Reforming U.S. Foreign Aid

Wednesday, October 31, 2007

NICHOLAS KRISTOF: Welcome to this meeting of the Council on Foreign Relations. We have a terrific discussion ahead of us. We're going to solve the problems of foreign aid over the next hour.

MARY K. BUSH: I like that.

KRISTOF: Or you get your money back. (Laughter.) But first, before we solve the problems, can you please just turn off your cell phones or pagers. We --

Now, this meeting, in contrast to most, will be on the record. And we have two members of the HELP Commission, which has been charged with examining the foreign aid structure and offering advice on how to improve it. With us, the HELP Commission is just working on its final report and this is an ideal time to quiz them about it.

Mary Bush, the president of Bush International is the chair of the HELP Commission. She has worked under three presidents, holding just about every possible position around in Treasury, IMF, and around Washington, and now runs Bush International, a advisory firm.

Then Leo Hindery is the vice chair. Mary was a Republican appointee, Leo a Democratic appointee to the Commission, which is a bipartisan one. Leo has long experience in development and also in the media industry, particularly cable, and is now running InterMedia Partners. And then Jim Harmon is not on the Commission, but also long experience in the field. He was President Clinton's head of the Ex-Im Bank during the second term of the Clinton administration and now runs Harmon & Company, which is also a international firm. I may start Kristof and Co., or Kristof International. I feel inadequate here.

Let me start with you, Mary, and if you can just talk a little bit about the aim, your aim in leading the HELP Commission. What do you hope to do with the report when it comes out, and fundamentally, are you aiming to present new ideas or to create some kind of a bipartisan consensus so that things can actually happen with ideas that have been kicking around?

BUSH: Thank you, Nick. I would say first of all that both things are important. New ideas, bringing forward ideas that have been around for a while because, as most of you -- most of us here know, this subject has been studied for a while. But also that a bipartisan consensus is extremely important.

Congressman Frank Wolf was the person who wanted this commission to happen and who was one of the authors of the legislation. And it was done, of course, and signed off on by President Bush. We do, as you mentioned, have a bipartisan commission.

I think one of the things that has been very satisfying to us as commissioners is that we are bipartisan but, at the same time, as we come to consensus on many, many things surrounding the issue of foreign aid, we have been very, very nonpartisan. Because it is an extremely important subject, not just for people in the developing world, but also for America and for Americans.

Congressman Wolf urged us to be bold, to be innovative, to figure out how we could do things, how the U.S. government can do things in a better way in order to be more effective at aid. He asked the question, many people asked the question, many Americans asked the question, Why is it that we've spent billions of dollars -- that's the U.S. government as well as other developed countries -- over several years, and yet so many people remain in dire poverty? And let me just mention a few things to start that I think are very, very important.

One of the things that this commission, not just I, one of the things that we think is important is that in order for things to change, in order for the United States government and other governments to have a much bigger impact, in order for our aid to have a much bigger impact, that there has to be a shared vision by our executive and legislative branches, as well as by the American people, that this is important, this is critical for America, for global peace and security, for America's national interests. And lots of work, I think, has to be done to get to that shared vision.

KRISTOF: And that's part of what you're doing, is try to create that shared --

BUSH: That's a part of what we are trying to do, and it's going to take a lot more, of course, than the report itself to do it, but I think many of our commissioners are very committed, even after we come to a close in December, to continuing the work on an individual basis.

A second thing is that foreign assistance alone can't do the job. It takes what we are calling an integrated approach. As far as our government being willing and able to help, we need to pull in instruments like trade; foreign assistance, of course; public diplomacy; the various financing vehicles that we have in the U.S. government; as well as marriages, if you will -- more and bigger marriages with the private sector. The private sector meaning private institutions, philanthropies, as well as business and individuals. All of those things are very important.

KRISTOF: Leo, let me ask you a little bit about amounts as kind of a starting point. That's one of the basic debates that has gone on in the world of aid, you know, with one group arguing we need to get to 0.7 percent of GNP, the Monterrey Consensus; others saying that the amounts are largely irrelevant and, you know, emphasis should be efficiency, rather than amounts. Is the Commission going toward any consensus on that issue?

LEO J. HINDERY: You know, let me just back up a little bit on some of Mary's comments, Nick, if I might. The Commission was actually formed in 2003. It took two years to appoint us. (Laughter.) Because of the -- well, we are not by anybody's measure particularly partisan. The activity is highly partisan, and the fact that it took us two years to be appointed was quite remarkable. And I think that we have to not lose sight of the fact that the solutions here, if they're to be found, are going to be breaking down, as Mary suggests, that partisanship.

This is going to be a report that I think will be of moment to an awful lot of people in an entirely nonpartisan fashion for about 75 percent of it. This group of women and men has been very capably able to address, Nick, administrative issues, budgeting issues, procurement, administration, human resources. Where the rubber hits the road is in three areas, and in one unshared perspective. Where the rubber will hit the road is funding, to your question; structure and rationale are imperative.

And as a subpart of the latter, there remain around the world and in this country a large number of citizens from all countries who aren't appreciative of the importance or the imperative of the issue. And it breaks down into three categories: "I don't want to do any of it;" "Okay, I'll do purely emergency humanitarian -- give me a natural disaster, I'll likely be there;" and "If I can't persuade you that that's all I want to do, then I'll talk about development, then go back off and throw humanitarian aside."

So you're going to find in the report a very noble effort, I think, where a lot of consensus was reached on practice. It's been more of a struggle around funding and structure. And I think people have to be honest, and I hope they will be -- there remain some on the Commission who don't like this activity at all. And I think they saw their role --

KRISTOF: Don't like this activity meaning --

HINDERY: Foreign assistance.

(Cross talk.)

KRISTOF: -- are -- (inaudible) -- suspicious of --

HINDERY: Foreign assistance. I think they saw their role as nuking it, killing it.

And I think Mary's done a -- just a remarkable job of moving us away from those perspectives, but this is going to be a struggle. And Jim went through one of these from a different direction, and there are colleagues of ours in the room today who've been on a few of these commissions. What do we do with it? That'll be the question.

Let me talk to you just one second on funding. The reason that a lot of people like formulas is because they exist. You can judge the merit and the amount of your participation against a formula. There are others who strongly suggest that in countries as nuanced as ours, where foreign assistance is both a defense activity, a trade activity, and a pure assistance activity, that there's no formula under a one-size-fits-all approach that can catch the United States. You can catch the Netherlands, you can catch the United Kingdom and most of Central Europe, but it's not easy to catch the United States in some commonly agreed formula.

So where we've been trying to take it is funding needs, but by specifically articulating, to use Mary's phrase, a vision and a rationale so that nobody will doubt that we want more monies, that if this thing is run better, we all, I think, generally can -- you know, with some arm-twisting -- we all got to the point, some of us more easily than others -- we all want more funding, but nobody believes that this punching bag that we've got out there now is going to work. Where, you know, visions change and rationales change, and this stupid sort of fundamental absence of a sense of longevity. And we make commitments all over the globe and we don't follow up on them --

And so you're going to see a lot of talk from us on funding, and then there'll be some -- and we'll get into it after Jim's comments -- on structure. There -- we think there must be a structure out there that is much different than today.

I want to introduce Margot Machol, who is sitting down there. These reports don't get just written. We have been as well staffed, and Margot's our executive director -- and the reason I bring it up, in addition to the fact she's done all the work, is we have spent 22 months in two-day meetings -- two-day meetings for 22 months. We've traveled to 18 countries, we've seen 58 people, I think -- is that right, Margot? Something like that -- that testified to us, one of whom is our friend Rod Nichols. And there's a lot of work here, and -- but you're going to -- and I think the fun of this conversation, Nick, will be hearing our colleagues talk about their own tensions around structure, funding, and sheer rationale.

KRISTOF: So the bottom line would be, in terms of what we should expect, that the effort to gut -- to use the Commission to gut foreign aid is not -- is going to fail, but it sounds like it'll be more or less a ringing affirmation of the benefits of aid, but without specific targets.

HINDERY: Yeah, but they're still living and breathing, the nihilists. (Laughter.) And so --

KRISTOF: As a humanitarian, are you arguing for putting them out of their misery, or -- (Laughter.)

HINDERY: That's right. That's right, a different form of humanitarian aid. (Laughter.)

KRISTOF: Jim, Mary talked earlier about conceiving of aid more broadly, beyond just foreign assistance. And can you just talk for a moment about the role of trade? And I mean, I think there's a general sense that trade should play a greater role in the development process, that there's more we should do. But specifically, you know, how do we get there? Somehow it doesn't end up being one of the things that tends to be at the top of the agenda, usually.

JAMES A. HARMON: Okay, thank you, Nick.

Let me first say that there's been so many reports done by so many commissions, I don't want either the audience or the members who are on it to be too disappointed if the results are not implemented immediately. (Laughter.) Secondly, I can't help but sort of jokingly comment on the fact that the budget, which was a public taxpayer budget for this Commission, was 40 times our budget for those members here on our commission on capital flows to Africa, which just showed that if you get the support, certainly, of the United States taxpayer, then you can produce a much broader report. Let's hope that it results in a lot of good things.

Now I come to trade. I think what I said to Nick before is I sort of start at the top. I think that the results, recommendations, and much of the work that all of us have done really depends on leadership. And if you don't have appropriate leadership from the very top down, it's very hard to implement change. And the next administration, let's hope, is focused on engagement, which is the first point that I would make, which is very important.

Because I strongly support engaging with many countries, not just those who agree with us. And I hope that we focus on multilateral rather than unilateral, because it's so important to leverage all of our own programs with the support that we can get from a lot of other countries. And that was my experience at Ex-Im Bank. Wherever we actually got a number of others to participate, we produced much greater results than when we did it as one single agency in the United States.

Now, aid. Aid is the most -- may be the most important tool, but it's close to being the most important tool we have for economic development in the poorest parts of the world. Where we have seen -- AGOA, for example, which I know some of you may be very familiar with it, others not so much. I think it was maybe the most important piece of trade legislation during my period. It was in the year 2000.

And the increase of -- by opening our markets in the United States to sub-Saharan Africa exports, even if you exclude oil and gas, even if you exclude -- which is the biggest, of course, trade item coming from Africa -- trade with sub-Saharan Africa on non-oil areas has grown 19 percent a year in the last five years on non-oil items with AGOA-eligible countries. Now, we had hoped for it to do more because frankly the total amount of that is about $3.6 billion today, and that represents a fraction, frankly, of the oil that we're importing from Africa. And not enough countries -- most of those countries that are AGOA-eligible, not enough are really taking full advantage of that. So --

KRISTOF: I'm sure most of you know this, but AGOA is the Africa Growth Opportunity Act.

HARMON: Yeah. But AGOA did a lot of other things beside just open up our markets. A little-known fact which I can tell you, AGOA obligated the Ex-Im Bank in the United States to have one director, under our charter, dedicated to Africa. AGOA obligated us to have a task force on a regular basis to increase our own support for exports from the United States to sub-Saharan Africa. And I could go on and on.

We institutionalized the relationship between the United States and sub-Saharan Africa in a very significant way. It really started from the top, though. It was Clinton, it was President Clinton and it was Hillary Clinton who first pushed me to go over 1998. And frankly, it was their effort that pushed all the other agencies and departments to focus in on Africa. So if there's one message here that my experience has been is where it is at the top. And the top, in my four-year period of time, was the president himself and the first lady, who wanted us to increase Africa aid.

And really, AGOA gave us the structured to do it and forced us to institutionalize it so that Ex-Im still has this obligation to report to Congress every single year on its results in Africa. Which, when you're an agency, you think twice whenever you make a report to Congress to make sure it looks good for -- compared to the prior year. So there was still this effort, so I give a lot of credit to AGOA.

I went too -- (inaudible).


BUSH: I want to, if I may, just make a couple of other points, based on what we're just talking about here. One is on trade, and I think the AGOA initiative is hugely important to Africa, but there's something else that we in our Commission discovered, and that is that the tariffs that the United States collects from Millennium Challenge countries are more than what we give in the grants to Millennium Challenge countries on an annual basis.

HARMON: (Chuckles.) Right.

BUSH: Now, that is pretty ridiculous.

HINDERY: By a factor of three.

BUSH: Pardon me?

HINDERY: By a factor of three.

BUSH: Yeah, and --

HINDERY: We collect three times as much in tariffs from Millennium Challenge countries as we give them in aid.

KRISTOF: In aid. Right.

BUSH: The other point related to that is that the structure of our tariff system results in the fact that we have higher tariffs on products from the lowest income, the poorest countries. It's not deliberate; it's just that those products on which we have the very high tariffs are the products that poorer countries are trying to export. Both of those things have hugely negative effects on the ability to trade of countries in Africa and in other parts of the world. Our Commission is going to make recommendations around both of those things.

Leadership, if I could just make a point on that, I agree it's hugely important. The -- President Kennedy, in 1961, that's when our foreign assistance act was written. It hasn't been re-written since then. All kinds of directives and amendments have been piled on top of it so it's hugely complicated.

In order to do something about that, we are going to have to have the next president really take this issue on. The president, the next president and the Congress, and that means that we need your help in getting the foreign policy advisers to all of the candidates really interested in this subject.

KRISTOF: But on that question of leadership, and I mean, Jim emphasized the importance of having that from the top. One of the problems right now is that in the Cabinet meetings, for example, often there isn't really a voice raising these issues. And one of the proposals has been precisely -- and I believe it's one that you've been discussing -- has been to have a Cabinet-level agency group, organization, that would focus on, that would absorb aid efforts, that would be an advocate on these issues within the administration, within the budget process. Is that a good idea? Is that something that's feasible?

HINDERY: Well, you've got four choices, and there's not a fifth. You can stick with the status quo. And right in our opening few paragraphs we comment that not a single woman or man with whom we spoke suggested the status quo was good. So that's not going to be our recommendation. (Laughter.)

You have three other choices. Two are obvious and are the subjects, Nick of a lot of well-thought articles. One is the stand-alone Cabinet department. The issue is whether you could ever construct something standing alone even with good intentions that stands sufficiently aside diplomacy, State and Defense, to have the stature. But it's certainly better than a poke in the eye.

And the second alternative, the obvious one is integration within the State Department. Under some leadership of Margot and her colleagues, we ended up spending an awful lot of time on a fourth alternative that was not so obvious going in, which is a super State Department. I don't -- we'll be more clever in our phraseology than that.

But it's one that says that maybe, maybe our successor commission, somebody who follows after us, should look at structure in the guise of a super State Department, lots of undersecretaries, of which one would be in this development category.

So a lot of good discussion from us on the stand-alone department, on the integration. Against those two, stand-alone wins out. And we didn't have the standing or the charter to re-form the entire State Department, but we do speak about it, or will speak about it at some length in, I hope, a compelling fashion so that people who might come after us will consider that.

BUSH: May I just add something quickly also to that -- to those three structures?


BUSH: To just two other points, that coordination around the government is hugely important and that needs to take place whether it's a Department of Development or some altered form of the State Department, that needs to happen. Because you have programs, of course, coming out of the Agriculture Department and the Treasury Department and various and sundry other departments, and you have people tripping over each other, you know, with regard to what is being offered to and talked about with the developing countries. It's very inefficient.

And the second point is that some-- what we would recommend that the next president consider is a very high-level office within the White House, whether it's NSC or one of the economic parts of his -- his or her organization, that will actually bring together all of the foreign aid and development activities around the government.

HINDERY: Can I just, Nick, add a quick one? One of the fundamental observations that I think we drew is that the developing world has cleaved itself into two developing worlds: one which is truly developing, and one which is -- got caught up in that, but is in abysmal poverty.

And I hope that as people reflect on our work -- that a lot of us grew heavily informed about hunger, and that led us into ag policies. We found ourselves overwhelmed by the tragedy of this combination of AIDS and malaria.

The urbanization phenomenon, which has seen the deeply poor move into even more difficult settings in highly urbanized environments -- and using Haiti as an example the fundamental absence in many places, in the deep developing world, of security and rule of law. And nothing -- nothing works until you acknowledge that those four things better be addressed first: the hungriest in the world, the sickest in the world, those who live now in urban poverty, which has got very unmanageable characteristics to it, and this absence of security and rule of law.

You know, some of us will argue that the Millennium Challenge is like having your dessert after -- you know. It just pales in trade and all these other things. There's an awful lot of hungry people out there that aren't feeling very well today and are living in great fear of their lives. And --

KRISTOF: But let me push back on that a little bit. And, I mean, Jim, actually you've seen the government in all its dimensions. Maybe let me ask this of you in particular. This question of security. I mean, you're absolutely right. You can't do anything unless you have security, and right now in southern Sudan we're building schools and building clinics and meanwhile, the north-south war may well arrive in Sudan and those schools and clinics will be burned down, and the doctors and teachers killed.

And what you need there is security, and the same in Congo, obviously. And that is the one thing that, you know, imposing, creating security where there isn't any that, I think, in general the aid community, whether governmental or nongovernmental, has been -- has found it difficult to figure out how to address.

So granted that that is needed, whether it's Congo, eastern Congo, whether it's Chad, Central African Republic, given how infectious chaos is from one country to the next, you know, how do we actually go about creating that security so that one can go ahead and build schools and clinics and so on?

HARMON: Is that a question for me, or for Leo?

KRISTOF: Yeah, you -- please solve it. (Laughter.)

HINDERY: Aw, shucks. I was going to do that one. (Laughter.) Oh, well.

HARMON: I don't really feel eminently qualified to discuss the security issue, but I'll give a crack at it.

Firstly, I'd like to say the number of countries in conflict in sub-Saharan Africa has dramatically decreased since the end of the Cold War. So it was in the mid-to-high 30s at one point, and now it's significantly less, in fact, than 12 or 11 or something like this. So we've made some progress. The mere development of the private sector in sub-Saharan Africa, and better governance. And the world is a little bit better off because we have fewer conflicts.

The second point I would make is again, it's unilateral action that gets us into trouble. So I think addressing the question of Sudan, I would have hoped that we would, working together with other countries more aggressively, we might have done a lot better to try to resolve this, to use the U.N. or other countries. Whenever we have done that, we have had a better chance of success. Without political stability, you have no economic stability. Without economic stability, you have no growth, so you have to come back to this. You have to decide this.

We would have been happier a number of times if we had convinced the African nations -- as it has improved its own leadership which is significant to Africa, if they had had a better peer review mechanism, we would rather have had the African nations today deal more effectively in Zimbabwe than they have. We would have preferred the African nations in a stronger way to have dealt effectively in Sudan.

But it is not only in Africa. I argue the same way in the Mid-East, where we could have worked -- let's say the G-8, rather than the U.S., together with the Arab League, we could have made some progress in Lebanon, which we have not made. So time and time again it comes back to the same thing. It's leadership, it's multilateral effort rather than unilateral effort, and I think it's -- where you can help develop leaders in the poorest parts of the world that is very significant to our ability to reduce the amount of conflict that we have.

And finally, I think we all know in this room, anyone who has worked in the private sector knows that where you find areas of mutual interest, you can lead to maybe reducing the amount of conflict. So the more investment we have in some countries, the more we work together, that reduces the likelihood of such conflict. And these are things which means that in recommendations -- and I am not privy to the recommendations; I have felt this for some time now -- that we should be leveraging a bit more our own aid programs with the private sector, because the private sector can add a lot of value.

So how can we work together in the private sector, at a time when the private sector is investing increasingly in the poorest parts of the world, may be critical. And the more investments we make, the more trade we have, the more likely it is that we will reduce the amount of conflict.

But you were right. With conflict, you have -- you go nowhere.

BUSH: Yeah, may I -- if I could just pick up on that quickly. I think those points are hugely critical. Leo mentioned earlier something that our commission is very focused on, that President Bush has also said, and that is that we need to elevate development to an equal footing with defense and with diplomacy. And if we can become successful in doing that, then I think, as you are suggesting, that we help prevent some of the conflicts around the world. Because clearly, some of them are based on political issues, some religious but frequently all wound up in better economic interests. And if we are able to use all the tools in our tool kit across the government to help prevent conflicts, then we're going to do a lot more for development.

And the other related point -- and it also relates to the point of funding that Leo was addressing -- is that our Defense Department, as I know all of you know, has been spending a lot more and doing a lot more in terms of assistance in recent years than it ever has before. And they're doing things that are typically in the province of the State Department, USAID. I think our Defense Department is terrific and great for the United States. However, if State Department and USAID or whatever a new development agency might be were sufficiently funded so that they could carry out these activities, then it puts more of our diplomatic and development face forward to the world, which is a good thing, and it returns our development agencies to the things that they are best at doing and allows our Defense Department to help more with these security issues.

KRISTOF: Well now I'd like to pass the microphone over to you folks. We have an extraordinary wealth of experience here. After I call on you, please identify yourself by name and your affiliation. And of course, stick to questions as opposed to assertions, analyses of the world. (Laughter.)

Yes -- there's a microphone right behind you.

QUESTIONER: Hi. Thanks, Nick. My name is Pranay Gupte, and I know three of the four panelists.

I've been traveling around the world quite a bit in recent months. And I think all your points are very well taken about reforming American aid. But what about the other side, the recipient part of it? In other words -- (inaudible) -- sitting right there talks about the absorptive capacity of these societies to really receive that aid and use it. What about governance? But overriding it all, I think, is the perception of America, because of recent politics in the Middle East. That perception really stretches right beyond the Middle East to Asia, to Africa, other parts of the world as well. And I wonder whether in the minds of the panelists there is a sense that regardless of reforming American aid, regardless of the size of American aid, that it really is a little too late at this point unless those perceptions change about what America's mission in the world is, whether it's manifest destiny or whatever. What does any one of you or all of you, what do you think about that? Thank you.

BUSH: Did I understand your question that it's too late? Was that --

QUESTIONER: In my view?

BUSH: Yes.

QUESTIONER: Well, what I hear, it's a bit too late. At least not the way we are going right now. On the other hand, I'm not a panelist, you are. So I'd love to hear from you. Thank you. (Laughs.)

HINDERY: Pranay --

BUSH: I think all three of us want to talk. (Laughs.)

HINDERY: Yeah. Pranay, on that point, it's not going to take up a lot of the document, but it was a heated discussion as to whether there are predicates to our foreign assistance based around form of government. And some would suggest there should be, and many of us would suggest there need not be. That rule of law, pathways to non-corruption, common agreement on, but the democracy predicate has, in the minds now of the majority of the commissioners, has served our country poorly. That it foreclosed us from opportunities of true humanitarian need as well as development assistance that might have led to an improved governmental environment. We've used foreign assistance too much sometimes as a tool of diplomacy. And I think that's the natural consequence of a collapsed three d structure. If it's not three d's -- if it's not development, including foreign assistance, diplomacy and defense -- standing relatively on a par with each other, one's going to take over the other. And development cannot be a tool of foreign policy. It needs to be an initiative unto its own, at least in many of our eyes.

BUSH: I'm an eternal optimist. Let me start with that. And I don't think it's ever too late. And I think there is plenty -- I mean, we can read the press and what, you know, press around the world might say about America. And then we can travel out, and we can talk to the people, to people who have been helped and are being helped by American aid. And I would submit to you that in many cases, the story is very, very different.

I'm going to ask for Margot Machol's help on this one. Because one of our commissioners, Ben Homan, travels quite extensively with his organization. And it was a country in the Muslim world where we had given an extraordinary amount of help. Maybe it was after an earthquake or something like that.

Margot, why don't you tell this story and the changes in opinion --

(Cross talk.)

BUSH: -- right.

HINDERY: Ninety-two percent of the population supporting us on --

BUSH: Right. And when the population was asked their opinions about America after our help with the earthquake, the opinions were very, very positive. We did not know that America could be so generous or so helpful or so compassionate. So I think these things are hugely important. It's not too late for America. The American character is imbued with our desire to, I think, help people around the world who don't enjoy the kinds of privileges and the wonderful way of life that we enjoy. And you know, if we can do a much better job of reaching out and making our aid more effective, that's what we're really after here, then I think America can improve its standing and as well the standing that it already has will be much more recognized.

KRISTOF: Jim, did you want to add to that?

HARMON: Yeah. I would say I'm becoming optimistic after a number of years of being concerned. The private sector in the United States and the world have led to a very significant growth of the developing world and especially the frontier countries, the poorest parts of the world. The U.S., with 27 percent of global wealth measured by GDP and 4-and-a-half percent of the world's population is not going to continue in any case, over a period of time. The fact that you have this very great, growing middle class in the frontier countries and even the bricks is very encouraging. So you see the rest of the world catching up with us in a number of areas, which I perceive as a global citizen, even though I'm a U.S. citizen, as a very positive factor. You could conclude that the private sector in the United States has done a better job than the public sector for some time. Because it's the private sector that's increasingly reached out, made investments and worked out relationships in the poorest parts of the world. And the public sector might not have done everything it should have, which is why this commission, I think, is a good thing, because it could result in thinking about how they can leverage off what the private sector has done.

But I also want to agree with what Mary said. It's not too late for the public sector. One gets optimistic when one thinks one is bottoming. I think that a number of things in the public sector, if you were charting this, we're close to a bottom. A new administration has an enormous opportunity, just an enormous opportunity, better than anything I've seen in some time, to really rebuild our foreign assistance in a constructive way with the developing world. But part of this, because the developing world is so much stronger -- and if you take your point on governance, governance is improving steadily in the poorest parts of the world. Yes, there are some exceptions like Zimbabwe, and you can talk about some of the real crisis problems. But if you looked at the private sector growth in some of the poorest parts of the world, it has been significant.


QUESTIONER: Hi. I'm Amy Frumin. I'm with the council.

Prior to working at the council, I spent three years with USAID. And I appreciate your work on all of these three main topics you said you were going to look at. But from my perspective in the field in Haiti or in the field in Afghanistan, the toughest thing for me was the mechanisms we were using to implement our projects. And in the field, I didn't really care if I was part of the State Department or part of an agency. None of that really mattered. My ability to actually spend the money was impeded by the various regulations that Congress would constrain USAID with. And I'm wondering how your commission will address that. Thank you.

HINDERY: You know, Amy, not a single one of your former colleagues disagrees with you. As I said, about 75 percent of this document will not be read from a policy point of view. It will be read from an administrator's point of view. The OE budget that you had to live with is ridiculous. And the human resource practices that you had to abide by are ridiculous and language skills and time in promotion and your ability to leave the agency and come back. So we do a pretty good job with that. And I think where we do the best job is in budgeting. The Defense Department, for obvious reasons, is probably the best of the government at budgeting, because it's allowed to be and needs to be over the sustained period. So I think you'll be pleased. And you know, a lot of us were concerned that the top-level stuff, it will be good. But will it be just positive enough to change? We don't know. We'll have to see what the next administration -- to Jim's comment -- makes. But boy, 75 percent of this you should be able to put in your pocket and have a better career as a foreign-assistance professional.


QUESTIONER: Thank you. Mahesh Kotecha, Structured Credit International.

My question is really -- did the commission or is the commission considering the international context of aid from the U.S. in the context of other countries' aid? China, for example, is raising its activities quite substantially. And I don't know if there was an effort to put USAID in the context of other aid business.

BUSH: Thank you, Mahesh, for that. Yes, to some extent, we do recognize the importance of collaborating, not just with the private sector but with other countries, with other multilateral organizations. Secondly, infrastructure, where China is making such an impact in Africa. The United States used to do a lot more on infrastructure, and we are going to encourage both our country to do more on its own as well as to take a leadership role, for instance, in the G8, perhaps with the World Bank, in getting more done in infrastructure in the developing world.


HARMON: And a point of infrastructure, I'm glad you mentioned that, Mary. I think that trade opens up, of course, if we have access to our markets, that's a positive thing. But that's not the only real factor we have to focus in on. Africa doesn't have the right infrastructure or enough of an infrastructure, which is why I think we have to think about maybe some cooperation with people in China. There is something I just learned about the last few weeks called the Africa-China-U.S. trilateral dialogue which is kind of an interesting message. When someone saw my name -- the advantages of serving on a panel like that, someone literally from the Council on Foreign Relations saw my name and sent me an e-mail. And then he sent me his document which was co-sponsored by four distinguished entities, including the Council on Foreign Relations. And basically they're reviewing -- they had representatives from Africa, China and the U.S. talking about how we can work together in a more effective way. I was delighted to read it and pleased that they focused in an area of infrastructure, because I have felt that the Chinese Export Credit Agency which has become a giant and which is financing projects all over the world without environmental standards or other standards that we have in the United States is a bit of a sticky problem for us in the U.S. And we have to address that. And this group seems to have assembled some very thoughtful people from the council, no less, and others and are focusing in on some of these areas. So someone else is thinking about it. It would be good if we could cooperate with China. Wouldn't that be a good resolution, especially on infrastructure in Africa?


QUESTIONER: Thank you. Lane Greene from The Economist.

We've heard a lot of really interesting things about the broader world of aid and how it connects with conflict, with reorganizing the U.S. government, with U.S. foreign policy generally, with the global context of things like China. But I became very interested today in finding out how can aid, very more narrowly defined, be made to work better? What works and what doesn't? What should the balance of infrastructure, health, focusing on women, disease, grants versus loans -- what are we learning about that? And what are you planning on putting in your report about what does the best in terms of aid itself?

HINDERY: I think, Lane, the answer is found in stature. If it has stature, it can have a vision. Right now, it's a year-to-year phenomenon. It's facile in setting goals, because it knows that they're subject to the budget cycles. So it does what it can do well. I mean, Amy comes from that world. It does what it can do, which is live in short-term horizons against really miserable administrative structures and does a pretty good job against that backdrop. So somewhere you've got to accomplish two things quickly. You've got to elevate the structure, which was Mary's comment, and you have to find enough funding to be real. And that funding has to be the subject of some sort of long-date budgeting system so that those projects that take a while and those projects which may fail are as readily embraced as the immediate ones that you know work and you default to.

BUSH: And if I could just add one thing -- long-term commitments, as Leo's saying, very, very important. But the other thing, we keep talking about this integrated approach, about using things across the government. And that's because, I mean, we know that even if we do get increases or substantial increases in aid, aid alone won't do it. And that's why we're talking about all of these other things. I use this argument 'necessary but not sufficient' in talking about what has to happen in countries. We spend a good deal on health. We spend a fair amount on education.

And I'll tell you just a very quick story. Two of the countries that I visited on our trips, the commission's trips, were Kenya and Uganda. In both places, I went to schools. They happened to be girls' schools. They were funded by USAID. And these young girls were just so appreciative of, you know, for really the first time being able to get an education. But you know what the head master of the school said to us as she took us aside? She said okay, now we will have educated young girls, but then what happens? There are no jobs for them to go to. You know, there are no companies. There are no government jobs or anything like that. And that's why I say help is absolutely necessary but not sufficient. Education -- necessary, it's not sufficient.

And that's why we need all of these other things to try to get trade going, to bring in finance, government, private sector, combination of, even private equity funds, as Alan has been talking about for some time. And I believe that the U.S. government can do things to help facilitate private funding going into Africa and other parts of the developing world. We did a great job in Eastern Europe with our enterprise funds. The Polish Fund returned nearly 300 percent. I forget over what period, but it was a reasonably short --

(Off mike commentary.)

All right, short period of time. These things are critical. So it's an across-the-board approach.

There's one over there -- sorry.

KRISTOF: Since you've returned 300 percent -- (inaudible) -- (laughter) -- okay, then we'll go to somebody else then.

Okay, Alan.

QUESTIONER: (Off mike.)

KRISTOF: There's a microphone right there.

QUESTIONER: Alan Patricof, Greycroft Partners.

I'm speaking really as the newest member of the Millenium Challenge Corporation board. And when you say Millenium Challenge, were you referring to the Millenium Challenge Corporation or -- yes?

BUSH: I am, yes.

QUESTIONER: Shortcut -- the Millenium Challenge.

BUSH: Sorry, yes.

QUESTIONER: I've been on the board for the last few months. I, too, took two years to be officially appointed.

BUSH: That's Washington.

QUESTIONER: That seems to be the normal --

HINDERY: That's Alan Patricof. (Laughter.)

QUESTIONER: I just thought I'd -- you know, I kind of feel I've been to a lot of meetings, but I've never seen as much participation in the audience as I've seen here today, so I kind of feel like we're the committee of the whole. We all want to be part of the HELP Commission. But I'll contribute from the standpoint of a member of the Millenium Challenge Corporation which is going through now a difficult time in the fact that -- the interesting fact is they are funding on a multi-year basis which is very unusual for Congress.

BUSH: Right.

QUESTIONER: They're uncomfortable, because they are allocated a certain amount of funds. They go in for more than they get, and they get a certain amount, and it doesn't go away at the end of September, it stays there. So they have now received $5 billion, have allocated about $4.5 billion, but only spent -- spent -- about 150 million (dollars) which is because it is foreign aid with accountability, and they do it like you would if you were an investor and you get it over a period of time. And if you meet requirements and it has lots of things built into it -- which is all, from my standpoint, from the private sector, extremely effective. And now they go to Congress this year. The Senate wants to cut their budget in half, because they're saying you only spent $150 million. The fact is --

HINDERY: Let me, Alan, give you an anecdote around challenge that -- think of Mozambique. And a young woman in her late 20s is in charge of all of Mozambique, a recipient country for Millenium Challenge, dressed better the day I met her than anybody in this room, literally. Her great skilled seemed to me that she spoke Portuguese, because she was of Brazilian heritage. She is charged with putting a ton of money into the port in Mozambique. And the man that I met who actually runs the port calls out 30 percent more men a day than he needs, because the health crisis is so acute that that's how many won't show up, because they're too ill to get out of bed that day. And then I said well, what about the roads to deliver the produce down to this port? That's not my work, I'm here to build the port. And what about this AIDS? And what about this malaria? And she says look, I don't have any authority or responsibility or particular interest in that. And it was just appalling.

And I'm not trying to be overly critical of this young woman, although I am. (Laughter.) You know, it was appalling, because it was this let's do what we really do well as Americans. Let's bring our capital expertise, our development expertise and put it down there. And she had no sense that this man was calling out 30 percent more workers a day than he needed because of AIDS. And she had nothing to do with that. You know, you've got to have a whole of government experience here in phenomenon that starts with basic humanitarian needs.

Margot and I asked her about the roads. It was just quite pathetic. She said we couldn't find enough volume on the goat track to justify a road. And I said well, you're not going to find a lot of cars on the goat track. I mean, it was mind boggling that at our ages -- Alan, you and I would have just -- out on her ear. I mean, it was pathetic.

HINDERY: (Off mike.) I think it's a little unfair because the way these compacts are done are what the countries want. And they're not just in roads, they're in --

HARMON: And then the system is flawed.

KRISTOF: Let's -- you know, we are running out of time. What I'd like to do is have a few people raise questions and then give you a couple of minutes at the end. But we do want to end punctually, on time.

So why don't you ask your question, then we'll have a few people ask questions.

QUESTIONER: Quickly -- I'm Steve (Schrage ?), I'm the foreign policy director for the Romney for President campaign.

And I want to thank you for your work. And I know we're watching very closely what's developing, and I'm sure the other campaigns are, too. And you mentioned the Foreign Assistance Act of 1961 which is actually a spring chicken compared to the National Security Act of 1947 and also a lot of the reform efforts going on across the board structurally. Are you integrated into some of the other efforts that are looking broader at kind of our foreign and national security structures? Like, for example, Jim Locker's project on national security reform, because it seems like those would match up very well. And do you think you need an overall, integrated approach across all these to go forward? In particular, one idea they've talked about is integrating civilian regional commanders or regional ambassadors along the level of a co-comms for the military that can integrate all courses of civilian power, which goes to a lot of the integration points that you've raised.

BUSH: We have --

KRISTOF: Let me actually --

BUSH: I'm sorry.

KRISTOF: -- get a few people to ask questions.

BUSH: I'm sorry, okay.


QUESTIONER: Thanks. Anika Rahman, Americans for UNFPA.

I'd like to know from each of your perspectives, what do you think is the best argument that can be made domestically to increase support for foreign assistance as opposed to relationships with developing markets or emerging economies? Are they security, health, social justice, peace? I'd like to hear from each of your different perspectives.

KRISTOF: And right behind you.

QUESTIONER: Thank you. (Name inaudible) -- Global Strategy Project.

I've got a quick question on the concept of communication for development. The World Bank had its first annual world conference on it. I served as an adviser. But what role does it play in U.S. foreign aid? Or what role should it play?

KRISTOF: I'm afraid we're just not going to have any time for any more questions. Sorry about that. But if you can please address, you know, some of the questions that came up.

HINDERY: Well, let me talk about your interest in coordination. I think health will have some legs if it is in fact delivered in conjunction with the Locker commission, obviously a very able initiative. And Mary's point early on was the only one that can make this successful which is we can't just drop this puppy and run. It has to be in the context of State, DOD and HELP.

I'm going to defer on World Bank to Jim. But on the answer on the imperative, sadly, the moral imperative is probably not going to be the sufficient trump card here. It's probable that the embrace of this will be when the respective secretaries say that security interests of the United States would have been enhanced and would be enhanced by viewing foreign assistance as an early-on palliative to the kind of crisis we find in large parts of the world. You know, it's sad, but I'm not sure moral imperative is going to get the wind in the sails that we need. But security clearly has a moment right now to bring it forward.

BUSH: And if I could just add to that. I think Americans are a lot more astute about this subject than we in Washington and maybe we in New York think. I think Americans have become much more sensitive to the fact that our security is tied up with the living standards of people around the world. You know, it might not be quite that clear in their minds, but I think that they're groping towards that. And as well, there is a lot more energy among Americans, a lot more time being spent just reaching out and trying to find ways to help people in the developing world. Whether it's a farmer in Iowa, you know, traveling to Kenya and advising farmers and helping them improve their crops and the equipment that they use. Whether it's college students that we understand are getting much, much more involved, and lots of others. The U.S. government needs to capitalize on that. We need to grasp it.

There's one congressman I want to mention. He's a former congressman, Tony Hall. I think it was Indiana. And for some reason -- I think he's very close to Congressman Wolf -- for some reason, he got very, very much attuned to the importance of what we do to help the developing world. His constituency was totally uninterested initially. But he worked very hard, you know, person-by-person in his constituency, group by group --

HINDERY: He was Peace Corps. That was where it came from.

BUSH: Right. And he really got his constituency and got reelected partly based on his platform of foreign aid and development. That's got to spread to, you know, a lot of other congressmen and a lot of other senators and, of course, to whoever the new president it.


HARMON: I'll make three quick comments, because I know everybody's about ready to go. First, on the humanitarian factor, you never get anywhere in the United States Congress arguing on humanitarian basis. It's maybe even not appropriate at the government level. But you can make a very strong case for foreign aid based upon the security issues. The growth of the developing world and the success of the developing world will lead to a much securer world. There's no doubt in my mind in that. So on national security and on private sector business, you make the strong enough case to get what you wish through.

The World Bank -- all of us are focusing on the lack of relevancy of the World Bank, quote, "today," and also the Ex-Im Bank today and the IMF today. Less so on the IFC since they've been so successful on the private sector area. So it's a very important question. I have some opinions on it, but I don't think we have enough time there. I would certainly suggest there are some issues that it will be shifting what their direction may be, which will lead to, I think, a healthier resolution. Some of it relates to the environment and what the climate does to the poorest parts of the world, which I think the World Bank can help a lot on. So I see a slightly different direction.

My last comment which I say to everybody, it's worth what you paid for it, which is zero. We have never had, I think, as much of a vacuum in the public sector of talent and skills as we have today. Part of it reflects the fact that the private sector has done so well and was so easy to leave. But in my agency and in so many other agencies and departments in the United States government, they do not have the kind of skill set and talent that we used to have. So for anyone here who has ever dreamed about doing something in the public sector, which I did and I loved it, I thought it was a terrific four-year experience. I cannot strongly recommend enough that you put your name in somewhere and go down there and get sworn in and do something for the country, which I think is so important to do.

KRISTOF: Well, thank you very much for coming. And please give a hand to the panel.










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