Fight Terrorism By Aiding Poor

14 April 2002

At the United Nations conference last month in Monterrey, Mexico, world leaders agreed that the war on terrorism can only be won with a major effort to help the poorest.

President Bush pledged a 30 percent increase in U.S. development aid, providing a $10 billion three-year program of additional funds. European leaders also pledged to increase spending by 18 percent. Good news for the poor? Not necessarily. Despite the brave words and pledges, the rich countries will have to deal more honestly, practically and even more generously.

Half the world's population lives on less than $2 a day. A sixth of the population, more than 1 billion people, lives on less than a dollar a day. For most, this means worry about food and shelter, limited access to schooling and literacy, sickness without health care, no employment beyond menial labor, and lack of opportunity.

People living on the margin are easy recruits for terrorism, but also "nothing to lose" agents of deforestation and environmental devastation, unwitting carriers of deadly epidemics, unwilling participants in social breakdown in the cities, a threat to prosperity and security.

Picture the world as a large airliner. The Americans are reclining in first class, watching personal video screens, enjoying drinks and nuts. In business class, the Europeans and Japanese are being offered a selection of desserts. Curtained off in coach, the middle-income countries are being handed boxed lunches. The poor are huddled on the wings, some are clinging for their lives, others sawing off pieces to sell for scrap.

The events of Sept. 11 have shown that we ignore the poor at our peril. As Britain's Chancellor of the Exchequer Gordon Brown points out: "What happens to the poorest citizen in the poorest country can directly affect the richest citizen in the richest country."

Despite broad awareness of the problem and the need to fix it, there is disagreement, in particular between the Bush administration and the international aid finance institutions, the World Bank, International Monetary Fund and United Nations, on how and how much.

The United Nations wants the rich countries to give more -- as much as 0.7 percent of their national income -- to development aid. In cash terms, the United States gives $10 billion a year, more than any country except Japan, which gives $13.5 billion.

But, in economic terms the United States has the lowest aid budget of all rich countries, about 0.1 percent of national income. In 1990, the U.S. foreign aid budget stood at 0.2 percent of national income. Comparatively, Europe (0.33 percent), and Japan (0.28 percent) give roughly three times more today. And, compared to a Pentagon budget of $330 billion, which Bush proposes to increase to $380 billion this year, the aid budget is tiny.

The Bush administration says that more aid is not the answer. It says that existing budgets must be used better.

First, it says that to prevent waste, aid agencies must focus on "what works" and future funding should be tied to results. Second, it argues, recipient countries must be more responsible and accountable. Bush's Monterrey funding pledge will be given to poor nations only if they commit to political reform, open markets and the rule of law. Third, it says, the international agencies, the World Bank and International Monetary Fund, need to be re-organized.

These are good arguments, but the Bush administration is in no position to assert them. Most U.S. development aid is allocated for strategic reasons to middle-income countries like Israel, Egypt and Colombia. The priority here is foreign policy, not the poor. Around 40 percent of American aid goes to poorer countries, but without any particular emphasis on good governance or policy reform that Bush raises.

The last 50 years of development aid has a dismal history. But lessons of experience point clearly to "what works" in combating poverty.

First, perhaps obviously, the highest impact is achieved by aiding the poorest countries, rather than less-poor countries.

Second, good governance and policy reform matters, and aid works when linked to good economic policy.

Third, the closer one gets to the customer, the better. Get aid into the hands of the poor and involve them in managing the resources.

Fourth, some ways of spending are more effective than others. For example, helping people feed themselves through better seeds and small loans is better than giving food aid.

Fifth, some ways of funding are more useful than others. Funding that targets the poor, and is provided to achieve measurable results, is effective. Funding that comes with conditions is driven by foreign policy, or is "tied" to buying back goods and services from the giver, are less effective.

From this perspective, the international financial institutions, using money pooled from many countries, are far more efficient at targeting the poor than individual countries, including the United States.

Helping the poor is the next global challenge. We have good strategies for fighting poverty. We must deploy them or suffer the consequences. Signs exist that the global community is rallying to the call, but a change in attitudes and policies will be needed. Let's hope that doesn't take too long. The poor are sawing the wings off the global airliner as we speak.

John McKenzie, Ho Chi Minh City, Vietnam
Published in the Baltimore Sun © 2002, The Baltimore Sun

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