Tag: foreign aid

No Discernible Rise in Wellbeing? The Data Suggests Otherwise…

Economist Jeffrey Sachs of Columbia University recently made this claim (emphasis mine):

“We’re so rich in our total production and in our capacities to do things that we could solve absolutely fundamental challenges, such as ending extreme poverty or addressing climate change or preserving biodiversity without much effort … it cannot be the most important issue in the world whether the U.S. grows at another 3% or 3.5% or 2.9% a year, when over the last 65 years there’s been no discernible rise in wellbeing

That is the theme of his new book, The Origins of Happiness.

By “we” Sachs appears to mean the U.S. and other rich countries and calls for their governments to engage in wealth transfers to poor countries and a plethora of environmental projects. What he does not seem to realize is that humanity is already making swift progress—through the free actions of billions of individuals—toward ending poverty and better preserving the environment.

Time for Washington to Just Shut Up

The military regime in Cairo continues to kill supporters of ousted president Mohamed Morsi with Washington’s financial support. The Obama administration is turning hypocrisy into an art form. 

Washington labors with the delusion that it controls the world. The administration insists that it must preserve its influence by giving more money to the generals in Cairo. Yet when has the United States ever exercised influence in Egypt?

For four decades American taxpayers have subsidized dictatorial regimes. The administration tried to save Mubarak from revolution, before supporting his overthrow. Washington’s attempts to convince President Mohamed Morsi to rule more inclusively, and military commander Gen. Abdel Fattah al-Sisi not to stage a coup, failed completely. Now the coup leader is ostentatiously ignoring the administration’s plea that he not force the Muslim Brotherhood underground.

Yet the president refuses to acknowledge the military coup, which would require the cut off of U.S. aid. If that happened, says the administration, Gen. al-Sisi might ignore American advice!

As I point out in my latest Forbes column:

It would have been better years ago had American officials simply shut up and done nothing.  No money would have been wasted.  Washington’s impotence would not have been demonstrated.  The U.S. would not be complicit in decades of military rule.

Alas, Egypt is not the first instance in which the U.S. government has managed to look stupid while spending a lot of money.  In fact, that is far more the rule than the exception for Washington.

For decades Washington has given away tens of billions of dollars a year for economic “assistance.” Among the lucky recipients? Crackpot communists such as Nicolae Ceausescu’s Romania and Mengistu Haile Mariam’s Ethiopia.

As in Egypt, local despots quickly learned that U.S. officials hate to admit failure and end assistance. So the money continues to flow no matter what.

Around the world Washington officials cheerfully talk about the importance of democracy while ostentatiously backing autocracy. Today the hypocrisy is most flagrant in Central Asia and the Middle East. Indeed, the administration praised the “Arab Spring” while supporting repression in Bahrain, Saudi Arabia, and now Egypt.

Much ink has been recently spilled on preserving American credibility after President Obama made Syrian use of chemical weapons a “red line” for intervention. In fact, Washington routinely draws meaningless red lines around the globe, which are routinely ignored.

American officials never learn!

In Egypt Washington has combined equal parts hypocrisy and futility. U.S. officials are never content to just shut up and stay home. If President Obama wants to leave a positive foreign policy legacy, he should do and say less abroad.

Egypt’s Vanishing Currency Black Markets

Despite escalating tensions between Egypt’s new military-backed government and supporters of ousted president Mohammed Morsi, there is at least one positive development coming out of the Land of the Nile. Yes, at long last, some semblance of stability appears to be returning to Egypt’s economy.

After the ouster of President Hosni Mubarak in 2011, the Egyptian economy took a turn for the worse. In particular, the Egyptian pound began to slide shortly after Morsi and his Muslim Brotherhood-backed government took power, sparking the development of a black market for foreign currency. The accompanying chart tells the tale: the official and black-market EGP/USD exchange rates began to diverge sharply in late 2012. In recent weeks, however, they have converged.

Recent currency auctions by the central bank, coupled with improved expectations about the country’s economic prospects, have begun to buoy the struggling pound. Indeed, the black-market exchange rate is now 7.13 EGP/USD, very close to the official rate of 7.00 EGP/USD. So, with Morsi, the black market appeared, and with the military’s re-entry, the black market has all but vanished.

The Egyptian stock market is echoing the confident sentiments displayed by the foreign exchange markets (see the accompanying chart). But, it remains to be seen if this newfound confidence in the Egyptian economy will be sustained.

Kick Egypt off the Foreign Aid Dole

The United States has spent decades attempting to micromanage the Middle East. The result is a long series of disastrous failures. Egypt is the latest example.

Almost everyone in Egypt now blames America—despite almost $75 billion in financial assistance to Cairo over the years. Instead of backing away, President Barack Obama is digging America in deeper. The administration is ignoring U.S. law by continuing financial aid.

The United States turned Egypt into a well-paid client during the Cold War after Egypt switched sides and later made peace with Israel. But the case for continuing subsidies has disappeared.

The law requires halting assistance. If what happened in Cairo was not a coup it’s time for an update to George Orwell’s 1984. In fact, it appears that the military planned its takeover for months. 

The Egyptian military is a praetorian institution which has been the foundation of dictatorship for a half century. Egyptian military officers are pampered apparatchiks who control as much as 40 percent of the economy. They always have served power and privilege rather than democracy and liberty. 

Moreover, foreign “aid” has subsidized Egypt’s catastrophic economic failure. Like government-to-government assistance elsewhere, American subsidies have discouraged economic reform. 

As for political influence, Cairo long ago realized that it could count on receiving Americans’ money irrespective of its behavior. Egyptian governments have never listened to Washington’s advice regarding either economic or political reform. That hasn’t changed since the coup.

Deputy Secretary of State William Burns visited Cairo a couple weeks ago and activists on both sides refused to see him. The top military leader met with him, but ostentatiously ignored Burns’ pleas. 

Even if the money theoretically brought influence, the Gulf States have promised Egypt at least four times as much as Washington. Why should Cairo listen to America?

The military already is well-funded domestically, and much of America’s assistance goes for prestige weapons, such F-16s. Nor does Washington need to pay the generals not to break the peace with Israel. They know that conflict with Israel would be suicidal. 

Unfortunately, the liberal opposition is living an illusion if it believes that security forces which backed dictatorship for six decades now represent liberal values. As I point out in my new Forbes online column:

[I]t will not be long before those who advocate democracy and liberty find themselves in the army’s cross-hairs. Literally, given the military’s penchant for using live ammunition against protestors. Democracy advocates who subvert democracy should expect nothing less.

Finally, America’s reputation is on the line internationally. The Muslim Brotherhood may be no friend of liberty, but political Islamists are far more dangerous if excluded from the political process. And the coup will resonate beyond Egypt. To work so hard to avoid applying the law in order to support a coup against the man who won the first free presidential election in Egyptian history will make a mockery of any future pronouncements about America’s commitment to democracy. 

Washington’s best hope is to disengage, leaving Egyptians to decide their own future. That would respect the rule of law in the United States. It also would restore a degree of leverage, if Egypt’s military actually values Washington’s cash and support. It is time to halt American assistance to Egypt.

Karzai’s Latest Outrageous Comment

Yesterday, Afghan President Hamid Karzai alleged that the United States and the Taliban are “working in concert to convince Afghans that violence will worsen if most foreign troops leave.” His accusation exposes a strange irony. Karzai not only supports U.S. forces in Afghanistan after 2014, but also disparages that presence to evade his own failings. 

Since 2001, senior U.S. officials have tethered our military might to the sick man of Central Asia. In 2004, President George W. Bush pledged America’s “ironclad commitment” to help Karzai’s country succeed. In 2010, President Obama made clear that the U.S. role in Afghanistan “is a long-term partnership.” 

President Karzai codified those pledges last May by concluding the Enduring Strategic Partnership Agreement between the Islamic Republic of Afghanistan and the United States of America. Despite his history of hindering U.S.-backed anti-corruption investigations, denouncing the international community, and claiming the U.S. ferried Taliban to the north in order to spread violence, he eagerly signed an Agreement that commits the U.S. government to Afghanistan’s future. It provided for the possibility of a U.S. troop presence until 2024, and a long-term framework for training Afghan security forces and targeting al Qaeda. 

Washington’s devotion to nation building still holds fast despite Karzai’s inability to fulfill its lofty expectations. As former U.S. ambassador to Kabul Karl W. Eikenberry bluntly warned his superiors in November 2009, Karzai “is not an adequate strategic partner.” 

Certainly, the United States is not blameless for Afghanistan’s downward spiral—it took responsibility back in 2001 to rebuild the war-ravaged country and then shifted its attention and resources in 2003 to invade and occupy Iraq. Yet, the endemically corrupt Karzai regime and its band of thugs and cronies are also culpable. 

Ample reporting on Afghan corruption need not be repeated here. More to the point, Karzai fails to appreciate the way in which his poor governance vindicates insurgent propaganda and drives many Afghans to fight. A widespread perception of the central government’s massive corruption delegitimizes the state and inspires the sense of injustice that makes the Taliban appear as an effective alternative. Apart from Karzai himself, Afghan police are notorious for perpetrating crimes they are supposed to be stopping, such as corruption, theft, kidnapping, murder, and child abuse. Meanwhile, the Afghan army, long hailed as the mission’s shining success story, is rife with factionalism and patronage networks that could splinter the institution along political and ethnic lines. Foreign policy planners in Washington overlooked the second- and third-order consequences of their attempts to build a strong central government that wields a monopoly on the legitimate use of force. 

As the Democratic majority staff of the Senate Foreign Relations Committee admitted two years ago, “Foreign aid, when misspent, can fuel corruption, distort labor and goods markets, undermine the host government’s ability to exert control over resources, and contribute to insecurity.” (Emphasis mine.] 

Perversely, the corruption of the Afghan central government and the failures of the foreign-led nation-building project feed off one another in disturbing symbiosis. The Washington Post hasreported that foreign military and development spending provide roughly 97 percent of Afghanistan’s gross domestic product, fomenting fears that withdrawal will push the Afghan economy into depression. The alternative to popping that foreign aid bubble, some argue, would be to commit several hundred thousand troops and decades of attention, resources, and patience to transform Afghanistan’s deeply divided society into a stable, non-corrupt, electoral democracy. Of course, such success would hardly be guaranteed and assumes we possess the local knowledge as well as the cultural and religious legitimacy to operate indefinitely in a country notoriously suspicious of outsiders and largely devoid of central authority. 

Over twelve years of nation-building has had little success in creating an economically viable Afghan state, much less a self-sustaining Afghan security force. Indeed, nation building has propped up an erratic and unreliable regime whose behavior feeds the insurgency’s momentum. 

Policymakers must reject the flawed premise on which their policies rest. They must overcome their tendency to overestimate the strategic importance of a small, underdeveloped country to the narrower and more achievable goals of disrupting terrorist networks and preserving U.S. national security.

Is Egypt Molded in Pakistan’s Image?

Last year, in a piece for AOL News titled “Will Egypt Follow Pakistan’s Troubled Path?” I warned that U.S. policymakers must be careful of whatever government follows ousted Egyptian strongman Hosni Mubarak by not repeating the mistake of giving lavish material support to a distasteful regime, as America did with Pakistan’s General-President, Pervez Musharraf. I had argued that the ample generosity of American taxpayers—in the form of lavish military and economic aid—to a foreign dictator’s all-powerful military hardly produces the desired outcomes, and results in a military that is further entrenched and able to ignore the popular demands of its people.

Sadly, that scenario is playing out in Egypt. An editorial in today’s Wall Street Journal picks up on my point from last year, stating, “the result may be a state that is less an Islamist-tinged democracy a la Turkey and more a military-Islamist condominium akin to unstable Pakistan.”

Indeed. The political turmoil in Egypt took yet another disappointing turn yesterday when its Islamist president, Mohamed Morsi, decreed that the military will assume responsibility for security during the country’s constitutional referendum, to take place on December 15. Amid protests against the referendum on a constitution hurried through an Islamist-dominated assembly, Morsi made his decrees immune from judicial review and gave the military the power to arrest civilians. As the Journal explains, the Egyptian military is the most powerful institution in the country and has its own reasons—such as maintaining de facto control over much of the economy—for keeping the status quo.

As for America’s role in this unfolding controversy, the Washington Post’s David Ignatius writes today:

The [Obama] administration’s rejoinder is that this isn’t about America. Egyptians and other Arabs are writing their history now, and they will have to live with the consequences…[B]ut it’s crazy for Washington to appear to take sides against those who want a liberal, tolerant Egypt and for those who favor sharia. Somehow, that’s where the administration has ended up.

Oddly enough, as Ignatius suggests, claiming that “this isn’t about America” is disingenuous. After all, America’s Egypt policy continues to tip the scale on both sides: it backs Egypt’s liberal protesters and the authoritarian government that oppresses them. The world is standing witness to a head-on collision between the Bush freedom agenda and the Cold War relic of U.S. grand strategy in the Middle East, as foreign policy planners in Washington pay lip service to principles of self-determination and political emancipation while simultaneously assisting authoritarian leaders who suppress the popular demands of their people.

In the end, while what is happening in Egypt is unfortunate, come what may. The best way to discredit Islamists is to let their record speak for itself. Egypt’s new Muslim Brotherhood President should be allowed to fail on his own terms. The Egyptian people voted to bring Islamists to power and it was their prerogative to do so. If Washington truly wants to leave Cairo’s future “to the Egyptian people,” then it should do so by phasing out aid to Egypt completely.

DoD Now Responsible for Guns and Butter

Of the many enduring tenets shaping America’s state-building project in Afghanistan, the belief that expanded economic opportunities can promote long-term stability has long been received as gospel. Past 2014, that principle will continue to animate U.S.strategy in Afghanistan.

Jim Bullion, the director of the Pentagon’s Task Force for Business and Stability Operations (TFBSO), said in a recent interview with Foreign Policy’s Situation Report that America’s long-term presence could be robust. TFBSO itself hopes to strengthen existing industries in Afghanistan by luring private sector investment. Its broader mission is to promote “economic stabilization in order to reduce violence, enhance stability, and restore economic normalcy in areas where unrest and insurgency have created a synchronous downward spiral of economic hardship and violence.”

That thinking is consistent with the U.S. Army’s Stability Operations Field Manual [3-07], which states that the “long term and costly” effort to reintegrate former combatants includes vocational training, relocation and resettlement support, and assistance in finding employment. Indeed, a couple years back, Secretary of State Hillary Clinton articulated a similar vision when she made clear that for those militants who turned away from the Taliban, “we need incentives in order to both protect them and provide alternatives to them to replace the payment they received as Taliban fighters.”

So much is wrong with this way of thinking it’s difficult to know where to start. First, part of the coalition’s problem has been attempting to secure and stabilize an active war zone while simultaneously spending staggering sums of money to develop it. As a result, numerous audits, reports, and investigations have found that a number of projects and programs funded by DOD, State, and the U.S. Agency for International Development (USAID) have been ineffective, unsustainable, produced unnecessary redundancy, wasted resources, and fraud.

In addition, as Congresswoman Betty McCollum (D-MN) asked last year in a statement on the TFBSO and a defense bill appropriating $150 million to operate it:

When in the course of this long war did it become the Department of Defense’s role to facilitate business opportunities for Afghan and foreign companies?

Is it really within the Pentagon’s expertise or mission to excel at business development, farming, or mineral exploration?

[…]

Every House member needs to ask why the Pentagon is supporting the development of the Afghan carpet industry while U.S.soldiers are under attack.

McCollum makes some astute points. That said, she also argues that the role of promoting economic development belongs to civilian agencies like USAID, State, and Commerce. On that point, we diverge.

The underlying assumption of economic development programs in Afghanistan is that locals will gravitate toward the Taliban if they lack an alternative livelihood. Certainly, the promise of money and jobs has lured some militant foot soldiers off the battlefield, but to adopt this position as the crux of an overarching strategy does more to trivialize the complex blend of intangible motives that spur many locals to fight.

Some Afghans (and Pakistanis) take up arms for reasons other than economic impoverishment. They do so for reasons such as factional infighting, traditional/local/tribal vendettas, the promotion of jihad, or group exclusion from power. In this respect, the causal link between economic development and conflict alleviation is not so robust, especially if other more pervasive forces are underlying the conflict.

Moreover, a few of Afghanistan’s most insecure provinces have received the most development aid. Matt Waldman, Oxfam International’s former head of policy in Afghanistan, wrote years ago, “if it were a state,Helmand [province] alone would be the world’s fifth largest recipient of funds from USAID, the US Agency for International Development.”

Part of the problem is that money that’s pumped into unstable environments becomes unaccountable. That often creates a feedback loop in which foreign aid breeds corruption and generates more instability. In fact, that was the finding of a June 2011 Senate Foreign Relations Committee report:

Foreign aid, when misspent, can fuel corruption, distort labor and goods markets, undermine the host government’s ability to exert control over resources, and contribute to insecurity.

Ironically, the “economic opportunity = long-term stability” strategy achieves neither. In certain areas, continuing such policies beyond 2014 may not only do more harm than good, but also perpetuate the dysfunction and underdevelopment that has plagued Afghanistan for centuries.

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