Monday, June 26

So Much Ill and So Little Good

William Easterly, the author of The White Man's Burden : Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good begins his book stating that there are two tragedies for the world's poor.

First, that so many suffer because they lack access to existing inexpensive solutions and second, that the $2.3 trillion (that is $2,300,000,000,000 in cash money / 23 followed by eleven zeros or 2.3 thousand billion bucks!) spent on foreign aid over the last five decades has still not managed to get those existing inexpensive solutions to the poor. Indeed, foreign aid often makes the lives of the poor far worse.

This point of view is a far cry from the Jeff Sachs school of "throw so much money at the third world that even the most rapacious elites can't manage to steal it all ... then maybe something good will happen ... maybe". The Easterly book manages to actually judge and evalutate human reality and the results of aid, accountability, institutions and governance.

His scholarship encompassess the modern history and policy of economics and aid with a sharp eye out for what actually works ... not what it is easy or convenient to accept. We will try and let the book speak for itself as we admittedly cherry pick through it. We were impressed with this work because the author agrees with us on many things sure, but mainly because he brings decades of broad scholarship and intimacy with the subjects at hand to the fore - all supported by fact that he constantly evaluates and questions.

Page numbers are from the 2006 Penguin Press edition.

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Some aid is expected to have impact on growth in the short term while other forms like humanitarian aid are expected to help in the long term. A study from the IMF in 2005 revealed that there was "no evidence that either 'short impact aid' or any other aid had a positive impact on growth." (p. 49)

The results of studies from the Center for Global Development, which have been used by Sachs and Blair to justify quadrupling or at least a doubling of aid under the MDGs and the Commission for Africa actually showed that "aid had a zero effect on growth whe it reached 8 percent of the recipent's GDP, and after that the additonal aid had a negative effect on growth". (p. 50)

A 2000 World Bank Study stated that "[d]espite the billions of dollars spent on development assistance each year, there is still very little known about the actual impact of projects on the poor". (p.194) Indeed, "bureacracies will devote effort more to activities that are more observable and less to activities that are less observable". (p. 179)

Observable can mean headlines or simply amounts of cash involved or just some combination of hype thereof. Popular accountability could make the less observable more important but there is, according to Yale Professor James Scott an "inherent contradiction between planning ... and democratic politics" that are normally implied by accountability. (p. 145)

Easterly says that the IMF and the World Bank don't show respect for democracy in general. The IMF charter officially bans consideration of domestic politics "[b]ut a problem with the apolitical approach is that it is not apolitical. Supporting a sitting government with funds is unavoidably a political act". (p. 147)

Taking up the example of Mobutu and numberous IMF bailouts he received Eaterly notes that the thefts were no secret. The brutal selfishness of local dictators began long before aid even began - one early 19th century observer noted of Haiti that
The present government seems to consider the poverty and ignorance of the people as the best safeguards of the security and permanence of their own property and power.
Dictatorships like the Duvaliers got credits galore when aid began although nothing changed politically. (p.149) Later in 2001 Congo the World Bank went out of its way to give the Kabila fils government 'early wins' but "[d]idn't explain why it wished on the Congolese people a government made up of political actors who had demostrated an exceptional ability to use violence". (p.289)

Easterly points out that while the rich can use their money and power in markets and accountable government that the poor are utterly alone against governments whose interests may have nothing to do with their own. "The central problem is that the poor are orphans; they have no money or political voice to communicate their needs or motivate others to meet those needs" while no one in the aid circuit considers what may actually work and what may not actually work. (p. 167)
Please understand that the foreign aid problem is inherently difficult because of the complexity of development, the weak power of the poor, and the difficulty of getting feedback from beneficiaries and of learning from failure. Throw into the trash can all the comprehensice frameworks, central plans, and worldwide goals. Just respond to each local situation according to what people in the situation need and want. (p.206)
Accountability for public services is called democracy. (p. 381)
donors also put a positive spin on awful recipient governments by asserting that while things are bad, they are getting better. The use of gerunds such as "developing," "emerging," and "improving." The language effects even scorecards that are supposed to hold governments accountable for poor results. (p.138)
The issue of playing with words in the face of millions suffering and billions being wasted comes up again with 'loans' - "[c]alling a loan to the poorest countries a 'loan' has become even more fictional. (p. 232) Then there is the issue of foreign aid volume as though it is an input to development and not an output.
Advocates for the world's poor throughout the decades have focused on increasing the volume of foreign aid. The recommended increase displays a strange fixation on double.
McNamara defined success at the World Bank in the 60s and 70s in terms of doubling loan volumes (p. 182) This trend has continued through to Blair, Sachs and the vast aid apparatus of which they are only the most visible elements.

Another issue beyond brutality and corruption is that of the society itself. As Francis Fukayama also pointed out in Trust Easterly quotes a pair of World Bank economists who "found that low income societies have less trust than rich societies, and societies with less trust have less rapid economic growth". (p.79)

Now imagine the result when a local government strives to create LESS TRUST in a society by tribal divide and rule and/or the creation of a police state. In previous paper by Easterly and Levine 'Africa's Growth Tragedy: Policies and Ethnic Divisions' reviewed in Foreign Dispatches the authors define these problems and their costs
Africa's economic history since 1960 fits the classical definition of tragedy: potential unfulfilled, with disastrous consequences. In the 1960s a leading development textbook ranked Africa's growth potential ahead of East Asia's and the World bank chief economist listed seven African countries that "clearly have the potential to reach or surpass" a 7 percent growth rate.

Yet, these hopes went awry. On average, real per capita GDP did not grow in Africa over the 1965-1990 period, while, in East Asia and the Pacific, per capita GDP was over 5 percent and Latin America grew at almost 2 percent per year. Much of Africa has even suffered negative per capita growth since 1960, and the seven promising countries identified by the World Bank's chief economist were among those with negative growth. Sub-Saharan Africa's growth tragedy is reflected in painful human scars.
Easterly also identifies what works. For example financial markets are a source of free market efficiency and create opportunities for the creation of wealth by borrowing and investing resulting in a positive feedback loop (p. 76) of service for the supposed consumers of economic growth - the so called people.

Another crucial element is property rights which underly financial markets and economic growth. "Property rights are an incentive to accumulate assets over time and across generations, which is often necessary to have a productive capacity to meet consumer needs. When I sacrifice consumption to buy land, factories,or other assets, I don't want someone else seizing those assets. (p. 90)

Easterly makes two crucial points on what should be done.
The utopian agenda has also led to an unproductive focus on trying to change whole political systems. The status quo - large international bureaucracies giving aid to large national government bureaucracies - is not getting money to the poor. Conditions on aid don't work to change government behavior.
[...]
Remember, aid cannot achieve the end of poverty. Only homegrown development based on the dynamism of individuals and firms in free markets can do that. (p.368)
Above all the author is opposed to BIG PLANS that are supposed to change the world with just a few tens of billions more. What is really needed is FREE PEOPLE.

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There is no reason to believe that as things stand in the aid game that countries like Ethiopia will do better for their people in the future. Ethiopia is a clear case of how divergent the interests of rulers and ruled can actually be - and how divergent the interests of the ruled and the 'development partners' of the rulers can be as well.

The Ethiopian government is doing everything wrong IF one assumes that its aim is development. From the point of view of gaining more power and money for a tiny aristocracy from day to day while the getting is good, then the Ethiopian government is doing everything right.

Remember the quote above from the early 19th century observer of Haiti that
The present government seems to consider the poverty and ignorance of the people as the best safeguards of the security and permanence of their own property and power.
We all want to assume that such is not the case and that generosity erases poverty because it is more often easier to believe so than to accept how really bad a government can be or how complex the world is.

Ethiomedia posts a recent article by a Western reporter who quotes an embassy official
"With direct budgetary support, donors aren't just dating the Ethiopian government, they're married to it".

A key force in earning that trust was Meles Zenawi. The prime minister, as both critics and fans will say, is a persuasive man, able to talk like a democratic reformer or a World Bank technocrat when needed.

"I always thought that Meles was going to save this country," says a long-time Western diplomat based in Addis.

"He comes across as a calm and rational leader, but right under the surface is a hard-core ideologue with a psychopathic willingness to kill his own people to keep power." (Like most people interviewed for this article, the official refused to be identified.
To us this is a bit like the scene in the classic movie Casablanca where Rick's casino is shut down by an official who is "shocked , shocked to find out that gambling is going on" - in the next shot the same official is handed his roulette winnings as he orders everyone out.

You see, all WANTED desperately to believe in Meles DESPITE all evidence because it served the purposes and illusions of all concerned - except the 70 million Ethiopians who it was all suppposed to be about.

Foreign aid donors are the sole consituents of the government and they are only fitfully concerned with the brutality towards and future economic prospects of the government's 70 million hostages to donor good behavior. Donor good behavior is defined in terms of the respect and above all the money paid into the coffers of government and the elites at their core. None of this is a secret to anyone concerned.

Donors give money for a host of geopolitical reasons that have nothing to do with development and growth. Aid given for frank feelings of altruism or the betrayal of feelings of altruism are all served with the now ridiculous notion that 'at least something is being done'.

Aid has created an Ethiopian political system designed to serve aid donors as long as they don't touch the political power of the government or even look too hard to see how the 'people' are being served. The donors play along at every level. The governments as we noted have realpolitik interests while their bureaucrats and NGO bureaucrats have career interests in the status quo and the promised 'doubling' of aid with no view to results.

The Ethiopian government dictates who is hired locally and internationally by NGOs. Indirectly for foreigners but it is clear that if they don't play ball they won't do well dealing with the government. Ethiopians, native or foreign based must be ... 'cooperative' and serve the interests of the government more directly to be acceptable to the regime.

Every measure of NGO operation is thus influenced by one of the most brutal, corrupt and least attractive to foreign investment regimes on earth. This is mutely accepted as the price for building careers and that proverbial 'chance to make a difference'. Both government or NGO bureaucrats are graded far more by how they get along with the local dictator and his minions or by pushing paper back and forth than by any measurable sort of results.

This is why absurd government claims of growth or investment are largely met with cooperative and complicit silence from the aid community. To them it makes no difference anyway and despite bouts of Meles worship they never really believed that they were creating growth and change but rather just enough 'positive' stirrings to keep their own taxpayers silent.

People joke about how the Immigration bureaucracy in the US is the very worst one because citizens don't have to deal with it. The actual reality of that imagined efficiency and dedication is found in foreign aid bureaucracies which literally don't have to deliver results at all to stay in business.

Imagine the existence of such agencies for a moment! Aid bureaucracies are judged by how much money they spend and plan to spend - not by how many people they lift out of poverty. For example, Ethiopia's government, tens of billions in aid in hand after 1991 has yet to allow its people to develop by any measure.

Now, we are sure that all those aid bureaucrats are indeed 'good' people. However, they only need to look across the table at their government, party and govt/party cronies during the next negotiation or dinner party to know the faces of those who are their real development partners and also the authors of ongoing, accelerating Ethiopian misery.

That vanishingly small elite that you hang out with and pay off for minimal access to Ethiopians controls the inseperable party and government as well as their attendant business empires and monopolies that account for the great majority of allowed economic activity.

After all you know who gets most of your aid contracts and all of the budget support and loans don't you? The same folks own all the land, control all the credit, pretend to have courts, laws and parliaments, routinely kill people and no longer even pretend to have free press or politics. But, you already know that don't you?

Everything that made donor countries rich or former poor countries develop is not being done in Ethiopia where the government's greatest pride is the amounts of aid it has managed to beg from societies where Ethiopians are acutally allowed to create wealth.

Neither lowly ethiopundit, nor Easterly on high nor any other of the myriad bearers of common sense everywhere are any sorts of prophets here. Everyone knows what works and what doesn't and what the human costs are in that choice for a long time already.

Note, no one is speaking of not providing food to the starving here - making that the issue along with crocodile tears are the usual tactic used to avoid discussing the benefits and harm that aid causes. Essentially, aid should be about more than subsistence welfare to last just from season to season and year to year.

The point should be to help the supposed recipients in the long and short run by allowing actual growth to take place and avoiding what has failed already. The old saying that 'the road to hell is paved with good intentions' is particularly apt here.

Some brutal regimes have oil or inherited a relatively developed economy that will take years to destroy while they strip it bare at leisure - Ethiopia has instead the endlessly renewable blood, sweat and tears of 70 million human beings - the evils of harvest time are horrible to behold.

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There are ways to deliver aid responsibly - read No More Appeasement for background and examples of what can be done to actually help - responsibly.

# posted by ethiopundit : 6/26/2006


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