Tuesday, June 7, 2011

Paying for Peace

Foreign Policy
Can we just buy security in Afghanistan?

by Charles Kenny

In Afghanistan, as in Iraq, both the U.S. Defense Department and Agency for International Development (USAID) are struggling to find ways to use aid resources to promote the goals of development and security. The effort involves a considerable amount of money: If Afghanistan's volatile Helmand province were a country, it alone would have been the fifth-largest recipient of USAID funding in 2008. Meanwhile, aid organizations and NGOs complain that military programs such as the $1 billion Commander's Emergency Response Program build infrastructure that will not be maintained and will provide little long-term development impact. The military, for its part, complains that civilian development efforts are too focused on secure areas at the expense of winning hearts and minds in other places where it would actually make a difference to reduce violence.

Both sides are probably at least half-right: Despite many successes in improving Afghan citizens' quality of life, it seems quite likely that aid flows are failing to deliver economic development or security. A recent review of reconstruction in Helmand province by Stuart Gordon of the London-based Royal Institute of International Affairs (Chatham House) concluded that aid "may have as many negative, unintended effects as positive ones and, at the very least, is not a panacea." Gordon's interviews with people in Helmand suggested a widespread feeling that aid was only entrenching local tribal and criminal elites while doing little to improve the lives of ordinary people. But perhaps there is a way to meet both security and development goals at once. Just giving money to poor people turns out to be a powerful tool to improve lives and foster opportunity. And making that money conditional on security could provide a big incentive for local communities to turn against the Taliban.

The latest rage in the development industry is paying people to develop: to go to school, to get kids vaccinated, and so on. Conditional cash transfers hand over money to families if -- and only if -- they ensure junior is in school or has his shots. Mexico's conditional cash program, Oportunidades, reaches more than 25 million people; Brazil's Bolsa Familia reaches 12 million households. The programs work and have dramatic impacts. Not only have they considerably increased vaccination and enrollment rates -- Mexico's program increases the chance that children will complete grade nine by 23 percent -- but the money also has a number of other positive effects in areas like nutrition and income generation.

Growing evidence suggests that even unconditional cash transfers to poor people -- just giving them money, no strings attached -- can have a big development payoff as well. A pilot of a universal grant program in the Otjivero-Omitara area of Namibia found that within a year of program launch, child malnutrition fell from 42 to 10 percent, the proportion of adults involved in income-generating activities increased from 44 to 55 percent, school attendance rose considerably, savings expanded, and crime rates fell.

Meanwhile, in Afghanistan, we are struggling to spend considerable resources in a manner that achieves peace and development. Why not use cash transfers to promote stability? Here's one way it might work: In districts that are free from violence against Afghan forces or NATO's International Security Assistance Force, every adult is paid $20 every other month, with no conditions at all. If violence resumes, payments drop by a widely advertised amount. Too much violence, no cash transfer. If the Taliban or related groups keep fighting or attempt to extort payments, then a whole district population has a strong personal incentive to snitch. And to incentivize the security of those involved in the payments system, deaths of payment agents would also lead to a reduction or curtailment of payments at the district level.

Even a large cash-for-peace program would be cheap compared with the resources the United States alone is already throwing at Afghanistan. A grant that gave $120 over 12 months to each Afghan above age 15 would cost $1.5 billion a year. In 2010, USAID and the State Department spent $5.7 billion in Afghanistan, while the Defense Department spent nearly $88 billion. If a cash-transfer program significantly reduced violence, it would be a bargain.

What about the practical issues involved in making payments to so many people? Afghanistan has already seen projects including the National Emergency Employment Program providing cash for labor on road rehabilitation, drainage projects, and irrigation construction. These involved the delivery of significant sums of money around the country, some using money-transfer companies. Expanding access would mean creating a registry of recipients and ensuring that people only collected payments once. The voter registration process has done a considerable part of the heavy lifting in setting up a list of the country's adult population, and Afghanistan plans to roll out a national ID card over the next few years. To increase the security of the system, registered adults could be biometrically identified using fingerprinting or iris scanning, as some people were for the last election. Iris scanning has already been used to ensure that 200,000 returning Afghan refugees only received one repatriation payment. When it comes to making those payments, Afghanistan already has a cell-phone-based cash-transfer system called M-Paisa, and the mobile signal already covers more than 80 percent of the population. Perhaps payment trucks could be used to reach the rest of the country, as they have been in similar initiatives in a comparably fragile country, the Democratic Republic of the Congo.

A cash-transfer program would undoubtedly have a significant development impact. Afghanistan has a GDP per capita of $609, meaning that a $20 payment every eight weeks would be equal to about one-fifth of the average income -- and, of course, a good deal more in poor, rural areas. Given a reasonable consensus in the aid-effectiveness literature that poorly governed fragile states receiving considerable aid flows are unlikely to be places where traditional aid has the largest impact, and that unconditional cash transfers can have a considerable impact on poverty, any pilot scheme is likely to be at least a partial success in terms of improving overall aid effectiveness.

What about an impact on security? Critics would likely argue that at least some of the cash handed out to Afghan civilians would undoubtedly end up in Taliban hands. But cash transfers to reintegrate former combatants into a peacetime economy appear to work if well designed. And even though the general link between reduced poverty and lower violence is not as strong as often supposed, there is some evidence pointing toward a relationship. Research from New York University's Oeindrila Dube suggests conflict is less likely in Colombia when coffee prices are higher -- and so the financial costs of fighting rather than growing and selling coffee are larger. (Dube also finds that U.S. financial support to Colombia's military had the opposite impact, increasing levels of violence.)

Again, we know that schemes that reward collective responsibility work in other settings. Not least, it's the basis of the microfinance movement, where new loans are only available to groups in which all members keep up on repayments. In Zimbabwe, passing on some of the income from hunting licenses and tourism to communities was associated with dramatic declines in poaching because local communities were given the incentive to keep animal stocks alive for legal use -- and so keep poachers out. Thus group financial incentives to reduce violence look to be a plausible approach.

None of these cases are exact parallels. In Colombia, the link between increased incomes and reduced violence had nothing to do with a government transfer. And the Zimbabwe case doesn't involve conditional payments to individuals to buy their opposition to a group dedicated to the overthrow of the government. Indeed, the model suggested here hasn't been tried anywhere before. And this lack of direct evidence of a security impact of conditional payments might be a reason to pilot the approach in a particular province or range of districts. Regardless, we've tried with limited success to buy hearts and minds by building roads and schools to foster peace and development. Maybe it is time to try a more straightforward approach -- and just buy the peace.

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