Personally, I think an aid economy is often counter-productive. Many NGOs are as inefficient as government organizations, and at a much higher cost. They also encourage a donor-driven economy based on reports rather than a people-driven one based on results. NGOs, including stuff like the UN, do a lot of good work and I don’t mean to take away from that. But I think the model may be a bit off. Maybe we don’t need foreign project coordinators making 10-20,000 per day. Maybe you could supplement a local government official’s salary that much per month and incentivize efficiency and decrease corruption. Maybe that money could be available for business loans, repaid to the government.
There’s an interesting article in Foreign Policy called a Marshall Plan for Africa. They say
The Marshall Plan was fundamentally different from the aid that Africa has received over the past four decades. The Marshall Plan made loans to European businesses, which repaid them to their local governments, which in turn used that revenue for commercial infrastructure — ports, roads, railways — to serve those same businesses. Aid to Africa has instead funded government and NGO development projects, without any involvement of the local business sector. The Marshall Plan worked. Aid to Africa has not. An African Marshall Plan is long, long overdue.
That sounds interesting to me. Rather than money that comes from the sky and goes mostly to administration, why not have money go into the system. Into peoples pockets here. Instead of bringing goods or food from abroad, buy it in Colombo or Vavuniya or Matara or wherever. Instead of hiring foreign project coordinators, keeping them in hotels and jeeping them outstation with translators, why not hire a local businessmen or someone already in the community.
In Colombo I meet people with more money than they know what to do with. I see figures which are, honestly, mind-boggling and nobody blinks. However, outstation, people are actually doing stuff and running businesses for little to no money. Instead of coming up with projects from Colombo or Geneva or New York, why not just offer micro-credit to Sri Lankan people, or actual credit for Sri Lankan businesses.
There are many businessmen who just want to restart a grinding mill or something and they need like Rs. 200,000. Meanwhile NGOs are spending 2 million on a website or printing booklets. I’m not saying you don’t need websites or booklets, but on some projects the administrative cost may simply not be worth it. It might be more useful to make that money directly available to people in the community.
The second part of FP’s Africa Marshall Plan talks about the money being repaid to the government. Now, there are people in government who work very hard for very little money. Like 6k even. Many people make less than their transport costs. So there is corruption. I mean, it’s wrong, but it’s also wrong if you work hard and you can’t do anything for your family. People that are talented in government service often get poached by NGOs for exorbitant salaries.
If NGOs could instead help government servants do their job and make ends meet that might make things a bit better. People are rewarded for corruption, but there isn’t as much incentive for doing right. Even NGO projects, being huge, have a lot of graft. People buy a lot of cars and equipment for temporary projects and the stuff disappears. The contracts are so big and bloated salaries so normal that a lot of stuff isn’t graft, but still shameful waste.
However, if you support loans to people and businesses and they’re repaying the government, then that might be sustainable. And I don’t mean just microfinance.
Take a look at the World Bank’s annual report, “Doing Business,” and you’ll realize that many African economies have never had a business market to fail — thanks to their governments’ dense, unnavigable regulations. “Doing Business” ranks countries according to how easy it is for citizens to start and run businesses — things such as registering a company, hiring and firing workers, getting credit, and so on. Poor countries in general and African ones in particular rank at the bottom of the list. The major reason is that their governments have never had an interest in fostering business because favor and aid for government and NGO projects comes so much easier. In essence, the market never failed because it never really existed.
The Marshall Plan in Europe came with conditions: Each country had to adopt policies that allowed its businesses to operate normally. It made the same offer to all of them, and those that refused got no aid. The offer went out to all Europe, but the Eastern bloc, under Soviet threat, declined. Some African countries will also decline. That means they don’t get the aid.
The aid economy sorta runs counter to having an actual one. As an example, one pet project is to plop down a bunch of computers in a village or city and run a free computer lab. However, very often there’s a guy in the community who scraped together some money to run a computer lab as a business. That guy goes out of business and the donor lab isn’t maintained and doesn’t really sustain or innovate or anything. If, instead, it was easier for the local guy to get loans and learn how to write business plans and stuff then that would create jobs plus computers.
Also, I sometimes feel a bit humiliated by the aid economy. I mean, people drive $50,000 cars and put their kids through school based on our national poverty. I appreciate what they doing, but I’d rather see a local guy on a motorbike getting tuition for his kid. I wish some of the money and power would go towards strengthening the business environment and government rather than administration of immediate needs. Fishing rods you know. Someday, I hope that Sri Lanka is able to say ‘so long, and thanks for all the fish‘.