This interview originally appeared in the Shell Foundation's October Newsletter.

The Shell Foundation has conducted an enlightening interview with former World Bank economist and respected academic William Easterly. As the author of a bestselling book and numerous articles about the effectiveness of development, Mr. Easterly offers a fascinating insight into the workings of the aid industry and why the application of business principles could offer a route to improved performance.

At July's G8 summit world leaders pledged to double aid spending by 2010, and barely a month later agreed to cancel $40 billion of poor country debts. We asked former World Bank economist and aid industry critic, William Easterly, whether he thought this was good news for the poor?

“Securing pledges for more aid is not going to make poverty history. What we should be examining is the aid industry’s plans to spend this new money because it has a track record of failure dating back to the 1940s and 50s. There’s been numerous and diverse attempts to buy the poor out of poverty but none of them have been particularly successful. So in 2005 we found ourselves ostensibly throwing more good money after bad. Above all, this is tragic for the poor.”

These are strong words from someone who spent 16 years working as Research Economist at the World Bank. In recent years, Easterly has carved out a respected niche as a leading critic of the aid industry, writing numerous articles, comment pieces and a bestselling book entitled The Elusive Quest for Growth.

He’s also supportive of the Shell Foundation attempt to engage the aid industry with the private sector to make development more accountable to the poor people its trying to serve.

“The Shell Foundation is asking the important questions in a year when billions more in aid has been pledged,” Easterly says. “Delivering the Millennium Development Goals (MDGs), for example, will hinge on the aid industry being willing and able to think and act more like a business if it is serious about meeting the needs of the poor across health, education and safe water."

However, Easterly’s starting point is why the aid industry is allowed to function in the manner it does. This is something which he claims makes it unique even among public sector bodies.

“There might be one billion people living on a dollar day but they are not a political constituency - they have no voice. They are effectively customers of this multi-billion dollar aid industry but lack the ability to give feedback and influence the type of aid they receive.

“At the same time, aid industry investors – rich country tax payers and the politicians writing the cheques – are ill-informed and far removed from the lives and daily challenges of the world’s poor. Therefore the disconnect that resides at either end of the development supply chain mitigates against change and reform to deliver the type of development the poor so desperately want and need,” he adds.

Therefore instead of targeted interventions responding to customer needs fused with pressure from investors to deliver, Easterly argues the history of development is one of grandiose and broken promises right up to the present day with the Millennium Development Goals.

“No one is accountable for failure,” he says. “Development professionals don’t think like business people. They are typically well-meaning, hard-working and idealistic, but they have to respond to a hierarchy of managers who themselves are captured by the political whims of those writing the cheques.”

A fundamental and little discussed aspect of international development is that the tax-paying public is far more concerned with everyday domestic issues than the plight of the distant poor.

“Imagine if the government suddenly stopped paying pensions on time or messed up income tax. There would be outcry, heads would roll and things would be put right. That’s not the case with international development.

“Instead, the public consumes poverty according to the way it is presented by aid agencies and the mainstream media. NGOs focus on sensational causes such as famine and disease and the media laps it up. Not surprisingly, we dig into our pockets, the governments ups the aid budget but then in six months time poverty is back on our TV screens. It never seems to go away,” he adds.

So are we rewarding the aid industry for past failures with the latest round of pledges to increase spending?

“Yes, in a sense,” admits Easterly. “We’re allowing politicians and the aid agencies to distract our attention from failure. It is, after all, in the interest of the aid industry to suppress past failures. There’s no historical memory and there’s a reason for that. It’ll be a PR disaster to confess to a track record of poor performance when pitching to double your budget. As such, there’s no systematic learning going on – the aid industry is not wired up to correct itself in the same way as an enterprise, for example.”

On this premise Easterly draws on the approach of the Shell Foundation to introduce business principles and business thinking to the working of the aid industry.

“The aid industry must be held to account. This means a whole new incentive structure running the length of the development supply chain. Above all, the customer – the poor – should be its focus. The aid industry needs a new business plan and the private sector can help write it.

“Until such time the MDGs will remain empty rhetoric. We have to breakdown these grandiose goals into specific programmes country by country. We have to get rid of top-down, one-size fits all solutions and focus on meeting the needs of local people wherever they may live. Enterprise thinking has much to offer in achieving this.”