Laws Create Thieves and Bandits

Published on 10th January 2006

Part Four

Should corrupt regimes in future be excluded altogether from foreign aid? The new \'Millennium generosity\' points to big increases in official Western aid to the poorest and often most corrupt countries. Governments in Africa south of the Sahara, which are currently receiving US-$80 billion p.a. in official aid, are to be given $125 billion a year by 2010. However, the US-$ 1 trillion transferred to governments in Sub-Saharan Africa over the past 50 years, has produced woefully little benefit for the majority of Africans. Indeed, with few exceptions, African per-capita incomes have fallen. Many instances have been documented where copious aid led to high-cost waste, while simpler, cheaper solutions were overlooked. One typical example is the public health service \"in the poorest countries..... (which spend $ 50 000 – 100 000 on each life [of a child] saved, [although studies show) that child deaths could be averted for as little as $ 10 each\". Such failings can be explained by corruption in aid agencies and African governments. The consequence is that income is being redistributed from the poor to kleptocratic elites, creating corruption-poverty spirals. Foreign aid can then be counter-productive. Peter Bauer probably expressed it most poignantly when he said: \"To give money to the rulers on the basis of the poverty of their subjects directly rewards policies of impoverishment\". He concluded that \"development aid is.... clearly not necessary to rescue poor societies from a vicious circle of poverty. Indeed, it is far more likely to keep them in that state\". 

Governments that obtain a significant proportion of their budget revenues from foreign aid, as is the case in Sub-Saharan Africa and the South Pacific, need to do little to cultivate the national revenue potential by promoting growth and paying no attention to the aspirations of ordinary citizens. Aid creates a torrid climate for those who aspire to democracy.

The performance of the highly-indebted, poor countries in Africa contrasts with the East Asian experience, where foreign aid per capita has been negligible. It should be noted that the tax-paying citizens of many fast-growing East Asian countries have by now obtained a good measure of democratic control.

The compilers of the Corruption Perception Index have of course also asked whether foreign aid to corrupt regimes should be stopped. Their answer is that the poorest cannot simply be written off. \"If a country is believed to be corrupt, this should serve as a signal to donors that investment is needed in systematic approaches to fight corruption.... [Donors must] pay particular attention to \'red flags\' and make sure appropriate control processes are set up\". This procedure is onerous for donors and likely to be highly unpopular with recipients, as PNG Prime Minister, Michael Somare, told Australians recently, in no uncertain terms during a television interview. Criticisms of neo-colonialism and cultural inappropriateness are then easily invoked. But when it comes to rigorous accountability, there can be no room for cultural relativism.

Multilateral aid agencies have poor accountability to the taxpayers who support them. They often count \'success\' by the millions of dollars delivered. UN Secretary Koffi Annan\'s economic advisor, Jeffrey Sachs, who has been advocating huge increases in foreign aid, has criticized that too large a share of past aid has gone to foreign advisors. But accountability involves monitoring of the aid disbursement to ensure their effective use. This inevitably requires the intensive deployment of foreign experts in joint working parties of officials from donor and recipient countries. Such joint operations can serve as schools for honest and effective administration. The Australian-inspired joint body to administer Australian tsunami aid to Indonesia could well become a model worth studying and maybe emulating.

The Cheer Squad for Corruption

Eradicating corruption is as vital to prosperity and stability, as it is still unpopular. Although it is increasingly evident that graft is a cancer that can be cured, although business decisions to relocate capital and enterprises are now informed by political risk analyses and many young Third-World citizens agitate energetically against kleptocracy, the battle of ideas is far from won. The priviligentsia will defend its entrenched positions and privileges. They will argue against openness to trade, investment and ideas and condemn globalization. As long as the battle between individualism and collectivism is kept alive, the self-seeking cheer squad for corruption can rely on intellectual support. The corrupt can normally hide their dealings behind supposedly noble motives where there are few highly educated citizens, the press is subdued, political life is not transparent and revenue is easy because of resource wealth or copious foreign aid. When confronted by allegations of corruption, leaders resort to feigning offence and blame foreign businesses, journalists and think tanks. In polities without freedom and a certain level of education, the ruling classes can deflect criticism and maintain resistance to changing their ways.

International comparisons, such as the Corruption Perception Index provide valuable evidence and equip political leaders at home and abroad, who are honest, with a powerful instrument for the fight against the cancer of corruption.

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