Tag Archives: hazard

Amoral hazards

In the last post we saw that humanitarian aid agencies are not gathering data on the outcomes of their work (such as years of life saved, average weight increases etc).  Not doing so has some dangerous ramifications, but before looking at these I want to characterize the interplay of motivations that leads to this situation.

Lord Ashdown is clear: donors are as allergic to measuring outcomes as the aid agencies themselves.  In fact, once a contract is determined there is no reason to distinguish between the two tiers; agencies are putting DFID priorities into action.  The distinction between the two tiers should be important when DFID or AusAID or USAID are choosing which agency to fund during a particular crisis.  How do they choose?  They use the process evaluations that the agencies are using to monitor themselves.  For example, who can shift the most food? Who can buy the most tents?

Donors like these types of ‘outcome’ because they are easy to interpret and sell to the public.  They don’t offer budgets for proper monitoring and evaluation and so the agency doesn’t have a choice but to continue with the status quo.  Maybe that’s all, but these agencies have clout (Oxfam, Save the Children) and the British public rarely scrutinize DFID reports to see how that money is being spent.  And yet the agencies don’t say anything, and they don’t put sufficient pressure on DFID to think differently. It is a closed loop: agency and donor benefit when costs are not compared to returns.  The risk of a poor strategy, like wasted food or worse, is borne by the recipients of aid.

This is a moral hazard.  A moral hazard is an economics term for when an agent (person or company etc) behaves differently because they do not bear the consequence of risk taking.

The situation is a bit like the banking crisis.  Aid agencies are ‘too big to fail’, inasmuch as we need them for when the next crisis comes along.  In the banking crisis, it was tax-payers’ money that went via the government to the banks.  With aid agencies, the aid recipients do not themselves contribute money (they’re normally too poor after all) but money is spent on their behalf by governments so that that aid can be given to them (the ‘process’ output often measured).  In both cases there is very little thought to whether or not the bearer of the ultimate risk (tax-payer in the UK, aid recipient in Somalia) is getting a good deal, that couldn’t be better supplied by someone else.  The life-blood of these agencies is recipients in their camps, they need them, but all of the risk is pushed onto the  same recipients.  For example, Oxfam won’t be outcompeted by Save the Children even if Save the Children could actually help 3 times as many people per pound spent in a crisis; we wouldn’t know.  All we know is what they are spending: how many tents? How much food? How many aid workers?  It is the people in Oxfam’s camps (who else!?) will bear the brunt of this inefficiency, alone.

So, no-one in the system need care about the quality/efficiency of services because the risk is passed on to the recipients of aid.  And, like the banks, they probably are too big to fail, indicating the need for tight, independent regulation.  Otherwise there is a run-away feedback of motivation: DFID spend more and the agencies spend more.  Perhaps the ‘good-will’ of the agency members is expected to stop this but, as Lord Ashdown says, the not insubstantial costs of doing so are not covered by DFID grants.  We cannot blame the aid workers themselves because the system has closed in.  However, if they felt the true risk of bad aid delivery then perhaps they’d be complaining with a louder voice.

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Is there such a problem?

“Help the needy in a humanitarian crisis,” is a moral position that stubbornly resists scrutiny.

Over the next three weeks I want to explore the foundations of this position, its implications and unintended ramifications.  I am not saying that no-one opposes humanitarian aid, many do, but when people oppose it they are often doing so on xenophobic, nationalistic, racist or ignorant grounds without framing their opposition in a coherent ethical framework that could be applied in all places.  What I intend to do – and I don’t know for sure where it will lead  – is to critique humanitarian aid and place it into a system of priorities that applies to all of our other ethical decisions.  In the book Dead Aid, Dambisa Mayo argues that development aid is exacerbating Africa’s problems.  She is one of the most controversial and outspoken critic of foreign aid but even she ring-fences humanitarian aid for natural and man-made disasters.  Now, I don’t know about her original thesis but I am interested in this distinction: what is special about disasters?

I will look at the outcomes of humanitarian assistance and how they are measured.  I will consider that there is a moral hazard in place that works for the agencies and their donors while excluding the people they are trying to help.  I will look at the psychology of the aid worker, how our ideas about causation and limitations in understanding statistics might be holding us back from rational progress.  I will think about the psychological effect of a disaster, who the death/disease is affecting, and the tyranny of present perception.  Finally I will make the contention that humanitarian aid is not only weak within itself but that so long as it is inefficient and opaque the opportunity costs are extra people dead/diseased that we could have helped.

What I am not going to do is a Crisis Caravan style exposition of humanitarian workers in specific contexts.   Not only do I lack the experience to do so, I don’t think that is the point.  Individual actions/inactions are not the problem, nor are agency level actions/inactions.  I am exploring the state of the system and how it came to be like it is.

With a crisis of immense scale unfolding in the Horn of Africa I appreciate that this is a sensitive time.  But there are many crises, albeit slow/sporadic/spread-out ones, that are happening right now; and humanitarian aid is not helping them, perhaps even, the reverse.

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