In his book “Lords of Poverty: The Power, Prestige, and Corruption of the International Aid Business,” Graham Hancock has revealed that the local elites in the recipient countries, special interest groups and the aid bureaucracy itself are the beneficiaries of foreign aid.
The chief losers are taxpayers of donor countries and the poverty-stricken people of the developing countries, including Ethiopia. The local elites in the recipient countries immensely benefit from foreign aid in different ways. They engage their relatives and friends in the so-called donor funded programs and projects.
They employ accountants for cover up and justification of flow of funds for activities, reflected in implementation programs that are not effective.
The donors are those countries or institutions that provide fund for approved programs and projects. Donors officially boast of delivering the poor people from hunger, death, malnutrition, illiteracy and diseases through sector programs and projects.
They cooperate with the local elites in assigning local experts to implement programs and projects. These experts are paid from the fund allocated for project activities, the implementation of which are not related to the needs of the poor people in Ethiopia as they are not consulted in the project preparation. This consultation is required to address the real needs of the poor people directly.
D. Osterfeld reviewed the book that elucidated the aid “industry” as a lucrative business for those who administer its programs and projects. Incomes for employees of international agencies are determined by the “Noblemaire Principle,” named after Georges Noblemaire, an employee of the League of Nations in the 1920s.
According to this principle, salaries for employees of international organizations should be high enough “to attract as employees citizens of the country with the best-paid national civil service.” United Nations pay rates must therefore exceed “those of the federal civil service of the richest country on earth.”
Not only does base pay for U.N. officials exceed that for the civil servants of the richest country by an average of 25 percent. The fringe benefits are also far more lucrative. Promotion comes twice as fast for U.N. employees than for U.S. civil servants. It takes a U.S. civil servant 14 years to accumulate as much sick pay as a U.N. staffer is entitled to on his very first day. U.N. pensions exceed those of the U.S. civil servant by 43 percent. And this is only the beginning.
The international experts who are “condemned” to serve in the developing countries are compensated not only by hardship allowances, but also by the cheap cost of living in the place of assignment. Allowances are so varied to cover fee for child education, family support, housing rents or hotel accommodations as well as study tours.
The composition of international staff assigned to a program or project is a stunning one. If the director of an internationally financed program is from a certain country other staff or experts are bound to originate from the same country in most of the cases. Even where it is a requirement to employ local experts, excuses are created to engage related “specialists” from abroad as happened in Ethiopia.
In this case, local elites cooperate with program directors in view of benefits that may accrue to them for sabotaging the placement of a local expert. Where a post is left vacant for a long time, the budget for salary and benefits is returned abroad to the source for further abuse. Local experts’ monthly salary could be reduced by half if they do not cooperate with the power elites as in Ethiopia.
Influx of food aid: An increasingly large part of aid budgets is for travel, first class, of course. As Hancock revealed most of the travel is not to poverty-stricken areas in the less-developed world, but to “poverty seminars” normally held at posh hotels in exotic and very attractive locations.
In just one year, Hancock notes, the Executive Board of the Educational, Scientific and Cultural Organization received more than one and a half million dollars for travel and lodging. During the same time it spent a few thousands of dollars on education for handicapped children in Africa, and one thousand dollars only to train teachers abroad. Interestingly, despite the Noblemaire Principle which is supposed to attract experts, U.N. agencies increasingly rely on the expertise of “outside consultants.”
The minimum annual salary for a consultant is a hundred thousand dollars. The average salary is probably closer to one and a half times the minimum salary. Since the number of consultants is large, it costs more than twenty two billion dollars.
When the salaries of the regular employees are combined with the costs of consultants, the amount is well over half of all that is spent by governments on aid each year. In fact, “personnel” and associated costs, Hancock notes, absorb a staggering eighty percent of all U.N.
expenditures. Groups with political clout in the developed countries are also major recipients. The purpose of food aid was and is to help dispose of farm “surpluses” in the developed countries.
The tragedy is that the struggling farmers of the developing countries are often “driven out” of business by the influx of food aid. Similarly, the real rationale of other aid projects, as Hancock amply demonstrates, is not to help the poor in the developing countries but the giant corporations in the developed countries.
Thus, nearly all aid money distributed to the developing countries is actually spent in the developed countries in the form of purchase orders. “Western aid,” as Hancock puts it, is used “to create profits for Western companies.”
Hancock has shown that some of the richest people in the world have lived in the poorest countries of the world. They do this not by accident but by intent. Aid has been regularly siphoned off by leaders of the developing countries with the knowledge and thus “implicit approval” of the aid agencies themselves.
The agency word for this larceny and theft is “leakage.” This leakage amounts to billions of dollars, with an estimated ten billion dollars for the leaders of the Marcos of Philippines and about four billion dollars for President Mobutu in Zaire, to name just two. Who covers the cost of such thefts? This is very tragic for the taxpayers of the developed countries, and more disastrous for the poor in the developing countries.
Examples of corrupt aid programs: Citing just another example of corruption, Hancock referred to the Akosombo Dam on the Volta River in Ghana which was built with WB and other sources of money.
The purpose of building the dam was to provide “inexpensive” power to the US-owned VALCO aluminum plant and to the wealthy sections of Accra, Ghana. In the process thousands of villagers were displaced, without compensation, when the dam flooded their lands.
And since the dam’s completion, thousands of people living in the vicinity have been permanently “incapacitated” by river blindness. This is far from a unique case. Similarly, aid programs in places such as Indonesia and Brazil have resulted in massive losses of life.
These countries had received millions of dollars to fund huge resettlement programs. But, the result was the needless destruction of millions of acres of forests and the decimation of many of the indigenous tribes. As Hancock wrote it, some of the settlers
arriving in the resettlement areas had lost their prospects. The chance of for supporting themselves was virtually “zero.” In addition, thousands of the settlers had contracted a particularly virulent strain of malaria to which they had no resistance. Even the WB had acknowledged that the program had been an ecological, human and economic “disaster” of tremendous dimensions.
Very similar resettlement projects had been funded by the WB in other countries. In South-East Pacific countries, the destruction of millions of acres of rain-forest, bloody and savage fighting between ethnic tribes and the death of thousands of indigenous people was a disaster.
The ethnic tribes were killed for opposing their land used as a resettlement area. They had not been consulted of the program that was to be implemented on their land.
They were considered irrelevant by those who wanted to execute the program of resettlement. For Hancock this was conducted with the aid programs which were so corrupt that they were utterly “beyond reform” and should have been abolished as they neglect the people on the ground.
Criticism on and support for the book: If there was any criticism of the book, Lords of Poverty, it was by J. Hogan who wrote that Hancock offered “no alternative.” As the problems are so immense, critics contend that it would be “inhumane” to abolish all aid. For Osterfeld this point was well taken.
The reader was left with the feeling that if only the rascals could be thrown out and replaced by good, public-spirited bureaucrats, foreign aid could achieve its noble purpose. What was needed in Lords of Poverty was an “explanation” why foreign aid, by its very nature, politicizing society, could generate large bureaucracies.
Also, how foreign aid encouraged or even required recipient governments to pursue highly interventionist policies needed explanation. Similarly, how state intervention that scare off private investors and generate inefficiency would retard economic development should have been explained.
Perhaps one should not criticize an author for not doing what he “never intended” to do, Osterfeld insisted. He explained that as the subtitle of the book indicated, the Lords of Poverty focused on the “power, prestige, and corruption of the international aid business.”
Hancock has done a remarkable job. His book deserved wide readership. Osterfeld recommended further readings related to corruption, “Perpetuating Poverty, WB, IMF and the Developing World,” by D. Bandow, and also “Foreign Aid and International Crises” by the same author.
He also recommended to read “Third World Development: Foreign Aid or Free Trade?” by J. Majewski. Osterfeld himself wrote “The Fallacies and Failures of Foreign Aid,” which should be read for deeper understanding of the purposes of foreign aid to the developing countries.
In conclusion, the experience of the developing countries with regard to foreign aid seems to be true for Ethiopia. In the past, the development of programs and projects, which are the medium of aid flows, have
been developed by expatriates with little or no knowledge about the realities of the poor people who are the intended beneficiaries of aid. These instruments of aid are designed to serve for a given period of time, with provisions for periodic assessments of implementation.
During assessment, problems of implementation are supposed to be identified to prevent their recurrence in the future. But, this is fallacious as the “same problems” are targets to be solved in the next successive donor programs and projects.
There are two or three interested parties in an aid program. These are the recipient country, the aid facilitators and the sources of funds. In the last group could be included the people and governments of the developed countries who may desire to support the poor people of the developing countries.
The implementation of donor programs in the developing countries, including Ethiopia, entirely depends on the honesty of officials who are in charge of these funds. Beneficiaries of donor programs should also be involved in all aspects of assistance.
The Ethiopian Herald March 13/2021
