Economic Affairs
Economic Assistance Archive
HAITI AFTER THE DONORS’ CONFERENCE: A WAY FORWARD.
U.S. Institute of Peace. Robert Maguire. October 5, 2009.
Full Text [PDF format, 20 pages]
Despite the hundreds of millions of dollars pledged to stimulate Haiti's economic development and reduce poverty, concerns remain that this funding will not reverse the country’s fortunes as Haiti continues to be vulnerable to external shocks. The report examines the obstacles to sustained growth, why stimulative efforts thus far have not succeeded and then recommends a way forward for both Haitians and the international community.
[Note: contains copyrighted material.]
FIRST ANNUAL REPORT ON THE LATIN AMERICA SMALL BUSINESS LENDING INITIATIVE.
U.S. Treasury Department. Web posted September 8, 2008.
Full Text [PDF format, 5 pages]
The report summarizes the first year of implementation of the Latin America Small Business Lending Initiative, launched by U.S. Treasury Secretary Paulson in June 2007, to expand and improve the access of small businesses in Latin America and the Caribbean to commercial financing. The effort is intended to accelerate the job creation and poverty-reduction that small businesses provide. Expanding small business ownership helps create more sustainable, stable economies with broader economic opportunities.
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Backer, Larry C. ODIOUS DEBT WEARS TWO FACES: SYSTEMIC ILLEGITIMACY, PROBLEMS, AND OPPORTUNITIES IN TRADITIONAL ODIOUS DEBT CONCEPTIONS IN GLOBALIZED ECONOMIC REGIMES (Law and Contemporary Problems, vol. 70, no. 4, Autumn 2007, pp. 1-46)
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The author, a law professor at Pennsylvania State University, examines how the traditional notion of odious debt as a method of repudiating sovereign debt may undergo a conceptual revolution as it changes focus from the illegitimacy of governments obtaining loans to the illegitimacy of the systems through which such loans are made and enforced generally. The focus of this analysis is the conceptual framework Cuban leader Fidel Castro sought to introduce into the debate about the legitimacy of sovereign debt and the extent to which this reframing might influence international institutional approaches. The two faces of odious debt are a much more complicated development in global governance. With international capital systems now potentially subject to the same legitimacy expectations as private and municipal systems, the simpler days of binary contractual arrangements between states, or between states and private entities for the provision of capital, are soon to pass into history. As Castro has not tired of explaining, these global systems now have acquired the burdens of legitimacy once limited to state actors. Development of the odious debt doctrine, like sovereign-debt forgiveness, may be as good for the banks as it is for the borrower, as each seeks to maximize the strategic value of this doctrine.
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Rasmussen, Robert K. SOVEREIGN DEBT RESTRUCTURING, ODIOUS DEBT, AND THE POLITICS OF DEBT RELIEF (Law and Contemporary Problems, vol. 70, no. 4, Autumn 2007, pp. 249-261)
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The author, professor of law at the University of Southern California, believes that odious debt is more of a literature than a doctrine. Going back to at least the 1920s, one can find arguments that countries should not have to pay back debts that are labeled "odious." The central tenet is that citizens of a country should not have to pay debts incurred by a prior "odious" regime when those funds did not benefit them, especially when the lender knew of this fact when it made the loan. The doctrine traditionally has an “ex-post” flavor to it. The question is whether the acts of the past are such that we should relieve a country of what would otherwise be a current obligation; the guiding intuition is moral rather than economic. The problems of debt overhang and corrupt regimes can be tackled either simultaneously or separately, notes the author; regardless of the strategy that one adopts, one cannot ask for too much from the system. Debt relief in this context is as much a matter of statecraft as it is of financial theory. Rasmussen believes that modest relief as a matter of right coupled with more generous relief as a matter of self-interest may lead to more overall debt relief than would otherwise be available.
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Boudreaux, Karol; Cowen, Tyler THE MICROMAGIC OF MICROCREDIT (Wilson Quarterly, vol. 32, no. 1, Winter 2008, pp. 27-31)
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Is microcredit the solution to poverty in the world? No, say the authors, both with George Mason University. Although microcredit is undeniably making people’s lives better around the world, it is not pulling them out of poverty. “It is hard to find entrepreneurs who start with these tiny loans and graduate to run commercial empires,” they write. Many lenders refuse to extend microcredit to start-ups.“The more modest truth is that microcredit may help some people, perhaps earning $2 a day, to earn something like $2.50 a day,” the authors say. Not a dramatic improvement, but definitely a step forward to a poor person in many third-world countries. An important advantage to microcredit is that unlike many charitable services, microcredit is capable of paying for itself. “The future of microcredit lies in the commercial sector, not in unsustainable aid programs,” the authors say.
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Mills, Nicolaus A GLOBALISM FOR OUR TIME (American Prospect, vol. 18, no. 7, July/August 2007, pp. 35-37)
Full Text
The 1947 Harvard commencement address of U.S. Secretary of State George Marshall introduced the world to the Marshall Plan. The Marshall Plan is still praised today for the role it played in helping Europe recover from World War II and the call it made for both greater U.S. involvement in international affairs as well as recognition of the limits of American power. Marshall linked national security to humanitarian aid and economic redevelopment, with America acting in concert with the European nations seeking help. There are lessons from the Marshall Plan that are relevant to our American policies today.
THE AFRICAN DEVELOPMENT BANK GROUP.
Congressional Research Service, RS22690, Library of Congress. Martin Weiss. Updated January 29, 2008. Web posted March 13, 2008.
Full Text [pdf format, 6 pages]
The African Development Bank (AfDB) Group is a regional development bank whose stated goal is to combat poverty in Africa. Initially headquartered in Abidjan, Côte d’Ivoire, the AfDB was forced by political instability there to relocate to Tunis, Tunisia in 2003. It is hoped that this move will be temporary and the AfDB can eventually return to Abidjan. The bank is comprised of three lending facilities: the AfDB itself, the African Development Fund, and a trust fund established by Nigeria to lend to low-income African countries. The Bank has 53 African members, as well as 24 non-regional members, including the United States.
THE WORLD BANK AND IRAN.
Congressional Research Service, RS22704, Library of Congress. Martin Weiss, et. al. First posted January 28, 2008; reposted March 14, 2008.
Full Text [pdf format, 6 pages]
Several laws restrict U.S. support for World Bank lending to Iran. Despite U.S. opposition, the World Bank has provided loans to Iran on several occasions over the past five years, and disbursements on these loans appears to be increasing. Several pieces of legislation: H.R. 1400, Iran Counter-Proliferation Act and S. 970, Iran Counter- Proliferation Act of 2007 would cut future U.S. funding to the World Bank if the Bank makes new loans to Iran. This report will be updated as events warrant.
FOREIGN POLICY ASSOCIATION AND PBS GREAT DECISIONS TELEVISION SERIES: PHILANTHROPY AND THE RISE OF GLOBAL GIVING.
Hudson Institute. Carol Adelman. March 9, 2008.
Full Text [direct link with additional link to video of “Great Decisions” episode]
For the Great Decisions TV Series, produced by the Foreign Policy Association (FPA) and the Public Broadcasting System (PBS), Dr. Carol Adelman and Kathy Bushkin Calvin were interviewed by Ralph Begleiter, former CNN world affairs correspondent, on philanthropy and development.
[Note: Contains copyrighted material.]
ACCOUNTABILITY IN COMPLEX ORGANIZATIONS: WORLD BANK RESPONSES TO CIVIL SOCIETY.
Alnoor Ebrahim and Steve Herz. John F. Kennedy School of Government, Working Paper, Harvard University. Web posted December 10, 2007.
Full Text [pdf format, 37 pages]
“Civil society actors have been pushing for greater accountability of the World Bank for at least three decades. This paper outlines the range of accountability mechanisms currently in place at the World Bank along four basic levels: (1) staff, (2) project, (3) policy, and (4) board governance.” The authors determined that the Bank has made some gains in policies and projects accountability, but deeper structural features remain largely unchanged.
[Note: Contains copyrighted material.]
ENTREPRENEURIAL PHILANTHROPY IN THE DEVELOPING WORLD: A NEW FACE FOR AMERICA, A CHALLENGE TO FOREIGN AID.
Mauro De Lorenzo and Apoorva Shah. Development Policy Outlook, American Enterprise Institute. December 12, 2007.
Full Text [html format, various pagings]
Philanthropy is usually considered a form of humanitarianism not a driver of economic growth. This paper examines the “entrepreneurial philanthropists” who provide credit and business education to small-scale entrepreneurs, mentor and finance small- and medium-sized enterprises (SMEs), offer advice to governments to improve competitiveness, and devise ways to get a “return on investment” in philanthropic projects.
[Note: Contains copyrighted material.]
FOUNDATION GIVING TRENDS: PREVIEW.
Foundation Center. December 2007.
Full Text [pdf format, 2 pages]
This preview highlights key patterns of giving during 2006 by subject area, type of support, population group, geographic focus, and foundation type. The report illustrates that health issues passed education as the top priority of private and community foundations primarily due to large grants received from the Bill & Melinda Gates Foundation. A full analysis of grants will be published in February 2008.
[Note: Contains copyrighted material.]
THE DEMOCRATIC REPUBLIC OF THE CONGO: SYSTEMATIC ASSESSMENT IS NEEDED TO DETERMINE AGENCIES’ PROGRESS TOWARD U.S. POLICY OBJECTIVES.
U.S. General Accountability Office (GAO). Web posted December 14, 2007.
Full Text [pdf format, 45 pages]
The Democratic Republic of the Congo (DRC) Relief, Security, and Democracy Promotion Act of 2006 established 15 U.S. policy goals to address humanitarian, development, economic and natural resource, governance, and security issues. The GAO was asked to evaluate the objectives, identify major challenges, and assess progress toward these goals.
GAO recommends that the Secretary of State work with other U.S. agencies to develop a plan to assess progress in achieving the Act’s objectives. The Department of State concurred with this recommendation.
EMBASSIES GRAPPLE TO GUIDE FOREIGN AID. Senate Committee Print, Committee on Foreign Relations, U.S. Senate. November 16, 2007.
Full Text [pdf format, 93 pages]
Secretary Rice’s instinct for greater coordination and clarity in foreign assistance is “on the mark.” New activities need to be merged in a constructive way. In order to have a better understanding of the situation, the Committee sent staff members to 24 countries in Latin America, Africa, Eastern Europe, Asia, and the Middle East to examine how the increased funding and new programs were being implemented. This report contains their findings.
U.S. CONTRIBUTIONS TO REDUCING GLOBAL POVERTY: AN ASSESSMENT OF THE U.S. AND THE MILLENNIUM DEVELOPMENT GOALS. InterAction, Bread for the World, Oxfam America, and World Wildlife Fund (WWF). Web posted October 18, 2007.
Full Text [pdf format, 101 pages]
According to this report, the U.S. is falling short on its commitment to the U.N.’s Millennium Development Goals, which is to reduce global poverty by 50 percent by the year 2015. The research shows that the U.S. has made major investments in specific goals such as the global battle against HIV/AIDS, but it could do much more to reduce global hunger, improve health, and advance economic stability.
INTERNATIONAL NGOS AND POVERTY REDUCTION STRATEGIES: THE CONTRIBUTION OF AN ASSET-BASED APPROACH. Pamela Sparr and Caroline Moser. Brookings Global Economy and Development, Working Paper, Brookings Institution. Web posted July 23, 2007.
Full Text [pdf format, 44 pages]
The objectives of this paper are to summarize the current poverty reduction strategies of U.S. and UK-based international non-governmental organizations (INGOs) and to identify “the applicability of an asset accumulation framework to prevailing programmatic and advocacy strategies for poverty reduction employed by INGOs.”
After reviewing background materials, a sample group of 21 INGOs were identified and assessed using five determinants of poverty approaches. Five key trends became evident that are discussed and reviewed in the report. The practical relevance of an asset framework is also highlighted.
MILLENNIUM CHALLENGE CORPORATION: PROGRESS AND CHALLENGES WITH COMPACTS IN AFRICA. Statement of David B. Gootnick, Director, International Affairs and Trade, U.S. General Accountability Office (GAO). Web posted June 29, 2007.
Full Text [pdf format, 23 pages]
The Millennium Challenge Corporation’s (MCC) mission is to reduce poverty by supporting sustainable, transformative economic growth with developing countries. MCC has signed five compacts in Africa—Madagascar, Cape Verde, Benin, Ghana, and Mali—and budgeted funding for transportation, agriculture, and rural development projects. For fiscal years 2004 to 2007, MCC received appropriations for $6 billion and obligated $1.5 billion for these five countries. The testimony provides an overview of the progress made by MCC.
SECURING, STABILIZING, AND RECONSTRUCTING AFGHANISTAN: KEY ISSUES FOR CONGRESSIONAL OVERSIGHT. U. S. General Accountability Office (GAO). Web posted May 24, 2007.
Full Text [pdf format, 37 pages]
Since 2001, the U.S. has appropriated over $15 billion to secure, stabilize, and reconstruct Afghanistan. More than 50 other nations have also been instrumental in this effort. Progress has been made in economic growth, infrastructure development, and training of the Afghan army and police, but the overall security situation has deteriorated significantly in the past year.
Previously, GAO identified several programmatic improvements such as improved planning, development of strategic plans and measurable goals, specific times frames, cost estimates, and identification of external factors. In this report, GAO identified the need for better coordination between the U.S. and other nations, more flexible options for program implementation, and timelier project implementation. GAO also identified several obstacles and challenges to the U.S. efforts.
U.S.-FOREIGN AID TO THE PALESTINIANS. Paul Morro. Congressional Research Service, Library of Congress. Updated April 27, 2007.
Full Text: [pdf format, 6 pages]
This report reviews foreign assistance provided to the Palestinian Authority. The Bush Administration has suspended most foreign assistance to the Hamas-led Palestinian Authority (PA) since its inception in March 2006, although humanitarian and other aid continues. The European Union (EU) and the World Bank provide relief to the Palestinian people through a mechanism that avoids the Hamas-led government. The Palestinians are the largest recipients of foreign aid worldwide, and are mostly dependent on external support.
FOREIGN ASSISTANCE: VARIOUS CHALLENGES IMPEDE THE EFFICIENCY AND EFFECTIVENESS OF U.S. FOOD AID.
U.S. General Accountability Office. Web posted April 13, 2007.
Full Text [pdf format, 110 pages]
“The United States is the largest global food aid donor, accounting for over half of all food aid supplies to alleviate hunger and support development.” However, due to rising business and transportation costs, food aid has actually declined by 52% in average tonnage over the last five years. Using agency documents, interviews, and fieldwork, this General Accountability Office (GAO) report examines some of the key challenges to food aid programs.
GAO recommends that the U.S. Agency for International Development (USAID) and the Secretaries of Agriculture and Transportation improve “logistical planning, transportation contracting, and monitoring, among other actions.”
FOREIGN ASSISTANCE: ACTIONS NEEDED TO BETTER ASSESS THE IMPACT OF AGENCIES’ MARKING AND PUBLICIZING EFFORTS.
U.S. General Accountability Office. Web posted March 13, 2007.
Full Text [pdf format, 52 pages]
“The negative perceptions of the United States associated with U.S. foreign policy initiatives have underscored the importance of the United States presenting a complete portrayal of the benefits that many in the world derive from U.S. foreign assistance efforts.” This report describes agencies’ foreign assistance marking and publicizing policies, regulations, and guidelines; and it identifies key challenges agencies face when marking and publicizing these programs.
The General Accountability Office (GAO) recommends that the Secretary of State develop a strategy to better assess the impact of marking and publicity programs and establish interagency agreements to facilitate implementation of government guidance for these programs. The Department of State concurs with these recommendations.
FOREIGN ASSISTANCE: ENHANCED COORDINATION AND BETTER METHODS TO ASSESS THE RESULTS OF U.S. INTERNATIONAL BASIC EDUCATION EFFORTS ARE NEEDED.
U.S. General Accountability Office. Web posted March 30, 2007.
Full Text [pdf format, 80 pages]
The General Accountability Office (GAO) was asked to analyze the U.S.’s basic international education efforts. This report explains the U.S. Department of State’s (State), the U.S. Agency for International Development’s (USAID), and the U.S. Department of Agriculture’s (USDA) basic education plans and activities. GAO analyzed the coordination among these agencies and examined how these agencies assess the results.
GAO recommends that State work with the heads of the other agencies to improve interagency coordination and develop a plan to better assess the results of the basic education plans. State, USAID and USDA generally concur with these recommendations.
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Carman, Paul; Bender, Kelley. INTERNATIONAL GIVING AND THE FIGHT AGAINST TERRORISM: A CLASH OF POLICIES BEGETS NEW RULES
(Journal of Taxation, vol. 106, no. 2, February 2007, pp. 100-109)
View article on ProQuest (password required)
Carman and Bender, both financial attorneys, examine the latest release of the Anti-Terrorism Financing Guidelines: Voluntary Best Practices for US-Based Charities. The Guidelines, designed to guard charities against terrorist abuses, provide recommendations for charities involved in international philanthropy. The authors cover the Guideline’s five primary focus areas: fundamental principles of good charitable practice, governance accountability and transparency, financial accountability and transparency, programmatic verification, and anti-terrorist financing best practices. Which rules any one charitable organization will need to implement depends on circumstances such as size and risk exposure, they note. The authors recommend planning ahead, assessing the risks and making decisions in advance to reduce the stress of continuing to operate in the increasingly risky world of international philanthropy.
INTERNATIONAL CRISES AND DISASTERS: U.S. HUMANITARIAN ASSISTANCE, BUDGET TRENDS, AND ISSUES FOR CONGRESS.
Rhoda Margesson. Congressional Research Service (CRS). Library of Congress. December 21, 2006.
Full Text [pdf format, 20 pages]
This report examines U.S. humanitarian assistance in international crises and disasters. It also considers the sources of U.S. government aid and the budget trends. This report does not address the creation of a Director of Foreign Assistance, a new position at the State Department. This report will be updated after the restructuring initiatives evolve.
MULTILATERAL INTERMEDIATION OF FOREIGN AID: WHAT IS THE TRADE-OFF FOR DONOR COUNTRIES? Andrew Powell and Matteo Bobba. Research Department Working Paper 594, Inter-American Development Bank. November 2006.
Full Text [pdf format, 28 pages]
This paper suggests that “multiple bilateral donors for each recipient may imply coordination and strategic problems but intermediating through a multilateral may dilute individual donor objectives. The paper conducts traditional panel and truly bilateral regressions with bilateral-pair, fixed effects to model aid allocation decisions.” The results “confirm that politics is important for bilateral donors but also that aid fragmentation and strategic behavior affect aid allocation.”
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Sundberg, Mark; Gelb, Alan MAKING AID WORK
(Finance & Development, vol. 43, no. 4, December 2006, pp. 14-17)
Full text (HTML format)
Sundberg and Gelb, both with the World Bank, say the end of the Cold War and progress towards a new aid architecture should make aid more effective. In the past, they note, aid was often guided by geopolitical considerations rather than by development objectives. Consequently, they explain, aid effectiveness suffered and was often seen as a reward for corrupt governments. However, changes since the 1990s hold clear promise for improving aid quality and effectiveness in achieving development objectives, they write. These changes include harmonization of aid efforts and improved aid allocation selectivity on the basis of need and policy quality.
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Joseph, James REDEFINING ACCOUNTABILITY
(Foundation News & Commentary, vol. 47, no. 4, September/October 2006, pp. 31-35)
Full text (HTML format)
The author, a former U.S. ambassador to South Africa and former president of the Council on Foundations, writes that accountability in international philanthropy is more than just transparency in financial or organizational matters, but in guarding the “soul and spirit” of the organization, and publicly share the values that go into decision-making. He notes that a major shift between ethics and power has occurred in recent years that should “serve as a background” for accountability in international philanthropy -– ethics and power are increasingly being recognized as one and the same. Consumers are increasingly making choices base on responsible corporate behavior, and political leaders are finding that military or economic might are less effective for cultivating influence than generosity and respect. Joseph explores several questions that philanthropic leaders should be asking themselves, cautioning not to “become so preoccupied with the preservation of our organization and the need to increase our assets” that the deeper meaning of philanthropy is neglected.
PROGRESS IN AID AND PEACE MONITORING THREATENED BY ONGOING VIOLENCE AND OPERATIONAL CHALLENGES. General Accountability Office. November 9, 2006.
Full Text [pdf format, 103 pages]
The United States has been the largest donor of humanitarian aid to Darfur providing nearly $1 billion through September 2006, consisting of food aid, water and sanitation, shelter, and health care. However, USAID has encountered several obstacles which have hampered delivery of these services primarily due to the insecurity in the Darfur region and restrictions imposed by the Sudanese government. The report from the Government Accountability Office (GAO) suggestions that the African Union should strengthen the peace support planning and optimize future donor assistance. The Department of State supports these recommendations.
BEIJING'S SAFARI: CHINA'S MOVE INTO AFRICA AND ITS IMPLICATIONS FOR AID, DEVELOPMENT, AND GOVERNANCE.
Josh Kurlantzick. Carnegie Endowment for International Peace. November 2006
Full report [pdf format, 7 pages]
This report notes that China has become a major donor and investor across Africa, and has skillfully used multilateral forums like the Forum on China-Africa Cooperation (FOCAC) to cultivate African elites. China now rivals the United States, France, and international financial institutions for influence on the continent. Chinese loans and grants to African nations, which now reach nearly $3 billion, have become much more attractive than condition-tied aid from international institutions. Beijing also has wooed African nations with aid for infrastructure, a ban on export tariffs for the poorest nations, and its thriving market for African goods and services.
Kurlantzick notes that Chinese engagement in Africa could be a catalyst for positive change. But, he warns, the China-Africa relationship also could be damaging to African politics, environments, and debt loads. Kurlantzick argues that China should develop a broader strategy of influence in Africa using soft power to build popularity among African publics, rather than reinforcing authoritarian regimes. The policy outlook further argues that the United States, Europe, and international financial institutions should not only call for China to be a stakeholder in Africa but give China a stake. This includes considering expanding China's role in the World Bank and International Monetary Fund, and helping China develop a permanent aid bureaucracy. The author claims that making China a stakeholder in Africa now will encourage positive Chinese leadership in mediating conflicts, promoting development, and tackling non-traditional security threats in the future.
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THE HIJACKING OF THE DEVELOPMENT DEBATE: HOW FRIEDMAN AND SACHS GOT IT WRONG
Broad, Robin; Cavanagh, John. (World Policy Journal, vol. 23, no. 2, Summer 2006, pp. 21-30)
Full text available from your nearest American Library
The authors refute two books, Thomas Friedman's THE WORLD IS FLAT and Jeffrey Sachs' THE END OF POVERTY with the claim that they have "narrowed the debate with simplistic slogans of ‘more aid’ and ‘more trade,’" and they have done this by putting forward myths about the poor, economic development, and the global economy. Broad and Cavanagh argue that this one-sided approach harkens back to the Reagan “free market” era of privatization, government deregulation and unfettered trade. They are dubious of Friedman’s and Sachs’ claim that aid, development and increased trade will start a linear process of economic improvement, or that there is no middle ground between wide-open global markets and protectionism. In the end, the authors give Sachs and Friedman credit for embracing the idea of ending poverty and of spreading prosperity, and for bringing these issues to wider public notice, but they also believe that they have hijacked the development debate by basing their arguments on "simplistic myths."
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Hackett, Ken THE MILLENNIUM CHALLENGE ACCOUNT (MCA): A DIFFERENT APPROACH TO FOREIGN ASSISTANCE
(Vital Speeches of the Day, vol. 72, no. 20/21, August 2006, pp. 586-589)
Full text available from your nearest American Library
Hackett, President of Catholic Relief Services and member of the Millennium Challenge Corporation (MCC) Board of Directors, says the MCA is an approach to foreign assistance that isn't just new -- it is bold. The MCA is a fresh approach that aims to improve aid effectiveness by requiring recipients to make difficult policy reforms that are necessary for successful development, he explains. He discusses some of the innovative aspects of the MCA -- funding is performance-based; MCA provides incentives to change policies for the better; countries who qualify can lose funding if their scores fall; recipient countries control MCA development efforts, from deciding which projects to pursue to implementation. He also talks about some of the challenges MCA has faced, noting that results have been slow in coming, and the negative perceptions many Americans have about foreign aid and its effectiveness; the MCA has not yet received full congressional funding. Hackett remains optimistic about MCA's potential to make a real difference, but also notes that while it is an innovative and important advancement in foreign aid, it will never be a panacea.
MILLENNIUM CHALLENGE ACCOUNT: IMPLEMENTATION OF A NEW U.S. FOREIGN AID INITIATIVE.
Curt Tarnoff. Library of Congress, Congressional Research Service. Updated August 1, 2006.
Download [pdf format, 37 pages]
The Millennium Challenge Account (MCA) is managed by the Millennium Challenge Corporation (MCC) and provides assistance, through a competitive selection process, to developing nations that are pursing political and economic reforms in three areas -- ruling justly, investing in people, and fostering economic freedom. The MCC differs in several respects from past and current U.S. aid practices:
- The size of the $5 billion commitment
- The competitive process that rewards countries for past and current actions measured by 16 objective performance indicators;
- The pledge to segregate the funds from U.S. strategic foreign policy objectives that often strongly influence where U.S. aid is spent; and
- The requirement to solicit program proposals developed solely by qualifying countries with broad-based civil society involvement.
A growing question raised by some Members of Congress concerns the level of funding to support MCC programs. Some, noting that proposals received by the Corporation in 2004 totaled more than $4.2 billion, fear that insufficient funds might force the MCC to reduce the number of recipients or the size of the grants. Others, however, believe that the slower-than-anticipated pace of Compact agreements means that the Corporation has or will have enough resources, and have supported reductions in MCC budget requests.
MILLENNIUM CHALLENGE CORPORATION: COMPACT IMPLEMENTATION STRUCTURES ARE BEING ESTABLISHED; FRAMEWORK FOR MEASURING RESULTS NEEDS IMPROVEMENT.
[GAO-06-805] United States Government Accountability Office (GAO). July 28, 2006.
Download [pdf format, 101 pages]
In January 2004, Congress established the Millennium Challenge Corporation (MCC) to administer the Millennium Challenge Account. MCC's mission is to reduce poverty by supporting sustainable, transformative economic growth in developing countries that create and maintain sound policy environments. By the end of May 2006, six compact countries-Madagascar, Cape Verde, Honduras, Georgia, Vanuatu, and Nicaragua-had signed the supplemental agreements that MCC requires before compacts can "enter into force," when MCC begins to disburse funds for compact implementation.
MCC has received more than $4.2 billion in appropriations, and, as of May 2006, it had disbursed $22.4 million to four countries whose signed MCC compacts have entered into force -Madagascar, Cape Verde, Honduras, and Georgia - to begin implementing their compacts. For Madagascar, Cape Verde, and Honduras, GAO was requested to examine the key aspects that MCC reviewed, and the criteria it used, in its due diligence assessments; and the structures that have been established for implementing the compacts.
Based on their findings, GAO recommends that MCC's Chief Executive Officer:
- Ensure that economic analyses of compact proposals better reflect country conditions and involve country participation; and
- Improve monitoring and evaluation by obtaining more reliable baseline data, ensuring a clear linkage to economic analyses, developing criteria for establishing and adjusting targets, and ensuring timely development of evaluation designs.
INTEGRATING REPRODUCTIVE HEALTH AND HIV/AIDS PROGRAMS: STRATEGIC OPPORTUNITIES FOR PEPFAR [U.S. PRESIDENT'S EMERGENCY PLAN FOR AIDS RELIEF].
A Report of the CSIS Task Force on HIV/AIDS. Janet Fleischman. Center for Strategic and International Studies (CSIS). July 2006.
Download [pdf format, 36 pages]
The CSIS Task Force on HIV/AIDS is co-chaired by Senators Bill Frist (R-Tenn.) and Russell Feingold (D-Wis.) and is funded by the Bill and Melinda Gates Foundation. In the wake of increasing consensus that women and girls need to be the focus of anti-AIDS efforts, this Task Force report urges policymakers to integrate HIV/AIDS services into reproductive health (RP) and family planning (FP) services. Among the recommendations the Task Force makes are:
- PEPFAR country teams should include women's health advocates and networks of women living with HIV/AIDS in programming and resource allocation decisions.
- The State Department's Office of the Global AIDS Coordinator (OGAC) should bring to the attention of the U.S. government and the U.S. public this growing body of evidence supporting integrated strategies, and build support for a streamlined approach that successfully addresses both reproductive health and HIV imperatives, to the benefit of both.
- PEPFAR should broaden its approach to prevention beyond ABC to include reproductive health and family planning integration.
[Note: Contains copyrighted material.]
INTERNATIONAL ASSISTANCE FOR HIV/AIDS IN THE DEVELOPING WORLD: TAKING STOCK OF THE G8, OTHER DONOR GOVERNMENTS AND THE EUROPEAN COMMISSION.
Jennifer Kates and Eric Lief. Kaiser Family Foundation (KFF). July 2006.
Report [pdf format, 21 pages]
Chartpack [pdf format, 15 pages]
This report analyzes funding by the G8 and other major donor governments for the global HIV/AIDS epidemic, and the gap that still exists between needs and actual funding. The authors summarize: "Within the international community, donor governments, through bilateral and multilateral assistance, have an especially important role to play in filling this gap. This is particularly true of the G8 which, in addition to providing significant resources, has shown a unique, collective ability to lead international action on HIV/AIDS and other infectious diseases."
The report indicates that in 2005, G8 members Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States together provided an estimated 75% of total net ODA [Official Development Assistance] reported by members of the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD). Russia, also a member of the G8, is currently a net recipient of international assistance for HIV/AIDS, but does provide contributions to the Global Fund. In addition to the G8, other donor governments, particularly the Netherlands and Sweden, provide significant amounts of international assistance overall, and for HIV/AIDS, specifically.
SECURITY BY OTHER MEANS: FOREIGN ASSISTANCE, GLOBAL POVERTY, AND AMERICAN LEADERSHIP.
Lael Brainard, Editor. Brookings Institution and the Center for Strategic and International Studies (CSIS), Task Force on Transforming Foreign Assistance for the 21st Century. June 22, 2006.
Table of Contents [chapters in pdf format, various pagings; 251 total pages]
Executive Summary [pdf format, 15 pages]
In the introduction to this collection of essays, the editor states: "With hard power assets stretched thin and confronting unprecedented global challenges of transnational threats, poverty, and pandemics, America must reform its weak aid infrastructure to leverage its soft power more effectively. While foreign assistance funding has seen the greatest increase in four decades, this has brought a proliferation of programs, policy incoherence and organizational fragmentation. Moving around the organizational boxes or increasing aid will do little to boost impact, unless there is broad agreement around a unified framework designed for 21st century challenges. This requires integrating the national security perspective of foreign assistance as a 'soft power' tool intended to achieve diplomatic and strategic ends, with that of a 'development tool' allocated according to policy effectiveness and human needs."
The document has ten chapters, each of which addresses one or more facets of foreign assistance:
- A Unified Framework for U.S. Foreign Assistance in the 21st Century.
- Organizing U.S. Foreign Assistance to Meet 21st Century Challenges.
- U.S. Assistance in the Fight Against Global HIV/AIDS.
- Strengthening U.S. Development Assistance.
- Humanitarian Assistance Expands in Scale and Scope.
- Development in the Shadow of Conflict.
- The Changing Complexion of Security and Strategic Assistance in the 21st Century. 8) Removing Impediments to an Effective Partnership with Congress.
- Foreign Aid Reform Commissions, Task Forces, and Initiatives: The Record from Kennedy to Bush II.
- Reforming Development Assistance: Lessons from the UK Experience.
[Note: Contains copyrighted material.]
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Bishop, Matthew et al. A SURVEY OF WEALTH AND PHILANTHROPY (The Economist, vol. 378, no. 8466, February 25, 2006, special insert, 16 pp.)
Full text available from your nearest American Library
"It's very, very striking that the new philanthropists, the likes of Bill Gates or Pierre Omidyar, who founded eBay, or Thomas Hunter, the Scottish retailer, who are coming into the field, are all very concerned about how do we make sure that our money isn't wasted, that it actually does make a difference. And they're rethinking the way philanthropy is done," asserts Bishop while discussing the first article of the survey: "The Business of Giving." The next article, "To Have, Not to Hold," addresses the rise of the new philanthropist, a product of the recent creation of vast global wealth. "The Birth of Philanthrocapitalism" compares the new philanthropists, who see themselves as social investors, with the founders of more traditional foundations. "The Good Company" asks: "Is corporate philanthropy worthwhile?" in light of the recent scrutiny given corporate philanthropy since the collapse of Enron. Additional articles treat "The Rise of the Social Entrepreneur," "Virtue's Intermediaries" (new businesses that are trying to make philanthropy work better), and "Faith, Hope and Philanthropy," which looks at the techniques the new philanthropists are using to improve the management of charities, non-profits, NGOs, and the social sector. The survey is accompanied by several useful charts and graphs.
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Djankov, Simeon; Montalvo, Jose G.; Reynal-Querol, Marta DOES FOREIGN AID HELP? (Cato Journal, vol. 26, no. 1, Winter 2006, pp. 1-28)
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The authors believe that foreign aid has a negative impact on the democratic stance of developing countries, and on economic growth, by reducing investment, increasing government consumption, and reducing the level of democracy of the recipient countries. Alternatives exist, for example, in the manner in which aid is disbursed. However, there is very little documented evidence on the effectiveness of foreign aid that aid has much of an impact on economic development. Loans induce a more effective use of the funds because they have to be returned while remittances and private assistance have also proven to be positive steps in fostering growth and investment, but the increasing number of participants to the aid market and the potentially conflicting goals of donors further contributes to the ineffectiveness of aid. They note that the effectiveness of foreign aid can be improved by increasing the responsibility of recipient countries, reducing the cost of remittances to developing countries, and improving the coordination of donors.
U.S. OCCUPATION ASSISTANCE: IRAQ, GERMANY AND JAPAN COMPARED.
Nina Serafino, Curt Tarnoff, and Dick K. Nanto.
Library of Congress. Congressional Research Service. March 23, 2006.
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This report provides aggregate data on U.S. assistance to Iraq and compares it with U.S. assistance to Germany and Japan during the seven years following World War II. U.S. aid allocations -- all grant assistance -- for Iraq appropriated from 2003 to 2006 total $28.9 billion. About $17.6 billion (62%) went for economic and political reconstruction assistance. The remaining $10.9 billion (38%) was targeted at bolstering Iraqi security. A higher proportion of Iraqi aid has been provided for economic reconstruction of critical infrastructure than was the case for Germany and Japan. Total U.S. assistance to Iraq thus far is roughly equivalent to total assistance (adjusted for inflation) provided to Germany -- and almost double that provided to Japan -- from 1946-1952.
For Germany, in constant 2005 dollars the United States provided a total of $29.3 billion in assistance from 1946-1952 with 60% in economic grants and nearly 30% in economic loans, and the remainder in military aid. Total U.S. assistance to Japan for 1946-1952 was roughly $15.2 billion in 2005 dollars, of which 77% was grants and 23% was loans.
U.S. assistance to Germany and Japan largely consisted of food-related aid because of severe war-induced shortages and the need to provide minimum subsistence levels of nutrition. In Iraq, humanitarian aid has been a minor part of the assistance. Expectations also have changed. Countries today have much higher expectations of what the United States should contribute to reconstruction in Iraq relative to what was expected following World War II. Germany and Japan also are larger than Iraq -- both population and size of their respective economies -- and the extent of war damage to each country's industrial capacity was different. Iraq also faces an insurgency that deliberately sabotages the economy and reconstruction efforts, whereas there were no resistance movements in either Germany or Japan. This report will not be updated.
HURRICANE KATRINA: COMPREHENSIVE POLICIES AND PROCEDURES ARE NEEDED TO ENSURE APPROPRIATE USE OF AND ACCOUNTABILITY FOR INTERNATIONAL ASSISTANCE [GAO-06-460].
United States General Accounting Office (GAO). April 2006.
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In response to Hurricane Katrina, countries and organizations donated cash and in-kind donations, including foreign military assistance, to the United States government. In accord with the U.S. National Response Plan, the Department of State (DOS) is the coordinator of all offers of international assistance, and the Department of Homeland Security's Federal Emergency Management Agency (FEMA) is responsible for accepting the assistance and coordinating its distribution. This report examines:
- The amount and use of internationally donated cash.
- The extent to which federal agencies have adequate policies and procedures to ensure proper accountability for the acceptance and distribution of that assistance.
In the report's Recommendations for Executive Action, the GAO advises the Departments of State and Homeland Security to adopt the following actions and procedures:
- Develop policies, procedures, and plans to help ensure international cash donations for disaster relief and assistance are accepted and used appropriately as needed.
- Consider cash management options and place international cash donations in an account that would pay interest while decisions are pending on their use, to maintain the purchasing power of those donations.
- Maintain oversight of foreign-donated in-kind assets by tracking them from receipt to disbursement, to reasonably ensure that assistance is delivered where it is intended.
- Establish plans for the acceptance of foreign-donated items that include coordinating with regulatory agencies, such as USDA and FDA, in advance, in order to prevent the acceptance of items that are prohibited from distribution in the United States.
GAO also recommends that the Secretary of Defense, in consultation with the Secretaries of State and Homeland Security, take the following two actions:
- Establish within the National Response Plan or other appropriate plans, clearly delineated policies and procedures to ensure that foreign military offers of assistance for domestic disasters are coordinated through DOS to ensure they are properly accepted and safeguarded and used as intended.
- Develop and issue internal DOD guidance to commanders on the agreed-upon process to coordinate assistance through DOS.
AA06126
Runde, Dan MAKING A WORLD OF DIFFERENCE THROUGH DEVELOPMENT ALLIANCES (Public Manager, Vol. 34, No. 4, Winter 2005/2006, pp. 38-41)
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Runde, Director of the Office of Global Development Alliances at USAID, says in the last thirty years, U.S. aid has undergone an important shift: more than 80 percent of resources flowing from the U.S. to the developing world now come from sources other than official development assistance (ODA). USAID created the Office of Global Development Alliances (GDA) to manage private-public partnerships designed to ensure coordinated, effective use of aid, regardless of source, he explains. Since its inception in 1999, reports Runde, GDA has increased public-private alliances from seven to 290 -- leveraging more than $1.1 billion of USAID funds with $3.7 billion in outside partner contributions, much of this in cash and in-kind goods and services from private companies. He says GDA's success comes with lessons learned, such as: the importance of showcasing success stories; the need to invest in staff training; adaptability is essential to innovation; and, metrics must be established and used to document effectiveness.
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Verweij, Marco; Gyawali, Dipak AGAINST MORE AID: WHY DEVELOPMENT ASSISTANCE SHOULD NOT BE TRIPLED (Harvard International Review, vol. 27, no. 4, Winter 2006, pp. 26-30)
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The authors address two main arguments against large-scale development. First, many low-income countries are hobbled by corrupt governance and uncompetitive markets which only benefit the rich. Second, donor agencies tend to favor development projects that are overly expensive and not sustainable. These criticisms come from all sides, they write, but now large-scale financial assistance for poor countries has suddenly resurfaced on political agendas. The authors say these plans should be abandoned as they suffer from the same weaknesses as the much-maligned aid efforts of the 1990s. When bureaucracies are obliged to spend massive amounts of money, they do just that, without regard to any economic, social, or environmental consequences. Foreign aid spending has increased over the past decade, they note, but the lack of good governance in recipient countries makes the aid ineffective. Small amounts of well-targeted development aid to accountable governments will be effective, they say. Despite the poor governance in much of Africa that renders most forms of development assistance ineffective, targeted donor campaigns against HIV/AIDS and other diseases have enjoyed perhaps the most success and show the importance of well-targeted aid. Rather than large-scale aid, the authors recommend economic reforms, such as opening up the markets of rich countries, ousting corrupt leaders, abolishing heavy debt burdens and improving interactions between the state and markets and civil societies.
AA06072
Kumar, Raj. USAID REVISITED
(Georgetown Journal of International Affairs, Vol. 7, No. 1, Winter 2006, pp. 51-57)
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Kumar, President of the Development Executive Group, says that given the current volume of U.S. foreign aid and its growing importance to national security, two basic things need to happen: unify all aid programs within USAID, and make the USAID administrator a cabinet-level position. As currently configured, he notes, U.S. aid programs suffer from "project proliferation" (many agencies funding many small projects across too many recipient countries), which results in aid fragmentation and reduces both efficiency and effectiveness. Kumar says the USAID administrator needs a seat at the policy table to ensure a strong development voice in foreign policy. Additionally, he explains, Congress needs to stop micromanaging special aid projects through earmarks and allow the experts who manage overall development efforts the flexibility to spend funds where they can best meet policy goals.
AA06056
Rajan, Raghuram AID AND GROWTH: THE POLICY CHALLENGE
(Finance and Development, Vol. 42, No. 4, December 2005, pp. 53-55)
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Rajan, Director of the International Monetary Fund's research department, notes there is general agreement among economists that there is little evidence of a robust unconditional effect of aid on growth. He emphasizes that aid effectiveness studies need to distinguish between causality and correlation when interpreting country studies. Despite extensive country studies, no one has found a "magic bullet" for growth, he writes, but there are clearly some things that seem important such as good governance, sensible macroeconomic management, laws and policies that support a positive business environment, and an economy open to international trade. Rajan recommends rich countries should make policies that meet these requirements an essential condition for aid, but cautions against micromanaging or being too prescriptive.
THE STATE OF FOOD INSECURITY IN THE WORLD 2005 [SOFI 2005].
Food and Agriculture Organization of the United Nations (FAO). November 2005.
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Subtitled, "Eradicating world hunger - key to achieving the Millennium Development Goals," SOFI 2005 focuses on the critical importance of reducing hunger, both as the explicit target of the World Food Summit (WFS) and as the essential condition for achieving the MDGs. The report's first section analyses long-term trends in reducing undernourishment, and explores the impact of economic growth, governance and natural disasters. The second section examines each of the MDGs, highlighting ways that hunger holds back development and that hunger reduction could accelerate progress.
Tables (pp. 30-35) provide FAO's latest estimates of undernourishment and of progress towards the WFS and MDG targets for reducing hunger; and key indicators for the other MDGs.
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AA05346
THE U.N.'S WORLD SUMMIT IS WRONG ON DEVELOPMENT ASSISTANCE. Schaefer, Brett D. Heritage Foundation Backgrounder.
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Schaefer, an economist with The Heritage Foundation, says that foreign assistance can be useful but increasing economic assistance to an arbitrary 0.7 percent of GNP will not improve economic growth and development in poor nations. Numerous studies have concluded that economic freedom, good governance, and the rule of law -- which are essential for encouraging investment and entrepreneurialism -- are the keys to long-term economic growth and poverty reduction, he writes.
The twentieth century approach to development -- which emphasized monetary aid as the road to poverty reduction -- produced a vicious cycle of aid, default and dependency, states Schaefer. In one study of 88 countries, he reports, only one case was found in which foreign aid actually led to increased investment and economic growth. Further, he notes, eleven years of data from the Index of Economic Freedom show a clear positive relationship between economic growth and the adoption of policies that promote economic freedom and the rule of law. The U.S. should continue to reject arbitrary aid targets and encourage developing countries to adopt policies that encourage private investment and entrepreneurship, writes Schaefer, because these are the true keys to development.
AA05327
Hahn, Robert W.; Tetlock, Paul C. MAKING DEVELOPMENT WORK (Policy Review, No. 132, August-September, 2005)
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The economies of developing countries can be substantially improved if aid is associated with recipient countries' policies that support performance, say the authors. Yet care should be given to avoid examples of inverse incentives to spending aid wisely -- when countries that perform well find they can lose out on future needed aid. Donors must to continue to try to determine how to best use aid by sharing more effectively information on the costs and benefits of individual aid-funded projects, especially before a project begins, the authors say. This is the concept of "information markets," allowing aid agencies, recipient governments and other informed parties to trade contracts that will yield aid payments based on expected measurable outcomes of projects. They use the example of a child vaccination project, in which benefits are paid according to how many children the information market estimates will be actually vaccinated in a certain country. Information markets can also help aid providers with project financing, and thereby encourage competition, the authors say.
AA05310
Traub, James THE STATESMAN (New York Times Magazine, September 18, 2005, pp. 80-89, 96//187)
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Rock celebrity Bono, the world's foremost activist for aid to Africa, has gone global with his campaign against poverty and disease, using his celebrity to elicit support from heads of state and other prominent figures. He has publicized his cause at top-level economic meetings, such as the World Economic Forum in Davos, Switzerland and the G-8 Summit, where he tried to get commitments for debt relief for African countries to "put mankind back on earth." The cause of ending extreme poverty in Africa appeals to Bono's sense of advocacy; he demands that aid be conditioned not only on need but on demonstrated capacity to use that aid effectively. Bono has worked with the Bush administration, which asked his support for the president's development agenda. This collaboration brought about his appearances through four African countries with then-Treasury Secretary Paul O'Neill in May 2002. However, Bono has been disappointed with the Bush administration's response to his requests. Consequently, he has focused on working with Great Britain, Germany and France. Bono's latest action is the creation of the One Campaign by 2008 to demand more action on Africa than he has received thus far.
AA05290
Radelet, Steven; Clemens, Michael; Bhavnani, Rikhil AID AND GROWTH (Finance and Development, Vol. 42, No. 3, September 2005)
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The authors, all with the Center for Global Development, review the prevailing views on aid effectiveness and argue that these views all suffer from inaccuracies perpetrated by treating all aid as if it is the same. They divide aid into three categories -- humanitarian aid, aid that might indirectly affect growth in the long-term, and aid designed to provide a more immediate and direct affect on growth -- and analyze each category separately to arrive at a more nuanced view on aid effectiveness.
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Easterly, William THE UTOPIAN NIGHTMARE (Foreign Policy, Vol. 150, September/October 2005, pp. 58-64)
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Easterly, an economics professor at New York University, says that utopian goals to cure world poverty are not the best way to help the world's poor. He asks why, after 43 years and $568 billion (2003 dollars) in foreign aid, Africa remains trapped in economic stagnation. The dream of solving poverty with a "big push" in aid or a realignment of conditionalities may make rich countries feel good, but it is not a realistic cure-all, says Easterly. The problems of the poor nations have deep institutional roots where markets don't work and pervasively corrupt politicians and civil servants are not accountable to their citizens. This is not to say that all foreign aid is futile, he explains, but instead of focusing on utopian goals such as ending world poverty, global leaders should simply concentrate on finding interventions that work. To best accomplish this, he adds, aid organizations will need to do a better job of evaluating the impacts of their programs.
AA05287
Dichter, Thomas TIME TO STOP FOOLING OURSELVES ABOUT FOREIGN AID: A PRACTITIONER'S VIEW (Foreign Policy Briefing, No. 86, September 12, 2005, 11 pp.)
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Dichter, an international development professional, says rich nations should reject calls for increasing aid because the ineffectiveness of aid has little to do with a lack of resources and much to do with the self-perpetuating cycles of corruption in developing countries and growth of the aid industry. Foreign aid's dismal record for curing poverty does not negate its humanitarian value, he emphasizes, nor does it mean that world poverty is doomed to continue. He notes that poverty reduction has occurred in some places, irrespective of the amount of aid it received. Lasting poverty reduction takes time and is a function of economic growth, not aid -- and sustained economic growth is linked to the rule of law, good governance, and leadership that is relatively un-self-interested, Dichter writes.
AA05269
Adamson, Michael R. MUST WE OVERLOOK ALL IMPAIRMENT OF OUR INTERESTS? DEBATING THE FOREIGN AID ROLE OF THE EXPORT-IMPORT BANK, 1934-41 (Diplomatic History, Vol. 29, No. 4, September 2005, pp. 589-623)
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Adamson argues that the Export-Import Bank (Exim), established by President Roosevelt in 1934, tried to define the role that foreign aid would play in accomplishing the goals of U.S. foreign policy. Proposals for a large-scale U.S. foreign aid program and efforts for its implementation predated World War II and the Cold War, he says, but such aid was opposed by the State Department as too expansive. An interagency debate in the Roosevelt administration ensued over the role of Exim and the appropriate scale of economic development projects and new programs. Eventually, The State Department did use Exim to advance short-term national interests and as leverage to restore a long-run liberal international political economy, Adamson explains. However, Exim limited its function as a development bank, since liberalizing private capital flows was one of its objectives. The struggle over the use of public vs. private avenues for foreign aid continued until the Marshall Plan and other post-1945 efforts, he says, when Exim's function as a development bank temporarily expanded as policymakers justified foreign aid as a national security response to counter the perceived threat of communism.
Bergmann, Barbara R. THE CURRENT STATE OF ECONOMICS NEEDS A LOT OF WORK. (The Annals of the American Academy of Political and Social Science, Vol. 600, July 2005, pp. 52-67)
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“The state of economics has vast practical consequences for humanity’s well being ... Economics probably ranks even above medicine in its potential for helping or hurting large numbers of people. A sick economy can result in millions of people out of work, with painful material and psychological consequences to job losers and their families.” Given the significance of decisions relating to economic policy, development and assistance, is the profession up to the task of providing sound guidance to decision makers? No, says the author. Political ideology rather than science determines theory. Further, a lack of empirical evidence and observation and simplified scenarios and assumptions provide a poor theoretical basis for understanding and forecasting.
Ukpan, Uwen. AN EX-MAS FEAST [A short work of fiction] (The New Yorker, June 13 & 20, 2005, pp. 94-117)
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"Now that my sister, Maisha, was twelve, none of us knew how to relate to her anymore. She had never forgiven our parents for not being rich enough to send her to school. She had been like a cat that was going feral." [extract]
Although a work of fiction, the story presents a compelling reason for sound economic assistance policy. The author, a Jesuit priest from Nigeria is working on a collection of short stories about the children of Africa. In "An Ex-Mas Feast", he portrays the brutal effects of poverty on family living in a slum outside Nairobi, Kenya. Relying on begging, theft and child prostitution for an income, the family attempt to provide an education for at least one of the children, realizing that this is the only way to break the cycle of poverty. However, their impoverished circumstances steadily cause the fragmentation of the family.
AA05219
Adelman, Carol C.; Norris, Jeremiah; Weicher, Jean. AMERICA'S TOTAL ECONOMIC ENGAGEMENT WITH THE DEVELOPING WORLD: RETHINKING THE USES AND NATURE OF FOREIGN AID (Hudson Institute White Paper, 28 June 2005, 7 pp.)
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Claims that America is "stingy" with aid abound, despite the fact that Americans privately give more than three and one-half times as much international aid as the U.S. government, note the authors. They also point out that the U.S. has the most overseas investment, provides the most military support for global disasters and security, produces the bulk of the world's research and development for better food and medicines, and provides preferential trade agreements that support imports from developing countries. The authors provide data on the full spectrum of U.S. assistance, explain why Official Development Assistance doesn't reflect the realities of aid today, and analyze the limitations of direct aid and what is really needed to overcome poverty in the developing world.
THE GLOBAL WAR ON TERROR AND U.S. DEVELOPMENT ASSISTANCE: USAID ALLOCATION BY COUNTRY, 1998-2005.
Todd Moss, David Roodman, Scott Standley. Center for Global Development. July 2005.
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This working paper assesses changes in the U.S. Agency for International Development's allocation of foreign aid since 1998, in order to gauge the Global War on Terror's (GWOT) impact on funding for anti-poverty programs. The common expectation, the authors note, has been that development assistance would be used to support strategic allies in the GWOT, perhaps at the expense of anti-poverty programs. The researchers studied the changes in USAID's country allocations over 1998-2001 versus 2002-05. For each country, they also looked at such variables as: the presence of foreign terrorist groups; sharing a border with a state sponsor of terrorism; troop contribution in Iraq; and relative share of Muslim population.
They conclude that any major changes in aid allocation due to the GWOT appear to be affecting only a handful of critical countries, namely, Iraq, Afghanistan, Jordan, and the Palestinian Territories. The extra resources to these countries also seem to be coming from overall increases in the bilateral aid envelope, combined with declines in aid to Israel, Egypt, and Bosnia and Herzegovina. The aid curtailments to Israel and Egypt were planned well before 2001, and the decline to Bosnia and Herzegovina is the result of the end of the immediate post-conflict reconstruction phase. While this increased availability of funds may be a coincidence, it also is clearly an enabling factor that allows aid to be channeled elsewhere. At this point, they write, concerns that there is a large and systematic diversion of U.S. foreign aid from fighting poverty to fighting the GWOT do not appear to have been realized.
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AID AND GROWTH: WHAT DOES THE CROSS-COUNTRY EVIDENCE REALLY SHOW? [WP/05/127]
Raghuram Rajan and Arvind Subramanian. International Monetary Fund. June 1, 2005.
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The authors examine the effects of aid on growth, after correcting for the bias that aid typically goes to poorer countries, or to countries after poor performance. Even after this correction, they find little robust evidence of a positive (or negative) relationship between aid inflows into a country and its economic growth. They also find no evidence that aid works better in better policy or geographical environments, or that certain forms of aid work better than others.
Their findings, which relate to the past, do not imply that aid cannot be beneficial in the future. But they do suggest that for aid to be effective in the future, the aid apparatus will have to be rethought. Their findings raise the question: What aspects of aid offset what ought to be the indisputable growth enhancing effects of resource transfers? Thus, the authors' findings support efforts under way at national and international levels to understand and improve aid effectiveness.
AA05205
Baldacci, Emanuele, et al. WHAT DOES IT TAKE TO HELP THE POOR? (Finance and Development, Vol. 42, No. 2, June 2005, pp. 20-23)
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The authors say that spending on education and health can boost human capital in poor countries and help them to reach the Millennium Development Goals (MDGs), but only if governments are held accountable. The authors suggest growth policy strategies based on their study of the interactions between various combinations of social spending, governance and social development. Although not a panacea, they write, spending increases should be accompanied by efforts to improve both the efficiency and targeting of public spending. Social spending will be more effective in countries with better governance and lower levels of government expenditure since the marginal returns to social spending tend to decline for countries that already spend substantially in these areas, they explain.
AA05189
Kanbur, Ravi. GROWTH, INEQUALITY AND POVERTY: SOME HARD QUESTIONS (Journal of International Affairs, Vol. 58, No. 2, Spring 2005, pp. 223-232)
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Kanbur, Professor of Economics at Cornell University, discusses some of the difficulties of determining how to reduce poverty and what criteria provide the best measures of progress. For example, he notes that while it seems obvious that economic growth should be good for the poor, -- what if the growth is accompanied by increased inequality? Or, he asks, if the total number of poor goes up, but because of overall population growth, the percentage of poor actually goes down -- has poverty gone up or down? Each of these issues needs more study in order to increase understanding of all the variables that impact poverty, writes Kanbur.
AA05190
Khanna, Tarun; Pelepu, Krishna; Sinha, Jayant. STRATEGIES THAT FIT EMERGING MARKETS (Harvard Business Review, Vol. 83, No. 6, June 2005, pp. 63-76)
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Finding successful business strategies for entering new international markets can be difficult, particularly in emerging markets where there are "institutional voids", such as a lack of specialized intermediaries or the absence of regulatory systems and methods for enforcing contracts, the authors say. They explain that businesses considering investment need to consider several factors -- a country's political and social systems, its degree of openness, and its product, labor and capital markets. This greater understanding of the business environment can help businesses take advantage of a location's unique strengths, they write.
AA05155
Chassy, Aaron M. THE MILLENNIUM CHALLENGE CORPORATION: MAKING IT WORK (Foreign Service Journal, April 2005, pp. 37-45)
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Chassy, a former USAID Foreign Service officer, asks whether or not the Millennium Challenge Corporation (MCC), as currently designed and operated, can produce significantly better development outcomes than USAID, the government's traditional aid program. The MCC could help sharpen the focus of U.S. development policy and programs, or at least serve as an assistance delivery mechanism that places a premium on results while insisting on accountability, he says. But, he notes, the MCC will have to overcome some major challenges in order to succeed. Some of the challenges Chassy identifies include: escaping the same kind of bureaucratic regulations that have encumbered USAID; determining how to objectively measure performance and ensure valid accountability and reporting; improving the metrics used to measure qualifying indicators, which currently suffer from untested methods and subjectivity; and over-reliance on the unfounded assumption that politics can be removed from foreign assistance decision process.
AA05157
Zeller, Shawn AID WITH STRINGS (Government Executive, Vol. 37, No. 6, 15 April 2005, pp. 24-25)
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Paul Applegarth, chief executive officer of a new federal agency, the Millennium Challenge Corporation (MCC), is trying to rebuild faith in foreign aid, says Zeller. Critics of foreign aid believe much of the monies are mismanaged or lost to corruption, and therefore wasted, so the MCC is changing the way aid funds are dispersed by targeting only to those countries that demonstrate the ability and commitment to use it wisely, he writes. MCC eligible countries must be from among the poorest, he notes, and they must prove commitment to ruling justly, investing in people, and economic freedom. To encourage real changes in how aid is managed, the MCC operates outside the old civil service system, relies heavily on contractors and has a small staff, writes Zeller.
AFRICA, THE G8, AND THE BLAIR INITIATIVE. [RL32796]
Raymond W. Copson. Library of Congress. Congressional Research Service. Updated March 17, 2005.
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British Prime Minister Tony Blair has championed a "Marshall Plan" for sub-Saharan Africa for several years. In October 2001, addressing the challenges of a post 9-11 world, Blair said that "the state of Africa is a scar on the conscience of the world" and called for a new partnership with the region. In February 2004, Blair appointed a 17-member Commission for Africa and asked it to undertake a comprehensive assessment of Africa's development problems. Members include Bob Geldof, the Irish musician and development advocate; Prime Minister Meles Zenawi of Ethiopia; President Benjamin Mkapa of Tanzania; former U.S. Senator Nancy Kassebaum Baker; and the British Chancellor of the Exchequer (Treasury), Gordon Brown. On March 11, 2005, the commission issued a 450-page report that will help set the agenda at the G-8 summit in July 2005 in Gleneagles, Scotland. The commission's report analyzes the reasons for Africa's poverty; endorses the main elements of the Blair initiative; and makes recommendations on governance, conflict prevention and peacekeeping, education, health, and other issues.
Blair is pushing for a substantial aid increase for Africa through an "International Finance Facility" (IFF) and 100% forgiveness of poor country debt to the international financial institutions. The IFF would issue bonds to finance an additional $25 billion in annual aid to Africa for three to five years, followed by another $25 billion boost if African governments improve their managerial and administrative capabilities. IFF bonds would be backed by a promise from the G7 leading economic powers to repay them after 2015. Poor country debts to the World Bank and the African Development Bank would also be paid by the G7, while debts to the International Monetary Fund (IMF) would be funded by revaluing or selling IMF gold. Finally, Blair seeks the removal of barriers to Africa's exports.
The Bush Administration is reacting coolly to the IFF proposal partly on grounds that it lacks a means of assuring new aid funds would be well spent, although IFF supporters note that the funds would be passed through existing aid agencies. The IFF could ultimately prove costly, since Blair sees it as "frontloading" aid as the G7 move toward a U.N. goal of giving .7% of GDP in development aid. For the United States to reach an interim level of .5% would require about $40 billion in added aid annually. The Bush Administration supports a simple cancellation of multilateral development bank (MDB) debt rather than repayment by the G7, and argues that future MDB aid should be in the form of grants. Some worry that this approach would reduce MDB resources for financing development. U.S. officials seek further study of issues related to IMF gold. Moves to reduce trade barriers face opposition in both Europe and the United States.
MILLENNIUM CHALLENGE CORPORATION: PROGRESS MADE ON KEY CHALLENGES IN FIRST YEAR OF OPERATIONS. [GAO-05-625T]
United States Government Accountability Office (GAO). April 27, 2005.
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In January 2004 Congress established the Millennium Challenge Corporation (MCC) to administer the Millennium Challenge Account. MCC's mission is to promote economic growth and reduce extreme poverty in developing countries. The legislation requires MCC to rely to the maximum extent possible on quantitative criteria in determining countries' eligibility for assistance. MCC will provide assistance primarily through compacts-agreements with country governments. MCC aims to be one of the top donors in countries with which it signs compacts.
For fiscal years 2004 and 2005, Congress appropriated nearly $2.5 billion for the Millennium Challenge Corporation; for fiscal year 2006, the President is requesting $3 billion. GAO was asked to monitor MCC's (1) process for determining country eligibility, (2) progress in developing compacts, (3) coordination with key stakeholders, and (4) establishment of management structures and accountability mechanisms.
GAO recommends that MCC's Chief Executive Officer continue to develop and implement overall plans and related time frames to establish corporate-wide accountability, internal control, and human capital management. In addition, GAO recommends that MCC's Board of Directors consider, in addition to its statutory responsibilities, other responsibilities associated with sound and effective governance.