Failure Should Spark Creativity, Not Caution, in Economic Development

Nobody likes to admit failure—least of all government-funded development organizations in hard economic times. Yet in the last few years we 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. I believe that we are witnessing the move to a more provisional style of governance—an approach to governing that is far more aware of the possibility of failure and seeks pre-emptively to manage that risk in new ways.

This preoccupation with failure is relatively new. In the 1980s and early 1990s, there was a very different approach to development governance. The era of “structural adjustment” lending and the “Washington Consensus” was a time of confidence and certainty. Policymakers believed that they had found the universal economic recipe for development success. When they encountered difficulties and delays, they assumed that various external factors were to blame. This is in spite of the fact that, in the case of the IMF, the success rate in the 1980s was somewhere between one quarter and one half of the programs initiated.

The 1990s marked a turning point in the 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 of the gains previously made 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 global financial crisis.

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

One of the major shifts in development practice over the past two decades has been the recognition that political “buy-in” matters for a policy to succeed. As development organizations tried to foster greater ownership by countries over economic and social programs, they became quite creative. By reducing conditionality and delivering more aid without earmarking to countries’ general budgets, development organizations shifted more decision-making responsibility to borrowing governments. Furthermore, development organizations asked those governments to engage civil society groups in identifying development priorities by introducing “Poverty Reduction Strategies.” In short, development organizations let go of some of their control and attempted to create a more open-ended and participatory process in the hopes that a “partnership” based approach would lead to greater success.

But sometimes 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 second, more cautious trend in modern society. He pointed to the increase in a kind of risk-based knowledge that could always be revised in the face of changing conditions.

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

An even more prominent trend in development policy is reflected in the current focus on results. There are very few organizations these days that do not seek to justify their 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?

But is it possible to know the “true” 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 that a given organization is claiming as their own.

Some agencies, like the 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. They have the advantage of a very narrow mandate—to reduce poverty by raising incomes—that is suited to quantitative analysis. 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 only count as successes those results that can be counted, then 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—the taxpayers who want to know that their dollars 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 as though the earlier experiment with country ownership and participation 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 quantitative and more standardized, but 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.

Jacqueline Best is a Professor at the University of Ottawa.