“Focusing on results” is usually political speak for “I am going to make cuts” – but not in either of these cases (taken at face value, anyway). The Obama Administration wants to spend more, not less, on the soft side of American influence in the world. Britain’s Coalition has pledged not just to protect the aid budget, which ballooned under Prime Ministers Blair and Brown, but to keep increasing towards the target of 0.7% of GDP suggested by the UN. Yet whilst that is all fine and dandy, spending that extra cash wisely presents a tough challenge.

Britain’s Department for International Development (DFID) is the best case study here. In the past decade the aid budget has soared from about £2 billion in 1997 to nearly £8 billion in 2009 (from 0.26% of national income to 0.52%). To get the money out of the door, DFID has had to write large cheques to developing countries (known in the trade as budget support) and to multilateral organisations such as the World Bank. (Britain gave more than America the last time the Bank passed round the hat in 2007 . Negotiations on another ‘replenishment’ are underway now and should conclude by the end of the year.)

Yet neither of those channels really fits the results agenda. Politicians rightly worry that slabs of cash handed over to African governments will go astray and doing so has meant trusting some less than credible leaders (even darling nations like Uganda and Rwanda have skeletons in the cupboard). Likewise, international aid bureaucrats cannot claim to have a great track record for getting results (just ask Bill Easterly).

Based on leaked documents, so far it is Mr Shah who has provided a clearer sense of what the new results-oriented aid will look like, with welcome commitments to more entrepreneurial and innovative approaches. Mr Mitchell, by contrast, has taken flak from the aid lobby for what he is not going to do, as well as facing what appears to be a sustained campaign from the right of his party to discredit his department and unpick the deal that protects his budget.

In January, in anticipation of this year’s British general election, we launched our Philanthrocapitalist Manifesto. One of our proposals was that the new British government should draw on the model of Tony Blair’s Social Investment Task Force, which spawned important new ideas on leveraging private financing for social innovation (many of which are now part of the new coalition government’s domestic ‘Big Society’ programme), by creating a Development Investment Task Force to do the same for international development.

So far Mr Mitchell has not talked much about partnering with philanthrocapitalists, whereas such partnerships are a central theme of many of Mr Shah’s public announcements (perhaps unsurprisingly since Shah came to USAID from the Gates Foundation). Bob Geldof, the man behind Live Aid, seems to have realised that a new approach is needed: according to the Financial Times the veteran rock star activist is now trying to raise a $1 billion private-equity fund to invest in, not donate to, Africa. Like him, others wanting to help the world’s neediest people must now move beyond Mr Geldof’s famous (if apocryphal) demand, “just give us the fockin’ money.” It is time for Mr Mitchell to come up with a sophisticated new strategy. Creating that taskforce would be a good place to start.

The Obama administration is currently undertaking at least two fundamental reviews of international development policy, one from a national security prespective, the other led by the State Department, of which USAID is a part. There had been rumours that, having originally talked about turning USAID into a stand alone division of government separate from the diplomatic wing of foreign policy, much like Britain’s Department for International Development, Team Obama was leaning towards scrapping USAID altogether. Shah’s nomination lays that idea to rest, and now he will be looked to for big ideas on how to improve the effectiveness of international aid.

USAID’s record is under attack from all sides, from those such as Bill Easterly and Dambisa Moyo, who have argued powerfully that aid harms the world’s poorest countries by breeding corruption and dependency, to the likes of Senator John Kerry, who want aid to play a bigger role in winning the “battle of hearts and minds” in places where America’s enemies currently flourish. Shah’s task will be to develop an aid policy that works on both fronts.

Shah is no Paul Farmer, who is widely regarded as a saint for his pioneering work on providing health care for the extreme poor in places such as Haiti and Rwanda. Yet running US AID is no place for a saint (which is not to cast any aspersions on the character of Shah!). There are real questions about the ability to scale up Farmer’s high-touch, resource intensive approach to health. Shah, by contrast, was until recently in a senior role at the Gates Foundation where, among other things, he was immersed in practical questions about how to improve food supply chains so that small farmers in poor countries can earn a decent living. Hopefully that will have taught him that job creation so poor people can help themselves should be at the heart of aid policy – and few people will understand better than him the practical requirements of such an aid regime.

Hopefully that will be only one of the lessons he brings from his years in one of the power centres of philanthrocapitalism, the Gates Foundation, where he was one of the more creative thinkers. Indeed, he is one half of a philanthrocapitalist power couple occupying two key jobs in the Obama administration: his wife, another Gates alumnus, has a leading role in driving innovation in the Department of Education, where partnerships with philanthropists are crucial to achieving the goal of dramtically improving the quality of education in America’s schools. The power of the Bill Gates Empire continues to grow…

One thing Shah should do is contact his old boss to form an advisory group made up of philanthropists who are focused on international development, to give them a formal role in the shaping of US government policy. Currently, both government and private aid initiatives are far too uncoordinated, and suffer badly from that. Shah should also read the excellent recent paper by Owen Bader on creating a market for aid, that we reported on recently.

In particular, there is a huge opportunity for Shah to increase the impact of aid and of philanthrocapitalism by investing in measuring properly the impact of all this money being deployed abroad, and of publicising this data so everyone can get a much better idea of what really works. Here there is potential for partnering with the Hewlett Foundation’s promising 3ie initiative, for example.

One bold move would be to invite proposals from philanthropists and businesses to improve the effectiveness of US aid spending, and to commit to implementing at least the best five ideas. Another would be to set aside part of the aid budget for scaling up successful philanthrocapitalistic initiatives in the developing world. He might even set a leverage target, for how much of the aid budget must be deployed in partnership with private funds.

Two recent initiatives to encourage for-profit approaches to development could also be accelerated with some help from USAID. One is GIIN, the Global Impact Investing Network. Another is ANDE, the Aspen Network of Development Entrepreneurs.

Last, but by no means least, there is a huge opportunity is to deepen the public’s commitment to international aid and at the same time tap into the wisdom of crowds, supporting the small donations of ordinary Americans by announcing that a certain percentage of the aid budget will be available to match gifts through innovative internet sites such as Kiva.org and GlobalGiving.

We have no idea what Shah thinks of any of these ideas: the last time Matthew spoke to him was in January, before he left the Gates Foundation. But we do know he is a fan of Philanthrocapitalism, as he signed up to our facebook fansite. We are excited to see what he can do with this important new role. Watch this space!

Easterly was picking up on an earlier article in the Huffington Post by Magatte Wade, a Senegalese entrepreneur, that fired the opening salvo against the tourism initiative. Wade picked out rule 1 of the brochure for prospective visitors to Mayange, the Millennium Village in Rwanda: “Please do not give anything to the villagers – no sweets, cookies, empty water bottles, pens or even money.” ”Condescension towards Africans is both offensive AND a sign of a counterproductive approach to development,” grumbled Easterly.

Millennium Villages have drawn plenty of criticism, particularly from commentators from the developing world, for being top-down, white-man-knows-best projects, with too much celebrity glitter (Madonna is one of the sponsors). In the book, we quote Indian social entrepreneur Bunker Roy, who claims, with what looks like considerable poetic licence, that he could use the money from one Millennium Village to feed 100,000 families.

Yet the tourism project has been defended with vigour by the Rwandan head of the Millennium Village at the centre of the controversy, again in the Huffington Post. Donald Ndahiro says that, rather than being imposed by Mr Sachs or his wannabee Albert Schweitzer minions, the tourism project was the brainchild of the community itself, with most of the money going back into projects such as building houses. Telling tourists not to hand out gifts, he says, was a deliberate decision by the villagers themselves, for fear of creating a dependency culture in Mayange.

Sachs has staked his reputation on the Millennium Villages project. He is not trying to lift a billion people out of poverty one village at a time, as some critics claim. The goal, in typical philanthrocapitalist style, is to lever wider change by piloting new ideas to create models that can be scaled up. According to Ndahiro, this is already happening, with ideas from Mayange now being adopted as part of the Rwandan government’s Vision 2020 national development plan. If the tourism works, let’s hope it gets adopted. If it doesn’t, let’s hope that Sachs will be open about it.

Singer’s book is an extension of an article he wrote for the New York Times a few years ago, which we discuss in some detail in the book. His argument has three steps: a) that the suffering of people in poorer countries is bad; b) that it is morally wrong to do nothing to address this suffering if you can; c) that by giving to charity you can do something about this suffering.  Hence we should all hand over some cash to help the poor, and the more we have the more we should give.

The step in the argument that is problematic for many people is the last one – that giving to aid agencies actually makes a positive difference (see for example the attacks on the aid business by Bill Easterly and, more recently, Dambisa Moyo). Singer explains how charities have traditonally been reluctant to provide hard evidence that their programmes have real impact and goes on tell the story of GiveWell, which was created in 2007 by two hedge funders, Holden Karnofsky and Elie Hassenfeld, to offer assessments of nonprofits based on their impact. GiveWell is part of the new infrastructure of philanthropic intermediaries that we describe in the book, which are trying to increase the quantity and quality of philanthropy by getting serious about measuring effectiveness. This quantitative approach, borrowed from the world of finance, has its critics, so it is interesting to see that Singer identifies the lack of transparency about impact as a big obstacle to giving.  Nonprofits please take note.

One of the other reasons that people don’t give more, according to Singer, is what he calls the “diffusion of responsibility effect” – that when there are many other people who could help, we all tend to leave it to others, so nothing gets done. Then add to that the “sense of fairness effect” – the fear that even if we do our bit, others won’t do theirs, so we are being taken for a ride – and there are some pretty strong psychological disincentives to giving.

An important gap in Singer’s discussion of these disincentives to give is that he doesn’t look at the impact of government spending reinforcing stinginess.  In our view this may explain why countries with bigger government (Europe) have a lower propensity to give than, say, America: in countries where citizens expect the state to provide there may be a tendency to assume that the needs of the developing world are being taken care of through the tax system, hence there is no individual responsibility to give and it feels “unfair” to be asked to give as well as pay taxes.

If the state admits that it does not have all the answers and that donors can do things that government cannot (i.e. philanthropy is not just a substitute for higher taxation) this helps to address the diffusion of responsibility and fairness obstacles to giving. That is one reason why we argue for a new social contract for philanthrocapitalism, based on the understanding that there should be a division of labour between government and philanthropy. If society admits that government cannot do it all, it is much harder to argue that the individual has no responsibility.

Yes, according to an interesting post from aid sceptic Bill Easterly (author of White Man’s Burden) on his new blog, Aid Watch. (Thanks to Owen Barder for flagging this up on his own provocative and intelligent blog on development.)

Easterly criticises Gates for claiming that there have been big falls in malaria incidence in some African countries. Gates is “repeating numbers that have already been discredited,” he says, since they were first cited by the World Health Organisation’s former head of malaria control Dr Arata Kochi (who made headlines in 2008 as a critic of the Gates Foundation). 

Felix Salmon quickly jumped to Gates’ defence, citing “pretty solid peer-reviewed research” from the Malaria Matters blog that anti-malaria programmes are working in places like Rwanda and Ethiopia, although some of this is evidence from specific projects rather than data on aggregate infection rates for whole countries.  The Zambian health ministry, however, is claiming a 50% reduction in parasite prevalence in children since 2006 as result of malaria control programmes and a recent study using sample data in the Malaria Journal has similarly promising results from Ethiopia and Rwanda.

Easterly is right that we should rely on hard evidence to judge whether development programmes are working. He is also highlighting the enormous problems in measuring progress in development because the data is often so poor.

Easterly says that “the Gates Foundation should be funding more rigorous data collection”. Impact measurement in global health has been a focus of a number of Gates investments in recent years, including a $100 million grant to the University of Washington, as well as the WHO’s own Health Metrics Network and the Institute for Health Metrics and Evaluation.

One public health expert commented to us that calculating the effectiveness of anti-malaria programmes is complicated by mis-diagnosis of malaria (when malaria is epidemic, any classic fever is likely to be malaria and so is counted as and treated as malaria; if control programmes work and malaria is less common, fevers are still being diagnosed and treated as malaria, even if they are now more likely to be a respiratory infection).  Our expert’s recommendation?  Gates should be leading an effort to subsidise a rapid diagnostic test for malaria.

Easterly’s main argument is that top down aid processes don’t work, whereas bottom up processes driven by people on the ground have a much better chance of succeeding.  Hence his scepticism about grand strategies like the Millennium Development Goals.  He said he had some reservations about the philanthrocapitalists, like Gates, falling into this trap but was generally supportive of new ‘searchers’ entering the development process, as long as they are willing to really look at evidence and acknowledge mistakes.  We look forward to hearing his views on the book.

Easterly’s principal sparring partner in recent years has been celebrity economist and aid champion Jeffrey Sachs, for obvious reasons.  But he tells us that he’ll be turning his guns on Paul Collier, author of The Bottom Billion, in a forthcoming article in the New York Review of Books.  Easterly says he wants to challenge the evidence that Collier uses to argue for western intervention in failed states.

Easterly is also working directly with one of the philanthrocapitalists we discuss in the book – he has just got funding from the Templeton Foundation (from their economics programme rather than their spirituality programme) to set up a team at New York University to scrutinise aid.  He’s planning an annual report on the best and worst of aid, which hopefully will include the philanthrocapitalists and stimulate the debate about impact that we argue for in the book.