America’s China Policy Is Not Working
The Dangers of a Broad Decoupling
To the Editor:
In "The Development Challenge" (March/April 2005), Jeffrey Sachs has correctly and forcefully emphasized how stingy the U.S. government is with foreign aid. Regarding Africa, Sachs points out that if sums for emergencies, military assistance, debt service, and research work are deducted, U.S. assistance in 2003 amounted to less than $1 billion for more than 700 million people.
But the sad fact is that even if the United States and other countries were much more generous, it would not likely do much good for the world's poorest countries, because they are undermined by corruption. A 2004 World Bank report on corruption noted that bribery is a trillion-dollar industry, causing far more wealth to flow from poor countries to rich countries than the poor countries receive in foreign aid. Whereas an estimated trillion dollars of foreign aid was given to poor countries between 1950 and 2000, at least five percent of the world's domestic product (amounting to $1.5 trillion in 2001) goes into the financial markets of wealthy countries in the form of money laundering. Focusing on Africa, The Economist reported that 80 percent of the funds lent between 1970 and 1996 "flowed out as capital flight in the same year." Robert Guest, the magazine's Africa editor, estimates that this amounts to about 40 percent of Africa's privately held wealth. In his book The Shackled Continent, Guest goes on to note that although a "Marshall Plan for Africa" (as advocated by many supporters of foreign aid) might be a good idea, "Africa has already received aid equivalent to six Marshall Plans."
In 1983, Lagos, Nigeria's largest city, with eight million people, was declared "the dirtiest city in the world" by the Guinness Book of Records. Despite a large 1986 World Bank project, totaling $164.3 million, there has been no real improvement, according to observers, with serious consequences for public health. Quoting a Nigerian newspaper, an enabling environment "cannot be achieved when the revenue the states and local councils need is appropriated by the center and doled out as largesse."
On the whole, the World Bank itself has judged a minority of its projects to be "sustainable"; and for the poorest, often most indebted countries (including half of the world, living on $2 a day), it estimates that fewer than one in four projects are sustainable. A 1997 evaluation found only 19 percent of policy-reform projects (the so-called structural adjustment lending) performing satisfactorily. In a 2004 World Bank review of anticorruption activities in 52 countries from 1997 to 2002, not much progress was found because "corruption is grounded in political factors and social fragmentation over which the Bank has limited influence."
Can anything be done to reduce corruption in Nigeria and other poor countries so that foreign aid will be more effective? The World Bank should become more like an ordinary bank, starting with small loans for projects desired by a particular country, with amounts gradually increasing based on progress made. For Nigeria, this would mean requiring the government to reform its civil service, police, and judiciary to be eligible for credits specified in the World Bank's annual report. The bank could give Transparency International responsibility for determining this eligibility. Such a practice might reduce the diplomatic difficulties encountered in fighting corruption and uphold the legal stipulation that the bank "should refrain from intervening in the country's political affairs."
Author of The Mysteries of Development: Studies Using Political Elasticity Theory