Dan Banik speaks with Dean Karlan about his efforts to strengthen evidence use and cost-effectiveness inside USAID during a period of dramatic institutional change. Together, they explore what the agency’s recent dismantling means for global development, U.S. soft power, and the future of aid in an increasingly uncertain world.
In this episode, Dan Banik speaks with economist Dean Karlan, the Frederic Esser Nemmers Distinguished Professor at Northwestern University and former Chief Economist of USAID, about his effort to build a new evidence-driven office inside the world’s largest bilateral aid agency. Drawing on his experience from 2022 to 2025, Dean reflects on the ambition behind creating the Office of the Chief Economist, the challenges of navigating congressional holds and bureaucratic resistance, and the excitement of assembling a team committed to cost-effectiveness and rigorous, science-based decision-making.
Dan and Dean explore what it means to introduce institutional reform in an agency as sprawling and politically exposed as USAID, how internal processes shape billions of dollars in global programming, and why transparent learning (including acknowledging failure) remains essential but difficult in development. They also discuss the dramatic shift that followed recent political changes in Washington, the speed with which parts of USAID’s architecture were dismantled, and what this means for partner countries, soft power, and the future of global development cooperation.
[DAN BANIK]
Dean, lovely to see you. The last time we met in DC at that really nice restaurant, things looked very different in the world than they do today. So welcome to the show. I wish it were under different circumstances, but nonetheless, welcome.
[DEAN KARLAN]
Thank you. Thank you very much for having me. It's great to see you again and talk to you again — unfortunately not over a really good spinach dish.
[DAN BANIK]
So if you recall our dinner, we were talking about effectiveness, about aid. You’d recently been appointed the Chief Economist of USAID, a position that apparently did not exist in the same way before you. Everything was new and there was a lot of optimism then. This was, what, January 2023, I believe.
There was optimism in the sense that you had accepted this position, if I recall, because you were asked to come and help USAID make the organization even more effective. And you had all these hopes and plans. You had hired all these people. And fast forward to today, it doesn’t exist anymore.
Walk us through what happened earlier this year.
[DEAN KARLAN]
Sure. So one clarification that is a little bit important in terms of what we were doing and what shifted within the organization.
Just to clarify your introduction, I was not actually the first Chief Economist of USAID. The difference is — and I learned this in bureaucratic speak — what I was, was the first head of an Office of the Chief Economist. And that might sound really, really wonky and bureaucratic, but it signals a really important change in the thinking of the leadership, which was:
“Let’s prioritize cost-effectiveness, evidence, and using science in general — social science in general — to inform USAID globally and across many sectors and issues. And let’s really empower this prioritization of evidence to guide what we’re doing.”
In the past, there were some great people who were Chief Economists before me, but their mandate and their charge were not that. It was much more focused on providing advice when asked about economic growth and very specific issues that were much narrower in scope. And it was within a bureau environment, which limited their ability to address issues across sectors and did not equip them with a staff to do things. They were kind of on their own. There’s only so much you can do.
In fact, the single biggest process change that we made — and the thing that, when I look back and reflect on my short period there, I’m proudest of — was the team we built. That was exhilarating. We brought in some amazing people, both from within USAID who came into the office, as well as people from outside who shared that vision and joined to try to help make the changes we were making.
We started off with one employee before me, who was basically the person who helped make it so that the office was created, and then I joined. By the time we left, we were in the low 30s in terms of headcount. Obviously headcount is not the objective, but it’s a signal of the enthusiasm with which we were greeted both internally and externally, as we tried to build relationships and build this evidence focus within USAID.
[DAN BANIK]
And I’m told that wasn’t easy, because you had to be creative to get money, right? Most of the money comes from Congress and this was a new office, a new setup. So you had to lobby… was it philanthropies? Where did you get the money?
[DEAN KARLAN]
Yeah. So we don’t lobby, just to be clear. That’s not the word we would ever use or what we would do. But I did learn that it wasn’t like we created the office and suddenly Congress had preemptively appropriated money to fund it.
So yes, we were faced with immediate challenges of: where are we going to get the money from in order to do this? We could try to be scrappy within the agency, but most of the money within USAID was already spoken for in sector and country allocations, and those processes happened well in advance of us showing up.
So we ended up — and this was both flattering and a fair amount of work — going and speaking to several philanthropists who saw the leverage story. They were like, “Okay, I get it. With one employee, you can then help guide how many millions of dollars?”
We did a bit of a portfolio analysis after a couple of years to ask: what has been the return on our office, in terms of the change in the way funds were being allocated? If 100 million dollars moved from a program which created X good to one that created 1.5X or 2X good, then that’s a 50 million or 100 million dollar gain.
We then divided that by the total cost of our office — not just the wins, but the total cost. When you think about that portfolio return, we ended up at around a 50-to-1 return on investment. We were quite proud of that. Obviously some speculative numbers have to go into that kind of calculation, but we tried to be conservative and hold ourselves accountable to it.
And when you’re able to have those kinds of returns, that’s the kind of return you get from doing “systems change” work, as it’s often called. It makes a very strong case to the crowd that is very attuned to quantifying the impact of philanthropy.
[DAN BANIK]
So what happened in those two years? I’m thinking about the time when we met — January 2023 — and then January 2025. You got these 30–34 people together, the office was established.
What was the first set of issues you had to tackle? Was it short-term impact evaluations? Was it getting enthusiasm for RCTs? What were the first wins you achieved?
[DEAN KARLAN]
The first win we achieved was actually creating the office. That alone took about six months. There was a hold from Congress, and USAID aims to respect those holds. There’s a complicated history there, but the fact is Congress does have the ability to put holds on reorganizations, and this was considered a reorg.
So that was the first win, the first obstacle: trying to understand, “Why is there a hold? Who is holding this up and what is it that they want?”
What was striking to me — and again, I was just learning about government and how it works — was that when we finally understood what they wanted, it was what we wanted. We wanted what they wanted. It was the same thing. The committee members behind the hold were actually, intellectually, some of our strongest allies for wanting exactly what we wanted.
But you have these layers in between that can sometimes prevent candid conversations that help you realize this isn’t about a Republican Congress versus Democrats running USAID. This was actually both sides wanting exactly the same thing. It just took time to get through that and have that understood.
The second thing I’d point to is the basic idea of using the evidence that’s out there. A lot of that evidence is highly relevant because USAID is doing things that are about program services — providing something, often through an intermediary (a contractor, an NGO, a firm), to households, firms, communities.
These are exactly the kinds of things that the academic world has made huge inroads on in the past 30 years. If someone came in to try to do what we were doing even 10 or 20 years ago, they really could not have done it, because the movement to do careful evaluations using randomized trials in development only really took off in the late 1990s and 2000s. There just wasn’t enough evidence.
You don’t want to change policy in Zambia because somebody in the Philippines did a study and found a certain thing, and then all of a sudden you change policy in Zambia. But now we’ve had about 5,000 randomized trials in development. Now we can really make more inroads and speak more intelligently about how to contextualize: when does something work, when does it not?
That, combined with a lot of staff within USAID being aware that this evidence exists but not really having the time, bandwidth, or technical skills to use it and put it in place, created an opportunity. We were greeted by a lot of people who were eager to see us. We opened shop and immediately had a large, willing, and eager contingent within USAID knocking on our door saying, “Love it. Love what you’re doing. How can I help? How can you help me?”
We were busy from day one providing that kind of direct, hands-on support to pen holders in different missions.
So our work overall is best described as taking two prongs. I’ll skip the first part, which was just me learning a lot about how USAID actually works — how procurement works, etc. There was definitely a learning curve for me, and many people generously helped me learn.
But past that, the two prongs were:
[DAN BANIK]
From an academic perspective, I would be very fearful, even apprehensive, of joining NORAD or trying to figure out the daily routines of procurement, or being told not to say certain things, or not to speak out of turn, and the hierarchy. As academics, we’re not used to this.
So you had to, as I understand it, get used to this new situation. Tell my listeners, Dean, what was it that struck you when you entered NORAD — when you started commuting to DC on a regular basis?
I’ve lived in DC, in Foggy Bottom, hung out in some of those streets, the World Bank, the International Food Policy Research Institute, USAID — all these international organizations. There is this perception that there are thousands of contractors, whether in defense or aid, everybody lobbying for something, everybody wanting something from you.
It is difficult to get a grip on the architecture, isn’t it? And then of course you have Congress, the executive, the White House, the State Department — so many actors involved, all with a stake in this pie. Did that take you six months? Were you prepared? Did somebody mentor you or give you the short version?
What was your impression of the aid architecture in Washington?
[DEAN KARLAN]
Yeah, those are interesting questions. Let me throw out two broad thoughts.
The first is minor, but: you couldn’t be more right about the very big difference between the style of an economics seminar and government meetings. I had a team — and although they didn’t have to be tactful with me, they were very good at schooling me and telling me, “Hey, Dean, tone it down. This is not an economics seminar.”
So I don’t know what that says about economists or about me, but that’s part of it. Underlying that is the consensus nature of government.
For what it’s worth, one of the challenges we faced is that this consensus nature isn’t just about tone or messaging in meetings. It also manifests itself when there’s a problem that everybody is trying to solve, and everybody has different opinions on how best to solve it.
There’s often a tendency to try to reach a consensus, which can mean: can everybody have a little piece of the pie, seeing things done their way?
How does that manifest? Suppose you have a procurement where you’re going to allocate 100 million dollars over five years to some effort — say, to address food insecurity in Northern Kenya. You have 10 people around the table with 10 different ideas on what to do, all in pursuit of the same broad goal.
Our message from the office was: each of those ideas may be great relative to doing nothing at all, but they all can’t be better than each other. So how do we help that process become more aware of the trade-offs they’re facing across these options? You can’t always end the meeting singing kumbaya, where everyone gets a piece of what they want. You need to look at the evidence, make those trade-offs clear, and help people be aware of them.
That was one fairly quick lesson.
The other thing goes to what you asked about my own trade-offs and what I needed to learn. When I was first asked to do this job, there were three parts to the ask, in terms of the job description and the office’s charge.
The first was on evidence use: how do we shift the way we spend money toward the most effective uses we know of, or toward innovation where we’re carefully measuring — one of the two — doing impact evaluations? But focusing just on the first part, where we actually have strong evidence about the most cost-effective way to do something: how do we align the USAID process to fund that?
At USAID, with 40 billion dollars a year, I didn’t have to do much math to figure out that if my goal was to help improve the way we fight poverty, I’m under no grand delusion that the impact of any one of my research papers is that high. So when I thought about the trade-off between slowing down my research for a few years and doing this, I didn’t have to do much math to feel strongly that improving evidence use at the largest bilateral agency in the world was far and away the most productive use of my time.
If I didn’t do it, frankly, I would have been a hypocrite and would have had to change my life story. When people ask, in contexts like this on a podcast, “Tell me how you got into what you’re doing,” my life story is that I got into this because I was working in development and I saw things being done without evidence. The things being done were actively debated: are they good, are they bad, not just “how good”? And I thought, why are we making these decisions without evidence? That’s what inspired me to be a researcher in the first place.
So it would have been pretty hypocritical, when given the opportunity to help improve how the largest bilateral in the world uses evidence, to say, “Yeah, no thanks.” That was the calculation for me. And I knew there was a lot I’d need to learn about how government works, how USAID works.
My short answer to your last question is: yes, there are different constituencies, and they have different views on different matters. But there was one commonality among just about everybody I met within USAID: they were there because they cared about other people and they cared about the United States’ role as a leader of the world in helping others.
Whether they cared about that because of the soft power benefits to America, or as a moral leader, or just for the end result impact on other people — in a sense, it’s all the same in terms of striving to do better. That commonality permeated a lot of conversations. It helps, even if people have different opinions about how to achieve those goals.
Now, that’s not to say people don’t care about their own budgets, or that there aren’t other constituencies to pay attention to, or that everyone feeding off the system is doing it out of altruism. But one of the things we did to tackle some of what you’re describing was a shift from cost–benefit to cost–effectiveness.
That might sound very wonky and econ-jargony, but let me explain what it implies and why it answers your question.
When you do cost–benefit analysis, you can compare everything to everything: health to education to economic growth. You can debate how you do the cost–benefit calculation, what you include in benefits, long-run effects, all that. It can be complicated, but at the end of the day you get a return on investment — you’re putting dollars in the denominator and dollars in the numerator and getting a percent return.
To do that, you have to convert lives to dollars, climate change to dollars, domestic violence to dollars. That’s obviously riddled with challenges, philosophical questions, value judgments, and good, honest debates. I don’t pretend to have the answer for how to value all those things.
But here’s the thing: doing that isn’t actually that useful, at least within the USAID system, because decisions about how much to spend on different sectors are actually made by Congress. And decisions on how to spend in different countries are mostly made by Congress.
So if we’re talking to the people who care deeply about, say, health, and we propose a cost–benefit analysis that potentially might be used to decide whether health should get more or less money relative to other sectors, that doesn’t always make us the most welcome group at the table.
If instead we say, “Whatever your goal is, we respect it. Whatever your budget is, it is what it is. We’re here to help you get the most bang for your buck,” that’s what cost–effectiveness does. It takes the outcome as given — whether it’s lives saved, income for farmers, climate mitigation, reduced domestic violence, child malnutrition, whatever you want — and then asks: what are the different options for moving the needle on that outcome, and which is most cost-effective?
That makes us everybody’s best friend because we’re there to help them reach their goal. We’re not there to judge their goal or judge whether it’s good relative to other goals.
[DAN BANIK]
But isn’t that a problem, Dean? Aren’t you also sometimes willing to say, “Look, we should not be prioritizing that”? We need to be more flexible. It shouldn’t always be up to Congress. There should be things that you decide on the move. We should be much more flexible.
I’m thinking about your initial conversations, those six months in Congress. I don’t know if you had to be confirmed or whatever, the hearings. But you said something interesting: that it was a bipartisan process, an agreement on some of the overarching intentions of USAID — that politicians were not oblivious to the major reasons why the US was providing all this money. Was it 0.6 or 0.7 percent of GDP?
When you were interacting with Congress, did you get a sense of where the disagreements were? If there was agreement on cost-effectiveness, what were the disagreements about? What did they actually want more of, or where did Republicans and Democrats disagree among themselves?
[DEAN KARLAN]
Let me answer the first part of that two-part question: should we weigh in on health versus education versus other sectors?
What I can say is that that’s a much more political process. Whether USAID should or should not have that power is a separate matter. Right now, obviously, what we’re seeing is that the executive branch is taking that power, and Congress is stepping back and letting them do it, even though they do, in theory, have the power of the purse. But it’s only a power of the purse if you actually stand up and use it.
So we are seeing that happen. When I was at USAID, there was no predicate for that. No one proposed doing things of that nature. The basic question you’re raising was never brought to me that way.
The closest version of it was something we were pushing for ourselves. For example, if you can do things that strengthen the Ministry of Finance — help them do better scenario planning for currency movements and cash flows, help them collect more tax revenue, domestic resource mobilization — then if you can spend one dollar that helps them collect five dollars of good taxes…
[DAN BANIK]
And thereby be less dependent on aid.
[DEAN KARLAN]
Exactly. Then they can spend that money on health. You can help health by helping the Ministry of Finance. It’s indirect.
We were there to help identify cases like that that might be less obvious — to do the math, to see those linkages. But it wasn’t that we were called in to shift the focus from health to something else. Rather, it was to point out the interconnectedness of different areas and help do the math to illustrate those connections.
I was never part of a meeting where the question was: “Should we ignore Congress on this large allocation of money and just spend it elsewhere?”
[DAN BANIK]
I would just think that if you’re in the operations business, you know what the need of the hour is, and it’s too long and cumbersome to go back to Congress. You’d want that mandate to take decisions in the spur of the moment because that’s what’s needed. That’s what I would have thought.
[DEAN KARLAN]
Look, there is a budget for humanitarian affairs that allows them to pounce on crises and act quickly. There’s long-standing support for humanitarian work. In fact, that’s one of the areas many identify as having bipartisan support — perhaps for different reasons, but still, there is support.
Frankly, my hunch is that not enough attention is paid to the long run over the short run in those cases. The long run lacks salience. But there is strong evidence that certain things you do at the humanitarian–development nexus — dealing with refugees who have already been in camps for a couple of years or more, for instance — can be crucial.
How do you help integrate them into the local economy and help them so they’re not needing humanitarian support for the next 20 years? That kind of work can be really critical, but it doesn’t have the same emotional pull as the immediate crisis. So you see less attention to it.
That was an area where we were working with the Bureau for Humanitarian Assistance (BHA) to roll out programs of that nature. In fact, those were some of our biggest wins: rolling out those kinds of programs with BHA.
[DAN BANIK]
And the second part of my question was about the disagreements in Congress.
[DEAN KARLAN]
First of all, there were a lot of conversations with Congress that went well beyond what I was doing. Things related to Latin American affairs, for instance, were very wrapped up in people coming to the border. There were obviously questions on reproductive rights, access to reproductive health around the world. These were not issues I dealt with directly, but they were front and center in many conversations and debates.
The conversations I was most involved in were about the evidence side: what is the evidence of short-run and long-run impact? What is the quality of the evidence we’re producing?
There, I think, we saw a very common issue — not unique to Congress. There’s a lot of misunderstanding about the difference between following people over time who are part of a program and actually having an impact evaluation where you can say how their lives changed compared to how they would have changed without the program.
For that, there was, as everywhere, a lot of misunderstanding and false attribution. Questions like: “Why aren’t more people tracked over the long run?” The fundamental problem is that even if aid works, you can see people’s lives get worse. If there are bad economic conditions, bad politics, bad weather, people’s lives can get worse. Likewise, their lives can get better as growth happens and good things happen. Poverty does go down over time in many places.
So you’d have a lot of false attribution — both positive and negative. The main thing we were bringing to the table was: don’t look at evidence like that. Look at evidence that carries with it some way of measuring what would have happened without the program. That’s the heart of what a randomized trial offers.
But you can’t go around doing randomized trials on everything. So when Congress would ask for evidence of the long-run impact, there was often a disconnect between what they wanted and what they were literally asking for in terms of measurements — because they were asking for tracking outcomes, not for counterfactual-based evaluation.
And, as you say, not always willing to fund the proper evaluations. There was one earmark for what’s called ex post evaluation, but it was unclear from the wording whether it included what we would call an impact evaluation that tracks a counterfactual, or just tracking people over time. Even then, it was a very small earmark relative to USAID’s overall budget — in the 10–20 million dollar zone.
[DAN BANIK]
Did people often ask you, “Dean, tell us what works. We’ve been asking USAID this question and we haven’t heard a good answer. Give us a list of things that work and that we should focus more energy and money on”?
[DEAN KARLAN]
It didn’t usually come in that form, at least not in the conversations I had. They would ask more specific things.
I’ll never forget one question that was, in some sense, exactly the right question. It was my first formal meeting with people in Congress, so I was nervous about what to say and what not to say.
The question was: “Why doesn’t USAID ever show us negative results?”
What went through my head was the obvious: first, USAID doesn’t do that many impact evaluations, and I’m not actually sure it should be doing lots of them itself. It should be using the evidence of what works and what doesn’t, and then tracking whether it executed what it said it would execute, and whether it executed it well.
But it’s not obvious that USAID should be spending money on impact evaluations for something where the impact is already well established.
Think about immunizations. If you’re going to distribute immunizations, you don’t need to do impact evaluations on the immunization itself. If it’s already well established in the medical literature that this is an effective vaccine, then just roll it out and get people immunized. You don’t need to run an impact evaluation to see the impact on infant mortality.
The same applies in other areas, including social science.
The other thing that went through my head — which I didn’t feel comfortable saying — was: can you commit not to using that evidence of something not working against USAID as a justification for defunding it?
A good, honest set of evaluations should show some wins and some losses. It should show that you learn from the losses, modify your plans, adapt, and move forward. If you showed me an organization that only produced great, amazing impact evaluations, I’d be highly skeptical of the quality and independence of the evidence. And even if you convinced me it was all honest and rigorous, my next question would be: this probably means you’re not taking any risks or trying any innovation.
It reminds me of my earlier work with microcredit. When I met a microlender that bragged about 100% repayment rates, I would say that’s a sign of failure, not success. A bank’s role is to take on risk and diversify it. You want to empower individuals to take loans that may or may not work out but could improve their lives. If you’re getting 100% of your money back, you’re probably not lending to people who would really benefit from those loans.
[DAN BANIK]
Some of these questions are also being asked here in Europe, in terms of politicians saying, “Why don’t we hear more about things that don’t work? We need to hear more about what works, but let’s get a balanced picture.”
And this comes from a lot of NGOs who, in my view — I may be wrong — are rather reluctant to talk about the bad stuff or the things they weren’t able to achieve, despite stated and lofty goals, because they fear cuts in their allocations.
That fear — that talking about negative results will lead to funding cuts — also, in my view, reduces the legitimacy of what they’re doing, because it should be balanced. It’s not like everything is rosy.
I’m asking you all these questions because I’m sure there are lots of people trying to understand what’s going on in the United States, what’s going on in Congress. How on earth could you dismantle something that was so fundamentally important to soft power?
I’ve had Joe Nye on the show — the inventor of the term soft power. There is so much our countries can do through a policy of attraction rather than coercion or brute force, attracting others because of our culture and what we do. One of the biggest sources of soft power for the US has been foreign aid.
And now, in many ways — I don’t mean you, but the US — has taken a step in the wrong direction. A lot of us can’t figure out what Congress was thinking, what the White House was thinking.
The sheer fact, Dean, is that every day there are calculations from the Center for Global Development or other agencies talking about millions of lives around the world that are affected. People are going to die — or are dying — because of the recent dismantling.
It wasn’t necessarily a complete shock, I would imagine. I mean, you at USAID knew something was coming, but perhaps not to the same extent. So what was the scene like after the elections in November? You were anticipating something, but not to that extent, I would imagine.
[DEAN KARLAN]
That’s right. Most people expected… well, everyone who wasn’t familiar with it pulled out Project 2025 and read through it to see what to expect.
So what did that mean? It meant some sectors were going to go away — no work on gender, no LGBTQ work, no climate, democracy promotion possibly being affected as well. Democracy promotion is always an odd space, since it’s in many ways aligned with conservative thinking too.
The expectation was that some of these sectors — climate is a good example — would be cut. Unfortunately, a lot of things were labeled as “climate” that weren’t really climate, but were tagged as such. For example, working with farmers to help them be better off in the face of shocks: one of those shocks is climate, and then you call this “climate.”
If the task of canceling things is as simple as searching for things that were promoted as “pro-climate,” then those things were vulnerable, when really all they were doing was plain vanilla “let’s help farmers be more resilient.”
So we expected some of that to go away. We expected an overall budget cut.
For the things I was there to do, frankly, the idea of being more effective with what you have resonates on both sides of the aisle. There was definitely a way of thinking that said, “When times are tough, it’s even more important to be cost-effective.”
As a side note, I’ve always found that argument a bit bizarre. I’m willing to use it and be a bit Machiavellian if it helps get people to think harder about the evidence of what works and what doesn’t. But the reality is: when budgets are flush, it’s also important to be as effective as you can with resources. I’ve never been in a situation where resources were so flush that it just didn’t matter — that we’d solve the problem one way or another. That’s never been my experience.
Regardless, I was willing to use that argument.
There are many cases where helping markets develop and helping people get access to markets is a great strategy for addressing not just short-run but long-run problems in a country. That kind of thinking about the role of markets for development is something a lot of Republicans support. There were many strategies I cared about and saw as right that were aligned with both sides of the aisle, and with some of the very people rumored to be coming in under a new administration.
Those people never came in — the people with the mindset of “let’s look at evidence and choose things that are most effective.” Some people I was hoping would come, who I knew would be great allies for what we wanted to see happen, never got tapped.
My understanding is that there wasn’t really a plan. The plan to destroy USAID did not exist as such. You’re describing the destruction of soft power as if someone actively sat down with an alternative theory of the world and said, “This is wrong, we have a different philosophy.”
I don’t think that’s what happened. Everything I’ve heard suggests that no one sat there with an alternative theory. Instead, it was more of an effort — driven by a particular faction — to find an agency they could “throw in the woodchipper,” to use their words, as a demonstration of power and, in a sense, completeness, by just destroying something.
That’s a really tragic way to think about the role of government and how government should work, and how governments should decide what to do. It’s a bizarre use of the term “efficiency.”
The single most striking thing to me was that this bean-counting exercise, which itself was repeatedly criticized as fallacious, never once took into account the benefits.
If they dropped 100 million dollars that was being spent on something, they’d call that a 100-million-dollar saving. They ignored the fact that those 100 million dollars might have been generating 200 million dollars of economic benefits — or even 50 million — to people in America or abroad.
You don’t get 100 million dollars of savings. If those 100 million dollars created 200 million dollars of good, then you’ve just made the world — or the US government — 100 million dollars less efficient. If they created 50 million dollars of good, then maybe it was good to cut that program, but you don’t get 100 million on your scorecard, you only get 50.
The fact that they ignored that is telling about the lack of analytical rigor and/or honesty in how they were thinking about efficiency.
[DAN BANIK]
You may well be right that there wasn’t an active plan to dismantle USAID, but it’s shocking that there was no appreciation of the consequences for lives around the world, and also for US power and influence.
So now you have one of the biggest actors in global aid virtually disappearing. We have a huge shortfall. There are tons of conferences, everybody talking about financing for development. Somebody needs to step up.
Is it the EU? The Nordic states — we are generous, but we are small actors. Is it philanthropies?
In the US, I remember that in the initial months after the dismantling of USAID, there was talk about China — fears that China would “take over” when the US stopped providing aid.
So who should step in? How do you see the aid world being reconfigured? Will there be greater emphasis on South–South cooperation, Europe-centric aid, or maybe the age of aid is over and we should be talking about something else?
How do you see this field progressing? I know you’re still actively involved in providing advice to aid agencies.
[DEAN KARLAN]
I think this highlights two basic thoughts.
One goes back to something we talked about earlier. The second is that it highlights the need not to be so dependent on any one donor.
Maybe there are other donors who can be more reliably counted on and don’t have the same vulnerability we have in the US to political swings. But if it’s a bilateral aid agency, odds are there’s some democratic process to choosing leaders, and swings can happen.
So that’s a lesson for low-income country governments. It’s going to increase the cost of trying to help, potentially, because even to accept aid now, countries will need to figure out how to do it in ways that limit dependence — maybe by saving some of it, putting in place buffers. Different things you can think about, but they inevitably make it more costly to do business that way.
The other thought is about the word “should.” It’s a powerful word.
Should others act more? I would have said yes two years ago as well. There’s a lot of good that can be done in the world — a lot of good that is in individual countries’ national interest, even if that national interest is just about becoming a stronger nation by standing up and helping others, contributing to global public goods, and helping the less fortunate. That’s part of what makes us strong as individuals and as nations: seeing past our own immediate interests and being leaders in the global community.
I would have said that a year ago. Just look at the wealth — whether held by individuals or sovereign powers — compared to the good that could be done. The disconnect is massive.
Now, it’s a little like what we expected within USAID: a smaller budget, more emphasis on cost-effectiveness. To which my answer was: sure. Of course I’m happy to say that. But I also think that when times are flush, you should also be as effective as you can be.
That’s how I think about “should.” We should have done more before, because there were great things we could do on the margin and make bigger impacts with our dollars. Yes, it’s all the more important now because of diminishing marginal returns in aid: we’re further down the curve, so the dollars we spend now — or the euros or kroner — will be that much more effective.
But I don’t think it fundamentally changes the “should” question. We should be doing it now just as we should have been doing it before.
[DAN BANIK]
Dean, lovely to see you again. Thanks very much for this lovely conversation and for coming on my show.
[DEAN KARLAN]
No, other way around — thank you very much for having me. It was great to talk with you.
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