This is an *old* paper (2012) that I submitted to CGD for peer review and it got shot down. I can't remember why, and I re-used some of the material in Results not Receipts but it has some interesting data in it and I still think I broadly agree with it so, with that caveat lector, here it is. For many donors throughout most of their history, the major assistance model has involved the tool of the investment project. This is based on a theory of aid and development that the key constraint facing developing countries seeking rapid growth is lack of investment and that donor financing to overcome that ‘investment gap’ can be overseen through the project process to ensure that it is efficiently spent to generate high returns. In reality, filling an ‘investment gap’ is neither an empirically well justified nor a practically well-implemented aid strategy. Furthermore, procurement oversight mechanisms appear to be doing a poor job at ensuring the average effectiveness of an investment portfolio in a country is significantly enhanced, or transferring knowledge, or building institutions. The procurement-focused project investment model should be limited in use to in cases where (i) a project design is significantly innovative and/or delivers regional or global public goods and/or aid is a large percentage of country investment and no agreement can be reached between donors and government on overall investment priorities in that country and (ii) alternate project approaches like output-based or cash on delivery models are deemed inappropriate.
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The Case for Transparency in Power Project Contracts: A Proposal for the Creation of Global Disclosure Standards and PPA Watch
A GCD Policy Paper with Todd Moss and Mohamed Rali Badissy. The purpose of a nation’s power sector is to deliver reliable electricity at the lowest cost and for the greatest benefit. At the heart of any private electricity generation project is a Power Purchase Agreement (PPA), a contract that contains key provisions such as price, payment stipulations, and obligations by the offtaker utility and/or host-government. Despite their significant effects on service quality and public finances, these contracts are often negotiated and signed in secret, with even the most basic terms shielded from the citizenry. This opacity has created risks and, in a growing number of cases, contributed to costly and damaging outcomes, such as overpayment, overcapacity, large debts, and grid instability. Drawing on examples from enhanced transparency in public budgets, sovereign debt, and extractive industries, we propose that governments agree to publish PPAs with any public sector obligation and that funders of private generation projects also agree to minimum disclosure standards. The objective is to create incentives for better practice, improve governance of the power sector, reduce transaction costs, and ultimately, to deliver cheaper and more reliable power for people and businesses. Transparency of PPAs would support the efforts of government policymakers and planners, investors, and development finance institutions to accelerate energy market development and to reap the benefits of open competition. Greater disclosure would also provide crucial information for citizens to hold their own governments accountable for the contracts they sign on behalf of the public.
Your World, Better
Your World, Better: Global Progress and What You Can Do About It is a book written for the smart and engaged middle school student. It looks at how America and the World has changed since the reader's parents and grandparents were young: what has happened to health and wealth, homes, school and work, rights and democracy, war and the environment, happiness and depression. It talks about the things that have gotten better, the sometimes-intensifying challenges that remain, and what readers can do about them.
Your World Better is optimistic, but it doesn’t shy away from the considerable problems we face: from inequality through discrimination and depression to climate change and infectious threats. It is meant to encourage kids to help make the world better themselves: tip them from a sense of powerlessness toward action, not into complacency.
The pdf of Your World Better is available to download here for free. Or you can buy a kindle version for 99 cents or a hard copy for $8.10 on Amazon (or six pounds on UK Amazon here). Any author royalties from those sales will be donated to UNICEF (so far, a bit more than $800 has been donated, thanks!). I talk about the book to Marian Tupy for the Human Progress podcast and to two (fantastic) middle schoolers for NPR. Then I did a Slack chat with five middle schoolers for Slate. A CGD discussion about the book and talking to children about progress is here. And here's a fifteen minute video about the book (or try it on Youtube). I am happy for the *text* (not pictures) to be copied or redistributed in any medium, and/or remixed or transformed for any purpose, with attribution.
"Everyone, no matter how old, or how young, should read this. I’m sending to grandkids and their parents." --Nancy Birdsall
"Great read for middle school kids who want to understand how the world is getting better -- and can become even more so!" --Parag Khanna
"How can you pass up a free book?! And one that is so relevant for today? If you know a middle school student or teacher, pass this along! Incredibly fresh and honest." --Karen Schulte
"Kids are taught that everything's getting worse and we're all doomed--factually incorrect, and a message that leads to cynicism & fatalism, not constructive action. An antidote: Charles Kenny's new Your World, Better..." --Steven Pinker
Five Principles for Use of Aid in Subsidies to the Private Sector
A policy paper for CGD. There is a significant and ongoing ramp-up in support for explicitly subsidized official development finance to the private sector around the world, but its role remains poorly defined. Lessons from the aid effectiveness literature as a whole and principles on effective use of aid suggest the need for approaches that do not merely finance the marginal private investment. Regarding experience of government intervention in markets, subsidies are only one of many options to incentivize the private sector, and bespoke subsidies provided by outside actors are rarely likely to be the most efficient form. This paper discusses where outside subsidy of the private sector may make sense and develops principles for the use of aid in subsidies based on that analysis. Subsidies should be allocated on the basis of necessity in meeting public policy goals; the norm for subsidy allocations should be competitive approaches or open offers; non-competitive subsidies should only support market making; subsidy levels should be capped; and subsidy levels should be transparent. Much of the content of these “new” principles is already implied or specified by the existing Multilateral Development Bank Principles to Support Sustainable Private Sector Operations, but they suggest that development finance institutions should not use their standard business model when using subsidies.
New procurement guidelines shed light on secrecy versus public right to know
A piece for the Contracting Excellence Journal with Caroline Anstey, summarizing The Principles on Commercial Transparency in Public Contracts.
Examining the Impact of E-Procurement in Ukraine
A CGD Working Paper examines the impact of Ukraine’s ambitious procurement reform on outcomes amongst a set of procurements that used competitive tendering. The ProZorro system placed all of the country’s government procurement online, introduced an auction approach as the default procurement method, and extended transparency. The reform was introduced with a dramatic increase in the proportion of government procurement that was conducted competitively. This paper examines the impact of ProZorro and reform on contracts that were procured competitively both prior to and after the introduction of the new system. It finds some evidence of impact of the new system on increasing the number of bidders, cost savings, and reduced contracting times.
Fighting crony capitalism at the World Bank
In The Hill, railing about the the IDA Private Sector Window.
What Should Silicon Valley Companies With Saudi Money Do?
Discussing Anand Giridharadas' idea for a boycott on accepting Saudi investment money, in Slate.
Anti-corruption policies are hurting the world's poorest. Here's how to make them better
A summary of the messages in Results Not Receipts in DevEx.
Unproductive entrepreneurship is increasingly common in America
Baumol in the US --for the Economist.
Stop blaming poor countries’ poverty on corruption—sometimes it’s just bad luck
Poor countries aren't a lot more corrupt than rich countries. For Quartz.
Results Not Receipts: Counting the Right Things in Aid and Corruption
Results Not Receipts: Counting the Right Things in Aid and Corruption is a CGD book.
In the aftermath of the invasion of Afghanistan, the US Agency for International Development supported the Afghan Ministry of Public Health to deliver basic healthcare to 90 percent of the population, at a cost of $4.50 a head. The program played a vital role in improving the country’s health; the number of children dying before the age of five dropped by 100,000 a year. But accounting standards at the Ministry of Public Health concerned the US Special Investigator General for Afghanistan. There was no evidence of malfeasance, nor argument about the success of the program. For all that the results were fantastic, receipts were not in order. The investigator called for the health program to be suspended because of “financial management deficiencies” at the ministry.
Results Not Receipts: Counting the Right Things in Aid and Corruption explores how an important and justified focus on corruption is damaging the potential for aid to deliver results. Donors treat corruption as an issue they can measure and improve, and from which they can insulate their projects at acceptable costs by controlling processes and monitoring receipts. But our ability to measure corruption is limited, and the link between donors’ preferred measures and development outcomes is weak. Noting the costs of the standard anticorruption tools of fiduciary controls and centralized delivery, Results Not Receipts urges a different approach to tackling corruption in development: focus on outcomes.
Conflict-of-interest allegations may not damage Donald Trump
For the Economist: don't get up your hopes that Trump will be voted out for being corrupt.
A Big Signing
Donald Trump signs a law repealing a disclosure rule for oil companies just as transparency initiatives such as this were beginning to bear fruit. For the Economist's Democracy in America.
Results Through Transparency: Does Publicity Lead to Better Procurement?
A CGD Working Paper with Ben Crisman. Governments buy about $9 trillion worth of goods and services a year, and their procurement policies are increasingly subject to international standards and institutional regulation including the WTO Plurilateral Agreement on Government Procurement, Open Government Partnership commitments and International Financial Institution procurement rules. These standards focus on transparency and open competition as key tools to improve outcomes. While there is some evidence on the impact of competition on prices in government procurement, there is less on the impact of specific procurement rules including transparency on competition or procurement outcomes. Using a database of World Bank financed contracts, we explore the impact of a relatively minor procurement rule governing advertising on competition using regression discontinuity design and matching methods. The rule does appear to have a small, positive impact on bidding levels, suggesting the potential for more significant and strongly enforced transparency initiatives to have a sizeable effect on procurement outcomes.
Make Addis Ababa stand for openness in development finance
A piece on the Thomson Reuters Foundation website on open contracting with Gavin Hayman.
A Lesson From Greece: Beware the Prophets of Boom
Bloomberg column suggesting Greece is one more piece of evidence it is a mistake to let the same people forecast growth who are agreeing debt deals.
What the World Needs Now Are Better Bribes
The FIFA scandal is a reminder that the size of bribes pales in comparison with the economic damage they inflict --for @BW.
The River That Swallows All Dams
A piece with John Norris for Foreign Policy on the history of dams at Inga on the Congo. TLDR: its depressing.
Publishing Government Contracts: Addressing Concerns and Easing Implementation
This is a report of the CGD Working Group on Publish What You Buy. Government contracts regarding the use of public property and finances should be published by default. Many jurisdictions already require that contracts be made public in response to requests for the information; some now publish contracts proactively. Doing so helps new entrants compete in the market for public contracts, helps governments model their projects on other successful examples, and allows citizens greater insight into how their taxes are being spent. This brief, summarizing the conclusions of the Working Group on Government Contract Publication, provides a practical outline for reaping the benefits of open contracts while addressing legitimate concerns about costs, collusion, privacy, commercial secrecy, and national security. There is the full paper, a brief, and editorials in The Guardian and The Wall Street Journal.
The Pentagon Overpays for Almost Everything—Even Prescription Drugs
Why do we give the DoD so much to do when it does the basic stuff so badly? For @BW.
Is the U.S. as Corrupt as the Third World?
Most Americans see political corruption as a problem that plagues the developing world far more than the U.S. The truth is more complex. For @BW.
Hating on the Hurdle: Reforming the Millennium Challenge Corporation’s Approach to Corruption
A CGD Working paper with Casey Dunning and Jonathan Karver. Perceptions of corrpution have no place in determining aid flows. Impressive response from the MCC.
Bill Gates Is Right: Corruption Isn't the Problem We Think It Is
Bill Gates downplays the corruption problem. He Should. In @BW.
Can Results-Based Payments Reduce Corruption?
A CGD working paper with Bill Savedoff. A common objection to results-based programs is that they are somehow more vulnerable to corruption. This paper explains why results-based approaches to foreign aid may be less vulnerable to corruption than the traditional approaches which monitor and track the purchase and delivery of inputs and activities. The paper begins by classifying different corruption costs and specifically distinguishes the problem of diverted funds from the costs associated with failing to generate benefits. It then characterizes the key differences between traditional input-tracking programs and results-based approaches in terms of how they are supposed to work, the implicit risks that preoccupy designers, how they function in practice, and what this means both for the scale of corruption and the realization of benefits. It then considers the conditions under which one approach or another might be more appropriate. The paper concludes that input-tracking approaches are vulnerable to corruption because they have high failure costs and a weak track record for controlling diverted funds. By contrast, results-based approaches are less prone to failure costs and limit the capacity of dishonest agents to divert funds unless those agents first improve efficiency and outputs.
Why People Don't Trust Government—and How to Fix It
Trust in gov't is down worldwide, suggesting it is more than the financial crisis. Time for more transparency.
Publish What You Buy: The Case for Routine Publication of Government Contracts
This CGD Policy Paper 11 argues for a citizen’s contract initiative that would exhort governments to “publish what you buy.” Greater transparency in contracting would improve and lower the costs of contracting outcomes to the benefit of governments, contractors, and citizens alike. This paper discusses some of those benefits.
But regardless of efficiency concerns, citizens should be able to see government contracts because the contracts are theirs. Citizens are entitled to know how government money is spent. New technology has made what was burdensome and expensive both cheap and straightforward. The remaining arguments commonly presented against—regarding administrative burdens and confidentiality concerns—are weak.
I discussed it on a wonkcast a few weeks ago.
A growing number of countries including the United States reactively publish contracts, but that is only a first step. The Federal Government in Colombia, the UK government, the Australian state governments of New South Wales and Victoria, and the US county government of Miami-Dade are leaders in this area—all proactively publish the text of contracts online. With the spread of e-procurement systems and the simplicity of online publishing, posting contract documents is increasingly straightforward. It is a good time for a global movement towards greater contracting transparency
A Trio of Perspectives on Corruption
A Trio of Perspectives on Corruption: Bias, Speed Money and “Grand Theft Infrastructure” is a World Bank Working Paper on which I'm listed as an author but Michael Klein and Monika Sztajerowska did most of the work. A number of recent survey articles express hope that new data from enterprise surveys would shed new light on corruption complementing the corruption perception index by Transparency International. The paper explores this using the World Bank’s Enterprise Survey data globally and not just the data on Eastern Europe and Central Asia that have been used before. The authors find that in general the Enterprise Survey data provide aggregate views on corruption that are similar to the corruption perception index. However, massive differences exist for key countries, such as China and India. This suggests that idiosyncratic, country-specific biases are at work in one or both data sources. The authors use the Enterprise Survey data and relate them to measures of bureaucratic complexity from the World Bank’s Doing Business data, finding that more red tape is associated with higher corruption. The data are also consistent with the view that bribe payments reduce the burden of red tape. Finally, the paper looks at corruption in infrastructure. It has been suggested that the natural monopoly characteristics of infrastructure provide the lever to extract bribes. However, based on data on price-cost gaps, the authors find that infrastructure ventures in power and water typically charge prices below cost in developing economies, not anywhere near monopoly prices. Furthermore, the Enterprise Surveys do not suggest that infrastructure-related bribe payments are more significant than those, for example, related to tax payments or various forms of licensing. Existing sources on bribery surrounding specific projects suggest that the value of bribe payments may not be the biggest problem but the choice of uneconomic and inefficient projects. If infrastructure ventures were entirely dependent on revenue from user fees, they could not afford to pursue inefficient projects, thus reducing the cost of corrupt activity to society. Monopoly pricing would be better than the typical current pricing policy.
Does Governance Matter?
An opinion piece for the Journal Governance in which I argue governance matters less than usually thought and can change faster than usually assumed.
Show Me Everything But the Money
A column about corruption perceptions, the gap between perceptions and reality, and the better ways of thinking about the development challenge of bribery.
Publish or Perish
This week's column is on government contract publication. No, really, it is exciting and important. You know how Secret Santa gifts aren't usually as good as the ones you get from your loving spouse? That's in part because they are secret. The same thing applies to contracts. Sort of.
What Resource Curse?
What Resource Curse? is the first of my weekly columns ("The Optimist") for Foreign Policy. It suggests there isn't a resource curse. But that doesn't stop EITI and Todd Moss' cash transfer scheme being good ideas.
Publishing Construction Contracts and Outcome Details
Publishing Construction Contracts and Outcome Details is a World Bank Working Paper. Construction governance failures can lead to the construction of the wrong infrastructure, poor quality construction, and excessively high prices for work. There is some evidence from both other sectors and the construction sector itself that improved transparency, especially when combined with oversight, can improve development outcomes through its impact on the quality of governance. This paper reviews that evidence, discusses costs and benefits of greater transparency in particular with regard to the contracting and delivery process in construction, and briefly discusses an initiative to improve governance in public construction -- the Construction Sector Transparency Initiative. Shorter, updated versions were published as a CGD working paper and in the ICE Journal.
'Red Flags of Corruption' in World Bank Projects : An Analysis of Infrastructure Contracts
Grand Corruption in Utilities
Grand Corruption in Utilities, co-authored with Tina Soreide, was issued as a working paper in December 2008. The paper discusses mechanisms of grand corruption in private sector utility provision in developing countries. The paper focuses on decisions made at the government level involving private sector management, ownership, and provision of utility services. Corruption at that level may influence the pace and nature of private sector involvement and competition in utilities, as well as the level and form of investments, subsidies, and prices. On the basis of a literature review and interviews with firms and regulating authorities in two countries, Tanzania and the Philippines, this paper discusses the levels and determinants of grand corruption in utilities. The paper concludes by discussing a research program to extend this knowledge through a cross-country survey instrument.
Is There an Anti-Corruption Agenda in Utilities?
Is There an Anti-corruption Agenda in Utilities? is forthcoming in Utilities Policy. In a networked utility setting (few, predominantly monopoly providers), it is very hard to measure the extent of grand corruption using perceptions or surveys. It is even harder to measure the extent of damage done specifically by corruption, petty or grand. As a result, it will be hard to develop 'actionable indicators' of, or to develop empirically tested responses to, corruption in utilities. How much does this matter? Corruption is the result of a failure of governance (poor sector structure, weak management and so on). We can measure the impact of poor governance at the level of the utility looking at measures such as transmission and distribution losses or the construction of inoperable power plants. And we have a number of tools to improve utility governance (including sector structure reform and SOE corporate governance mechanisms). It is not clear that, at the sectoral or company level, there is a significant anti-corruption agenda not encompassed by this broader agenda of improved governance. To that extent, the 'new' anticorruption agenda provides renewed justification for the 'old' focus on institutions at the level of utilities management, but does not require a radically different approach.
Infrastructure Governance and Corruption: Where Next?
Infrastructure Governance and Corruption: Where Next? was issued as a working paper in August, 2007. Governance is central to development outcomes in infrastructure, not least because corruption (a symptom of failed governance) can have significantly negative impact on returns to infrastructure investment. This conclusion holds whether infrastructure is in private or public hands. This paper looks at what has been learned about the role of governance in infrastructure, provides some recent examples of reform efforts and project approaches, and suggests an agenda for greater engagement - primarily at the sector level - to improve governance and reduce the development impact of corruption. The discussion covers market structure, regulation, state-owned enterprise reform, planning and budgeting, and project design. The paper was the subject of an Economic Times op-ed.
Construction, Corruption and Developing Countries
Construction, Corruption and Developing Countries was published as a working paper in June, 2007. The construction industry accounts for about one-third of gross capital formation. Governments have major roles as clients, regulators, and owners of construction companies. The industry is consistently ranked as one of the most corrupt: large payments to gain or alter contracts and circumvent regulations are common. The impact of corruption goes beyond bribe payments to poor quality construction of infrastructure with low economic returns alongside low funding for maintenance-and this is where the major impact of corruption is felt. Regulation of the sector is necessary, but simplicity, transparency, enforcement, and a focus on the outcomes of poor construction are likely to have a larger impact than voluminous but poorly enforced regulation of the construction process. Where government is the client, attempts to counter corruption need to begin at the level of planning and budgeting. Output-based and community-driven approaches show some promise as tools to reduce corruption. At the same time they will need to be complimented by a range of other interventions including publication of procurement documents, independent and community oversight, physical audit, and public-private anticorruption partnerships.
Measuring and Reducing the Impact of Corruption in Infrastructure
Measuring and Reducing the Impact of Corruption in Infrastructure was issued as a working paper in December 2006. The paper examines what we can say about the extent and impact of corruption in infrastructure in developing countries using existing evidence. It looks at different approaches to estimating the extent of corruption and reports on the results of such studies. It suggests that there is considerable evidence that most existing perceptions measures appear to be very weak proxies for the actual extent of corruption in the infrastructure sector, largely (but inaccurately) measuring petty rather than grand corruption. Existing survey evidence is more reliable, but limited in extent and still subject to sufficient uncertainty that it should not be used as a tool for differentiating countries in terms of access to infrastructure finance or appropriate policy models. The paper discusses evidence for the relative costs of corruption impacts and suggests that a focus on bribe payments as the indicator of the costs of corruption in infrastructure may be misplaced. It draws some conclusions regarding priorities for infrastructure anti-corruption research and activities in projects, in particular regarding disaggregated and actionable indicators of weak governance and corruption. A revised version will be published in the Journal of Development Studies.