Several weeks ago Pat McCullough, who is interning at Bread for the World, commented on my post "Is Lobbying Helping?" It was a thoughtful comment, and I appreciate it.
One of Pat’s responses to my questions was this: "There are many organizations doing great work out there …, but in terms of how much bang we get for our ‘buck’ (that is, our efforts to end poverty), the United States government has no competition."
I certainly understand the point. I also understand and appreciate the good intentions of Bread for the World and the people who support it and other similar groups. I think we all want the same thing, to help people. The question is how to best do it.
Certainly, the United States government, and other governments and quasi-governmental bodies, have a lot of money. All that money can, if used properly, accomplish a lot. The question is whether it is. What we need to do is to carefully analyze the results of various types of aid and see what they are accomplishing.
(Note: The rest of this post, while a bit lengthy, is really just a brief outline of what could be written. Others can do that better than me, but I think even this summary might be useful for raising issues to be considered.)
As I said in my post about Paul Wolfowitz and the World Bank, too often aid given by governments and organizations such as the World Bank is wasted. Waste can come in several ways. Aid can be stolen or diverted by corrupt government officials in the country receiving aid. In fact, this may be the biggest problem of all, and it is one that needs much more attention than it usually gets.
(I do not understand why governments and international agencies do not care more about corruption. It is as almost as if they know the problem is there, but they think if they ignore it, it will go away. Maybe they want to avoid the hassles and trouble of confronting countries and officials abut corruption. It is hard to fight corruption, and many times those who try to fight it are not supported by their bosses or agencies. I know it is a lot easier to just send the money out and let somebody else worry about how it is spent, but it doesn’t help people.)
But even if the aid is not stolen and is spent on what it is supposed to be, it still may not help. Projects may never be completed. Even if they are completed, they may not be worthwhile. Politicians and government leaders like big flashy projects, but often that is not what the people really need. Fancy factories may look nice, but they do not help poor farmers who need clean water and a way to get their crops to market.
Also, aid that is wasted can be a bigger problem than just the people who do not get helped. In many cases, aid actually hurts.
When the aid is in the form of loans, the money must be paid back even if it was stolen by corrupt officials or misused by incompetent ones. Even though the poor get no benefit from the loans that are wasted or stolen, they, through their country, still have to pay them back. Their government will have less money in the future to do things that need to be done because it has to repay loans that were wasted.
Even if the loans are forgiven, all it does is to make the donor country feel good about itself. It does nothing to help the poorer country or the people living there.
Aid can sometimes be the cause of problems, too. All that money coming into a country can be a temptation to corruption. This is not a criticism of poorer countries. They are no worse in this regard than other places. (I know; I live in Illinois.) But it happens, and it must be taken into consideration.
Not only do corrupt officials steal aid money, they use the money to maintain themselves in power. Officials steal or divert aid, which they use to maintain themselves in power so they can steal or divert more money, which they use to maintain themselves in power so they can steal more money. It becomes a vicious circle that goes on and on while the poor continue to suffer.
While problems can arise with aid from private groups, they are less likely to occur. Aid from private groups is usually smaller, which means it cannot be used for the kind of grandiose schemes and projects that so often go wrong. Private groups are less likely to just give money to governments, so the money is less likely to wind up being stolen or misused by corrupt officials.
The smaller size of private programs also allows for more direct supervision and involvement by people who care. This individual, hands-on attention usually results in more effective aid. With less bureaucracy and less red-tape, more can be accomplished and at a lower cost. For example, according to The Wall Street Journal of July 7, 2007, a report by the Hudson Institute "finds that while a moderately priced U.S. government consultant working in a developing country costs $300,000 per year, the private sector hires the same skilled professional at just over $100,000."
Private groups also have the ability to innovate and come up with new ideas and programs that governments, whether donor or donee, would probably not think of. Things like micro-finance would probably never have been started by government aid. They are too small and mundane, and too challenging to the established social order, to be started by governments, but they are the kind of thing that really works.
In other words, and perhaps not surprisingly, it seems likely that money spent by private groups achieves much more "good per dollar" than money spent by governments. The concern, however, as mentioned above, is that there is not enough money from private groups to address all the needs. Even if it does not accomplish as much good per dollar as private groups do, only government has enough money to address the needs.
The problem is that government money does not seem to be getting the job done. Is that because not enough money is being spent? That may be part of it, but it is not all. A lot of government aid is wasted. Much more could be accomplished if the government aid that is being given could be used more effectively. There is a lot of work to be done to make sure government aid helps, in terms of good per dollar, as much as it should.
In this regard, there is one thing government can do that private groups cannot do. Government needs to push poorer countries to address the problems that result in aid being wasted and to establish the necessary rules and framework so that aid can be used more effectively.
This involves several things. First, we need to demand honest government and a commitment to end corruption. Corruption is probably the biggest impediment to effective aid. Fighting corruption will not be easy. It will mean disagreements and confrontations. It may mean cutting off aid to countries that refuse to combat corruption. It will be hard, but it is necessary if we really want to help people as opposed to just feeling good ourselves because we give a lot of money.
But it is not just a matter of promoting honest government and wiping out corruption. Poor countries also need the rule of law. People must have rights and there must be courts to enforce them. Without a sense of security, both in their person and their livelihood, sustained development will not happen. People need the confidence that if they work hard, they can keep what they earn. They need to know they can build on their own work. This requires the rule of law and an impartial court system.
The next thing may bother some people, but it is important for real progress: Property rights. Property rights give people the ability to store and save the fruits of their own labor. Along with the rule of law and impartial courts, property rights can give people a sense of security. If people can own something, something that the rule of law will protect and that a corrupt government cannot take away, they will feel secure, and they will amaze us with what they can do for themselves. If we give them a little help, and they know they can build something and keep it, great things will happen. But if government officials can seize whatever they want, or if there is no rule of law or courts to protect people’s property from others taking it, people will have no incentive to try to better themselves.
Property rights also give people the ability to stand up to oppressive government. When the government controls your job and where you live, it is hard to oppose it. But having a way to live that is outside of the government’s control enables people to fight oppression.
Finally, there must be freedom, especially economic freedom. People need the right to buy and sell what they want. And this economic freedom needs to be for all people, not just one part of society. One of the great things that private groups have done is to encourage the economic empowerment of women. Many of the micro-finance plans have been aimed at women. The Women’s Opportunity Fund of Opportunity International is just one example of what can be accomplished when aid is provided to all groups in a country.
I know some may say it is cultural imperialism for us to tell a country and its government how they should organize themselves, whether we are talking about ending corruption or establishing the rule of law or allowing all people to participate equally and fully in society. Two comments. First, I believe every person should have the right to do what he or she wants. If they do not want to do something, that is fine. But they should not be prohibited from doing things by their government or society because of their sex or religion or some other personal characteristic. In other words, all people should be free to exercise their unalienable rights.
Second, we cannot force a country to organize itself in one way or the other. However, there is also no reason we are obligated to give aid to a country that organizes itself in a way that means the aid will be wasted or otherwise not used as effectively as it could be used in other countries. The amount of aid we can give is limited, and we need to give it to those countries where it can do the most good and we can help the most people. I do not believe this is cultural imperialism, but if it is, so be it.
But it is not just a matter of what the recipients need to do. There are things we need to do, too. Too often, government aid is given with strings attached that make it worth much less than it could be. The recipient is required to buy products or services only from the country that gives the aid. While this is great for the donor, it means that the aid is not worth as much. Instead of being aid for the poorer country, it becomes another government handout to the sellers of products and services in the country giving the aid.
Probably the two biggest things we can do to help poorer countries and their people will be the hardest. First, we need to cut tariffs and get rid of quotas and other import restrictions on products that poorer countries make. Instead of giving them handouts, we should give them access to our markets so they can make things and sell them to us. Too often we tell countries to improve themselves, and then when they try to do so, we refuse to buy what they make. Textiles and clothes are just one example of the kind of products we need to let in from poorer countries.
Second, we need to end export and other subsidies for our agriculture. These subsidies do two things wrong. First, they prevent farmers in foreign countries from competing in the United States, just like tariffs and quotas do on manufactured goods. Second, the subsidies we give our farmers mean they can export to poorer countries and unfairly undercut the local farmers there. This hurts rural development in those countries. Rural residents remain stuck in subsistence farming instead of being able to grow crops they can sell to the urban areas of their own country.
This will be hard. Letting in goods made by poorer countries may hurt some industries in the United States. Cutting agricultural subsidies may hurt some of our farmers. But we need to do it, and there will be benefits for us, too. Consumers in the United States will get lower prices for things like clothes and other products made by poorer countries. This may not matter to some people, but it will certainly help others.
I am not ignoring the costs these policies will impose on some workers and companies in the United States. These costs are real, but so are the costs of making people in the United States pay more for products and food to artificially protect U.S. companies. We need to help displaced workers, giving them training and assistance while they look for new jobs, but change happens and we cannot protect companies forever.
So what do we need to do to help the poorer countries? Four things. First, as individuals we need to give as much money as we can to private groups. Many private groups are doing a great job, and with more money they can do even more.
Second, our government needs to push for honest government and an end to corruption in poorer countries. We also need to encourage those countries to establish a legal and economic framework that will let their people develop and grow for themselves. Rule of law, impartial courts, private property, and economic freedom. These will provide the foundation on which people can build a future for themselves and their country.
Third, once corruption is ended and the necessary framework is in place, our government needs to give more aid to those countries where it can be used effectively to really help people.
Last, we need to open our markets and end our subsidies. Instead of just giving aid, we need to give poorer countries and their people a chance to help themselves. We need to give them a hand, not a hand out.
The bottom line is caring – but caring effectively. It is our duty and our obligation.
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