The Aversion to Government-Run Development Programs

Andrew Sullivan of The Altlantic writes a popular blog about politics, economics, culture, and anything else he finds interesting or relevant at the moment.  With 20-30 posts today, it has the depth of a traditional blog and the breadth of a link aggregator. The relative exposure he gives a subject depends on how much he likes the people who are writing about it.  He is a fiscal conservative and likes the idea of market-driven, bottom-up development.  Over the past year, international aid and economic development have been getting a lot more play after he discovered Aidwatch and Texas in Africa, two popular blogs written by development economists.  Most recently, Sullivan linked to an article in the NY Review of Books by William Easterly, author of the former blog, about the misuse of aid dollars to generate political support:

Human Rights Watch contends that the government abuses aid funds for political purposes—in programs intended to help Ethiopia’s most poor and vulnerable. For example, more than fifty farmers in three different regions said that village leaders withheld government-provided seeds and fertilizer, and even micro-loans because they didn’t belong to the ruling party; some were asked to renounce their views and join the party to receive assistance. Investigating one program that gives food and cash in exchange for work on public projects, the report documents farmers who have never been paid for their work and entire families who have been barred from participating because they were thought to belong to the opposition. Still more chilling, local officials have been denying emergency food aid to women, children, and the elderly as punishment for refusing to join the party.

This is a bit like saying that Miss Lippy’s car is green.  This dynamic is not new, and it is certainly not undocumented.  Easterly has been arguing for years that foreign aid in the hands of the local government is misdirected.  But this is on Andrew Sullivan’s blog, which is generalist, and it may well be a new concept, or at least a new example, to his readers.  But this is a concept I have seen in action and heard anecdotally often.  Two cases, in particular, come to mind.

When I was in the Philippines, I was friends with a Peace Corps volunteer who spent her free time teaching women to make handicrafts.  She organized them into a cooperative and began looking for an outlet to sell them.  Simultaneously, someone who had read a comment I posted on another blog reached out to me and said they were living in Manila and developing a social enterprise incubator for the Philippines.  I was heading to Manila for a wedding that weekend, so we met up.  A social enterprise incubator takes a concept, cultivates it into a business, and then spins it off once it is financially sustainable.  When I asked about his first project, I was surprised to hear that he was developing a company that produced and sold the same handicrafts my friend was making with her women.  He had the demand, but lacked the supply.  My Peace Corps friend had the supply, and was looking for greater demand.  It was perfect, so I put them in touch.  He had one stipulation for working with the group: the government could not be involved in any way.  My friend had already gotten the mayor and his wife on board, who were willing to put up seed capital to start the business.  It is still unresolved, but it is an interesting case study.

Why wouldn’t he work with any government-affiliated organization?  The answer is that the government is notoriously unreliable and self-interested.  The mayor supports the handicrafts cooperative, either for altruistic reasons or because it represents a sizable voting block.  If he offers financial support to the group, he expects them and their families to vote for him in the next election.  If they vote for him and he wins, the program continues.  If they don’t vote for him, he reserves the right to pull funding and kill the cooperative.  But if they vote for him and he loses, the new mayor will pull the funding as punishment and will redistribute it to a group of voters that voted for the new mayor.  This could be a cynical oversimplification, but that is exactly the rationale for not getting involved with the government.  The head of the social incubator is running a business, and cannot risk being at the whim of petty political squabbles.  So he avoids it altogether.

I saw the same dynamic in the project of another friend who worked for AUSAID, the Australian international development organization.  He was brought to the city help run a small, government-operated microfinance program.  It was, in his words, a disaster.  The books were disorganized and the staff unmotivated.  The accounting and operations departments fought over turf and refused to share information, worsening the problem.  The delinquency rate was over 70%.  To put this number in perspective, most MFIs consider a rate of more than 5% to be unsustainable.  I discussed this concept at length in a previous post.  My friend said he’d be surprised if the program lasted another three years and, if it did, it was likely be killed by the next mayor anyways.  The current mayor used the program as a system of political patronage, giving favorable loans to community leaders and others in exchange for votes.  After all, it’s not his money he’s spending.

This is the reality.  But it is not always the case.  There are honest people in government and some programs work effectively and corruption-free.  But the track record of government-to-government aid – or “doleouts” according to my old coworkers – is abysmal, and show that these “good” programs are probably the minority.

Lastly, (this one is a stretch) no one should be surprised by condition-based development.  On the local level, government officials give food aid in exchange for votes.  On the national level, countries give aid money in exchange for other conditions.  The US and Russia courted horribly corrupt dictators in Africa, lavishing aid dollars for them to steal in exchange for support of capitalism or communism.  There are many, many countries out there with desperately poor populations that receive a comparably small amount of aid money from the US government simply because we do not have a strategic interest in the country.  That is why Pakistan, which undermines our actions at every turn, gets billions of dollars in aid every year, and others with similar problems get comparatively very little.  In effect, governments provide food to the poorest when it is in our geopolitical interest.  Politicians provide food to the poorest when it is in their personal interest.  It is the same concept, only on a larger scale.

Post to Twitter

Leave a Reply

Your email address will not be published. Required fields are marked *


*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>