Development Industry Fail

April 14, 2009

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.

Chris Soghoian describes how he bumped up against Google’s questionable ad-sense trademark enforcement policies.

Soghoian’s story is troubling and it exposes yet another way in which the structure of web traffic has positioned Google as a de-facto arbiter of all kinds of legal speech, political salience, and good taste. More broadly, it demonstrates how key actors and institutions exercise influence in the networked public sphere.

For more on that idea, check out Matthew Hindman’s research. In his new book, The Myth of Digital Democracy, Hindman makes a related argument in a number of different ways, not the least of which is his compelling notion of “Googlearchy.” I disagree with Matt on a number of substantive points, but the significance of his analysis is undeniable. His work complements more established models for thinking about how social structure circumscribes certain kinds of thought and action.

One of the fascinating aspects of the Internet is that powerful forms of social order & status originate in seemingly innocuous expressions of aggregated opinions (e.g. the PageRank algorithm). Hindman’s work takes on the notion that such aggregated opinions are somehow equivalent to a utopian radical democracy or a free market of ideas.

In this sense, his argument parallels the work of economic sociologists, many of whom have analyzed the importance of the “embeddedness” of economic markets. Simply put, the thesis behind the concept of embeddedness is that the sorts of decentralized, disaggregated behaviors that occur in market-like settings are always an extension of the social and cultural contexts in which they occur. It’s a relatively simple idea, but it violates one of the core assumptions of neo-classical economic theory: that markets are a free and accurate expression of individual actors expressing rational preferences for the enhancement of their own wealth and welfare.

Sociologists such as Viviana Zelizer have shown how the economists’ assumptions break down in markets for deeply valued cultural goods such as intimacy and adoption. More recently, a number of scholars (including Marion Fourcade – a professor of mine at Berkeley) have taken up the idea that financial markets are also expressions of (economists’) cultural preferences and not merely an aggregated form of pure rationality.

Considering Hindman’s work and the continuing emergence of experiences like Soghoian’s, I think there’s a case to be made that research on the embeddedness of search technology might be a promising topic. Granted, I don’t know if there are many “neo-classical” information theorists out there that would be willing to defend the straw-man position that search technology serves up knowledge in a pure and rational form.

Iceland and Hungary are the first recipients of IMF loans as a result of the current global financial crisis.

In a sign of what’s to come, the Fund is already demonstrating its continued willingness to impose policy conditionalities on borrower states.

The Guardian has the story in Hungary:

This week the International Monetary Fund stepped in to stop any more investors from pulling their funds out of the country altogether. Hungary is now set to become the first EU state to receive an IMF lifebelt – of around €12.5bn.

The bail-out announcement received a mixed response in Budapest yesterday. “We have a credit noose around our necks,” declared the rightwing daily Magyar Hirlap, while another paper showed bundles of forint notes being sucked up by a cyclone.

“This is going to be tough,” said the tabloid Blikk, pointing out that a condition of the loan would be a 300bn forint cut in public spending, which will likely lead to high inflation and attacks on social benefits.

And the Financial Times covers Iceland:

The application will be presented to the IMF’s board on Thursday and the central bank said a condition attached to the loan was for a rate rise to 18 per cent.

The move reversed a 3.5 per cent rate cut announced just two weeks ago by David Oddsson, central bank governor, underlining the influence the IMF now has over policymaking in Iceland.

Brian Coulton, managing director at Fitch Ratings, the credit rating agency, said Iceland’s central bank had “no choice but to work very closely with the fund”.

While the policy conditionalities attached to the loans appear less extensive than the intrusive demands the IMF and World Bank used to place on its borrowers, the persistent willingness of the Fund to dictate borrower fiscal policy suggest that the D.C.-based institution has failed to learn from experience. IMF-sponsored structural adjustment policies implemented throughout the 1980’s and 90’s precipitated a string of fiscal crises in the economies of the Global South.

While I’ll have to dig around in the academic journals to assess whether there’s any evidence that IMF-loans caused later crises among borrower countries in the 80’s and 90’s, the historical record in places like Argentina, Mexico, and Brazil is pretty clear: in the process of imposing conditionalities had profound flaws that facilitated the collapse of otherwise strong currencies.

The obvious difference this time around is that the borrowers are in Europe – it will be interesting to see how this affects outcomes.

Reinventing the IMF?

October 26, 2008

With the continued decline of financial markets and the threat of radical destablization throughout the Global South, I suspect that a consensus view that the IMF must step in to ensure the solvency of developing countries is already spreading quickly among the punditocracy and major news outlets.

The IMF (photo by Kyrion cc-by-nc-nd)

The IMF (photo by Kyrion cc-by-nc-nd)

Given the weakened condition of wealthy states and corporations, the IMF will play a major role in any sort of multilateral bailout. Indeed the crisis presents an opportunity for the Fund to resurrect itself after a number of very, very bad decisions made in the Neoliberal 1980’s and 90’s finally came home to roost, bringing shame upon the organization and its ideas.

The question is what kind of an IMF will we get this time around? The critical work of Joseph Stiglitz, Ngaire Woods, and others has provided ample evidence that the Fund’s proclivities for anti-poor policies were not an accident, but a systematic result of the organization’s structure and culture.

Since 2002 (when such positions first gained widespread traction), there has been much talk of reform – a trend which will no doubt continue well past November’s Global Financial Summit – but precious little action.

The U.S. and Europe still retain a ridiculous share of the voting power within the IMF, World Bank, and the WTO, virtually guaranteeing that they will strong arm through whatever solutions they deem fit. While Ambassadors, Trade Representatives, and their ilk may talk a good game about promoting equality through increased multilateral liberalization, the bottom line is that truly equitable trade will not come about without a substantial sacrifice by the traditional “Great Powers” of the West. The recent trend of the U.S. and E.U. pursuing absurd schemes to evade accountability and transparency by undermining global forums also belies any rhetoric of good will.

Does the IMF have what it takes to bring about a true shift in the underlying structures of the global financial system? I doubt it, but it will be revealing to see just how hard Dominique Strauss-Khan (if he holds onto his job now that he has officially held onto his job despite a sex scandal) and his colleagues will try.

Jon Henke at The Next Right has replied to my earlier post about the prospects for a conservative Netroots (he calls it the “Rightroots”).

Henke begins by contesting my claim that there are ironic echoes of Markos Moulitsas in his and Patrick Ruffini’s writings:

Actually, I don’t think it’s ironic at all that the analysis of problems on the Right is similar to the arguments made by the Netroots Left. For one thing, the “claims made by Markos Moulitsas” are in many ways intentional recycling of the movement on the Right.

This is certainly a fair point to make (although the link to the TNR article was broken, so I’m not totally sure what evidence he’s using to supoprt his point). While I suspect kos might disagree strongly, I can see how there are some ways in which his strategic push for a populist, patriotic Left powered by mass participation borrows from the playbook of the Right.

Nevertheless, an underlying assumption in much of kos’s work has been the idea that there is something inherent to the culture of the Left which has made it particularly well-suited to decentralized action online. To me, it sounds like Henke and Ruffini don’t agree with this piece of kos’s thinking at all, but I’d be interested to hear more from them on this.

Henke then goes on to build off my argument that the current cross-ideological differences in networked organizing have not been determined by technologies per se:

The underlying systemic inputs are very similar. The political/electoral culture and incentives, and the emergence of the internet (sic) as an important social and technological phenomenon impacted both the Left and Right at approximately the same time.

The difference in uptake and evolution is predominantly due to the political cycle. Democrats went through the wilderness from 1995 to 2003; they found their way from 2003 to 2008.  Republicans entered their wilderness in 2007, though I would argue that the Right has been in the wilderness for longer.  How long the Right wanders in the wilderness depends, in large part, on how seriously they take the lessons they can learn from the Left.

The emphases to underscore what I take to be the key points here. The notion of an evolutionary political cycle is an interesting one that I’d like to think about more. While I am not aware of rigorous empirical research that supports this kind of idea, I agree that it’s an attractive explanation of political dynamics in this country since the mid twentieth century. It would be great to find out if someone’s tested the theory more carefully.

In my offline conversations with Gene Koo, we’ve also been throwing around the idea that a stint in the wilderness may speed up the process of partisan innovation by unleashing some old fashioned creative destruction. Gene frequently uses the metaphor of a political business cycle to describe this and argues for something like a leapfrogging effect as the parties alternately innovate, win power, and then grow complacent until they are forced to innovate again. This is very similar to Jon’s point. It’s also clearly reflected in the recent experience of the Left, which had to overcome the flawed strategies of the Clintonian Democratic Leadership Council to build a much more impressive grassroots machine for the 2006 mid-terms that may be on the vege of delivering a knockout punch two weeks from now.

Finally, Henke concludes by addressing what I see as the greatest obstacle facing an honest-to-goodness Rightosphere/Rightroots movement:

Does the Rightosphere not organize as well because of the nature of the online Republicans? Or do the online Republicans not organize as well because of problems with the Republican Party? I think it’s mostly the latter – something that can be fixed – but it will not be changed until a number of other changes happen within the Right and the Republican Party.

Unfortunately, there are powerful, entrenched interests maintaining the Republican status quo.

Once again, I think Jon and I mostly agree (apologies to any of you who came here looking for rhetorical fireworks – that was your first mistake). The main difference is that where he underscores the opportunity for a more profound break, I emphasize that a great deal of continuity is inevitable.

This same emphasis on continuity underpins my earlier claim that organizational/cultural differences will shape a Rightroots movement into something very distinct from the Progressive Netroots. The communications practices that helped the Republicans achieve electoral success in recent cycles – micro-targeting, direct mail, exceptional party discipline, and centrally-coordinated messaging – have “hardened” into organizations and personnel with a big stake in self-preservation (that’s those entrenched interests Jon’s talking about). New pathways to electoral victory for the Right will, at least in part, stem from the adoption of new organizing tactics. Nevertheless, I suspect that traces of the old institutions (in the form of people and organizational structures) will find a way into whatever comes next.

(Correction: I apologize for adding an “h” to Jon’s name in the original version of my previous post. I have subsequently changed it.)

My trusty RSS feeds have turned up two interesting recent posts on the subject of the Obama campaign and it’s implications for the future of governance in a networked society.

First, David Lazer, professor at Harvard’s Kennedy School and Director of the Program on Networked Governance, asks some big questions (emphasis added):

The lights are not going off on this operation. If Obama loses, the network provides him an instant infrastructure to run again. The more intriguing question to me, as a student of politics, is what happens if, as seems likely right now, he wins. There are inter-related political and strategic questions. On the political side, the question is how Obama might use the apparatus to help him govern. Does he directly appeal to his e-mail list to support his policy objectives? There are, on average, about four thousand politically active Obama supporters in each Congressional district–that could be a lot of letters to Members.

And a few lines down:

On the strategic side, the question is to what extent does the apparatus continue to evolve to allow grassroots involvement, and to what extent does stuff flow up as well as down? In the long run, the only way that there will be some stickiness to the structure is if the people who have been involved can mobilize for local action, can connect to each other, and feel that their voices matter.

network cables (photo by pascal.charest cc-by-nc-nd)

network cables (photo by pascal.charest cc-by-nc-nd)

Meanwhile, Joshua-Michele Ross at O’Reilly interviews Jascha Franklin-Hodge (founder and CTO of Blue State Digital, or BSD), who offers some partial answers to many of the same questions.

I recommend reading the whole post (and watching the videos, if you’re more of a visual person or whatever), but here’s the bullet-point version of Ross’s claims if you absolutely insist (emphasis removed from the original):

  1. Online U.S. political communities will morph from a campaign fundraising role to a governing role.
  2. Rather than one centrally governed behemoth, MyBO is enabling a thousand small campaigns to flourish…This kind of swarm politics has generated enormous amounts of energy (and money) from ordinary citizens.
  3. Technology (infrastructure and know-how) will become a necessary core competence in all U.S. political campaigns…Campaigns that maintain or are able to tap into a continuity of software, infrastructure and human capital will have serious advantage.
  4. When lobbyist data, earmark data etc. is available in standard formats it will be a great leap forward for more transparency in government.

Responses 1-3 are in varying stages of already being true. Number 4, on the other hand, has a long way to go (although the folks at the Sunlight Foundation are plugging away on that front).

Whether Franklin-Hodge’s vision of digital democracy comes to fruition, the devil will be in the details. An underlying concern voiced by Lazer is how the nodes (citizens and groups) at the edges of U.S. politics might use digital networks to enhance traditional mechanisms of representation (politicians and political parties). I would build off this insight to ask both authors whether they think the architecture of the network and the technologies that run it will also play an important role in determining the fate of netwoked democracy? If so, how do we design networks to facilitate democratic practice?

As a number of folks have argued, the choice of particular platforms and standards will enable certain forms of civic engagement while foreclosing or devaluing others. Furthermore, just because voters could gain access to the same kinds of technologies doesn’t mean they’ll use them equally effectively or even in the same ways (check out Eszter Hargittai’s research on skillful Internet use if you want some really sobering examples).

All of this is to say that the prospect of a networked polis (like a networked public sphere) presents a number of problems and challenges that few (if any) societies have been able to resolve with earlier communications technologies or institutional formations. In the ancient Greek version of the polis, a narrow class of citizens (land-owning men of means) had the ability and the right to participate. While contemporary democracies have become more populist and inclusive, the reality is that the playing field remains wildly uneven in favor of the wealthy, the well-educated, and the well-connected.

If the future imagined by Franklin-Hodge, Lazer, and others indeed comes to pass, all the fiber optic cable in the world will not make the democratization of effective citizenship any less of an uphill battle.

The Mt. Washington Hotel, Bretton Woods, NH, site of the creation of the current global economic governance arrangement (photo by robdebsgreen cc-by-nc-nd)

The Mt. Washington Hotel, Bretton Woods, NH, site of the creation of the current global economic governance arrangement (photo by robdebsgreen cc-by-nc-nd)

We have now seen first full week of trading since last weekend’s Euro-American attempt to stop the bleeding in the world’s financial markets. From any perspective, the results have been sobering.

Among the economic punditosphere, some consensus seems to be emerging (sweetheart bailouts = bad); however economists of various ideological stripes still offer competing explanations of the causes and effects of the crisis (for examples, see Tyler Cowen #1 and #2, Daniel Davies, and Arnold King), as well as a whole range of propositions about how to fix it.

Meanwhile, Mssrs. Bush and Sarkozy have announced plans to initiate a sort of Bretton Woods Redux at Camp David after the U.S. elections.

Taken together, these signs suggest that the captains of the global political economy may attempt to plot a bold new course in the coming months. Nevertheless, I remain suspicious that we’re really witnessing little more than a noisy shuffling of deck-chairs on a badly listing ship.

Certainly, the deluge of analogies linking the present era to the time when the Bretton Woods Conference was held are incomplete at best. The original conference did not happen at the first signs of global financial collapse (circa 1930-something), but rather in the midst of the resulting violence and global destruction of World War II (1944).

That era was one in which the U.S. and U.K. could quasi-legitimately claim to represent the core of the global financial system. The result was a naked demonstration of military and economic power thinly disguised as diplomacy. Richard Peet describes in his (richly detailed, but theoretically unsatisfying) book, Unholy Trinity: The IMF, World Bank and WTO how the outcomes of the New Hampshire meetings reflected their origins in back-room deals between U.S. Deputy Secretary of the Treasury Harry Dexter White and his counterparts working under Lord John Maynard Keynes. It was no coincidence that the resulting institutional arrangements so blatantly favored European and American interests. The event had been carefully engineered to ensure such an outcome.

What will the upcoming round of global economic talks look like? In a somewhat non-analytical, but nonetheless provocative piece published yesterday morning, DailyKos editor Devilstower gets to the heart of the matter. Here are three key quotes (emphasis added):

“While we are fretting about our plans to restore the broken economy, there’s one point that isn’t making the debates, and only rarely making the news. In many ways, we will no longer be the masters of our own economic ship. The factors that will most affect us in the future may no longer be under our control, or in the hands of those inclined to place our needs very high on their list of concerns.”

“After sixty years of Bretton Woods, the world is looking for a less dollar-centric alternative to our current fiscal system. And they’re not begging for our permission.”

“As the world meets in global summit to “rebuild capitalism,” the United States may host the event, but don’t expect the rest of the world to turn to America for ideas. Instead, they will try and sort out if we are AIG — salvageable, and possibly too large to fail — or Lehman Brothers — a former titan allowed to crash on the rocks.”

I agree with this assessment, although Devilstower’s claim that Europe will play a bigger role this time around ignores a more profound shift in the balance of global economic power. Given their current over-leveraged positions, the U.S. and the E.U. will be forced to cede some authority to the big players and creditors of the Global South (China, India, Brazil, Saudi Arabia, U.A.E. etc.). Thus, the analogy between the U.S. and AIG or Lehman is appropriate, but mis-specified: it will not be Europe that decides whether or not to make the call on this nation’s accumulated fiscal warrants.

My intuition is that these summits will look a lot more like the recently collapsed Doha round of negotiations at the WTO. In the foreground, the U.S. and European leaders will carry on a great shadow-play of magnanimity and cooperation. The opening gambit has already been made in the World Bank, where the U.S. has recently surrendered its long-cherished “right” to appoint the organization’s President.

At the bargaining table, however, these same U.S. and E.U. negotiators will flatly refuse to accept the fact that they are no longer the masters of the universe. Instead, they will bully, threaten, and backstab their way to a total impasse – or at best a watered-down statement of “principles” with no real institutional teeth to back it up (sound familiar?). This has been the pattern for a few years now, and I would be pleasantly surprised if it were to suddenly disappear when big issues made their way onto the table.