worth the same as an adult who lives a year under $1.25 a day. Or maybe something different.

Then you’ve got to decide how you weigh people and countries. Are you targeting a child at risk of death from cholera in India the same as you are weighting a woman living on $1.24 in Rwanda? Or are you going to attempt to work out the efficiency of aid in achieving particular poverty-reducing outcomes in particular countries at a particular time? You could use that as part of the allocation system.

That would be hard to do, but perhaps political realities will save you the effort. Perhaps the allocation systems will remain unconnected with your chosen levels of poverty or potential impact, instead determined by domestic politics or an obscure and empirically weak allocation formula as they’ve always been before. Perhaps the same is true of major sectoral allocations as well –because they are implicitly or explicitly ring-fenced. New mission, same old budgets.

So say you accept that limitation: your room for maneuver isn’t about maximizing poverty reduction or moving money across countries or even across sectors, but is about helping those furthest behind in terms of income, health, education and whatever else is in your poverty basket do better using a fixed set of resources for a given sector and country.

What’s left?  This could be an agenda for a sectoral concentration on extending access to whatever is a sustainable level of services in the country under discussion: ensure the vaccination system covers more kids, maybe alongside access to antibiotics for serious bacterial infections and bed nets, and a transfer program that provides enough to lift people just above $1.25 a day. For the more multidimensional definitions of poverty you add things like primary education that actually teaches literacy, condoms, basic maternal health services, electricity and maybe even a decent road.

But that approach faces the argument that it would be supporting ‘kinky development.’ It is aid as safety net, when the safety net is placed an inch off of the floor.  Real development is about a transformation of the way an economy and polity works to provide the kind of economic growth and improvement in public service provision that lies behind large and sustained growth in the quality of life: not from $1.24 consumption to $1.26, but to $5 or $10.  Not from one child in ten dying before their fifth birthday to one child in twenty, but to one in a hundred.  You don’t get that sort of transformation from handing out free bed nets or providing fifty-cent transfers alone, it takes broad-based institutional development.  Safety net aid is good and valuable, but it surely can’t be all that aid is about –even if the focus is squarely on the poorest.

At that point, what are we left with as our new strategy? We work with the same countries and the same broad sectoral allocations. Within those allocations we do some combination of service provision and transfers alongside efforts at structural transformation.

But wouldn’t that look rather like what we are doing now? 

Somewhere, Pangloss is raising a cheer.