New Strategies for Helping Third World

For more than a year now, a wonderful smell has wafted through Rwanda's drought-stricken Kigali Rurale province.

It is the aroma of a local delicacy, fried bread, delivered by 21-year-old Jean-Paul Safari as he pedals his bicycle through the dusty streets.

But to Safari himself, it is more.

Before he started his business, Safari and his five orphaned siblings were among the thousands of wretched survivors of his country's notorious genocide. They were destitute and needy, living in orphanages and surviving on handouts from the developed world.

Then Safari received a grant to buy the materials he needed for his business, and he began bettering his life. Now he makes enough to support his business and his siblings, and even pay for some of them to go to school.

To Safari, and many others, that delicious smell is now not only his product, but a sign of hope.

Waste of Money?

Safari's story is one of the many recounted by the New York-based aid organization Trickle Up, which gave him $50 to buy the first batch of ingredients and utensils he needed to make his bread, and a bicycle to transport them with.

The developed world has spent billions of dollars in efforts to aid people like Safari since World War II, when the Marshall Plan mostly succeeded in restoring war-ravaged Europe with a $13 billion outlay.

But in the following half-century, foreign aid has not always had the best reputation.

With many of the developing world's countries actually declining in development levels despite aid payments, critics paint it as a lost cause, a gaping fiscal black hole that has few effects other than to support corrupt regimes and ineffectual international bureaucracies.

"The United Nations has declared that 70 countries — aid recipients all — are now poorer than they were in 1980," said Doug Bandow of the libertarian CATO Institute. "An incredible 43 were worse off than in 1970."

Interactive: Click to learn about where American aid dollars go

The news media have also reported some of the failures: giant roadway projects that went nowhere, gleaming facilities that went dusty with disuse, energy generators that drained nothing but coffers.

The African nation formerly known as Zaire (now the Democratic Republic of the Congo) wasted so much in foreign aid that the spending of its dictator, Mobutu Sese Seko, became almost as a much of a personal trademark as his leopard-skin hat.

Mobutu notoriously redirected funds earmarked for his poverty-stricken nation and used them for extravagant shopping sprees on the French Riviera or for elaborate personal palaces in the middle of the African jungle.

Foreign aid was so badly used across Africa that Africans even invented a word for the corrupt bureaucrats that helped themselves to the largesse of the developed world.

They were called "Wabenzi" — "People of the Benz: in Swahili — in reference to Mercedes-Benz, the fancy German cars these politicians bought with aid money instead of helping their people.

"Anybody who's been around developing countries for any amount of time recognizes that there's been mistakes made," said Richenda Van Leeuwen, Trickle Up's executive director.

No More Afghanistans

The margin of error has become slimmer since Sept. 11 though, when the world came to realize by failing to help war-torn Afghanistan, it allowed the Central Asian state to become a haven for terrorists.

At a conference in Monterrey, Mexico, last month, the United Nations implored rich countries to raise the amount they spent on overseas aid each year to avoid creating future Afghanistans.

In the course of the conference, President Bush announced the creation of the Millennium Challenge Account, a program that will increase the U.S. foreign aid budget by 50 percent, bringing it to $15 billion by 2006.

Conscious of the criticisms of foreign aid in the past though, the president said his boost would be closely tied to results.

"Pouring money into a failed status quo does little to help the poor," he said. Success had too long been measured, he said, "only in the resources spent, not the results achieved."

A Change in Priorities

Experts say Bush's announcement is only the latest sign of the change under way in the development community.

The World Bank and the International Monetary Fund, two of the most important organizations in the aid community, had long been criticized for setting standards for aid that worsened the situation in developing countries instead of bettering them.

"These institutions have a political purpose," said Mark Weisbrot, co-director of the Center for Economic and Policy Research. "Poverty, that's way down on their list of priorities."

Bill Murray, deputy chief of the IMF's press office, recognizes that much of the money given in the past wasn't effective because it came with reams of stipulations. "The donor countries concerned did not want to give a blank check. That thing kind of snowballed over time.

"There was a degree of truth [in the criticism of foreign aid] a few years ago," Murray said — but he said things have changed, and are still misperceived.

As an example, he recalled a convention of trade unionists who last year declared the IMF anti-education because it denied salary increases for Kenyan teachers.

But the IMF diverted the money to constructing more schools — and there was a good reason for doing so, he said. "In Kenya, [among teachers] there are rampant no-show jobs," he said. "No-show jobs" are when wages are paid to fictitious people.

Interactive: Click to learn about where American aid dollars go

A Better Approach

"A lot of people realize the old system does not work anymore," said Gerald O'Driscoll, director of the Center for International Trade and Economics at the Heritage Foundation.

As a result, the international donor community is now taking a more "holistic" approach, concentrating on reducing debt, building up national institutions and lowering trade barriers, said Damian Milverton, a communications officer at the World Bank.

The end of the Cold War changed the reasons why people gave aid, he said. During the Cold War, he said, "there was not a great focus on results. It was a political tool."

The new policies are less paternalistic, Van Leeuwen said. "Before, donor countries used to decide where to spend money from the outside. They didn't always have the sexiest priorities."

A lot of foreign aid in the past was spent on showcase projects like huge dams, experts said, instead of concentrating on programs that had an effect, like disease prevention.

Organizations like Drop the Debt and Oxfam, and figures as varied as pop singer Bono and notoriously isolationist Sen. Jesse Helms, have also given momentum to a reconsideration of foreign aid — especially debt relief.

"They're coming together and the timing is right," said Milverton.

As a part of debt relief, the aid community is also moving from loans, which have in the past tended to hamstring countries, to grants. Grants give the donor community "less ability to force countries to do bad things," Weisbrot said.

And that's certainly fine for Jean-Paul Safari. He's already applied to Trickle Up for a fresh infusion of cash to buy a motorcycle, Van Leeuwen said.

He wants it so he can expand, he told her, and he said he's confident this business plan will succeed — boding well for him, his family, and his country.