Foreign Aid and the National Interest

Friday, January 30, 2004

Since Saddam Hussein’s fall from power last April, the world has learned a great deal about the consequences of his abhorrent rule: mass killings, a brutalized population, staggering corruption, an impoverished population, a devastated environment, neglected educational institutions, a miscarried justice system, and other failing governmental functions. This legacy of Saddam’s horrific misrule is the most dramatic demonstration of the vital connection between the vibrancy and economic development of a people and the nature of their governing institutions. The mounting evidence of this linkage around the world must drive a revolution in the way that we administer foreign assistance.

Saddam Hussein’s Iraq was merely the most recent example of atrocious governance in a world filled with dozens of tyrannical, predatory, and failing states. Democratic and accountable states do significantly better at delivering development for their people. To be sure, some East Asian states have contained corruption and achieved rapid development under authoritarian rule—but worldwide, these states have been the exception. Over the past two decades, the two most rapidly developing countries in Africa have been the only two African states to sustain democracy continuously since independence, Botswana and Mauritius. Recent research by Richard Roll and John Talbott (published in the July 2003 Journal of Democracy) shows that
government institutions and policies explain most of the variation across countries in economic development, with property rights, control of corruption, civil liberties, and political rights all significant factors accounting for development success. Thomas Zweifel and Patricio Navarro find (in the same issue of the Journal of Democracy) that at every level of national development, fewer infants die in democracies than in dictatorships.

In too many countries around the world, government does not advance the common good. Decisions benefit the rulers, their clans, oligarchies, and party but not the people. Corruption is rampant, laws are trampled, state capacity is weak, infrastructure is poor, and social services are starved. Jobs are scarce because investment is scant in the face of predatory governments and insecure property rights. Consequently, development is stalled and people are impoverished, alienated, and angry.

Our national interest urgently requires that we confront these scandalous betrayals of development promise. But decades of experience have taught us that we cannot do so by simply throwing money at the problem. No amount of resources transferred or infrastructure built can compensate for—or survive—rotten governance. Lifting countries out of poverty and hopelessness requires fundamental reforms to make governments more transparent, inclusive, lawful, and responsible to their citizens. These reforms can be sustained, deepened, and even catalyzed by clear rewards for governments that demonstrate a genuine commitment to human development and good governance. But linking aid emphatically to governments’ development performance and policy commitment is a radical step. Indeed, it entails a revolution in foreign assistance.

The Bush administration has already taken a bold step in that revolution with the creation of the Millennium Challenge Account, which will allocate $5 billion a year in new development assistance to the less developed countries that perform best on three broad criteria: ruling justly, investing in people, and encouraging economic freedom. But the drive for more just and responsible governance must infuse all our development assistance efforts—and not just those of the United States but of other bilateral and multilateral donors as well.

The old approach of conditionality—providing aid and then hoping that governments will comply with its expectations—has run its course. We must move from conditionality to selectivity, and from a motivation of unconditional obligation to a “tough love” approach that manifests a more profound compassion because it demands results. The president’s Millennium Challenge Account is the first step toward this new development construct, and these principles must now be embodied throughout U.S. development assistance programs.

The following elements are crucial to success. Levels of assistance, particularly development assistance as opposed to humanitarian relief or emergency health programs, must be more clearly linked to a country’s development performance and to the quality of its governance in controlling corruption and ensuring freedom and democracy. Good performers need to be tangibly rewarded with increased development assistance from the international community, more far-reaching debt relief, incentives for foreign investment, and trade liberalization. Democratic, accountable governance with responsible economic policies should bring immediate, significant, and sustained benefits.

If corrupt, abusive governments show no political commitment to democratic reforms and good governance, the United States will work primarily with nongovernmental actors instead. At the same time, where we can identify committed reformers within a corrupt state, we should work with them, provide them assistance, and try to strengthen their hand.

It is vital that the other development assistance donors embrace this logic of expecting and rewarding open and accountable governance. The United States must lead the global development community to preclude providing development assistance to grossly corrupt and abusive governments while enhancing aid to governments that sustain political and economic reform. The bilateral donors should mount coordinated efforts to pressure bad governments and to cut off the flows of assistance that keep venal, oppressive governments afloat. These governments—and their people—must hear a firm and consistent message from the international community. The game of promising reform and then stealing public resources, locking up the press, rigging elections, and subverting the rule of law is over. The time for reform is now.

If this new, governance-led approach to assistance is going to work, it must provide effective democracy and governance assistance programs. These programs must mobilize strong links among donors, across government agencies, across sectors, and across different developing countries to tackle a number of key challenges:

• Strengthening the institutions of public accountability that monitor and control corruption

• Institutionalizing the rule of law through judicial reform, human rights work, and more professional and democratic policing

• Strengthening and democratizing political parties and deepening their roots in society

• Assisting democratic groups and media in civil society to become more effective advocates of reform and to develop broader societal constituencies

• Developing stronger, more professional states that can respond to rising demands for more responsible governance

More accountable and democratic governance will not in itself deliver development. The revolution in foreign aid has many other dimensions as well, such as renewing the commitment to education and improved agricultural productivity, assisting countries to streamline their regulations and lower trade barriers, and supporting the microeconomic reforms that build a competitive business environment and an entrepreneurial class. It involves changes in health assistance to respond to the increase in noncommunicable diseases and the HIV/AIDS epidemic. And it entails integrated and context-sensitive policies to respond to civil conflicts and humanitarian emergencies in failed and failing states.

The United States has a moral and political responsibility to respond rapidly in the face of famine and humanitarian disaster. But as Amartya Sen has shown, famines do not take place in democracies. And countries that are well and decently governed do not fall victim to civil war. The best policy for managing violent conflict is to prevent it, through the construction of inclusive, just, democratic, and accountable governments. All the other lessons and imperatives of development assistance depend on this fundamental condition of governance for their sustainable success. And it is this realization that lies at the core of the revolution in development thinking and policy.