Doing Development
Every four years, a new crop of political appointees “solves” the problem of development with unique ideas and innovative approaches … that don’t work.
This is a 4-part interview. Part 1 focused on America’s national security strategy, and why foreign aid of all types has an important role to play. Part 2 focused on the different types of foreign aid, and how each serves a different purpose. Part 3 focused specifically on how development aid is the only type of aid that seeks to make America more secure in the long term. Part 4 below seeks to explain how development aid is supposed to work.
A Hypothetical Interview: Part 4
OK, walk me through the process. Does a country just ask for development aid?
Typically, a country’s minister of foreign affairs would have a meeting with the U.S. ambassador to ask for assistance. The ambassador offers to send a team from USAID. If the minister agrees, then USAID sends out a team of professionals who specialize in development aid — specialists in whatever seems important, which could be education, health care, roads and bridges, the power grid, the seaport, farming. It depends on the country.
When it works properly, each member of USAID’s team meets with a member of the host country’s team. Then they figure out together what needs to be done. There might be some research. The USAID team member might invite his or her counterpart to visit other countries to see what works and what doesn’t. This part of the problem should take about a year.
You say “when it works properly”. What happens when it doesn’t work properly?
When things go wrong, we stray from the idea that development is about a partnership to effect transformational institutional change. Instead, we focus on things and money.
Sometimes we focus on technology as the magic fix. Recently the USAID Global Development Lab made that mistake.
Sometimes we’re blinded by ideology. Privatization was an ideological fad for awhile. Sometimes it makes sense, but often it doesn’t. I just shared with you my story about telecoms in Senegal.
Sometimes we build monuments — things that are pretty to look at but don’t work. Sure, build a road, but if you don’t restructure the goverment agency charged with maintaining roads, you’ll end up with potholes you could drive a truck into.
The worst offense is committed when we sit within a committee room in Washington, DC and decide what a country really needs. No: Real development, real institutional transformation, is always home grown. Our job, as development professionals, is to offer ideas, not things. There is no magic sauce. There is no quick fix.
So that’s how to do it incorrectly. Let’s return to how development is properly done. You said USAID sends out a team of development experts to work with local counterparts. They come up with ideas. But what about money to implement those ideas?
You’re asking about finance. I’m talking about development. They’re related, but in my view, the two need to be completely separate. For example, I don’t believe there should be any finance or grant function within USAID, and I don’t believe the Millennium Challenge Corporation was a good idea.
You don’t like the MCC because…?
The MCC claims to have been about development, but it was mostly about making big grants, and I think that clouded their development thinking.
Development aid is about identifying the institutions that need to be transformed to make a country more prosperous. Finance, loans, grants — they’re tools that can be applied as we reach the next step.
Let’s take a practical example. We’ll start with the development planning side, then move to the finance implementation side.
Suppose we send out a team to a country. The government there assembles a corresponding team to meet with us. On both teams are experts. Let’s say one of those experts on their side wants to focus on trade, so we also send a trade expert. Their expert tells us it’s important for his country’s development that they produce more products that the United States and Europe will want to buy, and they hope that America and Europe will lower our trade barriers so that they can do that. That’ll create jobs and make their country more prosperous.
Let’s start with that. I’m pretty sure the local government person has missed the point. What’s the real development problem here?
Is it that they don’t make anything we want to buy?
That’s usually not true, in my experience. I’m sure they make something that we’d like to have. There’s probably a market for everything. No, usually the problem is that some other country can deliver the same product to the United States at a much lower cost.
So the problem’s at the factory in Westlandia? They’re not efficient?
Maybe, sometimes, but in my experience, there’s often a much bigger problem than that. Think about the entire chain of events that has to happen to bring a product to the U.S. market. Basic production, supply chain, manufacturing, delivery chain, market.
Did you know that shipping a container of goods from Newark, New Jersey to Chicago takes about 3 days? In some countries in Africa it takes three times longer.
Did you know that truckers in the United States might earn salaries that are 25 times higher than truckers in some countries in Africa, but the cost of shipping a container of goods is 7 times higher in Africa?
What accounts for that?
A small part of it has to do with corruption. A bigger problem is the quality of the roadway and the time it takes to cross state borders. And the biggest problem of all is typically congestion in the seaport.
Our local official will surely know that shipping a container takes time and costs money, but he may not be aware just how much more time it takes, and just how much more money it takes, in his country compared to others.
One of the things we do in development work is share data from our own government, and from our universities and research institutes. And our technical experts may have experience in many countries, where it’s often the case that the local official will only really know his own country.
By my count you identified four big problems.
More than that. Each one of the four I mentioned is a complex set of problems all on its own.
The first one you mentioned is corruption.
Extraordinarily complicated.
There might be several dozen police checkpoints along the road, kind of like weigh stations in America, except more of them, and each one might require that a small bribe be paid. But petty corruption like that is not really a problem of cost. It’s more a problem of time. Each stop slows down shipping. Time costs a lot more money than most people realize.
Then if a border is crossed, there’s paperwork. Africa and much of the world is filled with tiny countries, the size of American states, and each of these little states wants to collect taxes and transit fees. There’s paperwork, and there’s also one or even multiple bribes to be paid each time a document is stamped or a barrier is raised. But again, it’s less about the money than about the delay.
And then at the seaport, there are import and export taxes, port charges, stevedores to be paid, and safety inspections, quality control inspections — the list can seem endless. Corruption’s a part of it, and there’s an incentive to set up lots of roadblocks, because each roadblock presents an opportunity to collect a bit of money.
Where do you begin?
I don’t want to get too much into the weeds on this, because the details can frankly be overwhelming. There are two fundamental approaches. One is to make the entire process more efficient by reducing barriers and eliminating all but essential inspections. In some ways that’s the easy part. And it doesn’t cost much money at all. It’s mostly pen and paper stuff.
The other problem is to figure out what to do with all the people who make their living and feed their families by collecting bribes. If we do our jobs well in the first part, then all these bribe collectors will be unemployed. We certainly don’t want them all taking up weapons and overthrowing the government.
You could reemploy them in other parts of government, but chances are there are no other truly productive jobs elsewhere in government because we’re going to be proposing reforms all over the place. The typical solution is to buy them out and encourage them to turn to the private sector.
How much does something like that cost, and how do you pay for it?
In this particular case, I’d say the best option is a loan. The money from the loan is taken by the government to fund buyouts and annuities for all the people laid off. The government can reasonably be expected to pay off the loan with increased revenue from trade. It’s all worked out in a kind of business plan to justify the loan.
Does development aid provide the loan?
I think that would be a mistake. Our development agency shouldn’t be allowed to make loans of that kind, because it can cloud our judgment. The development part was in creating the business plan to justify the loan. Then there are agencies like the IMF and the African Development Bank that are there specifically to make these kinds of loans, provided they’re persuaded by the business plan we’ve developed.
What about something like education? Where does the money come from to pay for that?
I wouldn’t start with the money. Again, start with the development problem.
A local education official tells us the teachers don’t do their jobs well enough, and so they want our help to build a new teacher training college. We send a team out to have a look.
The bigger problem we often identify is that teachers are paid very poorly. The Ministry of Education says there isn’t enough money to pay teachers. The Ministry of Finance says there’s not enough tax revenue to pay the Ministry of Education. The inland revenue department says too many people avoid paying taxes.
It’s all a bit of a puzzle. But building a teacher training college is not development. And providing money to pay teacher salaries is not development. Those would both address symptoms of the development problem, but not the underlying development problem itself.
The country is going to have to figure out the broader problem of financing education, which is an area where the costs are quite specific, but the benefits are broad and take a long time to become evident. Those circumstances actually make education a bad candidate for a sovereign loan.
A public education system is a benefit to all of society within a country, even to those that don’t have kids in school. That means everyone in that country should pay for it. The development problem is to figure out how to make that happen, particularly in a country that is not wealthy like ours is.
The answer is probably going to lie within the Ministry of Finance and the Department of Inland Revenue. There are also creative solutions that can be worked out, which depend on local culture, paying for things in ways that would be novel to us. Every place will be a bit different, and it may be that the American model of primary or even secondary education won’t be the best.
But building a school would never be part of the solution?
It certainly could be for a local community. They might want to build a school. And their government or some other institution like a church or a mosque might want to pay for it. But again, that’s the wrong focus when we’re talking about development aid.
The slippery slope in development aid is when we’re forced to focus on short-term results, and particularly on what we sometimes call “monuments”. School buildings, hospital buildings.
I once had a very senior American political official promise to a local community that America would give them access to the Internet. But that was in a rural village with no electricity, where the teachers weren’t paid. Not only was there no chalk or chalkboard erasers, there wasn’t even a chalkboard.
Be that as it may, I was instructed to make the Internet happen. It being December, I waited until the middle of January for a new administration to take office in Washington, and the problem thankfully went away.
Sometimes the political situation here in America forces us to build monuments because the politicians want to see immediate results, and they’ll threaten to claw back the money if they don’t see those results. While some in Congress understand that development is a long-term process, many do not.
One of the challenges of development aid is actually the education of Congress. But when the president appoints leadership within USAID that also doesn’t understand development aid, that means every four years we have to re-educate an entirely new set of leaders in the executive branch as well, just so they can go to Congress and explain what we do. It can be quite tedious.
How do you fix that problem?
The law that authorizes USAID needs to be both simple and clear. It cannot be left up to each successive White House to redefine what they think development is. There’s really only one definition of development, and it’s the one I’ve given you.
So start with the authorizing legislation in Congress: a new act for international development. Define the problem clearly, and specify the allowable methodology as precisely as circumstances will permit. That methodology is the one I’ve described to you, starting with deploying a team of development experts, arriving at a plan for institutional transformation, and advising on the country’s own implementation of that plan over a number of years.
The part that’s trickiest is the funding of development aid. If a plan is to be implemented over a number of years, the funding will have to be similarly long term. Funding year to year simply doesn’t work, for the reasons I just mentioned.
Congress prefers year-to-year funding?
It’s Congress’s way of asserting control over the White House. But in this case, it isn’t helpful.
As a practical matter, in my opinion, Congress will need to apprpriate five-year funding. And in return for losing some of its control over the money, Congress can instead assert control by insisting on a technocratic methodology.
Technocratic?
A technocratic approach is where the major objectives and the overall funding are first decided by Congress. Then the methods and implementation to achieve those objectives are turned over to technical experts, to technocrats.
Political appointees from the White House administer and oversee, but on those terms. We don’t have political appointees meddling in the actual design and implementation of development programs on the ground.
The appointees execute the will of Congress. They cannot change Congress’s instructions.
USAID doesn’t exist anymore. What are the chances that it will be restored?
I actually hope it’s not restored as it was. By the time of USAID’s recent demise, the mission of USAID had become far too corrupted by political considerations. The influence of the State Department had become far too great. The mission was distorted by having too many objectives all needing to be implemented at the same time.
The current Congress seems disinclined, but I trust that won’t last too long. I hope the new USAID will have a single mandate, which is to implement development aid, and nothing else. I hope Congress will pass a new act for international development that incorporates long-term program budgeting so that real development has a chance for success.
What happens to the other three kinds of aid?
They’re all important in their own way, but I’d keep them out of USAID. I’d place humanitarian aid within FEMA, public health aid within the CDC, and security aid within State. The only kind of aid that’s specifically mentioned in USAID’s name — the U.S. Agency for International Development — is the only kind of aid USAID should be implementing.
When Congress writes the new act, as I trust it eventually will, there will be parts. There should be a first part called the Act for International Development, recreating USAID, hopefully following the design I’ve just outlined. Let there be additional parts for the other kinds of aid, clearly stating where in the executive branch those kinds of aid will be administered. That’ll bring clarity, and a better chance for success.