Connie Ballesteros is a second-year MPP candidate at the Goldman School, and a new blogger for The Wire.

There has always been significant controversy surrounding foreign aid. So far global aid has failed to effectively fight poverty, which clearly indicates a need to rethink current approaches.

The image above shows what Official Development Assistance (ODA) looks like for 2011 and 2012 (includes government-to-government aid and government donations to multilateral institutions from 29 member countries of the OECD’s Development Assistance Committee, or DAC). 

Total ODA in 2012 was over $120 million dollars. “Education, Health and Population” was the most popular category for donor governments, followed by “Other Social Infrastructure” (includes social welfare services, employment policy, housing policy, culture and recreation, among others)  and “Economic Infrastructure” (things like transport, communications and energy provision).

Critics point out that many of the receiving countries are plagued with corruption, and the aid they receive is used to support corrosive institutions. Since the expansion of foreign aid in the 1960s, assessments of the impact of these funds on their recipients have been mixed: there are success stories, but also dramatic failures. In general, foreign aid has been shown to have a definite impact on education and health in some countries. However, the effect on poverty is less clear. 

Angus Deaton is a Princeton professor and leading microeconomist.  In his book The Great Escape, he argues that aid has played a detrimental role in the democratic and economic development of poor nations. When aid is targeted towards the governments of poor countries—particularly small ones—instead of directly to communities in need, funds are often directed to special interests and not social objectives. This leads to unintended negative consequences, e.g. subsidizing corrupt or violent regimes. Along the same lines, Deaton argues against the provision of arms to corrupt governments. Instead, foreign aid should target gun reduction and create incentives for governments to act in the best interests of their populations.

To address these problems it is important to change the way donor countries think about, and target, the aid they award. This requires in-depth changes in the way donor countries structure their aid programs, and a more hands-on approach to aid provision, driven by long-term considerations. Deaton recommends changing the type of aid offered. He suggests that instead of directly financing projects which are then managed by foreign governments, donor countries should offer technical knowledge and capacity building tools to both individuals and governments.

A big problem with rethinking aid this way is that indicators get messy. It becomes harder to measure success because success no longer takes the form of dollars producing a tangible good or service. Under this new approach, funds are directed towards improvement of institutions, which take longer to develop. Yet to create lasting effects on quality of life and access to resources, local governments will eventually have to pick up the slack and guarantee sustainable service provision. Future aid should focus on building institutional capacity over time, rather than providing services or resources in the short-term.

Another criticism made by Deaton refers to the pressure constituencies of high-income countries place on their representatives to donate resources to developing countries. This pressure encourages short term, ineffective projects that provide representatives with easy ways to satisfy their constituencies. Society as a whole, and donors in particular, would be deeply misguided in continuing to fund this cycle, inattentive of the consequences discussed here. Governments report on the amount of aid money meant to alleviate poverty, but there is little evidence on the actual effect of those resources on the quality of life of poor populations. That is why Deaton states that in order to improve the effectiveness of aid, donors and donor governments need to increase their knowledge of what’s really happening to the resources offered to developing countries. If donors are better informed, then they will demand more accountability about the type of projects being funded, and how much is being spent on what.

However, changing perceptions will take time. The pressure from constituencies, the aversion to long term projects and the ease of implementation under current practices continue to encourage project-based giving with few restrictions. Changing the nature of aid as proposed by Deaton requires greater involvement on the part of both donor governments and aid recipients. Because of these challenges, I don’t anticipate radical change in this approach in the next decade.

If that is the case, and aid continues to be directed toward projects rather than institutional development, I think the provision of clean water and basic sanitation is one area with big potential for significant long term benefits, combined with tangible and immediate results. Clean water and sanitation improve health and nutrition, and are strongly correlated with disease prevention. In developing countries, diseases such as cholera, dengue and malaria are linked directly to water quality. Lasting infrastructure investments for clean water and sanitation would improve the wellbeing of both the young and adult poor.

So far, however, water aid projects are underrepresented among foreign assistance initiatives. According to wateraid.org, 748 million people in the world don’t have access to safe water, and 2.5 billion don’t have access to adequate sanitation. This is an incredibly large number. According to Deaton there were 800 million poor in 2010. And yet out of the $133.5 million official aid dollars in 2011, the average yearly donation of water and sanitation related aid reported by the OECD was only $12,000.


Catarina de Albuquerque, the first UN Special Rapporteur on the right to safe drinking water and sanitation, recently published On the Right Track. She identifies 10 criteria for assessing best practices in relation to water rights and sanitation in developing countries. De Albuquerque outlines the challenges faced by developing countries when addressing water and sanitation issues, and divides the solutions into four categories: legislative and regulatory frameworks, financing and budgeting, planning, and monitoring. Donor governments might provide aid for all four components, or focus on one according to their preferences.

The best thing that can happen for recipient countries is for donor governments to rethink the ways they provide assistance to the world’s least developed economies. While they’re working toward that change, redirecting aid toward the provision of clean water and basic sanitation will improve health outcomes and create lasting infrastructure investments that benefit several generations, without inadvertently financing additional ills.

Jonathan Yantzi is a second-year MPP student at the Goldman School and a regular blogger for The Wire.

We’ve been even busier this month! At the end of my last post, I mentioned the activities that our Congolese staff will facilitate for the respondents in our subsample.

In our version of the dictator game, Player 1 receives 1,000 Congolese francs. (One U.S. dollar buys 920 francs at most exchange stalls in downtown Kananga.) Player 1 decides independently how much of the 1,000 CDF payment she wants to share with Player 2. Player 2 has no direct role in the decision-making process.

The ultimatum game invites both players to make a decision. Player 1 receives 1,000 CDF in 100 CDF bills. She offers a portion of the 1,000 CDF to Player 2. Before receiving the offer, Player 2 determines whether he will accept each of the eleven possible offers between 0 CDF and 1,000 CDF. If Player 2 rejects Player 1’s offer, neither player receives their allotment.

Before the end of the summer, we’ll also play three less well-known games.

In the random allocation game, Player 1 privately chooses either herself or Player 2. Then she rolls a two-coloured die. If the die lands black-side up, she should give 100 CDF to the player that she chose. If it lands white-side up, she should give 100 CDF to the player that she did not choose. Each game consists of 30 rolls, or 3,000 CDF. We would expect each player to earn about 1,500 CDF on average…if Player 1s follow the rules.

In our trust game, Player 1 receives 1,000 CDF and shares part with Player 2. Our office triples whatever amount Player 1 shares with Player 2. Player 2 then decides how much of the tripled amount to return to Player 1.

Four players take part in our public goods game. Each player receives 1,000 CDF. They choose to keep part of the 1,000 CDF and contribute the rest to a group pool. Our office doubles the group pool and divides it equally amongst the four players. Next, we tell each player how much the other three players contributed to the group pool. For the price of 100 CDF, a player can deduct 300 CDF from any other player’s earnings. “It’s like the river nearby,” observed one of our Congolese staff. “Some people help plant trees to prevent erosion. Some people don’t help. And not everyone is happy about that.”

Daniel Kahneman was one of the first researchers to use theses kinds of games. Last summer, my classmates and I read Kahneman’s Thinking, Fast and Slow. Counting money that our Player 1s place in envelopes every day for our Player 2s reminds me about what we read. There are limits to assuming that every individual will engage in rational self-interest. So far our respondents have played the dictator game and the ultimatum game. Many “dictator” Player 1s share a significant amount of the 1000 CDF that they receive.

A “rational self-interested” actor would not share. Many of the economic principles that my classmates and I learned last year assume that individuals will always seek to maximize their utility. Economic models make assumptions by design. But my experience in Kananga further convinces me that these models need…tweaking.

How does self-interest affect decision-making? What other factors may be at play? Hopefully our respondents’ experiences with these games help us to better understand cultural norms and values in Kananga.

Jonathan Yantzi is a second-year MPP student at the Goldman School and blogger for PMJ.


Before the end of May, I’d never been to a country like the Democratic Republic of the Congo. I haven’t travelled enough to know whether there even are other countries like Congo. Each developed country that I’ve visited seems distinctive. Are Congo, Haiti, Kenya, or Afghanistan any more individually indistinguishable than Barbados, France, Greece, or the United States?

So I’ve trained myself not to refer to my “internship in Africa.” Africa spans more than thirty million square kilometers. I’m spending almost my entire internship in one city: Kananga. My classmates interning in Washington, DC don’t absurdly mention their internship in North America! Though I suppose perspective matters. You’ve heard of the White House. You probably haven’t heard of École Malandji.

École Malandji is the primary school across the road from the house where my three colleagues and I live. Early every morning hundreds of children sing and play in the schoolyard. It’s a harmonic ruckus. On days when there’s no school, roosters herald morning with gusto. Fellow iPhone users: it beats Marimba by a long shot. If we walk down the street to buy fresh beignets, the children shout, “Mutekete, mukete!” (“White man, white man!”) Sometimes even “Good morning!”

My three colleagues are researchers from Harvard University. Nathan is an economics professor, Sara is a PhD candidate, and Matthew is Nathan’s research assistant. Other members of the research team will join us here in July. Last summer, the team conducted a series of surveys and games with a sample of about two hundred Kananga residents. Their broad research question: “How do formal institutions affect internal cultural norms?” The tribes in Kananga have distinct histories of institutional development. The surveys and games help us to understand whether descendants from different tribes show differences in altruism, patience, risk aversion, and other views or beliefs.

This summer we’re expanding our sample and trying a few new activities. My job is to train and manage our Congolese investigators. Most are native Tshiluba speakers—important, because so are most of our survey respondents. The investigators all speak French too, so that’s the language we use to communicate. My Congolese colleagues are mostly curious, committed to their work, punctual, professional. And they’re an entirely heterogeneous group. My experience teaching and leading Congolese hasn’t been radically different from teaching and leading Americans or Canadians. This is a little contrary to what friends and mentors told me to expect.

There are cultural differences. Pedagogy revealed perhaps the most striking contrast. A few of the Congolese later told that me they’re more familiar with a didactic approach, whereas I prefer a participatory style. After everyone got to know one another, they engaged as enthusiastically as any group of Berkeley undergrads. I don’t mean to minimize the cultural distinctions. But in some contexts—a classroom, a workplace—they’re not always irreconcilable.

After the first round of training we began our initial screening survey. Then we’ll select a representative sample and conduct a more extensive survey. Later this summer, the Congolese investigators will guide respondents through the dictator game, the ultimatum game, and other activities. Wonky Internet connection willing, I’ll blog a few more updates over the next months.