The global reach of the EU

With the EU currently engaged in working out its budget for the coming period (2014-2020), and the British Government apparently resisting proposals for a modest real-terms increase in the budget, it's worth thinking a little about what the EU actually does with all our money. Here I shall mostly focus on some aspects of the EU's external relations.

The first thing to remember, though, is just how small the EU's total budget is. It's actually just under 1.25% of the overall EU Gross Domestic Product (GDP), and most of the spending goes to agriculture and the various structural funds.That doesn't leave much for all the other diverse things the EU does, both in Europe and across the wider world. Again, contrary to what many people tend to think, the EU bureaucracy is also surprisingly small. Given all this, you can see why, as presently constituted, the EU cannot possibly act as a sort of fiscal union for Europe, something that people often say would be needed for the Eurozone to work in the longer term. The EU budget, for instance, is minute as a fraction of Community GDP, compared to the US Federal Government budget in relation to the dollar area (the US and a few other territories).

Moving on to the EU's external relations, it turns out that all my recent and current work is funded by the EU, so I'll sketch a few points through three examples:

Tajikistan
When I mentioned to friends a few weeks ago that I was going to spend nine days in Dushanbe, the capital of Tajikistan, the main reactions were: (a) where is Tajikistan? And (b) why is the EU funding projects out there? Good questions, so let me try to explain.

Tajikistan is the smallest and poorest of the Central Asian Republics that were formed when the Soviet Union split up in 1991; it is located just north of Afghanistan. It experienced civil war in the 1990s and a good deal of economic mismanagement since then, though in the last few years the economy has been growing reasonably well and the public finances have returned to quite a healthy state. The EU has provided aid to the country ever since the Soviet Union broke up, and in recent years much of this aid has taken the form of technical assistance projects aimed at improving economic policy.

So my reason for going there was an invitation to contribute to the final stages of two of these projects, one on macroeconomic modelling and forecasting, the other on public financial management. Both projects involved a mix of outside experts and senior officials from the Tajik government working together to come up with solutions to various economic policy problems that fit the prevailing Tajik conditions. Not always an easy task, but an interesting one.

Turks and Caicos Islands (TCI)
These islands are in the Caribbean, and I'll be out there with a colleague from November 4th to 13th (arriving home on the 14th). Back in 2009, the British Government assumed direct control of the islands as a result of the TCI government's perceived corruption and incompetence, resulting in unsustainable budget deficits. The islands are one of the UK's overseas dependent territories, and as such, like the dependent territories of all EU Member States, they are eligible to receive EU aid through the European Development Fund (EDF). In the case of TCI, however, EU funding was suspended when the UK took over running the islands.

Our task for next week, therefore, is to assess the current economic situation of TCI, including the budget, in order to determine whether the islands have restored their economy sufficiently to be eligible for further EU funding. From what we already know, the islands obviously think they've done enough to turn things around, and with luck we'll end up supporting their view, perhaps with one or two added conditions. Also with luck, we might just manage to enjoy a little sunshine while out there, who knows...........

Falkland Islands
These islands are another UK dependent territory eligible for EDF support from the EU. My colleague and I have already almost finalised our report on the Falkland Islands supporting their EDF 10 funding, and proposing how it should be allocated in the next three years. However, the last major stage of the work involves spending two days in Brussels - November 15th and 16th - to discuss detailed points with Commission officials and to make sure we get the final report exactly right to meet EU requirements. As part of this work, I gather that a video link will be set up with the Falklands so that we can discuss some points with officials there, too.
____________

So that gives a little taster about the external activities of the EU. It's surprisingly diverse!

And after all this travel, to work on the above projects, I think that from November 17th I should be home at least until January.

Academic employment contracts

I was going to continue the discussion of the last posting on disruptive innovation and how it might impinge on our universities - and I shall come back to that topic quite soon. But almost by accident, while in the Budapest Corvinus University yesterday, I found myself talking about - and then thinking about - academic employment contracts. These have evolved over time, naturally, but they remain in many ways surprisingly open ended and almost informal.

When I first became a professor at Heriot-Watt University, back in 1985, my contract then basically said that I was appointed to be a professor, that I was responsible to the Principal of the University (in other words, he was formally designated as my line manager), and that I would be head of the then economics department for an initial five year spell. There was also a little about holiday, sick-pay, rules about consultancy and outside earnings, and stuff like that. But I don't recall anything in the contract that gave any clues as to what exactly a professor was supposed to do. In those days, I think, the presumption was that if you had got as far as becoming a professor, you should have absorbed enough of the 'ethos' and 'culture' of academic life to know what to do, without needing anything in the way of instructions or explicit guidance. And actually, that presumption was probably broadly correct.

Thus my contract provided at most a very sketchy outline of my role, while informal understandings across the academic community, and my personal goals to develop my own research, provided plenty of motivation and direction to keep me busy and (hopefully) productive. Moreover, I knew for sure that the Principal was not remotely interested in being an active line manager. He was clearly happiest when I just got on with the job (as defined by me), and was more than content to have the very occasional chat over lunch or a coffee for a quick update on what I was doing. Back then, we had no research assessments to contend with, no teaching quality assessments, no individual staff appraisal with annual targets and performance reports. So from a 'modern' perspective, it probably all sounds almost shockingly informal.

Even our external activities, including consultancy, were handled with considerable informality. It was taken for granted that as a professor, I would do some external examining for other universities, referee journal articles, and things like that, and I still do much of this, despite being officially retired. These are mostly unpaid activities (OK, external examining is not unpaid, but the remuneration is derisory; no one would do it for the money!) that most academics do as a routine part of being an academic. It goes with the territory - but there's nothing in our contracts about it.

As for consultancy, my 'old contract', long ago superseded by more restrictive conditions, allowed me to work up to one day per week outside the University without any special permission. I hardly ever took advantage of that provision, and the first time I worked for the World Bank, in 1990, I did consult the Principal about the project. I found myself in the bizarre position of trying to convince him that we should ask for an overhead contribution for the University (we did ask, and we got one), and I thought he might want the University to take a share of the income I was going to earn. 'No, no', he said, indicating that it was good for the University's reputation and standing to be engaged with bodies like the World Bank. He insisted that I keep all the money (which was not a huge sum, it must be admitted).

So much for the informality of the past, which was nevertheless perfectly compatible with working hard and being a productive academic, delivering a good, supportive teaching service to our students, and doing interesting research.

Nowadays, though, universities have shifted strongly in the direction of being more managerial, partly for external reasons to do with accountability - to funders, to the general public, to our students, etc. And partly for internal reasons, an increasing trend towards surrounding all our activities with extensive paper trails (for audit and accountability reasons, and also to provide protective documentation in the event of appeals and lawsuits), and towards thinking that we can get the best out of staff by managing/supervising them more closely. The last point, in my view, is just mistaken, but it seems to be the prevailing approach now.

Our contracts are probably a bit more precisely specified than they used to be, though they remain remarkably open ended. But in the academic working environment they are everywhere supplemented by quite detailed management of most of what we do. I sometimes wonder what this does  to academic incentives to do different things. In particular, service to the wider academic community is not managed, not incentivised (to use a truly horrible modern word) at all, and I wonder whether the next generation of academics will simply take the view that it is no longer part of the academic job. Or shall we move to a position where these external, and largely unpaid activities have to be properly paid for - so instead of a notional fee of £100, say, for examining a PhD, one would have to be paid, shall we say, £1500?

I would personally feel rather sad if the academic community did move far in this direction, as I like the traditional cooperative ethos and find that over the years it has given me the broad framework I have needed to manage the different strands of my work reasonably well. And I suppose I also feel that if institutions want their academics to deliver good work, it's not very wise to be overly prescriptive regarding what they should be doing. The academic 'job' is too complicated and diverse to be pinned down like that.

Consultancy projects - Points to watch out for! (2)

Continuing the theme of the previous post, here I comment on two other issues that arise in most reasonably challenging consultancy projects, namely information and judgement. As before, I treat my recent work in the Caribbean as a relevant case study.

For any consultancy assignment, good information is a critical success factor. When we started our work in St Kitts and Nevis (SKN), for instance, we were assisted by the provision of copies of various other consultancy reports and background papers. That was very useful. However, when we asked for more, our official contact person lacked the authority (and possibly the inclination) simply to say ‘Yes’ and had to consult more senior officers. On occasion, our requests resulted in a ‘No’ (as with the 2010 IMF Article IV consultation, which we were never permitted to see), or with a claim that the reports concerned still awaited ‘cabinet approval’; under further pressure, we were allowed to see executive summaries of the reports concerned. This is, frankly, an absurd way of treating highly experienced consultants, and I must say it took us by surprise. Hence the third lesson for successful consultancy:

Lesson 3. Make sure that all relevant reports, papers and other material needed to carry out the consultancy project to the required standard will indeed be made available (and preferably with the absolute minimum of hassle).

Later, when it appeared that the first version of our final report was insufficiently technical, and when we agreed to produce a more technical and analytical supplementary report, we asked for copies of various data-files to help us. We were advised that the files were ‘too big’ to send, and that some of what we asked for required approval from other ministries (presumably the Ministry of Finance or the Prime Minister’s Office). I’m afraid these days, such arguments look quite silly, for I have no doubt that everything we asked for could easily have been sent to us within a day, since none of it was especially complicated or problematic. Hence we had to do the best we could with the information we already had. Thus the fourth lesson:

Lesson 4. Ensure that all relevant (economic and financial) data - and these days that usually means, primarily, the relevant Excel files - is freely available to the consultancy project, without restriction.

An important aspect of most consultancy projects, where information is often assembled from a variety of sources of uneven quality, and where information is frequently incomplete or even unavailable, is that the consultants have to make judgements about various matters, and form conclusions on the basis of imperfect and fragmentary information. This is normal practice, an important part of consultants’ professional responsibility, and our project in SKN was no exception.

However, it turned out that on almost every occasion when we offered a judgement, the official SKN reaction was not ‘interesting point, we need to think about that’, but more along the lines of ‘how could you possibly know that, delete it from your report’. In other words, there was an extremely negative reaction to almost anything from us that sounded like a judgement. Aside from undermining our professional integrity, such an attitude implies that our SKN interlocutors were determined not to learn much, if anything, from all our work. To put it mildly, this was quite disappointing!

Let me briefly give some examples. Back in October when we first got GDP data on the country (1990 base), we already knew that a major rebasing exercise was going on, though we were not allowed to see any of the new figures until the exercise was published in mid-December. We found official estimates of the investment ratio at around 40% of GDP or even more, and I immediately commented that that could not be right. I discussed my view with ministry officials and with the Eastern Caribbean Central Bank, and all defended the existing figures. I said the figure should be 20-25%, and continued to question the official data in our draft reporting on SKN. My judgement, based on very elementary economic common sense, turned out to be correct.

Strangely, no one seemed remotely interested in how I had formed my judgement, whereas I saw a potentially useful part of our assignment as being to instil some ‘economic common sense’ into SKN officials. Surely we were there in part to teach people how to think about economic issues, but we weren’t allowed to.

We also commented on other contentious areas such as the government debt and the public enterprises (the latter including government departments producing utilities, public enterprises proper, and statutory bodies). In both of these areas we made many judgements and offered concrete policy advice, but in most cases where we made judgements the official reaction was as I indicated above, i.e. ‘how could we know; delete’. For the most part, I think what we had to say was correct and to the point, and would have benefited from open discussion and debate rather than simple rejection.

These remarks leads to my final, and in some ways most problematic lesson for consultancy projects:

Lesson 5. Establish right at the start that the consultancy project will involve making controversial and difficult judgements based on imperfect and incomplete information, and do everything possible to prepare the ground so that such judgements will not simply be dismissed out of hand.

Consultancy projects - Points to watch out for! (1)

As I mentioned in some previous posts, during the Autumn of last year I spent nearly three months out in the Caribbean working on an EU-funded technical assistance project. The project was based in the lovely islands of St Kitts and Nevis (SKN), ran from early October until just before Christmas, and drew on funds that formed part of the SKN Sugar Adaptation Fund. This fund was set up a few years ago, and it represents compensation from the EU for changes to the Sugar Protocol that made it less economic for SKN and other small states to produce sugar for export to the EU. In fact SKN took the decision to end sugar production back in 2005.

Working with a colleague who had long experience in the Caribbean, our task had nothing to do with sugar, however, and that's just as well as I have never pretended to be an agricultural economist. Rather, our remit was to study and advise on a macroeconomic framework for the islands, and deliver some training on that theme to officials from the relevant ministries. So for this project I had to pretend to be a macro-economist!

The picture shows the view from the house that we rented for the project, and where we did most of our work - yes, really.

While out in SKN, we wrote drafts of most of what we needed to do, but the final report was not completed and submitted to the St Kitts and Nevis government (through the consulting firm that hired us) until January this year. Then for a short time we ran into difficulties when the SKN authorities announced that our initial final report was unacceptable, and reported to the EU office in Barbados (which oversees the whole Eastern Caribbean sub-region) that they had been expecting something far more technical than what we had done.

This was rather strange as we (thought we) had made very clear to senior SKN officials how we proposed to approach the work, and why, and they seemed perfectly happy with what we planned to do. Our view was that in such a small country, with tiny technically qualified staffs in the key ministries, it would not be useful to set up a very technical macroeconomic framework - we thought no one would be able to use it effectively. So our first report was largely descriptive, underpinned by some economic analysis and supported by proposals about the organisational/ institutional changes that we thought would help in implementing the framework. But as noted above, we evidently misunderstood exactly what was wanted; this leads to:

Lesson 1. Make sure (really sure) you understand what the client wants.

Luckily, when these difficulties blew up we were already scheduled to spend a few days in Barbados (the picture shows a beach just north of Bridgetown), as a paper we had written in parallel to this project, on crisis and recovery in the Eastern Caribbean, had been accepted for an international conference in Bridgetown in late January (sponsored by the Central Bank of Barbados, the IMF and University of the West Indies). Our paper went down well, and we had time to meet the EU delegation in Bridgetown to discuss how to finalise our St Kitts and Nevis project. We agreed to write a more technical supplementary report, and this was delivered in February, finally accepted in March. So we got there in the end.

Part of the problem, I think - with the advantage of hindsight - is that we didn't manage to establish working relationships with key officials that were as trusting and positive as we would have liked. I don't fully understand what went wrong, though one thing that would have helped at the start would have been meetings with senior politicians - the Prime Minister and leading ministers relevant for our work. We failed to meet anyone at that level, and indeed were kept at arms length to a large extent by the middle level officials who were overseeing our work and (supposedly) helping us. This leads to the second lesson for consultancy projects:

Lesson 2. Establish positive and trusting working relationships at the most senior levels.

That's it for today; in my next post I shall offer some more lessons on the same theme.