Owen Barder

I’m not sure how I missed John Kay’s article in the Financial Times on March 20th, which has important implications for how we think about development policy: It is hard to overstate the damage recently done by leaders who thought they knew more about the world than they did – Read more…

In among the many problems caused by the decision not to fly in the ash-cloud, spare a thought for several very poor African countries who earn important foreign exchange by selling fresh fruit, vegetables and flowers to European markets and depend on air cargo to do so. This evening here Read more…

It would be invidious to recommend particular blogs, and what’s the point of having a blog if you can’t be invidious? So, if you only read a few development blogs, here is my list of who I think you should be reading. I expect I have embarrassed myself by leaving out Read more…

Back in 2006, I blogged saying that I am in favour of better use of data by government, provided that there is a shift of control of personal data back to the individual. Here is what I said then: A national identity register of unique personal identifiers could make a Read more…

The term fungibility has been misunderstood and misused in development circles, so creating confusion that leads to inappropriate policy conclusions.  This post goes back to basics and tries to bring a little rigour and clarity to the question of fungibility of foreign assistance.  As we will see, the technical concept of fungibility is irrelevant to the questions of whether aid is used as intended and whether it is effective. Nontheless donors do need to consider whether and how to take account of the possible reallocation of other resources that may occur when they give aid, and whether this has implications for whether and how they give aid.

Here is the summary version – the long version is below.

• To say that an asset is fungible means technically that one unit is directly convertible into another unit of the same asset.  But in development, people have come to use the term in a different, technically incorrect, sense.  They use it to mean that the recipient may respond to aid by changing the way they use their own resources, with the risk that aid “frees up” resources to be used in unpredictable ways.  (The tangential connection to the proper idea of fungibility is that aid may partly substitute for the other resources available to the recipient community.)
• Donors have two responsibilities which relate to this.  First, they should ensure that the aid they give is used for the purposes for which it was given.  Second, they should ensure that their aid is good value for money, which requires them to take account not only of the direct effects of aid, but also the indirect effects.   These indirect effects include the overall impact on resource use in the recipient community.  Resource reallocation is just one of the indirect effects, and it unlikely to be the most important.
• These two concerns are a close analogy to the general obligations in public financial management to ensure that public money is both properly spent and good value for money.  These are distinct concerns which are better not confused.   Aid can arrive safely and be used for the purposes intended even if the recipient community has made offsetting changes in its own resource use.  Being used for the purposes intended is a separate question from whether aid is achieving its broader goals and achieving good value for money: it is this latter question which may be affected by how it impacts resource use in the recipient community.
• Properly defined, neither fungibility nor liquidity of the aid affects the extent to which recipients can make offsetting changes in resource use.  The extent of offsetting changes is determined by whether recipients are willing and able to make choices about how to use their non-aid resources. The characteristics of the aid and how it is delivered make little difference to this.
• By mislabeling the question of broader resource use as an issue “aid fungibility” we create the misleading impression that the way we give aid is an important determinant of the extent and nature of the possible impact on overall resource use.  We create the impression that by choosing the right aid instrument, we can limit or prevent these effects.  In fact, aid could be entirely non-fungible and illiquid and still have big, unpredictable effects on resource allocation.
• There is a lazy assumption that these issues are more of a concern for aid given as budget support to governments.  Aid given in kind and aid given through NGOs is subject to the same issue of impact on overall resource use as aid given in the form of budget support.
• If donors are concerned about the indirect effects of aid on the allocation of government resources, then they should be looking for ways to strengthen the resource allocation process and to exercise more influence over the recipient’s budget allocations.  Giving their aid through NGOs is likely to have the opposite effect, since donors thereby exclude themselves from the dialogue about resource allocation.  Rather than try to bypass these issues, donors should increase their engagement in improving public financial management, supporting transparency and accountability to parliament, and providing aid through government budgets so that they have a locus to influence the recipient country’s use of resources.

A more detailed explanation follows.

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A new article published in The Lancet by Chunling Lu with Chris Murray, Dean Jamison and others, has caused quite a stir in development circles.  They use data on health aid and government spending on health to estimate that for every $1 given in health aid, the recipient government shifts Read more…

I generally assume that people who read blogs use an RSS reader, like Google Reader or FeedDemon (which is what I use), rather than hopping from one website to another in your web browser.  You can even use Outlook 2007 or 2010 to gather blog updates automatically.  But talking to Read more…

Clay Shirky, who writes about the social and economic effects of the internet, draws on Joseph Tainter’s book, The Collapse of Complex Societies, to describe why complex business models collapse: Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem Read more…

All effective complex systems got that way by a process of evolution. Evolution requires both variation and selection. The development industry has quite a lot of variation, but not enough selection. Better selection is not just a matter of more rigorous top-down evaluation, but also bottom up pressure from the intended beneficiaries.

The UK General Election campaign could start as soon as next week, and it is already clear that one of the battlegrounds will be the relationship between the citizen and society. Both parties are keen to demonstrate that they don’t agree with Margaret Thatcher’s adage that “There is no such Read more…