Development Industry Fail

USA Today has a really frustrating story about the UN’s abusive misuse of USAID funds for reconstruction projects in Afghanistan.

Basically, if you can think up a malicious way to screw up a development project, the UN probably did it. They built bridges that weren’t stable; “fixed” banks to make their basements leaky; and even siphoned funds into off-shore accounts.

USA Today includes a handy PDF of the USAID report.

For anyone who’s read James Ferguson’s classic The Anti-Politics Machine, this may all sound eerily familiar. Ferguson is a Cultural Anthropologist who teaches at Stanford. While the book is pretty heavy in the social theory department (if you don’t like Foucault, don’t even go there…), it chronicles how systematic failures occur as a consistent by-product of global governance and development organization interventions in the Global South.

This particular catastrophe is a totally different kind of failure than Ferguson talks about, but I think there’s a fantastic study to be done looking at how graft has become a systematic by-product of US interventions in the War on Terror in Afghanistan and Iraq.

We’ve gotten accustomed to passing off this kind of thing as a symptom or consequence of the Bush administration, but the problem with that explanation is that the phenomenon has replicated across such different bureaucracies and contexts. This is not just a few bad apples, it’s a series of institutions that unintentionally -  but consistently – create opportunities for abuse.

The IMF Reloaded…Remixed

Tony Curzon Price has a thoughtful piece at Open Democracy in which he examines what he calls The G20′s sins of commission.

I’m interested in a whole bunch of angles that Price explores, but the money shot for all you global governance and development geeks out there is a graph Curzon Price recycles from Paul Swartz at Council on Foreign Affairs Geo-Graphics blog:

Curzon Price goes on to use the graph to make an interesting (and important) claim about the implications of China’s newfound romance with the IFI’s and global regulation.

I, on the other hand, thought it would be kind of fun to play with the graph to try to get a better sense of what may have driven these changes in the IMF’s role over time. Since Swartz doesn’t share the data or source for his graphic, I’m reduced to hacking around with the .jpg in the GIMP (which made for a really fun distraction during a meeting the other day). Apologies for the resulting visual clutter, but here’s the same graph with some new knobs and bits. The bigger dots correspond to the events that accompanied the biggest shifts:

My jumbled, colorful dots represent a few of the most relevant political and economic events of the past thirty years. What’s interesting to note is which ones seem to correlate with changes in the IMF’s role as the “lender of last resort” for the Global South. Here’s the key to the dots:

1. Margaret Thatcher elected: May 1979
2. Black Monday: Dec 1987
3. Berlin Wall taken down: November, 1989
4. Soviet Union Collapses: December 8, 1991
5. Mexican Peso crisis: Dec 1994
6. Asian Financial crisis: July 1997
7. Brazil devalues the Real: Jan 1999
8. Dot-com bubble bursts: March 10, 2000
9. September 11, 2001
10. Argentine debt default: Dec 2001
11. US invades Iraq: March 20, 2003
12. Brazil and Argentina pay off IMF debts: Dec. 2005
13. Global Recession: October 2008

Some of the things I thought might correlate with sudden changes in the global weight of IMF lending – such as Black Monday (2); the Dot-com bubble burst (8); Argentina and Brazil paying off their debts (12) – didn’t seem to matter at all.

Others – such as Thatcher’s (and Reagan’s) election (1); the Mexican Peso crisis (5); and the 1-2 combo of the Asian (6) and Brazilian (7) financial crises – appear magnified when seen through this lens.

Most intriguing to me is the long steep slide that occurs following September 11, 2001 (9). My inclination is to explain that as the result of a perfect storm that combined the eroding credibility of the IMF (Joe Stiglitz, eat your heart out!) and a real estate derivative and petro-dollar fueled explosion of private lending world-wide. No matter how you slice it, though, there’s no denying that the world financial system has gone through some exceptionally dramatic changes in the last ten years.

Other than that, I don’t have a flashy Theory of Everything to explain all the data here. Heck, as I said, I don’t even have the data. Nevertheless, it’s fun to speculate.

The Price of Globalist Unilateralism

ASEAN may go ahead with once-scrapped plans to create an Asian Monetary Fund as an alternative to the IMF.

Seems to me like a redundant effort that only makes sense given the extent to which the IMF does not respond effectively to the needs of the majority of its member states.

Multilateralism falls apart if you don’t cultivate it in good faith.

Brazil as Petro-economy

Ever since the announcement of the discovery of Brazil’s Tupi oil field earlier this year, I haven’t really taken the time to think about the political implications of the new-found reserves. This article from the Christian Science Monitor is suggestive in that regard. Unfortunately, the piece hews to a decidedly optimistic storyline about how the income will pay for new social welfare programs. That’s all well and good, but let’s take off the rose-tinted glasses long enough to consider at least a few of the less attractive alternatives.

I share the view that Brazil’s new-found oil wealth will bring about transformative changes within the country’s economy, its state, and its society. The infusion of cash will indeed open up untold opportunities for closing Brazil’s notorious wealth gap. It will also further entrench Petrobras – already one of the largest firms in the Global South – as a worldwide energy-production leader. To the extent that these opportunities are managed effectively, Brazil will gain in influence, wealth, and international prestige.

However, to the extent that the Petrobras windfall is managed poorly and generates unanticipated spillover affects, it could easily produce a catastrophe. The sudden surge in income will likely give Petrobras executives and investors even more political clout than they already have, leading to increased opportunities for corruption (already a neverending problem in Brazilian politics), graft, and nepotism within the state. Furthermore, only an immense amount of well-channeled political goodwill can prevent the expansion of Petrobras from encroaching on the political interests of Brazil’s other burgeoning industries and its most vulnerable citizens.

This is not about simple optimism or pessimism, but rather about the realities of imbalanced petro-economies. The reasons why other oil-rich nations have such a horrendous track-record in terms of political accountability, transparency, and inequality has a lot to do with the pressures that a burgeouning state-owned energy sector tends to place on the rest of the state and private sector. Just because Brazil has enjoyed sustainable growth and social progress since the mid 1990′s does not mean that it has somehow “advanced” beyond the point at which its oil might prove more troublesome than its worth.

Brazil, the IMF’s A-List, and Currency Swaps

Following up on my earlier post in response to this Guardian story that offered an un-attributed claim that Brazil was appealing to the IMF for loans, it now looks like the Guardian wasn’t so much wrong as just a little inaccurate fuzzy on the details. Whereas the original Guardian story had spun the situation as though the wealthy nations of the Global South had come to D.C. with hat in hand, it looks like a totally different situation is in fact unfolding. The new liquidity fund is meant to offer stable “A-list” economies of the South the chance to strengthen their currency reserves in the event that foreign investment flows continue to run dry. According to the WSJ:

The IMF’s new program, called the Short Term Liquidity Facility, would be used largely to pad a country’s reserves, which could help the recipient defend its currency. But the funds could also be used to help recapitalize banks or cover import bills.

The IMF plan is its clearest recognition that its insistence on tough conditions is driving away potential borrowers that might need its help. But the new plan also puts the IMF in the position of deciding who can have money with few strings attached, and who can’t.

The attempt to draw a bright clear line between “responsible” and “irresponsible” borrowers is certainly new. It will be interesting to see where it leads.

Back to Brazil, though.

Reuters (via the Economic Times of India) actually found someone in Brasilia to do some reporting and added the following:

Brazil welcomes a new liquidity fund proposed by the International Monetary Fund to help emerging markets but does not see a need to draw on the funds for now, a source close to President Luiz Inacio Lula da Silva said on Wednesday.

“I don’t know if we will draw (on the fund) in the future. But we don’t need the money now,” the source said on condition of anonymity. The IMF board is considering a proposal for the Fund on Wednesday and an announcement is expected later in the day.

The Folha de São Paulo added even more critical details in its coverage, also noting that the IMF actions came in conjunction with an announcement that the US Federal Reserve will begin offering Brazil currency swaps at no cost in an effort to help the Lula government pump liquidity into the national economy:

The Central Bank [of Brazil] noted that, “these central banks of emerging economies with responsible fiscal policies and systemic importance,” will now be included in the global network of currency swaps.

The central banks of Australia, Canada, the Euro Zone, Denmark, the U.K., Norway, New Zealand, Sweden, Switzerland, and the U.S. Federal Reserve are currently part of that network. (my translation).

The Folha’s account was reiterated by Bloomberg as well, although the New York-based financial news agency did see fit to print at least one offensive, infantilizing quote that portrayed the poor countries of the world as naughty elementary school students:

“The Fed is there to support large emerging markets that have done their homework over the past several years like South Korea, Brazil, Singapore and Mexico,” said Alonso Cervera, a Latin America economist with Credit Suisse Group in New York.

If the central bankers of the world just needed to do their homework in order to build stable economic systems, I’d like to think that Alan Greenspan wouldn’t have had such a hard time.

Anyhow, if I understand this correctly, the actions taken by the IMF and the Fed signal an effort to treat these four middle income countries with an unprecedented level of parity in response to a crisis that has far exceeded anyone’s expectations. The implications for the post-election day Global Financial Summit are intriguing: will the members of the G22 now have a more substantive place at the bargaining table with an embattled Europe and U.S.? If so, will the Southern super-powers use their authority to defend the interests of their less well-off neighbors or will they merely seek a bigger slice of the pie?

Happy Open Access Day

Open Access (OA) FAQ

“Why support OA?” Because there’s nothing exclusive about ideas – we can share them at no cost and still develop business models to make a living. A vibrant knowledge ecology will thrive if we learn not to treat intellectual property regulations like legal cudgels to beat others into submission.

“Why does OA matter?” Because Access to Knowledge – whether in the form of software, academic journal articles, patented medicines, technical designs, or cultural products – will facilitate education, economic development, and equitable wealth distribution throughout the world.

But this is just a blog, you’re not really doing anything about OA: Actually, I use my blog to promote and enact OA principles (for example, check out my creative commons attribution-share-alike license up in the top of the right-hand sidebar). Also, as a graduate student and a researcher, I try to publish in venues that support OA models of distribution and licensing.

Alright, fine. I’ll “get involved,” just spoon-feed me some more information, please! For details about the day go here and here. If you really want to drink from the firehose, I dare you to subscribe to Peter Suber’s blog. If you still want to learn more about the theories and ideas behind OA, read this article by UC Berkeley law professor Amy Kapczynski, Yochai Benkler’s Wealth of Networks (don’t worry, it’s quick!), and Larry Lessig’s Free Culture.

Aaron, you rampaging nerd, I don’t read – just point me somewhere I can give money! Okay, fine. Support and get involved in the activities of the following organizations: Knowledge Ecology International, Public Knowledge, Universities Allied for Essential Medicines, Public Library of Science, and Essental Action (esp. their Access to Medicines project).

Anything else? Don’t forget to vote this November and please tip your waiter.

US will no longer appoint World Bank President

Wow.

The Guardian has the story.

This may be too little too late to mean anything in the context of the current financial crisis, but it is a very important step that was long overdue.

h/t Bretton Woods Project

Why Politics and Institutions (Still) Matter for ICT4D: a reply to Ken Banks

This is a shameless cross-posting of my contribution to the Berkman Center’s Publius Project. In the essay, I respond to a piece published by Ken Banks last week (“One Missed Call,” see link below). If you have time, I highly recommend reading Ken’s piece first. I also recommend checking out the other excellent contributions to the project, which enjoys the expert guidance of Caroline Nolan at Berkman (thanks, Caroline!).

Ken Banks’ provocative contribution to the Publius Project, “One Missed Call” boldly urges the ICT for Development (ICT4D) community to look beyond bureaucracy-heavy, top-down solutions to global poverty and inequality. In a similar spirit, my response to Ken’s piece will take the form of a question, critique, and complementary challenge to the ICT4D community that runs somewhat afoul of the Easterly-Schumacher-inspired vision he offered.

Ken echoes William Easterly’s disdain for bureaucratic, large-scale approaches to global poverty, calling instead for the adoption of small techno-centric solutions based on principles of Human-Driven Design and deployment by “grassroots” NGO’s. Like Easterly, he encourages us to bet on the ingenuity of small-time entrepreneurs to break the world’s persistent cycles of poverty. If we identify these entrepreneurs, the theory goes, we can eliminate poverty without the immense waste and inefficiency that plague so-called “Big-D” development projects.

While both Easterly and Banks present compelling, attractive claims, they leave a key question unanswered: how can ICT4D advocates effectively confront the systemic and structural aspects of poverty or inequality within this framework?

Easterly’s argument takes for granted that well-positioned innovators can overcome institutional constraints at the regional, national and global levels. Indeed, his arguments in The White Man’s Burden closely resemble the work of free-market ideologues Milton Friedman and Friedrich Hayek insofar as he objects to all forms of developmental “planning” as fundamentally misguided. Empirical research in Development Studies contradicts this position, suggesting that the ability of grassroots NGO’s and others to deploy technological solutions effectively is overdetermined by the institutional environment within which they act (for a recent example, see Ha-Joon Chang’s Bad Samaritans – The Myth of Free Trade and the Secret History of Capitalism). Of course, to adapt Margaret Mead’s much abused phrase, I do not doubt that a small group of committed citizens can change the world. And yet, such changes are bound to be fleeting in the absence of broader interventions.

The problem, as I see it, stems from the fact that Easterly’s proposition is free-market economics with a friendly face – compassionate conservatism in the truest sense of the phrase. Embracing Easterly’s vision entails a radical denial that broad political, economic, and cultural structures determine developmental outcomes in any way. The history of global development since World War II offers numerous grounds on which to reject this claim. First of all, the emergence of the United States as a superpower influenced the creation of the World Bank and the International Monetary Fund, the primary institutional frameworks within which development projects took place (until recently). Secondly, the concomitant dissemination of U.S. culture, values, and products has also shaped the ideals and aspirations through which people across the world understand what it means to be “developed.”

As a result, we cannot talk about “development” without referring to the broad political, economic and cultural currents that defined the late 20th century and the processes of globalization. All contemporary development projects operate in the institutional space defined by this history – and in many cases it is the space itself, rather than the any individual bureaucracy or top-down vision of change that determines what is and what is not possible for the poor and middle income populations of the Global South.

Contemporary global development paradigms (ICT4D among them) bear the traits of organizational and philosophical predecessors. The Millenium Development Goals represent a continuation of the Big-D development schemes of the 1950’s and 1960’s, where gigantic multilateral institutions like the United Nations dictated the terms on which the world’s poor would modernize. Similarly, the small-d development ideal proferred by Easterly and others places great faith in the ability of unregulated markets and small-scale entrepreneurs to bring widespread economic growth “from the bottom up.” This represents a scaled-down version of the so-called Washington Consensus of the 1980’s and 90’s that saw the dismantling of social welfare systems and the deregulation of financial markets around the world. The results of such “structural adjustment” were catastrophic for the poor, as local elites and multinational corporations extracted spectacular profits at the expense of less-empowered populations.

Both approaches – the big-D and the small-d – are stained by fundamental shortcomings that no amount of revisionism can wash away. On their own, neither will bring about sustainable widespread enhancements in the quality of life for the chronically poor and unstable regions of the world.

As a result, I challenge the ICT4D community to confront the contradictions of these competing paradigms of poverty and inequality alleviation.

At a practical level, we cannot simply abandon participation in (or engagement with) large national and multilateral political institutions. Access to fantastic gadgets and services will mean little in the long-run without a corresponding framework to support sustainable improvements in “human capabilities.” Likewise (and here I agree completely with Ken), the best intentioned multilateral efforts will fail unless they are grounded in the sort of modular, experimental approach embodied in Schumacher’s “small is beautiful” ideal.

Therefore, the ICT4D community (along with fellow travelers like myself) must find ways to split the distance between the Big-D and the small-d. We must reach out to the small grassroots NGO’s and innovators at the same time as we pursue less glamorous forms of political transformation and institution-building. We must design brilliant, appropriate gadgets and cultivate strong, accountable institutions. Together, these digital and social technologies will enable more people around the world to thrive, facilitating access to knowledge, networks, sanitation, water, and healthcare.

The need for broad political engagement has rarely been more apparent than in the present context. The collapse of the World Trade Organization’s Doha round of negotiations and the current global financial crisis provide textbook examples of institutional failures that grassroots intervention alone will not resolve. The lack of consensus at Doha reveals the extent to which existing global governance institutions have failed to meet the needs of low and middle income countries. Meanwhile, the implosion of the housing and credit markets in the United States has illustrated the risks of insufficient coordination between government and the private sector in the face of an obvious, long-standing threat to the collective interests of society. In the absence of sustainable solutions to these overlapping problems, rampant inequalities will likely reproduce and spread, leading to further financial and political instabilities.

In this setting, ICT4D advocates cannot afford to turn their backs on global institutions as critical mechanisms for achieving lasting techno-social change. Of course, analyzing and participating in big bureaucracies such as national states, multilateral governance forums, and international standards committees entails a distasteful degree of compliance with abusive forms of power. In this regard, Easterly’s claim that we must be wary of the tendency for these organizations to deliver corruption and inappropriate technologies is on target.

Nevertheless, if we want to avoid “missing the call” for technologies that have the potential to facilitate enhanced access, equality, and prosperity, such political and institutional engagement is more necessary than ever.

Globalization’s institutional collapse?

In response to the failure of Doha and the current global economic slow-down, two of Dani Rodrik’s most recent editorial pieces take the positions that #1: Doha was built on bad economic plans as well as ill-conceived negotiating strategies; and #2: the political and economic project of globalization currently suffers from a lack of intellectual consensus.

In the process, Rodrik points out the underlying problem with the existing global governance institutions:

There is no global anti-trust authority, no global lender of last resort, no global regulator, no global safety nets, and, of course, no global democracy. In other words, global markets suffer from weak governance, and therefore from weak popular legitimacy.

Is the lack of popular legitimacy just about weak governance, though? Clearly not – in order to obtain popular legitimacy, global governance institutions not only need to fulfill the functions listed above, but also to do so in an accountable way that integrates a semblance of democratic due process for the majority of stakeholders. These problems comprise Joseph Stiglitz’s famous “democratic deficit” and they are as much a part of Doha’s failure and the broader crisis of global institutions as the factors Rodrik enumerates.

In this sense, the broken consensus at the WTO also reflects the long-term costs of the G8′s constant maneuvering to undermine the institutional legitimacy of various multilateral fora.

More on Gurry Controversy and Brazil at WIPO

I just found out about the possible Brazilian-led challenge to Francis Gurry’s election as the new DG of WIPO a few hours ago.

Here are some interesting quotes (my translations) from news stories linked to by Joff Wild in the story I mentioned earlier.

This from the Agencia Estado coverage:

[Brazil's Foreign Minister, Celso] Amorim, according to sources within his cabinet, admitted that the situation of the Australian [Gurry] could become unsustainable, as his placement could bring about a paralysis within the organization on account of the dispute between wealthy and poor [states].

Brazil, as a result, is inclined to re-open the debate over the vote. However, the chancellor does not exclude the possibility that the new director could come from a third country and not be the Brazilian Graça Aranha. The primary object of Itamaraty [Brazil's Department of State], therefore, would be to guarantee that highest position overseeing the world’s patent system was occupied by someone sympathetic to the positions of emerging countries.

And the Folha de Sao Paulo (syndicated by Verbanet) reports that Gurry incurred the wrath of Amorim and the Lula government on account of his refusal to grant the second position at WIPO to Brazilian DG candidate Jose Graça Aranha (who lost to Gurry by 1 vote). Here’s a couple of good quotes from the story:

After spreading rumors that he would invite José Graça Aranha, who came in second in the voting…Gurry changed tactics. On Saturday, he offered a Brazilian diplomat a position in the third tier of the WIPO directorate, in the first formal attempt to pacify Itamaraty following its controversial nomination.

According to the Folha’s sources, Gurry said to the diplomat that he could not invite Graça Aranha to occupy one of the four vice-directorates of WIPO because he felt that this would give the Brazilian a platform from which he would try to undermine him.

All told, this sounds like a lot of cross-accusation and diplomatic shin-kicking. Nevertheless, I think it’s safe to say that none of it bodes well for Gurry’s ability to secure a strong mandate from a majority of the WIPO member states.