August 22, 2011

When Donations Aren’t Enough

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When I asked a small-store owner in Nairobi what he thought was the biggest boon to Kenya’s growth, his answer took me by surprise. He didn’t say the United Nations. Nor did he credit the Peace Corps or praise the United States Agency for International Development.Instead, he said China.And it was easy to see why. Much of the construction machinery — the bulldozers, excavators, pavers, even the helmets worn by the workers — were marked with the logos of Chinese companies. But the workers were Kenyan. And everywhere, roads were being paved and bridges being erected, creating traffic jams for stretches at a time. These are the welcoming signs of a booming economy. It turns out that China has been investing billions of dollars in Africa in exchange for access to its resources.It may seem a bit unorthodox for donors to benefit financially from humanitarianism, but this sort of foreign aid — one that’s highly efficient and targeted at a specific problem — is just what an ailing nation needs, especially when deteriorating infrastructure has eroded business productivity in sub-Sahara Africa by some 40 percent, according to the World Bank.And though opponents have argued against China’s poor domestic human rights record, it was endearing to see the mammoth Asian nation investing in infrastructure and stimulating job creation in a country a fraction of its size.The model isn’t perfect, but it is worth pursuing because the current paradigm for foreign aid lacks feedback and hard data. While our well-intended donations to UNICEF may make us feel warm inside, they have unintended and harmful consequences.  We hope that our second-hand sweaters will keep children warm during the colder seasons; that our pencils and pens will sustain a classroom for an additional month; that our professionally crafted American textbooks will be duly used by the teachers to improve test scores; and that handing out sex education booklets will erase any dangerous myths about HIV/AIDS.Alas, it’s not that simple. The clothes and classroom supplies donated by foreign volunteers may lead to lost business, and income, for the tailor or the stationary store owner working down the street. Textbooks only benefit the students who are already at the top of their class — the ones who don’t need as much help — according to a study by economics Professor Paul Glewwe at the University of Minnesota.In the orphanage where I stayed was a large dust-covered pile of glossy HIV/AIDS packets. Though they appeared professional with their thick paper and vivid pictures, they were never even opened. Education may be a solution, but the real difficulty lies in putting it into action.   So while Americans decry domestic jobs lost to the invasion of cheap foreign goods, we may be doing the same thing in these developing countries by flooding their markets with our supposed good will, stifling efforts and opportunities to create a dynamic and self-sustaining economy. It may even increase dependence on foreign aid: For every dollar given for health programs in developing nations, health funding from their own governments went down by 43 cents.The International Monetary Fund, the World Bank, volunteers and missionary groups have poured energy and billions of dollars into Africa with virtuous intentions, but they did so blindly. If a program worked, they often didn’t know why. And if it failed, they didn’t know to improve it. Even worse, they couldn’t learn from the mistakes, dooming themselves to repeat them.  But does that mean they should stop being generous? Not at all. It just means they need to get smarter with development funding. And that’s exactly what MIT economist Esther Duflo has done.Efforts from researchers like Duflo have begun a revolution in foreign aid that combines the precision of the scientific method with feel-good philanthropy. And though developmental economics is still a relatively young field, the results of Duflo’s experiments in poor nations have allowed aid workers to best leverage their resources to achieve maximal impact.So based on Duflo’s method, what is the best way to reduce the spread of HIV/AIDS in sub-Saharan Africa? Is it subsidizing education costs? Creating a better school curriculum? Or maybe even both? According to Duflo’s experiment over the course of seven years in Kenya, lowering the cost of education reduces rates of sexually transmitted infections for girls, but doesn’t chip away at the their high birth rates for young women. And most surprisingly, the curriculum had no significant impact. That is important data to keep in mind for future volunteer groups hoping to reform a school system — focus resources on lowering tuition costs rather than wasting them on curricula.For the world’s second largest continent in area with a population of 1 billion (more than Europe) that’s still growing at a rapid pace, Africa’s problems are unavoidably complex and entangled. But without a systematic and scientific approach, their solutions become only more elusive. Steven Zhang is a senior in the College of Arts and Sciences. He may be reached at szhang2@cornellsun.com. The Bigger Picture appears alternate Tuesdays this semester.

Original Author: Steven Zhang