Hedging bets: our new preoccupation with failure

Nobody likes to admit failure—least of all government-funded development organizations in hard economic times. Yet recent years have seen a number of prominent development agencies confess to failure. The International Monetary Fund (IMF) admitted its failure to recognize the damage that its overzealous approach to austerity would cause in Greece. The World Bank President, Jim Yong Kim, has adopted the idea of Fail Faires from the information technology industry, where policymakers share their biggest failures with one another. The United States Agency for International Development’s (USAID) Chief Innovation Officer also expressed some interest in organizing a Fail Faire, and the agency eventually did hold an “Experience Summit” in 2012.

This interest in failure is central to a broader shift in how development organizations—and other national and international agencies—have begun to work. As I argue in my new book, Governing Failure, these organizations are increasingly aware of the possibility of failure and are seeking to manage that risk in new ways.

This preoccupation with failure is relatively new. The 1980s and early 1990s—the era of ‘structural adjustment’ lending—was a time of confidence and certainty. Policymakers believed that they had found the universal economic recipe for development success.

The 1990s marked a turning point for confidence in the development success ‘recipe’. Success rates for programs at the World Bank began to decline dramatically’ critics started to label the 1980s a ‘decade of despair’ for sub-Saharan Africa; and both the AIDS pandemic and the Asian financial crisis reversed many gains in poverty reduction. These events made policymakers more aware of the uncertainty of the global environment and of the very real possibility of failure—lessons only reinforced by the recent financial crisis.

What happens to policymakers when they are more aware of the possibility of failure? On one hand, they can accept the fact of uncertainty and the limits of their control, becoming creative—even experimental—in their approach to solving problems. Or they can become hyper-cautious and risk-averse, doing what they can to avoid failure at all costs. We can see both reactions in international development circles.

A major shift in development practice over the past two decades has been the recognition that political ‘buy-in’ matters for policy success. As development organizations tried to foster greater country ownership of economic programs, they became quite creative. By reducing conditionality and delivering more non-earmarked aid to countries’ general budgets, development organizations shifted more decision-making responsibility to borrowing governments in an effort to create an open-ended and participatory process more conducive to policy success.

But development organizations also took a more cautious turn in their response to the problem of failure. The social theorist Niklas Luhmann first introduced the idea of ‘provisional expertise’ to describe this cautious trend in modern society. He pointed to the increase in risk-based knowledge that could always be revised in the face of changing conditions.

Risk management has become omnipresent in development circles, as it has elsewhere. No shovel turns to build a school without a multitude of assessments of possible risks to the project’s success, allowing the organizations involved to hedge against possible failures.

An even more prominent trend in development policy is the current focus on results, which is particularly popular in the Canadian government. Few organizations these days do not justify actions in terms of the results that they deliver: roads built, immunizations given, rates of infant mortality reduced.

At first glance, this focus appears to be anything but cautious: what greater risk than publishing the true results of your actions? Yet it is not always possible to know the results of a given policy. The problem of causal attribution is a thorny one in development practice, particularly when any number of different variables could have led to the results an organization claim as its own.

Some agencies such as the U.S. Millennium Challenge Corporation (MCC) have tried to get around this problem through sophisticated counterfactual analysis and the use of control groups in their aid programs. Yet even MCC staff members recognize that designing programs in order to gain the best knowledge about results can come at the expense of other priorities.

If donors can count as successes only those results that can be counted, they may well find themselves redefining their priorities to suit their evaluation methodology—and their political needs. In most cases, results are donor-driven: they are not calculated and published for the benefit of the recipient country but for the donor’s citizens back home, who want to know that their taxes are being spent wisely. So building roads and providing immunizations suddenly becomes more attractive than undertaking the long, slow, and complex work of transforming legal and political institutions. Caution wins out in the end.

Which kind of approach to failure is winning out today: experimentalist or cautious? Sadly it seems that the earlier experiment with country ownership has lost momentum, in part because the forms of participation involved were so much less meaningful than had been hoped. At the same time, the results agenda has only become more numbers-driven in the last few years. As agencies have grown more risk-averse after the global financial crisis, they have sought to make results-evaluation more standardized—and ultimately less responsive to the particular needs of local communities.

There is still hope, as the recent admissions of failure by major development organizations suggest. Yet the very fact that that the USAID event was ultimately named an ‘Experience Summit’ rather than a ‘Fail Faire’ is telling: even when leaders admit to failure, it appears that they can’t resist hedging their bets.

This blog post draws from my recent book, Governing Failure: Provisional Expertise and the Transformation of Global Development Finance, published by Cambridge University Press.

Earlier versions of this essay appeared on RegBlog.org and the CIPS blog.

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