Who Watches the Watchdogs?

Wolfowitz, Ending African Tour, Calls for Changes

Unsurprising conclusions made by Paul Wolfowitz, President of the World Bank: the Bank needs to make changes in its bureaucratic structure, and government corruption doesn?t help in resolving the problem of poverty.? Indeed, back in 2002 President Bush proposed the creation of ?Millennium Challenge Accounts? to address the problem of giving aid to corrupt governments, the idea being that poor nations pursuing democratic growth and ?sound economic and social welfare? policies would receive more aid from the U.S. to encourage these developments.?

Yet little has been done about this proposition thus far: The Millennium Challenge Corporation, which is charged with ?ensuring accountability for measurable results? and determining countries? eligibility for aid, has ?committed $110 million to Madagascar and $215 million to Honduras, and the program’s board this week approved $175 million for Nicaragua and $110 million for Cape Verde. But of that money, only $117,500 has actually been paid out.?? (Yahoo! News) ??The Corporation has been encompassed by such bureaucracy that it recently led African leaders to complain of its slowness; its CEO, Paul Applegarth, resigned last Wednesday; and a U.S. Congressional Committee voted the day after his resignation to cut back on its funding.?

How realistic is it to tie aid to democratization?? It has become so politicized that the U.S. is not about to stop giving funds to Egypt (or any other country in the Middle East) anytime soon, whether or not they democratize.? Moreover, is it necessary that a country be a democracy for conditions to improve?? Look at Somalia: a country that has limited, weak government in only some areas (in others, no government exists at all), yet the private sector has developed to create innovative replacements of government control.? The country actually has lower rates of extreme poverty than many other African countries, and, in some cases, better infrastructure!? (Harford and Nenova)

So who decides who gets what, and who watches these decision-makers to ensure that best intentions are in mind?? Incentives vary, and all humans are naturally inclined to do what is best for them (or on behalf of whom they are acting).? Remittances are the best form of aid because the incentives behind them are to assist family members, in contrast to aid given directly to governments, which is misused because of? leaders? incentives of keeping the money for themselves or, at best, engaging in nepotism.?

The incentives of the private sector are to profit: doing so creates wealth in a country, as well as provides jobs for people.? Aid going directly to the people and private-sector development proves to be the best-utilized.? Perhaps aid doesn?t even have to be in the form of donations: it could simply be invested in stable banks in developing countries, which will in turn provide microloans to citizens.? ?Donor? countries can help with development and still be able to withdraw funds and invest elsewhere if needed, and banks can create further funds through financial investments.? The donors gain, the banks gain, and the people gain if this form of ?aid? were to be undertaken.