Can aid agencies help systems fix themselves? The implications of complexity for development cooperation
Owen Barder gave a brilliant lecture on complexity and development to my LSE students earlier this year. Afterwards, I asked him to dig deeper into the ‘so whats’ for aid agencies. The result is this elegant essay (a bit long for a blog, but who cares?). I will try and get some responses to his arguments from similarly large brains.
If economic development is a property of a complex adaptive system, as I’ve argued elsewhere, then what, if anything, can development agencies and NGOs do to accelerate it?
To be clear what we mean when we say that development is a system property, here’s an example from the animal kingdom. You may have seen recently that ants have recently developed “super colonies” – including one that covers 6,000km along the Mediterranean that is said to be the largest co-operative unit in the animal kingdom. It is natural to talk about the “behaviour” of the colony, even though we understand that we are really talking about the individual actions of hundreds of millions of ants. Each ant responds to its external environment, including the behaviour of other ants. Because all the ants are adjusting to each other, this creates the sense that the colony as a whole is changing its behaviour, and we soon begin to ascribe intent and agency to the colony rather than the individual ants of which it consists.
Like any complex adaptive system, an ant colony will tend to go through long periods of stability and then sudden periods of rapid change that come about when ants all adjust their behaviour in response to changes in the behaviour of the ants around them. The emergence of a super-colony did not depend on the ants individually becoming fitter and stronger, learning new skills or becoming more entrepreneurial. They didn’t suddenly have access to better nutrients that made them healthier– nor have the ants benefited from universal education, access to microcredit, or new vaccines. In fact, the ants haven’t changed at all: the colony’s behaviour can change even if the individual ants have not, because it is a self-organising complex system whose behaviour in aggregate is not simply the sum of its parts: it is determined to a large extent by the way those parts interact with each other.
There are plenty of other examples of complex systems in everyday life, such as the weather, our brains, and traffic. These systems have emergent properties which cannot be reduced to or predicted by characteristics of their component parts. Emergent properties such as thunderstorms, consciousness, and traffic jams are not brought about by changes in the characteristics of the systems components (air molecules, synapses, and cars) but by changes in the way these things interact
with each other. Emergent properties are characteristics of systems, not their components.
So what does this mean for development? An economic, political and social system develops when it evolves a complex, self-organised set of interlocking institutions that provide freedom, prosperity and opportunities to its people. Each of these individuals, groups or institutions acts within the constraints and authorising environment provided by the other parts of the system, and as these different parts of the system adapt to each other, so they co-evolve.
For example, an effective civil society depends not only on the resources of Civil Society Organizations themselves, but on the authorising environment and constraints of courts, media, political system, police, army, churches, business and the public. Effective firms depend on being able to interact with other firms, the maintenance of contestability and competition, and both the support and constraints of government, the courts, civil society, the workforce, unions, consumers and others. And effective government depends on firms, civil society, political institutions, media, law enforcement, courts and so on. These institutions simultaneously reflect and shape the distribution of power within society.
As these institutions all evolve, and interact with each other in ways that shape each other’s behaviour, so self-organising complexity begins to generate the freedoms, opportunities and prosperity that we call development. Development is a property of the system, not of its components. All of these institutions have to evolve together: trying to move any one of them individually into a “developed” state is unlikely to be sustained: that component will simply revert to the trajectory that is consistent with the opportunities and constraints provided by the rest of the system.
If you see development as the sum of its parts, then you might think we should work out which constraint binds the most tightly and invest resources to relax it. But if you see development as property of a complex adaptive system, then targeting a specific constraint is unlikely to “make development happen.”
So what does this mean for those of us who want to see development accelerated?
Let us first say what it doesn’t mean.
First, complexity does not condemn us to fatalism: there is plenty we can do to accelerate and shape the evolution of the system.
Second, better analysis is not the solution to complexity: the way to find out what works is through iteration and improvement, not decade-long research projects to understand it better.
Third, there is little value in identifying missing ingredients or binding constraints (eg “growth diagnostics”). Even if the most important gaps could be reliably identified—and we often get even this step wrong—those gaps are the consequences, not the causes, of the condition of the economic and political system.
Fourth, we should avoid creating protected incumbents that become obstacles to change, whether in government (through large, unaccountable government-to-government aid flows), the private sector (through subsidised loans or guarantees, or trade preferences), or civil society (external finance can create “astroturf” organisations that are not accountable to their members). All these types of well-meaning intervention offer, at best, short-term gains at the expense of long-term damage to the dynamic evolution of the economy and polity.
Fifth, the problem is not “lack of capacity” – or rather, the lack of capacity is itself a consequence of the system and will not be rectified by technical cooperation or capacity building programmes. This might be why large-scale evaluations of technical assistance programmes generally declare them to be a failure. (See for example this World Bank review).
If we want to accelerate development we have to focus on improving the system’s capacity to adapt. As in nature, adaptive efficiency depends on two things: variation and selection. Interventions which improve or accelerate variation and selection will tend to help the system to generate the self-organising complexity we call development.
Examples of policies that rich countries control that can help to bring this about in developing countries include:
a. Trade. Access to overseas markets increases the returns for successful firms and so increases investment and jobs. It sharpens competition and increases contestability and so drives improvements in performance. It increases access to imported inputs (such as machinery, business services and knowledge) which increase productivity. And it helps accelerate the circulation of ideas and skills. And unilateral trade concessions like the African Growth and Opportunities Act, enacted by the US Congress in 2000, show how rich countries can unilaterally grant developing countries better trading opportunities, without requiring an immensely costly, reciprocal multilateral negotiation process at the WTO.
b. Tax. At the heart of every successful society is a social contract between the state, citizens and business; and tax plays a key role in enforcing that contract. Tax provides the revenues that enables the government to provide essential infrastructure and public goods, and it fosters the accountability to citizens on which good government depends. Rich countries should do more than provide technical assistance: they should change the mechanisms for international tax cooperation and information sharing to enable developing countries to start to build a sustainable domestic tax base, including by making sure multinational corporations pay their fair share of taxes in the countries in which they’re due.
c. Migration. Apart from improving the wellbeing of migrants themselves, increases in migration opportunities—even the chance to work temporarily in rich countries– for people from developing countries increases the circulation of ideas (for example, countries whose students go to university in democracies tend to improve governance at home) and increases the returns to skills, so encouraging investment in education, and directly benefits the sending communities through remittances and return migration.
d. Transparency. Greater openness facilitates accountability. Outsiders can be transparent about the aid they give and the payments they make to governments and public enterprises, for example for oil and other mineral concessions. They can through their own behaviour encourage the spread of openness as an international norm, for example open contracting, open data and public registries of the owners of companies, thereby expanding the spread of transparency and domestic accountability across the developing world.
e. Media and “connective action”. Though mobile phones are not a ‘silver bullet’ for development, there are examples of the way that improved communications and media have helped make governments more accountable and markets more effective. For example, there is evidence that when voters know more about the policies of candidates in elections, they are less likely to vote on ethnic lines and politicians are more accountable in office. Use of mobile phones can reduce election fraud (for example, in Ghana in 2004) and crowdsourced reporting of bribery might help to reduce petty corruption.
f. Access to ideas. The ability of developing countries to catch up with rich countries has been hampered by obstacles to the spread of new technologies and knowledge – such as medicines, software, machinery and know-how. Industrialised countries have done little to live up to their treaty commitment to facilitate technology transfer, codified in Article 66.2 of the Trade Related Intellectual Property Rights (TRIPs) Agreement.
g. Innovation. External donors can promote innovation by increasing the returns to success (for example, through Advance Market Commitments or Development Impact Bonds), and by acting more like venture capitalists and less like retail bankers. The key in such interventions is to avoid picking winners, even though there might appear to be short term benefits to doing so. The goal is to build industries that are successful and which are capable of remaining competitive through a process of innovation and adaptation. This is most likely to include a degree of creative destruction, in which new firms enter the industry, replacing less successful incumbents. Donors should stop giving subsidies to particular companies in ways that make these markets less contestable. For example, a country may be less likely to evolve a thriving, successful microfinance industry of its own if many of the most promising opportunities have been taken by externally-subsidised microcredit firms.
Many development interventions try to imitate the consequences of a successful system instead of thinking about how to enable the system to find successful solutions to its own problems. This difference matters because interventions to “plug the gaps” or “relax constraints”, however well-intentioned, may be harmful for the long-run evolution of the system. We provide aid to governments in ways which can make them less rather than more accountable; we provide humanitarian food aid in ways which can destroy markets for local producers; we subsidise civil society organisations and can make them less accountable to their own communities; we subsidise firms to invest abroad in ways which can make them less vulnerable to competition, and so make industries less contestable and innovative; we limit migration in the name of avoiding a brain drain; and through policy conditionality we try to make particular policies better (at least in our view) but usurp the emergence of contested national politics. All these interventions may undermine the long run evolution of a successful, inclusive economic and political system.
A policy to promote development would focus much more on helping the system to evolve, and much less on filling the gaps which are left by systems that have not yet done so.
The quest for sustainability in foreign aid projects over the last four decades has done untold damage. Projects that might have benefits in the long run have been structured and financed as if they could reasonably achieve success or become self-financing within a few years, and are declared failures when they do not. Health services that should have been free have been required to charge user fees in the name of sustainability, so denying access to the poor. It is understandable that aid donors and aid recipients alike would rather imagine that development projects will catalyse permanent change than accept that they will be permanently engaged in an international system of welfare payments. But despite the rhetoric, few programmes have actually achieved the sustainability that they were required to promise.
Sustainability has been elusive in practice because the aid industry thinks too much about gaps and too little about systems. Interventions that accelerate the evolution of a successful economic and social system can be catalytic; interventions that ignore the complexity of the system and only try to fill the gaps that it leaves or imitate its consequences will work only for as long as the intervention continues.
Improvements in the adaptive efficiency of the system are the new sustainability.
Tomorrow Jean Boulton responds on the politics of complexity