DFID’s impressive White Paper came out in July; it marks a major step forward in thinking and policy-making on international development (see my post on 21 August). But there are at least a couple of points that deserve a second, sceptical look. Without detracting from the achievement registered with the White Paper, but just to have it on record in a quiet way, DFID takes an unguardedly if necessarily optimistic view about recovery from the recession and over-states the success of peace agreements quite dramatically.
The shape of recovery
As The Economist asked on 20 August, is it “U, V or W for recovery”? At a global level, the recession seems to have ended but what will recovery look like:
- V-shaped with an upturn that is as sharp and fast as the original descent?
- U-shaped with a period spent bouncing along the bottom and a slower longer upturn?
- W-shaped with a mini-recovery giving way to a second fall in output before the real recovery finally kicks in? Also known as a ‘double dip’ recession.
The answer in the DFID White paper is firmly V-shaped (see page 23). In a thoughtful chapter about the need to sustain aid through the recession and linking economic recovery to green growth, the basic assumption is of a rapid return to global economic growth.
The shape of recovery is an exogenous factor for DFID in the sense that its actions alone are not going to affect the overall figures one way or another, so this is an assumption about its operating environment, not a claim about the success its policies will have. And since the UK government is both forecasting a V-shape for the UK economy and claiming credit for contributing to a timely (and implicitly, V-shaped) recovery from world recession, it is hardly surprising that DFID follows the same basic thinking.
But of course the assumption is highly vulnerable. The Economist‘s 20 August editorial argued that a U-shape is the most likely. But if you think that the economic stimulus policies may be ended soon, the big worry would be a W-shape. This is the concern of both the UK government and US administration. As a warning against an early end to large scale economic stimulus policies, reference is often made to the way Japan’s economy dipped back into recession after a 1997 tax increase, just when it seemed to be recovering from the ill effects of its banking crisis.
And there are further possibilities. Robert Reich has deftly argued that neither V, U nor W describe the shape of what will happen. He prefers the letter X, on the basis that there will not be a recovery back into a shape that is about the same as pre-crash but, he argues, instead a new development into a fundamentally differently shaped economy. Less visionary is the OECD’s projection of what, to keep the alphabetical theme going, we could call a Z-shaped recovery, meaning it is wiggly and uneven. Most notably from a UK perspective, the OECD’s Interim Economic Assessment, published yesterday, forecasts that only the UK and Japan among the richest economies will still be in recession through the rest of this year. UK Chancellor Alistair Darling has robustly rejected the OECD’s estimates as you would expect; fairly enough, he points out that the OECD has been wrong before. But OECD economists are not total knuckleheads – they may be wrong or right this time around but it is a serious view that they put forward.
At the least, this all adds up to suggesting that policy on international development and overseas aid ought to think about a variety of global economic scenarios and not be restrictively predicated on just one – and on the most optimistic set of estimates at that. personally, I hope confidence in a V-shaped recovery is well founded but wishing don’t make it so.
My attention was grabbed by the following statement on page 69 at the start of Chapter 4, Building Peaceful States and Societies: “We know we can make a difference. The number of conflicts is declining. International action has been successful in stopping wars. Since 1946 fewer than 6% of conflicts ending in a peace agreement have returned to conflict within five years.”
Since the figures normally used put the failure rate in the vicinity of of 40-50%, this is striking. So I nerdishly followed the reference to the Human Security Report Project in Vancouver, which uses data generated by the Department of Peace and Conflict Research at Uppsala University in Sweden. The first part of the explanation is that this statistic refers to conflict dyads rather than conflicts.
Bear with me: conflicts are often made up of multiple rivalries between pairs of parties (e.g., the UK government against the IRA, and against the UVLF, and the IRA and the UVLF against each other, and so on). The two parties in a dyad may resolve differences and sign an agreement while other dyads in the conflict fight on. That is why armed conflicts sometimes end only after multiple agreements between a multiplicity of parties. Think Burundi, for example, or DRC. It only takes one dyad agreement to break down for the conflict to be back on again; thus it is almost a matter of definition that the failure rate of agreements to end conflicts is greater than the failure rate of the dyad agreements.
The second part of the explanation is that part of the aim of the Uppsala researchers was to see how many serious peace agreements broke down, so they only counted agreements that have already last for a year after being signed.
In short, by taking a double short-cut through the academic nuances, DFID over-interpreted the data. So don’t quote that bit of the white paper, but it doesn’t affect the strength of that chapter or of the white paper as a whole – see my 21 August post on that – I remain an enthusiast.