The ungiven gift

Three years ago, the world was ready to mount a new attack on poverty. How that hope is fizzling, and why it could come back to bite us.

(Kim Kyung-Hoon/Reuters)
Australian and US personnel transported food aid to a helicopter bound for villages on Aceh's tsunami-hit west coast in January 2005. The US response to the catastrophe cleared the path to renewed cooperation from Indonesia on terrorism.

By Joshua Kurlantzick
August 31, 2008
JUST THREE YEARS ago, at the G-8 summit of industrialized nations, it looked like the world of foreign aid was about to change. As the 2005 conference ended, British Prime Minister Tony Blair ascended the steps of a resort in the quaint Scottish village of Gleneagles and announced that rich nations would double their aid to Africa by 2010, giving some $50 billion annually. "It is progress - real and achievable progress," he concluded.

Around the rich world, it seemed, millions of people had finally begun to pay attention to global poverty. Time magazine had recently featured on its cover economist Jeffrey Sachs, who offered solutions for "how to end poverty." Celebrities jumped on the aid bandwagon. Angelina Jolie traveled to Africa to receive weighty briefings on the future of the continent. And a consensus appeared to be building among donor nations like Britain and the United States on how to address endemic poverty. Working together, donors would use aid not just as a bandage, but as a lever - rewarding good government in poor countries, and pressing them toward long-term reforms.

Today, however, those hopes have all but evaporated. A collision of factors, from politics to shifting global wealth, has unraveled the consensus among rich countries and allowed poorer nations to ignore their calls for reform. Western nations have failed to deliver the money promised at Gleneagles, casting doubt on the entire experiment - and leaving development veterans deeply pessimistic about the future.

From that high point in Gleneagles, today the aid industry stands on the brink of disaster. According to the Organization for Economic Cooperation and Development, net aid from most of the wealthiest nations actually dropped, year on year, in 2006 and again in 2007. If the new push for foreign aid collapses completely, it could do just as much damage to the West as it does to the countries that need its benefits. Indeed, the crisis in foreign aid could not only prolong the world's human suffering, but could spark one of the biggest security challenges we face in the coming decades.

Foreign aid as we know it today is a relatively recent invention, born after World War II with the creation of new global institutions and the emergence of independent but poor states in Africa. By the 1960s, the world's major donors - the World Bank, the International Monetary Fund, and the rich industrialized nations of the West and Japan - had all created aid programs designed to help poorer regions, primarily in Africa and South Asia.

As the donations increased, foreign aid developed into an industry of its own, filled with consultants, contractors, and organizations that arose to channel the huge sums of money moving across borders. Over time, these became as entrenched as the government aid bureaucracies themselves.

Although its goals were laudatory, the aid industry had serious flaws. Donor governments tolerated massive graft by recipient nations, if these countries served strategic purposes - the West poured vast sums into kleptocratic Zaire, for instance, as a bulwark against communism. Leading global advocacy groups criticized aid providers for their stinginess and for directing some of their limited aid budgets to support the overseas operations of rich first-world companies such as agribusinesses. Some conservatives questioned the need for aid at all - the late Senator Jesse Helms memorably compared it with throwing money down a rat hole.

In his 2006 book "The White Man's Burden," former World Bank economist William Easterly issued a sweeping critique of the whole prevailing approach to aid, detailing how, for decades, aid providers had come up with massive plans to help poor nations and then, Soviet-style, attempted to impose them from outside, to little effect. Lacking local input and insensitive to local needs, these megaproposals often failed to make a real dent in the problems they were spending millions of dollars to address.

Earlier this decade, however, the aid industry seemed poised for a meaningful shift, fueled by an infusion of new money and optimism about what it could accomplish. The attacks of 9/11 seemed to convince skeptical conservatives that boosting foreign assistance would make America safer by increasing its global influence. "For at least a year into 2002 and 2003, there was a lot of pressure coming down from the White House to develop new aid programs," says one former top American aid official.

Between 2001 and 2005, the amount of foreign aid given by governments more than doubled. Britain's then-chancellor Gordon Brown proposed a kind of Marshall Plan for developing countries that would combine a doubling of aid to poor nations, a write-off of all their debts, and a vow by all rich countries to spend 0.7 percent of their gross domestic product on aid.

At the same time, the aid industry was developing a new model of assistance, one that emphasized accountability on the part of the governments receiving aid. This also pleased conservatives concerned about waste. The White House launched a new aid program in 2002 called the Millennium Challenge Corporation. The MCC, which received a new stream of aid money, used 16 indicators - on civil liberties, political rights, corruption, and other key factors - to determine whether nations were worthy of assistance. The World Bank and European nations also began to press, in cases, for reforms as a condition for aid money.

Massive global campaigns by celebrities like U2's Bono and Bob Geldof, organizer of the Live 8 concerts, brought poverty and aid greater public awareness. Days before the Gleneagles Summit, some 40 million people in 36 countries participated in an awareness campaign called the Global Call to Action Against Poverty.

But just three years later, that apparent wave of change is looking more and more like a mirage.

Rather than working with proven local programs and existing aid groups, leaders of the rich world simply created entirely new programs. The United States created the MCC and an HIV/AIDS funding bureaucracy called PEPFAR; Britain built a program to transform aid by giving cash directly to poor people in African nations. These new initiatives often duplicated projects that already existed, says Carol Lancaster, an aid expert at Georgetown University. The result adds to the confusion in recipient nations, who already have few trained officials to deal with the proliferation of aid groups. On my own trips to Malawi, one of the poorer nations in Africa, I found that health officials spent a vast percentage of their time simply catering to donors and consultants.

Many conservatives who backed aid now have turned against it, or have reconceived "aid" in ways that serve other interests. The Bush administration now routes nearly one-quarter of its aid money through the Pentagon, up from less than 10 percent in 2002, and much of that "aid" goes to Iraq and Afghanistan. In the 2008 budgeting cycle, Congress slashed funds for the MCC by half, partly because of conservative anger and partly because Democrats view it as a failed Bush administration program.

Despite promises to help the poorest and best-governed countries, rich nations have continued lavishing money on key strategic countries. The White House has continued to send the majority of foreign assistance to allies like Egypt, still run by a corrupt, authoritarian regime. Britain continued funneling aid to Russia - hardly an impoverished state, but one that London wants to build a stronger link with.

Unlike Bush, who made aid a centerpiece of his presidency, John McCain has spent his time in the Senate trying to cap the aid budget. Though McCain, in his presidential campaign, has declared that aid "really needs to eliminate many of the breeding grounds for extremism," he's offered no concrete plans for boosting or reforming assistance. (In comparison, Barack Obama has pledged to double American foreign aid by 2012.)

Public enthusiasm, too, seems to have ebbed. One comprehensive study, by Harris polling, found twice as many Americans think the government spends too much to help prevent disease and improve public health abroad as think it spends the right amount.

Wealthy countries have closed their wallets. In Japan, the government has slashed aid budgets dramatically. In 2006, the United States cut development aid by over 18 percent, and it dropped again the next year. Despite the promises of Gleneagles, net aid handouts from the G-7 group of powerful nations fell by 1 percent in 2007, according to the Organization for Economic Cooperation and Development, a monitoring group. The nongovernmental organization Oxfam projects that by 2010, wealthy nations will fall short of their pledges by some $30 billion - more than the United States' entire annual aid expenditures.

In the long run, this stinginess will backfire on everyone involved. It will have a disastrous impact on the citizens of poor nations, both because of reduced aid and less pressure on their governments for real political reforms. And aid has benefits for the rest of the world as well. It can prevent the kinds of failed states that harbor terrorism, crime, and other serious dangers.

President Bush in 2002 admitted as much: In his National Security Strategy, he, like McCain, made the link between combating poverty and reducing global extremism. "The events of September 11, 2001, taught us that weak states, like Afghanistan, can pose as great a danger to our national interests as strong states," the strategy declared. Other long-isolated, poor nations, like Yemen, Sudan, and Somalia, also have proven staging grounds for militancy.

Given correctly and designed to produce reforms, aid money can help strengthen weak states before they disintegrate into total failure. In Cambodia, a nation destroyed by decades of civil war, effective aid in the 1990s helped build a real civil society and restore the nation's social fabric to some extent. While hardly an idyll today, the country has strong nongovernmental organizations, an independent media, and some degree of stability, despite continued poor senior leadership.

Failed states can turn into breeding grounds for threats that dwarf even terrorism. In Burma, for example - a country isolated by sanctions and its rulers' own obstinacy - poverty, prostitution, and a brutal human rights climate have created not only a flourishing narcotics trade, but an HIV/AIDS epidemic that has affected all of Southeast Asia. According to Laurie Garrett of the Council on Foreign Relations, an expert on pandemic disease, all the HIV strains in Southeast Asia actually originated in Burma. The country "may be the greatest contributor of new types of HIV in the world," she wrote in a report on the crisis.

Some states' problems can spill directly over into Western democracies. Haiti, a country with many of the same longstanding problems as Burma, has become a major conduit for HIV and drug trafficking in the Western Hemisphere. Thousands of Haitians try to flee its chaos by coming to the United States, causing repeated refugee crises.

Eventually, many of these failed states actually wind up requiring more direct Western intervention, which can be yet more expensive and deadly. The United States has intervened in Haitian politics repeatedly over the past two administrations; similarly, both the Clinton and Bush White Houses felt compelled to intervene in Somalia, with disastrous results.

As Western countries' aid falls short, the door opens wider for new donors. In the past four years, middle-income authoritarian nations like China, Russia, and Venezuela, many fattened on higher oil profits or trade surpluses with the United States, have begun increasing their aid programs in a bid for regional or global influence. Venezuela already dwarfs US aid in Latin America, and China has become the largest lender to Africa.

These new donors care little about promoting better governance. In Angola, the government shunned a deal with the International Monetary Fund - which asks for accounting of the money spent and real reform - in favor of a massive financing agreement with China, which holds Angola to no conditions and provides aid with little transparency.

"We used to just listen to what they [the donors] said," said one aid expert I met in Phnom Penh, who also worked in the Cambodian government. "But we don't have to anymore." He pointed to other parts of the capital, where Chinese financing supported new construction. "We have China now. China will help."

Even from the most parochial point of view, the collapse of the new push for foreign aid matters to America. Aid clearly improves images of donor nations, critical at a time when anti-American sentiment is rife worldwide, and the country's military "hard power" remains tied down in Iraq and Afghanistan.

Focus groups in the Muslim world conducted for the Council on Foreign Relations showed that well-advertised, targeted American assistance actually helped swing public opinion toward the United States in Morocco, a Muslim nation where, after 9/11, local images of the United States had soured. Similarly, the US response to the 2004 tsunami in Indonesia helped restore American influence there and opened the door for renewed US-Indonesia counterterrorism cooperation. "That was a dramatic change," Puji Pujiono, an Indonesian relief specialist, told me. "People saw the US military on the ground helping here, and their image of America immediately turned around."

Despite the discouraging news, a bright spot may be emerging in another corner of the aid world. The private sector, increasingly wealthy, is adopting some of the lessons that nations seem determined to ignore, like funding smaller projects that have already enjoyed success on the ground. The Gates Foundation - with an endowment of nearly $40 billion, the largest foundation in the world, and a major private donor in Africa and India - has launched an initiative to focus on microfinance, the providing of small loans to poor borrowers to give them start-up capital. Such private groups may be impressive for their vats of money, but in the long term they may be even more important for their example.

Joshua Kurlantzick is a visiting scholar at the Carnegie Endowment for International Peace and author of "Charm Offensive: How China's Soft Power is Transforming the World." He can be reached at jkurlantzick@ceip.org.

© Copyright 2008 Globe Newspaper Company.

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