Responses to Poverty - Part 4: Foreign Aid & Corruption

Our past few blogs have investigated world poverty―some reasons for extreme poverty, where extreme poverty is prevalent, living on $1 a day, and various responses to poverty including aid programs.  Unfortunately, wherever large amounts of money are given to help the poor―corruption follows. 

Graham Hancock, in his book Lords of Poverty: The Power, Prestige, and Corruption of the International Aid Business, [New York: The Atlantic Monthly Press, 1989] attacks the wealthy bureaucratic agencies of the USAID and Britain’s Overseas Development Administration (ODA).  The powerful bureaucrats that run these agencies he calls “lords of poverty.”  Hancock argues these agencies transfer huge sums of tax payer money with little accountability for how it is spent and its effectiveness in helping the poor.  Hancock, like Maren [see the previous blog, Responses to Poverty – Part 3: Foreign Aid & Famine], believes that aid and development have lost their way and become a business—“the poverty business.”  The United Nations operates numerous agencies in the fight against poverty.  He cites, “All in all the United Nations system now employs in excess of 50,000 people in the cause of world development.”

Jean-Bedel Bokassa

            Graham cited a number of cases of massive corruption within governments receiving aid.  Jean-Bedel Bokassa, head of state of the Central African Republic from 1966 to 1979, “…admitted in a moment of rare honesty: “Everything around here is financed by the French government.  We ask the French for money, get it and waste it.”  …France in fact provided its run-down and obscure former colony with about $38 million per annum in aid during the 1970s….  In December 1977, however, and in just one day, Bokassa was permitted to waste on himself no less than $20 million of that year’s entire subvention from French tax-payers: he blew the money on a glittering but ludicrous ceremony that transformed him from a mere President to an Emperor…. The Central African Republic – or ‘Empire’ as it was renamed – had …less than 170 miles of paved roads and a population immersed in abject poverty: average per capita incomes were in the region of $250 per year.”

Corruption in Haiti is second to none.  In 1981, “…the IMF paid in $22 million to the Treasury as part of a standby credit; two days later a visiting team of Fund experts discovered that President Jean-Claude Duvalier (‘Baby Doc’) had withdrawn $20 million of this money for his personal use.  It was also noted that a further $16 million had ‘disappeared’ from various state bodies over the previous three months and that the Central Bank was paying the elegant Mrs. Michele Duvalier a salary of $1.2 million a year.”

Francios (Papa Doc) & Jean-Claude (Baby Doc) Duvalier

While the Duvaliers (father and son) were in power during the years 1957-1986 Haiti’s people descended into extreme poverty.  During this time only 10 percent of the rural people were functionally literate with 75-80 percent of all children suffering from malnutrition.  What is interesting is that, “Haiti was a major recipient of foreign aid throughout the Duvalier era—with the United States, Canada, West Germany and France prominent amongst the bilateral donors and with the World Bank, FAO, WHO, UNDP and UNICEF, the most notable of multilaterals.  With all these ‘assisters’ on the scene, a question has to be asked: Did the ruin of the Haitian poor occur in spite of foreign aid, or because of it?”

This author in Port-au-Prince two weeks after earthquake.

Haiti was literally shaken to its foundation on January 12, 2010 by a magnitude 7.0 earthquake.  The quake’s epicenter was approximately 20 miles west of Port-au-Prince and left the country mourning the loss of over 230,000 dead.  Two months after the disaster Haitian authorities calculated a cost of $11.5 billion over the next three years to get the nation back on its feet.  Donors have pledged billions in aid.  On April 1, 2010 the Wall Street Journal reported, “The international national community responded Wednesday to Haiti’s request for financial assistance to rebuild from January’s devastating earthquake, pledging at a conference here $5.3 billion for the next 18 months, and close to $10 billion over the coming years.”  The article’s writers then accurately note the challenge at hand, “Now comes the hard part: avoiding the pitfalls that have plagued previous aid efforts in Haiti and around the globe, ranging from a lack of coordination and accountability to donors not following through on their initial pledges and a shortfall of local expertise to turn money into results.”  Can Haiti break free from its history of corruption and misuse of international aid?  Haitian Prime Minister Jean-Max Bellerive believes so.  “He said by 2030 the government envisions ‘an emergent Haiti,’ an open, modern, knowledgeable country”  [  Christopher Rhoads and Joe Lauria, “Donors Pledge Billions in Aid for Haiti” The Wall Street Journal, April 1, 2010.].

Fifty years and $2.3 trillion in aid and assistance have not brought an end to poverty.  Richard Bolten, former U.S. Ambassador to the United Nations defined foreign aid as, “Money taken from poor people in a rich country and given to rich people of a poor country” [From Richard Bolten television interview with Greta Van Susteren on September 28, 2010.].  It is time for fresh ideas and new ways to help the poor and impoverished nations.  Easterly declares, “…aid cannot achieve the end of poverty.  Only homegrown development based on the dynamism of individuals and firms in free markets can do that” [  Easterly, White Man’s Burden, 368.].

Our next blog will begin to look at new strategies to deal with poverty.