Institute Notes: A Dialogue on Overcoming Hunger and Poverty

Building Haiti Back Better

In a packed hearing yesterday of the Senate Foreign Relations Committee, Chairman Kerry reminded us that prior to the earthquake, Haiti had actually begun to show some signs of progress, with violent crime declining and increased access to the U.S. market. Indeed, this week a CNN report, examined the garment industry, which before the quake employed 130,000 people, with workers earning $4 a day (more than half of Haiti’s minimum wage) and new investments fueling a potential resurgence of the sector.  Much of this gets lost in the flood of stories about how the earthquake has destabilized a “basket case” of a country. But I digress.

U.N. Deputy Special Envoy for Haiti, Dr. Paul Farmer, turned our attention to a new set of health concerns, such as outbreaks of cholera and water-borne diseases in the newly formed tent cities. He also urged a focus on quickly establishing safe schools, hospitals, and storm-resistant housing.  Wreckage must be cleared, students need to be back in school, and life -- as wretched as it appears in the present -- must continue. Dr. Rony Francois detailed the massive infrastructure challenges. Among them is assessing the structural integrity of the remaining buildings. We know that many people, even with homes intact, are loathe to return to them. He also called for a long-term plan to decentralize Port-au-Prince and reinvest in agriculture, food security, jobs, roads, and the like. James Dobbins of Rand Corporation pointed out that as post-conflict environments go, Haiti is “no Somalia, Iraq, or Afghanistan.” So we don’t need American troops in Haiti for the long haul, but we do need to focus on creating jobs, alleviating poverty, and enhancing Haiti’s capacity to govern. We should also pay Haitians to build back their own country as my colleague discussed earlier this week.

In light of the billions anticipated for recovery and reconstruction, all commentary led back to what Farmer described as the failed “aid machinery” and how to do it better than it has been done in the past. The AP reported this week that of the $379 million the U.S. spent on earthquake relief in Haiti, less then a penny of each dollar is going to the Haitian government in cash. See the full article for a breakdown on how this money has been spent. To date, $2 billion in relief has streamed into Haiti, almost all into the hands of NGOs. With more NGOs per capita than any other country in the hemisphere, this is no surprise. 

Some creative measures were put on the table, such as coordinating Haitian-American volunteers into small groups linked with their former hometowns and institutions in Haiti; creating a multilateral recovery fund and new ground rules for NGO involvement in Haiti; and my favorite, appointing a U.S. Haiti “czar” comparable to the role Ambassador Richard Holbrook now plays in Afghanistan. This could raise the profile of the recovery effort and help improve coordination among U.S. agencies. But there were no easy prescriptions for engaging the Haitian government, other than the acknowledgment that yes, there is corruption and weak capacity, but a “better” Haiti is one in which strengthening governance, civil institutions, and the economy is central. 

Haiti: Toward Reconstruction

Efforts in Haiti now turn to the wrenching task of clearing wreckage (with untold numbers still trapped in rubble) and housing hundreds of thousands before the rain and hurricane seasons start. Still reeling, Haiti must quickly turn to reconstruction and recovery, while balancing ongoing relief for the 2 million people affected.

On Monday, Haiti’s top leaders gathered with international donors in Montreal to assert their central role in the reconstruction agenda. Foreign ministers from 14 countries largely agreed that we are looking at a decade, at minimum, of concerted investment in Haiti. The outcomes of the meeting outlined the obvious: Haiti will need deep and broad long-term assistance. A more involved donors conference will convene down the road where actual dollars will be pledged following an independent needs assessment.

While the beleaguered Haitian government presented an initial $3 billion plan to salvage Port-au-Prince (housing the homeless and rebuilding infrastructure), others have begun to press for unprecedented levels of aid and coordination.

On Project Syndicate this week, Jeffrey Sachs recommends focusing on five key sectors for long-term reconstruction and development: smallholder, or peasant, agriculture; reconstruction; port services and light manufacturing; local small-scale trade; and public services, including health care and education. He also pushes for an overarching framework and an unprecedented display of international cooperation led by the Inter-American Development Bank because of its track record in Haiti. His price tag for this effort: $10-$20 billion over 10 years.

To naysayers of aid to Haiti, Sachs says:

“Other countries have risen from the rubble of natural disaster and war, and Haiti can do the same over the next five to ten years. For the next decade, however, and especially for the next five years, there will be no escape from the need to rely on international financing, and mainly grant assistance, to finance the rebuilding effort. The world has spent heavily in Haiti before, but very ineffectively. This time, it must be done right.”

So world leaders must now grapple with how to structure aid efforts in Haiti, with its history of corruption and weak institutions. In a statement following the meeting, Secretary of State Hillary Clinton said,

"It's important that we see ourselves as partners with Haiti, not patrons… We bear a responsibility to our taxpayers to assure that the money that our government commits will be well spent transparently and with results on the ground for the Haitian people.”

Let’s see if the interest, concern, and good will emerging from this tragedy can be channeled into a coherent, transparent, and collaborative development agenda that prioritizes broad-based economic growth, debt relief, and poverty reduction. This is our opportunity.

Haiti Needs Debt Relief

Haiti owes the International Monetary Fund $165 million for loans incurred before last week's devastating earthquake. These loans should be forgiven. How in the world will the country be able to pay them now?. In a sense, this is beside the point.

It’s worth noting the conditions under which the IMF loans were made, as Richard Kim did in The Nation last week.

Debt relief activists tell me that these loans came with conditions, including raising prices for electricity, refusing pay increases to all public employees except those making minimum wage and keeping inflation low.

And now, as Kim explains, the IMF is offering a new loan to Haiti for $100 million, with mostly the same conditions attached.

At this point, it's helpful to have a refresher on Haiti’s historical experience with creditors. As Kim writes:

As historians have documented, the impoverishment of Haiti began in the earliest decades of its independence, when Haiti's slaves and free gens de couleur rallied to liberate the country from the French in 1804. But by 1825, Haiti was living under a new kind of bondage--external debt. In order to keep the French and other Western powers from enforcing an embargo, it agreed to pay 150 million francs in reparations to French slave owners (yes, that's right, freed slaves were forced to compensate their former masters for their liberty). … It took Haiti 122 years, but in 1947 the nation paid off about 60 percent, or 90 million francs, of this debt (it was able to negotiate a reduction in 1838).

Then of course there are the structural adjustment policies imposed by the IMF and World Bank in the 1990s. In 1995, for example, the IMF forced Haiti to cut its rice tariff from 35 percent to 3 percent, leading to a massive increase in rice-dumping, the vast majority of which came from the United States. …During this period, USAID invested heavily in Haiti, but this "charity" came not in the form of grants to develop Haiti's agricultural infrastructure, but in direct food aid, furthering Haiti's dependence on foreign assistance while also funneling money back to US agribusiness.

A 2008 report from the Center for International Policy points out that in 2003, Haiti spent $57.4 million to service its debt, while total foreign assistance for education, health care and other services was a mere $39.21 million. In other words, under a system of putative benevolence, Haiti paid back more than it received.

Lately there’s been a lot of chatter on editorial pages about why Haiti is such a development "basket case." The agenda—and, frankly, it appears to me the earthquake has been exploited to forward that agenda—is to bash foreign aid.  In The Wall Street Journal, Brent Stephens tells us the reason Haiti is such a basket case is because we haven’t treated Haitians like adults. David Brooks in the The New York Times blames it on voodoo and a Haitian predisposition to fecklessness. Interesting.

Here we have two polar opposite views of Haitians, but the same agenda to discredit aid. What's missing from theirs and others' anti-aid agenda is how we might have done things differently and gotten better results. Rather than explore that angle, they conclude we should stop providing aid. 

Indeed, we need to do aid better in Haiti—because we owe it to Haitians, for one thing. But first let’s clear the decks. Debt relief for Haiti should come first. More on how to do aid correctly in the coming days.

The Senate Takes on Foreign Assistance Reform

The Senate Foreign Relations committee, under the chairmanship of John Kerry, has joined the House Foreign Affairs Committee, chaired by Howard Berman, in introducing legislation aimed at reforming the way the US government conducts foreign assistance and rebuilding the capacity of the Agency for International Development (USAID) to lead the effort. Neither the House bill (H 2139) nor the Senate bill (S 1524) take on the issue of comprehensive foreign assistance reform, but both constitute important steps, stressing strategic analysis and planning, accountability, and program consistency and integration. Significantly, both bills explicitly make the reduction of global poverty and hunger a key element of U.S. foreign policy. 

The Senate bill contains three particularly noteworthy elements:

• Reestablishing a bureau in USAID for policy and strategic planning;
• Elevating the role of monitoring and evaluation, and establishing an independent council to objectively evaluate program impact;
• Strengthening the coordination of U.S. foreign aid in the field under the guidance of the USAID mission director.

Is It Really the Vetting that’s the Problem?

Secretary of State Clinton, in responding to a question in the course of a “town hall” meeting with USAID employees over the Administration’s delay in naming a new USAID Administrator, blamed the vetting process.  According to an AP story, Clinton told USAID employees on Monday that several people had turned down the job due to overly burdensome financial and personal disclosure requirements.  But these disclosure requirements have not stopped the Administration from filling top positions in other departments, which leads one to wonder whether the problem might lie elsewhere.

The Secretary inadvertently indicated that this, rather than the process, may be the core of the problem. "Let me just say it's not for lack of trying," Clinton said in response to an employee's question about the delay, despite her and President Barack Obama's stated desire to have USAID play a bigger role in American foreign policy. "We have worked very hard with the White House on looking for a candidate who, number one, wants the job." 

That – finding someone who wants the job -- is the real question. There is no doubt that the Secretary and her top aides have a high regard for global development and see its critical importance to the advancement of American interests around the world. That regard, in fact, is so high that she wants to run the development program, and has now structured the position of USAID administrator so that he (or she) would report to a Deputy Secretary of State – hardly a role that would appeal to the kind of respected, senior figure needed to run the large and growing U.S. development program.

What do we mean by "poverty alleviation?"

Almost everyone agrees that poverty alleviation should be the paramount goal of development assistance. But what do we mean by poverty alleviation? Is it helping the very poorest of the poor achieve a better quality of life? Or is it enabling the largest number of people to get above the poverty line? Does it mean helping to improve people’s lives now, or laying the conditions for future improvements?

Owen Barder, of the Center for Global Development, has performed a useful service in a recent paper, What is Poverty Reduction? In it, he points out the implicit trade-offs between tackling current and future poverty, between helping as many poor people as possible versus focusing on those in chronic poverty, and between measures that tackle the causes of poverty and those which deal with the symptoms. In fact, notes the author, “poverty reduction actually encompasses many goals, some of which are contradictory.” If donor agencies do not explicitly recognize and account for these differences at the outset – unless it’s clear what measure for poverty reduction is going to be employed – confusion and disillusionment can and does ensue.

Addressing Lugar-Casey Legislation Criticisms

A piece of legislation amending the Foreign Assistance Act (FAA), co-sponsored by Senators Lugar and Casey, that recognizes and attempts to reverse a decades-long decline in funding on the part of the US government for global agricultural development has come under fire from two sides: the techno-sceptics who see the bill as a trojan horse that would enable the US agribusiness industry to expand its sway, particularly in the area of plant genetics, and those who view the bill as evincing insufficient regard for the experience and potential for the NGO community in advancing global agricultural development.

The most vociferous critics assert that the bill “mandates” research on GMOs – genetically modified organisms. The legislation would amend the original (1961) FAA language to include wording to the effect that agricultural research carried out under this act should include research on biotechnological advances “including genetically modified technology.” However, it’s important to note that there is no specified level of funding for agricultural research in general, nor for biotechnology in particular, and the directive is qualified by specifying that the work be “appropriate to local ecological conditions” and by including among the legislation’s objectives “support (for) conservation farming and other sustainable agricultural techniques to respond to changing climatic conditions and water shortages.”

The fact, frequently pointed out by critics, that GMOs have not yet led to major benefits for the world’s smallhold farmers is largely true. Genetically modified (GM) cotton and soybeans are being grown in some parts of the developing world – and would not be if farmers did not see some benefit to doing so. But more significantly, GM research to date has focused almost exclusively on rapid commercial returns, which means the large markets in the developed world. There has been little attention to the crops and crop production issues (e.g., drought, disease and salinity tolerance that are going to be increasingly important with changing climate) most directly relevant to farmers in the developing world.

Dead Aid?

Unique among the many recent books about African development, Dead Aid is by an African woman -- Dambisa Moyo, a native of Zambia -- which automatically raises its interest value. It complements, and raises a lot of the same points, as another recent book – an anthology of writing by Africans about development, Missionaries, Mercenaries and Misfits, edited by Rasna Warah. Both are worth reading, or at least skimming, by those deeply interested in the subject of foreign aid and, especially, foreign aid in Africa.

I’ll confine my remarks here to the former, which has received the greater media buzz. The author’s thesis, in a nutshell, is that not only has development aid not improved the lives of Africans, but it has actually made them worse – through encouraging corruption, repression and a culture of dependency. There is considerable substance to her argument: Some countries that have received large amounts of foreign aid have gone nowhere in terms of real development, while countries like Vietnam and China, which have received essentially no foreign aid, have made enormous strides in terms of ending hunger and poverty. Certainly, when not done right, foreign aid can undermine economies, empower and perpetuate corrupt elites and sap the initiative on which development ultimately depends: commodity food aid can undercut local farmers; massive cash transfers can drive up the value of the currency and discourage exports.

The author distinguishes three basic types of foreign aid: humanitarian or emergency aid “mobilized and dispensed in response to catastrophes and calamities;” charity-based aid, “disbursed by charitable organizations to institutions or people on the ground; and “systematic aid” – i.e., aid payments made directly to governments, either on a bilateral basis or through multilateral institutions such as the World Bank. 

But, in fact, the distinction between what the author describes as “charity-based” and “systematic” aid is not at all clear. The former may be strictly from one private group to another, or it can involve governments: PEPFAR (the President’s Emergency Plan for AIDS Relief) and, presumably, similar programs working with people “on the ground” are grouped with charity-based aid, although they are programmed by donor governments in consultation with recipient governments. It’s just that the bulk of it is implemented outside of traditional government channels. In fact, most U.S. development assistance is delivered in this way, whether for health, education, economic growth or democracy and governance.

Debt Relief Update

According to a recent GAO (Government Accountability Office) study, the United States has not fully funded its share of multilateral debt relief -- i.e., that offered through four international financial institutions (IFIs): The International Monetary Fund (IMF), the World Bank’s International Development Association (IDA), the Asian Development Bank, and the Inter-American Development Bank. Collectively, these four IFIs are projected to provide $58 billion in total debt relief to 41 countries.

The U.S. contribution does not fully fund its multilateral debt relief commitments because it is in arrears on its IDA replenishment, and the World Bank requires that a country’s IDA commitment be fully met before it uses any funds for debt relief. The reason that the U.S. is in arrears on its IDA replenishment is that we have been delaying payments pending certain transparency reforms required under U.S. law. To fully fund the U.S. debt relief commitment, (1) the Treasury needs to certify to Congress that the reforms have been made, and (2) Congress will need to appropriate a further $49 million.

This imbroglio points up once again how our foreign assistance system so frequently gets crosswise with itself. Clearly, the intent of Congress was to fully fund our debt relief commitments. But other legislative provisions – not unreasonable ones, in and of themselves -- make it impossible to do so. Fragmented legislative and administrative responsibilities make it difficult to implement consistent, mutually reinforcing policies, giving the impression that no one is in overall charge – yet another argument in favor of a foreign assistance reform package that would simplify and align responsibilities and authorities.  

Does More Aid Mean Less Poverty?

Could increasing aid to Africa do more harm than good? This is the provocative question posed by Jonathan Glennie in a recent article, “The Trouble with Aid in Africa,” in Monday Developments, the monthly journal of InterAction. Glennie, who has authored a book of roughly the same title (“The Trouble with Aid: Why Less Could Mean More for Africa”), is a development veteran who speaks from experience. One of his main points is that the major advocates for increased aid are African governments – not African civil society, who see their influence with their own governments undercut by outside donors. It is hard, he notes, to find a single example of an African NGO that is actively campaigning for aid increases.

Among the problems he cites are the conditions commonly attached – even in this post-Washington consensus era – which have great consequences for the way in which governments spend aid money. But what may be even more important, according to Glennie, is that dependency on aid from foreign donors undermines the development of the basic institutions (his emphasis) needed to govern and the vital link of accountability between state and citizen. Finally, receiving large amounts of aid has major macroeconomic consequences, since large inflows of money (or commodities) affect prices and incentives. 

This is not to say that aid is never effective and should be discarded, simply that more resources are not necessarily the answer. If we’re serious about ending poverty and providing poor countries the opportunity to get ahead, we need to look beyond aid to the full range of policies and programs pursued by advanced countries – trade, migration, domestic subsidies that distort markets, arms sales that destabilize governments, illegal capital flows (more money flows out of Africa each year than arrives in aid).

As we enter the new year, which will be marked by a major push for foreign aid reform, this article helps remind us that more is not necessarily better and that, if we’re serious about aid effectiveness, we cannot confine our attention to aid alone.