Foreign Aid and Foreign Policy: Lessons for the Next Half-Century (Transformational Trends in Governance and Democracy)

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Foreign Aid and Foreign Policy: Lessons for the Next Half-Century (Transformational Trends in Governance and Democracy)

TRANSFORMATIONAL TRENDS IN GOVERNANCE AND DEMOCRACY National Academy of Public Administration Modernizing Democracy: In

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TRANSFORMATIONAL TRENDS IN GOVERNANCE AND DEMOCRACY National Academy of Public Administration

Modernizing Democracy: Innovations in Citizen Participation Edited by Terry F. Buss, F. Stevens Redburn, and Kristina Guo Meeting the Challenge of 9/11: Blueprints for More Effective Government Edited by Thomas H. Stanton Transforming Public Leadership for the 21st Century Edited by Ricardo Morse, Terry F. Buss, and Morgan Kinghorn Foreign Aid and Foreign Policy: Lessons for the Next Half-Century Edited by Louis A. Picard, Robert Groelsema, and Terry F. Buss

About the Academy

The National Academy of Public Administration is an independent, nonprofit organization chartered by Congress to identify emerging issues of governance and to help federal, state, and local governments improve their performance. The Academy’s mission is to provide “trusted advice”—advice that is objective, timely, and actionable—on all issues of public service and management. The unique source of the Academy’s expertise is its membership, including more than 650 current and former cabinet officers, members of Congress, governors, mayors, legislators, jurists, business executives, public managers, and scholars who are elected as Fellows because of their distinguished contribution to the field of public administration through scholarship, civic activism, or government service. Participation in the Academy’s work is a requisite of membership, and the Fellows offer their experience and knowledge voluntarily. The Academy is proud to join with M.E. Sharpe, Inc., to bring readers this and other volumes in a series of edited works addressing major public management and public policy issues of the day. The opinions expressed in these writings are those of the authors and do not necessarily reflect the views of the Academy as an institution. To access Academy reports, please visit our Web site at www.napawash.org.

Foreign Aid and Foreign Policy Lessons for the Next Half-Century

Louis A. Picard Robert Groelsema and Terry F. Buss

Edited by

T RANSFORMATIONAL T RENDS IN G OVERNANCE AND D EMOCRACY

M.E.Sharpe Armonk, New York London, England

Copyright © 2008 by M.E. Sharpe, Inc. All rights reserved. No part of this book may be reproduced in any form without written permission from the publisher, M.E. Sharpe, Inc., 80 Business Park Drive, Armonk, New York 10504. Library of Congress Cataloging-in-Publication Data Foreign aid and foreign policy : lessons for the next half-century / edited by Louis A. Picard, Robert Groelsema, and Terry F. Buss. p. cm. — (Transformational trends in governance & democracy) Includes bibliographical references and index. ISBN 978-0-7656-2043-9 (cloth : alk. paper) 1. Economic assistance, American—21st century. 2. United States—Foreign relations—21st century. 3. Economic assistance, American—History—Case studies. 4. United States—Foreign relations—Case studies. I. Picard, Louis A. II. Groelsema, Robert, 1950- III. Buss, Terry F. HC60.F587 2007 338.91’73—dc22

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Printed in the United States of America The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences Permanence of Paper for Printed Library Materials, ANSI Z 39.48-1984. ~ BM (c) 10

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Louis Picard dedicates this book to Pauline Robert Groelsema dedicates this book to Marie Cecile Terry Buss dedicates this book to Abigail and Nathaniel

Contents

Preface

xi

1. U.S. Foreign Aid Priorities: Goals for the Twenty-First Century Louis A. Picard and Robert Groelsema

3

Part 1. Foreign Aid and Foreign Policy Debates 2. Foreign Aid and Security: A Renewed Debate? Lawrence Korb

27

3. Foreign Aid in the Twenty-First Century: What Purposes? Carol Lancaster

39

4. Foreign Aid in the National Interest: The Importance of Democracy and Governance Larry Diamond

61

5. Foreign Aid in Comparative Perspective: Regime Dynamics and Donor Interests Steven W. Hook

86

Part 2. Case Studies in Foreign Aid 6. Building Local Governance in Iraq: Limits and Lessons Derick W. Brinkerhoff

109

7. Foreign Aid and South Asia: The Case of Pakistan Robert LaPorte Jr.

129 vii

viii

8. Donors, Public-Sector Reform, and Decentralization: Democracy and Civil Society in Ghana Louis A. Picard, Robert Groelsema, and Ted Lawrence

146

9. Why Foreign Aid to Haiti Failed—and How to Do It Better Next Time Terry F. Buss and Adam Gardner

173

10. USAID and Eastern Europe: Something Old, Something New Kevin F.F. Quigley

214

11. Post-Millennium U.S. Aid for Africa: Reconciling Freedom and Security, Theirs and Ours John W. Harbeson

237

Part 3. Organizational Dynamics and Foreign Aid Policy 12. Transformations in U.S. Foreign Economic Assistance W. Haven North and Jeanne Foote North

263

13. Higher Education, Capacity Building, and Aid: Lessons Learned Ralph Smuckler and Louis A. Picard

302

14. NGOs in the Foreign Aid System Paul Nelson

315

15. The Millennium Challenge Account: An Early Appraisal Terry F. Buss and Adam Gardner

329

16. Deepening Local Democratic Governance: Connecting the Dots in Sub-Saharan Africa John W. Harbeson

356

Part 4. International Assistance and Development 17. Diasporas and Development: What Role for Foreign Aid? Jennifer M. Brinkerhoff

375

18. Remittances, Foreign Aid, and Developing Countries Jose N. Uribe and Terry F. Buss

394

ix

19. Aid and Development: A Conceptual Perspective from Development Economics Siddharth Chandra

405

20. Mainstreaming of Democracy and Governance in Foreign Assistance Jennifer L. Windsor

414

About the Editors and Contributors Index

425 433

Preface

It is a pleasure to introduce this collection of innovative papers on U.S. foreign assistance and foreign policy, and to contribute three chapters to the effort myself. This book could not come at a more propitious time. Readers scanning the New York Times, Financial Times, Washington Post, Washington Times, The Economist, and Time magazine in the summer of 2006, for example, were inundated with stories on foreign policy crises and efforts to address them through military intervention, reengineering or transforming U.S. agencies and programs that provide foreign assistance, and redeveloping aid efforts of partners in international and nongovernmental organizations. The need for foreign assistance in U.S. foreign policy has never been greater. Thousands of people are being slaughtered in Sudan in what Colin Powell has deemed a genocide of people in Darfur. Attempts to hold elections in Egypt have activated Muslim extremists whose aim is to dedemocratize the country. Israel is now embroiled in a war on two fronts, with the Hamas militia in Gaza and with Hezbollah in Lebanon, both aided by Syria and Iran. North Korea and Iran are demanding incentives and concessions in exchange for not launching or developing nuclear weapons. Pakistan and India are once again at loggerheads over Kashmir. Nepal’s autocratic monarchy has been embroiled with a populist Marxist insurgency, and leftist parties are on the rise in India. The fledgling state of East Timor, formerly a region of Indonesia, is in violent turmoil. Bolivia and Venezuela have left-wing governments aligned with Communist Cuba, threatening stability in the region. Muslim fundamentalists have come to power in anarchic Somalia, while unrest stirs in Ethiopia and Eritrea. Tamil guerrillas are once again battling the Sri Lankan government. Countries in the Balkans are struggling with issues of governance, autonomy, and independence. President Putin of Russia, favoring stability over pluralism, continues to consolidate power in undemocratic ways. Civil war, popular xi

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PREFACE

unrest, economic collapse, and natural disasters plague many African countries. Finally, the situation in Iraq and Afghanistan remains uncertain as nation building proceeds by fits and starts and as sectarian and confessional groups compete violently for power. A major purpose and political motivation for U.S. foreign assistance is to reduce the number and intensity of international crises that the United States must in some way manage. Day after day, though, stories appear about the inability of foreign aid organizations—bilateral, including the United States, and multilateral—to meet the needs of people in developing countries. The Southeast Asian tsunami and the Afghan earthquake (not to mention hurricanes like Katrina in the United States) revealed relief efforts plagued with corruption, delays, and ineffectiveness. United Nations (UN) efforts in East Timor have failed. The United States continues to struggle in its nation-building attempts in Iraq and Afghanistan. The African Union has been unsuccessful in stemming genocide in Darfur. The Global Aids Fund has been roundly criticized for failing to address effectively the HIV/ AIDS pandemic. The UN is having difficulty controlling soldiers under its command. Aid to Haiti has been an embarrassment to the international community. Efforts to improve aid and revise foreign policy have been widespread but sometimes problematic. The U.S. Agency for International Development (USAID) and several other aid programs are being folded into the State Department to make them easier to manage and more compatible with foreign policy goals. At the same time, the Millennium Challenge Account (MCA) program has been set up as an independent agency to rival USAID. MCA intends to depoliticize aid and make it subject to performance and accountability standards. The United States is pledging increased funding for aid programs, while being occupied with crushing expenses incurred in Iraq and Afghanistan. The United States is trying to marshal support to reform the UN, but has made only modest headway in stemming inefficiency, corruption, and repeated failures. The World Bank’s new president has launched an all-out campaign to wring corruption and waste out of its programs. The People’s Republic of China, itself a foreign assistance beneficiary, is using its resources to aid other developing countries where it seeks influence. This volume brings together a great deal of new thinking from experts in the field in order to inform current debates about the problems of U.S. foreign assistance programs, why those problems have not been solved in the past, and how they might be solved in the future. It focuses primarily on U.S. foreign assistance and foreign policy as they apply to nation building, governance, and democratization, broadly defined. It looks not only at issues currently in play but also traces the history and evolution of many of these issues over the

PREFACE

xiii

years. Contributors look not only at policy concerns but also at management and organizational factors as they affect programs and policies. Each chapter offers recommendations about how to improve the U.S. system of aid in the context of foreign policy. *** This work is part of a series of edited books, Transformational Trends in Governance and Democracy, that captures the latest thinking in public management. The books collectively represent what we believe are fundamental, transformational trends emerging in governance and democracy. Each book addresses the questions: How is governance or democracy being transformed? What impact will transformations have? Will forces arise to counter transformations? and Where will transformations take governance and democracy in the future? The National Academy of Public Administration sponsors the series in partnership with M.E. Sharpe, Inc. Many of the chapters in the series have been contributed by Fellows of the Academy and professional staff. We have also drawn on contributions from leaders in public management representing different ways of thinking about public management. I am editing the series overall, with well-known experts editing individual volumes. Current and forthcoming volumes include: • Innovations in Public Leadership Development, edited by Ricardo Morse and Terry F. Buss; and • Transforming Public Leadership for the 21st Century, edited by Ricardo Morse, Terry F. Buss, and Morgan Kinghorn. We would like to thank Dan Spikes and Steve Redburn for helping to edit many of the papers in this volume. Ednilson Quintanilla was instrumental in the publication process. The editors remain entirely responsible for the chapters in this volume. Terry F. Buss George Town, Grand Cayman

Foreign Aid and Foreign Policy

1 U.S. Foreign Aid Priorities Goals for the Twenty-First Century Louis A. Picard and Robert Groelsema

The Merger of USAID and the Department of State In late 2005 and early 2006, there was a great deal of discussion within the United States Agency for International Development (USAID) about the future of foreign aid. Rumors abounded that USAID would be restructured, linked to U.S. military activities, and folded into the Department of State, thus ending its forty-five years as an independent agency. Andrew Natsios, then USAID administrator, resigned effective January 13, 2006, allegedly in protest. The new department of development assistance, located in State, would be headed by a deputy secretary of state for development who would also, at least in the short run, serve as USAID administrator. According to rumors, USAID would be shorn of much of its economic development functions and would be directed away from long-term planning toward short-term goals—targeting conflict resolution, coordination with U.S. security objectives, and transitional assistance. The rumors portended the possible end of more than a half a century of U.S. economic and social development assistance activity.1 Some rumors were true. From a policy perspective, the institutional changes reflected the new international environment within the U.S. foreign policy community. Secretary of State Condoleezza Rice, in a speech to Department of State and USAID officials, announced on January 19, 2006, that a gradual process would integrate USAID into the Department of State. Ultimately, this would bring foreign policy and foreign aid closer together and link both to defense and security concerns. While much of traditional foreign aid would continue (at least in the short term), there would be a renewed focus on regime change, governance, and security issues, and, over time, a decline in interest in economic and social development. 3

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By the middle of 2006, central to the debate about international assistance was whether and/or when USAID would ultimately disappear. There were a number of clear indications that different components of foreign aid already operated outside of USAID. In Afghanistan and Iraq, reconstruction teams were already functioning largely outside of the USAID system (a model that seemed likely to be replicated in places such as Somalia, Darfur, and Southern Sudan). For several years, there had been an autonomous HIV/AIDS office, which fell outside of USAID, and there was the Millennium Challenge Corporation (MCC), an independent agency. U.S. foreign aid reorganizations make this a propitious moment to examine foreign aid issues from a policy perspective. This edited book, sponsored by the National Academy of Public Administration and including contributions by both high-level practitioners and academics, will examine the issues of foreign aid and sustainable development both from a policy, political, and managerial dimension and from an ethical dimension. The concern is that ultimately there have been both policy problems and a lack of political and even at times moral clarity, plaguing technical assistance and foreign aid since 1950. These are rooted both in the evolution of foreign aid policy over the last half century and in the ethical and cultural assumptions that were the antecedents of state-to-state foreign aid as they developed prior to and in the wake of World War II. This chapter discusses current U.S. aid priorities and goals for the twentyfirst century. Aid, to its critics, has become part of a broader problem of less developed countries’ (LDCs’) state weakness, since assistance historically has been directed at or gone through inefficient central governments even though local governments, nongovernmental organizations (NGOs), and the private sector provide social services more effectively. The future of the LDC state is an important concern of aid donors. The view presented in this chapter is that donors should provide foreign aid “only when the [recipient] national and local authorities are . . . clearly capable of receiving and using this aid through [a country’s] own instrumentalities” (Browne 1999, 195) to benefit the majority of its citizens. In addition, civil society, nonprofit, or private-sector organizations need to be able to utilize foreign aid to foster social, economic, or political development. Given the nature of government in the twenty-first century, for foreign aid to succeed it would have to be perceived as in the self-interest of a country’s leadership and its societies in both donor and recipient nations. The issues of foreign aid and technical assistance in 2006 remind us of a quaint series of films made in the 1980s, Back to the Future. The goal of foreign aid is at a minimum to get the LDCs’ economy back to the 1950s level through globalization, modernization, economic integration, and in-

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terdependent development. We address the following questions in the next several chapters: 1. Does foreign aid create dependent relationships and is it conducive to development? 2. What is the relationship between governance, nation building, and institutional development? 3. What will be the impact upon the new governance patterns from the merging of international assistance and security? 4. What is the current bias in foreign aid toward international security and international trade? 5. What is the impact of culture versus universal values and how does this impact upon corruption, clan, and ethnicity in terms of individual behavior? 6. What is the impact of intellectual systems and ideologies on donor influences and beliefs? Are economic and religious motivations part of a long-term missionary activity that link the West with the developing world? We’ve divided this book into four parts. Part 1 examines policy themes challenging foreign aid practitioners and those who have studied international assistance. Part 2 has a geographical focus, looking at disparate case studies of foreign aid around the world—Iraq, Pakistan, Ghana, Haiti, Eastern Europe, and Africa. Part 3 looks at specific programs, problems, and issues such as the Millennium Challenge Account, transitional assistance, and nongovernmental organizations. Part 4 discusses international assistance and development, concentrating on remittances. Post–September 11 Developments For a period after World War II and during the cold war, the United States opted for collective action, a multilateral approach based on collegial action among allies (Watanabe 2002, 18). In 1971, foreign aid had been available to “to the poor nations for nearly 20 years . . . but [had] become increasingly controversial” (Jackson and Kimmins 1971, 1). By 1975, elements of a more unilateralist approach began to appear in U.S. international development policies, pressures that intensified after September 11, 2001. In the twenty-first century, “U.S. unilateralism [had become] simply the other side of the coin from U.S. isolationism” (Watanabe 2002, 15). In the wake of 9/11, President George W. Bush, having found “a grandiose purpose” in foreign policy, announced what he called his preemption doctrine,

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by which the United States would strike first in the event of an international threat to its security (Woodward 2004, 34, 130). Increasingly after 9/11, institutions of global or regional governance were being required to intervene during periods of social upheaval and political or economic collapse (Browne 1999, 169). According to Scott Anderson, “with less ‘superpower’ resolve to bring these crises to an end, and more of the world’s wars resulting in the wanton slaughter of civilian populations, aid organizations are increasingly involving themselves directly in social, political and even, at times, military matters” (Browne 1999, 47). The limited resources available for foreign aid, however, have meant that in the contemporary era, Western powers could not sustain the colonial-style structures that had been maintained a generation earlier. To change this would require a massive infusion of both military and foreign assistance. Aid initially did not receive much of a bounce in Congress after 9/11. By 2002, Congress had approved $1 billion for the new aid program and $2.4 billion for HIV/AIDS. The amount going to Africa was to nearly double (Becker 2003, 6). However, in 2003, under Bush’s scheme, according to Rachel Swarns, “Most of the money for the projects [would] come from existing programs, and critics condemned the plan as an attempt to divert attention from the reluctance of wealthy nations [and particularly the United States] to reduce trade subsidies, which many economists say hurt farmers in poor countries” (Swarns 2002, A1). A 2003 New York Times report was typical: “Mr. LaVergne, a Republican, and Mr. Cannon, a Democrat, are strongly critical of President Bush’s request for $87 billion to finance military and reconstruction projects in Iraq and Afghanistan” (Clemetson 2003, A12). A similar comment could be found in the New York Times every year for the past thirty years since the end of the Vietnam War. It must also be said that neither Iraq nor Afghanistan had become more popular since 2003. There have been incremental changes in aid however. There is some evidence of increased cooperation internationally at least outside of Iraq. In the aftermath of the attack, “[a]fter years of resisting, the United States is enlisting [formally at least] in a global war on poverty, but only if it can choose the rules of engagement, the fields of battle and the ultimate cost” (Weiner 2002, A1). In the end, from a U.S. perspective, if there is to be a war against terror, “there is no alternative to rapid economic growth if the aim is the alleviation of poverty” (Wolf 1998, 6). Domestic pressures on specific assistance programs continued. Throughout the history of foreign aid, USAID has carried the burden of heavy congressional earmarks for specific policies—health, child-survival, and population programs (Brainard 2003, 166). This did not change much after 9/11. There remained a predictability to U.S. foreign aid policy, and “like an emergency

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room doctor who gives every patient an appendectomy regardless of the symptoms, the foreign aid institutions have treated almost every developing nation the same—with a package often referred to as ‘structural adjustment’” (Altman 2002, 11). In 2004, the Foreign Assistance Act of 1961 had not been modified or reauthorized since 1986 (Brainard 2003, 167). There remained consensus that aid is wasted. This skepticism was reflected in high political circles. As a Washington Post article put it (Blustein 2002a, E1), “The longer he tours Africa, the more convinced Treasury Secretary Paul H. O’Neill is becoming that massive amounts of aid dollars have gone to waste—and today, after visiting a poorly equipped primary school and village well, he issued one of his most impassioned blasts ever at aid agencies.” Despite the pessimism, USAID continued to stress three concerns in 2005: (1) conflict resolution and state transformation, (2) development of civil society, and (3) relief and development, both social and economic. Little had changed from a policy perspective after 9/11. The Nature of Foreign Aid Aid has been governed by “the structural power patterns in the global system” (Rugumamu 1997, 200). Aid, like diplomacy, propaganda, or military action, is an instrument of statecraft. Aid policy has been a component of diplomacy and ultimately “a sophisticated instrument of control” (Weissman 1975, 11) or at least influence. McGillivray and White offered in 1993 (2): From the donor’s point of view, aid is seen as an instrument of foreign policy, serving to: promote political and diplomatic relations with developing countries; enhance stability within countries of strategic importance; expand export markets; procure . . . strategic imports, and gain kudos in international fora by being seen to be a responsible, caring member of the international community helping countries in need and seeking to promote international development. Indeed, there is reasonably wide acceptance that political, strategic, commercial and (albeit often begrudgingly) humanitarian motives offer a reasonable a priori basis for explaining patterns of aid allocation among developing countries.

Nowhere has this been more clearly drawn than in the Middle East and Northern Africa in the months and years after the 9/11 attack. Domestic influences in donor countries have played a role in the development of foreign assistance policy. According to Paul Glastris (1997), speaking of aid policy, “even if these hearings were to lead Congress to

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tighten laws governing foreign influence, that wouldn’t diminish the impact of some of the most effective advocates for foreign governments: the ethnic compatriots and their descendents who have immigrated into the United States” (Glastris 1997, 30). There historically has been an assumption that U.S. models are best utilized in LDCs, an assumption that largely remains intact. As Fred Riggs has pointed out, “[n]evertheless, one forms the impression . . . that AID persists in thinking that American administrative technology ought to be exported, and that we have in our experience satisfactory solutions for the problems of developing countries” (Riggs 1987, 5). It is partly for this reason that domestic social issues have also intruded into U.S. foreign aid policy, particularly in the area of health. Not surprisingly, antiabortion bills are often linked to foreign aid. For example, in 1996, “In the latest tactical victory by a resurgent antiabortion movement in the United States, Congress has forced a drastic cut in aid that is the mainstay of family planning programs around the world” (Crossette 1996, A6). Policymakers, NGOs, and lobbyists all claim to know the needs of LDCs. Motivations for aid have been political and economic, as well as ethical and humanitarian, in nature (Sogge 2002, 43). Since 9/11, policymakers in developed countries, especially in the United States, have tended to see their actions as charitable and even, as in the case of Afghanistan and Iraq, as a way to justify force to meet ideological, security, and developmental goals. Aid contains more than a bit of ego gratification as well. According to Edward Horesh (1981), “[t]he point is rather that the political leadership found legitimacy for their own policies from the prevailing opinions of the development profession which gave intellectual respectability to the monopolization of power” (614) by the international community. From a policy perspective, the debate about aid and development revolves around cultural transformation and what used to be called modernization theory. The former occurs at two levels. First, there is the concept of identity and how one identifies oneself in relationship to family, language, religion, and culture. Second, there is the issue of social morality, which ultimately is defined, at least in part, by national policy. Modernization assumes a transformation of society from ascriptive to meritorious and from rural to urban. From a modernization perspective, a book on aid should focus on the relationship between the individual and a primary socialization process and the extent to which national ethical and moral values impact upon the individual. The primary assumption of aid is that there is a movement toward individualism and innovation and entrepreneurialism at all levels within society that can be stimulated by changes in ethical, political, and social values.

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There is a common assumption that foreign aid through modernization principles is directed toward expanding choices for individuals in society (Liska 1960, 6). “In some ways,” according to Paul Blustein (2002b), “the new approach resembles the insistence on structural adjustment in the 1980s, though with less emphasis on cutting budget deficits and more emphasis on developing clean, healthy institutions such as courts” (A27). It was not until the 1980s that development specialists focused on the role of institutions in development, “not only the formal organizations of government and private-sector entities but the ‘humanly devised constraints that shape human interaction’” (Lancaster 1999, 18). “Aid donors,” according to Lancaster (1999), “have found efforts to strengthen . . . institutions among the least effective of their activities. Indeed, evidence suggests that technical assistance has become part of the problem of institutional weakness, not the solution. Despite 30 years of a heavy technical assistance present and much training, local institutions remain weak” (57). Aid, to its critics, has become part of a broader problem of LDC state weakness because assistance historically has been directed at or gone through inefficient central government structures even though local governments, NGOs, and the private sector are able to provide social services more effectively than the state is (World Bank 1998, 22). Historically, according to Steve Weissman (1975), “the aid-givers coordinate their beneficence with other levers of control, from diplomatic pressure and private ‘philanthropy’ to military intervention” (11). Too often, it has been argued, aid “not only fashioned the structure of the aid relationship but also determined what interests were to be served and the modalities for achieving them” (Rugumamu 1997, 258). History, as Joseph Weatherby his co-authors authors point out, “has shown that institutions cannot be readily transplanted intact from one culture to another” (Weatherby et al. 2000, 79). Yet that transplant is often seen as fundamental to aid. At issue is the chain of forces that impacts upon individual and social values as a means of promoting international development. Focus here and in the following chapters will be on the full spectrum of foreign aid impacts, from individual to nation. A Mixed Record for Foreign Aid Ostensibly, aid goals—the reduction of material poverty through economic growth and the delivery of social services; the promotion of good governance through democratically selected, accountable institutions; and the reversal of negative environmental trends through strategies of sustainable development—in 2006 remained what they were more than half a century ago (Hook 1996; Sogge 2002, 8). Primary emphasis among donors has been on economic growth.

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During the 1950s, donors assumed that foreign aid would provide a shortterm boost to LDCs, by filling the “finance gap”—what a country lacked in order to take off toward sustained economic development (Easterly 2001, 31). Initially, the magic formula was based upon the Harrod-Domar model, which assumed that aid finance should be invested in large-scale infrastructure, dams, harbors, roads, and machinery (Easterly 2001, 28–9). The search was for what economists of the day called the “take off” point, and it all seemed so simple. In reality, however, the issues and perceptions of aid, particularly economic development and poverty reduction, have changed and are changing. Failure to reduce poverty and grow economies has been recognized empirically by academic studies, argued ideologically by anti-Keynesian economists, and reflected in changes in priority among bilateral donors including USAID. Put simply, by the end of the twentieth century, as a number of economists have noted, “universal models of growth [did] not work well” (Easterly 2001, 28). Western and specifically U.S. aid often seems “intellectually disorganized, practically ineffective in too many cases, and insensitive to the political implications and social consequences of foreign interventions” (Stillman and Pfaff 1966, 220). As Stillman and Pfaff (1966) noted, “the simple discharge of foreign aid funds on a vast scale without serious plan, is not a moral spectacle” (218). In that year, U.S. foreign aid to be sustainable should have been pegged at $3 billion (218). In 1994, U.S. assistance, exclusive of the security-based Economic Support Fund, was pegged at $2.469 billion less than the 1966 sustainable figure. The drop in foreign aid and technical assistance since 1970 has meant that even if aid were 100 percent effective it would not be sustainable from an economic growth perspective. The search for a formula for growth has been a constant in the debate about development assistance, though the path to growth has often changed over time. “Many times over the past fifteen years,” according to William Easterly, “we economists thought we had found the right answer to economic growth” (as quoted as Stillman and Pfaff 1966, 23). At various times, capital investment, population control, human resource development, policy reform and structural adjustment, and debt forgiveness have all been identified as the elixir of development. Despite massive amounts of aid, many heavily aided countries are among the poorest. At the beginning of the twenty-first century, basic assumptions about foreign aid came into question. Aid now supports economic growth but does not stimulate it. Support can come in the form of innovative technology, human resource development, organizational capacity, and capital investment. There is no evidence, however, of a relationship between foreign aid and either eco-

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nomic growth or the growth of private investment outside the context of good governance. Rather, evidence suggests that in many countries much foreign assistance goes for either individual or collective consumption. Historically, moreover, variations in growth across countries have had very little to do with variations in human capital growth alone. As Easterly puts it, “the growth response to the dramatic educational expansion [in LDCs] of the last four decades has been distinctly disappointing” (Stillman and Pfaff 1966, 73). Economic development occurs only when education grows within the context of government incentives and a framework for growth. Within the context of a pro-growth set of policies that will create incentives, the expansion of education and skills can be a powerful developmental tool. In the early twenty-first century, there was a growth in aid expenditures for the first time in a generation. From a policy perspective, there was a new need for the consideration of nation building, institutional development, and human resource development as a context (conditions precedent) for development. Within this context, humanitarian assistance has been linked to security management and social and economic development, sometimes labeled human security. Beyond concerns about the role of foreign aid in poverty reduction in the new century, three events impacted upon the nature and scope of foreign aid, particularly in the United States. The first was 9/11 and the U.S. reaction to it, the second was the war in Iraq and Afghanistan and the role that foreign aid played in these conflicts, and the third, linked to the first two, was the movement in U.S. policy circles to link foreign aid, foreign policy, and national security. These crises have resulted in several policy changes in recognition of the challenges and limits of assistance in circumstances of natural and human-made disasters. Searching for Direction Just as there are popular and elitist views of U.S. foreign policy, so are there populist and elitist views of aid (Campbell 1971). Populist views, though seldom articulated, correspond roughly to the bottom-up approach while elitist perspectives refer to the top-down, planning methodology within the donor’s power nexus. Populist formulas have become increasingly popular in technical assistance circles and should be examined within the context of foreign aid program managers’ policy choices (Hook 1996, 35). Elitist views, however, tend to predominate in foreign policy circles. It is this nexus between individual and collective views where one goes to ascertain contemporary directions in aid. Motivations usually attributed to foreign assistance include self-interest in

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international security, trade and commercial motives, and a sense of obligation and charity as some form of humanitarian responsibility. Historically, concession agreements have focused on commercial promotion with a particular focus on international trade. Aid is part of the balance of power calculation—a carrot-and-stick approach that is in turn based on exchange theory. Aid is about states and individuals. Self-interest defines the motives of actors on both sides of the foreign aid process (Rugumamu 1997, 7). Leaders in recipient states often “have had private interests and ambitions of their own” (Rugumamu 1997, 9). There is a mutual, but asymmetrical, dependence to the relationship and from the recipients’ perspective there are opportunity costs to forgoing foreign aid. Official foreign aid and technical assistance ultimately are vehicles of a country’s foreign policy (Sogge 2002, 194). Foreign aid agencies are thus “part of an institutional framework . . . that continues to fall short of its potentials. Foreign aid is . . . about politics and, crucially, the relationship between donors and recipients—not only at the higher echelons, but at all levels of contact” (Wedel 1998, 6). According to John Montgomery (1962), “foreign aid as a political instrument of U.S. policy is here to stay because of its usefulness and flexibility” (9). The U.S. Peace Corps’ ideology and those of other voluntary organizations has played an important role in purporting to transfer values over the past half century. Volunteerism has been important both in nonofficial as well as in official assistance in the United States, Europe, and to a lesser extent Japan throughout the last half of the twentieth century. This is an important legacy of the history of foreign aid as we move into the new millennium. There are several social and individual motivations for foreign aid, including national esteem; altruism, particularly in terms of humanitarian assistance; and military and strategic, political and diplomatic, commercial, and collective or multilateral advantages (Browne 1999, 170). An important foreign aid subtext links volunteerism to assistance. Those involved in aid are assumed to have noneconomic motives. Donor activities often have been justified by humanitarian theory and the moral imperative (sometimes referred to as the missionary factor). Donor representatives are sometimes motivated as part of a process of conscience-salving and through the performance of what Des Gasper has called accountability rituals. At an individual level, donor officials may or may not be patronizing, but systemically that is often the result. People in poor countries are sometimes seen, or treated (or perceived to be treated), as not quite adults. According to Gasper (1999), international aid assistance should work with those in the developing world and “treat them as people, adults, and in collegial fashion, not in general as children or delinquents” (1). Unfortunately, childishness sometimes remains a part of the LDC image.

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Reform over the past decade has included the redirection of funds through nongovernmental and local government institutions. From an LDC domestic perspective, over the last half century nongovernmental actors have had a major impact upon aid policy. Historically, Christian missionaries have been an important component of this prior influence and perhaps have contributed to contemporary fears of “crusaders” in Asia, the Middle East, and Northern Africa. It was in the British and the other European empires that the values of aid were most completely defined. The original intersection between the government and nongovernmental actors occurred in nineteenth-century Asia and Africa, where missionary organizations were a major factor in the development of the British and other European empires and faith-based humanitarian missions continued to operate around the world into the twenty-first century. USAID contractors, nonprofit grantees, and domestic bureaucracies that operate these programs all have become a major source of opposition to and support for foreign aid and, in some cases, advocates for its reform. Some of these reformers have called for a shift from bilateral to multilateral assistance. Others have called for the complete separation of foreign aid from the Department of State and a move to the Treasury, or the creation of a separate cabinet department or presidential agency headed by a person of stature. Still others have bemoaned a loss of mission in the foreign aid community. From this perspective, “mobilizing diverse energies means fostering decentralized development and selecting local initiatives (local government, private groups, individuals) over central initiatives” (Smuckler and Berg 1988, 24). The goal of the donor is sometimes said to be to assist “internal, postcolonial modernizers, carrying out tasks of development while mass awareness and participation evolve” (Liska 1960, 129). Part of that motive is political and military. Part of it is also economic. In the end, “foreign aid is an instrument of foreign policy” (Liska 1960, 1). The compelling mode for foreign policy, and hence foreign aid, is national self-interest, as defined by the political leadership of a country. In foreign aid, however, there is sometimes a lack of mutual exchange. There are strings attached but they are one sided. LDCs have little or nothing to offer prospective donors in the post–cold war period. Since 1950 moreover, donors have been remarkably ignorant of the impact that political conflict, social values, and ethnic diversity have had on the efficacy of foreign aid and technical assistance. Few understand that one or more ethnic groups are likely to benefit disproportionately from international assistance, increasing ethnic tensions and distorting the environment away from economic growth or institutional development, or that value changes can impact upon or threaten political, social, or religious leadership. According to Easterly (2001), “corruption increases with more foreign aid in an ethni-

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cally divided society though not in an ethnically homogeneous one. Foreign aid is a common resource that each ethnic group will try to divert to its own pockets” (249). The foreign aid system as it has evolved since 1950 has largely been bureaucratic in nature and sometimes allows for the implementation of foreign aid policies contrary to a country’s national interests. As Henry Kissinger noted in the late 1960s, there was “a sort of blindness [in terms of foreign aid] in which bureaucracies run a competition with their own programs and measure success by the degree to which they fulfill their own norms, without being in a position to judge whether the norms made any sense to begin with (Campbell 1971, 8). In aid policy, there remains a problem of what John Montgomery (1986) calls “consistent outcomes,” that is, seemingly large policy decisions lead to disappointing results (ix). As Montgomery has put it, “boldness [is] followed by indifference; greatness [is] permitted to degenerate into mediocrity” (x). In foreign aid policy, greatness in U.S. decision making can be followed by indifference in the aftermath of that decision. Montgomery goes on, “the best decisions can have consequences harmful to someone” (116). According to Stanley Hoffman (1989), “[a]n increasing differentiation has taken place between the developing countries that have been able to join the industrial world, and whose economic take-off has been spectacular, and the many other countries that have failed, and have fallen more and more deeply into debt” (87). However, he goes on, in terms of foreign aid policy there are, “formidable domestic obstacles to the [U.S. foreign aid policy]. One—[that has been] with us for so long that it is pointless to pin the blame on any administration—is the disjointed way in which American foreign policy is made” (46). Any U.S. efforts at consistency in building LDC institutional capacity must begin with a serious commitment by USAID to its own self-defined development themes, including: (1) the commitment to a policy dialogue between the public and the private sector, (2) a commitment to real technology and skills transfer from more-developed states to less-developed states, (3) a firm commitment to an expanding role for the private sector in economic activities, and (4) a concern for institutional development, capacity building, and sustainability in the public and the nonprofit sectors (USAID 1983). It is important for donors to fund NGOs. Foreign aid programs focusing on capital development have long been discussed among foreign policy specialists. According to a Presidential Task Force as early as 1970, the United States needed to “create a U.S. International Development Bank to carry out [a] bilateral lending program. The Bank should be an independent government corporation, with a full-time president serving also as chairman of a board of directors, which would be

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composed of government officials and private members” (Peterson et al. 1970, 28). It would take over thirty years for the Millennium Challenge Corporation to be created. With this mechanism for high levels of investment, in a post–September 11 world, U.S. international development policies may well prove to be the most important—and the most rewarding—determinant of America’s role in the world. . . . The United States has a profound national interest in cooperating with developing countries in their efforts to improve conditions of life in their societies. . . . This country should not look for gratitude or votes, or any specific short-term foreign policy gains from our participation in international development (Peterson et al. 1970, 2).

This was both an ideal position and perhaps realpolitik. Why Foreign Aid Fails Structuralist critics of foreign aid have long assumed that foreign aid was set up to widen the economic disparities between wealthy states and LDCs. According to Steven Hook (1996), the “perceived effects of this manipulation of foreign assistance include the increased reliance of LDCs on the monetary policies, consumption patterns, and export policies of core states” (38). In 1992, one South African observer suggested that the “Great Power simply makes it known that if the small nation does not do what is required of it then its aid will be cut off” (L’Ange 1992, 14). This may be somewhat overexaggerated. However, the realist position remains alive and kicking among observers of foreign aid. Though the focus among students of foreign aid has been on the negative in terms of international assistance, it is important to remember that there is a positive side to the story. A dozen or so former LDCs, such as Singapore, Taiwan, Korea, India, and China, are entering the ranks of the developed world. It also should be kept in mind that “Many developing countries have achieved in 30 years what it took industrial countries nearly a century to accomplish” (Wescott and Osman 1992, 5). There have been a number of successes in foreign aid—eradicated polio, reduced incidence of smallpox, increased life expectancy, and reduced fertility rates, to name a few. However, numerous studies suggest that foreign aid does not contribute significantly to economic progress in developing countries. Despite discrete successes, much foreign aid has been seen as a failure, especially from an economic and social perspective. Africa remains almost completely underdeveloped and “nearly one in every two people in Latin America and the Caribbean live in poverty today and one in five in extreme

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poverty” (Sanchez 2004, A21). Ultimately, as a number of economists have argued, universal models of growth have not worked very well. Many LDCs are getting poorer rather than more prosperous. Rightly or wrongly, foreign aid failures are often blamed on capacity limitations within LDCs rather than on the aid process, a view that may be less than fair (Rugumamu 1997, 194). In some cases, moreover, “the overwhelming donor demands [have] tended to overstretch the management capacity of the [LDC] state. This was . . . manifested in the state’s increasing inability to cope effectively with detailed aid processing and management procedures” (Rugumamu 1997, 191). The debate around aid in large part revolves around the extent to which aid failure is primarily the recipient’s fault (Lancaster 1999). When foreign aid fails, as it often does, and when pushed to say who is to blame, as Michael Maren points out, “[r]ather than pointing out who really makes money from foreign aid, members of Congress have tended to blame lazy Third World recipients for the vast sums of wasted aid money” (Maren 1997, 200). Corruption, bad government, and traditional values are often (and often are part of, but not all of) the problem. Aid failure has resulted from international pressures in a globalized world and domestic weakness within an LDC. The approach taken in the following studies recognizes the responsibility of domestic LDC leaders in aid management. However, the authors try to place domestic leadership within a web of international and domestic factors that define foreign aid. According to Edward Horesh (1981), “Just as the ‘policy adviser’ cannot come to grips with the administrative process still less can the professional foreigner understand the most elementary social processes unless . . . there are ‘enough local professional colleagues to save the outsider from most indiscretions’” (612). Development specialists often point to a concern about an “entitlement mentality” and aid dependency among Third World elites (Horesh 1981, 67). However, as Lancaster points out, much of the ineffectiveness of foreign aid rests with the donors, including their choice of methodologies and priorities (Lancaster 1999). Likewise, senior donor representatives can have a “board of directors” and top-down mentality in their approach to controlling their host country’s public policy choices (Horesh 1981, 68). A major focus of the essays in this book is on ways that recipient countries can understand, manage, or “deal with” the donor process. Decision makers in both donor and recipient countries need to focus on the benefits and costs of foreign aid policies, programs, and projects. Costs rather than benefits result from a policy if the donor fails to “avoid interference that is needless or irrelevant to major foreign policy purposes” (Montgomery 1962, 250). Foreign aid does reflect foreign policy. Decision makers need to focus

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on both costs and benefits, and the balance between the two, in order to avoid obstruction. In Iraq, for example, despite its obvious importance, USAID was “hopelessly behind” in the development of a democracy and governance plan in September of 2004, relying on operating procedures rather than creative thinking. Aid so often lacks strategic planning. Donor values and misperceptions are part and parcel of the picture of foreign aid miscommunication and failure. This is not new. According to Frances FitzGerald (1972), speaking of Vietnam over thirty years ago, “Americans had been brought up in a pluralistic world, where even the affairs of the family are managed by compromises between its members. In the traditional Vietnamese family (and in other traditional families throughout the Third World)—a family whose customs survived even into the twentieth century—the father held absolute authority over his wife (or wives) and children” (19). By contrast, the Western concept of decision making is based on compromise, modernization, and a nuclear family (Mosley 1987, 43). According to Richard Sandbrook (1993), “the new democratic [foreign aid] missionaries are perceived as ethnocentric in assuming the innate superiority of Westernstyle, liberal-democratic institutions” (103). Official foreign aid has been particularly weak when it came to technological discoveries. Most of these, in terms of international assistance, historically have come from the great private foundations (Esman and Montgomery 1969, 516). According to Dennis Rondinelli (1985), “AID’s technical assistance for development administration during the 1950s and early 1960s was heavily influenced by the prevailing concepts and theories of economic development, [which originated in the private foundations but were] reflected in the Marshall Plan and Point Four Program, which were primarily aimed at rehabilitating physical infrastructure and industrial plants, temporarily feeding large numbers of people whose sources of income had been destroyed during the war, and re-establishing the economies of industrial societies” (213). The Potential for Success? Even with outside input, it is difficult to change organizations. As a former USAID administrator puts it, “At this meeting, we received a briefing by a respected management consulting group, which had been engaged . . . in framing solutions to organizational concerns” (Roskens 1991). According to Gasper (1999), “If one’s theory of development centres not on volumes of investment but on building confidence and capacity, people, organizations and institutions, including capacity to learn, decide and mobilize resources in one’s own unique situation, then co-determination in projects and policies is vital in place of conventional modes of aid” (2).

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Donor intervention to improve management performance will not be successful without a sustained commitment to institutional development, particularly for institutions involved in education and training. Moreover, such interventions should be unencumbered by the unrealistic time-bound constraints of the project cycle. As Jon Moris pointed out over twenty-five years ago, the time phasing provided in donor project documents “is hopelessly unrealistic” (Moris 1981, 33). A recent World Bank report called for donors to shift their assistance from financing projects to financing a time slice of sectoral or subsectoral programs. An early implementation issue related to the debate between coordination and specialization. Delegating responsibility to other departments or contractors in some situations could actually weaken control over the distribution of funds between functional fields. There was also a fear that proposals of special interest to individual governments could monopolize available program resources. It is important to separate the process of policy making from the way foreign aid is planned and administered in the field. Too often, policy analysis focuses on bureaucratic processes while neglecting the situation on the ground. In the field, “Each mission director likes to make a personal mark with a cluster of new activity reflecting his/her own initiative. . . . Consequently mission staffs are project advocates” (Morgan 1980, 9). According to a report from the 1980s, “Mission directors assigned to the more developed of the developing countries testified that large numbers of senior policy and mid-level officials had received management training in the United States through United States or international training programs” (Thorsen and Kornher n.d., 4). Ultimately, implementing foreign aid has been at least in part a management problem. Development management services involve design and evaluation methodologies; the development of suitable donor, donor mission, and LDC participating agency procedures; and the teaching of these concepts and procedures to host country cooperants. Interventions, to be successful, need to include assistance to strengthen local and national-level public management systems and private-sector management capacity. Areas involved include program and project analysis, project identification, design, evaluation/assessment, implementation, and monitoring activities. Public policy concerns include policy analysis, personnel systems development, organizational development, accountancy, human resource development and planning, and project management. There is a growing consensus that good “economic management matters more to developing countries than foreign financial aid does” (Wolf 1998, 6). According to Jill Smolowe, “With the economy less than robust, isolationism on the rise and the November elections approaching, Congress recently warned the Bush Administration that it may not fund large increases for U.N. peace forces” (Smolowe 1992, 32). Judith Hoover notes, “A number of theorists

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have written in the area of values and particularly in the use of values appeal to achieve identification of self or identification of or with others” (Hoover 1994, 532). There is a middle ground among critics. According to Larry Chang, “Between these critics and a steadily decreasing number of aid proponents are some analysts who contend that aid should not be terminated, but be concentrated on those countries that ‘can be saved,’ rather than on those desperately in need of it” (Chang 1986, 6). According to Rondinelli (1985, 215), “This consisted merely of transferring American administrative technology and ‘know how’ to less developed countries, much in the same way that industrial and agricultural technology and ‘know how’ were transferred through the Marshall Plan” (and the Point Four model). Four policy areas can make a difference in terms of international development: transportation, competitive markets, agricultural extension, and transparent policy making and good governance. In addition, a country needs a well-functioning credit system, stable property rights, and effective incentives for public-sector employees (Klitgaard 1990). It is particularly important to recast the agencies dealing with commerce. According to Robert Klitgaard, “the Chamber of Agriculture should get out of the import-export business and certainly not aspire to be a marketing board. Instead, it should become an autonomous body [providing] service [to] the private sectors and functioning as its voice vis-à-vis the government” (1990, 229). Ultimately, it is clear that both individuals and groups of people respond to incentives (Easterly 2001, 115). The assumption has been that donors should “tie aid to past country performance giving the country’s government an incentive to pursue growth-creating policies.” However, policies that encourage incentives and entrepreneurialism require a public policy process that is both rational at the individual level and based on societal rather that narrow interests. According to Easterly (2001), development occurs “when government incentives induce technological adaptation, high-quality investment in machines, and high-quality schooling. It happens when donors face incentives that induce them to give aid to countries with good policies where aid will have high payoffs, not to countries with poor policies where aid is wasted” (289). Long term, there is a consensus that aid should be directed at supporting efforts by LDCs to reform their own economies and political systems (Browne 1999, 94). Beyond this, the donor countries should move toward cooperative mechanisms that facilitate global access and connectivity, in terms of trade, the movement of people, and productivity, and that also contribute to a more benign invasion of the more isolated and the less informed individuals and communities. This involves trade and tariff reform and a

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trade environment that is favorable, or at least equitable to, LDCs and LDC citizen access to education, training, and information and communications technology. Sustainability issues remain important and the goal is “sustainability generated in circumstances of good national governance; which does not mean large government, but strong institutions which facilitate the provision of goods and services by the most appropriate means” (Browne 1999, 166). Overall, the foreign aid dilemma often centers on the question of whether to co-opt or coerce. There has been one constant defining foreign aid over the last sixty years. Critics from LDCs suggest that the humanitarian and development goals of development policy have been distorted by the use of foreign aid for donor country commercial and political, or military, purposes (Hjertholm and White 1998). For the UN, “still, the missions reinforce the consensual approach of the post–cold war era and affirm the tenet held dear by U.N. diplomats: the price of peace, while steep, is ultimately less costly than letting war rage” (Smolowe 1992, 32). The developed-developing dichotomy remains a false one. Instead, a foreign aid community is made up of several interrelated groups and increasing interdependence mechanisms that cross developmental lines in both developed and developing states and societies. The goals of the policy can get mixed up because of the need of the organization to gain control over its social environment. There is a need, as Lancaster points out, to reshape the organization and management of aid. In the recent past, she notes, “USAID [had] one of the most elaborate and time consuming programming systems of any aid agency” (Lancaster 2000, 107). Foreign aid and technical assistance, however, ultimately are vehicles of a country’s foreign policy (Sogge 2002). Aid agencies are “part of an institutional framework . . . that continues to fall short of its potentials. [Aid is] about politics and, crucially, the relationship between donors and recipients—not only at the higher echelons, but at all levels of contact” (Wedel 1998, 6). According to Montgomery (1962, 9), “foreign aid as a political instrument of U.S. policy is here to stay because of its usefulness and flexibility.” Foreign aid is about states and individuals. To conclude, if not to caution, we can go back to Smuckler and Berg’s (1988, 1) wise words: “The world of the 1990s, and that of the Twenty-first century, will be substantially different from one in which a worldwide enterprise known as ‘foreign aid’ was launched forty years ago. New circumstances make the concept of foreign aid less appropriate. To much of Asia and Latin America, the concept of ‘cooperation for development’ fits better. By development cooperation, we mean that we share responsibilities widely and appropriately.”

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Note 1. This information was taken from “Notes from an Interaction Meeting on Restructuring” with USAID director Andrew Natsios, December 14, 2005. The material was provided to the author by a colleague who has asked for anonymity.

References Altman, Daniel. 2002. “As Global Lenders Refocus, a Needy World Waits.” New York Times, March 17, 11. Becker, Elizabeth. 2003. “With Record Rise in Foreign Aid Comes Change in How It Is Monitored.” New York Times, December 7, 6. Blustein, Paul. 2002a. “In Uganda, O’Neill and Bono Disagree About Success of Aid.” Washington Post, May 28, E1. ———. 2002b. “The Right Aid Formula This Time Around?” Washington Post, March 24, A27. Brainard, Lael. 2003. “Compassionate Conservatism Confronts Global Poverty.” Washington Quarterly, Spring, 166. Browne, Stephen. 1999. Beyond Aid: From Patronage to Partnership. Aldershot, UK: Ashgate Publishing. Campbell, John F. 1971. The Foreign Affairs Fudge Factory. New York: Basic Books. Chang, Larry. 1986. “Foreign Aid and the Fate of Least Developed Countries.” Unpublished manuscript. Clemetson, Lynnette. 2003. “Taxpayers Are Restless over Iraq Aid.” New York Times, October 16, A12. Crossette, Barbara. 1996. “U.S. Aid Cutbacks Endangering Population Programs, U.N. Agencies Say.” New York Times, February 16, A6. Easterly, William. 2001. The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropic. Cambridge, MA: MIT Press. Esman, Milton J., and John D. Montgomery. 1969. “Systems Approaches to Technical Cooperation: The Role of Development Administration.” Public Administration Review 29 (September/October): 507–39. FitzGerald, Frances. 1972. Fire in the Lake. New York: Vintage Books. Gasper, Des. 1999. “Ethics and the Conduct of International Development Aid.” Notes from a speech given at the Graduate School of Public and International Affairs, University of Pittsburgh, March 30. Glastris, Paul. 1997. “Multicultural Foreign Policy in Washington.” U.S. News and World Report, July 21, 30–34. Hjertholm, Peter, and Howard White. 1998. Survey of Foreign Aid: History, Trends and Allocation. Copenhagen, Denmark: University of Copenhagen. Hoffmann, Stanley. 1989. “What Should We Do in the World?” Atlantic Monthly, October, 87. Hook, Steven W. 1996. National Interest and Foreign Aid to the Millennium. Boulder, CO: Lynne Rienner. Hoover, Judith. 1994. “Ronald Reagan’s Failure to Secure Contra-Aid: A Post-Vietnam Shift in Foreign Policy Rhetoric.” Presidential Studies Quarterly 24 (3) (Summer): 532. Horesh, Edward. 1981. “Academics and Experts or the Death of the High Level Technical Assistant.” Development and Change 12 (4) (October): 614. Jackson, Sarah, and Joe Kimmins. 1971. “Thunder from the Left: The Radical Critique of Development Assistance.” Communique on Development Issues. London: Overseas Development Council, no. 4, January.

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Klitgaard, Robert. 1990. Tropical Gangsters: One Man’s Experience with Development and Decadence in Deepest Africa. New York: Basic Books. Lancaster, Carol. 1999. Aid to Africa: So Much to Do: So Little Done. Chicago: University of Chicago Press. ———. 2000. Transforming Foreign Aid: United States Assistance in the 21st Century. Washington, DC: Institute for International Economics. L’Ange, Gerald. 1992. “Aid Diplomacy: The New Persuasion.” Star (Johannesburg), May 20, 14. Liska, George. 1960. The New Statecraft: Foreign Aid in American Foreign Policy. Chicago: University of Chicago Press. Maren, Michael. 1997. The Road to Hell: The Ravaging Effects of Foreign Aid and International Charity. New York: Free Press. McGillivray, Mark, and Howard White. 1993. “Explanatory Studies of Aid Allocation among Developing Countries: A Critical Survey.” Working Paper Series No. 148 (April). The Hague, Netherlands: Institute of Social Studies. Montgomery, John D. 1962. The Politics of Foreign Aid: American Experience in Southeast Asia. New York: Praeger. ———. 1986. Aftermath: Tarnished Outcomes of American Foreign Policy. Dover, MA: Auburn House Publishing Company. Morgan, E. Philip. 1980. “Social Analysis, Project Development and Advocacy in U.S. Foreign Assistance.” Unpublished manuscript. Moris, Jon R. 1981. Managing Induced Rural Development. Bloomington, IN: International Development Institute. Mosley, Paul. 1987. Overseas Aid: Its Defence and Reform. Brighton, UK: Wheatsheaf Books. North, Douglass. 1999. Institutions, Institutional Change, and Economic Performance (New York: Cambridge University Press, 1990), quoted by Carol Lancaster, Aid to Africa: So Much to Do: So Little Done. Chicago: University of Chicago Press. Peterson, Rudolph A., et al. 1970. U.S. Foreign Assistance in the 1970s: A New Approach—Report to the President from the Task Force on International Development (March 4). Washington, DC: Government Printing Office. Riggs, Fred W. 1987. “Memorandum: Suggested Discussion Topics Based on Dennis Rondinelli, Development Administration and Foreign Aid Policy.” Personal Communication with the author from University of Hawaii, March. Rondinelli, Dennis A. 1985. “Development Administration and American Foreign Assistance Policy: An Assessment of Theory and Practice in Aid.” Canadian Journal of Development Studies 6 (2): 213. Roskens, Ronald W. 1991. Letter to USAID Colleagues, Washington, DC, January 23. Rugumamu, Severine M. 1997. Lethal Aid: The Illusion of Socialism and Self-Reliance in Tanzania. Trenton, NJ: Africa World Press. Sanchez, Marcela. 2004. “Better than Foreign Aid.” Washington Post, January 2, A21. Sandbrook, Richard. 1993. The Politics of Africa’s Economic Recovery. Cambridge: Cambridge University Press. Smolowe, Jill. 1992. “The U.N. Marches In.” Time, March 23, 32. Smuckler, Ralph H., and Robert J. Berg. 1988. “New Challenges, New Opportunities: U.S. Cooperation for International Growth and Development in the 1990s” (August). East Lansing: Michigan State University. Sogge, David. 2002. Give and Take: What’s the Matter with Foreign Aid? London: Zed Books. Stillman, Edmund, and William Pfaff. 1966. Power and Impotence: The Failure of America’s Foreign Policy. New York: Random House.

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Swarns, Rachel L. 2002. “U.S. Shows Off Aid Projects at U.N. Development Meeting.” New York Times, August 30, A1. Thorsen, Thomas, and Kenneth Kornher. n.d. “Draft Report of the Work Group for the Review of the Programs in Management Improvement and Development Administration of the Agency for International Development.” Washington, DC: Department of State, U.S. Agency for International Development. U.S. Agency for International Development (USAID). 1983. A.I.D. Policy Paper: Institutional Development (March). Washington, DC: U.S. Agency for International Development. Watanabe, Akio. 2002. “First among Equals.” In What Does the World Want from America? International Perspectives on U.S. Foreign Policy, ed. Alexander T.J. Lennon, 50-65. Cambridge MIT Press. Weatherby, Joseph N. et al. 2000. The Other World: Issues and Politics of the Developing World. New York: Longman. Wedel, Janine R. 1998. Collision and Collusion: The Strange Case of Western Aid to Eastern Europe, 1989–1998. New York: St. Martins Press. Weiner, Tim. 2002. “More Aid, More Need: Pledges Still Falling Short.” New York Times, March 24, A1. Weissman, Steve. 1975. “Inside the Trojan Horse.” In The Trojan Horse: A Radical Look at Foreign Aid, ed. Steve Weissman, 25–35. Palo Alto, CA: Ramparts Press. Wescott, Clay, and Abdul Magid Osman. 1992. International Resources and Policies. New York: UN Development Programme. Wolf, Martin. 1998. “Aid, Hope and Charity.” Financial Times (London), November 11, 6. Woodward, Bob. 2004. Plan of Attack. New York: Simon and Schuster. World Bank. 1998. Assessing Aid: What Works, What Doesn’t, and Why. Washington, DC: The World Bank and Oxford University Press.

Part 1 Foreign Aid and Foreign Policy Debates

2 Foreign Aid and Security A Renewed Debate? Lawrence Korb

The relationship between foreign aid and security has changed over time. During the cold war, and especially during the Vietnam period, the two operated in close proximity, at times intersecting (see also chapter 3). At the end of the cold war, there was a brief period when the two appeared to separate. Since September 11, 2001, particularly in Asia and the Middle East, the two appear to be merging together again. This chapter examines the linkage from a historical and contemporary perspective with particular focus on the 2001 to 2006 period. To comprehend the role aid plays in overall U.S. national security policy, it is important to first be aware of its components: bilateral development aid; economic assistance supporting U.S. political and security goals; humanitarian aid; multilateral economic contributions; and military aid and assistance. Since the end of World War II, and the emergence of the United States as a major actor in international politics, these five components of aid have become an essential instrument of U.S. foreign policy. If one views the Department of Defense and the armed forces as the offensive part of our national security policy, foreign aid can be viewed as its preventive part. The Cold War During the cold war, the primary purpose of U.S. aid was clear and it was generally supported by both political parties and the U.S. public. Its purpose, like all instruments of U.S. foreign policy, was the containment of Soviet Communist expansionism. These cold war aid programs were designed to promote economic development and bring about political reforms. Policymakers, from the Truman 27

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administration through that of the first President Bush, believed that these economic and political changes would create stable political systems that could reduce the attraction of citizens of those states to communist ideology and thus block Soviet political and military advances into western Europe, Asia, and the developing world. In fact, U.S. involvement in Vietnam in the early 1950s first began in the form of economic and military assistance. These expenditures also supported other U.S. policy goals, including reducing high rates of population growth, increasing wider access to health care, expanding the availability of education, advancing U.S. trade interests, and protecting the environment. While achieving these goals was considered less important than containment, the goals were seen as closely related to the primary purpose and usually sold to a skeptical Congress and the American people as a necessary part of the containment strategy. From 1945 until the North Korean invasion of South Korea in June 1950, foreign aid was actually thought to be the primary instrument for containing the Soviet Union, more important than military power. President Truman noted in March 1947 in a speech to a joint session of Congress that it was primarily through economic and financial aid that the United States could help free peoples resist subjugation to minorities or outside pressures. Three months later, Secretary of State George Marshall, in his address to the graduating class of Harvard, put flesh on these bones when he said that Europe must have outside financial help or face economic, social, and political deterioration. This aid program, which became known as the Marshall Plan, is the bestknown, most generous, and most widely admired U.S. foreign aid program, sending more than $100 billion (in 2006 dollars) to western Europe over a three-year period. President Truman feared that if Western Europe remained weak and eventually fell into communist hands, it would force the United States into a war footing that would demand tremendous sacrifices of the American people and could even threaten civil liberties in the United States. According to George Kennan, the architect of the containment strategy, Europe’s collapse would require not only a costly readjustment of U.S. political and military strategy, but would bring about changes in U.S. domestic life (McFarland and Roll 2005). This same sentiment was echoed by President Eisenhower in his farewell address, when he warned the American people about the dangers of the military-industrial complex. Indeed, as the United States was expanding its foreign aid programs in the 1947–50 period, it was substantially cutting its military budget. In March 1949, President Truman appointed Louis Johnson, his campaign finance chairman in the 1948 election, as secretary of defense with a mandate to slash defense spending. Johnson carried out his mandate with such a vengeance that on

FOREIGN AID AND SECURITY

29

the eve of the Korean War, the U.S. defense budget was 90 percent less than it had been in 1945. Moreover, NSC 68, the national security directive that laid the groundwork for the cold war military buildup, was not approved until September 1950, three months after the North Korean invasion of South Korea. Prior to the North Korean attack, the National Security Council was actually languishing in the bowels of the bureaucracy (McFarland and Roll 2005). Even before the enactment of the Marshall Plan, first funded in the FY1948 budget, U.S. aid was still substantial. From 1946 to 1948, the United States spent on average about $40 billion a year (in 2006 dollars), or about 2 percent of its gross domestic product (GDP), on foreign aid. In the FY1949 budget, the first full year of the Marshall Plan, aid jumped to about $70 billion, or more than 3 percent of the U.S. GDP. From 1949 through 1952, aid averaged about $50 billion a year, or 2.5 percent of GDP. After the completion of the Marshall Plan, aid dropped on average to about $30 billion a year, and it took less than 1 percent of GDP per year every year until the collapse of the Soviet Union in 1990. During this time, there were peaks and valleys, as different presidents emphasized one or more components of the foreign aid program. For example, in 1962 when President Kennedy unveiled his Alliance for Progress program, the aid budget jumped to nearly $40 billion. In 1972 and 1973, as the United States withdrew its military forces from South Vietnam, the Nixon administration increased military assistance to its former ally. This drove the foreign aid budget up to $40 billion in each of those two years. Finally, in 1979, as a result of the Camp David Accords, President Carter increased aid to Israel and Egypt substantially by $10 billion, to $23.5 billion in that year. Despite these occasional peaks, aid as a percentage of GDP continued to decline from the end of the Marshall Plan to the collapse of the Soviet Union. After 1951, foreign aid never again exceeded 2 percent of GDP. And from 1963 through 1990, it never went above 1 percent. After 1980, aid never exceeded 0.5 percent of GDP, dropping to about 0.25 percent of GDP by 1990. The Post–Cold War Period As the cold war wound down, so too did support for foreign aid. Between 1990 and the attacks on September 11, 2001, aid averaged about $15 billion, less than 0.2 percent of GDP. From 1996 through 2002, it never consumed more than 0.2 percent of GDP; on the eve of the 9/11 attacks, aid had dropped to 0.16 percent of GDP and, as a share of the federal budget, it was half of what it had been allotted in the mid-1980s. This precipitous drop alarmed many national security experts from both political parties (Edwards and Solarz 1997).

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As might be expected, the composition of the aid budget also changed after the collapse of the Soviet Union. In 1990, military assistance consumed about one-half of the aid budget. By 2001, it had dropped to 24 percent. Not surprisingly, as a portion of the overall budget, development and humanitarian aid grew substantially in that same time frame, increasing from 33 percent in 1990 to 46 percent of the total aid budget by 2001. Economic aid consumed a consistent 30 percent share of the budget from 1990 through 2001. In the 1990s, the Clinton administration also changed the goal of the foreign aid program from containing Soviet communism to promoting sustainable development. But this vision was challenged by many who felt that economic development, even if it were a foreign policy priority, could be promoted much better by the private sector and that aid did very little to help. Senator Jesse Helms (R-NC), chairman of the Senate Foreign Relations Committee for much of the 1990s, went so far as to claim that “foreign aid only lined the pockets of corrupt dictators while funding the salaries of a growing bloated bureaucracy” (Radelet 2005, 4). Even those less hostile to aid than Helms contended that increased trade, not more aid, was the key to dealing with the problems of the developing world. In fact, proponents argued that trade can provide more help than aid can to those who are poor. These trade advocates contended that if the United States and the European Union (EU) really wanted to help the world’s poor they would open their markets to what poor countries produce, namely textiles, apparel, agricultural products, and commodities. Some economists estimate that the elimination of trade barriers by rich countries could inject $100 billion annually into the economies of developing countries. In fact, they note that the United States collects more in import duties from some poor countries than it provides in aid (Radelet 2005, 3). But simply rolling back trade barriers and opening markets will not be enough to promote economic development. Many poor countries simply do not have the infrastructure to compete in the global marketplace. History shows that countries that have become development success stories relied on a combination of aid and trade. For example, during South Korea’s period of rapid economic growth, from 1955 to 1972, it still received about five times more aid per capita than sub-Saharan Africa did during those same seventeen years (Radelet 2005, 3). Critics of the Clinton approach also argued that the United States provides more than its fair share of foreign aid—that is, it distributes more assistance than any other country. On an absolute basis this is true. Even in the 1990s the United States contributed about 25 percent of the world’s foreign aid. But when aid is measured on other more relevant scales a different picture emerges. On a per capita basis, in dispensing aid, the United States ranks

FOREIGN AID AND SECURITY

31

Figure 2.1 Overseas Development Assistance as a Share of Gross National Income, 2004

Figure 2.1

Official Development Assistance as a Share of Gross National Income, 2004

1.0 0.9 0.87 0.85 0.83 0.8

As % of GNI

0.7

0.78 0.73

UN target 0.7 0.63

0.6 0.5 0.4 0.3 0.2

0.41 0.41 0.41

Average country effort 0.42

0.39 0.36 0.35 0.28 0.27

0.25 0.24 0.23 0.23 0.23

0.26 0.19

0.17

0.15

0.1

N

or D wa en y Lu m xe ar m k bo Sw urg N et ede he n rla Po nds r tu g Fr al Sw an itz ce er la Be nd lg iu U m ni te Ir e la d Ki nd ng do Fi m nl G an er d m a C ny an Au ada st ra lia N ew Spa Z e in al a Au nd st r G ia re ec e U ni Jap te d an St at es TO TA Ital L y D AC

0.0

Source: Cindy Williams, “Beyond Preemption and Preventive War: Increasing U.S.

Source: CindyEmphasis Williams,on “Beyond Preemption and Preventive War: Increasing U.S. Budget Brief, Budget Conflict Preemption,” Stanley Foundation, Policy Analysis Emphasis on Conflict Stanley Foundation, Policy Analysis Brief, February 2006, February 2006, p.Preemption,” 7. p. 7.

sixteenth among the world’s major donors, and as a share of national income the United States ranks next to dead last. (Figure 2.1 outlines net official development assistance [ODA] as a percentage of gross national income [GNI] in 2004.) Despite these criticisms, the Clinton administration argued with some success that foreign aid, particularly economic assistance, supported six interrelated foreign policy goals: broad-based economic growth; democratic political systems; population stabilization; human health protection; environmental management, education, and training; and humanitarian needs. To circumvent efforts by legislators like Senator Helms to gut foreign aid, the Clinton administration transferred many aid programs from the State Department to other cabinet agencies. These “recipients” of aid programs included the departments of Agriculture, Education, Labor, and Health and Human Services. These transfers did keep the total aid budget from collapsing. Even before 9/11, the Bush administration had modified the Clinton approach by structuring its aid program on what it viewed as the three strategic pillars, namely, economic growth, agriculture, and trade; global health; and democracy, conflict, and humanitarian assistance. In the FY2002 budget,

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LAWRENCE KORB

President Bush sought a slight increase in the overall aid budget compared to the last Clinton budget. The Global War on Terrorism After 9/11, foreign aid became a key weapon in fighting what President Bush called the global war on terrorism. According to USAID, aid in 2006 had five operational goals (Tarnoff and Nowells 2005, 3): • Promoting transformational development, especially in the areas of governance, institutional capacity, and economic restructuring; • Strengthening fragile states; • Providing humanitarian assistance; • Supporting U.S. geostrategic interests, particularly in countries such as Iraq, Afghanistan, Pakistan, Jordan, Egypt, and Israel; and • Mitigating global and international ills, including HIV/AIDS. President Bush also changed the criterion for awarding economic assistance by instituting the Millennium Challenge Account (MCA). Under the MCA (which is separate from USAID), development assistance is targeted toward lower-income and middle-income countries with a proven record of embracing policies that lead to stronger growth. The Millennium Challenge Corporation, which runs the MCA, has identified three policy indicators—good governance, investment in health and education, and promoting economic freedom—and sixteen performance indicators that measure these areas. To qualify for the MCA, a country must be above the median for half the indicators in each policy idea (see especially chapter 15 on MCA). The Bush administration also used aid’s military assistance component to punish those nations that ratified the creation of the International Criminal Court (ICC), an institution that the United States refused to join. According to a law that the administration proposed after 9/11, and that the Republicancontrolled Congress enacted, the State Department will end military assistance to nations that have failed to ratify a pledge not to extradite U.S. citizens to the ICC (Brinkley 2006). As might be expected, funding for foreign assistance increased after 9/11 and the composition of the program also changed. In FY2003, the first budget formulated after 9/11, the aid budget jumped to $23.2 billion, an increase of $5.4 billion and 30 percent above the previous year. This brought foreign aid to its highest absolute level since 1986 and to its highest share of the GDP since 1996. But this amount was still far below the first year of the Marshall Plan, which in 1949 consumed about $66 billion. Moreover, the increase in

FOREIGN AID AND SECURITY

33

2003 was only a temporary spike. Funding dropped again in 2004 and 2005 and by 2006 it was still below the 2003 level. The decline after 2003 was partly a result of congressional action. Between 2004 and 2006, the Republican-controlled Congress slashed President Bush’s aid budget by more than $2 billion each year. But President Bush did not veto nor even threaten to veto these congressional reductions despite the fact that, in 2005, he twice appeared on the world stage and promised to increase development assistance to poor countries. At the G-8 meeting in Scotland in July 2005, the president pledged to double aid to Africa by 2010, compared to the 2004 level. And at the United Nations summit meeting in September 2005, he called on the world’s nations to increase aid to 0.7 percent of GDP by 2015. But, as noted in Figure 2.1, as a result of the congressional reductions and administration inattention, the United States now gives only 0.18 percent of GDP to aid, making it the world’s second-stingiest country (“Where’s the Veto Threat” 2005). After 9/11, the composition of foreign aid changed, but not in the way one might have imagined. After falling to 35 percent of the overall aid budget in 2000, development aid rose to 55 percent by 2005. During this same time frame, the share allocated to economic and military components dropped substantially. Economic assistance dropped from 35 percent to 22 percent, while military aid surprisingly declined from 30 percent to 24 percent. One would have expected military assistance to have received more priority in prosecuting the War on Terror. However, if one includes the money allocated to reconstruction in Iraq, the size of the aid budget grows substantially. The U.S. assistance program to Iraq became the largest aid initiative since the Marshall Plan. By the end of 2006, some $18.4 billion had been allocated for that purpose. Unfortunately most of that money, which was supposed to improve the infrastructure and promote democracy in that war-torn country, went into providing security. As a result, virtually every measure of the performance of Iraq’s oil, electricity, and sewage sectors fell below prewar levels (Ganz 2006). A report by the special inspector general for Iraq, Stuart Bowen, concluded that the money allocated for Iraq’s reconstruction will run out before the most critical reconstruction projects are funded (see also chapter 6 on Iraq). Only 49, or 36 percent, of the 146 water projects, and only 300, or 70 percent, of the 425 electrical projects, would be completed, and only 2,300 megawatts of the promised 3,400 additional megawatts of electricity will be restored (Ganz 2006). Consequently, the percentage of people in Iraq with drinking water and with sewage services remained below prewar levels and oil production declined from 2.6 million barrels a day to 2.1 million. Nonetheless, the Bush

34

LAWRENCE KORB

administration refused to seek any more funding for reconstruction projects in Iraq. According to the head of the U.S.-led program to rebuild Iraq, the Iraqi government could no longer count on U.S. funds and had to rely on its own revenues and other foreign aid (Frank 2006). As noted by Tarnoff and Nowells (2005), the recipients of U.S. aid also changed after 9/11. In 2005, the United States provided assistance to some 150 countries. But the bulk of that aid was concentrated in certain countries, reflecting the priorities and interests of U.S. foreign policy. Compared to a decade earlier, there were both similarities and sharp differences between country aid recipients for the two periods. The most consistent thread connecting the top aid recipients over the decade between 1995 and 2005 was continuing U.S. support for peace in the Middle East, with large programs maintained for Israel and Egypt. The importance of counternarcotics efforts in Latin America is also evident in both periods, with Bolivia, Peru, and more recently Colombia among the top U.S. aid recipients. Assisting countries emerging from conflict, usually under more temporary circumstances, is another characterization of U.S. aid. Haiti (see also chapter 9 on Haiti) and Bosnia, the leading recipients of aid in FY1995, were replaced in 2005 by Sudan. But there are also significant contrasts among the leading aid recipients of the decade. The impact of the terrorist attacks on 9/11, and the subsequent use of aid to support other nations that are threatened by radical jihadists or are helping the United States combat the global terrorist threat is clearly seen in the country-aid allocations for FY2005. Afghanistan, Pakistan, Jordan, and Indonesia were key partners in the war on terrorism (aid to Pakistan is discussed in chapter 7). Moreover, with an $18.4 billion relief and reconstruction appropriation in FY2004, Iraq was the largest recipient of U.S. foreign aid. Another new feature of U.S. assistance—the emphasis on HIV/AIDS programs—was evident in FY2005 aid figures, with Ethiopia, Uganda, Kenya, Nigeria, Zambia, and South Africa among the top recipients, largely due to their selection as “focus” countries for the administration’s five-year, $15 billion Global AIDS Initiative. Compared to a decade earlier, the former Soviet states making the transition to democratic societies and market-oriented economies were downgraded. In FY2005, as opposed to a decade before, none of the former Soviet states were among the leading recipients as they were in 1995, and some were actually scheduled for “graduation” from U.S. assistance in the near term. On a regional basis, the Middle East for many years received the bulk of U.S. foreign assistance. With economic aid to the region’s top two recipients, Israel and Egypt, declining after the late 1990s and overall increases in other areas, however, the share of bilateral U.S. assistance consumed by the Middle East fell from 58 percent in FY1994 to 38 percent a decade later.

Figure 2.2 U.S. Foreign Aid, FY1946-FY2004 FOREIGN AID AND SECURITY Figure 2.2

35

U.S. Foreign Aid, FY1946–2004

Billions of constant 2004 $

$80 $70 $60 $50 $40 $30 $20 $10 $46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 00 03

Fiscal year

Sources: USAID, OMB, and CRS calculations; Congressional Research Service, U.S. Library of Congress.

Sources: USAID, OMB, and CRS calculations; Congressional Research Service, U.S. Lib Congress. After 9/11, South Asia emerged as region of growing concentrated levels of U.S. assistance, rising from a 4 percent share ten years back to 17 percent in FY2004. Latin America, where a renewed effort to counter narcotics production and trafficking was bolstered with large aid programs, is a region where the proportion of total U.S. assistance grew modestly. Similarly, the share represented by African nations increased from 13 percent to 18 percent, largely due to the Global AIDS Initiative, which concentrates resources on fifteen (twelve in Africa) “focus” countries where the disease has had the most serious consequences. With the graduation of several east European aid recipients in recent years and the phasing down of programs in Russia, Ukraine, and other former Soviet states, the Europe/Eurasia regional share fell somewhat. The proportion of assistance provided to East Asia grew during the decade, but the region remained the smallest area of concentration, accounting for only 3 percent of U.S. foreign aid in FY2004. Despite the fact that the president’s 2006 national security strategy said that helping the world’s poor is a strategic priority and a moral imperative, overall since 9/11, priorities in the foreign aid budget tie foreign aid more closely and more explicitly to the strategic goals of the War on Terror (White House 2006). More than half of U.S. foreign assistance in 2006 funded military and economic assistance to strategic allies, while less than 30 percent was directed to poverty-focused development assistance to poor countries. (Aid funding trends are summarized graphically in chapter 3, and in Figures 2.2, 2.3 and 2.4). While the Bush administration did not increase the aid budget as much as

Figure 2.3 Foreign Aid as a Percentage of GDP 36 LAWRENCE KORB Figure 2.3

Foreign Aid as a Percentage of GDP

3.5 3.0

% of GDP

2.5 2.0 1.5 1.0 0.5 0.0 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 00 03

Fiscal y ear

Sources: USAID, OMB, and CRS calculations; Congressional Research Service, U.S. Library of Congress.

Sources: USAID, OMB, and CRS calculations; Congressional Research Service, U.S. Lib Congress. might have been expected after 9/11, it did make some structural changes. In January 2006, it set up an office under the direct supervision of the secretary of state to oversee the agencies and bureaus that dispense foreign aid. This will be accomplished by dual hatting USAID authorities and should allow the secretary to exert dual control on aid projects (Weisman 2006). The Bush administration also developed new management systems at home and in the field. It established a new office in the Department of State, the office of the coordinator for reconstruction and stabilization. The office draws on all agencies of the federal government and integrates its activities with military efforts. In addition, the U.S. Joint Forces Command is training the uniformed military to work with other government agencies to apply the full range of U.S. power—diplomatic, foreign assistance, information, military, and economic aspects—to postconflict situations (Miles 2006). In Afghanistan, the United States used Provincial Reconstruction Teams, made up of both military and civilian advisers, to support the reconstruction effort. Conclusion To prevail in the war on terrorism, the United States must remember that aid is a national security issue. As former Secretary of State Colin Powell noted, “the United States cannot win the war on terrorism unless it confronts the social and political roots of poverty,” and to win this war it needs poor countries as

Figure 2.4 Foreign Aid Funding Trends

Figure 2.4

FOREIGN AID AND SECURITY

37

Foreign Aid Funding Trends

$45

$40

Mideast supplemental military aid peak

Billions of Constant FY2005 $

$35

Foreign aid including Iraq reconstruction

Deficit reduction measure enacted

$30

Cold war ends

September 11 terrorist attacks

$25

$20 Gulf War

$15

Foreign aid without Iraq reconstruction

Camp David Peace Accords

$10

Wye River peace aid Colombia Counternarcotics

$5

$78

80

82

84

86

88

90

92

94

96

98

00

02

04

Fiscal year

: Congressional Research Service, U.S. LibraryU.S. of Congress. Source Source: Congressional Research Service, Library of Congress.

well as rich ones to support the values it champions and to believe that they too can climb out of poverty and achieve economic and political freedom (Radelet 2005, 6). But they need help to do it, and the assistance the United States currently provides is not enough. References Brinkley, Joel E. 2006. “Bush Budget Would Cut Military Aid to Bolivia by 96 Percent.” New York Times, February 9, A10. Edwards, Mickey, and Stephen Solarz. 1997. Financing America’s Leadership: Protecting American Interests and Promoting American Values. New York: Council on Foreign Relations Press. Frank, Thomas. 2006. “U.S.: Iraq on Its Own to Rebuild.” USA Today, March 23, 1. Ganz, James. 2006. “Iraq Utilities Are Falling Short of Prewar Performance.” New York Times, February 10, A12. McFarland, Keith, and David Roll. 2005. Louis Johnson and the Arming of America. Bloomington: Indiana University Press. Miles, Donna. 2006. “Current Ops Helping Bolster Joint Training Emphasis” Press release (March 13). Suffolk, VA: Armed Forces Information Services. Radelet, Steven. 2005. “Think Again: U.S. Foreign Aid.” Foreign Policy (February): 15–20.

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Tarnoff, Curt, and Larry Nowells. 2005. “Foreign Aid: An Introductory Review of U.S. Programs and Policy.” Congressional Research Service Report for Congress. (Updated January 19). Weisman, Steven R. 2006. “Rice to Ground Foreign Aid in One Office in State Department.” New York Times, January 19, A1. “Where’s the Veto Threat?” 2005. International Herald Tribune, November 5–6, 3. White House. 2006. The National Security Strategy of the United States of America. (March 16). Washington, DC: The White House.

3 Foreign Aid in the Twenty-First Century What Purposes? Carol Lancaster

Foreign aid in the twenty-first century promises to be different from aid in the twentieth century in four important ways: who provides it, why it is provided, how it is organized and delivered, and how large it is, not all of which point in the same direction. The balance of change focuses on promoting development with aid; however, other changes suggest a renewed emphasis on commerce and diplomacy in aid giving. This chapter examines these trends, explores the factors driving them, and peers into the future to identify likely future directions of aid. But first, it is useful to define “foreign aid,” for the term is used in quite different ways. I shall focus on official development assistance (ODA), as defined by the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) to encompass concessional public resource transfers from one government to another (or to international or nongovernmental organizations) with at least a 25 percent grant element, one purpose of which is furthering development in a poor country. This definition does not include export credits or trade financing, funding for cultural exchanges, remittances, private charity, or funding for covert action by intelligence agencies. It omits public resource transfers to countries not classified by the DAC as “poor” (such as Russia or Israel). Based on this definition, total aid from DAC member states, not including China, Middle Eastern oil-producing governments, Russia, and developing country governments, in 2005 was $106 billion, up dramatically from $80 billion in 2004. Tsunami aid and U.S. aid for reconstruction in Iraq, combined with increases in aid volumes stemming from earlier commitments from donor governments, explain this exceptionally large increase.1 39

40

CAROL LANCASTER Official Development Assistance, 1960–2005 (net $)

Figure 3.1 100,000

US $ millions

80,000

60,000

40,000

20,000

0 1

3

5

7

9

11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45

1960–2005

Source: Development Assistance Committee, Organisation for Economic Co-operation and Development.

Who Provides Aid? Foreign aid is provided primarily by the countries of Western Europe, North America, and Japan, as it has been for the past half century. (Table 3.1 shows both bilateral and multilateral aid from donor governments to other governments, to international development organizations, and to nongovernmental organizations.) There are two important emerging trends in aid giving. One involves the reentry of China, former socialist bloc countries, and a number of middleincome developing countries into the category of aid donors (even as many of these governments are still recipients of aid). Rising aid flows from the above sources have begun to reach significant levels and cannot be ignored in overall aid data. As more countries join the European Union (EU), the number of aid donors will increase further since the existence of an aid program consistent with EU law and policy commitments (i.e., eventually reaching the EU interim aid target, announced in Monterrey, Mexico of 0.33 percent of gross national income) is one of the many conditions of accession to the EU (“The Enlarged European Union” 2002). Continuing

53,749.49 987.14 439.70 819.66 1,743.60 1,664.18 370.84 4,104.71 5,030.00 226.00 234.00 1,376.26 13,507.96 122.97 3,134.78 113.22 1,263.56 270.62 1,194.82 1,798.95 890.37 4,501.26 9,954.89

2000 52,435.37 872.78 633.09 867.32 1,532.75 1,634.42 389.00 4,198.03 4,989.50 201.54 286.53 1,626.95 9,846.82 138.94 3,172.49 111.66 1,345.91 268.45 1,737.04 1,665.60 908.21 4,578.99 11,429.35

2001 58,291.98 988.74 520.16 1,071.59 2,004.16 1,643.24 462.19 5,486.15 5,324.43 276.13 397.75 2,332.13 9,282.96 146.76 3,338.01 121.86 1,696.09 322.58 1,712.21 2,011.56 938.87 4,924.34 13,290.07

2002

Years 69,085.25 1,218.60 504.78 1,853.40 2,030.60 1,748.16 558.49 7,253.09 6,784.18 362.16 503.56 2,432.85 8,879.66 193.83 3,972.17 165.44 2,042.16 319.60 1,961.26 2,400.11 1,299.49 6,282.14 16,319.52

2003 79,553.31 1,460.13 677.63 1,463.31 2,599.13 2,037.13 679.92 8,472.56 7,534.21 464.59 607.44 2,461.54 8,922.46 235.59 4,203.82 212.10 2,198.66 1,031.05 2,436.99 2,722.01 1,545.44 7,882.69 19,704.91

2004

106,477.46 1,665.60 1,552.36 1,975.19 3,730.77 2,106.66 897.13 10,058.51 9,915.02 535.00 692.02 5,053.05 13,100.50 263.90 5,131.22 273.92 2,774.99 367.34 3,122.86 3,280.02 1,770.78 10,753.86 27,456.76

2005 (preliminary)

Source: Development Assistance Committee, International Development Statistics, online databases, http://www.oecd/dac.org (accessed May 2006).

DAC countries, total Australia Austria Belgium Canada Denmark Finland France Germany Greece Ireland Italy Japan Luxembourg Netherlands New Zealand Norway Portugal Spain Sweden Switzerland United Kingdom United States

Donors

Foreign Assistance by Donor Country, 2000–2005 (in million $)

Table 3.1

FOREIGN AID IN THE TWENTY-FIRST CENTURY 41

42

CAROL LANCASTER

Table 3.2 Foreign Assistance by Country, 2000–2005 (in million $) Years

Czech Republic Hungary Korea Latvia Lithuania Poland Slovak Republic Turkey Arab countries Other bilateral donors

2001

2002

2003

2004

35.41 — 270.03 — 2.96 43.87 10.74 68.36 686.55 197.20

54.71 — 296.17 1.95 — 29.48 9.14 85.30 2,649.23 200.55

97.58 47.61 372.56 1.26 3.75 49.60 18.34 74.52 2,728.46 164.64

121.66 81.85 429.53 8.95 15.83 137.55 31.14 439.67 2,125.57 543.49

2005 (preliminary) 130.97 — 743.64 — — 283.13 56.09 — — —

Source: Same as Table 3.1.

high prices for petroleum will also keep aid flows from oil-producing countries in the Middle East high. And as Korea and Turkey aspire to a larger regional role (along, eventually, with India), their aid flows will surely rise. What is missing from the table is China. Beijing has long provided aid to developing countries as part of its mini–cold war with Taiwan, first for a seat in the United Nations (UN) (which it gained in 1971), for diplomatic recognition as the rightful representative of the Chinese people, and as part of its competition with the former Soviet Union and the United States for influence among developing countries. (China is still competing with Taiwan for diplomatic recognition in Africa, Latin America, and elsewhere as the legitimate government of China.) While data on Chinese aid has never been robust, China financed one of the largest and most expensive aid projects in Africa in the 1970s: the Tanzania-Zambia railway, which is said to have cost $500 million at that time. It also provided aid for infrastructure—it is especially known for constructing sports stadiums—and turnkey industrial plants. While Chinese aid never ceased, data on Chinese aid from the DAC did cease in the 1990s. Neither the DAC nor the Chinese government has provided data on Chinese aid flows since that time. However, Chinese aid continued during that decade—possibly at reduced levels compared to the past. It now seems that Chinese aid is rising substantially, with new projects being reported almost monthly in Asia, Africa, and Latin America and a more energetic Chinese diplomacy in these regions in pursuit of access to petroleum, minerals, and other raw materials as well as recognition and influence. (For example,

FOREIGN AID IN THE TWENTY-FIRST CENTURY

43

the Chinese government has sought to formalize its relations with African governments by creating a China-Africa Cooperation Forum where the leaders of China and African countries meet periodically. It hosted a summit of African leaders in Beijing in the fall of 2006.) How much aid does China currently provide? Chinese government officials have told me that the volume of their aid is a “state secret”; that it amounts to less aid than China receives from foreign donors; and that half of it goes to Asian countries. A reasonable guess (hinted at by Chinese aid experts) is that China’s aid amounts to between US$1 billion and US$2 billion per year. (One problem in assessing the size of Chinese aid is that it is not entirely clear how the Chinese government defines “foreign aid” since it appears to mix concessional loans with trade and investment financing.) So China remains the 500-pound canary in the aid business (pardon the awkward terminology)—we know it’s there; we know it’s big; but we don’t really know how big; nor do we have a comprehensive picture of what it is up to or where it is heading. Several other sources of development financing need to be mentioned, even though they are not included in the definition of foreign aid. These are the increasing number of nongovernmental actors and the expanding size of their financing. A 2006 report by the Hudson Institute, entitled the Index of Global Philanthropy (see http://gpr.hudson.org/) attempted to tally up the total concessional flows in support of development abroad from the United States alone in 2004. It found that U.S. “private assistance,” which included funds from foundations, corporations, private and voluntary organizations, universities and colleges, and religious organizations, totaled $24 billion (exceeding the volume of aid from the U.S. government). The Index of Global Philanthropy also estimated that remittances from the United States to developing countries accounted for another $47 billion (see chapters 17 and 18 for discussions of the benefits and disadvantages of remittances). What these figures show is that public aid flows are now only one of the important sources of funds to developing countries that are intended—or in the case of remittances can be used—for financing education, health care, information technologies, investments in businesses, environmental protection, and a host of other beneficial activities. The fact that public aid is now one among many sources of financing has changed the development landscape from what it was in the previous century and has begun to produce a growing cluster of development actors of all kinds, producing a broadening set of pressures and encouragement for development in poor countries as well as new development partnerships, especially between government aid agencies and private corporations doing business in the developing world. (None of the data cited above includes U.S. private investment in developing countries, which the index estimated to amount to $6.5 billion in 2004.)

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These data on non-ODA flows are only for the United States. While other donor countries tend not to have such large foundations or perhaps as many venture philanthropists, they do provide significant amounts of private charity. According to DAC data, private charitable giving through nongovernmental organizations (NGOs) from all donors rose from $6.9 billion in 2000 to $11.5 billion in 2004. Development in the twenty-first century is a world of “many-to-many”— with individuals and organizations engaged in promoting economic and social progress—in contrast to the twentieth-century world of one-to-one (government-to-government) or one-to-many (government-to-government or NGOs). Costs of this change to development actors will be a degree of chaos; the benefits will be a lot more engagement by rich and poor in lifting societies out of poverty (and possibly creating the vibrant civil societies most in the development field believe important to sustained economic and social progress). It is a promising but understudied trend. Why Aid in the New Century? The second area where change is evident in aid giving is the purposes for which aid is provided. The four main purposes for which aid was given during the first half century of its existence were humanitarian relief, development, diplomacy, and commerce. By “diplomacy,” I am referring to those purposes involving international security or political interests—for example cold war containment, peacemaking (e.g., U.S. aid in the Middle East), or creating and maintaining spheres of influence (e.g., as with the French in Africa). Several patterns stand out in aid giving during much of the second half of the twentieth century. One is the prominence of these four purposes. Other, less prominent purposes included expanding the language, religion, or culture of the donor country—but these four were almost always the main ones. The second pattern was that donor governments almost always provided aid for a variety of purposes: the United States combined diplomacy with development; Japan mixed commerce with diplomacy; Denmark provided half of its bilateral aid for development and half to expand Danish commercial markets abroad. Other governments exhibited a variety of purposes but all were mixed. (Most governments provided some aid for humanitarian crises, though this aid did not usually represent a significant proportion of aid from any one country.) What explains the mixture of purposes in aid giving? The history of aid provides an answer to this question. Aid as we know it today—with one of its objectives being to better the human condition in recipient countries—is a new phenomenon in relations between states. Governments have long given one another subsidies, bribes, tribute, and other transfers linked to diplomatic or commercial goals. There was some international relief aid during the

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nineteenth and early twentieth centuries from the United States and Europe. But public concessional transfers, one purpose of which was development (broadly defined), is a twentieth-century innovation. Official aid began with an urgent search on the part of the U.S. government for nonmilitary tools to contain the expansion of Soviet influence in Greece and Turkey and, shortly thereafter, in western Europe. Aid was intended to stabilize the economies of these countries (and in some cases to ease the cost of rearmament), as well as to promote economic growth, which would dampen conflict and communist sympathies. Humanitarian or long-term development goals alone would have never moved an isolationist, fiscally conservative Congress to support transfers for Greek and Turkish aid in 1947 or the even larger ones for the Marshall Plan, announced later that same year (see chapter 12 for a closer look at the Marshall Plan). Once established, these aid programs took on a life of their own. Aid to Greece and Turkey continued over the years and the Marshall Plan eventually morphed into the Mutual Security Program of the 1950s to fortify governments and their economies on the borders of the Soviet Union and the People’s Republic of China. But U.S. domestic politics—as members of Congress and the public criticized aid ineffectiveness tied to cold war alliances—and evolving ideas about the more fundamental economic and social changes required to contain communism, led the Eisenhower administration and, later, the Kennedy administration to elevate the role of promoting development to both a means and an end of aid giving. Both administrations pressured Western Europe and Japan, as they recovered from the war and as decolonization proceeded rapidly, to set up their own programs to share the burden of fighting the cold war in the developing world. The governments of the United Kingdom, France, Germany, Scandinavia, Japan, and elsewhere established or expanded their aid in the 1960s—in part for their own reasons (some involving postcolonial policies, others responding to domestic pressures for development aid) and in part often as a response to U.S. pressures. Thus, by 1970, foreign aid that had begun as a temporary cold war expedient in the United States had become an increasingly common and expected element in relations between industrialized and poor countries worldwide. However, pressures internationally from developing countries (e.g., in the UN or in direct bilateral relations with rich countries); from other developed countries organized in aid donor clubs like the DAC; from domestic groups within aid-giving countries (i.e., relief- and developmentoriented NGOs); and from government aid agencies themselves for a greater emphasis on the development purpose of aid all combined to further elevate that purpose and, in effect, to create a norm in relations between states that supported and even required the transfer of significant amounts of public

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concessional resources from rich countries to poor countries to support human betterment in the latter. By the end of the twentieth century, governments of better-off countries had to justify policies that fell short of this norm—something that was unheard of and even unimagined at the end of World War II. In short, a combination of domestic and international pressures and practices had turned aid giving from a temporary diplomatic expedient into a common element in international relations. This norm was in evidence at the UN Millennium Summit in New York, during which all countries agreed to support the Millennium Development Goals—targets for reducing world poverty by 2015. It was in evidence at the UN Conference on Development Financing in Monterrey, Mexico, in 2002, where heads of state from Europe and the United States competed to make generous commitments of development aid in the future; it was visible at the G-8 Summit at Gleneagles, Scotland, in 2005, as governments committed aid to development in sub-Saharan Africa; and it was at work in the new accession of countries to the EU, the governments of which were required to establish aid programs according to EU law and practice, as mentioned above. And while not all of these ambitious commitments had been fulfilled at the time of this writing, aid levels had risen substantially since their decline in the 1990s. By the twenty-first century, it seemed that development had become the most prominent purpose of aid giving in many countries—and not solely at the level of official rhetoric. International agreements restricting aid use in “mixed credit” schemes (in which aid is combined with commercial export financing arrangements to make financial packages attractive to contracting governments) and on untying aid (i.e., restricting its expenditure to goods and services produced in donor countries) had contributed to a reduction in aid use in the service of commercial goals. The diplomatic goals that were once so evident in French aid appeared to be diminishing as its interest in a sphere of influence in Africa declined. Further, the proportion of aid from DAC countries to low-income countries rose from 38 percent of total ODA in 1996 to 48 percent in 2003. (It fell, however, in 2004, back to 40 percent. This may be an aberration associated with the dramatic rise in aid to Iraq. With the significant increase in aid worldwide and emphasis on aiding Africa in 2005, it seemed that aid to low-income countries would resume its rising trend.) The increasing emphasis in aid giving on promoting development is not the whole story of aid’s purposes in the new century. There are two other stories as well. One is the continuation of aid use for a variety of purposes—a trend evident since the end of the cold war in the 1990s. Among them are furthering economic and social transitions in former socialist countries (of less relative importance in 2004 than in 1994 but still evident in aid giving); promoting

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democracy (both as an end in itself and as a means—at least in the view of some aid donors—of promoting development as well as world peace); addressing global problems like HIV/AIDS and other infectious diseases, environmental degradation, drug production and distribution, and others; and performing conflict prevention and mitigation—the latest “new” aid purpose. The size and trend of a few of these purposes are shown in Table 3.3 (which also gives a sense of the size of emergency aid—roughly 10 percent of total ODA), though with the mix of purposes in most aid giving and the fact that aid donors do not typically keep data according to the purposes described here, it is difficult to say with confidence how much aid is provided for aid’s various purposes today. We know from U.S. government data that the United States plans to spend nearly $2 billion on HIV/AIDS in 2006, rising to $3 billion in 2007. But data on aid to fight HIV/AIDS worldwide is not available from the DAC. Thus, our ability to estimate with any confidence the amounts spent on the declared purposes of aid is seriously constrained at present even though these various purposes are clearly behind a portion—perhaps as much as 10–15 percent—of aid giving. The other story involving aid’s purposes involves aid donors that I shall term the outliers—the United States and China. In the case of China, it appears clear that two main purposes motivate Chinese aid: its continuing diplomatic competition with Taiwan and its commercial interests in ensuring access to raw materials—petroleum, minerals, food, and fiber—necessary to support China’s rapid growth. For example, a 2006 government paper on “China’s Africa Policy” contains the following definitive statement: “The one-China principle is the political foundation for the establishment and development of China’s relations with African countries and regional organizations” (People’s Republic of China 2006). The commercial orientation of Chinese aid in Africa and elsewhere is evident in countries to which it appears that China has directed much of its aid: Sudan, Angola, Congo, Zambia, and Zimbabwe. That aid finances infrastructure, education (in China), and turnkey manufacturing and mining projects. Another sign of the commercial orientation of Chinese aid is the location of responsibilities for managing that aid in China’s Ministry of Commerce. China is the only aid-giving government to put its aid program in a ministry of trade or commerce whose overall mission inevitably influences the management of programs under its control. This arrangement is the source of some dissatisfaction on the part of officials from the Ministry of Foreign Affairs, but there is no sign that the government is about to make any organizational changes in its aid structure. Further, China appears to have little interest in embracing the informal or formal practices governing aid giving by DAC member states: the human or political rights performance of recipient governments

Source: Same as Table 3.1.

ODA Emergency/distress relief Democratic development Post-conflict peacebuilding operations

59,574.19 3,811.38 1,220.50 401.58

242.30

2001

59,790.18 4,096.52 659.75

2000

Foreign Assistance by Type, 2000–2004 (in million $)

Table 3.3

402.80

66,941.20 4,391.84 205.80

2002

Years

1,066.27

79,674.43 6,923.46 —

2003

477.19

91,998.16 8,365.63 —

2004



117,319.93 14,267.77 —

2005 (preliminary)

48 CAROL LANCASTER

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is not a priority; the economic policy regime is not a factor in China’s aid giving; untying aid, concentrating on low-income countries, funding projects especially in the social sectors (except education), and moving toward grant aid are all absent from Chinese aid decision making as far as anyone can tell. And again, from my own discussions with Chinese aid officials and experts, those officials are not keen to become part of the DAC aid regime. They want at present to continue on their own path of aid giving. The United States increasingly appears to be another outlier in aid giving. At the beginning of the Bush administration in 2001, it looked like promoting development abroad had gained a renewed prominence in U.S. aid: President Bush declared himself a “compassionate conservative,” which included an interest in poverty abroad; he committed to a major increase in U.S. aid (in a new Millennium Challenge Account or “MCA”) at the Monterrey conference in 2002; his first National Security Strategy named “development” as one of the three legs of U.S. foreign policy (together with “defense” and “diplomacy”) (White House 2002); he made a major commitment in 2002 to increasing funding to fight HIV/AIDS worldwide; and he created a new aid agency, the Millennium Challenge Corporation (MCC) to manage the MCA (see chapter 15 for an assessment of the MCA). President George Bush had elevated aid and development in foreign policy more than any president had since John F. Kennedy. But those policy initiatives appear to have lost momentum and may be replaced by another policy purpose: using aid increasingly for more traditional diplomatic purposes, including reinforcing relationships with key allies in the War on Terror such as Pakistan and Jordan; funding reconstruction in Iraq and Afghanistan; and, more novel, assigning funding to strengthen “fragile states” to avoid state collapse and consequent opportunities for terrorist and criminal organizations to operate in these areas (although exactly how to do this with aid or any other diplomatic tool remained elusive at the time of this writing). Finally, there were some indications that a shift in emphasis had taken place in the U.S. national security strategy. Whereas “development” had been elevated to a seemingly high priority in the report issued in 2002, cited above, a similar report published in 2006, entitled The National Security Strategy, appeared to downgrade “development” and upgrade “democracy/freedom.” The National Security Strategy stated in its very first paragraph that “The goal of our statecraft is to help create a world of democratic, well-governed states that can meet the needs of their citizens and conduct themselves responsibly in the international system” (White House 2006). The implications of this statement and others like it were unclear for the purposes of U.S. aid. Did they imply that democracy (even coercively imposed) would be a driver of diplomacy and, by implication, that aid would be one of the tools

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to support that priority? There did not seem to be any major change in the administration’s proposed budget for foreign aid for 2007 to reflect the “freedom agenda.” But it was another thing to watch, and it certainly promised to set the United States apart from other DAC member states in the purposes governing its aid giving. Thus, the development purpose in aid giving worldwide appeared ascendant in the new century, but the United States and China looked to be outliers—China more than the United States. These trends raised the question of whether there would in the future be two major types of aid donors: those pursuing primarily development purposes with their aid, and those pursuing other purposes. The Organization of Aid Giving The way aid-giving governments organize themselves to manage their aid has a major role in shaping the purposes of that aid. Aid organization often reflects the government’s purposes at the time a particular organizational arrangement is put into place and usually influences their evolution. When the United States reorganized aid in 1961, for example, it established the U.S. Agency for International Development (USAID) as semi-independent of the Department of State to ensure that its mission—development—was not subsumed into the diplomatic concerns of the State Department. The British government based its aid organization in 1964 on similar model. But aid’s purposes do not always drive aid organizations. The German government created a Ministry of Development in 1961 to address a domestic political concern: to provide the leader of a major political party with a ministerial-level foreign affairs portfolio, his price for taking his party into the governing coalition (Lancaster 2006). While the ministry was in effect empty, with few responsibilities for German aid policy, over the decades ministers of development effectively lobbied to acquire those responsibilities and gradually succeeded. We cannot prove that the development purpose of German aid is prominent today (over diplomatic or commercial purposes, which were very much in evidence in the 1960s) solely because of the creation of this ministry—clearly détente had much to do with the decline in diplomatic concerns in German aid—but the way the Germans organized their aid seems to emphasize development. Government aid agencies tend to be lobbies for their own missions, both within government and outside it. The primary mission of aid agencies is typically development. Aid agencies seek allies within government administrations, in legislatures, and, where possible, among interest groups and the public. These allies help aid agencies promote policies or protect them from unwelcome policy pressures from nondevelopment interests.

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It is often the case, for example, that aid agencies work closely with development-oriented NGOs on key issues; sometimes, aid agencies help establish and strengthen those NGOs. Government aid agencies and NGOs sometimes, of course, work at cross-purposes as well; in the United States, this is especially evident in all the “earmarks” imposed on aid expenditures by members of Congress, who at times act in response to the advice and pressures of NGOs. (See chapter 14 for a general discussion of NGOs and aid provision, and chapter 9 for a discussion of NGOs in Haiti.) Three interrelated organizational characteristics affect aid agency influence: degree of unification of aid responsibilities in a single government agency, organizational location of an aid agency, and organizational status in the bureaucratic pecking order. The greater the degree of unification of aid programs, the greater the potential voice for development within that government. Highly fragmented aid systems—with numbers of separate agencies, bureaus, and other bureaucratic entities responsible for managing aid programs—tend to diminish the voice for development within government policy-making bodies. No one speaks authoritatively for development in those bodies (or is even senior enough to be invited to attend high-level meetings), and separate aid agencies themselves can spend time competing with one another. At times, aid agencies are created separately for different functions: for example, one for policy making and one or more for implementation. This is the “German model,” in which the Ministry of Development is responsible for policy and the Gesellschaft für Technische Zusammenarbeit (GTZ) for grant technical assistance, the Kreditanstalt für Wiederaufbau (KfW) for aidfunded project loans. In the case of Japan, policy-making authorities have been lodged in the Ministry of Foreign Affairs (and to a lesser extent in the Ministry of Economy and Industry) and aid activities have been implemented by the Japan International Cooperation Agency (JICA—for grant-funded technical assistance) and the Japan Bank for International Cooperation (for loan-funded project aid). In other cases, significant amounts of aid are managed in numerous different government agencies as well as one or more aid agencies—the French “model,” for example. Fully integrating aid responsibilities into a Ministry of Foreign Affairs is the Danish model. Aid responsibilities in China are located in the Ministry of Commerce. These models raise organizational location issues, which influence the degree of autonomy an aid agency has. One option is a fully independent agency or agencies. Another is a semi-independent aid agency (meaning that one or more other government agencies have a formal say in the size, allocation, and use of economic assistance abroad); yet another is locating the responsibilities for foreign aid fully within another government agency—for example, as a bureau or office. Major agencies—USAID and the MCC—are

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examples of semi-independent aid agencies with formal ties to the U.S. Department of State. In the case of USAID, the administrator “reports” to the secretary of state. This arrangement is ambiguous and has differed in its degree of significance from administration to administration. One of the essential elements in a reporting relationship is who has the last say about the budget of USAID. At present, the secretary of state does and submits it to the White House for a final decision. This arrangement (which did not exist in the Clinton administration, during which USAID submitted its budget directly to the White House), along with others currently in force, has given the State Department a greater influence over USAID’s operations. In the case of the MCC, State and several other agencies sit on the board of the MCC and have some authority over the allocation of MCC funds to countries as well as overall policies. Obviously, the greater autonomy an aid agency has, the more capacity it has to pursue its mission without having to negotiate with other government agencies or direct its resources toward supporting their missions. No aid agency is fully autonomous, but if one had to judge which aid agencies worldwide enjoy the greatest autonomy, they are probably the Department for International Development (DFID) in the United Kingdom and the Ministry of Development in Germany. This brings us to our third key organizational quality: bureaucratic status. The higher an aid agency sits in the bureaucratic pecking order, the greater its autonomy and influence is likely to be. Cabinet-level agencies enjoy the greatest status—they have a voice at the most elevated levels of government policy making where their issues are involved. And they cannot be pushed around by other ministries or agencies on policy or program as easily as subcabinet-level organizations can. At present, there are only two cabinet-level aid agencies among major aid donor governments: in the United Kingdom and in Germany. DFID includes bilateral and multilateral aid (responsibilities for the latter are often lodged in ministries of finance) and includes both policy and implementation. However, DFID has in the past been the Overseas Development Agency and was located in the Foreign Office (FO). In fact, where British aid is located bureaucratically almost seems a ritual, with Labour governments ensuring that responsibility for foreign aid is outside the FO and often locating British aid in a cabinet-level agency while Conservative governments typically put responsibilities for aid in the FO. Over the past several years, there has been quite a lot of organizational change among the three largest aid-giving governments: the United States, Japan, and France (see also chapter 5 for an assessment of Japanese and European aid agencies). Do these changes suggest changes in aid’s purposes? Perhaps the most dramatic reorganization has been the creation of the MCC, to manage an eventual portfolio of $5 billion per year. The MCC is intended to be a relatively “pure”

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development aid agency; its funds are to be allocated to “good performers” among poor countries (i.e., those that govern responsibly, support free markets, and invest in their people) to further their development. Allocation decisions are based on a set of sixteen quantitative criteria and diplomatic or commercial concerns are not supposed to have an influence over these allocations (apart from in cases where U.S. relations with potential recipients are very poor). MCC monies have not been earmarked by Congress, leaving the corporation considerable flexibility in their use, which is essential to its goal of letting the recipient governments decide (within bounds) how the aid should be used.The MCC was set up to be independent of USAID in part to establish its modus operandi as distinct from the Department of State and USAID in order to avoid the influence of diplomatic purposes and to avoid what are widely regarded as USAID’s poorly performing internal systems and its slowness and traditional ways of operating (including having a say in how aid is used). Creation of the MCC strengthened the development purpose of U.S. aid (albeit further fragmenting overall aid in the United States). Other aid donors sought to reorganize their management of foreign assistance. In 1998, after years of sharp criticism of French aid by the French political class, Prime Minister Lionel Jospin implemented several important changes in France’s aid system. France has the most fragmented aid system of any country. It had a Ministry of Cooperation, which was not actually a ministerial-level organization. It provided grant aid and often took its marching orders from the African adviser to the French president and thus had a strong political motivation in much of its aid (i.e., preserving France’s influence in its former colonies, primarily in Africa). There was also the Caisse Centrale de Devéloppement, which implemented the government’s concessional loan programs abroad. It worked to a considerable measure for the French treasury. Many French agencies—ministries, research institutes, subministerial agencies—continued their own aid programs from the colonial period, when the assimilationist view that many of these colonies were “overseas France” and would remain so indefinitely was still prevalent. Jospin sought to reform this system by merging the Ministry of Cooperation into the Ministry of External Affairs (which was only too happy to receive it); strengthening the Caisse Centrale (renaming it in the process the Agence Française de Devéloppement)—the “pivotal operator” in French aid but a subcabinet agency “under the tutelage of the Ministry of Finance and the Ministry of External Affairs”; creating an interministerial committee to coordinate aid policy; and setting up an advisory committee of NGOs to advise on policy. This reorganization made French aid more development oriented (and less a political tool of that government’s postcolonial policies of maintaining a sphere of influence in Africa) and more coherent.

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The other reorganizing government is Japan. In 2006, it decided to merge the aid-giving part of the Japan Bank for International Development (JBIC) with JICA, to be accomplished in 2008. This change had the potential to elevate the voice of development in government even though the new, combined implementation agency would remain a subcabinet-level one and policy would still be made in the Ministry of Foreign Affairs. Thus the three largest aid-giving governments all undertook substantial reorganizations of their aid systems that seemed to indicate a greater prominence for development in the purposes of their aid. But, in fact, a more detailed look at these organizational changes suggests that the outcome is far from certain. The intent behind creating the MCC was to ensure that the funds it handled would have a strong and almost singular development focus. But that left USAID to figure out what its role was—it began to emphasize helping fragile and failed states, preparing governments that could not meet the standards of aid set by the MCC to do so, and generally dealing with the less-successful states in the developing world (as well as providing humanitarian relief and help with reconstruction in Iraq and Afghanistan). There is little doubt that the creation of an independent MCC weakened USAID and hastened the influence of State over its activities. (Some of its traditional functions were already replicated by State democracy promotion, addressing global issues like HIV/AIDS and providing assistance in emergencies and postconflict situations.) As USAID moved away from its development mission, it became more vulnerable to absorption by State. Its strategic planning, mission, and budgetary processes were all subject to increasing control by State. By 2006, it was decided that the USAID administrator would be “dual hatted”—he or she would also be the director of foreign assistance in the State Department, with a large staff there in addition to in USAID. The intention of the secretary of state was not to seize control of USAID—Condoleezza Rice reportedly wanted the director to exert control over USAID’s and State’s aid budgets (a sizable amount of aid was managed by State)—but it was unclear that such would be the long-run impact of the change. It seemed more likely that if any change occurred at all, it would turn out to be that the larger, more powerful, more crisis-driven Department of State would, in fact, exert far more control over USAID—perhaps ending in a de facto merger and an extinguishing of USAID’s semi-independence and possibly eventually even its development mission. French organizational changes were not quite what they seemed either. Changes implemented by Prime Minister Jospin appeared not to go far enough to make a significant difference in either the coherence or the development orientation of French aid. The AFD was small and was not quite “semi-independent,” as it reported to two powerful ministries and lacked a substantial

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budget of its own to deploy. It was exceptionally well led but time would tell whether even the most intelligent and astute of France’s public officials could turn the AFD into more than an executing agency for the big ministries. Further, the once- or twice-yearly interministerial meeting on aid policy provided a very limited scope for coordination among France’s many aid spigots. Finally, the NGO advisory body had little clout with the government. What may have helped raise the prominence of development in French aid and reduce the diplomatic and commercial purposes was France’s disillusionment with political and economic conditions in its former African colonies. A sphere of influence in west and central Africa, wracked by poverty and conflict, wasn’t much to brag about and didn’t hold much attraction to French business (except oil and gas interests in certain countries, of course). Finally, Japan’s aid reorganization—while it looked promising for fortifying the development purpose of Japanese aid—was not undertaken for that purpose. Rather, it was a result of a government-wide reorganization, including a rationalization of government financing mechanisms. It had nothing to do with enhancing development abroad in the minds of Japanese. Aid Volume One of the most dramatic changes in foreign aid in recent years has been the turnaround in aid flows. Aid rose in the 1990s with the transition of former socialist bloc countries to democracy and capitalism. But by 1997, aid had sunk to its lowest real level since 1985. By 2005 (based on figures produced by the DAC), foreign aid had reached nearly $120 billion—the highest in real and nominal terms since 1960 and 25 percent above that of 2004. Figure 3.2 shows the nominal and real aid totals from all donors (net of repayments) between 1960 and 2005. The dramatic rise in aid levels for 2005 reflects the increase in aid for reconstruction in Iraq and the expenditure on tsunami relief. But the $20 billion budgeted for Iraqi reconstruction in 2004 (much of which was undoubtedly spent in 2005 and thus boosts the volume for that year) does not tell the whole story of the rise in aid in 2005 or during the preceding years. Decline of aid in the 1990s is attributed to the end of the cold war, which presumably undercut an important rationale for aid. This is a bit simplistic: other donor governments were never as driven by cold war concerns as the United States was. The British, French, Belgians, and Portuguese all used their aid to support their postcolonial policies of maintaining influence in their former territories. The United Kingdom was most interested in a smooth withdrawal, avoiding the chaos that could lead many Indians and others who had settled in Africa during the colonial period to flee to the United Kingdom. The Belgians,

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CAROL LANCASTER

Figure 3.2

Official Development Assistance, 1960–2005 (constant $) (Total ODA [net] constant $)

140,000

US

millions (constant)

120,000

100,000

80,000

60,000

40,000

20,000

0 1

3

5

7

9

11

13

15

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

1960–2005

Source: Development Assistance Committee, Organisation for Economic Co-operation.

Portuguese, and French were more interested in maintaining economic and political influence in their former territories. There may have been some cold war concerns informing these policies, but they were not among the most prominent policy drivers of foreign aid from these countries. The Germans tied aid to recognition of Bonn as the rightful representative of the German people under the 1960s Hallstein Doctrine. But with the Ostpolitik of Chancellor Willy Brandt in the 1970s, Germany’s competition with the German Democratic Republic diminished. Even for the United States, cold war concerns had greatly diminished by the end of the 1970s. It was clear that Fidel Castro’s Cuba was contained in Latin America; the colonial and postcolonial conflicts in Angola, Mozambique, and Rhodesia (now Zimbabwe) did not threaten to turn sub-Saharan Africa toward the east; and the Marxist government of Haile Mariam Mengistu in Ethiopia was limited in its influence (as regrettable as that influence was from Washington’s point of view). Since the Soviets declined to provide any help to other regimes in Africa, for example, in response to an urgent appeal from the Rawlings regime in Ghana in the early 1980s (see also chapter 8), it was becoming clear that Moscow was unable or unwilling to use aid to compete for influence. There was one final cold war skirmish for the United States, in Central

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America in the 1980s with the appearance of the socialist-leaning regime of Daniel Ortega in Nicaragua and the civil war in El Salvador. The United States responded to this socialist incursion in the Western Hemisphere with support for the Contras fighting against the Nicaraguan regime and with aid to fortify and strengthen the U.S. orientation of other governments in the region. Once there was a new regime in Managua in 1990 and a resolution of the civil war in El Salvador, aid to the region dropped. The diplomatic purpose that did motivate much of aid in the 1980s and 1990s was peacemaking in the Middle East. There was an unspoken agreement in Washington that approximately $2 billion per year in economic assistance would be provided to Egypt ($800 million) and Israel ($1.2 billion), the latter in a check transferred to Israel at the very beginning of each fiscal year. Both also received military assistance. Jordan also received aid during this period, up to $100 million per year. While there were some cold war concerns in the initial stages of aid giving in the Middle East, that aid came to be more influenced by U.S. policies of peacemaking in the region as well as the strong domestic support for aid to Israel. Thus, even for the United States, the cold war motivation in aid giving had greatly diminished by the early 1990s. The end of the cold war cannot adequately explain the decrease in aid worldwide after 1992. Two other factors played a major role in the decline in aid. One was the deficit-reduction policies of the Clinton administration in the United States. Similar policies were implemented in Western Europe, emanating from the Maastricht Treaty, which required EU governments to reduce deficits to no more than 3 percent of GDP, and in Japan, where expenditures were cut in the face of economic stresses. Domestic pressures on government expenditures combined with a chorus of criticism of past developmental aid effectiveness. The political right in most countries had long been skeptical of the ability of aid to effectively promote growth and reduce poverty in developing countries. Aid involving transfers from governments, usually to other governments, was a little too close to socialism for many of the free market supporters on the right. By the mid1990s, evidence from the developing world—especially from crisis-ridden sub-Saharan Africa—was mounting that the $2 trillion in aid transfers over the past half century had produced little in economic growth. The World Bank’s 1998 study Assessing Aid: What Works, What Doesn’t and Why lent credibility to these doubts, as it found that aid appeared to have little relationship to growth in recipient countries, except where policies were favorable. Further, aid appeared to have little impact on the quality of the policy regime (a criticism of the structural adjustment policies the World Bank and other donors had been supporting with their aid over the past two

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decades). This report, based primarily on econometric analyses, occasioned considerable criticism by other economists, who challenged its data, its methodologies, and its definitions of “good” policies. Nevertheless, it, along with a considerable literature criticizing aid’s impact on growth, influenced the perceptions of policy elites and the public as to the ability of development aid to do what it had long promised—promote economic and social progress in poor countries. It is not surprising that support for continuing or increasing aid levels in the face of domestic fiscal pressures was weak in many developed countries. So worldwide aid levels fell, reaching their lowest point in real terms in a decade and a half in 1997. Between that year and 2005, worldwide aid more than doubled. This change appears to have reflected two phenomena: one was an easing off of the budgetary pressures in major aid-giving countries (except in Japan, where they got worse). The second was gradually building campaigns within major donor countries, organized by development-oriented NGOs, business groups, and others, asserting that aid levels had been cut too much and needed to be restored. InterAction (an umbrella relief and development NGO) led the “Just 1%” campaign to raise foreign aid to 1 percent of the federal budget; VENRO in Germany led a similar campaign. NGOs were the constituency for aid, and above all for development. Their potential influence was underestimated—for example, it is frequently said in the United States that “there is no constituency for foreign aid”—but that is simply not true. The constituency for aid is not the military-industrial complex, the National Rifle Association, or the American Association of Retired Persons—all powerful constituencies. But is not insignificant either, especially when it has been bolstered by a powerful constituency of support for aid to Israel and to the Middle East generally (led by the American-Israel Public Affairs Committee, or AIPAC). Several other factors came together starting in 2002 to boost aid sharply. One was the terrorist attack of 9/11. While that attack was not a protest against world poverty, nor were the attackers from poor backgrounds, the attack reminded the world that problems in one place could quickly become problems in another and so made populations in the United States and Europe more amenable to increases in aid to fight world problems. But increasing aid was also the result of other forces. One of the principle ones has to be the Monterrey Conference on Development Financing. That conference forced heads of state who planned to attend to come up with “deliverables”—statements of commitment on aid giving. There was competition between the European Union and the United States over the size of the aid deliverables. Personalities also played a role: Prime Minister Tony Blair of the United

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Kingdom was strongly committed to fighting poverty in Africa (see also chapter 11 concerning this initiative). The rock star Bono persuaded conservatives, from Senator Jesse Helms to President George W. Bush himself, to raise aid levels. President Bush may have already been inclined to increase aid, given his commitment to “compassionate conservatism” and the growing support from the Christian right to do more to address human suffering and to reduce debt abroad (and the healthy budget surplus at that time, inherited from the previous administration). While there were factors at play in the turnaround in aid levels, a worldwide reawakening to development needs—especially in Africa—was certainly one of the principle ones. Conclusion: The Direction of Foreign Aid in the Twenty-First Century Development aid is alive and well and resurgent. Development appears set to be the major purpose of aid in the future. But not all the signs point in the same direction, suggesting that major domestic economic problems, international crises involving terrorism or political conflicts among states, major global issues like the spread of infectious disease (e.g., avian flu), or other incidents and trends can draw off aid to address these purposes. The international norm that rich countries should help poor countries to emerge from poverty appears well established and influential in supporting development aid. But other needs can and will influence aid’s purposes in the future. And should the current increases in aid for development fail to make a visible impact on growth and poverty in poor countries, especially in Africa, in coming years, aid for development could again be challenged in the future. Note 1. See OECD DAC, “Aid Flows Top USD 100 Billion in 2005,” http://www.oecd. org/document/40/0,2340,en_2649_33721_36418344_1_1_1_1,00.html (accessed May 1, 2006). If aid from non-DAC member states were included, along with aid to Russia, Israel, and other better-off aid recipients, this volume would likely increase by at least another U.S. government commitment of $11 billion.

References “The Enlarged European Union: Partner of the Developing World, Summary of Discussions.” 2002. WEnt (Internationale Weiderbildung und Entwicklung gGmbH), Bonn, Germany. Available at www.inwent.org/ef-texte/europe/rep.htm (accessed June 1, 2006). Lancaster, Carol. 2006. Foreign Aid: Diplomacy, Development, Domestic Politics. Chicago: University of Chicago Press.

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People’s Republic of China. 2006. “China’s Africa Policy.” People’s Daily Online, January. Available at http://english.people.com.cn/ (accessed March 1, 2006). White House. 2002. The National Security Strategy of the United States. (September 17). Washington, DC: The White House. Available at www.whitehouse.gov/nsc/nss.html (accessed June 1, 2006). ———. 2006. The National Security Strategy (March 16). Washington, DC: The White House. Available at www.whitehouse.gov/nsc/nss/2006/ (accessed June 1, 2006).

4 Foreign Aid in the National Interest The Importance of Democracy and Governance Larry Diamond

A Strategy for Assisting Democratic Governance There is growing evidence that governance patterns matter. And there is growing recognition in development assistance circles that poverty reduction and empowerment of the poor require broad improvements in governance. Yet policy and practice lag well behind understanding. International donors remain reluctant to violate international norms of sovereignty, and there is a powerful tendency for political conditionality to give way to compliance. Yet if poverty is a political phenomenon, then a serious effort to reduce the structural conditions of mass poverty is also a political action. Overcoming severe underdevelopment requires an assault on rent seeking, clientelism, injustice, and bad governance—in other words, sweeping political reforms. Is the world ready for the scope of political intervention that will be needed? This chapter examines the way that international donors can support the democracy and governance process in ways that foster development and poverty alleviation. Electoral democracy is important, because it enables the people to hold rulers accountable. Further, it enables people to elect representatives who will respond to their developmental needs and concerns and—one hopes—to monitor government and hold it to account. But the vertical, electoral dimension of democracy is not enough. If democracy is to serve development, it must be liberal and responsible democracy. This entails a number of dimensions of the quality of democracy and the broader quality of governance. Liberal democracy entails not only free and fair elections in the administration of voting and vote counting. A liberal or high-quality democracy (I use these two terms interchangeably) requires fairness of political competition, 61

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embodied in the concept of a “level playing field” (Diamond 1999, 12–13; Diamond and Morlino 2005). In a high-quality democracy, the electoral arena is open, and the playing field is reasonably level. Money must not be the principal determinant of who gets elected. Money politics is one of the major flaws in U.S. politics today, and every democracy is struggling with how to finance political parties and campaigns. But I am among a growing body of political scientists and good government advocates who believe democracy everywhere requires public financing of parties and campaigns, as well as transparency in reporting party and campaign contributions. An important element of this is guaranteed access to the mass media for competing candidates. Second, liberal democracy requires freedom of speech, the press, information, association, assembly, movement, and so on. Only in a free society with a vigorous public space can we realize all of the other aspects of liberal democracy and good governance. Third, democracy requires participation (see Buss, Redburn, and Guo 2006 for an overview of recent advances in citizen participation). Electoral participation is not enough. People at every level of public life must become involved in setting priorities for the expenditure of public funds and monitoring its implementation. Multiple, diverse mechanisms for public input can correct mistakes in policy design and implementation and promote social inclusion and political ownership of policies, including painful economic reforms. Institutionalized participation also provides channels for settling (or at least narrowing) conflicts over interests and values and for making broadly legitimate policy choices. Policies will be more likely to be stable and sustainable when they enjoy popular support. This requires some means for distinct organized interests, and for historically marginalized groups such as women and minorities, to have input into governmental decisions and some means of protesting. A revolution is under way in the developing world around the concept of “participatory budgeting.” When communities are involved in the decision about how public funds will be spent—whether to build a road, or improve a school, or construct a clinic, or drill a borehole, they acquire a sense of ownership and can become mobilized to make sure that the funds are allocated for their intended purpose. The same principle should apply in setting and monitoring national development priorities and in the need to involve civil society organizations in this process. The African Union’s New Partnership for Africa’s Development and the Millennium Challenge Account (see also chapter 15 for an assessment of MCA) both provide new opportunities and expectations. Fourth, democracy requires responsiveness of elected officials to societal needs and concerns. Obviously, government cannot respond to the interests

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of every group, because interests are in conflict. But different groups must be heard. They must have channels of communication to different ministries. There must be regular means by which elected representatives consult with constituencies. When there are multiple avenues for participation, and when there is strong freedom and competition, then government will be more responsive. And since poor countries want economic development and the physical improvement of their infrastructure and environments, responsive government will seek and promote development. Fifth, although it is not achieved satisfactorily anywhere, democracy requires political equality. Now, we all know that political equality is linked to economic equality, and that everywhere those with money and high social status have more access than do the poor and the middle class. But democracy must put some floor of political capacity underneath all citizens, so that every citizen understands his or her rights and obligations in democracy and has the knowledge and interest to participate—both in elections and in struggling to articulate and represent his or her needs and to hold government accountable. This generates a need in a poor country, with limited levels of literacy and education, for civic education to raise the political consciousness of citizens and to mobilize them into the public arena. In addition, the principle of equality requires that citizens who are disadvantaged be able to, and indeed be helped to, organize themselves to advance and defend their collective interests. There is strength in numbers, but this cannot be tapped unless it is organized. Historically, the ability of poor and disadvantaged groups to form trade unions and associations has prevented economic inequality from being perpetually reproduced as political inequality, and that has widened the political arena and advanced democracy. These five dimensions of democratic quality deepen the control of rulers by the ruled, the essence of democracy. Rulers are accountable, or, in the words of a famous new Iraqi saying popularized by one new civil society organization in the post-Saddam era, “the person sitting behind the desk is the servant of the person in front of him, and not the other way around.” But if democracy is to be effective in delivering development, popular control, however deep and vigorous, is not enough. It must be wedded to other dimensions of good governance. Good governance consists of several dimensions. One is the capacity of the state to function in the public good. Effective functioning requires knowledge of the policies and rules that best serve the public good, and hence training of state officials in their various professional realms. It requires a professional civil service with a set of norms and structures that promote fidelity to public rules and duties, in part by rewarding those who perform well. This relates intimately to the second dimension of good governance, commitment. Where

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does this commitment come from? It may be generated by dedicated and charismatic leadership. Or it may derive from a cultural ethic that appreciates, and a structure of institutional incentives that rewards, disciplined public service. It must be reinforced by institutions that punish betrayals of the public trust, and so this normative element is linked to the concrete institutional ones. A third dimension of good governance is transparency—the openness of state business and conduct to public scrutiny. Transparency requires freedom of information, including an act to ensure that citizens can acquire information about how government makes decisions, conducts business, and spends public money. It requires full openness and competitiveness in public procurement, but it also requires openness of the personal finances of government officials. Transparency relates to accountability, the fourth dimension of good governance. Governing agents are more likely to be responsible when they are answerable for their conduct. Effective oversight requires open flows of information, and hence transparency, so that monitors can discover facts and mobilize evidence. This requires that different institutions check and hold one another accountable, compelling them to justify their actions. Power is thus constrained, bound not only “by legal constraints but also by the logic of public reasoning” (Schedler 1999, 15). Transparency and accountability are bound up with a fifth dimension, the rule of law. Governance can only be good when it is restrained by the law: when the constitution and laws are widely known, when the law is applied equally, when everyone has access to justice, and when there are capable, independent authorities to adjudicate and enforce the law in a neutral, predictable, and efficient fashion. Both effective government and well-functioning markets require clear rules about what constitutes acceptable conduct in economic, social, and political life. All actors, public and private, must have confidence that those rules will be observed. Only under rule of law are property rights secure and contracts enforceable. Only through rule of law can individuals be secure against arbitrary harm from the state or private actors. A sixth dimension is conflict resolution. Participation is one means for doing so. Development is not only about choice at the individual level but also about making difficult choices at the collective level. Often, there is no clear answer about what is in the public interest. Only through a process of political participation and dialogue can conflicting interests be reconciled. But participation in itself can also stimulate conflict. Conflict resolution requires as well fairness, justice, and transparency, and often more specific mechanisms to ensure that all groups are heard and included and that power and resources are decentralized and dispersed in a way that gives each community or region some real control over its own affairs.

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Finally, when good governance functions as above, it also breeds social capital, in the form of networks and associations that draw people together in relations of trust, reciprocity, and voluntary cooperation for common ends. The deeper a country’s reservoirs of social capital, and the more these are based on horizontal equality, the more vigorous its coordination for and commitment to the public good. Social capital not only fosters the expansion of investment and commerce, embedded in relations of trust and predictability, it also breeds the civic spirit, participation, and respect for law, crucial foundations of political development and good governance. This creates political legitimacy and stability—further deepening society’s appeal to investors who risk capital in the effort to create new wealth. Good governance constitutes a “virtuous cycle” in which the several elements reinforce one another in a dense interplay (Putnam 1993). Governance and Development To be effective, development prospects and the potential for development assistance depend on the quality of governance. Good democratic governance is the key to development and aid effectiveness (see especially chapter 9 for an assessment of aid to Haiti). Unless states can be made more responsible, competent, efficient, participatory, open, transparent, accountable, lawful, and legitimate in the way they govern, stagnating and poorly performing countries will not experience vigorous, sustained development that transforms human development and lifts the population out of poverty. And badly governed states will produce diffuse threats to global order and the U.S. national interest. How can we foster stable and effective democratic governance in the coming decade? First, we must be clear about our objectives. The goal is not simply to advance democracy. As was demonstrated by the collapse of democracy in Pakistan in 1999, a country can have vigorously competitive national elections with frequent alternation in power and still have rotten governance that fails to generate development and loses the confidence of the people (see especially chapter 7, devoted to aid in Pakistan). Neither is the goal simply better, more capable, and transparent government. Few are the leaders in the world who can deliver and sustain good governance—with its overarching commitment to the public good and restraint of the abuse of power—without institutionalized accountability. Even when nondemocratic leaders come into power with a manifest and sincere commitment to reform, the absence of institutional mechanisms to restrain and monitor the exercise of power eventually degrades the quality and legitimacy of governance. In almost every country, governance that is responsible, accountable, and

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public spirited must ultimately go hand in hand with democracy. Of course, from every culture and religion, democracy and human rights are ends in themselves, independent of material development. But democracy is an essential companion of good governance. Democracy is an indispensable instrument of electoral accountability—the opportunity to remove leaders who do not perform well. Second, when this opportunity is denied, then the incentive for incumbents to restrain themselves and serve the public good withers. Corruption can seep into the political system, as in Indonesia. Rulers become not only venal and distant, but also abusive of human rights, as in Zimbabwe. Rot and sclerosis set in, because there is no way of exorcizing bad leadership. Third, democracy provides publics with the freedom and institutional means, between elections, to scrutinize the conduct and policy decisions of public officials. Thus, fourth, leaders in a democracy have more pressures, means, and incentives to explain their decisions, and to consult a broad range of constituencies before passing laws and making decisions. Fifth, wider participation in the policy-making process produces more legitimate and sustainable decisions. Competitive, free, and fair elections are the sine qua nons of democracy. But other institutional components of good governance are also much more likely to be vibrant and effective in a democracy than in a non-democracy— an independent judiciary with a clear and predictable rule of law; an elected parliament that is autonomous and capable of checking and scrutinizing the executive branch of government; and a civil society with the freedom and resources to monitor, evaluate, question, and participate in the making and implementation of policy. When governance is open to the scrutiny and involvement of a wide range of societal actors (nongovernmental organizations [NGOs], interest groups, think tanks, and the mass media), it is more likely to be transparent, public spirited, and thus legitimate. There is no guarantee that electoral democracy will bring such transparency and inclusion, but it is an illusion to imagine that “liberal autocracy” is a developmental option. Few are the examples (perhaps Singapore) of a well-governed autocracy. The typical recipient of U.S. aid is a country that needs the openness, competition, and broad and free public participation of democracy in order to develop truly good governance. The pursuit of stable and effective democratic governance will entail different political reforms and development in different countries. In some cases, the basic framework of multiparty democracy is in place but needs to be deepened and made more effective and accountable. Some emerging democracies suffer from obstacles to consolidation—such as the institutionalization of the rule of law. In some repressive, corrupt, and closed regimes, multiparty competition, if it exists at all, is largely a façade, but economic reform and the strengthen-

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ing of moderate forces in civil society might be more viable near-term steps than an immediate transition to democracy. It is impossible to offer a general strategy or sequence of political reforms to fit widely varying cases. That is why careful assessment must be done of the current state of democracy and governance in each recipient country. It is also why democracy and governance (DG) assistance should be pursued patiently. No one sector provides the key to fostering DG. There is no one “answer.” And there are no shortcuts. In most countries that lack stable and effective governance today, we must be prepared to work on a number of fronts. Nevertheless, across the range of countries that need and receive U.S. Agency for International Development (USAID) democracy and governance assistance, a few priorities do regularly emerge. These priorities, of strategic implementation as well as of strategic assistance, involve making democracy work better to advance development and respond to the needs of society. They would generate the capacity for and commitment to using the public resources of a country to advance the public good. Most are not new to the donor community. What is needed now is not wholesale invention but innovation, adaptation, refinement, elaboration, and a deepening of commitment. Making Democracy and Governance Assistance Effective Democracy and governance assistance is difficult and uncertain work. Countries that need assistance are those most resistant to positive change. They exhibit chronically poor governance. In these countries, rulers—who have typically been in power without accountability—have little commitment to the public good, and the distinction between public and private is scarcely recognized by those with access to political power and public resources. In these countries, political power bestows enormous wealth and privilege, and incumbents do not wish to give it up or have it checked. Lacking voluntary and sincere support, autocrats accumulate vast fortunes to purchase it, with chains of patron-client relations that cascade throughout the decrepit system. In this context—so common in Africa, the Middle East, and the former Soviet Union—DG assistance fails or disappoints because it is “disconnected from . . . the structures of power, authority, interests, hierarchies, loyalties, and traditions that make up the dense weave of sociopolitical life” (Carothers 1999, 101). In countries like Nigeria, Kenya, Egypt, Morocco, Georgia, Azerbaijan, Haiti, Paraguay, and Cambodia, the odds are stacked against democratic progress in part because a number of unfavorable factors reinforce one another (as an example, see also chapter 9 for a study of Haiti). Endemic corruption drains away resources, energy, and purpose from development. Poverty usually goes hand in hand with illiteracy and ignorance. Society is

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fragmented and organized mainly on hierarchical, clientelistic lines. People in growing numbers may have come to recognize the importance of freedom and responsible, accountable government, but they understand only vaguely the norms and practices necessary to sustain democracy, and they lack the skills, resources, and organizational strength to hold their rulers accountable. The scope for reform depends on “political will” within the state and the ruling party—especially at the highest levels of leadership. But it is leadership commitment to serious reform that is lacking. At its most intractable and egregious, bad governance constitutes a vicious cycle, very difficult to penetrate. Corruption and rent seeking have seeped so deeply into the culture that everyone expects that public officials will use their power for private gain, and there is great pressure on them from clients and kin to do so. Corruption tilts investment decisions toward contracts that yield large kickbacks rather than public goods. State rules and regulations proliferate in deliberate pursuit of ever-more opportunities to collect rents. Businesses cannot get licenses to operate, and farmers can’t get title to their land. These distortions stifle private enterprise and generate chronic deficits and resource scarcity, making society even more dependent on corruption and clientelism to survive. All of this reproduces the culture of corruption: diffuse distrust and lack of commitment to the public good. People lack confidence in their fellow citizens and in all of their public institutions—the executive, parliament, parties, the judiciary, the civil service, local government, the military, and the police. Ethnic and religious communities vie intensely for state power, resources, and favor, and often clash violently. State institutions lack any real sense of public purpose or discipline, as they mainly function to loot and extract rather than generate or protect. The state as a complex of institutions of power becomes so hollowed and dysfunctional it risks collapse. The more a country approaches bad governance, the more difficult is the challenge of improving governance, and the more international engagement must be coherent and cumulative to be effective. The strategy proposed here relies heavily on a comprehensive and integrated approach to intractable cases of development failure—“poorly performing states.” To turn around a poor performer, every source of influence must work toward a common end. Every point of leverage must reflect a clear and common purpose: fundamental reform of governance. If different international actors work at cross-purposes, or if different U.S. authorities articulate conflicting messages, or if the different elements of an aid program do not cumulate and interact, foreign assistance will fail, and the country will remain mired in poverty and oppression. In instances of protracted development failure, aid must pursue linkages and a synergy of investments if it is to have impact. But ultimately, governance cannot improve and development cannot happen without political will for

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reform. In fact, one reason why linkage and synergy is so crucially important is precisely to help generate, deepen, and amplify this will. Generating (and Assessing) Political Will In most countries where development has failed or stalled, an important missing ingredient is the political will of the nation’s leaders to improve quality of governance. “Political will” is the commitment of a country’s rulers to implement a particular policy course. At its most resilient, political will here involves a broad consensus among ruling elites, across parties and sectors of government, in favor of democratic and good governance reforms. But consensus is always imperfect, and will is most important at the top levels of government. Reform leaders must be committed not only to undertake actions to achieve reform objectives, but also “to sustain the costs of those actions over time” (Brinkerhoff 1999, 3; 2000). Without a robust commitment to fundamental reforms—to control corruption, open up the economy, enhance the rule of law, respect basic civil and political rights, and allow independent centers of power both within and outside the government—foreign assistance will fail. It may obtain some limited sectoral objectives, but these will not cumulate into development, and they may be highly reversible. Children may be inoculated, only to find that they have no access to education, and then no jobs that lift families out of poverty. Schools may be built and then destroyed in civil war. Clinics may be constructed and then not be sustained because there is no access to medication. Participation may be stimulated locally, but improvements in governance may be overwhelmed and vitiated by a national predatory government. Opposition political parties may be strengthened organizationally only to be marginalized by massive electoral fraud. Judiciaries may be assisted technically and then corrupted and intimidated by the national leadership. Country experience underscores the importance of political will in mediating the impact of USAID DG programs. A study of three countries with sizable DG programs in the 1990s (Bolivia, Bulgaria, and South Africa) concluded that USAID investments in improving democratic governance “produced substantial returns . . . precisely because the political leadership was so committed to reform” (Carter 2001, 22). The broader and more sustained the elite consensus in favor of governance reforms, the greater tends to be the impact of specific DG programs. Modest investments in assistance go considerably further when there is broad will to reform among political elites, and large investments are wasted when there is none. Political will is not an either/or phenomenon. In the typical recipient country, the will to reform is mixed and ambiguous in several respects. Within the

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state and ruling party, there are some elements that favor reform (or would favor it if it gained any momentum) and a number of obstructionists. Different officials may favor different kinds of reform; some may favor economic reform to the extent that it can be accomplished without surrendering political power or favored monopolies. Others may favor democracy but only of the “neopatrimonial” kind, driven by the lavish dispensation of corrupt patronage. A president or prime minister may promise donors governance reforms, but then grow cold when he realizes the political risks. Or he may promise anything to get aid, with no serious intention of ever delivering. In the worst cases (often countries of some strategic importance to one or more donors), assistance takes on the appearance of a mutual con game: intractable countries pretend to be developing, and donors pretend to be helping them. No one is facing up to the reality that development is not happening because governance is rotten. Over time, it is this rotten governance that drags a society down into violent conflict and a state into decay and collapse. The most urgent challenge for U.S. aid is to determine how we will engage such “poor performers.” Such political will is generated from three directions: from below, from within, and from outside (Schedler 1999). Organized pressure from civil society plays a role in persuading ruling elites of the need for reforms to improve governance. There may also be some reform-minded elements within the government and the ruling party or coalition who, whether for pragmatic or normative reasons, have come to see the need for reform (but are reluctant to act in isolation). Finally, international actors often tip the balance through persuasive engagement and by extending tangible benefits for improved governance and penalties for recalcitrance. U.S. foreign assistance can help to develop the first two forms of pressure, and in fact has done so in a number of countries since 1990. When political will for systemic reform is clearly lacking, the principal thing that foreign DG assistance can do is to strengthen constituencies for reform in civil society, including NGOs, interest groups, think tanks, and the mass media (chapter 14 examines the role of NGOs in aid). Assistance can enhance these actors’ understanding of key reform issues, their knowledge of other countries’ experiences, their coordination with one another, their capacity to analyze and advocate specific institutional and policy reforms, and their mobilization of support and understanding in society. Sometimes USAID must redirect its DG programming away from the central government when political will falls sharply (as it was judged to have done when the former communists came to power in Bulgaria in 1994). But then it must be prepared to resume engagement with state actors when political will revives with the election of a different ruling party or coalition, or a change of heart or calculus on the part of existing leaders. Often, political will appears more patchy and ambiguous. In

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that case, the best strategy is to work with those ministries that seem serious about improving governance, while demanding reform. A key lesson is that fundamental reform is only sustainable when there is a “homegrown” initiative. If changes in policies and institutions are promised in response to international pressures, they will not be seriously implemented. “Imported or imposed initiative confronts the perennial problem of needing to build commitment and ownership; and there is always the question of whether espousals of willingness to pursue reform are genuine or not” (Brinkerhoff 1999, 3). International engagement does not succeed if it compels a government to sign on the dotted line for dictated reforms, as has been the case with IMF assistance. Its goal must be deeper and more procedurally democratic: to generate public awareness and debate, and to induce government leaders to sit down with opposition and societal forces to fashion a package of reforms that is unique to the country and owned by the country. The vigor and depth of the political will to reform can then be assessed by several additional criteria. First, to what extent have (self-proclaimed) reformers undertaken a rigorous analysis of the problem and used it “to design a technically adequate and politically feasible reform program” that rises to the scale of the challenge? Second, to what extent have reformers mobilized political and societal support for their initiatives broad enough to overcome the resistance of threatened interests (and how sustained are these efforts to rally support)? Third, to what extent are reformers seeking changes in laws and institutions and allocations of human and financial resources that hold promise of effecting real change? In the case of controlling corruption, this would include, for example, laws to monitor and punish corrupt conduct and an anticorruption agency with the authority and staff to enforce them. Another lesson of DG assistance is the need to use the above criteria “to track the evolution of political will over time” and to feed that assessment back into the reform implementation process (Brinkerhoff 2000, 249). Successful international engagement must shift from conditionality to selectivity. Traditionally in international lending, for example, conditionality has been “ex ante in the sense that governments promise to change policies in return for aid.” As a result, “reforms are ‘owned’ by the donors.” A better approach is to dispense aid selectively to reward and deepen, and thus preserve and consolidate, reforms that have already begun to be implemented by the country, according to its own design (Collier 1999, 322). Selectivity focuses aid on good performers—countries that have reasonably good policies and institutions—and on assisting reform movements that are seriously under way, by governments and societies that have taken responsibility for the design of their own policies and institutions (Collier 1999, 327). It takes patience, intelligence, coherence, consistency, and dexterity for

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external actors to help generate authentic, “homegrown” political will for improved governance. The following should guide U.S. foreign assistance and the policies of other international development donors: 1. Overall levels of foreign assistance must be linked more clearly to a country’s development performance and to demonstrations of political will for reform and good governance. 2. Good performers must be tangibly rewarded. We need more “carrots” to encourage reform by predictably and meaningfully rewarding it when it has already occurred. When political leaders demonstrate respect for democratic procedures and freedoms, and a willingness to undertake and see through difficult political and economic reforms, they should benefit with steady increases in U.S. foreign assistance and in aid levels from other donors. In addition, good performers—principally, democracies that are getting serious about controlling corruption and strengthening the rule of law—should be rewarded. 3. Rewards must be granted for demonstrated performance, not for promises that may be repeatedly made and broken. The only way to exit from the chronic “cat-and-mouse” game of international conditionality is to make increases in development assistance and other economic rewards contingent on what governments actually do (and keep doing), not what they say they will do. Rewards should be structured to lock into place the institutions and practices of DG. For example, the European Union requires that democracy and respect for human rights be institutionalized before a country can be considered for admission. A similar standard might be adopted by the United States as a requirement for any future free trade agreement (whether bilateral or as part of a multilateral arrangement). And there should be clear and credible procedures for suspending countries that depart from this standard. In the case of debt relief for highly indebted poor countries, future relief should only be granted to countries that have demonstrated a basic commitment to good governance, by allowing a free press and civil society, an independent judiciary, and a serious countercorruption commission. Even in these cases, the debt should not be relieved in one fell swoop, but should be suspended and retired incrementally, generating ongoing incentives for adhering to good governance. 4. In the absence of any political commitment to democratic and good governance reforms, the United States should suspend governmental assistance and work only with nongovernmental actors. The

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only exceptions to this suspension should be humanitarian relief and responses to global public health threats. Such selectivity has frequently—but not always—been the approach of USAID missions, and it can have important symbolic as well as practical effects. U.S. assistance is typically only a small portion of overall foreign assistance received by a government, but it is a highly visible portion. When the United States ceases development assistance to a government, other donors and various political and societal actors in the country take notice (and should be lobbied to follow suit). Political leaders must learn they will pay a heavy international price for their bad governance. 5. The United States should use its voice and vote, and the full force of its influence, within multilateral development banks to terminate assistance to bad governments and to concentrate them on poor countries with good governance (Collier 2002). We should carry the principles of our own foreign policy into international development. International financial institutions should cease financing the larceny and purposelessness of grossly corrupt, wasteful, and oppressive governments. We have made progress, and we should continue to press for greater accountability and strategic sense in international lending. And beyond humanitarian and public health assistance, aid to chronic poor performers should mainly aim to empower civil society to change the regime or otherwise dramatically improve governance. 6. The United States must work more closely with other bilateral donors to coordinate pressure on truly bad, recalcitrant governments. Reductions in aid will not have much impact in changing the calculations of political leaders if they receive levels of funding from other donors far greater than the U.S. aid. Leadership calculations will be most likely to change, and to be translated into action, when those leaders perceive a relatively coherent message from donors. 7. A greater proportion of U.S. foreign assistance should be devoted to democracy and governance assistance. In intractable cases, helping to generate the demand for democracy and better governance, by strengthening the capacity and reform understanding of NGOs, interest groups, religious bodies, social movements, mass media, universities, and think tanks in civil society, is the most important thing the United States can do to aid development. In struggling democracies, improvements in governance enhance reform efforts, and investments in better governance are likely to yield more numerous, immediate, and powerful multiplier effects. Whatever progress

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8.

9.

10.

11.

is made on governance will almost certainly have a positive impact on other sectors, enabling given levels of sectoral assistance to go further. Probably no other dimension of aid yields so many synergies and such good development value per dollar. Where committed reformers can be identified within the state, donors should work with them. If pockets of political will for reform exist, donors should identify those opportunities and try to strengthen the hand of reform-oriented ministers, agency heads, and provincial governors through specific DG assistance programs. “Assistance can be provided to reformers to help identify key winners and losers, develop coalition building and mobilization strategies, and design publicity campaigns” (Brinkerhoff 2000, 249). Often, reform majorities or nodes of reformers can be found in some branches of the state outside the executive—the legislature, judicial system, and agencies that may be deprived of resources and authority. Even when reformers lack power to implement change, enhancing their training and technical capacity may enable them to enlarge public constituencies for reform. State capacity must be generally enhanced, but it makes no sense to try to strengthen the technical capacity and administrative ability of state structures that lack the political will to govern responsibly. Building effective state structures must become a strategic objective of DG assistance, but it cannot be pursued until state leaders are serious about governance. Expensive investments to improve the infrastructure and strengthen the technical capacity of judiciaries and legislatures will be largely wasted if there is no political will to use enhanced capabilities. The global private sector should be encouraged to accelerate its efforts to incorporate judgments about the quality and transparency of governance into its decisions on private capital flows. Support for Transparency International and other global anticorruption efforts should be institutionalized to continue pressing this agenda. A priority is improving the comparative measurement of the quality of governance and then publicizing results, so that investors will invest in countries that are governing well. Credible (independent) and publicly disseminated measurement of governance is particularly important for smaller, more peripheral developing countries, about which investors are slower to find reliable information. International donors must strengthen the global rule of law, particularly the capacity to track down and close off corrupt flows of money in the international banking system. The United States must work to institutionalize rigorous global standards and procedures for the rapid

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identification and recovery of corruptly acquired assets. It must work vigorously to ensure that Organisation for Economic Co-operation and Development (OECD) member states enforce the new OECD convention against bribery. Anti–money laundering tools used to fight the wars on terrorism and drug trafficking can be enlarged into a broader war on corruption. 12. Overall U.S. development assistance should be increased significantly. Without an appreciable increase in aid, we simply won’t have the funds to reward better performance, to sustain reform initiatives, and to enlarge efforts to improve democratic governance on a number of fronts simultaneously. Missions should not have to choose between vital institutional imperatives for aiding democracy and governance simply because there is not enough money for a more comprehensive approach. A comprehensive approach is needed to help institutionalize democracy and foster lasting improvements in the quality of governance. A substantial increase in aid is also needed for symbolic purposes, to demonstrate to recipient countries that we are serious about generating development, and not just changing policies. Forging a Coherent, Consistent U.S. Posture Perhaps the single, most common reason why U.S. efforts to improve democracy and governance fall short is that they lack the unified and vigorous support of the entire United States government. Specific programs of DG assistance cannot be successful if they are not consistent with the larger objectives and priorities of the United States, as articulated by the U.S. ambassador in the country and by the State Department, the National Security Council, the Defense Department, and other U.S. agencies. It is very difficult in any case to persuade corrupt, undemocratic, or only partially democratic regimes to adopt serious governance reforms. But there is no chance of our doing so if the regime perceives mixed messages from the U.S. government, either across agencies or over time. Inconsistency in the way we treat countries within a region can also generate resentment, confusion, and ambiguity about our aims. If the United States is serious about wanting to foster democratization and governance reform, or to improve and deepen the structures of democracy in a country, it must articulate from Washington a clear and consistent policy for that country. Every U.S. agency must understand that better and more democratic governance is a priority of U.S. policy toward that country, that there are clear objectives within that priority, and that all U.S. government actors are expected to support, articulate, and reinforce—or at least not contradict—the policy.

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Consistency across countries, across agencies, and over time has always been a difficult objective in U.S. foreign policy. And in the wake of the September 11 terrorist attacks on the United States, the pursuit of such consistency and coherence has become challenged once again, as in the cold war, by the rise of other foreign policy imperatives more immediately tied to security interests. This raises a painful question: Can the United States promote democratic governance reform in an autocratic country whose cooperation it needs in the war on terrorism? The tension between democracy and security is seen in a different light if we ask instead: Can we afford not to pursue democratic governance reforms in a strategically important country? If we want reliable, stable, and effective allies in the war on terrorism, we need as partners governments that have the support of their own people, that respect the rule of law, and that are sufficiently open, pluralistic, and responsive so that dissent can find moderate and peaceful outlets. This does not always require democracy per se—although stable, well-governed democracies will be our most reliable allies in the long run. But it does require reasonably good governance that limits executive power, political corruption, and the abuse of human rights. In many of the countries on the front lines of the war on terrorism, in the Middle East and central Asia for example, this will involve a transformation from venal, arbitrary, abusive, and secretive governance to more open, accountable, participatory, constitutional, and responsive governance. In other words, the development—however gradually, and by a variety of sequences—of stable and effective democratic governance is an essential strategic element of the war on terrorism. It is vital to U.S. interests, and to the success of U.S. aid efforts, that the United States articulate this philosophy at the highest levels, and then it should translate it into concrete regional and country policy directions. If all U.S. government agencies are to accept the promotion of democratic governance as a paramount long-term objective of U.S. foreign policy, the president must establish and make the case for this objective. Clear instructions must then flow to regional bureaus and country desks on the importance of this objective. Individual country strategies must then be forged that pursue this objective in a manner and with a timetable that is realistic but also clear and consistent in the direction of change that is sought. National-Local Linkages One important element of a strategy to strengthen democratic governance involves working at the regional (state, provincial) and local levels and into civil society. It is at the local level that the ordinary citizen most frequently experiences the impact of government, in the delivery of services, the response

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to grievances, the protection or abuse of rights, the administration of justice, and so on. DG assistance programs, therefore, cannot focus exclusively on the central government institutions in the capital. They must reach down. But they cannot reach down simultaneously to every local (or even regional) government. Typically, they begin with a pilot project in a few discrete jurisdictions. This generates a dilemma for assistance. How can programs to improve governance in particular local communities cumulate or reflect back into a national impact? Pilot programs directed at particular localities must be complemented with a holistic strategy for linkage to national-level politics and replication across the country. USAID experience suggests several possible approaches. One approach is “working intensively with more and more municipalities over time . . . to support replication of best practices and new systems” (Carter 2001, 35). This may be the most reliable approach but it is also the most expensive and may be prohibitively so in large countries. Replication and linkage may also come by enabling intermediaries such as municipal associations to provide technical assistance and training over time, by soliciting the active involvement of the central government, and by joining with other donors to share the burdens of replication. USAID in Bulgaria also trained a cadre of independent consultants, available for hire by local governments. To some extent, clear demonstrations of success will generate incentives for adoption by other jurisdictions. But the lessons of success must be distilled and diffused. National policymakers and constituencies must be made aware of the results of pilot projects. In analyzing and disseminating the results of local-level reforms, think tanks, NGOs, and the mass media play a crucial role. Governance reforms are also more likely to diffuse throughout the country to the extent that civil society organizations are linked in national networks, or national NGOs have a number of active and authentic local chapters. These lessons reflect a recurrent, overarching theme: the pieces of democracy and governance assistance must fit together and cumulate into a broad and coherent strategy. The local dimension must connect up with the national. Reform of state structures must proceed in tandem with empowerment of civic participation, and vice versa. USAID local government strategies generally place a heavy emphasis on stimulating political participation at the local level. This not only develops active citizenship but also helps to make government more responsive to citizen needs and concerns. But if government is to respond, it must have the resources and capacity to do so. This requires not only training of local government officials to enhance their capacity to govern effectively and accountably, but also working at the national level in support of initiatives (new laws and administrative regulations, even constitutional reforms) to transfer more power, authority, and resources to the local level.

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Thus, effective support for local democracy may also involve assistance to national executive agencies, parliamentary committees, and even political parties to identify institutional models and policy lessons from other countries, to help draft administrative regulations and decentralization laws, and to address the funding constraints of local governments. In short, decentralization (from the top down) must work in tandem with efforts to improve democratic local governance (from the bottom up). Other, specific cross-sectoral linkages are important to the success of decentralization efforts. One problem with decentralization in transitional systems is that it may simply further empower corrupt and oppressive political bosses and machines, especially in the poorest, least educated (generally more rural) areas. Decentralization must proceed in tandem with efforts to strengthen the autonomy and capacity of judicial and other accountability systems, both in the local courts and in the national prosecutorial, countercorruption, and auditing institutions. Linking Supply and Demand for Political Reform Across a number of subsectors, one of the major lessons to emerge from DG assistance over the past decade has been the need to balance the demand and supply sides of the political reform equation. DG assistance cannot be successful if it only works on one side or the other. Even if state elites propose institutional reforms—for example, to privatize state industries, reform the tax system, or crack down on smuggling and bribery—these reforms may not be sustainable unless society is educated about the need for them and mobilized to support them. Urgently needed reforms are often vitiated in implementation because of the failure to generate broader pro-reform constituencies among logical “stakeholders.” State officials who want to promulgate reforms need technical assistance within their ministries or agencies to accomplish the changes and to train and equip the new institutions. But sustainable reform also requires complementary programs targeted at interest groups (such as chambers of commerce and trade unions), advocacy NGOs and other civil society groups, think tanks, and the mass media. And often, the momentum for systemic governance reform begins with the articulation and mobilization of these kinds of groups. By the same token, reform cannot be accomplished only with a strategy of pressure from below, in civil society. In the absence of genuine political will, this is a necessary place to begin, and it may be the only arena in which a DG program can work in some countries at some historical junctures. But ultimately it is the leaders of various governmental and political institutions who must enact and implement reform. And once new, more democratic and

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accountable institutions are constructed, they must be enabled to work and to respond. When DG programs focus too heavily for too long on civil society to the neglect of political parties and formally democratic state structures, they may help to generate a level of demands and expectations with which the state and political system simply cannot cope. The resulting overload of political participation and consciousness can generate not better and more stable governance but heightened cynicism and frustration, a growing rupture between the people and their government. Development assistance must pay more attention to the supply side of reform, in programs to strengthen the capacities of the state and political parties to respond to citizen expectations and complaints and to deliver development and good governance. Strategic Priorities for Assistance Given the difficulties of democratic governance and the intractable nature of corruption and autocracy in much of the world, what should be the substantive, thematic priorities for DG assistance in the coming decade? When results are disappointing and conditions frustrating, there is always a temptation to search for something new—a new method, a new set of tactics, new strategic priorities. There is always the hope that a new approach will catapult us over the muck of the deeply embedded norms and structures that perpetuate venal, sloppy, abusive, exploitative governance. There is always the search for the miracle cure. Unfortunately, there are no miracle cures for what ails the politics of badly governed countries. We can and must periodically reevaluate our strategic priorities, both globally and within each country that we assist. We must give more attention, as indeed we have begun to do in recent years, to some of the key bottlenecks to democratic progress: political corruption, feckless political parties, and weak states. But obstacles that rise into sharper focus may coexist with more long-standing targets of concern, and each country represents a distinctive mix of problems, possibilities, and currents of progress or sclerosis. The overarching lesson is that DG assistance priorities must fit the particular political conditions of the country, and this requires periodically an authoritative, shrewdly perceptive, and well-focused strategic assessment. Fortunately, countries are not entirely unique. Their political regimes can be roughly grouped into categories according to the extent and nature of democratic development. Strategic priorities overlap across categories, but a country’s place in a typology of regimes begins to tell us something about what needs to be done. At the extremes are two types of regimes in which USAID will not have

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missions, or at least not DG country assistance programs. One type is the consolidated democracy, which by its level of economic and political development has “graduated” from assistance. Botswana, Mauritius, Costa Rica, Chile, Poland, Hungary, and the Czech Republic fall into this group. These countries can play an important role in our DG assistance to their neighbors in the region, by providing institutional lessons and human resources for crossborder linkages. But they no longer need significant external assistance. An unfortunate aspect of U.S. aid is that some countries that (because of their middle-income status) either did not receive or have long since “graduated” from development assistance—such as Argentina, Venezuela, Turkey, and Thailand—continue to have serious problems of governance. These are not consolidated democracies (or if they once were, they are no longer). Limited DG assistance could help them to address the obstacles to improving and consolidating their democratic institutions. USAID and other democracy assistance donors must pay more attention to these troubled, middle-income democracies and consider how modest but strategically focused investments can leverage efforts within the societies to combat corruption, strengthen civil society, and improve policies and institutions. The second extreme is occupied by repressive, closed regimes in which we do not have a USAID mission (China, Iraq under Saddam Hussein, CongoBrazzaville), in which we have a mission without DG objectives (Burma, Vietnam), or that we assist in sectors of development other than DG (Burundi, Chad, Mauritania, Cuba). In between these extremes (more or less) are some seventy-five countries in which USAID has development assistance missions with DG objectives. This includes almost the entire former Soviet Union, the politically lagging countries of Eastern Europe, twenty-five African countries, and most of Latin America, with a separate Caribbean Regional Program (chapters in part II look at country- and region-specific aid programs). With the exception of India, which is a special and (relative to its size) quite limited case of DG assistance, none of these seventy-five countries has a consolidated democracy. Indeed, about half of these are not democracies at all, although they fall short of democracy in varying degrees and ways. These DG assistance countries can be roughly grouped into the following four categories of regime: 1. Electoral democracies with problems of democratic performance. These regimes—in places such as Ghana, Mali, Senegal, Benin, South Africa, Namibia, the Philippines, Bangladesh, Brazil, Mexico, and most of Central and South America—have more or less institutionalized competitive, relatively free and fair elections. In some, not even

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that basic element of democracy is secure, but in most, the threats to democracy derive from other shortcomings: corruption, judicial inefficacy, party weakness, human rights abuses, state incapacity, and in a few cases one-party dominance. About half of the countries in which USAID conducts DG programs fall in this category. 2. Ambiguous (quasi-democratic) regimes. In these cases—most prominently Ukraine, Nigeria, and Indonesia—it is not clear (and independent experts disagree) as to whether elections are really free and fair, or elected authorities have full power to govern. These countries have competitive, multiparty elections, but there is significant fraud and manipulation or insecurity surrounding the contest. There are all the formal institutions of democracy, but most function poorly. To the extent that their elections are not democratic, these regimes are instances of “competitive authoritarianism.” 3. Electoral authoritarian regimes. These regimes have multiparty elections, and they may even be quite competitive, but elections are so tainted with fraud and tilted with advantages for the ruling party (and typically the incumbent president) that they cannot be considered free and fair. This category encompasses wide variation. To the extent these regimes allow for serious competition and pluralism (as in Jordan, Lebanon, Morocco, Kenya, Zambia, Tanzania, and Georgia), this is evident not only in the electoral arena but also in the actions of legislative and judicial systems that may take prudent steps to break free of executive domination. The mass media may be another sector that seeks to erode constraints and exercise some accountability. At the lower boundary are regimes that maintain the façade of multiparty elections while in fact allowing little real pluralism or freedom, as in Egypt, Azerbaijan, Belarus, and most of the Central Asian republics. To the extent that these regimes become seriously challenged (as in Zimbabwe) they can also become quite brutally repressive. Other USAID presence in countries in this category include Haiti, Cambodia, Guinea, Liberia, and Uganda. 4. Closed authoritarian regimes. These regimes do not conduct multiparty elections and generally exhibit the highest levels of political repression and closure. There is precious little space for opposition or dissent in civil society or the political system. The state executive and the security apparatus are thoroughly dominant, at least within the territory they control. Countries with USAID missions that fall into this category include Angola, Congo (DRC), Eritrea, Somalia, Sudan, Rwanda, and Turkmenistan.

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The scheme above is not an arid, academic exercise. It helps to organize thinking about strategic priorities. Within these four categories, different countries will need different mixes of programs. These strategies and priorities are likely to be suitable for all countries: 1. Electoral democracies face one overriding challenge: to improve the quality of governance and political representation. Securing the freedom and fairness of elections may be important in some of these countries. However, in the majority of them, it is either no longer a major problem or it is one that domestic political actors have learned to manage through their own organization and resources (or that domestic actors can be assisted to manage with modest further investments of aid). In these countries, where democracy is not consolidated and major problems of governance persist, a priority is corruption control and rule of law. Nearly all of these countries need significant help in strengthening and professionalizing their judiciaries, their other institutions of horizontal accountability, such as countercorruption commissions, and their political parties. The overriding goal must be to make politics more transparent, accountable, and responsive. In all of these countries, civil society has an important role to play in educating and mobilizing for systemic reform and deepening democracy. 2. Ambiguous, quasi-democratic regimes share the programmatic priorities of the first group, but with one major addition: electoral assistance. In these countries, there is often still considerable need for all three dimensions of electoral assistance within the DG portfolio: to develop the technical capacity, independence, neutrality, and professionalism of electoral administration; to educate and inform voters; and to empower domestic monitoring efforts in civil society. In a few cases, particularly Indonesia, civilian authorities need help developing their capacity to manage the military and subordinate it to their constitutional authority. 3. Electoral authoritarian regimes encompass wide variation. Some of these regimes have considerable competition and pluralism, and they could become democratic if elections became free and fair. For these more competitive regimes, electoral assistance (see above) is a major priority, as is assistance to civil society to intensify demand for reform. A country assessment may determine (as for Egypt) that it may only be possible (or strategically wise for the United States) to push open the electoral arena to genuinely free competition after other improvements in governance have been made. But in many

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electoral authoritarian regimes, such as Kenya, Zambia, Zimbabwe, Liberia, Belarus, Cambodia, and Haiti, improving the credibility and fairness of the electoral process is vital to preventing violent conflict and securing progress on other governance fronts. In other words, without the uncertainty and incentives generated by truly democratic competition, the political will for reform is unlikely to emerge. 4. Closed authoritarian regimes are either failed states, struggling to reconstruct a viable political order, or repressive regimes in which political opposition is banned. In failed states, rebuilding state capacity is essential for improving governance. Yet even in these cases, unless some means of political accountability, participation, consultation, and power sharing emerge, the state is unlikely to garner the minimum level of legitimacy necessary to consolidate peace and establish effective governance. That is true for states plagued by civil war or conflict, such as Angola, Sudan, and Congo. The problem with the typical repressive, closed regime is that there is little political will for liberalization, since that means surrendering some political power and resources (or risking control altogether). In these circumstances, probably the most that foreign assistance can do is to work with civil society to keep hope alive: to improve the demand and potential for democratic governance, to defend citizens’ rights by fighting the worst abuses of power, and to promote peaceful resolution of conflict and even reconciliation among warring parties. Raising citizen awareness and access to information, and empowering citizens to organize peacefully for political change, are particular imperatives. These are the DG programs USAID is pursuing in Angola, for example. In some cases, it may also be possible to help courts and representative bodies to become more independent and effective. However, it makes little sense to train or work with state agencies or actors (including parliaments) in closed regimes unless there is evidence of some commitment to improving governance and opening up political life, even if that will only happen incrementally. In general, DG work in closed, authoritarian countries is of high risk and unlikely to yield much discernable progress. That does not automatically rule it out; a case can be made for the moral imperative of engagement for better governance, even against formidable odds. However, it does raise the question of whether the same dollar investments would achieve more in other countries. In thinking about prospects and priorities for DG assistance, it is important to be realistic about where a country stands. As Thomas Carothers has recently noted, most electoral authoritarian (or what he calls “gray-zone”) regimes are not “in transition” or “stuck in transition.” The way they combine authoritarian and (often quite limited and superficial) democratic elements constitutes a

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distinct and possibly persistent regime form (Carothers 1999). This recognition underscores two points. One is that for these regimes (particularly the less-competitive, more-repressive ones) to become democracies, they must initiate a transition, not complete one that is still “under way.” This necessitates a whole series of reforms to allow a more level and neutrally administered field of electoral competition and to allow more space for independent civil society and political actors. And second, this returns analysis to the matter of the political will to reform. A third conclusion follows from this note of realism. In some countries, we will need to do what we can do to improve governance, even against stiff odds, simply because the countries are so large and important to the stability of their regions and the security of the United States. Russia, Ukraine, Nigeria, Indonesia, and Pakistan are five such countries. But with smaller countries of roughly equal strategic importance, it makes more sense to focus assistance on those that are electoral democracies, or at least those (such as Uganda in the past decade) that manifest political will for reform and good governance. These countries (which will not always match the social science predictions about the structural “conditions for democracy”) are the ones most likely to make progress, and therefore the ones in which DG investments are most likely to yield results. The countries that had good prospects to consolidate democracy since 1990 have largely done so. Now almost of all the remaining cases are tough, and logic dictates a bias toward those with a clear will for progress. It is not simply—or even mainly—that we should want the encouragement of some new success stories. It is that we need some successes to sustain democratic momentum in the world—and to sustain the willingness of weary publics to fund international development assistance. If we can, in the coming decade, help some of the three dozen electoral democracies that now receive USAID DG assistance to consolidate their institutions and entrench popular commitment to them, these consolidated regimes can become new sources of democratic inspiration and diffusion for their neighbors. Conclusion Global democratic progress has slumped in recent years. Many countries that once seemed “in transition” have settled into authoritarian rule. And even many electoral democracies are performing poorly and losing public confidence. Democracy assistance has achieved uneven results, and in some countries, sizable efforts in some sectors appear to have had little if any impact. None of this is cause for despair. The world has seen striking democratic progress in the past two decades, and most people still want to be governed in democracy and

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freedom. However, if a broad reversal of democratic progress is to be averted, if development is to be generated where it has been blocked and stalled, and if we are to prevent the collapse of more states into catastrophic cycles of political violence, social chaos, rampant criminality, and humanitarian crisis, we must induce sweeping transformations in the quality of governance. As described in this chapter, if we can extend and institutionalize the significant innovations in U.S. foreign aid strategy and structure from recent years, designed to induce, support, and reward fundamental governance reforms; if the United States can partner with its fellow donors to coordinate international pressure and incentives for such reforms; and if we can, with patience and adaptive savvy, sustain this approach with appropriate resources for two or three decades, we can help to generate the economic and political transformations that will lift nations, and many hundreds of millions of people, out of poverty. This effort should be a higher priority in U.S. foreign policy and, if successful, will enhance the national security of the United States. References Brinkerhoff, Derick W. 1999. “Identifying and Assessing Political Will for Anti-Corruption Efforts.” Working Papers No. 13, Implementing Policy Change project (January). Washington, DC: US Agency for International Development. ———. 2000. “Assessing Political Will for Anti-Corruption Efforts: An Analytic Framework.” Public Administration and Development 20: 242–50. Buss, Terry F., Steve Redburn, and Kristina Guo, eds. 2006. Modernizing Democracy. Armonk, NY: M.E. Sharpe. Carothers, Thomas. 1999. Aiding Democracy Abroad: The Learning Curve. Washington, DC: The Carnegie Endowment for International Peace. Carter, L. 2001. “Linking USAID Democracy Program Impact to Political Change: A Synthesis of Findings from Three Case Studies.” L. Carter, revised fourth draft (unpublished), August 8. Collier, Paul. 1999. “Learning from Failure: The International Financial Institutions as Agencies of Restraint in Africa.” In The Self-Restraining State: Power and Accountability in New Democracies, ed. Andreas Schedler, Larry Diamond, and Marc F. Plattner, 25–35. Boulder, CO: Lynne Rienner. ———. 2002. “Making Aid Smart: Institutional Incentives Facing Donor Organizations and Their Implications for Aid Effectiveness.” Prepared for the Forum Series on the Role of Institutions in Promoting Economic Growth, directed by the IRIS Center, sponsored by USAID, February 25. Diamond, Larry. 1999. Developing Democracy. Baltimore: Johns Hopkins University Press. Diamond, Larry, and Leonardo Morlino, eds. 2005. Assessing the Quality of Democracy. Baltimore: Johns Hopkins University Press. Putnam, Robert D. 1993. Making Democracy Work: Civic Traditions in Modern Italy. Princeton, NJ: Princeton University Press. Schedler, Andreas. 1999. “Conceptualizing Accountability.” In The Self-Restraining State: Power and Accountability in New Democracies, ed. Andreas Schedler, Larry Diamond, and Marc F. Plattner, 40–60. Boulder, CO: Lynne Rienner.

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5 Foreign Aid in Comparative Perspective Regime Dynamics and Donor Interests Steven W. Hook

Foreign aid persists as a vital instrument of foreign policy amid sweeping changes in world politics since 1989, encompassing the end of the cold war, a global economic recession, and the onset of the war on terrorism. Every nation-state, rich and poor, serves in some capacity as an aid donor or recipient. The worldwide transfer of official development assistance (ODA) in 2005, $106.5 billion, set an all-time record and exceeded the previous year’s total by more than 30 percent. Aid has gained legitimacy in the global political economy. As aid volumes rise, tensions remain between prerogatives of leading donors and norms and expectations of the development-aid regime. Industrialized countries, particularly the United States, Japan, and Western European governments, agreed in the years following World War II that concessional financing was needed for the growing number of less developed countries (LDCs) that could not attract private investments or loans in private financial markets. These donors, however, were careful to mold aid programs around their broader foreign policy goals. While U.S. leaders placed aid flows in the service of communist containment, Japan used aid to rebuild its regional economic ties and France and Great Britain employed aid to gain the allegiance of former colonies (chapter 3 discusses these and other countries’ aid programs). Only the Scandinavian states and smaller European powers based aid calculations upon humanitarian concerns (Hook 1995), a pattern that still holds today. The volume, direction, and terms of aid programs mirror this uneasy relationship. Donors maintain the power to dictate the performance, if not the normative values and policy preferences, of the global aid regime. The United States plays a pivotal, often paradoxical role in this regime, both as a leading 86

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source of ODA and as a relatively poor performer on measures of aid “quality.” But other donors similarly assert their prerogatives in approving aid packages and overseeing their delivery. While Japan continues to concentrate on East Asia, for example, French aid remains squarely focused on Francophone Africa. As David Baldwin (1985) observed more than two decades ago, such prerogatives render foreign aid a vital domain of “economic statecraft.” Strategic conceptions of aid’s role in development have varied since the regime’s emergence shortly after World War II, reflecting the evolution of development paradigms. The wealthiest industrialized states, which maintain the power to impose their models of development on recipients, as well as smaller-scale donors, have emphasized different aspects of development over time in response to prevailing intellectual currents: modernization in the 1950s and 1960s, basic human needs in the 1970s and early 1980s, sustainable development and structural adjustment into the 1990s, and human security in the 2000s. Unfortunately, the problems identified by unfolding development paradigms are additive, not exclusive. Today’s demands and policy responses tend to crowd out yesterday’s priorities, forcing changes in budget allocations that ensure the stunted growth or outright suspension of previously enacted aid programs. Abrupt budgetary reallocations are most common when unforeseen events—the Vietnam War, the Soviet Union’s collapse, the September 2001 terrorist attacks, or the Asian tsunami—alter demands for finite resources. The higher aid volumes of recent years, reflecting donor preferences as well as the heightened demands of developing countries, are directed toward five objectives: • Stimulating market-driven economic growth and industrialization; • Combating the spread of hiv/aids and other infectious diseases; • Easing the burden of international debt facing nations in extreme poverty; • Supporting emergency response and reconstruction after natural disasters; and • Countering the threat of international terrorism. As described elsewhere in this volume, the U.S.-led war on terrorism has elevated security concerns on many government agendas. The diversion of funds for security, often defined and operationalized in military terms, not only reduces the pool of other resources but often conflicts with development efforts. This militarization of development aid, a defining pattern of the cold war, makes it less likely that long-term sources of poverty and state failure—squalid living conditions, illiteracy, a lack of foreign investment—will be adequately

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addressed. “Shifting ODA to counter-terrorism simply perpetuates the vicious cycle of war and poverty,” observed Koshida Kiyokazu (2004, 113) of the Pacific Asia Resource Center. To Ngaire Woods (2005, 407), foreign aid that “prioritizes the achievement of human development is at risk.” The record ODA transfers in 2005, which boosted the average donor commitment from 0.26 to 0.33 percent of their gross national income (GNI), marked the fourth straight year of rising allocations. The boom in aid flows, spurred by a 400-percent increase in debt-relief grants, was especially welcome in developing countries given declines in private investment during the same period after a decade of rapid increases. Longitudinal trends reveal 2001 as a turning point in ODA flows. Private contributions to global development, from such sources as the Bill and Melinda Gates Foundation, also grew dramatically in the early twenty-first century. As this chapter argues, despite recent growth in aid flows, most programs are unlikely to achieve their stated goals given the continuing lack of cohesion and solidarity within the aid regime. Public and private donors have yet to “harmonize” the hundreds of aid-based programs they oversee, let alone the multilateral efforts of the United Nations (UN), the World Bank, regional development banks, and other intergovernmental sources. Each program includes distinctive goals, qualifications, and expectations, making it virtually impossible for recipients to adopt and implement strategies of political and economic development suited to their individual needs. The analysis here proceeds in three stages. The first section examines patterns in bilateral ODA flows since 2000, with particular emphasis on the relationship between aggregate aid flows and measures of aid quality. Second, we consider trends within the regime and ongoing efforts to coordinate national aid programs. Finally, we review the politics of foreign aid within major donor governments that will affect their contributions to the aid regime in the next decade. Recent Trends in Aid Flows All of the development priorities noted earlier—neoliberal economic reforms, treating infectious diseases, debt relief, emergency response, and counterterrorism—have converged in recent years to produce unprecedented volumes of development aid (see Figure 5.1). Along with soaring volumes of ODA, aid from nongovernmental organizations increased by nearly 50 percent between 2000 and 2004, from $6.9 billion to $11.3 billion (OECD 2005). These flows counteracted the near collapse of private investment in 2002, including a net withdrawal of more than $30 billion in portfolio investment during the year. Foreign direct investments (FDI), generally long-term invest-

Figure 5.1 AID IN Overall Volumes of ODA,FOREIGN 2000–2005 Figure 5.1

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Overall Volumes of ODA, 2000–2005

120 Value ODA Total billions of U.S.$

110 100 90 80 70 60 50 40 2000

2001

2002

2003

2004

2005

Year

Source: Development Assistance Committee, Organisation for Economic Co-operation and Development.

Source: Development Assistance Committee, Organization for Economic Cooperatio Development. ments by multinational corporations in overseas production facilities, fell by nearly half in 2002 before recovering two years later to their earlier levels. As a proportion of North-South financial flows, ODA grew from less than 50 percent in 2000 and 2001 to nearly 80 percent in 2002. With investment levels gradually recovering, ODA averaged about 55 percent of total financial flows from 2002 to 2005. These patterns are significant because, only a decade earlier, private investments were widely expected to supplant foreign aid as the engine of growth in the developing world. Both FDI and portfolio investments, which are usually in the form of stocks and bonds held by individuals and fund managers, played that role in the 1990s, with developing countries in East Asia attracting the largest share of private investments. Since that time, however, private investments have proven to be highly volatile. The volume and direction of portfolio investments have changed in response to economic shocks (e.g., the East Asian economic crisis of 1997) and security crises (e.g., the September 2001 terrorist attacks on the United States). By comparison, ODA offers a larger number of LDCs the prospect of longer-term, concessional capital inflows geared toward broadly based development. Five countries have provided the lion’s share (about two-thirds) of ODA in recent years: the United States, Japan, France, the United Kingdom, and Germany (see Table 5.1). The United States alone accounted for nearly one-

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Table 5.1 ODA Transfers and ODA/GNI Ratios of Top Donors, 2000–2004 (in millions of US$) Years Donors United States Japan France United Kingdom Germany

2000

2001

2002

2003

2004

9,955 (0.10) 13,508 (0.28) 4,105 (0.30) 4,501 (0.32) 5,030 (0.27)

11,429 (0.11) 9,847 (0.23) 4,198 (0.31) 4,579 (0.32) 4,990 (0.27)

13,290 (0.13) 9,283 (0.23) 5,486 (0.37) 4,924 (0.31) 5,324 (0.27)

16,320 (0.15) 8,880 (0.20) 7,253 (0.40) 6,282 (0.34) 6,784 (0.28)

19,705 (0.17) 8,906 (0.19) 8,473 (0.41) 7,883 (0.36) 7,534 (0.28)

quarter of total ODA flows between 2000 and 2004. Despite its deep cuts in ODA, Japan still provided the second-largest volume of annual transfers. The three European donors, all of which recorded growing rates of Organisation for Economic Co-operation and Development (ODA/GNI), followed closely behind Japan during this period. These bilateral aid transfers were supplemented by contributions to the European Union, which accelerated efforts during this time to establish its own development aid “identity” (see below). The continuing prominence of the United States and Japan is noteworthy given the relatively poor performance of both donors with regard to the qualitative measures of the Development Assistance Committee (DAC) of the OECD. Of the twenty-two DAC donors, only Italy (0.15 percent) ranked below the United States (0.17 percent) and Japan (0.19 percent) in the percentage of national output devoted to ODA in 2004. These figures fell far below the aid regime’s target of 0.7 percent and paled in comparison to the average DAC effort of 0.42 percent. While this closely watched indicator of aid quality has risen in the U.S. case since 2000, for Japan the proportion of ODA/GNI steadily declined. On a per-capita basis, both countries fell below the DAC average of $82, with Japan recording $68 and the United States $61. Only the governments of Greece, Italy, New Zealand, and Spain provided less ODA on a per-capita basis. Although increasing by 2003–4, grants in Japanese ODA lagged behind that of all other donors. Less than one-half of Japan’s ODA were grants, far below the DAC average. These figures reflect a broader inverse relationship across the aid regime between the quantity and quality of ODA flows. This relationship is perhaps best illustrated by focusing on the five countries with the highest ODA/GNI

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ratios in 2004—Norway, Denmark, Luxembourg, Sweden, and the Netherlands. All of these donor states routinely exceed the 0.7 threshold and in some cases have exceeded the original target of a full 1 percent of national output. These countries also rank among the top five in per-capita aid, which averages $345. They are also among the leading aid donors to the most impoverished LDCs. On an absolute level, their ODA contributions in 2004 amounted to $11.4 billion, or 58 percent of the aid provided by the United States alone. This inverse relationship, dating back to the origins of the aid regime, reflects not only relative economic capabilities but ideological differences regarding development and the state in promoting socioeconomic equality (Lumsdaine, 1993). The same governments that record the highest levels of ODA/GNI also devote greater shares of national output to domestic spending, particularly social programs. The parallels between domestic welfare policies and foreign aid flows suggest that “principles institutionalized at the domestic level shape the participation of developed countries in the international aid regime” (Noel and Therien 1995, 552). The United States and Japan, in contrast, follow neoliberal models of political economy that discourage active government intervention and largescale social-welfare programs (domestic or international). In defending the U.S. government’s low ODA/GNI ratios, U.S. officials further point to their disproportionate contributions to the United Nations and international financial institutions as well to as the unmatched infusions of U.S.-based private investment into the economies of LDCs. For their part, Japanese officials dispute many DAC measures of aid quality, particularly the norm favoring grants rather than loans. The latter, the Japanese government argues, are often preferable as they impose necessary “discipline” on recipients (Hook 1995). While Japan has increased funding to sub-Saharan Africa in recent years to support the aid regime’s goals to reduce extreme poverty, its aid flows remain concentrated in East Asia and Oceania, where average living standards are generally higher. This regional concentration is viewed in Tokyo as compatible with the government’s traditional role as an engine of regional rather than global economic growth. Japan’s regional focus on East Asia provides evidence for a division of labor among aid donors. This arrangement, reflected in which countries are the top recipients of aid donations, has evolved without formal intergovernmental collaboration. Although Israel has disappeared from the ranks of U.S. ODA recipients, the United States continues to direct the largest share of its ODA to the Middle East and southwest Asia. The geographical division of labor also applies to France, whose aid has been concentrated in Francophone Africa, viewed as a sphere of French political and economic influence (see below). While the United Kingdom serves as the leading aid donor to its former colony

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India, the Spanish government directs most of its aid to Latin America. The prospect that the higher ODA levels recorded in the first half of the 2000s can be sustained are clouded by several factors. Much of the recent surge in aid can be attributed to debt relief, which, though an essential prerequisite of economic recovery and growth, will not eliminate the need for external funding and technical assistance once the recipients’ national accounts have stabilized. The U.S. aid budget will likely confront downward pressures from several sources, including demands for domestic reconstruction in the wake of Hurricane Katrina in 2005 and its ongoing war on terrorism. Already, the impact of rising U.S. defense spending on record budget deficits has been used to justify cutbacks in some ODA programs. Japan and European donors face acute budget constraints and rivalries among ministries for control over spending programs. All these governments profess a continuing commitment to meet the UN’s Millennium Development Goals, which will be difficult to achieve if current fiscal strains continue. Dynamics of the Aid Regime The development aid regime conforms to the widely accepted definition of an international regime, understood as “principles, rules, norms, and decision-making procedures around which the behavior of states converges” (Krasner 1983, 1). Although they diverge on many questions related to international development, industrialized states accept the underlying principle that relief from extreme poverty is a common responsibility. In addition, donors generally observe rules regarding the constitutive properties of ODA and accept a wide range of normative standards regarding aid quality (see Wood 1986). And although donors retain control over ODA, their transfers are documented within the regime’s institutional home, the Development Assistance Committee of the Organisation for Economic Co-operation and Development. Regular peer reviews of DAC members’ aid programs reinforce aid standards. It is commonly believed that political institutions cannot be divorced from the ideas generated by their creators and primary stakeholders (Goldstein and Keohane 1993). In this respect, one must recognize the functional link between evolving ideas regarding international development and the evolution of institutions, particularly state and transnational governing structures, related to the development-aid regime since its creation nearly half a century ago (Pierson 2000). To some aid analysts (e.g., Lumsdaine 1993), this regime is sustained by shared normative values, including a concern and sense of responsibility for the welfare of individuals and societies in need. Lumsdaine’s analysis of aid policies during the cold war found that, for most donors, neither geopolitical

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concerns nor direct economic self-interests were determinative in aid policies. Instead, variations in aid flows reflected varying societal commitments to humanitarian relief and the reduction of socioeconomic inequalities within LDCs. This sense of a “moral vision,” Lumsdaine concluded, was further affirmed by the failure of aid transfers to deliver concrete benefits to donors beyond the “tying” of aid to their own goods and services (a common practice in the United States but less so elsewhere). These collective values do not exclude donor self-interests from national aid calculations. At a general level, donor economic interests are advanced by the more prosperous and stable world order presumably facilitated by development assistance. Beyond this, donors face chronic political resistance to the volume of aid that is necessary to produce sustained development. While the DAC provides a venue for donor collaboration and reporting, its reports more commonly document the failure rather than the success of donors in meeting accepted standards of aid quality. Most telling in this respect is the failure of most donors to provide at least 0.7 percent of their national income in the form of ODA, a standard adopted in the 1960s by the UN Conference on Trade and Development. It was expected in the 1950s that Western-style modernization could be exported to LDCs through infusions of private investment along with concessional funding and technical assistance, primarily for the construction of public infrastructure. Expectations of industrial “takeoff,” and later stages of economic “maturity” and “mass consumption,” were closely related to the ideological strains of the cold war (Rostow 1960). It soon became clear, however, that the required infusions of private capital would not be forthcoming to most LDCs, which remained mired in poverty during the proclaimed “development decade” of the 1960s (see Krueger, Michalopoulos, and Ruttan 1989). The institutional framework of the ODA regime assumed its current form during this period. The Organisation for European Economic Co-operation (OEEC) was reorganized in 1961 as the OECD. The name change reflected the members’ shift in emphasis from European postwar reconstruction to Third World development. In 1963, OECD members formed the DAC, which soon became the forum of the richer nations for discussing their mutual interests involved in aid policy and administration. Aid donors shifted their focus during this decade toward state-building efforts across the developing world. Overall aid flows doubled during this period as the institutional basis of the contemporary aid regime was established. Developing states, through the Group of 77 (G-77) and other coalitions, used the UN as a forum to articulate their collective needs. In December 1974, the General Assembly endorsed the G-77’s call for a Charter of Economic Rights and Duties of States. While its terms were advisory, the charter

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identified structural problems in the world economy as the basis of underdevelopment and demanded fundamental changes in North-South economic relations. Widening income disparities figured prominently in G-77 demands for a New International Economic Order, which embraced import substitution as a development model and a redistribution of wealth from North to South, primarily through ODA (Prebisch 1970). Rejection of this model by industrialized states and the persistence of poverty led the aid regime in the late 1970s and 1980s to focus on human needs, an ambiguous term that did little to alter the policy and aid strategies of donors. The recognition of transnational problems after the cold war led to the adoption of sustainable development as the centerpiece of UN economic programs in the 1990s. Global aid levels dropped, however, primarily as a result of deep cutbacks in ODA from the United States, where the end of the cold war effectively ruptured the long-standing basis of its aid program. Most other donors scaled back their aid programs, largely in response to domestic political pressures. Several factors contributed to this drought in aid: the lack of cold war spillover in bilateral aid relationships; the primacy of “neo-liberal orthodoxy” (Hoebink and Stokke 2005, 1) in development thought; criticism stemming from the failed UN peacekeeping efforts in Somalia, Haiti, and the former Yugoslavia; and the boom in North-South private investment. The outbreak of civil wars in many LDCs, due in part to the withdrawal of cold war pressures for internal stability, prompted a new shift in the aid’s focus to human security, a term that captured the threat posed by domestic political repression to economic and social development. An emphasis of today’s aid regime involves developing countries’ “ownership” of their projects and outcomes. Increasingly, aid recipients must demonstrate a record of economic reform and good governance as a prerequisite for assistance. Donors expect LDCs to be responsible for planning, implementing, and evaluating projects. These measures, involving such reforms as the privatization of industries, monetary and fiscal discipline, open elections, and the rule of law, are monitored by DAC. Recipient ownership and accountability are central to multilateral and private aid programs, including the Global Fund for AIDS, Tuberculosis, and Malaria. The aid regime has weathered the intrusion of donor prerogatives and in recent years has witnessed unprecedented moves toward collective action. The UN-sponsored Millennium Summit in New York City identified the end of poverty as a moral imperative and a prerequisite to global security. Nearly every government attended the summit in 2000 and approved eight Millennium Development Goals (MDGs). The UN’s Millennium Declaration (2000), while stressing the need for developing countries to assume responsibility for their development policies, called upon affluent states to “grant more generous

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development assistance, especially to countries that are genuinely making an effort to apply their resources to poverty reduction.” The Millennium Summit was followed in March 2002 by a conference in Monterrey, Mexico, where political leaders from industrialized states and LDCs agreed on a model of domestic and global development founded upon neoliberal assumptions and market-friendly fiscal, monetary, and trade policies. Industrialized states recognized the need for greater commitments of ODA to meet pressing needs that were neglected by market forces. As part of the “Monterrey Consensus,” the International Conference on Financing for Development acknowledged that ODA “plays an essential role as a compliment to other sources of financing for development, especially in those countries with the least capacity to attract private direct investment” (United Nations 2002, 9). The global aid regime faces three central challenges in the years to come. The first stems from the decentralized structure, one of the regime’s essential characteristics. Lack of coordination across aid programs increases transaction costs and precludes effective leveraging of aid funds. These problems extended beyond bilateral development projects to functional responses to crises in Rwanda and the former Yugoslavia, for example, where “UN action had been undermined by a lack of coherence between the political, peacekeeping, and humanitarian aspects of the response” (Harmer and Macrae 2004, 20). The Rome Declaration on Harmonization, approved in February 2003, called for donors to align their aid missions, conditions, reporting requirements, and criteria for evaluation. But, like the MDGs, the Rome Declaration is more a statement of principles than a binding obligation, something aid donors have resisted. Second, the aid regime faces heightened challenges in the face of “new bilateralism,” or overwhelming pressure from donors to maintain exclusive control of their aid transfers (Rogerson, Hewitt, and Waldenberg 2004). Contrary to the regime’s call for the prevalence of multilateral programs, bilateral flows now represent nearly three-fourths of all ODA transfers. In the United States, the Millennium Challenge Corporation (MCC) represents the most significant institutional change within its aid system since the creation of the U.S. Agency for International Development (USAID) more than four decades ago (chapter 15 looks closely at the MCC). Among the MCC’s founding principles are the unilateral selection of recipients and the approval and evaluation of funded programs. Despite stated pledges by Japan to conform more closely to regime norms, Japanese aid remains tightly controlled by its government ministries, whose choices of recipients and terms of aid are aligned with Japan’s regional economic interests. The third problem facing the ODA regime relates to the heightened pres-

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ence of security concerns stemming in large measure from the September 2001 terrorist attacks on the United States. Such concerns distract attention and divert resources from development priorities, including good governance and the promotion of civil societies. Ruling elites in LDCs attract attention, and possibly foreign assistance, by identifying their foreign and domestic enemies as “terrorists,” much as elites during the cold war gained assistance from Western industrial powers by branding their adversaries as communists. The intrusion of security concerns raises the dilemma of aid fungibility: development assistance, including debt relief, may simply free up the budgets of recipient governments for increased military spending, which is often designed primarily to consolidate the power of ruling elites. Donor Politics and Aid Policies As we have seen, the ODA regime has become a fixture in North-South economic relations and has, in recent years, taken on new missions and institutional forms. In this section, we briefly review the performance of leading ODA donors. Of particular interest is their record in meeting the qualitative standards of the aid regime. The discussion also examines the governing structures in place in donor states that determine the volume, direction, and terms of aid flows, along with the salience of development aid relative to other foreign policy priorities. The United States From the Marshall Plan through the end of the cold war, the aid programs of the United States were driven in large measure by the geopolitical objective of communist containment. Aid flows were coordinated with other efforts by the U.S. government to support LDCs along the periphery of the Soviet Union and China, many of which joined the United States in anticommunist security alliances. The basic design for aid was established with the passage of the Foreign Assistance Act of 1961, which created USAID to serve as a centralized conduit of economic aid. USAID was forced to compete for funds with other departments, and its presumed focus on development was blurred by security interests. After the cold war, the United States aligned its objectives with those of the ODA regime, pledging to use future aid flows to promote sustainable development and democracy in the Third World. The aid program confronted domestic resistance during this period, owing largely to the absence of the security threats that had previously driven aid allocations. As a result, most U.S. development aid was committed annually to Israel and Egypt, a by-product

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of the 1978 Camp David Accords, and other aid programs were sustained largely on the basis of congressional earmarks and ties to domestic goods and services. Congressional efforts to abolish USAID were unsuccessful, although the agency has come under more direct control of the State Department. Given the State Department’s lack of a formidable domestic constituency, members of Congress air these grievances without fear of alienating voters or powerful interest groups. The highly fragmented U.S. foreign aid system continues to lack a center of gravity (see Lancaster 2005). While the State Department oversees aid programs that remain closely linked to U.S. foreign policy goals, USAID’s mission is ostensibly directed toward apolitical development concerns. The Defense Department assumes responsibility for military assistance in the form of financial transfers or the subsidized provision of weaponry or training. Multilateral aid programs associated with the World Bank and the International Monetary Fund are managed by the Treasury Department, the Agriculture Department approves funding for the Food for Peace program, and the Commerce Department coordinates aid with trade and private investments. Trends in development thought combined with President George W. Bush’s election in 2001 to bring about major changes in U.S. ODA. Principles of recipient ownership and programmatic autonomy, performance-based eligibility, and transparent measures of evaluation were written into the design of the Millennium Challenge Corporation. The MCC’s creation coincided with a new round of proposed reforms at USAID, whose mission was restricted to disaster relief, battling infectious diseases, and responding to extreme poverty and failed states. Acting as reassurances to the market-oriented White House, the principles led President Bush to become an ODA advocate and a sponsor of institutional change. In addition to the MCC, the Bush administration launched a separate funding program to combat HIV/AIDS. The September 2001 terrorist attacks, and the subsequent U.S.-led war on terrorism, produced their own corollary to U.S. development thought: extreme poverty and government repression breed societal resentments and unrest that may be expressed through anti-U.S. or anti-Western political violence, including terrorism. From this proposition the security orientation of post9/11 U.S. ODA emerged. Iraq and Afghanistan not only consumed billions of U.S. military funds weekly for the next several years, the two countries absorbed nearly all of the $8 billion increase in U.S. ODA spending between 2002 and 2005 (Moss, Roodman, and Standley 2005). Other major increases in U.S. aid went to frontline states in the war on terrorism, including Pakistan, Turkey, and Jordan. The leading recipient of U.S. ODA for more than two decades, Israel, absorbed deep cuts during this period, although these cuts did not affect large annual transfers of U.S. security assistance. Indeed, the

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war on terrorism produced an overall resurgence of security aid, which had been greatly reduced in the wake of the cold war. Japan Several factors contributed to Japan’s demise as the world’s leading donor, a status it held for most of the 1990s. The nation’s economic crisis, with an accompanying blow to the government’s budget, restricted funding that had been readily available during Japan’s boom years. Political leaders in Japan, meanwhile, were frustrated by criticism of the aid program’s poor quality, a charge that was fueled by differences over the appropriate use of ODA. Finally, Japan’s decline was assured by Washington’s rediscovery of aid as an instrument of U.S. foreign policy. Japan’s ascension from military defeat and global estrangement after World War II to the status of an economic superpower occurred in a forty-year period during which economic wealth became comparable to military might as a power resource. Japanese leaders openly utilized ODA to promote their national interests (kokueki) by stimulating the economic development of regional LDCs, subsidizing domestic industrialization, and attracting goodwill from other members of the ODA regime (see Arase 1995).With large-scale military rearmament precluded by the country’s U.S.-imposed constitution, Japanese elites “conceived a vision of economic power without military power” (Vogel 1986, 755) and concluded that their principal contribution to global stability would be in stimulating economic and technological development. Japan surpassed the United States as the world’s leading ODA donor in 1989, a status it held for more than a decade. Aid transfers were designed to complement Japanese foreign investments and trade policies, particularly with states that possessed raw materials that were critical for Japan’s economic development. Thus ODA was “explicitly regarded as a legitimate arm of national policy” (Rix 1980, 268). Japan’s emergence as an ODA superpower was also instigated by foreign pressure. Leaders of other industrialized states, LDCs, and international organizations turned to Tokyo as a potential source of relief during a period of economic stagnation outside East Asia. In expanding the size and scope of their aid programs, Japanese leaders proved particularly responsive to pressure from the United States—to increase aid to Russia and North Korea, for example, and to reduce aid to China after the Tiananmen Square massacre and other “states of concern” to Washington (see Miyashita 2003). After the U.S.-led invasion of Iraq in March 2003, Japan contributed troops as well as capital to the coalition, despite domestic protests. The Japanese government adhered more closely to the preferences of the United States than to those

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of the ODA regime, which continued to criticize Japan’s high level of grants versus loans and its concentration of aid transfers to affluent LDCs. These strains intensified as Japan’s aggregate aid volumes decreased by nearly one-quarter between 1998 and 2004, and as Japan’s ODA/GNI ratio fell below 0.2 percent. As with the United States, the objective of the Japanese program was placed in the context of its national interests. According to the new ODA Charter (Government of Japan 2003), development aid seeks first and foremost “to contribute to the peace and development of the international community, and thereby to help ensure Japan’s own security and prosperity.” Prime Minister Junichiro Koizumi approved cuts in Japanese ODA to China, for many years its largest recipient. Old intragovernmental divisions were revived during this period, as the Ministry of Foreign Affairs, which sought to satisfy the aid regime with more humanitarian assistance, lost ground to the Ministry of International Trade and Industry (MITI) and its calls for tying aid to domestic private-sector interests (see Katada 2002; and Hook and Zhang 1998). Despite these cutbacks in Japanese ODA, the government committed significant resources to achieving the UN’s Millennium Development Goals in 2015 and to serving other multilateral goals. As UN Secretary General Kofi Annan asserted, the prospects for Japan and Germany of gaining permanent membership on the UN Security Council were linked, among other conditions, to the success of their governments in reaching the 0.7 ODA/GNI ratio established by the aid regime. His statements, combined with ongoing pressure from within the OECD-based aid regime, provide leaders in both countries with strong incentives to revive aid spending after domestic economic strains are overcome and demands for fiscal austerity are satisfied. Major European Donors Aid from the member states of the European Union (EU) represents a third primary source of concessional funding for LDCs. After a decade of deep cuts in ODA programs during the 1990s, assistance from the EU and its member states grew after 1997 both in absolute terms and in its proportion of global ODA flows, which rose to 60 percent by 2005. Taken together, EU members exceed OECD-DAC qualitative norms. Led by Denmark, Luxembourg, the Netherlands, Norway, and Sweden, the EU’s ODA/GNI ratio has averaged 0.35 percent in recent years, about ten points higher than the DAC average. Like the global ODA regime, the European Union casts its own shadow over the bilateral aid calculations of donors, which maintain their own aid programs alongside those of the EU. It was widely believed during the cold war that bilateral programs were driven primarily by donor self-interests,

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which collectively imposed a system of “collective clientelism” on recipients (Ravenhill 1985; see also Grilli 1994). With the passage of the Maastricht Treaty in 1992 and the EU’s subsequent pursuit of a Common Foreign and Security Policy (CFSP), the union has increasingly identified transnational European interests, including the reduction of extreme poverty, sustainable development, and social welfare, that have in some cases superseded the selfinterests of member states. Pursuit of a European development identity sets the EU apart from other donors while furthering the adoption of a comprehensive CFSP (Olsen 2005). In this respect, a more coherent EU aid identity represents an extension of the broader process of integration that began in the immediate aftermath of World War II (see Holland 2002). Tensions remain, however, between donor and collective prerogatives. Despite recent progress in harmonizing aid programs, “Europe does not yet speak with one voice” (Hoebink and Stokke 2005). Members of the EU steadfastly protect their autonomy in selecting recipients and approving the volume and terms of ODA transfers. In addition, European donors remain committed to the norms, standards, and reporting mechanisms of the OECD-DAC and freely contribute to multilateral programs sponsored by the United Nations, the World Bank, and other intergovernmental organizations. This institutional complexity is reflected in multiple decision-making processes, with national consensus on the norms and objectives of development aid required before member states negotiate with each other on multilateral initiatives (Elgstrom 2000). All of this inhibits the prompt or orderly adoption of a unified European voice in development. As yet, European donors “have not been able to join forces, draw strength from their diversity, and build a European aid system that integrates national and community-level cooperation” (de Fontaine Vive and Severino 2006). In aggregate rather than qualitative terms, France, Germany, and the United Kingdom provide the majority of development assistance. French aid has long served as an agent of the Fifth Republic’s “cultural nationalism” (see Hayter 1966). Within its multifaceted aid program, which stood as the world’s thirdlargest during the cold war, ODA also served the government’s interest in remaining among the “front rank” of great powers. After a steady decline in ODA disbursements in the 1990s, France regained its status as the continent’s leading donor in 2003 and has since led the G-7 nations in its ODA/GNI ratio (0.44 percent in 2005). The rapid increases in French ODA were mandated by President Jacques Chirac, who embraced the Millennium Development Goals and pledged at the 2002 Monterrey summit to reach the 0.7-percent ODA/GNI ratio by 2012, three years ahead of the target for all donors. French leaders have identified an array of objectives for their ODA programs—maintaining close ties to Francophone Africa, debt relief for

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highly indebted poor countries (the HIPC initiative), sustainable development, democratization, and, most recently, counterterrorism. While these objectives reflect the enormity of development challenges facing all donors, a recent DAC peer review (2004) found that “French development policy does not project a unified vision.” This lack of a coherent French ODA identity is reflected in the multiple sources of aid within the government. While the Ministry of Foreign Affairs oversees aid programs that advance French diplomatic interests, the Ministry of Economic Affairs, Finance, and Industry sponsors programs related to debt management, monetary policies, and private investment, and other functional areas linked to commercial relations. The differing institutional objectives and cultures associated with this system lead to inevitable tensions, much as they do between Japan’s Foreign Affairs Ministry and MITI. Like France, Germany used aid as a vital instrument of foreign policy after World War II, when the recovery of both countries was hastened by massive flows of U.S. Marshall Plan funding (Schmidt 2003). German leaders, like their contemporaries in postwar Japan, embraced a future global role founded primarily on economic leadership rather than military power (see Kozo 2002). Development aid emerged as a natural vehicle for demonstrating such leadership at the founding of the ODA regime in the 1960s. Like other countries, however, Germany tailored its aid policies not only to accommodate the regime’s normative principles and objectives, but also to advance German self-interests in the global economy. Paradoxically, the end of the cold war produced a more ambitious German aid policy, based upon transnational notions of sustainable development and democratization, along with immense strains on the German government’s ability to deliver on its ODA pledges (see Ashoff 2005). German leaders in the 1990s approved large aid transfers to Russia, other post-Soviet states, and the Central and Eastern European countries. At the same time, Germany absorbed the huge costs of incorporating and rebuilding the former East Germany, whose physical decay during the cold war was underestimated at the time of national reunification. Finally, Germany accepted primary responsibility for the process of European monetary union, which required member states to trim public spending and budget deficits. These latter goals proved formidable for Germany itself, which confronted large budget deficits that precluded increases in ODA spending. Indeed, the nation’s ODA/GNI ratio fell during the 1990s from a peak of 0.41 percent in 1990 to 0.26 percent in 1999. Despite constraints, Germany joined other donors in adopting the Millennium Development Goals in 2001, which called for halving global poverty by 2015. Chancellor Angela Merkel restated Germany’s commitment to raise ODA levels to 0.7 percent of national income by 2015, although the level of 0.28 percent in 2004 cast doubts on Germany’s ability to achieve this. Un-

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foreseen costs, including contributions to relief efforts after the Asian tsunami in 2004 and ongoing contributions to U.S. and NATO operations in Iraq and Afghanistan, created new demands on the German budget. Finally, the United Kingdom has retained its status as a leading ODA donor while shifting the objectives and institutional basis of its aid program in fundamental ways. Upon the election of Prime Minister Tony Blair in May 1997, the dominant (New) Labour government abandoned the program’s earlier emphasis on furthering the United Kingdom’s economic and political interests in the developing world. In its place, the British government identified the elimination of poverty as its singular development goal. Overall aid volumes grew by nearly 40 percent between 1997 and 2000, along with an increase in the share of British GNI devoted to development aid. Growing shares of British aid to sub-Saharan Africa were offset, in part, by cutbacks in aid to Russia, East Asia, and British overseas territories that had previously served as primary destinations of ODA. These and other changes created a distinctive, and more benevolent, British aid identity and a leading role for the United Kingdom in pressuring other donors to forgive debts and open their own markets to exports from LDCs. British leadership in this area will represent a central legacy of Blair’s tenure as prime minister. The most important change in British aid during this period was structural: the Overseas Development Administration, which oversaw British aid under successive Conservative governments, was dismantled and replaced by the cabinet-level Department for International Development (DFID). Its secretary, Clare Short, emerged as an outspoken advocate for rising ODA levels and declared, in the DFID’s first “White Paper,” the elimination of poverty as “the single greatest challenge which the world faces” (DFID 1997). London subsequently established “partnerships” with carefully selected African LDCs, which were granted long-term aid commitments in return for pledges of greater accountability and “ownership” of development programs. This effort continued even as the United Kingdom approved massive reconstruction aid for Iraq following the U.S. invasion in 2003, with support from Blair’s government. Conclusion As this chapter has argued, sharp rises in foreign aid spending in recent years have not resolved the long-standing debates about the utility of aid in eradicating extreme poverty or stimulating long-term economic growth. In the view of advocates, aid reflects the generosity, compassion, and best intentions of governments and their people. Others defend aid on utilitarian grounds. They argue that aid serves national self-interests by securing allies, promoting stable and democratic governments, fostering export markets, and subsidizing domestic farmers and manufacturers through the tying of aid.

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Critics charge that aid flows are wasted on bloated bureaucracies, reward corrupt dictators, and serve as an agent of Northern hegemony. To many opponents of aid, governments can better advance development by encouraging private investment rather than providing assistance. Such aid debates, and the complex and subtle intermingling of national prerogatives and regime norms, will remain part of the landscape of North-South economic relations throughout the new century. Despite pledges to achieve the Millennium Development Goals by 2015, aid donors face severe limitations in their ability to secure a larger share for development aid in their national economies and budgets. This continuing uncertainty reflects the status of foreign aid as an “impure public good” (Bobrow and Boyer 2005). In presuming a link between improved living standards, reduced population growth, and environmentally sustainable development, on the one hand, and a more stable and collectively beneficial international system, other the other, foreign aid conforms to the standard of public goods. Aid flows are “impure,” however, because they are selective in terms of recipients and in the mix of benefits for the donor as well as for the recipient. Stated another way, global development is a classic collective-action problem that rewards free riding and virtually assures the attainment of suboptimal outcomes (see Ostrom et al. 2001). The development aid regime is unlikely to achieve its goals under these conditions. The collective resources of aid donors will continue to produce disappointing results so long as aid flows remain fragmented among myriad sources—bilateral and multilateral, public and private. Even within many donor governments, including the United States, the presence of multiple and often competing aid agencies discourages the adoption of coherent development strategies, let alone the effective use of aid transfers by recipients. Pledges to harmonize aid objectives and coordinate the direction and terms of aid transfers remain rhetorical, and they are likely to remain so given the chronic and deeply entrenched intrusion of donor self-interests in aid calculations. Nonetheless, the increased attention paid to ODA since 2000 provides a basis for optimism that the aid regime can overcome its inherent limitations. Success stories can be found in aid’s role in enhancing food supplies in southern Asia during the 1960s, in stimulating economic growth in South Korea and other East Asian states during the 1970s and 1980s, and in propelling political and economic reforms in Eastern Europe after the collapse of the Soviet bloc. Progress has been made toward debt relief and in the fight against HIV/AIDS in Africa. Wealthy states took unprecedented steps forward in adopting specific targets for poverty reduction at the Millennium Summit of 2000 and in agreeing upon a unified development strategy at the 2002 Monterrey conference. These

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efforts reflect a recognition that continued distress in the developing world threatens global prosperity and security. The challenge in the years to come will be to convert this consensus into sustained development cooperation, and the occasional sacrifice of short-term national interests on behalf of enduring transnational concerns. References Arase, David. 1995. Buying Power: The Political Economy of Japan’s Foreign Aid. Boulder, CO: Lynne Rienner. Ashoff, Guido. 2005. “Germany’s Development Co-operation Policy Since the Early 1990s: Increased Conceptual Ambitions in Times of Severe Financial Constraint.” In Perspectives on European Development Co-Operation, eds. Paul Hoebink and Olav Stokke, 267–302. New York: Routledge. Baldwin, David A. 1985. Economic Statecraft. Princeton, NJ: Princeton University Press. Bobrow, Davis B., and Mark A. Boyer. 2005. Defensive Internationalism: Providing Public Goods in an Uncertain World. Ann Arbor: University of Michigan Press. De Fontaine Vive, Philippe, and Jean-Michael Severino. 2006. “Open Forum: Reconciling European Aid with Itself.” European Information Service (April 10). Available at www. lgib.gov.uk/eis/issues/269/index.html (accessed July 7, 2006). Department for International Development (DFID). 1997. Eliminating World Poverty: A Challenge for the 21st Century. London: Department for International Development. Development Assistance Committee (DAC). 2004. France 2004: DAC Peer Review. Paris: Organization for Economic Co-operation and Development. Elgstrom, Ole. 2000. “Norm Negotiations: The Construction of New Norms Regarding Gender and Development in EU Foreign Aid Policy.” Journal of European Public Policy 7 (3): 457–76. Goldstein, Judith, and Robert O. Keohane, eds. 1993. Ideas and Foreign Policy: Beliefs, Institutions, and Political Change. Ithaca, NY: Cornell University Press. Government of Japan, Ministry of Foreign Affairs. 2003. “Revision of Japan’s Official Development Assistance Charter.” Tokyo: Ministry of Foreign Affairs, Economic Cooperation Bureau. Available at www.mofa.go.jp/policy/oda/reform/revision0308.pdf (accessed February 28, 2007). Grilli, E. 1994. The European Community and the Developing Countries. New York: Cambridge University Press. Harmer, Adele, and Joanna Macrae, eds. 2004. Beyond the Continuum: The Changing Role of Aid Policy in Protracted Crises. London: Overseas Development Institute. Hayter, Theresa. 1966. French Aid. London: Overseas Development Institute. Hoebink, Paul, and Olav Stokke. 2005. “Introduction: European Development Co-operation at the Beginning of the New Millennium.” In Perspectives on European Development Co-Operation, eds. Paul Hoebink and Olav Stokke, 1–31. New York: Routledge. Holland, M. 2002. The European Union and the Third World. Basingstroke, UK: Palgrave. Hook, Steven W. 1995. National Interest and Foreign Aid. Boulder, CO: Lynne Rienner. Hook, Steven W., and Guang Zhang. 1998. “Japan’s Aid Policy since the Cold War: Rhetoric and Reality.” Asian Survey 38 (1): 1051–66. Katada, Saori N. 2002. “Japan’s Two-Track Aid Approach.” Asian Survey 42 (2): 320–42. Kiyokazu, Koshida. 2004. “Security and Development as an Emerging Issue.” In The Reality of Aid, eds. Judith Randel et al., 109–13. London: Zed.

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Kozo, Kato. 2002. The Web of Power: Japanese and German Development Cooperation Policy. Boston: Lexington Books. Krasner, Stephen D., ed. 1983. International Regimes. Ithaca, NY: Cornell University Press. Krueger, Anne O., Constantine Michalopoulos, and Vernon Ruttan, eds. 1989. Aid and Development. Baltimore: Johns Hopkins University Press. Lancaster, Carol. 2005. Transforming Foreign Aid: U.S. Assistance in the 21st Century. Washington, DC: Institute for International Economics. Lumsdaine, David. 1993. Moral Vision: The Foreign Aid Regime. Princeton, NJ: Princeton University Press. Miyashita, Akitoshi. 2003. Limits to Power: Asymmetric Dependence and Japanese Foreign Aid Policy. Lantham, MD: Lexington Books. Moss, Todd, David Roodman, and Scott Standley. 2005. “The Global War on Terror and U.S. Development Assistance: USAID Allocations by Country, 1998–2005.” Working Paper No. 62 (July). Washington, DC: Center for Global Development. Noel, Alain, and Jean-Philippe Therien. 1995. “From Domestic to International Justice: The Welfare State and Foreign Aid.” International Organization 49 (3): 523–53. Olsen, Gorm Rye. 2005. “The European Union’s Development Policy: Shifting Priorities in a Rapidly Changing World.” In Perspectives on European Development Co-Operation, eds. Paul Hoebink and Olav Stokke, 573–608. New York: Routledge. Organisation for Economic Co-operation and Development (OECD). 2005. “Aid Flows Top USD 100 Billion in 2005” (April 4). Paris: OECD, Development Co-operation Directorate. Ostrom, Elinor, Clark Gibson, Sujai Shivakumar, and Krister Andersson. 2001. Aid, Incentives, and Sustainability. Stockholm: Swedish International Development Cooperation Agency. Pierson, Paul. 2000. “Increasing Returns, Path Dependence, and the Study of Political Change.” American Political Science Review 94 (June): 251–67. Prebisch, Raul. 1970. Change and Development: Latin America’s Great Task. Washington, DC: Inter-American Development Bank. Ravenhill, J. 1985. Collective Clientelism: The Lomé Convention and North-South Relations. New York: Columbia University Press. Rix, Alan. 1980. Japan’s Economic Aid: Policy Making and Politics. New York: St. Martin’s. Rogerson, Andrew, Adrian Hewitt, and David Waldenberg. 2004. “The International Aid System, 2000–2010: Forces For and Against Change.” London: Overseas Development Institute. Rostow, W.W. 1960. The Process of Economic Growth. Oxford: Clarendon Press. Schmidt, Heide-Irene. 2003. “Pushed to the Front: The Foreign Assistance Policy of the Federal Republic of Germany, 1958–1971.” Contemporary European History 12 (4): 473–507. United Nations. 2000. United Nations Millennium Declaration. New York: United Nations. Available at www.un.org/millennium/declaration/ares552e.htm (accessed February 28, 20). ———. 2002. Report of the International Conference on Financing for Development. New York: United Nations. Available at www.un.org/esa/ffd/aconf198–11.pdf (accessed February 28, 2007). Vogel, Ezra. 1986. “Pax Nipponica.” Foreign Affairs 64 (Spring): 752–67. Wood, Robert E. 1986. From Marshall Plan to Debt Crisis: Foreign Aid and Development Choices in the World Economy. Berkeley: University of California Press. Woods, Ngaire. 2005. “The Shifting Politics of Foreign Aid.” International Affairs 81 (2): 393–409.

Part 2 Case Studies in Foreign Aid

6 Building Local Governance in Iraq Limits and Lessons Derick W. Brinkerhoff

The Nation-Building Challenge The short—since 2003—history of nation building in post–Saddam Hussein Iraq has been cast as a tale of overweening arrogance, foreign policy miscalculation, bureaucratic bungling, military quagmire, necessary counterterrorist intervention, ambitious societal liberation, steadfast optimism, slow but steady progress, and/or unprecedented political transformation, to name but a few descriptors. Just like Rashomon, which of these designations captures the truth depends upon whom one asks. Passage of time will inevitably produce new judgments. However, one tale largely untold concerns Iraqi governance reconstruction. In assessing nation building, key questions are, How can democratic systems of governance be designed and installed? What are the limits of external assistance to do so (chapter 4 lays out a set of general criteria for achieving this)? This chapter explores these questions, looking specifically at subnational governance and public administration. It offers some answers based on the experience of the Local Governance Program (LGP), funded by the U.S. Agency for International Development (USAID) and implemented by RTI International (the Research Triangle Institute).1 LGP began activities in Iraq from spring 2003 through spring 2005. In its second phase, LGP2 was planned to continue through 2007. LGP and LGP2 demonstrate the importance of public administration to laying the foundation for democratic governance. Effective democratic governance provides for the security of citizens; assures effective and equitable delivery of public goods, services, and economic opportunity; and generates legitimacy via participation, accountability, and contestability for public of109

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fice (see also chapter 4). In the discussion below, I highlight four affirmations emerging from the LGP Iraq experience: (1) effective public administration matters to citizens, (2) local government is a key building block for effective governance and can serve to mitigate conflict, (3) empowered citizens enhance governance outcomes, and (4) despite these benefits, public administration improvements alone cannot solve fundamental governance issues. This analysis is preliminary, given the brevity of LGP’s and LGP2’s experience on the ground, the limited data available, and the uncertainty of Iraq’s current situation and its evolution. While perhaps a special case, in terms of the level of resources committed and the geopolitics of the Middle East, postwar reconstruction in Iraq shares core governance and public administration challenges faced in many other countries. Thus Iraq’s emerging lessons have relevance beyond its own borders. Rebuilding Governance and the LGP The postwar governance reconstruction program for Iraq was an ambitious effort that targeted reform of state institutions to lay the groundwork for a transition to democracy, the restoration of core public services and related infrastructure, and the creation of an enabling environment for private investment and economic growth (see USGAO 2004; Ward 2005). Government under Saddam Hussein was highly centralized, and while subnational administrative entities existed, these were appendages of central ministries and served largely to support the exercise of top-down control. Reform to lay the basis for responsive and accountable governance required the creation of new local institutions and revitalized subnational administrative structures (see Woodward 2002). USAID designed LGP to focus on governance and civil society institutions at the local level, while other USAID and Coalition Provisional Authority (CPA) projects targeted simultaneously the conditions deemed necessary for security, democratic transition (elections), and economic growth (see www.usaid.gov/iraq/ and United Nations and World Bank 2003; Yordan 2004; Ward 2005). LGP’s immediate objective concentrated on the restoration of basic public services and support to local administrations with service delivery responsibility. The longer-term objective was to establish subnational government structures and procedures that would assure responsive and transparent local services, while putting in place democratic governance mechanisms—elected councils at neighborhood, city, and provincial levels—that would support the empowerment of local authorities and citizens, including strengthening administrative and budgeting systems for service delivery, training and capacity building in municipal management tools and approaches, establishment of democratic councils, capacity building for civil society organizations,

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coordination with central authorities on local governance issues, and civic education and democracy training. The project also had a grants component to provide rapid assistance for small-scale infrastructure investments (see Carothers 1999). LGP2 continues activities intended to improve the efficiency and effectiveness of local government, support subnational governance reforms, and create a supportive policy environment for decentralization. The Setting for Nation Building in Iraq Beginning with the British mandate, efforts to create a modern state in Iraq met with mixed results. Successive regimes sought to unify Iraq’s different ethnic and religious groups under the banner of Arab nationalism, and later Ba’athism, to create a national identity (Dodge 2003). Under the Saddam Hussein regime, the highly centralized Iraqi state combined authoritarianism, clientelism, and ethnic politics to rule from Baghdad through a hierarchy of provincial, municipal, and neighborhood structures. Local services, to the extent they were available, were dispensed from the center (see ICG 2003a). The Ba’ath Party’s elaborate patronage and social control system, fueled by oil revenues and consolidated under Saddam Hussein, created what Dodge (2003) and others have termed a “shadow” state, where behind the formal institutions of government the members of the ruling party elite operated. The regime suppressed or destroyed social relations other than those integral to the Ba’athist system of state domination; ethnic divisions were exploited and traditional tribal groups were enlisted for social control. The use of executive and judicial agencies for selective service delivery and for repression created privileged groups that were co-opted into the system while destroying administrative professionalism. Across economic classes, opportunities for advancement, as well as self-protection, depended upon inclusion in this advantaged arena, where resources (jobs, patronage, kickbacks, and illicit payments) were distributed. Saddam’s five intelligence and security agencies, with support from the police and the military, assured enforcement by creating interlocking networks of informers, who were rewarded for spying on family, friends, and neighbors. The regime systematically destroyed trust among tribes, clans, and religions. While Saddam’s Iraq appeared strong and on the surface exhibited the administrative trappings of modernity, in reality the state was weak. The effects of the Iran-Iraq War and Gulf War I, plus economic mismanagement, had destroyed or deteriorated important pieces of the country’s physical and administrative infrastructure. Isolation exacerbated this decline. Except for the Ba’athist elites, large segments of the population had little confidence in the state’s capacity or legitimacy. Patronage networks fed a culture of cor-

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ruption. Civil society was inactive and bereft of social capital (Uphoff 2000; Woolcock and Narayan 2000). LGP Implementation This section summarizes LGP’s and LGP2’s major activities and their contribution to building governance and public administration capacity. Central to new governance arrangements was the establishment of representative councils in governorates, districts, cities, subdistricts, and neighborhoods. Capacity building for local service delivery agencies (local units of central ministry departments) led to increases in efficiency, effectiveness, and responsiveness to citizens. Strengthening of civil society organizations helped society to begin to reestablish social capital. Policy and analytic support of decentralization of central authority down to the provincial and district/subdistrict levels, and of the development of administrative statutes and procedures (especially under LGP2), assisted with the creation of a revised governance policy and administrative framework. The civic dialogue program contributed to educating Iraqi citizens on issues of democracy and to providing forums for debate of the new constitution. Local Council Development The structure of local government in prewar Iraq consisted of a highly centralized and executive-dominated system. The country is divided into geographically defined administrative units and subunits that served the purpose of delivering centrally determined public services. Executive councils existed at the governorate level, and in cities and large towns were composed of service department heads and Ba’ath Party appointees, with no citizen representation or input. A 1995 law established elected popular assemblies, but members were appointed by the Ba’ath Party, and assemblies did not serve a representational role. The formation of local councils was a cornerstone of reconstruction efforts to change the relationship between government and citizens. Immediately following the cessation of formal hostilities, U.S. military personnel took the lead in setting up local councils in many of the major cities, governorates, and districts. Initially these councils’ role was limited to providing a communications channel between the military and Iraqi society. During this early phase, LGP started organizing councils in the eighty-eight neighborhoods of central Baghdad, and it also began similar work in al-Basrah. Working closely with the local U.S. military commanders, LGP staff introduced a process through which neighborhoods participated in the selection of representatives for these newly formed neighborhood councils. Eventually

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in Baghdad, all eighty-eight neighborhood councils chose delegates to local councils, which were formed in each of the nine city districts, and then each of the nine councils elected three delegates to the twenty-seven-member citywide council, representing all of Baghdad. As the military designated other areas of the country “permissive,” LGP expanded beyond Baghdad and al-Basrah to work throughout Iraq with councils already formed by the U.S. Army and assisted with the establishment of more councils. LGP offered technical assistance, training, and mentoring, and it provided facilities and tools to enable councils to work and interact effectively with citizens. Bylaws were drawn up, codes of conduct were written, and procedural handbooks were prepared. These materials were refined further under LGP2 and widely disseminated through training programs and accompanying CDs. By the end of March 2005, LGP had facilitated the formation of 445 neighborhood, 194 subdistrict, 90 district, and 16 provincial (governorate) councils. The role of the councils quickly grew beyond simply an interface with the military to encompass service needs assessment, participation in joint planning with local department staff, voicing of citizen concerns and demands, and holding local officials accountable. LGP staff assisted council members in canvassing constituents for needs assessment, prioritizing those needs, designing projects, seeking resources to implement them, and exercising oversight. Developing projects for public lighting, garbage collection, cleaning up public parks, and repairing and refurbishing of local schools and health clinics quickly enhanced the visibility of these local councils as instruments of social good. Councils also played an oversight role and saw that services were delivered as promised. Some worked with the military to provide security for fixed structures. Some needs were met, but many were left unaddressed because of lack of resources beyond the CPA-established governorate development funds, which provided support for local projects. Councils resolved conflict and served as watchdogs to make sure insurgents did not enter their neighborhoods. Citizens also approached the councils to obtain papers and documents to qualify them for CPA and other jobs. The resources issue emerged as critical to the councils’ effectiveness and legitimacy at all levels. Council members found their lack of authority and of control over resources very frustrating. The introduction of stipends for serving on councils exacerbated political infighting given the scarcity of jobs in Iraq. By early 2004, some councils began to lose credibility and legitimacy, and members were accused of being agents of the United States. Councils’ inability to access funds, allocate them, and exercise oversight regarding their use limited their authority and utility as a mechanism to link

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government and citizens. The uncertainties surrounding the degree of decentralization (see below), the absence of a clear legal framework for local government, and the high expectations among citizens for the restoration of basic services continued to challenge and frustrate the councils. Particularly for provincial council members elected in the January 2005 national elections, their lack of authority threatened to undermine their nascent ability to function, as well as their legitimacy. These problems aside, local councils are essential structures in institutionalizing responsive and accountable subnational government and will likely prove instrumental to stability and good governance in the long run. Dawisha (2004, 13) states that “probably the most encouraging development in Iraq has been the surge of activity at the level of local self-government. . . . These councils will over time prove to be indispensable agents not only for political stability, but for the growth of a democratic political culture.” As noted, an impediment to council empowerment was the lack of formalized authority to oversee municipal officials or budgets and of access to significant levels of resources. LGP trained council members in how to be effective members in a legislative body, but without an actual budget to work with, they were clearly frustrated (Chandrasekaran 2004; ICG 2004). Many governors and governorate council members acknowledged that until some type of revenue-sharing formula, established in the new constitution, gave them some form of independent funding sources, the possibility of a truly devolved and effective local government would not be possible. The potential contribution of councils to democratic governance will only be fully realized once some measure of devolution takes place. LGP2’s work on the decentralization legal framework, the Local Government Code, supports these changes. Another positive result of the introduction of councils is their leadership incubator role. The fact that these individuals were selected according to merit criteria, as opposed to connections to ruling elites, offers the potential for more democratically based state-society relations (see Dodge 2003, 168–69). Sadly, the insurgents recognize this potential, and they have targeted council members, particularly those in neighborhood councils, for intimidation and assassination. Some local leaders have taken on roles at higher levels of government. Fourteen former council members were appointed to leadership positions within the Iraqi interim government, and ten were elected to provincial assemblies, in the January 2006 elections. Local Government Service Delivery Capacity Building Public service delivery in Iraq historically has taken place through deconcentrated units of sectoral ministries controlled from the center. In each of

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Iraq’s eighteen governorates, there are, on average, at least fifty different departments representing the key central ministries in Baghdad. These departmental employees remain under the administrative and financial control of their respective central ministries, but they receive little support from Baghdad. LGP worked with these departments, providing technical assistance, limited financial support, and opportunities to network with other departments, both in their own province and in neighboring provinces as well. For example, a capacity-building program assembled senior staff from individual governorates to participate in workshops on (1) leadership and management in a democracy, (2) planning and budgeting, (3) accounting and auditing to ensure accountability and integrity, (4) human resource management, (5) effective and efficient service delivery, and (6) community outreach. These workshops were structured to encourage networking among officials. Budgeting and expenditure management capacity building and systems design were major elements of LGP technical assistance. Beginning with the 2003 national budget allocations, LGP public finance specialists assisted local finance ministry treasurers and service departments with budget monitoring and expenditure tracking. Among the innovations was to establish separate departmental accounts. LGP helped its counterparts to use the 2003 experience to prepare expenditure and capital budgets for 2004 and 2005, which were submitted to their central offices in Baghdad and continued under LGP2. Hundreds of local government officials in most of the provinces of Iraq have been exposed to this training under LGP and LGP2. Besides transferring technical skills, the training sessions have helped facilitate networking, joint planning, and increased levels of cooperation among the various departments in a given province. Many officials acknowledged this was the first time that they had been allowed to review their own individual budgets, which were previously considered “state secrets.” Working together in workshops, they were encouraged to think strategically and identify ways each department might work with others to solve problems. As an example of increased cooperation, governorate treasurers, local staff of ministry departments, and their central counterparts developed a new joint system of auditing and financial reporting for use by governors, local councils, and central ministries. To create an institutional mechanism to promote exchange among local government officials and to create a constituency for decentralized governance, LGP supported the creation of provincial associations of local governments. In LGP2, training and systems development for local government service delivery continued for municipalities throughout Iraq.

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Civil Society Strengthening LGP’s work with civil society focused on assisting citizens to engage with local government in dialogue to express needs and demands, joint problem solving to address these, and oversight to build accountability for actions and performance. LGP supported existing and newly formed civil society organizations to help them develop agendas for priorities that could be met or assisted by local government intervention. For example, in al-Basrah, the Association of Disabled Veterans received assistance in working with city departments on the rehabilitation of a community facility for physical therapy, training, and recreation. LGP also facilitated identifying groups and individuals with common interests and forming associations. For example, in Kirkuk in August 2003, the project supported a conference on civil society development. This event, and others like it, helped to connect citizens with each other, build and mobilize constituencies, and facilitate opportunities for citizens to participate in governance and politics. One of the outcomes of this conference was a community mediation program to address ethnic tensions in Kirkuk led by a local civil society organization (CSO). In Karbala, LGP staff provided training to the Iraqi Human Rights Watch and the Former Prisoners and Families of Victims Association to organize outreach and dissemination workshops. One result of this training was that the CSOs began to use the Internet, both to network with groups in Iraq and to reach out to the outside world. Long suppressed under Saddam Hussein, except in the internationally protected Kurdish region in the north, citizens showed an eagerness to come together around shared interests and concerns. New and/or rejuvenated associations of professionals, youth, and women were formed. LGP assistance to such groups mainly focused on how they could serve as watchdogs over the performance of local officials, could articulate needs to local government, and could work in partnership with local government service departments to achieve common ends. Decentralization A major goal of nation building in Iraq was to restructure and decentralize the power and authority of the central government. Reformed local government, supported by and accountable to local populations would lay the governance “groundwork” for growing countervailing political power, able to confront and challenge Iraq’s centralized government institutions. Planners recognized that in the aftermath of war, Iraqis needed water, electricity, and other basic services as soon as possible, and that since nearly 70 percent of the citizenry

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live outside of Baghdad, it would be in the governorates where immediate investments should be made. LGP’s focus on council formation, local government capacity building, and civil society strengthening—along with the rapid response grants program— sought to implement this planned vision of decentralized democratization. A small team of decentralization and democracy advisers contributed technical input to policy discussions among CPA, USAID, and State Department officials over the life of the project. Among these organizations, however, staff had different visions for how Iraq’s governance system should be rebuilt. CPA felt that the pressing needs in Baghdad needed to be met first, and those in the rest of the country secondarily. The central ministries convinced their CPA advisers that Baghdad was where the funds were needed most and that few trained and capable administrators existed in the governorates due to deBa’athification. In 2003, few CPA officials were strong supporters of decentralization. Besides strengthening local budget and expenditure management systems, LGP sought to assist USAID and Iraqi supporters of decentralization in making the case for autonomous local government. Regional autonomy, decentralization, and federalism remain contested issues that are highly political. The interim constitution (the Transitional Administrative Law, or TAL), in Article 52, laid the groundwork for a federal system, but contained no specifics about local councils. CPA Order No. 71 detailed the authorities and responsibilities of subnational levels of government and reinforced devolution, but did not address finances (see ICG 2004). The constitution, ratified by vote in October 2005, replaced the TAL and CPA Order No. 71. The document establishes what is termed a federal system consisting of regions, decentralized provinces, the capital, and local administrations. Its articles grant potentially significant autonomy to subnational bodies. Article 117, Paragraph 3, addresses the politically divisive issue of oil revenues, stating that, “[r]egions and provinces shall be allocated an equitable share of the national revenues sufficient to discharge their responsibilities and duties, but having regard to their resources, needs and the percentage of their population.” As noted above, LGP2 is supporting the development of enabling legislation and administrative regulations to create the legal and regulatory framework for local government. LGP2 advisers continue to provide technical input to policy discussions on decentralization with ministry officials and USAID. LGP2 has kept up its support to subnational service delivery units to assist them in the development of planning, financial management, and accounting systems, anticipating some degree of central delegation of resources and discretionary authority.

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Civic Dialogue When the CPA accelerated the schedule to June 2004 for the handover of sovereignty to an Iraqi government in response to pressure from the interim governing council and the increased public disaffection with the U.S.-led reconstruction effort both in Iraq and at home, LGP was tasked with a new activity (citizen participation models are extensively discussed in Buss, Redburn, and Guo 2006). In February 2004, the Civic Dialogue Program (CDP)/Democracy Dialogue Activity (DDA) was launched, which was intended to build citizen understanding of basic democratic principles and how they might operate in Iraq nationwide. The aim was to reach significant segments of the population rapidly and to create a critical mass of citizens with understanding and motivation to participate in political and electoral processes. LGP ramped up rapidly, hiring and training nearly 600 Iraqi facilitators for workshops, conferences, and discussion groups. These events consisted of discussion, debate, and dialogue in which the facilitators introduced a variety of concepts related to democracy, rule of law, federalism, constitutionalism and the TAL, the role of political parties, differing electoral systems, and so on. Participants rated dialogue sessions as effective, largely due to the ability of facilitators to express these concepts within an Iraqi context, and to demonstrate compatibility between democracy and Islam. In May 2005, approximately 750,000 people had attended one or more of over 22,000 events. While there is evidence of success from other countries for such civic education approaches, like the experience of the local councils themselves, newly established democratic structures will need to demonstrate their efficacy and value to citizens. Prospects for Effective Local Governance LGP’s experience affirms the importance of local political and administrative institutions for post-conflict reconstruction and nation building. These institutions and their capacities to function effectively have an impact on basic service delivery, the creation of multiple spheres of political power and the avoidance of zero-sum contestation, and the empowerment of citizens and government responsiveness. All of these contribute to democratic governance. LGP’s experience also affirms that “standing up” institutions (a favored phrase of the CPA and the military) is only part of post-conflict reconstruction. Addressing the political dynamics of social relations and developing political solutions cannot be ignored. These four affirmations are discussed further in this section.

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1. Public Administration Matters Post-conflict Iraq possessed a weak local civil administration: the local civil service had little experience in decision making, the government was generally corrupt, and the legacy of decades of central control and intimidation had conditioned local officials to avoid taking initiative. In addition, the extensive sabotage and looting following the war had incapacitated local service-delivery departments and destroyed most of their assets. But at the same time, Iraqi citizens were pressing for the restoration of electricity, water, sewerage, health care, education, gasoline distribution, and security services. LGP worked with municipal departments and finance offices across Iraq on developing systems and training staff for budget planning and implementation, accounting, auditing, procurement, inventory control, and resource allocation. These efforts, coupled with investment in rehabilitating infrastructure, improved access to services for substantial numbers of Iraqis and gave them a stake in stability and maintenance of security. Restoring services is central to citizen satisfaction and to giving legitimacy to government. Public administration matters, and when the gap between capacity and expectations is large, it matters a lot. This gap is a major challenge to the newly elected government. Among the consistent complaints of Iraqi citizens are the shortages in electricity and fuel and the lack of security. 2. Local Government Is a Key Building Block for Effective Governance While national public institutions are certainly important, citizens’ connections to the center are often weak or nonexistent. Building from the bottom up helps to promote stability, and it addresses citizens’ day-to-day needs and priorities (see Woodward 2002). Participatory and responsive local government encourages dialogue, problem solving, and conflict resolution on a manageable scale around issues of common community concern. It enhances the quality of service delivery and contributes to legitimacy. Local government also incubates leaders; as noted, a number of the Iraqi council members that LGP worked with ran successfully for provincial assembly seats. Local government, by creating multiple arenas of contestation for power and influence, can serve to mitigate conflict by avoiding “winner-take-all” situations. Groups that would be unlikely to win nationally can score local wins, helping satisfy their desires and demands, assuming the governance system devolves decision making and resources to subnational levels. Politics in Iraq today point toward a likely state structure made up of relatively autonomous regional entities, loosely connected to each other and

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to the center, with a weak central government that has limited powers. Under this scenario, local structures will emerge as the major arena for the exercise of governance in Iraq. 3. Empowered Citizens Enhance Public Administration Outcomes Beginning in Baghdad, in cooperation with USAID, the Department of State, and the U.S. military, LGP neighborhood “town meetings” enabled citizens to articulate issues needing immediate redress and led subsequently to the formation of neighborhood, subdistrict, district, and city councils. This institution-building effort established a nested system of councils from the neighborhood up to the provincial level that eventually extended throughout Iraq. LGP was not the only entity involved. U.S. and British military forces also helped Iraqis form councils and provided sustained support to LGP throughout all the provinces. More than a year before the first elected Iraqi national assembly, local councils were functioning across the country. Councils conducted needs assessments, participated in joint planning and project design, voiced citizen concerns and demands, and held service departments accountable. Councils contributed to visible service outcomes by developing and overseeing projects for street lighting, garbage collection, cleaning up public parks, and refurbishing local schools and health clinics. Sustaining councils’ contributions both to effective service delivery and to democracy, however, depends upon institutionalization of their legal status and authorities. 4. Public Administration Alone Cannot Solve Political Differences New administrative structures and procedures are institutional “building blocks” for improved governance, but to create a sustainable foundation they need to be embedded within the cultural, historical, attitudinal, and behavioral landscape of the country. LGP helped establish new local building blocks and aided Iraqis in exploiting the new opening of political space at subnational levels through the development of social capital. If experience from other countries holds, social capital formation could help Iraqis to redefine their connections to the state and to each other (see Colletta and Cullen 2000). In multiethnic Iraq, shared understanding of democratic governance, along with trust and conflict resolution skills, will be important contributors to stability. Well-functioning public administration can help foster the emergence of democratic governance, but improved structures and procedures and new skills are not enough. Without political consensus on the structure and role

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of the state, the gains in administrative efficiency that LGP has supported are at risk. In Iraq today, regional autonomy, decentralization, socioethnic power sharing, and the role of Islam remain contested issues that are highly political. Only a political solution can ultimately raise the costs of resorting to violence and offer credible alternatives to address problems in ways that contribute to basic security and societal consensus. Today, Iraq’s prospects for stability and recovery are uncertain at best (see ICG 2006). Conclusion: Limits and Lessons Limits The fourth affirmation presented above deals with the limits of institutionbuilding intervention to reconstitute and reform local governance. I expand on that issue here. The overthrow of Saddam Hussein’s government opened the door to dismantling the old power structures and released heretofore pent-up social forces. The U.S.-led reconstruction, stabilization, and democratization effort, of which LGP is one instrument, struggled with the challenges involved, both those anticipated and the unforeseen and unplanned for (see Dawisha 2004; Diamond 2004; Dobbins et al. 2003; IGC 2003a; Jabar 2004; Rathmell 2005). As I noted in the introduction, perspectives on this nation-building endeavor vary, and some observers have already totted up the “balance sheet” and found the results seriously wanting (e.g., Diamond 2005; Phillips 2005; see also Feldman 2004; Brownlee 2005). While LGP and LGP2 have been recognized as contributing to the creation of the administrative infrastructure that supports effective and responsive local governance (see ICG 2004), the sustainability and ultimate impact of these achievements—including particularly their intended contribution to democratization—depend upon factors largely outside the purview of external actors. These contributions risk being overwhelmed by the fact that many of the conditions necessary to establish stability and build a new governance system are weak or nonexistent. Foremost among them, as many observers have noted, is the lack of basic security and the intensification of violence. As Larry Diamond (2004, 2005) and others have pointed out, it is impossible to create a viable nation unless the state retains a monopoly on legally sanctioned violence (Diamond lays out more of his views in chapter 4). The emergence of ethnoreligious militias is a serious problem. Some of these militias are involved in the insurgency, and others have infiltrated reconstituted police units. They pose a threat to short-term stability and the rule of law, and also undermine longer-term prospects for state reconstruction, democratic or otherwise.

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A second limiting factor is the enduring strength of embedded networks of ethnic, social, and political power relative to the nascent, isolated, and fragile new governance practices promoted by LGP, LGP2, and other USAID projects. The forces contending for central political control versus regional autonomy, capture of economic rents, and ethnic redress are powerful drivers in today’s Iraq. Among these forces is a mix of old and new “entrepreneurs” seeking to take advantage of the current uncertainty and fluidity to position themselves for gain (Brinkerhoff and Brinkerhoff 2002). The concerns expressed by some analysts regarding “a pervasive and conflictual politicization of ethnicity” appear to be justified by current events (Wimmer 2003–04, 113). The fierce debates on federalism in the context of the constitution-drafting process are emblematic of this volatility. New groups of winners and losers emerged in the wake of the January 2006 elections, and the relative political and economic strength and standing of different socioeconomic and ethnic groups continued to change. The aspirations of the dominant Shi’a majority, along with those of the strong Kurdish minority, are the key to whether a new sociopolitical pact emerges, or an extended period of conflict prevails in which displaced Sunnis are marginalized and the insurgents continue their spoiler role (Nakash 2003; Jabar 2004; Dawisha 2005). The 2006 elections gave the Shi’a United Iraqi Alliance and the Kurdish Alliance 181 of the national parliament’s 275 seats. Political actors are dealing with conflicts over the formation of a new government through bargaining and deal making, while extremist elements are employing violence and intimidation. The United States is pushing strongly for a unity government, but it is far from certain whether this outcome is either achievable or sustainable. Iraq’s ability to build a broadly acceptable vision of a future society and polity that can avoid ethnic sectarianism or Islamic fundamentalism is in doubt (Diamond, Plattner, and Brumberg 2003; Carothers and Ottaway 2005). Iraqi society is strongly divided on the country’s future path. A 2006 opinion poll reveals that while 84 percent of Shi’as and 76 percent of Kurds feel that Iraq is going in the right direction, 93 percent of Sunnis consider the country to be going in the wrong direction (PIPA 2006). Other polling data reveal support for democracy but serious divides regarding the role of Islam in politics, the status of women, and relative desires to protect ethnic-sectarian identity versus forging a national identity (Tessler, Moaddel, and Inglehart 2006). As sectarian politics and associated violence gain in intensity, the prospects for national stability and recovery are increasingly uncertain (Benomar 2004; Morrow 2005; ICG 2006). Beyond internal politics and social relations, the interests and interventions of neighboring countries and other international actors are influential factors

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in the future governance system that emerges in Iraq. For example, Iran has provided important support to Shi’a groups and politicians, and is vitally interested in the outcomes of the political process in Iraq, as are its other neighbors. Beyond the immediate neighborhood, Iraq has become a geopolitical lightning rod, drawing Islamic extremists from around the world whose pursuit of violence and terrorism have contributed to the intractable security problems facing the U.S.-led military coalition and its Iraqi partners. Lessons The U.S.-led nation building in Iraq and Afghanistan, and the Bush administration’s democracy-promotion agenda, have added intensity to the ongoing vigorous debate in the foreign policy and international assistance communities on the advisability, feasibility, and results of post-conflict democratic reconstruction efforts (see, for example, Bastian and Luckham 2003; Rondinelli and Montgomery 2005; Rathmell 2005). What lessons can be drawn from the LGP experience for other efforts to support change in governance systems in post-conflict societies? Besides the affirmations discussed above, I offer the following. Strong collaboration with other reconstruction actors facilitates success. LGP’s public services restoration experience confirms a key lesson of other post-conflict capacity-building efforts in regard to the need for strong cooperation and coordination with the military and other donors’ programs (see, for example, Brinkerhoff and Brinkerhoff 2002). In Baghdad, as noted above, LGP worked closely with the U.S. military in setting up councils. In al-Basrah, for example, LGP partnered with British forces in creating local councils and restoring services. The British provided security for LGP’s cash reserves that were held for payment to local contractors, purchase of spare parts, and financing of small grants. The British also provided security information that the team used in planning activities. Early coordination with other reconstruction projects helped LGP to fill knowledge gaps with regard to the status of essential services, key actors, and needs. Collaboration with other groups also helped to leverage LGP resources and to identify and coordinate larger-scale infrastructure repairs and replacements. Build on local capacity and the engagement of local actors in governance reconstruction. LGP, particularly in the early days of the program, relied heavily on the knowledge and skills of the local actors in lieu of conducting full-fledged diagnostic assessments of needs and existing capacity. LGP found that, for example, many local civil servants were well educated and skilled, were motivated and concerned about the need to restore services, and were

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willing to work closely with the LGP team. These governorate-level and local government staffs were knowledgeable about the needs and priorities of the local population, and they knew how to address them. Significant servicedelivery improvements could be achieved once the Iraqi counterparts, most of whom were technically competent, were provided with technical assistance and rapid-response grants to purchase and use spare parts and small tools. Foster accountability and transparency to reduce corruption and build citizen support. In a country with a long history of corruption, government accountability and transparency at the local level are essential to reducing administrative abuse and to building citizen support and willingness to work with the local government officials and local councils. LGP’s introduction of accountability and transparency systems appears to have given credibility to local service-delivery departments, strengthened the legitimacy of local officials, and provided an important function for local councils. It also had the added benefit of giving donors and investors confidence that their investments had been put to good use. These systems were disseminated through LGP2’s technical assistance and training support to municipalities. Build new relationships between citizens and public officials around key service-delivery issues. LGP aimed to change the way that citizens interacted with local public officials to increase responsiveness, effectiveness, and citizen oversight. The creation of local councils provided an institutional mechanism for citizen engagement. Councils, as described above, were engaged in services restoration and provision in many ways. Councils and community groups were, for example, asked to conduct needs assessments and participate in planning, to nominate workers, to participate in service-delivery monitoring, and to secure reconstructed infrastructure. Pay attention to building legitimacy when introducing new governance structures. When introducing new governance structures, outsiders need to pay close attention to building legitimacy in order to assure their effectiveness and sustainability. Local representative bodies, such as councils, put in place as a result of donor interventions risk rejection, as foreign-dominated entities, and failure to fulfill their intended purposes. The CPA reconstruction effort lost an opportunity to reinforce council legitimacy by failing to institutionalize resource flows to subnational councils. Since 2001, procedures for awarding reconstruction contracts retain tight control through a State Department committee, where elected Iraqi provincial council members sit on the sidelines, thus perpetuating this legitimacy problem. The insurgency’s targeting of council members for assassination added to the difficulty in institutionalizing councils. Excessively ambitious notions of governance transformation conflict with the time frame for fundamental reform. LGP, as one element of the Bush

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administration’s bold plan for reconstructing Iraq, was subject to a demand for rapid ramp-up of field activities and achievement of targets and results. These demands and the pressure to supply “good news” to USAID that could be used justify the war and the post-conflict reconstruction program emphasized blueprint plans that generated “countable” results within predetermined tim frames (e.g., numbers of citizens benefiting from restored services, councils formed, small grants given). Shortened time horizons for change increase the risk of relying on existing power structures (Iraq’s shadow state) and on weak newly created institutions. These lay an insufficient foundation for potentially more fundamental governance reform and changed state-society relations. As U.S. public opinion increasingly questions the financial and human costs of the postwar reconstruction, the prospects for long-term support to reform are dimming, making more likely a governance outcome that resembles less and less the idealized version of Middle East democracy put forward by the Bush administration. Governance is fundamentally a sociopolitical project, to which external technical expertise can contribute largely at the margins. External nation-building efforts, as recent experience in Iraq and the historical record elsewhere demonstrate, should point donors in the direction of modest expectations and limited impacts. Plans that recognize these limitations from the outset are more likely to yield positive and potentially sustainable results. In terms of what outsiders can do to promote more democratic state-society relations, LGP’s experience suggests the importance of identifying and building on local leadership. Looking Forward The period after September 11 has been a turbulent time for the U.S. foreign policy community. The Bush administration employed a variety of justifications for U.S. intervention in Iraq, Afghanistan, and other failed or fragile states to promote democracy. The instrumental rationale is that U.S. security and the prospects of winning the global war on terrorism will be enhanced by moving nations from authoritarianism to democracy. The economic rationale is that along with democracy come free markets, foreign investment capital, greater links to the global economy, and prosperity. The rationale based on principle is that all peoples have a right to live in the kind of free and open societies that democratic governance creates and sustains. However, combining these three rationales “muddied the waters” for democracy promotion and associated governance reform efforts such as LGP. From the perspective of the countries that are the targets of such efforts, promoting democratic governance becomes inextricably tangled with U.S. political and

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military objectives. These policy connections are becoming institutionalized as U.S. actors that previously operated relatively autonomously—the State Department, USAID, and the Department of Defense—develop bureaucratic, operational, and procedural linkages. Lessons and implications of this fusion began to be explored in 2006. For example, Carothers (2006) examines how the gap between the U.S. democracy rhetoric and the country’s practice has led to resistance to external democracy support overseas and a loss of legitimacy for democracy promotion. Fukuyama (2006) reviews the evolution of the Bush administration’s foreign policy agenda and remarks on the possibility of a backlash among the U.S. public, leading to renewed isolationism and reduced support for helping countries democratize. Applying the lessons learned from LGP’s experience with building local governance systems and structures in Iraq to future international development assistance and reconstruction interventions will be strongly influenced by the evolving U.S. foreign policy that emerges from policy debates, programmatic reassessments, and bureaucratic and political realignments. Note 1. The author was a member of a project advisory group that provided periodic policy and technical advice to LGP, and he made short-term visits to Iraq in 2003 and 2004. The views expressed in this essay are solely those of the author and should not be attributed to USAID or to RTI International. The chapter draws on Brinkerhoff and Mayfield (2005) and on the author’s presentation for the panel on “Insurgency, Counterinsurgency and Nation-Building in Iraq” at the annual conference of the American Political Science Association in September 2005.

References Bastian, S., and R. Luckham, eds. 2003. Can Democracy Be Designed? The Politics of Institutional Choice in Conflict-Torn Societies. London: Zed Books. Benomar, J. 2004. “Constitution-Making after Conflict: Lessons for Iraq.” Journal of Democracy 15 (2): 81–95. Brinkerhoff, D.W., and J.M. Brinkerhoff. 2002. “Governance Reforms and Failed States.” International Review of Administrative Sciences 68 (4): 511–31. Brinkerhoff, D.W., and J. Mayfield. 2005. “Democratic Governance in Iraq? Progress and Peril in Reforming State-Society Relations.” Public Administration and Development 25 (1): 59–75. Brownlee, J. 2005. “Imperial Designs, Empirical Dilemmas: Why Foreign-Led State Building Fails.” Working Paper No. 40 (June). Stanford, CA: Stanford University, Center on Democracy, Development, and the Rule of Law. Buss, T.F., S. Redburn, and K. Guo, eds. 2006. Modernizing Democracy: Innovations in Citizen Participation. Armonk, NY: M.E. Sharpe. Carothers, T. 1999. Aiding Democracy Abroad: The Learning Curve. Washington, DC: Carnegie Endowment for International Peace.

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———. 2006. “The Backlash Against Democracy Promotion.” Foreign Affairs 85 (2): 55–69. Carothers, T., and M. Ottaway, eds. 2005. Uncharted Journey: Promoting Democracy in the Middle East. Washington, DC: Carnegie Endowment for International Peace. Chandrasekaran, R. 2004. “Death Stalks an Experiment in Democracy.” Washington Post, June 22. Colletta, N.J., and M.L. Cullen. 2000. Violent Conflict and the Transformation of Social Capital: Lessons from Cambodia, Rwanda, Guatemala, and Somalia. Washington, DC: World Bank. Dawisha, A. 2004. “Iraq: Setbacks, Advances, Prospects.” Journal of Democracy 15 (1): 5–20. ———. 2005. “Democratic Institutions and Performance.” Journal of Democracy 16 (3): 35–49. Diamond, L. 2004. “What Went Wrong in Iraq.” Foreign Affairs 83 (5): 34–56. ———. 2005. Squandered Victory: The American Occupation and the Bungled Effort to Bring Democracy to Iraq. New York: Henry Holt and Company, Times Books. Diamond, L., M.F. Plattner, and D. Brumberg, eds. 2003. Islam and Democracy in the Middle East. Baltimore: Johns Hopkins University Press. Dobbins, J., J.G. McGinn, K. Crane, S.G. Jones, R. Lal, A. Rathmell, R. Swanger, and A. Timilsina. 2003. America’s Role in Nation-Building: From Germany to Iraq. Santa Monica, CA: Rand Corporation. Dodge, T. 2003. Inventing Iraq: The Failure of Nation Building and a History Denied. New York: Columbia University Press. Feldman, N. 2004. What We Owe Iraq: War and the Ethics of Nation Building. Princeton, NJ: Princeton University Press. Fukuyama, F. 2006. “After Neoconservatism.” New York Times Magazine, February 19, 62–67. International Crisis Group (ICG). 2003a. War in Iraq: Political Challenges after the Conflict. Middle East Report No. 11 (March 25). Brussels, Belgium: International Crisis Group. ———. 2003b. Iraq’s Constitutional Challenge. Middle East Report No. 19 (November 13). Brussels, Belgium: International Crisis Group. ———. 2004. Iraq: Can Local Governance Save Central Government? Middle East Report No. 33 (October 27). Brussels, Belgium: International Crisis Group. ———. 2006. The Next Iraqi War? Sectarianism and Civil Conflict. Middle East Report No. 52 (February 27). Brussels, Belgium: International Crisis Group. Jabar, F.A. 2004. Postconflict Iraq: A Race for Stability, Reconstruction, and Legitimacy. Special Report No. 120 (May). Washington, DC: U.S. Institute of Peace. Morrow, J. 2005. Iraq’s Constitutional Process II: An Opportunity Lost. Special Report No. 155 (November). Washington, DC: U.S. Institute of Peace. Nakash, Y. 2003. “The Shi’ites and the Future of Iraq.” Foreign Affairs 82 (4): 17–26. Phillips, D.L. 2005. Losing Iraq: Inside the Postwar Reconstruction Fiasco. Boulder, CO: Westview Press. Program on International Policy Attitudes (PIPA). 2006. “What the Iraqi Public Wants.” Center for International and Security Studies, University of Maryland (January 31). Available at www.worldpublicopinion.com/pipa/pdf/jan06/Iraq_jan06_rpt.pdf (accessed February 15, 2006). Rathmell, A. 2005. “Planning Post-Conflict Reconstruction in Iraq?” International Affairs 81 (5): 1013–38. Rondinelli, D.A., and J.D. Montgomery. 2005. “Regime Change and Nation Building: Can Donors Restore Governance in Post-Conflict States?” Public Administration and Development 25 (1): 15–25.

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Tessler, M., M. Moaddel, and R. Inglehart. 2006. “What Do Iraqis Want?” Journal of Democracy 17 (1): 38–51. United Nations and World Bank. 2003. Joint Iraq Needs Assessment. New York and Washington, DC: UN and World Bank. Uphoff, N. 2000. “Understanding Social Capital: Learning from the Analysis and Experience of Participation.” In Social Capital: A Multifaceted Perspective, ed. Partha Dasgupta and Ismail Serageldin. Washington, DC: The World Bank. U.S. General Accounting Office (USGAO). 2004. Rebuilding Iraq: Resource, Security, Governance, Essential Services, and Oversight Issues. Report to Congressional Committees. GAO-04-902R (June). Washington, DC: USGAO. Ward, C.J. 2005. The Coalition Provisional Authority’s Experience with Governance in Iraq. Special Report No. 139 (May). Washington, DC: U.S. Institute of Peace. Wimmer, A. 2003–2004. “Democracy and Ethno-Religious Conflict in Iraq.” Survival 45 (4): 111–34. Woodward, S.L. 2002. Local Governance Approach to Social Reintegration and Economic Recovery in Post-Conflict Countries. New York: UN Institute of Public Administration. Woolcock, M., and D. Narayan. 2000. “Social Capital: Implications for Development Theory, Research and Policy.” World Bank Observer 15 (2) (August): 10–13. Yordan, C.L. 2004. “Failing to Meet Expectations in Iraq: A Review of the Original U.S. Post-War Strategy.” Middle East Review of International Affairs 8 (1). Available at http://meria.idc.ac.il/journal/2004/issue1/jv8n1a5.html (accessed July 17, 2006).

7 Foreign Aid and South Asia The Case of Pakistan Robert LaPorte Jr.

In his autobiography, Mohammad Ayub Khan, president of Pakistan, wrote (1967, 183): [Foreign] Aid was used as an instrument of the cold war, but in view of the new situation [i.e., U.S. and Soviet acceptance of coexistence], it may become more and more difficult for the smaller countries to get large-scale assistance. In fact, I doubt very much whether it will remain aid at all; it will probably assume the form of purely commercial transactions. The industrialized countries have discovered that territorial imperialism is no longer fashionable nor easy to maintain. They have tremendous accumulated economic power which they find it more advantageous to use.

In his description of foreign aid, Ayub Khan stressed two major characteristics of bilateral foreign assistance, (1) its political nature and (2) its strong tie to the foreign policies of the assistance-providing countries. Ayub Khan was an expert on securing foreign aid, especially from the United States. Pakistan was and continues to be the archetypical recipient of foreign assistance. How Pakistan developed since 1955 influenced not only its neighbors in the South Asia region but its principal foreign assistance sponsor, the United States, as well. This chapter will focus primarily on the foreign aid that Pakistan has received from the United States. In exploring assistance to Pakistan, we will examine (1) the setting for aid—the country itself—followed by (2) aid over time. The ties between aid and the foreign and domestic policies of both the United States and Pakistan, the political dynamics within Pakistan and the United States vis-à-vis aid, other sources of aid from international and other bilateral agencies, foreign aid from foreign nongovernmental organizations (NGOs), and aid and democracy and governance in the Pakistani context will be examined. A fundamental 129

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question regarding aid is what it has done for (and to) Pakistan. This question will also be explored in the following pages. Finally, the future of foreign assistance to Pakistan will be discussed and serve as our conclusion. The Setting Pakistan is classified as a Low Income Country (LIC) by the World Bank. An LIC has a gross national income per capita of $755 or less. The percentage of the population below the national poverty line is 34. Life expectancy at birth is estimated at sixty-three years. The under-five-years infant mortality rate is 126 per 1,000. The adult literacy rate (people fifteen years and above) is 55 percent (the rate for women is lower than 55 percent). The major factor contributing to Pakistan’s slow social and economic progress over the past five decades has been population growth. According to the 1941 census (the last census conducted before independence in August 1947), the total population of the provinces of West Pakistan (West Punjab, North-West Frontier Province, Sindh, and Baluchistan) was 26.7 million. The combined territories of these provinces constitute the present state of Pakistan. East Bengal and the Sylhet district, the two areas that became East Pakistan in 1955 and then Bangladesh in 1971, had a combined population of 41.9 million. Both East and West Pakistan were the areas that became the Islamic Republic of Pakistan on August 14, 1947, with a total population of 68.6 million. The census taken in Pakistan in 2001 revealed a population of 141 million, and a July 2005 estimate by the CIA published in its Factbook put Pakistan’s population at over 162 million. During the postindependence period, Pakistan’s population growth rate often exceeded 3 percent per annum. Pakistan’s average annual growth rate from 1990 to 2000 is estimated at 2.5 percent. In South Asia, Pakistan’s population growth rate is only exceeded by Bhutan (at 2.9 percent). When Pakistan’s population growth rate is compared to Bangladesh (at 1.6 percent), India (at 1.8 percent), Nepal (at 2.4 percent), and Sri Lanka (at 1.3 percent), it becomes the undisputed leader in South Asia in population growth. Pakistan is, after Indonesia, the second-largest Muslim country in population, but its population has outpaced social and economic gains despite the efforts of Pakistan and the international community. Foreign Assistance Over Time The Military-Economic Assistance Nexus: 1947 to 1957 With Independence in 1947, the territory, population, human, and material resources of the British Indian Empire were divided between India and

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Pakistan. Territorially, Pakistan became a two-winged nation with the western provinces of Sindh, North-West Frontier, West Punjab (the province of Punjab was divided between India and Pakistan), and the Baluchistan States Union forming the western wing and East Bengal (the province of Bengal was also divided) forming the eastern wing. There were also the territories of the princely states within Pakistan’s borders. Pakistan negotiated with native rulers regarding their inclusion into the new state. Populations also were divided. One of the most massive transfers of population occurred during the spring and summer of 1947 when millions of Muslims living in what is now India moved to the new state of Pakistan and millions of Hindus and Sikhs moved east to the new Republic of India. The first aid that both received was for refugee relief. The division of material resources was based on population, but Pakistan maintained that it did not receive its fair share. Regarding the human resources of the empire, British Indian Army units and their armaments were divided. The civil service that ran the empire was divided, with officers given the choice of opting for either country’s new civil service. The division of human resources was not entirely based on religion. As a result, a substantial population of Muslims opted for India while smaller pockets of Hindus and Sikhs (in East Bengal, Sindh, and Baluchistan) chose to remain in the new state. Gaps in government human resources were met by contracting for the services of British military and civil service officers. For example, the first commander in chief of the Pakistan Army was a retired British general. Even the first head of state of India, as governor-general, was Lord Louis Mountbatten, who had served as the last viceroy of India. In the late 1940s, Pakistan faced critical issues, domestic and foreign. One immediate issue facing Pakistan was refugee relief and resettlement. At the same time that leaders were trying to deal with this problem, they were trying to establish a national government. Out of 540 Indians in the Civil Service (ICS), only 82 opted for Pakistan. Karachi, the new capital of independent Pakistan, saw government officers using packing crates for desks because there was not enough office furniture to go around. Policing the eastern border with India was nearly impossible because there were not enough military units to go around. The new Pakistani leadership felt under siege and established internal control while defending its borders. In foreign affairs, the Kashmir conflict began with the independence of both countries because in drawing the borders through the northeastern area of Pakistan (the northwestern area of India), Great Britain permitted India to gain a substantial amount of Kashmir. The maharajah of Jammu and Kashmir, a Hindu, had no other feasible alternative than to opt for India even though a majority of Kashmir’s population was and is Muslim.

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The late 1940s saw the assistance agencies within the United Nations (UN) system either still establishing themselves or focusing upon European recovery. The principal government1 provider of foreign aid was the United States. Harry S. Truman’s 1949 inaugural address contained the Point Four pledge of economic and technical assistance to Asia and Africa as they emerged from European colonialism (chapter 12 reviews this and other milestones in U.S. aid). But it was not until the 1950s that Pakistan emerged as a significant recipient of assistance. Although the U.S. government earlier had provided $8 million in grants and credits to Pakistan, the first substantial request for economic aid from the United States was to help deal with a food shortage in 1953. The following year, Pakistan signed the Southeast Asia Collective Defense Treaty and in 1955 it joined the Baghdad Pact (later to be known as the Central Treaty Organization, or CENTO). Both organizations were sponsored by the United States and were part of an attempt to contain the Soviet Union and the People’s Republic of China. Military assistance was part of the arrangement. By the mid-1950s, U.S. economic aid and technical assistance to Pakistan were wedded to U.S. military assistance and U.S. foreign policy interests. Interestingly, the United States did not exert as much influence over Pakistan as it might have, given the amount of military assistance it provided to Pakistan. One U.S. analyst maintained that the real beneficiary of U.S. military assistance was General Mohammad Ayub Khan, whose position as commander in chief of the army and minister of defense during the 1950s was strengthened because he demonstrated that he “brought home the bacon” (Hammond 1969). The military became a secure and autonomous power base for Ayub Khan. His takeover of the government in 1958 was related to how military assistance began and was continued. The 1950s saw aid in Pakistan being used for nation building and the expansion of basic services. A major task confronting the newly formed government of Pakistan in the late 1940s was reorientation of the national economy. Railways in western Pakistan (there were few rails in East Bengal) had to reorient their services from west-east to north-south. A thousand miles of hostile territory separated the western and eastern wings of Pakistan. A port had to be developed in East Bengal at Chittagong. Given the paucity of the private sector in 1947, if the people of Pakistan were to receive basic goods and services, then government had to play a major role. Foreign advisers encouraged five-year planning and the development of a sizable public enterprise sector. A driving force behind government involvement in the economy was Ghulam Ishaq Khan, who served as federal secretary (the highest civil servant in a federal government division) in all the major federal divisions (Finance, Defense, etc.). As chairman of the West Pakistan

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Water and Power Development Authority (WAPDA) in the late 1950s and early 1960s, he gave speeches regarding the efficacy of public enterprises in economies: The difference between a public enterprise [i.e., WAPDA] and a [government] department lies in their respective attitudes towards . . . rules and regulations. In a government department . . . conformity with the rules . . . defines accountability [and is] an end in itself . . . while in a corporation [read public enterprise], where accountability extends to achievement, it is the end result that matters, the rule being treated only as a means to that end. . . . A department does not exercise the same degree of control over the factors that contribute to results as a corporation does.2

In the 1970s, Prime Minister Zulfikar Ali Bhutto nationalized all the domestic banks, domestically owned insurance companies, and a good portion of the manufacturing sector, turning them into public enterprises. By the mid-1980s, virtually every sector of the economy saw public enterprises either competing with private enterprise or completely dominating the sector. Although the British had created public enterprises in what is now Pakistan, the expansion of public enterprise can be traced to the 1950s and the encouragement of foreign advisers. The Decade of Development, 1958 to 1968 With Ayub Khan’s coup d’état in 1958, Pakistan was already on an internationally financed development course, receiving substantial aid from the United States. It already had a national planning commission and planning departments in Punjab and Sindh. However, socioeconomic planning did not have the priority or importance that development economists felt it should, given the lack of domestic resources devoted to development and the need to coordinate foreign aid with domestic resources for development. Ayub Khan boosted the status of planning at the national level by making himself the chairman of the planning commission. Ayub Khan had an agenda and he had willing domestic and international partners to take advantage of the development climate he promoted. Besides foreign assistance, Ayub Khan had the active cooperation of the bureaucracy in governing the country. Although he came to power through the support of the armed forces, the military did not assist in ruling the country but returned to the barracks shortly after the 1958 coup. The governance of the nation, including its socioeconomic development, was in the hands of the civil service. Ayub Khan often commented that Pakistanis were not ready for

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democracy, and the establishment of his Basic Democracy Scheme, complete with indirect elections, was controlled by the bureaucracy from the subdistrict, district, provincial, and national levels. On the economic side, Ayub Khan sought to strengthen the private sector. Government incentives were offered to private entrepreneurs to engage in critical sectors of the economy such as finance and manufacturing (Papanek 1967; Brecher and Abbas 1972; White 1974). The planning commission was assisted by foreign advisers provided through aid. Agricultural development with an international dimension was also an important part of the second decade of independence. In 1960, India and Pakistan signed the Indus Waters Treaty, which divided the water resources of the Indus River system between both countries. Although the World Bank was the principal international agency involved in bringing both parties to the table, foreign aid from the United States and Europe was instrumental in implementing provisions of the treaty. Government human resources development was also prioritized during Ayub’s Decade of Development, through civil service training. Sponsors included not only USAID but also the Ford Foundation. Development of the training institution, the Pakistan Administrative Staff College (PASC), was funded by the Ford Foundation. The National Institutes of Public Administration in Lahore and Karachi (NIPA, Lahore, and NIPA, Karachi, respectively), the Pakistan Academy for Rural Development (Peshawar), and the Civil Services Academy were funded in part by USAID. These efforts began in the 1950s and continued into the 1960s. In the 1980s and early 1990s, USAID once again came to the aid of these training institutions, including the PASC, through its Pakistan Development Support Project. Another area supported by aid in the 1950s and throughout the 1960s was human resource development overseas. Besides supporting civil service training in-country, aid also permitted thousands of Pakistanis to attend colleges and universities in the United States for degree work. U.S. private as well as public universities were the beneficiaries of U.S.-sponsored scholarships offered to Pakistanis. U.S. universities also became involved in U.S.-funded technical assistance. One example was the long tenure in the country of Harvard’s Development Advisory Service, working with the Pakistan Planning Commission (chapter 13 relates Michigan State University’s experiences in Vietnam and Pakistan). From 1958 to 1965, while Pakistan was a major U.S. aid recipient, it also continued to receive military assistance. But the aid relationship between Pakistan and the United States was not immune from South Asian regional conflict. In September 1965, war broke out between India and Pakistan. This was the second war between them, the first having taken place in 1948. As in 1948, the stimulus for the 1965 war was Kashmir. It was a short war that

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lasted less than a month. However, upon the outbreak of hostilities, foreign aid both economic and military from the United States to both countries was suspended. Given the close aid relationship that Pakistan enjoyed with the United States, the largest loser in this action by the Johnson administration was Pakistan. It was not until the Nixon administration took office in 1969 that suspended aid was reinstated. The Ayub Khan period ended with his forced resignation on March 25, 1969. The Decade of Development ended as well. Although criticism of “biased development” in the favor of West Pakistan (in particular, the Punjab) had already surfaced, by Ayub Khan’s resignation the leadership of East Pakistan was openly critical of Punjabi dominance of the federation. In the military, in the civil service, and in the private sector, Punjabis tended to dominate. Politically, both the 1956 and Ayub Khan’s 1962 constitutions disadvantaged Bengalis. Economically, Bengalis made the case that it was East Pakistani jute that financed West Pakistan’s development. Further, looking at the personnel assignments in Pakistan of USAID and its predecessor organizations by geographical location, an overwhelming number of USAID officials were posted in West Pakistan, 2,015, while only 306 were assigned to East Pakistan over the 1948–71 period. Foreign aid in terms of dollars would also be biased toward West Pakistan. Interestingly enough, the so-called backward areas of West Pakistan province (the present provinces of North-West Frontier and Baluchistan) did not receive aid until the 1980s, when USAID became the first donor in both provinces. By 1971, the U.S. government had provided over $4.1 billion in grants and credits to Pakistan. But this assistance had not helped to stave off the second partition of the Indian subcontinent (or the third Indo-Pakistani War). By December 1971, Pakistan was no longer a federal state that included the territory and population of what is now the Democratic Socialist Republic of Bangladesh. The civil war that erupted in March 1971 lasted almost nine months. Although foreign assistance continued to flow into Pakistan after the 1971 war, it was no longer the model for development that Western development economists had proclaimed in the 1960s. Islamic Socialism, 1969 to 1979 USAID describes its activities in Pakistan during the Zulfikar Ali Bhutto period (1971–77): During the 1970s, the United States turned its attention back to agriculture. In addition to helping it increase its own production of fertilizer, U.S. assistance helped Pakistan import fertilizer and improve its water and irrigation

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systems on farms. These systems were replicated throughout Pakistan and by other countries and donors. . . . In the same period, the U.S. also supported nutrition research, malaria control, population planning, and health care for rural areas.3

USAID’s approach was to provide inputs into these areas as opposed to placing a large number of expatriate advisers in country as was the case in the 1960s. Unlike President Mohammad Ayub Khan, Prime Minister Zulfikar Ali Bhutto was not a leader that many Americans admired.4 Although General Yahya Khan as president of Pakistan (1969–71) abolished Ayub Khan’s 1962 constitution and the entire political structure (the so-called Basic Democracy scheme) that Ayub Khan put into place, he did not replace either the constitution or the political structure. Bhutto did both. Bhutto made changes in government that may have inadvertently sidetracked economic development. Besides reducing the autonomy of the military, in his quest to eliminate potential opposition Bhutto also reduced the autonomy of the civil service and purged several thousand civil service officers. This had a dampening effect on bureaucratic performance and sent the message that if you disagreed with the prime minister or his advisers, your government employment might be terminated. Throughout the 1960s, part of the training curriculum at the civil service training institutions (from the Pakistan Administrative Staff College that provided training for senior officers to the Civil Service Academy that trained the probationers) was devoted to development (as contrasted to the law-and-order emphasis inherited from the British colonial period). As a result, by the end of the 1960s there were substantial numbers of civil service officers who saw their responsibilities in development terms to foster social and economic development at the subdistrict, district, provincial, and national/federal levels. Although other Pakistani leadership had introduced political elements into the governance and development of the country (after a fast and effective start, Ayub Khan’s Rural Works Programme was politicized, dispensing patronage rather than providing employment in depressed rural areas), development programs during the Bhutto period suffered from chronic politicization. If the development program did not benefit the prime minister, the People’s Party of Pakistan (PPP), or a PPP stalwart, then its usefulness soon ceased. Civil servants who disagreed were soon discharged from duty. Bhutto’s much-publicized integrated rural development program never really reached beyond the borders of the North-West Frontier Province (NWFP), where it had some limited success. This program also suffered from lack of funding, revealing the inability of the Bhutto government to deliver on its promises to the economically depressed rural areas.

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By the July 5, 1977, coup d’état, Bhutto’s political promise of Islamic Socialism had become an oxymoron. Bhutto’s 1970 election slogan of “bread, shelter, and clothing” for all had not materialized. His promise to alter the power structure in Pakistan fell to naught when he began to enlist the support of the zamindari class in the 1977 elections. Although there were some protests when the coup took place, there were very few protests when Bhutto was executed in April 1979. The country seemed ready for a change in government. Islamization and Frontline State Status, 1981 to 1991 When General Mohammad Zia-ul-Haq seized power in July 1977, he promised that elections would be held in ninety days. Ninety days became ninety months. Unlike Ayub Khan, Zia-ul-Haq had no vision for the development of Pakistan, nor a new political system that he wanted to install. He had little interest in finance and economics, and the only direction he gave to Ghulam Ishaq Khan, his minister of finance and development, was not to do anything that would harm the middle class of Pakistan. Zia-ul-Haq also promised Islamization of the nation. His Islamization program included a series of government actions designed to neutralize the influence of the Islamic fundamentalists, and particularly the Jamaat-e-Islami (JI) Party. These actions included appointing prominent JI members to cabinet positions, banning the sale and consumption of alcoholic beverages, and introducing “the Islamic penal code, Zakat and Ushr, some interest-free counters in the banks, holiday on Friday instead of Sunday, Shariah courts, an Islamic university, prayer breaks during working hours, the wearing of chadors by female newscasters on television, adding a few more pages on Islam in school text books, holding marathon Islamic conferences, and patronizing popular religious festivals” (Ahmed 1998, 103). With regard to development, Zia-ul-Haq abolished Bhutto’s integrated rural development programs and replaced them with his own Local Bodies Scheme. In essence, each province enacted its own local bodies legislation, with the federal government as well having its own law. District administration (meaning law and order) would remain in the hands of the civil service. At the district level, elected (on a no-party basis) councils composed of politicians would be responsible for development works in the district. Funding would come from both the national and the provincial governments. Districts could raise revenue (within strict guidelines) to fund development efforts. The Local Bodies Scheme went into effect in 1979. The impact of this new scheme was more political than socioeconomic. One chairman of a district council remarked that once provincial and national elections are

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scheduled, very few people will be interested in local government or development unless development will deliver votes for provincial or national assembly candidates. Zia-ul-Haq’s Local Bodies Scheme was abolished when General (later President) Pervez Musharraf installed his Local Government Scheme in August 2001 (LaPorte 2004). Also in April 1979, the United States cut off military and economic assistance to Pakistan when President Jimmy Carter enforced an amendment to the Foreign Assistance Act. This was a period of time when Pakistan’s largest single source of foreign exchange was remittances from Pakistanis working overseas. Aid from the United States contributed to the health of the economy. The cutoff was a blow that generated hard feelings between the Carter administration and the Zia-ul-Haq government. Relations between the two countries reached an all-time low when the U.S. Embassy in Islamabad was attacked, laid siege to, and burned in November 1979. U.S. officials and private citizens and families were evacuated. Standard procedure is that when a foreign facility is attacked, then it is incumbent upon the host country to relieve the beleaguered compound. This did not occur. It took several hours after the embassy was set on fire before the Pakistan Army arrived. However, as was the case with the 1965 Indo-Pakistani War, foreign aid is not immune from regional conflict. This time it was not India going to war with Pakistan over Kashmir. Rather, it was the Soviet Union’s invasion of Afghanistan on December 25, 1979, that caused a reversal in U.S. foreign policy in general and foreign aid policy in particular. President Carter dispatched his national security advisor, Zbigniew K. Brzezinski, to Pakistan to offer military and economic assistance to the Zia-ul-Haq government. The offer was refused. In November 1980, Ronald Reagan was elected president and shortly after taking office he sent a team to Pakistan to negotiate a military-economic assistance package. By 1982, U.S. assistance to Pakistan totaled $5.1 billion. In the fall of 1981, the U.S. signed a five-year (1982–87) military and economic assistance agreement that totaled slightly over $3 billion. Half of the package was military assistance and included forty F-16 fighter aircraft as well as tanks and other armaments, while the other half ($1.62 billion) was economic and technical assistance. Pakistan was once again a partner of the United States and this time was playing a critical role as the main frontline state in a major U.S.-Soviet cold war struggle (Baxter 1985; Burki and Baxter 1991). During the 1980s, about one-fourth of U.S. economic and technical assistance to Pakistan was provided to improve and secure the energy sector. USAID also worked in the agriculture sector. Health and education were still additional areas that saw USAID efforts. One area that was entirely new for foreign donors was the so-called backward provinces, North-West Frontier and Baluchistan. Several USAID projects were designed and implemented in

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the NWFP including the Frontier Regions of the province and the Federally Administered Tribal Agencies (FADAs). In Baluchistan, a major project (the Baluchistan Area Development Project or BALAD) included a bridge over the Ketch River near Turbat, the signing of construction contracts for a 101-kilometer Bela-Awaran road, and design work on the 235-kilometer Awaran-Turbat road. Looking at a map of Baluchistan Province, one could see that if these roads had been completed, Turbat (the divisional seat for the Makran Division) would be linked to Karachi and would help meet the overall goal of both Pakistan and the United States of linking Baluchistan with the rest of Pakistan. Likewise, the projects in the NWFP were designed to link this province with the rest of Pakistan. The regional development projects in NWFP and Baluchistan encountered resistance from some of the maleks and sirdars (i.e., landowners) in both provinces. Development can easily be interpreted as government interference with tribal ways (and tribal power structure) in both the tribal agencies in NWFP and the rural areas of Baluchistan. The British had established the present systems of governance in both provinces back in the nineteenth century, systems based on government bribing tribal chiefs to keep the “tribals” from raiding the settled areas in both provinces. With the Soviet invasion of Afghanistan, Pakistan’s western border areas became threatened. These were areas with the least ties to the rest of the nation. Through development, some progress was being made in economically linking parts of both NWFP and Baluchistan to the mainstream. By the end of the 1980s, 70 percent of the seven Federally Administered Tribal Areas (FATA) tribal agencies were accessible to government and more tribal areas were beneficiaries of development efforts. What the tribal people wanted were roads and access to schools and hospitals. Roads would permit them to reach hospitals. Schools would educate their children and prepare them for employment beyond the subsistence farms and the herding of sheep and goats. Another congressional mandate that USAID had from the beginning of its program in 1981 was poppy suppression. With the Soviet invasion of Afghanistan in 1979 and the Red Army’s expansion into the countryside, opium poppy cultivation and the refinement of poppy into heroin moved from Afghanistan to the western border areas of Pakistan. Six of the seven FATAs border Afghanistan, and the border with Afghanistan was not heavily guarded. By the early 1980s, Pakistan had become a principal exporter of opium and heroin. The one area in which the U.S. government continued to operate after aid to Pakistan was terminated in 1991 was opium poppy suppression. When USAID finally left Pakistan, the Narcotic Affairs Section of the U.S. Embassy in Islamabad continued to fund opium poppy suppression efforts in Bajur and Mohmand Agencies.

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Zia-ul-Haq, along with a number of senior Pakistani Army officers and the U.S. ambassador to Pakistan, were killed in the explosion of a Pakistani air force C-130 on August 17, 1988. This assassination led to the restoration of democracy in Pakistan. Ghulam Ishaq Khan, serving as chairman of the Senate of Pakistan, became acting president and called for national and provincial elections in November 1988. Benazir Bhutto’s Peoples Party of Pakistan (PPP) captured a plurality of seats in the National Assembly while Nawaz Sharif and his Muslim League Party emerged as the largest opposition party at the national level. Ghulam Ishaq Khan asked Benazir to form a government, she did, and shortly afterward Ishaq Khan was elected president. Foreign aid projects continued during the Benazir Bhutto (1988–90 and 1993–96) and Nawaz Sharif (1990–92 and 1996–99) governments; however they operated on reduced funding after the termination of U.S. aid. With the Benazir governments, donors had concerns that money was being siphoned off. Allegations regarding “Mr. 30 Percent,” a derogatory term applied to Benazir’s husband, circulated widely. It seemed he played too great a role in the contractual arrangements Pakistan made with both foreign aid providers and foreign private firms. Both Benazir and Nawaz were charged from time to time with corruption and, in the case of Benazir, nepotism. Of course, it has been unusual in the Pakistani context to have a deposed politician brought up on such charges by those who deposed him/her. The Islamic Bomb and Development, 1992 to 2001 The term Islamic Bomb was first used in connection with Pakistan’s nuclear weapon development program during the Bhutto period in the 1970s. The project was masked in secrecy for several decades, but by the late 1980s Pakistani officials openly indicated that Pakistan had developed a nuclear device.5 As one scholar has noted (Haqqani 2005, 282): Pakistan’s nuclear program became the major irritant in its relationship with the United States after 1989. Until 1989, Pakistan’s nuclear program had evaded sanctions mandated by the U.S. Congress because the Reagan administration had certified annually under the Pressler Amendment to the Foreign Assistance Act of 1961 that Pakistan did not as yet possess a nuclear weapon. Pakistan did, however, assemble a nuclear device in 1987, which meant that the U.S. president could either issue a certification he knew to be incorrect or impose sanctions on Pakistan. The United States warned Pakistan that certification was no longer possible without Pakistan rolling back its nuclear program to an earlier stage. . . . When President

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George H.W. Bush withheld certification, thereby triggering sanctions that suspended aid beginning on October 1, 1990, Islamabad reacted with disbelief, shock and anger.

This was the second termination of U.S. assistance to Pakistan (the first being in April 1979), although there was enough aid in the pipeline that it was not until June 1995 that the USAID mission was closed and the building in Islamabad was turned over to the government of Pakistan. When the last USAID expenditure had been made, the total disbursement of U.S. foreign assistance to Pakistan from 1982 to 1993 was approximately $3.9 billion. But U.S. assistance to Pakistan did not cease totally with the termination of aid on October 1, 1990. In addition to the assistance still in the pipeline and the U.S. Embassy’s funding of opium poppy suppression efforts in NWFP, the United States initiated an Interim Program that operated from 1993 to 2002. Under a humanitarian assistance regulation [P.L. 106-429, Sec. 541(a)], USAID worked with, and through, nongovernmental organizations on basic education and community-based learning, literacy and skills development, reproductive health (including family planning) and maternal and child health care, income-earning activities, strengthening of local NGOs and community organizations, and policy advocacy at the national, provincial, and local levels. USAID also continued to fund two interesting projects in the areas of democracy and governance. One was the Parliamentary Development Project and the other was the Federal Judiciary Academy Project, both administered by the Asia Foundation. Termination of U.S. aid did not affect foreign assistance to Pakistan from other sources. Other countries, such as the People’s Republic of China, actually began to assist Pakistan in a manner larger than it had in the past. China began work on a road that would run east-west approximately the length of its border on the Arabian Sea, a road in which USAID refused to become involved. The Kuwait Fund and assistance from Saudi Arabia continued. International organizations such as the World Bank, the International Development Association, the UN Development Programme, the UN Drug Control Programme, other UN system organizations, the Asian Development Bank, and others continued to provide loans and grants. Major foreign NGOs such the Aga Khan Foundation continued development activities (often with the Canadian International Development Agency). The Aga Khan Foundation started its pioneer development work in medical education with the establishment of the Aga Khan Medical University in Karachi in 1982, expanding its educational development activities in 1993 with the establishment of the Aga Khan Institute for Educational Development and

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providing health services (through Aga Khan Health Services) and educational services (through Aga Khan Education Services). Another area in which the Aga Khan Foundation has been successful is rural development. Started in 1982, the Aga Khan Rural Support Progamme (AKRSP) began working in Gilgit and expanded into Hunza. The first manager of the AKRSP, a former Civil Service of Pakistan officer, built upon his experience in rural development that he gained as director general of the Pakistan Academy for Rural Development in the 1970s. In other development-related areas, the Aga Khan Foundation established the Aga Khan Fund for Economic Development and the Aga Khan Agency for Microfinance (of which the First Micro-Finance Bank of Pakistan is a part). Frontline State Status Again: Post–September 11, 2001 September 11, 2001, was a critical point not only in world history but also in U.S.-Pakistan relations. USAID describes it as the “start of a new program 2002–2006.” The creator of this new program was President George W. Bush when he “restored U.S. economic and military aid for Pakistan and announced a five-year bilateral aid package of $3 billion. Pakistan’s outstanding debt to the United States and other Western nations was also forgiven or restructured. The new U.S.-Pakistan relationship and renewed U.S. aid commitments brought back memories of the favored treatment given to the Zia-ul-Haq regime during the Afghan jihad” (Haqqani 2005, 262). What did Pakistan give up to secure these benefits? According to Haqqani: “The immediate price [President Pervez] Musharraf paid to qualify for U.S. support in September 2001 was to end Pakistan’s support for the Taliban regime in Afghanistan and to sign up as a member of the U.S. coalition against terrorism. As time passed, Musharraf was coerced or persuaded by the United States to expand intelligence sharing against jihadi groups linked to Al Qaeda, shut down the infiltration of militants across the Line of Control into Indian-controlled Kashmir, and join a peace process with India” (Haqqani 2005, 261). Was this déjà vu all over again? Not exactly. Unlike Zia-ul-Haq, Musharraf was not in complete control of Pakistan, politically speaking. The 2002 national and provincial elections revealed that the fundamentalist Muttahida Majilis-e-Amal (United Action Committee, a coalition of Islamist parties led by the Jammat-e-Islami Party) emerged as a major opposition force in the National Assembly and captured the provincial assemblies in NWFP and Baluchistan provinces, which proved to be havens for the Taliban and Al Qaeda and sites for terrorist training camps. As a result of the dramatically changed political climate in Pakistan, USAID

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had to work in a very constricted fashion. The USAID Mission to Pakistan was opened in July 2002. Its program focuses on four areas: education, health, governance, and economic growth. USAID’s Democracy and Good Governance program consists of three parts, legislative strengthening ($17.8 million), support to devolution ($17.7 million), and strengthening electoral processes ($15.7 million). The Legislative Strengthening effort seems to be a continuation of a parliamentary development project that the Asia Foundation was contracted to implement. The Strengthened Electoral Processes effort also builds in part on previous efforts by the Asia Foundation, working with Pakistani NGOs to widen the electorate to include more women voters and provide more information to voters. The new USAID program includes the Election Commission Pakistan, political parties, the media, and the civil sector (civil society) in its support and funding efforts. The new area of focus is support to devolution. As was mentioned earlier, Musharraf replaced Zia-ul-Haq’s Local Bodies Scheme with his own new Local Government Scheme. USAID efforts in this area involve institutional strengthening and capacity building at the local level through the development of a “districts that work” program in selected districts. By early 2007, no evaluations had been made public of USAID efforts with regard to its new program era in Pakistan. Social and economic efforts and the accompanying institutional development have been part and parcel of almost every major donor’s program since the 1950s. It is much easier to erect a building than to educate a child, let alone millions of children, and, as in the case of Afghanistan, weapons are not the tools of nation building. Simply withdrawing from the area, as the United States did in the 1990s, is neither possible nor does it solve the problem. The Future When questioned about the role international politics has played on Pakistan’s development, former president of Pakistan Ghulam Ishaq Khan stated in a 1995 interview with the author: Pakistan is not a free agent. It has always been greatly affected by what the developed world wants it to do. This is true for all underdeveloped countries and the developed world has not been consistent in what it wants underdeveloped countries to do. In fact, Pakistan has been forced to do what developed countries want it to do. . . . The inconsistency [in terms of economic strategy dictated by the developed countries] has taken the form of: (1) stress on macro-economics and increasing growth of GNP, then (2) basic needs, and now (3) free markets. There is no such thing as a

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free market. . . . Throughout these inconsistent economic policy mandates from developed countries, nobody has ever stopped to consider the results of policy. For example, what will be the impact [of privatization] on people in terms of prices, inflation, the environment, [and] employment with the sale of [Pakistan’s] public enterprises? These concerns are not considered, we just pursue free market policies.

At the time of that interview, the World Bank was encouraging Pakistan to continue to sell off its public enterprises and permit its private sector to expand in areas of the economy that had been either preempted or nationalized by government. Pakistan was attempting to march to the tune that the World Bank was playing. Pakistan has been very successful in securing foreign assistance. What it has not been able to do is to effectively and productively use the foreign assistance it has received. Corruption has and continues to be a major problem in Pakistan despite efforts on the part of foreign assistance providers and the government of Pakistan from time to time. As long as the environment within which Pakistan finds itself remains hostile to Western nations, Pakistan will continue to receive foreign assistance. Notes 1. Government-to-government assistance (credits and loans for development) were preceded by assistance from nongovernmental organizations such as the Aga Khan Foundation and its predecessor organizations. The Aga Khan had been active in development work prior to 1947 in what is now Pakistan. The present Aga Khan’s grandfather (Aga Khan III) established a network of schools in the Northern Areas in celebration of his Diamond Jubilee. With independence in 1947, the Diamond Jubilee Schools supplemented the efforts of the new Pakistani government, and emphasis was placed on the education of girls. 2. An address delivered at the Pakistan Administrative Staff College, 1962. 3. USAID Mission to Pakistan Web site, “Background Information on the USAID Program in Pakistan.” Available at www.usaid.gov/pk/mission/background/index.htm, 2. (accessed May 9, 2006). 4. This qualitative appraisal of Mr. Bhutto is drawn from interviews that the author conducted with U.S. officials who served in Pakistan during the Bhutto period as well as Americans who worked in Pakistan for nonprofit organizations. Bhutto was educated in the West (University of Oxford and University of California–Berkeley) but surrounded himself with left-leaning advisers and ministers of government. Bhutto’s “Islamic Socialism” was a term that did not sit well with the U.S. government. 5. In June 1988, the author attended a conference on Pakistan sponsored by the International Institute of Strategic Studies (London) and the Quaid-e-Azam University. One of the speakers was President Zia-ul-Haq. One of the Pakistani participants, a former Pakistani ambassador to the United States, stated openly that Pakistan had a nuclear weapon. This did not seem to surprise those in attendance.

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References Ahmed, Mumtaz. 1998. “Revivalism, Islamization, Sectarianism, and Violence in Pakistan.” In Pakistan: 1997, eds. Craig Baxter and Charles H. Kennedy. Boulder, CO: Westview Press. Ayub Khan, Mohammad. 1967. Friends Not Masters: A Political Autobiography. London: Oxford University Press. Baxter, Craig, ed. 1985. Zia’s Pakistan: Politics and Stability in a Frontline State. Boulder, CO: Westview Press. Brecher, Irving, and S.A. Abbas. 1972. Foreign Aid and Industrial Development in Pakistan. London: Cambridge University Press. Burki, Shahid Javed, and Craig Baxter, eds. 1991. Pakistan Under the Military: Eleven Years of Zia-ul-Haq. Boulder, CO: Westview Press. Hammond, Paul V. 1969. Military Aid and Influence in Pakistan: 1954 to 1963. Santa Monica, CA: The Rand Corporation. Haqqani, Husain. 2005. Pakistan: Between Mosque and Military. Washington, DC: Carnegie Endowment for International Peace. LaPorte, Jr., Robert. 2004. “Implementing Devolution: The New Local Government Scheme.” In Pakistan on the Brink: Politics, Economics, and Society, ed. Craig Baxter, 155–70. Lanham, MD: Lexington Books. Papanek, Gustav F. 1967. Pakistan’s Development: Social Goals and Private Incentives. Cambridge, MA: Harvard University Press. White, Lawrence J. 1974. Industrial Concentration and Economic Power in Pakistan. Princeton, NJ: Princeton University Press.

8 Donors, Public-Sector Reform, and Decentralization Democracy and Civil Society in Ghana Louis A. Picard, Robert Groelsema, and Ted Lawrence

State and society in Ghana are in transition toward a more participatory political life, but tensions continue between participation, control, and development strategies. The state is undergoing a shift from centralized to decentralized administrative, fiscal, and political governance. Donors have tried with varying success to facilitate this process by providing advisers at the central level and technical assistance and organizational development at local levels, especially through programs designed to strengthen civil society (see chapter 11 for an overview of aid to sub-Saharan Africa). This chapter explores these questions and offers preliminary answers based on research in Ghana in 2003 and 2004. Our concern is with political power and administrative control in decentralized governance, focusing on the efforts of the U.S. Agency for International Development (USAID). Policy and public-sector reform, supported by the International Monetary Fund (IMF), the World Bank, and bilateral donors, promotes entrepreneurialism while democracy programs often encourage social equity. Although Ghana has had 150 years of experience with decentralized forms of government, much of this history has been highly vertical, undemocratic, and unfriendly to associational life. This legacy could constitute a drag on policy reforms and democratic decentralization rather than serve as a proving ground for more progressive initiatives, and it could conflict with goals of microlevel economic entrepreneurialism as Ghana continues to implement donor-guided development strategies. Critics have suggested that donor support (under structural adjustment) may be biased toward entrepreneurial groups at the expense of social service 146

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organizations. This could impede the development of social and human rights groups, likely increasing inequities in communities. This chapter examines these issues in rural Ghana by examining donor-supported public-sector reform and decentralized governance programs for evidence of patterns of entrepreneurialism, democratic governance, and social equity. Debate about civic groups needs to focus on civil society, government, donors, and political society, and whether civil society is a prerequisite to democratic processes. Do civic groups foster democracy or do they advocate special economic interests? Much foreign aid reaches nongovernmental organizations (NGOs) whose advocacy work is social and economic in nature and not focused on political or human rights. Critics suggest that these special interest groups can gain the potential for exercising an inordinate influence over society (Carothers and Ottaway 2000, 16). Local Governance: The Impact of History The Precolonial and Colonial Legacies Prior to colonial rule, governance in Africa was based on traditional authorities. These authorities played an important, if controversial, role in the Gold Coast, now Ghana. The continuing role of traditional leaders in rural local government has been overlooked. However, because traditional leaders antedate the colonial period, they retain legitimacy for many people. Traditional leadership in Ghana is based on kinship linkages, creating a “totemic genealogy” that unites people over time and space. In precolonial times, the Ashanti developed some degree of departmental organization with lifelong “career” patterns, with descending organizational authorities within the traditional system. Traditional leaders are often most comfortable with centralized authority, accounting for the executive dominance of political systems and personal rule in many African countries after independence. During the colonial period, traditional authorities were transformed by Europeans and contained precolonial and “modern” elements of leadership. As a result, “the weak position of the traditional political system today could be substantially attributed to the introduction of colonial rule” (Boaten 1997, 121). Despite the weakening of traditional authority, it has remained popularly accountable and a focal point of mobilization. The Municipal Ordinance of 1859 created municipalities in the Gold Coast’s coastal towns. Early local governance reforms were introduced in 1924. Urban councils by then were indirectly selected. Rural councils represented traditional leaders and their nominees. Urban councils were partly elected by direct franchise from 1943. The 1943 reforms reduced the number of centrally appointed councilors from

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one-half to one-third, a ratio that continued into the twenty-first century. Outside urban areas, the British introduced indirect rule, a system that functioned until 1951. At the heart of indirect rule was the idea of guided autonomy. Colonial bureaucratic structures date from the nineteenth century, and the proclamations establishing these structures defined the statutory basis for district-level political control through the appointment of British district commissioners and gazetted traditional authorities (native authorities). The goal was to modify traditional authority consistently across the British Empire. Throughout its history, during the colonial and postcolonial eras, Ghana functioned as a centralized state. During the colonial period, the relationship between traditional leaders and colonial officials became increasingly contradictory, leading to role conflict at the district level. “Colonial administration,” according to Martin Staniland, “was in form bureaucratic, but in practice it was personalized, even proprietorial” (Staniland 1975, 46). Although it was centrally controlled, colonial Ghana experienced four separate historical, institutionalized patterns of governance: 1. In the south, the British used a form of direct rule. A small, racially mixed, and significant group of urban dwellers played a major role in civic life. However, traditional leaders were used as government agents. 2. In the central area (Ashanti), a kind of parallel rule occurred with a strong hierarchical monarchy. There was limited colonial interference, and the area developed a reputation for being the political heartland of the country. 3. In the north, there was indirect rule. Colonial administrators introduced administrative, judicial, and financial structures within traditional administrations, and paternal relationships developed between British officials and traditional leaders. 4. After World War I, the British part of German Togoland became a fourth region, TransVolta, and was ruled by an indirect rule formula from the end of World War I. There was little movement of colonial officials among the regions in the colonial period. Both during the colonial period and in the postcolonial era, education, health, infrastructure development, and tax collection were primarily central government concerns. Local treasuries and administrative staff for traditional authorities and district councils came later. Colonial rule in Ghana “sought to politicize [local level] authority structures with District Commissioners working through traditional leaders who became

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the key political intermediaries with access to state revenue” (Mohan 2002, 139). Ultimately, however, “the effectiveness of tribal politics was based upon the district commissioner’s support, a local by-product of which was tension and hostility, to both the district commissioner and the chief” (Apter 1972, 148). As a result, old precolonial institutions were being “deinstitutionalized.” A series of colonial commissions, beginning with the Watson Commission (1948) and the Coussey Committee (1949), introduced more democratic local government and a proto-parliamentary system with an activist public sector. With elected district councils in 1948, central government nominated up to one-third of the councilors to ensure traditional and moderate representation. The Greenwood Commission of 1956 created postcolonial local governance structures. In 1957, the Gold Coast became the first sub-Saharan African country to become independent. From the Gold Coast to Ghana As the Gold Coast approached independence, the issue was whether there was a potential for federal or devolved regional and district structures as demanded by the Ashanti area leadership. Kwame Nkrumah, the first president of Ghana, fearing fragmentation and rival power structures, rejected this demand. Ghana leaders opted for a unitary state with a centralized personnel structure. While the Nkrumah period damaged the state, it retained institutions that were available to reformers a generation later. It enjoyed a highly qualified cadre of senior civil servants and ten years of colonial parliamentary experience. Nkrumah and Ghana took no irrevocable steps. “She [Ghana] has not destroyed either the procedures of democracy embodied in the parliamentary form, although she has not followed the spirit of democratic institution[s]” (Apter 1972, xix). At independence, the Gold Coast had a substantial physical and social infrastructure and a $481 million surplus in foreign reserves. The new state, rich in mineral resources, had a strong economy, good infrastructure, a strong public sector, good schools, a strong educational system, and several excellent hospitals. Yet most Ghanaians were poor and lacked social services. Half a century later, Ghanaians were poorer than they had been in the mid-1950s. Ghana, however, fell victim to mismanagement and corruption after independence, suffering a half century of economic stagnation and decline in growth. For example, Nkrumah imposed draconian taxes on cocoa farmers. During the Nkrumah period, and beyond, many farmers left crops to rot. Others smuggled crops out of the country. By the mid-1960s, Ghana’s foreign reserves were gone and the country could not repay its debt. By the early 1980s, many rural Ghanaians had opted out of the highly controlled but cor-

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rupt and soft state. Between 1957 and 1983, the income of the average Ghana citizen dropped by close to 30 percent. Despite its reputation for high levels of human resource development, Ghana was an economic disaster. Local Governance Nkrumah tried to abolish traditional leadership as part of his “modernization” efforts, but the influence of traditional leaders, often in conflict with central authorities, endured in rural areas. By 1965, Ghana had 282 district councils. The Mills-Odoi Commission proposed in 1967 an integrated system of governance headed by a chief executive appointed by the president with control over a range of functions delivered through local offices of line ministries (the prefect model). Local taxes and fees would be collected by district administration. In 1974, the number of councils was reduced to 65, and between 1974 and 1992 there were several attempts to strengthen local government, with various governments changing the number of councils. Elections were held, although the councils elected had little power. During periods of military rule, local councils were appointed and included military officers. After independence, the role of traditional authorities was part problem and part solution, with the perception that traditional rule and its privileges remained in place. The reality is much less fixed, and rural privilege as an issue had not in 2007 been addressed. Having failed to create devolved local government, Ghana became characterized by a highly centralized political system: one-party rule, weak civilian regimes under multiparty conditions, and multiple military interventions. Flight Lieutenant Jerry Rawlings reestablished military rule in 1982, announcing plans to decentralize government from Accra to the regions, districts, and local communities. This turned out to be only rhetoric. Rawlings declared a Fourth Republic after a referendum, but it was only after 1992 that Ghana began to move toward democratic governance with a new constitution. Parliament passed the Local Government Act and Civil Service Law in 1993. A series of implementation laws followed between 1993 and 2003. Ghana seemed set to try democracy, public-sector reform, and decentralized government in a serious way beginning in 2004. Structural Adjustment, Public-Sector Reform, and the Impact of Donors Foreign aid became part of the problem in the 1970s and early 1980s. Critics of aid prior to 1983 have described it as little more than welfare. Ghana in the early 1990s carried that legacy of waste, and its “urban and rural landscapes

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are littered with the corpses of billions worth of centrally planned investments from the 1970s . . . mistakes at their core were simply investments with someone else’s money condemned to failure because of the top-down decision process” (Nasar 1991, C3). In 1983, under the stewardship of the IMF and the World Bank, Ghana launched economic recovery and policy reforms, and macroeconomic stability, anticorruption, and financial transparency were pursued from 1987 through 1990. The Rawlings government had to shift from left-wing populism to advocating the World Bank’s structural adjustments. Public-sector reform focused on barriers to entrepreneurship, including regulatory problems, especially for small businesses and internal trade. Ghana accepted the principles of subsidiarity, with government functions deconcentrated to the lowest level of the public sector that was able to perform the function. Structural adjustment and policy reform programs brought Ghana 5 percent growth during much of the 1980s, although it slowed after 1992. According to one report, “Ghana and a handful of other African nations no longer tax[ed] their farmers out of producing” (Nasar 1991, C3). At first, Rawlings balanced free market economics with populist and anti-Western rhetoric. Later, with the end of the cold war, Ghana became committed to economic globalization. Ghana received nineteen structural adjustment loans between 1980 and 1994. Ghana no longer taxed commercial cocoa farmers out of production, ending the “black market premium” disincentive, and by 1994 Ghana’s economy had begun to grow faster than the country’s population. Economic and public-sector reforms did not persuade many investors, and private investment, critical to sustainable growth, was slight, leaving the country donor dependent. Structural adjustment policies in Ghana included economic and publicsector reforms, followed by democracy and governance reforms. Creation of democratic institutions was key to the legitimization of policy reforms. It is generally agreed that the country is a fragile national democracy, and at the district level very little democratic decentralization exists, with an “absence of a political process that promotes accountability, responsiveness and representation at [the] local government level.” Donors assumed that “aid given to countries that are well-governed and have adopted market-oriented economic policies may provide a boost to their development” (CBO 1997, xi). However, it is civil society organizations that ensure local interest, and it is active institutionalized life that produces stable governance patterns, participation in public policy, and potential for development. As the millennium approached, there were contradictions in reforms. According to one donor official, “Ghanaian reforms have the schizophrenic personality of a ‘Sybil,’ with greatly reduced import tariffs, but laws against bottling water locally and a completely arbitrary implementation of the reformed tax code” (Shoen 1991, 8).

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The premise of policy and public-sector reform is that there is a need for a civil society that is broadly based, informed, and attentive and that can serve as a watchdog for local government and influence governance. This civil society then would promote entrepreneurship and growth, while at the same time serving as a check on corruption and patronage. Salary incentives also became caught up in the reform process. To promote the development of a middle class, several donors paid salary supplements to their employees. Auditors claimed that incentive payments were widespread among donors, international NGOs, and civil servants. Ghana strengthened central government and rule of law, to reduce black market and institutionalized corruption. By the early 1990s, growth had slowed, inflation was up, and austerity programs faced difficulty as elections approached. Foreign investment had declined. Although stock market gains remained high, capital gains and real production were low. Privatization continued, and by the mid-1990s the country’s gold mines had been privatized and internationalized. Since 2000, Ghana enjoyed modest economic growth although foreign investment was minimal. Throughout the 1990s, Ghana remained a favorite of donors, receiving more assistance than any other African country except Zimbabwe. According to the World Bank, Ghana’s improved economic performance was linked to the country’s structural adjustment and policy reform programs. However, there were critics of foreign aid support for the private sector. By the mid-1990s, according to one journalist, USAID’s money in West Africa was being used to finance a palm oil processing scheme for the village chief using forced labor (Hudock 1995, B1). Elite and popular support for policy reform in Ghana was weak, especially for structural adjustment efforts. While Ghanaians had a strong sense of entrepreneurship, there was broader support for democracy than for market reforms. With two-thirds of Ghanaians supporting democracy, democratic reforms appeared to be the key to legitimizing market reforms. The logic of social capital as a component of economic transformation propelled donors to support the development of civil society groups. However, in some cases “NGOs have tended to set up parallel systems alongside a weak and underfunded local government system” (Mohan 2002, 146). The result has been the weakening of democratically selected institutions in favor of nonrepresentative, economically based, weak, and underfunded local interests. The social capital issue is poignant when those who benefit from donor support are grassroots economic actors. As one critic has pointed out, many activists in NGOs, despite protestations that they are nonpartisan, use NGOs “as vehicles for personal and party political gain” (Mohan 2002, 145). Tensions have developed between economic growth strategies and the promotion of economically based civic groups that demand greater social equity.

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Unfortunately, aid has not always favored countries with good management and policy systems (see especially chapter 4). This was the case during the cold war (see chapter 3 for insights into this period). During the 1990s, aid in Ghana “rose in lockstep with better policies” (Mohan 2002, 151). Despite this commitment, after twenty years of structural adjustment Ghana remained a highly indebted poor country. The Shift to Governance Issues Donor assistance in Ghana took on its modern form during the 1990s, when the focus was on what Browne has dubbed the era of public-sector reform and good governance (Browne 1999, 31). At that time, bilateral donors began democracy and local governance programs. Such work on public-sector reform came late to Ghana. The public-sector reform agenda in Ghana acquired issues central to a coherent anticorruption strategy, including support for the audit agency and a procurement secretariat. One of the critical triggers in the Multi-Donor Budget Support (MDBS) program is focused on public-sector reform, and the government, according to the World Bank, consistently underperformed, failing to meet those targets in 2005. As a result, by 2004 donors explored ways to support the newly created Ministry of Public Sector Reform as a way of combating corruption and engaging in civil service reform. Conditions for good governance came to be defined as “an efficient public service, a well-run legal system and clearly defined and respected property rights” (Browne 1999, 149). An ongoing concern is transparency in national and local government, and demands for stable and democratic political institutions came to the fore in the late 1990s. An incentive for meeting democratic governance conditions was the Heavily Indebted Poor Country (HIPC) program. Donors continued to put pressure on Ghana to devolve responsibility for HIPC funds to local government. To assuage donor concerns, the government set up the Ministry of Public Sector Reform after the 2004 elections and appointed a former international consultant to head it. The ministry in 2006 had only a skeletal staff. Donors were working with the ministry to develop a strategic plan, including a coordinating mechanism for resources to support reforms. Decentralized Governance, Democracy, and Civil Society Democracy and Governance With transitional but free elections in 1992 and 1996 came bloc and ethnic voting and “ethno-regional” political behavior. Nondemocratic behavior

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on the part of governmental officials and the interlinking of state and party institutions constituted a formidable political machine. At the district level, 110 [later 132] district assemblies (DAs) and their presidentially appointed district chief executives supposedly had nothing to do with partisan politics, but they too were tightly fused with political structures. Democracy remains fragile, and the potential for social conflict remains. There is evidence of a democratic deficit in Ghana. A public opinion survey by Afrobarometer discovered that citizens were more likely to consult traditional chiefs, faith-based healers, and other notables than go to local government representatives or public officials, suggesting a legitimacy gap. Ghana is one of the few countries in Africa that provides a modicum of political space for local politics. Local government can contribute to publicsector reform and democratic reconstruction. It can serve as a laboratory for democratic development of fragile states. Functioning local government systems allow for low-intensity political disagreements and for experimentation with alternative types of services. Democratic local governance avoids a winner-take-all syndrome and ensures low-stakes political conflict. It develops democratic political and conflict resolution skills while refocusing political attention from rhetoric, ideology, and ethnic differences to things that matter, such as waste collection, water, and sanitation. Ghana has not entirely escaped the turbulence that has plagued other West African states. There were more than twenty-three different conflicts and close to two thousand deaths in the north between 1990 and 2005. Throughout Ghana, there are hundreds of chieftaincy disputes, some of which date to the colonial period and represent efforts by traditional leaders to preserve and exploit the precolonial structure of authority. Some suggest that traditional authorities have been ignored in the development of postcolonial civil society in Ghana. Ethnic divisions between the Ashanti and the coastal Akan, and particularly conflict over access to economic privileges, accounted for much of the political collapse of postcolonial Ghana. Polarized groups acting in their own interest often are responsible for bad policies. The crux of the issue revolves around perceptions of public administration, governance, and local government. Despite almost twenty years of effort, the public does not have much faith in local governance. There is much resentment of district-level government and the “feeble legitimacy of the (local) state is probably a major reason for the continued importance of chieftaincy in Ghana,” with local administration “perceived to be bureaucratic, unresponsive and self-serving” (Post et al. 2003, 10, 34). The weakness of local governance may threaten gains made by donor-mandated reforms.

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Decentralization There are four components to decentralization: (1) the development of effective local institutions of collective decision making; (2) devolution of authority to local-level political institutions; (3) deconcentration of administrative capacity, and the allocation of finances and the control of personnel, to lower-level administrative organizations; and (4) establishment of and support for viable and democratic local political processes. These components should be seen as complementary in public-sector reform and decentralization. As far back as the 1970s, Ghana focused on districts as the primary unit of local government, using the regions as a top-down mechanism to coordinate regional planning. According to Seth Zanu, this created a single monolithic structure that was assigned full responsibility for governance at the local level. A primary goal of decentralization in Ghana has been to incorporate economic, social, spatial, and environmental issues into the development process at the local level. According to a USAID official, the role of district assemblies has been “to ensure that the benefits of growth are shared equitably and fairly [and] to promote efficiency in resource allocation at both individual and community levels.” A problem with this assumption is that critics see this as a collectivist view of social development, and many macroeconomic planners denigrate the importance of microeconomic activities as “small potatoes.” Throughout the years following independence, there was no agreed-upon definition of decentralization, and no common vision developed of a desirable end state for decentralized government. Between 1966 and 1988, the system of tax collection and service delivery simply stopped. As the then deputy minister of Ministry of Local Government and Rural Development (MLGRD), Nkrabeah Effah-Dartey, put it in 2004, “Until 1988, governance outside of Accra was almost zero.” Since 1988, Ghanaians have debated decentralization. Following elections in 2000, which made opposition leader John A. Kufuor president, Ghanaians began to consolidate their democracy through responsive and decentralized political institutions. Donors increasingly played a major role in this debate. At the district level, a system of miniparliaments, called district assemblies, was created; they in theory have wide-ranging authority over all aspects of government but in fact have actual authority over almost none. At the same time, representation is partly based on appointment rather than elections. Onethird of each council is appointed by the president of the country, as is the chief executive of district assemblies. District assemblies are also required to be nonpartisan. In reality, political parties sponsor local-level candidates for election to the district assemblies as well as candidates for leadership positions.

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Table 8.1 Local Government Structures in Ghana Level of government

Substructures

Region

Number 10

District Metropolitan Municipal Submetropolitan Urban zonal councils Town zonal Councils Area councils Unit committees

138 3 4 13 34 250 826 16,000

Source: Provided by Ghana Ministry of Local Government and Rural Development in 2005.

Under decentralization, district political structures were expected to “coordinate, integrate and act in cooperation with [civil society] organizations in the district” (Ayee 2003, 16). Development programs were intended to be a shared responsibility between government, district assemblies, civil society organizations, the private sector, and communities. There have not been clearly defined separate spheres of responsibility between national and local government. Table 8.1 shows the current structure of local government in Ghana. Most service responsibilities are concurrent, with joint responsibility rather than clear separation. For both public-sector reform and decentralization to work, one must start by separating and defining authority at both levels and only later try to develop a concurrent system of intergovernmental cooperation. The problem, as one observer noted, is that local government in Ghana has been “a blend of devolution and deconcentration, with more emphasis on deconcentration” (Ayee 2003, 64). At issue in Ghana are two forms of decentralization. Politically, advocates of increased authority for district assemblies have promoted devolution of political power to lower-level political entities. Others, in advocating public service reform strategies, call for deconcentration of authority in which administrative responsibility in sectors such as education, health, and agriculture are transferred to district offices and separate service commissions for each area govern human resource skills development. What is required is a balance between the two types of decentralization and a demarcation of the responsibilities of each level of government.

Figure 8.1 DONORS, PUBLIC-SECTOR The Structure of Decentralization in Ghana

Figure 8.1

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The Structure of Decentralization in Ghana Office of the President

National Development Planning Committee

Cabinet

Ministry of Local Government and Rural Development Regional Coordinating Councils Regional Departments Municipal Assembly Thirteen Departments

District Assembly Eleven Departments

Town Councils

Zonal Councils

Urban Councils

Unit Committees

Unit Committees

Unit Committees

Metropolitan Assembly Sixteen Departments Submetropolitan District Assembly

District assemblies in Ghana face four challenges: (1) engaging in economic growth activities; (2) expanding their involvement in increasing the availability of social services, particularly health and education; (3) increasing community participation in decision making and being more receptive to NGOs; and (4) developing better internal implementation skills among assembly administrators. Ratification of the Local Government Service Act at the end of 2003 “provides that as far as practicable, persons in the service of local government shall be subject to the effective control of local authorities.” It creates a similar sectoral responsibility (health, education, agriculture, etc.) for local authorities without clearly defining a division of authority between central and local government. Implementation of the Local Government Act began after the 2004 general elections but remained incomplete in June 2007. In 2004, there were 10 regions headed by regional ministers and 138 districts in Ghana. Ghana is in the final stages of both public-sector reform and decentralization, an effort that includes both a presidential and a legislative process. According to the Ministry of Local Government and Rural Development, the purpose of decentralization is to ensure greater citizen involvement in governance and in rural development activities. At issue, as decentralization evolves, is the extent to which this means a democratic devolution of authority as opposed to an administratively driven deconcentration of authority at the district level. In terms of government reform, the creation of the Local Government Service in 2005, along with the earlier creations of sectoral services (health, education, etc.), will complete the decentralization of most personnel services throughout Ghana and away from Accra.

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The Limits of Decentralized Governance The Ministry of Local Government and Rural Development is described by observers as weak but historically inflexible on devolution, demanding more than can currently be managed. The Ministry of Finance is said to oppose decentralization because it would include the reassignment of fiscal responsibility to the district level, which, the Finance Ministry feels, has weak financial management systems. District authority, as part of the public-sector reform process, has not been clearly defined. It is assumed that district assemblies should have direct responsibility for infrastructure development, the provision of local public services (water, sanitation, and waste removal), the regulation of local-level economic activities, and income generation. Implementation of local government reform has been partial at best. Reform has been constrained by a number of factors, including perceptual differences on the meaning of decentralization, weak intersector cooperation, inadequate technical and managerial capacity, and a lack of capacity among senior administrators to monitor personnel performance and attitudinal problems. To critics, support for decentralization in Ghana has been more vigorous in word than in deed. To those less critical, the decentralization exercise has been incremental and based on the capacity of district authorities to take on new responsibilities. Ghana has told critics that it is concerned that there be adequate qualified personnel in place at all levels of government at the end of the decentralization process. Only then can power and responsibility be shifted. The role of traditional authorities will also need to be clarified. Decentralization, like public-sector reform, requires reforms at both the national level and the district level. One problem often noted with regard to subnational government in Ghana is that there is only limited authority and funding given to district statutory authorities by the national government. As District Chief Executive K.T.K. Agban has put it, “We are not talking about federalism but some form of decentralization. At the moment, local government employees are paid by central government, remain part of the civil service and are seconded, in effect, from central government to the districts.” Public-sector reforms are designed to clarify this problem. What was required was public-sector reform and decentralization that established specific and discrete responsibility for local government and ensured separate statutory authority over certain areas that was not shared between central and local government. There needed to be resolution of the nondemocratic pattern of appointing 30 percent of the district assembly members and of the proscription of party identification at the district level as well as resolving the problem of having an appointed district chief executive (DCE). Administratively, the budget and finance system and the role of

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committees at the district level needed definition and the process of district governance needed greater transparency. Overall, what is needed, according to one donor-sponsored adviser on decentralization, is central government reform of the public sector, not promises of devolution. There have been significant morale problems within district assemblies, according to a number of those interviewed, with contracting-out being a particularly troublesome issue. According to Joseph Ayee, “DA members were not happy with the perceived lack of transparency exhibited by the DCEs (District Chief Executives) as far as the contract procedure was concerned” (Ayee 2003, 64). Many councilors resented the administrative domination of the political process at the local level. Yet many assume that the local tendering system is corrupt and that political cronies gain almost all of the contracts. As Joseph Ayee points out, some of the various objectives of public-sector reform and decentralization can be incompatible (Ayee 2004, 125). From the local perspective, there are far too many unfunded mandates at the district level in Ghana even for a less developed country. DAs only have exclusive authority in the areas of sanitation and waste management. Other delegated, though concurrent, responsibilities include some infrastructure development, regulation of economic activities, and tax collection. An average council may have eleven departments but have only eight to ten professional or technical specialists. There may be only two or three financial managers who still use manual accounting methods. Financially, the aggregated revenue for local government in 1997 was 140.375 billion cedis. In 1996–97, 2.6 percent of GDP went to local government. The major sources of local revenue were central government transfers, 69 percent; local government taxes, 22 percent, and user fees and charges, 9 percent. There is a history of arrears in the payment of district assembly funds by central government in Ghana, in part because of district-level ineffectiveness in the raising of local funds. Demands for local governance are limited because of the absence of capacity to make policy and expenditure decisions at the district level. As a result, assemblies depend on the District Assemblies’ Common Fund as well as on external donor-funded projects and programs and on local people in self-help projects. On the other hand, though districtlevel authority is inadequate, there is room for decision making in district assemblies. Discretionary decisions that are possible are often not taken, and district governments underutilize their existing authority. There are the beginnings of a consolidated fund geared toward creating fiscal capacity at the district level. It needs only to be expanded to create district-controlled program activity. Fiscal and accountancy skills are part of the deficit preventing this from happening. Several issues are essential to the creation of decentralized governance.

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The first involves the creation of the Local Government Service and the operationalization of the secretariat. This will, as one district assembly member, Kwamw Owusu-Bonsu, decentralization secretariat, notes, “dramatically change the district government system. Then, the MLGRD will be able to better control (in support of district government) staff directly assigned to district assemblies.” The creation of local governance systems will have a significant impact on the human resource development needs of Ghana. There is a lack of qualified personnel at the district level. Since 1993, one of the goals of decentralization has been the transfer of skilled staff from sector ministries to local government. However, continued central government control over the local bureaucracy has meant that local policy has continued to be centrally controlled. The impact of public-sector reform efforts here could be very significant. Among the specific local administrative skills needed as it approaches decentralized governance are planning and capital investment skills, budgeting and fiscal management, personnel systems and management, finance and revenue administration, and management coordination. Fiscal decentralization in particular is said to be hampered because of partisan and nepotistic considerations (Bambangi and Seidu 2005). A second issue, related to public-sector reform, relates to deconcentration of responsibilities to several of Ghana’s line ministries and the concern both in the districts and in the MLGRD that there is a reluctance of national- and regional-level officials to accept the authority of district assemblies, DCEs, and district coordination directors (DCDs). Decentralization from a sectoral perspective in reality has focused on administrative deconcentration rather than political devolution. At issue is the nature of relations between local government officials and centrally administered technical services (health, education, agriculture, etc.) and the relations of both to district assembly political leaders. This remains an area of some tension at the district level. Of 365,000 people employed by the government of Ghana, less than 60,000 were civil servants in 2004, a number to be reduced significantly after the creation of the Local Government Service. The extent to which the political responsibility for services and development promotion should be devolved to district assemblies had not yet been resolved as of 2007 and will remain on the agenda during the next five-year presidential term of office. As one close observer of the process, Esther Ofeu-Aboye of the Institute of Local Government Studies, has put it, “The top issue facing decentralization still needs to define the relationship between deconcentrated field staff and devolved District Assemblies.” The MLGRD and the Public Service Commission (as the parent body of the various services) can facilitate in terms of policy guidance and advice as well as in the communication process

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between entities of central government and the Public Service Commission’s constituency-based suborganizations. The third issue relates to the development of composite budgets. A composite budget is an integrated district budget system that synthesizes and harmonizes expenditure and revenue estimates of all the departments of the district assembly. District Assemblies’ Common Fund budgets need to be devolved to district assemblies and reviewed through the committee system of DAs. A first step must include revision of fiscal and tax policy, reorganization of local government accounts, and a system to collect taxes. There is also a major skills development task that the new Local Government Service faces. At the national level, there appears as yet to be little interest in district-level fiscal decentralization. All the central government control mechanisms were still in place at the end of 2004 in Ghana. Nor were most donors interested in these “bureaucratic” issues. While fiscal decentralization to district assemblies was limited, districts did have some funds where there was discretionary authority. The management of these funds would allow the introduction of decentralized budget systems. However, district assemblies had not utilized the power and influence available to them. Influence from the districts to the national government remained weak. The relationship between central and local officials in Ghana remained that of a principal-agent relationship. Decentralization, as one Canadian donor representative advising the MLGRD put it, has problems: “The reform is too supply driven. Ghana governments, including the current one, have decided, at least in theory, that this is a good way to go. So have the donors. However, decentralization, to its critics, may also increase the potential for corruption.” There are also those who see public-sector reform and decentralization as distinct. In reality, they are intertwined. Donors have expressed a concern with government corruption. In 2007, public-sector reform efforts are being designed to address this. There is strong evidence that a significant amount of money has been embezzled by local government officials in Ghana. Institutional reforms to address this problem are needed to increase transparency and accountability, provide strong penalties for corrupt activities, and improve financial incentives for administrators. A number of the Ghanaian academic observers interviewed in 2003 and 2004 were not optimistic about the further institutionalization of decentralization as there was some resistance within the civil service to political and even further administrative decentralization. Centralized revenue collection, intergovernmental grants, and centralized control over promotion, transfer, and training systems also ensured continued national control over district government.

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Ghana, according to the World Bank, does not lack the human capacity to establish decentralized governance (World Bank 2004, 1). A 2004 World Bank team concluded that although there were capable individuals in Ghana’s government, there were serious problems in terms of institutional and organizational capacity in the country and that human, material, and financial resources were not being efficiently used or well managed. World Bank capacity-building efforts had only a minimal impact and needed to be redirected to the local and even the community levels. The World Bank team concluded: “The need to rebuild capacity in the public sector and restore the quality of public services has been recognized for a generation. The decline in the effectiveness of and respect for public service has been dramatic” (World Bank 2004, 3). Little of this capacity filtered down to the district or subdistrict levels. Ultimately, implementation issues are capacity challenged. The skill level in the districts is particularly low. The average district directly employs fewer than 100 people, most of them seconded from central government. There may be as few as twelve to fourteen professionals in a district administration office. Distributed among them are seven or eight old computers, not all of them in working order. Key government departments such as health and education have not relinquished authority over their district-level employees to district assemblies. Financial resources at the district level are very limited. Civil Society and Democratic Governance The Origins of Civil Society in Ghana Primary civil society associations in Ghana have their origins in traditional social groups, including trading networks and revivalist religious cults, some of which date back to the colonial and precolonial periods. A national civil society group, the Centre for Civic Education, appeared in 1971. Since the 1970s, “decentralization in various forms [including the role of civil society groups] has often been identified as a missing link between poverty-reduction and anti-poverty efforts in developing countries” (Nath n.d., 100). This was certainly the case in Ghana. By the early 1980s, most civil society organizations had become disengaged from the state. Many had withdrawn as part of the “exit” option being chosen by increasing numbers of Ghanaians in reaction to economic collapse and political authoritarianism. After that time, local government in Ghana was influenced by the Rawlings government’s political populist philosophy of “power to the people” and promises of bottom-up economic development. Advocates of decentralization argue that development should be bottom-up rather than top-down and local communities should self-direct the development agenda.

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The informal sector grew rapidly in the 1980s, as the economic crisis deepened and drove Ghanaians to subsistence agriculture. Related self-provision activities stimulated a large-scale “exit” from the formal economic sector and from governmental controls. Thousands of primary associations came to dominate associational life, with trading networks coming to dominate in both rural and urban Ghana. Twenty-five years later, many if not most civil society organizations were likely to remain disengaged from the state system for some time. Civil society organizations in the rural areas are important since many Ghanaians continue to place more faith in informal NGO networks than in official government channels. It is important to understand the kind of civil society organizations that exist at the district level in Ghana. They are most often not the democracy, governance, or human rights groups that some might imagine. Instead, they tend to be economic associations (hairdressers, tailors, chop bars, farmers’ associations, etc.), professional associations (Ghana National Association of Teachers, Civil Servants Association, nurses), self-help associations (often similar to farmers’ associations), religious groupings (choir groups, women’s ministries), and a few organizations that represent disadvantaged groups (blind, disabled). These district- and subdistrict-level associations are made up of people with little primary education. It is a sad fact of life in rural Ghana that there are few active grassroots social and human rights organizations compared to economic interest groups in community associations (called civic unions in Ghana), and it is likely at this stage that they cannot develop much influence at the district and subdistrict levels. Aspirations based on models of civil society may suggest that more than one kind of group is represented at the community level and may fail to recognize the reality of what is on the ground in Ghana. The basic reality at the district level and below must be recognized. Most people are exclusively concerned with bettering their economic situation. Linked to this, one must then have realistic expectations of the timescale for building meaningful engagement of these groups given their starting point. There must be recognition of the difficulty of the operating environment. One must have a realistic expectation about group affiliation to civic associations in a realistic timescale for civic engagement and about what it takes to build meaningful relationships with grassroots civil society groups. There is evidence that gender is a major factor in defining grassroots issues in Ghana. There is a clear gender gap in the country. Only about 3 percent of district assembly members are women. According to several surveys, at both local and national levels women see themselves as underempowered. The role of women in governance has been a major unresolved issue. The socially disadvantaged also have little access to political life. Gender groups, the physically handicapped, youth groups, and social development foundations appear to be

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at the beginning stages of institutional development. Critics suggest there is not an adequate social base for the civic unions in the targeted districts. Democracy requires a stable middle-class membership in civil society groups, a situation that in 2007 does not yet exist in Ghana. Some argue accordingly that for civil society to develop, donor technical assistance should focus on existing social and human rights organizations in the larger urban areas. In Ghana, an alternative approach to civil society practiced by at least one European donor (Denmark) focused on more organized district- and regional-level civic organizations (“meso-level” organizations) that have clear goals, have some capacity, and can act as intermediate units to support grassroots advocacy. An option pursued by USAID was to focus on grassroots organizations in rural district capitals and the surrounding countryside. The World Bank, focused on economic and social issues, emphasized efficiency in service delivery and fiscal performance. The overall emphasis of World Bank–sponsored decentralization was deconcentrated in nature. As Eriksen et al. point out, “The fact that the [World] Bank fears that political decentralization could reduce efficiency clearly makes it difficult for the [Ghana] government to push it too hard. Second, there is an ever lingering fear of political fragmentation, ethnic mobilization and even secessionism” (in Nath n.d., 106). Donors, Local Governance, and Civil Society Donors have supported Ghana, at least in part, because there was a strong potential for civil society organizational development in the country. After the early 1980s, civil society organizations appeared to have the capacity to demand accountability and to act as watchdogs of local government and in some cases provided needed capacity support to local government implementation activities. At both national and district levels, political leaders have sometimes been openly hostile to any organizations that were outside of their sphere of control and have resisted donor support for decentralized governance. The problem was that “[d]issent is often viewed as treason, and government officials are unaccustomed to the presence of countervailing domestic forces” (Nath n.d., 424). Government at both national and district levels, both before and after the 2000 elections, remained suspicious of civil society organizations while at the same time many citizens remained suspicious of government. According to the Centre for Democratic Development in Accra, a 2002 survey revealed that 64 percent of Ghanaians lacked even basic political knowledge, finding political and governmental matters too complicated to understand. Distrust of politicians was very high, and local-level politicians fared less well in the

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trustworthiness ratings. Efforts at both public-sector reform and decentralization will have to address this concern, which is essential to reforming and opening up government. The goal of several donors has been to support a strengthened local governance system based on a strong interface between central government, local governments, and civil society organizations. Some donors have supported the development of regional civil society groups in secondary cities in order to ensure economies of scale in the development of pluralist influences over local governance. Influence from the grass roots on district and national government remains weak. Civic education is at a low level given the weakness of civic advocacy organizations. Government representatives, district assemblies, and Congressional Budget Offices (CBOs) often remain unwilling partners in Ghana, and all are faced with serious capacity constraints that militate against structuring effective partnerships for service delivery. To some critics, there is too little donor support for civil society development. Those writing about local government in Ghana often make no reference to NGOs or civil society. Ghanaian academic observers interviewed were not optimistic about the further institutionalization of decentralization, or about public-sector reform and a role for civil society in it, as there was some resistance from within the civil service to political and administrative decentralization. In any event, there was unlikely to be much more that could be done until after the national elections in 2004 and local government elections in 2006. From a developmental perspective, donors considered it essential that democratizing governments “should concentrate on creating the institutional framework that enables private sector actors, both commercial and non-profit actors, to directly provide . . . services” (Post et al. 2003, 1). Unfortunately, despite twenty years of policy reform, most Ghanaians have negative perceptions of the overall state of the economy, private-sector development, and their own standard of living. There remains a deep ambivalence among Ghanaians about market-oriented reforms. Nor is local government in Ghana facilitating economic and social development or public-private partnerships. The problem is one of rhetoric versus reality. As a Ghanaian consultant put it in 2002, “the commitment to devolve power, functions and responsibilities, and especially financial and human resources, from the centre to the local levels of administration is not commensurate with the rhetoric [of decentralization]” (Nkum 2002). The absence of effective socially based civil society organizations makes it “less likely that communities can effectively engage in common activities to improve their habitat [social and economic conditions]” (Post et al. 2003, 1). The World Bank has concluded that civil society development is part of economic and social development and “[an] active civil society improves public services” (World Bank 1998, 3). This chapter questions that assumption, and

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argues that social and economic development efforts may require different and contradictory types of civil society groups. Engaging civil society “involves supporting civil society to pressure the government to change or take service provision directly into its own hands” (World Bank 1998, 104). These may be broad social groupings or narrowly based economic entrepreneurs or some mix between the two. The type of groups supported does make a difference. It is often assumed that civil society organizations complement and support local government structures and processes. Post et al. point to the “importance of social capital, i.e. of relations of trust, reciprocity and exchange between local actor networks” (Post et al. 2003, 1). This is the key to ending the zero-sum politics that has characterized competition in so much of Africa since independence. Ghanaians do appear to be engaged in civil society at most levels, though mostly in a passive way. Civil society organizations at the district level, however, according to one donor representative, remain very weak and unable to promote broad thematic concerns as opposed to narrow economic interests. There remains a great deal to be done in order for “civil society to play a leading role as guardians of society and advocates for change” (Amable 2002). Targeting civil society involves tackling a challenging set of goals. If one targets associational life at too low a level, one is likely to miss what one donor representative has labeled an aspiring middle class, more likely to be found in regional capitals and larger towns. At this point, grassroots civil society groups, of necessity, focus less on service delivery than on economic opportunity. As of 2007, civil society had not moved beyond a “union” stage in the economic sense and some village-level organizations are likely to be susceptible to patron-client relationships. Their advocacy capacity remains very weak. Donor Support for Civil Society A number of Ghana’s donor partners support decentralization. As one senior donor representative put it, speaking of democracy, there is a good “case to be made for a public sector initiative in the decentralization area.” Britain, Germany, Denmark, and Canada all have major programs in decentralization or local government and/or civil society. Of particular interest among donors is the development of partnerships between statutory and nonstatutory bodies at the district level. A number of donors after 1994 were involved in the fourth program area of the National Decentralisation Action Plan (NDAP), designed to promote the participation of and deepen the association between district assemblies, civil society organizations, private-sector organizations, faith-based organizations, and traditional authorities.

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In a number of Ghana’s districts, civil society groups, encouraged by one of Ghana’s donor partners, formed civic unions to articulate their interests vis-à-vis local government. The establishment of these district-level civic unions, supported by USAID, enjoined district officials, both central and local, and district assemblies to interact with civil society organizations and to enable subdistrict structures to be based upon popular participation to better articulate community needs. With Giles Mohan, we remain concerned whether “the real beneficiaries of strengthening civil society have been the local elites who use foreign aid and locally generated income as a means of achieving or consolidating their middle class status” (Mohan 2002, 148). Critics question the extent to which associational life requires marketfriendly policies as part of democracy and governance support. The beneficiaries of decentralization and public-sector reform efforts at least in part should be those members of civil society who are challenged in terms of gender, regional grouping, and social or physical handicaps as well as those who are more entrepreneurial. Critics have argued that donor support (and especially USAID) is biased toward entrepreneurial groups and that this impedes the development of social and human rights groups. “The new democratic [foreign aid] missionaries,” according to Richard Sandbrook, “are perceived as ethnocentric in assuming the innate superiority of Western-style, liberal-democratic institutions” (Sandbrook 1993, 103). To donor critics, such an entrepreneurial focus often neglects the disadvantaged and women, who are predominantly in the informal sector and in food crop farming, rather than in commercial agriculture, trade, or rural industries. An issue raised here is whether support for entrepreneurial grassroots economic groups (farmers, market groups, traders, etc.) could disadvantage the development of human rights and other social groups (gender, handicapped, etc.). At issue is the extent to which in some districts the membership of civic associations might be too narrowly based and unrepresentative. This was a view presented in a number of academic assessments of democracy in Ghana. In the civic organizations in some districts there appeared to be a predominance of professional associations (teachers and nurses) and commercial networks, including small-scale businesspeople, and this may have long-term governance implications. The donor reply, at least from the USAID perspective, is equally clear. It is essential that democracy and governance programs deal with the reality of the districts and the grass roots on the ground and understand the need for income generation that is common to all civil society organizations. Under structural adjustment and policy reform, entrepreneurialism and competition and essential to economic growth. For without entrepreneurialism and economic growth, there will be no social or human rights perspective.

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Decentralization Efforts in Ghana after the 2004 Election In the wake of the 2004 national elections, Ghana moved forward with the implementation of the National Decentralisation Action Plan as well as public-sector reform efforts. This was to accelerate after the 2006 local government elections. The NDAP has four main program areas: (1) Policy and Institutional Arrangements for Decentralisation Implementation; (2) District Development Funding Facility; (3) Capacity Building and Human Resources Development; and (4) Partnership and Participation for Accountable Local Governance. There have been appreciable gains in both areas 2 and 3 from the government side. For program area 3 on capacity building, the ministry is moving forward with donor support on the development of a capacity measurement tool that will allow the government to conduct a full capacity measurement exercise of local government staff as the first step to determining the gaps in capacities, which will allow the development of a capacity-building program that harmonizes existing approaches and ensures that local government staff get the needed training to allow them to perform at a higher level. For program area 2 on district development funding, efforts are moving forward to set up a mechanism to allow direct funding of district development efforts. This mechanism would operate along the same lines of the District Assemblies’ Common Fund and is being pioneered through Canadian support for the District Wide Assistance Project (DWAP). Efforts such as the USAID-funded Government Accountability Improves Trust II (GAIT II) Project are addressing program area 4 on accountable local governance by providing support for civic unions as associations of community-based organizations. The GAIT II project expanded to include sixteen districts and was already showing some gains after its first year, particularly in the areas of district assemblies’ improving performance in participatory decision making and in citizen groups’ increasing their advocacy efforts. Local governments welcomed this approach. For the selection of the second cohort of GAIT II districts, the GAIT II team employed a competitive process. As a result, over forty districts applied to participate in GAIT II, and the districts were selected based on the strength of their commitment and their ability to present a shared vision of collaboration between citizen groups, local government, and district-level education offices. The project was launched in each of the new districts in 2004–05 with a public meeting for each participating district assembly (DA) in which the DA gave a presentation on the project, sought input from the community, and closed with a motion to support the district’s engagement in the project. Some of these meetings were attended by more than 1,000 people. Other

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donors, including German Technical Assistance (GTZ), Danish International Development Agency (DANIDA), and the European Union, have pledged to support efforts in other districts in this program area in 2007–2008. In the area of fiscal decentralization, the government has committed itself to composite budgeting and, after an initial pilot in three districts, expanded it to include twenty-five districts, at least two from each of the ten regions. Composite budgets offer local governments the opportunity to get a better handle on the various resources flowing into their districts from the various sectors and possibly to begin to exert some influence on how the funding is allocated. As of 2007, the exercise has been an ex post exercise conducted on the center and therefore has meant little to local government. However, the government committed to developing budget guidelines for the 2007 budget cycle that would shift this to an ex ante exercise conducted at the district level. If this moves forward between 2007 and 2010, it will open a significant window of opportunity for local government. Meanwhile, there has not been significant movement on program area 1 on policy and institutional arrangements for decentralization implementation. Although the Local Government Services Act was passed, there were concerns regarding its implementation. The Local Government Services Secretariat showed signs of wanting to centralize powers rather than delegate, and it was unclear whether the implementation of the act would lead to local governments having control over their staffs. In addition, drafts of the updated Ghana Poverty Reduction Strategy (GPRS) identify one policy area as redefining the type of decentralization Ghana will pursue, a devolution or deconcentration model of decentralization. This raised concerns as the NDAP mapped out a strategy aimed at moving Ghana toward full devolution. On public-sector reform, actions in other sectors, such as setting up independent sector civil services (Ghana Education Service, Ghana Health Service, and Ghana Forestry Service), suggested that Ghana’s leadership favors a deconcentration model. In addition, there was a push in a number of sectors to establish central sector funds. For example, the water sector pushed for a “water fund” that would fund water projects throughout the country. This centralizing tendency runs counter to decentralization efforts. The government’s reluctance to increase the allocation of the District Assemblies’ Common Fund (DACF) from 5 percent to 7.5 percent also raises concerns about the government’s commitment to decentralization and policy reform. The first GPRS included the increase to 7.5 percent as one of its targets, and Parliament made a motion calling for the increase in June 2004. Ghana looked to the 2006 budget to see whether such an increase would include the 5 percent amount maintained in the 2005 budget. Some in government argued that local governments do not have the capacity to handle the increase in revenue

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and worried about possible leakages, but it seems that if local governments are not provided more revenue from the center, their capacity will not increase. As of 2007, districts were several quarters behind in allocations of DACF. Some districts visited by the World Bank in August 2005 indicated that they had yet to receive any releases of the 2005 DACF, putting them nearly three-quarters behind on what is meant to have only a one-quarter lag. Independent research suggests that actual releases to districts did not even reach the full 5 percent budgeted. In addition, the DACF is heavily earmarked, allowing little flexibility. The central government argues that the onus is on local governments to increase local revenue generation, and although most agree that this is an area in which local governments need to improve, the revenue generation potential in the majority of districts was limited and could not approach the development needs of the districts. At the same time, the central government negotiates investment agreements with major international firms in which the investor is freed of any obligation to pay local taxes. This leaves many complaining that, without significant increases of revenue flows to local government, efforts at decentralization are meaningless. As regards USAID’s program, USAID remains committed to supporting the NDAP, specifically in program area 4. USAID remains engaged in the dialogue on decentralization efforts and hopes that the government continues its commitment to the NDAP strategy. USAID will also continue to support efforts to strengthen Parliament while exploring opportunities to support anticorruption and public-sector reform. USAID will remain engaged in the democracy and governance (DG) sector, although USAID funding for DG continues to be modest and subject to fluctuations. Conclusion In an environment of fragile democracy, we have asked questions about the relationship between donors, decentralization efforts, and civil society. Which civil society groups are most capable of adapting and promoting accountability, responsiveness, and representation at the local level and how should they carry out this role? How does donor-sponsored public-sector reform relate to decentralization efforts? Should donors attempt to transform trade and associational groups into change agents and reformers at the local level when local governments themselves are only weakly endowed with administrative, fiscal, and political authority? To what extent should local government institutions or civil society be strengthened in order to respond to social services? To what extent are there contradictions between support for entrepreneurialism and equity inherent in donor-stimulated democracy and governance programs?

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At issue in Ghana is the sensitive question of the relationship between district-level government and civil society institutions and the way that donors interact with both. Civic education is at a low level given the weakness of civic advocacy and grassroots human rights organizations. At the same time, civil society groups continue to threaten political elites. A number of observers have concluded that one of the major problems associated with “strengthening the NGO sector at the expense of the state is that state institutions and actors feel threatened” (Mohan 2002, 144). Despite the efforts of donor support for development projects and governance in Ghana, there is a lack of community-level leadership, particularly in secondary towns and in rural areas. Donor-supported projects are seen by many rural dwellers as outside of their daily lives. The community action efforts that do exist at the grassroots level are largely defined and controlled by lower-middle-class entrepreneurs. Evidence found in Ghana suggests that most Ghanaians feel that community organizations and local government structures remain very weak and that the international community can do little in the short run to strengthen them. Acknowledgment This chapter reflects the personal views of the authors and does not represent the views of the United States of America, the U.S. Agency for International Development, the Africa Center for Strategic Studies, National Defense University, Associates in Rural Development, or the University of Pittsburgh.

References Amable, Delasi. 2002. “Working with Thematic Programs: A Program Officer’s View.” Ibis Innovator 4 (September 26) (accessed July 17, 2006; password protected). Apter, David E. 1972. Ghana in Transition. Princeton, NJ: Princeton University Press. Ayee, Joseph R.A. 2003. Towards Effective and Accountable Local Government in Ghana (March). Accra, Ghana: Ghana Center for Democratic Development. ________. 2004. “Ghana: A Top Down Initiative.” In Local Governance in Africa: The Challenges of Democratic Decentralization, eds. Dele Olowu and James S. Wunsch, 125–154. Boulder, CO: Lynne Rienner. Bambangi, Sagre, and Al-hassan Seidu. 2005. “Shared Growth in Africa.” Paper presented at the Cornell/ISSER/World Bank International Conference, Accra, Ghana, July 21–22. Boaten, N.A. Abayie. 1997. “Colonialism and Forms of Traditional Local Rule in Ghana.” In Traditional and Contemporary Forms of Local Participation and Self-Government in Africa, eds. Wilhelm Hofmeister and Ingo Scholz, 121–36. Johannesburg: Konrad Adenauer-Stiftung. Browne, Stephen. 1999. Beyond Aid: From Patronage to Partnership. Aldershot, UK: Ashgate. Carothers, Thomas, and Marina Ottaway. 2000. “The Burgeoning World of Civil Society Aid.” In Funding Virtue: Civil Society Aid and Democracy Promotion, eds. Marina

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Ottaway and Thomas Carothers, 3–17. Washington, DC: Carnegie Endowment for International Peace. Congressional Budget Office (CBO). 1997. The Role of Foreign Aid in Development. Washington, DC: Congressional Budget Office. Hudock, Ann C. 1995. “Ending Foreign-Aid Folly.” Pittsburgh Post-Gazette, October 15, B1. Mohan, Giles. 2002. “The Disappointments of Civil Society: The Politics of NGO Intervention in Northern Ghana.” Political Geography 21: 125–54. Nasar, Sylvia. 1991.”Third World Embracing Reforms to Encourage Economic Growth.” The New York Times, July 8, A3. Nath, Vikas. n.d. “Political Decentralization—A Complementary Rather than a Substitution Approach.” London: London School of Economics. Unpublished manuscript. Nkum, John. 2002. “Local Governance for Rural Poverty Reduction.” Paper presented to the European Forum on Rural Development Cooperation, Montpellier, France, September 4–6. Post, Johan, Dan Inkoom, Maxwell Baffoe-Twum, and Tawiah Nerquaye-Tetteh. 2003. “Local Governance, Civil Society, and Partnerships: Community Action in Neighbourhood Service Upgrading in Kumasi, Ghana.” Amsterdam, Netherlands: Amsterdam Research Institute for Global Issues and Development Studies. Sandbrook, Richard. 1993. The Politics of Africa’s Economic Recovery. New York: Cambridge University Press. Shoen, Samuel W. 1991. “USAID Africa Bureau: Strategic Analysis and Recommendations for the 1990’s.” Working Draft (September 9). Washington, DC: US Agency for International Development. Staniland, Martin. 1975. The Lions of Dagbon: Political Change in Northern Ghana. Cambridge: Cambridge University Press. World Bank. 1998. Assessing Aid: What Works, What Doesn’t, and Why. Washington, DC: The World Bank and Oxford University Press. ———. 2004. Evaluation of Bank Support to Capacity Building in Africa: Ghana Country Study—Preliminary Studies (April 12). Washington, DC: World Bank.

9 Why Foreign Aid to Haiti Failed—and How to Do It Better Next Time Terry F. Buss and Adam Gardner

Haiti—an island (shared with the Dominican Republic) country of 8 million people about the size of Maryland just 600 miles off the coast of Florida—is an extreme case: it has received billions in foreign assistance, yet persists as one of the poorest and worst-governed countries. Haiti is strategically important to the United States because of its location; perpetual state of violence and instability affecting the region; support for drug trafficking; potential as a trading partner; strong ties to a large Haitian American diaspora; counterbalance to Communist Cuba; and relationship with the Latin American and Caribbean communities. Although it proudly lays claim to the title of second-oldest republic in the hemisphere, and the only nation whose slave population defeated a colonial power to become free, Haiti is, and has been, among the worst governed and most undemocratic states. Few places in the world, and no places in the Western Hemisphere, are poorer than Haiti. This chapter explains why, after consuming billions of dollars in foreign aid over three decades, and hundreds of millions specifically for governance and democratization programs, not to mention billions for other programs, Haiti remains politically dysfunctional and impoverished. The international donor community classifies Haiti as a fragile state—the government cannot or will not deliver core functions to the majority of its people, especially the poor. Haiti is also a post-conflict state—one emerging from a coup d’état and civil war. Others have variously characterized Haiti as a nightmare, predator, collapsed, failed, failing, parasitic, kleptocratic, phantom, virtual, or pariah state. Researchers assembled mountains of documents covering every aspect of foreign aid to Haiti and lessons learned and best practices in providing assistance to developing, fragile, failed, and post-conflict countries. We visited 173

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Haiti in January 2005 on a fact-finding tour. We interviewed numerous key informants. We shared drafts of this chapter with experts, policymakers, and practitioners in foreign assistance, generally, and Haiti, specifically, for review. Broader Context Duvalier, Aristide, and U.S. Foreign Policy To understand aid failure, one need look at Haiti’s politics and U.S. foreign policy over several decades. From 1957 to 1971, François Duvalier ruled Haiti under a highly repressive, internationally isolated dictatorship, where government institutions and the economy were chronically weak. The United States tolerated Haiti’s regime because it was staunchly anticommunist. Duvalier’s son, Jean-Claude, took over on his father’s death, retaining many of his unwise policies. When Haiti deteriorated, the Reagan administration (1981–89) forced Duvalier to leave in 1986, allowing a military dictatorship to be established. For three years, the military repressed the population, compelling Reagan to suspend aid. Jean-Bertrand Aristide, a former priest, confronted the military and Duvalierists, not to mention Haiti’s economic elite, capitalists, and the United States, in an effort to establish a democratic government, modeled on “liberation theology.” He was elected president in 1990. The government was in shambles, as were the economy, society, and the environment. Seven months into his term, the military overthrew Aristide, installing yet another dictatorship. The military became even more repressive, allowing the country to further sink into extreme economic, social, and environmental despair, from which in 2007 it had yet to recover. The Bush administration (1989–93), and other nations at Aristide’s insistence, embargoed, then blockaded Haiti, suspending all but humanitarian aid. In 1994, the Clinton administration (1993–2001) invaded Haiti and restored Aristide to power. Aristide had only a year left in his term, and was replaced as president by his former prime minister, Rene Preval, in 1995. Aristide won another term as president—2000 to 2005, with only 5 percent of registered voters participating. During Aristide’s, then Preval’s tenure (1995–2000), Haiti was steeped in violence and discord as political factions and economic interests jockeyed for power, the country became ungovernable, and the economy all but imploded. National elections were deemed fraudulent in 1997, causing aid to be suspended once again. In 2004, ex-military, neo-Duvalierists, paramilitaries, economic aristocracy, and many of his once-loyal supporters overthrew Aristide in yet another violent coup. The Bush administration (2001–2009) elected not to intervene to save Aristide, considering him the problem, not the solution. A new transition

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government replaced Aristide, intending to step down after holding elections in February–March 2006, which, ironically, led to the election of Preval as president once again. Aid is flowing once more. Regardless of one’s view of Aristide—he was democratic, warding off overwhelming reactionary forces, or he was just another in a long line of undemocratic, autocratic leaders—four things seem true. First, Haiti has been virtually ungovernable. There was no functioning parliament or judiciary system, no political compromise or consensus, and there was extreme violence perpetrated by paramilitaries, gangs, and criminal organizations. Corruption and drug trafficking ran rampant. No government enjoyed much legitimacy. Second, U.S. administrations suspended, reduced, or delayed foreign aid to pressure Aristide and the opposition to stop the conflict, contributing to extreme poverty and economic and political instability. Third, the 1991–93 international economic blockade further impoverished Haiti’s people and economy. Fourth, Haiti remains the object of an ever-changing U.S. foreign policy, which on occasion has made problems there worse, making Haiti a U.S responsibility. Economic, Societal, and Environmental Degradation The facts of Haitian poverty are startling. The UN Human Development Index (HDI) ranks Haiti as 153rd least developed among the world’s 177 countries. About three-fourths of the population is impoverished—living on less than $2 per day. Half of the population has no access to potable water. One-third have no sanitary facilities. Only 10 percent have electrical service. Ninety-five percent of employment in Haiti is in the underground economy, while 80 percent of businesses in urban areas are “off the books.” Official unemployment rates range from 50 percent to 70 percent, but no one really knows. Haiti’s private sector comprises mostly subsistence farmers and microbusinesses. A small elite, organized in family groupings, controls all exports and imports, tourism, construction, and manufacturing. About 4 percent of the population owns 66 percent of the country’s wealth. Some 10 percent own nothing. About 5 percent to 8 percent of the population has HIV/AIDS, and that percentage is rising. Haiti is the country most severely affected by HIV/AIDS outside sub-Saharan Africa. Only an estimated 5 percent to 10 percent of those with HIV/AIDS receive treatment. HIV/AIDS is reducing life expectancy in Haiti by ten years. In addition, tuberculosis, and recently polio, have emerged as epidemics. Nongovernmental organizations (NGOs) deliver four-fifths of the country’s public services. As many as 250,000 children work as unpaid servants in homes, having been placed there by their biological parents. Around 2,000 children annually

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Box 9.1 Weaknesses in the Judicial System Donors have tried to assist the Haitians in reforming their judicial system. Its shortcomings are serious and legion. The 1987 Constitution calls for an independent judiciary, yet the executive branch—first under the military, then under Aristide—controls the appointment of judges, budgets, training, evaluation, and removal. The government has not supported investigations or prosecutions of major crimes, including drug trafficking, murders and assassinations, political violence, and corruption. The system relies on outdated legal codes and time-consuming, complex procedures. Court buildings have no windows, running water, bathrooms, or electricity, not to mention legal texts, office supplies, or telephones. There are severe personnel shortages in the judicial system. Proceedings are conducted in French, yet the lion’s share of the population speaks only Creole, and many before the court are illiterate. Judges receive no training after graduating from law school. Many judges are not current in Haitian law. Judges are frequently intimidated by gangs, the military, police, and politicians. Many thrive on bribes in a corrupt system. Communication is sparse between the courts, police, and prosecution.

are victims of human trafficking, primarily to the Dominican Republic. Twothirds of women have been violently abused. Haiti ranks among the worse countries environmentally: 141st out of 155 on Yale University’s Environmental Sustainability Index. Because Haitians are forced to use wood for fuel—70 percent of energy use is from this source—and because of excessive wood harvesting by private companies, Haiti is now 97 percent deforested, an irony for a tropical island. Deforestation causes chronic, catastrophic flooding with extensive loss of life. In 2004, tropical storm Jeanne caused property damages at 3.5 percent of the gross domestic product (GDP). According to a recent poll, 67 percent of Haitians would emigrate if they could. Many already have: 2 million Haitians live in the United States, of whom 60 percent are now U.S. born. Four-fifths of Haiti’s college-educated citizens live outside of the country. Because of political unrest and violence in Haiti, refugees periodically attempt to flee to the United States. In 1991 and 1992, during the military junta, the U.S. Coast Guard intercepted 41,000 Haitian “boat people” exiting the country. In 1994 and 1995, during Aristide’s return, some 25,000 boat people were intercepted.

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Poor Governance As of 2004, Haiti ranked in the bottom 1 percent of all countries on corruption and government effectiveness. The World Bank’s Country Policy and Institutional Assessment program rated Haiti in the bottom fifth of all developing countries, equating it with Angola, Central African Republic, Congo, Sudan, Tajikistan, Uzbekistan, and Zimbabwe. Transparency International (TI) ranked Haiti, along with Bangladesh, as the most corrupt country in the world in 2004. Foreign Aid Investments From 1990 to 2003, Haiti received more than $4 billion in aid—not including remittances from Haitian expatriates, who contribute $1 billion annually—from bilateral and multilateral sources. In 2005 and 2006, this rose another $1.3 billion. U.S. contributions from 1990 to 2005 totaled about $1.5 billion (see Table 9.1). In May and June 2004, the transition government, with assistance from the international community, national and international experts, and civil society organizations, prepared a needs assessment—the Interim Cooperation Framework (ICF). The ICF identified priority interventions and related financing needs to support economic, social, and political recovery over the next two years (see Table 9.2). Foreign Aid Failure [T]he outcome of assistance programs [in Haiti from 1986 to 2002] is rated unsatisfactory (if not highly so), the institutional development impact, negligible, and the sustainability of the few benefits that have accrued, unlikely. —Director, Operations Evaluation Department, World Bank, 2002

The Canadian International Development Agency (CIDA) summed up the Haitian context, one similar to the least developed countries in sub-Saharan Africa (CIDA 2003): • A society profoundly divided between a traditional culture and an elite, ex-military, and petit bourgeois class, each seeking or clinging to power; • An unstable government and a weak public institutional capacity; • Seriously deteriorated economic and social infrastructures;

40.2 38.5 26.6 23.3 26.0 56.6 14.1 24.4 0.9 0.0 0.0 0.0 0.9 33.2 31.7 45.0 361.4

DA/CSH

1.5 12.3 4.5 24.0 36.7 56.0 45.3 53.5 65.1 65.1 52.5 46.9 30.0 0.0 55.0 39.7 588.1

ESF 16.0 29.1 19.6 41.3 42.7 44.0 39.2 22.5 34.9 27.0 25.1 25.1 23.1 36.6 30.5 37.7 494.4

P.L. 480 0.7 1.0 0.3 0.1 0.0 0.0 0.5 0.9 1.1 1.4 1.4 1.3 1.5 1.7 1.4 1.4 14.7

Peace Corps 0.0 0.0 0.0 0.0 0.0 3.0 0.0 0.0 0.0 0.3 0.0 0.0 0.3 0.4 0.3 0.3 4.6

Foreign military 0.1 0.3 0.0 0.0 0.0 0.0 0.2 0.3 0.3 0.2 0.3 0.3 0.0 0.1 0.2 0.2 2.5

IMET

58.5 81.2 51.0 88.7 105.4 159.6 99.3 101.6 102.3 94.0 79.3 73.6 55.8 72.0 119.1 124.3 1,465.7

Totals

Source: U.S. Department of State, Congressional Budget Justifications, various years. Notes: DA/CSH = Development Assistance and Children’s Health; ESF = Economic Support Fund; P.L. 480 = U.S. food program; IMET = International Military Education and Training.

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 est. Total

FY

U.S. Foreign Assistance to Haiti, 1990–2005 (in million US$)

Table 9.1

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Table 9.2 Donor Pledges—Grants and Loans, July 19–20, 2004, Conference (millions) Total pledges* Grants EC France Germany World Bank Sweden Canada United States Other countries Concessional loans World Bank Inter-American Development Bank (IDB) International Fund for Agricultural Development (IFAD)

$1,085 663 288 33 14 5 2 88 207 23 422 150 260 12

Source: Organization for Economic Cooperation and Development and World Bank. *Minor donations are not listed in the table, but are included in the total pledges.

• An absence of capacity for law and order, allowing continued violent insurgencies and rioting, perpetrated by paramilitaries and gangs; • An uncontrollable flux of migrants from rural areas into slums of Portau-Prince; • Concentration of wealth in a few traditional families and new mafia-like groups; and • An inadequate and constantly deteriorating environment. Haitian Governance Failure and Political Instability The World Bank related that “The Haiti Country Assistance Evaluation (CAE) concludes that the development impact of World Bank assistance to the country since 1986 has been negligible, as the critical constraints to development—governance and public sector capacity and accountability—have not diminished.” The report added that “without improved governance and institutional reforms, the World Bank and other donors will be able to accomplish very little” (OED 2002, 17; see also Hassan 2004). The report went on: “The single overarching constraint to satisfactory implementation, outcome and sustainability of development assistance to Haiti has been the continuous political turmoil and governance problems in the country. In project after project, the reason for delayed implementation or cancellation, is a coup, civil

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Box 9.2 The Community-Driven Development Project The Community-Driven Development Project builds upon the successful implementation of a Community-Driven Development pilot project, which was executed in 2004 by the Pan American Development Foundation and financed by the World Bank’s Post-Conflict Fund. The project is part of the bank’s reengagement strategy with Haiti as set out in the bank’s Transitional Support Strategy (TSS): Community-Driven Development (CDD) is a project to improve basic economic, social, and infrastructure services while building social inclusion, participation, transparency, trust, and public-private partnerships at the local level. The project will scale up a direct transfer of $38 million in funding to local community organizations to improve their access to basic social and economic infrastructure and income-generating activities. Specifically, the project will support the following activities: Community Subproject Funds, Management, and Support: This component will finance approximately 1,300 small-scale investments in 55 to 65 targeted municipalities of rural and peri-urban Haiti. The investments are identified by community organizations and prioritized in project development councils. Capacity Building and Technical Assistance: This component will finance the training of trainers in basic management, administration, accounting, and financial management and the sharing of experiences and knowledge between municipal and regional representatives, and local councils. Project Administration, Supervision, Monitoring, and Evaluation: This component will finance incremental costs associated with project implementation and operate under the oversight of the Ministry of Planning and External Cooperation. Source: World Bank press release, July 28, 2005, www.worldbank.org/ WBSITE/EXTERNAL/PROJECTS/0,,contentMDK: 20598774~menuPK:64282138~pagePK:41367~piPK: 279616~theSitePK:40941,00.html.

unrest, or the inevitable results of these events, such as lack of ownership by a frequently changing government and aid staff turnover. Despite efforts on the part of the World Bank and other donors, it has been all but impossible to carry on a coherent lending program” (OED 2002, 17). Donors, without exception, agree with this sweeping indictment.

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In addition to development problems precipitated by the embargo and military intervention, at least four drivers—lack of government capacity generally and in aid administration specifically; lack of government support for or ownership of programs funded by foreign assistance; excessive aid dependency; and widespread dissention between president and Parliament— contributed to aid ineffectiveness on the Haitian side. Government Capacity Aid Administration According to the World Bank, since 1995, there was a “total mismatch between levels of foreign aid and government capacity to absorb it” (OED 1998). USAID’s Mission in Haiti echoed the sentiment in its Results Review and Resource Request—1998: “Most of Haiti’s public institutions were too weak and ineffective to provide the level of partnership needed with USAID or other donors to promote development. These institutions are characterized by lack of trained personnel; no performance based incentive system; no accepted hiring, firing and promotion procedures; heavy top down management; and a decided lack of direction” (USAID 1998, 2). The UN Ad Hoc Advisory Group on Haiti concluded in 1999, during the ongoing electoral crises, that “Unfortunately [and ironically], capacity building within those national institutions that have a mandate for aid coordination is being hampered by the political stalemate which has made it difficult to approve new technical cooperation projects, some of which would have strengthened managerial and coordination capacity” (ECOSOC 1999, 15). The UN recommended that “The long-term development program of support for Haiti address the issues of capacity-building of governmental institutions, especially in areas such as governance, the promotion of human rights, the administration of justice, the electoral system, law enforcement, police training, and other areas of social and economic development, which are critical for enabling the Haitians to adequately and effectively coordinate, manage, absorb and utilize international assistance and development aid” (ECOSOC 1999, 18). The government of Haiti, in 1997, also concluded that it had a serious aid management problem (Ministry of Economy and Finance 1997). Financial Management Lack of capacity went considerably beyond poor aid administration. Haiti has dysfunctional budgetary, financial, and procurement systems, making financial and aid management impossible (World Bank 2005a). A budget

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reform law enacted in 1985 was never fully implemented. Offices were not created and personnel remained unassigned. Budget procedures and policies were not in place; budget data were unavailable. From 1997 through 2001, there was no approved national budget. Internal and external audits were weak. No external audits were conducted for years. Not even Parliament had access to or approved the budgets. Public procurement procedures were never fully implemented. Procurement was decentralized without controls or accountability. Government utilized sole-source contracts and unadvertised bidding. Government was unwilling or unable to pay vendors for services in a timely fashion. Budget reductions and low salaries drove away most finance professionals. One-half of government expenses were nonrecurrent or discretionary, making it virtually impossible to identify fund use, beneficiaries, or impact (OED 2002, 4). Civil Service The Haitian civil service has been perpetually a problem. Assessments revealed that about 30 percent of the civil service were “phantom” employees, compensated about half of the public wage bill. One ministry had 10,000 employees, only about half of whom were ever at work. A 2004 International Monetary Fund (IMF) assessment, looking back at Haiti’s civil service in 1998, found that (1) the civil service has played a very limited role in providing social services; (2) the small size and very limited capacity of the government contrast with the massive development challenge facing the country; (3) the public sector is far smaller than in other developing countries; (4) the public-sector wage bill in Haiti is very low; (5) the public wage bill takes up a significant portion of the government budget in Haiti; and (6) the public-sector wages are not comparable to those of the private sector. The IMF doubted Haiti’s ability to deliver services, attract quality civil servants, and avoid corruption. Country Ownership The World Bank’s 2002 Country Assistance Evaluation found, from the donor perspective, that “The government did not exhibit ownership by taking the initiative for formulating and implementing [its] assistance program, encouraging a consensus among key ministries and decision makers, or adopting timely action to support the program” (OED 2002, 19). The ICF echoed this: “The preceding governments lacked the political will and the means to make the necessary changes in key areas, particularly justice, police, administrative reform and decentralization” (Republic of Haiti 2004, 6). CIDA concluded: “Considering the resources invested, scattered Canadian projects do not seem

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to provide a critical mass of results, do not foster efficiency and effectiveness of the action taken, and make it difficult to achieve sustainable results in view of the surrounding high-risk environment” (CIDA 2004, 7). An example: the United States, from 1995 to 2000, expended nearly $100 million on rule of law programs in Haiti. A General Accounting Office (GAO) review concluded: “The Haitian government’s lack of a clear commitment to addressing the major problems of its police and judicial institutions has been the key factor affecting the success of the U.S. assistance provided to these institutions. U.S. assistance has been impeded because the Haitian Government has not acted to (1) strengthen police organization by filling vacant key leadership positions, such as the Inspector General and the heads of many field units; (2) provide human and physical resources needed to develop an effective police force; (3) support police investigations of serious crimes; and (4) keep the police force out of politics. U.S. assistance to the judicial sector has been undercut because the Government has not, for instance, (1) followed through the broad reform of the judicial sector needed to address problems, (2) assumed ownership of many of the improvements made possible by U.S. assistance, and (3) provided physical and human resources needed to operate the sector effectively” (GAO 2000a, 2000b, 5). Other examples: in recognition of Haiti’s environmental disasters, the Environmental Secretariat was elevated to ministry status. A National Environmental Action Plan was approved after extensive citizen participation in 1999. The plan was never implemented (IADB 2004, 12). The Ministry of Education approved a National Education Plan, but never presented it to Parliament for approval. The Ministry of Health was unable to establish norms and standards and to implement a decentralization program. The Justice Ministry balked at implementing reforms. Aid Dependency Haiti depended on aid and remittances to sustain itself. In 1996 and 2002, aid dollars to Haiti per capita were $50 and $19, respectively. In 2003, per capita aid rose to $23.7, as compared to $9.9 for Latin America and the Caribbean. Haiti relied heavily on aid, measured as a percentage of gross national income (GNI), at 12.4 percent and 4.5 percent for 1996 and 2002, respectively, as compared to 6.2 percent and 3.9 percent on average for the Caribbean, respectively. In 2003, Haiti’s aid as a percentage of GDP—6.8 percent—was much higher than that of other developing countries, on average at 3.0 percent and for least developed countries at 18.7 percent. In 1999, the UN found that 86 percent of development investments came from external sources. Although it is open to debate, some detractors argue that Aristide expected

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donors to contribute aid with which the government could do what it wanted, while donors bore responsibility for meeting the needs of the country. Others argue that Aristide, having precipitated the Haitian crisis for political reasons, extorted donors to do something about poverty. The Haitian government seems not to have been much concerned about nation building, institution building, or post-conflict reconstruction, and uninterested in governance, content to let outsiders dictate its future. President and Parliament Because Haiti has a weak presidential system, donors tried to work with both the president and Parliament to develop strategies and approve aid funding. Donors found it much more difficult to promote country ownership because of widespread dissention and political gamesmanship. Small factions thwarted consensus building. The 1997–2000 elections impasse is an extreme example of intragovernmental conflict negatively affecting aid. Parliament passed only two bills. No budget was submitted to Parliament for approval. Consider the decentralization issue. No ministry was able to implement any decentralization or deconcentration program. Laws defining national and local financing, including the Decentralization Framework Law, Law on the Commune, and Law on Municipal Development and Management, were not passed (USAID 1998, 2–3). The Inter-American Development Bank (IADB) concluded in its Country Program Evaluation that “the Bank was unable to foresee that the lack of coordination between the executive and legislative branches of government would become a strong obstacle to the delivery of its program” (IADB 2003, iii). Donor Failures Haiti should not be blamed exclusively for failed aid. Bilateral, multilateral, regional, and charitable organizations all failed as well. Shortcomings likely originated because donors collectively failed to address Haitian politics and governance as the important drivers of success, from which everything else would follow. Donors, instead, adopted an assistance model more appropriate to Latin America than to Haiti, which was more like sub-Saharan Africa. Aid continued to be ineffective as a result of aid suspensions and cutbacks; inappropriate conditionality; unclear policy focus and program design; poor alignment, accountability, and harmonization; ineffective capacity building; faulty implementation; lack of coordination; and delusions about what constituted program success. No donor stepped forward to lead. These issues, perpetually in play, may have caused donor fatigue, wherein aid organizations tired of Haiti.

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Aid Priorities In recent years, “failure to give highest priority to resolving the political and governance problems that undermined economic development” nullified donor attempts to improve conditions in Haiti (OED 2002). Mark Schacter (2000), in looking at World Bank programs, concluded: “Only recently have Bank-supported activities paid systematic attention to deeper rooted institutional issues at the root of the dysfunctional patrimonial state—issues related to leadership, incentives, and human capacity deficits. Yet the hallmarks of patrimonialism—corruption, cronyism, and critically ineffective service delivery—remain embedded in the fabric of government.” Donors tended to focus on structural reform, security, military demobilization, health and infrastructure, all critically important to be sure. Having said this, a review of donor projects shows increasingly more attention to politics and governance, especially projects funded by the United States, Canada, the World Bank, the United Nations Development Programme (UNDP), and IADB. Yet Haiti continued to flounder. Likely what happened was that governance projects either failed outright or only dented the problem, while other factors overwhelmed even what few gains may have been realized. Donor Assistance Strategy The World Bank’s Country Assistance Evaluation concluded that donors had erred in offering traditional aid programs—the Latin American Model—when governance and political barriers were likely insurmountable in that framework (OED 2002). The Latin American Model assumes a stable democratic political system, a supportive government with the capacity to partner and implement, a well-functioning economy, and peace and security. Decision makers should have assumed a Sub-Saharan Africa Model (OED 1998). It may be the case that in the mid-1990s, donors were just beginning to struggle with the notion of fragile states and post-conflict reconstruction as special cases. Past approaches simply were inappropriate. Aid Suspensions Aid has waxed and waned as donors—usually acting collectively, under U.S. pressure—have responded to Haitian politics. Haitian political leadership made Haiti an aid orphan—a country that has great needs but is so dysfunctional that donors do not want to invest resources in it. Aid, after all, is scarce and competition for it is intense. Aid suspensions contributed to ineffective aid policies. Programs in place suddenly terminated when aid stopped, unraveling

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many positive benefits. Once aid started up again, programs had to regain what had been lost before they could move forward. This was disastrous because many development projects, even in the best of circumstances, take years to mature and produce results. It was difficult, time consuming, and expensive to recreate capacity and programs when donors restored aid. Capacity created in government or among NGOs dissipated. At the same time, the government was unwilling or unable to continue programs. USAID’s decentralization project illustrates the confounding effects of aid suspensions. The project decentralized or devolved state authority back to local governments, as mandated by the 1987 Constitution but never implemented (ARD 2000). The project was authorized in May 1991, then suspended in September 1991 because of the coup d’état. The project was reworked so that some civil society components could be activated, something the military junta approved. Then in October 1994, Aristide returned to Haiti. The new government did not sign an agreement to start up the project again until September 1995. But so much time had elapsed that the project had to be competitively bid by USAID before it could be relaunched. Once it was in place, a deadlock occurred between President Preval and Parliament over the resolution of the 1997 fraudulent elections. There were no local officials in place from January 1999 to September 2000. The project accomplished little. Conditionality Conditionality occurs in several ways: donors may offer programs targeted at a specific issue or problem, and if the country wants aid, then it must accept the program; donors may attach goal attainment criteria to aid such that if countries do not meet donor expectations, targets, or goals, aid will be reduced or terminated; and donors may withhold or reprogram funds if countries do not resolve an issue or problem. Bilateral donors often require countries to purchase goods and services from the donor using aid funding—aid tying. Conditionality in the Haitian case may have been counterproductive, confrontational, or misguided—because of timing, political feasibility, or cultural barriers—thereby increasing aid ineffectiveness (CIDA 2004). The World Bank concluded: “the Bank has been unable to leverage—conditionality, delayed program/project funding, overall levels of funding—in support of the implementation of important reforms, particularly in governance and public sector management and in sound economic policies; political pressures of other stakeholders and the fragility of the whole situation were simply too great to allow the Bank to operate as it would have in a more normal setting” (6–7). Canadians opined that “Haiti exemplifies some of the negative

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consequences of conditionality for both recipient and donor. 1994 to 1997 was marked by donor-driven reform agendas and conditionality-based financing in Haiti. Results from this period are unsurprising. Donor-driven agendas contributed to poor commitment and ineffective implementation on the part of the government of Haiti and to frustration and Haiti fatigue for the donor community. This in turn contributed to the withdrawal of some donor agencies. Following the 2000 disputed elections, strict conditionality was imposed to promote transparency of governance, solid macroeconomic policies, and fiscal responsibility. Once again, it is highly questionable how constructive this set of conditionality was given that the system did not reform” (CIDA 2004, 11). Donor-Driven Projects Donor politics, methods, and foreign policy goals led them to impose aid programs on Haiti, even though this might have been premature. One example is elections. The United States and other donors have focused on elections in democratizing Haiti. In 1995, the United States spent $18.8 million in assistance on the elections. And in 1995, donors equated democracy with Aristide’s return. Few equated the elections and Aristide’s return with legitimacy of the regime, a much larger and more important question. Even fewer equated democracy with the need for broad opportunities for grassroots citizen participation, not just the right to vote. Haitian news commentators warned that elections were not enough (Mobekk 2000). Yet, each election between 1990 and 2006 has been perceived by many as unfair and fraudulent, opposition parties have been intimidated, opposition parties have engaged in boycotts, and voter turnout has been low. Further, Aristide, elected twice, has been ousted twice from power. The same pattern repeated itself in the 2005 cycle under the transition government, when elections were postponed four times until they were finally held in February 2006, again with numerous irregularities and fraudulent activity. But Haiti does not have a culture of democracy in place, so elections merely became, in the view of many, another political tool of whichever faction was in power. To complicate matters, the international community accepted electoral results as fair on some occasions but not on others, drawing into question the legitimacy of the whole process. Eventually —if they are not already—the Haitian people will tire of the pretense of participating in a “democratic” society. Funding elections raised questions of intent for some Haitians: Are elections a way for the international community to declare victory and disengage: “vote and run”? Aristide’s prime minister, Rosny Smart, remarked that the focus mainly on elections was in retrospect a mistake, because they make no difference in people’s lives.

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Accountability Governments around the world hold themselves accountable by setting goals, objectives, baselines, and benchmarks, then measuring performance and reporting to the public. Accountability and performance are now heavily infused in aid programs. This has created problems for developing countries like Haiti. First, data-gathering and reporting requirements are burdensome for developing countries. If they do not have the capacity to administer aid, they likely will struggle to demonstrate that aid produced the intended results. The UN system, in its 2003 report on an Integrated Emergency Response Programme for Haiti, observed that assistance was hampered by the inability of Haitians to gather data and then provide them to donors to promote accountability. Second, even if performance data were available, fits and starts of aid programs thwarted assessment efforts. Most accountability efforts required baselines and benchmarks against which to compare ongoing performance. But baselines in Haiti could never really be established: programs were frequently suspended or revised because of reduced funding and refocusing. The decentralization project was reworked several times, making performance measurement highly problematic. Third, donors mandated accountability and performance, but aid provision in Haiti suggested they will continue to award aid even in the most problematic of cases. So, rather than spurring Haiti to better performance, it might make little difference. Democratization programs, especially elections, continued to receive funding even though fraud, opposition boycotts, and low participation were endemic to them. Aid Tying Aid tying—requiring that countries purchase services, technical assistance (TA), or goods from a donor country—was a widely imposed conditionality in Haiti, as it is in most countries receiving aid. U.S. aid required that a country buy U.S. food products—grown and processed in the United States and transported on U.S. carriers. TA is another. Presumably, recipient countries benefit from TA provided by a donor. But this practice can have negative consequences: donor services may be much more expensive than those available from other vendors, 11 percent to 30 percent more expensive by some estimates (World Bank 2005b, 102). Amounts of aid, then, were greatly reduced, as was potential impact. Tying also thwarted efforts to build donor partnerships. It contributed little to much-needed government capacity building.

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Alignment Alignment concerns the linkage of donor programs to country goals, objectives, and strategies, so that donors and recipients do not pursue projects benefiting neither. The Canadian assessment showed that there was “insufficient coordination of international aid, the rise of parallel structures, and growing mistrust between the donor community and the Government” (CIDA 2004, 13). As observed above, the decentralization project miserably failed (chapter 8 discusses decentralization in the Ghanaian context). An assessment of the project by DAI—a consulting firm—concluded: “There remains . . . a great deal of indifference or even resistance to decentralization within the central government and among the social and political elite. Further advances in decentralization will require a revival of interest and support for decentralization among those who are now indifferent or hostile. The project’s relative inability to engage national-level power brokers, both within and outside government, seriously impeded the possibilities of achieving decentralization objectives” (ARD 2000, 38). Or consider privatization. Donors have pressured developing countries into privatizing state-owned enterprises, not only because private companies are more efficient and responsible, but also because state-owned enterprises serve as patronage jobs for political cronies. Preval attempted to privatize Haiti’s state-owned enterprises and failed: the Haitian people believed he was transferring companies to the rich or to foreign owners, not benefiting Haitians, and Aristide appeared to oppose and undermine Preval at every turn. Some believe Aristide—as was the case with the civil service—wanted to protect patronage employment for party loyalists, and the more jaded believed he intended it for his paramilitary operatives. The World Bank subsequently concluded that “the norms of behavior of the private sector and the degree of corruption and cronyism within and between the private and public sectors may be such that privatization may well not enhance the prospects for sustained, equitable development, and may even make them worse” (OED 2002, 7). Program Design Program design is critical in delivering aid, but is often poorly done. In 1994, USAID funded the International Organization for Migration (IOM) to demobilize the army and reintegrate soldiers into civilian society. Demobilization in the short term protected U.S. occupation forces and in the long term reduced potential disruptions to the restored Aristide government. Ex-soldiers received a stipend for attending vocational training sessions and participated in an employment service. Some 5,500 of 6,250 soldiers registered with IOM.

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Some 5,200 were trained and 4,600 participated in the job service. Around 304, or 6 percent, obtained a job, and only was an officer. The IOM program may have succeeded in attaining short-term stabilization, but it failed miserably in reintegrating ex-soldiers into society. Program evaluators opined that this was not a problem, as ex-soldiers represented only a “vague threat” to the country. In February 2004, these ex-soldiers overthrew Aristide for a second time. Why did reintegration fail? The program offered reintegration as an amorphous, ill-defined goal—almost a wish, according to those who evaluated it. But program design failed to take into account reintegration problems. Businesses were loath to hire ex-soldiers, many of whom had human rights abuse records and were known to have terrorized the population. Even those businesses that might have hired ex-soldiers did not out of fear of retaliation from Aristide paramilitary supporters. Because most ex-soldiers likely were anti-Aristide, the government was unlikely to hire them as civil servants. In any case, civil service jobs were reserved for Aristide supporters. Most importantly, the program did not engage the officer corps. Officers have leadership skills, allowing them to motivate soldiers to revolt or mutiny, which they did. Capacity Building Donors addressed capacity issues in Haiti either by offering programs to build government capacity or by bypassing government altogether to work with NGOs and to manage projects themselves or through contractors. Building capacity has not worked well: bypassing government only exacerbated capacity problems in Haiti over the long term. Even so, some believe aid administration may be so complex that it will always be difficult. Common Capacity-Building Approaches Donors have tried various capacity-building schemes. In 1996, the World Bank attempted to help the Haitian government manage foreign assistance and reduce its need for outside managers. The project provided $1 million to pay higher salaries to skilled, expatriate Haitians willing to return to Haiti to help. Few expats participated. Much capacity building relies heavily on dubious short-term workshops, seminars, or conferences. Many have questioned whether short-term approaches were effective. As observed above, efforts to promote rule of law seemed to have failed in Haiti. Although the project described below has not been evaluated, it is typical of short-term efforts that are seemingly of little value. The National Center for State Courts (NCSC) offered emergency two-

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day-long training to judges in Haiti early in 1995 upon the election of President Preval. According to NCSC, judges in the program were clueless as to their role in the judicial system and what powers and responsibilities they had. Many participants thought the United States was trying to impose its system on them. The Ministry of Justice did not lay out any guidance for the program and was not supportive. The Haitian Judges Association complained that the training was not related to the current situation in the country, and it did not comply with Haitian law (NCSC 1995). Training led to a lack of uniformity in interpretation of law across the country. TA is a common approach, but as practiced it has been ineffective. Consider this World Bank assessment: “Where TA has been used to fill the gaps in skills needed to manage Bank-funded projects, it has had little impact on strengthening client capacity. TA has been effective when used for discrete and well-defined technical tasks and in the context of a clear TA strategy that includes a phase-out plan. A majority of the projects reviewed support training individual staff, and projects have almost always achieved the targeted numbers to be trained. But public agency staff is often trained for specific tasks before they are positioned to use the training or before measures are taken to help retain them. Programs have focused on the supply of skills in the public sector without ensuring that the skill-building is synchronized with organizational and institutional changes needed to improve public sector performance” (OED 2005b, xv–xvi). Foreign assistance might fail when relying on NGOs for service delivery for a variety of reasons, even though the alternative—government corruption and/or lack of competency—has considerable risk. First, when assistance was channeled through NGOs, the Haitian government became indifferent to programs—they were someone else’s worry. The Haitian government tended not to allocate matching, operating, or maintenance funds to programs it did not manage; neither did the government fund programs so that they could be sustainable over time. NGOs actually welcomed this indifference: donors continued to keep them in business. Second, building capacity in NGOs in Haiti created a brain drain in public-sector employment as good people moved from government to NGOs, where salaries were higher and mobility was facilitated. Third, NGOs tended to be numerous and difficult to coordinate. Haiti has been called the “Republic of NGOs.” Fourth, operating parallel systems eroded the legitimacy of the government, which already had demonstrated it would not serve the people. Parallel systems increased aid coordination needs. Fifth, once NGOs obtained power, they did not cede it back. Under the junta in 1991 to 1994, government capacity to administer aid virtually disappeared, and the void was filled by an army of specialized NGOs. On Aristide’s return, many NGOs were unwilling to transfer power back to the government, preferring

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instead to operate “under the radar” as they had during the embargo (ECOSOC 1999, 10). And sixth, there was growing concern that NGOs were becoming increasingly political, extending well beyond their mandate and becoming advocates for causes. Donor-Administered Projects Donors over time felt “burned” by the Haitian government in administering aid programs. So donors, particularly multilaterals, often managed projects themselves. This had implications: first, Haitians had no way to acquire administrative skills, not being allowed to manage. Further, excluding Haitian government officials only postponed the inevitable, and likely made it worse. Second, donor projects tended to be short term, narrow, limited, and small, because donor project management was expensive to keep in place over sustained periods (Hassan 2004). Because these projects had little impact, they were wasteful and the problem of poor capacity remained. Third, donor administration was several magnitudes more expensive than government management. So aid projects had less impact, and the government capacity issue remained. Projects had done little to reconstruct Haiti. The OED Country Assistance Evaluation concluded: “the nearly constant state of crisis and recurring instability in the country have blocked any longer term strategy to reduce dependence on Project Management Units” (OED 2002, 8). Complexity of Aid Administration Working with donors became increasingly complicated (UN 2003, 100). Donors expected returns on investments and, not receiving them, reprogrammed money or withheld it; enforced strict compliance with myriads of regulations, policies, and laws with extensive controls over expenditures; and insisted on transparency in all dealings. Each donor’s requirements for enforcing accountability, compliance, control, and transparency varied. Donors had very different development philosophies, administrative cultures, and political concerns that often conflicted not only with a country’s goals but also with those of other donors. Paperwork was crushing and endless, sometimes duplicative. When charitable organizations were added to the mix, the number of donors became legion. Meetings with donors in consultative groups were numerous and time consuming. When donors required extensive citizen input, development administration became even more complicated. Even in advanced industrial countries, these administrative issues created barriers. In Haiti, where there was little expertise and

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few resources in place, where there were continual upheavals in political regimes, where ebbs and flows of aid created and destroyed capacity, and where violence and instability took precedence over administration, even the best-intended government might fail. Transaction costs associated with aid were daunting. The World Bank, in Haiti, required extensive planning before extending loans and grants and, once they were approved, required even more reporting, accounting, and evaluation. The more World Bank programs a country participated in, the more planning, reporting, accounting, and evaluation were required. Country officials worked with each World Bank program (or sector or thematic area). Because each program was highly specialized, countries had to assign expert staff. As donors added more specializations to the aid portfolio, country staff had to coordinate with one another, often across ministries. Added to this was the same process for other multilaterals and bilaterals, who also had planning, reporting, accounting, and evaluation requirements. Pretty soon, Haiti needed a larger aid administration staff to match the donors. Since 2006, when aid was restored, the World Bank and the Haitian government produced or are producing fifteen major documents. The ICF, now under way, involved twenty-six bilateral and multilateral organizations, employing 250 experts, and required six months to complete. Harmonization Harmonization refers to donor efforts to ensure that programs complement and supplement one another and avoid duplication. According to the Canadians and other donors, “Lack of harmonization resulted in under-funded sectors and prevented a common framework for investment and practical and complementary division of labor” (CIDA 2004, 13). In Haiti, most donors funded democratization programs without concern for what others were doing. Coordination There was need to coordinate efforts across donors and between donors and the Haitian government. The World Bank organized a Consultative Group Meeting in Haiti in 1997, designating lead donors in priority sectors, and included NGO, civil society, and the media. It was considered a model for other postconflict programs (World Bank 1997; Hassan 2004). But the failed elections of 1997, which precipitated aid suspensions and reductions, unraveled this exceptional effort. According to a UN assessment, “Decades of institutional instability have adversely affected the coordination capacities of the government accumulated in previous years” (ECOSOC 1999, 10).

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Implementation Donors did not always implement aid projects effectively. Donors had a tendency to push projects to demonstrate immediate results (OED 1998). The 1995 elections again are a case in point. In October 1994, Aristide returned as president of Haiti. Elections were immediately scheduled for December 1994, an impossible time frame. A Provisional Electoral Council, the mechanism that manages all aspects of Haiti’s electoral process, had not even been appointed. The council tried holding elections on two different occasions, but failed. In June 1995, elections were finally held. Donors also failed to take into account that Haitians were not accustomed to voting in run-off elections, and there was little attempt to educate them. The 1997 elections had even lower turnouts. Haitians had voted for president in the past, but never for local assemblies. A Haitian newspaper headline announced in 1997 following the elections: “Democracy on Course Without the People” (Mobekk 2000). The same issues reappeared in 2000, 2003, and 2005. Leadership It is apparent that no multilateral or bilateral donor led reconstruction in Haiti—with exception of the failed 1997 World Bank Consultative Group. To be sure, there was a great deal of on-and-off coordination across donors, often done effectively and sometimes not. But this is different from a single donor or consortium’s taking responsibility and ensuring that aid worked. Claiming Success Too often, donors accepted as successes those projects making little difference. USAID’s Strategic Plan for Haiti—1999–2004 was merely a listing of projects under way with the annotation that they were “accomplishments.” Yet the policy areas—environment, privatization, justice, security, fiscal and monetary management, and elections—were disasters, with billions spent and adverse results produced. A UN Development Programme initiative to promote democracy in the 1999–2000 election cycle also is illustrative. “UNDP’s Haiti office claims that its Common Country Assessment (CCA) provides an example of a positive process. The CCA document itself took over a year to complete because the UN Country Team was keen that space for policy debate should be provided. As it took place during the run-up to elections, it became one of the few national forums where policy discussion could occur and civil society organization (CSO) actors could feed their views into the government’s poverty-reduction

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strategy. The UN needed a conscious decision to include representatives from both old and new administrations, so that the CCA would continue to be useful and relevant after the elections. ”Had civil society representatives not participated in this process, the goal of creating for the first time in Haiti an open forum of discussion about the trends, constraints, assets and perspectives of human development in the country would not have been completed.” Yet, the Aristide government ignored these democratic inputs and held the most faulty elections in the nation’s history. Donor Fatigue The factors above may have contributed to donor fatigue. In their retrospective look at aid, the Canadians recounted how their hopes rose and fell with Haitian politics (CIDA 2003, 2; CIDA 2004, 11). Aristide’s return in 1994 seemed to augur a new era where aid could really help. Then, after the World Bank and others spent months putting together the Emergency Economic Recovery Plan, the 1997 election debacle dampened donor enthusiasm. The pattern continued. Over time, donors lost enthusiasm for Haiti and began going through the motions. In 1998, the World Bank concluded: “Lack of progress in reform measures could discourage further investment, reduce donor support, and jeopardize both political and economic recovery” (OED 1998, 61). As it turned out, they did. After 1994, Haiti became an aid orphan—it received increasingly lower amounts of aid, in part because the costs of state failure were not of sufficient consequence to bilateral or multilateral donors to justify more. Lessons Learned Lessons learned center on addressing and resolving issues of governance and political instability as the highest priority. This could take years, and thus requires long-term commitments from donors. Donors must understand the entire aid process and make decisions from a holistic perspective, not in a fragmented, unconnected fashion. Issues concerning conditionality, accountability, harmonization, leadership, planning, alignment, country ownership, partnership, implementation, capacity building, performance assessment, compliance, evaluation, coordination, and knowledge transfer all must be addressed and in most cases rethought: much conventional wisdom may not work, and did not work in Haiti. Resolve governance issues as the top priority. Haiti illustrates that failing to address issues of poor governance and political instability jeopardizes the

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entire aid effort. Donors face two choices: either to engage governments or to wait until countries resolve their own governance issues. The problem with the latter is that fragile, post-conflict states are very unlikely to ever resolve their own governance issues without assistance. And, while they are doing so, economies, societies, and people’s lives can be severely damaged. So like it or not, strategic countries like Haiti require intense engagement, with good governance and political stability as the highest priorities. Be prepared for the long haul in achieving good governance. Building good governance takes time—probably years, maybe decades (OECD 2005). Nonetheless, donors seem to have little patience. Why? Aid flows to developing countries through annual appropriations. Bilateral investors are faced with changing priorities and administrations at home that can translate into reduced or interrupted aid. Multilaterals have increasing demand for assistance and diminishing resources, so they tend to invest where they see the best return. Because results from governance programs are often negative or at best invisible, donors get nervous about continuing to pour what they perceive as good money after bad. There is no instant gratification in funding governance programs. There is, by contrast, much gratification in funding humanitarian and infrastructure projects—thousands of starving people fed and a highway system completed. Donors must find ways to persist in promoting and sustaining good governance. Understand what a fragile, post-conflict state is. Donors in Haiti were slow to consider that even though Haiti is in the Western Hemisphere where all countries—except Cuba—are well-functioning democracies, Haiti was not one of them. It is important for policymakers to understand the government in place and what its circumstances are. Although this looks to be an easy matter, in fairness it is not. Only in the last few years have donors tried to understand the special circumstances of fragile and post-conflict states, Haiti being one. But there is disagreement, at the World Bank, for example, about whether the country is a post-conflict country or one in conflict: violence continues and the government is not in control of portions of Port-au-Prince or the regions. However classified, Haiti is perpetually in a state of conflict, albeit at a steady level of violence with occasional strong peaks. Because there are different models of foreign assistance, uncertainty increases the risk of aid failure. Do not move too quickly from post-conflict reconstruction to normalization. Haiti illustrates donor impatience in wanting to move from post-conflict assistance to normalization. Normalization is comparatively easy work; reconstruction is much harder, and higher risk. Donors, for example, seemed to

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think that when elections in Haiti were held, everything would fall into place. Elections might have made things worse. Elections in the Haitian context, at least in retrospect, likely are a concern under normalization, not reconstruction. Some will disagree. But regardless, donors should front-end load assistance into setting a fragile nation—especially a post-conflict one—right, before assuming normalization. Afford more flexibility in allocating aid. In the U.S. system, Congress appropriates aid to specific programs—HIV/AIDS, disaster relief, food, democratization—sometimes on its own initiative, and sometimes in support of the presidential administration. Even when appropriating against an administration’s plan, Congress expects to allocate funding to specific programs. Congressional and administration aid allocation practices may cause problems. Countries may neither need nor want donor-determined programs. Situations in countries may suddenly and dramatically change, making aid ineffective or irrelevant. Donors may duplicate one another’s programs and leave gaps in other areas. Policymakers should consider making aid more flexible and nonprogrammatic, then hold aid managers accountable for performance. Because it has a low probability of success, approach conditionality cautiously. There seems to be an emerging consensus that conditionality is of limited utility (DFID 2005a, 2005b). Donors have little leverage through conditionality, especially in support of governance, public-sector reforms, and sound economic policies. In many cases, need is so great that funding flows, even if under less-than-ideal conditions. Other stakeholders pressure one another politically to provide assistance even when it might be wasted. Cutting off or slowing assistance can wreck or undo progress. Many regimes simply hold the population hostage, forcing donors to provide assistance. And many regimes care so little about their own people that they are willing to forgo assistance rather than give in to demands. Governments will agree to almost anything; whether they support it is another matter. All of these characterized Haiti. Conditionality should be employed sparingly or more judiciously. Carefully assess whether to tie aid. Multilaterals are increasingly lobbying against aid tying because of its negative consequences: reducing aid flows to countries, limiting options and flexibility in providing goods and services, and succumbing to politically powerful vendors—private companies or NGOs, for example—who may set a donor’s aid agenda. Benefits to donors can be significant, but may not be worth the cost to aid recipients. It seems unwise to untie all aid, regardless of the country, the country’s circumstances, or the

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donor’s interest. Donors should treat each project or program on a case-bycase basis. In general, though, less will be more. Be cautious setting up a donor-driven aid agenda. Conditionality occurs when donors provide aid for programs fitting their agenda—recipient countries either take it or leave it. Who determines the aid agenda? It would be nice if donors and governments worked out what needs to be done. But there appear to be many cases where donors are influenced by NGOs, advocacy groups, or industries, having agendas they would like to pursue that are important neither to the donor nor to the recipient. So, if an NGO sets up capacity to work on the environment, then it will lobby for specific environmental programs regardless of whether these are the best way to address the environment or whether other programs should have a higher priority. This appears to be the case in Haiti for some programs funded under USAID. It would be much preferred if USAID and the Haitian government, along with other donors, worked out the agenda and then found vendors to deliver services or undertake projects, rather than having vendors and advocates set the agenda and having donors fund it and governments accept it. Hold government accountable: offer incentive-based funding. The Haiti experience shows that even in the best-intentioned governments, officials do not want to be held accountable. They claimed to lack capacity, on the one hand, but argued they knew how to spend wisely on the other. All assistance should be subject to performance goal attainment and to compliance with regulations, controls, and conditions. Funding should be awarded in tranches based on performance. Many oppose this. It imposes too much burden—compliance, reporting, data gathering—on governments and sets governments up for failure when they inevitably come up short in meeting development goals. But, rewarding dysfunctional countries a blank check is courting disaster. Rather than focusing on disincentives—aid suspension or reductions—funding should be awarded with incentives for good performance. Rethink budget support funding. Donors, for the most part, were suspicious about Haiti’s ability to control aid spending, or any spending. As such, donors channeled funding directly into programs, bypassing government altogether, or treated government as a pass-through agency for administration. Donors are wary of providing direct budget support—transferring funding into the Treasury for general use by ministries. Bypassing government was intended to encourage it to become accountable, and hence allowing it to receive more flexible, direct funding. Although this promoted accountability (DFID 2004), it jeopardized other aspects of the aid program. Without direct budget

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support, countries may not be able to sustain aid investments already made and may be ineffective in managing agencies and ministries where revenue is not available. Haiti lacked resources and had few options. The extent to which donors provide direct budget support needs to be rethought. Direct budget support is not inconsistent with performance-based aid. Be prepared to deal with aid suspensions. Aid suspensions or deep reductions to force accountability were highly problematic in Haiti. Suspending aid sent a message to the government that it needed to reform or comply, or risk loosing future funding, on the one hand. On the other, the government really did not care whether aid was suspended: it had other priorities—in Haiti’s case political power consolidation or individual aggrandizement—or alternative ways of funding its activities. Between 1996 and 2006, Haiti’s government and Parliament engaged in a standoff, while letting the country deteriorate. They knew donors would fund humanitarian programs, regardless of what they did. It is an open question as to whether aid should have been suspended or reduced to force compliance. Many believe suspensions were largely ineffective. Regardless of the merits of suspension, donors must develop strategies for immediately reengaging once a government is ousted or reforms itself. In Haiti’s case, donors were too slow in realizing the implications of having withdrawn funds: donor capacity in the country, government capacity in aid administration, and donor funding reprogramming or new programming needs. Sometimes share credit for successes with other donors. Aid harmonization is in every donor’s interest, but it did not happen in Haiti. What occurred was that donors shared information on what they were doing or intended to do. But this was very different from dividing up assistance to eliminate duplication, form partnerships around common interests, and lead in a sector. In Haiti, without exaggeration, every major donor worked on democratization, and yet Haitian democracy was no where to be found. Donors had compelling reasons for offering aid even though it might conflict with or be duplicative of that from other countries—U.S. foreign policy, for example, promotes democracy globally, so aid programs tend to focus on democratization in part. But other multilaterals and bilaterals have similar agendas. For aid to be effective, it must be harmonized. Carefully choose when and where to assume a leadership role. Donors have numerous issues surrounding whether and when to assume a leadership role in delivering aid. In Haiti, at least in retrospect, it may not have been the best

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approach for the United States to lead on democratization, even though every U.S. administration promotes democracy and/or human rights. Many Haitians and others believe that the United States meddles in their country, taking sides and imposing its will. And the United States has done so for over a century. The reality is that the United States has done poorly in democratizing Haiti. Perhaps the United States, as donor, should consider taking a leadership role in humanitarian assistance, health care, infrastructure provision, and agricultural development, while ceding democratization to others. Again, for fragile states, this decision should be made on a country-by-country basis. Do planning differently. As observed above, Haiti, like other developing countries, has a plethora of planning documents, carefully thought out. They consume a lot of resources from Haitians and donors. Yet none of these planning efforts in Haiti seemed to pay off in effective aid provision—in spite of their sophistication and elegance. To be sure, aid failed in large part because of political instability and bad governance. These factors, ironically, were mentioned as issues in every plan since 1990, but then plans went on to promote other things of low priority. One problem may be that planning, especially among multilaterals, has become too standardized, and hence irrelevant. If countries are very different, standardization may systematically exclude new opportunities not supported in a common product. Plans focus heavily on design, but not on context. This ignores the fact that context probably determines design. Plans also seem to take a “blueprint” approach where “good governance” is something that is installed, not developed. It might be time to rethink planning in fragile states and post-conflict countries. Be prepared to abandon plans when circumstances change. Too often in the Haitian case, donors saw that projects and programs were unraveling and likely to lead to aid failures. Rather than reworking plans to be more realistic for the situation on the ground, donors pressed on. There is no justification for continuing to invest in hopeless enterprises. Such projects rarely produce worthy results. Many have adverse consequences. Consider pros and cons of aid alignment. Alignment is much talked about, but overall it still has many shortcomings, especially in fragile and post-conflict countries. Donors often face a dilemma in accommodating a country’s needs and preferences, while withholding funding for projects and programs that they know will not work or that are inconsistent with their agenda (OED 2003). Not aligning aid has consequences, most often difficulties with developing country ownership and inconsistent, fragmented, or dysfunctional assistance

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approaches. But another often overlooked negative consequence is legitimacy. On the one hand, if aid is not aligned, good governments may be seen as somewhat illegitimate; on the other, aligning aid with bad governments may make them seem legitimate (CIDA 2003, 2004). In Haiti’s case, issues of legitimacy and foreign intervention were critical, but were never addressed. For governments trying to create a good governance environment, “An overarching principle of the harmonization and alignment agenda is that donors should support country-owned strategies for growth and poverty reduction and base their programming on the needs and priorities identified in these strategies” (UN 2005, 173). For governments that are not sincere, do not align with them unless it serves a donor country’s interest to do so. Take country ownership seriously. Donors tend to pay lip service to country ownership as essential to aid effectiveness. If governments are not committed, they tend to implement programs without enthusiasm and may not invest matching or operational funds in programs, as was the case in Haiti. Donors need to decide whether their programs can be sustainable and effective without government support. If they can, then the present aid system probably works well. If they cannot, then promoting country ownership must move high on the agenda, and tradeoffs to achieve it must be made. Aid recipients may fail when donors allow them to do things they suspect are risky, but aid often is ineffective when donors exclude government. Donors must look closely at the impact of country ownership on programs before going it alone or operating parallel systems. Understand that promoting country ownership implies a reduced donor role. Donors often think that they can simultaneously control development and elicit strong country buy-in. They cannot. Country ownership necessitates a lessening role for donors, and increasingly more responsibility for governments. Donors must accept the risk. Remember, donors cannot buy democracy, capitalism, or reform. Given the aid funding invested in Haiti, it seems that donors may be intent on buying reforms rather than building them, or, as observed above, installing rather than building them. This will not work. Unless country leadership believes in reform, they will either take the aid and do what they want or stand by indifferently. Only fund sustainable projects and programs. Emergency relief and humanitarian assistance are, by definition, short-term programs to maintain a population in times of crisis. Other assistance should be undertaken only if

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it is sustainable. Sustainability is likely attainable in one of three ways. The preferred way is to invest in a program that becomes sustainable once funding is concluded: creating an irrigation system that helps farmers compete in food markets, the returns from which allow farmers to maintain the irrigation system with their own resources, for example. For other investments, either government or donors must take responsibility for continued maintenance and operations. Donors need to look more carefully at the capacity and willingness of government to pay for maintenance and operations after assistance is withdrawn. If capacity and willingness are absent, then donors must continue to invest, rethink the investment, or pressure government to take over funding. Too often in the Haiti case, donors seemed surprised that Haitians did not sustain initial donor investments. But donors failed to realize that all of the factors enumerated thus far conspired against them. Poorly governed countries have few resources and many demands. Fund only big-picture programs that make a difference. A close examination of donor efforts in Haiti shows a plethora of small projects intended to address big issues. This is a shotgun approach. But these small projects tend to be low impact, short term, and labor intensive to manage. The reason for the shotgun approach was that the Haitian government lacked the capacity to partner with donors for major program initiatives and donors were suspicious of how Haitians would spend funding on a more massive scale. Being risk averse, donors tended to opt for small projects where damages—of any kind—would be minimal. As the Canadians repeatedly point out, this strategy produced few positive results. Donors must, instead, focus scarce development resources on programs and initiatives that will make a difference. A few workshops that serve several hundred people in a democratization program, no matter how well intentioned, are likely meaningless. “[G]overnments and their partners should move from a narrow focus on organizational, technocratic and public management approaches to a broader perspective that incorporates both the political dynamics and the institutional rules of the game with which public organizations operate” (World Bank 2004a). Establish donor offices as soon as circumstances permit. Haiti points out the need for a physical presence in a country early on in the foreign assistance process (OED 2005a, 2005b). This applies mostly to multilaterals who tend to withdraw entirely when aid is suspended or security is jeopardized. Donor absence is a problem when countries move into post-conflict status and require meetings to prepare plans, write loan proposals, and coordinate and administer aid. Donors need to begin moving resources into place as soon as security permits.

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Develop aid administration capacity as soon as possible. In Haiti, lack of capacity in and suspicion of government led donors to administer aid themselves and/or fund NGOs to deliver services. Bypassing government makes a country a “protectorate.” Expectations were that over time, the Haitian government would assume these responsibilities. But it did not do so since the 1990s, if ever, in spite of what in 2006 appeared to be meager attempts to assist the Haitians. Donors needed to make a more determined effort to build government capacity. Not to do so was in the end self-defeating. Remember that capacity building is a government responsibility. Too often, a lack of capacity was blamed on donors. In the end, it is a developing country’s responsibility to develop and refine its own capacity. The 2005 Paris Declaration on Aid Effectiveness summarizes the issue: “This represents a clear agreement that capacity development is the primary responsibility of developing countries, with donors playing a supportive role. Developing countries must lead the process of capacity development through setting specific objectives in their national plans. Donors should mobilize their financial and analytical support around credible partner country objectives, plans and strategies, making full use of what capacity exists” (Manning 2005). Rethink how capacity building is undertaken in fragile states. The World Bank’s OED did the international community a great service by pointing out that most capacity-building efforts—as in Haiti—are woefully inadequate (OED 2005a, 2005b). Lessons learned appear to apply in Haiti as well. Although well beyond the scope of this chapter, general capacity-building principles include: • Is not a collateral activity, it is a core goal and high priority in its own right; • Is the underpinning of good governance; • Must be integrated across all sectors, ministries, and institutions and government wide, because weakness in one area affects the rest adversely; • Must have clearly defined purposes, objectives, and strategies just as do projects and programs; • Must be seen in a broader, comprehensive approach to human resource management and in a human capital strategy for a country; and • Must switch from a focus on individual training and technical assistance to a “whole of government” needs assessment and strategy. Ensure that the government produces accurate, timely financial, economic, and social data. Performance assessments are only as good as the data they produce— pertinent, accurate, timely, usable, and credible. Even in developed countries, this

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has been a tall order, not fully attained. In countries like Haiti where government resources were scarce even for basic, minimal operational effectiveness, imposing and funding a data-gathering system might be perceived as of low priority. Yet, if aid programs are implemented and cannot be assessed, there is no way to keep them on track, let alone determine how well they performed. Do not waive sound financial control practices for expediency’s sake. Donors are under enormous pressure from one another and from recipients to relax financial controls to expedite aid allocations. This is a bad idea. As recent events in the U.S reconstruction of Iraq and the Hurricanes Katrina and Rita recovery, and the UN Oil-for-Food scandal show, even in countries with strong controls in place, along with extensive transparency and accountability mechanisms, money tends toward corruption when controls are waived, ignored, or not enforced. In Haiti, where virtually no financial controls exist or where they are likely to be weak, aid is likely to be wasted. Understand what constitutes a successful foreign assistance effort. The Haitian experience is replete with documents that begin by saying that a program—democratization, for example—was a success, then go on to say that specific projects and programs did not work: “the operation failed, but the patient recovered anyway.” Or, documents report on successful programs—voter registration efforts, for example—where the overall initiative failed: “the operation was a success, but the patient died.” These represent donor failure to understand that they are in business to improve governance. A program cannot be successful if governance is not changed for the better; neither can it be successful if governance progresses on its own. Reports like these had consequences in Haiti, not the least of which was detracting from the seriousness, credibility, and legitimacy of assistance efforts. Take “donor-to-government” and “donor-to-donor” coordination seriously. Ironically, Haiti became a model of aid coordination for a short time under Aristide II (Hassan 2004), and in our view an apparently effective model under the Interim Cooperation Framework. In spite of these admirable efforts, aid coordination remains a problem. As noted above, donors have different agendas, cultures, politics, and capacity, inhibiting cooperation, either intentionally or inadvertently. Donors need to revisit reasons for coordination failures. Specific Programmatic Efforts The failure of democratization programs in Haiti suggests that donors ought to rethink assumptions under which civil society organizations are developed,

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elections are offered, grassroots participation in politics is promoted, individuals are supported over institutions, and legitimacy in government is spawned (Diamond, in chapter 4, lays out criteria for democracy and governance programs). Rule of law programs are most effective when courts, prosecution, law enforcement, and prisons are treated as a justice system within a larger set of executive and legislative branch reconstruction and reform. National reconciliation and justice following conflict must be effectively pursued. And civil service, decentralization, and privatization reform should be delayed until normalization, and not pursued during reconstruction. Anticorruption programs should be pursued as soon as possible. Rethink democratization programs in fragile, post-conflict states. Haiti raises some troubling issues about democratization of countries that have no tradition of democracy, have leaders who value democracy only to the extent that it serves their political or individual interests, and are impoverished. There are no good answers about how to promote democracy in these countries using aid. But it is time to start asking tough questions. Consider whether CSOs are the solution or the problem. Civil society organizations in many ways are the foundation of modern democracy. CSOs, as political scientists tell us, are responsible for aggregating the interests of their constituents and then articulating them to people who are in or seeking power. But in Haiti, where there is a single dominant dysfunctional party and dozens of loosely tied factions and interests, there are no bounds on civility, and violence is the preferred method of resolving disputes, is funding CSOs a good strategy? Would this not be the equivalent of the French funding political groups in a U.S. state because they were unhappy that it was dominated by Republicans? CSOs are important, but donors need to think more carefully about when and how they promote them during the post-conflict reconstruction phase of an assistance effort. The United States has been widely criticized for appearing to use CSOs to undermine governments, under the guise of democratization. CSOs also make it possible for elites to agitate in the political system in low-visibility ways through surrogates. It will be difficult to reduce the influence of CSOs in development assistance. Do not rush to hold elections. Elections are the mainstay of democracy. But nearly all countries hold elections, even authoritarian states like Cuba. What makes elections important to democracy is that they are legitimate, free, and fair, and that people and political parties and actors accept them. Haiti, since 1990, has demonstrated that it can hold elections, but these have not been viewed as legitimate. To make matters worse, countries and regional

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organizations accept illegitimate election results that they should not, and fail to accept legitimate results when they should. This politicizes elections even more. We need to rethink the importance of equating democracy with elections during a post-conflict reconstruction period. An OAS ambassador to Haiti, after assessing the situation in 2003, reached a similar conclusion: “Elections anytime within the next few months are likely to do more harm than good because: the security situation in the country would not permit full participation in safety; opposition parties would be grossly unprepared; participation would be very limited; there would very likely be violent clashes; the result of the elections would be unrepresentative of popular will; and, such solutions not under Resolution 822, probably would not be recognized as valid.”1 Gerard Le Chevalier, head of the UN electoral assistance mission, had even stronger words about the impending 2005 elections: “The idea that hit-and-run elections will overcome a crisis is wrong—more often than not elections generate civil wars rather than solutions. What Haiti needs is a process of negotiation and dialogue and democratically elected authorities who behave democratically” (Lakshmanan 2005). Do not use elections to cut and run. Many commentators suspect that the rush to hold elections is a way for donors to declare victory and leave reconstruction to a newly elected government. Elections have become an “exit strategy” for the international community, who might be accused by some of wanting to invest aid in countries that are more deserving. If this is true, then a great disservice is being done to democracy (Orr 2002, 142). Expand opportunities for poor people to participate in the political system. Many informed observers suggest that poor people in Haiti would like a voice in the country, having grown tired of being exploited by a small economic/political elite and a larger cadre of people who would like to become elites. This is why Aristide was and remains popular among the poor. Democratization efforts to date, as observed above, have focused on elections and CSO formulation. But elections have made little difference in poor people’s lives, and CSOs are dominated by elites who may not represent or even care about their poor constituents. What are needed in Haiti and other developing countries are much-expanded opportunities for poor people to directly participate in political affairs. There are many effective models for achieving this: they ought to be considered in fragile, post-conflict countries (Buss and Redburn 2006). Rather than trying to mobilize the poor through CSO activity, donors might want to consider creating an “enabling environment” in which the poor are given incentives for collective action and mobilization, especially removing

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obstacles (Moore and Putzel 1999). Consider mobilization in Western democracies. There are few programs to create CSOs and like organizations. Why? People who believe their interests are not adequately dealt with in the political system will find ways to organize themselves. Consider supporting democratic institutions, rather than individuals. The rise and fall and rise and fall of Aristide is controversial: Was he a truly democratic figure under assault by reactionary, undemocratic elite forces, who ought to have been supported, or was he another in a long line of rulers who talks about democracy but is a tyrant? Regardless of whether Aristide was or was not democratic, or intended or did not intend to remain in power indefinitely, the fact that so many believe one way or the other, and that Haiti is in shambles, indicates that a careful reconsideration of supporting specific country leaders versus supporting democratic institutions is in order. Aid comes into play because it was used to support and unravel—sometimes at the same time—Aristide’s regime, and as such becomes tied to it. Understand how aid affects legitimacy. As events in Haiti so clearly demonstrate, even the most corrupt, dysfunctional, autocratic government seeks legitimacy if it can get it. Constitutions, elections, and foreign assistance all can legitimize really bad governments. When this occurs, donors have the worst of all worlds: they give legitimacy to the illegitimate and likely fail in the end in their ambitions for democratization. Legitimacy should be of concern in aid provision (Orr 2002). The judicial system must be reengineered in its entirety, not in parts. The rule of law undergirds democracy, and it must be a high priority in foreign assistance. Indeed, it is the mainstay of good governance. In Haiti, a lot of funding was allocated to the rule of law, but the judicial system appears to have made only marginal gains. One reason for this was that assistance was fragmented across donors and lacked coherence. It comprised a myriad of small projects, many insufficient to achieve the donor policy goals. And commitment by the government was weak. The rule of law is one sector where donors must harmonize and align if results are to be achieved. Reconstructing the judicial system cannot be done effectively in isolation. The judicial system is itself only part of the system of governance. In order for it to be reengineered, operations of the executive and legislative branches must also be reconstructed. One necessary condition is that the executive and legislative branches commit to judicial reform, providing leadership, policy, and funding to make it work.

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Legal reform should change political culture. A critical factor in successfully bringing a country under the rule of law is to build a culture where legal norms prevail over individual authority. This is extraordinarily difficult in fragile states where political leadership promotes democratic principles only so long as they benefit the leadership. In Haiti, presidents who found institutions inconvenient would create new ones or ignore existing ones. Unless donors or leaders find a way to break this pattern, rule of law and democratization will be only a dream. Pursuing justice for those killed or wronged during conflict may have no solution. The rule of law is founded on the notion that no one is above the law. But what happens when rebels, thugs, criminals, murderers, and the like break the law to overthrow a government, especially one that has not established much legitimacy and one that behaves lawlessly? Are the lawbreakers really freedom fighters and perhaps immune from prosecution? What happens if lawbreakers take over the government and eventually become legitimate? Many sub-Saharan and Middle Eastern countries have leaders in power who got there through revolution, mostly violent. Haiti is no exception. Aristide punished Duvalierists who opposed him, but did not bring his own followers to justice. Apologists seriously contended that this was acceptable because the opposition did it first. The transition government is bringing Aristide supporters to trial but not many who opposed him. Someone needs to break the cycle of violence in Haiti. A national reconciliation effort is necessary to prevent future violence. Like South Africa, Haiti initiated a national reconciliation effort to reduce violence and promote healing to allow recovery to begin. Smaller efforts at conflict resolution have been funded by donors. Nothing has worked. These efforts have been poorly conceived or supported. Because of their importance, donors must determine why programs failed and make them right. Do not confuse civil service reconstruction with civil service reform. Donors in Haiti appeared to equate civil service reconstruction with civil service reform. It may have been wrong to do so. Haiti’s civil service, it is true, was and remains much in need of reform—it has phantom employees, incoherent human resources policies, unskilled personnel, rampant corruption, low salaries, political influence, and under- and overstaffing. As dysfunctional as the civil service is, it remains the only mechanism to administer the country during the post-conflict era. Reforming the civil service during the reconstruction phase in foreign assistance greatly disrupts an already bad situation, making aid administration and general management all but

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impossible. As a result, donors will bypass government for the delivery of aid programs, denying opportunities for capacity building. Donors may want to work within the existing bureaucracy to determine who can do the job, and ignore or marginalize dysfunctional elements until reforms can be put in place. Few bureaucrats will participate in a reconstruction program while their jobs are being eliminated. Institute anticorruption programs immediately. Governance in Haiti unfortunately seems to have been built on corruption. Why corruption? Some causes are low civil service salaries; bribes and embezzlement; lack of transparency and accountability; opportunities for corruption; ineffective legal systems and enforcement impeding investigations and prosecutions; political influence; pervasiveness; no commitment to stop; and tolerance of corruption. Generally, the more corruption, the less aid effectiveness. The international community is becoming increasingly more adept at reducing corruption in developing countries. And some countries have made major strides in reducing it. The foundations of anticorruption efforts are a sincere commitment by country leadership not to tolerate corruption and when corruption is exposed, perpetrators are brought to justice publicly and swiftly. Donors must insist that developing countries end corruption as a high priority. This will require a well-functioning judicial system. Postpone decentralization initiatives until post-conflict reconstruction is well under way. Decentralization—transferring power and resources from national government to local communities—is the cornerstone of foreign assistance efforts. Decentralization can be fiscal, administrative, or political. As with other reforms, decentralizing during post-conflict reconstruction is highly problematic. If the civil service at the national level in Haiti was unable to do its job, imagine how difficult it would be for thousands of local officials, many without experience or resources, to manage villages, cities, and regions. After Aristide’s ouster in 2004, local officials discovered that government offices had been ransacked of everything, including desks, file cabinets, and anything else of value. To complicate matters, thugs and opportunists roamed the streets with impunity. And no security forces, either local or international, were to be found. How could these dedicated officials possibly administer the country? Rushing into decentralization may be ineffective until a country becomes normalized. Importantly, though, the number of developing countries that have pursued decentralization and actually achieved it is surprisingly few given the attention to the issue. So there are few models donors can draw on to effect decentralization in fragile states.

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Pursue privatization programs only with popular and governmental support. Privatization of government enterprises is a high priority, especially among multilateral donors. Government enterprises are inefficient, rent seeking, and political. They should operate like businesses. Haiti illustrates the necessity to lay the groundwork among people and leadership before wholesale privatization. Premature privatization efforts will tend to be ineffective. Broader Context Unfortunately, democratization and public-sector reform cannot be addressed in a vacuum. They exist in a much broader arena where security, growth and development, and job creation are important, and are preconditions for reconstructing a country. Without security, nothing positive is likely to happen in a country. Likewise, unless countries establish necessary structural reforms, economies cannot grow and develop. Above all, poor people need jobs. If they do not see any positive gains from foreign assistance, they will likely be manipulated by those who will promise a better life. Prospects for the Future Haiti, under its transition government, has embarked on yet another effort at development—the Interim Cooperation Framework. Given governance failures in Haiti, especially since the 1970s, it appears that Haiti and the donor community have done a lot of things right in this initiative. The transition government has been creating appropriate governance policies, processes, and reforms, not to mention enacting laws that are necessary to make the most of foreign assistance. The Haitians have partnered with the donor community to craft a strategy to help Haiti turn around by 2008. On the donor side, bilateral and multilateral donors are effectively working together and with their Haitian partners. Everything seems to be in place for a successful outcome. Only the impact of 2006 elections will portend Haiti’s future in 2007 and beyond. Everyone hopes that the new government will jettison the governance approaches common in the past and embark in new directions that will benefit the people. Acknowledgments The authors would like to thank NAPA Fellows Ambassador Edward Perkins and Ambassador Terence Todman, Eric Walcott, and Fareed Hassan at the World Bank for their thoughtful comments on this chapter. We would like to thank Academy President Morgan Kinghorn and Academy Vice president Scott Belcher for the encouragement and support. In addition, Academy Fel-

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lows Ralph Widner, Enid Beaumont, Dan Spikes, and Phil Rutledge deserve special mention for their work on the project. Note 1. From a memorandum (subject: observations and conclusions on the situation in Haiti ), from Ambassador Terence Todman, Special Envoy to Haiti, to Dr. Cesar Gaviria, Secretary General, OAS, November 18, 2003. Available at http://scm.oas.org/pdfs/2004/ cpsc02366e.pdf (accessed May 1, 2006).

References ARD, Inc. 2000. Haiti Democracy Enhancement Project (November). Burlington, VT: ARD for USAID. Buss, Terry F., and F. Stevens Redburn. 2006. Modernizing Democracy: Innovations in Citizen Participation. New York: M.E. Sharpe. Canadian International Development Agency (CIDA). 2003. Corporate Evaluation of the Canadian Cooperation Program in Haiti (1994–2002): Summary Report. Quebec: CIDA Performance Review Branch. Available at http://www.oecd.org/dataoecd /36/45/35425444.pdf (accessed March 2007). ———. 2004. Canadian Cooperation with Haiti: Reflecting on a Decade of “Difficult Partnership.” Ottawa, Canada: Canadian International Development Agency. Available at www.oecd.org/dataoecd/41/45/34095943.pdf (accessed March 2007). Department for International Development (DFID). 2004. Poverty Reduction Budget Support. DFID Policy Paper (May). London: Department for International Development. Available at www.dfid.gov.uk/pubs/files/prbspaper.pdf (accessed March 2007). ———. 2005a. Partnerships for Poverty Reduction: Rethinking Conditionality. Policy Paper (March). London: Department for International Development. Available at www. dfid.gov.uk/pubs/files/conditionality.pdf (accessed March 2007). ———. 2005b. Why We Need to Work More Effectively in Fragile States. Policy Paper (January). London: Department for International Development. Available at www.dfid. gov.uk/pubs/files/fragilestates-paper.pdf (accessed March 2007). Economic and Social Council (ECOSOC). 1999. Report of the Ad Hoc Advisory Group on Haiti (E/1999/103) (July 2). New York: UN Economic and Social Council . Available at http://daccessdds.un.org/doc/UNDOC/GEN/N99/198/35/PDF/N9919835. pdf?OpenElement (accessed March 2007). General Accounting Office (GAO). 2000a. Foreign Assistance: Any Further Aid to Haitian Justice System Should Be Linked to Performance-Related Conditions. Report to Congressional Requestors, GAO-01-24 (October). Washington, DC: General Accounting Office. Available at www.gao.gov/new.items/d0124.pdf (accessed March 2007). ———. 2000b. Foreign Assistance: Lack of Haitian Commitment Limited Success of U.S. Aid to Justice System. Testimony before the Committee on International Relations, House of Representatives, GAO/TNSIAD-00-257 (September 19). Washington, DC: General Accounting Office. Available at www.gao.gov/archive/2000/ns00257t.pdf (accessed March 2007). Hassan, Fareed M.A. 2004. Lessons Learned from World Bank Experience in Post-Conflict Reconstruction. OED Conference Note (September 21). Washington, DC: World Bank. Inter-American Development Bank (IADB). 2003. Country Program Evaluation (CPE): Haiti. RE–274 (April 30). Washington, DC: IADB Office of Evaluation and Oversight.

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Available at http://www3.iadb.org/ove/Documents/uploads/cache/320614.pdf (accessed March 2007). ———. 2004. Haiti: Bank’s Transition Strategy: 2005–2006 (November). Washington, DC: Inter-American Development Bank. Available at http://idbdocs.iadb.org/wsdocs/ getdocument.aspx?docnum=561125 (accessed March 2007). Lakshmanan, Indira. 2005. “In Struggling Haiti, Some Long for Ex-Dictator.” Boston Globe, October 27, A5. Manning, Richard. 2005. “Beyond 2005: Changes in Donor Roles and Behavior.” Development Outreach (September). Available at www1.worldbank.org/devoutreach/september05 /article.asp?id=342 (accessed March 12, 2007). Ministry of Economy and Finance. 1997. Project Implementation Problems: Managing Development Assistance in Haiti (January 26). Port-au-Prince, Haiti: Ministry of Economy and Finance. Mobekk, Eirin. 2000. “Enforcement of Democracy in Haiti.” A paper presented at the Political Studies Association meeting, London, King’s College, April 10–13. Moore, Mick, and James Putzel. 1999. “Politics and Poverty: A Background Paper for the World Development Report 2000/1.” Sussex, UK: Institute of Development Studies. National Center for State Courts (NCSC). 1995. Haiti Short Term Judicial Training. Report to USAID, Development Experience Clearinghouse, PD-ABP-366. Williamsburg, VA (accessed May 1, 2006). Operations Evaluation Department (OED). 1998. The World Bank’s Experience with Post-Conflict Reconstruction. #18465 (June). Washington, DC: Operations Evaluation Department. ———. 2002. Haiti: Country Assistance Evaluation. Report No. 23637 (February 12). Washington, DC: Operations Evaluation Department, World Bank. _______. 2003. Toward Country Led Development: A Multi-Partner Evaluation of the Comprehensive Development Framework (Synthesis Report). Washington, DC: Operations Evaluation Department, World Bank. Available at http://siteresources.worldbank. org/IDA/Resources/OED_evaluation_of_CDF.pdf (accessed March 2007). _______. 2005a. Improving the World Bank’s Development Effectiveness. Washington, DC: Operations Evaluation Department, World Bank. Available at http://www.worldbank. org/ieg/development_effectiveness/documents/development_effectiveness_complete _report.pdf. ________. 2005b. Capacity Building in Africa: An OED Evaluation of World Bank Support. Washington, DC: Operations Evaluation Department, World Bank. Organisation for Economic Co-operation and Development (OECD). 2005. Chair’s Summary (DAC/CHAIR[2005]3, February 1). Senior Level Forum on Development Effectiveness in Fragile States, London, January 13–14. Paris: OECD Development Assistance Committee. Available at www.oecd.org/dataoecd/60/37/34401185.pdf (accessed March 2007). Orr, Robert. 2002. “Governing When Chaos Rules.” The Washington Quarterly 25 (4): 139–52. Republic of Haiti. 2004. Interim Cooperation Framework 2004–2006: Summary Report (July). Port-au-Prince, Haiti. Available at http://haiticci.undg.org/uploads/ReportVers ion8%20Eng%20FINAL%20Low%20Res.pdf (accessed March 2007). Schacter, Mark. 2000. “Evaluation Capacity Development.” Working Paper No. 7, Operations Evaluation Department. Washington, DC: World Bank. United Nations (UN). 2001. UN Development Assistance Framework—Haiti. New York: UN Development Programme. ———. 2003. Integrated Emergency Response Programme Targeting Vulnerable Groups and Communities in Haiti (March). New York: United Nations. Available at http://haiticci .undg.org/uploads/PIRen.pdf (accessed March 2007).

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U.S. Agency for International Development (USAID). 1998. Haiti: Results Review and Resource Request (June). Washington, DC: USAID Mission in Haiti. World Bank. 1996. Country Assistance Strategy: Haiti. Report No. 15945 (August 13). Washington, DC: World Bank.. ———. 1997. Haiti: Consultative Group Meeting. Report No. SecM97–299 (April 21). Washington, DC: World Bank. ———. 2004a. “Building State Capacity for Good Governance in Africa Requires a Paradigm Shift.” News Release No. 2005/158/AFR (November 16). Washington, DC: World Bank. ———. 2004b. Program Document of the International Development Association to the Executive Directors on a Proposed Adjustment Credit in the Amount of SDR 24.3 Million (US $36.5 Million Equivalent) and a Proposed Adjustment Grant in the Amount of SDR 16.4 Million (US $24.5 Million Equivalent) to the Republic of Haiti for an Economic Governance Reform Operation. Report No. 30882–HT (December 10). Washington, DC: World Bank. ———. 2005a. Project Appraisal Document on a Proposed Grant in the Amount of SDR 1.4 Million (US $2.0 Million Equivalent) to the Republic of Haiti for an Economic Governance Technical Assistance Project. Report No. 32147–HT (May 13). Washington, DC: World Bank.. ———. 2005b. Global Monitoring Report. Washington, DC: World Bank.

10 USAID and Eastern Europe Something Old, Something New Kevin F.F. Quigley

With the breaching of the Berlin Wall on November 9, 1989, a virtually unimaginable new horizon opened and unexpected new demands were placed on the U.S. Agency for International Development (USAID). The agency that for much of the cold war had been asked to deal with problems of global poverty in the developing world was tasked with promoting a regionwide transition from centrally planned autocratic systems to market-oriented democracies. This dual transition had never been made before, so there was no readily available blueprint and the agency lacked the requisite personnel with needed skill sets. USAID started its ambitious efforts in Eastern Europe with a number of severe handicaps. It lacked an experienced staff with the substantive, cultural, and linguistic skills of the region. Given the agency’s focus, USAID staff knew a great deal about economic development. However, like everyone else, there were few at USAID who had experience with the kind of political development that would be required to assist the Eastern European countries in their transitions away from centrally planned communist systems toward democracy. Lacking familiarity with Eastern Europe, it was not uncommon for staff to view the region through a monochromatic lens, although each of the countries in the region has different economies, histories, political traditions, and ethnic compositions. USAID, like many other donors, initially acted as if the transition to more democratic societies should be relatively easy. Eastern Europeans were also overly optimistic about the speed and ease of this transition process. Given the region’s experiences with highly successful mass movements like Solidarity in Poland, Sajudis in Lithuania, and Civic Forum in Czechoslovakia—involving significant portions of the population—Eastern Europeans wrongly thought 214

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these movements could be transformed into effective political parties and networks for civil society. As these societies opened, these movements became politicized and factionalized and the pace of democratic development fell far short of admittedly high expectations. This chapter examines how USAID’s approach influenced democratic development in Eastern Europe. It focuses on Eastern Europe, with a particular emphasis on Central Europe, the region that received the initial and greatest attention. It begins with a discussion of democracy, offers a brief history of democracy promotion/assistance, and places the U.S. democracy assistance program in the context of the overall assistance effort—including public and private donors. The chapter discusses the signature USAID democracy program in the region, the Democratic Network Project (DemNet). This discussion includes recommendations for the future (chapter 4 offers recommendations for USAID democracy programs as well). This chapter asserts that the concept of external promotion of democracy is extremely problematic, if not impossible. Only citizens of a state can decide that they want democracy. They then must be willing to engage in a complicated, time-consuming, and uncertain process before democracy can be developed—and that process is not certain and is often circular. The author recognizes that there is, however, a useful supporting role that can be played by U.S. public and private democracy assistance programs. That role is likely to be more successful if assistance programs marry style and substance, rely to a great extent on local human and financial resources, and provide longer time horizons than the typically five- to ten-year time frames for most democracy assistance programs. If we have learned anything, it is that efforts to build sustainable democracy require generations. Democracy programs require much greater humility about the role being played by the U.S government in general and USAID in particular. Definitions One of the major challenges in developing an effective democracy assistance program was defining what is meant by democracy, and what role could be best played by USAID. “Democracy” is characterized by three essential and interrelated factors involving processes, institutions, and values. These processes include broad participation by the citizenry, regular competition for political office, and extensive protection of rights. These processes are reinforced by a complex web of public institutions (such as effective legislatures and judiciaries) and private institutions (civil society organizations, media, labor unions, etc.). These institutions help hold the government accountable to the citizenry and take considerable time and

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effort to construct. For democracy to succeed, these processes and institutions must be supported by appropriate values, including tolerance and transparency, and supportive political culture. The citizenry must also have the skills, attitudes, and mechanisms to capitalize on any democratic gains (Dahl 1971; Lipset 1994). The term democracy promotion is problematic. As used by many, it seems self-aggrandizing. Democracy promotion presumes that external actors—whether public or private—can play a determinative role in shaping democratic development in other countries. A preferable term is democracy assistance, which recognizes that external actors are simply assisting, while the primary determinant for progress in building democracy rests with internal actors. (For clarity’s sake, this chapter uses democracy assistance or democracy assistance programs except in those circumstances where government uses the term democracy promotion.) In trying to make sense of recent developments in democratization and democracy promotion, it is important to distinguish between what happened and why it happened. Similarly, it is critical to distinguish between the establishment of a democratic form of government, generally through open and competitive elections, and the development of a more robust democracy along the lines discussed above. This gradual process of developing a more robust democracy is often referred to as democratic consolidation. Democratization is the movement toward greater democracy, regardless of whether the starting point is an authoritarian or semiauthoritarian/democratic regime. Democratization indicates simply a direction but not a result. The focus here will be on the role played by USAID in the establishment and then the consolidation of democracy since 1989 in Eastern Europe. Recognizing the considerable challenges associated with building democracy, this chapter will consider what role USAID played in this effort. Although there are a myriad of multilateral and international organizations involved in this process, the concentration on USAID is warranted because the U.S. government provides more resources for democracy assistance efforts than any other entity, although important bilateral support is provided by Britain, Canada, Denmark, Germany, Japan, the Netherlands, Norway, and Sweden, among other countries (chapters 3 and 5 look closely at these programs). Official U.S. democracy assistance is coordinated by the Department of State, and most of the program is administered by USAID. Although USAID is the principal actor, the United States also provides considerable indirect support for democracy assistance efforts through a plethora of private organizations, many of which are heavily dependent on government funding. These include the National Endowment for Democracy, the National Democratic Institute (NDI), the International Republican Institute

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(IRI), the Center for International Private Enterprise, the Solidarity Center, the International Foundation for Election Systems (IFES), the Eurasia Foundation, and the Asia Foundation, among others. A discussion about the effectiveness of those organizations is outside the scope of this chapter. Long Tradition in Support of Democracy Democracy has been an important emphasis in U.S. foreign policy, at least rhetorically, since the Wilson presidency in the second decade of the twentieth century. Beginning in the 1990s, assisting democracy has had greater salience in U.S. foreign policy, in large part because of the waning of and then the end of the cold war (Carothers 1999). The Support for Eastern European Democracy Act in 1990 and the Freedom Support Act in 1992, which was directed at the Newly Independent States, are two of the most prominent examples of legislation in support of democracy assistance. During the 1990s, democracy promotion was institutionalized in U.S. foreign policy and foreign assistance programs. For example, deputy assistant secretary of state positions were created in each of the State Department Regional Bureaus; the Bureau for Human Rights and Humanitarian Affairs was converted into the Bureau for Democracy, Human Rights, and Labor; a directorship for democracy promotion was created at the National Security Council; and, most germane to this chapter, USAID created a Center for Democracy and Governance (D/G) within its Global Program Bureau (Carothers 2004). A Bush administration annual report on its democracy promotion efforts, Supporting Human Rights and Democracy: The U.S. Record 2004–2005, indicates that promoting democracy and freedom is “the bedrock of U.S. foreign policy.” President Bush gave dramatic support to democracy promotion in his 2005 Inaugural Address by saying, “It is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world.” The U.S. democracy assistance program seeks to promote and consolidate democracy worldwide. The principal implementing agency, USAID, makes the case that democracy assistance is in the national interest: Expanding democracy improves individual opportunity for prosperity and improved well-being, thus contributing to the more traditional goals of the Agency. The strategic long-term domestic and foreign policy objectives of the United States are best served by enlarging the community of democratic nations worldwide. Establishing democratic institutions, free and open

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markets, an informed and educated populace, a vibrant civil society, and a relationship between state and society that encourages pluralism, participation, and peaceful conflict resolution—all of these contribute to the goal of establishing sustainable democracies (www.usaid.gov).

USAID’s strategy is built to achieve four distinct, but related, goals. If progress is not made toward achieving all four goals, democracy will not be sustainable. These goals are (1) strengthening the rule of law and respect for human rights, (2) more genuine and competitive political processes, (3) increased development of a politically active civil society, and (4) more transparent and accountable governance. Why Focus on Democracy Assistance? Although democracy assistance/governance (called D/G in the bureaucracy) programs were a relatively small portion of USAID’s overall effort in Eastern Europe, because they represented a new stream of programming that has taken on greater global salience since 1989, these programs are the focus of this chapter. From 1990 to 2003, D/G represented 14.8 percent of the total U.S. assistance in Eastern Europe provided by USAID. Democracy assistance rose more than 600 percent, from $121 million in 1990 to $722 million in 2003, measured in 2005 dollars. Although this is a large increase, it is still a small percentage, less than 10 percent of overall USAID funding (9 percent in 2003) (Finkel et al. 2005). A focus on democracy assistance is particularly apt for Eastern Europe. D/G assistance in Eastern Europe is a growing piece of a declining pie. Between 1990 and 1995, D/G was approximately 5 percent of a $450 million program; from 1995 to 2003 it was approximately 20 percent of a $350 million program. The key question that this chapter will explore is: Did U.S. assistance contribute to democratic development in Eastern Europe? Like most interesting questions, this poses methodological concerns, among the most important of which is whether the effects of democracy assistance are measurable. Are the results caused by the program interventions or are they simply correlated with other factors? If democracy takes generations to develop has there been sufficient passage of time to evaluate whether these programs have truly been effective? What also are the appropriate measures of success? Is it free and fair elections? Or is it competitive political parties, or broad protection for civil liberties and human rights, especially freedom of assembly and expression? Or is it universal participation or broad citizen access to information to hold the government accountable? Similarly, it is also important to consider how

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the democracy assistance program operated. Did these democracy assistance programs have an appropriate strategy and effective elements? Earlier studies of democracy assistance have generally acknowledged the importance of these programs while being critical about the effect of U.S. governmental democracy assistance, as well as other kinds of private or multilateral assistance (Carothers 1999; Quigley 1997). In a recent pioneering quantitative study of USAID democracy assistance programs, a team of authors suggest that, “Spending on the promotion of democracy, in the period 1990–2003, helped to increase democracy above the levels that would have been achieved based on all other factors that could reasonably be expected to have mattered” (Finkel et al. 2005, 3). This study goes on to further conclude that, “However, the positive impact of increases in democratization were of a very modest nature. But then again, perhaps one could not reasonably expect more than a modest result, when the inputs themselves, by any comparative standard, have been so modest. U.S. levels of democracy assistance pale in comparison relative to other U.S. development assistance” (Finkel et al 2005). This chapter will examine whether USAID democracy assistance programs made a modest contribution to democratic development in Eastern Europe between 1990 and 2003. A complicating factor in answering this question is the time frame. In a prescient book written just a few months after the fall of the Berlin Wall, sociologist Ralf Dahrendorf suggested that it takes roughly six months to draft a constitution, six years to build a market economy, and sixty years to create a democracy. Dahrendorf (1990, 92–93) wrote that: The formal process of constitutional reform takes at least six months; a general sense that things are moving up as a result of economic reform is unlikely to spread before six years have passed; the third condition of the road to freedom is to provide the social foundations which transform the constitution and the economy from fair-weather into all-weather institutions which can withstand the storm generated within and without, and sixty years are barely enough to lay these foundations.

If Dahrendorf is right, and the evidence seems to suggest that he is, it is possible to assess the constitution-drafting and economic-restructuring efforts, but it is probably premature to conclusively assess democracy assistance and democratic development in Eastern Europe. USAID and Democracy Assistance What is democracy assistance? This is a broad and interrelated array of programs including assistance to elections, parliaments or judiciary arms of

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governments, political parties, trade unions, independent media, civil society, civic education, and many other organizations. Given this considerable scope, USAID and other donors had considerable challenges in designing and implementing democracy assistance programs. Throughout the region there were divergent experiences with democracy, with countries like Poland, Czechoslovakia, and Hungary having had a brief experience between the two world wars, and others like Bulgaria having had no prior experience. Each of the countries in the region also had different experiences with mass movements and civil society. Poland is on one end of the spectrum, with more than 25 percent of the population having been involved in Solidarity. Poland also had a very robust Catholic Church that played a strong role as an alternative source of power and influence, unlike in many other Eastern European countries where the communist regimes maintained a strict monopoly on power. Romania was on the other end of the spectrum, without any prior experience with civil society and any power centers distinct from the regime. Expectations also complicated the design of democracy assistance programs. Both donors and host countries thought that the movement to democracy once the communist system fell and free and fair elections were held should be relatively swift and easy. It was neither. Another complicating factor for democracy assistance programs was that program horizons did not match with the requirements for building democracy alluded to earlier by Ralf Dahrendorf. For example, since the 1990s, USAID made important strategic shifts in program design away from support of formal democratic processes and institutions to a far greater emphasis on buttressing the civil society sector. Also the focal point for USAID’s democracy assistance programs, which began in Central Europe in 1990, quickly shifted north to the Baltics and south to the Balkans as political openings occurred. And far too many of these democracy assistance programs were of very short duration. In both Estonia and the Czech Republic, most U.S.-based assistance was phased out by the mid-1990s, no more than five to six years after they began. USAID shifted emphases and “graduated” or terminated programs there. A challenge growing out of the monochromatic view of the region was the tendency to have very little adaptation in programs although there were different experiences, cultures, and politics. Carothers discusses this as the “one-size fits all” syndrome (Carothers 1999). This was especially pronounced in the early 1990s; however, as USAID’s experience with democracy assistance deepened, it allowed for much more customization of the approach, to adapt to local circumstances, and a more nuanced and effective program. USAID’s democracy assistance program was primarily about strengthening civil society and political processes. To support democratic development, USAID

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sought to strengthen democratic processes, support institutions that make democracy more robust, and encourage civic values, such as tolerance and respect for minorities, that underlie democratic practice. The program included media training, assisting democratic governance, improving public administration, and promoting pluralism. Four program emphases were, in descending order: civil society, governance, rule of law, and elections (Finkel et al. 2005, 34). Most U.S. government–funded programs were administered by U.S. intermediaries, which brought many knowledgeable and committed Americans to Eastern Europe, but far too often imported distinctively U.S. approaches and structures (Carothers 1999). A few of the leading examples of these include the USAID-funded Institute for East West Studies, the Foundation in Support of Local Democracy, and the SUNY Albany CASLIN (Czech and Slovak Library Information Network). Working with a variety of democracy promotion groups like NDI, IRI, and IFES, as well as more traditional USAID contractors/grantees like the Academy for Educational Development, the Institute for Sustainable Communities, and World Learning, USAID sought to accomplish the tripartite effort of supporting democratic processes, institutions, and values. Substantively, the program focused on improving public administration, promoting decentralization, and fostering an independent media and judiciary, as well as strengthening civil society and other democracy-related concerns. Despite the modest amounts of resources going into democracy assistance programs, these programs warrant special attention here because of the significance assigned to them both by the United States and by the recipients. USAID regarded these as important because they were part of a new institutional framework, one of the agency’s four new pillars, reflecting a growing salience in U.S. foreign policy. Host countries considered them important and as being directly responsive to their calls to develop what was necessary “to return to Europe.” USAID relied heavily on training and technical assistance; over time it shifted away from efforts to develop the formal institutions of democracy (e.g., judiciary, legislature) and more toward enabling citizens to develop their own solutions to their societies’ problems. Institution strengthening or capacity building for NGOs/civil society became an important focus (see chapter 14 for a discussion of NGOs). One of the most dramatic expressions of this was the Democracy Network (DemNet) Program, which will be discussed in a subsequent section. USAID and Eastern Europe Signed into law on November 28, 1989, Support for East European Democracy (SEED) was the major U.S. government program for assisting the countries

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of Eastern Europe in their efforts to build market-oriented democracies. This program was administered by USAID and eventually included fifteen countries in the region (Poland, Hungary, Czech Republic, Slovakia, Bulgaria, Romania, Yugoslavia, Albania, Estonia, Latvia, Lithuania, Bosnia, Croatia, Macedonia, and Slovenia). During fiscal years 1990 through 2003, SEED provided to Eastern Europe approximately $6.7 billion in three major areas: (1) strengthening democratic institutions, (2) economic restructuring, and (3) improving the quality of life (Finkel et al. 2005, 31). Perceptions and rhetoric to the contrary, the preponderance of this funding went to economic restructuring, followed by improving the quality of life (emergencies, social safety, housing, health, and environment). Under SEED, support for the market economy received the preponderance of resources, with more than 70 percent; projects improving the quality of life (housing, environment, emergency services, etc.) received 21 percent; and democracy support received 9 percent. Assistance for civil society—as one of the four program areas under the D/G program, along with governance, rule of law, and elections—received considerably less than that. For example, from 1990 to 1996 in the four countries of Central Europe (Czech Republic, Hungary, Poland, and Slovakia) the amounts for these programs were $1.079 billion for economic restructuring, $210 million for quality of life, and $57.4 million for democracy assistance, which represented just 4.2 percent of the total amount (Quandt 2002, 40). These official U.S. democracy assistance efforts need to be put in the context of what the Europeans were doing, providing roughly comparable amounts, and what private foundations were doing. Although private foundations’ overall donation amounts were smaller, relatively speaking private foundations placed a far greater portion of their resources on supporting democratic development. For example, financier George Soros provided more than $250 million annually in support of open societies/democracy through his country foundations, almost five times as much as USAID provided. These amounts did not include the approximately $40 million annually Soros was contributing to support higher education and libraries in Eastern Europe. Providing citizens access to information is a prerequisite for democracy and thus these higher education and library-related projects are related to democracy assistance. Strategy for Assisting Democracy There are a variety of different approaches for assisting democracy. These can be described in very general terms as top-down, bottom-up, or a combination of these approaches. USAID’s basic approach in the first few years of the 1990s was top-down. This approach was predicated on U.S.-centric notions of de-

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mocracy (i.e., a federal presidential system with power spread equally among the executive, judicial, and legislative branches) and a somewhat simplistic linear model of the democratic transition process wherein the democratization process moves from an opening, which enables opposition groups to form and strengthen. Then, the opposition pushes for elections, engendering a peaceful handover of government and a democratic form of government that over time becomes more robust or consolidated. In the top-down approach, assistance focuses on the central democratic processes such as elections and subsequently enhancing major state institutions including the executive, legislature, and judiciary. As part of this strategy, there are many possible tools to be used, although USAID did not deploy a great deal of variance in the process of assisting democracy despite very different political, economic, and social contexts. USAID’s major tools include constitution-drafting assistance through support for groups like ABA-CEELI (American Bar Association–Central and Eastern European Law Initiative); election assistance (including design, administering, monitoring, and voter education) and assistance to major political parties; assistance to strengthen the capacity of parliaments; judicial reform; and enhancing civilian control over the military. A bottom-up approach focuses more on developing ways to strengthen citizen participation in an effort to make the government more responsive to citizen concerns. One example was USAID’s support for the Foundation in Support of Local Democracy in Poland, founded by Solidarity activist and later Polish senator Jerzy Regulski. This approach typically relies on efforts to develop the civil society sector and an independent media through support for groups like the International Media Fund. Assistance can also focus on infrastructural concerns, such as developing the legal framework for civil society or ensuring legal protection for an independent media. This bottom-up approach could also focus on capacity building for civil society organizations and/or support for a variety of independent print and electronic media. A bottom-up approach might also involve civic education directed toward enhancing citizens’ understanding of and ability to access and use information that allows them to hold the government more accountable. An example of this might include work with the Center for Civic Education. A related approach is outside-in, which seeks to shift authority and power away from the central government to the regional and local governments through decentralization. Among these different approaches and tools used by the democracy assistance community, support for elections has received a fair amount of attention, especially in the immediate aftermath of a transition. Election assistance efforts can include help in designing, administering, or monitoring elections,

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as well as voter education to increase the prospects for participation. In many ways, these efforts have received significant amounts of democracy assistance resources since results are quickly and easily discernible, as well as the fact that elections are understood as one of the early and essential steps in the democratization process. Absent free and fair elections, it is difficult to have a robust democracy assistance program. USAID’s programs focused on elections because they are not only the necessary first steps, but they are also a kind of “low-hanging fruit.” Assistance to elections can have an effect that can be readily measured and then communicated to Congress, donors, and other interested parties. With relatively limited resources devoted to democracy assistance programs, this attention to elections may result in less attention being provided to other key aspects of democratic development. For example, a concentration of resources on elections means fewer resources for institutions essential for democratic development including an effective judiciary or the independent media. This may also mean scant resources for the much more complicated process of inculcating democratic values such as tolerance and respect for minority rights. USAID’s approach to democracy assistance gradually shifted from a topdown approach in the early 1990s to more of a hybrid approach blending both top-down and bottom-up. One of the most innovative examples of this was the Democratic Network Project, the so-called DemNet Project. DemNet DemNet provided small grants and capacity-building assistance to local NGOs through U.S.-based intermediaries and was perhaps the most important example of USAID efforts to strengthen civil society and build democracy in Eastern Europe during the first decade after the fall of the Berlin Wall. President William Clinton announced this initiative during a visit to Prague in January 1994. DemNet was formally established in 1995. DemNet initially provided $30 million to a group of NGOs providing resources to eleven Eastern European countries, essentially all the countries in the region excepting Yugoslavia. In addition to country-specific grants, DemNet provided two regional grants, one supporting legal infrastructure development for the NGO sector and the other to encourage networking and sharing of best practices among NGOs. This DemNet approach was an innovative breakthrough. To develop it involved considerable collaboration between USAID and its partner U.S. organizations, which were selected through a competitive process. Some of these included fledgling organizations like the Institute for Sustainable Communities, which was created by former Vermont governor Madeleine Kunin

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following an election observation visit to Bulgaria in 1991; the Foundation for Civil Society (formerly called the Charter Seventy-Seven Foundation), which was set up to support the implementation of the Helsinki Accords in then Czechoslovakia; the U.S.-Baltic Foundation, which was set up by a Lithuanian American; and the International Center for Non-Profit Law, established to develop legal frameworks for civil society. In DemNet, these new organizations were joined by groups like World Learning and the Academy for Educational Development, leading partners of USAID. USAID’s innovative approach included a series of meetings with these organizations before the program began and a year after it started, both hosted by the Rockefeller Brothers Fund at its Pocantico Conference Center in New York. The initial meeting was designed to discuss strategy and means of enhancing cooperation and the subsequent meeting to consider assessment and how to realign the program to respond to dynamic circumstances in the region. Starting with these Pocantico meetings, these partner NGOs established country-specific strategies and set priorities, and aligned them with the overall DemNet goal of supporting participatory NGOs. The DemNet partners hoped to find local partners of some size and significance that would have an impact on national policy. The administering NGOs set up local advisory committees to oversee the development of grant-making priorities/guidelines, and they succeeded in both these important regards. Political sensitivities and concerns about accounting and avoiding corruption slowed the start of DemNet country programs. In addition, final sign-off on the grants was done by the U.S. embassy, which added another layer of bureaucracy, thus further slowing this high-profile program. Given that this program was launched by the president, it raised expectations that were nearly impossible to meet. Although designed simply as a three-year program to jump-start the development of local NGOs, with the exception of Estonia and the Czech Republic—which were graduated—this program was extended for at least another three years in all of the countries of Eastern Europe. This longer time frame, of at least six years for most countries, directly countered one of the major obstacles to success for many democracy-related projects in Eastern Europe, which is the limited time frame. And USAID should be applauded for this. Although the lengthy timetable and bureaucratic process with embassy involvement made the process a bit more opaque, this was a very important step. Despite a solid design that allowed local ownership and adaptation to country circumstances, congressional concerns about financial accountability and state department concerns about political accountability, especially in some countries, required a much more measured approach to DemNet implementation.

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There was also confusion about the relationship between DemNet and the Democracy Commissions that had been established in U.S. embassies throughout Eastern Europe. In efforts to build the social foundations for democracy and encourage democratic resolutions to societal problems, these embassy-administered commissions provided small grants to NGOs of up to $25,000. These grants were designed to be authorized on an expedited basis, in three to six months, rather than in a year, which was standard for most large USAID grants. Besides the issue of confusion with parallel programs, the fact that the U.S. embassy had final sign-off on all DemNet grants engendered perceptions that the primary motivation for this innovative project was to promote U.S. political objectives instead of to assist the host country in the development of democracy on its own terms, in its own way. This question of motivation is increasingly bedeviling democracy assistance programs. Clearly, they are undertaken to promote U.S. interests. However, local organizations have to perceive that these funds are provided without a great deal of political strings attached. Toward the end of the 1990s and increasingly in the twenty-first century, U.S. democracy assistance is increasingly perceived as politically motivated—and thus, as Thomas Carothers argues in his provocative piece in the March/April 2006 issue of Foreign Affairs, there is an understandable backlash against U.S. official democracy assistance efforts. Assessing Democracy Assistance in Eastern Europe Given the broad time frame, and the myriad projects in vastly different country contexts, there are significant risks in generalizing about the overall effectiveness of USAID-supported democracy assistance programs in Eastern Europe. Nevertheless, there are some things that have become increasingly clear (see also Carothers 1999). On a very practical level, democracy assistance should be guided by the physician’s motto of “Do No Harm.” In many cases, democracy assistance programs raised expectations that could not be met, strengthened individuals or institutions that hindered rather than helped democratic development, or never achieved the most fundamental program or project objectives. While generally applauding the effort to assist democracy in other countries, there are ample grounds for skepticism about USAID-administered programs and projects, including (1) rhetoric exceeds the reality of our efforts, (2) far too few resources are used to achieve the stated goals, (3) the importance of external support is overstated, (4) programs are not sufficiently adapted to local circumstances, and (5) style and goals are not aligned.

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Ever since Ronald Reagan made his speech on democracy at Westminster in 1984, all presidents have indicated that promoting democracy is a cornerstone of U.S. foreign policy. Unfortunately, that rhetorical commitment has never been backed by the financial and political support to make the commitment serious. This commitment looks impressive on the surface, for example in launching efforts such as Support for East European Democracy in the 1990s or more recently the Middle East Initiative. The reality is that these grand-sounding initiatives provide paltry amounts of budgetary resources. For the U.S. government, democracy assistance efforts are typically less than 3 percent of the total international affairs budget, which is a small amount (approximately 2 percent) of total federal expenditures. Further widening the gap between U.S. rhetoric and the reality of these programs is that when resources are provided for a democracy assistance program in a particular region, as in Eastern Europe in the 1990s and in the Middle East in the twenty-first century, it is done in a zero-sum fashion. Accordingly, democracy assistance efforts are funded at the expense of other programs in other regions. In the mid-1990s, democracy programs in Russia were funded by limiting funding for programs in Central Europe. If resources matched reality, one would expect that democracy assistance would be the major component in U.S. foreign assistance. In fact democracy assistance trails behind agricultural assistance, the Economic Support Fund, and Child and Health programs. Another reason for skepticism is that many proponents of democracy assistance assume that democracy can be assisted from abroad. Impetus for democratic development is an internal one, although external models and forces can be marginally influential. For example, our most poignant recent examples of dramatic democratic development are the Orange Revolution in Ukraine and the Rose Revolution in Georgia. Both President Viktor Yushchenko of Ukraine and President Mikheil Saakashvili of Georgia said that homegrown forces were responsible for overcoming tyranny and advancing democracy. While they indicated that this never could have been accomplished by outsiders, Yushchenko and Saakashvili expressed appreciation to the international democratic community for supporting their efforts. Given the multiple government actors and the numbers of intermediaries involved, it is difficult to determine precisely the size of U.S. democracy assistance. It is even more difficult to calculate the significance of this assistance. For example, in Kyrgyzstan, this assistance has been described as helping create an influential infrastructure. By itself this infrastructure, including support for civil society organizations, information centers, and printing presses used by the independent media, could not spark the uprising. However, once the spark was lit, having this infrastructure enabled the spark to spread and ignite in some but not all circumstances.

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In Kyrgyzstan it seems likely that civil society and a more independent media, supported by USAID and other U.S. government-supported programs, had an encouraging effect on the citizenry as there was growing disenchantment with President Akayev and his highly corrupt and increasingly autocratic rule. U.S. D/G efforts, especially through support to independent newspapers like MSN (My Capital News), support to Kyrgyz-language radio broadcasts, and support to extend the reach of independent Osh TV, were also helpful in informing citizens at a time of growing politicization. These independent media “played a critical role in disseminating word of when and where protesters should gather” (Karantnycky 2005, 52). However, these efforts did not determine the outcome, which in 2007 appeared to be a long way from democratic. Perhaps more importantly (but also equally difficult to gauge), the recent Kyrgyzstan, Ukrainian, and Georgian examples provide a powerful model to other countries that may have an even greater impact than any specific democracy assistance program or projects. Presidents Yushchenko and Saakashvili clearly believe in the power of their countries as models, as the Velvet Revolution in Czechoslovakia was a model for them. For example, after the people of Belarus saw what was transpiring in Bishkek, there were virtually unprecedented demonstrations demanding greater openness in Minsk, which unfortunately had no effect on the repressive regime there. One of the most powerful arguments suggesting that these investments in democracy assistance programs have been sound is the track record from the early USAID programs. For example, virtually all of the countries of Central Europe that were the early focus of democracy assistance programs after the fall of the Berlin Wall in 1989 have developed politically if not economically. All of the political systems are more participatory and competitive, there is generally greater protection for civil rights, and citizens typically are holding their governments more accountable. The fact that these countries have developed politically and are now well on the way to integration with Europe is a very powerful example for other countries. However, it is simply not credible to suggest that USAID or any other democracy assistance programs produced these results by themselves. Although democracy has progressed in Central Europe, democracy and the assistance programs supporting it have a decidedly mixed record. Fifteen years after the Velvet Revolution, one of its principal architects—Vaclav Havel—argued that “we again witness political apathy. Democracy is increasingly seen as a mere ritual. In general, Western societies, it seems, are experiencing a certain crisis of the democratic ethos and active citizenship” (Havel 2005, 1).

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What Worked After nearly two decades of ambitious efforts to assist democracy in many regions of the world, the United States learned that there are a number of critical elements to successful programs. These include: (1) adapt programs to best fit local circumstances; (2) draw on the most relevant model, which in all likelihood is not a U.S. model; (3) make a long enough commitment to have the desired results, recognizing that democracies are not built in a day; and (4) provide the necessary substantive focus to improve results.1 In some regards, private, independent foundations—dollar for dollar—have a better track record than USAID since they have far greater freedom of action in terms of governance, staffing, programming, and accountability. Thus, these foundations are more capable, but not always inclined, to take more risks—in terms of where they will work and with whom. These private organizations also seemed better able to adapt to local contexts (Quigley 1997). Especially noteworthy and perhaps the most controversial is the work done by George Soros and his Open Society Network. Much of his most effective work relates to investments in education (like the Central European University) and “democratization technology.” Soros’s approach is predicated on the understanding that democracy is fundamentally about helping citizens hold their governments more accountable. This requires that citizens have greater access to and learn how to use information. In this view, democracy assistance can and should be essentially about providing citizens with greater access to information. Since the mid-1980s, there are poignant examples of this. In the late 1980s and early 1990s in the former Soviet bloc, the Soros Foundations provided copiers, which enabled more citizens to read samizdat and other oppositional papers. In the 1990s, pagers and cell phones provided a critical way to mobilize large numbers of citizens to resist antidemocratic activities of governments. And recently, printing presses were important in Kyrgyzstan. These examples suggest that democracy assistance programs can be very effective if they provide the material and technological resources that make participatory institutions and processes more effective rather than explicitly trying to build political institutions and/or democratic processes. By nature these contributions are modest; they play a supporting role enhancing the effectiveness of local processes or institutions. They are not designed to create these democratic institutions, processes, or values from scratch. In the first six years after the fall of the Berlin Wall, there was also insufficient attention to how democracy assistance efforts could be sustained after donors inevitably turned their attention to other regions and issues. The civil society landscape in Central Europe contracted due to unanticipated

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dependencies in the mid-1990s after USAID “graduated” Poland, the Czech Republic, and Hungary and ended their assistance efforts. Drawing on lessons from there, democracy assistance providers tended to be much more attentive to sustainability concerns. Another lesson learned from Central Europe was the need to involve local participants much more extensively and earlier in program design, execution, and evaluation. In Eastern Europe, George Soros modeled some “best practices” for democracy assistance providers that USAID and others can learn from. Soros relied heavily on in-country staff, drew on technical assistance providers from countries with similar political traditions, and built local institutions around Eastern Europe that focused heavily on providing educational opportunities for young people. He also helped developed East-East technical assistance efforts, which in many ways provided more applicable models than a U.S. model. In the Soros programs, distinct from USAID’s, advisers from Poland and the Czech Republic, for example, would share their experiences and provide advice in neighboring countries like Ukraine or Bulgaria, which were lagging behind in the transition process. Since there were many similarities between these countries, this advice was often easier to implement than advice emanating from Brussels, London, Oslo, or Washington. The Soros programs also were designed to make a longer-term, but not permanent, commitment to the transitioning countries. By using in-country staff and developing local institutions, the Soros resources went much further than those of USAID, which relied heavily on high-cost U.S. intermediaries and embassy-based staff. Soros also did much better than USAID did in building up local institutions, especially outside the capital cities (Quigley 1997). Organizations that seemed to have, relatively speaking, more success in implementing democracy assistance programs were those organizations that learned to focus, to resist the pull to be everywhere providing the entire menu of democracy assistance programs. Generally, the organizations that focused on elections, like NDI, IRI, and IFES, developed widely recognized competencies and learned how to adapt their expertise to various circumstances. Some of these organizations also decided that although they had a global scope they would not seek to develop democracy assistance programs in every country where there were opportunities to do so. They instead decided to strategically marshal their resources so as to have the greatest possible impact. For example, under its former president Lorne Craner, the International Republican Institute passed on the opportunity to conduct programs in numerous countries of the Newly Independent States. This tight focus enhanced the quality of their work elsewhere. In addition to adapting, deploying the most relevant model, making a longterm commitment, and having the necessary focus, one of the most important

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aspects of USAID’s democracy assistance programs was that they were generally perceived as important by both donor and recipient. For the United States, “Propounding the virtues of democracy makes us feel good and it’s relatively cheap besides” (Carothers 1999, foreword by Martin Abramowitz). Democracy assistance programs made us feel good because they reflected our perhaps idealized notions of who we are. For recipients, an important impact was psychological. These programs were to connect citizens, many of them who had figuratively and literally been cut off for decades, with other parts of the world. The process of reengagement was extremely powerful encouragement to those inclined to push their countries toward greater political openness. What Hasn’t Worked There are multiple reasons why some USAID democracy assistance programs in Eastern Europe did not work especially well. If USAID programs were not adapted to fit the local context, relied on a top-down U.S.-centric model where style did not match substance, or were short term and unfocused, they were unlikely to have much impact. And even if these programs used the language of long-term commitment, in most cases the rhetoric did not match reality. Other reasons that USAID democracy assistance programs didn’t work include these programs were often treating symptoms not causes, they might be perceived as partisan, and there were negligible amounts of resources—time and money—contributed to them. These programs achieved considerably less than they might. We will examine each of these issues. Inevitably, D/G programs were designed in ways that treated symptoms rather than causes. For example, since the mid-1990s a major focus of these programs has been rule of law. This focus results in efforts to provide training for judges, among other things. Although such training is helpful, it may be only marginally so due to the judiciary’s lamentable weak power in many authoritarian contexts. Without fundamentally altering the balance of power between the executive and the judiciary, it is unlikely that any amount of judicial training will have the desired democratic development effect. Rhetoric to the contrary, it is extremely difficult for any external assistance program to fundamentally alter the balance of power between the executive and the judiciary or the executive and the legislative, or significantly enhance the role played by citizens to truly hold their government more accountable. Without altering these arrangements, democracy assistance programs treat symptoms rather than root causes. It is unrealistic to expect that the root causes can be adequately addressed by external programs. This would not be so problematic but for the expectations generated by the USAID programs that make claims that they are doing so.

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Another major challenge for USAID democracy assistance efforts is that they are perceived as partisan. Given U.S. views on democracy and the democratization process, U.S. programs often align themselves with oppositional figures and institutions. This results in resentment and suspicion from the host country since the United States is perceived as assisting government opponents, and as a consequence gets drawn into the political process. As the recent political changes erupted in Ukraine and Kyrgyzstan, in each case the government lashed out at the civil society sector and criticized the external support it received from USAID and others. A related challenge, and something that is discussed well by Thomas Carothers, is the “one model fits all syndrome,” where the USAID democracy assistance program is applied without sufficiently adapting to the local context. For example, rule of law efforts in Indonesia and in Romania should be dissimilar due to the very different traditions of jurisprudence in the two countries. However, there appear to be relatively modest differences between them, especially if the same implementing organizations are involved. However, far and away the greatest challenge for these programs were the negligible amounts of time and money provided given the task and time required. If, as Ralf Dahrendorf suggests, democracy takes sixty years to build, programs providing a few million dollars for four or five years are unlikely to have a systemic and/or lasting impact. With short-term assistance efforts, especially those emanating from USAID, it is very difficult to appropriately differentiate among recipient organizations as well as to innovate through some careful risk taking. There were also conceptual flaws threaded through many of these USAID democracy assistance programs. Some programs, especially nongovernmental organizations involved in advocacy, falsely assumed that if they assisted the development of civil society (or strengthened the rule of law, etc.) this would inevitably have a salutary effect on democratic development. In far too many cases, given the inherent complexity of civil society, this was a dubious assumption. In part, the designers of these programs assumed that these nongovernmental organizations would be the catalysts for social change that they were in the United States. If the objective, for example, developing civil society, were achieved it might have a contributory effect, but it was highly unlikely to have a causal effect on democratic development. The mismatch between the style and substance of many USAID democracy assistance programs has limited their effectiveness. In many cases, these programs are designed without sufficient participation of host country nationals or necessary adaptations to address local contexts. Design is driven more by the donor’s—USAID’s—interest than by the host country’s needs. Decision making about program goals and directions is not shared, and

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many programs miss an opportunity to promote essential democratic values of participation, transparency, and compromise. Programs that embodied democratic values were more likely to have an impact that lasted beyond the program’s conclusion. All these flaws suggest that wherever democracy has developed since 1990 in no case can anyone reasonably suggest that USAID’s democracy assistance program had the decisive, or even a decisive, impact on democratization. At best, it played a useful supporting role. Doing It Differently USAID’s democracy assistance programs could be strengthened by marrying style and substance, relying to a greater extent on local resources, being more long term, and being a bit more humble about the U.S. role in a country’s democratic development. If the intention is to assist democracy, how programs are designed, implemented, staffed, and evaluated should mirror the democratic process and embody as much of its values as possible. For example, program design and execution should be participatory and transparent, including accountability for both donor and recipient. Although this is difficult to do, eschewing the “Buy America mentality” that permeates much of U.S. bilateral assistance would strengthen democracy assistance efforts. Accordingly, these programs rely far too heavily on U.S. staff, consultants, and institutions. As a consequence, insufficient resources are left for developing sustainable local institutions. One way to overcome this is to accelerate attention to sustainability through promoting greater local involvement as well as engaging other supporters from the private and civil society sectors. Increasingly, USAID programs are going to have to devise strategies for confronting a daunting challenge to democratic development, that is, corruption: “While we have less petty corruption than 10 to 15 years ago . . . large-scale, especially political corruption is on the rise” (Marschall 2005, 10). Although this may be a result of better reporting, there is evidence of expanding corruption. The World Bank estimates that $1.4 trillion annually, or 5 percent of total global economic activity, relates to corruption. These sums dwarf all development assistance and far outstrip the resources provided for democracy assistance. Given the scope of corruption and the likely available resources to combat it, this challenge will be very difficult to overcome. Beyond democracy assistance programs, the United States has a powerful set of policy tools for encouraging democracy that are generally not considered part of democracy assistance. For example, if the U.S. government enacted

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a new energy policy resulting in major conservation efforts and producing a decline in global energy prices, this could have an important impact on political change in the major oil exporters, most of whom are not especially democratic. Similarly, if there were significant investment of oil revenue in human development issues, such as health and education, this could have a powerful impact on political development. As Marina Ottaway notes, “oil and democracy do not mix easily in countries that depend highly on oil revenue” (“Tyranny’s Full Tank” 2005). These oil revenues buttress authoritarian regimes that resist political change and make democratic development much more difficult. Initiatives that provide citizens with greater information about how much oil revenue their governments receive and how these are spent enable citizens to demand much greater accountability and have some potential to advance democracy in these countries. In addition to these steps, lowering the rhetoric about democracy assistance would be helpful. A bit more humility about what we expect to accomplish would probably have a positive effort on USAID D/G programs. If our leaders truly understood the complexity, time, and resources required to advance democracy, they might provide greater resources and a different attitude that would engender greater cooperation and results. As we saw in what looked like a hopeless case during a decade-long struggle in Serbia, democracy assistance can have an impact if it is done right. This means that these programs direct support to an organized, motivated, and committed opposition. Equally important, these programs must be large, sustained, and decentralized; the preponderance of the aid must directly benefit the population; and the United States must not be acting alone (Carothers 2004). Conclusion Even if USAID democracy assistance providers acted on all of these recommendations, it might only marginally improve the effectiveness of these D/G efforts without altering program character. These USAID programs are unlikely to play more than a supporting role in encouraging domestic forces in their efforts to develop more democratic societies. Good intentions and modest time and money resources are not sufficient to make any country democratic. As we have seen from Poland to Ukraine, modeling democracy is very powerful. At this time, perhaps the most important way that our country can effectively assist democracy is to ensure that the actions of the United States are more consistent with the democratic values and principles the United

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States espouses. The widely disseminated and horrifically graphic evidence of the abuse of prisoners at Abu Ghraib and Guantanamo Bay seriously set back U.S. credibility in assisting democracy. Those shocking images make it very difficult to believe that the United States is a country that abides by the rule of law and recognizes the fundamental human dignity of every individual—bedrock principles of democracy. Hypocrisy is not persuasive. Until the United States acts as it believes, USAID democracy assistance efforts will not achieve their full potential. Despite considerable high-level political rhetoric and not-insignificant financial resources, USAID’s democracy assistance programs have not been a determinative factor where democracy has advanced in Eastern Europe since 1990. Similarly, these programs have not appeared to have been a major factor in countries where democracy has regressed. Although these programs—which have been a blending of some things old and some things new—have not by themselves advanced or impeded democracy, they have played a useful supporting role in encouraging democratic development. Since these programs are consistent with the United States’ highest aspirations and values, they should be extended. If these programs marry democratic style to substance, rely on local resources, and are longer term, they could play a more effective supporting role in Eastern European and other countries’ democratic development. Note 1. In my work as a funder of democracy assistance programs as director of public policy at the Pew Charitable Trusts, I tried to be mindful of Ralf Dahrendorf’s warning that although a constitution might be drafted in six months it might take sixty years to build democracy.

References Carothers, Thomas. 1999. Aiding Democracy Abroad: The Learning Curve. Washington, DC: Carnegie Endowment for International Peace. ———. 2004. “Democracy Promotion under Clinton.” In Critical Mission: Essays on Democracy Promotion, ed. Thomas Carothers, 30–31. Washington, DC: Carnegie Endowment for International Peace. _______. 2006. “The Backlash Against Democracy Promotion.” Foreign Affairs 85 (March/April): 200–20. Dahl, Robert. 1971. Polyarchy: Participation and Opposition. New Haven, CT: Yale University Press. Dahrendorf, Ralf. 1990. Reflections on the Revolutions in Europe. New York: Time Books. Finkel, Steven E., Anibal Perez-Linan, Mitchell A. Seligson, and Dinorah Azpuru. 2005. “Effects of U.S. Foreign Assistance on Democracy Building: Results of a Cross-National Quantitative Study.” Version #31, 1–35.

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( N ove m be r 2 5 ) , Ava i l a b l e a t h t t p : / /sitemason.vanderbilt.edu/lapop/ %20THE%20EFFECTS%20OF%20US%20FOREIGN%20ASSISTANCE%20ON (accessed July 17, 2006). Havel, Vaclav. 2005. “What Communism Still Teaches Us.” Special feature in a magazine published by the International Foundation for Electoral Sections, Democracy at Large, 1 (2). Available at www.democracyatlarge.org/ (accessed July 17, 2006). Karantnycky, Adrian. 2005. “Ukraine’s Orange Revolution.” Foreign Affairs 84 (2): 52. Available at www.foreignaffairs.org/20050301faessay84205/adrian-karatnycky/ukraine-s -orange-revolution.html (accessed July 17, 2006). Lipset, Seymour Martin. 1994. “The Social Requisites of Democracy Revisited.” American Sociological Review 59 (3) (February): 1–15. Marschall, Miklos. 2005. “The Changing Face of Post-Communist Corruption.” Democracy at Large 1 (2): 10–11. Available at www.democracyatlarge.org/vol1_no2/vol1_no2_ FW_PC_Corruption.htm (accessed July 17, 2006). Quandt, Richard. 2002. The Changing Landscape in Eastern Europe: A Personal Perspective on Philanthropy and Technology Transfer. New York: Oxford University Press. Quigley, Kevin F.F. 1997. For Democracy’s Sake: Foundations and Democracy Assistance in Central Europe. Baltimore: Johns Hopkins University Press. “Tyranny’s Full Tank.” 2005. The New York Times, OpEd, March 31, A20.

11 Post-Millennium U.S. Aid for Africa Reconciling Freedom and Security, Theirs and Ours John W. Harbeson

The Blair Commission Report on Africa, featuring seventeen political leaders from Africa as well as industrialized countries, articulated an arresting theme, one rarely if ever asserted in the context of foreign assistance prior to September 11, 2001. The common interest, at least in the area of foreign assistance, that these leaders of the developing and developed world recognized was that “Now more than ever . . . we rely on each other not just for sustenance but for our safety and security” (Commission for Africa 2005). As a premise for the design and implementation of post-millennium aid for sub-Saharan Africa by the United States and other developed countries, this assertion, however visionary and laudable, tacitly presumed bases for reconciling what are on their face not easily reconcilable foreign assistance objectives. Starkly stated, the Blair Commission calls upon donors and recipient countries to accept that they can and must reconcile their possibly divergent national security interests, the pursuit of freedom and democracy with the quest for national security, and to achieve these dimensions of reconciliation in ways that result in the strengthening rather than the weakening of subSaharan African states that are characteristically fragile or worse. Reminiscent of dominant development paradigms of the 1970s, far more than those of the 1980s and 1990s, the Blair Commission has signaled that partnerships between donor and recipient countries need to be worthy of the name. The commission emphasized that donor countries must allow recipient countries real input in shaping the meanings and pursuing engagement of the foregoing objectives, even as some donor countries—the United States in particular—have insisted with new urgency since September 11, 2001, that aid serve their paramount interests by continuing to take as hegemonic norms their own particular conceptions of political and economic organization. 237

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By contrast, the Blair Commission has implicitly postulated that enlarged foreign assistance programs can and must be made to serve common and reconciled divergent interests of strong countries and the weak countries of sub-Saharan Africa alike, rich countries and poor, the hegemonic and the marginalized ones. The Bush administration has declined to meet the financial foreign assistance targets proposed by the Blair Commission, continuing an unwillingness of the United States to match other industrialized countries in the percentage of gross domestic product (GDP) devoted to foreign aid. At the same time, however, the United States has articulated a commitment, resembling that of the Blair Commission, to the idea that cooperation between donor and recipient countries for purposes of economic development must include advancement of common security objectives as well. Although the United States has always pursued security and economic development objectives simultaneously under the general rubric of its foreign assistance programs, a long largely latent issue in its foreign assistance programs, that is, how to reconcile the pursuit of security and economic development objectives, has manifestly acquired new importance as a consequence of September 11, 2001. This is particularly the case with respect to U.S. assistance for sub-Saharan African countries. For most of these countries, U.S. and host country security objectives have rarely been debated publicly and always have been overshadowed publicly by economic and, more recently, political development and reform objectives. For the United States, the increased importance of security objectives within its foreign assistance program for sub-Saharan African countries has been complicated by a further problem just within the framework of foreign assistance political objectives. The core issue has become how to pursue security objectives while, at the same time, continuing to support democratization and, also, pursuing another important post–September 11 political objective, strengthening fragile states, a pervasive problem in sub-Saharan Africa. Since September 11, the United States has articulated a commitment to the hypothesis that the contending objectives of freedom and security, its security interests and those of developing countries, and efforts with those to strengthen fragile states can and must be pursued simultaneously. The United States has done so notwithstanding the Bush administration’s explicit and enhanced commitment to preventing, unilaterally, other countries from challenging its military dominance and its commitment to regime change in countries threatening to its security (White House 2002). This increased post–September 11 penchant for going it alone complicated problems of reconciling U.S. security interests with those of African countries. A further problem is that African countries have not received much aid or encourage-

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ment in fashioning their own security policies, let alone reconciling them with those of influential donor countries. The purpose of this chapter is to inquire to what extent and in what ways the United States has reshaped its post–September 11 foreign assistance strategies with a view toward reconciling the pursuits of freedom and security, reconciling its security interests with those of developing countries, and simultaneously supporting the strengthening of fragile states through its foreign assistance programs in sub-Saharan Africa. Specifically, it will consider the ways, and the extent to which, economic assistance to sub-Saharan African countries through the U.S. Agency for International Development (USAID) has sought to identify and operationalize the pursuit of these goals through specific country programs. USAID’s Fragile States Strategy excludes any role for democracy, thereby implicitly seeming to sustain the position that democratic initiatives in weakly institutionalized countries tend to undermine state stability. To the contrary, this chapter will offer the hypothesis that in fact USAID’s parallel promotion of democracy has supported the strengthening of fragile states, thereby preparing the foundations for the formation of host country national security strategies that can then be reconciled with, rather than overridden by, the United States’ global pursuit of its post–September 11 security strategy. The crucial point underlying this chapter is not that security issues and state strengthening as well as democracy promotion have been insufficiently addressed since September 11 in either the foreign policy community or the academic community. Rather, the critical insufficiently addressed problem has been the relationships and the reconciliation of these at least potentially competing priorities with one another more explicitly than has generally been thought necessary since at least the darkest days of the cold war. It has been as though these divergent policies have been pursued on separate tracks. An important complicating dimension that may help to explain the difficulties of effecting these reconciliations and articulated relationships between competing objectives has been a multidimensional reductionism and disaggregation of necessarily connected objectives that has accompanied operationalization of some of the key concepts involved. That is to say, the question is how these concepts have been translated into empirically observable and potentially measurable empirical phenomena. Examples include (1) the reduction of democracy to political freedom and/or to elections; (2) disaggregation rather than connectivity between centrally important rule of law, electoral, and civil society components of democratization; (3) implicit limitation of civil society’s role to the promotion of electoral democracy; (4) shrinkage of democratic governance systems to be substantially coextensive with transparent, accountable bureaucratic rule; (5) interpretation of the rule of law in such

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a way as to bypass the matter of democratic constitutional foundations upon which it needs to rest in any democracy; (6) a focus on state strengthening that bypasses the question of how states and state institutions acquire the strength and legitimacy needed to support democratic electoral processes; (7) a tacit presumption that elections are the only democratic vehicles for building or strengthening states and state institutions; (8) a dearth of emphasis in assistance programs upon the political ends that democratization as a whole—not just democratic elections—can serve, for example, discerning and articulation of their basic national interests, including how those national interests might be realized and secured; and (9) an absence of acknowledgment that “partnership” between donor and recipient countries may require negotiation and reconciliation of possibly conflicting elements in their respective security strategies, consistent with the Blair Commission’s premise that “we rely on each other not just for sustenance but for our safety and security.” The starting point for exploring the extent and ways in which U.S. aid to sub-Saharan Africa has been refashioned to reflect the post–September 11 security imperative is the national security strategy required of every new U.S. administration. The Bush administration’s strategy was published on the first anniversary of September 11, 2001 (White House 2002). In the strategy’s introduction, the Bush administration proclaimed that, as a key part of this strategy, it would “use this moment of opportunity to extend the benefits of freedom across the globe.” It promised to “bring democracy, development, free markets, and free trade to every corner of the world” on the premise that “weak states can pose as great a danger to our national interests as strong states [because] poverty, weak institutions, and corruption can make weak states vulnerable to terrorist networks and drug cartels within their borders” (White House 2002). As an overarching U.S. foreign policy strategy serving, inter alia, as a guide for foreign assistance to sub-Saharan Africa as well as other developing country regions, the new strategy articulated the objectives of promoting both freedom and security abroad, strengthening weak states, and working with recipient states on their security interests as well as promoting our own. But in so doing it took on board all of the elements of reductionism and disaggregation just articulated that obscure both the possibilities and the need for reconciling divergent objectives of freedom, security, state strengthening, and state security. The best known and most controversial feature of the strategy, its promise to “not hesitate to act alone, if necessary, to exercise our right of self-defense by acting preemptively against terrorists,” sits very uneasily with the promise to work with European allies to help “strengthen Africa’s fragile states, help build indigenous capability to secure porous borders, and help build up law

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enforcement and intelligence in infrastructure to deny havens for terrorists” (White House 2002, 5). The document says nothing about working directly with African countries. The National Security Strategy (NSS) promised to “make freedom and the development of democratic institutions key themes in our bilateral relations,” but at the same time it directed much of the emphasis of foreign assistance for these purposes to the Millennium Challenge Account (MCA), which rewards overall country national reform efforts involving the economy as well as the polity, rather than to programs to assist countries in fashioning them (see chapter 15 for an assessment of MCA). This is in marked contrast to the reform efforts that have always been the province of the U.S. Agency for International Development. In the chapter on “opening societies” and “building the infrastructure of democracy,” it appeared to reduce “freedom” to encouraging “economic freedom,” to reduce “open societies” to opening avenues to “commerce and investment,” and to encourage countries to “embrace the rule of law” without any reference to how the rule of law might be interconnected with other elements of democracy or the strengthening of fragile states. Although one cannot reasonably expect detailed specifications in a comprehensive strategy statement of this nature, it is fair to observe that the NSS departs markedly from the Blair Commission’s core premise of mutual reliance between developed countries and the less developed ones of Africa in the areas of both “sustenance” and “security.” This departure brings to light a fundamental and largely unexplored gap in U.S. foreign assistance programming in a post–September 11 era when the promotion of security and freedom have been increasingly presumed to be interconnected: recipient countries’ conceptions of their own national interests and formation of security strategies to serve those interests. A major consequence of reductionism and disaggregation of key elements of democracy, security, and state strengthening in foreign assistance strategies has been the risk that those strategies may serve to not only not support, but even to discourage, recipient countries making those connections for themselves. The Bush administration’s post–September 11 National Security Strategy unmistakably influenced a shift of priorities as well as instrumentalities in the foreign assistance programming for sub-Saharan African and other developing countries (USAID 2004). The Clinton administration’s foreign assistance strategies centered on broadly based economic growth, democratization, and world population stabilization together with promotion of human health, management of natural environments on a sustainable basis, human capacity building through educational initiatives, and humanitarian assistance. Prominently, strengthening of fragile states has joined the top ten aid priorities. Transformation and restructuring of economic and political structures

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has seemed to supplant the more continuous, incremental approaches toward these ends that were in place during the Clinton administration. More subtle, but nonetheless apparent, has been a subsuming, at best, of democratization under the rubric of improved “governance,” and “institutional capacity” and its linkage with fresh initiatives to promote conflict management practices. U.S. aid to sub-Saharan African countries, as well as other developing country regions, in fulfillment of the Bush administration’s new priorities, separates developing countries into three groups: (1) those that are deemed to be of special strategic importance to the United States—Afghanistan, Pakistan, Jordan, Egypt, and Israel (see chapter 7 for a study of Pakistan); (2) countries that the Bush administration considers to be “reasonably stable” but yet “needy in developmental terms”; and (3) “fragile states including failing, failed, and recovering states” (USAID 2005). No sub-Saharan African countries are to be found in the first group. The second group, although many are still assisted by USAID programs, have appeared to be routed toward the Millennium Challenge Corporation (MCC) for assistance. Of twenty-three countries deemed eligible for MCC assistance as of November 2005, based heavily on a mix of quantitative economic and political indicators, twelve were sub-Saharan African countries: Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Lesotho, Madagascar, Mali, Mozambique, Namibia, Senegal, and Tanzania. Of these, Benin, in January 2006, was the first sub-Saharan African country to actually conclude an assistance contract with MCC. These are countries to be rewarded for their own initiatives rather than for their responsiveness to efforts, primarily through USAID assistance, to enable them to become eligible for MCC awards. The remaining three dozen countries of sub-Saharan Africa have been implicitly slotted into the third category, defined primarily by their political weakness, although some are also in preliminary stages of candidacy for MCC assistance. U.S. hands-on assistance in achieving political reform and socioeconomic transformation, then, takes place principally through the USAID, working in ever-closer collaboration with the Department of State, and is directed to countries whose defining characteristic has been established not so much by their degrees of democratization or their socioeconomic advancement as by the weakness of the states themselves. This characterization has made USAID’s Fragile States Strategy a centerpiece of U.S. efforts to assist the development of sub-Saharan African countries and USAID project assistance a central instrumentality for its implementation (USAID 2005). The next section examines this new strategy as it seems to bear on the parameters of that strategy. USAID’s Fragile States Strategy (FSS) recognizes that this phenomenon is not new but asserts the importance of addressing this “third pillar” of U.S. foreign policy, on the same level as defense and diplomacy, because of the

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security threats that their existence is perceived to represent (USAID 2005, v). The FSS employs the term fragile to encompass “failed,” “failing,” and “recovering” states without differentiation. It understands fragile states to be those in crises wherein “(a) the central government does not exert effective control over its own territory, or (b) is unable or unwilling to assure the provision of vital services to significant parts of its territory, (c) where the legitimacy of the government is weak or nonexistent and (d) where conflict is a reality or a great risk.” The operative elements of state failure in the FSS are control, legitimacy, services, and conflict. The FSS identifies lack of legitimate and/or effective government as a precipitant of state fragility, where effectiveness is understood as governmental ability to provide order and public goods and services, and it regards legitimacy as a condition in which important elements of society consider the exercise of governmental power to be “reasonably fair” and “in the interests of the nation as a whole” (USAID 2005, 3). The FSS understands “public goods” to include security of borders and limitation of crime, responsive political institutions, infrastructure and institutions supporting economic growth, and provision of basic services (including to vulnerable and minority groups). It understands legitimacy to be a function of equitability, respect for rights, cultural tolerance, acceptable political processes, leaders and norms, widely accessible economic opportunity, and transparency in the provision of public goods. Four keywords epitomize USAID’s priorities in fragile states: stability, security, reform, and capacity building. It counsels (1) addressing the sources of “stress and conflict” threatening stability, (2) promoting an environment that “enhances personal safety,” (3) implementing governance reform but also critical social and economic reforms, and (4) building the capacity of institutions to serve “key social and economic sectors.” In implementing this strategy, FSS assigns importance to focusing on underlying causes rather than symptoms, critical short-term measures undertaken with a view to required long-term efforts, and eschewing of one-size-fits-all programming. The underlying premise of the FSS is that state fragility is a direct function of governmental quality and behavior. The FSS hypothesizes that the key to strengthening fragile states is for government to do certain positive things and, implicitly, that the role of society at large is to receive and passively approve these dispensations. The strategy does acknowledge that increased legitimacy is indispensable to the strengthening of fragile states. However, the FSS also implicitly reflects and further endorses a long-accepted hypothesis put forward perhaps most explicitly in a classic work by Seymour Martin Lipset in the 1950s: governments that lack intrinsic legitimacy may nevertheless acquire it by governing effectively (Lipset 1959). The FSS acknowledges the importance

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of governmental legitimacy but identifies no processes other than governmental effectiveness, as defined in the strategy itself, as a means to strengthening its legitimacy. Implicitly FSS hypothesizes that governmental effectiveness may be not only necessary but even sufficient to ameliorating state fragility. The truly remarkable feature of the FSS is not what it ordains, which is surely unexceptionable, but what it omits. Almost entirely missing in this strategy is any sense that citizens or citizen groups, civil society or political parties, interest groups, or the media have anything but passive roles to play in the strengthening of fragile states. In a word, the FSS reduces the state to what the government is and does. In so doing it indulges in the very disaggregation and reductionism that undermine the integration of the pursuits of democracy, security, and state strengthening for which the U.S. broad foreign policy strategy calls. First, apart from acknowledging that an effective government must honor basic human rights, it implicitly completely disaggregates and makes no effort to integrate the strengthening of fragile states with the pursuit of freedom and democracy that remains the hallmark of USAID’s political development strategy for sub-Saharan Africa and other developing countries. At the same time, the FSS does not recognize that a security strategy more comprehensive than effecting border integrity and crime fighting is essential to the strengthening of fragile states, let alone the importance of reconciling U.S. and host country security strategies in the particular circumstances of individual countries and regions. In these ways, the FSS belies the objective of closer integration of foreign policy objectives and development support that has been the promise of closer working relationships between USAID and the Department of State. Second, multifaceted reductionism exacerbates this disaggregation of the fundamental pillars of U.S. foreign assistance to sub-Saharan Africa and other less developed countries. Reduction of the problem of fragile states essentially to the performance of governments alone tacitly denies that it is popularly approved constitutions rather than government alone that are the true glue holding democratic states together. In this respect, the strategy appears to deny not only a long and venerable tradition in democratic theory but one of the key factors that has appeared to distinguish more-stable from less-stable democratic states that have emerged in sub-Saharan Africa since the end of the cold war, for example, national conferences in west African states like Mali and Benin, and extensive negotiations on constitutional rules of the game in such countries as South Africa, Namibia, Mozambique, and Malawi. Parenthetically, the FSS affords no recognition that significant external bilateral and multilateral participation has been a critical factor in the case of at least the latter set of states. In the same vein, in acknowledging the importance of

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the rule of law, the FSS tacitly declines to recognize democratically approved constitutions as the basis and wellspring of the rule of law. Equally problematic is the sharply reductionist treatment of democracy’s roles in the strengthening of fragile states. The FSS does not go to the extent of imagining that legitimate, stable developing countries are possible without democracy, since it insists on the importance of governments’ upholding human rights and the rule of law, even if it does not insist that they be grounded in a popularly enshrined constitution rather than simply wise government rule. In specifying the importance of these basic elements of democracy, but only these elements, the FSS assumes tacitly that these are sufficient as well as necessary elements of such democracy as is required for stabilizing or strengthening fragile states. Conversely, by its silence, FSS assumes that citizen roles, civil society, elections, interest groups, legislative policymaking institutions, and political parties are either unnecessary or counterproductive to the end of strengthening fragile states. In this way, as a practical matter, the strategy suggests that two key USAID programs for strengthening African polities, democratization and strengthening fragile states, either have no relationship to each other or may even be mutually antithetical. It takes no imagination to envision a strategy for strengthening fragile states that treats democracy as irrelevant or antithetical to that end. On the one hand, over nearly half a century in sub-Saharan Africa, the pervasiveness of fragile states under, and made so by, predominantly authoritarian rule speaks for itself. On the other hand, the FSS’s tacit exclusion of any role(s) for democratic participation poses the opposite question: to what extent and in what ways, if any, might democratization contribute positively to the strengthening of fragile states? The question of participatory democracy’s value, not just for its own sake but as a means toward other ends, such as strengthening fragile states, is a fundamental question of great importance and one that deserves more attention than it has received in both theoretical and practical terms. It is of surpassing importance for a USAID program that has made the promotion of democracy in Africa and other developing regions a centerpiece of its strategies since the end of the cold war. Democracy as Antithetical to the Strengthening of Fragile States By its silence on the question of democracy’s instrumental utilities, the FSS invites a rephrasing of that question in the negative. It offers an implicit, albeit unacknowledged, empirical test of what is arguably the most important contemporary academic, theoretical challenge to the post–cold war pursuit of democratization in weak states. Snyder and Mansfield have argued that democratization in weakly institutionalized states is premature. Democratiza-

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tion in these circumstances, they argue, rather than being instrumental in the pursuit of peace and state stability, serves to undermine those ends (Snyder and Mansfield 2005; Snyder 2000). Their thesis has offered an important qualifying corollary to the most widely accepted hypothesis of democratic peace theory, resuscitated during the twilight of the cold war; that is, that democratic states do not fight one another (Rasler and Thompson 2005; Ray 1995). Their corollary is that this hypothesis applies to mature democracies, that is, those with strong, stable institutions. What they fear is that the combination of democratic initiatives and weak institutions will enable “illiberal elites” to “hijack” free speech and even a “vibrant” civil society for “nationalist rhetoric and activism” (Snyder and Mansfield 2005, 16). For Snyder (2000) in From Voting to Violence, the danger in all this is heightening of ethnic conflict, further weakening fragile state institutions and, for Snyder and Mansfield (2005) in Electing to Fight, the sidestepping of domestic conflicts by promoting nationalism directed to perceived common external enemies. They worry about the latter eventuality when “the boundaries of the nation” have not been clearly “solved by demography or history,” in which case “national legitimacy can only be achieved by constructing effective state institutions [that] meet a people’s needs for security and create for them a shared fate even if they do not share nationality” (18). Premises are that a “shared fate” is an adequate, if temporary, surrogate of a sense of nationhood, and that other conventional elements of nationhood—language, culture, sense of shared destiny—are either not present or are irrelevant. Given these risks, Snyder and Mansfield call for a sequencing of transitions so that democratic processes follow rather than precede institutional strengthening. They cite with evident approval Thomas Carothers’s complaint that “activists typically arrive with a shopping list of ingredients that a mature democracy compromises, such as free speech, the rule of law, a vocal opposition, and a vibrant society and try to mount programs to develop all of these simultaneously, with no strategy for sequencing or integrating these elements in a way that takes into account the dynamics of transition” (Snyder and Mansfield 2005, 17; paraphrasing Carothers 1999). They comment that “many of these elements may be counterproductive for democratic consolidation if they are promoted in an institutionally immature setting” (17). It is important to note that in leveling this critique of democratic initiatives, Snyder and Mansfield (2005) do not differentiate between domestic and external change agents—“democracy promoters . . . whether they are U.S. occupation forces, NGOs, or reform coalitions in transitional states.” Implicitly, therefore, their critique focuses directly on USAID efforts to work collaboratively with embryonic civil society groups to promote democratic change. Snyder and Mansfield construct, as an alternative to democratic regime

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change, a model in which democratic participation concludes rather than initiates, guides, or even influences regime transition. “Our most general rule,” they say, “is to start the process by building the institutions that democracy requires, and then encouraging mass participation and unfettered electoral competition only after these institutions have begun to take root” (2005, 18). They sketch a model sequence that begins with “constructing effective state institutions” whose first task is to settle the “boundaries of the nation” as indicated above. They envision that settling for a minimalist foundation for national identity and building effective state institutions are interrelated. By “institutions” they mean “converging expectations about what conventional behavior is likely to be” aid in the establishment of standards concerning “what behavior ought to be” (Snyder and Mansfield 2005, 30). The measure of institutional strength and effectiveness is the capacity of the “administrative apparatus of the state to act rationally, consistently and impartially in implementing the policy of the regime” (18). Simultaneously, Snyder and Mansfield envision that “leaders of a would-be pro-democracy coalition, together with international backers [would] seek out and empower a strong political constituency that anticipates benefits from a successful democratic transition, while neutralizing potential spoilers who might have the power and the motive to wreck it.” They anticipate that “economic and bureaucratic elites left over from the authoritarian regime” will participate in such a constituency (18). Through some unspecified process, such a coalition comes to power or, perhaps, is in essence grafted onto a regime already in power. The task of this coalition is then to build the institutions “necessary to regulate participation in a working democracy” (Snyder and Mansfield 2005, 23). The “most important institutions,” Snyder and Mansfield contend, “are administrative, such as a non-corrupt bureaucracy and a police force that follows the law, and those that regulate political competition,” such as election commissions, “well-organized” parties, “competent” legislatures, and “professional” news media (87). Who is to define what these qualities mean and how are they to be engendered? They add, “the absence of significant constraints on the chief executive helps this individual to manage rivalries and . . . head off potentially dangerous logrolling.” Relying on Ted Gurr’s Polity II data set, they contend that these institutions can be more effective to the degree that they enjoy “a more centralized grip on the reins of domestic power” (88). Taken at face value, the Snyder-Mansfield hypothesis must be read as encouragement for U.S. foreign assistance programs for sub-Saharan and other developing countries to resist with one hand what it has promoted with the other. It must be read as offering theoretical and empirical support for an FSS that counsels good governance but not democracy promotion as

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a means to that end, on the grounds that promoting democracy could prove counterproductive both to regional peace and to stable states. On these terms, an FSS that discourages democratization might offer a simpler way to reconcile the goals of strengthening fragile states and promoting the security interests of the United States and sub-Saharan African countries than would be the case were the bearing of democracy on the fragile conditions of states to be addressed. Democracy and the Strengthening of Fragile States: A Theoretical Rejoinder Although Snyder and Mansfield speak of “democratic institutions,” there is nothing democratic about the way in which Snyder and Mansfield propose to accomplish formation and strengthening of effective institutions. At the heart of their thesis lies a reductionist conception of democracy moving from one that includes institutions normally thought to be important components of democracy to one that shrinks democracy to participatory processes culminating in elections. It follows that they conceive the creation of “strong” parties, “competent” legislatures, “independent” courts, the rule of law, and “professional” media—all institutions normally understood as essential components of consolidated democracy—to be the work of political, economic, and bureaucratic elites absent the influence of citizen groups, civil society, and domestic or international “democracy promoters.” They go further to assert that work on forming these institutions by democracy promoters is antithetical to state strengthening and, implicitly, democracy itself, but is constructive in the hands of unspecified political, economic, and bureaucratic elites. Indeed, more fundamentally, they allow civil society processes no role in influencing the “converging expectations about conventional behavior,” their definition of institutions by which citizens in a democracy are to be governed. A further corollary of the Snyder-Mansfield thesis is implicit disallowance of constitution formation, let alone any important role for popular participation in constitutional formation and ratification. This removes a critical feature distinguishing democratic from nondemocratic states, effectively reducing the state to government as in authoritarian regimes. There is something self-confirming in the Snyder-Mansfield conception of democracy. Having postulated that democratic processes and democracy promotion are intrinsically incapable of displacing illiberal elites with democratic ones, incapable of constructively influencing the state institutions by which they are to be governed, and incapable of mounting, conducting, and ratifying constitutions that are to define the democratic state, Snyder and Mansfield prescribe a political transition sequence intended to ensure that those eventu-

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ally elected will be, at the very best, actively discouraged from undertaking any of those tasks. What incentive will the people’s representatives have to be anything but as irresponsible as Snyder and Mansfield presume them to be? Why would citizens have any incentive to take ownership of what has been entirely created for, rather than by, them? Why would they conclude that democracy is the “only game in town,” as Linz and Stepan have argued they must in a consolidated democracy (Linz and Stepan 1996)? Citizens are both assumed, and encouraged, to be apolitical. Given their reduction of democratic processes to electoral competition, deferred pending the formation or strengthening of state institutions, Snyder and Mansfield’s thesis flirts with circularity because they leave essentially unanswered the question of how the institutions they require are to brought into being, let alone with the democratic qualities they need to embody. How are the elites who, by their definition, are to be above and beyond democracy promotion to be cultivated, to be identified, and to find themselves in the position of being in effect Rousseauian legislators? How are such elites to come to the fore and to prevail over “illiberal” elites in order to play these roles and, indeed, why and how are they to become differentiated from one another? One key to addressing the fundamental questions that the Snyder-Mansfield thesis leaves unspecified and unexamined is to relax their assumption that democracy promotion is as ineffectual, indeed potentially destructive, as they assume it must be based on their empirical research. That question then becomes an empirical one. Why should Snyder and Mansfield’s thesis about the incapacities of domestic and international promoters necessarily be equally valid in every circumstance? In short, the Snyder-Mansfield thesis should be rendered contingent rather than a priori. Here is one instance where evidence from other regions, which at best includes only superficially two country cases in sub-Saharan Africa, is presumed to be confirmed a priori with reference to that region. It is not difficult to imagine a range of exogenous factors that might influence in varying degrees the empirical validity of the Snyder-Mansfield hypothesis. Why should FSS not be fashioned on some empirical exploration of this question? The next section explores what some preliminary evidence concerning democracy promotion in sub-Saharan Africa may suggest regarding the merits of USAID’s democracy promotion program, its relationship to strengthening or weakening fragile states, and the empirical merits of the Snyder-Mansfield hypothesis. By its tacit exclusion of participatory democracy from any positive role for the advancement of fragile states, USAID’s FSS poses an issue that students and practitioners have tended to bypass and that is of great significance in the context of sub-Saharan Africa: What is the bearing of civil society not

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only on the advancement of democracy but on the condition of fragile states? There is a considerable literature on the question of the role of civil society in advancing democratization, and that is the subject of another chapter. However, the question of civil society’s impact on the state per se has received considerably less attention. Authoritative answers to that question can only come from careful and searching empirical inquiry into the condition and functioning of civil society, exactly how USAID has supported civil society and with what outcomes, and what connections can be drawn between civil society’s trajectories and the strengthening or weakening of fragile states. USAID’s support for civil society strengthening throughout sub-Saharan Africa since at least the mid-1990s offers the opportunity for at least forming provisional hypotheses, derived in part from available quantitative data addressing at least some aspects of this overarching question. From USAID, Freedom House, and World Bank data it is possible to form preliminary estimates concerning (1) the correlation of progress toward democratization and changes in state strength; (2) correlations between the current strength of democracy, state strength, and that of civil society, given that civil society has experienced strong secular growth in many African countries since the 1970s; and (3) how the scale and foci of current USAID funding for democratization relate to the foregoing data. An important limitation is the absence of longitudinal data. A prior definitional question intrudes before proceeding to this analysis. There has been significant variation in academic and policy-making literatures on the definition of civil society (Harbeson, Rothchild, and Chazan 1994). Perhaps the most commonly employed definition is that civil society refers to all the space between the family and the state. Other work on civil society centers on the formation and strengthening of horizontal linkages among individuals and groups within society to provide for common needs and to advance shared purposes. However, at least for the purposes of this analysis, the conception of civil society in the classic literature of democratic political philosophy is more to the point: civil society as the formation or use of private-sector groups to advocate and defend norms and purposes concerning the structure and functioning of the state or governmental policies and behavior. The focus here is on civil society as it bears on the advancement of democracy as it is commonly understood in the literature on the subject, which is not to be understood as a presumption that civil society is by definition about democracy. Rather, the presumption is that the advancement of democratic civil society has to do with the overall progress of democracy. U.S. aid for democratization, including for the advancement of civil society, has increased, albeit not as much as has been claimed. President Bush claimed in a June 2005 press conference with British Prime Minister Tony

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Blair that “over the past four years, we have tripled our assistance to subSaharan Africa.” Citing official statistics, former assistant secretary of state for Africa Susan Rice reported that the actual increase was closer to 33 percent between 2000 and 2005. Democracy in general, and civil society in particular, is supported in numerous ways, and USAID has specifically undertaken to support democracy and civil society cross-sectorally, that is, as an element of programs for such sectors as agriculture and health as well as those for the advancement of democracy specifically. Moreover, some official support of democracy is conveyed through programmatic and direct budget support, the purposes of which are broad and not clearly broken down by specific targets. It is also difficult to draw conclusions about the relative priority afforded democratization in sub-Saharan Africa in competition with other aid programs without comparing funding priorities to costs between assistance categories. With these provisos, of the $1.96 billion directed to sub-Saharan Africa in FY2005, an estimated $147.2 million, or about 7.5 percent, was channeled for project aid in support of democracy. That percentage has not appeared to change dramatically over at least the last several years. USAID support for democratization in sub-Saharan Africa incorporates a range of purposes, priorities that vary markedly from country to country. These purposes include “governance,” which may have less to do with participatory democracy than with governmental effectiveness, more or less as defined in the FSS; conflict management and peace promotion, centered on building horizontal comity among conflicting groups and communities rather than on competitive elections; constitutional development; local rather than national government, which may be centered on particular provinces; and accountability and transparency. In FY2005, USAID supported democratization through twenty-five of its twenty-seven country missions in sub-Saharan Africa and additionally through geographic subregional programs. Only Eritrea and Djibouti received no democracy funding. USAID has closed its missions in many sub-Saharan African countries although it continues to assist them through the appropriate regional programs. With the proviso that support for democratization and other purposes reaches sub-Saharan African countries through centrally funded offices in Washington, and regional offices based in Africa, as well as through country missions, one way to estimate USAID democratization priorities among these countries is to juxtapose by country levels of project support for democratization, population size, and level of economic development. USAID assistance for democratization in Africa has reached countries holding about 75 percent of the continent’s population. The scale and distribution of democratization assistance has not appeared to have been influenced by

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any easily observable independent variable, for example, size or relative economic strength. Averaging project expenditures for FY2004 through FY2006, USAID expenditure per person per year on democratization assistance has averaged $0.26. These figures mislead because 64 percent of expenditures have been devoted to rebuilding the state and democracy in Liberia. With the Liberia outlier removed, the USAID expenditure per person per year on democratization assistance throughout these twenty-five country missions has averaged $0.16. Table 11.1 portrays USAID funding for democratization assistance to subSaharan African countries for FY2004 through FY2006 with the countries ranked by average assistance per fiscal year per person. The top six countries on a per capita basis are, unsurprisingly, countries that have been the most ravaged by civil war. Somalia, in a condition of state collapse since 1990, has also ranked fairly high on the list. There has been no correlation between democratization assistance per capita and purchasing power parity per capita. If USAID mission-based project funding for democratization does not correlate with equity considerations such as population size or per-capita wealth, has it correlated closely with more explicitly political criteria? To address that question, it is necessary to consider the condition of the state, democracy, and governmental effectiveness in sub-Saharan African countries where USAID has retained mission-based assistance since 2000. Table 11.2 is based on the World Bank Institute’s (WBI) Governance Matters surveys (World Bank 2004). The biennial WBI conducts multiple surveys of a variety of constituencies in virtually all countries to gain a sense of the status of “voice” (or democratic participation, state stability, governmental effectiveness, regulatory quality, the rule of law, and control of corruption). Scores are normed and expressed as standard deviations and, as here, in percentile terms. (Table 11.2 averages the percentiles for each topic between the 2002 and 2004 surveys. The final column [g] averages columns [a] through [f] to give overall country scores.) Table 11.2 establishes that the twenty-five countries to which USAID offers democratization assistance are well below average globally in terms of perceived state strength, governmental effectiveness, and extent of democratization. As a group, they are at levels comparable to all African countries as a group, including those not served by USAID missions. The importance of this finding is that if the Snyder-Mansfield and, implicitly, the Fragile States Strategy hypotheses are valid concerning the irrelevance or harmfulness of democratization in fragile states, one would expect that reality to show up in the WBI data in a group of roughly 50 percent of sub-Saharan African states that collectively are substantially below average globally on measures of state strength, democratization, and governmental effectiveness.

74,219 8,756 4,007 11,941 3,525 3,984 4,385 4,328 794 6,436 1,000 1,870 5,316 9,421 2,277 1,791 2,211 1,031 3,389 2,054 1,400 1,647 3,021 4,964 753 164,520

26,125 10,952 4,342 20,840 2,927 4,050 3,245 2,719 75 6,728 2,451 1,520 6,068 6,969 5,746 0 1,907 453 3,689 1,987 806 1,500 5,460 8,312 550 129,421

FY2005 85,758 8,669 4,642 21,000 2,128 3,068 2,479 2,735 697 7,673 1,186 2,112 7,148 6,380 1,903 1,579 2,430 1,000 2,926 1,500 570 514 5,500 8,017 595 182,209

62,034 9,459 4,330 17,927 2,860 3,701 3,370 3,261 522 6,946 1,546 1,834 6,177 7,590 3,309 1,123 2,183 828 3,335 1,847 925 1,220 4,660 7,098 633 158,718

Avg. 2004–2006 2,807 5,732 7,516 39,148 8,239 11,521 11,426 12,084 2,014 32,982 8,305 11,026 44,448 58,919 26,390 9,234 19,112 7,438 36,071 21,483 11,126 17,502 71,337 125,744 12,407 614,011

Population 22.10 1.65 0.58 0.46 0.35 0.32 0.29 0.27 0.26 0.21 0.19 0.17 0.14 0.13 0.13 0.12 0.11 0.11 0.09 0.09 0.08 0.07 0.07 0.06 0.05 0.26

[$] per cap

Democratization assistance FY2004–2006 FY2006 2,903 4,471 5,202 77,388 11,604 36,784 18,868 27,085 13,354 34,487 4,597 9,853 501,667 36,957 44,692 17,790 23,696 7,916 24,700 50,416 12,485 14,684 57,842 159,750 7,033 48,249

PPP 1,034 780 692 1,977 1,408 3,193 1,651 2,241 6,631 1,046 554 894 11,287 627 1,694 1,927 1,240 1,064 685 2,347 1,122 839 811 1,270 567 1,903

PPP per cap

Sources: Democracy assistance, USAID; Population data, U.S. Census, April 2005; Purchasing Power Parity Data, International Monetary Fund, 2004.

Liberia Sierra Leone Burundi Sudan Rwanda Angola Senegal Zimbabwe Namibia Kenya Somalia Zambia South Africa D.R. Congo Uganda Guinea Mozambique Benin Tanzania Ghana Mali Madagascar Ethiopia Nigeria Malawi Total/Avg.

FY2004

USAID Democracy Assistance, Population, and Purchasing Power Parity (PPP) in Sub-Saharan Africa

Table 11.1

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Table 11.2 Democratization, State Stability, and Governmental Effectiveness, 2002–2004 Government Regulatory Rule Corruption Voice Stability effectiveness quality of law control Avg. South Africa Namibia Ghana Madagascar Senegal Mali Benin Tanzania Malawi Zambia Uganda Mozambique Rwanda Kenya Nigeria Ethiopia Guinea Sierra Leone Angola Burundi Zimbabwe Sudan Liberia D.R. Congo Somalia Averages

(a)

(b)

(c)

(d)

(e)

(f)

(g)

14.2 59.9 53.9 49.3 52.3 55.7 53.2 38.1 31.4 38.4 27.4 43.6 13.5 33.8 28.2 16.1 14.6 31.2 15.0 15.1 7.9 3.2 9.4 3.7 6.5 28.6

37.6 60.4 45.8 48.7 37.5 45.8 52.6 35.1 42.3 42.8 10.5 54.9 15.4 18.5 6.8 15.9 16.2 22.1 13.6 2.3 6.0 2.6 1.2 0.8 1.9 25.5

73.3 63.4 56.1 39.2 54.8 36.6 37.9 37.6 24.8 21.1 41.2 42.1 29.3 21.3 12.4 18.4 19.9 5.2 9.8 6.6 14.8 9.6 1.5 2.9 0.0 27.2

66.7 64.9 43.4 50.8 42.9 41.4 33.4 31.7 34.0 30.8 54.4 36.8 28.2 34.1 11.1 13.8 20.4 12.3 7.0 7.6 2.6 13.3 4.5 4.5 0.3 27.6

59.6 61.9 50.4 47.2 48.7 40.2 42.5 39.0 42.9 36.7 26.3 33.5 19.6 15.9 5.0 28.4 20.8 10.2 5.2 4.5 4.8 4.8 1.7 1.2 0.0 26.0

68.4 61.9 46.8 56.0 47.4 46.3 41.3 25.7 23.0 24.3 24.5 23.8 44.6 13.7 6.0 33.8 29.4 22.9 7.5 10.6 8.2 8.6 12.7 3.2 3.3 27.8

62.8 62.1 49.4 48.6 47.2 44.3 43.4 34.5 33.0 32.3 30.7 29.1 25.1 22.9 22.6 21.0 20.2 17.3 9.7 7.7 7.4 7.0 5.2 2.7 2.0 27.5

Source: World Bank Institute..

Equally important, however, Table 11.2 establishes that these same data portray clear and substantial variations in country performance. Overall scores for South Africa and Namibia place those countries above the average (0.50) for all countries. Ghana, Madagascar, Senegal, Mali, and Benin all have overall scores in the fortieth percentile range, close to the all-country average and well above average for the continent as a whole. Although more in-depth and longitudinal data are needed, these data nonetheless suggest that progress on democratization and progress on state strength and governmental effectiveness may indeed vary positively with one another.

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Table 11.3 Democratization, Governance, State Correlations Government Regulatory Rule of Corruption Voice Stability effectiveness quality law control Voice Stability Government effectiveness Regulatory quality Rule of law

0.87

0.65 0.76

0.68 0.76

0.76 0.90

0.71 0.86

0.93

0.92 0.90

0.87 0.84 0.89

Source: Adapted from World Bank Institute.

Table 11.3 suggests that progress on democratization (voice) is correlated very highly with state stability (0.87). Thus, the apparent high correlations carry important potential implications for the empirical soundness of both the Snyder-Mansfield hypothesis and USAID’s Fragile States Strategy. On the one hand, they do suggest confirmation of the Fragile States Strategy’s implicit hypothesis that government effectiveness sustains state stability, or conversely that ineffective government covaries positively with diminished fragility. On the other hand, if the Snyder-Mansfield hypothesis that democratization threatens state stability were to be upheld empirically, one would expect the WBI data to reveal much lower, even negative, correlations between democratization and state stability. The high positive correlations between democratization and state strength suggest important empirical disconfirmation of the Snyder-Mansfield thesis and, implicitly, the FSS’s application of it. Although in-depth longitudinal data and analysis would be required, the data do suggest also at least a plausible hypothesis that progress on democratization and state strength can be, and to a substantial degree in sub-Saharan Africa have been, positively correlated. The data also call into question a critical and insufficiently examined assumption underlying the Snyder-Mansfield hypothesis: that elites hostile to democratic elections will survive and use their influence negatively to provoke domestic and, ultimately, international conflict. The strength of civil society has also appeared to be directly related to the overall strength of democracy and democratization in post–cold war sub-Saharan Africa. It suggests that growth in civil society may be an important reason why democracy and state stability have appeared to correlate with one another. Strengthened civil society may be a vehicle for generating democratic institutions other than elections, not just or not necessarily elites upon whom Synder and Mansfield and, implicitly, USAID’s FSS call on for this purpose. Indicative, albeit certainly not conclusive, support for these alternative for-

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mulations can be gleaned from Freedom House data. Freedom House scores on countries’ observance of political and civil liberties have long been relied upon as trustworthy indicators of democratic progress and quality. Freedom House part-scores, scores on particular dimensions of political and civil liberties, are available to the scholarly and practitioner community. Table 11.4 presents 2005 part-scores on electoral process, participation and pluralism, government effectiveness, freedom of expression, associational rights, the rule of law, and personal autonomy for the countries in which USAID provides democratization assistance. Associational rights principally, but also participation and pluralism, best cover the ground encompassed by civil society. The numbers are the percentages of perfect scores for each item, 1.00 being the highest score and the equivalent of a 1 for overall performance on civil or political liberties. What these data suggest is the hypothesis that civil society grows in support of democracy as democracy gains strength overall, thereby casting into sharp doubt the Snyder hypothesis that elites hostile to democracy survive its initial stages and act to undermine state stability and regional international peace. The fact that the component parts of democracy appear to be highly interdependent (Table 11.5) undermines the Snyder and the Snyder-Mansfield contention that elections predictably come about before other elements of democracy develop to complement them. Thus, the singular human and political tragedies that have engulfed dramatically a handful of African countries appear to have unduly influenced a negative perception of the bearing of democracy on the state, and of elections on democracy. These countries illustrate the Snyder-Mansfield hypothesis and the tacit premise of USAID’s FSS, but the variation in performance of sub-Saharan African countries as a group suggests that these outcomes have been contingent on a range of circumstances, not predictable outcomes of democratization per se. These data suggest that the parts of the USAID political assistance strategy do indeed fit together even if the designs of the democratization program and, especially, that of the FSS do not acknowledge that interface and, in the case of the latter, seem to suggest the opposite conclusion. They challenge the Snyder-Mansfield hypothesis upon which the FSS is based: democratization is hostile to the stability of fragile states and, by extension, regional international peace. They suggest that building civil society supports democratization as a whole, not just multiparty elections, notwithstanding the fact that democracysupporting civil society, like democratization as a whole, is at an early stage of development in sub-Saharan Africa. More broadly, the evidence from U.S. support for sub-Saharan African democratization suggests that notwithstanding the reductionism and disaggregation at conceptual and program levels, the objectives of integrating the pursuit

1.00 1.00 0.50 0.83 1.00 0.75 0.75 0.75 0.50 0.67 0.58 0.42 0.58 0.75 0.50 0.75 0.25 0.50 0.17 0.25 0.16 0.08 0.08 0.00 0.00

0.88 0.94 0.88 0.75 0.75 0.75 0.69 0.63 0.63 0.56 0.63 0.75 0.69 0.63 0.50 0.69 0.38 0.38 0.31 0.19 0.32 0.31 0.25 0.19 0.00

Participation

Source: Adapted from Freedom House data.

South Africa Ghana Benin Namibia Senegal Mali Kenya Sierra Leone Tanzania Madagascar Malawi Zambia Mozambique Liberia Nigeria Burundi Uganda Ethiopia Guinea Rwanda Angola D.R. Congo Zimbabwe Somalia Sudan

Electoral process

Democratization Part-Scores

Table 11.4

0.83 0.83 0.67 0.75 0.75 0.75 0.50 0.33 0.50 0.58 0.50 0.50 0.58 0.25 0.50 0.42 0.42 0.33 0.17 0.42 0.08 0.17 0.00 0.33 0.08

Government effectiveness 0.94 0.94 0.94 0.94 0.94 1.00 0.88 0.75 0.69 0.63 0.69 0.69 0.63 0.69 0.69 0.56 0.69 0.44 0.50 0.44 0.50 0.38 0.25 0.19 0.25

Free expression 1.00 0.92 0.92 1.00 0.75 0.75 0.67 0.67 0.58 0.50 0.67 0.67 0.58 0.58 0.58 0.42 0.50 0.33 0.42 0.25 0.50 0.42 0.25 0.08 0.08

Associational rights 0.81 0.81 0.75 0.63 0.63 0.69 0.50 0.50 0.63 0.56 0.50 0.50 0.38 0.44 0.25 0.25 0.44 0.31 0.25 0.38 0.25 0.00 0.06 0.19 0.00

Rule of law 0.75 0.69 0.63 0.56 0.56 0.56 0.50 0.56 0.50 0.56 0.44 0.44 0.50 0.50 0.38 0.25 0.44 0.38 0.38 0.31 0.19 0.06 0.06 0.00 0.06

Personal autonomy 0.88 0.87 0.76 0.78 0.76 0.75 0.64 0.60 0.58 0.58 0.57 0.57 0.56 0.55 0.48 0.48 0.45 0.38 0.32 0.32 0.29 0.20 0.14 0.14 0.07

Avg.

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Source: Adapted from Freedom House.

Personal autonomy

Associational rights

Free expression

Government effectiveness

Government function

Participation

Electoral process

Electoral process

Freedom House Part-Scores

Table 11.5

0.87

Participation 0.82

0.79

Government function

0.84

0.89

0.85

Free expression

0.94

0.79

0.91

0.79

Associational rights

0.85

0.89

0.87

0.85

0.79

Rule of law

0.03

0.87

0.91

0.82

0.85

0.85

Personal autonomy

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of democracy and the strengthening of fragile states can be reconciled with one another. These developments imply the emergence of bases for Africancountry recipients of U.S. foreign assistance to apply the attendant covarying development of democratization and state strengthening to the policy agenda of building security policy on these foundations. What is not apparent in either USAID’s support for democratization or its conception of how to strengthen fragile states is any suggestion or acknowledgment that the payoff for these achievements might be the capacity of recipient countries to apply them to the formation and legitimacy of country policies, for example, in the security area. Beyond that horizon is the pursuit of the further objective of reconciling recipient countries’ democratically developed security strategies with those of the United States, which, since September 2001, have been unilateralist. To the extent that, in the security as well as the economic arena, strong and weak sub-Saharan African countries may realize that mutual interdependence in the post–September 11 world has remained empirically elusive. References Carothers, Thomas. 1999. Aiding Democracy Abroad: The Learning Curve. Washington, DC: Carnegie Endowment for International Peace. Commission for Africa. 2005. Our Common Interest. London: Commission for Africa. Harbeson, John W., Donald Rothchild, and Naomi Chazan, eds. 1994. Civil Society and the State in Africa. Boulder, CO: Lynne Rienner. Linz, Juan, and Alfred Stepan. 1996. Problems of Democratic Transition and Consolidation: Southern Europe, South America and Post-Communist Europe. Baltimore: Johns Hopkins University Press. Lipset, Seymour Martin. 1959. Political Man. New York: Doubleday. Rasler, Karen, and William R. Thompson. 2005. Puzzles of the Democratic Peace Theory, Geopolitics and the Transformation of World Politics. New York: Palgrave MacMillan. Ray, James Lee. 1995. Democracy and International Conflict: An Evaluation of the Democratic Peace Proposition. Columbia: University of South Carolina Press. Snyder, Jack L. 2000. From Voting to Violence: Democratization and Nationalist Conflict. London: W.W. Norton. Snyder, Jack L., and Edward D. Mansfield. 2005. Electing to Fight: Why Emerging Democracies Go to War. Cambridge, MA: MIT Press. U.S. Agency for International Development (USAID). 2004. U.S. Foreign Aid: Meeting the Challenges of the Twenty-First Century. Washington, DC: USAID, Bureau of Policy and Program Coordination. Available at http://www.usaid.gov/policy/pdabz3221.pdf (accessed March 2007). ———. 2005. Fragile States Strategy. Washington, DC: U.S. Agency for International Development. Available at www.usaid.gov/policy/2005_fragile_states_strategy.pdf (accessed March 2007). White House. 2002. The National Security Strategy of the United States of America. Washington, DC: White House. World Bank. 2004. Governance Matters 1996–2004. Washington, DC: World Bank. Available at www.worldbank.org/wbi/governance/pubs/govmatters4.html (accessed July 17, 2006).

Part 3 Organizational Dynamics and Foreign Aid Policy

12 Transformations in U.S. Foreign Economic Assistance W. Haven North and Jeanne Foote North

U.S. bilateral foreign economic assistance (aid) has been prominent in foreign policy since 1948, with numerous transformations and continuous management challenges, many unique. First, agencies and missions were new in the 1950s. Second, political goals, implementation, and complex technological requirements changed rapidly in a global environment of great diversity and in a domestic setting of skepticism and fragmented initiatives. Meeting goals demanded skillful strategic planning and high-quality implementation structures and processes. It also required orchestration of organizations and systems, programs and procedures, and human and financial resources in response to domestic U.S. interests and foreign cultures. This chapter focuses on the management of U.S. foreign economic assistance (USFEA) and illustrates how management has responded to the interaction of U.S. interests and domestic concerns with developing countries and internal agency preoccupations. We cover the period from the end of the Marshall Plan and the Economic Cooperation Administration in 1952 through 2006. In particular, we address changing programs and processes of the U.S. Agency for International Development (USAID), an agency that has had external stability but much internal change. Management transformation often is viewed as change in the structure of aid agencies, but also should be seen from the perspective of program policies and strategies, internal organization, assistance instruments, program categories, and operating systems. The Transformation and Evolution of USFEA Organization Changing Context after the Marshall Plan USFEA management has been affected by events after the end of World War II and by the security interests of the United States in the preservation of its 263

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values of freedom and democracy, including specific political, economic, and humanitarian interests and evolving U.S. involvement in the socioeconomic and political conditions of the world and their potential impact on U.S. society. World War II provided the United States with eye-opening exposure to those conditions. The devastation of Europe became an immediate challenge at the end of the war. Extreme poverty in the vast majority of the world’s populations, the fluidity and instability of their evolution into sovereign states, and their continuing vulnerability were slowly recognized as a long-term challenge. Security, and the instability and poverty of developing countries, were intertwined themes in perpetuating the transformation of aid. Ten Years of Transition through the 1950s The threat of communism and Soviet domination in Western Europe was the major rationale for the massive economic assistance provided by the U.S. Economic Cooperation Administration (ECA) to European countries devastated by World War II. The Marshall Plan provided an example of clarity of purpose and coherent management, providing assistance in the form of balance-of-payment grants for importing goods critical to reviving the economies of Europe. Small portions were provided for technical assistance and productivity centers for modernizing European technology and management practices. Some technical assistance was provided to Asian countries and European colonies in Africa. As the Marshall Plan ended, the challenge of developing countries emerged and demanded attention, and USFEA management moved into a new era of transformation. Independence movements in developing countries were ripe for communist ideologies and threatened or actual Soviet and Chinese military interventions. Containment of Soviet dominance in countries on the periphery of the Soviet Union, and Chinese encroachments in the Korean War and later the Vietnam War, became the central themes in justifications of aid (and military assistance) legislation following the Marshall Plan. Early Organization Response As Figure 12.1 illustrates, the decade of the early 1950s into the early 1960s was a time of considerable ferment. Domestically and internationally, an array of institutional arrangements came into being, concerned with the best approaches for managing assistance to developing countries and responding to the communist threat. It was a time of organizational dispersion, restructuring, and fluidity of purpose as domestic and foreign interests drove management decisions on organization, program priority, and administration. Technical assistance had

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been split between the new Technical Cooperation program (known as Point 4) and the Institute of Inter-American Affairs (IIAA); the Development Loan Fund had its own agency; and military and defense support and special supporting assistance were responsibilities of the Departments of Defense and State. These were brought together by Congress’s proposal for a Mutual Security Agency (MSA) in 1951, echoing the attraction of ECA’s structure and operations. MSA lasted about three years and was replaced by the Foreign Operations Administration (FOA). FOA lasted only two years (1953–55) and was replaced by the International Cooperation Agency (ICA), which in turn lasted for six years until the creation of the U.S. Agency for International Development in 1961. Until the Foreign Assistance Act (FAA) of 1961, the Mutual Security Act had been an umbrella for a number of programs and funds. Table 12.1 illustrates the shifting administrative lines of authority and locations of U.S. assistance agencies. In the ten years from 1950 to 1960, there were five major organization arrangements either concurrent or in succession and seven different program administrators under Truman and Eisenhower. By 1960, the Mutual Security Appropriations Act “contained twenty separate appropriations, providing funds to be allocated among the less developed countries by either the U.S. or an international agency” (Kaplan 1967, 64). In addition, other aid was available from the surplus food program under PL 480 and its Titles I (loans/sales), II (food assistance: relief and development), and later III (food for development grants); the Export-Import Bank; and U.S.-supported international organizations. The considerable organizational change of the 1950s can hardly be rated as having been a time of clearly designed transformation. Apart from determination to contain Soviet and Chinese expansion, a consensus on the purposes and administration of assistance to developing countries had yet to emerge. In retrospect it appears to have been a decade without a clear agreement in the executive and congressional branches, with each promoting differing strategies for USFEA and its organization(s). With the dismantling of ECA, the State, Defense, Treasury, and Agriculture departments gained control of their bureaucratic interests in reaction to the time when ECA, and later MSA and FOA, reported directly to the president. MSA and FOA retained the direct line to the president, but for only brief periods. Rationales, Assistance Instruments, and Their Transformation An alternative perspective on transformation during the 1950s and into the 1960s is evident in the rationales for the assistance instruments of the USFEA. These instruments of assistance changed over time with distinctive requirements for their management. With the emergence of developing countries

Figure 12.1

Timelines of U.S. and International Economic Foreign Assistance Agencies, Legislation, and Initiatives

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Table 12.1 Primary Lines of Authority of USFEA Agencies

Line of authority/ USFEA agency ECA 1948–51

President

Department of State

X

Coordination

TCA 1950

Coordination ECA independent agency

X

MSA 1951–1953 TA (TCA), ESF, military assistance

X

Policy guidance

FOA 1953–1955 Technical assistance, Supporting assistance

X

Policy guidance

ICA 1955–1961 Technical assistance, Supporting assistance

Department of Defense Military Assistance Comment

Semiindependent Policy guidance

MSA independent agency

Military Assistance separated from MSA; TCA functions moved from State to FOA

X Semiautonomous

DLF 1975–1961

X

USAID 1961– Technical assistance and development loans/ grants, supporting assistance

X

Temporary agency until 1998

and concern with the communist threat, new instruments of assistance were established. The most immediate one created under the Mutual Security Act was Defense Support. The purpose of this assistance—largely budget support—was to strengthen the economies of countries to which the United States was providing major military assistance on the periphery of the Soviet Union; in this way those countries—Laos, South Vietnam, South Korea, Pakistan, Afghanistan, Taiwan, Thailand, Greece, Turkey, Philippines, Spain, and Iran—could support large militaries.

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At the same time, a separate fund called Special Assistance was used for geostrategic purposes in other countries that were not part of the Defense Support system. These latter purposes included developing country support for military base rights in Morocco and Libya and for countering instability in Jordan, Tunisia, Burma, Guatemala, and Panama. Over time, these two funds merged under MSA and then under the FAA to become Economic Support Funds (ESF). These funds were, and continue to be, more flexible in their uses and are not as constrained by development purposes as were technical assistance grants and development loans. By FY2003, seventy-three countries were receiving ESF (USAID 2003). A second group of assistance instruments was associated with development objectives for the poor developing countries. In the 1940s there were small starts such as the Institute of Inter-American Affairs, initiated by Nelson Rockefeller for technical assistance programs in Latin America. There was also the little-known U.S. Economic Commission for Liberia, established in 1944 by the State Department. Its purpose was to “assist the Government of Liberia wherever possible in increasing their food production and obtain local strategic materials such as fats and oils, tropical hardwoods, wild and natural rubber for shipment to the United States. The commission comprised technicians of various disciplines in agriculture, forestry, geology, and engineering” (Pindar 1986, 65). During World War II, the United States had built Roberts Field as a relay point for military planes coming from the United States on their way to North Africa and Europe; it was modernized by USAID in the 1960s. Another successful early start was the Sino-American Joint Commission on Rural Reconstruction (JCRR), begun in 1948 in Taiwan (Republic of China). There also were numerous private programs, including missions, in developing countries. In Ethiopia, Emperor Haile Selassie, concerned with education, directly hired British, Canadian, and U.S. teachers to staff secondary schools. These early starts focused on providing aid to developing countries. They were precursors to the Technical Cooperation Administration (TCA), popularly known as Point 4, under the Truman administration as part of the Foreign Economic Assistance Act of 1950. The purpose was to “make available to peace-loving people the benefits of our [U.S.] store of technical knowledge in order to help them realize their aspirations for a better life.” This technical cooperation program was the beginning of U.S. involvement worldwide in programs specifically focused on the development problems of developing countries. A second major initiative for assistance to developing countries was the creation of the Development Loan Fund (DLF) in 1957. Its establishment reflected the recognition that technical assistance alone was not sufficient to

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help developing countries. The need for large-scale capital transfers had been considered at the time of TCA (Point 4) program design, although initially it was thought that this would be provided by private capital and subsequently by International Bank for Reconstruction and Development (IBRD) hard loans. The coming together of economic theory on the need for large capital flows, the increasing evidence of developing country financial requirements, and the IBRD’s experience with capital projects all merged to promote creation of the DLF. Among its first clients was India, which was not eligible for Defense Support and for which the Special Assistance appropriation was too small to be useful. Yet India was a priority given the communist threat, its extreme poverty, and its major presence in Asia. By 1961, the separate technical assistance program and the loan program were merged and the loan requirement reverted to grants and became the assistance category called development assistance. Development and Development Assistance The conceptual underpinning of assistance for economic development and development assistance emerged slowly during the late 1940s and early 1950s. The Marshall Plan was a recovery program; defense support and special assistance, while used for economic purposes and mostly budget support, were not concerned with development. The TCA Point 4 program for aid (expanded with capital assistance through loans) began the engagement of the USFEA in long-term aid to developing countries. There had been considerable debates and writings about economic development and low-income, underdeveloped countries. Numerous theories and strategies emerged under the headings of “balanced growth of agriculture and industry,” the “big push on all fronts,” “import substitution,” greater or lesser priority to agriculture or industry, the joining of the welfare state to economic growth, and providing a “large infusion of capital with technical assistance to enlarge the capacity for this capital.” The stages of growth put forth by W.W. Rostow became a popular summation of economic development concepts (Rostow 1960). The stagesof-growth concept made clear that development would be a very long-term process, a perspective frequently neglected in the preoccupations with immediate political impact or expectations for rapid results. There were other views that stressed the importance of political and social development. As Jacob Kaplan points out, a consensus emerged for economic development reflected in the Kennedy administration’s Foreign Assistance Act of 1961 and the origins of development assistance as a part of assistance instruments (Kaplan 1967, 77).

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Foreign Assistance Act of 1961 and USAID From this consensus emerged a major transformation of USFEA that established development as a focus of assistance to developing countries as described by Kaplan (1967, 22): [I]n 1961 the program’s proponents elicited inspired backing not just from the security lobby, but also from humanitarian, public interest, labor, and even some business organizations. President Kennedy engaged in a major public relations campaign to win support for the aid program among the people of the United States. In retrospect, Kennedy made his greatest contribution to development assistance doctrine both during the last year of his tenure in the Senate and in the first year of his presidency by translating the security concerns of the 1950s into greater support for economic development assistance.

The FAA of 1961 and the formation of USAID with President Kennedy’s inspiration provided a moment of excitement for U.S. foreign economic assistance under the captivating phrase, “to those peoples in the huts and villages of half the globe struggling to break the bonds of mass misery, we pledge our best efforts to help them help themselves, for whatever period is required—not because the communists may be doing it, not because we seek their votes, but because it is right” (Butterfield 2004, 22). Both the FAA and the creation of USAID provided a sense of stability for the management of USFEA, providing a framework that was sustained for over forty years. In the beginning, the FAA emphasized long-term development planning with country programs. It consolidated into one agency (USAID) the various assistance instruments and their separate organizations or administrations—development assistance (TCA, DLF), ESF and Title II Food Assistance under PL 480, private investment guarantees (later spun off to the Overseas Private Investment Corporation, OPIC), and housing guarantees. This stability, however, has been deceptive. First, until 1998, USAID had to be authorized by Congress annually. Second, each reform failed at the outset of the legislative process or collapsed in its implementation. Third, frequent legislative amendments and internal administrative changes precipitated uncertainty. Below, we offer examples of instability. Overarching Assistance Policy and Strategy One principal feature of transformation in USFEA in the early years of the 1961 FAA was comprehensive economic development programming based

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on country development plans. This was essentially a bottom-up approach giving the field missions latitude in the planning of country development programs, including the full range of economic and social sectors and related infrastructure. Programs were laid out in five-year Country Development Strategy Statements (CDSSs; see chapter 9 on strategies for Haiti). Two major innovations in development assistance at the start of the FAA in 1961 illustrate this innovation in policy and strategy: the concept of Long Range Assistance Strategies and the Alliance for Progress for Latin America. Long Range Assistance Strategies With the new FAA in 1961, a proposal was developed to undertake Long Range Assistance Strategies (LRAS) in countries that met certain criteria. The criteria called for democratically elected governments and national development plans. Three countries in Africa met these criteria: Nigeria, Tanzania, and Tunisia. Nigeria had just gained its independence in October 1960. The coincidence in timing of Nigeria’s independence and the new FAA presented a unique opportunity to apply this strategy. Nigeria had had nationwide elections in 1959. With the assistance of two Ford Foundation economists—Stolper and Hansen—the Nigerian government had prepared a National Development Plan (1962–67) giving priority to professional and technical education, agriculture, industry, and private investment. A USAID assessment was impressed with Nigeria’s dynamic economy and development potential. It was the largest country in Africa with substantial diversity in resources and capable leadership. Consequently, in 1961 USAID pledged $225 million to support the development plan as a multiyear grant commitment, an unusual break from the pattern of year-by-year commitments, although budgets had to be prepared for Congress each year. The USAID program that was developed between 1961 and 1966 (when civil war broke out) covered professional and technical education, agriculture, infrastructure and private-sector investment, small-scale enterprise, and lowcost housing financing. There were fourteen U.S. university contractors working with Nigerian universities, technical schools, comprehensive high schools, and teacher training schools in the fields of university development, agriculture education research and extension, teacher education, public administration, and veterinary medicine. Several hundred Nigerians were trained in a wide spectrum of fields with the largest group, about 300, in the agricultural sciences. Private-sector development was supported through technical assistance in foreign investment promotion with the preparation of selected industry planning and feasibility studies and investment climate improvements; smallscale enterprises were assisted through special enterprise centers. Infrastructure

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development included roads, water systems, telecommunications, and college school buildings. In addition to the university contractors, USAID had in the field some 150 direct-hire agricultural technicians (U.S. government employees) located in posts throughout the country working in projects in soil conservation, well drilling, extension training centers, maize research, livestock development, and rubber tree development. Technical assistance was also provided for the national census, a highly sensitive issue at that time. A small but significant project provided two members of the U.S. Federal Reserve to assist the Central Bank in developing its economic research department. By 1964, USAID had provided 350 technical assistance specialists. Interestingly, there were no programs in public health except for smallpox vaccination. The prevailing view of USAID economists at the time was that public health programs did not contribute to economic growth. By 1965, Nigeria was making good progress: economic growth was strong, financial management was sound, and the number of Nigerians attending vocational and technical schools and universities, especially the agricultural universities, had increased dramatically. USAID sponsored one especially significant study when there were concerns about Nigeria’s balance of payments. Economists Will Schmidt and Scott Pearson interviewed the foreign oil companies investing in drilling new sites. Their report, entitled “Nigeria—A Tiger in Their Tank,” was one of the first indications of the huge oil revenues that would flow to Nigeria. However, U.S. confidence in Nigeria’s democratic system was undermined by political developments. Major differences arose among the three main political parties as a result of the census, which dictated membership in parliament and the sharing of oil revenues. Assassination, military coups, and attempted regional succession ended in a civil war from 1966 to 1970. The USAID development program was disrupted, and major institutional development projects were phased out. USAID mounted a massive relief program costing over $200 million and started a reconstruction program following the war. Congress closed the program after the bonanza of oil revenues became apparent. There was an attempt to restart the program in the early 1980s, but it was rejected by the U.S. Embassy. By 2000, a new start had been made, with a broad base of development programs in democracy and governance, agriculture and economic growth, basic education, health, and family planning with annual funding in the range of $40 million to $50 million. The several educational institutions previously supported by USAID in the 1960s continued to be viable. This example of the USAID Nigeria program (Butterfield 2004, 77) was one reflection of the transformation that had taken place in the USFEA by the

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1960s. In Tunisia, under the LRAS, USAID pledged $180 million for three years in support of the government’s five-year plan. In Tanzania, the pledge was $10 million. However, the Long Range Assistance Strategies faded. It was a shooting star that came and went unheralded in the records of USFEA history. The Alliance for Progress This was not the case for the Alliance for Progress, an extraordinary initiative under the new FAA legislation providing a new approach and substantial assistance to Latin American countries. It represented a profound transformation in USFEA, at least for aid to Latin America. The alliance grew out of a conference of the Organization of American States (OAS) in 1961 and the initiative of the president of Brazil. Its aim was to promote economic and social reform and democratic governance in Latin American countries. Its implementation was primarily to be the responsibility of the Latin American countries through the arrangement of the Inter-American Committee for the Alliance of Progress (CIAP). Its function was to review national development plans and estimate the external assistance requirements of the members, echoing the coordinating structure of the recipient countries under the Marshall Plan. Initially, the United States pledged $20 billion for a ten-year program, of which $5 billion to $6 billion was actually provided. Other donors—the InterAmerican Development Bank (IDB), the World Bank, and bilateral donors—provided another $16 billion and the countries themselves invested about 80 percent to 90 percent of the total investment in the development program during the 1960s. The focus of the program, in addition to the advancement of democracy, was on macroeconomic policy issues and investment for economic growth and on change in the social sectors of primary education, health, agriculture and rural reform, housing, and urban services. Some targets were met and had some lasting impact on social and economic conditions; others were not. The USFEA program in Brazil was a centerpiece in the Alliance for Progress. In the mid-1960s, the program provided some $2 billion of assistance, or about $200 million a year. A major part was balance-of-payment assistance connected with requirements for macroeconomic reforms, which were not, however, fully satisfied by the government. In consequence, the USAID program shifted to sector loans, with conditions tied to the sector and not macroeconomic policy, marking the beginning of the sector loan concept. “We had major commitments in agriculture, roads, power, water, sewage, health, education and university development, municipal development, public administration, economic planning, tax collection, feasibility studies and housing” (Brown 1996, 10). In addition, there was a program for

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the very poor in Northeast Brazil managed by a “semi-independent” USAID mission. There were in the range of 1,000 U.S. technical and administrative personnel in the country. One assessment of the alliance program concluded that of the “$5 billion, little trickled down to the rural and urban poor.” In El Salvador, a major recipient, “the funds served to strengthen the coffee and sugar oligarchies, who evicted peasants and tenants to turn over more land to commercial agriculture” (Reynolds 2000, 225). An alternative assessment noted that “there were major improvements in Latin American educational systems and major increases in professionally skilled people in many fields, especially agriculture, health, public administration, economic planning, and education. It also provided a sense of confidence among many Latin Americans that they had acquired the capacity to modernize their countries” (Butterfield 2004, 71). Under the Johnson and Nixon administrations, the program was scaled down and terminated with other country programs in Latin America. New concerns during the Reagan administration led to the Caribbean Basin and Central American initiatives. In Asia in the 1960s, South Korea, Thailand, the Philippines, and Indonesia were among the most highly supported countries, with multisector programs, balance-of-payment support, policy reform, and technical assistance with institutional development. South Korea in particular demonstrated extraordinary growth. In 1960, “the country’s per capita income was lower than that of Liberia or El Salvador. By the 1980s, however, average incomes exceeded those in all Latin American countries. . . . Because of South Korea’s importance as a front line of the cold war, the United States kept open its markets for Korean exports and pumped in economic aid to the tune of $6 billion between 1946 and 1978 compared with $6.89 billion for the whole of Africa and $14.8 billion for all Latin America” (Reynolds 2000, 421). During the mid-1960s, the USAID program averaged $260 million a year plus another $150 million in the form of the presence of the U.S. military. Some of the innovative programs included integrated rural development, export promotion, and family planning. While the South Korea story is exceptional, other countries in Asia (Thailand) and the Middle East (Jordan) were among those receiving substantial assistance in broadly conceived economic development programs. Fading Support for the Comprehensive Approach in Development Assistance Although the beginnings of the FAA and the formation of USAID carried an air of optimism about the contribution USFEA would make to the economic development of developing countries, other forces and circumstances began

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to dim those hopes. U.S. engagement in Vietnam, with the mounting requirements for military and economic assistance, became increasingly troubling. U.S. national political interests took precedent over economic development objectives; the dominant rationale for ESF assistance was other than development. Developing countries’ internal and external agendas, moreover, were not always conducive to the discipline and reform that accompanied economic development policies. Understandings of economic policies for economic growth were not clear, and the data to guide them were not available or reliable. Wolfgang Stolper’s 1966 book Planning Without Facts, written after preparing the Nigerian National Development Plan, points to those concerns. Expectations were perhaps most important: the Rostow stages of growth referred to twenty to twenty-five years in the “take-off stage.” Congress envisioned more immediate results. In the foreword to Development Reconsidered by Edgar Owens and Robert Shaw, Bradford Morse and Donald Fraser, both members of Congress, refer to the foreign assistance debate of 1971, when “for the first time in its legislative history, the foreign aid program was defeated by the Senate. It survived a hurried and, in many ways, unsatisfactory last minute Senate-House compromise” (Owens and Shaw 1974, xv). The main causes they observed were: • “Expectant hopes are not being fulfilled. While development is progressing well in a few countries, poverty and unemployment, illiteracy and disease are still endemic throughout the developing world; • “Development has turned out to be a much more complicated problem than had been thought when the foreign aid program began; • “Realpolitik has more often than not governed our relationships with the less developed world. Foreign aid has been used as an adjunct to our Cold War efforts in Africa, Asia and Latin America . . . enduring friendship of governments and people does not depend on guns and money or even technical expertise. Nor do they win the allegiance of a people to their own government. Sometimes our efforts to win the support of a government for international political reasons have turned its people against us . . . foreign aid programs have become identified with elitist governments and programs that favor the rich . . . [and] widen the gap and deepen the discontent with the people we want most to help; and • “If foreign aid is to be continued a meaningful aid policy must be developed and articulated—a policy that the American people can believe in once more, a policy which the people in developing countries can respect.” The transformation initiative of the 1960s had run its course.

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The “New Directions” Policy and Sector Orientations and Initiatives By 1973, the House Foreign Affairs Committee, with private leaders in international development, put together a new legislative mandate with the emphasis on the poor majority, mainly the rural poor, in developing countries. This new legislative mandate in effect called for a major transformation of USFEA. It presented to the management of USAID an extraordinary challenge to reorient the policies, programs, and processes of the agency. Legislative points detailed here provide an understanding of the complexity of the task and the extent to which Congress sought to provide detailed guidance and instructions on implementing the new directions mandate. The key words underlined in the Development Assistance Policy (Sec. 102) are repeated and echoed in other parts of the legislation and in USAID’s policies and programming. Other points in this policy statement refer to: • Building and maintaining social and economic institutions for selfsustaining growth; • Improving the quality of life depends on “marshalling their own economic and human resources”; • Recognizing that the “magnitude of the effort exceeds the resources of the developing countries” and that there will be a “long-term need for wealthy countries to contribute additional resources for development purposes”; and • The U.S. taking the “lead in concert with other nations in mobilizing resources from public and private sources.” Other key words for achieving objectives include self-help, democratic participation, development planning, high priority to host government undertakings that directly improve the lives of the poor, and a collaborative style to support the goals chosen by each country receiving aid. (The word “directly” was repeatedly raised when members of Congress and their staffs questioned project proposals put forward by USAID.) The legislation also laid out seventeen principles, including focus on countries that make the most effective use of assistance to satisfy basic human needs; focus on countries with the greatest need; assessments of country commitment and progress toward “increasing productivity in small farms, labor intensive agriculture, reduction of infant mortality, control of population growth, greater equality of income distribution (progressive taxation and equitable returns to small farmers); literacy; unemployment and underemployment reduction, combating corruption, and improving transparency and accountability” (italics added to the legislation in 2000).

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Some principles stress that the mandate should be carried out through private-sector institutions with ties in developing countries, such as educational institutions, cooperatives, credit unions, free labor unions, and private and voluntary agencies, thereby encouraging U.S. private investment, promoting regional cooperation, and coordinating with donors. Principles added in 1985 include policy reform for economic growth and equity, open and competitive markets, access to technology, capacity for long-term institutional development, and training. Legislation in 2000 linked economic reform and effective democratic governance. Most important for shaping the management of the mandate, the principles specified that development assistance should focus on critical problems in functional sectors that affect the majority of people in the developing countries, for example, food production and nutrition; rural development and employment; population and health; environment and natural resources; education, development administration, and human resources development; participation of women in national economies and improvement in their status; and energy development and production (added 1979). By 1990, these themes were funded under nine separate development assistance functional accounts: agriculture; rural development and nutrition; population; health; child survival; AIDS prevention and control; education and human resources; private sector, environment, and energy; and science and technology. There were special accounts for the Development Fund for Africa, the Southern Africa Development Coordination Conference, American Schools and Hospitals, International Disaster Assistance, and Housing Guarantee Borrowing Authority, and funds for administrative purposes. Management of each functional account required policy and strategy directives, technological innovations, institutional arrangements, and funding plans. Focus on sectors directed attention to special research on, and the introduction of, technological innovations and institutional arrangements as well as funding that accelerated efforts and results. They also reduced management flexibility in the allocation of the funds among programs and missions. These approaches were often picked up by other donors. The New Directions initiative also led to important changes in the way USAID managed programming procedures. USAID reported in 1975 that sixty-three policy statements, definition, and conceptual framework papers had been completed or were in preparation, including papers on Aiding the Poor Majority, Working Definitions of Essential Mandate Concepts, Integration of Women into National Economies, and Expanded AID-PVO Relationships; a global policy statement and sector guidelines for rural development, health, nutrition, education, and populations; and descriptive guidance establishing a revised project system. Changes were made in restructuring USAID’s plan-

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ning, financial, evaluation, and information systems. Country programs were set out in USAID mission-prepared Development Assistance Program papers (DAPs) to provide a multiyear USAID strategy for each country assisted and subregional groupings. A new project planning system was introduced. Training programs and field visits were undertaken to introduce agency staff to these new dimensions of the mandate. The report of the OECD Development Assistance Committee peer review for 2002 pointed out that in FY2001 there were “270 special provisions and earmarks in the development legislation.” These included “strongly-felt political themes like HIV/AIDS or Education for Africa” and “specific projects supported by a few politically influential persons or groups.” The report concluded that such earmarks, added to the functional accounts, resulted in inefficiency in finding local solutions, less than optimal use of staff, inefficient funding, and squeezing funds for less-strong constituencies, leading to the uneven, feast-or-famine nature of congressional budgets. For development agencies like USAID with a long-term perspective, this can result in management chaos as priorities shift, new programs are launched, and existing commitments can no longer be completed (OECD 2002, 32–33). The New Directions legislation set in motion a process of limiting the flexibility of USFEA that existed under the country program for economic development approach of the early 1960s. As it progressed, it became burdened with thematic and special project directives and other restrictions. One requirement that created a substantial burden on USAID was the congressional notification provision, which required that no funds could be available for obligation under any of the accounts for “programs, projects, type of material assistance, countries, or other operations not justified or in excess of the amount justified to the Appropriations Committee . . . unless the Committees on Appropriations of both Houses of Congress are previously notified 15 days in advance.” There was less than 10 percent flexibility in the project funding level and a waiver provision associated with risks of health or welfare. But even the latter required notifications and justifications within three days of the event. Given these detailed directives and restrictions, the transformation associated with the “New Directions” resulted, as the OECD/DAC peer group pointed out, in management chaos. The peer group cited the growth in the number of U.S. government agencies involved in foreign economic and technical assistance, compounding the complexity of managing USFEA. There were a number of attempts beginning in 1978 to reform the structure and operations of USFEA. One was the proposal to create an International Development Cooperation Agency (IDCA) to coordinate all U.S. aid. While not established in law, it was created by President Carter by an executive order in 1979. The administrator of USAID served also as the director of IDCA.

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However, none of the other U.S. government executive agencies with foreign assistance programs were willing to cooperate, leaving only USAID and OPIC under the IDCA mandate. The administrator stated in a staff meeting at the time: “I feel like a plucked chicken.” A Development Coordination Committee also was instituted by President Carter but rarely met. Other attempts at legislative reform were tried in 1988, 1991, and 1994, with provisions for the greater program flexibility that characterized the original 1961 FAA. None were successful. While not transforming USFEA, there were moves on the part of subsequent administrations to advance a particular orientation to assistance. Under President Carter, there was concern for assisting the poorer developing countries and for human rights. In project review, one had to certify that the project would directly benefit the poor if the country was otherwise on a list for human rights violations. Under President Reagan, the stress was on market forces and private investment, along with an antigovernment flavor. A special bureau was created in USAID for private investment with some attempts at promoting direct foreign private investment projects. Subsequent evaluations made clear that this initiative was not appropriate for USAID management. The bureau lasted only a short time. Transformation, Developing Countries, and Managing U.S. Interests The formation of the Foreign Assistance Act of 1961 and its amendments took place in a changing international setting of developing countries. Independence movements in low-income countries and their poverty had a profound transformative effect on USFEA. After the end of the Marshall Plan, the number of independent countries that became recipients of USFEA grew dramatically. Not including those countries involved in the Marshall Plan (sixteen), from the beginning of the FAA to 1999 there were 158 countries that were receiving U.S. aid. Many terms have been applied to this group: developing countries, less developed countries (LDCs), low income countries, relatively less developed countries (RLDCs), middle-income countries, advanced developing countries (ADCs), Third World countries, and even initially, and fortunately briefly, “backward” countries for some of the poorest: • During the 1940s, several countries in Asia and the Middle East had established their independence. Fourteen countries that were not part of the Marshall Plan, such as India, Pakistan, Taiwan, Indonesia, the Philippines, Israel, and Iran, were receiving U.S. economic assistance by the late 1950s.

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• This growth was most evident in Africa in the late 1950s and early 1960s (see also chapter 11). In 1952, there were only two countries—Ethiopia and Liberia—that were independent. Over the next four decades the number of “newly independent” sub-Saharan African countries grew to forty-eight. USFEA, particularly technical assistance, was being provided to all of them. Assistance to South Africa began in the early 1990s. • With the collapse of the Soviet Union in the late 1980s and early 1990s, fifteen Eastern European and Baltic countries asserted their independence; all received U.S. economic assistance (see also chapter 10). Similarly, in the 1990s, twelve Soviet republics, including Russia, established their independent sovereignty, known briefly in Washington as the Former Soviet Union states or the Newly Independent States. USFEA programs were initiated in all of them. In the Latin American and the Caribbean countries, political and economic events called for a response by the United States, and economic assistance was provided almost continuously beginning in the 1940s. The great tide of independence movements was welcomed and supported by the United States. Roosevelt had leaned on Churchill to promote India’s independence, and the United States had leaned on the Netherlands to free Indonesia at the time of the Marshall Plan. The United States supported the independence of the African countries from their European colonists. The United States also welcomed the independence of the Eastern European and Soviet states, a foreign policy ambition of long standing. USFEA was a principal way in which the United States demonstrated support for these newly independent countries. From the developing countries’ political perspective, this assistance served to reinforce, for a time, the fact of their independence from former colonial and external domination. The number of countries receiving aid fluctuates over time. Nineteen countries had “graduated” from this assistance by 2006. For other countries, such as Ethiopia, Nigeria, Zimbabwe, Ghana (see chapter 8), Tanzania, and Brazil, the economic assistance programs were briefly suspended (in part or entirely) and then reinstated. Eighty-two developing countries had active programs in 2006: sub-Saharan Africa, twenty-five; Asia and the Near East, nineteen; Europe and Eurasia, twenty-two; and Latin America and the Caribbean, sixteen. Moreover, even those that are “graduates” continue to benefit from participation in USAID regional and transnational programs. Poverty and Highly Varied Country Situations In an Overseas Development Council paper in 1976, Mahbub ul Haq referred to the Third World as a political and economic force “united by its poverty—by

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Table 12.2 Developing Country Population Change, 1950–2000 Population Region

1950

2000

Africa—North and sub-Saharan 222,000,000 877,000,000 728,000,000 2,166,000,000 Asia (excluding Japan and China) Latin America and the Caribbean 165,000,000 551,000,000 Eastern Europe 88,000,000 121,000,000 Newly Independent States (Former Soviet Union) 180,000,000 315,000,000 Total for developing countries and USFEA recipients 1,383,000,000 4,030,000,000

its heritage of common suffering.” The World Bank had estimated that 800 million people in the developing world were in a condition of absolute poverty. The management of assistance programs in the large and varying number of countries and the need to cope with off-and-on assistance status is a distinctive challenge. Moreover, each country provides a rich and highly varied context in its political, economic, institutional, and, most important, cultural settings. Aid can be deeply intrusive in addressing development problems in developing countries, especially where it aims to affect individual and society customs, traditions, behaviors, and political/institutional shortcomings. U.S. population programs, for example, have been notable, but others—such as education for girls, communicable disease control (HIV/AIDS), environmental restrictions, roads, macroeconomic policy reforms, and many other interventions—have had both desired and at times unanticipated and destabilizing effects on recipient societies. Sensitivity to these settings is essential in managing external assistance. One dominant but initially little-understood issue with a pervasive but subtle effect on all aspects of social and economic conditions in developing countries has been the accelerating growth in populations. Since the Marshall Plan, populations in regions of the developing countries and USFEA recipient countries have grown, as seen in Table 12.2. This growth of over 2.6 billion people has directly affected the management of USFEA. The initiation of major population and family planning programs is a result. Population growth also has had a significant impact on the development requirements of several assistance sectors, such as food, education, health, agricultural services, and requirements for infrastructure (e.g., roads, potable water and power, housing, etc.). In 1950, for example, nineteen cities in the developing countries had a total population of 58 million; it was projected that by 2000 this number would be 261 million. Population growth is having marked impacts, for example, on forestry, biodiversity, potable water, and energy consumption as well as on education, health, and agriculture.

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Population growth and the accompanying growth in economic and social disparities between elite communities (often representing expatriate generations) and indigenous traditional societies have provoked rebellions, often exploited by unscrupulous leaders. For example, these situations were evident in different forms in El Salvador, Guatemala, Liberia, Zimbabwe, South Africa, and Nepal. The importance of understanding these country contexts has been a vital part of assistance management, not always taken into account in the pressure to move programs quickly. Project design methodologies, discussed later, aimed to take these issues into account. Maintaining appropriately staffed missions in within countries has been critical. Humanitarian Disasters: Natural and Man-Made Poverty in developing countries bluntly and frequently confronted the United States in the form of massive disasters, requiring billions in U.S. emergency assistance. USFEA has been the major U.S. government resource for U.S. response with emergency assistance. This aid has had a major impact on the management of USFEA in relation both to urgent relief and to rehabilitation and reconstruction work. Emergencies have been natural in origin: drought and famine in India (1960s), in Africa in the Sahel and Ethiopia (1970s), and in East Africa (1980s); repeated floods, hurricanes, and typhoons in Bangladesh; and earthquakes in Nicaragua and El Salvador, and the tsunami in Asia (2004). Man-made disasters have been most evident in countries experiencing civil strife, such as Nigeria and its civil war in the late 1960s, or in El Salvador, Mozambique, and Sudan. In the 1970s, the Vietnam War became a dominant force in the management of USFEA, resulting in significant distortions of the USAID organization, personnel, and funding and, most important, of congressional support. U.S. Political and Economic Interests The security rationale described earlier, while dominant for much of the period since the Marshall Plan, was not the only rationale put forward for USFEA. U.S. political and economic interests supporting USFEA have been highly varied, at times conflicting, and largely more tactical than reflecting long-term strategies. The existence of an economic assistance program in any country provided the State Department and its ambassadors with opportunities to create friendly relations and to have access to political leaders, and thus with occasions for pressing U.S. interests of immediate political concern. In 1957, former congressman James P. Richards was sent to the Middle East under the Eisenhower Doctrine to deter Soviet influence. He dropped

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off $200 million in emergency special assistance in several Middle Eastern countries (Newsom 1988, 171). In Ethiopia, for example, the amount was $5 million, which the mission tried to program for development but was told by the Ethiopian government: “this is our money.” Over time, an understanding for its use was worked out. In a more crass form, assistance provided a tool for expressing immediate favor or disfavor with recipient governments’ performance touching on U.S. relations. Insulting the United States during a former U.S. president’s visit to Zimbabwe prompted suspension of an assistance program; withdrawing an invitation to a secretary of state during travel in Africa caused cancellation of a major new project for small farm development in Ghana that had been scheduled to be signed during the visit. In Pakistan in 1965, the United States found Pakistan’s nonalignment position “unacceptable” and criticism of U.S. military engagement in Vietnam “irritating.” As a consequence, the United States suspended aid and postponed a World Bank–led consortium meeting for Pakistan. There were similar appeals by other USAID missions where programs had been abruptly suspended. In Brazil aid was suspended because of the government’s 1967 “Institutional Act Number Five” to restrict political freedom. Subsequently the program was phased out in 1971 over human rights issues. Economic interests were reflected in the support of various U.S. groups. For a while the huge surpluses of agriculture commodities promoted Title I sales under the PL 480 Agriculture Act. These sales were in the form of soft loans that generated local currencies, the use of which was tied to various U.S. local funding requirements and development activities. In India, they became a political and economic embarrassment for the United States because the United States owned and controlled a massive amount of Indian currency. Various groups in labor, business, and farming sought to affect the assistance legislation to favor their causes. While usually favoring the assistance program, they often complicated it with demands in support of free labor movements and objections to certain agricultural crop programs such as cotton, pushing for special earmarks. Economic interests were also reflected in various FAA provisions, such as the Hickenlooper and Gonzalez amendments that call for cutting off assistance if there is nationalization of U.S. companies. This was the case in Ethiopia under the Mengestu regime; when a U.S. company was nationalized without compensation, it resulted in the termination of aid. The Brooks Amendment called for cutting off aid when a country is in arrears on its debts to the United States (Tanzania). One U.S. economic interest that has pervaded the management of economic assistance has been the “Buy American” requirement, known among the donor community as “tied procurement.” In addition, where procurement outside of

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the United States was necessary and allowed, it could only be made in selected countries on the Section 941 list, that is, avoiding communist or otherwise unacceptable countries. This tied procurement priority reached its extreme when USAID missions in the late 1970s and early 1980s were required by the U.S. Treasury to provide a “gold budget” along with their annual budget submissions. The “gold budget” was to establish that assistance expenditures would not result in a loss of U.S. foreign exchange and would not contribute to the U.S. foreign exchange deficit, as expenditures would be for U.S. procurement only. Where there had to be local expenditures, such as those of resident staff, the Central Bank was called on to provide a dollar equivalent in a special dollar account. Reports to Congress on the percentage of assistance spent in the United States were a standard requirement. USFEA and the Number of Countries Being Assisted In the late 1950s and subsequently, with the encouragement of the Kennedy administration, there was an eagerness to respond to independence movements, particularly in Africa. The first response was usually in the form of an independence “gift,” such as a mobile health van to Togo or a $100,000 pledge for constructing and equipping an Institute for Foreign Affairs in Nigeria. Later, after the Unilateral Declaration of Independence (UDI) and the formation of Zimbabwe in 1980, the assistance program responded with a hastily designed rural public health clinics program. But as the assistance programs in the newly independent African countries began to get under way, there was a reaction. General Lucius Clay’s report to President Kennedy from the Committee to Strengthen the Security of the Free World of 1963 stated that “the U.S. is over-extended in resources and under-compensated in results” (Lancaster 1999, 85). Congress was also concerned (ix). In 1966, Ambassador Korry reviewed the assistance program in Africa. His report, “Review of Development Policies and Programs in Africa, 1966” (North 1994, 18) called for limiting the number of countries assisted to ten, with the rest (mostly former Francophone Africa) to receive aid through regional projects and support to African regional organizations. With the widespread famine in the Sahel and across the continent, the United States mounted a massive relief and rehabilitation program, which evolved into the multiyear Sahel Development Program and, as a consequence, the return (reversing the Korry recommendation) to bilateral programs. Similarly, renewed concern about poverty raised the questions in Congress about there being no programs in some countries in Africa. Among the last to be included was Equatorial Guinea. USAID was cool on trying to start a program there and was not enthusiastic about local conditions. Yet it was pressed to

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outline a $1 million program. But to start a new country program required top-level approval. The request for approval traveled through USAID and the State Department to the White House before anyone would make a decision. The White House returned the request, saying, in effect, “Why are we being asked to make such a decision? That’s your responsibility.” Ironically, Equatorial Guinea now reimburses the United States for technical assistance from its abundance of oil revenues. Internal Organizational Changes in Program Management Growth, diversity, and the off-and-on assistance vagaries of developing country situations and U.S. reactions to them, along with the shifting character of the legislation, have had a profound effect on USFEA. USAID has been constantly challenged to transform its program priorities, internal structure, and operating systems. Transformation and Program Priorities One of the more distinctive features of USFEA’s transformation has been the rise and fall of major program priorities. Examples include: • Nonproject assistance, also known as program aid, primarily in the form of commodity imports but at times in the form of cash grants, has been a common use for ESF allocations. This commonly is associated with efforts to promote economic policy reforms related to developing country management of budgets, exchange rates, and economic growth. South Korea, as discussed earlier, is an excellent example of how program assistance and economic policy reform worked together. In the 1980s, it was helpful in African countries faced with serious debts and in danger of defaulting on World Bank and IMF loans. The World Bank led a donor group called the Special Program for Africa (SPA) that generated substantial program assistance, called “quick disbursing aid,” along with policy measures undertaken by African governments. Although program aid continues to be used in selected ESF countries, particularly where U.S. political and security interests are of primary concern, it has not been popular with Congress. It is relatively easily spent where there is an urgent requirement for industrial commodities and budget support; its impact, however, has a short life and its contribution to poverty alleviation is hard to identify. The effectiveness of the requirements for policy reforms that are conditions for receiving this assistance has been controversial and questionable. More recently, the focus of this type

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of assistance has been shifted to sector programs, once used in Latin America in the Alliance for Progress. Infrastructure and capital projects—beginning with the DLF and extending into the early 1970s, assistance for major infrastructure projects was a dominant part of USFEA, particularly for transportation and irrigation projects, although the full range of developing country infrastructure requirements were evident. With the onset of the New Directions, Congress ruled out major infrastructure projects as not being responsive to basic human needs. The main exceptions were projects funded by ESF, such as in Egypt, with a heavy emphasis on urban utilities and irrigation. Agriculture was the dominant program priority for ICA in the 1950s and into the 1960s, with the emphasis on university education, research, and extension and the formation of the worldwide network of agricultural research centers initiated by the Rockefeller Foundation and supported by USAID. Major programs for applying the new varieties of rice and wheat were carried out in developing countries through USAID missions such as those in India and Turkey. U.S. universities had a major role in establishing agricultural universities abroad, undertaking special research projects, and, generally, promoting agriculture in international development through their unique relationship with USAID, the Board for International Food and Agricultural Development (BIFAD). The employment of direct-hire agricultural technicians in a wide range of activities was also common. The dominance of agricultural programs has declined since 1985, and USAID’s substantial direct-hire expertise was greatly reduced. Funding for agricultural programs dropped from $2 billion in 1985 to $400 million in 2003 and technical agricultural staff dropped from 185 in 1985 to 48 in 2003 (National Research Council 2006, 53). Large-Scale Integrated Rural Development programs became popular as large grassroots, multisector endeavors at the time of the New Directions; they were not sustained as had been the case with Community Development in the 1950s. In the 1980s, the USAID administration worked to have these projects terminated because they were believed to be ineffective. Such projects are administratively complex for developing countries, cutting across line agency bureaucratic interests. They require special sensitivity to local community cultures and local participation in slow, long-term nurturing endeavors not often possible through external assistance. Population programs grew dramatically in the 1980s and 1990s, especially with the emphasis on massive contraceptive condom and pill distribution, responding to what was then believed to be an unmet demand

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in developing countries. This approach, always controversial, has been moderated in time with greater emphasis on voluntary family planning in conjunction with health services. Promoting the use of condoms has been renewed in connection with HIV/AIDS prevention campaigns. • Health programs followed two tracks: those that emphasized vertical control or eradication services and those that stressed institutional development in health delivery systems. The former has been among the more successful of USFEA programs and has included the campaigns for eradicating or controlling smallpox/measles, onchocerciasis (river blindness), polio, and diarrhea sicknesses and the Expanded Program for Immunization (EPI) vaccination program for children. Funding for child survival programs continued to be substantial from the 1980s. Malaria control had been a major interest in the 1970s and 1980s and was revived with new technologies. Institutional capacities for health delivery systems has been largely a lesser priority and has been supported as an adjunct to the vertical campaigns if it has been addressed at all (the very successful smallpox campaign left almost no sustained institutional capacities in the developing countries, but that was not its objective). Although rural and urban clinics have been supported, hospital development has been distinctly resisted. Nutrition programs, especially through PL 480 Title II school feeding, have been widespread but have declined as not sustainable. Community potable water systems were promoted through well drilling and other sources; training in their management became particularly important. New massive funding for HIV/AIDS, malaria, and tuberculosis were among the most dominant programs in the early twenty-first century. • Professional education, especially at the postsecondary level, has been a major interest through the creation of educational institutions in the developing countries and large-scale participant training programs for long-term academic and short-course technical training. Long-term training has been greatly curtailed and replaced with short-term workshops and seminars. Curiously, some members of Congress during the New Directions period objected to such programs as not directly assisting the poor in developing countries. Programs for basic and informal education have become important, emphasizing quality improvements after a period when the USAID administration questioned whether the United States had much to offer and developing countries were sensitive to external interventions. • Public administration was prominent in the 1950s and early 1960s and was revived in the mid-1970s. Some assistance for the management of sectoral, urban, and other development programs has continued. Issues

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such as local and decentralized government (see especially chapter 8), tax systems, and, more recently, implementing policy change have been stressed. • Establishing developing country institutions, such as schools for higher education, development banks, and research organizations, as an essential dimension of development was a priority for all sectors in the TCA, ICA, and early USAID years. This role was downgraded in importance when economic policy reform was promoted and only in the 1990s was given priority associated with improving developing country governance. • Other sectors and programs have become more prominent but not dominant in resource allocations such as the environment, trade, and investment. The list of program initiatives in each of the sectors is extensive. • The most dramatic transformation in USFEA in the 1990s and 2000s has been involvement in the promotion of democracy, governance, human rights, and conflict management (see also chapters 3, 4, and 5). A brief trial with political development under Title IX of the legislation was not sustained. Once thought to be a politically inappropriate area for external assistance, democracy and governance reform by 2006 had become the most prominent dimension of USFEA. Concern with “fragile states” and their stability, and its implications for U.S. and global security interests, accentuated its importance. These thumbnail summaries of USFEA program priorities do not do justice to their complexities and evolution. But they suggest that their transformations have been a continuing preoccupation of USFEA. USAID Restructurings in Washington The internal organization of USAID has been restructured over time to respond to changing developing country situations and domestic interests, another example of internal transformations of USFEA. First, the role of the central bureaus and their relationships to the regional bureaus has shifted with continuing tension over involvement in project development, fund allocation, and personnel control. The central bureaus include both those responsible for management (personnel, finances, and administration) and those concerned with development sectors and programs. In TCA, the regional offices had their own technical staffs. During the ICA period, the central bureaus, particularly the central agricultural office, were dominant. With the formation of USAID and the emphasis on country programming, the regional bureaus were given the lead with their own fully staffed technical and project development and country desk offices. The roles of the central program bureau included sector

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policy definitions and strategies, technical field support, research, and liaison with U.S. universities and private foundations. The offices within the central bureau took the lead on advancing USAID involvement in key critical areas such as the child survival program and the HIV/AIDS program. Some of their offices, such as the population office, controlled and allocated substantial resources. After 2001, the central bureau responsible for sector programs was divided into three global bureaus (called pillar bureaus): Global Health; Democracy Promotion, Conflict Prevention and Humanitarian Assistance; and Economic Growth, Agricultural Productivity and Trade, reflecting a further transformation in priorities. Second, there were significant transformations in the geographic bureaus. The African Bureau grew from a desk in the Near East Bureau under TCA to the Europe and Africa Bureau under ICA to an Africa Bureau under USAID with residual responsibilities for Europe. The North African countries were split off to reduce the workload of managing aid for numerous African countries. A special bureau, with a Washington staff of about 400 people, was established from the late 1960s until 1972 to administer the program in Vietnam. In 1972, a Bureau for Supporting Assistance was set up to manage all supporting assistance programs worldwide for Vietnam, Laos, Cambodia, Egypt, Jordan, Syria, and Israel. In 1974, in another reorganization, the Supporting Assistance Bureau was terminated with the creation of the Bureau for the Middle East, South East Asia, and North Africa. With end of the Soviet Union, a Task Force for Newly Independent States (NIS), now the Bureau for Europe and Eurasia, was established. Third, the Latin America Bureau and the Africa Bureau had for a time unique organizational arrangements reflecting the impact of their program orientations. For Latin America, the arrangement was called back-to-back, or a “merged bureau,” a merging of the State Department and USAID at the time of the Alliance for Progress. Under this arrangement, the assistant secretary of state for Latin America was appointed U.S. coordinator for the Alliance for Progress and the deputy was the USAID deputy assistance administrator. At the country desk level, the senior officer was from the State Department with a USAID deputy. An exception was Central America, where the USAID officer was the senior and the State officer was the deputy. The Latin American Bureau Institutional Development Office, the Development Loan Office, the Program Office, and the Management Office were retained as separate offices within USAID. This structure was phased out with the end of the alliance. In the Africa Bureau, as a consequence of the Korry Report and its recommendations to have only regional programs for all but ten countries, a USAID mission was created within the bureau in Washington with a mission director and appropriate authorities and staffing. This arrangement entailed

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an exceptional amount of travel as the office tried to manage regional projects and relations with countries, mostly in West Africa, from Washington. This was a temporary arrangement, which ended with the reinstatement of bilateral programs in the previously excluded countries. Overseas Field Representations A key feature of USAID management has been the overseas mission, variously called the Technical Cooperation Mission (Point 4) or TCM, the U.S. Operations Mission (USOM) under FOA, and finally the USAID Mission. Missions were staffed with from one or two up to over 100 direct-hire and personal service contract (PSC) personnel (Egypt). No staff were located in Israel. Their main tasks were to develop country strategies and budgets, design and implement projects, and maintain relations with country officials. The existence and size of these missions changed with the scale of the programs and the extent to which they were delegated authority to approve projects. Some unique arrangements were the concepts of the servicio and the regional development offices. In the early days of the Latin American program, the concept of the servicio was created for administering assistance funds. The servicios were, in effect, shadow ministries with coadministrators from the United States and the developing country, as the local ministries were not well staffed. They had their own funds and staff to carry out development projects. This concept was picked up in the Point 4 program in Ethiopia in the 1950s, called Joint Funds, for programs in education, agriculture, and health. Each was funded with U.S. and Ethiopian contributions and operated as separate administrations. While serving a useful purpose at the time when country line ministries were weak, they were discontinued as questionable arrangements since they operated independently of both governments, did little to strengthen line ministry capacities, and could not be sustained. A second innovation in Africa was the creation of Regional Economic Development Service Offices in Abidjan and Nairobi. The African region had struggled with the problem of how to manage programs in many small countries, with the right assortment of professional staff—sector technical officers, contract officers, engineers, social scientists, food for peace officers, and so on—as it was not practical to have full missions in each country. One variation was to have one mission that was responsible for programs in neighbor countries, such the USAID mission in Cameroon being responsible for programs in Chad, Gabon, Congo Republic, and Equatorial Guinea. This concept of regional development offices has been extended to all of the other regions.

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Table 12.3 Foreign Aid Personnel, 2002 Personnel numbers Direct hire civil service (USCS) Direct hire foreign service officers (FSO) Total USAID direct hire employees

Overseas

Washington

1,079 1,082 2,161

0 687 687

1,079 395 1,474

170

170

0

Direct hire foreign service nationals and third-country nationals USPASA (Participating Agency Service Agreement) Foreign service nationals (personal service contracts) U.S. personal service contractors (USPSC) Other*

172

24

148

4,579 630 163

4,579 488 51

0 142 112

Total

7,875

5,999

1,876

*Intergovernmental Personnel Act agreements (IPAs), Technical Assistance for AIDS and Child Survival (TAACS).

Managing Technical and Management Personnel Requirements Staffing of USAID is complex and made up of several categories. These include direct hire foreign service officers, direct hire civil service employees, personal service contracts (U.S. Personal Services Contracts and Direct Hire [DH] for individuals), and foreign service nationals (direct hire [DH] and contract). In addition, USAID arranges for expertise and program support through Participating Agency Service Agreements (PASAs) and Research Agency Service Agreements (RASAs) with other federal agencies and through contracts and grants with universities, nonprofit institutions, and commercial firms. In the 1990s, direct hire staffing fell from over 3,000 to the 2,000 range, with a major and wrenching reduction in force in 1995. Unfortunately, comparable data from the beginning of the FAA and USAID, which would provide an indication of trends in the transformation of USAID personnel, are not available. Three developments in particular have had transformational effects on USAID staffing. The first is the major shift in the 1970s ending the use of direct hire employees for the implementation of projects, such as the 150 U.S. direct hire agricultural officers working in Nigeria in the 1960s. In Iran in the 1950s, 300 Americans—direct hire and contract—were working

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in agriculture, community development, education, health, industry, public administration, and media communications throughout the country. The Vietnam Bureau in the early 1970s had over 4,000 personnel in the field and 200 in Washington. Ending the use of U.S. direct hire in project implementation shifted the agency from orientation as a technical agency to one that emphasized program management of grants and contracts. With this change in sector priorities, the agency’s staffing, for example, with agriculturists, engineers, and economists, was greatly diminished. The second development was concern about the number of U.S. citizens overseas, especially those in the foreign assistance program. This concern was dramatically demonstrated by the U.S. ambassador in Brazil in 1967; the number of U.S. government employees in the country was particularly large, expressed in the thousands. The ambassador was concerned that everything the Brazilian government did, such as making decisions on taxation, was identified with U.S. advisers: “we were interfering in everything.” As a consequence, he was authorized by Washington to cut all agency staffs in Brazil by 50 percent. The operation was called “Topsy.” Similarly, in the late 1970s and early 1980s, the Africa Bureau in the State Department instructed embassies to justify (which meant restrict) the addition of any U.S. staff. This was particularly difficult for USAID, which was attempting to start up new programs. A similar issue arose with the start of assistance programs in Russia and the other former Soviet states. The dilemma about overseas staffing for USFEA continues, given differing understandings by USAID and the State Department about what is required to develop and implement long-term assistance programs. A third development relates to the staffing of USAID programs in Africa. This situation has already been referred to in connection with the effects of the Korry Report and the rapid growth in the number of African countries being assisted. As a consequence, the Africa Bureau had to be creative in managing its programs. A special study was undertaken on mission staffing requirements relative to the size and character of the program. Various arrangements, mentioned earlier, were created, such as one mission’s being given responsibility for programs in neighboring countries and the creation of Regional Economic Development Service Offices in Abidjan and Nairobi to provide technical, legal, and contract services to the one- or two-person missions. Some staffing arrangements were picked up by other bureaus. These demands—the number of Americans overseas, the number of direct hire employees, congressional budget restraints on the annual operating budgets, and the character of the USAID staffing requirements—have had a profound impact on USAID’s ability to maintain its professional expertise. The use of personal service contracts and other ad hoc arrangements

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has grown. Technical assistance, in these instances, is commonly given in short-term visits rather in continuing in-country associations or in temporary Washington assignments. Foreign service nationals, both DH and PSC, have come to play an increasingly major role in managing the assistance programs, both as technical experts and program managers, in addition to continuing administrative support. Many of them are experts in their fields and provide local understanding and important country relationships and continuity, as U.S. personnel rotate in and out of the missions every two to four years. One of the less-appreciated transformations during this time has been the increasing professional capability of the foreign service nationals and their management contributions. The effect of these changes has been evident in concern about the transformation of the agency’s scientific and technical capabilities. Transformation in Programming Procedures A significant area of program transformation in the internal management of USAID has been the changes in programming procedures. Briefly: • In the pre-USAID era, technical assistance under TCA projects was in the form of relatively simple documents included in annual budget submissions by the field missions. DLF capital projects had more rigorous requirements calling for feasibility studies and cost/benefit calculations. These two design systems were merged when USAID came into being. • Subsequently, the logical framework requirement was introduced in the 1970s. This project design tool provided for laying out project goals and objectives with related inputs and outputs and accompanying indicators and their verifications and assumptions. It became popular among donor countries and was seen used in a village in Tanzania; it was an essential part of project design during the New Directions era but was replaced by the strategic planning and results framework programming system. • When the New Directions approach to assistance was introduced in the mid-1970s, a new project development system was created. This system became particularly burdensome and slow as it required three stages of documentation (the Project Identification Document—PID; the Project Review Document—PRP; and the Project Paper—PP). Each underwent detailed review in Washington, although in time some authority for review and approval was delegated to large field missions. Reflecting the concern for addressing basic human needs, these documents were required to have (in addition to the traditional technical, economic, financial, and implementation analyses) social analyses, environmental impact analyses, and statements about the role of women.

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• Since 2001, USAID shifted to a Strategic Results Framework programming system. Strategic planning requires each field mission to develop a three-year strategy describing issues in the sectors where it will work and the goals it wants to accomplish. Goals are established for each area. An annual operational plan then specifies the particular program and components for meeting each goal. Progress toward achievement of each program component is measured using a number of common indicators. Activities are defined in contract arrangements, cooperative agreements, collaborative agreements, and grants and strategic objective agreements. These arrangements and agreements, backed up by the strategic planning document, constitute the activities to be implemented. In many ways this recent approach to programming has oriented assistance programs toward the larger strategic objectives and away from the particularistic orientation of the project mode. Coordination: Worldwide and within the United States Coordination and Other International Donors Management of USFEA took on a major dimension with the rapid enlargement of the community of donors engaged in assisting developing countries. It was one thing to be the sole donor leading the recovery of Europe and encouraging countries to take responsibility for assisting in the coordination of the economic assistance programs. It was a different challenge when it came to providing economic assistance to the numerous and diverse countries of Africa, the Middle East, Latin America, and Asia. The United States had encouraged the European nations to join together for economic cooperation in the Organisation for Economic Co-operation and Development, of which it became a member. It was eager to share the burden of providing assistance to developing countries. Thus it became the prime mover in setting up in 1961 a subsidiary group, the Development Assistance Committee (OECD/DAC). The primary motive was to promote the participation of the European nations in providing assistance to developing countries and to share the growing assistance burden. Over time, countries have become members of the DAC as donors of assistance to the developing countries. Official development assistance from the Western DAC bilateral donors reached $51.5 billion in 2001, of which the U.S. government, the largest donor, provided $10.9 billion. This move to get other donors engaged in “sharing the burden” came full

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circle as the other donors in the DAC began pressing the U.S. government to increase its development assistance to be more proportional to the country’s wealth—the United States ranks fifteenth among the donor community in the share of development assistance provided. Apart from funding levels, it became crucial that there be some coordination in policy and practice to help ensure the effectiveness of assistance to a developing country and to simplify, to a degree, the administrative burden on these countries of assistance requirements of multiple donors. DAC agendas over time illustrate attempts to improve aid performance. Among the many topics addressed have been untying assistance from restrictions in limiting procurement to the donor country; technical assistance and capacity building; country programming; various sector policies and planning; and monitoring and evaluation. Coordination became a part of donor field mission responsibilities to reduce conflict and duplication in areas of assistance and to represent to the developing country governments’ common positions. USAID missions often took the lead in coordination. This effort was at times not welcomed by the developing country governments, which preferred to deal with the donors separately. On major projects donors attempted to pool resources, although differing design requirements, implementation procedures, and donor interest in “showing the flag” complicated these efforts. Major multidonor projects were largely for infrastructure. USFEA, for example, participated in the Volta Dam project in Ghana and the Transcam Railroad project in Cameroon. In a health sector project, fourteen donors came together with seven west African countries to tackle the problem of river blindness in a massive river-spraying campaign. In addition to the bilateral donors, the World Bank—originally the International Bank for Reconstruction and Development—and its associates, the International Development Fund (IDF) and the International Finance Corporation (IFC), over this period became preeminent sources of funding, policy, and technical advice for the developing countries, overtaking the role played by USFEA. This brought a new dimension to coordination: World Bank Consultative Groups. By working with the developing country governments, the World Bank provided leadership in preparing policy and program plans and assembling the donors in sessions for developing consensus on recipient country policy and programs for generating new assistance. Consultative Group meetings provided occasions for the developing country to lay out their development plans and assistance requirements and for the donors to raise their policy and program issues as well as to make commitments of “new” assistance. Not all of the major developing countries worked within the World Bank consultative group framework. Pakistan and Indonesia had special international consortiums. (The one for Indonesia was chaired by the

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Dutch.) Others—for example, Nigeria—refused to join in a consultative group in what they perceived to be a “ganging up” of the donor community. The combination of the large number and very diverse range of developing countries being assisted with underdeveloped economic, social, and institutional conditions; the threats of communist ideology and interventions; frequent natural disasters and civil crises; population explosions; and the growth in the community of donors presented a major challenge for USFEA and its management. Coordination and Other U.S. Donors in International Development A growing dimension of international development assistance has been the proliferation of U.S. agencies and U.S. private nongovernmental organizations providing assistance. From the 1960s, U.S. agencies have obtained support from Congress for their international assistance programs. The Peer Review for 2002 pointed out that over fifty separate government agencies carried out aid-related activities overseas. The principal ones are listed in Figure 12.1. As a percentage of development assistance from the United States, in 2002 USAID provided 50.2 percent, the State Department 18.6 percent, Treasury 10.7 percent, Agriculture 5.8 percent, Defense 5.9 percent, and all others 8.9 percent. The USAID share dropped from 64.3 percent in just four years. In addition, there are 160 U.S. nongovernmental organization members of Interaction, an association involved in international development. Privately endowed foundations such as the Ford and Rockefeller foundations, the Bill and Melinda Gates Foundation, and the Turner Foundation play a significant role. One recent form of coordination with other agencies and private organizations has been the Global Development Alliance (GDA) initiative, through which USAID forms partnerships with civic organizations to carry out development activities. The transformation of U.S. involvement in international development raises formidable challenges for assistance coordination and whether coordination as such is the relevant concern. Epilogue Initiatives and Innovations: The Global Impact of USFEA Despite the severely constraining environment of USFEA legislation, nondevelopment-oriented U.S. interests, the often chaotic conditions of the developing countries, and the continuing ferment about and within the USFEA organization, USFEA can claim a role in many initiatives and innovations that

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have benefited the “poor majority” in developing countries. These accomplishments are unheralded, and the taking of credit by any one individual, group, or organization can seem inappropriate given the larger numbers that were engaged in bringing them about. Some suggest that perpetual transformation is an inhibiting and inefficient condition because of the loss of continuity in program and expertise. Yet it has provided flexibility within an inflexible and binding context, out of which have come numerous advances in the cause of development. In some instances one individual has provided the initial spark in a conducive setting that has moved on to major development contributions. Some illustrations: • The idea of applying the land grant agricultural university model to developing countries started with Dr. Henry Bennett, the first administrator of TCA (Point 4) and formerly the president of Oklahoma State University. The first institution of this type, challenging the classical university pattern inherited from Europe, was started in Ethiopia. This model has been introduced in a several countries (five in India, three in Nigeria, Thailand, Brazil, Morocco, and Tanzania) with variations in other countries such as Kenya and Malawi. These universities have provided the developing country with technical capacities at the heart of international agricultural development, contributing to spreading the use of the new varieties of rice and wheat, and advancing U.S. foundation and USAID support for international agricultural research centers, now coordinated by the World Bank with multiple donors. • The health sector has been noteworthy in examples, including (1) the unanticipated discovery of oral hydration therapy in Bangladesh for children afflicted with diarrheal diseases in a cholera vaccine research project support by USAID; (2) evolution of the concept of rural health centers staffed by nondegree doctors, community nurses, and sanitarians, pioneered in Gondar, Ethiopia, through the Public Health College and Training Center in the 1950s; (3) the development of a strategy by the U.S. Communicable Disease Centers, supported by USAID, that led to the eradication of smallpox in the resultant worldwide campaign; (4) the beginnings of child survival programs in Africa with the Combating Childhood Communicable Disease initiative of USAID, CDC, and the U.S. Congress; and (5) two public health doctors (U.S. and French) joining to promote the eradication of onchocerciasis (river blindness) from West Africa, through spraying rivers and medical treatments. Shortly after the implications of HIV/AIDS first became known in 1981, USAID formed a special staff group to map out strategies and assistance programs to initiate measures to counter the devastating impact of AIDS.

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• Programs for population and family planning were first led by USAID in domestic and world settings resistant to the idea and the more effective approach was debated heatedly. • In higher education, a leading educator from Harvard, distressed by the image U.S. universities had in Africa when contrasted with higher education in Europe, took the lead with the then ICA to initiate the African Scholarship Program of the American Universities (ASPAU), which allowed African students to study abroad in the United States. He rallied U.S. universities to provide scholarships, USAID to provide per diem support, and the African governments to provide travel for selected African secondary school graduates; hundreds of Africans benefited from this program as well as its successor, the AFGRAD program for graduate education. Scholarship programs and support for African educational institutional development were initiated under the $20 million Special Program for Tropical Africa (SPTA) by the ICA Africa Bureau in the late 1950s. • The Sahel Development Program, formed after devastating famines, was initiated by USAID staff with support from the OECD/DAC leadership. • In disaster after disaster, USAID has been the leader in responding, but also in moving beyond the crises to help build local disaster preparedness capabilities. • Individual developing countries, benefiting from the close relationship with the expertise of field missions, can cite examples where USFEA has made significant contributions to policies, technologies, institutions, and individual professional capabilities. Not all innovations have worked out. Costly early attempts to control malaria with DDT failed—the disease returned and the DDT treatment was ruled harmful; irradiation of the tsetse fly to control the disease of sleeping sickness in animals and humans did not work; the idea of having a country counterpart to a technical assistance specialist was not sustainable; promotion of direct private investment was not effective in the absence of a positive investment climate; integrated rural development schemes became overly complex and administratively beyond local or national capacities, suffering also from local and donor unwarranted expectations for early results. With successes and disappointments, and despite concerns about the uncertainties of “perpetual transformations,” there has been room in USFEA management for initiative and innovation. Meanwhile, consideration of the impact of global foreign assistance on economic growth moves to a different level of discussion as part of global and multidonor development assistance.

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Continuing Transformation Although the 1961 attempts to reform the FAA did not succeed, the FAA was repeatedly amended to add new features, and USAID has undertaken a number of program initiatives and changes that are reshaping its programming. The most recent were set forth in a White Paper, U.S. Foreign Aid: Meeting the Challenges of the Twenty-First Century (USAID 2004). The White Paper focuses on five challenges: transformation development in countries that are reasonably stable and that have a need for concessional assistance; fragile states; humanitarian relief; strategic states such as Iraq, Afghanistan, Egypt, Israel, Jordan, and Pakistan; and global and transnational issues such as HIV/AIDS. This strategy has evolved from the most significant recasting of the role of USFEA in U.S. foreign policy: the recognition of the importance of development, along with diplomacy and defense, in the framework of U.S. national security. Flowing from this recognition of the role of development in U.S. national security interests are new sets of development priorities, policies, programming guidance, and procedures, perpetuating the transformation of U.S. foreign economic assistance. But some constants are noted in the 2006 statement of the Nine Principles of Development, although they are not always adhered to and have had some variation in emphasis and characterization over time. They are ownership through development country leadership, participation, and commitment; capacity building to strengthen institutions, transfer skills, and promote appropriate policies; sustainability to ensure that impact endures; selectivity based on need, commitment, and U.S. foreign policy interest; assessment through research and evaluation, best practices, and design for local conditions; clearly defined results and measurable, strategically focused objectives; partnerships in close collaboration with governments, communities, donors, nongovernmental organizations, and private-sector organizations; flexibility to adjust to changing conditions, take advantage of opportunities, and maximize efficiency; and accountability and transparency built into a system of checks and balances to guard against corruption. Development is not an easy concept to understand and is usually appreciated only in terms of small, isolated human interest achievements rather than in terms of broad changes in economic and social conditions; poverty is still on the agenda. The term aid is itself misleading (and somewhat demeaning for the recipient) when applied to the long-term task of economic and social change. USFEA and its primary agency, USAID, are more politically vulnerable than most U.S government programs. They are faced with a public that is skeptical about the purposes for foreign assistance, not perceiving a direct and visible benefit from this use of their tax money. Its mistakes are often

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widely publicized. Its achievements usually are long term in nature and become internalized over time within the countries being assisted. Like salt in water, these achievements are not visible, but positive global change in health, education, and food production is evident. USFEA’s short-term political or economic contribution to diplomacy is rarely noted; even its role in helping to counter the spread of communism is lost as that issue fades. During the late 1960s, a senator from Connecticut, who gave constant support to foreign assistance, told a group, in effect, that he took a political risk to vote for these measures: “you can’t expect us to advocate them.” As has been frequently noted, the U.S. public commonly and greatly overestimates the amount of USFEA in the U.S government’s budget. This political vulnerability has strengthened the impulse of succeeding administrations to transform USFEA programs and its organization. Some of this transformation is inevitable and necessary given the growing knowledge of development and the rapidly changing international and domestic environment. Each administration has the responsibility to set forth a vision of the role of USFEA in international development. As this chapter has illustrated, in past transformations, presidential leadership has been decisive. USAID is unique in its ability to be “on the ground” and sensitive to changing conditions in developing countries while maintaining linkages with the vast technological resources of the United States. This capacity needs to be strengthened to keep abreast of changing conditions in developing countries and the possibilities of cutting-edge technologies. One of the most important contributions of the USFEA and USAID has been their role in shaping through the power of ideas the understanding of development issues and ways to address them. Continuing dialogues with leaders in developing countries, with other donors in the United States and worldwide, and with Congress and the U.S. public, backed with the appropriate resources, are the key to maintaining perpetual transformations of development assistance in a changing world. Given the issues that now confront developed and developing countries in globalism, terrorism, cross-country criminal activity, transnational diseases, costly man-made and natural disasters, and global warming—to name only some of the more prominent issues—USFEA and its primary implementing organization should move beyond “aid” to a program that views its role as one of maintaining global security and mutual development and transforms its global program accordingly. Acknowledgment This chapter draws on secondary sources, selections from approximately 100 oral histories of those who have retired from economic assistance agencies, the experiences of the authors, and the review of selected literature on specific topics.

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References Brown, Marshall D. 1996. Oral History Interview, December 14, 1996. Association for Diplomatic Studies and Training Library. Washington, DC: Library of Congress. Butterfield, Samuel Hale. 2004. U.S. Development Aid—An Historic First. Westport, CT: Praeger. Kaplan, Jacob J. 1967. The Challenge of Foreign Aid: Policies, Problems, and Possibilities. New York: Praeger. Lancaster, Carol. 1999. Aid to Africa: So Much to Do, So Little Done. New York: Century Foundation. National Research Council. 2006. The Fundamental Role of Science and Technology in International Development. Washington, DC: National Academies Press. Newsom, David D. 1988. Diplomacy and the American Democracy. Bloomington: Indiana University Press. North, W. Haven. 1994. Oral History Interview, June 1994, on Frontline Diplomacy: The U.S. Foreign Affairs Oral History Collection (CD-ROM). Arlington, VA: Association for Diplomatic Studies and Training Library. Organisation for Economic Co-operation and Development (OECD). 2002. “United States (2002): Development Cooperation Review” (October 22). Paris: Organisation for Economic Co-operation and Development. Owens, Edgar, and Robert Shaw. 1974. Development Reconsidered: Bridging the Gap Between Government and People. Lexington, MA: Lexington Books. Pindar, Frank E., II. 1986. Pindar: From Little Acorns. Tallahassee: Florida Agricultural and Mechanical Foundation, Inc. Reynolds, David. 2000. One World Divisible: A Global History Since 1945. New York: W.W. Norton. Rostow, W.W. 1960. The Stages of Economic Growth—A Non-Communist Manifesto. Cambridge: Cambridge University Press. Stopler, Wolfgang F. 1966. Planning Without Facts: Lessons in Resource Allocation from Nigeria’s Development. Cambridge, MA: Harvard University Press. U.S. Agency for International Development (USAID). 2003. “U.S. Overseas Loans and Grants: Obligations and Loan Obligations, July 1, 1945–September 30, 2003.” Doc. no. PN–ADA–800. Washington, DC: U.S. Agency for International Development. Available at http://pdf.dec.org/pdf_docs/PNADA800.pdf (accessed March 2007). ———. 2004. “U.S. Foreign Aid: Meeting the Challenges of the Twenty-First Century.” White Paper (January). Washington, DC: U.S. Agency for International Development, Bureau for Policy and Program Coordination. Available at http://www.usaid.gov/policy/ pdabz3221.pdf (accessed March 2007).

13 Higher Education, Capacity Building, and Aid Lessons Learned Ralph Smuckler and Louis A. Picard

U.S. national interest at the beginning of the twenty-first century demands greater development momentum abroad and understanding of world affairs among our future leaders. Universities and other institutions of higher education are an essential component of foreign aid. They can and should play an important role in international development and technical assistance, now more than ever. Unfortunately, since 1990 higher education has played a diminished role in international assistance. Since the 1980s, the role of U.S. universities and institutes of higher education in development has declined in favor of for-profit contractors and single-issue nonprofit organizations. By the 1990s, the U.S. Agency for International Development (USAID) was no longer ready to view development as broadly as it had before, nor to embrace a closer alliance with U.S. universities. The world has changed since September 11, 2001. Now is a good time to look more seriously at the university record in international development. We do so briefly here in the hope that others, both academics and practitioners, will examine the history of higher education in foreign aid efforts more deeply. In our view, universities, more than other organizations, have had a positive impact on international development efforts. It is for universities to take up the task of building the historical record of higher education and development with an eye toward those lessons that have been learned over the last half of the twentieth century. The goal should be to determine how to best use the university experience with developing countries to strengthen aid policy and meet national needs in the new world situation. Such a review of higher education can illustrate the many successes, and some failures, in the twentieth-century record as we reexamine international development in the new century. As we examine this issue, we use the example of Michigan State University (MSU) to illustrate this history, since one of the 302

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authors had direct involvement with MSU and its international programs for most of the last half of the twentieth century. The Historical Context Since the beginning of the public university system in the early nineteenth century, U.S. higher education has played an outreach role. In the years after the Civil War, “European and American universities became centers of instruction for foreign students. Europeans and Americans sometimes became teachers in foreign lands. Missionaries carried with them information useful for life in the here as well as in the hereafter. Engineers, colonial governors, businessmen, and philanthropic foundations all lent a hand in carrying on this trade in ideas” (Curti and Birr 1954, 4). U.S. universities became involved in development after World War II. MSU was one of the first. MSU began working in Okinawa in 1951 as part of Japan’s reconstruction (Smuckler 2003). MSU trained Okinawa faculty members, sending people to the United States to study agriculture, home economics, public administration, and language and literature. At first considered second rate by some members of the highly established higher education system in Japan, the University of the Ryukyus, aided by MSU, became recognized as an equal in the Japanese system. MSU work was sponsored by the U.S. occupation forces in Japan. Along with a number of other university programs in Japan and Germany, it was considered an exemplary case of higher education “institution building,” one that both built a university abroad and provided some of the U.S. university faculty with a valuable experience and education. In the last half of the twentieth century, MSU managed one or more technical assistance programs in over forty countries. Individual faculty members, staff, and graduate students worked with the great foundations, USAID, the World Bank, and various United Nations sponsors in advising, teaching, research, and management services. Eventually, MSU joined Indiana University, the University of Pittsburgh, and Rochester University to form a consortium to study institution building for international development. In addition, it would link up with U.S. land grant institutions for agricultural development under Title XII of the Foreign Assistance Act. Technical assistance was central to the role of universities in aid. From the beginning, universities made it clear that no state-level taxpayer funds would be used to support assistance programs. From its beginnings in the early 1950s, MSU’s international program reputation rested more on foreign aid and international cooperation with developing countries than on any other single activity. After 1951, it became a

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model for the select group of U.S. universities that became involved in U.S. foreign aid in the years following President Truman’s Point 4 announcement, calling on the United States to fight “hunger, misery and despair” (Smuckler 2003, 44) and opposing collectivist revolutionary movements given the cold war environment of the time. Point 4 provided a role for universities as part of the populist and egalitarian “land-grant philosophy.” The Vietnam Project The cold war environment is illustrated by the U.S. involvement in the Vietnam War. In 1955, Michigan State University, at the request of the South Vietnam government, led by Premier Ngo Dinh Diem, established an extensive technical assistance program, focusing on public administration—training and research for a stronger civil service and civil police administration in rural areas. The MSU programs were funded by the International Cooperation Administration, the predecessor to the U.S. Agency for International Development (Schulzinger 1997, 89). Wesley Fishel, a political scientist and an Asian area specialist—above all, a confidante of Diem—was a key figure in organizing the MSU Group in Saigon—MSUG, as it came to be known. Overall, the MSUG was an important ingredient of aid to the South Vietnamese government in the late 1950s. It involved fifty specialists at its peak. The MSU mission was important, as was the role played by Fishel in his unique relationship to President Diem. In 1962, after seven years of contract activity, the MSU Vietnam Project came to an end, not renewed by Diem because he felt that the university was not sufficiently controlling staff members who were unfairly critical of the Diem government. This was prior to the overthrow of President Diem and the Americanization of the war. By 1958, the MSU team consisted of some fifty scholars, including public administration experts who came to assist in the reorganization of the police, the civil guard, and the public service. The wisdom of this approach came into question only a decade later. According to Frances FitzGerald, “In laying out the groundwork for the reorganization [of South Vietnam], groups of social scientists set out to research the economics and sociology of the Vietnamese as well as every aspect of Vietnamese government operations” (FitzGerald 1972, 107). By 1967, although the MSU project had ended, Vietnam, she went on, “was inundated with social scientists working under contract to the Defense Department” (FitzGerald 1972, 453), and, it should be added, USAID. During this period, work on development problems was satisfying for the many U.S. academics involved in Vietnam, many of whom would go on to

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have distinguished careers in international assistance. As Smuckler (2005) puts it, speaking of his experience in Vietnam at this time: I would identify three highpoints in my own experience. The first was active participation in settlement of refugees in South Vietnam in 1955. The public administration specialists within our MSU group were asked to devise the formula for settling almost one million farmers, fishermen and workers who moved to the South at the time of the partition between North and South. Over a number of months, working closely with local authorities and studying the problems in the field, we put together the administrative pieces in ways that we thought could work. And they did, much to our pleasure and the satisfaction of the refugees themselves. By 1957, resettlement was succeeding in visible and measurable ways. Instead of occupying tent cities strewn along the roadways, the refugees were moved to new areas and rebuilding their villages and their lives in productive ways. We felt our abilities and knowledge had been put to very good use.

The MSU project, which was later controversial, was clearly established to aid Ngo Dinh Diem’s new government and occurred within the context of the cold war, but also represented a genuine, if ill-fated, effort at nation building. The Vietnam effort began under the International Cooperation Administration, before USAID was created, and lasted until 1962. It thus clearly ended before the momentous and to some unwise decision to introduce U.S. combat forces into Vietnam. Prominent among the strategies that were developed in Vietnam were the so-called agrovilles, protected rural development centers. These efforts, controversial though they became, would later provide the model for integrated rural development projects in the 1970s. Vietnam linked development and security, but with the militarization of U.S. involvement after 1963, an expansion not favored by Diem, any assistance efforts were eclipsed by the enormity of the U.S. commitment. Whether appropriate or not, parallels have been made between this earlier link of security to development and similar attempts to do so in postinvasion Iraq. Despite the controversy, the Vietnam experience would have a considerable impact upon the evolution of foreign aid over the second half of the twentieth century, particularly in the areas of public administration, community development, and rural industrialization. Models developed in South Vietnam came to be applied in many parts of the developing world as part of the basic needs strategy that was developed in the 1970s and 1980s. It is also true that over the next twelve years (1963–75), USAID came to sponsor the development of South Vietnamese police, security, and intelligence

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services. Many of the security concerns in Vietnam were primarily military in nature, not internal/domestic (from a South Vietnamese perspective). Most importantly, as the war expanded, little U.S. aid actually trickled down to the village level, despite the fact that prior to 1965 this rural development support was the most successful component of aid in Vietnam. The Vietnam Project drew little media attention during its operation from 1955 to 1962. Yet four years after the project ended, antiwar activists loudly and unfairly attacked MSU and its prewar role in Vietnam, linking what was clearly a civilian project with the Americanization of the war, which would occur after the project ended. Diem’s government, assisted by MSU, had not favored U.S. military intervention and Diem had opposed it. Militarization occurred after Diem’s assassination. In 1966, at the height of the Vietnam War, and four years after the MSU project ended, a left-wing magazine, Ramparts, published an article revealing the extent to which MSU had become involved in supporting South Vietnam. Though MSU withdrew from Vietnam before the beginning of U.S. largescale military intervention, MSU involvement became symptomatic of the intersection of foreign aid and military policy, and few would be surprised at the emotions this stimulated within the university community. (Ramparts cleverly put a cartoon of Madam Nhu in an MSU cheerleader’s outfit on the magazine’s cover.) The intervention by MSU in Vietnam disturbed many not only at MSU but throughout the university community and became a focal point of the antiwar struggle, which was at its early stages. Writing about the phenomenon of what Ramparts called “MSU and Madam Nhu,” Warren Hinkle argued that the leaders of the project saw the future of the social sciences within the worldwide scope of the action-oriented activities throughout the Third World (Hinkle, 1966, 22). This was certainly true and those social scientists involved—Milton Esman, John Montgomery, John Dorsey, and other MSU members—were internationalists who believed in an activist state role in development. Moreover, experience in Vietnam, along with, for some, a two-year stint in the Peace Corps, became defining events for a whole generation of international development professionals. To make matters worse, in June of 1955, a team of CIA specialists knowledgeable in solving intractable problems of a political nature had arrived in Saigon. At least one of the group was linked with the MSU advisory group, and others in the delegation were rumored to have CIA links. The decision to include the CIA, in hindsight, was unfortunate. “One lesser-known, and perhaps more unpleasant task of the MSU professors,” Warren Hinkle, author of the Ramparts article, snidely noted, “was to provide a front for a unit of the CIA” (Hinkle 1966, 14). There continued to be accusations that MSU served as a CIA front until the Vietnam War’s end (Sheinbaum 1966, 13). The pres-

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ence of CIA people in MSUG was not a “front,” since it was no secret to the Vietnamese government, the U.S. government, or the Americans in Saigon. When MSU agreed to help strengthen civil police organizations, it agreed to recruit the best people that it could find and that included people in the CIA and other such organizations. MSU had an excellent School of Police Administration and that department did the recruiting and screening. It was also agreed (and enforced) that the intelligence individuals were there to train, do research, and perform other activities needed to build up the civil police organizations. And they could be sent home if they were out of line. MSU had about eight of them, plus secretaries, at their peak. MSU negotiated out of sending experts for the Sûreté and other intelligence operations in civil police after about two years of experience. USAID was not able to absorb the function easily. The reason for getting out of the responsibility (over the objections of MSU police) was that the Vietnam project could not recruit enough good people in our own school. It just got too big to handle. Though MSU operated within the parameters of the cold war, which was real at that time, it was not true, as Ramparts claimed, that “The same disastrous vacuum of information occurred in this country [Vietnam] only a decade before when the China experts, almost to a man, were purged as Reds and comsymps, and yahoos were all the public heard” (Hinkle 1966, 2). Those involved in Vietnam came from among the most thoughtful academics writing on development. The Vietnam period was a time of rhetoric, and Ramparts had a heyday writing about the MSU activity, claiming without evidence that “The professors found their colleague [Wesley] Fishel and General Edward Landsdale of the CIA maneuvering furiously to consolidate Diem’s support, an effort that culminated with the endorsement of Diem by the Security Council in the spring of 1955” (Hinkle 1966, 17). The Ramparts article was effective rhetoric, not an academic study; however, the authors were not accurate even in a journalistic sense. Nonetheless, the article and the subsequent debate were a part of the debate about the Vietnam War and aid generally. The project in Saigon began at the same time that MSU also sent business administration staff to assist a new institution in São Paulo, Brazil, and was set to begin work in Nigerian higher education. By the mid-1950s, a large number of U.S. universities were beginning to work with developing countries. What was lost in the controversy over Vietnam were a series of rural and institutional development activities that would have a long-term influence on aid and technical assistance techniques. Also forgotten was the experience, positive and negative, of all those aid workers who had Vietnam experience; and that was more than half of those working in USAID in the 1970s, some of whom were among the last Americans to be helicoptered out when Saigon fell in 1975.

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By the mid-1970s, the rose was off the bloom and as U.S. public opinion became increasingly disturbed by the ambiguities of the cold war, increasingly torn apart by the Vietnam engagement and the crisis in Iran, and more aware of the poverty and inequity in their own country, the urge to contribute to international development waned. The aid budget was increasingly threatened in Congress every year as a result. These doubts would come to be labeled “donor fatigue” and would define aid for the next twenty years. Increasingly, international development work became based on projects that consisted of boilerplate documents, rules and regulations, and contracts and agreements that became increasingly complex. South Asia, Leadership, and Rural Development Despite the onslaught of donor fatigue, there were a number of specific success stories of broad impact that involved U.S. higher education in the development process. These included the worldwide eradication of smallpox and polio; the Green Revolution, which countered periodic famine in Asia; oral rehydration therapy for cholera; and the development of population and human resource development statistical systems. The impact of aid on public health was impressive. Most importantly, U.S. universities produced hundreds of thousands of graduates who worked internationally, and in their own countries, on international development activities. A high point of aid for academics was to work with inspired development leaders from the developing world. One such leader was the great Pakistani rural development leader Akhtar Hameed Khan, who worked under a Ford Foundation project with a number of universities. Akhtar Hameed Khan was one of the few Muslims from the Hindu Asian subcontinent who was carefully selected and sent by the British to Cambridge University. He was to be educated as a proper “gentleman” and trained to be a member of the wellrespected Indian civil service. He had been predestined to be a colonial (and postcolonial) manager and to live among the Indian elite. Akhtar Hameed Khan was advancing well in the Indian civil service when he decided that his success was pulling him away from confronting rural poverty and assisting the rural poor and the downtrodden. He resigned from the Indian civil service and gave away all of his material possessions. He became a ditchdigger and a laborer and then a locksmith. After a while, he realized he was not using his education and full ability, so he turned to teaching at a local school in Comilla, a poor, frequently flooded locale in East Pakistan (now Bangladesh). MSU assisted Pakistan in building two rural development academies—one in Peshawar and the second in Comilla (see also chapter 7 on Pakistan).

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Akhtar Hameed Khan was named director of the Comilla Academy. MSU helped to train Comilla Academy faculty at their East Lansing campus and to put into place Khan’s highly creative design for a research, training, and innovative academy to improve rural life in the region. He was successful beyond all expectations and as a result millions of people benefited. To be associated with the Comilla Academy, and its leadership, in any small way in those days was truly exciting and certainly one of the high points of one’s professional experience. The Microview: The Green Revolution Smuckler observed Akhtar Hameed Khan from two perspectives: the MSU university project and, later, when he served for several years as the head of the Ford Foundation in Pakistan. That was 1967–69, the first years that the world became aware of the impact of the Green Revolution, the development of scientifically improved seeds. The Green Revolution was a direct result of the new technology coming out of years of research supported largely by the Ford and Rockefeller foundations and introduced in the field abroad through grants from Ford and USAID. Borlaug, Chandler, Narvaez, and other agricultural “greats” served as consultants. Robert Havener was the agriculture adviser in Pakistan and a key leader working behind the scenes to orchestrate the revolution. Working with the Green Revolution, and the scientists who spawned it, was another highlight for Smuckler. Although there has been a great deal of controversy over the impact of the Green Revolution, it was to create an enormous difference in the way that food was produced and in the role that agriculture would play in international development. What did the Green Revolution mean? It meant a leap forward in rural productivity and toward food self-sufficiency. Wheat, the dominant crop in West Pakistan, increased by about 50 percent in one year, creating a new outlook on hunger and famine in rural Pakistan and throughout the Asian subcontinent. It was a truly revolutionary change, now reflected downstream as a diversified high-technology development throughout east and southern Asia and parts of Latin America. Despite some later criticism of the Green Revolution and its impact on agrobusiness, the advances in rural productivity were real and profound. These were personal high points as one worked in international development. Yet as they multiplied within the academic community, development experiences led naturally in the university setting to concern with the broader issues of the university’s role in international affairs and the internationalization of the university curriculum. These issues did not reduce the impor-

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tance of the university’s role, but they did place it in a broader perspective. It was a legacy that would be passed on to later generations of students, in the United States and in other parts of the world, as interest in international events appeared to wane among students and the public in the early twentyfirst century. The most important development projects from a university perspective were those that succeeded abroad and also taught U.S. professionals lessons. High on the list in Asia would be the Comilla project in what is now Bangladesh, where one can say with some confidence that much good came out of those formative years when Bangladeshi academics and practitioners led the venture and a few U.S. agricultural economists, rural sociologists, agricultural engineers, and production scientists worked closely with them. The Comilla Academy was concerned with multiple aspects of rural improvement. Productivity increase was just one; public works was another. The Comilla method was adapted in other parts of the country, with the help of MSU advisers and the Harvard Planning group, whose members visited frequently. The village small cooperative loan system set up through Comilla was a forerunner of the Grameen Bank, now considered a major breakthrough in terms of microcredit. Later, when East Pakistan became Bangladesh, Akhtar Hameed Khan, who was a Punjabi, moved to Karachi and after a few years became the director of the Orangi project. Its task was to improve the lives of several million Karachi urban slum-dwellers. He adapted the rural development methods that had succeeded at Comilla to an urban setting in Orangi and its challenging poverty. Khan’s first rule was to study the situation in the field and learn the desires, needs, and capabilities of the resident population, who would be affected directly by a project. As one example, at Orangi, contrary to the common belief, Khan found that slum-dwellers earned enough income to pay their share of costs so that low-cost contractors were able to carry out a few high-priority improvements such as better control of sewage. Slum-dwellers mainly needed an organization to get what they required. The Macroview: University Linkages During the 1950s, the International Cooperation Administration (ICA) had begun to extensively give aid contracts to U.S. universities, the first being awarded in 1951. By July of 1956, ICA had fifty-two universities on contract in thirty-eight countries. In 1960, it had contracts with sixty universities involving “indispensable skilled human and institutional talent for the development program overseas” (Grant 1960, 14). Harold Stassen, then director of the

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International Cooperation Administration, “was responsible for the concept that American universities should be tapped as manpower reservoirs for the extension of Americanism abroad, and Clark Kerr, [later] the embattled Berkeley savant, first came up with the vision of the large university as a service station to society” (Hinkle 1966, 14). By 1958, there were more than 2,235 Americans overseas in private firms, universities, and nongovernmental organizations (NGOs) carrying out the work of the International Cooperation Agency. The ICA had, at the beginning of 1959, a total of 84 active technical service contracts (Cleveland, Mangone, and Adams 1960, 109). During the same year, 184 universities carried out 382 international programs and 234 of these programs sent university faculty abroad (194). Increasingly, the overseas American in the private and nonprofit sector “like the government worker and the missionary . . . drifted into a deep involvement in the domestic affairs of other nations” (100). In 1960, a Ford Foundation report argued for an increased role for U.S. universities in international development. By then, of the large midwestern universities at the end of the decade, Michigan was in the Philippines, Indiana was in Thailand, Purdue was in Brazil, and Illinois and Wisconsin both worked in India. Outside of the Big Ten, Southern California worked in Iran and Harvard worked in Pakistan. Though most of Africa was still colonized, it would open up to U.S. universities in the next decade. MSU would have a major involvement in Nigeria. Eastern Europe opened up to U.S. higher education in the 1980s with the end of the cold war. Harlan Cleveland and his colleagues concluded, in a pathfinding study in 1960, that most of the education and training work internationally should be assigned to U.S. colleges and universities (Cleveland, Mangone, and Adams 1960, 286). The use of contracting out had drawn the private sector and nonprofits into technical assistance, but less successfully than with university programs. Since U.S. university development programs began working overseas in the 1950s with the support of aid funds, we have learned a great deal about the role that higher education can play in the development process. For it to be successful, the use of U.S. universities and institutes should be in a capacitybuilding and institutional development mode rather than a training mode. University leaders have learned the hard way that development projects at universities are not moneymakers any more than are their domestic counterparts. When all is taken into account, their indirect cost recoveries do not sufficiently offset the full costs of quality performance. And this is another reason to be sure that projects are two-way streets, and that university board members, students, and university higher leadership view projects that way. Private foundations have played a major role in promoting development.

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The Ford Foundation stimulated educational development in Indonesia and a number of other Asian countries. With the proliferation of NGOs in recent years, there have been ongoing efforts to develop them as efficient servicedelivery agents. NGO absorption of programs traditionally associated with the public sector, and the pressing need to employ successful cost-recovery methods for NGOs, both take on added significance in terms of our understanding of aid (see chapter 14 for a discussion of NGOs). One of the more successful institutional development interventions was that of the Rockefeller Foundation. From the beginning, the foundation focused upon selected programs with clearly defined goals. In its university development program, Rockefeller’s objective was to strengthen a few universities in Africa, Asia, and Latin America and to commit significant resources over a medium range of fifteen to twenty years to enable what Stifel and colleagues (1978, 1) call a “critical mass” of assistance. The Rockefeller experience illustrated the importance of “going first class” with an intervention of highly qualified people. Borrowing a term from Joseph S. Nye Jr., one observer stated that U.S. power in the twentieth century was marked by soft power based on diplomacy and persuasion (Graham 2003, A5). And, one could add, the intellectual power of universities. Lessons Learned At MSU, John Hannah, Glen Taggart, and other leaders defined two goals for the international office when it was established in 1956, the first of its kind in the nation. First, the university had to perform well in its expanding international commitments. Second, the goal was to encourage a strong international dimension throughout the university’s programs on campus and in Michigan. U.S. students were to be introduced to the world, not permitted to live in a domestic cocoon learning only about the United States. Development projects, while meeting a high standard of performance abroad, were also expected to facilitate learning on campus. By the 1960s, MSU had over 200 faculty members in the field annually “in the boondocks of the world running ‘educational projects’ in 13 countries” (Hinkle 1966, 14). Universities became more selective in work abroad over time. Feedback to campus programs and classrooms was considered essential. Universities sought projects that included a learning and research component and involved both undergraduate and graduate students. Typical of such university programs was the University of Pittsburgh’s Graduate School of Public and International Affairs, founded in 1957 on the principle of academic-practitioner linkages for both its degree and its executive

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training programs in English, French, Spanish, and Arabic and its interactive master’s program in Macedonia. International affairs and development programs focused on the student’s personal philosophy and an understanding of the power structure and the bureaucratic processes in foreign and comparative policy perspective. These programs brought a professionalism to development work that had been lacking in the early years. The internationally oriented university, through its international work, developed new organizations to encourage more support for development research. Title XII and Collaborative Research Support Programs (CRSPs), along with other new approaches, became vehicles for expanding the research dimension, training, and consultancy and for a broader role for project work. A few visionaries at universities talked about such matters in the early years, but not many before 1960. The period from 1975 through 1990 may have been the high point of universities and aid. Looking back at the development experience of U.S. universities, most people engaged in the process take great satisfaction in their involvement in international work. Despite the criticism of foreign aid, it is not true that development efforts show little success. However, successes are often sectoral in nature and in many cases occur at a microlevel. It is certainly not true that university projects in the developing world have all failed. However, neither universities nor their organizations have done well laying out the many successes, or the lessons learned, for wider view. The importance of higher education in international development in large part was based on its contribution to institutional capacity and network development. Throughout the world, education needs are by their very nature high-quality needs since “No educational system can be more efficient than the people who staff it” (Teschner 1988, 8). Most countries where U.S. universities have worked can now show training, research, and educational institutions that have contributed to higher living standards. One can cite successes along with some deficiencies—often tied to changing political or regional circumstances. Indeed, a good number of the countries where universities worked in those early years have graduated from assistance ranks and some are aiding other developing countries. U.S. university development assistance activities did not end poverty in the world—no one but the very naive would expect them to. Development practitioners learned early that development was a long-term process and least likely to succeed when directed at economic growth and poverty alleviation directly. Throughout Africa, Asia, Latin America, and the Caribbean, however, U.S. universities did create and strengthen institutions that contributed importantly

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to that goal. And the many thousands of graduates who have returned home to Asia, Africa, and other developing areas contribute every day in many ways to economic, social, and political development. Acknowledgment An earlier version of this paper was presented by Ralph Smuckler, “The University Experience in Development: Some Important Lessons Learned,” Annual Meeting, Association for International Agriculture and Rural Development (Washington, D.C., June 5–7, 2005). Material has also been taken from Ralph H. Smuckler, A University Turns to the World (East Lansing: Michigan State University, 2003).

References Cleveland, Harlan, Gerard J. Mangone, and John Clarke Adams. 1960. The Overseas Americans. New York: McGraw-Hill. Curti, Merle, and Kendall Birr. 1954. Prelude to Point Four: American Technical Missions Overseas 1838–1938. Madison: University of Wisconsin Press. FitzGerald, Frances. 1972. Fire in the Lake. New York: Little Brown. Graham, Bradley. 2003. “Clark Wants More Foreign Aid, New Department to Handle It.” Washington Post, September 29, A5. Grant, James P. 1960. “Towards a More Effective Domestic Political Base for American Economic Assistance Abroad—As Seen by a Practitioner.” Paper prepared for delivery at the annual meeting of the American Political Science Association, New York, September 8–10. Hinkle, Warren. 1966. “The University on the Make.” Ramparts 4 (12) (April): 11–22. Schulzinger, Robert D. 1997. A Time for War: The United States and Vietnam, 1941–1975. New York: Oxford University Press. Sheinbaum, Stanley K. 1966. Introduction to “The University on the Make.” Ramparts 4 (12) (April): 11–22. Smuckler, Ralph H. 2003. A University Turns to the World. East Lansing: Michigan State University. ———. 2005. “The University Experience in Development: Some Important Lessons Learned.” Presented at the annual meeting of the Association for International Agriculture and Rural Development, Washington, DC, June 5–7. Stifel, Lawrence D., Joseph Black, and James S. Coleman, eds. 1978. Education and Training for Public Sector Management in Developing Countries. New York: Rockefeller Foundation. Teschner, Wolfgang. 1988. “The State of Education Development in the Region.” Panel review, meeting of the Asian Development Bank, Manila, Philippines, March 14–15.

14 NGOs in the Foreign Aid System Paul Nelson

A [private voluntary organization’s (PVO’s)] relationship with USAID must not result in a loss of the PVO’s private and independent character since, without independence, the fundamental values associated with PVOs and USAID’s working with them are diminished. (USAID 2002)

You want to know why we’ve chosen contractors? I’ve told them, the contractors, if you even mention your own organization once, when you’re in the villages, I will tear your contract up and fire you. I actually said that in Iraq. I said, “You are an arm of the U.S. government right now, because we need to show the people of Iraq an improvement in their standard of living in the next year or two.” And I have to have it clearly associated with the U.S. government. (Andrew Natsios, then USAID administrator, speaking to the InterAction Annual Forum of NGOs, 2003)

The academic literature on nongovernmental organizations (NGOs), and analysis out of development agencies on the topic, seem to broadly agree in claiming two important assets that NGOs bring to work in the development field: the capacity to play a part in the flow of aid by delivering services effectively, and the capacity to give voice to neglected issues and excluded voices. Both are virtues that NGOs claim, and that donors assign to them, and both have their roots in social theory. But both have been challenged recently. This chapter examines, in the U.S. context, challenges to existing NGO involvement in the aid system and their possible implications. NGOs have become a high-profile actor in the aid system. Americans are as likely to hear a representative of Oxfam International, Doctors Without Borders, or Save the Children commenting on the latest humanitarian disaster or North-South dispute over trade rules as they are to hear a representative of 315

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any official development agency, and NGOs’ apparent impact on debt relief, land mines, HIV/AIDS, and trade rules since 1995 have made household names of previously obscure organizations. Worldwide, NGOs in the wealthy industrial countries delivered almost $16.3 billion in relief and development assistance in 2004, and $11.3 billion of that sum was raised from private sources (Development Assistance Committee 2006). The U.S. administration of President George W. Bush asserts that voluntary action, and in particular voluntary action by faith-based communities and agencies, is central to sound development. This enthusiasm for voluntary action is not a feature of only conservative U.S. politics: during the Clinton administration, Vice President Al Gore announced a “New Partnerships Initiative” to bring about rapid growth in the share of U.S. Agency for International Development (USAID) funds allocated to U.S.-based private and voluntary organizations (PVOs), with a stated goal of 50 percent. Social theory gives us a number of options for understanding international NGOs: as agents of a civil society that promotes association and growth of social capital, as agents of administrative efficiency in service delivery, and as independent political actors that encourage civil society to confront and provide a check upon the state. Debates in theory between Gramscian political perspectives and the essentially Tocquevillean associational views are a matter of emphasis: NGOs perform both functions in aid programs, and advocates acknowledge the significance, if secondary, of the other (see, e.g., Howell and Pearce 2001; Edwards 2004). For each perspective, the ongoing changes in the relationships between donors and NGOs are a matter of great interest. There are those who argue that development NGOs worldwide are caught up in a social system of aid flows and the intellectual influence and interpersonal contacts that accompany it. Tvedt (2002) argues that this participation in the aid system renders development NGOs incapable of participating in an independent civil society. The prominent U.S.-based NGOs discussed here are evidence of this tension, between U.S. and other donor funding and an independent political voice. Their experience in both advocacy and U.S.-funded development programs and projects yields important insights into the debate over the nature of international civil society. This experience also has policy implications for donors that engage NGOs in foreign assistance programs weighted down with multiple objectives. The remainder of the chapter proceeds by first setting the stage, reviewing the dynamics of NGOs in the aid system. Section three examines NGOs and aid flows, including the impact of antiterrorism initiatives and occupation and reconstruction efforts in Iraq. Section four turns to the political roles and voice of NGOs, and, argues that a substantial advocacy agenda has become an expected feature of development NGO activity, and that important shifts are

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occurring in the substantive focus and strategies of U.S.-based development and humanitarian NGOs. Setting the Stage: NGOs in the 1990s In 2001, Coralie Bryant and the late Marc Lindenberg (Lindenberg and Bryant 2001) published Going Global, a profile of international NGOs in development aid. Based on interviews and meetings in 2000 with NGO executives, it highlighted a set of major trends: the growth of international confederations or NGO “families,” the expanded role of humanitarian relief in complex humanitarian emergencies, higher priority to policy advocacy, and shifts in state and corporate roles in the economy driven by privatization and increasing global trade. NGO families, groupings, and federations including Oxfam, Save the Children, World Vision, ActionAid, and others, were established or became prominent in the 1990s as national NGOs sought to cope with fund-raising challenges, government relations, and stability of mission and strategy where transnational and global actors were increasingly important. In some cases, these families play an important role in advocacy, another central theme of NGO development in the 1990s. NGOs that had long carried out some policy advocacy expanded their efforts, and others created new offices or units to represent their policy views and interests. In 1987, Larry Minear’s article in the World Development special issue on NGOs called attention to the advocacy and education agenda. Ten years later, advocacy clearly had taken hold and had become part of the expected profile of major development NGOs, with advocacy agendas including aid spending and policy, and extending to debt, trade, and investment. NGOs’ understanding of their humanitarian roles, Lindenberg and Bryant show, has been challenged repeatedly in the post–cold war era, both by the rapid rise in numbers of acute humanitarian needs, and by the growing awareness that humanitarian aid can support continued fighting, even as it sustains innocent civilians. Agreements crafted during the 1990s by practitioners and agencies sought to create standards of practice that could be widely used, but guidelines for assistance in situations where combatants are likely to gain access to relief commodities, for example, have not been created. The 1990s were a period of considerable change for NGOs in the aid industry, and the first five years of the twenty-first century, as the editors of this volume argue, have been remarkable for the number of global and national events that shake and shape the aid establishment. But events have challenged the aid arrangements profoundly in the first five years of the new century, and this chapter updates the perspective of Going Global by examining how those turbulent five years affected trends among NGOs, and their relationship

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Table 14.1 U.S.-Based Development NGOs and U.S. Government Funding Receiving U.S. government funds

Limited or no U.S. government funds

CARE $624 m./$266 m. USG

Oxfam America $79 m.

Catholic Relief Services $373 m./ $91.9 m. USG

Mennonite Central Committee $63 m.

World Vision $525 m./

Doctors Without Borders $91.4 m.

Adventist Development and Relief Association $103 m./$48 m. USG

American Friends Service Committee $41.5 m. (27 percent is for international programs)

Lutheran World Relief $32 m./$5 m. USG

Church World Service $88.1 m.*

Mercy Corps $87 m./$40 m. USG Save the Children $396 m. $128.1 m. USG (2005)

Sources: Annual reports of the agencies, 2004 and 2005. *Church World Service received $27.9 million in 2005, almost all for resettlement of refugees in the United States.

to USAID and other official aid donors. This chapter shares the volume’s concern with the effects of the September 11, 2001, attacks, the U.S. war in and occupation of Iraq, and the tsunami of December 2004. I will argue that the continuing development of international trade and investment rules, especially the World Trade Organization (WTO) ministerial meetings, have also significantly shaped the NGO sector’s relationship to the aid industry. NGOs and Aid Flows NGOs’ management of donor relationships is one feature of their evolution. The contrasts between the minority of development NGOs that forgo U.S. government support, and the major NGOs that rely on substantial government funding, remains sharp, and the demands of conflict and post-conflict reconstruction work, including in Iraq and Afghanistan, are putting pressure on NGOs by heightening the securitization of aid, expanding the roles of for-profit development contractors, and creating demands on NGOs for a less independent posture. Nonprofit contractors, exemplified by the U.S.-based Academy for Educational Development and the World Resources Institute, are 501(c)(3) organizations, with missions to address one or more aspects of donor-funded development, who draw their funding from contracts with aid agencies and for whom private individual donations are not a significant source of sup-

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port. Other major NGOs such as CARE, Save the Children, Catholic Relief Services, and World Vision do draw on voluntary or private-sector donations, but also cooperate with official donor projects and receive USAID funding for emergency and development programs and projects. Finally, a smaller number of (mostly) smaller-scale NGOs operate entirely independently of official donor funds, or choose not to accept funds from the United States but may have small program funds from United Nations (UN) agencies. Although small, these agencies are sometimes influential because of their commitment to public voice and their distinctive operating styles: Oxfam, Doctors Without Borders, International Women’s Health Coalition, and Mennonite Central Committee are examples. Dependence and Independence: Iraq and NGOs NGOs’ proximity to major donors has worried some practitioners and observers in the field since the sustained public discussion of NGOs surfaced in the 1990s. Hulme and Edwards’s 1997 volume NGOs, States and Donors: Too Close for Comfort? includes a variety of perspectives on the subject, but most agree at least that the subject is significant, that some care is needed on the part of donors and of NGOs to protect a measure of NGO privacy and independence. NGOs have long argued that they can balance receiving substantial funding from donor governments with their desire to play a role as advocates on development policy issues, and some research supports the belief that the flow of funds and independent voice need not be closely tied (Themudo 2002; Commins 1999). The substance of this concern, that dependence would reduce NGOs’ capacity to innovate, advocate, and operate as a voice in U.S. civil society, has often rested on theories of resource dependence, and on the pragmatic observation that the recipients of major program contracts or grants from donor governments will be affected in their programming and advocacy choices, even if they are not deliberately making decisions based on this dependence (Pfeffer and Salancik 1978; Smith and Lipsky 1993). The humanitarian postwar and wartime response in Iraq and Afghanistan, however, has raised these concerns to a new level. Both for USAID itself and for NGOs working with the agency, operating in countries that are high priority for U.S. foreign policy has historically involved political difficulties. USAID and the U.S.-based NGOs working with it in Central America since the 1980s, for example, have been associated by progressive NGOs in the region with U.S. military and economic policy there, and they are viewed by many as strategically tied to counterinsurgency efforts of sometimes brutal and highly unpopular governments (author’s interviews, Guatemala 1988 and 1989; MacDonald 1992).

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But in the context of Afghanistan and Iraq, charged by religious and cultural tensions and by the perception of one-sided superpower domination, the difficulty is heightened, and the U.S. government at least occasionally sought to demand a higher level of identification by NGOs with its policies. In May 2003, then USAID administrator Andrew Natsios delivered a speech to the U.S. NGO association InterAction, in which he took the NGOs to task for not clearly and consistently identifying the U.S. government as the source of the assistance they provide. Natsios urged NGOs to recognize that they, like contractors, are “arms of the U.S. government,” and threatened that if NGOs did not demonstrate stronger ties to U.S. foreign policy, he would find other partners. His remarks reinforced then Secretary of State Colin Powell’s characterization of NGOs as “force multipliers” for the U.S. government, and a call by USAID for broader participation by U.S.-based voluntary agencies in Iraq (USAID 2002). U.S.-based agencies have responded cautiously to their government’s deep involvement in a highly unpopular war and occupation. Catholic Relief Services (CRS) coordinates any positions it takes on policy issues with the National Conference of Catholic Bishops. On Iraq, CRS quotes cautionary statements from U.S. Catholic authorities and takes no position on the U.S. presence in Iraq. Instead, it emphasizes its peace-promoting work, noting that it “plays an important role in grassroots peace building, especially where U.S. policy or presence is significant—i.e., Colombia, Iraq, and Afghanistan” (Catholic Relief Services 2006). Oxfam America is somewhat more critical in its comments, but also stops short of taking a position on the U.S. decision to go to war. Beginning before the invasion, Oxfam expressed concern and argued that “humanitarian disaster” would follow from war in Iraq; it has continued to emphasize the need to adhere to the Geneva Conventions for all prisoners, and to coordinate humanitarian work with the UN agencies involved. It suspended direct operations and closed its office in April 2004 (Oxfam America 2004). Oxfam International, however, and several of its other national member agencies, took more explicit positions. Oxfam International (2002) urged the members of the UN Security Council not to authorize any military action, arguing on humanitarian grounds. Humanitarianism and the Military: Securitization of Emergency Response For development NGOs, the primary challenge has been to work out relationships with military and with for-profit contractors. In the United States and elsewhere, the military role in humanitarian affairs grew rapidly in the late

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1990s and the first years of the new century. Driven by the involvement of (especially) U.S. and British forces in Afghanistan and Iraq; the vast scale of the need in post-tsunami Sri Lanka and Indonesia; and, in some cases, the determination of military leaders to build an expanded role for the military in security-related humanitarian operations, the expansion of uniformed involvement has implications for the NGOs long regarded as the intrepid humanitarians on the front lines of meeting human needs. InterAction has worked to clarify NGO working relationships with military units in humanitarian response, producing training and operational guidelines, a video, and other resources, all calling attention to the significance NGOs attach to the expanding military role. A study by Minear and Donini (2006) assesses the attitudes of local populations, the recipients of emergency assistance, toward the very different military, civilian government, UN, and NGO agencies involved in delivering aid. NGOs have come to realize, the study argues, that “the military is here to stay in the humanitarian arena” (3), and there is often greater funding available through the military budget than through civilian aid agency budgets or NGO coffers. The “securitization of aid”—the rise of security concerns, concepts, and institutions in the humanitarian process—gives some additional legitimacy to military actors. Minear and Donini find that local aid recipients welcomed military involvement when it meant strong logistical arrangements and secure and orderly distribution. Military staff may be less inclined to give priority to processes that solicit and attempt to take account of local views and priorities, a tendency that may force NGOs to craft deliberate relationships and roles vis-à-vis the military. Aid Programs: Are NGOs Going Out of Style in Development? While NGOs’ profile in humanitarian assistance seems assured, some donors (the Department for International Development, DFID, for example) have distanced themselves somewhat from the heavy emphasis on NGOs. Around the aid donor world, there are indications of increasing refocus on the state, and of deemphasis, sometimes disenchantment, with NGOs. As major donors in Europe and the United Nations system reemphasize the role of the state in development, NGOs are rhetorically, it seems, moved to the side. Still, Organisation for Economic Co-operation and Development (OECD) data show that donor funding allocated to NGOs remained “on a rising trend” through 2004, reaching approximately $5 billion in that year. NGOs’ privately raised aid rose more sharply during the period, from $6.9 billion in 2000 to $11.3 billion in 2004, up 37 percent in real terms according to OECD, in part due to the public response to the tsunami and Hurricane Katrina.

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Are the NGOs taking a less central place in U.S.-financed aid programs? Along with the increasing links between USAID and nation-building activities associated with U.S. foreign policy, two major initiatives seem to suggest a shift: the Millennium Challenge Account, and sector or program assistance. Sector programs deemphasize specific projects in a field such as education or health in favor of cash and technical support to a ministry in support of national priorities. Several donors have supported governments’ initiatives to eliminate fees and reduce other costs to promote universal enrollments in primary school (Jamison and Radelet 2005). This trend toward program support is further institutionalized in the Bush administration’s principal new aid initiative, the creation of a Millennium Challenge Account (MCA) to concentrate aid spending in a set of countries identified as pursuing sound governance, economic policies, and social policies (also see chapter 15). Administered by the Millennium Challenge Corporation (MCC), the MCA has identified sixteen countries (FY2004), and concentrates its separate, dedicated aid allocation there. NGOs are essentially sidelined in the MCA, whose private-sector and development-through-growth mandates have meant a stronger orientation toward the private sector. NGOs successfully argued for language regarding consultation with civil society to be written into the MCA mandate, but have played the role of external monitor and commentator. Much more detailed, and often critical, monitoring of MCC has come from the Center for Global Development (http://www.cgdev.org/section/initiatives/_active/mcamonitor). Advocacy: Public Voice But there is a second important dimension to NGOs’ engagement with the foreign aid, and sometimes foreign policy, of donor countries. The public voice of development and humanitarian NGOs in the United States has historically been muted and secondary to their service delivery role. This pattern, too, is shifting in the early years of the new century. During the 1970s and 1980s, advocacy by development NGOs focused largely on the policy and funding of aid programs. Small, Washington-based offices of the major development NGOs have made the case since the 1970s for more general congressional appropriations for development assistance, and sometimes against growing military and strategic economic aid. During the period from 2001 to 2005, however, the content and focus of advocacy shifted to include international finance, debt, trade, and other issues. As NGOs became engaged in global advocacy focused on the global economy outside of aid policy, the norm for international NGOs came to include an advocacy agenda that goes beyond supporting the flow of public funds for

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Table 14.2 Advocacy Agendas, Four U.S.-Based Development NGOs Aid policy issues

Non-Aid policy issues

Catholic Relief Services

Food aid funding Foreign aid funding Specific needs: Uganda, Sudan

Debt and financial policy Fair trade

CARE

Aid “One Campaign” Sudan Education funding

Advocacy capacity in African NGOs

World Vision

Global food aid School feeding UN Fund HIV/TB/malaria

Sudan Conflict diamonds Child exploitation

Oxfam America

Millennium Development Goals

Fair trade Debt Gold, coffee Workers’ rights Small arms trafficking

Sources: Organization Web sites.

aid. Organizations such as Oxfam, with a strong activist presence, have long been active on trade and foreign policy issues, in addition to aid policy. But more mainstream development aid NGOs have made significant changes in the focus and strategy of their advocacy work. The Catholic Relief Service is representative of one major trend, expanding its advocacy work and adding some emphasis on international financial policy and debt. CRS created a new advocacy unit in 1996, and a review of its “action alerts” from 2004 and 2005 feature topics such as food aid funding, adequate foreign aid funding, commitment to rebuilding in Sudan, adequate assistance to Northern Uganda, and two non-aid issues: debt relief and fair trade. CARE’s evolving pattern of policy advocacy work represents a second strategy. After maintaining a Washington-based office to carry out advocacy on aid policy for two decades, CARE added significant program emphasis, training and supporting local advocacy capacity in African countries through programs such as the Strengthening Capacities for Transforming Relationships and Exercising Rights (SCAPE) Program in South Africa/Lesotho. Oxfam’s advocacy work has most clearly gone beyond focusing on aid allocations and aid policy, and its agenda is increasingly focused outside of

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the aid system. While the policies of the World Bank remain of significant interest, Oxfam has shifted its analysis and focus increasingly to trade, debt, and corporate policy issues. Oxfam America and the twelve other Oxfam affiliates rely in part on the staff and work of Oxfam International, whose campaigns in 2006 reflected this broadening of the agenda, and included fair trade, agriculture trade, coffee, workers’ rights, small arms trafficking, and “dirty” gold. The “One” Campaign is the only major initiative in Oxfam’s agenda focused on aid policy, calling for increases in development cooperation in order to finance the fulfillment of the Millennium Development Goals. In contrast, World Vision’s Washington, office for advocacy, research, and education work pursues an agenda that is generally closely tied to the practice of development assistance. World Vision’s major policy reports for 2004 and 2005, which represent its most substantial advocacy initiatives to that point, focus on country-specific work on Sudan; food aid (“where it is needed”); fully funding the UN Fund to Fight HIV/AIDS, Tuberculosis, and Malaria; aid to Bosnia and Kosovo; global school feeding; and food for education in Afghanistan. Several initiatives, however, are less closely tied to aid issues: conflict diamonds, child exploitation (tourism and sexual abuse of children), and foreign and humanitarian policy toward Sudan are examples. There is variation across the advocacy agendas of major U.S. development NGOs, and those with the strongest programmatic and financial ties to USAID tend to stay closest to the aid-funding agenda. But, as Table 14.2 shows, trade, debt, and financial policies have crept into the agendas of major aid donors and of independents alike. The differences among them are not so much differences of position on either the war in Iraq or the particulars of WTO rules (although there are important differences), but over two related factors. First, NGOs differ in their perception of the benefits, costs, and appropriateness of engaging in the debate over issues beyond straightforward humanitarian and aid policy. Most NGOs, including mainstream agencies such as World Vision, which has a traditionally conservative constituency in the United States, appear to have decided that taking a stand on carefully chosen issues related to global trade, exploitation, and human rights is not only defensible but desirable. Second, while many have taken positions on trade or finance issues, fewer have attempted to engage themselves with the newer social movements active on these global economic policy issues. Aside from debt, where U.S.based NGOs have associated themselves with national and global Jubilee and “Drop the Debt” campaigns, only Oxfam among the major development NGOs has tried to establish a collaborative relationship with the globalization movements, and its success has been mixed at best (Nelson 2002; see also Bendana 2004).

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Table 14.3 Major Media References, Five NGOs, 2004 and 2005

References 2004 Oxfam Doctors Without Borders Save the Children Catholic Relief Services World Vision

16 25 14 6 4

References, May 15, 2005–May 15, 2006 23 12 7 3 1

Sources: LexisNexis searches, on file with author, for Cable News Network; Washington Post; New York Times; Washington Times; Chicago Tribune; and San Francisco Chronicle.

Tracking the content of NGOs’ advocacy is complicated by the fact that many of them rely on their participation in InterAction to represent their views on core aid policy and funding issues. InterAction, with 165 member NGOs, almost all of them working in development and humanitarian affairs, focuses its advocacy work heavily on shared concerns regarding aid policy: MCA; the U.S. budget, and aid funding allocations in particular; responses to specific emergencies; and issues of diplomacy and foreign policy when they bear directly on development in an area where member organizations are working. Agency size, measured by annual program expenditures, is not a good predictor of an NGO’s presence in major media coverage of international development and humanitarian issues. A search of six major media outlets in the United States—Cable News Network and five newspapers (the New York Times, the Washington Post, the Washington Times, the Chicago Tribune, and the San Francisco Chronicle)—reveals that Oxfam and Doctors Without Borders are each mentioned, cited, or quoted more than three times as often as the much larger Catholic Relief Services or World Vision, with Save the Children garnering twice as many references as the two larger agencies. (Doctors Without Borders and Save the Children appear to have experienced the sharpest increase in references in the immediate aftermath of the tsunami, an observation that is confirmed by a separate search for references in the last days of December 2004.) The reasons for this “overrepresentation” of Oxfam and Doctors Without Borders are no mystery: Oxfam has an active and sophisticated advocacy and research program on international economic policy as well as on aid issues, and Doctors Without Borders (Medecins Sans Frontieres, MSF) is known for its willingness to comment candidly on the political and human rights

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issues in countries where it responds to emergencies, as well as on donors’ performance. There is, it seems, more than one route to prominence among development NGOs in the United States: the more outspoken Oxfam and MSF appear to benefit from their advocacy strategies and their savvy media work, and perhaps from their independence from government programs. Conclusions Adequate and secure funding, a clear identity for operational and fund-raising purposes, and a distinctive organizational voice are all essential factors for NGOs’ flourishing. The first years of the new millennium heightened awareness of each of these roles and placed new pressures on NGOs, while providing new opportunities. Among the donor countries, the tension between the demands of the aid system and the potential roles for NGOs as political actors in a global civil society may be sharpest in the United States. As in other donor countries, nonprofit agencies balance engagement with global networks and issues and connection to aid funds. But the high-profile and assertive posture of the United States in economic and military affairs mean this tension is heightened for U.S.-based NGOs. The flow of resources available to NGOs has grown in absolute terms, while shifting toward Iraq, Afghanistan, and other countries where security interests are perceived to be immediate and strong. NGOs’ deep engagement in emergency assistance in conflict situations is forcing them to confront the securitization—or militarization—of humanitarian assistance, and to work out cooperative arrangements with contractors and military units, while preserving their reputation as independent, principled agencies. The expanded role of the military is important for NGOs and for aid management not only because of the presence of uniformed personnel in units delivering aid, which requires coordination across radically different organizational cultures, but because of the security pressure that humanitarian work in conflict-related situations places on humanitarian personnel from nonmilitary agencies. NGOs’ roles as independent political actors, so highly valued in discussions of transnational advocacy networks and global civil society, are put to the test by the heightened demands they have encountered since 2001. The U.S. government insists on closer working relationships (and less appearance of independence) in Iraq, and on frequent results-oriented reporting, while international networks and partner organizations in the poor countries often encourage their U.S. colleagues to place higher priority on their independent political voice. The variety of responses to these tensions among U.S.-based NGOs should

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remind scholars and practitioners alike of the ambiguity that is inherent in their dual identity. They are at once principled voluntary agencies with distinctive missions, which have at times made contributions quite unlike those of governments and firms, and organizations with all the imperatives of other organizations: survival, management of uncertainty, and need to promote their distinctive identities in a competitive and changing environment. References Bendana, Alejandro. 2004. “NGOs and Social Movements: A North-South Divide?” Available at www.transcend.org/t_database/articles.php?ida=515 (accessed March 24, 2006). CARE. 2006. “Care’s Activities and Initiatives on Inclusive and Democratic Governance.” Available at www.caresa-lesotho.org.za/activities4.htm (accessed May 28, 2006). Catholic Relief Services. 2006. “Policy and Strategic Issues.” Available at www.crs. org/get_involved/advocacy/policy_and_strategic_issues/index.cfm (accessed July 15, 2006). Commins, Stephen. 1999. “NGOs: Ladles in the Global Soup Kitchen?” Development in Practice 9 (5). Available at www.developmentinpractice.org/abstracts/vol09/v9n5a16. htm (accessed July 15, 2006). Development Assistance Committee. 2006. Development Cooperation Report 2005. Available at www.sourceoecd.org/developmentreport (accessed May 28, 2006). Edwards, Michael. 2004. Civil Society. Cambridge, UK: Polity. Howell, Jude, and Jenny Pearce. 2001. Civil Society and Development: A Critical Exploration. Boulder, CO: Lynne Rienner. Hulme, David, and Michael Edwards, eds. 1997. NGOs, States and Donors: Too Close for Comfort? New York: St. Martin’s Press. InterAction. 2003. “Natsios: NGOs Must Show Results; Promote Ties to US or We Will ‘Find New Partners.’” In The Challenge of Global Commitments, Synopses of Forum 2003 Panels. Available at www.interaction.org/forum2003/panels.html (accessed May 28, 2006). Jamison, Dean, and Stephen Radelet. 2005. “Making Aid Smarter.” Finance and Development 42: 2. Lindenberg, Marc, and Coralie Bryant. 2001. Going Global: Transforming Relief and Development NGOs. Westport, CT: Kumarian. MacDonald, Laura. 1992. “Turning to the NGOs, Competing Conceptions of Civil Society in Latin America.” Presented to the 1992 Annual Meeting of the Latin American Studies Association, Los Angeles, September 24–27. Minear, Larry, and Antonio Donini. 2006. “International Troops, Aid Workers and Local Communities: Mapping the Perceptions Gap.” Available at www.odihpn.org/report. asp?ID+2766 (accessed May 23, 2006). Natsios, Andrew. 2003. Remarks by Andrew S. Natsios, Administrator, USAID, InterAction Forum, Closing Plenary Session, May 21. Available at www.usaid.gov/press/ speeches/2003/sp030521.html (accessed April 3, 2006). Nelson, Paul. 2002. “New Agendas and New Patterns of International NGO Political Action.” VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations 13 (4): 377–91. Oxfam America. 2004. “Oxfam Suspends All Direct Operations in Iraq.” Press release

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(April 19). Available at www.oxfamamerica.org/newsandpublications/press_releases/ archive2004/art7093.html (accessed May 28, 2006). Oxfam International. 2002. Letter to the UN Security Council, December 16, 2002. Oxfam International. Available at www.oxfaminternational.org (accessed July 17, 2006). Pfeffer, Jeffrey, and Gerald R Salancik. 1978. The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row. Smith, Steven R., and Michael Lipsky. 1993. Nonprofits for Hire: The Welfare State in the Age of Contracting. Cambridge, MA: Harvard University Press. Themudo, Nuno. 2002. “Resource Dependence and Nonprofit Independence: Lessons from Two Intermediary Development Countries.” Paper No. 50. Edinburgh, Scotland: University of Edinburgh. Available at www.ems.ed.ac.uk/irspmvi/abstracts/themudo. pdf (accessed July 17, 2006). Tvedt, Terje. 2002. “Development NGOs: Actors in a Global Civil Society or in a New International Social System?” Voluntas 13 (4): 363–75. U.S. Agency for International Development (USAID). 2002. “USAID-US PVO Partnership.” Policy Guidance. (Revised August 2002). Available at www.usaid.gov/policy/ ads/200/200mau.pdf (accessed May 28, 2006).

15 The Millennium Challenge Account An Early Appraisal Terry F. Buss and Adam Gardner

At the Inter-American Development Bank on March 14, 2002, President Bush called for “a new compact for global development, defined by new accountability for both rich and poor nations alike. Greater contributions from developed nations must be linked to greater responsibility from developing nations.” The President pledged that the United States would lead by example and increase its core development assistance by 50 percent over the next three years, resulting in an annual increase of $5 billion by FY 2006. These funds will go into a new Millennium Challenge Account (MCA). —White House Press Release, March 22, 2002

And a little over two years later . . . There’s a certain degree of disillusionment and disenchantment with how things stand today, but there’s still a great love of the concept. —Ambassador John Danilovich, November 13, 2005

On March 22, 2002, arising out of a global commitment at the Monterrey, Mexico, Conference on Financing Development, U.S. President George W. Bush proposed a radically new approach to bilateral aid (UN 2002). Aid would flow to those countries demonstrating progress in poverty reduction, democracy, free markets, rule of law, human rights, and anticorruption, measured objectively on a standard set of indicators. Aid would be distributed only after an eligible country prepared a plan—including performance goals and objectives—mutually agreed to by the United States, and then demonstrated that it had the financial management capacity to spend, control, and account for aid spending. Countries also would be required to promote widespread 329

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participation from citizens, civil society organizations (CSOs), and nongovernmental organizations (NGOs); demonstrate commitment at the highest levels of government; ensure transparency in the entire process; and pursue sustainability. Congress passed the Millennium Challenge Act of 2003, funded as the Millennium Challenge Account (MCA), and administered by the Millennium Challenge Corporation (MCC), to pursue aid in this innovative way. Only four years after its inception, it was too soon to assess whether MCA achieved (or even will achieve) better results than alternative foreign assistance programs, not only traditional ones administered by the U.S. Agency for International Development (USAID), but also those operated by other bilateral and multilateral donors—the World Bank, regional development banks, or the United Nations. It is possible, however, to look at MCA’s basic design features, MCC’s management as a start-up government corporation, MCA’s initial implementation, and politics emerging around MCA in a preliminary assessment. Most development experts find MCA to be as innovative and potentially effective as policymakers have claimed. Very few design features of MCA have proven problematic. Even where problems might emerge, there will be ample opportunities to modify and improve MCA as MCC gains more experience in the field. The Bush administration was slow to set up the MCC, and remained slow in making it fully operational. Likely, a preoccupation with the Iraq War and a lack of appreciation for the complexities of launching a new government corporation—even a small one—along with continuing management issues, caused delays. As of February 2006, MCC had executed compacts—agreements to pursue a plan—with only eight countries, obligating $1.6 billion. Some of this is attributable to delays in becoming operational and management problems, but it also appears that MCC staff were taking time to execute their “due diligence” responsibilities under the program, something that was unavoidable. At the same time, the Bush administration appeared under assault from all quarters, including foreign assistance: it’s too much, too little, not the right type, not the right countries, not the right time. Congress cut the MCC budget from $3 billion, requested by the president, to $1.77 billion in FY2006, and some Republican members even tried to kill MCA. President Bush requested $3 billion again for MCA in FY2007. It is unclear how these intertwined factors will affect MCA in the future. Nonetheless, the Bush administration failed to keep its commitments from Monterrey. Before looking closely at the issues above, this chapter details the MCA program and the operations of MCC by way of background. This chapter was developed using official government documents; think tank analyses; discussions with MCC officials, congressional staff, and knowledgeable experts; and participant observation.1

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Background Improving on Past Aid Programs According to the MCC’s Web site (www.mca.gov), policymakers drew on lessons learned in development over the previous fifty years, specifically: “(1) Aid is most effective when it reinforces sound political, economic and social policies—which are key to encouraging the inflows of private capital and increased trade—the real engines of economic growth; (2) Development plans supported by a broad range of stakeholders, and for which countries have primary responsibility, engender country ownership and are more likely to succeed; and (3) Integrating monitoring and evaluation into the design of activities boosts effectiveness, accountability, and the transparency with which taxpayer resources are used.” Characteristics of an Effective Aid Program MCC policymakers incorporated the following principles in MCA’s design: (1) Reduce Poverty through Economic Growth—MCA will promote sustainable economic growth and development, reducing poverty through investments in agriculture, education, private-sector development, and capacity building; (2) Reward Good Policy and Governance—Using objective indicators developed by the World Bank, countries will be selected to receive assistance based on their performance in governing justly, investing in their citizens, and encouraging economic freedom; (3) Operate as Partners—Working closely with MCC, countries receiving MCA will eliminate barriers to development, ensure civil society participation, and develop a program. MCA participation will require a high-level government commitment. Each country will enter into a compact, including a multiyear plan for achieving development objectives and identifying responsibilities for achieving those objectives; and (4) Focus on Results—MCA will go to those countries that have developed welldesigned programs with clear objectives, benchmarks to measure progress, procedures to ensure fiscal accountability, and a plan for effective monitoring and objective evaluation of results. Programs will be sustainable after funding is terminated. MCC as a Government Corporation MCC is a government corporation, operating much like a private-sector business. MCC is governed by a board of directors, including the secretary of state, the secretary of treasury, the USAID administrator, the U.S. trade

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representative, four members nominated by the House and Senate, and a chief executive officer (CEO). It may organize its operations in any way it sees fit. It has highly flexible human resource authorities, allowing it wide latitude in hiring and firing, and compensation. Indicators Approach Selection of Candidate Countries The World Bank annually sets gross national income (GNI) per capita income thresholds in late June. Based on these data, MCC’s board approves a list of candidate countries that meet income qualifications and are not otherwise ineligible to receive funding by law or policy. MCC then submits the candidate list to Congress. For FY2006, each candidate country had to meet one of two income tests: (1) per capita income equal to or less than $1,575 GNI to be considered as a low-income country or (2) income greater than $1,575 but less than $3,255 GNI per capita to be considered as a lower-middle income country. Countries must also be eligible for aid from the World Bank (see Figure 15.1). Selection of Eligible Countries From the list of candidate countries, the MCC board determines which countries are eligible for aid, according to each country’s demonstrated commitment to “ruling justly, investing in people, and promoting economic freedom.” This commitment is measured by performance on sixteen indicators within each country’s income peer group (see Figure 15.1). Indicators come primarily from a database maintained by the World Bank. MCC bases its eligibility determination on objective, quantifiable indicators of a country’s commitment to the principles above. The board also considers whether a country performs above the median in relation to its peers on at least half of the indicators in each of the three policy categories and above the median on the corruption indicator. A country’s inflation rate, however, need only be under a fixed ceiling of 15 percent. Developing Bilateral Compacts Figure 15.2 shows the elaborate assessment and approval process required under MCA: submission of a country proposal; MCC due diligence, negotiations and compact development; compact approval and signing; execution of supplemental agreements; implementation and monitoring reports; and evaluation.

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Figure 15.2

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MCC invites eligible countries to submit proposals, developed in consultation with CSOs, the private sector, and NGOs, not to mention citizens. Country eligibility does not guarantee MCA funding. The MCC encourages eligible countries to propose projects and programs complementing national development strategies, including those required by the World Bank Poverty Reduction Strategy Papers (PRSP). MCC staff discuss the proposal with country officials during compact development. Some countries have received grants for proposal development from regional organizations, and the Government Accountability Office (GAO) first reported that MCC was exploring the possibility of providing grants to facilitate compact development and implementation in April 2005 (GAO 2005). MCC conducts a preliminary assessment of the proposal, utilizing its own staff and contractors, as well as employees of other U.S. government agencies, to examine (1) potential impacts of the proposal’s strategy for economic growth and poverty reduction, (2) consultative processes used to develop the proposal, and (3) indicators for measuring progress toward the proposed goals. MCC staff then seek approval from the MCC’s Investment Committee to conduct due diligence. MCC’s due diligence includes an analysis of the proposed program’s objectives and its costs relative to potential economic benefits. Plans for program implementation, as well as monitoring and evaluation, fiscal accountability, and coordination with other donors are also reviewed. Much of the review is done in-country by MCC staff and consultants. The board’s Investment Committee must approve due diligence work before notifying Congress that MCC intends to begin compact negotiations. At the conclusion of negotiations, the Investment Committee then decides whether to approve submission of the compact text to the MCC board. In the final step, the MCC board reviews the compact draft. Before signing the compact and obligating funds, the board must approve the draft and MCC must notify Congress of its intention to obligate funds. MCC only signs compacts with national governments. MCC expects to approve compacts with durations of three to an MCA-determined maximum of five years. Congress does not specify which projects or countries MCA shall fund. Un-obligated money can be used in subsequent fiscal years. For FY2004 and FY2005, Congress directed MCC to use appropriations to fully fund compacts: MCC must obligate the entire amount for the compact’s duration. Budgeting MCA As originally conceived, MCA would gradually ramp up funding to $5 billion annually, in effect nearly doubling the existing “core” U.S. foreign assistance budget (Nowels 2003). In FY2004, Congress appropriated $1 billion. In

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FY2005, Congress appropriated $1.5 billion. In FY2006, the president requested $3 billion for MCA but Congress slashed the request, appropriating only $1.77 billion. When Congress was reviewing the FY2006 budget, some $2.5 billion remained unexpended from FY2004 and FY2005 (Nowels 2005). Congressman Henry Hyde, chair of the House Committee on International Relations, in explaining the committee’s funding decision for FY2006 said, “I would prefer that Congress be under pressure to catch up and fund a success, than need to justify funding for a potential one.”2 As of February 2006, MCC had obligated $1.6 billion. Threshold Program MCC’s Threshold Program assists countries deemed MCA-ineligible but nevertheless showing commitment to MCA objectives. The Millennium Challenge Act authorizes some assistance to candidate countries to help them achieve eligibility in subsequent years. Candidate countries must (1) meet FY2004 or FY2005 requirements for MCA candidacy and (2) demonstrate a significant commitment to meeting the act’s eligibility criteria, but fail to meet those requirements. MCC transferred administration of the Threshold Program to USAID in an effort to partner, and perhaps cut administrative expenses. The program may consume up to 10 percent of MCA funding. MCC expected to spend $75 million on the Threshold Program in FY2006, and President Bush requested another $75 million for FY2007. Assessing Program Design Delaying Program Development Some have criticized MCA for taking nearly one year between the president’s commitment to the program and sending legislation to Congress. This criticism seems unfounded in light of past experience in developing federal programs. The White House had to negotiate with USAID and State, not to mention the National Security Council, the Office of Management and Budget, and the Treasury over which agency would administer the program and how much funding would be allocated, and once policymakers decided that none would be suitable, a new government corporation had to be developed and vetted with all concerned—no easy task (Nowels 2003). Some believed that a separate MCA would further fragment U.S. foreign aid. Others believed that USAID was incapable of managing its funding. And still others wanted the State Department to direct the program so it would be harmonized with U.S. foreign policy, something that would defeat one of the key purposes.

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Inexplicably, policymakers crafting MCA opted not to consult extensively with Congress while designing the program. Our interviews on Capitol Hill revealed that both parties were in the dark about many program details, as was USAID. This may have reduced time required to develop MCA, but at the expense of building support among important stakeholders. Nevertheless, MCA enjoyed a great deal of bipartisan support. Aid Restrictions Even though MCA departed from current foreign aid practices, major provisions in law, including the Foreign Assistance Act of 1961, remain in place. Many laws prohibit aiding countries with human rights problems, drug trafficking, terrorism, nuclear weapons proliferation, military coups, debt payment arrears, and human trafficking issues. Of course, even in the face of these issues, the United States continues to aid countries when it appears politic to do so. MCC awarded aid to Armenia even though it had major elections problems (see section below). But it will be more difficult to do so under MCA because of the transparency of the process and the requirements for funding. Indicators Although much has been made of the use of indicators as an objective way for MCC to determine country eligibility, MCC has wide discretion in including or excluding countries from MCA. Indicators have attracted criticism about their use in country selection and their validity. Inclusion or exclusion of countries related to indicator rankings, legislative aid prohibitions, or foreign policy concerns also attracted criticism. Some of these criticisms appear justified; others do not. GAO (2005) and World Bank (Kaufmann and Kraay 2002) staff have criticized MCC for using quantitative indicators in selecting eligible countries for MCA, noting significant data problems. Scores or rankings were not available for some countries. Errors or missing data caused some countries to score higher than they should have and others to score lower. Certain scores bounced countries out of contention. Numerous countries clustered around median scores, making it difficult to discriminate among them. Although these criticisms are valid, they beg an important question: If such data are not to be used to rank countries, on what “objective” basis can countries be ranked? In fact, much data are wanting in most cases, and not just for developing countries. Proponents rightly claim that at least MCC made a transparent effort to rank countries on what data were available. These criticisms, at least by World Bank researchers, seem a little disingenuous.

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Why would the World Bank develop these databases, maintain them annually, present legions of reports based on them, and then suggest that they should not be used? Eligibility Criteria The FY2006 candidate list expanded to include twenty-nine lower-middle income countries (LMICs) with GNI per capita between $1,575 and $3,255. This group’s inclusion in the selection process stretched MCA funds even thinner. Operating at $5 billion annually, MCA could absorb and involve more candidate countries, but increasing the number of countries at only $1.77 billion probably means signing fewer compacts. This would result in a lower profile for MCA in compact countries and potentially less country buy-in for aid programs. According to the Center for Global Development, “The biggest poverty reduction bang for the MCC buck is not going to be had by providing grants to countries that are three times richer than the original lower income group” (Radelet and Herrling 2005). Many countries in the lower-middle income category already have access to private sources of funding and have more significant tax revenue—they are not in as dire straits as those nations in the low-income group. Others argue, however, that effective development policies like those advocated by MCA propelled LMICs into the higher-income group and countries should not be penalized for their successful efforts fighting poverty. LMICs still have significant numbers of people living in poverty and would benefit from MCA aid. Furthermore, a few LMICs also have important political and strategic ties with the United States—for example, Egypt, Jordan, Colombia, Turkey, and Russia. Larry Nowels at the Congressional Research Service noted, “Achieving economic results as an objective has frequently taken a position secondary to strategic interests in U.S. aid allocation considerations in the past” (Nowels 2003). Targeting Growth Potential MCA is predicated on the idea that countries with sound public policies are more likely to grow and develop than are others. Growth and development then benefits everyone. The premise is that countries will not benefit from increasing amounts of aid invested if sound policies are not in place. World Bank researchers David Dollar and Paul Collier, to name the most widely noted, make a convincing case that aid should be invested where it will do the most good (Burnside and Dollar 1997; Collier and Dollar 1999). Repre-

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sentative Jim Kolbe, chair of the House Appropriations Foreign Operations Subcommittee, calculated that ninety-seven countries received $144 billion (in constant dollars) between 1980 and 2000, and that as of 2000, the median income of these countries had actually declined (Kolbe 2002). Much of the initial criticism of MCA questions the program’s focus on growth and development at the expense of other more pressing needs. Some criticism appears political—claims that growth and development as goals are the Bush administration’s attempt to impose a “conservative” vision on the developing world. These critics fail to realize that this is not a conservative agenda, but rather the widely accepted market-based economics approach— that is, capitalism. Planned economies have not succeeded in developing poor countries. Other criticisms are theoretical: Is development best pursued by promoting growth or providing for basic needs? Others counterargue that humanitarian aid creates dependency, not self-sufficiency. Some critics want aid to be invested in sustainable projects—meaning protecting the environment (Purvis 2003). Many environmentalists are against sacrificing the environment to promote development. Developing countries often oppose protecting the environment when it means they cannot compete in world markets. China, for example, one of the world’s largest polluters, was exempted by the Kyoto environmental treaty because it needed to exceed emissions limits to continue to develop. The most advantageous approach is somewhere between these two extremes. Madagascar’s MCA proposal requested funding to develop a land tenure system. Such a system establishes legal ownership of land, allowing owners to sell it, improve it, or use it for collateral, something they cannot now do because much land is in disputed ownership. Critics question this investment, asking why villagers lacking running water, health care, and schools would care about land tenure. But many development economists argue that it is precisely this lack of title to property that has hampered development in poor countries (De Soto 2000). It may not be possible to resolve issues of growth and development until MCA and similar efforts are evaluated. Many believe that aid has been ineffective in many developing countries, and it is time to try something new. There is enough aid floating around internationally for each country to pursue its own objectives. None of the MCA investments thus far (see below) are onerous, and all have extensive country support. Impacting Other Aid Programs In its initial design phase, critics were concerned that MCA might provide an “excuse” to reduce, replace, or substitute for USAID programs already in

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existence. USAID programs have a strongly imbedded constituency receiving aid—particularly NGOs and multilaterals—and a dedicated cadre who believe in the USAID approach. Many were concerned that programs like the Global AIDS Fund would be impacted, for example. The Bush administration, in marketing the idea, promised that MCA would not affect other programs. These fears were unfounded. Ironically, Congress scaled back MCA funding rather than cutting other programs. Another concern was policy cohesiveness between MCA, USAID, and other aid programs. This is a strange concern for those familiar with U.S. aid programs. There is generally no cohesion in aid, either within or among agencies. So, in this respect, MCA does not harm. Because MCA is selfcontained, one could argue that it actually imposes much more discipline on the aid process than exists elsewhere . Some would argue that USAID should align with MCA. In January 2006, Secretary of State Condoleezza Rice announced the appointment of a new director of foreign assistance in the State Department. In a speech to USAID employees outlining her plan, Rice highlighted that although USAID was being “aligned” with the State Department, MCC would remain an independent organization, with its CEO reporting to the MCC board of directors.3 A final issue concerns the relationship between MCA and other multilateral and bilateral aid efforts, where MCA may be either the dominant or the subordinate source of foreign assistance. In general, as is the case with U.S. programs, “harmonization” problems abound, in spite of the international community’s best efforts to eliminate them. Nonetheless, MCA encourages eligible countries to link MCA funding with other multilateral and bilateral initiatives in their countries, as a way of maximizing the potential benefits. Because MCA requires extensive planning, it might actually improve aid all around: MCA forces countries to think about what they are going to do with aid, and MCC holds them accountable to do it. Experts argue that MCC’s consultative compact approval process should include extensive analysis of existing aid programs in each country. Transformative Investments Given the restrictive budgetary climate, considerable disagreement exists over the merits of signing smaller compacts with many countries or larger compacts with only a few. John Danilovich highlighted MCC’s role to ensure aid dollars have a transformative impact (Danilovich 2005; Fletcher and Bluestein 2006). Both sides of the debate have good arguments to support their views. Some say investing boldly in a few countries is the only way to ensure transformational

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impact (Radelet and Herrling 2005). Indeed, in both its FY2006 and FY2005 budget justifications, MCC emphasized providing countries significant policy incentives to “command the attention” and “galvanize the political will essential for successful economic growth and sustainable poverty reduction” (MCC 2005). Initial reports from countries in the proposal process indicate that governments may be less willing to undertake meaningful reform if MCC funding levels are lower than anticipated. All this being said, others seek more equity among those eligible MCC countries—spreading the wealth. Investing modest amounts in more countries is a viable approach because it would create fewer hard feelings among those excluded, and more support in Congress. As the smaller compacts demonstrate success, Congress will likely invest more in MCA, so that other countries might receive more aid. It seems however, that Danilovich is leaning toward awarding larger compacts to fewer nations. In a January 2006 interview with the Washington Post, Danilovich said that MCC was “focusing on fewer countries with larger compacts, because [it] wants to have a transformative impact” (Fletcher and Bluestein 2006). In the same interview, Danilovich also outlined his plan to give recipient countries greater sums of money at the outset of their development projects to step up the pace of disbursements. Apparently the new CEO decided that demonstrating success with a few well-funded, transformative compacts would generate the best results—in recipient countries as well as on Capitol Hill. Launching MCC Many observers believe that MCC took too long to become fully operational, even though its enabling legislation was signed in January 2004. As of December 2005, MCC was still not fully operational. On June 13, 2005, President Bush met with five African nation heads of state, who raised concerns about delays in the MCA program (Nowels 2005). Some attribute delays to the Bush administration’s preoccupation with the Iraq War and Hurricane Katrina. Others note that MCC had only ninety days from the passage of its legislation to form the new corporation, issue required reports, consult with Congress and stakeholders, and select first-year participant countries (Nowels 2005). Still others conclude that MCC policymakers underestimated the time necessary to develop, launch, and then bring up to speed a new government corporation, even a small one. Indeed, other major start-ups and reorganizations—for example, creation of the Department of Homeland Security, the Department of Transportation, and the Environmental Protection Agency—provided lessons that were apparently not fully appreciated in constructing MCC. Analysts have argued that each of these factors contributed.

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Table 15.1 Key Events at MCC MCA program announced by President Bush

March 12, 2002

MCA legislation sent to Congress

February 5, 2003

President Bush signs Millennium Challenge Act of 2003

January 23, 2004

MCC board holds inaugural meeting

February 2, 2004

FY2004 eligible countries announced

May 6, 2004

Applegarth confirmed by Senate

May 9, 2004

MCC selects candidate countries

July 20, 2004

FY2005 eligible countries announced

November 8, 2004

Madagascar Compact signed

April 18, 2005

Applegarth announces resignation

June 15, 2005

FY2005 candidate countries announced

July 28, 2005

Danilovich confirmed by Senate

October 12, 2005

Danilovich reorganizes MCC

November 16, 2005

Source: Millennium Challenge Corporation, press releases, www.mcc.gov/public_ affairs/press_releases/index.shtml (accessed November 5, 2006).

Appointing the First Director MCC got off to a slow start, without its first director appointed by the president and confirmed by the Senate in a timely fashion. The president signed MCA into law on January 23, 2004. The first director, Paul Applegarth, was not confirmed until May 9, 2004, leaving MCC without its top policymaker in place—although there was an acting CEO—during a critical time. Some observers believe that this delayed key policy-making and staffing decisions. Suddenly on June 15, 2005, Applegarth stepped down as director. This left MCC in the hands of an acting director for several months, until the confirmation of Ambassador Danilovich in October 2005 (Dugger 2005). Colleagues describe Danilovich, who brought extensive private-sector experience to the MCC, as much more decisive than Applegarth (Fletcher and Bluestein 2006). Generally, leadership changes in top management often shake up an organization—for better or worse. It was unclear in 2006 whether MCC was mature enough to run on autopilot during the transition in leadership, or whether this would cause even further delay in providing aid. Regardless, Danilovich reorganized MCC shortly after taking over—probably for the better, but injecting even more change into the process (see section below).

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Appointing Board Members Even as of February 2006, MCC policymakers had yet to nominate two vacant MCC board members—both allotted to NGO representatives—as required by statute. These are to be nominated by the U.S. House of Representatives. Some note that it is difficult to see why MCC would neglect to appoint two members who might give the MCA program more credibility or management oversight. Taking on Personnel What the MCC as an organization still lacks is real strength in people with significant development experience, with deep understanding of how to improve on the practices of other aid organizations without repeating some of the mistakes that have been made in the past. —Steve Radelet, Senior Fellow, Center for Global Development

MCC began operations with a small core of full-time employees, supplemented with detailees from other agencies and independent contractors. MCC recruited some staff, while others were acquired through a “headhunter” firm. MCC policymakers had maximum flexibilities under law to craft the organization necessary to accomplish their mission. This seemed a reasonable way to proceed at start-up. Key personnel at MCC seem to be the “best and brightest” and have demonstrated their commitment to and enthusiasm for the program. The only shortcoming of the approach was the time required to get key managers in place. Some believe that the process moved as fast as it could, given federal hiring practices and the availability of highly qualified staff and management, while others continue to believe the process was slow in getting started, possibly because an executive director was not in place. At start-up in February 2004, only 7 staff were on board; by September 2004 only 61. In April 2005, MCC hired 120 staffers over a period of just three months—an impressive accomplishment. But 72 jobs were left unfilled that would have brought it to near full strength at 192. So MCC remained at 63 percent of employment capacity (GAO 2005). In any case, policymakers deliberately held overall staffing levels at MCC to a minimum in an effort to wring out bureaucratic inefficiency and expense that they perceived to be operative at USAID, the sister organization. According to CEO John Danilovich, MCC expected to operate at no more than 300 staff—a self-imposed limit—to administer what was to be a $5 billion program, while USAID was operating with a 2,000-person staff administer-

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ing an $8 billion program—not including special humanitarian and disaster relief efforts (Nowels 2003; Danilovich 2006). With MCA funding cutbacks in FY2006, some expected that staffing levels would be adequate. Establishing Personnel Policies The Millennium Challenge Act granted MCC waivers in hiring and compensation, essentially allowing MCC to operate as a business. In interviews with congressional staff, this “authority” was of concern on both sides of the aisle, where representatives feared that employees would not be protected. MCC was slow in putting into place personnel policies for the workforce. Ordinarily, had the agency been subject to the usual civil service laws and regulations, the task would not have been so daunting. But because of the granting of authorities, policies started from scratch. Granting of authorities in personnel and pay is relatively new in the federal system, but is becoming widespread, especially in the Department of Defense and the Department of Homeland Security. MCC had an opportunity to develop and implement a state-of-the-art personnel system had it had sufficient lead time to design the necessary policies and processes. Not surprisingly, MCC eventually brought in consultants to create the new system. Some suggest that MCC waited too long to execute this. In the end, MCC also contracted out basic human resources functions to the National Business Center, an office within the Department of Interior (Office of Inspector General 2004). Organizing and Reorganizing Administrative Functions MCC policymakers initially divided the organization into eight departments, each aligned with a specific function in the MCA program—Country Relations, Market and Sectoral Assessments, Administration and Finance, Monitoring and Evaluation, Domestic Relations, International Relations, Development Policy, and General Counsel Department—and headed by a vice president. Vice Presidents then met in committee to develop consensual decisions and policies. Although this model may have built support, buy-in, and enthusiasm for the new program, it may also have been more cumbersome to manage, especially with deadlines impending in the early months of operation. This model may have delayed policy decisions. (See section below on policies, plans, and procedures.) In November 2005, then newly confirmed CEO Danilovich announced the reorganization of MCC, merging departments to streamline operations, seemingly validating that the MCC organizational model might have been

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too cumbersome. The departments of Development Policy, International Relations, and Threshold Programs were merged into an Office of Policy and International Relations. The Markets and Sector Assessments departments were eliminated, and their Fiscal, Environment, and Social Impact units were reassigned to the new Department of Accountability, also including the Department for Monitoring and Evaluation. The new Department of Operations included some functions under the defunct Market and Sector Assessments departments. In 2006, it was too early to tell whether these management changes would improve MCC operations, but to some the consolidation of functions seemed on the surface to be preferable to the previous more compartmentalized approach. Danilovich announced that he was “bolstering” the MCC staff to 300, to “be more aggressive in our approach, attack our congressional priorities, and manage the risk in our investments” (Danilovich 2006). Developing Policies, Plans, and Procedures According to a GAO audit in April 2005, MCC had not yet completed “the plans, strategies, and timeframes needed to establish corporate-wide structures for accountability, governance, internal control and human capital management” (GAO 2005, 4). MCC had no strategic plan, annual performance plans and goals, performance measures, or reporting mechanisms as required by law under the Government Performance Results and Accountability Act (GPRA) and by policy under the President’s Management Agenda (34). MCC lacked a supportive internal control environment, a process for ongoing risk assessment, and a process for correcting weaknesses (35). On the human capital side, MCC had not developed an effective human capital infrastructure, an assessment of critical skill needs, a recruitment plan aligned with corporate goals and plans, or a system linking performance to compensation (35). MCC apparently put most of its effort into program policy decisions to get funding out, but spent little time developing policy and planning infrastructure in which to make sense of program decisions. In an age of transparency and accountability, this strategy may create long-term problems. It would be bad form for MCC to be criticized on accountability issues when its purpose is to promote accountability in developing countries through MCA. MCC, likely in its haste to become operational, implemented separate systems for financial, human resources, and procurement management (MCC 2004 annual report). Failure to integrate systems is not critical, but it is an archaic management approach. MCC would incur much greater expense in trying to integrate.

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Implementing MCA Selecting Countries For FY2006, twenty-three countries had high enough indicator scores and were eligible to submit proposals: Armenia, Benin, Bolivia, Burkina Faso, Cape Verde, East Timor, El Salvador, Gambia, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Morocco, Mozambique, Namibia, Nicaragua, Senegal, Sri Lanka, Tanzania, and Vanuatu. Of these, Cape Verde, El Salvador, and Namibia were included as lower-middle income countries—a category including countries with per capita incomes between $1,576 and $3,255. For FY2005, sixteen countries were deemed eligible: Armenia, Benin, Bolivia, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Morocco, Mozambique, Nicaragua, Senegal, Sri Lanka, and Vanuatu. In June 2006, MCC rejected Gambia’s proposal because the government continued to arrest members of the opposition. Congressman Henry Hyde, a strong advocate of the program, took this as an indication that the United States would no longer reward poor governance with foreign assistance (Hyde 2006). Assisting Countries Eight countries had entered into compacts as of February 2006: Madagascar, Honduras, Cape Verde, Nicaragua, Georgia, Armenia, Vanuatu, and Benin, totaling $1.62 billion (see Table 15.2). Spreading the Word MCC, after designating MCA-eligible countries in 2004, sent small teams of MCC staffers to prospective countries to inform country leadership and U.S. Embassy staff of the program. The Academy, coincidentally, was working in Ghana in June 2004, offering the Ghanaian government technical assistance and cosponsoring a conference on Information Technology and Governance in Accra, Ghana, when MCC visited the country (the work described in chapter 8 was an outgrowth of this project). Academy representatives were surprised that the USAID mission staff were largely uninformed about the MCA program, as was the embassy staff generally. Academy representatives, working with the government and the embassy, made the linkage between all of the parties, hopefully facilitating the process. Apparently, word of the MCC program had not reached all of its prospective targets. Building awareness of the MCA has the potential to be as important as the actual aid-giving compacts. As nations hear about the program, they will tailor

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Table 15.2 Descriptions of Current MCA Compacts Country

Amount

Program description

Madagascar

$109,773,000 Compact will support a program designed to raise incomes by bringing the rural population from subsistence agriculture to a market economy. The program includes three projects that will work together to help rural Malagasy secure formal property rights to land, access credit and protect savings, and receive training in agricultural production, management, and marketing techniques.

Honduras

$215,000,000 Compact will reduce poverty and spur economic growth by increasing productivity of high-value crops and improving transportation links between producers and markets.

Nicaragua

$175,000,000 Compact will reduce poverty and spur economic growth by funding projects in the regions of León and Chinandega aimed at reducing transportation costs and improving access to markets for rural communities, increasing wages and profits from farming and related enterprises in the region, and increasing investment by strengthening property rights.

Cape Verde

$110,078,488 Compact will help transform Cape Verde by making sizable investments in water resources, agricultural productivity, major port and road improvements, and initiatives to promote the private sector, including investment climate and financial sector reforms.

Georgia

$295,300,000 Compact aims to reduce poverty and stimulate economic growth in the regions outside of Georgia’s capital, Tbilisi, where more than 50 percent of rural households live below the poverty line. By focusing on rehabilitating regional infrastructure and promoting private-sector development, the program will directly benefit approximately a half-million Georgians.

Armenia

$235,650,000 Compact aims to reduce rural poverty through a sustainable increase in the economic performance of the agricultural sector. The compact consists of two investments: a Rural Road Rehabilitation Project and an Irrigated Agriculture Project. The program will directly impact 75 percent of the rural population and is expected to increase annual incomes by $36 million in 2010 and over $113 million in 2015.

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Country

Amount

Program description

Vanuatu

$65,690,000

Five-year compact program addresses the country’s poor transportation infrastructure. Consisting of up to eleven infrastructure projects—including roads, wharfs, an airstrip, and warehouses—the program aims to benefit poor, rural agricultural producers and providers of tourist-related goods and services by reducing transportation costs and improving the reliability of access to transportation services.

Benin

$307,000,000 Compact aims to address key constraints to economic growth and poverty reduction by supporting improvements in physical and institutional infrastructure in four critical sectors focusing on access to land, financial services, justice, and markets.

Source: MCC Web site, Compact Fact Sheets, www.mcc.gov (accessed March 15, 2007).

their policies to achieve eligibility for MCA funding—resulting in positive changes in poor countries. Procuring Services In September 2004, MCC issued a request for proposals (RFP) to provide “Financial Management and Procurement Systems Assessment Services” to MCC-eligible countries. In November 2004, MCC awarded “blanket purchasing agreements” to six vendors. In January 2005, MCC began issuing “requests for quotes” to vendors, asking them to provide quotes for work in MCC-eligible countries. The procurement process seemed flawed. Not all vendors received requests for quotes, meaning that some were excluded from bidding, even if the vendor had special expertise in a country. MCC, it would seem in order to save funding, pit bidders against one another to exact the lowest price for the government. In effect, vendors, expecting future muchmore-lucrative contracts, bid below their actual costs in some cases. Low bidders, then, had the same work to perform but insufficient compensation to perform it. Vendors appeared to be subsidizing MCC. It is unknown how this might affect the quality of the country assessments being conducted. The greatest annoyance to some vendors was the short turnaround time on submission of quotes and the lack of information on financial management and procurement systems on which quotes were sought. MCC policymakers—in keeping with the overall human capital approach—decided to hold the procurement staff to a minimum to make the organization lean and mean. Procurement concerns the acquisition of con-

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tractor services to conduct financial capacity assessments in MCA-eligible countries, then monitor them for compliance as they receive and distribute aid funds. In retrospect, this was likely a mistake. Procurement in the federal system has become a complicated process requiring considerable resources. Procurement generally is also under careful scrutiny, because of numerous cases of corruption, abuse, and malfeasance. MCC lacked necessary resources to develop procurement policies and processes, and then engage in procuring services to assess MCA countries making proposals. We believe this slowed implementation. Country Ownership Further strengthening our development efforts is the inclusion of Mongolia in the MCA program. When we sign our compact to begin project implementation, it will add a new level of transparency, “sunlight” and public participation to this critical poverty alleviation program by supporting economic growth. The mechanics of putting together our MCA program have involved public input and solicitation of proposals from the people. This is grass-roots governance at its best. —Tsakhia, 2005

One important pillar of the MCA program is country ownership. Many aid programs shy away from country ownership (see chapter 9). Donors offer aid for specific purposes, and developing countries may either take it or leave it. Other donors impose numerous conditionalities on aid, tightly restricting what can be done. The most extreme example of conditionality is aid tying—countries receiving technical assistance, training, or services must procure them exclusively from donor country vendors at donor-determined rates. Most often, donors, dissatisfied with developing country administrative capacity, either administer aid themselves or distribute it to NGOs, effectively bypassing government. When bypassed, governments tend to lack commitment to aid programs they receive. MCA is highly effective in promoting country ownership. MCA requires countries to involve a wide spectrum of participants in developing and implementing compacts. MCA verifies that countries are as committed as they claim to be. This reduces conditionality and fosters country ownership much more than most aid programs in the field do. Wide Participation in Plan Development Widespread stakeholder participation is rare in foreign aid. Conditionality requirements virtually eliminate it, at least in the project or program develop-

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ment phases. But the development phase is the most important: this is where stakeholders carve out benefits that will flow to them or their interests through aid provision. Again, MCA is designed to encourage casting a wide net in securing support for a compact. If support is not achieved, MCC could restrict further aid. The only objection to support building in MCA is the prominent role given to NGOs and CSOs (see also chapter 14). These organizations are important in articulating community needs and transmitting them to those in power. NGOs are also essential in delivering services to people. Many, though, are raising questions about the role of NGOs and CSOs in aid (see chapter 9). NGOs are becoming increasingly political and often pit themselves not only against government but also against donors. The International Committee of the Red Cross, for example, felt compelled to strongly criticize the Bush administration’s treatment of detainees in Iraq, while at the same time asking for increased appropriations for its operations. NGOs articulate needs, but these tend to be those relating to their capacity and funding requirements. The needs of people and governments may not be consistent. NGOs by their very nature bypass government. This may be unwise in developing countries, struggling to develop management capacity only to have it delegated to others. Once it is delegated, governments will find it difficult to get it back. CSOs are the foundations of democracy in that they represent the political interests of diverse groups in society. A problem arises when CSOs opposed to the government organize to overthrow it. When MCC forces CSOs into the process, it not only creates broader representation, it also empowers and legitimizes groups seeking power. These CSOs are often undemocratic and deadly for fledgling democracies. Overcommitting Funds In the early enthusiasm for MCA, policymakers expected to roll out $5 billion to developing countries in multiyear compacts. They believed that MCA’s success would produce even more funding. The inability to disperse MCA funding in a timely fashion essentially halved the funding that was available, while expectations of eligible countries skyrocketed. MCC, in 2007, faces the unpleasant prospect of not being able to meet its obligation to be a major source of funding in each compact country. It can reduce commitments already made, a very bad idea. It can reduce amounts to be awarded in the future, reducing the intended “transformational” effects of the program. Or, it can reduce the number of countries receiving MCA funding, creating a lot of hard feelings among developing countries. Some tension might be reduced by moving

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USAID funding to support MCA-eligible countries, but this would also cause problems. MCA may have placed itself in a no-win situation, from which only Congress can bail them out, and this is far from certain to occur. Conclusions Assessing Program Design Our ultimate success will be manifest only when we are no longer necessary. —MCC CEO John Danilovich, January 23, 2006

Since 2006, MCC has fulfilled its goal to fundamentally alter the way the United States distributes at least some of its foreign aid. The compact-oriented system increases buy-in in compact countries. Although the ramp-up of MCC was more difficult than expected, in less than one year the MCC board approved eight compacts and obligated $1.62 billion in foreign aid. Initial indicators showed that eligible countries’ “strategic value” to the United States had yet to significantly influence MCC’s decisions. Nations awarded compacts had little military interest to the United States—only Georgia and Armenia were even close to the Middle East, and still were removed from most conflict. Criticism about indicator data inaccuracy took a secondary place to objectively ranking countries in order to determine where aid’s impact would be greatest. Other concerns such as agency overlap and funding levels were expected to bear out as MCA evolved. Many believe that MCC, as designed, will eventually be the future of foreign aid in the United States. As it demonstrates success, more money will flow through the organization, and more low-income countries will show measurable progress toward growth and development. Launching MCA A mystery: neither the MCC annual report, nor the Office of Inspector General (OIG) quarterly reports, address shortcomings reported by GAO in its assessment in April 2005, even though these were widely known. Neither did MCC or OIG report the issues summarized above. On the other hand, Congress neglected or chose not to ask about these issues, judging from a review of periodic hearings held on MCA. MCC seems to have chosen to place management issues on the back burner in an effort to roll out its funding as best it could. Hindsight in policy and politics usually is twenty-twenty, but neverthe-

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less, it seems that MCC policymakers may have misjudged the complexity of “ramping up” even a small agency. As such, MCC proponents’ justifications for delays—erring on the side of caution in selecting, vetting, and awarding aid—in “rolling out” funding to recipient countries may not be entirely accurate. But, any reasonable person would likely agree that the processes described in Figures 15.1 and 15.2 take considerable time to execute, no matter how many staff are in place. In any case, management and process conspired to delay MCA funding, costing the MCC part of its budget. Implementing MCA MCA’s implementation remained in its infancy in 2006. Again, however, MCC had obligated $1.62 billion—no small feat. Management and rampup issues aside, this is an accomplishment for which the agency should be applauded. Even so, some critics are dissatisfied with program processing times: an average of 484 days from eligibility determination to compact signing or approval for eight countries, and another 112 days on average for three countries to move from signing to implementation (GAO 2006). The agency still must resolve issues related to procurement. Can MCC clarify and streamline its procurement policy and process in order to avoid uncertainty and delays? Furthermore, compact monitoring and evaluation efforts in each compact country will determine whether MCA programs achieve results. The Threshold Program will be evaluated on how many countries improve their indicator scores and enter into compacts with the MCA. Much uncertainty still permeates the fledgling agency. A February 2006 GAO analysis, for example, suggested that MCC would experience major capacity problems as it tried to expend program funding in the next few years (GAO 2006). Ultimately, success for the MCA will come only from real poverty alleviation and economic development in compact countries. Politics Unfortunately for MCA, the domestic political climate apparently began to overwhelm the program, where once there was considerable support. Not only did events in Afghanistan and Iraq, and then Hurricane Katrina, drain resources that might have gone to development, U.S. efforts at nation building did not go well, especially in Iraq. Enthusiasm for foreign assistance appeared on the decline. Hurricane Katrina, in addition to highlighting shortcomings at all levels of government when dealing with natural disasters on an epic scale, drew billions in funding to rebuild the Gulf Coast region. Scandals in the United Nations—the Oil-for-Food Program and administration of tsunami

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funds (Donnan 2005), to name but two—and the inability of the UN to reform itself cast a pall over helping developing countries. Criticism of the United States across the globe dampened enthusiasm for helping developing countries, who increasingly demanded aid while becoming increasingly more vocal in denouncing the United States. The federal budget deficit, at unprecedented levels, also meant that there was less funding to go around. To compound matters, Republicans were under intense assault from Democrats as both parties geared up for the 2006 congressional elections, which were viewed as a referendum on the Bush administration’s performance. Attacks on MCA began to emerge. Advocates of the old foreign assistance system reemerged, rooting against MCA in favor of USAID. Advocates—especially NGOs, who benefit under USAID programs but very little under MCAs—began to attack MCA. Because MCA promotes growth and development, rather than humanitarian and social development, the program is criticized as a Bush administration attempt to impose a conservative view on developing countries. And, of course, there are those for whom any amount of aid no matter how much would not be enough. All of these factors conspired to create an atmosphere in which MCA received reduced funding from a Republican Congress and a Republican administration. The Republican Study Committee actually went so far as to recommend killing the program altogether. Even as the MCC left the ramp-up phase, difficulties still loomed. Ambassador Danilovich was well aware of the challenges ahead: The initial thing was to get the Compacts, and sign the agreements, and, for God’s sake, disburse the money. I think in retrospect we’re going to look back to that as easy. The tough stuff is now going to be to implement these projects. And implementation in this country is difficult. In Western European countries, it’s difficult, let alone in developing countries. —MCC CEO John Danilovich, January 23, 2006.

In 2006, MCA was at a critical phase in its development. Despite funding challenges and an intense political environment, with effective management and solid compact execution, MCA still had a tremendous opportunity to begin acting on President Bush’s “new vision for development.” Acknowledgment The views expressed here are the authors and do not necessarily represent those of the National Academy of Public Administration as an organization. The authors are solely responsible for any errors in interpretation or fact in this chapter.

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1. In June 2003, the National Academy of Public Administration, after discussing MCA with informed sources at USAID, the Department of State, and other experts, became concerned that the Bush administration lacked a strategy for rolling out MCC immediately after passage of the MCA in January 2004. Terry Buss, representing the Academy, visited the U.S. House Committee on International Relations to discuss MCC management issues. With bipartisan support, the House placed in its report language suggesting that MCC retain the Academy or a similar organization to help it launch its operations. Representative Tom Lantos also called for assistance in a speech on the House floor. Academy staff met with various MCC officials in the early days of the operations, but MCC never formally retained consultants to assist them on management issues. 2. Comment made by Hyde at an oversight hearing on the MCA, U.S. House of Representatives Committee on International Relations, April 27, 2005. 3. In a speech by Rice before USAID personnel at the Andrew Mellon Auditorium, Washington, DC, January 19, 2006.

References Burnside, Craig, and David Dollar. 1997. “Aid Spurs Growth in a Sound Policy Environment.” Finance and Development (December 1): 4–7. Collier, Paul, and David Dollar. 1999. Aid Allocation and Poverty Reduction. Washington, DC: World Bank. Danilovich, John. 2005. Speech at InterAction’s annual CEO retreat, Washington, DC., December 6, Available at www.mcc.gov/press/speeches/2005/speeches-120605danilovichtointeraction.php (accessed March 2007). ———. 2006. Keynote speech at a conference hosted by the American Enterprise Institute to mark the second anniversary of the MCC, Washington, DC, January 23. Available at http://www.mcc.gov/press/speeches/2006/speech-012306-danilovichkeynoteataei. php (accessed March 2007). De Soto, Hernando. 2000. The Mystery of Capital. New York: Basic Books. Donnan, Shawn. 2005. “Little Clarity on How Aid Gets Spent.” Financial Times (December 23): 6. Dugger, Celia W. 2005. “Foreign Aid Chief Pledges Reforms.” New York Times, November 13, A10. Fletcher, Michael A., and Paul Bluestein. 2006. “With New Leader, Foreign Aid Program Is Taking Off.” Washington Post, January 31, A15. Government Accountability Office (GAO). 2005. Millennium Challenge Corporation: Progress Made on Key Challenges in First Year of Operations. GAO Report No. 05455T (April 26). Washington, DC: Government Accountability Office. ———. 2006. Analysis of Future Millennium Challenge Corporation Obligations. GAO Report No. 06-466R (February 21). Washington, DC: Government Accountability Office. House Appropriations Subcommittee on Foreign Operations. 2005. FY2006 Appropriations Hearings (April 13). Congressional Transcripts. Hyde, Henry. 2006. “Why Saying No Counts.” Washington Times, June 30, A10. Kaufmann, Daniel, and Aart Kraay. 2002. Governance Indicators, Aid Allocation, and the Millennium Challenge Account. Washington, DC: World Bank. Kolbe, Jim. 2002. Remarks to the Advisory Committee on Voluntary Foreign Aid (October 9). In Nowels, The MCA, 2003. Millennium Challenge Corporation (MCC). 2005. FY2005 Congressional Budget Justification. Washington, DC: Millennium Challenge Corporation. Available at www.mcc.gov/ about_us/key_documents/FY05_Budget_Justification.pdf (accessed July 17, 2006).

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Nowels, Larry. 2003. Millennium Challenge Account: Congressional Consideration of a New Foreign Aid Initiative. CRS Report for Congress, Order Code No. RL31687. Washington, DC: Congressional Research Service. ———. 2005. Millennium Challenge Account: Congressional Consideration of a New Foreign Aid Initiative. CRS Report for Congress, Order Code No. RL32427 (July). Washington, DC: Congressional Research Service. Office of Inspector General (OIG). 2004. MCC: Semiannual Report to Congress (October 29). Washington, DC: USAID, Office of Inspector General. Purvis, Nigel. 2003. “Greening U.S. Foreign Aid Through the Millennium Challenge Account.” Policy Brief No. 119 (June). Washington, DC: Brookings Institution. Radelet, Steven, and Sheila Herrling. 2005. “The MCC Between a Rock and a Hard Place: More Countries, Less Money and the Transformational Challenge” (October 26). Washington, DC: Center for Global Development. Tsakhia, Elbegdorj. 2005. “Mongolia: Moving Mountains.” Washington Post, November 21, A20. United Nations (UN). 2002. Report of the International Conference on Financing Development: Monterrey Consensus (March 18–22). New York: United Nations.

16 Deepening Local Democratic Governance Connecting the Dots in Sub-Saharan Africa John W. Harbeson

This chapter’s thesis is that an important nexus among the processes of state strengthening, governmental decentralization, and democracy promotion at local levels in sub-Saharan Africa has been overlooked. This nexus has been overlooked both in U.S. foreign assistance programming through the U.S. Agency for International Development (USAID) and in insufficiently specified connections between discussions of civil society, decentralization, and state strengthening in the contemporary academic literature. Both the weakness of and the importance of political development at subnational levels in subSaharan Africa have long been recognized. However, connections between important dimensions of the problem, although thoroughly recognized and appreciated, have remained insufficiently specified. The result has been that synergies among them necessary to the end of enhanced political development at local levels have been insufficiently recognized. This chapter explicates some of these connections. At the heart of the problem lies the underdevelopment of the conception and promotion of civil society. Critiqued for the weakness or nonexistence of civil society local roots in the context of advancing democratization at national levels, the importance of building civil society organizations at local levels, and linking and balancing the tasks of promoting democracy at national and local levels, has been underemphasized in both the academic literature and in USAID’s assistance programming. Partly as a result, the academic and policy-making literatures on decentralization have recognized the integral importance of civil society while seeming to overlook the importance of strengthening civil society for this purpose in ways analogous to the roles it has been assigned in advancing democracy at the national level (chapter 8 discusses decentralization in Ghana). 356

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Underlying this omission has been a tendency in these literatures to concentrate civil society’s roles on elections and organizations that replicate Western conceptions of democracy. Although academic and policy-making literatures have addressed many dimensions of the goal of strengthening local government, the task of assisting sub-Saharan Africa to conduct and manage the politics of determining balances of roles, responsibilities, and resources in ways appropriate to their particular circumstances has received insufficient attention. Finally, the underemphasis on the politics of decentralization in the foregoing ways brings to light a fundamental tendency to treat the state as synonymous with governmental structure. In fact in a democratic state, at least, the balance of roles, responsibilities, and resources between central and local levels is a critically important constitutional question that the people of a country must address in determining the terms upon which they agreed to be governed as one political community. The Status of African Decentralization James Wunsch and Dele Olowu (1990) sounded the clarion call for decentralized government in 1990 with their Failure of the Centralized State. They did so following a decade of coordinated multilateral and donor-country challenges to overextended governments and just as democracy’s “third wave” was reaching African shores in the wake of the end of the cold war. Although a sizable library of literature followed their call for more attention to decentralization, it is fair to say that this initiative was greatly overshadowed by democratic initiatives to replace authoritarian governments at the national level. Certainly, that was the case for USAID programming. Their more recent Local Governance in Africa renewed the call in the context of post–September 11, 2001, refashioning of U.S. foreign policy in general and foreign assistance strategy in particular. Particularly salient in USAID’s post–September 11 assistance strategy has been its Fragile States Strategy, while decentralized democratic governance has appeared to gain a higher priority in USAID programming although not in the academic literature (USAID 2005). At the same time, a recent World Bank survey recorded increased prominence for decentralization initiatives in sub-Saharan African countries in recent years (Ndegwa 2002). The survey defined “decentralization” as the “transfer of public authority, resources, and personnel from the national level to subnational jurisdictions” (1). Implicitly, the bank survey centered on “devolution” (transfers of authority and resources to subnational levels), rather than upon “deconcentration” (the assignment, as distinct from the transfer, of responsibilities to local administrative units) or “delegation” (the relocation of specific functions to local levels rather than any broad transfer of author-

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ity). The findings of this study derive from surveys of bank professionals with expertise on the countries involved rather than from direct in-country research, analogous to, but less comprehensive than, bank opinion surveys on the basis of which it has assessed the extent and quality of democracy, state stability, and governmental quality in nearly all countries. Thirty sub-Saharan African countries were included in the study, some being excluded for reasons of small size, or for lack of data due to ongoing conflict. The survey assessed political, administrative, and fiscal decentralization, and it also estimated the extent of “downward” accountability in the form of local elections and “upward” accountability in the form of central government oversight of accounts and service delivery standards. Scores for political and administrative decentralization ranged from 0 to 3.5, and 0 to 4.5 for fiscal decentralization, and downward and upward accountability. Table 16.1 presents the results of this survey. The average overall decentralization score for all the countries in the survey was 1.8, roughly halfway between the extremes of complete centralization and extreme confederation. On average, the score for fiscal decentralization, 2.0, is somewhat surprisingly greater than those for political and administrative decentralization. Downward accountability, at 2.3, is substantially greater than upward accountability, at 1.4. In the absence of longitudinal data, one may hypothesize that there have been significant increases in levels of decentralization accompanying democracy’s “third wave” in sub-Saharan Africa. Given the pervasive weakness of African states, and a prominent hypothesis that democratization risks their further weakening as well as enhancing the risk of war with neighboring countries, it is pertinent to inquire how decentralization may have affected either state strength or quality of democratization (Snyder and Mansfield 2005). Table 16.2 presents the survey scores for democratization, state stability, and governmental quality for the same thirty sub-Saharan African countries for 2002, the year of the decentralization survey. These biennial studies are based on numerous within-country surveys of opinion in a variety of communities on the questions of political voice, rule of law, state stability, governmental effectiveness, regulatory quality, and corruption control. The results are expressed in terms of percentile scores on each item in relationship to nearly 200 countries, with a score of 50 indicating dead average. Although these survey data are based on perceptions rather than objective research, the results suggest only weak to moderate connections between overall levels of decentralization and progress, or lack of it, on democratization and state stability. Table 16.3 suggests an almost random connection between levels of decentralization and state stability, modest connections between decentralization and governmental effectiveness and regulatory quality, and rather weak correlations with rule of law, political voice, and corruption con-

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Table 16.1 Sub-Saharan African Decentralization Decentralization Countries South Africa Uganda Kenya Rwanda Nigeria Ghana Senegal Namibia Ethiopia Tanzania Zimbabwe Cote d’Ivoire Madagascar Zambia Guinea Mali Eritrea Burkina Faso Malawi Congo Rep Mozambique Burundi Angola Benin D.R. Congo Cameroon C.A.R Niger Sierra Leone Chad

Accountability

Avg

Political

Admin.

Fiscal

Down

Upward

3.4 3.2 2.8 2.6 2.6 2.6 2.6 2.5 2.4 2.4 2.56? 2.4 2.12? 2.2 2.48? 2.2 2.1 1.8 1.68? 1.8 1.5 1.6 1.6 1.4 1.4 1.2 1.22? 1.1 1.1? 1.2 1.1? 1.2 1.1 1.0 1.0 0.9 0.9

3.3 3.3 3.0 2.7 2.7 3.0 3.0 3.3 3.0 2.4 1.4 3.0 2.7 2.7 1.7 2.4 0.4 1.7 2.0 0.4 1.4 0.4 0.4 0.4 0.4 0.7 0.7 0.4 0.7 0.4

3.0 3.0 2.4 2.7 2.7 2.4 1.4 1.7 2.0 2.7 2.7 1.4 2.0 1.7 1.7 1.7 2.0 2.0 1.0 1.4 1.7 1.0 1.7 1.7 1.4 1.0 1.0 1.0 1.0 1.0

4.0 3.5 3.0 2.5 4.0 2.5 2.5 1.5 1.5 2.5 3.0 3.5 1.5 1.5 2.0 1.5 1.5 1.5 2.0 2.5 1.5 2.5 1.0 1.0 2.5 2.0 1.0 1.0 1.0 1.0

4.0 4.0 4.0 3.7 2.7 3.7 3.7 4.0 3.4 2.7 2.0 3.0 3.7 3.4 2.0 2.7 1.7 2.0 2.4 1.0 1.7 0.7 1.4 1.4 0.7 0.7 1.0 1.0 0.7 0.7

3.0 2.5 2.0 1.0 1.0 1.5 2.5 2.0 2.0 2.5 1.5 1.5 1.0 1.0 1.0 1.0 2.0 1.0 1.0 1.5 1.0 1.5 1.0 1.0 1.0 1.0 1.0 1.5 1.0 1.0

Source: World Bank, Africa Region Working Paper, No. 40, November 2002.

trol. Noteworthy is the slight negative correlation with fiscal decentralization. The connections between particular elements of decentralization and those of democratization, state strength, and governmental quality appear similarly weak. Democratization, state stability, governmental effectiveness, and dimensions of decentralization appear to have a remote relationship to one another, with numerous unspecified intervening variables collectively exerting much more influence on these relationships.

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Table 16.2 Democracy and Governance in Africa, 2002 State Government Regulatory Rule Corruption Voice stability effectiveness quality of law control Avg. Namibia South Africa Ghana Madagascar Senegal Benin Burkina Faso Mali Mozambique Malawi Tanzania Zambia Uganda Eritrea Niger Ethiopia Guinea Rwanda Kenya Cameroon Chad Côte d’Ivoire Sierra Leone C.A.R Nigeria Congo Rep. Zimbabwe Burundi Angola D.R. Congo

59 71 50 50 53 51 43 55 44 30 38 39 24 1 45 15 13 8 28 16 20 12 29 24 26 16 7 14 9 2

61 37 45 50 34 70 41 42 68 49 35 44 10 34 36 16 12 12 20 31 9 2 14 5 9 7 8 2 9 0

63 72 61 40 56 36 30 28 45 27 35 21 44 34 18 21 23 25 20 30 26 16 4 3 10 7 19 4 8 2

64 69 45 46 45 36 47 40 33 40 34 31 54 14 26 16 24 19 33 22 17 41 8 20 13 14 4 8 7 5

66 58 52 50 50 44 36 38 32 40 38 35 27 40 25 40 28 18 14 11 24 7 8 14 5 8 6 5 4 1

61 66 42 59 52 36 60 54 23 22 15 21 19 55 10 45 35 45 9 11 18 19 26 7 3 14 5 15 7 2

62 62 49 49 48 46 43 43 41 35 33 32 30 30 27 26 23 21 21 20 19 16 15 12 11 11 8 8 7 2

Source: Adapted from World Bank Institute, Governance Matters, 2002.

Olowu and Wunsch have hypothesized that two critically important factors affecting the salience and impact of decentralization measures are (1) the extent to which, in any given country, there is “a strong local demand for public goods” and (2) “the existence of local social capital” (Olowu and Wunsch 2004, 262). Their implicit hypothesis is that if well-developed patterns of decentralized governance are to embody themselves, and also promote, stronger states and better consolidated democracy, inter alia there must be political demand for local government services, founded on expectations that local government is capable of providing such services.

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Table 16.3 Bivariate Correlations between Democracy, State Strength, and Elements of Decentralization Decentralization Overall Political voice State stability Gov’t. effectiveness Reg. quality Rule of law Corruption control Overall

0.27 0.05 0.57 0.55 0.39 0.36 0.41

Political Administrative 0.43 0.20 0.57 0.68 0.50 0.44 0.53

0.14 0.03 0.42 0.31 0.24 0.24 0.26

Accountability Fiscal

Down

Up

–0.06 –0.34 0.17 0.21 –0.15 –0.12 –0.07

0.43 0.26 0.62 0.69 0.57 0.50 0.58

0.27 0.02 0.54 0.46 0.41 0.28 0.37

Sources: World Bank Institute, Governance Matters, 2002; World Bank, Working Paper No. 40.

USAID Assistance for Decentralization As a point of departure, it is appropriate to remind ourselves how centrally important, complex, and controversial “decentralization” has been in the United States, though these debates are couched in terms of “federalism” and “states’ rights.” No issue has occupied more of the attention of the U.S. federal courts or the Congress. It is implausible, therefore, for students and practitioners of democratic development in Africa not to anticipate and even encourage ongoing debates on these issues in those new democracies. This is especially the case given that both the leading academic and assistance programming literatures recognize explicitly that no one size fits all when it comes to decentralization (Olowu and Wunsch 2004; Wunsch and Olowu 1990). USAID established its policies and programs for assisting decentralization very early in the new millennium (USAID 2000a, 2000b). USAID reported that the major lessons learned from a prior decade and half of support for decentralization included recognition of the importance of “a favorable environment for decentralization, primarily through support for decentralizing legal reforms,” and the presence of “local government capacity.” But “most importantly,” USAID claimed to have determined to “emphasize the democratic aspects of local government programs to empower citizens locally and to disperse power from the central government to localities” (2000a, 4–5; 2000b). USAID’s programmatic emphasis centered on “assistance, training, and analysis for both enactment and implementation of new laws” (2000, 6). USAID also recognized that a key to successful decentralization would be the effectiveness of local government, on which its legitimacy would hinge.

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To that end, USAID has undertaken to “improve the know-how and the financial resources of local governments so they can deliver services to the community’s satisfaction” (14). The political prerequisites and underpinning for the success of these initiatives are clear on their face. In these circumstances, USAID undertook to support the democratization of local governance. This it undertook by supporting “practices that increase citizen input into decision-making, mechanisms through which citizens can gain access to information, voice their preferences, and participate directly in community advisory committees and projects,” including local elections (USAID 2000a, 8–9; 2000b). USAID is clear that decentralization “is about power and is, therefore, a fundamentally political process” involving long and difficult processes of shifting power from some individuals to others, processes dependent on a variety of indices of sufficient political will (2000a, 7). USAID recognized that programming for local democratic governance should be undertaken with “an eye toward promoting national democracy” (34). USAID’s strategy recognized the importance of “simultaneously working with civil society or otherwise supporting development of responsive and participatory governance” (33). A noteworthy feature of USAID’s approach to democratic decentralization is its implicitly passive approach toward the inescapably political dimensions of the project. USAID recognized the importance of democratic local governance and undertook to take those steps necessary to facilitate participatory democracy at these levels. However, although USAID’s overall political assistance strategy continued to emphasize promoting democratization at national levels, USAID’s strategy seemed to indicate accommodation of democratic participation rather than promotion of it, even though it recognized that community demand for effective local provision of governmental services was a prerequisite for the ultimate success of decentralization initiatives. Specifically, USAID’s strategy recognizes the importance of civil society in local government, but nothing in the strategy suggests any initiative to strengthen civil society’s focus on local as distinct from national. Local participation and the role of civil society are treated as, in effect, independent variables in local political contexts rather than as a dependent variable whose increased values would be the intended outcome of assistance efforts. Elusive Civil Society and the Nonelectoral Dimensions What accounts for USAID’s seemingly passive approach to democratic participation in decentralized governance notwithstanding recognition of its critical importance to the success of these initiatives? A key to this enigma is apparent relative inattention to the weaknesses of civil society, at least in

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sub-Saharan Africa, both supporting and supported by diminished regard for civil society in contemporary academic writing. On the one hand, there have been numerous studies of the roles of civil society in particular African contexts and elsewhere that have brought to light important limitations and prerequisites for the role of civil society in advancing democratization. Nearly universally recognized has been the organizational weakness of democracy-promoting nongovernmental organizations (NGOs), their reliance on external support, and—especially significant for purposes of this chapter—the urban constituencies of civil society NGOs and their corresponding lack of strong rural constituencies. What is noteworthy about this widely reported civil society organizational weakness is a dearth of evidence that USAID has shifted its programmatic focus toward helping the democracy-promoting organizations to deepen and broaden their constituencies. It should not be surprising, therefore, that strengthening of civil society organizations at local levels has not been a centerpiece of USAID decentralization assistance programming. More fundamentally, however, an important issue that appears to have gone almost unaddressed is how urban-centric civil society organizations can be assisted to build local, and primarily more rural, constituencies. The gaps in income, educational opportunities, and other key quality-of-life indices between city and countryside in sub-Saharan Africa and elsewhere are well understood and need no rehearsing. All the more important, therefore, is it for civil society organizations to be assisted in bridging or ameliorating these socioeconomic and cultural divides in the interest of more effective democracy promotion at both national and local levels. That issue, in turn, places another recognized weakness of civil society organizations in fresh perspective. The lack of internal democracy in civil society organizations has been well reported. Not only has there appeared to be relatively limited emphasis in USAID programming on helping civil society organizations to be more democratically constructed internally, but this significant barrier to be overcome has appeared to go largely unaddressed. Were it to be addressed, the question would then arise within civil society itself concerning how to balance political authority and resources, as between local and national levels of those organizations. On the other hand, fairly visible academic and policy community literature has also challenged both the very legitimacy and the likely efficacy of civil society as an engine of democratization and promotion of popular participation in government. In this challenge, this literature has posed, without analyzing this, a fundamentally important theoretical and practical issue. Given widespread recognition that electoral democracy per se does not a democracy make, how else than via civil society are other presumptively common requirements of democracy to be generated? Must not only free and fair

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competitive multiparty elections but also other elements of democracy like the rule of law, human rights, a democratic constitution, judicial independence, transparent civil service administration, civilian control of the military—and democratic local governance—be dependent upon liberal elites’ acting on behalf of spectator citizen constituencies, rivalries among governing elites, or comprehensive regime decay? Perhaps through emergent courageous media? As observed above, some developments such as these appear to be an unspoken but implicit and unexamined assumption underlying USAID local governance programming. There are limitations to the capacity and appropriateness of external agency in promoting democratic regime change either nationally or locally. When and how are liberal elites supposed to both emerge and gain political traction in order to engineer political change if not with wind in their sails supplied by civil society, remembering that the case against early democratic elections in weak states is that they won’t emerge or gain power via elections alone (Snyder and Mansfield 2005)? This is a question that classical liberal political philosophy has addressed and contemporary empirical theoretical literature has resisted incorporating. Civil Society’s Antecedents The debate about the nature and roles of civil society dates at least from the genesis of modern liberal political philosophy. Charles Taylor (1990) discerned a tension among even the seventeenth- and eighteenth-century originators of modern normative liberal political theory on the meaning of civil society. They agreed, he postulates, that civil society exists to express the essential purposes for which people come to agree to be governed together. But where Montesquieu positioned civil society as a countervailing power arisen to force moderation and restraint upon government, Locke portrayed civil society as the author of government, as superior to it, and as imposing accountability upon it. For Montesquieu, in Taylor’s analysis, civil society’s function resides implicitly in limiting the capacity of potentially autocratic governments to infringe on a society increasingly animated by consciousness of its potential once liberated by the entrenching of basic political and civil liberties. For Locke, however (and certainly for Rousseau, as well), civil society’s function is more comprehensive and proactive, creating a democratically accountable government authorized and limited by rules of the game enshrining individual liberties. Nineteenth-century political philosophers appeared to reduce the political scope and function of civil society even as they altered and varied its purposes. Hegel effectively equated civil society with the market while

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subordinating it to the state, thereby divesting it of exclusive association with political liberalism in the process. Alexis de Toqueville’s contribution to the theory of political society included operationalization of the concept of secondary associations intermediating between people and government. In so doing de Toqueville, while clearly enamored of civil society and its political importance, nonetheless tended to reduce civil society from authoring or counterbalancing government to mediating between government and society. John Stuart Mill for his part, meanwhile, feared that in the context of dramatically inegalitarian industrial society in England, civil society’s previously defined functions might lead to expressions that would threaten and undermine the political and civil liberties of individuals rather than embody and uphold them as Locke presupposed. In effect rejecting the collectivism implicit in Rousseau’s social contract, Mill exposed a comfortable assumption of his liberal predecessors, and even some of his contemporaries like Ricardo and Bentham, that society’s interests could be calculated as the sum total of individual interests. Civil society required restraint, presumably by government, in the interest of the protection of individual liberties. Preoccupation with the global political and economic crises that afflicted much of the twentieth century seems to be much of the explanation for the virtual eclipse of civil society in political theory until the century’s last decades. When imposing the Weimar Republic, the winners of World War I seemingly took no account whatsoever of civil society’s possible bearing on the stability of an imposed democratic constitution. Adoption of civil society as a construct useful in understanding processes for establishing, defining, or reforming the democratic state is notable for its lack of prominence in empirical theory for decades until it reappears in the theory and practice of Third Wave democratization in the last quarter of the century (Keane 1988). A factor in the retreating significance of civil society per se may have been a new emphasis upon scientific understanding of individual behavior as a more reliable predictor of the contours of a political order than the institutions, societal as well as governmental, that had so tragically failed either to prevent World War I or to insure international peace thereafter. Curiously, it may have been the translation of behavioralism into a comparative and historical framework, to explain and implicitly to prescribe for the circumstances of colonies moving toward independence after World War II, that provided a foundation for the reinvention of civil society some decades later. While reducing the significance of the state vis-à-vis society as a whole, to the disdain of a later generation of academics, conversely they did recognize that society, and implicitly civil society, is capable of generating and defining political change.

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Reductionism of Civil Society in the Third Wave To the extent that civil society in liberal political philosophy connoted accountability of the state to the people for adherence to the basic purposes for which the state exists, it acquired no explicit limitation or necessary linkage to democratic electoral processes. Only with the resurrection of civil society as an element of empirical democratization theory, inspired by the replacement of authoritarian regimes in southern Europe and Latin America, did civil society become a construct to express expanding and increasingly powerful social movements centered specifically, narrowly, and intermittently upon forcing the authoritarian regimes to submit to national-level multiparty elections. Only then, too, did civil society acquire a seemingly limiting focus on the replacement of authoritarian regimes with new democratically accountable regimes by this method. Moreover, civil society’s role acquired a temporal as well as functional limitation as a momentary, intermittent force that surfaces at times of surpassing political crisis, retreating back into society at large at other times. Having arisen to play a crucial role in those moments of crisis, civil society was to retreat, leaving to political society—implicitly professional party leaders and legislators—the business of both reestablishing, and governance during, periods of normalcy. So far as I have discerned, this shrinking and limiting of civil society’s raison d’être, to essentially means, prerequisite, and ancillary to democratic electoral processes, rested on empirical generalizations drawn principally from the experience of early manifestations of democracy’s Third Wave in regions that were in the forefront of the Third Wave, that is, Latin America and southern Europe. The more civil society’s role(s) became restricted, implicitly or explicitly, to regime replacement and formation by democratic electoral practices, the greater its susceptibility to further marginalization through association, referred to as the “transition paradigm.” Operationally, civil society became the vanguard of civic education centered on preparing voters to exercise their newly won, or re-won, suffrage rights. Its narrowed functions yielded an important paradox. On the one hand, as the Third Wave reached sub-Saharan Africa’s shores with the end of the cold war, Michael Bratton (1989) would write expansively on the breadth, depth, and diversity of civil society. On the other hand, the academic and policy community, in writing on civil society, would briefly comment with something approaching disdain on civil society in Third Wave countries, referring to it as puny, insignificant, externally inspired graftings onto the body politic in countries featuring struggles to join the Third Wave. They marginalized and reduced the significance of civil society by contrasting cadres pressing the furtherance of Third World

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democracy, allegedly significantly dependent on Western donor funding, with the immense array of associational groupings with agendas not evidently associated with the electoral democratic project. This much larger array of associations, these writers deemed, lay outside civil society in their respective countries simply because they had not visibly signed on to or been recruited to the post–cold war geographical expansion of the Third Wave democratic project. These analysts accomplished bifurcation by implicitly importing into their analyses an unexamined assumption that the definition of civil society was somehow operationally synonymous with only the small communities of activists promoting Western-style electoral democracy with donor support. Academics have reified this understandable emphasis of democracy-promoting donors by assuming that what policymakers do in practice is synonymous with the working academic definition of civil society (Harbeson 2002)! That conceptualization has reinforced more than it has corrected for the electoral centricity of the now-discredited “transition paradigm.” The foregoing pattern of reductionism has marginalized civil society’s importance as a venue for asserting and defending the basic rules of the political game, in terms of which government is to be held accountable to the citizenry. As a corollary, this reductionism has contributed to a marginalization of civil society’s role in creating the political foundations for effective decentralized governance at local levels. It has done so in two distinct ways. In broad terms, in the literature of liberal political philosophy, civil society was to fulfill two indispensable, equally important, and interdependent political roles: establishing the “vertical” accountability of government to citizens and stitching society together “horizontally” on the basis of shared rules of the game and interests that government would be held accountable for upholding and protecting. Vertical accountability relates to civil society’s role in articulating and influencing defining norms and structures of government and, particularly pertinent here, the balance of power and resources between central and local dimensions. The horizontal function is broadly synonymous with the bridging and bonding of contemporary social capital literature. The horizontal function of civil society has particular relevance to building the political foundations for effective decentralized governance that USAID’s program tacitly acknowledges are essential. Its role in this context may be understood to be one of activating local community awareness, expectations, and demands directed toward their shared political authorities, as distinct from the particular content the resulting activism may take. Its role in these contexts may be termed metademocratic in the sense of activating community participation, as distinct from the particular and likely conflicts of interests, preferences, and/or identities that activation of these particular groups may engender and represent.

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In short, civil society’s metademocratic, other-than-electoral function, derived from its pedigree in the history of political theory, has been deeply discounted by reductionist conceptions of civil society in contemporary democratization literatures. As a consequence, its role as a complement to democratic elections in building democratic institutions has been profoundly and unnecessarily marginalized. Small wonder, then, that promotion of civil society has not been better recognized and urged upon USAID programmers as an instrument for building political consciousness, demand, and support for effective decentralized governance, which USAID programming has recognized is fundamental to its long-term legitimacy and effectiveness. The Forgotten Politics of Federalism The conceptual and programmatic vacuum in the arena of local, decentralized governance, as it concerns building its political foundations, occasioned in significant measure by the discounting and marginalization of civil society roles, has set the stage for a large and remarkable lacuna in the literature and programming for decentralized governance. Very little attention has been devoted, particularly since 2000, to the politics of federalism, which, of course, underlie and may overshadow whatever decentralized governance may be institutionalized. Manifestly, decentralization presumes political agreement on distributions of power and responsibility among two or more levels of governance. As they were in the formation of the U.S. Constitution, those questions are central to defining the meaning of a state, especially one that would be democratic. Why should it be different for newly democratizing African states? How can it be anything but exponentially more important for them, given their pervasive weakness? One example illustrates the point. Since the overthrow of its tyrannical military regime in 1991, Ethiopia has become one of the more thoroughly decentralized, even in principal confederal, states in sub-Saharan Africa. As Table 16.1 indicates, that level of decentralization appears to be anchored in especially strong downward accountability, although qualified by more limited degrees of fiscal and administrative decentralization. Ethiopia’s decentralization is a function of an important political decision to restructure the Ethiopian state, one subsequently incorporated into its new constitution. That political choice reflected the ruling Ethiopian People’s Revolutionary Democratic Front’s judgment that only such a formula could establish a viable state, in the wake of Eritrea’s loss and in consideration of Ethiopia’s long history as an African empire. It is unique in that confederal units, and subunits, are defined in ethnic terms; each unit, under certain conditions, retains the right to secede. That decision, however, was the premise

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of a hasty, all-party conference called following Mengistu’s departure, not a negotiated one. It remained immensely controversial in the core constituency of the principal opposition party in the May 2005 elections. This core constituency of the Coalition for Unity and Democracy (CUD) considered ethnic confederation a denial of Ethiopian political identity and a recipe for the Balkanization of the Horn, exacerbated by unwillingness to accept the terms of Eritrean independence from Ethiopia. The May 2005 elections were the first opportunity for electoral debate on the Ethiopian People’s Revolutionary Democratic Front’s dispensation, which was one factor spurring postelectoral violence and unrest. Parenthetically, the May 2005 elections were one of the rare instances where a still-new constitutional order has been the focus of a competitive national election contest (Harbeson 2006). The Ethiopian case dramatizes the importance of a centrally important matter in any analysis of decentralization in countries pursuing democratization: negotiations over the distribution of roles, responsibilities, rights, and resources between levels of government. Central to the problems of Ethiopia’s transition to a postimperial, postfeudal, postdictatorship state as well as to democracy after 1991 was an absence of negotiations on this critically important point. USAID assisted the implementation of Ethiopia’s ethnic confederal constitutional structure. However, in the first years of the new constitutional dispensation, when the terms of this new arrangement were being hammered out, USAID did nothing to facilitate this discussion, notwithstanding a line item in its program to assist decentralization and a clear USAID comparative advantage, given long U.S. domestic experience. Less dramatic, perhaps, but surely no less politically sensitive and important, has been this same very large and complicated issue in other sub-Saharan African countries. Successful negotiations on the extent and terms of federalism are central both to democratic consolidation and to strengthening fragile states. Yet programs for decentralization assistance have treated the subject as essentially an administrative matter, begging the underlying multifaceted political question concerning the terms of the center-local relationships. Central, however, to the attempted finessing of this political question has been inattention to an inescapable prior question: Negotiations among and with whom? Inattention, not simply to allowing civil society access to local government negotiations but rather to cultivating civil society activism, inexorably results in weak emergence of recognizable contemporary local political leadership in a position to negotiate with national political leadership for and on behalf of localities. The idea of cultivating local political leadership leads immediately to a perceived reality that any such “leadership” is likely, at least in sub-Saharan Africa, to be grounded in particularistic, tradition-centered ethnicity. Quite

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apart from the calls of distinguished African scholars for building contemporary democratic states on legitimate African traditions, any truth that may underlie a fear of such particularism supplies precisely the reason why cultivation of civil society at local levels is so important. Strengthened local civil society is needed both to supply depth and breadth to civil society at national levels and to generate politically legitimate local leadership with a capability to articulate viable connections between traditional cultural identities and contemporary local political and economic interests and requirements. These individuals then become the true negotiating partners on federalism with national-level leaders. Conclusions The central hypothesis of this chapter has been that the cultivation of civil society is a key to strengthening local governance. Decentralized government requires not only allowance for but practice strengthening of civil society, because, as the academic and policy-making literatures both acknowledge, effective local government requires constituencies that expect and demand it from those they elect to serve in those roles. Active measures to strengthen civil society at local levels bring to light the importance of addressing the politics of center-local balances of roles, rights, responsibilities, and resources. This is important for civil society itself, given that one of the pervasive criticisms of its role in African democratization has been its weakness outside urban centers and its corresponding greater dependence upon external support. Even more fundamentally, the cultivation of civil society at local levels builds constituencies not only for effective local governance but for centerlocal negotiations on the distribution of roles, rights, responsibilities, and resources between levels of government. This central question has been overlooked in academic and policy-making literatures, notwithstanding its importance in the strengthening of fragile, embryonic democratic states and USAID’s clear comparative advantage in assisting African countries given U.S. experience. References Bratton, Michael. 1989. “Beyond the State: Civil Society and Associational Life in Africa.” World Politics 41 (3): 27–39. Harbeson, John W. 2002. “Assessing Civil Society Performance.” In Democratic Institution Performance, ed. Edward R. McMahon and Thomas A.P. Sinclair, 60–75. Westport, CT: Praeger. ———. 2006. “Ethiopia’s Extended Transition.” Journal of Democracy 16 (4): 144–58.

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Keane, John. 1988. Civil Society and the State: New European Perspectives. London: Verso. Ndegwa, Stephen. 2002. “Decentralization in Africa: A Stocktaking Survey.” Africa Region Working Paper Series, No. 40 (November). Washington, DC: World Bank. Olowu, Dele, and James S. Wunsch, eds. 2004. Local Governance in Africa: The Challenges of Democratic Decentralization. Boulder, CO: Lynne Reinner. Snyder, Jack L., and Edward D. Mansfield. 2005. Electing to Fight: Why Emerging Democracies Go to War. Cambridge, MA: MIT Press. Taylor, Charles. 1990. “Modes of Civil Society.” Public Culture 1 (3): 95–131. U.S. Agency for International Development (USAID). 2000a. Decentralization and Democratic Local Governance Programming Handbook. Technical Publication Series, Document No. PN–ACH–300 (May). Washington, DC: U.S. Agency for International Development. ———. 2000b. USAID’s Experience in Decentralization and Democratic Local Governance. Technical Publication Series, Document No. PN–ACH–302 (September). Washington, DC: U.S. Agency for International Development. ———. 2005. Fragile States Strategy (January). Washington, DC: U.S. Agency for International Development. Wunsch, James, and Dele Olowu, eds. 1990. The Failure of the Centralized State: Institutions and Self-Governance in Africa. Boulder, CO: Westview.

Part 4 International Assistance and Development

17 Diasporas and Development What Role for Foreign Aid? Jennifer M. Brinkerhoff

One long-standing and universally accepted role of foreign aid in development is to leverage and enable private initiatives, whether these concern foreign direct investment, more targeted private-sector development activities, or the development of important inputs into economic growth, such as knowledge and skills. Although this role has not changed and is not expected to, new—or at least newly recognized—avenues exist for foreign aid to support these efforts. Specifically, donors can enhance, support, and channel the contributions of diasporas to development (chapter 18 offers some possible barriers to these goals). Following a review of diasporas and their potential impact on the homeland—both negative and positive—this chapter reviews diasporas’ contributions to economic development and knowledge transfer (with diaspora philanthropy included in both) in support of homeland development. These potential contributions suggest policy strategies and options to which foreign aid can contribute both through policy frameworks and programmatically. The chapter reviews these policies and their components and concludes with a specific discussion of how donors can contribute to these in ways that can maximize diaspora development contributions. Diasporas, for Better or Worse Modern diasporas are “ethnic minority groups of migrant origins residing and acting in host countries but maintaining strong sentimental and material links with their countries of origin—their homelands” (Sheffer 1986, 3). Migration has grown significantly, doubling from 75 million in 1965 to 150 million in 375

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2000, and rising to 185 million in 2005, suggesting that diasporas are likely to become increasingly important players on the global stage. Diasporas are already attracting attention for a variety of reasons. Beyond security concerns related to terrorism and civil unrest, in the international development arena, developing country governments and international donors are taking notice of diasporas’ potential contributions to economic development. Here, attention has focused on the impressive totals of economic remittances, whose global estimates outpace official development assistance: $70 billion per year in 2004; estimated at $125 billion in 2005. This alone is an evolutionary development as historically national governments focused on the security risks posed by organized diasporas, and, along with the development community, emphasized the brain drain phenomenon of out-migration. Neither of these issues has been eliminated. Security remains a concern. Collier and Hoeffler (2001) found that diasporas substantially impact the risk of renewed conflict; after five years of post-conflict peace, the presence of diasporas increases the likelihood of renewed conflict six-fold. As for brain drain, Özden and Schiff (2005) identify four positive externalities lost to the sending country as a consequence of skilled migration: (1) spillover productivity of other workers, (2) public service provision (e.g., education and health), (3) tax revenues, and (4) public debate and policy and institution influence. The consequences of brain drain are most commonly noted with respect to health care. Public health systems in Africa are a case in point. Loss of nurses in the Philippines and Jamaica pose serious challenges. Docquier and Marfouk (2005) confirm high brain drain in poor, isolated countries in Africa and the Caribbean. On the other hand, the so-called new brain drain literature posits that opportunities abroad for skilled migrants produce incentives to invest in education and skills development in the homeland, yielding a “beneficial brain drain.” The universal application of this finding is increasingly scrutinized and, despite attention to identifying critical factors that yield it, the beneficial brain drain itself is considered by some to be widely exaggerated (e.g., Schiff 2005). However, refuting one of the most accepted and lamented examples of brain drain, Clemens (2006) finds no evidence that African countries experiencing the highest health professional emigration rates have lower health staffing levels, suggesting a beneficial brain drain effect. Beyond debating brain drain, or even indirect gains to the homeland economy, an alternative perspective sees skilled migrants—or diasporas—as assets that can be mobilized. Potential resource gains include remittances as well as skills and knowledge. In fact, recent perspectives on remittances promote attention to a broader perspective that includes social remittances, that is, skills transfer, and cultural and civic awareness/experience. The potential

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gains to the homeland derive not only from the skills and knowledge from the diaspora itself, but also from the “socio-professional” networks these migrants have joined overseas (Meyer and Brown 1999). In its recent migration report, the International Organization for Migration (IOM; 2005) confirms that these extended diaspora networks can yield investments in new technology, market intelligence, and business contacts. At the macroeconomic level, migration can reduce unemployment (IOM 2005), provide access to foreign exchange (Lowell, Findlay, and Stewart 2004), and yield other benefits through more sophisticated financial flows. The latter can include strengthening the portfolios of home country banks through the purchase of remittance-backed bonds and holding foreign currency accounts (Lowell, Findlay, and Stewart 2004). Research confirms that generalized answers to the drain-or-gain question, as well as the more specific questions noted above, are not possible. Benefits and costs accrue to sending countries, to receiving countries, and to the migrants themselves (IOM 2005; Özden and Schiff 2005). Among other factors, the relative balance depends on the volume of migrants, as well as labor market conditions and the strategy and economic growth of the sending country (IOM 2005). More specifically, gain-or-drain is determined by the particulars of the migrants, including the migrants’ profession; remittance-receiving households; the sending country; the receiving country; and the time frame in which the outcomes are judged. Economic Effects of Diasporas A discussion of the economic impact of diasporas must necessarily begin with an overview of remittances, as these are the focus of much attention and policy and remain more prominent in terms of data collection and research than other potential contributions do. Economic remittances have grown substantially in recent years. As noted, they now significantly outpace global overseas development assistance, with estimates of $70 billion per year in 2004, and $125 billion in 2005. USAID estimates that of all U.S. international assistance (public and private), individual remittances compose more than 30 percent, and they more than doubled in the 1990s. However, economic remittances do not automatically contribute to national development. According to the IOM, remittances tend to follow three spending phases, attention to (1) family maintenance and housing improvement, (2) conspicuous consumption, and (3) productive activities. A large percentage of remittances do not extend to phase three. Furthermore, such remittances often do not reach the poorest of the poor, who may be less likely to have links to diaspora communities; and remittances to socioeconomically unequal societies may further polarization. In their study of Mexico, Mora and Taylor

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(2005) found that remittances have an equalizing effect on incomes only in high-migration areas. The IOM’s recent World Migration: 2005 report (2005) also notes that remittance data analyses tend to ignore the proportion of gross transfers that are made to developed countries and among developing countries. Although there is cause to be cautious in making assumptions about the household use of remittances and their consequent productive contributions, the IOM (2005) finds that recipients do have a high propensity to save, and remittances may pave the way to accessing investment capital. They can also more directly provide capital for small businesses when channeled through credit cooperatives and microenterprises. Although the highly skilled are not necessarily the largest remitters, they are more likely to make productive investments. In its recent research, the World Bank reports that remittances can (1) reduce recipient household poverty, with spillover to other households; (2) increase investment in education and health, as well as other productive activities; (3) reduce child labor; and (4) increase entrepreneurship (Özden and Schiff 2005). With respect to poverty reduction, remittances are especially important for addressing the severity of poverty, for example, in Guatemala. Beyond the beneficial brain drain hypothesis regarding incentives to invest in education, research also suggests that remittances enable and yield increased education investments. A recent development, which seeks to better channel and coordinate remittances, is the emergence of hometown associations (HTAs) or regional clubs. Through such associations, resources can be channeled to specific development projects, sometimes identified by the targeted communities themselves, and/or coordinated with government funds and expertise (Orozco 2003). HTAs in Mexico begin with health and education, sports, and cultural projects, and then focus on physical infrastructure. HTAs have begun to explore more targeted productive activities, such as job creation and direct investments (Orozco 2003). USAID has recently sought proposals for collaborative ventures with HTAs (Lowell, Findlay, and Stewart 2004). Of course, a large portion of actual remittances remains unknown due to the use of informal remittance systems. These are systems that range from the unregulated to the illegal. Types include but are not limited to hand delivery/couriering, which may include hawala systems; money transfer as part of other business transactions; money transfer enterprises; and migrant association and microfinance institution–based transfers. Many of these interact with formal systems, making their identification problematic. Transfers may also be in-kind, thus contributing to trade. A recent UK study finds that the more remittances are regulated, the larger the informal market is likely to be (Pieke, Van Hear, and Lindley 2005). The report concludes that efforts to formalize these systems for the pur-

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pose of harnessing the resources for development may be misguided, as these systems emerge as adaptive responses to the constraints and opportunities presented to heterogeneous migrant groups. Hawala systems, for example, are based on trust and telecommunications and often do not require receipt of the money prior to transfer. They are typically less costly than formal systems. Many migrants find such systems particularly helpful in the early stages of their migration, before they have been able to enter the formal banking market in the host country. There is no evidence to suggest that informally transferred remittances are applied any differently to development objectives than formal remittances are, though hawala systems themselves have been scrutinized for illegal trade, money laundering, and general support for terrorism. Beyond remittance-related efforts, diasporas contribute to the economic development of their homelands through foreign direct investment and transnational entrepreneurship, including support for entrepreneurs and small businesses in the homeland. The United Nations Development Programme (UNDP) Commission on the Private Sector and Development notes that diasporas are “supporting entrepreneurs in their homelands with remittances, informal financing of small businesses, and business advice and mentorship” (Commission 2004, 30). In fact, diaspora members may be much more effective investors. First, they may be more likely to invest in economies that others would consider high risk, simply because they have knowledge and relationship opportunities that other investors lack. Second, they can combine this knowledge with skills, knowledge, and networks they have cultivated abroad, yielding synergistic advantages.1 India’s information technology success story is a widely cited case, where diaspora members have networked with their returned counterparts, contributing an estimated 16 percent of total foreign investment (Margolis et al. 2004). More specifically, a substream of the literature on transnationalism and international migration has begun to examine transnational entrepreneurs. For example, Landolt and associates (1999) developed a framework of transnational enterprises, identifying four types. Circuit firms concern themselves with the transfer of goods and remittances between countries; they include informal couriers as well as large formal enterprises. Cultural enterprises depend upon contacts within the home country for the purpose of importing cultural goods. Ethnic enterprises are based in the host country and provide goods imported from the home country. Finally, return migrant microenterprises are created by returned migrants who depend upon their former-host-country contacts for their business. Transnational enterprises may rely on kin networks in the home country and diaspora. Regarding development objectives more generally, diasporas also organize philanthropic activities targeted to the homeland, either through diaspora orga-

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nizations or less formally and individually. Diasporas represent important opportunities for more formal development organizations to recruit expertise and solicit information for development programs, and to disseminate information about priorities and programming, potentially reducing duplication and crosspurpose efforts (Brinkerhoff 2004). Diaspora organizations can act as important intermediaries between traditional development actors and diasporas and local communities, for example, identifying needs and priorities of local communities and communicating those to donor organizations, NGOs, and diaspora members to solicit funding and expertise; and diaspora organizations may demonstrate innovative programs and approaches that can be replicated and/or used to advocate for traditional actor administrative and programmatic reforms.2 Diaspora Knowledge Transfer In considering diaspora knowledge transfer, it is necessary first to consider just what can be mobilized and how these knowledge resources are created. And who are these diaspora members from whom such contributions are sought? Definitions of skilled migrants are quite varied, complicating any comparative assessments. Skilled migrants are defined as “those in possession of a tertiary degree or extensive specialized work experience” (Vertovec 2002, 2). Williams and Baláž (2005) argue for a human capital approach, which, beyond qualifications, income, and occupation, accounts for tacit knowledge, including interpersonal skills and self-confidence. Meyer (2001) discusses how brain drain and the human capital approach “refer to a substantialist view of skills as a stock of knowledge and/or abilities embedded in the individual” (95). In addition to the networking implications of this limited view, discussed below, this perspective ignores the fact that knowledge is not static, nor is it represented only by the credentials the migrant achieved (prior to or after migration). That is, the receiving country may provide the experience necessary to enhance the migrants’ skills. In questioning the very nature of the “brains” that get “drained,” Meyer (2001) posits that migrants seek opportunities to develop their skills and knowledge, and then apply these in supportive contexts inclusive of adequate resources, infrastructure, and professional norms. That is, related characteristics of receiving countries produce incentives for out-migration that may lead to development of skills and knowledge. This was true, for example, for Italianborn astrophysicist and 2002 Nobel laureate Riccardo Giacconi. In response to disgruntled compatriots’ questions about why he left Italy, he responded, “Scientists are like painters. Michelangelo became a great artist because he had been given a wall to paint. The U.S. gave me my wall” (quoted in Margolis et al. 2004, 30).

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Meyer and Brown (1999) elaborate on what this “wall” might mean, noting scientific migrants’ work environment in the industrialized host country, which tends to be far superior to that in the developing country homeland in terms of funding, technical support, equipment, scientific networks, and experimental conditions. They apply the sociology of science and technology to argue that the process of knowledge creation, transmission, and application requires not only social and institutional communities, but also sociocognitive ones, which are rarely replicable as they rely upon local conditions and collective tacit knowledge built through daily group practice. This view of the sociology of science and technology extends to its mobilization for homeland contributions—diaspora knowledge transfer requires networks. Much has been written about networks’ contribution to migration and brain drain, but networks also facilitate knowledge development (as above) and transfer. Indeed, Meyer (2001) argues that it is through intellectual diaspora networks that brain drain transforms into brain gain. What are the implications of this networking perspective for knowledge transfer? Meyer (2001) argues that the brain drain perspective, whose defining concept is human capital, misses the mark by ignoring the implications and impact of social capital. He cites Greeve, Benassi, and Harkola’s (1999) findings that social capital is the larger explanatory factor of firm achievement. With specific application to knowledge networks, he applies the notion of sociotechnical or technoeconomic networks to describe how such networks link heterogeneous entities—including equipment, norms, and organizations—such that the potential of each link within the network is only as valuable as what it can mobilize in the network as a whole. Research on intellectual scientific diaspora networks is increasing. Meyer and Brown (1999) identified forty-one expatriate knowledge networks tied to thirty different countries. These are specific efforts to link diaspora professionals to the homeland for the purpose of transferring knowledge. The networks were categorized into four types: student/scholarly networks, local associations of skilled expatriates, expert pool assistance through the UNDP’s Transfer of Knowledge Through Expatriate Nationals (TOKTEN) program, and intellectual/scientific diaspora networks. Of the forty-one identified, fifteen were classified as intellectual/scientific diaspora networks with an explicit purpose of promoting the economic and social development of the homeland. Many associations of skilled expatriates are evolving into formal professional associations, which are becoming increasingly active in intellectual/ scientific diaspora networks. Already, in terms of recruitment and placement outside of migrants’ homelands, professions themselves are viewed as networks. The highly skilled may rely more on such professional networks, as well as school-based networks and formal recruitment and relocation agencies, than

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on kin-based ones (Vertovec 2002). In fact, such reliance is more likely to yield a match of skill levels to jobs than are networks based on personal ties, which tend to foster ethnic profession and destination niches that can yield brain waste. These professional associations need not be diaspora specific to foster knowledge transfer to the homeland. While experience varies, professions are increasingly international; their operation has become transnational. The most notable examples of knowledge transfer highlight the role of diaspora identity-based professional associations. These include, for example, the Silicon Valley Chinese Engineers Association, the Indus Entrepreneurs and the Korean IT Forum. These associations fulfill a range of social network roles, including facilitating the settlement—professional and otherwise—of recent migrants, professional and technical advancement, ethnic identity formation and maintenance, and entrepreneurial investments in the homeland. These examples highlight the importance of intermediaries to facilitate both entry into knowledge networks and the successful application of skills and knowledge in both host country and homeland. Intermediaries may include formal recruitment and relocation agencies and professional associations, among others. Generally, intermediation might include facilitating the migration process and ensuring transportability of qualifications (Vertovec 2002). More specifically, Meyer and Brown (1999) argue for a coordinating body to facilitate knowledge transfer: “The function of such a coordinating body would be to collect, organize and maintain the information needed for the systematic search of partnerships, but also to manage and promote the interests and actions of the multiple entities present in a network of this kind” (13). Information technology has emerged as an essential enabler of diaspora knowledge transfer. Among other things, it holds great potential for providing the information system proposed by Meyer and Brown (1999), which would include a searchable database of diaspora members and their skills on the one hand, and opportunities/needs in the homeland on the other. It also supports less-formal bridging social capital by fostering networks that encompass a broader range of potential actors (including skilled individuals outside of the diaspora), directly connecting diaspora individuals and organizations with homeland resources and organizations—both public and private—beyond national governments. Less formally, IT can be used to cultivate bonding social capital and community, which fosters will and ability to mobilize for homeland contributions (Brinkerhoff 2004). Through IT, knowledge transfer projects can be proposed, designed, and vetted. IT also enables diaspora knowledge contributions without necessitating short-term return or repatriation. This further challenges the human capital approach to brain drain, which assumes that knowledge moves only with the

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physical body (see Meyer 2001). It also enables the sustenance and continued development of the sociocognitive networks that yield and maximize knowledge. In fact, the Internet is the main tool of the intellectual/scientific diaspora networks studied by Meyer and Brown (1999). It is IT that enabled diaspora connections to the homeland to evolve from “sporadic, exceptional and limited links” to “systematic, dense and multiple” ones (6). Policy Options to Capture Diaspora Gains Rather than support diaspora contributions, most of the studies of host country policy have revolved around the design and implementation of policy that would reduce migration incentives or regulate the immigration of migrants whose skills and knowledge are in short supply in the homeland. Deen (2004) notes such policy disincentives for the United Kingdom and France. More commonly, regulatory policy relating to skilled migration is driven by the market and through trade agreements, whose impact on the home country is variable. To date, very little, if any, attention is given to receiving country policy frameworks that would encourage diaspora knowledge transfer to the homeland, though the Department for International Development (DFID) is investigating the range of diaspora contributions to the homeland, which could inform policy frameworks in the future. There are three broad policy options for addressing skilled migration: migration management, the diaspora option, and democracy and development. The diaspora option encompasses several potential approaches. This policy framework conceives the skilled diaspora as an asset to be captured. Gamlen (2005) distinguishes three types of related diaspora engagement strategies: remittance capture, diaspora networking, and diaspora integration. Migration management creates disincentives for skilled migration. Related policies have evolved from an emphasis on value recovery through taxation and repatriation programs (e.g., the return option, Meyer 2001) to host country immigration regulations and international agreements limiting immigration of skilled individuals from targeted countries (see Lowell, Findlay, and Stewart 2004; Gamlen 2005); and to addressing the causes of migration, that is, tackling economic and political development challenges (Lowell, Findlay, and Stewart 2004). More conventional return policies persist and their targeted design and application are encouraged for retirees and students. Regarding remittance capture, home governments are increasingly soliciting remittances and offering policy incentives (e.g., tax-free investment opportunities, matching) and investment options (e.g., remittance-backed bonds, foreign currency accounts) to encourage diaspora contributions. The Mexican government has introduced a 3X1 matching incentive program to

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encourage developmental investments, where HTA investments are matched at local, state, and national levels. Remittance capture can be achieved by offering investment options and supporting incentives, including remittancebacked bonds, foreign currency accounts, investment tax breaks, exemption from import tariffs on capital goods, duty-free shopping bonuses, and free passport insurance (Gamlen 2005, 20). Diaspora networking refers to developing bridging social capital—networking that links the homeland to the diaspora. This includes fulfilling intermediary functions—acting as a coordinating body between the supply and demand of potential contributions (Meyer and Brown 1999), facilitating the migration process, and ensuring transportability of qualifications (Vertovec 2002). Outreach and communications, including visiting delegations between home- and host-land contribute to networking and integration strategies. The diaspora integration strategy recognizes the diaspora as a constituency that is marginalized from the homeland. Thus, related policies include the extension of citizen rights, such as voting, and the organization of diaspora summits and diplomatic visits to diaspora organizations in their host countries. For example, countries that include migrants as “official members of their political communities” include Mexico, Colombia, Brazil, Ecuador, and Portugal. Mexico, a leader in the diaspora option generally, has even created positions for elected diaspora representatives in state parliaments. Diaspora integration policies confer social status, political influence, and legitimacy to the diaspora and its potential efforts to contribute to the homeland. Zambia’s president, Levy Mwanawasa, provides an example of combining remittance capture with diaspora integration strategies. In a 2004 address, he stated: “I know you expect me to say come home. I am not going to do that. I have no jobs to give you. Work here and send money home” (quoted in Manda 2004, 74). Policies for democracy and development include strengthening institutions and human rights, education, and targeted development; promoting civil society participation in the policy process; and intergovernmental agreements and harmonization, bilateral and multilateral agreements, and the General Agreement on Trade in Services (GATS) (see Lowell, Findlay, and Stewart 2004). This policy area encompasses a broad range of potential actors—home- and host-country governments, international and intergovernmental organizations, NGOs, and diaspora organizations themselves. Indeed, the active interest in the diaspora of this broad array of actors is an important opportunity for the diaspora option more generally. Democracy and development in the homeland at once serves to address the causes of migration for some and provides incentives for diaspora contributions by enabling the contributions and enhancing a sense of efficacy—that they can have an impact.

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Kapur and McHale (2005) develop their own policy typology—control policies to prevent skilled migration; compensation policies that would share the “spoils of emigration” with those remaining in the homeland; creation policies that focus on creating human capital in home- and host-land; and connection policies, which seek to strengthen economically valuable diasporic interactions and enhance the possibility of return. The first three correspond to migration management. Compensation policy has been referred to as a “brain drain tax.” Creation strategies suggest increasing training opportunities in both developing and industrialized countries (the latter most notably in the health care professions). The primary focus of discussion is on connection policies or, more broadly defined, the diaspora option (remittance capture, diaspora networking, and diaspora integration). Finally, policies for democracy and development remain the backdrop for brain drain prevention and realization of migration gains. Together, these policies constitute a core element of the opportunity structures that may either enable and promote diaspora contributions, or prevent and discourage them. Table 17.1 summarizes these policy options and their potential outcomes. The latter include likely gains or losses to the homeland, as well as a more specific assessment of whether or not these policy options are likely to counter the migration losses identified by Özden and Schiff (2005). Outcomes indicated are possibilities, and in some instances may not be probable. The emphasis here is on general potential, but appropriate policies must be determined on a case-by-case basis. Migration management includes the more conventional policy options focusing on preventing migration and making it more costly. On the other hand, it may include a labor export strategy, as in the Philippines. In the first instance, if skilled migration can be prevented, then all of the losses of positive externalities identified by Özden and Schiff (2005) are countered. Remittance capture entails not only increasing the volume and productivity of remittances, but also policies that seek specifically to encourage diaspora “foreign” direct investment. For example, the government of China supports industrial parks to nurture and host business ventures originating from its professional diaspora (Biao 2006). This strategy can counter losses of tax revenue and public service provision externalities as it yields the following potential outcomes for home countries and recipient households: increases in total remittances and investments, household savings, productive investments including support for entrepreneurship, and education investments. While the government may expend some resources for matching programs, it may further gain through productive investments, a strengthened financial sector, and greater access to foreign currency. The diaspora networking strategy encompasses program activities that

Counters migration drains: • “Brain drain” of skills and knowledge at time of departure • Skills shortage • Spillover productivity of other workers • Public service provision • Tax revenues • Public debate and policy and institution influence

Potential drain that may be countered

Remittance capture (includ