Easterly Index: Ranking Aid Agencies

I thought this was a very interesting study, with even more interesting results. Even though Easterly has been very critical of the World Bank, the World Bank's International Development Association comes in as number one, followed by Britain's DFID, the African Development Bank, the Asian Development Bank and the Inter-American Development Bank.

http://blogs.wsj.com/economics/2008/06/19/easterly-index-ranking-aid-agencies-hint-un-stinks/

June 19, 2008, 11:32 am
Easterly Index: Ranking Aid Agencies (Hint: U.N. Stinks)

New York University professor William Easterly, a former World Bank economist, has made a career out of skewering the aid establishment in elegantly written books, including "White Man's Burden" and "The Elusive Quest for Growth." He regularly argues that development pooh-bahs futilely try one faddish strategy after another, rather than helping countries get market incentives right.

Now, along with Tobias Pfutze, a PhD economics student at NYU, Mr. Easterly has put together a ranking of how aid agencies operate . What's a guy like him doing praising such agencies as the World Bank and Britain's Department for International Development? "Despite the demands of the polemical style one adopts for op-ed pieces, I realize there are different degrees of dysfunctionality in the system," he says, not exactly making peace with the aid establishment. "There are some parts that are a complete joke and should be shut down and other parts that do some good."

Nevertheless, he trashes a number of U.N. agencies, which is bound to place him, yet again, the center of controversy in the development world. "The conclusions are based on rankings, where agencies score low just because the (researchers) couldn't find things on our website," says Michael Usnick, director of U.S. relations for the U.N.'s World Food Programme.

Prof. Easterly, who is doing a stint at the Brookings Institution, ranks aid agencies by five different criteria. They include what he calls "fragmentation," that is, divvying up projects into tiny, ineffective grants to too many recipients; "selectivity," or funneling funds to corrupt regimes; "ineffective channels," of attaching too many conditions to aid grants; as well as overhead costs and transparency of operations.

The researchers say they obtained the information largely by perusing websites or sending follow-up emails. "The idea is to see how transparent these agencies are to an average politically engaged individual," says Mr. Easterly.

That was galling to agencies that rank poorly. They say that Prof. Easterly and his co-author should have called to get more complete data.

By the Easterly criteria, the World Bank's International Development Association comes in as number one, followed by Britain's DFID, the African Development Bank, the Asian Development Bank and the Inter-American Development Bank. The U.S. Agency for International Development is in the middle of the pack, while two the three agencies tied for last are part of the United Nations.

The World Bank was pleased at the praise from an unlikely source. IDA "acts in many countries as a platform with positive spillover effects for other aid programs," said World Bank vice president Philippe Le Houérou, in a statement.

Luis Alberto Moreno, president of the Inter-American Development Bank, also was happy. "While we are pleased to have fared comparatively well in this study," he said in a statement, "we need to keep improving the way in which we deliver our aid to ensure that it benefits as many of the region's poorest as possible

The three laggards in the Easterly rankings are: the U.N.'s World Food Programme, the United Nations High Commissioner for Refugees, and the independent Global Environmental Facility, whose programs are managed by the U.N. and the World Bank. Mr. Easterly said he thought the U.N. agencies did so poorly because they are considered "bloated and politicized," but he was surprised at the performance of the World Bank - which he regularly lambastes in other work. "The World Bank is seen as professional and staff is chosen on the basis of merit," he says.

All three agencies at the bottom of the Easterly rankings blasted the index as flawed. The GEF said that Mr. Easterly hadn't fully taken into consideration data that was available about the agency and had misreported other information. "The information we have tells another story," Ramesh Ramankutty, a senior adviser at the GEF.

Nicholas Van Praag, spokesman of the UNHCR, said that Mr. Easterly was wrong to lump together a humanitarian agency like the UNHCR with development agencies. The UNHCR, for instance, spends much of its money in countries governed by corrupt leaders because that's where the refugees are. Similarly, Mr. Usnick of World Food Programme says the WFP doesn't decide where food gets allocated; its donors make those decisions. "It's like saying multilateralism is a bad practice," he says.

Responds Mr. Easterly: "We don't dispute that many of the statistics presented in the paper might be erroneous, but they are only so to the degree that they had to be of necessity computed from extremely poor and inadequate data provided by the aid agencies."

He also notes that the ranking look only at how well the agencies operate - not what they accomplish or don't accomplish. "Aid agencies don't provide enough data to tell whether they make a difference," he says. -Bob Davis