Congrats to Daniel Yohannes '76 for being named the CEO of the Millennium Development Corporation by the Obama Administration yesterday. The Millennium Development is a corporation run by the United States government that seeks to implement the Millennium Development Goals by 2015. The hope is to make the world free from poverty, misery, and illiberalism by 2015. (Yeah, I'm also curious as to why the U.S. government owns a corporation, but hey, didn't you get the memo? We're all socialists now...)
Economists are often congratulated for their impressive grasp of the obvious. Yet if this principle [of gains from specialization] is so obvious, why is it routinely violated in the aid world? It’s gotten worse with the Millennium Development Goals. Each aid organization tries to meet all MDGs and each fails to specialize. Therefore some aid agencies are forced to supply things they are bad at – the equivalent of Gates’ [producing] music videos – for which there is no demand.
UNICEF is working on swine flu, the traditional province of WHO, who is distracted by trying to do development research, which is the traditional specialty of the World Bank, who is in turn distracted by a new emphasis on children, which is the strength of – just to complete the circle – UNICEF.
Even very small aid agencies fail to specialize – Luxembourg’s $141 million aid budget was divided among 30 different sectors (out of a possible 37). The tiny Luxembourg budget also went to 87 different countries.
With high overhead costs for each separate activity for each country, the ratio of overhead costs to funds for the activity gets extremely high, sometimes over 100 percent. UNDP has one of the very LEAST specialized aid budgets by country and by sector, and it actually does have a ratio of overhead costs to aid disbursed of 129%.