Opinion: Can Obama reform the aid business?

BOSTON — The most important part of U.S. President Barack Obama’s bold enunciation of a new global development policy at the U.N. last week was his promise to measure the effectiveness of aid by outputs, not inputs.

Aid experts have long emphasized results, not the amount of aid dollars spent — in other words the mileage of roads built, or the quantity of vaccines delivered — as the true determinants of foreign assistance effectiveness.

Obama did not say exactly how outputs — reductions in maternal mortality rates, improved education, reductions in corruption — were going to be calibrated. But he said firmly, in a first for world leadership, that aid alone is not development. Only moving a nation from poverty to prosperity, through a combination of aid, trade, diplomacy and other variables, constitutes real development.

This novel approach is one that critics of foreign aid to poor countries have sought for decades. Fifty years of foreign aid has produced very little development, especially in Africa.

If Obama’s lead is followed by Scandinavian, Japanese, British and other European aid donors, effective global development may at last come into its own.

Obama asked for transformational change that would eradicate poverty and create opportunity. He promised to reward entrepreneurship in the recipient countries, and to help countries that create conditions that welcome foreign investors rather than send them fleeing. But how? If Washington were to give aid only to countries, especially in Africa, with truly open macroeconomies that are friendly to investors, it would have few partners.

The badly led and badly governed countries are the very poor ones. Only well-governed places like Botswana and Mauritius, and now Ghana, have really improved the lives of their peoples.

When coupled with Obama’s other major (but seemingly obvious) innovation — to partner with the poor nations to deliver the kinds of aid that they want — donor assistance to the least developed of the world’s countries may actually produce results despite the paucity of countries that meet his new requirements.

Obama promised that Washington would work most closely with countries that “want to build their own capacity to provide for their people.” If that means that Washington will now aid only those nations with honest, minimally corrupt, governments who put all of their own people (not just favored ethnic groups) ahead of themselves and their families, the aid business will be revolutionized.

But what then happens to American assistance to heavy-handed regimes like Egypt, or to needy countries like Ethiopia and Rwanda with questionable elections? Can Washington really afford to ignore strategic priorities and support only beneficent nations?

Washington first has to implement the president’s message, and that will be tough. He is keeping USAID under the Department of State, with its director reporting to Secretary of State Hillary Clinton. That is a mistake. Subordinating our new global development strategy to diplomatic preferences which may not fit the war against poverty is backward.

When USAID was independent, it functioned robustly. It could project soft power for the United States in ways that were not easily available to ambassadors and embassies.

Obama’s speech was long on good ideas and short on details. Nowhere in the speech did he declare that all American assistance would now be in the form of outright grants rather than loans. That is a reform of aid practice that has long been advocated in order to reduce dependence and strengthen true partnerships between donors and recipients.

It is also important to make grants that stipulate deliverables and that hold receiving countries accountable. If Washington intends to improve a health system rather than simply provide vaccines or anti-retroviral medicines, it and the host country must together specify outcomes. Those outcomes can be determined objectively and used to determine whether or not to renew the grant.

If Washington can really reform global aid practices, the vulnerable and the deprived throughout the world will benefit enormously. But the task is huge. To follow Obama’s lead will mean assisting only countries with honest leaders and honest governments, and focusing almost exclusively on measurable results.

Can we really afford to do what is right?

Robert Rotberg was director of the Program on Intrastate Conflict at the Harvard Kennedy School and president of the World Peace Foundation until mid-2010.