Search This Blog

Wednesday, November 17, 2010

Why We Should Cut Foreign Aid

“AIDS is big business, maybe Africa's biggest business. There's nothing else that can generate as much aid money as shocking figures on AIDS. AIDS is a political disease here, and we should be very skeptical.” — James Shikwati

The US spends more than other countries in total dollars, as a percentage of its total annual budget it gives 25 billion dollars away a year — mostly to countries who don’t need it, and or hate the USA.

While this is a mere pittance of our annual budget foreign aid is one of those budget items that seem to come under criticism each year, criticism that is well deserved.

Foreign aid or (development assistance) is often regarded as being too much, or wasted on corrupt recipient governments despite any good intentions from donor countries. In reality, both the quantity and quality of aid have been poor and donor nations have not been held to account.

In 1970, the world’s rich countries agreed to annually give 0.7% of their gross national income (GNI) as official international development aid. Since that time, despite billions given each year, rich nations have rarely met their actual promised targets. For example, the US is often the largest donor in dollar terms, but ranks amongst the lowest in terms of meeting the stated 0.7% target.

Furthermore, aid has often come with a price of its own for the developing nations:
  • Aid is often wasted on conditions that the recipient must use overpriced goods and services from donor countries
  • Most aid does not actually go to the poorest who would need it the most
  • Aid amounts are dwarfed by rich country protectionism that denies market access for poor country products, while rich nations use aid as a lever to open poor country markets to their products
  • Large projects or massive grand strategies often fail to help the vulnerable; money can and often is embezzled away.
Some interesting observations can be made about the amount of aid. For example:
  • USA’s aid, in terms of percentage of their GNP has almost always been lower than any other industrialized nation in the world, though paradoxically since 2000, their dollar amount has been the highest.
  • Between 1992 and 2000, Japan had been the largest donor of aid, in terms of raw dollars. From 2001 the United States claimed that position, a year that also saw Japan’s amount of aid drop by nearly 4 billion dollars.
In a 2005 interview with Der Spiegel Magazine the Kenyan economics expert James Shikwati, says that aid to Africa does more harm than good. The avid proponent of globalization spoke with SPIEGEL about the disastrous effects of Western development policy in Africa, corrupt rulers, and the tendency to overstate the AIDS problem.

When the proposition that the industrialized nations of the West want to eliminate hunger and poverty was put forth by Der Spiegel Shikwati responded; “Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor.”

Shikwati continued’ “Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa's problems. If the West were to cancel these payments, normal Africans wouldn't even notice. Only the functionaries would be hard hit. This is why they maintain that the world would stop turning without this development aid.”

Shikwati’s response to the interviewer’s comment “that even in a country like Kenya, people are starving to death each year. Someone has got to help them”, was “But it has to be the Kenyans themselves who help these people. When there's a drought in a region of Kenya, our corrupt politicians reflexively cry out for more help. This call then reaches the United Nations World Food Program -- which is a massive agency of apparatchiks who are in the absurd situation of, on the one hand, being dedicated to the fight against hunger while, on the other hand, being faced with unemployment were hunger actually eliminated. It's only natural that they willingly accept the plea for more help. And it's not uncommon that they demand a little more money than the respective African government originally requested. They then forward that request to their headquarters, and before long, several thousand tons of corn are shipped to Africa.” You can read all of Shikwati’s comments by clicking here.

Several years ago I was in Bangkok, Thailand visiting the US Trade and Development Agency for the purpose of exploring opportunities in the region. While the TDA reprehensive and I were driving next to the construction of a new viaduct through Bangkok he mentioned that the Japanese had done all of the planning and design of the viaduct with Japanese grant funds. It was obvious why they did this. The viaduct was being built with steel girders, not with concrete. The Japanese export steel, not concrete.

There are several reasons we give foreign aid: 1) promote the sale of US goods and services, 2) humanitarian and feel good projects and programs, 3) disaster relief, and 4) military assistance.

The U.S. Trade and Development Agency’s mission is to provide funds to a host nation so they can hire the services of a U.S company to prepare a study that will eventually lead to the export of U.S. goods or services to that nation. Once the study is completed the host nation is supposed to obtain financing for the project from the U.S. Export Bank or World Bank to fund the project. In essence the U.S. taxpayer is financing the marketing efforts of a U.S. company. Sometimes this is called corporate welfare by the detractors of the agency. All industrial nations do this, some on a much larger scale than the United States. The amount of money the federal government puts forth for this program is miniscule in comparison with other aid programs, about $5 million dollars each year. The return on the investment is difficult to calculate and the ultimate goal of the program is to create exports for American firms.

The big cahoona when it comes to foreign aid is the United States Agency for International Development (USAID). Formed in 1961 USAID’s mission is:
  • Disaster relief
  • Poverty relief
  • Technical cooperation on global issues
  • U.S. bilateral interests
  • Socio-economic development
This is undoubtedly the most overblown, bureaucratic agency of the United States Government. As an agency within the US State Department there is a USAID representative in each of our embassies and consulates around the world. USAID gives billions of dollars way each year with little accountability for the results. Most of the money goes to projects that are carried out by nongovernmental organizations (NGOs) that have a cadre of lobbyists on K Street. It is not only the NGOs that get the money, but other government agencies get funds from USID to carry out projects. As an example after Hurricane Mitch devastated Honduras in 1998 The National Geodetic Survey was given almost a million dollars from USIAD to conduct surveys of the damaged areas. This is like using money from one government pot to fill the pot of another government agency without Congressional oversight.

Another example of the inefficiency of USAID was a $30 million dollar sewer project in Gaza. The project was given to a church to provide the design and construction management. When I asked the USAID representative why it was given to a church and not a qualified civil engineering firm his response was that the church had a retired civil engineer that would be responsible for the project.

USAID also pours millions into so called Socio-economic development programs around the globe. These are the types of projects James Shikwati talks about. No one really knows the value of the project or what the expected results should be. They are just feel good projects for the USAID manager. If any agency of the federal government needs a complete overhaul its USAID with its cadre of glassy-eyed liberals who want to change the world with your money.

Disaster relief is another form of foreign aid. No one really knows what the true cost of this aid is. When an earthquake or tsunami hits some third world country or Pacific island we rush in with billions in aid. The aid is not coordinated or accounted for; it is just dumped on the ground. USAID was bringing in their field managers right after the earthquake struck Haiti last year. They were passing out food and clothing with no idea as to where it was going. Most was ending up in the hands of the war lords who were controlling the villages while the people were going thirsty and hungry. They just are not accountable for the money they spend. Also, the cost to our military for providing transport and medical assistance is not taken into account.

Military assistance might be the largest boondoggle of them all. There is no accurate accounting for the cost of military assistance we provide around the world. As an example the off the shelf price for an F-16A is said to be about $25 million dollars. When the price for spares and weapons systems is thrown in the price jumps up to about $80 million. Say, for example, we “sell’ six F-16As to Saudi Arabia for $500 million dollars, including training and maintenance. How does Saudi Arabia pay for these planes? Do they write us a check, give us oil, or do they allow us to base our troops there?

Deals like this go on all the time. In addition to selling military hardware we also give nations like Turkey license to manufacture F-16s and sell them on the open market. We also furnish millions in military training to our allies and “friends”.

So what do we get in return for all of this money? Are we liked any better around the globe for our largess? During the Bush administration we gave more money to Africa to combat AIDS than all of the nations of the world combined. The rock star Bono, a big proponent of fighting AIDS, goes around the world bad mouthing the United States. When we poured more money into Haiti for earthquake relief we were condemned for raising our flag over the relief stations with the piles of water and food stuffs.

While foreign aid is less than 1% of our GDP I still believe we should begin to curtail it. Like earmarks, it may be purely symbolic, but unlike earmarks we don’t get any bridges or post offices for the money.

No comments:

Post a Comment