The OPEC meeting in Vienna has just concluded without a production freeze deal. Oil prices—which prior to the meeting had risen above $50 a barrel (an important “psychological” milestone and a 50 percent increase since the low of February 2016)—fell about 2 percent following the announcement.

As the famous film producer Samuel Goldwyn once said, “Only a fool would make predictions—especially about the future.” Yet oil prices remaining below their fiscal break-even points are posing a unique challenge for the oil- and gas-rich Gulf Cooperation Council (GCC) countries. They also present a once-in-two-decades opportunity for these governments to reform and diversify their economies. High oil prices have powered the GCC’s rapid growth for almost two decades. Since the end of 2014, revenue losses have put significant pressure on the prevailing mode of governance, one that involves significant welfare channeled to citizens through the public sector combined with a highly segmented labor market.

Naturally, the GCC does not face the same types of crises compared to its poorer fellow OPEC members. Last year, Angola slashed its public investment budget by more than one-half; some have argued that cuts to waste and sanitation, in particular, may have triggered a yellow fever epidemic. In Ecuador, the government has garnished wages of those in the public sector earning more than $1000 per month. In April, Ecuadorian President Rafael Correa began talks with the International Monetary Fund (IMF) and World Bank—whose resident representative Correa famously expelled at the start of his first presidential term in 2007. Revenue losses have dramatically affected Iraq and Libya’s capacity to fight Islamic State. In Nigeria and Venezuela, revenue losses from plummeting oil prices have contributed to economic crises not seen for over two generations: Public services are collapsing; mortality rates are rising; multinational corporations have withdrawn (several international airlines have suspended operations to both countries); and both countries are struggling to defend their fixed exchange rates.

But in the GCC, the oil glut has forced governments to think the once unthinkable: cuts to public benefits and the T-word—taxation. In the GCC, the public sector provides citizens with higher wage and benefit packages and better job security than the private sector. Opinion polls in the GCC routinely show that between 60 and 80 percent of GCC citizens prefer low-productivity, high-paying government jobs to working in the private sector (or being self-employed). Meanwhile, the private sector is dominated by family businesses, where low-wage and low-skill employment is taken up by migrants. Even as private investment has increased, firms have continued hiring expatriate workers, who generally have lower wage expectations, require less training, and are subject to more flexible labor market regulations. As a result, economic growth in the region has mainly been due to factor accumulation and little due to gains in productivity. Moreover, despite policy efforts to nationalize labor forces, segmentation of the workforce by nationality—with the public sector dominated by nationals and the private sector dominated by foreign workers—has persisted.

The relationship between oil wealth and dictatorship is well known. There are 14 countries with a per capita income above $15,000 (PPP-adjusted) that are classified as dictatorships by the Polity IV score. Of these, 11 are oil- or gas-rich countries. Dictatorships—even the most repressive—require some form of legitimacy to survive. By the authoritarian “bargain,” autocratic states restrict political rights while aim to provide welfare necessary to avoid challenges to their rule. The story of reform in the GCC is that, when oil prices are low, governments make meager gestures towards enhancing the political franchise. During the last period of low oil prices (1990s) Kuwait—the only GCC country considered by the watchdog organization Freedom House to be “partly free”—held its first multiparty parliamentary elections in which opposition parties participated. Around the same time, Saudi Arabia held its first municipal elections, and Qatar granted women the right to vote. When oil prices rise, leaders can use their state’s wealth to secure their rule. In the aftermath of the Arab Spring in early 2011—at a time when oil was over $100 per barrel—Saudi Arabia, Bahrain, and Qatar increased salaries for civil servants, military, and internal security forces. At the same time, all three countries cracked down on dissent or suspended political liberalization efforts (Qatar cancelled what would have been its first parliamentary elections). Thus observers have likened political cycles in the Arab world to a pair of political lungs, “breathing in… and expanding, but then inevitably exhaling and contracting when limits are reached.”

The relative economic wealth of the oil-exporting, labor-importing GCC countries has provided a stronger buffer against revenue losses compared to the resource-poor, labor-exporting countries of the Middle East and North Africa. Now the plunge in oil prices is pushing the GCC countries to draw down their reserves, go into fiscal deficit for the first time in over a decade, and implement various types of austerity. They have begun to make cuts to subsidy programs—including fuel subsidies—and have discussed the option of a GCC-wide, value-added tax. IMF Managing Director Christine Lagarde, among others, have pressed the Gulf States to cut spending.

Ultimately, it will fall to reform-minded GCC leaders to take advantage of what may be a brief window of opportunity to push for diversification. There are hints of movements in that direction. The emir of Qatar, Sheik Tamim bin Hamad Al Thani, has warned that the state will no longer be able to “provide for everything.” Saudi Arabia’s Vision 2030 foresees a kingdom no longer reliant on oil. These are important steps, but of course, will require a major political reorientation of Gulf-state governance. Blueprints for economic diversification, based on the experience of countries that opted for similar reforms, are widely available.  

But more critically, and far more difficult to achieve, will be the need for GCC rulers to stop fearing the rise of a truly independent merchant class—one that has achieved its wealth through entrepreneurship and hard work, rather than through transfers from the state, through royal birth, from membership in the inner circle of the rulers, or through some other forms of advantage or privilege. Equality of opportunity and diversification are the two sides of the same economic coin.

      

 

 

Editor's Note: This is a chapter from "The Last Mile in Ending Extreme Poverty," which explores the challenges and steps needed to end extreme poverty.

In 1990 approximately half of the population in the developing world lived on less than US$1.25 a day. By 2010 some 700 million people had been lifted out of poverty, dropping that rate to 22 percent, and fulfilling the first Millennium Development Goal of cutting extreme poverty in half (UN 2014). Still, a billion people continue to live below the $1.25-a-day line, and achieving the “last mile” in eradicating poverty will require a different set of instruments, institutions, and policy regimes than has been commonly used.

This chapter argues that, although much progress against extreme poverty in low- and middle-income countries has been accomplished through so-called inclusive growth, the elimination of consumption-based poverty will require greater attention to the political economy of social protection in developing nations. Since the 1990s, increases in labor-based income have been responsible for most of the achievement in poverty reduction. But for the large middle- income countries (where most of the world’s extreme poor currently live), evidence suggests that the effect of labor income on consumption will hereafter diminish considerably, with the poorest individuals remaining vulnerable to a variety of shocks, thus requiring a more effective social floor below which they cannot fall. In middle-income countries, it may be that growth has lifted all the poor out of extreme poverty who can be lifted; for the rest, social policy will be needed.

What kind of social policy mix is needed? While it is technically possible to devise precise, leakage-free, redistributive mechanisms that can raise consumption among the extreme poor and protect those on the edge of poverty, the political reality is that critical support among the nonpoor for these types of schemes is the lowest where it is needed most, namely, in countries with large populations of extreme poor. Consequently, if these countries continue their typical policy mix of “inclusive” growth strategies combined with targeted transfer programs, movement along the last mile will be slow. Instead, the last mile in poverty reduction is more likely to be sustainable through comprehensive, even universal, social policies in which the nonpoor are included.

By 2030, however, most of the world’s extreme poor will live in fragile states, many of which are low-income countries. In these countries, of course, there remains much mileage to be gained from growth. However, reforms to social policies in these countries also have their place. Here the challenge is to weave together the various strands of highly fragmentary antipoverty programs into more uniform, effective systems of social protection that preserve cohesion.

Much of this chapter draws upon the history of poverty reduction and social policy reform in advanced, industrialized economies. Of course, countries in the developing world have followed different trajectories—with respect to the timing of industrialization, reliance on service sectors, and the role of the state in the economy in the context of postcolonial development. This chapter argues, however, that the mechanisms by which extreme poverty was reduced in richer countries when those countries were much poorer—through “welfare states” financed through a tax system in which all citizens held a stake, but that also reduced the multiple vulnerabilities faced by the poor—apply with equal force in developing countries today. From Brazil to India to sub-Saharan Africa one already sees hints of these historic forces at work: a long-undermined commitment to the tax system; middle-class resentments against corruption and poor service delivery; and a political awakening that has upended long-lived alliances between ruling elites and particular constituencies in which the middle classes are sidelined. Indeed, the process of welfare-state building—much like state building itself—has not been a peaceful one. In Western Europe and in the United States in the nineteenth and early twentieth centuries, it was characterized by social unrest, political extremism, and economic turmoil. Whether countries where the extreme poor live can develop durable institutions of social protection will depend on a number of factors, including the broader macroeconomic environment, the effect of globalization on the types of risks countries face, the establishment of domestic political alliances between the poor and the nonpoor, and the ability of aid recipients to temper the strong preference for targeting among the donor community.

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This blog is the last of a four-part series highlighting themes from “The Last Mile in Ending Extreme Poverty,” a book published this month by Brookings Institution Press.

India today is already richer than Germany was when it introduced social insurance for all workers in the late 1880s. Indonesia is richer than the United States was in 1935, when the Social Security Act was passed. And China is richer than Britain was in 1948, when the National Health Service was introduced. So what can we learn from comparing developing countries today to richer countries when those countries were at equivalent levels of economic development?

Although the industrial revolution had dramatic effects on poverty in today’s rich countries, the end of extreme poverty only occurred in those countries after the creation of modern welfare states in the post-World War II period. These welfare programs raised the living standards of the most destitute citizens while establishing a “social floor” that protected all members of society.

Today’s lower and middle-income countries, despite their significant progress, are actually lagging behind in their fight against poverty when compared to countries that industrialized before the 20th century. In Table 1, I’ve compared the extreme poverty rates of today’s developing countries—China, India, Indonesia, and Nigeria—to the extreme poverty rates of today’s rich countries—the United Kingdom, United States, Germany, France, Japan, Italy, and Spain—when those countries were similarly “developing.”

Table 1. Extreme poverty rates of today’s rich countries, when they were at similar levels of development (%)

Note:  table compares extreme poverty rates in the four countries across the first row (2010 data, in parentheses) to those of the seven advanced, industrialized countries in the first column in the approximate year in which the per capita incomes of the matched countries were approximately equal. All rates represent the percentage of the population living below $1.25 per day in 2005 PPP-adjusted dollars. Per capita incomes used to match country pairs are also in constant 2005 PPP-adjusted dollars. Poverty rates are generated from parameterized Lorenz curves based on data from François Bourguignon and Christian Morrisson (2002), “Inequality Among World Citizens: 1820-1992,” American Economic Review 92, 4: 727-744.

Take India, for example. In 2010, India’s extreme poverty rate stood at 33 percent, and its per capita income was just above $3,000. The U.K., U.S., and Germany passed the $3,000 per capita mark in 1870s, 1890s, and early 1900s, respectively. Their extreme poverty rates in those decades were 12 percent, 10 percent, and 5 percent, respectively. A similar gap can be seen when comparing India with France, Japan, and Italy, all of which had extreme poverty rates at or below 15 percent when they were at the $3,000 per capita mark. Even Spain, which did not cross the $3,000 mark until the late 1950s, kept extreme poverty to less than half the Indian rate at the time.

One explanation—that today’s rich countries grew more “inclusively” a century ago than developing countries today—cannot be the whole story. In the first place, there is considerable variation in income inequality across low and middle-income countries. Moreover, as described by everyone from Charles Dickens to Karl Marx to Thomas Piketty, the beginnings of industrialization plunged large numbers of landless working people throughout Europe into (mostly urban) poverty. And just as today’s richer countries were transitioning from lower to upper-middle income countries, they were also experiencing peak inequities—during the “Gilded Age,” when private wealth exceeded national income and was concentrated among a small group of wealth-holders. Yet all of these countries managed to eliminate extreme poverty within a few decades.

The gap in reducing poverty is more likely due to very different trajectories of social protection. The earliest social protection programs in Western Europe were of the contributory variety—financed out of taxes on wages—as a way of preventing social conflict. Otto von Bismarck’s pension, sickness insurance, and worker compensation programs were, after all, created to pre-empt a Social Democratic victory in Germany. These systems, combined with the political changes taking place in the continent, would lead to dramatic expansions in social protection in later decades. Even as industrialization initially caused poverty, it also created rising wages for workers. Eventually, organized working classes formed a strong alliance with the fast-growing, urban middle class. This political coalition sought policies that would protect itself from economic cycles—especially after the economic turmoil of the 1920s and 1930s—that would eventually result in the postwar welfare system. Indeed, the durability of these welfare programs may be attributed to the participation of the middle class, which shaped program design: welfare programs provided universal coverage so that the middle class itself was not excluded from benefits.

Many of today’s developing countries have followed a very different path. Labor tends to be less organized and have weaker relative bargaining strength. Much of the labor force remains in the informal sector and is left out of any contributory schemes, which tend to have limited scope. Social protection is more reliant on a fragmented system consisting of a large number of non-contributory programs financed out of general revenues. More importantly, the preferences of both governments and donors are mainly for programs that target particular sub-populations to achieve cost efficiency.

Consequently, an opposite political dynamic appears to be playing out in developing countries. Instead of middle class “buy-in” resulting in broader and more comprehensive programs, targeted and fragmented programs are inhibiting median-voter support for social protection and leading to middle-class exit. The consequences are familiar to designers of targeted social protection—their vulnerability to shifts in political winds, their susceptibility to abuse or capture by elites, and their occasional failure to outlive the aid programs that may finance them.

The overall result is that the demand for comprehensive welfare programs in middle-income countries remains weak.

Of course, this may be changing as countries such as India begin to recognize the political as well as economic benefit of programs in which all citizens have a stake. Indeed, the Modi government has unveiled a universal social security program in its latest budget, perhaps recognizing that the last mile in poverty reduction is more likely to be achieved and sustained through social policies that garner broader political support by including the nonpoor as beneficiaries.

      

 

 

Under the rules of the Westphalian international system—where sovereign nation-states are the central players—states have complete authority over citizens within their territory (without legal obligation to behave in a particular fashion toward them), and are to avoid interference in the internal matters of other “juridically equal” sovereign entities. This system was in place for three centuries before being upended by post World War II innovations such as human rights law, standards of international cooperation, and cross-border humanitarian and development assistance.  But even these norms ultimately rely on sovereignty to operate since the networks of treaties, conventions, agreements, and compacts that support these norms rely on the acquiescence of states.

A new collection of essays, edited by Mark P. Lagon and Anthony Clark Arend, examine some contemporary developments in international affairs that seek to “break through the veil of state sovereignty to support individuals.”  Our contribution to this anthology argues that private development aid advances the centrality of human agency rather than state sovereignty as the analytical centerpiece of relationships between donors and recipients.  It does this in two separate but related ways:  by shortening the “long route” between donor and recipient; and by relying on peer-to-peer relationships abetted by the Internet and social media. Channeling aid through official state agencies removes the ability of individuals to make choices about resource allocation—both taxpayers and aid recipients are denied a direct role in determining the end uses to which funds are put.  Private aid, by contrast, can be applied to projects and sectors selected by the donors themselves.  Moreover, the spread of Internet platforms for private aid often enables recipients themselves to identify their own needs and funding amounts.

Our essay looks at new partnerships and actors promoting poverty alleviation and economic development, notably private sector actors who use social media and “crowdsourcing” to mobilize microloans to developing countries. We highlight some institutional arrangements that not only advance the agency private sector actors moved by a dignity-based rationale to provide assistance, but of the loan recipients themselves.

      

 

 

Editor's Note: This piece was originally published on the Washington Post's Monkey Cage blog on July 17, 2014.

As World Cup fever recedes, this week in Fortaleza heads of state from Brazil, Russia, India, China, and South Africa (the so-called BRICS countries) agreed to establish a New Development Bank (NDB) at their summit meeting. They will have a president (an Indian for the first six years), a Board of Governors Chair (a Russian), a Board of Directors Chair (a Brazilian), and a headquarters (in Shanghai). What is the purpose of this BRICS bank? Why have these countries created it now? And, what implications does it have for the global development-finance landscape?

The “what” is relatively straightforward. The NDB has been given $50 billion in initial capital. As with similar initiatives in other regions (see below), the BRICS bank appears to work on an equal-share voting basis, with each of the five signatories contributing $10 billion. The capital base is to be used to finance infrastructure and “sustainable development” projects in the BRICS countries initially, but other low- and middle-income countries will be able buy in and apply for funding. BRICS countries have also created a $100 billion Contingency Reserve Arrangement (CRA), meant to provide additional liquidity protection to member countries during balance of payments problems. The CRA—unlike the pool of contributed capital to the BRICS bank, which is equally shared—is being funded 41 percent by China, 18 percent from Brazil, India, and Russia, and 5 percent from South Africa.

Next, the “why.” As we have discussed in our research, the rising economic strength of the BRICS countries has outpaced increases in their voice at the World Bank and the International Monetary Fund (IMF). South-South economic cooperation has expanded dramatically in recent years. Brazil now has more embassies in Africa than does the United Kingdom. China has become Africa’s most important trading partner. The value of South-South trade now exceeds North-South trade by some $2.2 trillion—over one-quarter of global trade. Low-income countries have also seen unprecedented growth in “South–South” foreign aid—with China, Brazil, and India all becoming larger donors. So, these BRICS institutions are partly just the result of a two-decades long process of greater economic engagement by and among developing nations.

In the meantime, long-standing dissatisfaction with Bretton-Woods institutions has also pushed BRICS towards a developing-country alternative to global development finance. We have seen this before. In the late 1960s, Andean nations created the Corporación Andina de Fomento (CAF), also known as the “Development Bank of Latin America,” as a way of bypassing the stringent rules imposed by the World Bank on infrastructure loans. In the early 2000s, partly as a reaction to a widely perceived failure of the IMF to stop currency speculation during the Asian Crisis, 10 ASEAN nations plus China, South Korea, Japan established a network of bilateral currency swap agreements that would become he Chiang Mai Initiative. In 2009 seven Latin American countries signed an agreement to establish the “Bank of the South” or BancoSur to fund regional development and social protection, and in which each member nation would have one vote. Both of these latter efforts were launched, in part, as a response to the Bretton-Woods enforcement of conditions on countries seeking emergency loans. So it is with the NDB and the CRA; said the official statement, “International governance structures designed within a different power configuration show increasingly evident signs of losing legitimacy and effectiveness.”

Although the BRICS comprise over one-fifth of the global economy, together they wield about 11 percent of the votes at the IMF. But reform to the governance of the Bretton-Woods institutions has encountered a number of roadblocks. In 2008 and again in 2010, quota reform at the IMF was intended to double total financial commitments from all member countries, while at the same time giving BRICS countries larger voting shares. Because this required additional contributions by member governments of richer countries, several balked for different reasons.

Smaller European countries, whose quota shares would be reduced by the changes, opposed quota reform on the grounds that their contributions to total official development assistance would be undermined if their voting strength were diminished at the IMF. In the United States—whose shares would not be reduced by quota reform—the Congress failed to approve increased capital contributions to the IMF. In the one recent effort to pass quota reform, Democrats in the House of Representatives tried to sneak an amendment into a loan guarantee for Ukraine that would have authorized the increased quota, but then withdrew the amendment, bowing to Republican opposition. Thus, the one time the Congress has considered IMF quota reform has been as a rider in an unrelated bill.

These developments show the political tightrope on which countries must walk when it comes to global development finance:  while low- and middle-income countries have legitimate claims about their exclusion from the governance of the Bretton-Woods institutions, richer countries cannot cede too much influence over these institutions to developing nations and still justify large contributions—in particular, to the World Bank’s International Development Association every three years, and to the IMF as part of quota reforms—to their restless voters, especially during difficult economic times.

What are the implications of the BRICS institutions for international development finance? Developing nations hope that BRICS bank/CRA may eventually challenge World Bank-IMF hegemony over matters such as:  funding for basic services, emergency assistance, policy lending, and funding to conflict-affected states. The World Bank’s own estimates point to a $1 trillion infrastructure investment “gap” in developing countries. Existing multilateral development banks are able to fill approximately 40 percent of that gap. So, the fact that a BRICS bank aims to make electricity, transport, telecommunications, and water/sewage a priority is important; the demand for infrastructure is expected to grow sharply as more countries transition out of low-income status. In terms of scale, it has been suggested that—after a couple of decades, should membership be expanded, and should co-financing by governments and private investors be mobilized—that BRICS Bank loans could dwarf World Bank loans. This type of success has been seen with the CAF, which now funds more infrastructure in Latin America than the World Bank and the Inter-American Development Bank combined.

Whether the BRICS institutions go the way of the more successful CAF on the one hand, or the way of the as yet unutilized Chiang-Mai Initiative orBancoSur on the other, will ultimately depend on two other factors:  risk management and coordination.

Presumably a BRICS bank and reserve fund will need to ensure a high-quality loan portfolio that maximizes developmental impact, but keeps defaults to a minimum (for expanding the scale of lending operations, it would also be important to make profits on its loans). And so the problem of surveillance will have to be tackled. Unfortunately, the track record of regional initiatives on surveillance does not bode well. The Chiang Mai Initiative, for example, was simply unable to devise and implement a system of monitoring and surveillance, and eventually resigned itself to requiring countries using its credit lines to undergo surveillance by the IMF! The result:  not a single Asian nation has used credit through the initiative.

Meanwhile, given the abundance of evidence that multilateral economic initiatives work best when their principal stakeholders are able to resolve coordination problems, the possibility of serious intra-BRICS disagreements could prevent these new institutions from operating at capacity. Hugo Chavez’s dream of BancoSur supplanting both the World Bank and IMF in Latin America foundered on a series of disagreements on issues such as:  the bank’s tax-free status, the role of concessional finance, relationships with the private sector, transparency rules, and the need for environmental safeguards.

The structural disparity between China and the rest of the BRICS members (the Chinese economy being larger than the economies of all other BRICS combined) is at the heart of the matter for any BRICS institution. China’s dominant position makes coordination—in terms of operations and funding priorities—difficult to imagine. At one point, all other BRICS countries have expressed concern with Beijing’s economic policies and currency regime. Brazilian and Indian central bankers spoke out against the undervalued Yuan in 2009 and 2010, but to little effect. Ongoing trade disputes among developing countries also threaten unity. Last year WTO member states reached a deal on trade facilitation in Bali but India, among a group of developing nations, has threatened to withdraw support for the protocol over the issue of food security. A joint communiqué of BRICS trade ministers remains vague about whether BRICS countries commonly support the Bali agreement. These, along with a host of other intra-BRICS disputes, could limit the effectiveness of the NDB/CRA. For now, they seem to have been papered over amid the excitement surrounding the Fortaleza agreements. But they will, ultimately, determine whether the developing world has finally found a viable alternative to Bretton Woods.

      

 

 

What has been called the “largest exercise in democracy”—eight weeks of voting in which over 800 million people participated—has concluded in India with a victory for the opposition, the Indian Bharatiya Janata Party (BJP) led by Narendra Modi.  Although it earned slightly less than one-third of the vote nation-wide, the Indian single-party district system magnified the scope of the win. The BJP, along with its allied parties, has almost doubled the number of seats it holds in the Lok Sabha (lower house of parliament).  Moreover, the BJP on its own now holds 282 out of 543 constituency seats, enough to allow it to form a government without any coalition partners.  Meanwhile, the Congress Party suffered an historical defeat, now relegated to just 44 seats.  Rahul Gandhi, the Congress Party’s prime ministerial candidate and scion of the Nehru-Gandhi family that has led the Congress Party since independence, barely won his own constituency in Amethi district, Uttar Pradesh.

This election has also changed the Indian electoral map.  Four states—Modi’s own Gujarat, along with Himachal Pradesh, Rajasthan, and Uttarakhand—are now BJP-only states, with no other party representation in the Lok Sabha.  Another six “union territories,” including Delhi and Goa, are also represented entirely by the BJP.  Additionally, some 109 seats flipped from Congress to the BJP—most of them rural districts where the Congress Party has traditionally shown strength. One can drive from Mysore to Delhi while crossing only BJP constituencies.

The reasons for the BJP’s victory are multiple:  an anti-incumbent mood among Indian voters given the state of the economy, the failure of the Congress Party to connect with younger voters, corruption scandals that saddled the current government, Modi’s 24-hour campaign which—much like Barack Obama in 2008—made innovative use of technology and social media, attracting millions of first-time voters.

While there are reasons to avoid the term “realignment,” this election may nonetheless mark a turning point in India’s political development more generally.  Modi’s victory highlights four possible changes to the political system that, if they persist, could portend welcome shifts in the character of the democratic franchise as it is traditionally practiced in India.

Historically, caste, religion, language, and ethnicity, have motivated significant blocs of voters.  Although these factors—particularly the power of caste-based voting—are hardly irrelevant, in 2014 they took a back seat to punishing the party in power for presiding over falling growth rates, inflation, and a rupee that had lost up to 25 percent in value before recovering.  Economic voting has occurred in India’s past; for example, in the 1991 elections, which took place amid a currency crisis.  But in this election, the BJP and Congress adopted the rhetoric of conventional center-right and center-left parties, respectively.  Modi, perhaps due to allegations of his own culpability in the 2002 communal violence in Gujarat, assiduously avoided religious politics and stuck to the pro-market, anti-red tape platform that earned his home state a reputation as a business-friendly place.  Indian stock markets hit a record at the prospect of a Modi-led government. The rupee also strengthened to an 11-month high.  Meanwhile, Rahul Gandhi focused on rural poverty and unemployment, on the widening gap between rich and poor, and on basic needs such as food, education and health.   That much of the political debate was focused on ideology rather than identity was a welcome development in the history of Indian politics.

Nothing has been more certain in Indian politics than the expectation that the party in power will shower its supporters (and fence-sitters) with benefits in order to secure their vote.  The Congress Party has expanded the National Rural Employment Guarantee Act (NREGA), a massive public works program that has provided jobs to close to 300 million households.  Congress also enacted an ambitious right-to-education program, a national “rural livelihoods” program, as well as a food security bill that will ultimately deliver subsidized grains to two-thirds of the population. Supporters argue that these laws are critical to addressing India’s chronic poverty and inequality; critics deride them as old-fashioned budget-busting handouts. There is evidence that the NREGA, for example, helped the Congress-led coalition win in the 2009 general election.  But the failure of the Congress’ welfare-based platform to cushion its collapse even in rural areas may signal the eclipse of welfare populism as a central electoral strategy.  If true, this could prompt parties to modernize, to generate ideas, mobilize support, and govern on the basis of a consistent policy platform rather than entice backers through patron–client networks and seek power in order to gain control over state resources.

Much has been written about the rise of regional parties in India.  Milan Vaishnav of the Carnegie Endowment for International Peace notes that, rather than erode the stature of national parties, regional parties have more or less stabilized in terms of their relative power. The figure below compares the changes in vote shares for the BJP and Congress, by state, between the 2009 and 2014 elections.  With the possible exceptions of Bihar, Andhra Pradesh, and Uttar Pradesh, most of the BJP’s victories came at the expense of the Congress Party.  Unsurprisingly, Andhra Pradesh—which has been in the process of splitting into two states—is one of the few states where Congress’ losses were taken up by a regional party (Telugu Desam).  Although the number of states where regional parties gained greater shares of votes than either of the two main national parties remained roughly the same, in some of the larger states—UP and Bihar—BJP popularity eroded the strength of regional parties. 

Middle-class and urban citizens may continue to be mobilized.

One of the truisms of Indian democracy has long been the apathy of urban and middle-class voters.  As mentioned above, Indian political parties make numerous direct appeals to poor and rural voters through a targeted transfers, but also through vote-buying schemes.  Meanwhile, the middle classes have generally remained on the sidelines.  It is not likely that these patterns have, all of a sudden, reversed themselves in this election.  But we do know that urban areas experienced unprecedented voter turnout. There is also anecdotal evidence that the middle classes may have increased their turnout, prompted by pocketbook issues, anti-corruption sentiments, crumbling infrastructure, shoddy public service, and other concerns.  If so, it would be the continuation of a trend in middle-class mobilization that has coincided with, among other things, a broad anti-corruption movement, street protests against a high-profile gang rape, the emergence of the Aam Aadmi (Common Man) party on an explicit “clean government” platform.  All of these events were characterized by middle-class, primarily urban, support.

All of these developments are, in their own ways, precarious.  Religion, for example, remains a strong factor in Indian political life.  According to exit polls, only 9 percent of Muslims voted for the BJP which, although up from 4 percent in 2004, suggests that the largest minority religion remains excluded from the largest center-right party.  The problems of vote buying are as rampant as ever, with party officials having been caught distributing cash, alcohol, and even drugs, in an effort to win votes. National parties have yet to make inroads in states such as Orissa, Andhra Pradesh, or Tamil Nadu, where regional parties remain dominant.  And, the mobilization of middle-class or urban voters may prove temporary.  But all of these changes, should they continue, would be unequivocally beneficial for the Indian political system, making it more institutionalized, stable, coherent, and transparent.

      

 

 

INTRODUCTION

In 2010, foundations, nongovernmental organizations (NGOs), religious groups and other charitable organizations in the United States contributed $39 billion to international development causes (Hudson Institute 2012). By comparison, $30 billion in US official development assistance (ODA) was disbursed during the same year. For US-based organizations, this represented a doubling of international private, voluntary development assistance over the past decade.

In recent years, the proliferation of private development aid has been facilitated by peer-to-peer (or “crowd-funding”) practices. As with the broader “crowd-sourcing” phenomenon which solicits information from large numbers of individuals for various entrepreneurial activities, crowd-funding platforms bundle large numbers of small, individual contributions for investment, grants or loans. The bundling of funds is generally done through internet-based social networks. From the United States, internet-based companies such as Global Giving, Kiva, Wokai and Zidisha have channeled millions of dollars to individuals and partner organizations in developing countries.

Despite the tremendous growth in private development assistance of all kinds — from mega-charities to “micro-philanthropy” — very little is known about the allocation and selectivity of private aid. Compared to official aid, private aid — whoever provides it — is obviously more sensitive to the preferences of philanthropic-minded individuals who determine allocations across countries and, within countries, across sectors, projects and individuals. More importantly, crowd-funding philanthropy affords an opportunity to test a central premise behind arguments for expanded private aid — namely, that private aid avoids the political and strategic considerations that influence bilateral ODA allocation, and better matches recipient need with individual donor preferences.

Information on the allocation of crowd-funded private aid, and on the choices made by private citizens who contribute to international causes, can potentially reveal the implicit preferences of philanthropic citizens in a way that cannot be captured by looking at official aid allocations. There are several possibilities: that crowd-funders behave in accordance with rational-choice theories of charity, allocating money based on individual-specific preferences; that crowd-funders behave like official donors, responding to a combination of recipient-country need, expected performance and commercial and/or strategic value; or that crowd-funders make allocative decisions on the basis of group behavior and norms.

This article presents new data on crowd-funded development assistance, which allows us to analyze the motivations behind individual contributors. We analyze data from Kiva, the largest provider of crowd-funded microcredit to developing nations.

This article presents new data on crowd-funded development assistance, which allows us to analyze the motivations behind individual contributors. We analyze data from Kiva, the largest provider of crowd-funded microcredit to developing nations. We develop a model to show how the allocation of aid through crowd-funding websites reflects the preferences of philanthropically-minded citizens regarding development assistance, and then use data on Kiva’s transactions to examine empirically the factors that affect the supply of private development aid, as well as to determine the extent to which private preferences differ from official aid agency allocative mechanisms.

We argue that the rate at which individual microloan requests are funded by Kiva’s community of lenders, once they are posted on the Kiva website, can be interpreted as a proxy for crowd-funder preferences regarding private development assistance. We can therefore use survival analysis of the time to fund each project to estimate the significance of a number of covariates.

We find that Kiva’s crowd-funders are generally not influenced by the usual set of official aid determinants (including foreign-policy considerations, recipient-country poverty and recipient-country institutional quality). Additionally, Kiva crowd-funders do not appear to base lending decisions on the usual indicators of credit risk. We find, instead, that the type of diaspora and migrant networks of aid recipients in the crowd-funder’s country is a stronger determinant of hazard rates, and that the nature of associational networks and social linkages between prospective private donors and aid recipients will more likely affect crowd-funded aid allocation than recipient-country or project risk.

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INTRODUCTION

There is significant evidence of the role collective action plays in reducing poverty. Effective coordination by the poor has been shown to strengthen property rights (Baland and Platteau 2003; von Braun and Meinzen-Dick 2009), increase bargaining power in labor markets (Bardhan 2005), improve access to fi nancial markets (Karlan 2007) and increase public investments in poor communities (Alesina et al. 1999; Banerjee and Somanathan 2007).

In light of this evidence, governments, aid donors and international NGOs have sought to expand their support to collectives in poorer communities. At the World Bank alone, more than $50 billion has been spent in the past two decades on “community-driven development” projects that expand participation of the poor in the design, implementation and evaluation of development (Mansuri and Rao 2012).

The question of where social capital originates remains poorly understood. Most analyses of how poor communities resolve coordination problems focus on simple, group-devised solutions that restrict access to common resources (Bowles 1998; Ostrom 1998; Henrich et al. 2001; Fehr and Gächter 2000; Ostrom 2000; Ostrom and Ahn 2009). Others examine “socialization” effects for group members in fostering collective action (Miguel and Gugerty 2005). Overall, this research suggests that, in the absence of common preferences, collective action is likely to emerge when individuals have low costs of information, the opportunity to coordinate their actions, the opportunity to engage in repeated interaction and the power to reward contributors and punish free-riders. Given that these constraints are often binding for the poor, it follows that almost everywhere, the poor demonstrate lower levels of organization and collective action (Narayan et al. 2000; Gugerty and Kremer 2008).

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2012 has been a rough year for India’s government. It began with a series of protests led by an anti-corruption activist, who went on hunger strikes to protest foot-dragging by the government in passing a new anti-corruption law. Then, as a reminder of one of the worst scandals in recent memory, the Indian Supreme Court revoked all broadband licenses granted through what turned out to be illegal spectrum auctions. On the economic front, India has maintained stubbornly high inflation and the Indian government lowered the economy's growth forecast for the current financial year to 5.7 percent, the lowest in a decade.

As if these events were not bad enough, just in time to ring out the old year, major protests have broken out across the major cities in India over the brutal rape of a 23-year-old medical student in New Delhi. In Delhi’s famous Raisina Hill area where the parliament, presidential palace and several ministries are located, thousands of demonstrators clashed with riot police for several days before the area was barricaded. Those who have witnessed the protests—including the authors of this article—have noticed that the protesters’ anger is directed against the country’s police and politicians as much as it is against the rapists. The crowds also bear more than a passing resemblance to those participating in the Arab Spring protests in early 2011, being composed predominantly of urban youth, mobilized through social media, whose collective anger is being vented at various targets all at once.

In fact, one can think of the protests as motivated by a confluence of three major stresses facing contemporary India: crime, government ineffectiveness and gender inequity.

To begin with, India’s police remain unable to provide basic policing services, even after reforms put in place following the terrorist attacks in Mumbai in 2008. Delhi, for example, is home to one of the largest metropolitan police forces in the world with some 84,000 officers. But only one-third are involved in any kind of actual “policing” at any given time, while the rest provide protection services to various politicians, senior bureaucrats, diplomats and other elites. According to the Times of India there is one officer for every 200 citizens and about 20 officers for every VIP. Many of those who do perform police duties can be found shaking down motorists, participating in protection rackets and simply looking the other way as crimes take place. The victim herself was allegedly being assaulted on a bus traveling along a major thoroughfare that crossed police checkpoints. Many police departments around the country lack basic crime-fighting resources such as forensic facilities or specialized crime units. Police are provided with little training on securing crime scenes, gathering evidence, or conducting criminal investigations. There are no nationwide standards for training, competence or accountability.

And then there is the perception of a corrupt, paternalistic governing class that seems to have been left behind as rapid changes have swept other parts of Indian society. As India’s economy has acquired a global reputation as an IT services hub, government offices are still buried under piles of handwritten records. Even as India’s businesspeople—from its CEOs to its small shopkeepers to its millions of rural and urban micro-entrepreneurs—have innovated and discovered new markets, their government still operates as it has for decades. And when young protesters ask for improvements in policing or changes in government behavior, politicians warn of chaos and disorder, or simply keep silent. It took the prime minister one week to comment on the recent demonstrations. The home minister likened the protesters to the Maoist insurgents that the government is currently fighting. And the Delhi police commissioner, when asked what is being done about improving ties with the public, responded by mentioning “vocational work” for the poor. “Young India, old politicians,” is how author Gurcharan Das once described this gulf between the aspirations of its citizens and the incapacity of its politicians to deliver.

Finally, it is no secret that India remains a difficult country for women despite major advances by women in professional life. Basic indicators—female literacy, female labor force participation, female life expectancy and maternal mortality—are low relative to South Asian neighbors (Bangladesh and Sri Lanka) and even when compared to poorer countries such as Laos, Yemen and many countries in sub-Saharan Africa. The male-female ratio, a statistic that says much about the status of women in a society, remains one of the lowest in the world with only 940 women per thousand men. These “missing women” are largely victims of sex-selective abortion, poor investments in health and education for girls, and their general neglect. Delhi and neighboring Haryana state have sex-ratios below the national average: 866 women and 830 women for every thousand men, respectively. The surplus of single men, the prevalence of widespread youth unemployment and the persistence of traditional marriage practices have combined to produce serious social consequences, including violence against women.

As for the incident that sparked the current protests, the official statistics are even grimmer: almost 25,000 rapes were reported to police in India in 2011, a 25 percent increase over the previous year. According to local reporters, this is a fraction of the over half-million rapes that are actually committed each year—almost one every minute. With less than 7 percent of the police officers being women, the police are widely accused of gender insensitivity and apathy to crimes against women. In 2010, as many as 414 rape cases were reported in Delhi, the highest among 35 major cities in the country. According to the National Crime Records Bureau, the conviction rate in these rape cases was less than 35 percent. An investigative report by NDTV and Tehelka Magazine exposed how male police blame women for violence and harassment against them; remarked a station commander of a Delhi precinct: “if girls don't stay within their boundaries, if they don't wear appropriate clothes, [this] attraction makes men aggressive.” A senior police officer from the same precinct later revealed the identity of a minor who was gang-raped in a moving car, criticizing her “moral character” at a press conference.

The public debate in India continues. Senior members of the Delhi and national governments have broken their silence to acknowledge the magnitude of public discontent. Some short-term measures have been proposed: a new helpline for women, a promise to prosecute rape cases quickly, a strengthening of punishment against rape and other crimes against women, etc. A special session of parliament has been convened to address short- and long-term solutions to these issues. It remains clear however, is that solutions to the protesters’ concerns are neither quick nor simple. An overhaul of law enforcement systems is required, with investments in recruitment, organization, training, and new systems of accountability and oversight. Laws against sexual crimes must be strengthened. And most importantly, greater dialogue about India’s patriarchal norms must continue.

As for the other societal strains that moved the protesters, organized collective action will be needed long after the street demonstrations have died down, as will the sustained mobilization of women and young people. Women in India have been slow to organize around crosscutting issues. In the years since independence, the Indian women’s movement has been largely eclipsed by other divisions along the lines of class, caste, tribe, language, religion and political affiliation. And an irony that has not been lost on some commentators is that the crowds protesting in the cities—young, middle- or upper-middle class—are not generally dependable voters in Indian elections.

Perhaps the recent protests are a turning point, a sign of growing awareness that the problems of policing, bad governance and crimes against women have been neglected by the normal political process, and that they have implications for managing social tensions as well as for economic development. Given that two-thirds of India is today below the age of 35, the potential for the voice of the youth to shape national policy is powerful, if still unfulfilled. As the New Year approaches, Indian politicians would be well-advised to remind themselves of the lessons of the Arab Spring: young people may not matter in politics… until they do.

      

 

 

The British international development secretary, Justine Greening, recently announced that all assistance from the UK to India will end by 2015. The withdrawal of foreign assistance from India’s largest donor affords an opportunity to reflect on the role British aid (indeed, all foreign assistance) has played in Indian economic development, and on how Indian anti-poverty programs will evolve in the absence of foreign aid.

The Indian beneficiaries of UK aid programs will inevitably feel the loss of the experimentation and risk-taking that characterized UK aid. On the other hand, India has also been moving away from more fragmented anti-poverty programs traditionally supported by donors towards more centralized, universal schemes. But these reforms require increasingly sophisticated management and accountability mechanisms — something donors have had limited success in supporting. While the absence of British aid may leave a small hole, it will not affect India’s anti-poverty efforts.

To put the aid stoppage in context, consider that UK assistance comprises about 15 per cent of all foreign aid received by India. The UK gives slightly less than 10 per cent of its foreign aid to India. This makes India the largest beneficiary of UK aid and the UK the largest donor to India. Given the current state of the British economy, it is only natural the UK would be forced to reconsider its assistance to fast-growing countries such as India. Indeed, other donors may soon follow suit, forced by fiscal constraints. In the U.S. foreign aid may be cut due to “budget sequestration”, under which all government programs will be subject to across-the-board cuts.

More than half of official aid from Britain to India went to programs focused on education, health, nutritional programs, and water and sanitation access. In relative terms, these are not large amounts (the $450 mission in total annual British aid was about 0.04 per cent of India’s GDP). Despite some prevailing views that the Department for International Development was merely a source of British “soft power” or that British aid simply supported British strategic and commercial interests, the evidence suggests that Britain has been one of the better-behaved donors. According to a joint assessment of the Washington-based Brookings Institution and the Centre for Global Development, DFID performs quite well when ranked against other donor agencies on measures of efficiency, institution-building in recipient countries, keeping administrative burdens to a minimum and ensuring transparency.

British aid was also an invaluable source of piloting, access to knowledge and risk-taking. The Business Innovation Facility funded by DFID is a decent example of this—a programme that supported companies as they developed and implemented “inclusive” businesses that expanded opportunities for the poor. This was an example of foreign aid at its best: a gateway to current information, a clearinghouse for insights on good practice, a resource for businesses, and of course, targeted financial support.

On the other hand, British aid—and most foreign aid—has achieved only modest success in helping countries such as India make the transition from a multiplicity of narrowly targeted interventions, transfers and subsidies to a comprehensive welfare system. Both bilateral and multilateral aid to India may be rightly criticized for placing too much faith in these narrower instruments.

Many observers have long pushed for more comprehensive social policies based on universal provision of essential services in India, and for less reliance on narrower social programs. The latter have not served India well. In the past two decades, for example, India has grown much richer than Bangladesh and Nepal. But during the same period, both countries have overtaken India in terms of life expectancy, infant mortality, fertility rates, immunization rates, and female literacy. India’s expansion has been characterized by Jean Dreze and Amartya Sen as “growth without development”. In recent years, the Indian government has moved to consolidate social policy through nationwide multi-sector programs such as NREGA. But the local bodies largely responsible for administering them continue to suffer from capacity weaknesses. It is in governance and institutional capacity-building at the local level that foreign aid has had less impact.

While few in India may shed tears over the end of British official aid in India, the occasion should also provide an opportunity to double efforts to reform the public institutions that govern social policy and poverty alleviation.

      

 

 

Editor's Note: For Campaign 2012, Shadi Hamid wrote a policy brief proposing ideas for the next president on U.S. policy in the Middle East. The following paper is a response to Hamid’s piece from Raj Desai. Tamara Wittes also prepared a response arguing that the next president must remain flexible in response to the political instability throughout the region.

For years, the United States was able to ignore democracy and human rights in the Middle East in favor of supporting autocrats who stabilized oil prices, signed treaties with Israel, repressed Islamist groups and, in the past decade, cooperated in antiterrorist actions. During the Bush administration, aside from Iraq, some Arab states tolerated U.S. democracy-promotion activities as long as they did not threaten incumbent regimes. In 2009 and 2010, funding for such activities in some Middle Eastern states was reduced.

But as Shadi Hamid points out, the Arab Spring has blown the lid off this arrangement. Elections in Tunisia and Egypt have shown that the median Tunisian and Egyptian voter is more anti-U.S., more anti-Israeli, and more pro-Islamist than the United States would like. As a result, the Obama administration has had to confront the reality that voters’ preferences, if translated into policy, might threaten regional peace or stability. It is small wonder that the Obama administration was forced into a complicated dance that required rhetorical support for Tunisian, Egyptian, and Libyan citizens while reassuring dictatorships in Jordan, Saudi Arabia, and even Bahrain of U.S. backing. Hamid also points out that trying to split the difference did Obama no favors—neither with the Arab public nor with Arab rulers.

How, then, should the next presidential administration support reform in the Middle East? Although the objectives of rebuilding American influence and supporting democratic reform in the region are laudable, one of the principal mechanisms Hamid proposes to accomplish this—a “reform endowment”—may not be the best approach. As he envisions it, a multilateral reform fund would be established to “apportion loans and grants to states or substate actors” that agree to undertake certain democracy-promoting reforms. Putting aside the thorny issue of loans (especially to countries like Egypt that may soon face serious debt sustainability problems), such a fund would raise three concerns.

First, it is unlikely that yet another U.S.-dominated, international institution will find a supportive public in the current Arab political climate. Arab citizens have not forgotten that U.S. financial assistance supported the old regimes. Nor have Arab citizens forgotten the U.S. role in the “austerity” era in the 1980s and 1990s when, amid falling oil prices, most Arab states undertook (albeit incompletely) painful structural economic reforms that slashed subsidies, ended long-term employment guarantees for some, and wound down a number public benefits. These popular resentments are unlikely to subside soon.

Second, it is unclear what added value such a fund would provide. Currently, the functions envisioned for the reform endowment are already performed by institutions such as the Millennium Challenge Corporation (MCC) and the Open Government Partnership (OGP). Of course, the MCC is not a multilateral institution as the reform endowment would be, but it operates along the same lines. That is, it provides grants based on whether recipients meet certain good-governance thresholds. Meanwhile the OGP—a multilateral body established at Obama’s suggestion, and in which countries seeking membership are required to meet similar criteria as envisioned in the Hamid proposal—is a purely voluntary organization with no capacity to provide loans or grants for good behavior. It is unlikely that the United States would be able to promote Arab democracy more effectively through a new institution than it would through expanding MCC or OGP programs in the Middle East.

Third, it is also unclear whether democracy-promotion activities undertaken by donors actually work as intended. The evidence of the effect of political conditionality on democratization in recipients of official development assistance is mixed at best. Most analysts find no effect of aid on democracy, with or without political conditionality. In one region where political conditionality imposed by donors seems to have made an impact—Eastern Europe—democratization occurred mainly in those countries offered EU membership. The absence of this kind of external inducement in the Arab world makes a similar impact unlikely.

One must ask—in an environment where the United States and other donors will continue to be fiscally constrained—whether it may be better to focus greater attention on economic reform and development in Arab states. This is not to say that democracy promotion should be excluded altogether. But it is clear that a strong economic rationale is driving Arab citizens to support democracy. In an Arab Barometer survey of Egyptians conducted in the summer of 2011, for example, almost two-thirds of respondents defined the most important characteristic of democracy as either low inequality or better provision of services. By contrast, only 6 percent consider elections to be essential. More than 80 percent say that “the economy” is Egypt’s greatest challenge. If the economies fail to deliver, democracy will fail.

Accordingly, one must ask whether U.S. financial assistance might be put to better use, both for rebuilding American influence and for underwriting democracy. For example, U.S. assistance to create jobs for those aged eighteen to thirty in Egypt, Tunisia, and Libya, through financing for vocational schools and active labor-market programs, would not only help a group that has historically borne disproportionate costs of economic adjustment but could also increase support for U.S. policies and influence among youth. U.S. leadership in reviving an expanded Barcelona Process and Union-for-the-Mediterranean initiative—both designed to build political, economic, and social partnerships between the European Union and its southern Mediterranean neighbors—could focus on behind-the-border trade issues such as logistics as well as provide guarantees for U.S. investors, eliminate investment obstacles, and ease technology flows between the United States, European Union, and North Africa.

The Arab Spring represents the most important set of political--economic transitions since the end of communism in Europe. But as Hamid points out, the United States has not found an effective way to channel its support for the reformers in Arab states into financial resources at a time when its influence in the region has waned. Correcting this state of affairs in the next presidential term is important. The question, and core of the debate that should continue, is how best to accomplish this.

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Event Information

Following the attack on the U.S. consulate in Benghazi and the death of U.S. Ambassador to Libya Chris Stevens, the United States is weighing its position and policies in the post-Arab Spring Middle East. More than a year after the initial Arab uprisings, the United States is questioning the state of its relations with the nascent Arab democracies and the emerging Islamist regimes. As the second anniversary of the Arab revolutions approaches, political and economic instability persists alongside growing anti-American sentiment, forcing the United States to adapt its policies to the evolving landscape in the Middle East. With the U.S. election just over six weeks away, many American voters are questioning the presidential candidates’ foreign policy strategies toward the region and wondering how the volatility in the Middle East and North Africa will affect the United States in the months and years ahead.

On September 25, the Campaign 2012 project at Brookings held a discussion on the Arab Awakening, the tenth in a series of forums that identify and address the 12 most critical issues facing the next president. POLITICO Pro defense reporter Stephanie Gaskell moderated a panel discussion where Brookings experts Tamara Cofman Wittes, Shadi Hamid and Raj Desai presented recommendations to the next president.

Participants can follow the conversation on Twitter using hashtag #BIArabAwakening.

Download papers from the event:

• Prioritizing Democracy: How the Next President Should Re-Orient U.S. Policy in the Middle East, by Shadi Hamid 
• Three Key Challenges in Confronting the Arab Awakening, by Tamara Cofman Wittes 
• The Challenge of a Reform Endowment, by Raj M. Desai 

Campaign 2012: Twelve Independent Ideas for Improving American Public Policy is an indispensable guide to the key questions facing White House hopefuls in 2012.

Video

• Tamara Wittes: Coping with Dramatic Change Is a Challenge for the U.S.
• Shadi Hamid: Reform Should Be Incentivized
• Raj Desai: Desire for Income Equality and Access to Public Services Fuels Unrest
• Panel: U.S. Foreign Policy Drivers In the Middle East
• Full Event - Campaign 2012: Arab Awakening

Audio

• Campaign 2012: Arab Awakening

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20120925_arab_awakening
• 20120620 middle east hamid
• 20120925_arab_awakening_wittes
• 20120925_arab_awakening_desai

     

 

 

Editor's Note: The "Scaling up in Agriculture, Rural Development and Nutrition" publication is a series of 20 briefs published by the International Food Policy Research Institute. To read the full publication, click here.

Taking successful development interventions to scale is critical if the world is to achieve the Millennium Development Goals and make essential gains in the fight for improved agricultural productivity, rural incomes, and nutrition. How to support scaling up in these three areas, however, is a major challenge. This collection of policy briefs is designed to contribute to a better understanding of the experience to date and the lessons for the future.

Scaling up means expanding, replicating, adapting, and sustaining successful policies, programs, or projects to reach a greater number of people; it is part of a broader process of innovation and learning. A new idea, model, or approach is typically embodied in a pilot project of limited impact; with monitoring and evaluation, the knowledge acquired from the pilot experience can be used to scale up the model to create larger impacts. The process generally occurs in an iterative and interactive cycle, as the experience from scaling up feeds back into new ideas and learning.

The authors of the 20 policy briefs included here explore the experience of scaling up successful interventions in agriculture, rural development, and nutrition under five broad headings: (1) the role of rural community engagement, (2) the importance of value chains, (3) the intricacies of scaling up nutrition interventions, (4) the lessons learned from institutional approaches, and (5) the experience of international aid donors.

There is no blueprint for when and how to take an intervention to scale, but the examples and experiences described in this series of policy briefs offer important insights into how to address the key global issues of agricultural productivity, food insecurity, and rural poverty.

     

 

 

INTRODUCTION

The problems in farming in developing countries are numerous and well-known: drought vulnerability, soil degeneration, a lack of financial instruments (credit and insurance), high transaction costs imposed by intermediaries, the inaccessibility of reliable inputs, and a lack of market opportunities. Over the past decade, agriculture in India has undergone what one state-level commission terms a period of “generalized rural distress,” producing high levels of rural unemployment, forced migration, and declines in per capita calorie consumption among the poor. Indian agriculture— characterized historically by much greater volatility than the general economy—has also been adversely affected in recent years by declining productivity, greater import competition, and rising prices for fertilizer, seed, and pesticides. Although the percent of agricultural employment in the labor force has been declining, most of that decline has been due to the loss of cultivators.

Adjustment costs in the Indian rural economy have fallen disproportionately on tenant farmers and rural day or “casual” laborers, and in particular, on female farmers. Women constitute only one-third of the Indian workforce, but three-quarters of these economically active women are engaged in agriculture (compared to 53 percent of men), as either workers in household farms owned or tenanted by their families, or as wage earners, and almost all of these agricultural workers are the informal sector. Moreover, Indian women face a range of disadvantages that are exacerbated by the pressures of rising input costs, cuts in agricultural subsidies and risks of weather shocks. First, they encounter steeper entry barriers than men in agriculture. Patriarchal inheritance codes restrict women’s property rights over agricultural land, particularly in North India (Agarwal 1994b; Dyson and Moore 1983). Barriers to access in land translate into barriers to accessing credit, since most formal sector loans require land titles. Female farmers also face other impediments such as cultural indifference, regulatory barriers, as well as higher bribe taxes from officials than their male counterparts (World Bank 2001). As a result, most women’s agricultural work is informal, done under conditions of high insecurity in relation to a lack of contract and benefits, and the availability of a large supply of surplus labor (Unni and Rani 2003).

Second, most government investments in agricultural- support programs—such as agricultural extension— have typically excluded women and have almost exclusively been targeted at men (Danida 2002; Raabe 2008). Third, the lack of collective-action mechanisms available to women in rural areas relative to men has limited female access and representation in local decision-making, and has contributed to the self-exclusion of women from a variety of participatory schemes and other community-based development programs that might mitigate the results of rural gender bias.

In recent years, several non-governmental organizations have attempted to address these issues and provide support to female farmers. “Membership-based organizations” have emerged to provide women with organizational resources that increase coordination, improve their capacity for management of collective goods (e.g., property, irrigation schemes), and support their participation in village affairs and local politics. In rural communities, producer associations have mobilized and organized female farmers, provided them with diverse services that include access to information and training, assistance in organizing inputs, marketing support, provision of credits, as well as in enhancing the bargaining power of farmers for securing better contracts and prices. The general basis for the proliferation of producer associations is the view that local farmers’ possess informational advantages regarding their own farming needs and placing them at the center of decision-making leads to greater efficiency, greater equity and lower transactions costs (Bank 2008; Chen et al. 2007).

Governments and multilateral development institutions have increasingly promoted producer associations. It is expected that collective action by farmers increases participation, improves agricultural productivity, establishes better connectivity with markets, and increases their bargaining power in securing inputs and selling outputs. In the long run, this contributes to both growth and poverty alleviation. Recent research however, demonstrates that this approach has its challenges. Evidence from Sub-Saharan Africa and South Asia suggests that local producer associations’ informational advantages may be nullified by problems ranging from local elite capture, exclusion of the poorest groups from decision-making, and the lack of information about the external environment and market conditions. These issues can prevent producer associations from translating their informational advantages into either agricultural productivity growth or poverty alleviation (Bernard and Spielman 2009).

Empirical assessments of the impact of producer associations are thus quite important. This evaluation focuses on a program in the Indian state of Gujarat that combines social empowerment with agricultural extension. The program, known as the “Women Farmers with Global Potential” (WFGP) initiative, focuses exclusively on rural women and draws on producer associations as the primary channel for delivering the intervention. The effort was coordinated by the Self-Employed Women’s Association (SEWA), a non-governmental organization that has acquired significant experience in the development of producer associations and other membership-based organizations for the rural poor in India.

We aim to evaluate the impact of the WFGP program at the individual level, considering both economic and non-economic outcomes. We examine results of SEWA membership on income, employment, empowerment, consumption, income, and assets of women in these communities. We draw on a survey of approximately 1,500 women in 42 villages in five rural districts in Gujarat conducted in 2010 over several months following the monsoon, divided between members of SEWA and non-members. Although villages were selected randomly for SEWA treatment, individual women were not. To control for problems of individual selection, then, we rely on propensity score matching on observables to ensure balance between SEWA members and non-members.

Our results illustrate that SEWA membership had some important effects: it raised awareness of available opportunities among its participants, and linked women to the financial sector, and to diversified employment opportunities, including non-farm work. SEWA members are less likely to work as unpaid workers, are more likely to have better knowledge of loan products available, more likely to have obtained those loans, and more likely to have superior information about market prices than non-members. SEWA women were also more likely to sell outside the established state-procurement system than non-members.

We also find considerable evidence of the heterogeneity of impact. SEWA membership benefitted the poorest women (as measured by residence in temporary or “kutcha” housing) as well as those who had faced previous income shocks. Relative to other women, these women experience higher farm and non-farm income, greater food consumption, improved household and farm productivity, more self-employment opportunities, a greater likelihood of opening a bank account, higher crop harvests, having access to adequate food for the family.

The remainder of this paper is organized as follows. The next section reviews agricultural extension programs in India, and describes SEWA’s intervention in detail. The section after that examines household impacts of the WFGP initiative. The final section discusses the prospects of scaling up the program in India as well as in other developing countries. The final section concludes and offers some implications for agricultural policy in India and globally.

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Václav Havel, the dramatist and reluctant politician who led Czechoslovakia (and later the Czech Republic) as president following the collapse of the communist in regime in 1989 during the Velvet Revolution, passed away on Sunday, December 18. Since his death, he has rightly been eulogized for his words and deeds on behalf of democracy and human rights, which reached far beyond the borders of the former East Bloc nations. Havel’s ideals were not merely abstractions; they were personal. The price for being the most visible anti-communist dissident in the Czechoslovak Socialist Republic was repeated incarceration. Upon assuming the presidency, he opposed efforts to strip former communist officials of their civil rights, or to engage in other punitive actions since, as he famously claimed, all citizens were “co-creators” of the totalitarian machine.

But his legacy is not only the rebuilding of the “human, moral and spiritual potential, and the civic culture that slumbered in our society” that he noted in one of his first speeches to post-communist Czechoslovakia. More than many other technocrats who ultimately managed the economic transformation in Eastern Europe, Havel understood that the post-communist “transition” would be a Janus-faced creature—capable of both sowing deep nostalgia for authoritarianism, and also creating a stable, democratic nation. The difference, according to Havel, would hinge on the resilience of civic and political institutions, which would be needed to force mid-term corrections in economic policy, to support competition, to police the common market, and to protect consumers, investors, taxpayers, and entrepreneurs.

Havel’s economic positions have often be juxtaposed to those of his political rival, Václav Klaus, who served as his prime minister between 1993 and 1997, and who replaced Havel as president in 2003. Klaus famously argued “civil society” did not exist and that it was merely a leftover, albeit useful, fiction employed by former dissidents to fight the communist regime; Havel believed the absence of civil society in economic reform would inevitably produce economic crime. Klaus barely concealed his distaste for (and continues to criticize) the European Union; Havel recognized the power of an external anchor to convince Czech citizens that their destinies were tied to “the West,” and to create incentives for companies and banks to adopt EU practices in business matters. Klaus intended to irreversibly remove the government from economic activity; Havel saw the need to maintain credible governmental institutions in economic activities.

An instructive contrast between the “Two Václavs” can be seen in how privatization—one of the cornerstones of the post-communist transition—was conducted before and after Klaus came to power. Before Klaus launched the voucher-based privatization program for which the Czech Republic became famous (if not infamous), the Czechoslovak automobile company Škoda was sold to Volkswagen in late 1990, requiring lengthy negotiations between government officials and Volkswagen. Meanwhile, a similar trade sale of Zetor (a tractor company) was halted in favor of distributing shares as vouchers, which drastically limited the government’s role, and became the main privatization policy during the early Klaus years. Škoda’s global presence grew dramatically, while Zetor ended in bankruptcy and floundered for over a decade before staging a recovery. Notably, the Klaus government failed to privatize banks, contributing to the rapid accrual of bad debt, and a currency crisis in the mid-1990s. Havel found little consolation in the fact that Klaus's neglect of institutional matters led to a financial scandal in the governing party, which caused the collapse of Klaus’s government.
 
Nor is Havel’s economic legacy merely an historical curiosity—a long-forgotten debate between “big-bang” reform advocates and their opponents. One year after the beginning of the Arab Spring, it is central on Egypt and Tunisia’s agenda. Reformers struggle to navigate between the imperatives of economic opportunity and the demands of the population for human dignity, knowing that extremism or dictatorial backlash may be the consequence of reform failures.

As protests emerge in response to rigged elections in Russia and Kazakhstan, the limits of imitation democracy—even for regimes that deliver economic prosperity—are becoming apparent. As Havel noted in his essay The Power of the Powerless, “The original and most important sphere of activity . . . is simply an attempt to create and support the independent life of society as an articulated expression of living within the truth.” In the “year of the protester,” Havel’s life and work should serve as a reminder to all citizens of the importance of civic virtue in underpinning both political and economic liberty.