"Whenever I go into a restaurant, I order both a chicken and an egg to see which comes first"

Saturday, July 27, 2013

Foreign Aid–Giving For Guilt, Giving For Gain

Peter Buffett, son of Warren Buffett, writing in the New York Times (7.27.13) criticizes his father’s brand of ‘conscience washing’ – giving more to assuage the guilt of having accumulated so much wealth by giving it away, than investing seriously in economic development:

[Foundation giving] just keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep the pot from boiling over. Nearly every time someone feels better by doing good, on the other side of the world (or street), someone else is further locked into a system that will not allow the true flourishing of his or her nature or the opportunity to live a joyful and fulfilled life.

This may be true, but it is probably unfair to single out private foundations.  The Gates Foundation long ago decided to invest in finding vaccines for AIDS, TB, and Malaria, and did so by issuing a challenge to private pharmaceutical companies.  “Develop a vaccine”, Gates said, “and we will buy it all up”.  This made perfect sense, for Gates knew that none of the ‘participatory, community-based, and culturally-sensitive’ did not work.  The ‘development’ battlefield was littered with the detritus of failed projects which never had a chance given host government corruption, venality, and indifference; and donor governments beholden to national, parochial, political interests.  Few of the programs intended to improve health and nutrition, for example, ever had a chance because of poor design, limited oversight and evaluation, and hidden agendas.  Most importantly, projects failed because government leaders knew that they were on the receiving end of entitlements – donors really didn’t care about results, only the geopolitical advantages to be gained by pouring money down the sluice for leaders they hoped to influence – and they simply took the money and sent it to Switzerland.

Gates’ original intention was to bypass all the PC nonsense and get to hard, scientific facts.  Vaccines save lives, and the historical evidence is clear – polio has been almost eradicated, and measles is on the run.  In vaccination campaigns there are no fluffy intermediaries as interested in the cultural sensitivity or inclusion as they are results.  A needle in the arm equals a life saved.

The Clinton Foundation, like many others, also supported George W. Bush’s campaign to address AIDS, TB, and Malaria and the Global Fund which was set up to administer multi-lateral donor money.  President Bush focused primarily on treatment (e.g. anti-retroviral drugs to prevent full-blown AIDS) but ignored the equally important prevention aspect of the disease.  He smartly wanted to avoid the political minefield of condoms, sex education, and prostitutes and still make a difference.  His programs did indeed save thousands of lives.

In other words, both foundation- and government-sponsored programs can be effective if they act like businesses – and certainly Gates, Warren Buffett, and Clinton all know about investment and rate-of-return.  Investments in products (drugs, vaccines, insecticide-treated bed nets) are easier to control, supervise, and measure.  They have a known input, and a quantifiable output – decreased morbidity and mortality.  There is nothing waffly about the proposition.

Therefore it is hard to find fault with this businesslike approach to health – invest in a sure thing that is guaranteed results.  Vaccines and anti-retrovirals work. While it may feel good to give away millions to these reality-based programs, it still is a good business decision.

The problem comes with giving away money for anything other than proven interventions with a high cost-benefit ratio. Programs which focus on behavior change – more antenatal checkups, more green leafy vegetables, more responsible sex – have always been iffy because of their highly subjective nature.  I worked for over 40 years in this field, and I saw more cockamamie ideas that came out of cultural left field than I ever imagined possible.  If programs to change deeply-rooted socio-economic and cultural behavior are designed by Americans from Peoria, what can one expect? Nevertheless, the belief that the means are as important as the ends – i.e., the process of participatory, inclusive, community-based decision-making is as important as reducing illness and death – persists.  The projects are as fanciful as any concocted by Puck or Oberon.

Unfortunately the foundations, once solidly business-oriented, have been coopted by this philosophy.  As they expanded, they staffed up with retreads from USAID who did not think in this bottom-line, cost-benefit, rate-of-return way but in the idealistic ways of the past.  Not long ago I worked for a Gates-funded NGO which was given a genius grant – no 100 page Request for Proposals, no 100 page grant submissions, no bureaucracy, meddling, or second-guessing, only $50 million to reduce infant and child mortality however we saw fit.

Instead of taking the Gates approach – flood East Africa with the new artemisinin-based malaria drugs and reduce infant mortality rapidly and significantly; or mount national campaigns to vaccinate women against tetanus (neonatal tetanus is responsible for many infant deaths), the NGO refused.  These programs were too ‘top down’, to exclusive and non-participatory.  In other words, reducing mortality and morbidity were fine and dandy IF you did it in the right way.

Rather than push his father back to the original sound business model, Peter Buffett hammers it:

With more business-minded folks getting into the act, business principles are trumpeted as an important element to add to the philanthropic sector. I now hear people ask, “what’s the R.O.I.?” when it comes to alleviating human suffering, as if return on investment were the only measure of success.

This is way off the mark.  It is just the ROI mentality of the early Gates that initiated the product-based, fluff-less vaccine, drug, and bed net programs that held so much promise and have yielded results.  It gets worse.  Peter Buffett suffers from the sins of the fathers, and has a guilt far more profound than beloved pater; and like many before him, want to take out his resentment on the American Capitalist System:

Micro-lending and financial literacy (now I’m going to upset people who are wonderful folks and a few dear friends) — what is this really about? People will certainly learn how to integrate into our system of debt and repayment with interest. People will rise above making $2 a day to enter our world of goods and services so they can buy more. But doesn’t all this just feed the beast?

Hernando de Soto, a well-known economist, has promoted a very simple idea – land titling – to help the poor. If a man owns and has legal right to the land he works, he has capital; and with that capital can secure bank loans to enable him to be more productive and to generate more wealth.  Property rights are at the very heart of capitalism and democracy, says de Soto, so why should the Third World poor be disenfranchised?

Land titling leads to bank loans which lead to more accessible banks which leads to competition among banks, etc., all of which leads the poor farmer into the 21st century.  Yes, he may eventually purchase American goods and services, but he will make money first – money that will enable him to demand better health care and education and allow him to escape the patronizing cycle of foreign and government assistance.

My view, expressed many times on this blog, is that the whole enterprise of foreign assistance – whether private (foundation) or public (government) should be dismantled. Countries should be forced to borrow on the open market for only those projects which will produce, you guessed it, a good ROI.  In order to have access to international capital markets, these countries would have to shape up, reform their corrupt governments and show some progress.  Most of the hundreds of billions of taxpayer dollars throughout the donor world of the US and Western Europe have been wasted through idealistic or politically-motivated projects, so why not ditch them now and stop the hemorrhage?

In any case, foreign aid will not end soon; but I think Peter Buffett is a bit too hard on his father and friends.  They are no better or worse than the civil servants cranking out senseless ideas in the Ronald Reagan building.  If only they got back to their business roots, they might do some good.

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