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Ukraine and the pitfalls of foreign aid

The international effort at rebuilding Afghanistan holds many lessons for organizing the reconstruction of post-war Ukraine

EuropeWar Zones

A residential building in the city of Irpin, a suburb of Kyiv, heavily damaged during the Russian occupation. Photo by Jesco Denzel/Bundesregierung.

Few people came out of America’s 20-year war in Afghanistan looking good. A rare exception was John Sopko, the Special Inspector General for Afghanistan Reconstruction (SIGAR). Sopko was the Cassandra of the American war effort, repeatedly revealing unwelcome truths only to be equally repeatedly ignored. In charge of auditing the vast sums of money that the US government spent on economic aid and reconstruction in Afghanistan, SIGAR’s office issued regular reports detailing waste, incompetence, and corruption on a scale that boggles the mind. Among other things, SIGAR published stories of how the US spent $6 million airlifting nine Italian goats to Afghanistan; spent $486 million buying aircraft for the Afghan airforce which were so dangerous to fly that they were never used and were turned into $32,000 of scrap metal; and spent $150 million building luxury villas to lodge staff of its economic development office. All this was just the tip of a very large iceberg.

The basic lesson of SIGAR’s many reports was that throwing vast sums of money into poor countries doesn’t promote economic development. Instead, it encourages corruption and inefficient economic practices. Formal institutions (laws, governments) depend upon informal ones, such as local customs and social structures, that foreigners do not understand, leading to misguided policies and misdirection of funds. Efforts to impose Western formal institutions on top of these very different informal ones, and then flooding the country with Western advisors and money, ends up being counterproductive. None of this, of course, is particularly revelatory. Critics of foreign aid programs have been saying much the same for years. Still, it is an important message.

Although the United States has left Afghanistan, Sopko is continuing his work. Last week, he published a letter written in response to a request from various US Senators. In this, he discussed how lessons from rebuilding Afghanistan could be applied to Ukraine. All wars come to an end. When that in Ukraine does so, there will no doubt be huge pressure on Western governments to flood that country with development assistance. SIGAR’s letter provides a dose of caution that is well worth listening to.

SIGAR notes that “many of the challenges US agencies faced in Afghanistan—coordinating efforts, dealing with corruption, and effectively monitoring and evaluating projects and programs—will be the same as the ones they will face in Ukraine.” He identifies seven particular lessons. These are:

  1. “The US government struggled to develop a coherent strategy for what it hoped to achieve in Afghanistan and imposed unrealistic timelines that led to wasteful and counterproductive programs.”
  2. “Lack of effective coordination—both within the US government and across the international coalition—was a major obstacle to success in Afghanistan and resulted in a disjointed patchwork of ineffective efforts, rather than a united and coherent approach.”
  3. “Though viewed as our greatest strength, the level of financial assistance in Afghanistan was often our greatest weakness.”
  4. “Corruption was an existential threat to the reconstruction mission in Afghanistan.”
  5. “Building and reforming the Afghan security forces was hindered by their corruption, predation, and chronic dependency on the United States.”
  6. “Tracking equipment provided to Afghan security forces proved challenging well before the government collapsed.” And:
  7. “Monitoring and evaluation efforts in Afghanistan were weak and often measured simple inputs and outputs rather than actual program effectiveness.”

Sopko makes a number of important points under these headings. One that is, “In Afghanistan, the US government spent too much money, too quickly, in a country that was unable to absorb it.” Yet estimates of how much money will be required to rebuild Ukraine far surpass what was spent in Afghanistan. The US (and by implication other Western states also) must take care not to provide more than Ukraine is able to effectively absorb or more than the donor states are able to effectively monitor. More is not necessarily better.

SIGAR also notes that “Under pressure to produce results quickly, agencies bypassed Afghan institutions and government channels when they encountered corruption, rather than slog through efforts at reform. When aid did flow through Afghan budgets and institutions, the United States prioritized the survival and short-term stability of the Afghan government over following through on anti-corruption efforts.” This is a problem that is likely to be repeated in Ukraine, where corruption is “likely to be a significant obstacle to the country’s recovery” given the country’s status as “the most corrupt country in Europe.”

Strangely, SIGAR misses a key fact, which is that this point and the previous one are connected—corruption feeds off excessive foreign aid. So does poor governance more generally. It is no coincidence that so-called “rentier” states (states that derive their income not from taxes on citizens but from what economists call “rents,” such as revenues from natural resource production or from foreign aid) tend to be corrupt, undemocratic, and generally unresponsive to citizens’ needs. When your revenues come from your citizens, you have to pay attention to what they want. When they don’t, you can afford to ignore them. A post-war Ukrainian government that is dependent on foreign assistance, maintains a huge military and security apparatus that is beyond its means, and has few sources of finance of its own, will have few incentives to listen to its own people or to act in an honest way.

A final point made by SIGAR is that in Afghanistan US agencies “often failed to measure programs and projects against the ultimate outcomes and impacts they sought to achieve. Instead, how much money was spent, and how quickly, became the measure of success, regardless of the actual result. This poured money into a fragile environment with no concept of whether projects achieved their intended goal, or even necessarily where all the money was going.” This is a perpetual problem in aid and development projects. Post-war, Western governments will no doubt feel a strong need to be seen to be “doing something” to help Ukraine. They will therefore be likely to throw money at the problem, publicizing their “success” in terms of funds expended and projects begun, but ignoring the actual outcomes.

SIGAR sees part of the solution as lying in better monitoring and evaluation. The problem with this is that there are generally few incentives to carry out such monitoring, because if one does there is a high possibility that one will come to the conclusion that one’s aid is failing, a conclusion that one cannot politically admit. In addition, the recipient of the aid is very possibly aware of this, and thus lacks incentives to use the aid appropriately. Confident that the donor is politically committed to supporting him come what may, he is free to act as irresponsibly as he wishes.

Simply put, giving money away in large quantities tends to produce perverse incentives that cause people to behave in ways that engender negative results. This isn’t a problem that can be fixed by better monitoring, anti-corruption efforts, and the like. It’s inherent in aid itself. If there is a weakness in Sopko’s reporting, it is that, as an auditor, it’s not his job to say whether aid should be given, just to point out whether it is being used effectively. Consequently, his reports end up consisting of lists of how things could be done better without ever challenging whether they should be done in the first place.

Still, they are vital reading for anybody who wants to think about how to reconstruct war-torn societies. What is clear is that if Western states want to produce better results in Ukraine than they did in Afghanistan, they will have to think a lot more intelligently about what sorts of aid they give and how they deliver it. But it’s not as if they weren’t previously aware of the problems mentioned above. SIGAR warned them repeatedly. Nobody listened. One must wonder if they are listening now.

Paul Robinson is a professor in the Graduate School of Public and International Affairs at the University of Ottawa and a Senior Fellow at the Institute for Peace and Diplomacy. He is the author of numerous works on Russian and Soviet history, including Russian Conservatism, published by Northern Illinois University Press in 2019.

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