[stop-imf] NYT: New Consensus on Aid - with a bit on debt

[Robert Weissman]

http://www.nytimes.com/2002/06/01/opinion/01KELL.html?todaysheadlines=&pagew
anted=print&position=top

New York Times
June 1, 2002

Pollyanna Meets Cassandra
By BILL KELLER

Now that we've all had a good laugh at the spectacle of our fastidious
treasury secretary touring African misery with a middle-aged rock star, now
that we've snorted at Paul O'Neill and Bono in matching Ghanaian robes and
tortured all the obvious U2 lyrics, it's time to ask whether anything is
going on here besides soliciting MTV votes for the Republican Party.

Before I try to answer that, a caveat. Whenever I set out to write something
hopeful about the current administration, I hear a cynical voice whispering
"Sucker!" in my ear. And on the subject of compassion, President Bush has
more than the usual burden of proof. You don't need Ralph Nader to tell you
this is an administration that has methodically exalted corporate power and
fortified the obscene gap between America's rich and poor. So my credulity
alarm tingles at the idea that the administration cares about the far more
remote and powerless poor of Africa.

And yet, something interesting seems to be happening. Something we've seen
before.

In the early 90's an improbable consensus came together on the issue of
America's own poorest citizens. After a period of fatalism that hit bottom
with Charles Murray's classic indictment of welfare, "Losing Ground," some
conservatives shook off the deep pessimism that had become an excuse for
doing nothing and began asking what would work. Some liberals, in turn, took
off their blinders about the failings of welfare. Bill Clinton brought forth
a tough-minded law pushing welfare recipients into jobs.

Whatever you think of those welfare-to-work reforms, and most experts agree
they did far more good than harm, that hard compromise changed the politics
of poverty. As Jason DeParle, who covered all this for The Times, points
out, the compromise created a belief that progress was possible, and thus
took much of the poison out of the poverty debate. Suddenly there were
serious, competing visions of how to help the poor Ð and a shared assumption
that this was actually a worthwhile thing to do.

Is something similar happening to our attitude toward the rest of the
world's poor? Can we do for Congo what we did for Milwaukee?

On one side you have (to oversimplify a bit) the conservative Cassandras,
defeatists, moral scolds and free-market zealots who believe that until poor
countries get a grip on their own bootstraps, any amount of foreign aid will
be money wasted. This idea flowered in the Reagan/Thatcher years, and led
the major development lenders to a policy of "structural adjustment": If you
want loans, shrink your government, cut your deficits and tighten your
belts. And as for those people dying of AIDS and malaria Ð not our problem.
This approach was not only heartless but mindless; countries being eaten
alive by disease, hunger and regional warfare were bad candidates for tough
love. Their failures, of course, simply confirmed the pointlessness of aid.
American donations shriveled, and not just under Republicans. During the
Clinton years, our meager contribution to the world's poor dropped by nearly
half. Nowadays your annual share of our aid to the 40 most pitiful countries
is about the price of a fancy coffee and a pastry at Starbucks.

If there is a Charles Murray of this debate it is William Easterly, an
apostate World Bank economist who wrote an authoritative book last year
outlining the failure of foreign aid to generate economic growth. His
skepticism has helped stimulate some conservatives to look for new ways up
from despair.

On the other side you have (again, to oversimplify) the liberal Pollyannas,
populists and romantics who regard aid as a simple humanitarian obligation,
even a guilty debt we owe for our exploitation. Putting conditions on
aid is
a form of colonialism Ð except for conditions that suit a liberal agenda,
such as empowering women or protecting the environment. Development
strategies that feature trade and global business play into the hands of
multinational capitalists. If you just pump in the money, countries will get
better.

What we are seeing now is an awareness among the Cassandras that foreign
misery and chaos breed real dangers to our national interest; and among the
Pollyannas, a recognition that more discriminating aid works better and does
not necessarily amount to big-business imperialism. You have the Bush
administration advocating debt relief and offering a little more money for
the most desperate countries; you have Oxfam talking about the
importance of
lowering trade barriers as part of the war on misery.

It's too early to celebrate a consensus, but it is possible to see some
points that might be part of a compromise leading to more help for countries
in lethal distress.

One new common theme is a large-scale forgiveness of old debts Ð in effect,
allowing the poorest countries to declare bankruptcy. This is not the magic
bullet the Bono-ites make it out to be, and in a sense it unfairly rewards
countries that squandered their loans on corruption and patronage. But the
loans are not going to be repaid anyway. The Bush administration and many
liberals embrace this idea, along with an important corollary: Stop making
these make-believe loans in the first place. Give grants instead, which
don't carry burdensome interest, and save loans for countries that will
actually repay them.

A second possible point of agreement is that we should no longer give money
to governments we know will steal or misspend it. The late economist Peter
Bauer famously described foreign aid as the phenomenon of taxing poor people
in rich countries to support the lifestyles of rich people in poor
countries. Even liberal aid economists, like Jeffrey Sachs of Harvard, say
that as a general rule, aid should go to foreign governments that are
democratic (or at the very least, responsive), that live by the law and that
have more or less free markets. These are the countries with a hope of
turning aid into economic growth, which may ultimately get them off life
support.

The tricky part is judging which countries qualify and, over time, measuring
whether they are making good use of their aid. Mr. O'Neill talks about
"productivity growth" as the litmus test of whether aid is effective, which
sounds sensible in theory but a little simplistic. James Wolfensohn,
president of the World Bank, notes that Mr. O'Neill seems to be setting a
standard of effectiveness we don't even apply to our own government.

At the same time, there is enormous good that can be done in failing
countries without sending money through their bad governments. As Mr. Sachs
points out, relief agencies can immunize children even in war zones.

A third area of agreement is that aid should be more nimble and less
bureaucratic. Mr. Easterly counts at least 10 annual reports that every
World Bank country officer has to file on every project Ð impact on the
environment, on indigenous peoples, on waterways, etc. Now the World Bank
and its meaner sister, the International Monetary Fund, are everybody's
favorite scapegoats Ð to the left, handmaidens of rapacious multinationals;
to the right, an empire of waste. In fact, the bank does what the big
donors, mainly Washington, tell it to do, and it has already begun some
serious internal reforms. But it could use more competition. Mr. Bush has
announced a $5 billion "Millennium Challenge Account," new grants to poor
countries with good governments. We'll see if the U.S. can teach the World
Bank some new tricks.

A fourth principle should be to separate aid from geopolitical expediency.
We used to give money to corrupt thugs Ð Mobutu Sese Seko in Zaire and
Daniel arap Moi in Kenya come to mind Ð just because they were
anti-Communist. Now we will inevitably give money to some unsavory autocrats
for their cooperation against terror. But let's at least not do it out of
the aid account. Let's put it in the homeland security budget, or somewhere
else.

One other important component of a new middle ground is a recognition that
trade is at least as important as aid. Mr. O'Neill was rightly chewed
out at
every stop on his Africa tour because the latest American farm bill, signed
by Mr. Bush, lavishly subsidizes American-grown food that competes with farm
products from the poorest countries. On that point you'll find Bono and
Oxfam singing perfect harmony with the Wall Street Journal editorial
writers. Rich countries spend $350 billion a year on farm subsidies Ð six
times what they spend on foreign aid.

Will Mr. Bush veto the next farm bill for the sake of free-market principles
and a few million African lives? Not until Ugandans vote in Florida. So
here's an easier compassion test: Once we've got American aid focused on
things that work, let's double it. Then double it again. That would finally
catch us up to France in terms of national generosity (Qué Bono!) and leave
a lot of cynics speechless.