23 May 2010

DFID: Week One

Andrew Mitchell and his team have been in post at DFID for just over a week now. First impressions from those who have seen him in action are that he is a good listener, fundamentally believes in DFID's mission, and is serious about VFM: value for money. The good news is that people feel his agenda is not all about money, but also about value.

He caught the headlines by making some initial cuts to development awareness projects. These projects are designed to increase the UK public's awareness of global poverty and what can be done about it. We know that the new Secretary of State wants the UK public to be more engaged with international development so it will be interesting to see whether he relies solely on MyAid--the model that allows UK public voting on some of DFID's priorities to do so.

Secretary of State Mitchell also caught the headlines in Afghanistan saying it was "crucial" to create a functioning Afghan state by providing good health care and education, while Defence Secretary Liam Fox said that Britain was not there to fix Afghanistan. This is probably the first of many apparent disconnects between Defence and Development and shows how difficult the joined up approach will be.

I am very pleased that Andrew Mitchell stood up for development in a difficult context.

Finally reviewing the Sunday media in the UK we had Dambisa Moyo on the Andrew Marr Show. Moyo, one of the harshest critics of aid (see my review), was invited to scan the newspaper headlines but did not pick up on an international development story. Other critics have not been so quiet, perhaps emboldened by this week's DFID cuts. Alex Singleton writing in the Telegraph heavily criticises Mitchell for his commitment to the 0.7 % aid target (which seems to have made it into the Queen's speech outlining the current government's legislative agenda).

He cites "the most authoritative econometric study of aid" by Tomi Ovaska which concludes "that a 1 percent increase in aid as a percent of GDP decreased annual real GDP per capita growth by 3.65 percent" to make the claim that "the Tories are going to increase poverty, and we’ll paying for them to do it".

Well, Mr Singleton, please use better source material in the future. The paper is published in the Journal of the Cato Institute, a libertarian think tank. The paper is full of problems (variable definition, variable choice, econometric specification, econometric robustness checks etc.) but even if we take the econometric results at face value they do not support the conclusion of the paper. Using his first definition of aid, the full sample and the most appropriate econometrics, Ovaska cannot show overall significance of the impact of aid (positive or negative) on GDP growth and using the second definition he finds a result less than half as negative as the stated result.

At the end of a week where VFM has dominated the discourse, it is clear that it must be applied to research studies too.

1 comment:

Lawrence Haddad said...

Here's a follow up comment frm Paul Isenman

On the perpetual question of the
impact of aid on growth, I imagine you have seen the article by Channing
Arndt, Sam Jones and Finn Tarp.
David Roodman, who is the toughest critic I have run into on econometric
claims of causal relationships, told me he thought it had the better of the
argument with Rajan and Subramanian