‘Tis the season of giving as food drives, Salvation Army bell ringers, gift sponsorships, and charitable appeals become commonplace. Americans give and they give a lot. The total amount of charitable giving was $316.23 billion in 2012, an increase of 3.5% from the previous year. Total giving as a percentage of GDP was 2%, the highest proportion for any country, and individuals are responsible for 72% of the total amount while corporations account for just 6%. Individual motives for donating to charity can vary from the Christmas spirit to economic and tax benefits to passion for human needs. But can giving be about something less grand, more anomalous and internal, and perhaps, even, irrational?
For a long time, philanthropy was mostly ignored by social scientists who assumed that individuals are rational, self-interested, and possess well-defined and revealed preferences. But why do people part with their hard-earned money in the first place? And how can cash-strapped charities can easily induce individuals to give more? These are vital questions that basic behavioral economic insights can answer. Do individuals really fork over a couple bucks to receive a coffee mug and their name printed in the back of an annual report? Why do charities behave as if donors were calculative and rational automatons? Behavioral findings presented by a UK government report and profiled by David Leonhardt in The New York Times indicate there is more to charitable giving than we have previously thought.
Economists John List and Dean Karlan used charitable giving as a laboratory for studying human behavior and used their findings to consult charities on how to induce greater contributions. For instance, a common practice amongst charities and corporations is to match the donations of individuals to encourage greater sums of giving. Karlan and List tested this piece of conventional wisdom and determined it was only partially correct. Even though the existence of a matching offer was very important—in an experimental study, 2.2% of people who received a match offer made a donation compared with only 1.8% of people who did not—the size of the match did not have any effect on giving. “Donors who received the offer of a one-to-one match gave just as often, and just as much, as those responding to the three-to-one offer.” This is inefficient on the donor’s part as a larger match ratio effectively increases the amount of a person’s gift by giving them a discount. So much for those aforementioned assumptions of rationality.
Another common fundraising practice that proved to be more beneficial than unnecessarily large matches is so-called “seed money”. Seed money are funds that charities raise toward their ultimate goal before officially announcing a donation drive, making their cause seem more legitimate and their goal more attainable. An experiment that List conducted with the University of Central Florida and their campaign to buy new computers indicated that the more upfront money the university claimed to have, the greater amount of contributions it raised.
When Rachel Croson, an economist at the University of Dallas, examined public radio station pledge drives, she observed how an anchoring effect could compel listeners to make larger contributions. Anchors can serve as starting points for people who lack well-formed preferences and are uncertain about appropriate values. When callers were told that a previous donor made a contribution of $300, despite the average contribution being $75 dollars, they gave an average of 12% more. The $300 figure inserted an idea into callers’ minds about the appropriate donation value and the psychological vagaries of shame, prestige, generosity, and inspiration did the rest. Croson’s further experiments lend a cautionary tale too. When the anchor value seemed too large to be relevant, say, $1000, callers actually gave less.
If giving was strictly rational, huge charitable donations from the likes of Warren Buffet and Bill Gates would induce others to give less to the supported causes. Economist James Andreaoni argued the exact opposite is the case. Andreaoni formulated the “warm glow” theory which states that people derive an internal satisfaction from giving even though their contributions remain anonymous. Even though Buffet or Gates consistently bequeath massive charitable gifts, people would prefer that gifts come from them and not from others, even the two wealthiest people on the planet. The intrinsic motivation to give can be tapped into further by drawing on a peer effect. When making acts of giving more visible to others within one’s social group, we are more prone to give.
While some behavioral economic findings can lead to unconventional fundraising practices, other findings are unsurprising. In door-to-door fundraising, men give more money when the person asking for the gift was an attractive woman. Charitable appeals also proved to be most effective during the holiday season. People are more likely to make a donation in December than in January. And charities shouldn’t be quick to discard the beloved coffee mug and annual report donor list just yet. Economist William Harbaugh found that individuals hold a powerful preference for prestige, implying that “charities can increase contributions by reporting gift categories and publicizing donations” and contributions are most often the lower bound of a specially named category (i.e. $50,000 to $99,999 to qualify as a “Gold Class Donor”).
The nuances of behavioral science will surely be at work behind the scenes this holiday season but the donors’ motives—whether rational or not—should not matter as long as charity coffers are being filled. Nevertheless, we shouldn’t think twice about being compassionate and generous this year.
Last month the Walk Free Foundation released their inaugural report attempting to quantify the number of people enslaved worldwide. The Global Slavery Index 2013 has concluded that almost 30 million people fall under their definition of slavery. Similar reports from the International Labor Organization and the State Department had estimated 22 and 27 million respectively. This new report clearly lays out the concentration of slavery in the world by country- implicating India, China, and Pakistan as the worst offenders in absolute terms. These three countries alone account for roughly 60% of the reported number of enslaved peoples. Mauritania, Haiti, and Pakistan are ranked as the top 3 countries with the highest prevalence of slavery relative to their population size.
Modern slavery, though it can take many forms, is generally defined as “one person depriving another people of their freedom: their freedom to leave one job for another, their freedom to leave one workplace for another, their freedom to control their own body.” Forced labor, what most people think of when they hear the term slavery, is specifically when a person is forced to work against their will through coercion or threats of coercion. While most forced labor (68%) involves activities in agriculture, construction, or manufacturing, an estimated 22% involves sexual exploitation. Bonded labor is the most common form of slavery, in which a person is forced into labor by an employer due to a debt owed. The employer stipulates that the indebted worker cannot find any other form of employment and will pay them little or nothing at all. Generally the debt can never actually be repaid despite their work exceeding the value of the original loan and in some cases is passed on through generations leaving some children born into servitude. Trafficking is also considered a form of slavery by which people are lured away from their homes through coercion or deception. Often trafficking leads to another form of slavery where people have their passport taken and are forced to work for little to no wage to repay a debt or simply to survive. Of course, other forms exist related to caste and ethnic structures or servile marriages.
The slavery Index estimates that there are 13,300,000 – 14,700,000 enslaved people in India, almost half of the global total. Slavery in India is largely internal with women and children of the lower castes or indigenous groups being the most vulnerable. In some instances people are lured away from rural areas to wealthier cities by false prospects of employment only be forced into a form of bonded labor or sold to wealthy families where they are often physically or sexually abused. Some sectors well known for their bonded laborers are stone quarries, brick kilns, construction and mining. India does have legislation banning most forms of slavery however officials do little to enforce these laws. One article states, “Officials don’t care, and sometimes even want maids for their own houses, [which is] partly why they’re silent on this.” India is also one of the few countries that has yet to ratify the Worst Forms of Child Labor Convention. Recently (April 2013), India has passed a more comprehensive ban on modern slavery though it has yet to be seen how this will be utilized by enforcement agencies.
Though some may assume slavery no longer exists in the United States, there are an estimated 57,000-63,000 people enslaved within the U.S. today and, according to the index, almost all forms of modern slavery are present here. From bonded labor to sexual exploitation slavery in the U.S. affects populations of a wide range of socio-economic class, race, and age. Some of the most vulnerable groups include temporary visa holders, domestic servants to international diplomats, LGBTQI peoples, runaways, homeless youths, and sex workers. Much of these activities occur on interstate highway routes, truck stops, urban centers, and agricultural, fishing or forestry related industries. Though the State Department released an annual Trafficking in Persons Report, they had not analyzed the U.S. until 2010. U.S. citizens forced into sexual exploitation are often younger than those from abroad with an average recruitment age of 12-14. “The National Center for Missing & Exploited Children (NCMEC) estimates that at least 100,000 American children are the victims of commercial sexual trafficking and prostitution each year.” Foreign workers are sometimes lured into the agricultural sectors with the promise of well-paying jobs only to have their passports and visas taken and forced to work in remote areas. The government has taken great strides in addressing the issue and fostering cooperation between relevant agencies and streamlining prosecution practices. They have also been supporting the efforts in civil society to identify and assist victims of modern slavery such as Truckers Against Trafficking and the Polaris Project.
The World Bank’s Doing Business Index measures the ease of doing business in countries around the world. The highest-ranked countries have the simplest regulations on businesses and the strongest protections of property rights, which together enable a thriving private sector. A country’s ranking is based on its scores in ten areas: ease of starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. The World Bank scores countries in these areas by studying laws and regulations and consulting with in-country government officials and professionals. The recently-published 2014 index ranked Singapore as best in the world, followed by Hong Kong, New Zealand, the United States, and Denmark.
Since the first Doing Business index was released in 2004, countries have made an effort to reform their regulations and remove the “bureaucratic obstacles to private sector activity” to improve their rankings on the index. The “most-improved” countries that best reformed their regulatory systems between 2012 and 2013 were Ukraine, Rwanda, the Russian Federation, the Philippines, and Kosovo. While these countries are still generally ranked low on the Doing Business index, they were able to improve their scores and their business climates in the past year.
“Most Improved” Countries, 2014 v. 2013 rankings
This is not the first time Ukraine and Rwanda have been on the “most-improved” list; Ukraine placed second between 2011 and 2012, and Rwanda was ranked the second-best reformer in the six-year period between 2005 and 2011. In the past five years, the two countries have implemented reforms in every area measured in the Doing Business index.
Between 2012 and 2013, Ukraine simplified many of its complicated procedures, making many aspects of doing business in the country easier. It streamlined procedures for registering businesses and obtaining construction permits, simplified tax forms, implemented a new customs code which makes it easier to import and export, and changed the bankruptcy laws so that insolvency can be resolved easier.
During the same period, Rwanda made it easier to obtain a registration certificate for a business, streamlined the processes to obtain construction permits and transfer property, and strengthened protections for investors. Rwanda has also been using technology to streamline its business processes, implementing the online Land Administration Information System for processing land transactions, rolling out an electronic tax filing system for businesses, and introducing an electronic single-window system at the border to make cross-border trade easier.
Ukraine and Rwanda are still hardly the best places in the world to conduct business; Ukraine is ranked 112th overall, and Rwanda is ranked 32nd. Nevertheless, these countries have been making a serious effort to improve their business environments, because doing so can lead to huge payoffs.
International businesses entering new markets look to the World Bank’s Doing Business index to determine whether they should invest in or move into a country. A good score, especially compared to a country’s regional neighbors, can help that country attract foreign direct investment, bringing capital and employers into the country. The Doing Business index is not only providing incentives for improvements in regulations and property right enforcement, but is also making it easier to track such reforms in countries like Ukraine and Rwanda.
For those of us still enthralled by a very notoriously dysfunctional website, the recent release of AidData 3.0 should restore your faith in the power of the Internet and web developers. AidData is an online database that seeks to improve international development outcomes by making aid data accessible and actionable through crowdsourcing and an interactive user interface. The data portal allows any global development stakeholder to analyze over $40 trillion dollars in integrated remittances, FDI, foreign aid, private foundation grants, and domestic public expenditures across countries from 90+ donor agencies. AidData facilitates comparability between incoming financial flows and their subsequent real world outcomes and has the potential to be a valuable tool in the areas of development finance most readily amenable to policy changes.
The remarkable thing about AidData is that you do not have to work at the World Bank or even the Hudson Institute’s Center for Global Prosperity to effectively engage the interactive database. The portal provides enhanced visualization tools that make online data analysis easy and intuitive, even on a granular level. Users can run search queries for a specific project, donor, or country and generate state-of-the-art visual dashboards and geographic information system (GIS) maps instead of cumbersome data tables; all the food security projects in the northern Antsiranana region of Madagascar are just clicks away for a finance minister managing a large aid portfolio, an NGO volunteer working in a local field office, or a researcher conducting an in-depth study.
Civil societies are being increasingly seen as “arenas” of evolving mass participation and information exchanges with entering and exiting NGOs, social movements, and private investors that advance the common interest over pursuing private goals rather than as a static term with rigid contours.The spirit of AidData in rooted in the recognition that a nation with the most wealthiest of donors or a developing country with the most pressing of needs cannot successfully partner unless they both operate in vibrant civil societies and have adequate access to information. The poor in any given country may think that a routinely absent teacher or doctor must be just an accepted feature of the poor and may not realize that this may be due to unaccountable and opaque political institutions. This is where not only AidData but mediums like radio broadcasts, mobile telecommunications, and SMS messages can supply vital information, triggering a demand for accountability from institutions and even reciprocally nudge individual behavior. For example, a community-level information project in Uganda utilized community monitoring of health workers and service providers to dramatically improve health outcomes. Health facilities began to use suggestion boxes and numbered waiting cards and the reductions in wait time and absenteeism were dramatic. Similarly, when individuals in Peru, Bolivia, and the Philippines received monthly SMS message reminders to make a monthly deposit into their savings account, the gross amount saved by the reminded individuals increased by 6%.
Those on the opposite side of the equation that are administering aid and spearheading various development projects benefit from AidData to an even greater degree. Looking toward the future, natural disasters—which have doubled since 1980—will present a real danger to international peace and security and augment displacement, business shocks, and enormous material damage in the most vulnerable of communities as they. When a disaster strikes, first response usually comes from NGOs and their volunteers and then big governments and organizations follow, resulting in inefficient and uncoordinated relief responses; one community may receive triples rations of food but no water with another community not receiving any aid at all. The GIS maps of AidData can be a less costly tool to coordinate humanitarian and disaster relief projects as those working on the ground can see in real time which areas have yet to receive help.
Individuals have a right to be informed in order to hold governments accountable. Information is needed to actively participate in decision-making and is increasingly needed to access government services. Nevertheless, information is useless if individuals in civil society are not enabled to act on it. Appraisals of civil society should reflect this fluid component and open data portals like AidData should continue to seize opportunities to enhance transparency and improve efficiency by providing accessible and utile data to all development stakeholders.
A significant number of people in the world think of China as the next leading superpower. This isn’t surprising as China boasts the second largest economy, continues to see some of the highest GDP growth rates in the world, and has more than doubled their military spending between 2005 and 2011. Despite China’s accumulation of power, they still face an issue most people in the Western world would barely even think about, access to clean water. China holds 7% of the world’s fresh water, but also 20% of the global population. Pollution, inefficiency, outdated delivery systems, and logistical problems all contribute to a growing concern that water scarcity will hit China hard in the near future.
As China continues its rapid development, rampant pollution threatens to further deplete an already scarce resource. Thousands of industrial plants have popped up along the river banks all over China, dumping sewage and chemicals into water previously used by local populations resulting in up to 60,000 deaths per year. A 2012 report produced by the Chinese water authority indicated that “Up to 40 percent of China’s rivers were seriously polluted last year.” Three of China’s largest lakes (Tai Hu, Dian Hu, Chao Hu) are so polluted they are considered unfit for human contact. The laws fail to provide any short term economic incentive to treat water prior to discharge as the cost would be far greater than the fine imposed for environmental violations.
In addition to the extensive pollution of water by industries, there exists a regional disparity in water availability, especially when compared against population concentrations. Northern China only holds 23% of total water resources while supporting 40% of the total population as well as 64% of China’s arable land. 8 out of the 11 “dry” provinces, indicating water poverty at a per capita water consumption under 1,000m³, are located in the north as well as all 6 “deficit” provinces, which consume more water than they actually have. 4 out of these 6 provinces are home to China’s most populated cities including Shanghai and Beijing. In an attempt to bring water from the south to the north the Chinese Government has begun one of the largest engineering projects ever conceived. The South-North Water Diversion Project will link the Yellow and Yangzi rivers via thee new channels at a cost of almost $80 billion. While this would be an amazing feat of modern engineering, the environmental cost could be devastating. Major dam projects proposed on the Mekong and Brahmaputra rivers could also lead to sour relations and pollution issues with their downstream neighbors.
China does not necessarily need to go to such lengths to increase the supply of water, but rather reduce the demand. Currently, China’s water productivity is significantly lower than other competitive economies in Europe. The Economist writes, “For each cubic metre of water used, China gets $8-worth of output. The average for European countries is $58 per cubic metre. Of course, these countries are richer—but they are not seven times richer.” The price of water in China is extremely undervalued despite its obvious scarcity, causing it to be used carelessly by businesses and people alike. The low cost of water renders various forms of treatment, desalination, and recycling economically nonviable. Industries in China only recycle about 40% of their water while dumping the rest in various rivers and lakes. The Government is attempting to implement a complex pricing scheme to punish over use while retaining lower prices for rural farmers and areas with higher water efficiency. While solutions around efficiency seem cheaper and more effective, there are evident problems that may arise. Increases in the cost of water can affect poorer people who are already struggling to pay, or cut into the livelihood of rural farming areas in the north. An increase in the price of water can reduce the productivity of various industries that use it for cooling machinery or cleaning products. The largest industrial user of water is the energy sector where roughly 97% of China’s energy supply is dependent on water. Increases in price or water scarcity can have huge effects on the sectors production capacity and price.
Water scarcity in China is a complex issue that can’t be fixed with giant engineering programs alone. Time is running out as over half of China’s larger rivers have disappeared in the last 60 years. Hopefully additional support to environmental regulation agencies and stricter penalties for violations will push industries to recycle and treat more of their water supply. In addition advancements in agriculture practices in rural areas may help lower the amount water necessary for use. China could also be more wary of building huge cities in regions without easy access to water saving time and money on large diversion projects. Ideally, focusing on issues of efficiency and conservation may be best suited to address China’s water crisis and ensure their continued economic expansion.
October 2013 marked the 3rd anniversary of the widely-documented 2010 cholera outbreak in Haiti, a small developing Caribbean country which shares the island of Hispaniola with the Dominican Republic. Haiti first reported cases of cholera in October 2010; within one month cholera had spread to all parts of Haiti and the Dominican Republic. “Between October 2010 and August 2013, more than 670,000 people in Haiti were treated for cholera, with around 8,200 deaths attributed to the outbreak.”
Cholera is an intestinal infection, caused by ingestion – usually in contaminated food or water – of the bacterium Vibrio cholerae. Cholera causes diarrhea and vomiting, symptoms that can lead to dehydration and death within hours. Every year, 3-5 million people develop symptoms and 100,000-200,000 people die due to cholera worldwide. Many developed countries, like the United States and Canada, have largely eliminated domestic cholera. However, global cholera incidence has increased since 2005; in 2011, more than 60% of reported cases occurred in the Americas- mostly in Haiti.
As with many other diseases, cholera usually affects vulnerable populations. Those with low immunity are most likely to develop symptoms if exposed, and cholera can spread easily in areas with poor infrastructure and sanitation facilities. While cholera has been largely eradicated in most of the developed world, “cholera remains a global threat to public health and a key indicator of lack of social development. Recently, the re-emergence of cholera has been noted in parallel with the ever-increasing size of vulnerable populations living in unsanitary conditions.”
While many other countries in the Americas dealt with cholera epidemics in recent decades, Haiti had not encountered cholera for 100 years when the 2010 outbreak began. This meant that there was no natural immunity or protection within the Haitian population against this bacterium, which spread quickly. The cholera epidemic also began a mere 9 months after a magnitude 7.0 earthquake hit Haiti, which had destroyed infrastructure and displaced 1.5 million people. 80% of cases can usually be successfully treated with oral rehydration salts, but cholera in Haiti has had a high fatality rate- partially because of limited access to health services.
Three years after the epidemic began, the emergency response is slowly winding down. However, the underlying problems that allowed cholera to spread so quickly – most notably lack of access to clean water, sanitation facilities, and health services – remain unsolved. Haiti has the lowest coverage of improved water and sanitation services in the Western Hemisphere. According to the World Health Organization, in 2010 only 64% of Haitians had access to clean drinking water and only 26% had access to adequate sanitation facilities- and the number of people in Haiti with access to adequate sanitation has since decreased to 17%. But the problems extend beyond merely providing access; one recent survey showed that 50% of improved water sources in rural Haitian households tested positive for e. coli. To meet the Millenium Development Goal of halving the proportion of the world’s population without access to improved water and sanitation facilities by 2015, Haiti would need to achieve 74% and 63% coverage for improved water and sanitation facilities, respectively. Unless the situation quickly improves, these goals likely will not be met.
These unsolved problems in Haiti could represent an international health threat as well. In the years since the beginning of the epidemic in Haiti, cholera has spread to Cuba, most likely through international travel. Health officials in Mexico detected cases of cholera in early September 2013; since then, there have been 171 reported cases in Mexico. 75% of individuals infected with the bacteria do not show symptoms- but can still infect others around them. If cholera remains present in Haiti at current levels, many other countries are then at risk of ‘imported’ cases.
In February 2013, the Haitian government began a National Plan to eliminate endemic cholera in 10 years through improvements in water and sanitation, health care services, epidemiology and surveillance, and health and hygiene promotion. It is estimated that the National Plan will need $2.2 billion to be successful; however, funds and resources are scarce. A recent publication by the Center for Strategic and International Studies, Water and Sanitation in the Time of Cholera: Sustaining Progress on Water, Sanitation, and Health in Haiti, argues that the international community – specifically the United States – must step in and contribute to support these anti-cholera efforts. Improvements in water and sanitation coverage and health care in Haiti could have far reaching effects, such as decreasing the disease burden from other diarrheal and water-born illnesses. The report argues: “failing to adequately support Haiti’s water and sanitation activities threatens the sustainability of other U.S. development investments in the country, including improved population health, economic development, the empowerment of women, and progress toward democratic governance and political participation.”
Cholera is preventable with adequate water, sanitation, and healthcare services and treatable with oral rehydration salts; the most effective anti-cholera campaign in Haiti will combine all these strategies. Three years after the epidemic began, international coverage, attention, and action are beginning to wind down. However, these challenges persist and need permanent solutions to prevent future cases, future unnecessary deaths, and possible future epidemics in other countries. Eliminating cholera in Haiti will require a sustainable and coordinated long-term strategy – and will require participation from a variety of actors, including domestic governments and communities, non-profits, and the international community.