An approach to poverty alleviation for large international development agencies

World Development, Vol. 21, No. 10, pp. 1633-1646, Printed in Great Britain.

0305-750X/93 $6.00 + 0.00 0 1993 Pergamon Press Ltd

1993

An Approach to Poverty Alleviation for Large International Development Agencies PAUL CLEMENTS* Princeton University, New Jersey Summary. - This essay explores the nature of the poverty alleviation problem from the perspective of international development funding agencies, These agencies have been poorly structured to promote the interests of the poor. Agencies such as the World Bank and the US Agency for International Development (USAID) can achieve better results by creating independent units devoted exclusively to poverty alleviation. These units should immerse their staff more completely in local societies, with lower pay scales and longer tours of duty. A revised form of cost-benefit analysis around which these units should orient their work is presented. Previous analyses of poverty alleviation opportunities and failures have neglected funding agency influences.

To a hammer, every problem looks like a nail.

1. INTRODUCTION Although

and compassion for the poor as virtues in every major culturthe last two decades have seen a unique institutionalization of efforts to help the charity

have been recognized al tradition, international

poor. Governments have long provided services to their own destitute populations, and missionaries and relief agencies have long crossed borders to reach those in great need. Yet, if there is a book on good will, then a new chapter was opened with the 1970s rush of governmental and multilateral agencies that set out to help some of the world’s poorest escape from poverty. Just as the book’s other chapters must be filled with stories of heroism and deception, mixed motives, intrigue and paradox, so the chapter underway must charm and confound the cynical as much as the sincere. This chapter may be particularly engaging; although the texture of the drama is unchanged the stage has grown wider and the plot more complex. For the reader who is a participant as well it grows ever harder to maintain ones bearings. Most observers agree that official international poverty alleviation efforts to date have met with more failure than success. Development agencies have proven better at promoting economic growth than equity. While strategies of the 1970s emphasized projects that directly serve the poor, the emphasis in the 1980s shifted to promoting macroeconomic and of late political conditions deemed favorable to economic growth. Still, most authorities suggest that direct poverty alleviation efforts remain essential (Riddell,

1987; Lewis, 1988). There is a potential for these direct efforts to achieve substantially better results if major reforms are carried out within the official development agencies. The conditions of poverty and the structural characteristics of funding agencies combine to give poverty alleviation projects certain fixed requirements. Yet when these agencies adopted poverty alleviation objectives, they had been designed and molded for very different tasks. Although much has been learned about what these projects need to succeed, the agencies remain poorly constructed to support them. They could be serving the poor much more effectively within current resource constraints. This essay focuses on the US Agency for International Development (USAID) and the World Bank, but much of the argument applies to other aid agencies too. I argue that to improve their records with direct poverty alleviation efforts AID and the Bank need to set up independent organizational units with poverty alleviation as their sole objective. These units should be free to cultivate their own organizational

*I am grateful for comments on drafts of this paper from John P. Lewis, David Shear, Janmejaya Sinha, Herbert Turner, Ramesh Venkataraman, John Waterbury, and two anonymous reviewers. This material is based upon work supported under a National Science Foundation Graduate Fellowship. Any opinions, findings, conclusions or recommendations expressed in this publication are those of the author and do not necessarily reflect the views either of the National Science Foundation or of anyone who provided comments. Final revision accepted: March 18, 1993.

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structures and styles, with lower pay scales, longer tours of duty, different perquisites, and independent offices and career tracks. Their regulations should permit them to make long-term financial commitments and as far as possible shield them from political interference. They should orient their efforts around a specific definition of poverty, and develop historical analyses of constraints facing the larger concentrations of particularly poor populations. The viability of such organizational units would depend greatly on the quality of their initial leadership, but this is an unavoidable characteristic of direct poverty alleviation efforts.

2. THE STRUCTURE OF THE POVERTY ALLEVIATION PROBLEM FOR INTERNATIONAL DEVELOPMENT AGENCIES Although poverty alleviation is only one goal among many for USAID or the World Bank, it is a goal that when pursued directly places unusual demands on a funding agency. Given the weaknesses of the poor compared to others who claim agency resources, the difficulties inherent in these projects, and the opportunities and limitations that rest in control of the purse strings, funding agencies will be most effective when they immerse field staff in local societies and cultivate both a commitment to the interests of the poor and a capacity to analyze the consequences of agency interventions for these interests. Since other

agency goals have different organizational requirements, funding agencies should create independent units for staff who serve the poor. A business, to remain competitive, must seek to maximize its profits. A government must satisfy its key constituencies. A development agency, by contrast, must satisfy not only its intended beneficiaries (or clients) but also distant sources of finance. This split constituency defines part of the structure of the problem all international development agencies face. When the intended clients are the poor this split places an added burden on a funding agency, for these clients are far less able than developing country elites to articulate their interests. On the contrary, agency resources must be protected from the many interests that make claims on monies appropriated for the poor (see Figure 1, also Hellinger, Hellinger and O’Regan, 1988, pp. 16-18). The paternalistic nature of the agency’s task must be faced squarely. Although high levels of local participation may be desirable, the agency cannot be demand driven. It must select the interests and values it wants its funds to support and continually modify its interventions to support these goals. While accounting systems have been designed to allow a corporation to assess the profitability of each of its divisions, no equivalent system exists for development agencies. The World Bank uses cost-benefit analysis to calculate economic rates of return for all but its social sector projects, but these evaluations have focused narrowly on the monetary value of

Interests

Relationships Tax Payers Rich country

Indifferent public Interested public Lcgislaton Executiw branch Religious interests Humanitarian intereats Political interests suppliers interests Academics The prcaa Agency executives Head office staff

1 Legislature

t Funding Agency /

\

/

Implementing agency :z,

\

\

Local government

/

Intended beneficiaries

Field office staff Implementing agency staff Politicians Bureaucrats Academica Tbt press Suppliers Business elite Landed elite Local organizations Local politicians Household heads Poor men Women ChildICll

Figure 1. Development spending: Main relationships

and selected interests.

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investments (Squire, 1989, p. 1126) ignoring many of their morally significant effects. USAID uses economic cost-benefit analysis much more selectively, assessing most of its projects in an ad hoc manner on the basis of their stated goals. This approach allows for the fact that projects promote diverse objectives that are not easily quantified or compared, but in recognizing diversity it assures that comparisons among its projects are extremely difficult. Although the Bank takes factors besides economic rates of return into account, and USAID has taken steps to develop objective measures of project impacts, neither evaluation approach permits sound comparisons of different projects’ impacts on poverty. USAID staff develop a general sense of what has worked well and what has not, but any assessment of a given cog in the USAID system rests heavily on opinions, politics, and the disciplinary training of the assessor. Thus development agencies have neither signals from their clients nor satisfactory objective measures to distinguish between strong and weak projects. In the area of poverty alleviation there is a middle way that could reconcile the Bank’s short-sighted determinism and USAID’s extreme subjectivity. By adopting a definition of poverty and estimating the contribution each intervention makes to reducing poverty’s intensity and incidence, an agency could construct a unified measure with which to compare projects. Then the agency’s poverty alleviation division could organize itself to maximize its impact thus defined over the long run. To fix ideas I present the outlines of a definition of poverty that I favor, but most of the discussion will apply to any reasonable definition. Suppose that poverty is understood as a multidimensional concept involving identifiable minimum standards of nutrition, clothing, shelter, health care (including access to safe water), education, and political liberty. Here “poverty” implies a restricted potential ability to participate in society.’ Suppose also that the marginal value of supplying a unit of, say, improved nutrition or health care to someone increases the further they are below the minimum standard. The poverty alleviation division’s task is to maximize its poverty alleviation “points” within resource constraints, where points are gained when individuals achieve improvements in one or more of the dimensions listed above for a unit of time, reducing the level of poverty compared to the situation that would have arisen without the agency’s intervention. This system requires the agency to adopt the discipline of deciding explicitly how much it cares about education compared to health care compared to nutritional standards as it assigns point values to different prerequisites for human well being, and the discipline of estimating the likely short and long-term, immediate and indirect, effects of its interventions. Point assignments clearly include a strong element of judge-

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ment, yet it will be possible to refine these judgements with empirical research and reasoned argument2 Perhaps most important, this system provides a means of focusing the minds of everyone involved on the “end products” the agency actually seeks. The opportunity cost of buying a computer can be measured in children’s lives. A food for work road building project that trains villagers to be accountants would naturally gain extra points for this investment in human capital. A clinic that provides immunizations and oral rehydration therapy training to a population with high mortality rates would gain more points than a similar clinic serving a healthier population. A clinic where few mothers were found to have adopted correct oral rehydration practice when their infants have diarrhea would need to improve its practice or see its ratings fall. When a project evaluation revealed corruption or environmental damage negative points would be assessed, so there would be an incentive to learn from mistakes. And a teacher, preparing for a day’s classes, would be encouraged to envisage the consequences of his lessons for future literacy rates, crop yields, and infant mortality. Although a clear definition of poverty can guide much of the analytics within a poverty-oriented agency, it can tell us little about how such an agency should be designed and managed. We gain some insight into this question by considering the nature of the development agency’s tools and client population. Esman and Uphoff consider the three essential ingredients to development to be technology, resources and organization (1984, p. 50). Of these they consider the last, organization, to be the least understood and most poorly employed by international development agencies. Agencies should be designed to manage technical assistance and resource flows competent by reasonably well-established standards; they should be designed to experiment with organizational forms. In this their options are conditioned by their role as resource providers and by the number, diversity and conditions of their client population. Funding agency staff face the task of channeling money through implementing agencies that spend it to improve conditions for the poor. The desired project content is typically first described in a project plan drawn up before the project begins. Agency staff have great influence over the content of this plan. They may be in a position to select some of the staff who will implement the project. Once the initial contracting document is completed and signed, funding agency influence is oriented around disbursements of funds, periodic project reviews, and conditions written into the project plan. These procedures are most dependable when the full range of desired results can be specified precisely at the planning stage, when it is possible to foresee conditions of implementation well enough to make a comprehensive and accurate plan, and when the implementing agents can be

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trusted to promote the plan’s objectives wholeheartedly. Experience shows that initial project plans are likely to be based on incorrect assumptions and to miss opportunities that will arise in the course of the project. While a business manager can glance through her offices’ balance sheets and make a fair guess of their effectiveness, it would be inefficient for a development agency to acquire an equivalent level of confidence in the efficacy of all its projects. Thus the implementing agency staff’s understanding of and commitment to the funding agency’s goals is at least as important as the logical integrity of the project plan. For how do these staff benefit from carrying out the often tedious and difficult work of the project wholeheartedly? Why should they identify mistakes in the project plan and adjust their operations to achieve objectives written in some project document? Why should they juggle their systems to take advantage of unanticipated opportunities to achieve goals not even stated in the project plan? Chambers (1983) provides an eloquent account of the difficulties of working with the poor. He describes how both donor and implementing agency staffs tend to work from vehicles, mainly contacting people in or close to urban centers or to tarmac roads, and talking mainly with relatively prosperous men in the relatively prosperous dry season. Many clinics and schools are grossly overcrowded and undersupplied. Conditions are usually rough and amenities few where the poor live. Even when services reach rich and poor alike, the poor may be slower to respond because of the interlocking hardships of poverty. Chambers describes a “deprivation trap” involving limited assets, low stocks and flows ofcash and food, physical weakness, isolation, vulnerability to disasters and social demands, and powerlessness amidst active exploitation all of which make it harder to come by measurable accomplishments. Well-structured incentives may encourage staff to persevere, but sound practice depends vitally on the nature of the staff’s internal motivation. Obviously the selection of project staff influences project outcomes greatly. Funding agencies influence outcomes more profoundly, however, in the manner of their dealings with those they fund, in the operational attitudes they cultivate. Funding agency staff clearly cannot hope to succeed in promoting values that they do not to some extent exemplify themselves. They participate in a series of management decisions each of which may be understood as a portrait of perceptions and priorities. Often it will be best for them to leave decisions completely to the implementing agency, but sometimes it will not, and the only way they will gain the insight to tell the difference will be by developing a sensitive familiarity with the local society. Developing countries are poor in part because of the weaknesses of their institutions, so funding

agencies must anticipate that some of the spokes in their projects’ wheels will be weak. Thus normal standards of self-interested professionalism are inadequate for funding agency staff serving the poor. Their task requires considerable analytical ability and subtle project design skills; they have to protect agency resources against strong competing interests, forthrightly promoting the best interests, in their view, of a population that can only partly articulate its own; and rather than doing the work themselves they have to support agencies made up largely of the local populace (and should thus seek to strengthen agency and beneficiary simultaneously). They face an unusual likelihood that their resources will be frittered away on inessentials. To protect against this the funding agency needs an unusual unity of purpose; among the higher priorities for agency executives must be the cultivation of a sense of mission. Although we speak of agencies “making decisions,” agency effects are of course determined by the actions of disparate individuals. Yet it is an intriguing fact that organizations come to have characters, and characteristic effects, of their own (Wilson, 1989). The World Bank and USAID should channel direct poverty alleviation resources through autonomous organizational units because this task requires a sense of mission different to that appropriate to their broader purposes. These large development agencies are rightly concerned about recipient country macro economic policies, major capital investments, and specialists’ educations. These matters are central to economic growth, and the development agencies are reasonably well equipped to provide the face to face, high level support they require. Direct poverty alleviation projects call for different sensibilities. They call for greater emersion into local society. Without separate arrangements these projects will not be managed well.’

3. THE DEVELOPMENT MANAGEMENT LITERATURE’S WEAK TREATMENT OF ORGANIZATIONAL ISSUES The great majority of publications intended to improve direct approaches to poverty alleviation have been based on field level evaluations and case studies. Since the early 1970s a plethora ofjournal articles and books have been published, sections of which have been described as rural development, community participation, and local organization literatures. In addition, a few publications are found that seek to understand the consequences of funding agency characteristics for project outcomes. In this essay these various literatures are considered part of the development management literature (DML). The DML is concerned with organized efforts

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to strengthen the poor. I would impose this label retrospectively on studies promoting and then seeking to improve the poverty alleviation focus that took root in the 1970s; thus its prominent authors include Bryant, Chambers, Chenery, Esman, Korten, Lewis, Paul, Riddell, Rondinelli, Tendler, Uphoff, and White. Several writers have lamented compartmentalization in this literature, stemming from the fragmentation and specialization of contemporary social science (Moris, 1981). The DML overlaps with literatures on development economics, project management, agricultural extension, informal education, rural and public health, etc. The difficulty in defining its boundaries explains part of the difficulty of allocating poverty alleviation resources. The addition of this acronym to the already crowded development field is justified by the need to forge a unified perspective on interventions in favor of the poor. (A major task on the DML agenda must be the clarification of the relationship between macro- and micro-level interventions. In this essay, however, we focus on the latter.) Among the prominent themes in the DML have been the need to make projects more participatory (Cohen and Uphoff, 1977), the need for managers to adopt “learning approaches” in lieu of rigid “blueprint” planning approaches (Korten, 1980) the importance of staff commitment to project success, the value of capacity building and empowerment as project goals, and the merits of channeling poverty alleviation funds through private voluntary organizations (PVOs) and nongovernmental organizations (NGOS).~ Although all these themes predate the 1970s it is no exaggeration to say that they achieved vastly greater prominence and perhaps relevance as international agencies and governments the world over climbed on the poverty alleviation bandwagon. It is ironic that the DML blossomed only in the early 1980s after widespread debt crises had shifted much of the attention of the official international development community’s leaders to problems of structural adjustment. This timing for the DML had its own logic. The poverty alleviation focus arose largely in response to distributional failures in earlier development strategies. Policy statements were more visionary than pragmatic. Thus it took a full generation of projects before the evidence was available to begin to assess the new strategies. If Robert McNamara’s 1973 speech before the World Bank’s board of governors is taken as the symbolic birth day for the poverty focus5 and the 1980 Turkish loan as the beginning of the structural adjustment era (Mosley, Harrigan and Toye, 1991, p. 39), then we may conclude that history passed judgement on the world’s first foray against poverty before scholars had the chance to.6 The reactive nature of the DML led to a neglect of central organizational issues. Analysts typically

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stopped short of exploring reforms that might be needed within funding agencies to permit field level recommendations to be properly implemented. Note that if the 1970s poverty alleviation efforts had been great successes there would be no DML; it would be unnecessary. The strongest driving force behind it has been development workers’ frustrations with project results. The published record is only the visible tip of the iceberg of reports, evaluations and conference proceedings that document our evolving understanding of poverty alleviation strategies. Only a small proportion of the contributors to this literature have been fulltime academics, and most of these have had substantial field experience. This literature is deeply grounded in historical reality, but its foundation in personal experience has led to recommendations that often rest precariously on a mist of unexplained contextual assumptions. We are advised to pay attention to intrahousehold distribution, to emphasize women’s participation, to adopt flexible and participatory planning processes yet to avoid elite domination, to seek simultaneously economic efficiency and environmental sustainability. It appears likely that such suggestions have implications for funding agency structures and procedures. The clean decision rules of economic cost-benefit analysis are not sensitive to these concerns, but the alternative has all the precision of a changing list of general admonitions. The DML’s discussions of “staff commitment” and of PVOs and NGOs are instructive in themselves, and they also illustrate the limitations of much of the DML’s analysis from an organizational point of view. Innumerable field studies have found resources diverted, contrary to plans, away from intended (poor) beneficiaries, or have found some form of lethargic, half-hearted implementation, and the analyst writes of the need for increased commitment or attitudinal changes (e.g., Kabra, 1984). They typically treat commitment as an exogenous variable or one that responds to easily manipulated variables such as incentives and training. Project management specialists generally recognize the commitment problem, but attempt to treat it at the project level. For example, Paul writes that, “Field workers’ orientation and commitment to CP [community participation] are key determinants of their effectiveness as instruments of CP. Training can be used to influence their community mobilization skills and attitudes”( 1987, pp. 5-6). Elsewhere Paul notes, “The motivation process should focus relatively more on non-economic incentives such as commitment to a cause, recognition, and autonomy for implementors in programs whose dominant concern is social rather than economic change” (1986, p. 23). This may be sound enough advice, but somehow it appears too facile. We have seen that for structural reasons poverty alleviation projects do indeed require unusually strong staff commitment. It is not a variable, however,

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that can be left to managers in the field. If an agency is not structured to encourage commitment, and if agency executives do not explicitly cultivate it, it should be no surprise when field staff work to the minimum requirements of their jobs. Some writers, such as Heaver in his 1982 analysis of World Bank projects, insist upon viewing organizational decision making as a competitive political process oriented to maximizing personal power and material resources. Heaver paints a bleak picture of a “coalition of indifference to the poor,” where officials struggle to gain development resource but see “little political advantage in using resources to maximum developmental potential once secured” (p. v). Heaver proceeds to make a series of recommendations for improving planning by clarifying goals, making goals realistic, setting up planning units, and continuing planning during project implementation, and for improving staff feedback by emphasizing formative evaluations, using “participative monitoring” with self-evaluations, and selecting few indicators that directly reflect key goals. If, however, a coalition of indifference indeed exists then these structural devices alone can have little chance of succeeding. As a political scientist with wide-ranging development expertise, Uphoff is one of the few who connects commitment problems with donor agencies. In his discussion of “Assisted Self-Reliance: Working With, Rather than For, the Poor” Uphoff makes the standard observation that most developing country government staff are not oriented toward working with the poor in support of their interests, and suggests that programs should be designed to build a cadre of appropriately knowledgeable and committed persons. Then he gives donors a gentle prod, writing, Donor agencies have a difficult time dealing with value dynamics. They claim to be functioning in an objective, value-neutral way. But anyone who has observed successful experiences in assisting the poor knows that normative factors are central in such efforts (1988, pp. 47-57). Uphoff has identified a key problem, but his analysis stops there. He does not consider institutional changes that might be involved in acknowledging and incorporating “normative factors.” The DML has no better explanation for why some organizations have strong commitment than for why others have weak commitment. There is a widely held view that PVOs and NGOs are on average better than governments or official donor agencies at supporting the Third World poor. For example, Esman and Uphoff write of PVOs: Though they are not immune from elitism and paternalism, PVOs can attract staff members, both domestic and foreign, who are more willing to live in rural areas and serve the poor, more committed to developing their capabilities and institutions, and more prepared to experiment

with

unorthodox

ideas

and

practices

(1984,

pp.

274-275). Although this view has detractors, it has led to a remarkable increase in flows of official funds through these agencies. Unfortunately the DML often treats PVOs and NGOs as though their characteristics are for practical purposes given and fixed, with no serious attempt to understand how these characteristics are determined. The donor agencies are undoubtedly changing the PVOs and NGOs individually and collectively as they provide more and more of their funds, but these effects have received little attention. Perhaps more importantly, it may be possible for donor agencies to imitate some PVO or NGO characteristics. Of course, PVOs and NGOs are seen as having their own limitations. Several writers have noted that PVO roots in the Christian church and in disaster relief left many of them distrusting governments and macro-level theories (Harris and Poulton, 1988, pp. 1, 5 and 1I), and slow to adopt standard management techniques such as financial planning and costaccounting (Dichter, 1988, pp. 179-l 80). NGO staffs too have often held antagonistic views of local governments (Sanyal, 1991, pp. 1371). Tendler describes several organizational features that help PVOs and NGOs achieve small successes but hinder them from achieving large ones, and then writes, We have turned our backs on the public sector without being sufficiently informed and have put excessive faith in a “new” sector, the NGOs, which is impeded by its very structure from bringing about the kinds of impacts we hope to achieve ( 1989, pp. 1042-I 043).

All these accounts, whether supportive or critical of PVOs and NGOs, are attempts to describe characteristics of and prospects for these organizations. It is almost as though these agencies were part of the bounty of nature rather than malleable forms for collective action. Yet future poverty alleviation efforts need not be constrained by the current array of organizations. On the contrary, we can be sure that these organizations will change one way or another. If they are to be consciously changed for the better, it is not enough to know what they are. We must also try to understand how they gained their current identities, and to gauge the boundaries between realistic expectations and visionary dreams for new organizational types. Although its criticisms may be very broad, most specific recommendations found in the DML are better described as tactical than as strategic. An ambitious exception to this rule is Korten’s promotion of “third generation NGO development strategies” (1987, pp. 145-1.59). Using the Ford Foundation as his primary example, Korten recommends an approach he calls “sustainable systems development” in which PVOs and NGOs analyze institutional and policy constraints to helping the poor, form coalitions

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of “individuals committed to change who bring with them the resources of a number of relevant institutions” and introduce “a variety of sources of feedback on operational experience as an input to institutional learning” (pp. 148 and 152). He suggests that this strategy could supplement traditional PVO disaster relief and village development strategies. By strengthening their links with governments they could widen their range of impact. Korten speculates as to whether USAID or the Bank might be able to carry out a strategy like the one he proposes, but he rejects the idea. AID staff are normally limited to a maximum four-year assignment in a given country (longer than some major donors) and continuing cuts in staff force those who remain to focus their attention on matters of AID’s internal administration - their time largely consumed by logistical and procedural concerns. The bulk of AID funding goes into large projects funded through formal government-to-government mechanisms, seriously limiting flexibility and creative initiative. The large development banks face even more serious constraints. Often they have at best only a token staff presence in the country, and face intensive pressures to keep the money flowing in large, technically designed projects. The large donor organizations were founded on the premise that financial resource transfers are the key to stimulating development. This is the purpose to which they are dedicated and to which their structures and operating procedures are geared (Korten, 1987, pp. 153-154). Korten argues that for historical reasons AID and the Bank are poorly structured to implement the strategy he recommends. These structural features, however, are not fixed for all time. A few writers have addressed the poverty alleviation debate with attempts to understand how these features arose.

4. THE WORLD BANK AND USAID ARE NOT WELL STRUCTURED TO PROMOTE THE INTERESTS OF THE POOR Management

theorist

James

Wilson

writes,

Every organization has a culture, that is, a persistent, patterned way of thinking about the central tasks of and human relationships within an organization. Culture is to an organization what personality is to an individual. Like human culture generally, it is passed on from one generation to the next. It changes slowly, if at all. All organizations seek the stability and comfort that comes from relying on standard operating procedures [which] represent an internally defined equilibrium that reconciles the situations imperatives, professional norms, bureaucratic ideologies, peer-group expectations and (if present) leadership demands unique to that agency (1989, pp. 91,375).

World Bank and USAID organizational cultures were forged while funding capital-intensive infra-

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structure projects. During the 1950s and 1960s theoretical, political, and pragmatic considerations combined to focus policy makers’ attention on the monetary quantity of development investments rather than on their quality. The professional skills brought to bear on program and project design were mainly those of the economist and the engineer. Thus when their leaders altered their goals from economic growth to poverty alleviation, agency staff were poorly equipped to promote the new objectives. Starting off on the wrong foot they set out in directions with bleak prospects, and although they learned some hard lessons they had little opportunity to mend their ways. Political motives for foreign aid were cast in humanitarian rhetoric from the start. US nonmilitary foreign assistance began with the reconstruction of war-torn Europe, and Secretary of State Marshall set the tone for 40 years of aid as a preventive measure against communism. As Rondinelli writes, Although Marsha11 proclaimed that “our policy is directed not against any country or doctrine, but against hunger, poverty, desperation and chaos,” the underlying goal was clearly to strengthen the economies of European countries for security purposes and against the

possibility of Soviet domination (1987, p. 18). The mere existence of political motives tells us nothing about the nature of the ensuing aid. The most common political use, however, of US aid has been in the shoring up of anti-communist regimes. In these cases the quantity of funds transferred has been of greater moment than the developmental impact of subsequent investments. The initial character of aid was also influenced by the particular needs of the postwar economies. Their binding constraints were financial and logistical rather than technological or managerial; the European countries had ample expertise and their governments had every incentive to employ aid resources wisely. It made sense for the Americans to focus on evaluating project proposals and transferring funds. The emphasis on capital-intensive support to industry and physical infrastructure continued when aid began to flow to Latin America, Asia and Africa. It is notable that the development economics of that period reinforced the emphasis on the level rather than the content of aid. The theoretical model central to development economics took the capital-output ratio as given, thus emphasizing the level of investment. Governments were conceptualized as “rational actors” intent upon maximizing the long-term welfare of national populations. Development professionals recalled British and US successes with central economic planning during the war, and viewed this experience as largely transferable. Development economics did not promote a neglect of project outcomes; rather it reinforced an attitude of benign overconfidence.

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While politics and theory set the stage for a quantitative orientiation to development spending, organizational imperatives turned this potential into a de facto operational emphasis on the task of moving money. Neither the Bank nor USAID implements projects in the field; they channel funds through a variety of spigots to other institutions that spend them. When monies are lent it is not the funded entity that is responsible for repayments, it is the government that requested the project. The period between the appropriation of funds and the determination of the final worth of the project (if this determination is ever made) is likely to be many years. With project implementation demanding mainly engineering feats it was natural enough that the energies of Bank and USAID officers came to be focused on the initial funding decision. The handiest metric for assessing individual officers and offices was the volume of funds spent rather than any measure of their investments’ development impact. One of the most frequently voiced criticisms of the Bank and USAID has been of their undue emphasis on moving money. Tendler (1975) provides a detailed critique of USAID’s money moving behavior. She notes that, New loan officers are considered bright and energetic if they are good at moving money. The individual

from project sites guaranteed minimal levels of oversight. Although USAID’s structural features gave it the potential to exercise considerable discretion over how its monies were spent, Tendler argues that much of this potential was wasted. First, USAID was required to spend most of its budget on US goods and services.’ Second, USAID’s system of fringe benefits had the effect of distancing their staff from local societies and strengthening the cliquishness that pockets of expatriates often fall into. These staff are entitled, at no cost to themselves, to access to the Army Post Exchange (or commissary, where US foods and household goods may be purchased at US prices), a generous housing allowance, the loan and free maintenance by USAID of furniture, stove, refrigerator, air conditioner, washing machine, and dryer, and various other perquisites. Not only do these perquisites constitute a welfare loss for the staff themselves compared with equivalent financial remuneration,* they also reduce the staff’s knowledge and experience of local society. Tendler remarks, It is ironic that an employer would have gone about the task of seeking persons who were interested in living abroad, who got along well in foreign cultures, and who could learn the language, by holding out the promise that the new employees would be able to live just as if they were at home. The conspicuous PX [Post Exchange]

knows that his career in the institution will be very much determined by his abilities in this area. Needless to say, the moral imperative to be economic can have little punch in a world where the most compelling absolute is that money shall be spent (pp. 88 and 95).

consumption of AID Americans abroad, needless to say, aroused host-country resentment and skepticism (1975,

Tendler attributes part of the blame to the annual appropriations process by which Congress allocates funds to USAID. USAID is expected to deplete an approved budget by the end of the fiscal year. Appropriated funds, “have negative opportunity costs,” she writes, “in the sense that if funds are not spent, the agency will incur ‘costs’ in the form of problems with Congress the next time around” (1975, p. 89). She notes that there have been repeated attempts since the late 1950s to convince Congress to allow USAID to spend money on a multiyear basis, but to no avail. The $1 billion Development Fund for Africa is a current Congressional experiment with a focused multiyear appropriation for USAID. Tendler notes that the World Bank, which is not tied to single year appropriations, also overemphasizes quantities of monies moved. She provides evidence that suggests, however, that USAID should be better positioned than the Bank to assess how monies are spent. In 1967 the World Bank committed an average of $1,500,000 in loans for each professional staff member, compared to USAID appropriations of $120,000 per “direct hire” (Tendler, 1975, p. 6). Most USAID staff work in field offices while most Bank staff work in Washington. The quantities of money processed by Bank officers and their physical distance

Tendler estimates that the consequences of this alienation were severe enough to eliminate the potential programmatic advantages that might accrue due to staff knowledge of local circumstances from having missions in the field (p. 30). While money-moving behavior and ignorance of local subtleties may not have been optimal for Bank and USAID sponsored capital intensive projects, they were particularly unfortunate for poverty alleviation projects. A growth-oriented strategy is much better suited to a heavy dependence on local governments than is an equity or poverty-oriented strategy. Government officials may be expected to promote in some combination their own private interests, the interests of their fellow politicians and bureaucrats, those of other monied classes, and those of the nation at large (or of selected target populations). Some uses of development resources, as when money is stolen, are normally harmful to all but the circle of direct beneficiaries. Often, however, resource allocations merely serve some interests over others, yielding sequences of actions that augment to a greater or lesser extent the cash flows we measure to assess economic growth. When assistance goals could be achieved by the rich getting richer it was fairly likely in most countries that government decisions would

pp. 32-33).

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lead to enough of the desired transactions. When development goals began, however, to rest on the stewardship by governments of the fortunes of their poor, the odds worsened dramatically. The development community’s conception of Third World governments is reflected in the type of public administration reforms the aid agencies sponsored. Rondinelli writes, During the 1950s. U.S. development administration assistance was focused primarily on transferring managerial techniques and organizational structures that seemed to be successful in the United States to developing countries. The aim was to create rational, politically impartial, and efficient national bureaucracies in the

Weberian tradition (1987, 142-143). During the 1960s aid organizations encouraged developing country governments to take on a much more activist role than that of the US government. State managers were trained in the United States to be “social engineers” in their own countries, so their governments could stimulate economic growth, promote social change, and transform their traditional societies (Rondinelli, 1987, p. 143). Esman and Montgomery write of public administration assistance in the 1950s and 196Os, Administrative reformers did not at all appreciate the degree of behavioral change at all levels of the bureaucracy that was necessary if these rationalistic innovations were to influence performance. The result was that these efforts at reform by changing government-wide systems had little visible impact in the field (1980, p. 234).

It appears that aid agency staff believed that most developing country government staff were, or could easily become, impartial promoters of the national interest, as opposed to rationally self-interested, rentseeking bureaucrats or representatives of ruling class interests. Thus on the eve of the turn to the poor USAID and the World Bank had but shallow roots in the societies they were assisting, and their practices bespoke excessive confidence in their local government counterparts. Their analytical resources were concentrated at the front end of the project cycle, on the preparation of project plans and on initial funding decisions. Moreover, funding decisions displayed a bias in favor of large sums and rapid disbursements. A project with a two-year experimentation period culminating in the construction of a moderate, tentative, six-year budget would have fit these systems like a square peg in a round hole. It is widely agreed that poverty alleviation goals were adopted to correct earlier strategies’ distributional failures. The literature is less clear about the source of the motivation for reform. In particular it is not clear how far development agency staffs promoted reforms and how far they responded to changes driven

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by agency leaders. It is clear that the 1970s was the decade when the Bank overtook USAID in funding levels and in intellectual leadership of the international development community. The 1973 “New Directions” legislation that gave USAID its pro-poor mandate came after several years of conflict within and between the Nixon administration and Congress over USAID’s future (Rondinelli, 1987, pp. 69-70). Then USAID spent the rest of the decade conducting studies on how to implement its new mandate (Rondinelli, 1987, pp. 75-97). The Bank, by contrast, was firmly led, expanded and reoriented by Robert McNamara, its president from 1968-8 1. The new poverty orientation at USAID and the Bank was reflected in the mix of projects they funded - with more projects supporting small holder agriculture, public health, family planning, small enterprises, rural roads and water supplies, low cost housing, etc. Most prominent were the integrated rural development projects, described as the World Bank’s favorites but also sponsored by USAID, that attempted to accomplish multiple objectives within confined areas. What the literature does not report for either USAID or the Bank is fundamental internal organizational reforms to correspond to the new goal. USAID field missions are responsible for producing project proposals that conform to previously articulated country, regional, and agency goals. Decisions about how to conform to agency goals are somewhat decentralized; mission directors have considerable flexibility in responding to guidelines. This very flexibility in project design, however, diverts attention from questions of internal organizational structure. The New Directions legislation accomplished a lot by defining USAID’s target population; it would be expecting too much to criticize it for failing to reorganize USAID at the same time. It only gradually became clear that USAID’s existing organizational structure and culture were far from optimal for implementing the new goals. The Bank’s approach to poverty alleviation cannot be dissociated from McNamara’s determination to expand his agency and his confidence in goal-oriented, hierarchical organizational systems. Anyone familiar with his efforts as Secretary of Defense under Kennedy and Johnson to strengthen top-down planning in the US federal government might have predicted his leadership style at the Bank. Total annual Bank lending increased fivefold in real terms during McNamara’s tenure, while total and professional staffing levels increased by just over a factor of three (Ayres, 1983, p. 4). The increase in loan commitments per staff member, “resulted in what some members of the Bank’s own Staff Association referred to as an assembly-line approach to project preparation. Pressure increased to grind out projects to meet the year’s quantitative goals” (Ayers, 1983, p. 7). McNamara further centralized Bank decision making.

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WORLD DEVELOPMENT

It is notable that during the 1970s the Bank significantly relined its cost-benefit analysis techniques with the elaboration of “shadow pricing” to correct for distortions in an economy. This development, important as it was for the field of applied economics, reinforced the Bank’s emphasis on preproject planning. During the 1970s the Bank became less able to provide the sustained, locally sensitive management attention poverty alleviation projects require. It is not too great a simplification to attribute the decline of USAID and Bank poverty emphases to four factors. First, by the end of the 1970s there was considerable disillusionment with prominent poverty alleviation strategies, particularly with integrated rural development projects. Second, development agencies had to respond to widespread developing country government insolvency (due in part to the 1979 oil price hikes, the 198 1 world economic recession and the US Federal Reserve’s high interest rate policies). Third, when Reagan became President in 1981 he ushered in a more conservative, market-oriented approach to development assistance. Fourth, and partly as a result of the previous three factors, the academic field of development economics took a turn to the right. It began to promote a more circumscribed role for government economic intervention and a stronger role for macroeconomic stability and “getting the prices right.” The Bank and USAID continue to sponsor poverty alleviation projects to this day, but these projects have never regained the prominence they enjoyed in the mid- to late 1970s. The main structural innovation in Bank and USAID poverty alleviation strategies since the early 1980s discussed in section 3 above, has been the increase in levels of funds channeled through PVOs and NGOs. World Bank and USAID organizational structures and cultures continue to strongly reflect the tasks they faced in their formative years. 5. REFORMS TO IMPROVE DEVELOPMENT AGENCY CAPACITIES TO STRENGTHEN THE POOR The main proposition here is that the United States could significantly improve the impact of its resources devoted to poverty alleviation by channeling them through organizational units that have no other goal. What might be lost in additional overhead would be more than recovered in increased project effectiveness. Two background conditions must be satisfied: that the American people, as represented in Congress, if convinced that their monies were being spent effectively would maintain support for the program, and that there exist potential personnel interested and able to promote the program’s goal more or less for its own sake given favorable organizational conditions. Without a certain store of idealism this goal does not make much sense.

The main innovation involves the implementation of a point system based on a definition of poverty. This system focuses agency attention on the estimation of project outcomes. The idea is not to get scientifically accurate impact measures, but to develop information efficiently to maximize impact in the long run. This approach yields a strong comparative orientation; investments in, say, primary health care would tend to be seen as a class, subdivided in terms of whatever distinctions lead to variations in a clinic’s contribution to human well-being. Point assignments at the beginning, middle, and end of a project would tell a story that should be plausible given all available information and that should be reasonable given point assignments for other projects of its type. It would be inefficient not to have field staff making point estimates on the basis of both quantified and unquantifiable information. Staff should be rewarded for good scores, but penalized should they consistently overrate their own work compared to others’ assessment of it. Legitimate differences in opinion over point assignments would be common, but since points are intended to correspond to identifiable improvements in people’s lives (or at least in their options), a reality check would always be possible. The point system would guide overall strategies toward maximum poverty alleviation from available resources. It should provide a firmer base for strategic choices than is available from the Bank’s economic cost-benefit analysis or USAID’s goal hierarchy approach. This system is powerfully egalitarian, in that any client’s improvement from a given starting point counts the same as any other’s Moreover, the factoring in of costs automatically discourages operations in places with social conditions hostile to improvements for the poor. Costs tend to be lower where local elites favor reforms than where they oppose them, so poor people with the good fortune to live in a favorable policy environment will tend to get help sooner. This is not unfair; resources should go where they can have the greatest impact. The system acknowledges more extreme poverty as long as it assigns more points to incremental improvements from extreme than from moderate poverty. I do not mean to imply that the point system would be easy to implement. There are serious conceptual difficulties in estimating relationships between project activities and measurable changes in clients’ lives. Assigning points to indirect efforts against poverty, and to those that take years to show their results, is sure to be contentious. Efforts to maintain consistent standards in point assignments between projects are sure to fall short. If poverty alleviation is the goal, however, then these difficulties are exactly the ones that should be confronted. When mistakes are made the consequences are not likely to be worse than current practice. The discussion in sections 24 above suggests sev-

POVERTY

ALLEVIATION

era1 reforms that would leave poverty units in USAID and the Bank with organizational structures more suited to their task than under the status quo. (Although I argue for reforms within the Bank and USAID, Congress might be better advised to channel its poverty alleviation resources through some new agency. It is beyond the scope of this essay to sort out the pros and cons of this choice.) These units should be free to develop their own personnel, planning, evaluation and reporting procedures as it is around these that a sense of mission can be constructed. Field offices would have higher staff: budget ratios. The average field assignment would be longer, and the average field salary lower, and with different perquisites, than at present. (Perhaps a portion of the money saved with lower field salaries could be banked as severance pay or retirement funds. Expatriate staff would live more like their local upper middle-class colleagues, but would not suffer, relative to other career options, when they return home.) In USAID’s case the unit should be funded with multiyear or bankable appropriations and released from buy-US requirements. In the Bank’s case the unit might have to grant most of its loans on highly concessional terms for investments to remain attractive to local governments. With more staff on the ground the Bank could reduce its dependence on preimplementation estimates of project impacts. Projects would be selected based on the analysis of problems and opportunities facing particular populations. Often the most strategically sound plan will be quite ambiguous for the first year or two of the project’s operation, with only the most tentative of estimates of likely point values. With no need to contort a project to fit the funding cycle, and with no need to construct plans with firm projections of economic rates of return, the agency should be better able to estimate optimal levels of ambiguity for each stage of the project cycle. For agency executives to be free to cultivate an appropriate organizational culture, they need statutory protection from related organizations that might seek to change their agenda. Congress and the Bank’s Board of Governors would have to state clearly that poverty alleviation is the units’ one and only goal. Consider the dilemma for Congress: it would have fewer options for rewarding friendly foreign govemments, and fewer favors for US interest groups. It would have to limit its interference in the units’ affairs to confirming that they were indeed doing their best to help the poor. Surveys suggest that the US public supports humanitarian assistance more strongly than other types of foreign aid,9 but this support is diffuse and of lower intensity than concerns about many national problems. Would it be possible to get enough votes to set up and then fund these units? The answer is, of course, speculative. One result of the proposed reforms would be a gradual improvement of our understanding of the outcomes for the

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poor of different interventions; thus we could eventually expect to estimate the improvements in human lives due to these reforms. At this point we can say little besides that there appears to be considerable room for improving poverty alleviation efforts. Poverty unit staffs’ tasks would resemble portfolio management. They would envision streams of investments and impacts, with attention to sunk costs and probabilistic assessments of changing project environments. It would be prudent to have at least a few direct provision projects in each sector, funding schools, clinics, and agricultural extension operations. These would serve as points of reference for more “risky” and hard-to-assess projects, such as basic cassava research, curriculum development, or campaigns against female circumcision. A central committee would continuously review point assignment procedures and values. Relations between a poverty unit and its parent agency would take some working out. Presumably they would share many resources and coordinate their strategies, but the poverty unit would need a little distance at the outset to establish its own approach. In many cases their agendas will overlap, and they might often negotiate jointly with host country governments. Sometimes the poverty unit may “buy into” parent agency projects over which it will have limited influence, but it must be free to enter such joint ventures only when the terms suit its purposes. The poverty unit would recognize that many governments contain elements unprepared to invest in improvements for their poor populations for a variety of reasons, yet also that governments are seldom monolithic. Of course it can operate in a country only at the pleasure of the local government. Governments will naturally attempt to steer funds and projects in directions that suit their own purposes. Sometimes these purposes will overlap with the poverty unit’s goals, sometimes not. Once established in a country, the unit may play a sort of policy entrepreneur’s role, attempting to develop programs the local government may adopt. It would develop an historical analysis of factors affecting the poor in its region, and attempt to ally itself with local governmental and nongovernmental “players” that share its goals. Having more staff more closely associated with the local society should put the unit in a better position to analyze these opportunities. In all cases a comprehensive assessment of an operation’s likely impact must be weighed against an estimate of costs. Cases where early and late estimates for a single project differ markedly would be carefully analyzed. In this sense project officers will be held accountable for their decisions. The unit would attempt to digest all available information on the conditions of poor populations within its regions, and try to judge the contribution of its policies and procedures to improving these conditions.

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WORLD DEVELOPMENT

The poverty unit would seek out offices and agencies it could support with the least administrative oversight. It would place a lighter record keeping and reporting burden on an implementing agency of proven integrity and ability than on one of questionable reliability. Resources devoted to studies, evaluations, record keeping and reporting would be assessed in the same light as any other investment. Any organizational design has characteristic dangers. A serious danger for the scheme sketched here is that agency staff might collectively lean toward overestimating project impacts. On occasion sectoral specialists from academia or other agencies should be contracted to review sets of point assignments. This will help, but the danger remains. staff find they cannot reconcile

If someday junior the agency’s pro-

claimed achievements with what they understand on their own, they should prepare to fight or jump ship. Since the agency depends on funds from taxpayers, it should be permitted to spend a small part of these funds reporting to the public on its errors and accomplishments. Inevitably this will involve some development education. Some communications will be at a level indistinguishable from propaganda, but others should seek to engage the educated and interested public. At whatever level, these communications should be rigorously truthful. If lies are found here, the agency’s integrity should be questioned. In the end the central but elusive question will be whether the unit is able to develop an organizational culture appropriate to its task. This is not a judgement

that any individual can make definitively at any particular point in time. If such an agency is created, after 10 or so years there will probably be a majority opinion inside and outside the agency on whether it is doing its job well. If these views are roughly the same, it is quite likely they will be fairly accurate.

6. CONCLUSION Development funding agencies pump money into societies where most people’s life prospects are severely limited by the lack of it. One may imagine each dollar generating a trail of activity, the consequences of its passage extending into the distant future with ever decreasing clarity of attribution. The approach to poverty alleviation proposed here specifies desired outcomes from this activity in its poverty definition. The method for achieving these outcomes is contained in a revised form of cost benefit analysis. Considering that development agency staff, unlike business men and women and most government staff, are shielded from the consequences of their actions, this approach provides a means of evaluating every aspect of an agency’s operations by a single scale of value. Insofar as this scale of value truly reflects the best interests of the poor, it places poverty alleviation interventions on a firmer ethical foundation than they have enjoyed under existing organizational arrangements.

NOTES I. This approach is broadly consistent with the moderate wing of the “basic human needs” tradition and the concept of poverty promoted in many of Amartya Sen’s publications (e.g., 1982, pp. 30-3 1). The inclusion of political liberty as a basic need is somewhat innovative, but I will not attempt a justification for it here. 2. Authority to assess points to a project would probably rest with the head of the poverty unit, and be delegated in ways that would maintain consistency between projects. The poverty unit would not normally evaluate or be evaluated by other divisions of the parent agency.

4.

In this essay the term “PVO” refers to international, private, usually rich-country based development organizations (e.g., CARE) while “NGO” refers to private, nonprofit, domestic organizations with developmental goals (e.g., Grameen Bank, Bangladesh). These terms are not used consistently in the DML; each may refer to international and/or domestic agencies. 5. This was also the year that Congress rewrote USAID’s goals to focus on the needs of the poor in its “New Directions” legislation (the 1973 Foreign Assistance Act). 6. Ayers writes in 1983 that, “Surprisingly, the [World] Bank has conducted little in the way of an impact analysis of its rural development projects” (p. 128).

3. As Wilson (1989, p. 371) writes, “If the organization must perform a diverse set of tasks, those tasks that are not part of the core mission will need special protection. This requires giving autonomy to the subordinate tasks subunit (for example, by providing for them a special organizational niche) and creating a career track so that talented people performing non-mission tasks can rise to high rank in the agency. No single organization, however, can perform well a wide variety of tasks; inevitably some will be neglected

8. See any microeconomics kind subsidies.

Moreover, conglomerate agencies rarely can develop a sense of mission; the cost of trying to do everything is that few

9.

things are done well.”

Contee’s

7. At the time of Tendler’s writing most World Bank financing was tied to foreign exchange costs too, so only 25% of the Bank’s loans went to local expenses. text book’s treatment

of in-

Smuckler, Berg and Gordon (1988) report from C. E. 1987 survey, “What Americans

Think: Views on

POVERTY ALLEVIATION

Development and Third World Relations.” The sampled group’s priorities, from highest to lowest, were: (a) disaster relief, (b) health care, (c) family planning, (d) aid to farmers overseas, (e) US volunteer programs, (f) reducing infant mortality, (g) food aid, (h) help governments improve

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national economies, (i) infrastructure projects, (j) military bases overseas, (k) support local small businesses, (1) education training in United States, and, (m) encourage US investment overseas.

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