Алистер Смит - The Dictator's Handbook - Why Bad Behavior is Almost Always Good Politics

Aid Shakedowns

We started this chapter with an account of Haile Selassie’s shakedown of donors. By now it should be clear that this practice is all too common, and reflects the logic of privately given aid. When private donors provide aid, governments must either strike deals with them so that the government gets its cut—that, after all, is the value of aid to a small-coalition regime—or, in the absence of such deals, they must shakedown well-intentioned private donors. Either way, the government must get its piece of the action or it will make it impossible for donors to deliver assistance. That, for instance, is what the Myanmar government did following the Nargis cyclone in 2008. They insisted on having United Nations aid delivered to the government or barred from the country. Why? Because, as we noted earlier, the military dictatorship wanted to use the aid to enrich itself by selling food on the black market rather than distributing it to those most in need. You might think this was the odd behavior of a horrible regime, atypical of the response of government leaders following natural disasters. Not so! Consider the case of Oxfam relief for Sri Lanka in the wake of the 2004 Indian Ocean tsunami.

Following a massive earthquake on December 26, 2004, a tsunami sent huge waves of water rushing inland, killing over 230,000 people across fourteen nations. Subsequent assistance totaled over $14 billion. Yet even while the goal of aid agencies might have been to relieve suffering, many recipient governments took it as an opportunity to enrich themselves.

To distribute aid, Oxfam shipped twenty-five four-wheel-drive trucks to the region. The Sri Lankan government impounded the trucks and insisted that Oxfam pay a 300 percent import duty. For over a month (the first critical month after the tsunami) the trucks sat idle and people went without food and shelter. Eventually Oxfam paid over $1 million to have its trucks released.

Before giving to a charity many people like to assess how much of their donation goes to help people versus how much is spent on overhead. Oxfam America, for instance, gets three out of four stars from Charity Navigator, an organization that rates charities. Oxfam spends 6 percent of its revenue on administrative expenses and 14 percent on fundraising. The remaining 80 percent is spent on programs, that is, helping people. Unfortunately, 80 cents on the dollar is not the effective amount of help provided. Remember those trucks and the 300 percent import duty—if such cases are the norm (and they usually are) the actual aid benefit may only equate to 20 cents on the dollar. If even as careful a charity as Oxfam is being shaken down, then it makes us wonder what is happening to the rest.

It is virtually impossible to quantify how much aid gets diverted towards the recipient government’s objectives rather than the donor’s intended goals. However, we suspect this figure is huge. The fundamental problem is that recipient governments are not appropriately incentivized to fix problems. Consider the recent case of flooding in Pakistan in 2010. No one can blame the government for the rains, but they are very much accountable for the subsequent devastation. Over 20 million people were affected, 4 million made homeless, and nearly 2,000 died.

Following severe floods in the 1970s, Pakistan set up a Federal Flood Commission. On paper this agency has completed about $900 million worth of dike construction. Of course the reality is very different. Irrigation and flood control are a source of graft, not public policy. And when the dikes are built, they serve the interests of the wealthy; that is, coalition members, not the people. As the floods swept downstream and threatened huge segments of the population, President Zardari, who is nicknamed “Mister 10 percent” for his alleged penchant to take that portion as his cut, acted as a good autocrat should. He ignored the problem, headed off to Europe for a high-profile tour and left his government to sacrifice the many to save the few. The government reinforced dikes to protect essential supporters while allowing flooding to continue in poor areas. Areas with ethnic minorities and large numbers of opposition supporters were particularly likely to flood.21

Richard Holbrooke, the late US Special Representative for Pakistan, described the flood as “an equal opportunity disaster,” but this is far from the truth. Beholden to a few, Pakistani leaders sacrificed the many. They reinforced barrages and dikes to protect the homes and farms of their supporters and ignored the plight of towns and villages. A local official acknowledges,

local government figures in the Sindh province conspired with prominent landowners to bolster the riverbank running through their property and others deemed important, at the expense of other regions, which were left vulnerable to flood waters.... It was not just incompetence on the part of the authorities to protect the poorest of the poor from potential floods; it was their deliberate intention that they should suffer if floods were to take place.22

Obviously, from a good governance stance, this behavior makes no sense. But in terms of ruling for one’s own survival, it is an ingenious move. Supporters were reminded of the consequences of being outside the coalition of essential backers. That is good for loyalty. And aid agencies rushed to give money. The UN Secretary General, Ban Ki-Moon described the flooding as the worst he had ever seen and called for massive foreign assistance. Many Pakistanis preferred to directly assist those affected, noting “we don’t donate to the government because we know it’s mainly a way for government officials to make money.”23 The international community was less careful. They gave Pakistan $1.7 billion in the first three months. That equates to about $83 per affected person. Presumably much of the money was siphoned off. It certainly was not used for efficient disaster management.

Pakistan was not the only nation affected by severe floods in 2010. Benin also faced historic floods that covered two thirds of the country. Although the absolute numbers were smaller because Benin is a much smaller country, in proportion to its size the scale of the disaster was very similar to that in Pakistan. Benin received much less assistance, only about one twentieth of the aid per affected person. Yet despite this, its response has been widely praised. But then of course Benin is much more democratic than Pakistan. With a disastrous earthquake and tsunami having struck Japan in 2011 we are confident much the same pattern as in Benin will be repeated. Japan, a democratic country, will receive massive assistance as it should. It will use the money much more wisely than the nations affected by the 2004 tsunami.

It is easy to understand why Zardari did so little to minimize the impact of the flood on the masses, and, as some have suggested, he may have deliberately made things worse. He had strong financial incentives. As the magnitude of the disaster increased so did the amount of aid. His survival depends upon paying off the few rather than protecting the many. Aid incentivizes autocratic leaders to fail to fix problems. Had Pakistan implemented an effective flood-management program instead of just saying they had, then the people would have been much better off, but Zardari would have had no pretext to further fleece donors.

Similar incentives plague Pakistani assistance with the war on terror. Following the terrorist attacks of 2001, the United States repeatedly sought their assistance in fighting the Taliban and Al Qaeda and in capturing international terrorists—foremost of which has been Osama bin Laden, the leader of Al Qaeda who was believed to be hiding in the tribal regions of Northwestern Pakistan. Through 2008 the United States has paid Pakistan $6.5 billion in economic and military aid for its assistance. If Pakistan had captured bin Laden and prevented the Taliban from operating in northern Pakistan, then the United States would have been very grateful. But it would also no longer have needed to pay Pakistan. As with effective disaster management that limits the number of disaster victims, capturing bin Laden would have ended aid to Pakistan’s leaders, as his death may do now.