The wastage of health funding
William Easterly argues that donors should not give more development aid while so much of it is being wasted. The most recent example is the WHO report that tells us that 20-40% of health funding is wasted. Easterly questions the WHO’s calls for more health donations, asking “How do you make an impassioned plea for spending more money when we’re wasting so much?” To be sure this is not just through the sort of corruption that corpulent white businessmen moan about over drinks in Washington, London and Paris. The WHO reports that some countries pay almost double what they should for drugs and that at much of the medical equipment donated to developing countries is useless. But I digress. The point that Easterly and many others make is that donors should not send more money through the system until the leaks are fixed. And it makes good common sense. My Mom or any other non-economist would agree.
It’s the same story with general budget support
Similar debates rage around the issue of general budget support. How can you send unconditional money through governments that are broken in so many ways. One of the key assumptions of general budget support is that domestic accountability institutions are in place to keep recipient governments honest. But who would be so brave as to argue that parliaments in Tanzania and Mali have the means and willingness to hold their executives to account for how they raise and spend money? Or that the national audit institutions in these countries have the staff and clout to report mismanagement? Just have a look at the recent Open Budget Index scores for these two countries if you feel like arguing this point. Yet 11 bilateral donors provide general budget support to Tanzania: Norway, UK, Japan, Sweden, Denmark, Ireland, Canada, Germany, Finland, Netherlands and Switzerland, together with the European Commission, the World Bank and the African Development Bank. And Mali receives budget support from at least the Canadian International Development Agency (CIDA), Swedish International Development Cooperation Agency (SIDA), the Europen Comission and the AFD (Agence Française de Développement).
Yet all of this doesn’t mean that I agree with Easterly and the aid skeptics
He preaches Karl Popper’s pragmatism and crucifies “Planners”, who supposedly impose top-down big plans in favour of “Searchers”, who heroically pursue bottom-up solutions to specific needs. Searchers who are more realistic because they focus on piecemeal interventions. But not on this issue. Don’t spend more money until the leaks are fixed, he tells us. Sounds kind of top down and utopian to me.
The searcher’s solution to wastage
So why should we spend more while 20-40% of health funding is wasted? Any ‘searcher’ will tell you that we need to spend more because 60-80% of this funding is not lost. And this is money that buys ARVs, mosquito nets and other things that searchers care about. The realist, pragmatic approach to this conundrum is to fix the leaks even as we increase aid. But no, Easterly wants a nice utopian solution that cleans up the world before we spend more.