13 IMGP0217by Dominic Cardy

Through my work for an American-based democracy-building institute, principally in South and Southeast Asia, I have dealt with corruption in different forms. But I acquired the tools of my trade earlier, as a political activist in Nova Scotia. And sadly, to this point, there is no type of corruption I did not first encounter back home.

Federal transfer payments to have-not regions offer Canadians a close-to-home example of how aid dollars, in their billions, can disappear into flawed megaprojects or the pockets of provincial elites. Donors are left frustrated by the failure of interventions to achieve desired goals and by the growth in affected regions of a dependency culture that saps economic and cultural strength. Corruption takes root when donors expect failure and recipients know that dismal performance will bring no adverse consequences. Examining the roots of corruption and insisting on its eradication are essential to Canada’s domestic and international development programs.

The police in Phnom Penh

Corruption has many faces. Living in Phnom Penh, I cannot get used to driving during the day with my headlights off. The Cambodian police officer who pulls me over explains, “Driving with your lights on in the day is the practice in Canada because it is dark all the time, because of the snow.” In Cambodia, it is the practice to drive with your lights off during the day – and often at night – and it is also the practice, the officer tells me, to give policemen who stop you, whatever the pretext, twenty U.S. dollars. Sensing my reluctance, he bargains down to ten dollars, then five, then one. Eventually, we’re down to a can of Angkor beer and a pack of twelve-cent cigarettes, but still I won’t pay.

Cambodian police earn about $20 a month, so unless they supplement their income with bribes they can’t feed their families. But I’m not offering a good return on this officer’s time investment. Cambodian traffic police are a fairly benign species, and I know he’ll soon move on to easier prey, leaving me with a feeling of self-righteousness that, as an honest Canadian, I value greatly.

For Cambodians, corruption is part of daily life. As in 19th-century New York, firefighters battle to be first at a blaze but do not start the water until the homeowner pays, or offers the pick of salvaged possessions. You can get a driver’s licence by taking an exam, or you can pay US$25 and it magically appears. Teachers in government schools teach only those children who pay an extra fee.

13 James Steidle max resFor Canadians, corruption is our tax dollars diverted to buy that second Lear jet for a sub-Saharan dictator; it’s money for a dam project misappropriated before the dam is finished, but after towns downstream have been bulldozed. The amounts involved are small – less than $100 annually for each Canadian – and the people involved are far away. All this makes it easy for the citizens of a donor country to ignore the issue or assign it to the corrosive effect, depending on one’s prejudices, of left-wing autarkists or mercenary free traders.

This lack of interest suits donor governments. Close public scrutiny of corruption in foreign aid delivery might lead the public to pay more attention to similar problems at home: money diverted to friends of government ministers, contracts unfairly tendered, paid work uncompleted and so on. To readers of the Auditor General’s reports or viewers of the Gomery Commission’s hearings, this problem is starting to sound familiar.

The 2005 federal budget promises to double Canadian foreign aid by 2010, relative to 2001. Deep in the budget is a passing reference to the problem of “poor governance” in developing countries:

Achieving the Millennium Development Goals requires mobilizing the private sector – and the contributions it can make to economic growth, job creation and incomes of the poor. Entrepreneurs are emerging throughout the developing world, but many of them are locked into informal micro and small enterprises. They must cope with weak policy and regulatory environments, poor governance, and inadequate infrastructure.

As Canada expands its international development programs, more than a cautiously worded paragraph is required. Without an honest reevaluation of past naiveté, Ottawa will squander tax dollars internationally as it has domestically, and add to cynicism at home and abroad about the ability of donor governments to address social and economic problems positively.

From the Mira to the Mekong

Corruption is a universal human behaviour, and any examination of the issue must begin with a look at the people involved. A crisis, be it famine in Malawi or the collapse of Canada’s East Coast fishery, creates pressure for government action. Programs are quickly designed, often by people without direct knowledge of the region or problem in question, or by large committees with conflicting interests and agendas. If locals are consulted, they are rarely from the affected groups – be they Malawian farmers or Newfoundland fishers – as donors prefer to draw on local elites who understand the politics and language of aid diplomacy. This tendency is understandable but dangerous, and often ignores the leading role those groups played in causing the problems they are now, with outside funding, supposed to address. Expecting any group to behave responsibly with other people’s money when they have cheerfully squandered their own is optimistic.

13 IMGP0234Bangladesh, which means “land of people who speak Bengali,” became a sovereign country in two stages: in 1947, it became part of Pakistan after the departure of the British and the partition of India; in 1971, after a bitter war, Bangladeshis liberated themselves from Urdu-speaking West Pakistan. The legacy of “anti-imperialist” pro-Bengali education policies post-1971 created an acute shortage of English speakers. Those few with higher education and English fluency come largely from the traditional elite, a group with a high tolerance of corruption that bears singular responsibility for the myriad problems that afflict the country. In Cambodia, most English speakers are part of the exile community that fled following the Vietnamese invasion in 1979. They tend to oppose the party Hanoi put in power, making it difficult for English-speaking foreigners to obtain a balanced picture of political life.

In a domestic context, consider Atlantic Canada. The dominant influence of the Liberal Party over the Canadian civil service, especially in the Atlantic provinces, creates similar difficulties for outsiders. Few Canadians outside the region understand the 
intimate links between local Liberals and officials. Accustomed to adjusting their work to justify changing political needs, the bureaucracy becomes a part of the problem when politicians cross the line into corrupt practice. While not as straightforward as the Cambodian policeman’s pyramid scheme, the moral underpinning is the same: it’s easy to justify bad behaviour when the system within which you work encourages it.

The Atlantic Groundfish Strategy (TAGS) provides a recent example of a misbegotten program. Having extended Canadian sovereignty over coastal waters to 200 miles in the 1970s, Ottawa then acceded to local pressures to subsidize overfishing, and in the 1990s fish stocks collapsed. TAGS did a poor job helping displaced fishers but helped launch many “training centres” operated by friends of the governing party. “I’d like to work in a call centre, but my fingers are too mashed for the computer and even my wife don’t understand my accent,” was how a Cape Breton fisherman summed up his TAGS-funded training experience. Development aid is too often a story of inappropriate solutions to ill-understood problems, reflecting the latest fad to grip donor governments.

From the Mira River in Cape Breton to countries bordering the Mekong in Southeast Asia, governments seeking development money learn a complex dance. They accommodate the latest development fashion because they know requests cast in fashionable language mean more cash. But recipient governments must also play to the local audience, emphasize their independence and show that the aid money is tribute, not charity. Present problems are treated as being entirely due to past injustices: Atlantic provincial poverty is due to ill-conceived trade policies imposed by Ontario that destroyed access to traditional U.S. markets; poverty in Kenya is due to colonial rulers who pitted tribe against tribe. Historical disasters are dusted off and propped up as totems, distracting donors and recipients alike from examining the actual impact of aid money.

Communities already isolated by poverty lose the moral right to object to the conditions that determine their lives, and fall victim to a cycle of paternalism familiar to students of welfare dependency. Aid money perversely weakens the hand of indigenous reformers. As communities come to identify with the bad behaviour of their entrenched leaders, it becomes harder for those who would stand against them to speak with authority; it is nearly impossible for any individual to remain untainted by a corrupt environment.

Only in the last decade have donor countries imposed serious monitoring of foreign assistance; before, it was considered an infringement of sovereignty to ask if aid dollars were reaching their intended destination. With such weak oversight, it is unsurprising that most projects failed; what is surprising is that it took so long for donors to address the problem of governance. Poor program design, incompetence and corruption all played their part, but there is another problem to face squarely. For developing-world elites whose prestige derives in part from their control of donor money, it is safer to extrapolate past failures than to do things differently. After all, doing more of the same keeps aid flowing.

The revolution that wasn’t

 

You can’t turn off the Big Red Machine; you just shut it down for maintenance.

– Liberal party activist, Cape Breton, 1997

Nova Scotia, as my Upper Canadian friends point out, is a have-not province, long a recipient of transfer payments paid by the generous people of Alberta and Ontario. But the money spent has not had the desired effect. It has spawned impressive levels of corruption and welfare dependency, while failing to resolve problems of low economic growth, inadequate health services, underperforming schools and – the ultimate sign of political failure – continuing out-migration.

The pattern is simple. Desperate communities are plied with development projects. Voters are bought with promises of jobs, a paved road, a favourable review of a disability pension application. Voters apply rational choice, and vote for the party that offers the most tangible short-term incentive. Sometimes the price of a vote is depressingly small. I recall a group of old men staggering from a minivan into a polling station in North Sydney, too drunk to walk a straight line. A young man called from the van, “Don’t forget – vote for the Premier!”

13 IMGP0123The effects of generous transfer payments from Ottawa were devastating to Cape Breton. In the 19th century, the island contained vibrant communities, filled with immigrants who came to work hard at often-dangerous jobs. Its towns were centres of community activism and radical politics. Today they have degenerated into depopulated semirural slums, ridden with substance abuse, crime and neglect and abandoned by those with sufficient ambition and ability to escape.

Working for the Nova Scotia NDP I believed, as recently as the 1997 federal election, that this situation was about to turn around. Paul Martin’s 1995 budget appeared to have ended the addictive relationship between Nova Scotians and the Liberals. Post-1995, access to unemployment insurance required more work; make-work income replacement programs for the fishery were wound down and the long-threatened closure of the Cape Breton coal industry loomed. As unemployment rose, confusion and despair spread in the poor communities that fringe the Atlantic coast. In northern New Brunswick, riots broke out against reductions in seasonal benefits.

When the Liberals called the 1997 election, they anticipated an easy win in Atlantic Canada. In 1993, they had won 31 of 32 seats in the region. The Tammany Hall style was much in evidence. Doug Young, Liberal minister for New Brunswick, gained infamy with his threat of military base closures if voters failed to vote correctly. David Dingwall, patronage king at the Department of Public Works and the Atlantic Canada Opportunity Agency, had spent nearly 20 years building a power base from his Cape Breton constituency. Infamous for spending tax dollars on a stone wall surrounding the University College of Cape Breton (a folly dubbed the Ding Wall) and for hiring well-connected construction companies to build boardwalks along stretches of deserted coast, the minister lived up to the traditions of crony politics by marrying into the family of Prime Minister Chrétien. But when he told an angry crowd of demonstrators that there were “no more bags of money,” voters stopped and asked themselves: if there weren’t any bags of money, why vote “correctly”?

I watched this wave of anger build and break from an abandoned storefront in a decrepit rooming house, a building with no electricity and a failing furnace that couldn’t keep out the raw winds blowing across offshore icebergs. Considered desirable office space in Glace Bay, this was my base and the campaign HQ for New Democrat Michelle Dockrill. She worked in a local hospital and was nominated less than four weeks before election day. In 1993, the NDP had won 6 per cent of the vote, against Dingwall’s 78 per cent.

The office was warmed on election night by dozens of supporters who, despite my “mainlander” insistence on peace and quiet, crowded in to listen to results. We didn’t wait long: minutes after the polls closed, the CBC declared that Dockrill had won. Not only did the NDP defeat Dingwall; the party also defeated Young in New Brunswick. Across Atlantic Canada, the Liberals’ hegemony appeared to be broken; their regional caucus collapsed to 11. The NDP, with no Atlantic MPs in 1993, elected eight in 1997.

There are few things as intense as the joy that comes with an unexpected political victory. Despite the efforts of the local police, who descended on our campaign office to distribute retaliatory parking tickets, that night offered hope to a part of Canada long bereft. I moved to Glace Bay and began work in Dockrill’s office, hoping to be part of what could have been the Canadian equivalent of a revolution.

It was soon clear that there would be no revolution. Even though the patronage machine had been starved of cash by Martin’s austerity programs, the Liberals still controlled federal spending, and in Cape Breton that meant control over everything.

Had the NDP been able to offer an alternative to the status quo, events might have evolved differently after 1997. But the New Democrats could not or would not address the role of corruption in the region’s decline. Having personalized the problem as the fault of specific Liberal politicians, and then having dislodged several of them, the party faced the realities of an entrenched patronage system. I saw this first hand as Liberal influence over the bureaucracy exerted itself and elected officials were marginalized. Senator Al Graham was appointed as the face of the federal government in Nova Scotia; NDP MPs were “accidentally” left off invitations to the opening of federal projects, including ones they had initiated. Government agencies forwarded only the signature pages of grant applications to our office. We had no tools to influence the bureaucracy.

With its close ties to public sector unions, the NDP was reluctant to address the corrupting nature of transfer payments administered by the civil service. When specific program abuses were uncovered, New Democrat MPs were paralyzed. The Liberals branded criticism of corrupt spending as attacks on impoverished communities. Believers in an active government, New Democrats were reluctant to argue that government handouts per se were flawed, and eager to muffle any sentiment that could be seen as anti-union. Before the 2000 election, the Liberals rescinded some of the 1995 reforms and boosted spending. Both Cape Breton seats returned to the government fold, while in Atlantic Canada overall, the Liberals recouped half their 1997 losses. Better the devil you know.

Meanwhile, on the Mekong

13 AlexPictures 100In Cambodia, in 1993, the United Nations administered the most expensive election in history, ending decades of revolution and occupation. Voters chose FUNCINPEC, the royalist party founded by then-King Norodom Sihanouk, over the Communist Cambodian Peoples’ Party (CPP) that had governed since the Vietnamese overthrow of the autogenocidal Khmer Rouge. But the royalists could not compete against a state bureaucracy created and staffed by the CPP since 1979. Unable to present a viable alternative, the royalists were outmanoeuvred, sidelined and, in 1998, defeated.

Similar problems have befallen the opposition Sam Rainsy Party (SRP). Born in 1995 from anger over corruption, the party captured the imagination of Cambodians who wanted their country to emerge as a modern liberal democracy. In 2003 it won a fifth of the vote. But, in a system where dissent is frowned on and corruption and nepotism are culturally entrenched, the SRP found it hard to develop a coherent policy to address government failures, and harder to ignore internal pressures to distribute positions and gifts to party cadres. When the SRP speaks out against alleged misuse of government funds it is criticized for being unpatriotic, for putting partisan interests ahead of the national good by jeopardizing aid-financed projects that bring services and jobs.

Foreign aid allocation is often based more on the political considerations of donors than on the actual needs of recipient governments. Just as Atlantic Canadian politicians adjust to changing federal patronage interests – from nationalizations and megaprojects in the 1960s and 1970s to call centres in the 1990s – the governments of developing countries are attuned to donor rhetoric.

There is fierce competition for money. Only Denmark, Luxembourg, the Netherlands, Norway and Sweden – to be joined by 2013 by Ireland, Belgium, Finland, Spain, France and Britain – meet the UN goal of 0.7 per cent of a donor country’s GDP being dedicated to international aid. Despite the promised increases in the 2005 budget, Canada’s expenditures have declined throughout the last decade to just 0.3 percent of GDP, and a large percentage of our aid is “tied,” forcing Canadian-sponsored programs to purchase Canadian-made goods. Assistance for an agriculture project in Bangladesh may be primarily benefiting Canadians through the subsidized purchase of domestically manufactured tractors or other equipment, a neat example of the confluence of national and international patronage.

Turf battles between aid agencies are endemic. In Cambodia, more than 1,000 NGOs are conducting work in a country of 14 million. In Bangladesh, a legislative support project provided hundreds of computers to government officials. All of them promptly disappeared, except for three converted into a makeshift coffee table in one office. Despite this obvious failure, another European aid agency relaunched the project, with predictable results. From Afghanistan to Zimbabwe, the story is the same: local beneficiaries play off one donor against another, seeking to gain funds for the same project from multiple sources or to continue funding a failed project by moving from one donor to the next, confident that the lack of coordination will make detection unlikely. I am reminded of the Sydney Tar Ponds, a project “solved” by more than half a dozen separate programs, though these solutions have yet to clear the tar from the ponds.

Come from Aways

 

I hope the government doesn’t push too quickly; at this rate I’ll be back in France within a year.

– NGO worker in Pakistan, concerned about anticorruption reforms, 2002

The perverse incentives created by aid money are rarely discussed. Those working in the field have a vested interest in maintaining their positions, which means having projects funded. It is the rare aid organization that adopts the motto: our job is to make ourselves redundant.

13 IMGP0218Just as the creators of the welfare state in the early 20th century did not imagine the crisis of state capture by interest groups, development theorists did not conceive that similar problems of rent seeking and dependency would be replicated at a global level.

Most donor states have reformed their domestic economic policies in the last 20 years. There are few career avenues open for those who espouse bigger government as the solution to domestic problems in developed countries. Marginalized at home, those who favour public spending as a catch-all solution have often ended up working overseas, inflicting outdated ideas on poor countries likely to accept the most empty-headed advisors when they arrive with full wallets. As Cambodian Prime Minister Hun Sen once said, “Too many people who cannot find work in their own country come and tell us what to do.” The tendency of aid organizations to serve as repositories for worn-out ideologies, and sometimes worn-out people, remains a serious impediment to development. I acknowledge the irony of these words coming from a New Democrat.

“Come from Aways,” as they’re called in Atlantic Canada, are a well-known phenomenon: experts who visit a region to change some aspect of local life they don’t like, the “Quiet Americans” of the development world. Local resistance to new ideas may stem from an aversion to change, or from the geographic isolation that corruption encourages. But sometimes there are sound grounds for hostility. While principles of political organizing and management are identical from place to place, the subtleties of culture mean that an idea presented in one way in one village has to be presented differently down the road. This applies to neighbourhoods in Toronto, Cape Breton or Pakistan. A donor’s lack of respect for local practice abets corruption: if reform is seen as undermining indigenous culture, it is easier for transparency initiatives to be dismissed as alien, or incompatible with existing social structures. When corrupt behaviour is rewarded with more aid targeting corruption, and that aid is in turn stolen, cynicism is hard to escape.

Aid-receiving nations adjust publicly stated priorities to maximize international assistance. Bangladesh responded to donor pressure for “gender equality” by creating 30 parliamentary seats reserved for women, and received praise for the initiative. The women MPs are appointed, not elected; in effect the governing party gives itself 30 additional members. Without the veil of women’s participation in politics being drawn across it, this move would have been roundly and rightly condemned.

Drawing conclusions

For all the above reasons, many have given up on international aid as a tool to address poverty and bad governance. Isolationists point to the long list of failures and call for an end to the enterprise, while neoconservatives say the way forward is to concentrate on economic liberalization and free trade. Both point out, correctly, that most developing-world success stories began with open markets and domestic anticorruption efforts. Think Taiwan, South Korea, Singapore, Hong Kong and, most important, China.

In these countries, local elites decided, usually at a clearly defined point in time and with clear leadership, to address the major political issues facing their peoples. They embarked on reforms that had an impact on all areas of life including the elite itself, which was often undermined by the process. But there are many countries that have made the choice not to embrace reform, and that tolerate corruption and failure while enriching themselves and those around them.

These countries are the usual targets for foreign aid, but the nature of their past failures means that too often development money keeps the wheels of corruption greased. As public resources are stripped, more outside assistance is required, opening new avenues for graft. Those new veins of corruption then require excavation by more development specialists, who bring with them yet more money.

To address these issues, Canadians need to decide what we can hope to gain from our development programs, and stop using them as a sop for our collective conscience. Aid as charity, given without question, demeans the recipient and endangers Canada’s investment. We invest in schools and hospitals and training centres in developing countries and hope it will lead to – what?

As a small country, Canada is limited in what it can achieve. Our failure to address poverty and corruption at home speak to those boundaries. But while Canadian Liberals gain some political advantage from tolerating domestic corruption and bad governance, there are no such incentives on the global level. The key to successful development projects are clear goals and strategies, aimed at creating the political will among a country’s leaders to effect change. The following are steps Canada can take to help make that happen:

•   Foreign aid needs to focus on countries. Targeting isolated sectors ignores the pervasive nature of corruption; pumping assistance into children’s health programs will simply make those programs the target for corrupt and powerful people who will absorb a new source of illicit revenue. Recent moves by Canada to focus aid on a smaller number of countries and provide more comprehensive assistance make sense.

•   Criteria for the receipt of Canadian aid should be clear and detailed, and conditions for its continuation must be equally transparent. Following a request from a government for assistance, thorough assessments need to be undertaken of existing structures, past efforts to address problems and possible solutions. Too many development programs are based on reports written by consultants who spend one week in a country before moving on, and too many donors are unwilling to spend the time and money to study an issue before proposing prescriptions.

•   Aid programs should be comprehensive. If civil servants supplement their salaries through bribery because there is no tax system to generate their wages, foreign interventions should touch on all areas of the civil service salary system. Increase wages, create a tax system to pay the civil servants in the future and educate the public and authorities about the changes. Interested politicians and party leaders can work with Canadian counterparts (preferably not Nova Scotia Liberals) on designing anticorruption programs and increasing ethical standards within parties, while bureaucrats and bankers create similar links.

•   Programs need to be sustained for five, ten or more years, allowing long-term education and training projects to bear fruit. Assistance programs traditionally operate under one- or two-year funding cycles, which encourage short-term thinking and generate often-illusory results used to ensure continued funding. Much of the important work in development consists of passing information and skills to those who need them; the simple process of identifying such people can easily take a year. At the other end, aid programs should include a “sell-by date,” at which point they will be closed down. While flexibility should be maintained to address changing circumstances, recipient governments must not see programs as neverending.

•   Aid must focus on developing public institutions. Too much effort has been dedicated to the creation of “civil society” organizations that come to serve as parallel governments in countries with corrupt public sectors. This distorts the development of a genuine civil society, as local groups attune themselves to the needs of donors instead of local communities, and creates hostility between governments and nongovernmental organizations. NGOs play a critical role in all countries, but well-meaning donors should not use them to create neocolonial power structures while they seek short cuts around unresponsive governments.

•   Canada must follow Britain’s example and ban “tied” aid. Similarly, we cannot preach the virtues of open markets when our trade relationships with many underdeveloped countries remain restricted. Part of being a partner in a more focused and intensive Canadian aid program should be free trade and a greater economic, cultural, educational and political exchange. This will also help rebuild an international diplomatic power base for Canada, a goal abandoned by our government in recent decades.

If the corruption that exists in many corners of the world continues unaddressed, the poor and the desperate will seek other answers for their misery, and other avenues for their liberation from misrule. If wealthy nations do not offer concrete measures to improve living conditions, we should not be surprised if more of the world falls into the camp of those opposed to liberal democracy, and if more of the human fallout from the resulting conflicts lands on our doorsteps.

On the left, discussion around corruption and development needs to move away from sterile arguments over neocolonialism. Asking recipients to account for how they spend our money is not an act of condescension. Opposition to accountability is understandably put forward by recipient governments, eager for the flow of money to continue. But it is also advanced by many in donor countries concerned that greater conditionality will exacerbate the distorted relationship between rich and poor, North and South.

This argument ignores the fact that aid money is not going to poor people in poor countries; it is going to the governments of poor countries, which is not the same thing. It is precisely to ensure that our money reaches its intended targets, the poor and oppressed, that we must impose stricter standards on aid-recipient governments. In so doing, we will help the poor and give hope to local reformers, who exist in all states and political parties. We need to strengthen their hand because they must do the real work of developing their countries as their citizens see fit. The present situation of unaccountable aid, channelled through local elites, is more appropriately labelled neocolonialism. It has entailed foreigners setting the agenda for indefinite periods, based on their changing and often mercantile policy priorities.

Efforts to fight corruption must hold to the idea that individuals have the power to change their environment. In too many communities, in Canada and far away, that belief is stillborn or has yet to be conceived. Until aid programs contribute to the expansion of that idea, our development money will continue to disappear and our worst suspicions about others will be confirmed. We will ourselves start sliding away from a belief in a more liberal and humane world toward a narrow place that denies the possibility of one person helping another, for the benefit of both.

Dominic Cardy served as constituency and youth wing president for the Nova Scotia NDP. He managed the campaign against David Dingwall, worked as an MP’s assistant, and cofounded NDProgress, a movement to modernize the federal NDP. He joined the National Democratic Institute in 2001, and now serves as its Program Manager in Phnom Penh, Cambodia. This article is written in a personal capacity and does not reflect the views or opinions of NDI.