Yale University

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Dismantle Foreign Assistance

Ronald Parlato

July 29, 2013

Category: Society > Government and Politics

Foreign assistance does not work.  It is beset by corruption, mismanagement, venality, and inefficiency on the recipient end; and self-serving, politically-motivated, and idealistic project design on the other.

Few development projects have reported success and projects are still badly skewed to US interests and not those expressed by local governments.  Not only are the projects of little interest to these governments, but they have been designed to keep money away from government and in the hands of US contractors.  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 have 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 co-opt it for its own ends; and there is absolutely no hope of success if government has absolutely no stake in developmental success. A recent article in The Guardian (1.21.13) said 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.  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 can negotiate good prices from generic pharmaceutical companies and begin to charge for products and services.  They can hire international consultants at going rates when they absolutely need a foreign expert. 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.

Governments 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.

In summary, stop all international foreign assistance and force developing countries to secure funding from capital markets; and limit World Bank lending to 'last resort' status and lend only to support private sector economic development.