XI. Lords of Poverty
America's Unknown Enemy: Beyond Conspiracy
Editorial Staff of the
American Institute for Economic Research
[1993]
| This is a review essay based on Graham
Hancock, Lords of Poverty: The Power, Prestige, and Corruption
of the International Aid Business (New York: The Atlantic
Monthly Press, 1989), 234 pp., $17.95, hardbound. |
In their enthusiasm to encourage the current momentum for democratic
political and economic reform in Poland, Hungary, the Baltic states,
and even Russia itself, many commentators have urged the Bush
Administration to provide generous amounts of economic aid to Eastern
Europe, no matter what the consequences for the Federal budget.
Although primarily an indictment of the international aid "industry,"
Graham Hancock's recently published Lords of Poverty
nevertheless may provide a useful perspective on this new foreign-aid
question. Hancock asserts that, no matter where it is directed, such
aid is "inherently bad" -- and almost invariably has damaged
both those it is supposed to help and those (taxpayers) who eventually
must pay for it.
Communist rule has, from an economic perspective, effectively reduced
a good part of the Eastern bloc to Third World status. Indeed, the
recent revelations of the impending economic demise of the Soviet
republics and their Warsaw Pact neighbors have inspired some policy
analysts to proclaim the need for massive aid to incipient
Eastern-bloc democracies. They now speak of stunted development in
Russia and Poland in much the same terms that previously have been
used to describe the economic woes of Latin America, Africa, or the
Asian subcontinent.
Not surprisingly, they also are recommending aid prescriptions
similar to those that recently have been applied to troubled Third
World debtors -- notably, infusions of Western capital via bilateral
and international-agency "structural adjustment loans" to
Eastern European governments. Reportedly, President Bush is prepared
to discuss providing access to such aid to the Soviet Union (for
example, via Soviet participation in the IMF and the World Bank) at
his sea-going summit with President Gorbachev next month [December
1989 -- ed.].
Economic Aid for Whom?
Given this marked turn of events, it may be useful to review briefly
one recently published chronicle of the effects of such aid in "traditional"
Third World nations. According to Graham Hancock's
Lords of Poverty, virtually all government-sponsored aid to
underdeveloped nations has been disastrous. Indeed, he recites a
litany of abuse and incompetence in the administration of
international aid by the United Nations, the World Bank, and other
organizations engaged in "humanitarian" pursuits that would
more than fill the space available here. Suffice it to say that much
of the aid provided through international organizations has gone not
to those for whom it was supposedly intended, but rather to enlarge
the fortunes of the aid bureaucrats themselves -- or to entrench Third
World governments that have little or no interest in promoting the
commonweal of those they govern. Where aid actually reached its
intended destination, it usually was wasted on projects that did
nothing to contribute toward (indeed, stunted) economic development.
In Hancock's somewhat ponderous prose:
"[A)t every level in the structure of almost all our
most important aid-giving organisations, we have installed a tribe
of highly paid men and women who are irredeemably out of touch with
the day-to-day realities of the ... underdevelopment which they are
supposed to be working to alleviate. The over-compensated aid
bureaucrats demand -- and get -- a standard of living often far
better than that which they could aspire to if they were working,
for example, in industry or commerce in the home countries. At the
same time, however, their achievements and performance are in no way
subjected to the same exacting and competitive processes of
evaluation that are considered normal in business. Precisely because
their professional field is 'humanitarianism' rather than, say,
'sales', or 'production' or 'engineering', they are rarely required
to demonstrate and validate their worth in quantitative, measurable
ways. Surrounding themselves with the mystifying jargon of their
trade, these lords of poverty are the druids of the modern era
wielding enormous power that is accountable to no one."
[pp.32-33]
It Hasn't Worked in the Third World
Hancock observes that "the ugly reality is that most poor people
in most poor countries most of the time never receive or even make
contact with aid in any tangible shape or form: whether it is present
or absent, increased or decreased, are thus issues that are simply
irrelevant to the ways is which they conduct their daily lives. After
the multi-billion-dollar 'financial flows' involved have been shaken
through the sieve of overpriced and irrelevant goods that must be
bought in the donor countries, filtered again in the deep pockets of
hundreds of thousands of foreign experts and aid agency staff, skimmed
off by dishonest commission agents, and stolen by corrupt Ministers
and Presidents, there is really very little left to go around. This
little, furthermore, is then used thoughtlessly, or maliciously, or
irresponsibly by those in power -- who have no mandate from the poor,
who do not consult with them and who are utterly indifferent to their
fate." [p.190]
"Aid is not bad, however, because it is sometimes misused,
corrupt, or crass; rather, it is inherently bad, bad to the bone, and
utterly beyond reform. As a welfare dole to buy the repulsive loyalty
of whining, idle and malevolent governments, or as a hidden,
inefficient and inadequately regulated subsidy for Western business,
it is possibly the most formidable obstacle to the productive
endeavors of the poor. It is also a denial of their potential, and a
patronising insult to their unique, unrecognised abilities."
[p.183]
"To continue with the charade seems to me to be absurd. Garnered
and justified in the name of the destitute and the vulnerable, aid's
main function in the past half-century has been to create and then
entrench a powerful new class of rich and privileged people. ...At the
same time ... it has allowed governments characterised by historic
ignorance, avarice and irresponsibility to thrive; last but not least,
it has condoned and in some cases facilitated -- the most consistent
and grievous abuses of human rights that have occurred anywhere in the
world since the dark ages." [pp. 192-3]
And It Won't Work in "Formerly Developed" Countries
With respect to the current situation in Eastern Europe, one might
suppose that international economic aid might have a better chance of
promoting useful results. As "formerly developed" countries,
for example, Poland and Hungary (and some parts of the Soviet Union)
would seem to be in a better position to put subsidized capital to
good use if they are willing to make the "structural adjustments"
upon which international economic aid of the IMF-World Bank variety
has become conditional.
Few would question the desirability of promoting many of the changes
-currency reform, cuts in Government spending, elimination of
subsidies and price controls, and the privatization of
Government-owned monopolies -- that the World Bank loan provisions are
designed to advance.
However, the problems Hancock describes have not gone away: the aid
bureaucrats are more firmly entrenched than ever. And structural
adjustment loans are made to governments that, providing they make the
mandated policy changes, in effect are given
carte blanche with the funds so obtained. In reference to the
Third World leaders who have been recipients of such aid, Hancock
cautions: "For such people money has probably never been easier
to obtain than it is today: with no complicated projects to administer
and no messy accounts to keep, the venal, the cruel and the ugly are
laughing literally all the way to the bank. For them Structural
adjustment is like a dream come true." [pp.59-60]
These invitations to larceny aside, and even accepting for the moment
that the new leaders of the Eastern European reform movements (if they
are able to hold onto power) are sincere in their desires to promote
political democracy and economic prosperity in their beleaguered
homelands, a fundamental problem remains. Namely, there simply is no
way that Governments -- in the East or in the West -- can know what
investments will produce the best results. Rather, that is what
markets driven by the judgments of private investors decide.
Even under the "new and improved" provisions of
international aid agencies, the aid givers and the aid receivers still
refuse to acknowledge this inescapable element of economic life. What
this means is that, regardless of how corrupt or venal the parties to
the aid transactions may or may not be, any Government aid provided to
our "former" foes most likely will be money down a rathole.
But then, it is only taxpayer money.
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