It’s a pleasure to be here today in such distinguished company, and I add my welcome to those already given. I’d like to thank my colleagues at AEI and the Joint Center, Jon Entine, Bob Hahn, Ryan Stowers, and Sasha Gentling for putting this event together.

I remember back in early 2000 being in my office in London and speaking with a Swedish colleague about a Danish statistician who had created quite a stir in Scandinavia. It was even being suggested that Cambridge University Press were interested in the English updated version and translation. The master of my Cambridge College was on the committee that decided to publish the book The Skeptical Environmentalist, and the rest as they say is history. Although CUP had never thought they could make money from selling books before--that has changed.

And it seems as though Dr. Lomborg has done it again--pulling together the right kind of arguments at the right time. For while there has been deserved aid fatigue for much of the 1990s, with the realization that AIDS was becoming the worst plague since the Black Death there has been a resurgence in interest.

Thankfully aid is probably being done better now than in the past, because much aid has been an unmitigated disaster--propping up dictators, encouraging massive rent-seeking and other politically manipulative behaviour. It also directly supports development projects which have been hugely damaging. However, problems continue, and there are problems with the approach taken by some of the authors in this book. Nevertheless, prioritizing aid, or at least discussing prioritization of aid has to be welcomed.

I will confine my remarks to three specific areas--malaria, AIDS and water. And really discuss only the former (malaria) in any detail--a paper is being handed out which is a more detailed critique of the malaria section than I can cover in the next few minutes. And I’ll have a few general comments along the way as well.

Before doing that I would like to echo the remarks of some of the contributors to the Copenhagen Consensus by arguing that removal of trade distortions comes at such low cost that it should be done anyway.

Malaria

Malaria ranked fourth, the last of the very good investments. Ironically, given what I’m about to say, that is probably about right, it may even warrant a higher ranking.

The main approaches discussed by the main challenge paper (ITNs and limited treatment) are in principle, a reasonable investment. However, recent investments following this approach have not faired well.
 
Roll Back Malaria was established in 1998 to halve malaria rates by 2010. Half way thru that time period rates have increased probably over 10 percent--the main mode of action used is that discussed in the challenge paper--ITNs. Nets are useful but they really don’t work without massive coverage, and distribution is spotty, and even where distribution is high compliance may be low--imagine a humid August night in D.C., where the ACs not working and you’re trying to sleep under a net--uncomfortable at best. Yet, if we’re to believe RBM staff net distribution is an outcome measurement.

What has worked well historically and continues to in Southern Africa and parts of Latin America and Asia, is insecticide spraying. And its cheaper than ITNs (under many circumstances--perhaps three times cheaper than the figures used in the challenge paper).

But spraying (indoors with small amounts of insecticides) is not promoted by health/aid agencies, yet it works (rates down 80 percent in two years in several places). And this leads to the second problem I have with the challenge paper--it ignores the spraying approach because it ignores the private sector--and it’s the private sector (along with wealthier national Governments--notably SA) that is driving spraying.

The private sector in Africa (led by southern African mining companies) actually does use every intervention method--ironically doing what USAID, WHO and RBM say they do, but which they fail to deliver.

Ignoring the kid that dies every 30 seconds, the most tragic part about the RBM approach--echoed in the challenge paper is that it sets the standard ( a terrible one) for the private sector to follow. Only those companies that don’t have major exposure to Western media (such as African mining companies) can afford to do what’s right, even if it goes against the consensus approach.

To be fair, this problem is not the Challenge papers fault, but more aid following the current approach could actually be harmful. Aid used wisely could save even more lives than the figures indicate. So for malaria control at least, more money will only help if policy changed are enacted--and don’t hold your breath.

AIDS

Rated top and probably justifiably given the economic destruction this disease delivers--but given the nature of HIV/AIDS without decent infrastructure treatment at least is largely impossible to deliver. And when it comes to treatment the challenge paper seems to have accepted the notion that drug delivery is getting much cheaper--it cites the Clinton Foundation as having lowered prices. I asked the Foundation in early June to send me invoice data, or shipment data on its supply of drugs at the price of $140, which apparently it has brokered since October 2003--I await the data still. Of the drugs at the cheaper end of the range are they true bioequivalents? Some certainly are not having been withdrawn by WHO last month (therefore drug costs may be higher than estimated). None of this is the fault of challenge paper- but it makes me wonder how remotely accurate some of these figures really are.

Where I once again have a problem with the fact that the private sector is largely ignored from the analysis. Its probably not that surprising--the private sector does stuff, and doesn’t write too much about it. But the private sector, ignored by aid agencies, as van der Gaag complains about in his opposition paper, are important for delivering services.

Water

In the opening page of the challenge paper on water, the problem is explained as one of economic and institutional scarcity not of physical water scarcity. I believe this is correct.
But all of the interventions discussed are more driven by engineering than law: the institutional changes required.

When it comes to water allocation, the gorilla in the corner that is not touched on a great deal is the gross misallocation of water to inefficient farming around the world. Irrigation farming can reduce poverty, but Government provision of irrigation alone doesn’t work--water has to be treated as an economic good. Boland in the opposition paper challenges the water as public good condition. And establishing institutions that minimize the difference of water from other marketed goods is vital.

I feel that the challenge paper ignores this. There is no doubt that improved irrigation techniques would save water and improve food production--but the world is replete with decaying irrigation and other types of hydraulic infrastructure. Furthermore, where water has been de-politicized, where individuals have been allowed to trade their allowances in raw water markets, not only has efficiency improved but so has equity, since efficiency has driven water availability (Chile is a good example of this, as is Australia). It is important that this happens in India and China since aquifers are depleting rapidly, encouraging further centralization of control, speeding the vicious circle.

And even more so than in AIDS and about the same as in Malaria, I feel that more aid along current lines may make matters worse. For in the same way that aid has in the past it entrenches approaches that can and do fail, it bolsters rent-seekers who apply energy to encouraging government transfers, it damages diversity (the one size fits all approach is certainly true with respect to malaria and probably some other fields too), and undervalues, and stifles the private sector.

Having said that--prioritizing aid expenditure is certainly warranted--close scrutiny of how its spent will minimise some of the myriad aid failures of the past, and for this, if nothing else, Dr. Lomborg and his team are to be congratulated. 

Roger Bate is a visiting fellow at AEI.