Making the Best Use of Development Dollars - Global Trade Magazine
  September 21st, 2017 | Written by

Making the Best Use of Development Dollars

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  • How to get the most bang for the buck when spending development money.
  • Cost-benefit analysis provides a powerful tool to see the potential benefits of development policy alternatives.
  • Shifting 1% of Bangladesh government spending could produce $35 billion worth of social benefits every five years.

“What if an extra dollar or rupee in a budget could feed ten people instead of one? Or if $100,000 of international aid spending could be tweaked so it would save ten times as many lives?” asks Copenhagen Consensus Center President Bjorn Lomborg in the September/October issue of Foreign Affairs. “When the stakes are this high, efficiency in spending becomes a moral imperative.”

Lomborg explains how to get the most bang for your buck when spending development money. “Cost-benefit analysis provides a powerful tool to see the true track records and potential benefits of the policy alternatives before us, helping more people live longer, healthier, better lives. The moral is simple: If you really want to make the world dance, don’t forget about the price tag.”

Highlighting recent work his think tank undertook in the public and private sector to find out how to improve the efficiency of Bangladesh’s development efforts, Lomborg writes, “The results were startling: they showed that major gains in national well-being could be achieved simply by rearranging budgets to favor policies with high returns on investment” while considering factors “such as justice, equality, and political sustainability.”

Lomborg estimates “that shifting a mere one percent of Bangladeshi government spending from mediocre programs to great ones could end up producing more than $35 billion worth of social benefits every five years—a whole additional government budget’s worth.”

The project revealed which unexpected programs could yield significant results—and which celebrated programs aren’t particularly effective. Lomborg estimates that an investment of $1 in Bangladesh would yield benefits of: $663 by switching to a digital procurement system; $21 by treating tuberculosis, one of the country’s crucial problems; $19 by providing small children with micronutrient supplements, including iodized salt, vitamin A, and zinc.

And yet, an investment of $1 would only produce: $2 from microfinance experiments; $1.80 through household solar projects; 80 cents from unconditional cash transfers.