International Development–More Questions Than Answers

A new high-level panel convened by Prime Minister David Cameron, joined by the Presidents of Indonesia and Liberia, debated – once again – the future of international development.  The field is stagnant, say the organizers, and a new, more innovative, and responsive system must be put in place. (The Guardian, Editorial, 1.21.13)

International Development has been around for a long time.  It got it start after WWII when the Marshall Plan was designed to rebuild Europe.  Harry Truman in his Point Four Program turned his attention to the developing world and its developing world incarnation USAID was born shortly thereafter:

The 1950 Point Four Program focused on two goals: creating markets for the United States by reducing poverty and increasing production in developing countries, and diminishing the threat of communism by helping countries prosper under capitalism. (USAID)

In 1961 Kennedy created USAID and formalized international development within the structure of the US Government.  It adhered to the same principles enunciated by Truman and was as much a program beneficial to the US as it was to recipient countries – more, in fact, because Buy America legislation promoted American products; foreign ‘assistance’ meant the deployment of American technical advisors whose salary returned to the United States; and valuable American dollars were means of leveraging American political influence.  Exposed to American advisors, American products, American programs, and American ideas, the argument went, countries would be less tempted to ally with the Soviet Union in the Cold War.  As importantly, a strong foothold in countries endowed with natural resources and a complaisant government, meant years of favorable private company contracts.

The United States Congress was under no illusions.  The international development program was set up to benefit the United States first for economic and geopolitical reasons; that the money was meant to be a source of leverage to curry favor with wobbly regimes; and that a physical American presence showed our political commitment. If ordinary people benefitted collaterally, so much the better; but early development programs were designed to keep governments happy.

The irony of all this is that legions of young, idealistic Americans, many just out of the Peace Corps, joined USAID and the many private NGOs taking advantage of government largesse to do good.  They believed – despite he clear indications from Congress and the history of Presidential statements – that the real goal of these programs was to alleviate poverty and human suffering.  They were willing to work within the shabbily-constructed projects always designed to please Congress and their lobby groups and to advocate tirelessly for more money, more US involvement, and more commitment.  It was a perfect arrangement.  Congress would be satisfied because the aid program was working o promote American interests; young idealists would realize their dreams to actually work alongside poor people in cooperative ventures; and countries would easily suffer the latter to assure the flow of funds from the US.

The World Bank, set up as part of the Bretton Woods agreements after WWII as an international funder, operated with less overtly political goals; and in the Sixties financed capital improvements – roads, ports, railways, bridges – in developing countries.  These were exactly what countries emerging from colonialism needed, for they provided the infrastructure necessary for the movement of private goods and services.  They were the first steps towards liberalizing and modernizing newly-independent nations.

All that changed when Robert McNamara, guilty about his involvement in Vietnam and wishing to expiate his guilt by ‘doing good’.  If he regretted the pain and suffering he caused for the millions of Vietnamese during the War, then he could do something about it.  He reconfigured the Bank, moved it away from the successful capital development projects of the past, and turned the focus on people, poverty alleviation, and human progress.

This, of course was a tricky business.  A bridge is a bridge, allowing trucks to carry goods from a formerly underserved area to market, increasing revenue for farmers, truckers, merchants, shippers, etc.  Alleviating poverty through more direct social means – programs of health, education, and welfare – are far more complex.  Behavior change is at the heart of the matter, and getting people on the margins for whom no risk is tolerable to opt for a new food, health practice, or educational initiative was almost impossible – and even if it were, it would take years.  The World Bank had wandered into the same miasmic swamp as USAID. The difference was that USAID never cared whether their projects succeeded or failed; just that the money was spent, governments were happy, and Americans were on the ground.  The World Bank cared, rarely succeeded, but kept proposing new configurations of their loans (governance, transparency, conditionalities), issued World Development Reports in which they said that they would get it right next time.

USAID projects designed in Washington  were doomed to failure from the start.  If countries had been asked what they wanted rather than be given what the US wanted, they might have been better off.  Advisers on an environmental sanitation program which was promoting Low Cost Sanitation – i.e., latrines - went through the exercise of ‘Needs Assessment’, finding out what the residents of the community really wanted and needed, and in almost all cases they replied something other than latrines.  Blocked drains were a big problem, they said, and the build-up of water was an ideal breeding ground for mosquitoes.  They had no proper municipal solid waste disposal, so rats and other vermin were a problem.  That was all well and good, advisers replied, but latrines is what you’ll get because that’s where the money is.  The dismal results of the program were not unexpected.

There have been noteworthy success stories, but these had less to do with traditional development programs than with ideal products which were already in demand.  Vaccines work when they are given and ARVs (Antiretroviral drugs) are effective against AIDS; and artemisinin successful to prevent and control malaria.  In the last decade, these drugs have flooded Third World markets – discouraging local enterprise, ultimately unsustainable, but effective in reducing disease – and have been welcome.

Which brings us to the question before the British panel – how to reconfigure, reinvigorate, reinvent as system badly in need of reform.  Few development projects have reported success, projects are still badly skewed to US interests and not those expressed by local governments; and good money follows bad.  Not only are the projects of little interest to these governments, but they have been designed to keep money away from government and in US NGO hands.  There is literally no reward for a government who needs visible successes to keep its electorate happy.  Worse still is the fact that the US seems blind to the corruption and venality in many developing countries.  The State Department and USAID has continued to pour money into Mali, Ethiopia, Rwanda, and Uganda – to name just a few – despite the reigns of discredited dictators.  A corrupt regime will always take advantage of foreign assistance and coopt it for its own ends; and there is absolutely no hope of success if government has absolutely no stake in developmental success. As The Guardian says it well:

Skewed incentives, a patchy human rights record, chaotic structures, hubristic prescriptions and one-size-fits-all solutions all blight development, and so too does a penchant for technical solutions to political problems.

The best way to resolve the problem is to discontinue foreign assistance altogether, and force countries to access international capital markets. If they borrow from international lenders of repute, they must design a project which will be successful, and pay dividends; otherwise the lender will lend no more.  If a government really wants the money and knows that access to more will be determined by observable success, then there is a good likelihood that the money will be used wisely. This private capital will be supplemented by the Chinese who offer no-strings-attached deals with resource-rich countries.  In Angola, for example, the Chinese agreed to build needed infrastructure for a guaranteed favorable price for oil.

Countries that cannot afford to borrow or are not favored by the Chinese, will have to do as any other progressive Western country has done – reform government and public services, streamline the judicial system and make it independent and free, liberalize the economy, and position itself favorably to attract foreign investment.  These countries will have to live within their means, become democratic and not kleptocratic, and marshal whatever resources available for national investment. Countries which are already on the economic margins – such as many countries of the Sahel – might opt for regional cooperation, liberalized flow of trade, creation of economic hot spots, and other programs which collectively address economic development.  Another problem with past foreign aid is that it has mistakenly chosen to invest in ‘the poorest of the poor’ living in marginal rural areas; when a saner approach would have been to focus on economic opportunity in cities, always the engines of economic development.

As far as drugs and vaccines are concerned, countries can negotiate good prices from generic pharma companies and begin to charge for products and services.  They can hire international consultants at going rates when they absolutely need a foreign expert.

The World Bank should revert to its status as Lender of Last Resort.  If a country is unable to secure a loan from capital markets, but satisfies most conditions exacted, the World Bank might consider lending at commercial rates, and if the project met one fundamental condition – that the loan directly contributed to economic activity.

The Guardian mentions ‘Millennium Development Goals’ and the need to rethink them.  These goals were about the only thing on which the international community could agree, for they are idealistic statements of purpose and good intent.  At least countries will have something to work towards, said international development planners, while watching one after the other fail to meet them for the reasons stated above.  They are a fiction, irrelevant, and satisfying only to those who set them.  They are, however, an emblem of the entire fiction of development, one whose history is filled more with politics that with progress.