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I recently read an interesting book by James Tooley called The Beautiful Tree: A Personal Journey Into How the World’s Poorest People Are Educating Themselves, published by the Cato Institute.

This book describes how the governments of many countries in the developing world are failing to educate their children, because their government-run schools are basically worthless. The author described seeing many schools where only a small fraction of the teachers even arrived at the school on any given day, and an even smaller fraction were engaged in meaningful teaching activities (he also did careful studies that documented these problems, as well as poor educational outcomes); this system was made possible by wide-spread government corruption. Perhaps it is no surprise that everyone involved is apparently aware of the issues at the government schools, from the children and their parents, to government officials at all levels, to the international aid agencies and foreign governments that continue to give money for education to the government agencies that are running the schools. So of course, middle- and upper-class families living there send their children to for-profit private schools.

But the real surprise in this book was that Tooley found that many extremely poor people in these countries were also sending their children to for-profit private schools — low-cost schools run by entrepreneurs of similar backgrounds to the poor families, living in the same neighborhoods (rural areas or urban slums). And although these poor private schools tended to have dismal facilities by our standards (poor lighting, poor sanitation, etc.), this was more than balanced by much greater level of accountability than the government-run schools, as parents would immediately withdraw their children (and their tuition money) from poorly-performing schools. Tooley also documented, through careful study, that these low-cost private schools (so low in cost as to be affordable by workers at the very bottom of the social scale) had much better educational outcomes than the nearby government-run schools.

After reading this book, I was left wondering (as Tooley certainly intended) why international aid organizations and US and other governments would continue to pour money into corrupt and ineffective government-run educational programs in these countries. Tooley suggested instead that we direct our aid money in two directions that seemed worthwhile to me. First, he suggested setting up scholarship funds for poor children’s tuition in the low-cost private schools. The cost of such tuition per student is very low, in US dollars or European currencies, and the return in educational provision is high. Tooley has apparently already been involved in setting up one organization that provides such scholarships. Second, the major barrier for educational entrepreneurs in setting up or improving their schools is the lack of financing — banks will not or cannot lend to them, in spite of their financial soundness. So, the idea would be to set up micro-credit institutions dedicated to funding such educational ventures. I haven’t been able to find any projects of this nature that are in progress, but definitely the ideas of micro-credit are well developed in general, and maybe someone will start one up soon. We’ll have to wait and see.

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I started this blog mostly so that I could do some research into US foreign aid and report the results, which I have been doing. But I haven’t written an article lately, and I realized that the reason was that I had really come to the conclusion that the Program Our Government Calls “Foreign Aid” (POGCFA for short) has very little to do with what you would think from its name: helping foreign countries. Instead, the POGCFA is mostly just a US corporate welfare program. So, analyzing what it is and isn’t doing well in the area of foreign aid seems to be rather pointless, and I am going to give up doing further analysis of the POGCFA and concentrate on other subjects. But before I do, here is a summary of why I think the POGCFA is not a real foreign aid program, based on my previous articles and the information sources cited by them:

• A real foreign aid program would analyze humanitarian need and send aid to the countries where the need is greatest, designated for humanitarian purposes (food, water, health care, education). But as I’ve reported in previous articles, the POGCFA does not give the most aid to the countries generally recognized to have the greatest level of humanitarian need. Also, the POGCFA spends a lot of the money it calls foreign aid on the military, drug enforcement, and economic “development” aimed at preparing foreign countries to trade beneficially with US companies, rather than for humanitarian purposes.
• A real foreign aid program would be providing aid either directly to foreign governments or better yet to humanitarian non-governmental organizations based in the countries, because they would presumably be in the best position to know what their country needs. It would also use local labor, local management, and local methods to complete projects in foreign countries, in order to provide much-needed employment, make sure most of the aid money stays in the foreign country, spend money efficiently (salaries are lower), draw upon local knowledge, and respect local cultures. However, the POGCFA is currently giving most of its aid money to for-profit companies based in the US, who conduct the projects with US personnel, so much of the money comes back into the US economy.
• A real foreign aid proram would give grants of money, and if interested in loans, concentrate on micro-credit going directly to small entrepreneurs. Instead, the POGCFA promotes large loans to foreign governments, which are terrible for the countries in the long run and provide little benefit to the average person there in the short term (see this article on loans for more information).
• A real foreign aid program would avoid getting involved in foreign politics and the governing of foreign countries. But the POGCFA demands that foreign governments accept its economic policies, supports foreign political and military groups that are willing to work for its agenda, distributes propaganda, assasinates political leaders, and in some cases simply goes into a foreign country and openly and directly takes over.

So I guess that rather than campaigning to change the current US foreign aid program, we ought to campaign to eliminate the POGCFA, and start over with a real foreign aid program based on needs, and aimed at actually helping foreign countries. What a concept!

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The latest question in my series on US foreign aid is this: who actually receives the money we spend on foreign aid — are we sending it directly to foreign governments, charities, consultants, or what? Unfortunately, I was not able to answer this question definitively — the US government does not appear to publish this information in its foreign aid statistics. Here is what I did find:

• On the USAID home page, if you use the “Country Locator” to visit the home page of a particular country, and then scroll down to the bottom, you can find a section labeled “Congressional Budget Justification”. From that page, you can click on links for each program, and see who might get the money for each sub-program. However, exact amounts are not given, and it’s a projection rather than an actual commitment. Also, if you wanted to collect information, even from a single country, it would mean clicking on several links and extracting names of organizations from the text.
• A more comprehensive picture comes from the USAID Yellowbook, which is a listing of all active foreign aid grants from USAID to organizations, businesses, and universities for a given year, by country. However, the most recent available version of this publication is from 2001, so it’s not very current, and unlike the other statistics on the USAID web site, it only covers the USAID agency itself, not other US foreign aid.

Given a choice between these two less-than-perfect resources, I decided that the Yellowbook was the more useful. It comes in either an Excel spreadsheet or a PDF file containing the names of the grant recipients, starting and ending dates of the grants, and amounts. Unfortunately, it does not contain any other information about the recipients (such as whether they are consultants, charities, etc.), it does not include recipients that are foreign governments, and there are also about 4000 entries in the list. To make the research manageable, I decided to focus on Nicaragua to start. Here is what I did:

1. Since the grants cover different time periods, I decided that it would make more sense to consider an annualized amount. So, if a grant covered one year or less, I used the amount from the Yellowbook, and if it covered more than one year, I divided by the number of years covered to get an annualized grant amount.
2. I looked up each recipient on Google, in order to determine whether it was a non-profit charity, for-profit consultant, governmental organization, etc. I was able to determine a category for all but one of the recipients.
3. Added up the annualized amounts for each category, and calculated percentages (thank goodness for Excel pivot tables!)

In the table below are the results for Nicaragua (and a few notes on definitions are below the table). They do not look too terrible, but I think (from looking at the Budget Justification pages) that the situation has changed somewhat since publication of these data. Also keep in mind that amounts given directly to the Nicaraguan government are not included, or funds from agencies other than USAID. It is interesting to note that only about 9% of the funds analyzed are going directly to agencies or co-ops based in Nicaragua. My feeling is that probably these organizations have the best chance both of creating Nicaraguan jobs and of knowing what is really needed by the Nicaraguan people.

Notes:

• NGO: Non-Governmental Organization, also known as a non-profit or charity; I divided them up into ones based solely in Nicaragua, and US or International ones working in Nicaragua. For the US charities, I also looked up ratings for many of them, and they were all highly rated for efficiency by independent ratings organizations (i.e. most of their funds go to their programs, not to fund-raising, administrative costs, or executive salaries).
• Cooperative League: These are leagues of American or International cooperatives, who were given money presumably for their programs of helping establish cooperatives in other countries
• Nicaraguan Co-op: A few Nicaraguan cooperatives were given grants directly
• US For-profit Company: For the most part, the recipients in this category are consulting firms that specialize in working on international development projects. However, they are operating as for-profit US businesses.
• US Government Agency: Includes the US Department of Agriculture, the Defense Department, and the National Oceanographic and Atmospheric Agency
• International Government Agency: Agencies, such as the World Health Organization, which are funded and run by multiple governments
• Unknown: I was not able to determine which category a listing for “Nicaraguan Development Center” should be put into.

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Today I was thinking about my previous posts on Foreign Aid. I realized that I have been basing my articles on total foreign aid, rather than strictly humanitarian aid, because the numbers I got from the USAID web site include military aid, aid used to fight drug traffic, and other items that do not fall under the category of humanitarian aid. So, I went back to the USAID web site, and downloaded numbers for aid from the USDA (agricultural aid), aid from USAID (mostly humanitarian), aid from the Peace Corps, refugee and migration aid, and Global AIDS Initiative aid. However, my conclusions are substantially the same, because for the most part, countries’ rank in humanitarian aid is similar to their rank in total aid. There are a couple of exceptions — notably, the first three countries in per capita total aid (Marshall Islands, Palau, and Micronesia) are not ranked highly in humanitarian aid (which is to say, they are getting mostly military aid from the US). But apart from that, my previous conclusions hold: even if we consider only humanitarian aid, our decisions on where to send it are based on something other than humanitarian need.

Here is a new spreadsheet, so you can see for yourself…

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The United Nations measures the level of human development of its member countries in its “Human Development Index” (HDI). This index is regarded as the standard measure for the well-being of people (especially children), and it incorporates measures of poverty, literacy, education, life expectancy. It is published regularly as part of the Human Development Report. Presumably, countries with a low HDI would be the ones in most need of humanitarian aid, and those with high HDI numbers would not need much, if any. So how do the US foreign aid numbers compare to HDI?

To answer that question, I got the latest (2005) HDI numbers from Wikipedia, and added them to my previous foreign aid spreadsheet. You can look at the latest version of the spreadsheet on foreign aid, if you are interested in the specifics; I also found a usable source for the corruption index numbers discussed in my previous post on corruption, so the new spreadsheet contains those numbers as well.

What conclusions can we draw from the numbers? Well, clearly some of the countries of the world that are the worst off are not receiving much aid. For instance, Niger, the country with the lowest HDI, receives only the 96th-highest amount of per-capita US foreign aid. Sierra Leone, with the 2nd lowest HDI, is number 59 in per-capita aid. In fact, of the 15 countries with the lowest HDI numbers, the one receiving the most per-capita aid (Zambia) is only number 35 in per-capita aid.

On the other end, most of the countries with high HDI numbers are receiving very little, if any, aid (as you would expect). The main exceptions are Israel, which has an HDI number of 0.915 (about the same as Spain and Portugal), and yet receives the 5th-most per-capita aid; and Cypress, with a similar HDI number of 0.891, number 21 in per-capita aid.

Clearly, our foreign aid decisions are being based largely on something other than humanitarian need.

Note: A new version of the spreadsheet is now available.

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