A Vexing Problem: How to Fashion Development Assistance

There has been and will always be vexing problems facing the inhabitants of Earth. Every generation faces multitudes of problems some get eventually solved while others fester from one generation to the next. One such problem is “Economic Development”.

Economic textbooks on development economics abound, all claiming their authors offer solutions to the “vexing” problem of developing the “less developed”, or as most often put the “underdeveloped” world. An often cited solution is “development assistance” to give the underdeveloped world a head start towards the so called “Take Off”.
The economic textbooks on development for the most part were successful in putting forth the idea that development is a long term process, that one shoes solution does not fit all. With the preponderance of evidence about the slow pace of development in many regions of the world in general, but in the African continent in particular, it is abundantly clear that development economists have “a long road to hoe” to claim success for the thesis put forth about development strategies.

As I am not a development economist, I cannot claim either success or failure of what the development economist has accomplished or failed to accomplish. Nonetheless, as a macro/public economics specialist, I feel that we economists have failed somewhat in putting forth clear and workable solutions to the vexing problem of economic development, and most significantly the role development assistance should or ought to play.

Development assistance espoused by policy makers, mostly on the advice of political economists and development practitioners, as a policy tool to lift humanity in the less developed world out of the desperate status most face, seems not to have delivered what was hoped for. Yet, not many would advocate that development assistance should be scraped (an exception is the CATO Institute who advocated eliminating US foreign development assistance altogether), or that the plight of humanity in many less developed countries should not be of concern to the many fortune individuals in the developed world.

There is ample evidence that most if not all members of the developed world believe that development assistance, although is only one of the pillars for successful development, has a place to play in the development of the less developed world. One such evidence, indeed one that prompted me to write this essay, is the “continual” search for the most effective means to promote development as parlayed in the following announcement.

Appearing in “The Economist” journal (July 19th-25th ) is the following announcement:
GDN (the Global Development Network) in partnership with the Bill& Malinda Gates Foundation seek suggestions from “any one with ideas” about development assistance. As the announcement indicates what they are seeking is “ideas” which would answer the question of “How to Reinvent Foreign Aid”. Individuals with the winning essays would each receive $20,000 and that their ideas would be promoted by the sponsors.

(I wonder how many students of developments would apply.)
Although I do applaud GDN and the Gates Foundation for seeking ideas as to how to “ reinvent” foreign assistance, I nonetheless find it a bit “ simpleminded” as to believe that simply by offering a sum of money (not significant at that) to the readers of The Economist, they would gain insight that could not have been gained from reading most if not all texts on economic development, and most significantly from the voluminous literature, policy papers, testimonies and other forums on the failure of many well designed publicaly and privately funded programs of foreign assistance. What would have been, perhaps most informative was to provide a focus to the inquiry.

To begin with: The announcement ought to have made it clear that development assistance by NGO that is non-governmental organization accounts for only 15-20% of total development assistance; that the other 80% or so is provided by governments mostly by the United States under the auspices of the Agency of International Development( AID). According to statistics provided by the OECD development aid amounted to $134.8 billion in 2013. Development Aid provided by private voluntary agencies amounted to $29.7 billion in 2012 of which the US contributed $22.1 billion. Hence any effort to enhance such a contribution would be most welcomed. Another issue is that public sector donors as well as private donors have their “own’ agenda in dolling out said assistance. Most importantly is the fact that the host country is friendly toward such largess – that it would accept whatever strings donors are bound to impose. Hence it would have been helpful in shaping up a response— reinventing foreign aid proposal, to know whether or not a donor is likely to withhold assistance to a country based on its political standing.

It is worth noting that two centuries have passed since development assistance was inaugurated. The most successful of course is the “Marshall Plan” which was instrumental for the development of Europe following the destruction of WWII. But this is not the development assistance the solicitation of proposal has in mind. It seeks I believe ideas that would break the cycle of underdevelopment in the less developed world. In some sense, the GDN and the Gates foundation hope to elicit new suggestions as to device and put in place a successful (hopefully) assistance program. But once again: is there a shoe that would fit all. No one is likely to think so.

Few months ago I watched a couple of televised hearings by a “Congressional Committee” on foreign assistance. Appearing before the committee was an administrator from AID, as well as representatives from private agencies that are engaged in providing development assistance. Obviously the Congressional Committee in scheduling such hearings is acting as the “Watch Dog” guarding our interests as US taxpayers in that, it needs to insure for us that money taking out of our pockets yields a higher rate of return than if left there (not all obviously would agree, but then in a democracy one ought to believe that it is so). One of the issues that came up in one of those hearing was in relation to a program called “Power Africa”. Before the hearing started, and before hearing AID’s administrator makes his statement, I wondered what such a program is about. What “power” are we US citizens want to impair to Africa. Thankfully, the administrator did not keep me guessing for long. He was reporting on an initiative with a public- private partnership to double the number of people with access to “Electricity” in six focus countries: Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania. The program engages both the African governments and the private partners—the World Bank, the African Development Bank as well as other private partners in such effort.
As a taxpayer I applauded such effort, not only because electric power is an enabler but also because it conveys a message that we should always adhere to in our life: “let there be light”.

There are a host of private-public partnerships in Africa and other developing countries that aim to fill a gap in knowledge about resource use or supplement existing resources through access to resources not available at home. Physical and human capital is needed to be combined to produce output, whether such output is for consumption or to augment the productive capacity of a country. This in essence is what development assistance is all about. Unfortunately good intentions may not always yield good outcomes.

I have read and participated in conferences as well as written papers on some aspects of developments, in particular that which deals with the role of the public sector. On August 19-21, 2008, The Institute for Economic Policy Studies, Worcester, MA, USA sponsored a conference that was held in Gaborone, Botswana with a theme: “Developing the African Continent: Who is in charge”, papers from that conference appears in a special Issue of the journal; International Advances in Economic Research, August 2009.The conferees were academician as well as policy makers in the field of development. The most striking facts arising from the conference sessions are: first, an overwhelming level of corruption still persists in many sub-Saharan African countries, hence impacting the use of foreign assistance; secondly, that aid should be channeled into activities that not only complement and enhance current investment, but also provide the environment to attract further investment and thirdly, perhaps most significantly is that a “better understanding” of human development and its impact on growth is imperative for the development of a successful development assistance program.
Now I offer my “two cents” and not a “$20,000” suggestion:

An Integrated Approach to Development no matter in which Area, or for which Country.

In the “Power Africa” initiative, for example, it is not enough to build cables to supply electricity. It does not do much for a country where the majority of its inhabitants have no decent housing to make use of electricity, nor for education attainments if there are no schools that can make use of electric power to deliver education to students throughout the year. Perhaps that was the reason for the pilot project of the “Power Africa” program to limit the program to six sub-Saharan African countries.

A final word: Education should be the Road on which Development Assistance Ought to Travel.