Visible Hands and Invisible Reforms?

A new book edited by Stephany Griffiths-Jones, Jose Antonio Ocampo and Joseph Stiglitz "Time for an Invisible Hand: Lessons from the 2008 World Financial Crisis" takes on the policy implications of what to do.

They cycle through a wide range of ideas including:

* Reforming financial regulation--the more liberalised the financial system, the greater the need for effective regulation. Effective regulation means making it counter-cyclical and comprehensive ("the domain of the regulator should be the same as that of the market that is regulated")

* Fix flawed incentives for bankers and fund managers--put all bonuses into an escrow account that can only be cashed out after a period equivalent to a "an average full cycle of economic activity"

* Asia may have learned the worng lessons from the Asian Financial Crisis of 1997-98--it improved domestic regulation and transparency and accumulated large reserves, but countries in the region did not put in place counter cyclical measures to cope with the vicissitudes of the global markets, within which they have subsequently become much more integrated.

* the Special Drawing Rights system that the IMF put in place in the 1960s and which the G20 has refuelled in recent years need to be come more development orientated--they are still allocated according to IMF shareholdings (and so go largely to the rich countries) and there are no rules governing trading which is entirely voluntary.

I'm not an expert in this area, but the pace of reform in this area (3.5 years on) seems very very slow (do we really have to wait 65 years for the super sovereign reserve currency idea from Keynes to gain traction?). One of the chapters co-authored by Stiglitz delves a little into the political economy of reform, and shows how some global greenback currency would impact on domestic policy freedoms, especially in the US.

A good book--for me it reinforces the need to look harder at the political economy of financial market reform. The technical issues are not insurmountable, but the political ones seem to be.

Speculating about Speculation

Yesterday the Future Agricultures Consortium, which IDS co-chairs with ODI and which is supported by DFID, held a meeting on Food Price Volatility. The core questions revolved around the state of knowledge around: (a) is FPV going up or down? (b) if going up, is it a problem and for who? (c) what, if anything, should be done? and (d) what more do we need to know?

We were joined by colleagues from several organisations including the UK's Treasury, Oxfam, UNCTAD, IFPRI, WDM and SOAS.

The meeting helpfully unpacked a lot of the questions.

1. Food price spikes -- are we talking about food price levels or volatility? They tend to go hand in hand, but they have two different effects.

2. Which components of volatility do we care most about? Predictable or unpredictable components? The latter.

3. Is FPV going up or down? We had papers that said it had never been higher, and some that said it was lower than in the 1970s. Not much consensus there. I suspect the answer depends on the commodity and time period (e.g. for coffee, not much price volatility, for wheat, a lot). Also, the periodicity of the price volatility matters a great deal.

4. Does FPV matter? At the macro level if the effects are big enough it could lead to a tightening of interest rates. At the micro level consumers are affected--they may be able to offset by switching consumption into foods that have not seen such big price rises, but these are not without costs (whether nutritional or taste) and the adjustments tend to fall more on women (based on work from elsewhere). On the producer side, farmer decisions in one year tend to be highly affected by decisions the previous year (adaptive expectations) and so they can easily over or underinvest in inputs with disastrous consequences. For farmers, FPV muffles the underlying market signals and this is not good. Who does FPV benefit? No-one really with the exception of Commodity Exchanges whose revenues are based on volume.

5. What are the drivers of FPV? Two classes were identified: fundamental and amplifiers. On the fundamental side we have things like price inelastic demand (a result of economic growth--wealthier consumers are not price sensitive to the foods they like) and on the supply side we have climate uncertainties. But we also have policy choices that for example cast a blind eye to the concentration of exporting surplus in the hands of a few countries and which allow physical food stocks to dwindle. On the amplifier side we have hedgers and speculators. Hedging can be against natural phenomena or market phenomena as can speculation. There was no consensus as to whether hedgers or speculators played any role in amplification. Certainly the speculators in the market provide a direct connection to the need for more hedging and the potential for ramping up of fundamental volatility. But the group also noted the potential of these speculators to be scapegoats when prices are high.

6. What to do? Lots of options were discussed. There are cause specific solutions--if you think the FPV is being driven by market speculators then limit their positions. There were also general solutions (wherever the FPV comes from) such as reducing information asymmetries through greater transparency, building up stocks--physical or virtual, taxing the rate of volatility, developing risk management products, diversifying production to minimise the impact of local weather shocks. Others suggested region and commodity specific strategies (e.g. agreements in Asia about rice). We did not talk enough about the capacity to formulate, implement and enforce these policies nor the political economy of them.

7. What additional evidence do we need? Many of the discussants said that the choices above were empirical questions. I felt that everyone had their own favourite evidence base that backed up their assertions but that there was no consensus evidence base--so this would be a priority for me. Other areas of interest to me--experimental economic approaches to appetite for volatility (perhaps we are overestimating the negative impacts?), research on how depleted women become if they act as shock absorbers for the rest of their family in the face of shocks, the impacts of biofuel mandates on FPV, and the contribution to FPV of large scale land and water acquisition deals.

All in all, I felt that once you begin to unpack the issues, there is no easy quick fix (no surprise), there is a clear need for more evidence in this area and there is a need for a consensus set of evidence.

For more information see www.future-agricultures.org (where you will be able to find the power points) and contact my IDS colleagues Stephen Spratt and Jim Sumberg.

Disaster Relief 1.0 vs 2.0? Bringing new voices into the humanitarian space

OK, so you need to get past the tired "2.0" framing in the report title, but "Disaster Relief 2.0: The Future of Information Sharing in Humanitarian Emergencies" is quite interesting.

The report is "a snapshot of an ongoing discussion" and one of several initiatives under the $30m "Mobilising Development" collaboration between the UN Foundation, and the Vodafone Foundation. The report also involves OCHA (the UN Office for Coordination of Humanitarian Affairs) and the Harvard Humanitarian Initiative.

Apparently the humanitarian response to the 2010 earthquake in Haiti was different. For the first time, members of the community affected by the disaster issues pleas for help directly to those who could help. Also citizens around the world mobilised to plot and organise these pleas and help coordinate the humanitarian technical response.

So far so good. But the international humanitarian system is not equipped to handle these new voices and actors. The Report is a first attempt to help these worlds--old and new--come together to find ways of strengthening humanitarian initiatives. The seasoned humanitarian community relies on techniques that are tried and tested, that have been subject to scrutiny in the harshest of contexts and have come through and is understandably cautious when it comes to new technologies and armies of laptop volunteers.

The report does a good job of convincing people like me (i.e. not very well informed enthusiasts) that generating signals from people in distress via SMS technologies is only one part of the needed enabling technology. Also needed: (1) tools for viewing and processing high resolution aerial imagery, (2) geospatial wiki platforms (like OpenStreetMap) that allow many people to co-construct maps, (3) regular wikis for building up narratives of what is happening and needed, (4) collaborative platforms like Google Docs to allow people to share data and reports, and (5) bandwidth to allow Skype and other types of video conversation.

I feel that the report is a bit too pessimistic in how long it will take this technology to become useful and therefore used by people working in the humanitarian space. In a sector with many young people, they surely will be the champions of this new way of seeing, listening, analysing and acting. There is no substitute for experience, but experience is no defense against resisting innovation. This Report and the initiative seems like a good safe space to explore and learn. It is raising more questions than it is answering but, for now, that seems OK.

Footnote: my IDS colleagues Martin Greeley and Henry Lucas are doing a review of "Real Time Monitoring" with UNICEF and I'm sure it will prove to be a useful complement to the work summarised in this report.

The highly structured thinking of Michael Lipton

Last night Michael Lipton gave a talk entitled "The State and the big push towards modern industry: 'new' economics, defunct economists, and farmers".

Michael is one of the world's leading thinkers on development.

The array of issues that he has contributed to in profound ways is staggering:

* on the pro-urban bias in development

* on decision making by smallholder farmers and its importance in development

* on poverty measurement and policies and on holes in the poverty consensus (such as social exclusion)

* on the emergence of institutions such as land reform

* on the disconnects between poverty and nutrition

* on mechanisms for governing competition for water amongst its multiple uses

* on population dividends

And the list goes on. These are all topics of much discussion today. But this is not surprising as Michael is one of those rare academics who is widely respected in the academic world, but also in the policy world.

It is for this cumulative body of work at the intersection of policy, practice and academia that he was recently awarded the Leontif Prize by Tufts University.

His Sussex Development Lecture built on and critiqued the interesting work of Justin Lin, Chief Economist at the World Bank. In a couple of papers from 2010 Lin argues that we need a New Structuralism to understand growth. Old Structuralism emphasised state activity to move economies from agriculture to industry and services, essentially ignoring comparative advantage (how one evolves and uses natural endowments of a country) while the New Structuralism sees the state more as a facilitator than an orchestrator when it comes to moving from agriculture to other types of production, but always guided by comparative advantage.

In the Lecture (and in a related paper) Michael concluded that Lin's work is a good start, but it is only a start. For example he notes that Lin's paper is very much couched around growth, not poverty reduction. Michael argues that the New Structuralist approaches make it imperative that the State is more active in guiding this comparative advantage-led growth towards poverty and inequality reduction. Michael also makes the argument that the New Structuralist perspective supports (and can be driven by) science-led smallholder-agriculture led growth.

As usual, Michael made me think hard about something that it would be much easier not to have to think about at all. He has been doing that for most of us for a long time and I am very thankful to him for that.

Development Acumen and Achilles Heels?

This week, I met with CDC's excellent new CEO, Diana Noble. CDC is a development finance institution, set up by DFID, but not financed by UK taxpayers since 1995. CDC has been successfully recycling returns from investments into new investments. With the aim of having a bigger additive effect transformative change, they are focusing all new investments in South Asia and sub-Saharan Africa.
In the course of our discussion, Diana told me about the Acumen Fund, investing in "social enterprises, emerging leaders, and breakthrough ideas".
The Fund has an interesting "10 things we have learned to be true":

1. Dignity is more important to the human spirit than wealth
2. 
Neither grants nor markets alone will solve the problems of poverty
3. 
Poverty is a description of someone's economic situation, it does not describe who someone is
4. 
We won't succeed in the long term without cultivating local leaders
5. 
Great people, every time, no exceptions
6. 
Great technology alone is not the answer
7. 
If failing is not an option, you've ruled out success as well
8. 
Governments rarely invent solutions, but they can scale what works
9. 
There is no currency like trust, and there are no shortcuts to earning it
10. 
Patient capital investing is built upon a system of values; it is not a series of steps

I like the fact that the Fund is reflective. I also like the focus on dignity, leadership, blends of grants and markets, patient investing, listening to customer feedback.
But the Achilles Heel of this sector is the lack of independent evaluation and verification of impact.
The claims of Acumen's success are loud: 55,000 jobs created and supported, and 86 million lives impacted. I could not find any evaluations on the website (the "knowledge centre" has photo essays, stories and update letters but no independent assessments of impact and sustainability).
It would be so much more reassuring if these numbers had been generated by independent and publicly available evaluations. This is one way of building trust.

The Egyptian Revolt one year on: How should it change the way we think about development?

This week IDS releases a collection of papers authored by Egyptians who bridge the academic and activist worlds on "The Pulse of Egypt's Revolt".

The collection is edited by my colleague, Mariz Tadros. Mariz is a Research Fellow at IDS and previously an Assistant Professor at the American University in Cairo and a journalist for the Al-Ahram Weekly newspaper.

The collection of papers, including a nice overview from Mariz, asks two questions:

(1) why and how did the Egyptian uprisings begin? and
(2) what are the implications for development paradigms, concepts and practices?

Linking to and getting inspiration from the other 11 papers in the volume (including one of her own on "Backstage Governance") Tadros puts forward 5 ideas:

1. We need new ways to grasp the pulse on the street

The paper argues that "disciplinary silos" and "methodological precincts" make it hard to get a rounded picture (deductive political science, for a variety of reasons, assumes Egyptians will not rise). It says that what matters is the "dark matter of citizenship" and that this cannot be assessed by surveys. Finally it highlights sites of information that are not mainstream but which need to be engaged (Wikileaks, online reactions to stories, new Arab satellite TV channels, soap operas, films).

2. Calling the revolts a "Facebook revolution" is a gross simplification

There were many triggers and it was their confluence that was important: youth (Facebook, yes, but also old fashioned pamphlets and slogans) and the brutality they were subjected to; the people, who were connected to the brutality by Al-Jazeera and the like and came out in numbers that the security forces couldn't handle; and the military which did not side with Mubarak (and we don't know how hard they had to be pushed to switch loyalties). All of these factors came together.

3. The act of revolting should not be confused with its outcome

Tahrir Square in Jan-Feb 2011 was a particular time and space: it did not represent the whole of the nation (Facebook offered limited opportunities for forging a coalition outside of youth in Cairo), and the political truce called for by rivals with a common goal--get rid of Mubarak--was quickly called off.

4. The concept of "unruly politics" may offer a powerful way to understand people's mobilisation

Much of the public dissent leading up to the revolt was missed because it does not fit conventional "checklists" of what constitutes the right way of challenging the status quo (for example the Stay at Home campaign in 2008 or campaign that conveyed their anger with politicians of their hunger by banging on pots and pans). The unruly label is because citizens engaged in spaces outside of the conventions realms of state and civil society--in hidden and informal spaces that many civil society organisations failed to connect to.

5. There is a disconnect between development paradigms and the dynamics of unruly politics in authoritarian settings.

First, there is a disconnect between the publicised state of the economy (good) and conditions on the ground (no change). Second, the irrelevance of institutions mandated to improve governance and the background operation of the State Security Investigations in pulling the governance strings. Finally, the neutering of civil society through apolitical compartmentalisation and projectisation. These disconnects, together with the right political catalysts and moment, created the right environment for mass mobilisation.

Overall, the shifts the Bulletin calls for include:

(a) a "made in Egypt" economic growth policy, one that recognises the politics of different choices about how markets function, the political consequences of those choices, and how citizens should be protected from its extremes,

(b) civil society organisations to root themselves in civil society, not in donor society,

(c) looking before leaping onto the social media bandwagon--it undoubtedly has a role to play in creating new spaces for meaningful engagement, but not if it is not embedded in the context,

(d) aid to be viewed less through a geopolitical lens and more through a developmental one, and

(e) new ways of supplementing conventional methods of data collection as to the conditions, attitudes and perceptions of ordinary citizens, capable of doing extraordinary things.

Clearly Mariz argues that the donors have a very large opportunity to shape the way they interact with civil society and the Government and that these new relationships must be driven by home grown initiatives, development. Having worked in Egypt in the late 90s this all makes a lot of sense to me. I just hope the new government provides the space to let this happen.

Do Indices Change Anything?

With so many indexes out there, whether they change behaviour in those collecting, reporting or reading them seems like an obvious question to ask. Thirty minutes on Google Scholar does not reveal anything.

I have indices on the brain this week. On Monday I was at the Danish Ministry of Foreign Affairs making a presentation on hunger, food security and agriculture. This is going to be a new priority for the new Minister for International Development. I presented the Hunger Reduction Commitment Index (HRCI) that an IDS team has constructed with support from Irish Aid. The HRCI shows Denmark at number 1 in the donor countries. This went down well, but raised the question: if Denmark is doing so well, why the new priority?

Then on Tues-Weds there was a meeting at FAO on measuring hunger outcomes, using various indices--my IDS colleagues Edoardo Masset and Stephen Devereux were in attendance. I hope some progress has been made in measuring hunger properly since the last such meeting in 2002 and that even more progress will be made in the next 10 years.

Then on Thursday we had the Global Think Tank Index from the University of Pennsylvania. The index places IDS at 8th in the world in terms of think tanks on international development (2nd in UK behind ODI) and 2nd in the UK in all topics for a University affiliated think tank (although we are independently governed). Of course I would like to be higher than 8th, but last year we weren't even on the list (because no one thought to nominate us, presumably thinking that someone else would --you cannot nominee yourself) so that is an improvement.

Finally on Thursday and Friday we hosted a DFID-IDS Learning Event on Nutrition Governance, showcasing 6 country case studies. Each case study looked at the incentives, barriers and tradeoffs behind the structures and frameworks that are supposed to help coordinate nutrition actions across sectors and across levels of government. We noted the vast difference in governance effectiveness behind the "good governance" scores of the WHO Landscape indicators which track whether such structures are in place.

In all of these examples, the index in question has proven to be a lightning rod for discussion. Sometimes this can be a distraction, but most times it serves as a kick off point for discussion and debate about the index, but also about the issue.

Nevertheless, it does seem that there is a need for rigorous evaluations of indices used--do they spur effective action? This is something that IDS will work with Irish Aid and DFID on in evaluating the HRCI and a related but distinct nutrition commitment index.

If you know of any studies we can draw inspiration from, please let me know. Thanks.