Foreign Aid, an Aid to America's Self-Interest
Foreign aid and assistance are essential instruments of donor nations' foreign policy. However, they are often sold to the public as humanitarian favors to alleviate the misery in the countries receiving the aid. But the true agenda could be that the more stable and prosperous recipient countries are, especially where progress is underway, as in emerging markets, the better foreign interests are served.
The foreign interests served may relate to security problems
associated with extreme poverty in many places of the world, massive migration
of refugees, environmental disasters, or even health concerns like the spread
of AIDS, which all may lead to the breakdown of nations and the failure of
international order, situations which are certainly unwelcome and in which the
heavy losers would be the wealthier nations. The economic well-being of the
aiding countries is said to be ensured when their trading partners in the
developing world are more stable, progressive, and able to provide markets for
the goods and services of the former. Nonetheless, NICs such as Taiwan and
South Korea as recipients of massive foreign aid during the Cold War were seen
not so much as potential sources of profit but as strategic bulwarks against
communism. The underlying motive therefore was still the same, selfish interest
(of the aiding countries).
Even now, notwithstanding the claims that the developing countries are taking away the jobs of the advanced economies, the fact is that in the U.S., for example, unemployment remains low because U.S. high-value exports to these markets have been growing. Emerging markets now represent the fastest-growing destination for such U.S. goods as telecommunications and power equipment as well as financial and other expert services.
If history is any guide, the advent of new technology in the late 19th century allowed the production of goods in enormous quantities. But people in the U.S. and Europe could not buy all the goods in the market, so producers had to look in Asia, Africa, and Latin America, where people’s tastes and customs could be recast, to create new markets. Nationalism in fact took a new twist, which included winning the imperialistic race to acquire new territories ahead of rival nations. That was the real agenda wrapped up in a supposed missionary motive to transmit Western ideas to “backward” peoples—backward because their religion and culture differed from those of the West. Although there were conscientious people in the dominant powers who opposed and exposed the pretense of the “white man’s burden,” which to them was nothing but a race to rake up colonial wealth and carry it back home as fast as possible, these opponents of colonialism and imperialism were a minority and not mainstream, just like the anti-globalization protesters in Seattle and in Washington, D.C. who today get the label of anarchists.
But even as foreign aid as a humanitarian program is merely ancillary to the real agenda of advancing self-interest, the call for its effective and efficient management deserves more than a critical look, especially from the policymakers of the U.S., still one of the largest foreign aid contributors.§
Not too long ago, the power reform and privatization initiative in the Philippines backed by IMF, World Bank, and ADB (Asian Development Bank) which was marred by a payoff scandal or “briberization” (to use the term attributed to renegade former World Bank Chief Economist, Joseph Stiglitz) and high-level collusion that unfolded in the Philippine congress presented itself as just another telling argument for instituting meaningful reforms into the foreign aid system.¨
Of relevance here is a portion of the December 1999 report by the Joint Economic Committee of U.S. Congress on the activities of IMF:
Evidence of widespread corruption in several countries
receiving IMF assistance raises questions about the relationship between such
assistance and corruption. While some degree of corruption is present in all
countries and is often ‘home-grown,’ there are a number of reasons to believe
that under certain conditions, government-to-government assistance can actually
promote corruption.
Research suggests that the more pervasive the public sector’s role in the
economy is, the more likely corruption is to flourish. Foreign assistance,
however well-intentioned, can promote the very conditions fostering corruption.
Such aid can strengthen existing public sector bureaucracy, result in larger
government spending and a larger public sector (relative to the private
sector), entrench a corrupt status quo elite, and foster delay in reforming
existing corruption.
All of this is directly relevant to current IMF operations.
IMF funds currently can be distributed to corrupt public bureaucracies and
elites and are often (unwittingly) used to promote those conditions fostering
additional corruption. Despite widespread evidence of corruption, IMF lending
generally has not been associated with adequate safeguards, controls, or
pre-conditions to prevent corrupt misuse of borrowed funds. This lapse suggests
IMF lending may work to foster corruption. Reducing or reforming IMF lending,
imposing strict conditionalities, and/or establishing reliable monitoring
methods appear to be alternative remedies available at this time.
A quarter of a century ago, or in December 1977, the U.S. Agency for International Development reported on the state of impoverishment of the Filipinos:
Almost eight decades after Admiral Dewey steamed into Manila Bay, visitors to many rural areas of the Philippines today would see conditions similar to those first seen by Americans in the last century—a farmer in the field with his water buffalo; women washing clothes in the stream; homes without electricity, water, or toilets; malnutrition, especially among infants and children; no paved roads at all; no irrigation; no doctors or dentists.
Going further back to the 1935 constitution adopted during the commonwealth period of American tutelage, Delegate Miguel Cuaderno, in lauding the provision authorizing “the expropriation of lands to be subdivided into small lots and conveyed at cost to individuals,” articulated that such provision “will prevent the repetition of the history of misery, trials, and tribulations of the poor tenants throughout the length and breadth of the Philippine Islands.”
Now, despite an estimated $9.55 billion of aid commitments and assistance given by foreign aid establishments to the Philippines just from 1992-2002,15 the repeated “history of misery” is still the story of the impoverished Filipinos.
Does more aid mean more laggard economic performance?
In February of 2003, Maryland-based consulting firm Development Alternatives, Inc. (DAI), a recipient of around $40-million grant from USAID, was accused by some Philippine senators (initially by Senators Ralph Recto, Joker Arroyo, and Sergio Osmeña III) of being in cohort with Accelerating Growth and Liberalization with Equity (AGILE), a USAID-funded activity, in directing Philippine policies on economic and financial issues fueling speculations that AGILE holds sway over the Philippine President’s economic advisers and various departments of the government.
The U.S. Embassy however explained the Philippine government and USAID jointly supervise AGILE through a steering committee chaired by the Department of Finance.
“The committee,” the statement issued by the U.S. Embassy attempted to explain, “meets every six months to ensure that the purposes for which organizations use AGILE’s assistance are high-priority projects consistent with the Medium-Term Philippine Development Plan. AGILE always assists interested local partners and does not implement activities of its own. It is neither an NGO nor a lobbying group.”
Senator Recto however insisted the lobbying efforts of AGILE “(bears) the imprint of U.S. interests.”16
Even more apprehensive and critical was Senator Arroyo. Inq7.net quoted him as saying: “I don’t know whether the Supreme Court realizes they were being used, that the DoJ, meaning our justice system is already being infiltrated by AGILE, or even Congress.”17
According to USAID website,18 however, many of its economic development and governance activities are implemented under AGILE whose program “aims to accelerate economic policy reforms, generate growth, create jobs, and reduce poverty.” AGILE assistance, by USAID’s account, has been used in the Philippines by a wide range of government agencies (such as the National Economic and Development Authority, Department of Finance, Securities and Exchange Commission, Bangko Sentral ng Pilipinas, National Telecommunications Commission, Bureau of Customs, Philippine Stock Exchange, Department of Transportation and Communications, and the Department of Agriculture) and by non‑governmental organizations (such as The Asia Foundation, the Center for Research and Communications, and the Foundation for Economic Freedom) supposedly to advance the national agenda for economic policy reform by combining technical analysis with policy advocacy, mobilizing advisors and consultants from the Philippines’ leading firms and universities, as well as from international sources, arranging training and study tours for decision‑makers, and helping to expand public information and open discussion on important issues including those affecting the protection of intellectual property rights, the exploitation of biotechnology and grain sector reforms. USAID acknowledges funding AGILE whose activities are in turn implemented by a consortium of consulting firms with extensive experience in policymaking, led by DAI.
Following this controversy, Congressman Florencio Abab has confirmed reports that AGILE representatives have coordinated with House members in crafting the contentiously anomalous Power Reform Law.19
In the Philippine Senate, joining the critics was Senator Aquilino Pimentel who sounded even more to the point. He said: “AGILE officials may go scot-free on the pretext that the senators are busy with the (2003) budget. The budget deliberations pale in importance compared with the damage to the national sovereignty and integrity caused by the massive penetration of the Philippine bureaucracy by this foreign-funded lobby and study group.”20
“It’s too bad, I guess,” said U.S. Ambassador Richard Ricciardone, “that so many people are critical.”
If for no other unwholesome consequences, this insidious exercise of backseat patriarchy, a friary in 21st-century frock, best exemplified by AGILE’s many-sided parenting roles has stunted the Filipinos’ ability to germinate their own independent visions of nation-building, assuming it had not yet caused a permanent lesion to the national self-esteem.
Criticizing US “meddling” on the appointment of Angelo Reyes’ successor as defense secretary, Max V. Soliven wrote: “That’s what we get for continuing to be a mendicant nation: the almsgivers believe it their imperial prerogative to run the entire shabby neighborhood. We can’t even shout, “Yankee, go home!” Because they’ll sulk, but they won’t go home.” (Philstar.com, August 31, 2003)
Aids, assistance, support, doles, or bribes in whatever guise given in return for continued allegiance of former colonies or dispensed in the colonizer’s interest are, by Philippine experience, recipes for failures.
Then, they declined,
degrading themselves in their own eyes; they became ashamed of what was their
own; they began to admire and praise whatever was foreign and incomprehensible;
their spirit was dismayed and it surrendered.©
§Although relative to other donor nations, US foreign aid, at 0.10 percent of the nation’s GDP, is still strikingly miniscule given the size and strength of the US economy.
In March 2002 (after the original
posting of this piece) President Bush announced the Millennium Challenge
Account (MCA) initiative, which is supposed to increase the United States
assistance to developing countries by 50% in the next three years over current
levels by 2006. The avowed purpose of MCA is to improve the economies and
standards of living in qualified developing countries. More
specifically, to reward sound policy decisions that foster good governance,
investment in their people and economic freedom. The initiative admits that in
countries where poor public policy dominates, aid can even become detrimental
to the very citizens it is intended to help. There is a clear indication the MCA
is just part of Dubya’s national security strategy (read: “those who are not
for us” would be ignored). Unfortunately, these countries are among those in
most need of assistance.
¨The Philippine Congress was hesitant to pass the power reform initiative but during its final deliberation, there were reports of massive bribes given to Philippine legislators to pass the bill into law, which were exposed by two members of the House of Representatives, Etta Rosales and Rene Magtubo. The two lawmakers claimed they were offered half a million pesos each. There was no official finding establishing ADB, the lead agency, was involved, but certain critics still held ADB responsible for the “briberization” because of the bank’s prodding to rush the bill through the legislative process.
©Excerpts from The Philippines a Century
Hence, an essay by Jose Rizal.
15. “RP needs key reforms to make foreign
aid effective—Officials,” January 8, 2003, Philstar.com.
<http://www.philstar.com/philstar/News200301160702.htm>,
citing Jonathan Uy, a public investment officer at the Socio-Economic
Planning Department, RP.
16. Sammy Santos, “Agile not a lobby
group—US,” February 20, 2003, Philstar.com.
<http://www.philstar.com/philstar/archive/archive.htm>. February 20,
2003.
17. Lira Dalangin, “US‑funded lobby group
hit
for meddling in RP affairs,” February 19, 2003,
Inq7.net. <http://www.inq7.net/brk/2003/feb/19/brkpol_17‑1.htm>.
18. February 2003, usiad-ph.gov.
<http://www.usaid‑ph.gov/economic%20policy%20agile_usaid.htm>.
19. February 21, 2003, bworld.com.ph.
20. Jose Galvez, “Pimentel: Investment expert should testify on AGILE,” February 26, 2003, Inq7.net.<http://www.inq7.net/brk/2003/feb/26/brkpol_10‑1.htm>.