Foreign Aid in the 

National Interest

Promoting Freedom, Security, and Opportunity

FOREIGN AID IN THE NATIONAL INTEREST

PROMOTING FREEDOM, SECURITY, AND OPPORTUNITY

2002

U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

WASHINGTON, D.C.
ACKNOWLEDGEMENTS

Susan Merrill led the task force producing this report, under the general direction of USAID

Administrator Andrew S. Natsios and Agency Counselor Janet Ballantyne, with support from many

career professionals.

Carol Adelman, Larry Diamond, Dina Esposito, James Fox, Brian Hannon, Christian Ketels, Sharon

Morris, Michael Porter, Susan Raymond, Yung Whee Rhee, and Peter Timmer produced the background papers.

Supporting the research at USAID were Felice Apter, Melissa Brown, Karen Cavenaugh, Richard

Cornelius, Jennifer Hoffman, and Jon O’Rourke. Also contributing from USAID’s Development

Information Services were Sarah Bouchie, Thomas Buck, John Gold, Frank Martin, Steve Metzger, Amy

Oggel, Jennifer Powell, Diane Ray, and Ramsay Teviotdale.

Bruce Ross-Larson was the principal editor. Meta de Coquereaumont, Paul Holtz, and Alison Strong

also edited parts of the report, while Elaine Wilson and Stephanie Rostron were responsible for layout

and coordination, and Kenneth A. Brown assisted with references. Faideh Pakravan was an early editor

of the background papers.
CONTENTS

Foreword iv

Overview 1

Chapter 1. Promoting Democratic Governance 33

Global trends in democracy 34

A strategy for assisting democratic governance 42

From conditions to selectivity 49

“Tough love” for development 51

Chapter 2. Driving Economic Growth 54

New thinking on drivers of growth 54

More trade and investment mean faster growth 60

A microeconomic agenda for development 65

How can the U.S. support growth in developing countries? 68

Chapter 3. Improving People’s Health 73

Health, development, and aid: changes and challenges 74

Broad progress, startling changes, persistent quandaries 75

Health indicators: advances and obstacles 79

Health systems and services: progress, lags, and a rising private role 84

To review the bidding: future trends and current funding 86

Implications of trends for future directions: shifting opportunities 87

Implications for the philosophy and pursuit of “foreign assistance” 91

Chapter 4. Mitigating and Managing Conflict 96

Conflicts since the Cold War 97

Understanding conflict 97

Windows of vulnerability and opportunity 105

Foreign assistance, conflict management, and conflict mitigation 106

Guiding principles for encouraging stability 107

Chapter 5. Providing Humanitarian Assistance 113

Humanitarian aid in the 1990s: higher stakes, higher profile 113

New humanitarian actors 116

Innovations, failures, and the crisis in humanitarian aid 119

Evolving practices and future challenges 121

Looking ahead 123

Chapter 6. The Full Measure of Foreign Aid 129

Objectives, outcomes, and amounts of government aid 129

Sources and amounts of private investment and lending 133

Sources and amounts of private aid 134

Taking the full measure of U.S. international assistance 145
THE WORLD HAS CHANGED DRAMATICALLY OVER THE

past two decades. Of the world’s 200 countries

in 2001, 124 were democracies—the highest number

ever. Nearly 6.0 billion people live in market

economies, up from 1.5 billion in 1980. Globalization

has integrated the world’s markets for goods, services,

finance, and ideas. Population growth rates are

down, and in most parts of the world health and education have surpassed where the U.S. stood 50 years

ago. And remarkable advances in biotechnology are

bringing the promise of new cures for the sick and

new seeds for the hungry.

But these bright prospects also have dark sides.

Many new democracies are fragile, others fake.

Many market advances are reversing in stupendous

losses of confidence—as with Enron and Argentina.

Several billion people remain mired in poverty—

and stranded across a gaping digital divide, blind to

what could be free for all. Weapons of mass destruction using modern technology could unleash irreversible disasters on people and the planet. And for

many people, especially Americans, the terrorist

attacks of September 11, 2001, breached the sense

of security offered by geography. 

In September 2002 President Bush introduced

his National Security Strategy. For the first time

development has been elevated as the third pillar

of U.S. national security, along with defense and

diplomacy. Under the leadership of Secretary of

State Powell, the U.S. development community

is redefining its own strategic priorities to meet

this challenge.

These changes have altered the landscape for global

development. Within this new landscape U.S.

foreign assistance must move in new directions. To

inform the debate on future assistance, the U.S.

Agency for International Development (USAID)

commissioned this analysis of the main trends—and

the related challenges—now unfolding. This follows

in the tradition established more than a decade ago

by then USAID Administrator Alan Woods, whose

similar report on development trends changed

USAID and the debate on foreign assistance.

The main message of this report: foreign assistance

will be a key instrument of foreign policy in the

coming decades. The report does not address all

the issues of development assistance. Instead, it

focuses on six:

• Promoting democratic governance.

• Driving economic growth.

• Improving people’s health.

• Mitigating conflict.

• Providing humanitarian aid.

• Accounting for private foreign aid.

Of these six issues, four articulate key development

concepts driving the President’s proposed

Millennium Challenge Account, a major new initiative announced by President Bush in March 2002,

just the third major foreign aid policy statement since

the second world war. The Millennium Challenge

Account is based on the proposition that countries

ruling justly, investing in their people, and encouraging economic freedom will receive more U.S. aid.

Around the world one of the most pressing needs

is to advance democratic governance—no small

task. At a superficial level the state of global democracy appears highly encouraging. Over the past

quarter-century democracy has become the world’s

most common regime. But swirling beneath this

expansion is growing disenchantment with political leaders seen by their people as corrupt, selfserving, and unable or unwilling to address economic and social problems. In many developing

and postcommunist countries, people are losing

confidence not just in elected officials but also in

democratic institutions. So, promoting democratic governance must become a higher priority in

U.S. foreign aid. Democracy and good governance

are required to spur development and reduce

poverty in poorly performing countries. It is also

vital to U.S. security.

Also essential is boosting economic growth in

developing countries. The United States can get

global agriculture moving by restoring the budgets

of global agricultural research centers, training scientists in basic biology and applied agriculture, and

pressing to reduce the damage from industrial

countries’ agriculture policies. The United States

can also promote trade and investment in developing countries by better coordinating its policies

and programs. And it can help countries develop

their microeconomic agendas, improving the

climate for business.

Fundamental to this growth is improving people’s

health and education. Because of changing demographics, most developing countries will have larger

workforces over the next two decades. As a result

more resources will be available to invest in economic endeavors. But for that to happen, workers

must be productive—and to be productive, they

must be healthy. Diseases that cause illness and premature death must be identified, prevented, and

iv

FOREWORD
managed—including future health problems, which

will be more diverse. If foreign assistance continues

to rely on long-standing definitions of public health

priorities, it may be unable to address this diversity. Responding to changing health challenges will

require different budget allocations and more

flexible programs. 

Global markets are also changing as developing

countries shift from low-cost labor to higher-end

manufacturing. That change requires new types of

workers, able to learn new skills and use new technologies. A primary school education is no longer

enough for workers to take part in the global

economy. Moreover, higher degrees—academic

and technical—are needed to adapt global technology to local settings and to keep up with new

advances. So education systems in developing

countries must broaden their sights—and U.S.

foreign assistance must offer more support for secondary education for the global marketplace. 

Given the devastation caused by conflict, the

United States needs to do much more to mitigate

it—and when that is not possible, to help manage

it. Conflict is the product of deep grievances, political and economic competition, irresponsible political leaders, and weak and unaccountable institutions. It does not occur simply because people are

unhappy or greedy, or because a country has the

resources to sustain violence. Nor does it happen

where all state and social institutions are weak. It

happens when causes at multiple levels come

together and reinforce each other. 

Preventing conflict requires long-term interventions

that make states and societies better able to manage

tensions. Whatever the causes, a crucial part of the

solution is encouraging innovative institutions that

can deal with problems—local, regional, and national. The most important principle when designing

country programs is to apply a conflict lens to each

major area of foreign assistance—from agriculture to

economic growth to democracy and governance—

and to have each area work in concert.

In the aftermaths of conflict and natural disaster,

the United States must continue to provide

humanitarian assistance—but much more effectively. The need for humanitarian assistance shows

no signs of abating, and new dimensions of disasters will create new demands. Trends indicate a

larger, more complex role for humanitarian assistance in the coming decades. The United States,

the only national power with truly global reach,

has a critical role in addressing current and future

trends in disaster assistance. It must project a clear,

consistent message about addressing humanitarian needs in conflict settings and reducing vulnerabilities that transform natural and technological

events into disasters.

U.S. assistance can do much to shape the 21st

century. And as the Millennium Challenge Account

ramps up, U.S. official aid is set to rise from $10

billion a year today to $15 billion in 2006 and thereafter. U.S. assistance is generally measured solely as

the official development assistance that the government provides through USAID, the Peace Corps,

multilateral institutions, and programs sponsored

by the State Department and Department of

Defense. But many nongovernment sources also

provide foreign aid: foundations, corporations,

private and voluntary organizations, colleges and

universities, religious organizations, and individuals. 

All these sources—providing nearly $60 billion a

year, or six times the official assistance—must be

taken into account to plan aid more effectively.

With private assistance predominating, U.S. official

assistance will have to develop stronger partnerships with the full array of private sources.

The dominant themes, then, are for foreign assistance to focus on political leadership, on policy, on

people, and on partnership. Unless a country’s

leaders make smart choices for national priorities

and show their political will to work with outside

donors, development—and development assistance—cannot succeed. Unless sensible policies are

put in place, with the rule of law to promote good

governance and individual freedom, development

cannot be sustained, particularly for agriculture,

the engine of growth for most poor countries.

Unless countries invest in health and education,

people cannot take on the demands of today’s competitive workplace, and development cannot even

start. And unless the official development community works better with partners, both traditional

and new, many development opportunities will be

wasted. Too much is at stake in all this. We have to

ensure that these themes suffuse the future of

foreign assistance—all in the national interest.

Andrew S. Natsios

Administrator, USAID

v

T HE NEW CENTURY HAS BROUGHT NEW THREATS

to U.S. security and new challenges and

opportunities for the national interest. The terrorist attacks of September 11 tragically demonstrated the character of today’s world.

Globalization has sent unprecedented flows of

people, ideas, goods, and services across borders,

fostering growth and expanding democracy.

More than ever, U.S. security is bound up with the

outside world. And as the world has become

more connected, it has become more hazardous.

Weapons, germs, drugs, envy, and hate cross

borders at accelerating rates. Just as the tools,

ideas, and resources for progress can quickly

move from industrial to developing countries,

many forms of risk and instability can travel in the

opposite direction. 

When development and governance fail in a

country, the consequences engulf entire regions

and leap around the world. Terrorism, political

violence, civil wars, organized crime, drug trafficking, human trafficking, infectious diseases,

environmental crises, refugee flows, and mass

migration cascade across the borders of weak

states more destructively than ever before. They

endanger the security and well-being of all

Americans, not just those traveling abroad.

Indeed, these unconventional threats may pose

the greatest challenge to the national interest in

coming decades.

Conventional military force, intelligence gathering

and operations, law enforcement, and diplomacy

play important roles in containing threats to U.S.

security. But these mainly deal with the manifestations of trouble, not the root causes. In countries where government does not advance the

common good, ordinary people do not realize the

promise of development. Corruption is rampant.

The state’s capacity is weak. Social services are

inadequate. And economic growth is stunted.

Economic policies hinder growth while benefiting

privileged groups. Investment is scant because

property rights are insecure, government is predatory, infrastructure is poor, freedom is compromised, human capital is underdeveloped, and

there is little confidence in the future. So, economic development is hard to get going—and

impossible to sustain.

These circumstances entrench poverty, nurture

injustice, and fuel anger and alienation. People

give up on the possibility of collective progress. In

different countries and among different types of

P ROMOTING

F REEDOM ,

S ECURITY ,

AND

O PPORTUNITY

OVERVIEW
PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

2

people, hopes for development are surrendered in

different ways. The surrender may be in crime

toward other individuals or in hate and violence

toward other ethnic groups. It may be toward the

state, in insurgency or revolution, or toward the

world’s successful countries, in terrorism. The

response may simply be to emigrate or flee. Most

often, the powerless and suffering simply withdraw from the state and survive as best they can

from one day to the next. But surviving on the

edge of existence only exposes people to catastrophe when nature or politics takes a downward

turn. Even when failing states do not directly

threaten the United States, they are humanitarian

disasters waiting to happen. Only when countries

achieve sustained development can they move

beyond a chronic vulnerability to crisis.

Preempting threats and disasters is not the only

reason that fostering development is in the U.S.

interest. Successful development abroad generates diffuse benefits. It opens new, more dynamic

markets for U.S. goods and services. It generates

more secure, promising environments for U.S.

investment. It creates zones of order and peace

where Americans can travel, study, exchange,

and do business safely. And it produces allies—

countries that share U.S. commitments to economic openness, political freedom, and the rule of

law. 

Almost all countries with high levels of economic

and social development are democracies. Why?

Because lawful, accountable, participatory government fosters development—and because prosperous, well-educated people demand political

freedom. No two full democracies have ever

fought a war with one another. The spread of prosperity and democracy is an important foundation

for peace. A free, open, prosperous, lawful world

is the kind of world Americans want to live in.

A world where all countries are becoming more

prosperous would also be a profound affirmation

of U.S. values and ideals. The United States is a

nation of immigrants who believe that with

energy, ideas, and initiative, anyone can succeed.

Americans want to believe that for countries as

well as people, progress should not be limited by

region or culture, and that the country’s founding

principles affirming life, liberty, and the pursuit of

happiness are universal. For the United States to

prosper and be secure, the world must prosper

and be secure. Thus the United States must foster

development around the world.

WHAT IS DEVELOPMENT? FREEDOM,

SECURITY, AND OPPORTUNITY

Freedoms are not only the primary ends of development, they are among its principal means.

—Amartya Sen

Freedom, security, and opportunity are the

essence of development. Development gives

people freedom to choose. Though few people

ever have the luxury of perfect choices, development expands choices for individuals—and for

the broadest possible range of individuals in

society. Development increases people’s opportunities to prosper—to educate themselves, to work

and produce, to consume, to travel, to enjoy

leisure, and to enhance their health and wellbeing as they wish, as much as they wish. A truly

developed society offers equal opportunity to all

its members regardless of their background. And

development offers people security—from threats

of violence that might come from the state, from

conflict, or from other people.

Development has densely overlapping economic,

social, technological, and political dimensions.

Economically, it involves growth—through

increasing productivity—and the capacity to

sustain it independently of foreign aid or nonrenewable natural resources. Genuine development

requires autonomous engines of growth—market

expansion and technological innovation—supported by government but led by private initiative. Since World War II some countries have

experienced economic growth that has far outstripped their real level of development.

Swimming in waves of income from oil or other

natural resources, they have absorbed windfalls of

national income without transforming their productive capacities. In most cases these waves of

greater income do not last. And when they

recede, the country plunges backward.

Frequently this unnatural wealth is grossly

misused by autocratic, corrupt, or fanatical

leaders.

Real development involves accumulating physical

and human capital and implementing governance rules and institutions that foster lasting

increases in investment, output, and income.

The process requires economic freedom, with

people able to work, save, invest, and produce

based on their own choices rather than government mandates.

DEVELOPMENT HAS

DENSELY OVERLAPPING

ECONOMIC, SOCIAL,

TECHNOLOGICAL, AND

POLITICAL DIMENSIONS
Improvements in plants, equipment, and infrastructure raise productive capacity by promoting efficiency and cutting transaction costs. In

addition to technology for agricultural and

industrial production, these improvements

involve roads, bridges, ports, markets, schools,

industrial parks, communications, and water

and power grids. Without these public goods,

bottlenecks raise production and exchange

costs and so discourage investment. Building

and maintaining public infrastructure is often

hugely expensive and vulnerable to corruption.

Thus the quality of governance strongly influences the potential for sustainable infrastructure

development.

Investments in people—essential for sustainable

development—are well suited to the humanitarian imperatives of foreign assistance. Lasting

improvements in a country’s income-generating

capacity require healthy, well-educated, welltrained workforces, with the broadest possible

inclusion of people in the full scope of economic

opportunity. Poverty—with its links to illiteracy,

chronic illness, and shorter life expectancy—is

not simply a profound humanitarian concern. It

is also an obstacle to economic growth. Yet vigorous, sustained economic growth is required to

reduce poverty.

Socially, development improves human capabilities and well-being by reducing poverty, improving health, and expanding education. Absolute

poverty—with little or no access to nutrition,

sanitation, clothing, and shelter—degrades the

human spirit and becomes a vicious circle,

blocking acquisition of the physical, social, and

cultural attributes needed for a viable income

and more dignified life. Robust physical health

and vigorous support for public health—as

reflected in declining infant and child mortality,

control of deadly and disabling diseases, and

increasing life expectancy—are ends in themselves. But they are also important for raising

productivity, reducing poverty, and sustaining

economic growth. Better education also

enhances people’s income opportunities and

raises society’s productive capacity and entrepreneurial potential. This is why it is so vital that

girls enjoy the same education opportunities as

boys—that half of society not be left behind.

Educating girls reduces birth rates, results in

higher education levels for their children,

increases agricultural productivity, and boosts

family incomes—four big pluses.

Development affects groups as much as individuals. A crucial dimension of development is the

accumulation of social capital—the networks

and associations that bring individuals together

based on trust, reciprocity, and cooperation for

common ends. The deeper are a country’s reservoirs of social capital, and the more these are

based on equitable relations, the more vigorous

is coordination for—and commitment to—the

public good. Social capital does more than

expand investment and commerce based on

trust and predictability. It also stimulates the participation, civic spirit, and respect for law

required for political development and good

governance.

Politically, a society develops as it institutionalizes

choices for its citizens. Among the most important is electoral choice—the ability of citizens to

choose and replace their leaders and representatives in regular, free, fair elections. Another is the

ability of citizens to choose their political beliefs

and interests, express them, and organize around

them. These and related dimensions of political

freedom and civil liberty complement economic

competition and stimulate and deepen political

accountability.

50 YEARS OF DEVELOPMENT GAINS

The development progress in the past halfcentury has been extraordinary. Developing countries now have an average infant mortality rate (69

for every 1,000 live births) equivalent to what

industrial countries had in 1950 (see feature overleaf). In 1951, 40 percent of people in industrial

countries had a secondary education; today 50

percent of people in developing countries do.1

Back then almost 1.8 billion people lived in countries with an average daily intake of less than 2,200

calories; today only 432 million do.2 Life

expectancy and literacy have increased almost

everywhere. 

Some countries have achieved even more dramatic grains. In the late 1950s the Republic of

Korea, Taiwan, and Singapore were all considered economic basket cases. Yet all three have

moved from low to high incomes as a result of

sustained, rapid economic growth. Malaysia,

Thailand, and more recently Indonesia have

also made impressive progress. And Mauritius,

with the help of foreign aid, achieved rapid economic and social development, more than

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

3

BETTER EDUCATION

ENHANCES PEOPLE’S

INCOME OPPORTUNITIES

AND RAISING SOCIETY’S

PRODUCTIVE CAPACITY

AND ENTREPRENEURIAL

POTENTIAL
Over the past half-century most of the

world’s people, including the poorest, have

seen continual and substantial improvement in their basic living conditions.

Developing countries are catching up with

industrial countries—particularly in life

expectancy, nutrition, and literacy. And in

infant mortality and secondary school

enrollments they have already reached or

surpassed the levels achieved by industrial

countries in the early 1950s, when the era

of foreign aid began.

INCOMES ARE RISING ALMOST

EVERYWHERE

Per capita GDP is the most widely used

measure of well-being in a country (box

table 1). But it is an incomplete proxy,

because it takes into account only the

aspects of life captured by market transactions. So it is inadequate for such aspects as

education and life expectancy, which also

contribute to welfare. Indeed, most people

would probably agree that health, life

expectancy, access to learning, and

freedom to make one’s own choices are

more fundamental than income.

Another way to measure well-being

(though one that still focuses on income) is

to find out how many people live on less

than a given income. The World Bank uses

$1 a day per person as a rough benchmark

to identify the world’s poorest people, but

only since 1987. A recent study went back

farther in time. Its estimates show a rapid

decline in the share of the world population living on less than $1 a day—from 55

percent in 1950 to 20 percent in 1998 (box

figure 1). Just as striking is the steady

decade-by-decade decline. Moreover, the

study estimates that in 1900 the share of

the world’s people living on less than $1 a

day was 66 percent, so the reduction in the

second half of the century was much more

dramatic than that in the first.

PEOPLE ARE LIVING LONGER—AND

HEALTHIER

Much of the improvement in life expectancy in developing countries comes from the

decline in infant mortality, which fell from

158 per 1,000 (meaning that 15.8 percent

of babies died within a year of their birth)

to 63 between 1970 and 1999. The United

Nations projects that infant mortality in

these countries will drop to 58 in 2000–05,

the same rate prevailing in industrial countries when they began providing assistance

to poor countries in 1950–55.

The progress in life expectancy was

general. In the early 1950s some 27 percent

of the world’s people lived in countries

where life expectancy averaged less than 40

years. By the end of the century only 0.2

percent lived in the two countries (Rwanda

and Sierra Leone) where life expectancy

remained that low. And only 4 percent

lived in countries where it was less than 50

years—down from 60 percent in 1950–55

(box table 2).

While life expectancy has clearly lengthened, are people healthier? Or has modern

medicine simply kept sick people alive

longer? Researchers have concluded that

health status closely tracks live expectancy.

In general, longer lives are healthier lives.

PEOPLE ARE EATING MORE—AND

BETTER

Trends in food and nutrition show a steady

improvement since 1961, the earliest year

for which comprehensive data are available

(box figure 2). Since that year per capita

caloric intake has risen worldwide, but

much more sharply for developing countries (37 percent) than for industrial (9

percent). Developing countries have clearly

been catching up: their average caloric

intake rose from 65 percent of industrial

countries’ in 1961–63 to 83 percent in

1997–99. On past trends, developing countries can be expected to reach the average

caloric intake enjoyed by industrial countries in 1961 within a decade—by 2010. 

The share of the world’s people living in

countries where average caloric intake

probably falls short of general nutritional

Steady declines in the proportion 

of the world’s people living on less 

than $1 a day

Source: 1950-80 are from Bourguignon and Morrission 

2002 and 1990 and 1998 use the numbers of poor from 

Ravallion and Chen 2001, and world population from the 

United Nations World Population estimates.

Note: The main defense for combining the different 

sources is that the World Bank uses the same combination 

for a chart (p. 8) in its 2002 publication Globalization, 

Growth and Poverty.

People living on less than $1 a day 

(% of world population)

BOX FIGURE 1

0

20

40

60

1950 1960 1970 1980 1990 1998

Incomes rising everywhere, 

except in Africa, and too slowly in 

the former Soviet bloc, the Arab 

world, and even Latin America

Source: United Nations, Global Population Prospects, 2002.

Growth in real per 

capita GDP (%)

World

Industrial countries

Developing countries

East Asia and Pacific

Europe and Central Asia

Latin America and the Caribbean

Middle East and North Africa

South Asia

Sub-Saharan Africa

Total growth,

1980–2000

29

52

36

224

1

7

4

95

–16

BOX TABLE 1

Caloric intake on the rise

Source: FAO Agristat database.

World average caloric intake 

(calories per day per capita)

Developed countries

Developing countries

1,500

2,000

2,500

3,000

3,500

1960 1980 2000

BOX FIGURE 2

50 YEARS OF DEVELOPMENT GAINS

Box Fig. 1 % living on less than $1/day 1950 55 1960 41 1970 37 1980 32 1990 24 1998 20

Box Fig. 2

Developed Developing 

1961 2948.1 1932.1

1962 2978.2 1973.6

1963 3001.1 1973.5

1964 3022.8 2027

1965 3034.9 2072.2

1966 3052.2 2062

1967 3073.3 2040

1968 3101.7 2057.8

1969 3112.1 2079.6

1970 3143.8 2138

1971 3145.5 2121.6

1972 3140.3 2109.9

1973 3165.4 2139.2

1974 3161.5 2152.3

1975 3144.6 2151.2

1976 3200.4 2153.8

1977 3183.7 2181.2

1978 3204.6 2276.9

1979 3228.6 2303.2

1980 3220.2 2287.6

1981 3204.5 2343.6

1982 3211.3 2383.4

1983 3220.9 2406.4

1984 3241.7 2450.2

1985 3275.2 2431.8

1986 3271.2 2467.9

1987 3318.6 2470.1

1988 3330.1 2474.8

1989 3310.7 2524.2

1990 3319.5 2518.7

1991 3241 2532.8

1992 3222.1 2557.9

1993 3209.1 2550.2

1994 3200 2580.2

1995 3184.1 2631.5

1996 3201.2 2659.9

1997 3218.4 2682

1998 3226.2 2675.7

1999 3245.1 2684.3

Box Fig. 1 % living on less than $1/day 1950 55 1960 41 1970 37 1980 32 1990 24 1998 20
adequacy—less than 2,200 calories per

person a day—has declined from 57

percent to 7 percent in less than four

decades. Meanwhile, the share living in

countries where average intake exceeds

2,600 calories a day has risen from 30

percent to 62 percent. But 36 countries still

had a per capita intake of less than 2,200

calories in 1997–99—with 24 in Africa, 11

in Asia, and one (Haiti) in Latin America.

MANY MORE BOYS AND GIRLS ARE IN

SCHOOL

Perhaps the most dramatic change has been

the spread of literacy from the elite to the

majority. In 1950 only 35 percent of people

ages 15 and over in developing countries

were literate, but by 2000 this share had

more than doubled to 74 percent (box

figure 3). The raw numbers are even starker:

in 1950, 366 million people in the developing world could read—in 2000, 2.4 billion.

Educating children, not adults, has made

most of the difference. Between 1950 and

2000 the number of enrolled students in

developing countries jumped from about

100 million to about 1 billion. The growth

occurred first at the primary level, where

enrollment rose from 38 percent of

primary-school-age children in 1950 to

100 percent in 1997. (This does not mean

that all children were in school in 1997; in

poor education systems older children

commonly swell enrollment ratios.) 

Even more dramatic has been the growth

in access to secondary education in developing countries. In 1950 high school was

the province of a small elite—5 percent of

the relevant age group. By 1997, 52

percent of that age group was enrolled—

a much higher share than the 40 percent in

industrial countries in 1950. Looked at

another way, developing countries lag

about 40 years behind industrial countries

in providing access to secondary education. They reached a secondary enrollment

ratio of 50 percent in 1995—industrial

countries, in 1955.

MORE THAN HALF THE WORLD’S

PEOPLE ARE URBAN

The world is becoming more urban (box

figure 4). By 2000 almost 40 percent of

Sub-Saharan Africa’s people lived in cities,

and about 75 percent of Latin America’s.

Large nations such as India and China,

long considered overwhelmingly rural,

have joined the march into cities. In 1950

India had only 17 percent of its people in

cities, and China only 12 percent. By 2000

those shares had increased to 28 percent

and 32 percent.

Urbanization brings other changes that

influence health status. Greater access to

education, closer proximity to services,

and higher family income can all encourage

more—and more informed—use of health

care services. But changes in diet and the

more sedentary urban lifestyle can lead to

new health risks and an increase in noncommunicable disease.

WOMEN HAVE MANY MORE

OPPORTUNITIES

In 1950 women had a lower status and

fewer rights than men in most developing

countries—because of laws and cultural

traditions. By century’s end, substantial

progress had been made across the board.

• Life expectancy for women, already 2.7

years longer than that for men in 1950,

has since increased faster than that for

men, with the gap reaching 4.2 years in

1995–2000.

• The gross primary enrollment ratio

for girls rose from 56 percent to 95

percent, substantially narrowing the

gap with boys’ enrollment. Girls’

enrollments have risen particularly

rapidly (from a low base) in Arab

countries. But South Asia lags

behind. While in South Asia female

secondary enrollments were only 65

percent of male enrollments in 1997,

in all other regions they had reached

at least 80 percent of male enrollments. At the tertiary level, China and

India both lag behind all other developing countries.

AND MANY MORE PEOPLE ENJOY

FREEDOM

Another area of important progress is

human freedom. Recall what conditions

were like at the beginning of the aid era in

1950. Stalin ruled the Soviet Union and a

third of Europe, and Mao ruled China,

both maintaining totalitarian governments

that rejected individual sovereignty.

Much progress has also been made in the

ability of individuals and families to live

and work without undue control by

government—in large part because representative democracy has become widely

accepted as the only legitimate form of

political organization.

Source: Fox 2002.

The march into cities continues

Source: UNESCO, Statistical Yearbook (various years) 

and July 2002 Assessment.

Urban population as % of total

Southern Europe

0

25

50

75

100

1950 1975 2000

Middle East and North Africa

Asia

Latin America and the Caribbean

Africa

BOX FIGURE 4

Many more people can read

Source: UNESCO, Statistical Yearbook (various years)

and July 2002 Assessment.

Share of people ages 15 and over 

who are literate (%)

Industrial countries

2.4 billion

Developing countries

366 million

20

40

60

80

100

1950 1975 2000

BOX FIGURE 3

50 YEARS OF DEVELOPMENT GAINS

Box Fig. 3

Industrial Countries Developed Countries

1950 35 93

1960 43 95

1970 48 94

1980 58 96

1990 67 98

2000 74 99

Box Fig. 4

1950 14.7 17.4 44.2 41.4 26.7

1960 18.5 20.8 49.4 49.3 35

1970 23.1 23.4 56.6 57.4 44.4

1980 27.3 26.9 61.2 64.9 51.8

1990 32.1 32.4 63.8 71 62.6

2000 37.9 36.7 66.4 75.3 70.2

2010 43.7 41.9 69.5 78.6 74.5

2020 49.2 47.6 73 81.1 77
tripling its real per capita income between 1970

and 1998.3

But many countries remain mired in poverty,

and in many African countries per capita

incomes have declined since the 1970s. In the

1980s and 1990s economic growth in SubSaharan Africa averaged about 2 percent a

year—while populations grew by 3–4 percent a

year. In 1998 the region’s real per capita income

was 9 percent lower than in 1970—and in

Ghana 16 percent lower, Zambia 41 percent,

and Zaire (now the Democratic Republic of

Congo) 68 percent.4

HIV/AIDS is reversing gains in many countries

and deepening poverty in others. Around the

world some 40 million people are infected—and

nearly three-quarters are in Sub-Saharan Africa,

which contains just one-tenth of the world’s

population. In seven Southern African countries—Botswana, Lesotho, Namibia, South

Africa, Swaziland, Zambia, and Zimbabwe—

more than 20 percent of the population is

infected.5 But the disease is also advancing elsewhere, and is poised to wreak havoc in highpopulation countries such as China, India,

Indonesia, and Russia. The spread of the

disease, and the usefulness of technologies and

strategies to combat it, will turn on leadership,

innovation, and integrated prevention and

treatment.

There are many reasons some countries have

not made more development progress. But

common to almost all of them is bad governance. Rather than being invested in public

goods, public resources have been siphoned off

by corruption. Kleptocratic leaders have distorted economic incentives, misdirected public

investment, and discouraged domestic and

foreign investment. Without secure property

rights and the rule of law, individuals, communities, and corporations have not had the confidence to risk substantial capital to create wealth.

Instead individuals and ruling parties have used

their positions to enrich themselves and their

families and cronies. Power has been used to

distribute opportunities and accumulate personal wealth—not to govern for the common

good—creating a zero-sum game in which

control of the state means everything. It is easy

to see why such societies do not develop—

and are prone to violent conflict over control of

the state.

PROMOTING DEMOCRATIC

GOVERNANCE

Good governance is perhaps the single most important factor in eradicating poverty and promoting

development.

—UN Secretary-General Kofi Annan

Governance is a broad concept, encompassing

the capacity of the state, the commitment to the

public good, the rule of law, the degree of transparency and accountability, the level of popular

participation, and the stock of social capital.

Without good governance, it is impossible to

foster development. No amount of resources

transferred or infrastructure built can compensate

for—or survive—bad governance.

DEMOCRACY IS GOOD FOR

GOVERNANCE

The last quarter of the 20th century witnessed the

greatest expansion of democracy in history. If

democracy is defined in the minimal sense—as a

system of government in which the principal

positions of political power are filled through free,

fair, and regular elections—about three of every

five independent states are democracies today

(figures 1, 2, and 3).

Political parties are among the core elements of

democracy. They are the only tested vehicles to

structure electoral competition, organize government, and recruit leaders. Yet, almost universally,

they stand in disrepute. Their client electorates do

not believe they truly represent interests or work

for the common good. Instead, parties are often

seen as internally authoritarian, corrupt, even

venal. Donors often agree—and prefer to work

with “purer” actors in civil society. This would be

a mistake. Donors need to help reform parties, no

less than governmental institutions or NGOs.

Democracy is not strictly essential for good governance. Moreover, bad governance is quite possible under formal democratic structures. But

free, fair, and competitive elections do make it

possible to remove bad or corrupt political

leaders. Thus they encourage leaders to govern

more effectively, in the public interest. 

Democracy also gives citizens nonelectoral

means—associations, movements, the media—to

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

6

FREE, FAIR, AND

COMPETITIVE ELECTIONS

ENCOURAGE LEADERS TO

GOVERN MORE

EFFECTIVELY, IN THE

PUBLIC INTEREST
monitor officials and participate in policymaking.

In addition, leaders in democracies have stronger

incentives (and more institutional means and

obligations) to explain and justify their decisions

and to consult a broad range of constituencies

before making decisions. Such participation and

debate give the public a stronger sense of policy

ownership. As a result policies are more sustainable and government is more legitimate.

For these and other reasons it is strongly in the

U.S. interest to promote both democracy and

good governance. The two are mutually reinforcing: when they develop together, resources are

used to advance the public good. Public institutions perform their designated roles. Social consensus supports and stabilizes the system of

government. Disputes are settled peacefully. And

investment flows into the country, attracted by the

low transaction costs associated with government

transparency and legitimacy and the rule of law.

In these circumstances economies grow, human

welfare improves, trade expands, political stability and capacity deepen, and countries become

more responsible and resourceful members of the

international community. 

By contrast, when governance is bad and undemocratic—or only superficially democratic—the

pathologies of development inevitably have regional

and global consequences. Poverty becomes

entrenched, reflecting the resources wasted by corruption and distorted investment. Chronic fiscal

deficits drain and ultimately drive away international resources. The absence of the rule of law

permits—and poverty drives—wanton destruction

of the environment and depletion of biodiversity,

threatening the global ecological balance (and

robbing the world of new medical and agricultural

breakthroughs) in ways not fully fathomed. 

In the absence of state capacity and will to address

public health problems, HIV/AIDS, tuberculosis,

and new viruses proliferate, mutate, and cross

borders. Venal, unjust regimes fuel antimodernist

and religious fundamentalist movements of rage

against the West, especially the United States. In

the fertile soil of a weak state and feckless legal

system, organized crime networks take root,

threatening the rule of law internationally through

terrorism, piracy, fraud, counterfeiting, kidnapping, money laundering, and trafficking in

weapons, drugs, and people. 

How can the United States encourage stable,

effective democracies? First, the objective must be

clear. The goal is not simply to advance democracy around the world. As the collapse of democracy in Pakistan showed in 1999, a country can

have competitive national elections and still have

governance that fails to generate development

and loses public confidence. Nor is the goal

simply to promote more capable and transparent

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

7

FEW LEADERS CAN

DELIVER GOOD

GOVERNANCE WITHOUT

THE INSTITUTIONAL

ACCOUNTABILITY TO

OTHER BRANCHES OF

GOVERNMENT AND TO

THE PEOPLE THAT

DEMOCRACY PROVIDES

0 100

2001

1987

1974

Electoral democracies more prevalent

Note: Data for 2001 are for the end of the calendar year, from the 

Freedom House survey for that year. Data for 1974 reflect Larry

Diamond’s estimate of the number of democracies in April 1974, at

the inception of the third wave. Data for 1987 are also his estimate.

Source: Freedom House 2002.

Proportion of electoral democracies (%)

0 50 100

1974 39 of 142 countries

1987 66 of 164

2001 121 of 192

FIGURE 1

Partly free

Independent states becoming free

Note: Ratings refer to the status of the countries at the end of the 

calendar year. See text for an explanation of the basis of the ratings.

Source: Freedom House 2002.

Not free Free

1972 1985

2001

FIGURE 2

Liberal democracies less prevalent

Source: Freedom House 2002.

Proportion of liberal democracies (%)

0 50 100

1974 32 of 39 democracies

1987 48 of 66

2001 75 of 121

FIGURE 3

Fig. 1.2

Not free Partly free Free

1972 46 25 29

1985 34 34 33

2001 26 30 45
government. Few leaders can deliver and sustain

good governance—with its commitment to promoting the public good and restraining the abuse

of power—without the institutional accountability to other branches of government and to the

people that democracy provides. Even when nondemocratic leaders are sincerely committed to

reform, the absence of institutional mechanisms

to monitor and restrain power eventually

degrades the quality and legitimacy of

governance. 

These mechanisms include an independent judiciary that enforces clear and predictable laws, an

elected parliament that can check the power of

the executive, and a civil society that can participate in making and implementing policy. When

governance is open to the scrutiny and involvement of a wide range of nongovernmental organizations (NGOs), interest groups, think tanks,

and mass media, it is more likely to be transparent, public-spirited, and thus legitimate. 

There is no guarantee that electoral democracy

will deliver such transparency and inclusion. But

it is an illusion to imagine that “liberal autocracy”

is a development option in today’s world. There

are precious few well-governed autocracies, and

those that exist (such as Singapore) have sustained

good governance for highly idiosyncratic reasons

that are not broadly transferable. To develop truly

good governance, the typical recipient of U.S.

foreign aid needs the openness, competition, and

broad and free public participation of democracy.

DIFFERENT REFORM SEQUENCES FOR

DIFFERENT COUNTRIES

The pursuit of stable, effective democratic governance will involve different sequences of political

reform in different countries (figure 4). In some

cases the basic framework for multiparty democracy is in place but needs to be deepened and made

more effective and accountable. Some emerging

democracies suffer from more specific obstacles,

such as institutionalization of the rule of law. And

in repressive, corrupt, and closed regimes, multiparty competition—if it exists—is largely a façade.

In such countries reforming the economy and

strengthening civil society might be more viable in

the short term than making an immediate transition to electoral democracy. Another possibility for

repressive regimes is to start with elections for local

office, the training ground for national politicians.

Such variation makes it impossible to offer a

general sequence of political reform. Thus

democracy and governance must be carefully

assessed in each country slated for reform—

especially when resources are limited and strategic choices are needed. Moreover, assistance for

democracy and governance should be provided

with patience and an open mind. No single sector

holds the key to fostering democracy and good

governance. There is no universal approach, and

there are no shortcuts. In most countries lacking

stable and effective governance, the United States

must be prepared to work on many fronts over

long periods.

STRATEGIC PRIORITIES

That said, countries that need assistance for

democracy and governance tend to share a few

priorities. These involve ensuring that democracy advances development and responds to the

needs of society—generating capacity for and

commitment to using public resources to

promote the public good. Such efforts are not

new. The foreign assistance community has

worked on most of them, particularly over the

past decade. What is needed is not invention but

innovation, adaptation, refinement, elaboration,

deeper commitment, and expansion of activity in

some areas.

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

8

THE PURSUIT OF STABLE,

EFFECTIVE DEMOCRATIC

GOVERNANCE WILL

INVOLVE DIFFERENT

SEQUENCES OF POLITICAL

REFORM IN DIFFERENT

COUNTRIES

Democracy is regional

a. Excludes Djibouti, Gambia, and Sierra Leone even though 

Freedom House rates these countries as electoral democracies at the 

end of 2001. In each case the absence of a free and fair climate for 

elections—because of fraud, intimidation, or civil war—renders the 

system less than minimally democratic. 

Source: Karatnycky 2002.

Proportion of 

democracies (%), 2001

0 50 100

Western Europe and

 Anglophone states 28 of 28 countries

Middle East and

 North Africa 2 of 19

Sub-Saharan Africaa 17 of 48

Former Soviet Union

 (without Baltics) 4 of 12

Asia-Pacific 22 of 37

Latin America and

 the Caribbean 30 of 33

East Central Europe

 and Baltics 14 of 15

FIGURE 4
Strategic priorities for assistance include:

• Controlling corruption and increasing

accountability.

• Strengthening the rule of law and the way it

affects individual citizens—not only through

the judiciary but also through more professional, vigorous, democratic policing. 

• Strengthening and democratizing political

parties and deepening their roots in society. 

• Helping NGOs committed to democracy and

good governance increase their constituencies

while using more traditional interest groups

to strengthen democracy.

• Developing stronger, more professional states

better able to respond to growing public

demands for better governance. 

Pursuing these priorities requires strengthening

links: 

• Across government agencies. U.S. efforts to

strengthen democracy and governance most

often fall short because they lack unified

support from the entire U.S. government.

Such programs cannot succeed if they are

inconsistent with U.S. objectives and

priorities. It is always difficult to persuade

corrupt, undemocratic, or partly democratic

regimes to adopt serious governance reforms.

But there is no chance of doing so if a regime

perceives mixed messages from the U.S. government, whether across agencies or over

time. Inconsistency within a region can also

generate resentment, confusion, and ambiguity about U.S. aims. 

• Across sectors. Among the most important

lessons of the past decade is that establishing

cross-sectoral links—connecting program

activities intended to achieve two or more

goals—enhances development and amplifies

the impact of a given investment. For

example, supporting the development of

small and medium-size enterprises does more

than stimulate and diffuse economic growth.

It creates a middle class. And in building up a

large class of entrepreneurs independent of

the state, it crystallizes interests in better governance, provides new bases for political

parties to reach out to these productive interests, and generates new resources to support

autonomous interest groups and NGOs.

Linking programs for democracy and governance with other programs can thus produce

a triple effect. It advances specific aspects of

democratic governance. It achieves a more

traditional development objective (such as

better health care). And it generates additional benefits that neither program could have

achieved alone. 

• Over time. Successful work on democracy and

governance requires patience, dedication, and

a long-term perspective. The more intractable

a country—in the sense of a long history of

poverty and weak governance—the longer it

will take to turn things around. Development

assistance cannot succeed unless it remains

engaged in pressing for democratic reforms

and assisting forces of reform over an extended period, possibly decades. Significant

improvements in governance also require

political will. In intractable cases this will take

time to generate—and even as it accumulates,

it is liable to erode. So, democracy and governance assistance requires engaging the key

actors in state and society to develop and

sustain the will to reform.

Such assistance also demands tailoring programs

to different countries. Some electoral democracies

have problems of democratic performance: widespread corruption, judicial inefficacy, weak political parties, human rights abuses, an incompetent

state, and in a few cases one-party dominance.

The main challenge in these countries is strengthening governance and political representation.

About half the countries in which USAID conducts democracy and governance programs fall

into this category.

Other countries are quasi-democratic, with

ambiguous regimes. In these countries it is not clear

if elections are free and fair, or if elected authorities have full power to govern. Competitive, multiparty elections are held, but the contests involve

significant fraud or insecurity. And though all the

formal institutions of democracy are in place, most

function poorly or with constraints. These countries share the program priorities of the first group

but also require electoral assistance.

A third group of countries, electoral authoritarian regimes, hold multiparty elections that can

even be quite competitive. But the elections are so

tainted with fraud and biased toward the ruling

party (and typically the incumbent president)

that they cannot be considered free or fair. Some

of these countries allow serious competition and

pluralism not only in elections but also in legislative and judicial systems—which, along with the

media, may take steps to erode constraints and

induce accountability. Electoral assistance is a top

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

9

CONNECTING PROGRAM

ACTIVITIES INTENDED TO

ACHIEVE TWO OR MORE

GOALS ENHANCES

DEVELOPMENT AND

AMPLIFIES THE IMPACT

OF A GIVEN INVESTMENT
priority for these more competitive regimes, as is

assistance to civil society to intensify demand for

reform.

Other electoral authoritarian regimes maintain

the façade of multiparty elections but allow little

real pluralism or freedom. And when challenged,

some of these countries can become brutally

repressive. In some cases it may be possible (or

strategically wise) to push for genuinely free

elections only after other improvements in governance. But in many of these regimes, making elections more credible and fair is vital to preventing

violent conflict and securing progress in other

areas of governance. In other words, without the

uncertainty and incentives generated by true

democratic competition, political will for reform

is unlikely to emerge.

The final group of countries, closed authoritarian

regimes, do not hold multiparty elections and

generally exhibit extreme political repression and

closure. There is little space for opposition or

dissent in civil society or the political system. The

executive branch and the security apparatus are

thoroughly dominant. These regimes fall into

two categories: failed states struggling to restore

political order and repressive regimes that ban

political opposition. In failed states, rebuilding

state capacity is essential for improving governance. But without any type of political accountability, participation, consultation, and power

sharing, the state is unlikely to gain the legitimacy needed to consolidate peace and establish

effective governance. That same is true for states

still plagued by civil war or violent conflict.

Among the most urgent challenges for U.S.

foreign assistance is how to engage such poor performers. Where political will for reform is lacking,

the main thing assistance can do is work with civil

society—including NGOs, religious institutions,

interest groups, think tanks, and the media—to

strengthen constituencies for reform. There may

also be reform-minded elements within government who recognize the need for reform but are

reluctant to act in isolation. Over the past decade

U.S. assistance has helped both groups in several

countries. Assistance can enhance actors’ understanding of reform issues, knowledge of experiences in other countries, coordination with one

another, capacity to analyze and advocate institutional and policy reforms, and mobilization of

support and understanding in society. Other

external actors can also help tip the balance

toward reform through persuasive engagement

with a country’s rulers and society. 

GUIDING PRINCIPLES FOR FOREIGN

ASSISTANCE

The following principles should guide U.S. and

other donor efforts to generate home-grown political will for better governance:

• Levels of foreign assistance must be more

clearly tied to development performance

and to demonstrations of political will for

reform and good governance. 

• Good performers must be tangibly rewarded.

Reform should be encouraged through predictable and meaningful rewards. When

leaders demonstrate respect for democratic

procedures and freedoms, and willingness to

undertake and follow through on difficult political and economic reforms, they should receive

steady increases in aid from the United States

and other donors. In addition, good performers—democracies getting serious about controlling corruption and strengthening the rule

of law—should be rewarded in other tangible

ways: with debt relief, with incentives for

foreign investment (including publicity about

their good governance), and with trade liberalization—such as the bilateral free trade agreement recently granted to Jordan. It is crucial,

though, that increases in development assistance and other economic rewards be contingent on what governments actually do—and

keep doing—not what they say they will do.

• If there is no political commitment to democratic and governance reforms, the United States

should suspend government assistance and

work only with nongovernmental actors.

USAID has often used such selective suspensions, which can have important symbolic

and practical effects. The only exceptions

should be for humanitarian relief and

responses to global public health threats, and

even then minimal reliance should be placed

on poorly performing states. 

• The United States should use its voice, vote,

and full influence within the World Bank and

other multilateral development banks to terminate development assistance to bad governments and to focus on countries with reasonably good governance. The principles of U.S.

foreign policy should extend into

international development—meaning that

international financial institutions should stop

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

10

LEVELS OF FOREIGN

ASSISTANCE MUST BE

MORE CLEARLY TIED TO

DEVELOPMENT

PERFORMANCE
financing grossly corrupt, wasteful, and

oppressive governments. Considerable

progress has been made on this front over the

past decade, and the United States should

continue to press for greater accountability

and logic in international lending. 

• The United States must work closer with other

bilateral donors to coordinate pressure on bad,

recalcitrant governments. Reductions in U.S.

assistance will not do much to change the

behavior of political leaders if their

governments continue to receive significant

aid from other donors. Leaders will be most

likely to change if they perceive a consistent

message from international donors.

In intractable cases the most important thing the

United States can do to advance development is

help generate the demand for democracy and

better governance—by strengthening the capacity of NGOs, interest groups, religious institutions,

social movements, the media, universities, and

think tanks. A larger portion of U.S. assistance

should be devoted to democracy and governance

efforts, which are fundamental to institutionalizing policies that foster sustainable development.

DRIVING ECONOMIC GROWTH

Success in the global economy comes to countries

that maintain fiscal discipline, open their borders to

trade, privatize inefficient state enterprises, deregulate their domestic markets and invest in the

health and education of their people.

—U.S. President George W. Bush 

U.S. economic growth has been moderate, averaging only about 1.7 percent a year per person

since 1776. But despite a civil war and periodic

recessions, it has been continual. Over 225 years,

average annual growth of 1.7 percent means a 44-

fold increase in per capita income.6 So the miracle

of high U.S. living standards has been persistence,

not speed. And it has been the result of strong

institutions and sound economic governance that

permit individuals to become a bit more productive and a bit wealthier each year, and to be confident that the fruits of their efforts will not be

arbitrarily taken from them.

One of the biggest challenges facing developing

countries is to sustain growth-promoting conditions over a long period, because a growing

economy offers the only long-run hope for reducing poverty. There is scope for implementing

growth policies that benefit poor people. But

most developing countries have trouble achieving

any type of sustainable growth. At least for the

next generation, U.S. strategy for reducing

poverty in developing countries must focus on

economic growth. 

Self-sustaining growth is difficult for developing

countries because generating knowledge and

developing sophisticated human capital depend

at least as much on institutions that protect property rights and ensure low transaction costs as on

specialization and trade. No simple alternative has

been found to the gradual evolution of such institutions. For many developing countries, the quest

for growth remains elusive.7

GROWTH IS GOOD FOR THE POOR

The importance of market exchange illuminates

the role of governance in both causing and alleviating poverty. Bad governance results in poorly

defined property rights, high transaction costs,

large economic risks, and outright theft. Markets

disappear in such environments—and with them

poor people’s hopes for an escape from poverty.

Other factors affecting poverty are visible but hard

to incorporate in general models of development.

Cultural and religious values are often high on the

list: attitudes, mistrust, traditions, religious outlooks, preferences for leisure, and viewing economic success negatively can impede rapid

change. Important research, now under way, will

define more precisely the relationship between a

country’s value system and its level of development. The research suggests how and why value

systems evolve—and the measures countries might

take to strengthen values that encourage development and alter those that undermine it.8

AGRICULTURAL GROWTH IS EVEN BETTER

In recent years many economists have ignored

agriculture, arguing that market forces will favor

whatever sectors are appropriate. In addition,

agriculture plays a shrinking role as economies

make the structural transformation to urbanbased activities and to industry and services. But

in many economies agriculture connects poor

people to economic growth. Most of the world’s

poor people live in or come from rural areas.

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

11

ONE OF THE BIGGEST

CHALLENGES FACING

DEVELOPING COUNTRIES

IS TO SUSTAIN GROWTHPROMOTING CONDITIONS

OVER A LONG PERIOD,

BECAUSE A GROWING

ECONOMY OFFERS THE

ONLY LONG-RUN HOPE

FOR REDUCING POVERTY
Rising agricultural productivity offers economywide benefits, such as making food cheaper for

urban residents. Pursuing agricultural strategies in

line with market realities and institutional capabilities would provide many benefits to developing countries, including:

• Access to technology. For many countries agricultural exports provide the foreign exchange

needed to buy foreign technology, mostly

machines.

• Increased capital formation. Public revenues

can be highly productive when invested in

public goods and infrastructure that make

private investment in agriculture more profitable. If agriculture is more easily taxed than

nonagriculture in early stages of development,

perhaps through border taxes on exports, it

may provide revenue for this important initial

stage of public investment.

• Better social outcomes. Rural education improves with growth in agricultural productivity and rural incomes. Better education, in

turn, can directly increase farm productivity.

It can also make moving to cities more economically rewarding for children who leave

the farm.

The requirements for agricultural development

are well known. Better agricultural technology

and adequate prices for farmers lead to profitable

farm investments and higher incomes that

increase commodity output and lift rural residents

out of poverty. As noted, rural education speeds

up the process, as does assistance in developing

new technology. Successful agriculture requires

supportive macroeconomic policies, with low

inflation, a stable exchange rate, positive real

interest rates, and perhaps some monitoring of

short-term capital flows. Extending these policies

to trade, getting prices right is important: an open

economy with low barriers to internal and external trade should create a level playing field for

producers and consumers alike. Improving the

rural financial system—so farmers can make longterm investments and to handle savings and

remittances—is also essential to successful structural transformation. 

BUT IT HAS TO BE SUSTAINABLE

The world’s agriculture produces $1.3 trillion a

year in food and fiber. Agriculture, forestry, and

fishing account for one of every two jobs worldwide and seven of 10 jobs in Sub-Saharan Africa,

East Asia, and the Pacific.9 Maintaining the

natural resource base that sustains these jobs is

critical in the coming decades. 

Environmental degradation of these resources

affects both human welfare and the economy.

Urban water shortages in China—aggravated by

overextraction and pollution of nearby rivers and

groundwater sources—cost $11 billion a year in

reduced industrial output and afflict nearly half

the country’s major cities.10 Commercial cutting of

India’s forests and their conversion to agriculture

have undermined the traditional system of village

management of local forests—causing shortages

of fuelwood and building materials for many of

the 275 million rural Indians who rely on local

forest reserves.11

As global population and income grow, the

demand for food, fuel, fiber, and water will

increase. To keep up, agriculture must be put on

a sustainable footing. Some 2 billion hectares of

arable land have been rendered irreversibly

unproductive by soil erosion, salinization, compaction, and depletion of organic matter.12 An

estimated 430 million hectares have been

destroyed by erosion alone—nearly a third of

currently cultivated cropland.13 Without conservation, more than 500 million hectares of

rainfed cropland may become unproductive

over the long term in Asia, Africa, and Latin

America.14

Government prices and policies are key determinants of how ecosystems are treated. They

direct many choices on what to consume and

how to manage lands and resources. A farmer

deciding what crops to plant and what chemicals to use, or whether to increase cultivated

area by clearing adjacent forests, is guided by

calculating commodity and pesticide prices as

well as other farm costs. Similarly, economic

factors drive a developer’s choice on where to

locate housing or a factory or a fisherman’s decision on where to fish.

GOOD ECONOMIC GOVERNANCE BOOSTS

ECONOMIC GROWTH

Institutions and rules have to be in place to sustain

growth once it starts. To encourage competitive

markets, governments must overcome the vestiges

of protectionism that stifle market activity and

block new entrants into the economy. Good

PROMOTING FREEDOM, 

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12

PURSUING

AGRICULTURAL

STRATEGIES IN LINE

WITH MARKET REALITIES

AND INSTITUTIONAL

CAPABILITIES WOULD

PROVIDE MANY BENEFITS

TO DEVELOPING

COUNTRIES
economic governance, founded on predictable

and fair laws, is one way to solve this problem.

Since the times of John Locke, economic development has been linked to the protection of individual rights and especially of property.

Good economic governance is the result of strong

public institutions, with important roles for individuals, civil society organizations, and business

and interest groups. The possibility of developing

policies for the public good increases when fairness and equity exist to a reasonable degree and

when an open society allows for healthy competition among multiple interests. In many developing countries special interests impede economic activity by marginalizing large and

potentially productive segments of society that

lack the legal and political means to affect public

policy. A lack of transparency in government and

absence of equal treatment before the law continue to prevent people from participating constructively in the economy. Democratic

processes—with equitable, broad popular participation and transparent laws and regulations—

contribute to good governance and sound economic policies, resulting in higher levels of

development.

Sound economic governance helps create an environment that encourages private groups and individuals to take risks, invest capital, and export. To

encourage exports, governments must, at the

very least, provide supportive and predictable

laws and regulations. Brazil, the Republic of

Korea, and Taiwan show how government policies can support low-cost trade in the transition to

export-led growth. The same environment that

enables private sector–led growth also encourages

foreign direct investment.

MORE TRADE AND INVESTMENT MEAN

FASTER GROWTH

Globalization provides an unprecedented opportunity to direct resources toward development.

Over the past 10 years developing countries’

trade (exports and imports) has grown from less

than $1.9 trillion a year to nearly $4.6 trillion.15

Private capital flows to these countries have

grown even more dramatically: net foreign direct

investment rose from $30 billion in 1990 to $188

billion in 1999.16 Countries that have experienced growth in trade and investment have also

achieved faster economic growth.

Globalization and regional integration have benefited countries regardless of their stage of development—but developing countries that have

changed conditions and mindsets have gained the

most. Among countries that have integrated with

global markets, income gaps have shrunk and

equality has improved. Countries resistant to globalization or lacking the capacity to foster investment and trade have not fared as well.17 Countries

are better able to enter markets when democracy

and the rule of law provide freedom and constrain

corruption and monopolistic policies (figure 5).

WHICH COUNTRIES ARE THE SLOW

INTEGRATORS—AND WHICH, THE

NORMAL?

Two indicators show how well countries are

integrating:

• The change since 1980 in the share of a

country’s merchandise trade in GDP indicates the speed of trade integration.

• The share of manufactured exports in a

country’s merchandise exports in 2000

indicates the depth of trade integration.

Of 111 developing countries, 46 are considered

normal integrators and 65 slow integrators.18

About 90 percent of the least developed countries

and 87 percent of low-income countries are slow

integrator. In 1999 these countries contained 22

percent of the world’s population but accounted

for just 9 percent of global GDP and 5 percent of

merchandise trade.19 In Sub-Saharan African 37

countries were slow integrators, with 10 percent

of the world’s population but only 1 percent of

PROMOTING FREEDOM, 

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13

INSTITUTIONS AND

RULES HAVE TO BE IN

PLACE TO SUSTAIN

GROWTH ONCE IT STARTS

Freedom means greater integration 

with global markets

Note: Countries classified by USAID. GDP adjusted for purchasing

power parity (PPP).

Source: For Freedom House scores, Freedom Foundation; 

for GDP, World Bank. Hannon and Rhee 2002.

High-income

countries

Normal

integrators

Slow

integrators

Combined average 

Freedom House score, 2000

Not

free

Free Low

income

High

income

GDP (PPP 

$billions), 2000

1.8 $830

$314

$57

3.0

4.6

FIGURE 5
global GDP. The Middle East, North Africa, and

Central Asia also contain many slow integrators.

Among normal integrators annual growth in per

capita GDP rose from less than 2 percent in the

1980s to more than 3 percent in the 1990s. But

among slow integrators per capita GDP shrank,

from –0.5 percent a year in the 1980s to almost

–3.0 percent in the 1990s.20 Differences in global

trade and in financial and technological integration are the main reasons for these dramatic gaps.

Most slow integrators desperately need export-oriented foreign direct investment and other types of

collaboration with foreign companies. Slow integrators are trying to improve their enabling environments, but potential investors and lenders lack

confidence in these countries’ capacity to earn

foreign exchange and pay back loans. Innovative

U.S. assistance could break this vicious cycle,

inducing export-oriented foreign investment and

other types of foreign collaboration needed to

jumpstart nontraditional or manufactured exports.

IMPROVING THE CLIMATE FOR FOREIGN

INVESTMENT

Foreign direct investment is a valuable form of

capital because it also transfers production technology, marketing, and management. Just as

important, that investment is much less vulnerable to investor runs and cross-border contagion

than are portfolio investments and bank loans,

providing a valuable source of financial stability.

Foreign direct investment has also been a harbinger of globalization. During 1970–86 direct

foreign investment flows to developing countries

were essentially flat, fluctuating around $11 billion

(in 2000 dollars).21 These figures were small relative to development assistance and other official

flows. But by 1999 net foreign direct investment

had rocketed to $188 billion, more than three

times the official flows (about 20 percent of that

foreign direct investment went to China).

Still, in many countries the investment climate

continues to be clouded by trade barriers, corruption, and market distortions. Evidence from a

large sample of countries suggests that corruption

significantly reduces domestic and foreign investment. Leveling the playing field with transparent

regulations, predictable laws, and lower trade

barriers is necessary to establish a favorable

investment climate (figure 6). The environment

for foreign direct investment is also directly

related to that for private sector development.

U.S. foreign assistance can speed economic

growth by providing better access to U.S.

markets, encouraging foreign direct investment,

and facilitating worker remittances. It can also

speed economic growth by:

• Engaging governments in policy dialogues,

often with the explicit or implicit promise of

greater aid if policy actions are taken.

Meaningful policy dialogue requires extensive

knowledge of a country’s political economy

and local capacity for pragmatic policy

analysis.

• Producing new knowledge about development through research and project activities.

Policy dialogue and knowledge generation

should be seen as mirror images that require

coordinated, integrated support over long

periods.

• Bringing the United States to the table, often

in multilateral settings, for diplomatic and

trade negotiations. Connecting developing

countries to the $10 trillion U.S. economy

through trade and investment offers a crucial

driver for faster economic growth in developing countries. Because the U.S. government

has many agencies with many agendas, an

overall policy direction has been missing.

Clear guidelines on responsibilities for different aspects of foreign assistance—even narrowly in assistance for economic growth—

would be welcomed both in the government

and by outside participants.

GETTING AGRICULTURE MOVING

For decades, there has been no great secret to

agricultural development. Better agricultural technology and adequate prices for what farmers

produce will lead to profitable farm investments

and income streams that simultaneously increase

commodity output and lift the rural economy out

of poverty. Education of rural inhabitants will

speed up the process, as will assistance in the

development of new agricultural technology.

Neither the agricultural technology nor the prices

in rural markets have been reliable in SubSaharan Africa. In Asia success in linking the nontradable sector in rural areas to urban markets

and labor-intensive export growth has been

PROMOTING FREEDOM, 

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14

FOREIGN DIRECT

INVESTMENT IS A

VALUABLE FORM OF

CAPITAL BECAUSE IT

ALSO TRANSFERS

PRODUCTION

TECHNOLOGY,

MARKETING, AND

MANAGEMENT
mixed at best. And in Latin America many of the

rural poor have migrated to urban areas—which

now account for two-thirds of the population

there. Central America and Mexico continue to

face acute rural poverty, however, and rural strategies will be needed to reduce it.

The mechanisms for developing technology and

providing rural price incentives are no longer as

clear as they were in the 1960s. The global agricultural research system has a laudable record of

important breakthroughs for many of the world’s

staple foodcrops. But funding for the system has

been threatened as the market prices of these crops

dropped to historic lows, under the weight of productivity gains in developing countries and publicly

subsidized crop surpluses in rich countries.

Biotechnology holds out great promise—largely a

product of scientific enterprise, public and private,

in rich countries. Already, pest resistance and

drought tolerance are being incorporated, using

biotechnology, into crops of great importance to

poor farmers—cotton, maize, and sweet potatoes.

Cost reductions and greater productivity are results

that will help keep agriculture moving. Still, few

countries have the scientific resources to conduct

basic crop research on their own, so a large question looms. Where will agricultural technology

come from to feed the additional 3 billion people

expected in the next 50 years?

There is an obvious role for the United States in

answering this question. First, U.S. leadership can

help in restoring budgets of the agricultural

research system—and can bring other donors

back to the table. Second, our university system

is the best in the world at training scientists in

basic biology and applied agricultural fields. We

have an opportunity to provide the next generation of these scientists for the entire world. Third,

we can press for reducing the destructive effect on

poor countries of agricultural policies of the

industrial countries.

Some place high hopes for solving world market

problems in agriculture negotiations at the WTO.

But this is likely to be very difficult, as both

Europe and Japan are still extremely reluctant to

expose their farmers to free markets. But the U.S.

Department of Agriculture has taken a clear

stance in favor of reduced subsidies and freer

trade in agriculture. Its research concludes that

removing all forms of agricultural protection and

support could raise world prices 12 percent,

mostly from removing tariffs. In such a free

market U.S. agricultural exports would grow by

19 percent. And removing such distortions would

increase global economic welfare by $56 billion

annually—about the same amount as all official

foreign aid provided by the industrial countries.22

Part of the challenge may involve getting U.S.

acceptance of agriculture’s “multifunctionality” as

the basis for domestic policies that have clear

social, environmental, or security rationales. The

United States joined with other WTO members

to launch the Doha Development Agenda that

solidified the importance of liberalizing agricultural trade. To be designed are rules that explicitly recognize what functions might be reasonable

for agriculture in different countries and at different stages of development. For example, environmental protection would be acceptable for

domestic agricultural policies in all countries,

whereas policies to stimulate basic grain production to enhance domestic food security would be

restricted to countries with limited access to

world markets or with poorly developed internal

marketing systems.

PROMOTING FREEDOM, 

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15

BETTER AGRICULTURAL

TECHNOLOGY AND

ADEQUATE PRICES FOR

WHAT FARMERS PRODUCE

WILL LEAD TO

PROFITABLE FARM

INVESTMENTS

Good investment climate, good growth

Source: Heritage Foundation, World Bank, USAID country 

classifications. Hannon and Rhee 2002.

0

4

2

6

8

10

Highincome

countries

Normal

integrators

Slow

integrators

Oil

exporters

Highincome

countries

Normal

integrators

Slow

integrators

Oil

exporters

Economic Freedom Index 2001

–2

0

2

4

6

GDP per capita income growth 1990–2000

FIGURE 6

Fig. 6

Economic Freedom Index

2001

High-income countries 8.3

Normal integrators 6

Slow integrators 4.7

Oil exporters 4.5

GDP per capita income

growth 1990–2000

High-income countries 3.6

Normal integrators 5.8

Slow integrators -1.7

Oil exporters 2.3
Beyond improving the external climate for

agriculture, what are the main components of an

agricultural strategy and how can the United

States help countries develop one? First is a supportive macroeconomic policy, one that yields low

inflation, a reasonably stable exchange rate, positive real interest rates, and perhaps some monitoring of short-run capital flows. Second, “getting

prices right” extends good macro policy to the

trade arena, where an open economy with low

barriers to internal and external trade should generate a level playing field for producers and consumers alike. Third, improving the rural financial

system will take time but is essential. 

None of this is intrinsically difficult, but all of it

requires talented policy analysts and government

administrators. Training them in U.S. universities

and empowering them when they return home is

a powerful form of U.S. foreign assistance.

DEFINING THE MICROECONOMIC AGENDA

Much discussion of competitiveness has focused

on the macroeconomic, political, and legal circumstances that underpin a successful economy.

A stable set of political institutions, a trusted legal

context, and sound fiscal and monetary policies

contribute greatly to a healthy economy.

Macroeconomic conditions provide the opportunity to create wealth but do not by themselves

create wealth. Wealth is actually created in the

microeconomic foundations of the economy,

rooted in company operating practices and strategies as well as in the quality of the inputs, infrastructure, institutions, and array of regulatory and

other policies that constitute the business environment in which a nation’s firms compete. 

Developing countries, again and again, are slowed

or paralyzed by microeconomic failures. With

global capital markets, countries can engineer

spurts of growth through macroeconomic and

financial reforms that bring floods of capital and

cause the illusion of progress as construction cranes

dot the skyline. Such reforms allow countries to

exploit current comparative advantages. But unless

firms are fundamentally improving their operations

and strategies and competition is moving to a

higher level, growth through productivity gains will

be snuffed out as jobs fail to materialize, wages

stagnate, and returns to investment prove disappointing. Capital flows and attention then shift elsewhere. The austerity that results from such cycles

is at the core of the backlash against globalization.

The microeconomic foundations of productivity

rest on two interrelated areas: the sophistication

with which companies or subsidiaries based in the

country compete, and the quality of the microeconomic business environment. National productivity is ultimately set by the productivity of a

nation’s companies. An economy cannot be competitive unless companies operating in it are competitive, whether domestic or subsidiaries of

foreign companies. The sophistication of these

companies is intertwined with the quality of the

national business environment. More sophisticated business strategies require highly skilled

people, more information, better infrastructure,

advanced institutions, and stronger competitive

pressure.

Foreign aid organizations, both public and

private, have a distinct role in developing and

implementing a developing country’s microeconomic agenda. They can bring unique assets to

bear that the developing country otherwise would

not have access to. Traditionally, foreign donors

have provided capital to finance development

projects. Often more important, however, is a new

type of technical assistance in assessing a country’s

current competitiveness, in developing the key

elements of its microeconomic agenda, in creating

measurement tools to track performance, and in

setting up institutions for implementation and

continuing research on the microeconomic

agenda.

This new technical assistance differs from macroeconomic, legal, and financial assistance in a

number of crucial ways. The time line between

providing the technical assistance and actual

changes in behavior and later outcomes is usually

much longer than when stabilizing a government’s budget or fixing the exchange rate by government fiat. Microeconomic reform requires

permanent, stable changes of many interrelated

policies. These policy changes filter through to

changes in companies’ behavior and expectations. Over time, they finally show up in the outcomes if policy makers have kept course. Microeconomic reform is a marathon, not a sprint.

The new technical assistance also requires the

cooperation of a large number of participants. It

has to include private companies, both domestic

and foreign-owned, in assessing the current competitiveness of a location and in implementing

changes to upgrade. It has to include non-profit,

educational, research and trade organizations to

PROMOTING FREEDOM, 

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16

WEALTH IS ACTUALLY

CREATED IN THE

MICROECONOMIC

FOUNDATIONS OF THE

ECONOMY, ROOTED IN

COMPANY OPERATING

PRACTICES AND

STRATEGIES
organize the collective action of individuals and

companies and to implement measures to change

the business environment. It has to include many

different functional and regional parts of government, stretching beyond the traditional focus on

the leadership of national ministries.

Finally, the new technical assistance needs to

define clusters and regions within a country as

their primary unit of action rather than industries

and nations. Clusters go beyond individual industries, which on their own control only a subset of

the factors that drive their economic performance. And clusters are narrower than large

sectors like manufacturing, which are too diverse

to allow the development of policies that can

make a material difference. Regions control many

of the microeconomic business environment conditions that determine the ability of companies to

operate productively. And regions differ significantly in their current competitiveness and thus

require unique efforts to address their weaknesses. The national level, however, continues to be

critical to provide the basic macroeconomic, legal,

political, and social conditions that set the stage

for microeconomic competitiveness. 

On a very basic level, U.S. policies for foreign

assistance should meet two practical tests:

• Does the activity upgrade elements of the

business environment most critical to development in a particular country?

• What is the distinct advantage to the U.S. in

performing this specific activity to upgrade

the business environment?

JUMP-STARTING THE SLOW INTEGRATORS

Most slow integrators desperately need exportoriented foreign direct investment and other types

of collaboration with foreign enterprises. These

slow integrators are making efforts to improve

their enabling environment. Yet potential

investors and lenders lack confidence in these

countries’ capacity to earn foreign exchange and

pay back foreign loans, stemming from slow integration into the global economy.

Innovative approaches to U.S. assistance strategies can break this vicious cycle. Foreign economic assistance could play a catalytic role in

inducing export-oriented FDI and other types of

foreign enterprise collaboration needed to jumpstart nontraditional or manufactured exports. 

As many now agree, globalization is good for

development: the countries that have benefited

have been the poorer ones, the ones with the most

to gain. What can U.S. foreign economic assistance

supply? Much, but only with more effective coordination of policy and program development by

U.S. government agencies, and departments. The

private sector, which has already done so much to

promote development, must also be treated as a

partner in the difficult task of building the capacity of countries seeking to globalize. Alleviating

poverty and creating opportunities for countries

“left out” of globalization’s benefits are critical for

international security and long-term stability. Only

by approaching the process of assistance in this

larger and more creative framework of coordination can U.S. foreign economic assistance ensure

long-term gains in the process of development.

INVESTING IN PEOPLE

Investing in people improves the distribution of

assets in the early stages of economic growth. For

growth to benefit poor people, these investments

must include rural schools, primary health clinics,

and household food security. In addition, policies

that encourage efficient rural financial markets

increase poor people’s access to capital.

At later stages equitable growth requires providing unskilled and semiskilled workers with opportunities for high school education and on-the-job

training (box 2). If such investments are broadly

based and of adequate quality, they will keep the

distribution of income from becoming highly

skewed until well into the development process—

leading to the near elimination of absolute

poverty. The Republic of Korea and Taiwan

managed such investments quite well as they

moved into middle-income status. Brazil, the

Philippines, and Thailand did not. 

Even the poorest countries can set themselves on

a fiscally manageable growth path that includes

the poor. But that may not occur. Political forces

and governance averse to investing in poor people

are more likely in countries where poor people’s

lack of assets keeps them apart from the growth

process. But such obstacles provide U.S. assistance with a rationale for investing in the people

who those countries’ leaders might choose or be

forced to ignore. The resulting policy dialogue,

and the resources mobilized behind it, could

have dramatic effects.

PROMOTING FREEDOM, 

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17

FOREIGN ECONOMIC

ASSISTANCE COULD PLAY

A CATALYTIC ROLE IN

INDUCING EXPORTORIENTED FDI AND

OTHER TYPES OF

FOREIGN ENTERPRISE

COLLABORATION
IMPROVING PEOPLE’S HEALTH

When it comes to health, developing countries are

separating into two groups. In the first, larger

group, health care has improved dramatically in

recent decades—raising life expectancies,

expanding workforces, and reducing deaths from

communicable diseases. As a result, by 2020

these countries will have achieved international

objectives for basic health indicators. They will

have smaller populations under 5, and their

median ages will approach those in industrial

countries today. Moreover, noncommunicable

diseases will be the leading cause of death.23 But

these countries will still have subpopulations with

health profiles similar to those in least developed

economies. Further, there may be unexpected

shocks that could cause countries to regress, such

as the HIV/AIDS epidemic, social upheaval, and

natural disasters.

In a second, smaller group of developing countries—which includes badly managed economies

that have seen little or no growth in recent years—

health indicators have stagnated or worsened.

Fertility and infant mortality rates are high. Life

expectancies are low. And infectious diseases,

including HIV/AIDS, are widespread. Though

some of these countries are seeing slight improvements in demographics and mortality rates, they

will not approach the levels of today’s industrial

countries by 2020.24

These features offer opportunities—and create

challenges. In addition to maintaining basic

public health services, the first group of countries

must decide how to invest in new approaches and

technologies. Global health programs can shift

their focus from women of reproductive age and

children under 5 to entire families, including

income earners and elderly dependents. Better

health outcomes will require better management

of chronic diseases, from prevention through

treatment. Sustainable progress in health will

require health care institutions with both capital

and recurrent financing. And systems will need to

respond to rising expectations for health care and

to the dominance of private flows in its funding. 

In the second group of countries public health

interventions will have to remain focused on

family planning and maternal and child health—

but, given serious quality problems, must radically

revise the strategies used to do so. By 2020 nearly

nine of 10 people in this group of countries will

be African.25 New thinking is needed to generate

more effective results from global health programs. In addition, consideration must be given

to external concerns that affect health outcomes—including income growth, education,

water, sanitation, and good governance. 

PROMOTING FREEDOM, 

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18

INVESTING IN PEOPLE

IMPROVES THE

DISTRIBUTION OF ASSETS

IN THE EARLY STAGES OF

ECONOMIC GROWTH

Gross enrollment trends spotlight the education

revolution that took place in developing countries after 1960. The World Bank’s World

Development Indicators 2002 shows a 104

percent enrollment ratio in low- and middleincome countries in 1998. The gains of the past

decades are even more remarkable given the

massive increases in population.

But the numbers mask great differences across

regions and within countries. Many industrial

countries enjoy near universal literacy. But in

the Balochistan region of northern Pakistan

only 3 percent of women, and only 8 percent of

men, were literate in 1990. And in the developing world an estimated 113 million children—

one in every five ages 6–11—are not in school,

60 percent of them girls. Girls’ enrollments are

lowest in Sub-Saharan Africa and South Asia.

The numbers also mask system inefficiencies,

such as grade repetition, overage and underage

enrollment, and children who enroll but never

attend. One in four school-age children drops

out of school before completing five years of

basic education—but international research

suggests that countries may be trapped in low

returns to education unless children complete at

least five to six years of school. 

Masked most by the enrollment numbers: educational quality is often deficient. Education must

also be linked to a productive economy. It must

provide learning on demand so that workers and

citizens can meet the needs of a rapidly changing

global economy. Primary education, while providing the basics for lifelong learning, is no longer

enough to prepare young people for employment.

Secondary education and skills-based learning

must now be considered essential elements in

tapping into the global economny—and in building democratic institutions.

Source: USAID staff.

Box 2. Making education meet the needs of a modern economy
What do these changes mean for foreign

assistance? 

• Health interventions must encompass a wide

range of new approaches and actors. Dealing

with local financing institutions, employer

benefit plans, and telecommunication networks may be just as important as ministries

of health. Increasing both the availability and

quality of food will remain critical, but new

approaches, such as biofortification of staple

crops to enhance their micronutrient content,

need to be examined.

• The increase in noncommunicable diseases

will be permanent, making health care more

expensive. Donors and developing countries

must make complementary investments involving all parties—public and private—with

vested interests in a country’s long-term health

status, ultimately aiming for self-reliance. 

• Given the rapid and diverse changes in many

developing countries, donors must be flexible. Efforts to accelerate the progress of

countries suffering from traditional health

and disease problems must be combined with

programs to help other countries address new

challenges. 

• Despite 40 years of effort, many countries

have extremely high infant mortality and low

life expectancy, now affected by high

HIV/AIDS rates—suggesting a need to carefully evaluate past public health investments,

develop new approaches, and better define

the role of the private sector.

Why act on these changes? The impact of the

changing disease profile on the economies of

these countries, the rising expectations of newly

democratic populations for better health care, the

expertise and experience of U.S. medical and

management organizations to help solve these

problems—all argue for transforming U.S. global

health portfolios into dynamic investments benefiting everyone.

For both old problems and new, the central concern

will be self-reliance—so that economic progress can

be tied to progress in public health. A central

concern of self-reliance will be financial diversity—

including private financing, which already accounts

for more than half of health resources in developing countries. Political commitment is also key. For

many developing countries, self-reliance in traditional areas such as immunizations is not a matter

of inadequate resources but of political will, commitment, and management. 

NEW OPPORTUNITIES—AND CHALLENGES

New opportunities in global health are a direct

result of the changing demographics, epidemiology, and diversity in developing country populations.

These opportunities do not imply that humanitarian programs should be eliminated where such

needs continue to dominate national landscapes.

Nor do they imply that core public health functions

dealing with conventional problems are not needed.

Indeed, the combination of public and private services is a prerequisite for health progress. But in

coming years, where economic progress and democratic governance advance alongside epidemiological change, countries can assume the burden of

managing these services.

Keeping breadwinners healthy and taking care of

parents. With changing age structures, there is

opportunity for widening the focus of global

health efforts from women of reproductive age

and children under 5 to the family—a unit that

encompasses both traditional and emerging

health concerns.

The number of children under 5 is falling in many

developing regions. And at least until 2020, the

number of youth will rise. In addition, grandparents and great aunts and uncles will survive

middle age.26 Whether they live independently or

with their adult children, their health problems

will become a concern for family breadwinners.

Thus the health issues of working-age populations

will affect family life and economic viability. If

both aging dependents and productive breadwinners are chronically ill, a family’s future is

bleak. Hence the importance of health strategies

that aid economic growth. 

The near-term challenge is to learn more about

families—their problems, their aspirations, and

how they are adapting to changing living patterns

and health status. How are they allocating their

resources to meet changing demands, and how

can foreign assistance help that process?

Reexamining financing. The past decade of experimentation with health care financing in developing countries, and equally painful but longer experimentation in the United States, provide a base for

exploring new approaches to rising health care

costs. Choices will have to be made about public

spending, and fresh approaches will be needed to

create revenue streams. In young democracies the

balance struck between young and old and

PROMOTING FREEDOM, 

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19

NEW OPPORTUNITIES IN

GLOBAL HEALTH ARE A

DIRECT RESULT OF THE

CHANGING

DEMOGRAPHICS,

EPIDEMIOLOGY, AND

DIVERSITY IN

DEVELOPING COUNTRY

POPULATIONS
between productive and dependent populations

will be a function of what health experts advocate

and what people want for themselves. Expectations

of health care quality, safety, and service will drive

public decisionmaking on health resources. To

meet these new demands, governments will have to

explore private outsourcing and insurance, as well

as pursue greater transparency and better management of service delivery and financing.

One largely unaddressed element is the need for

investment in the health industry, for both goods

and services. The new epidemiology will require

investing in management systems, information

systems, technology, provider training, and public

education. The public and private capital available

for investing in provision—not necessarily bricks

and mortar, but start-up costs of new service combinations and organizations—will determine the

viability of health sectors in developing countries. 

Ensuring quality. Poor-quality health care results

in illness and death. It is also a tremendous waste

of resources. Higher quality means lower costs.

Quality can reduce waste by shortening hospital

stays, lowering laboratory test and operating costs,

and shifting personnel allocations.27 For even the

poorest countries, such assessments of quality

argue for new approaches. And especially for the

poorest, they highlight levels of waste that are

unsupportable under constrained budgets.

The need to ensure quality is becoming more

compelling as epidemiology in most developing

countries shifts to chronic and noncommunicable

diseases—with longer treatment periods and

higher unit costs in both private and public

systems. The United States is the world leader in

disease management and quality assurance,

largely because of national debates over cost containment and health outcomes.28 These techniques are becoming increasingly refined and

practical to transmit to other settings. 

Reexamining management systems. Changing

disease patterns, broadening demand among

aging populations, and rising expectations will

make the management of health services more

complex. The decentralization of responsibility

that often accompanies democratization and economic liberalization also creates new challenges

for public health care. 

With the increase in private providers and more

diverse financing schemes, the role of public health

ministries will change from providing services to

setting standards and overseeing operations. How

well these roles are developed will affect the quality

and sustainability of national health systems, public

and private. Deeper capacity will be required to

manage dispersed health care networks rather

than centrally controlled systems.

With the demographic and epidemiological transition, one big management change may be in

pharmaceuticals. For many noncommunicable

diseases, prevention and treatment are combined.

Indeed, many of these diseases entail lifelong

pharmaceutical use, unlike communicable ones,

with the exception of HIV/AIDS therapies. Rising

literacy, education, access to information, and

globalization will also spur demand for pharmaceuticals. Given the effectiveness of modern medications, greater access to therapeutics can contribute to a more productive workforce at all ages.

Educating the public. Changing demography,

rising urbanization, and spreading literacy may

provide opportunities for pursuing more comprehensive approaches to public health education, using new communications technologies.

Indeed, such strategies may be essential. Many

noncommunicable diseases, especially cardiovascular conditions and cancer, have deep roots in

behavior. Encouraging prevention through

health-promoting behaviors brings prevention to

the forefront for these diseases and can be incorporated into existing primary health care initiatives for infectious diseases.

Research in industrial countries shows that as

people age, they begin to be more attentive to

health problems and their consequences. The

absorptive capacity of the population for health

information deepens. Technological innovation

will make reaching people easier. Even now, solarpowered, satellite-based internet connectivity is

spreading to rural areas in many developing countries.29 Cell phone penetration is greater than in

some areas of the United States.30 Distance learning methods and technologies are becoming widespread. The evolution of bottom-up wireless

mesh routing (Wi-Fi) is rapidly becoming a lowcost method for weaving networks of wireless

telecommunications capacity without major

investments.31 The expected extension of such

networks into the developing world will significantly increase the capacity to deliver health care

messages and consultation to larger populations

for lower costs than ever.

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

20

EFFORTS TO ACCELERATE

THE PROGRESS OF

COUNTRIES SUFFERING

FROM TRADITIONAL

HEALTH AND DISEASE

PROBLEMS MUST BE

COMBINED WITH

PROGRAMS TO HELP

OTHER COUNTRIES

ADDRESS NEW

CHALLENGES
IMPLICATIONS FOR THE PHILOSOPHY AND

PURSUIT OF FOREIGN ASSISTANCE

After more than four decades, foreign assistance

programs in health—focused largely on public

health endeavors aimed at women of reproductive

age and children under five—look out on a

changed health landscape. Decisions about how

to allocate and manage “aid” on that landscape

can be guided by various considerations.

First, resources have to confront a growing diversity of complex problems many of which will be

more serious. The world is very different from

what it was even 20 years ago; it will be even more

different 20 years hence. What is striking is the

progress, albeit with serious lags in the least

developed countries. Entirely new generations of

public health problems require entirely new portfolios. Health conditions not previously considered part of a “foreign assistance” portfolio are

now worthy of attention. New skills, such as those

in health finance and management, become as

important as public health credentials.

Second, progress in health will come not just from

health programs. Health portfolios must be interdisciplinary, combining the best of health and

medical innovation with simultaneous attention to

problems as diverse as capital investment capacity, biofortification in agricultural systems to correct

micronutrient deficiencies, wireless communication distribution systems, and women’s education.

This means that portfolios will need to be fairly

slim; one cannot undertake multiple complex

partnerships in one place (let alone many places)

at once. Having limited resources means being

selective about investments with an eye to their

economic contributions, staying rigorous and brutally honest about measuring impact, and being

insistent on the long-term self-reliance of partners.

Third, public health challenges of tomorrow argue

for flexibility. There certainly are no longer simple

categories of health challenges, if there ever were.

Nor are the challenges defined by narrow age

categories or by gender. Achieving equality in partnerships means that the United States must have

the flexibility to adapt the discussion to priorities

as defined by the emerging health conditions.

Accelerating the progress of some countries still in

the grip of conventional global health and disease

problems must be combined with the ability to

help other nations address new challenges not

conforming to old categories.

Fourth, despite 40 years of effort, health progress

in some nations continues to lag behind, with only

slow progress projected for the future. Quality,

impact, and sustainability have remained elusive.

Given the continuing need for future investment

in conventional problems, there should be frank

and open discussion on new approaches to

achieve results. In other quarters, this has been

cast as a matter of inadequate international

funding.32 But money is not at the heart of the

matter. The partnership dialogue with nations still

struggling to make health progress requires

exploring and developing entirely new strategies.

The future may thus see major opportunities for

a new wave of financing alternatives in the private

sector—and for the emergence of service-based

commercial lending in health. In the more

advanced developing countries, there can be a

future in which the health industry is a dynamic

force in the economy, creating jobs and accumulating capital. 

MITIGATING AND MANAGING

CONFLICT

Understanding what, if anything, the foreign

assistance community can do to help stop a

nation’s slide to self-destruction is critical. By one

count, there were 111 armed conflicts in 74 locations in the 1990s. Of these, 56 were counted as

major, armed conflicts, meaning that military

casualties exceeded 1,000 battle deaths, either in

a year or over the course of the conflict. Although

the number of new conflicts has been steadily

declining since reaching a peak between 1992 and

1993, many of those that remain—in Afghanistan,

Colombia, and Sudan—have become increasingly lethal and durable.33

The vast majority of recent conflicts have been

internal, characterized by brutality, severity, and

socially divisiveness. They cause tremendous

human suffering, with a disproportionate share of

the costs falling on civilian victims. Before the

second World War, the ratio of military to civilian

casualties was nine to one. By the close of the 20th

century, that ratio had reversed, producing

massive and protracted humanitarian crises.34

Hundreds of thousands have died in direct fighting, with many more forced into refugee states.

Fueling religious and ethnic intolerance, these

conflicts have led to an enduring climate of hate

and fear that can take generations to overcome.

PROMOTING FREEDOM, 

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21

HEALTH CONDITIONS

NOT PREVIOUSLY

CONSIDERED PART OF A

“FOREIGN ASSISTANCE”

PORTFOLIO ARE NOW

WORTHY OF ATTENTION
In addition to the human costs, civil conflict has

blunted and reversed prospects for growth,

destroyed investments, and caused a dramatic

deterioration in the quality of life. Not only has violence taken a serious toll on the economies of countries experiencing conflict, new research demonstrates that the economies of neighboring states

and regions also take a serious hit. The financial

burden of these wars on the international community is also staggering. In the 1990s the donor community pledged more than $60 billion in aid to

assist in the recovery of war-torn countries. World

Bank lending for post-conflict recovery alone has

increased more than 800 percent. Between 1992

and 1997, peacekeeping expenditures rose by $3

billion, and emergency assistance, largely to conflict

affected areas, rose by $33 billion.35

In these anarchic and lawless settings, a new

breed of conflict entrepreneurs have found sanctuary, and the line between criminal violence and

political violence has begun to blur. Transnational

criminal organizations, terrorist networks, and

local warlords have amassed enormous power

and wealth through instability and violence.

Indeed, many of the activities these groups engage

in—smuggling drugs, trafficking in people, counterfeiting currencies, trading chemical, biological,

and nuclear weapons—are easier during conflict

and with failed states. To move toward enduring

solutions for the problem of mass violence, it is

important to understand that violence is not the

problem for these groups and individuals—it is

the solution, a political and financial step up

rather than a step down.

Conflict becomes more likely when causes

operate at all of these levels. Clearly, the simple

existence of poverty isn’t enough. Nor are ethnic

divisions. Nor is access to the human and financial resources necessary to sustain violence. These

grievances and “conflict” resources are likely to

remain latent until political elites see a reason to

tap into them to advance a political or economic

agenda, often one that serves them more than the

group they claim to represent.

Similarly, if there are strong institutions in place

that can address grievance or check the behavior

of “conflict entrepreneurs,” then whatever

incentives for violence exist in a society can find

legitimate channels of expression or be successfully controlled. External pressures—global

markets, transnational weapons flows, criminal

networks—can also undermine efforts to keep the

peace. But these forces are unlikely to lead to

widespread violence unless they resonate in some

way with internal causes.

WHAT FOREIGN ASSISTANCE CAN DO

At a very general level, conflict prevention and

management entail a continuum of interventions

that have as their primary objective strengthening the capacity of states and societies to sustainably manage sources of tension and strain in

their own countries. This will require helping

key stakeholders locate and rank the most

important causes of conflict that exist in their

own country. In some places, this may be ruralto-urban migration. In others, communal competition over a dwindling water supply or access

to arable land. And in others, still, corruption.

Whatever the underlying cause, a critical part of

the solution is encouraging the growth of institutions that can craft innovative and participatory solutions to these problems at the local,

regional, and national levels.

While there are clusters of fairly distinct activities

for short-term and long-term interventions, it is

important not to compartmentalize them. Even in

the period immediately before and after violence,

it is critical that the foreign assistance community continue to encourage the creation of institutions that can address underlying grievances and

ambitions. It is also vital that short-term assistance, humanitarian or otherwise, be acutely sensitive to how it feeds into or sustains long-term

conflict dynamics, particularly the economic

dimensions of violence. Some factors critical in

the short-term, such as high levels of youth unemployment, require both long-term and short-term

interventions.

Determining where a country falls on the continuum from pre-conflict to post-conflict requires

much more sophisticated risk-monitoring systems

than most foreign donors currently use. Some

early-warning models are being developed to

assess risks two or more years out. While these

models are not perfect, and certainly cannot

predict the outbreak of violence with accuracy,

they do a reasonably good job of ranking countries by the probability of violence. In combination with regional expertise, they can help donors

identify priority countries and guide decisions

about what type of intervention is most necessary

at a point in time.

PROMOTING FREEDOM, 

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22

UNDERSTANDING WHAT,

IF ANYTHING, THE

FOREIGN ASSISTANCE

COMMUNITY CAN DO

TO HELP STOP A

NATION’S SLIDE TO

SELF-DESTRUCTION IS

CRITICAL
GUIDING PRINCIPLES

There are clear limits to what U.S. assistance can do

to encourage peace and discourage violence. In

severely divided societies, it may be possible to

reduce or manage tensions. But it is not possible

to eliminate them, and policymakers shouldn’t

pretend that it is. A durable peace cannot be

imposed from abroad. Outside actors can attempt

to shift the balance of power between conflicting

parties at the margin. They can raise issues that

internal actors might not be able to. They can

monitor events. And they can bring diplomatic,

financial, and military pressure to bear against

leaders who are walking down a dangerous path.

But conflict is ultimately the product of deep

grievance and ambition, reckless leadership, zerosum competition over political and economic

power, weak or unaccountable institutions, and

regional and global pressures. What is required is

a change in attitudes and power inside a country

and the will to address these issues. While a range

of policy tools can help in this task, it is important

to recognize that most of what we are able to do

is at the margins—and will take years to

accomplish.

Even within these limits, we need to recognize that

U.S. assistance matters a great deal. All aid is political, particularly in countries at high risk for conflict. Foreign assistance is a valuable resource in a

resource-poor and highly competitive environment. It feeds into complex internal dynamics and

often produces explicitly political results. These

results can be positive but—intended or not—

they can just as easily be negative. We need to

accept and manage the heightened risks in these

types of environments. To some extent, this

means being more aware of the political aspects

of any project and understanding how its design,

implementation, and aims may interact with

underlying conflict dynamics in a society. It also

means consciously attempting to minimize the

potential negative consequences of any project.

But “doing no harm” does not mean avoiding all

action. It means adopting a strategic framework

that has an understanding of conflict at its core—

and then taking considered risks within that

framework.

One of the most important things the foreign

assistance community can do is develop a deeper,

context-specific understanding of what drives conflict. This will entail a significant investment in

research and analysis, both the donor community and in countries where conflict programs

are being considered. Much of the success that

foreign assistance has been able to claim in the

field of health and population, for example,

stems from close collaboration between practitioners and researchers. But there is still a strong

belief among many development practitioners

that conflict is inherently random, driven by

passion rather than rational calculation, and not

amenable to rigorous analysis or subject to

outside influence. There is still a long way to go

in conflict research, but scholars have made

great strides in uncovering many of the forces

that cause and sustain widespread violence.

As important as it is for U.S. assistance agencies

to use this research, it is even more critical that

they invest in strengthening the capacity of local

institutions to conduct research on conflict—and

support local discussions about these issues.

Unless all the major actors in a society can discuss

what they believe to be the central causes of conflict are—it will be extremely difficult to set priorities and devise effective solutions. Drawing in

all relevant stakeholders, including the government and the military, has the advantage of

gaining consensus on the issues that can be

tackled first, and those that are too problematic to

take up immediately.

The United States needs to focus as much attention

on how to engage or contain groups and individuals who have incentives to participate in violence as

on those who are committed to peace. Because of

the difficulty of working in environments of conflict, there is a tendency to seek out like-minded

human rights organizations, religious groups, and

women’s groups committed to dialogue and

peace. These groups have an important role in the

search for solutions, but they have been asked to

carry too much of the burden in addressing conflict. The United States also needs to focus on

institutions and actors actually driving the violence, whether they are political elites and their

followers, religious leaders, or the police.

A cross-sectoral, multi-disciplinary perspective is

critical when designing programs in environments

of conflict. Every major area focus area in foreign

assistance—from economic growth, to agriculture,

to democracy and governance—has at least some

bearing on the causes of conflict. It is important to

apply a conflict lens to each area in high-risk countries, rather than assuming that some areas are

more relevant to conflict than others. This is probPROMOTING FREEDOM, 

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23

DETERMINING WHERE A

COUNTRY FALLS ON THE

CONTINUUM FROM

PRE-CONFLICT TO

POST-CONFLICT

REQUIRES MUCH MORE

SOPHISTICATED RISKMONITORING SYSTEMS
ably the most important principle to keep in mind

when designing a country program. 

PROVIDING HUMANITARIAN

ASSISTANCE

More than three million people lost their lives in

the disasters of the 1990s. Conflict-related emergencies were by far the most deadly, with civilians

nine times more likely to be killed than the

combatants.36 Natural disasters are statistically

less lethal (one-third the number killed in 

conflict-related emergencies), but they affected

seven times as many people over the decade 

as did conflict.37

Reflecting this growing disaster problem and

increased awareness, the international community has responded. Between 1990 and 2000 (using

1999 prices and exchange rates), official development assistance (ODA) for humanitarian aid programs grew from just over $2 billion to nearly $6

billion. In most years, the United States was the

largest donor of humanitarian assistance by a

factor of three to four.38

There is no reason to believe that the 1990s disaster pattern was exceptional, with natural disasters

being more numerous and affecting more people

but conflict-related disasters being more deadly.

Natural disasters will likely become even more

devastating as populations at risk increase, and the

post-cold war world shows little sign of becoming

less violent, although the conflicts now are often

internal or “intrastate.” The trends guarantee that

humanitarian assistance will remain enormously

important for the international community and for

the United States. They also guarantee that the

controversies will continue.

NATURAL DISASTERS

While conflict-related disasters have dominated

the funding and focus of much international

assistance over the last decade, natural disasters

still take a tremendous toll worldwide. They are

neither simple nor purely nature-induced, and

their devastation in global economic terms and in

terms of populations affected far outstrips the

damage caused by conflict.39

Natural disasters killed or affected an average of

211 million people per year during the 1990s—

seven times more than the average of 31 million

people killed or affected by conflict.40 The

number of deaths due to natural disasters during

the decade—estimated at 665,000—is only onethird of the number estimated killed in conflict.

For natural disasters, the lower numbers killed

reflect the benefits of early warning and disaster

preparedness measures as well as advances in

such basic services as clean water and sanitation.41

The vast majority of those killed in natural disasters occur in countries with low incomes and low

levels of human development, reflecting the correlation between poverty and vulnerability.

The rise in number of natural disasters has been

meteoric. There were three times as many natural

disasters in the 1990s as in the 1960s.42 While geophysical disasters have remained somewhat steady

in number, hydrometeorological disasters have

increased dramatically. The period 1991-95 saw

three El Niño-Southern Oscillation (ENSO) phenomena, associated with the devastating southern

Africa droughts of 1991–92, 1993–94, and

1994–95. In 1997–98, the phenomena again affected temperatures and rainfall patterns around the

world. South and Central America had devastating floods and landslides in some areas, drought in

others. Southeast Asia had droughts and fires, and

East Africa heavy rains and floods.43

HUMANITARIAN EMERGENCIES IN FAILED

AND FAILING STATES

The defining disaster of the 1990s was conflictrelated, and the recent growth in humanitarian

aid was largely driven by the devastation in failed

and failing states. In the late 1980s five manmade

humanitarian emergencies were declared on

average each year. In 1990 there were 20. And

after reaching a high of 26 in 1994, they averaged

22 a year in the last half of the decade.44 The

majority of were directly related to conflict or

severe government repression. Countries from

every region made up the list, including Angola,

Burundi, Eritrea, Ethiopia, Democratic Republic

of Congo, Liberia, Rwanda, Sierra Leone,

Somalia, Sudan, Uganda, Indonesia, Afghanistan,

North Korea, Bosnia-Herzegovina, SerbiaMontenegro, Tajikistan, Colombia, and Haiti.

By the end of 2000, intrastate conflicts and repression had generated some 14.5 million refugees

and asylum seekers worldwide and more than 20

million people displaced within their own

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

24

HUMANITARIAN

ASSISTANCE WILL REMAIN

ENORMOUSLY IMPORTANT

FOR THE INTERNATIONAL

COMMUNITY AND FOR

THE UNITED STATES
countries.45 The number of refugees was just

below 10 million in 1984, peaked at some 16.3

million in 1993–94, and only then began to

decline.46 Significant refugee repatriations from

peace settlements in Namibia, Central America,

Cambodia, and Mozambique contributed to the

decline. Unfortunately, conflicts in Africa, especially the Great Lakes Region, and elsewhere partially offset these gains. At the end of 2000,

Palestinians (4 million), Afghans (3.6 million), and

Sudanese (460,000) were the largest refugee populations, more than half the total. Six of the top

ten refugee-generating countries were in Africa.47

The rise in internally displaced persons has been

even more dramatic. From an estimated 1.2

million in 11 countries in 1982, the number rose

to 11–14 million in 20 countries in 1986 and to

more than 20 million in 40 countries in 1997

(where it remains). Sudan and Angola have most

internally displaced people, followed by Colombia

and the Democratic Republic of the Congo.48 This

trend reflects the increased number of ongoing

internal conflicts. It also reflects improved access

to some displaced populations (and more accurate

counts) and the world’s efforts to limit refugee

flows through assistance models that attempt to

keep people within their national borders.49

LOOKING AHEAD

As late as the mid-1980s, only a few pessimists—

not well-received—were discussing the potential

for religious nationalism, ethnic conflict, and

intrastate wars that would, with the demise of the

Soviet Union, profoundly affect the world for

humanitarian assistance. But we have to look

ahead as best we can. Consider the following:

• Economic migrants will continue to swell

urban ghettos, many ending up in poor quality

housing without water or sanitation and subject

to criminal gangs. Flood-induced cholera outbreaks will become more common in urban

slums and require emergency responses. 

• More people will push into “marginal lands”

where human activity has led to deforestation,

water shortages, and desertification.

Population pressures will continue to force

migration to these areas.50

• Infectious diseases such as AIDS, tuberculosis,

and malaria are emergencies in and of themselves, but they are also deepening the impact

of natural disasters and conflict-related crises.

HIV/AIDS among drought-affected populations, for example, is leaving many more susceptible to health problems associated with

food shortages (and infectious disease) than

they might otherwise be. Related illnesses (and

death) deeply affect food security and will

leave many families less able to fully recover

from natural or conflict-related disasters.

• Technological accidents and disasters are projected to increase in both number and severity because of spreading industrialization,

aging plants and technologies, declining

resources for safety and monitoring, and

rising vulnerability caused by ill-informed

development decisions (and nondecisions).

The consequences of such accidents will not

be sensitive to borders and entire regions

could well be affected.51

• A “domino” or compound effect is also possible whereby a natural disaster triggers a technological event in an urban area, creating unforeseen and uncontrolled population movements

and generating conditions for conflict.

• The challenges of meeting needs in current

intrastate conflicts remain. While expert opinions vary on whether new intrastate conflicts

will erupt, there can be little doubt that some

are already intractable and lethal, generating

ever-larger numbers of civilian casualties and

consequences that are increasingly global in

nature. 

• The war on terrorism may generate additional

intra-state wars or non-military strategies

(such as sanctions) that will create new

humanitarian assistance requirements. 

• Chemical, biological, radiological, nuclear, and

explosive disasters loom larger than ever in the

post-September 11 world, with still unforeseen

implications for humanitarian assistance. 

In sum, the need for humanitarian assistance

shows no signs of abating, and the new dimensions of disasters will create new exigencies. If

anything, the trends indicate an even greater and

more complex role for humanitarian assistance in

the coming decades. The United States, the one

power with truly global reach, has a critical role

in addressing current challenges and shaping

future trends in disaster assistance.

COMPLEX EMERGENCIES AND THE

NATIONAL INTEREST

There is moral imperative for the United States to

take a stand when unimaginable human atrocities

PROMOTING FREEDOM, 

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25

THE RECENT GROWTH IN

HUMANITARIAN AID WAS

LARGELY DRIVEN BY THE

DEVASTATION IN FAILED

AND FAILING STATES
take place—no matter where. And conflictrelated emergencies are, by definition, dangerous

to the United States and to global security, as they

have clearly destabilized entire regions and

proven to be recruiting grounds and safe havens

for criminals, extremists, and terrorists.

The war on terrorism’s long-term effects on U.S.

humanitarian policies are not yet clear. But one

can hope that it will generate more interest in

addressing festering complex emergencies

abroad, avoiding the use of humanitarian aid as a

“fig leaf” covering the lack of political or military

action. There is danger, however, that the war on

terrorism will bring the United States even deeper

into the “politics over humanitarianism” realm.

Sustained vigilance is now required on the part of

U.S. humanitarian officials to ensure that aid is

based on need and that resources are not diverted from more acute but less visible emergencies

to meet political ends elsewhere.

The U.S. government has improved its assistance

operations over the past decade. It must now

place special emphasis on the difficult question of

protecting war-affected populations, especially

the internally displaced. Our commitment to

improving the security for relief personnel and for

relief goods is clear. Less clear, or at least less reliable, is the commitment to protect the people

receiving relief. While traditional discomfort

lingers in the humanitarian community over

mixing human rights with humanitarian assistance programs, and using military and other

types of security forces to enforce protection, the

problem of the “well-fed dead” must be faced. A

necessary part of addressing the broader protection issue will be a far more rigorous and systematic approach to guarding those internally

displaced.

CLEAR DIRECTIONS

The emerging practices and future trends outlined here point to other clear directions:

• The United States should not only support

NGO and UN initiatives to improve standards and accountability. It should also insist

on such reforms (and link dollar resources to

it), especially in light of sexual misconduct by

humanitarian assistance staff in West Africa.

Such a strategy should be mirrored by an

internal review of accountability measures.

The extensive review by the Dutch government of its role at the Srebrenica massacre

should be taken to heart.

• The United States should take a stronger

leadership role in shaping the practices of

developmental relief, breaking from its traditional reluctance to embrace the more political aspects of relief operations. At USAID,

the recent creation of a transition assistance

office and the incipient birth of a conflict

management fund give it greater latitude to

experiment with some “nontraditional”

approaches and, through its programming,

shape the evolution of assistance practices in

conflict settings. Support for research, case

studies, evaluations, and workshops would

help to advance the debate around these

important new avenues of aid and expedite

progress in improving the overall impact of

humanitarian assistance.

• On the development side, the United States

should initiate a review of all of its development programs with an eye towards creating

a culture of “development for disaster prevention.” For much too long, development

assistance and programming have been blind

to the fact that they have often actually

increased vulnerability to disaster, either by

ignorance or misinformation.

THE FULL MEASURE OF U.S. 

DEVELOPMENT ASSISTANCE—OFFICIAL

AND PRIVATE

Heroes. The Mexicans living in the U.S. and sending

money to relatives back in Mexico are heroes.

—Adapted from Vicente Fox

President

United States of Mexico

At $9.9 billion, official development assistance

accounts for just 17 percent of U.S. assistance to

developing countries (table 1). Private international assistance, by contrast, is $33.6 billion—60

percent of the U.S. contribution, and projected to

grow to 69 percent by 2010. Every year the publication of the OECD’s report on development

assistance results in press reports and statements

by academics and opinion leaders disparaging

America’s “stinginess.”52 They assert that U.S.

foreign policy will be ineffective without more

official development assistance.53 They claim that

U.S. foreign aid programs collapsed after the Cold

War.54 But official development assistance is a

limited and outdated way of measuring a

PROMOTING FREEDOM, 

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26

THERE IS MORAL

IMPERATIVE FOR THE

UNITED STATES TO TAKE

A STAND WHEN

UNIMAGINABLE HUMAN

ATROCITIES TAKE PLACE
country’s giving, and donors should reevaluate it,

given the enormous growth in the private sector

around the world.

In 2000 the international affairs budget totaled

$22.6 billion—so at $9.9 billion, official development assistance accounted for less than half. That

official assistance consists primarily of allocations

to USAID, the Peace Corps, multilateral institutions, and certain programs sponsored by the

State Department and Department of Defense

(table 2). The other $12.7 billion spent on

international affairs represents all other

contributions.

Despite reservations about government aid,

Americans have a long tradition of domestic and

international generosity. Money finds its way from

the United States to developing countries through

churches, private charities, foundations, and

remittances by U.S. workers to their homelands.

In 2000 U.S. universities and colleges gave more

to developing countries in foreign scholarships

than Australia, Belgium, Norway, Spain, and

Switzerland each gave in official development

assistance. Remittances from U.S. immigrants to

their homelands exceeded official development

assistance from Japan—the second largest

provider (in dollars) of government aid to developing countries in 2001.55

Over the past 25 years U.S. private giving has

grown significantly. Churches and other religious

congregations initially played the largest role in

international giving through relief and humanitarian assistance as well as overseas missions.

Then colleges, universities, and foundations

began responding to international development

needs with scholarships and support for foreign

universities and research centers. The number

and budgets of private voluntary organizations

have also grown as Americans have offered their

money and time to international causes. With

globalization and changing immigration patterns,

U.S. corporations have also increased their philanthropy to developing countries. And U.S.

immigrants, many from developing countries,

have been sending more and more money back to

their homelands. 

Although this assistance far surpasses official government aid, the data are weak, and the development community knows little about its nature,

flow, and the full amounts involved. Donor agencies understand that private international assistance no longer means only relief efforts or missionaries working in isolated villages. Today, this

assistance means dollars transferred directly to

Salvadoran families from their relatives in

America so that they can buy good healthcare and

education. It also means dollars starting up

indigenous foundations in Kenya that involve

community members in creating grants. The size

and the impact of private international giving

creates new opportunities for development agencies. By learning more and working with this vast

private army for assistance, USAID can enhance

its effectiveness and define its comparative advantage and role in the 21st century.

Table 3 summarizes all U.S. government international assistance and U.S. private international

assistance for 2000, 2005, and 2010. The figure

for official development assistance in 2005 does

not include additional amounts, still to be

decided, for the Millennium Challenge Account,

which is to increase that official assistance by $5

billion a year in 2006 and thereafter. Private

international giving is not well documented and

all categories are underestimated. The table

therefore provides a range from the lowest estimates supported by the research to reasonable

higher estimates suggested by known gaps in the

research. This range of numbers provides a starting point for estimating private international

giving.

Foundations. In 1998 all foundations gave an estimated $1.6 billion to international activities, a 66

percent increase from 1994. Since the latest

surveys are for 1998, they do not reflect the large

international grants by the Bill and Melinda Gates

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

27

AT $9.9 BILLION,

OFFICIAL DEVELOPMENT

ASSISTANCE ACCOUNTS

FOR JUST 17 PERCENT OF

U.S. ASSISTANCE TO

DEVELOPING COUNTRIES.

PRIVATE INTERNATIONAL

ASSISTANCE IS $33.6

BILLION OR 60 PERCENT

OF THE U.S.

CONTRIBUTION

More assistance than meets the eye

a. Including volunteer time.

Source: OECD 2002; OMB 2002; USAID 2002; various private sources.

Estimated U.S. international assistance to developing countries, 2000

U.S. official development assistance

All other U.S. government assistance

U.S. private assistance

Foundations

Corporations

Private voluntary organizationsa

Universities and colleges

Religious congregations

Individual remittances

Total U.S. international assistance

US$ billions

9.9

12.7

33.6

1.5

2.8

6.6

1.3

3.4

18.0

56.2

Share of

total (%)

 18

22

60

100

TABLE 1
Foundation and by Ted Turner’s UN foundation

between 1999 and 2001. These two foundations

alone give at least $350 million a year to international projects.

Assuming a modest international giving growth

rate of 25 percent rather than the robust rate of

66 percent it knew in the 1990s, foundation

giving could reach $2.5 billion in 2006 and $3.1

billion in 2010. Foundation reporting is underestimated since not all of the smaller foundations

report. In addition, corporate foundations have

underreported or not reported at all for surveys.

With better data collection, projected levels will

be even higher.

Corporations. The full scope of international corporate giving is unknown. It may well be that not

even a small portion of it has been captured.

Because these expenditures are relatively new and

because of different tax, management, and

accounting systems overseas, they are difficult to

track. The two latest and most complete studies

cover only a small sample, with just over 200 companies included in each. In one sample of 209

U.S. companies, only 83 reported making international contributions and only 74 provided more

details for the analysis.56

The latest survey on international corporate contributions forecasts increases in giving of 1

percent a year. A conservative estimate would

mean $3.6 billion in 2005 and $4.6 billion in 2010,

an estimate that could perhaps double with better

tracking and reporting.

Private and voluntary organizations. PVOs work

in some 159 countries in almost all areas of

development. The majority work in health,

nutrition, and population, with a focus on

family planning and child survival. This is followed by community development, food security, food aid, and disaster relief.57 Of the 436

PVOs registered with USAID, the top 20 each

receive above $20 million in grants and contracts. The total came to some $854 million in

2000, 67 percent of PVO funding by USAID.

Some of the older, traditional PVOs—such as

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

28

REMITTANCES FROM

U.S. IMMIGRANTS TO

THEIR HOMELANDS

EXCEEDED OFFICIAL

DEVELOPMENT

ASSISTANCE

Nearly $23 billion in all: U.S. government international assistance

Source: U.S. Office of Management and Budget 2002.

Total U.S. government international assistance by agency, classification, and selected programs, 2000

Official development assistance—$9.9 billion

Operations

Development assistance

Child survival, humanitarian

Disaster relief, food aid

Refugees, narcotics

Asia Foundation

International organizations

Humanitarian

Peacekeeping development

Peace Corps

U.S. Trade and Development Agency

Multilateral institutions

Security assistance (Egypt and others)

USAID

State Department

Department of Defense

Other agencies

Other government assistance—$12.7 billion

Israel

Newly independent states

Eastern Europe and Baltic States

Operations

Broadcasting (Voice of America, Radio Marti)

Peacekeeping

 Educational and cultural exchanges

 International organizations

 National Endowment for Democracy

Military education and training

Foreign military loans

 Antiterrorism, nonproliferation

Export-Import Bank

Overseas Private Investment Corporation

Inter-American Foundation

TABLE 2
CARE, Catholic Relief Services, World Vision,

and Save the Children—receive large private

contributions for their domestic and international efforts, ranging from $60 million to more

than $380 million.58

Assuming increases of 25 percent, PVO private

contributions abroad would rise to $5.4 billion in

2005 and $6.8 billion in 2010. Adding the $3.3

billion value of international volunteer time to

each of these years would give a total PVO international assistance of $8.7 billion in 2005 and

$10.1 billion in 2010.59

Colleges and universities. American colleges and

universities have played a dominant role in the

education of students from developing countries.

There were 500,000 foreign students in school

year 2000/2001, 3.9 percent of all students

enrolled in American colleges and universities.

The funding of foreign students increased from

$83 million in 1980-81 to $1.3 billion in 2000-01.

The percentage of foreign students with U.S. university and college scholarships steadily increased

as well, to 20 percent. Funding of foreign students

by U.S. universities and colleges doubled between

1996 and 2001. Taking just half this increase

would result in $1.7 billion of private funding for

foreign scholarships in 2005 and $2.6 billion in

2010.60

Religious organizations.International programs in

disaster relief, healthcare, agriculture, and education play a large role in the non-secular activities

of religious organizations. In a survey of religious

congregations, some 74 percent engaged in international activities as one of their top three

program areas (health and human services are the

other two).61 Along with corporate contributions,

religious international giving is probably the most

underestimated of all private giving. With a

current figure of $3.4 billion, and assuming a 20

percent increase from the previous survey results,

religious giving in 2005 would be $4 billion. In

2010 this could rise to $7 billion.62

Personal remittances—staggering. Mexican

President Vicente Fox calls them “heroes.” Their

dollars account for 10 percent of GDP in six

Latin American countries and 13 percent in El

Salvador alone. They are not presidents of foundations. They are American immigrants sending

money back to their hometowns and villages.63

These personal remittances are a fairly new topic

in international development circles.

Worldwide remittances from immigrant workers

more than doubled in the 1990s.64 In 1989 remittances to all regions of the world were $21 billion

(excluding Russia, for which data were not available). By 1999 the total had soared to $50 billion.

Latin America claimed the highest amount—

$14.5 billion—followed by India’s $11.5 billion,

the Middle East’s $10.4 billion, and Eastern

Europe’s $6.2 billion. The amount sent to Latin

America in 1999 by millions of migrant workers

exceeded the financing of USAID and all multilateral lending agencies to the region.

Total personal remittances by immigrants in the

United States to developing countries were 

$18 billion in 2000. Assuming that there is no

significant decline in immigration in the medium

to long term and that the economy continues to

recover in 2002, remittances should continue to

grow—but at a slower rate than the 1990s. But

even assuming more modest growth rate of 5

percent a year, personal remittances could rise to

$23 billion in 2005 and almost $30 billion by 2010.

Americans have not given up on foreign aid. They

simply have found new channels to express their

compassion for those less fortunate abroad.

Eclipsing official government aid is a rising tide of

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

29

Much more to come

n.a. Not applicable.

a. Provisional. The Millennium Challenge Account is set to increase U.S. official development assistance by $5 billion a year

in 2006 and thereafter.

b. Including volunteer time.

Source: U.S. government and private sources.

Estimated U.S. government and private international

assistance to developing countries (US$ billions)

U.S. official development assistance (ODA)

All other U.S. government assistance

Millennium Challenge Account

U.S. private assistance (low estimates)

Foundations

Corporations

Private voluntary organizationsb

Universities and colleges

Religious congregations

Individual remittances

Total U.S. international assistance

U.S. ODA as % of total

Other U.S. government as % of total

Private as % of total

2000

9.9

12.7

n.a.

33.6

1.5

2.8

7.6

1.3

3.4

18

56.2

17

22

60

2005

10.4

13.3

3.3

43.5

2.5

3.6

8.7

1.7

4.0

23.0

70.5

15

20

65

2010

10.9

14.0

5.0

55.2

3.1

4.6

10.1

2.6

4.8

30.0

84.9

19

16

65

TABLE 3

a
private giving with significantly lower transaction

costs, more client-directed services, and a willingness to cede control to recipients.

Boosting U.S. official development assistance in

coming years will be the increased funding

through the Millennium Challenge Account.

Announced by President Bush at the

InterAmerican Development Bank in March

2002—just before the UN Conference on

Financing for Development in Monterrey,

Mexico—the core assistance to developing countries will rise by $5 billion a year after three years.

This was just the third time in more than 50 years

that a U.S. president has proposed a major initiative on foreign assistance. The first was President

Truman’s, before a joint session of Congress, in

what led to the Marshall Plan to lay the foundations for a stable, prosperous, and democratic

Europe. The second was President Kennedy’s,

announcing the creation of the Alliance for

Progress, to address the basic needs of people in

Latin America.

The Millennium Challenge Account will increase

official development assistance by an estimated

$5 billion in 2006 and thereafter. It will support

reformers and reward good performance.

Research shows that in good policy environments, a dollar of aid attracts two dollars in

private capital—but that in poor environments,

aid drives out private capital and perpetuates

failed policies. A guiding principle of the

Account is to promote the participation of beneficiaries in program design and implementation,

for that is known to increase the prospects for

success. Another principle is to broaden today’s

development partnerships by including more

private firms, universities, foundations, and

private and voluntary organizations, thus leveraging U.S. official assistance.

NOTES

1. World Bank 1999.

2. United Nations 2000. FAO 2000. 

3. Van de Walle 2001.

4. Van de Walle 2001.

5. Raymond 2002.

6. Timmer 2002.

7. Easterly 2001.

8. Harrison 2000.

9. World Resources Institute 2001.

10. World Resources Institute 2001.

11. World Resources Institute 2001.

12. World Resources Institute 2001.

13. World Resources Institute 2001.

14. World Resources Institute 2001.

15. USAID 2001.

16. USAID 2001.

17. Dollar and Kraay 2002.

18. Hannon and Rhee 2002. All the developing countries

with a population of greater than half million and PPP-adjusted

GDP data from 1980 or 1990 were included in the analysis. In

addition, 27 high-income countries with a population of more

than half million and PPP-adjusted GDP data were classified as

developed countries. So the global total in the analysis includes

111 developing countries and 27 developed countries. 

According to UN (2001), as of 2001, 49 countries (34 in Africa,

9 in Asia, 1 in Caribbean, and 5 Pacific regions) were designated as

the Least Developed Countries (LDCs) that are deemed structurally

handicapped in their development process, and in need of the

highest consideration from the international community in support

of their development efforts. Eleven island countries—population

of many of these island countries is less than half million—and 15

land-locked countries are included in the LDC group.

19. See the data annex in Hannon and Rhee 2002.

20. See the data annex in Hannon and Rhee 2002.

21. USAID 2001.

22. USDA 2001.

23. Raymond 2002.

24. Raymond 2002.

25. Raymond 2002.

26. Raymond 2002.

27. Lin (in press); Tavrow and others (in press); Abdallah and

others (in press); Reinke (in press); Rafeh and El-Tobgi 1995 and

A. K. Rowe and others 2001.

28. This is not to say that quality always drives decision making.

The Commonwealth fund surveyed U.S. employers and found that

90 percent of employers ranked price above quality in choosing

employee health plans, perhaps, of course, because quality is fairly

uniform across providers. See J. S. Scott 1998. For a discussion of

the strategies for inserting quality deeply into the motivational structure of future health care financing in the United States in the next

two decades see K. Davis and others 2000, pp. 3357–62.

29. Mayur and Daviss 1998. 

30. Tri-State Trends 2000.

31. Harmon, A. 2002. “Good (or Unwitting) Neighbors

Make for Good Internet Access.” New York Times. 4 March.

Also see Markoff, J. 2002. “The Corner Internet Network vs. the

Cellular Giants.” New York Times. 4 March.

32. WHO 2001. A problem with this work is that it fails to

examine marginal costs of extending previously sunk investments

in public health. These are likely to be less than average costs.

Further, the analysis does not distinguish between the local currency and foreign exchange elements of those costs. The international resource is foreign exchange, not local currency. Hence the

only aid-relevant cost issue (even at the margin) is that portion of

cost structure that requires convertible currencies. Whether inadequacy of resource flows is an issue, and how big an issue,

depends on the nature of this financial analysis.

33. Wallensteen and Sollenberg 2001.

34. Semerad and Hawkins 2001.

35. Semerad and Hawkins 2001.

36. Weiss 1999.

37. IFRC 2001.

38. Randel and German 2002. Official ODA is money given

by governments of donor countries who are members of the

OECD Development Assistance Committee. They include

Australia, Austria, Belgium, Canada, Denmark, Finland, France,

Germany, Greece, Ireland, Italy, Japan, Luxembourg, the

Netherlands, New Zealand, Norway, Portugal, Spain, Sweden,

Switzerland, the UK, the US and the Commission for the

European Union. ODA for humanitarian aid includes (but is not

limited to) food aid, and aid to refugees abroad and in the donor

countries for their first year of assistance. This latter piece distorts

the statistics somewhat since some of the funds counted are spent

PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

30

THE MILLENNIUM

CHALLENGE ACCOUNT

WILL INCREASE OFFICIAL

DEVELOPMENT

ASSISTANCE BY AN

ESTIMATED $5 BILLION

IN 2006 AND

THEREAFTER
PROMOTING FREEDOM, 

SECURITY, AND OPPORTUNITY

31

in donor countries. See ODI report for fuller discussion of what

is comprised in the humanitarian assistance statistics.

39. IFRC 2001.

40. IFRC 2001.

41. Abramovitz 2001.

42. OFDA 2000.

43. OFDA 1998.

44. NIC (National Intelligence Council) 1999. NIC used a

combination of USAID and UN data. USAID assistance is triggered by a formal “declaration of disaster” by the U.S.

Ambassador or the U.S. Department of State. Thus, the reference

to “declared” emergencies.

45. USCR (U.S. Committee for Refugees) 2001.

46. NIC 1999.

47. USCR 2001.

48. USCR 2001.

49. Deng and Cohen 1998. p. 3. Consider, for example, Iraq

and Bosnia-Herzegovina, where the international community

created “safe havens” to protect and aid people within their own

countries and limit refugee flows.

50. Kent 1997.

51. Kent 1997.

52. Johnson, Tracy. 2000. “America’s Stinginess Is a Problem,

Carter Says.” Seattle Post-Intelligencer. 20 January.

53. Gardner 2000.

54. WHO 2001.

55. IMF 1999 and World Bank 2000.

56. Tillman 2000 and Kao 2001.

57. USAID Private and Voluntary Agencies Financial

Statistics Database 2002.

58. Adelman 2002.

59. Adelman 2002.

60. Adelman 2002.

61. Independent Sector 2000.

62. Independent Sector 2002.

63. Bate 2001.

64. IMF 1999; World Bank 2000.

BACKGROUND PAPERS

Adelman, Carol. 2002. “International Development Assistance—

Taking the Full Measure into the Future.”

Diamond, Larry. 2002. “Democracy and Governance.”

Esposito, Dina. 2002. “Humanitarian Assistance.”

Fox, James. 2002. “Growth and Development in Poor Countries.”

Hannon, Brian, and Yung Whee Rhee. 2002. “Globalization,

Trade, and Investment.”

Morris, Sharon. 2002. “Conflict in the Post Cold War World.”

U.S. Agency for International Development, Washington, D.C.

Porter, Michael, and Christian Ketels. 2002. “Microeconomics of

Competition.”

Raymond, Susan. 2002. “Improving People’s Health.”

Timmer, Peter. 2002. “The Role of Economic Assistance in

Developing Countries.”

Available at www.usaid.gov/NatsiosReport/backgroundpapers

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F OR THE PAST SEVERAL DECADES THE CONVENtional—and, until recently, the predominant—perspective on development in the international donor community has been that

countries are poor because they lack resources,

infrastructure, education, and opportunity. By

this logic, if rich countries and international institutions could only transfer enough resources and

technology, improve human capacity enough, and

support health and education enough, development would occur. To be sure, greater public

resources, better physical infrastructure, and

stronger public health and education are essential

for development. But they are not enough, and

they are not the most crucial factor. 

No amount of resources transferred or infrastructure built can compensate for—or survive—

bad governance. Predatory, corrupt, wasteful,

abusive, tyrannical, incompetent governance is the

bane of development. Where governance is

endemically bad, rulers do not use public

resources effectively to generate public goods

and thus improve the productivity and well-being

of their society. Instead, they appropriate these

goods for themselves, their families, their parties,

and their cronies. Unless we improve governance,

we cannot foster development.

Democracy—as reflected in free, fair, and competitive elections—is not strictly necessary for

good governance. And it is quite possible to have

bad governance under the formal structures of

democracy. But when competitive elections are

truly free and fair, they do provide an instrument

for removing bad, corrupt, or merely ineffectual

leaders. They thus provide an incentive for political leaders to govern more effectively in the

public interest. 

Democracy also gives citizens nonelectoral

means—associations, movements, the media—to

monitor the conduct of public officials and participate in policymaking. And leaders in a democracy have more incentives (and more institutional

means and obligations) to explain and justify their

decisions and to consult a broad range of constituencies before making decisions. Such participation and debate give the public a stronger sense

of policy ownership. As a result policies are more

sustainable, and government is more legitimate.

These are some of the reasons that promoting

democracy and good governance is so profoundly

in the national interest of the United States.

PROMOTING

P ROMOTING

D EMOCRATIC

G OVERNANCE

CHAPTER 1
Democracy and good governance are mutually

reinforcing: when they develop together,

resources are used to advance the public good.

Public institutions perform their designated roles.

Social consensus supports and stabilizes the

system of government. Disputes are settled peacefully. And investment flows in, attracted by the

low transaction costs associated with government

transparency and legitimacy and the rule of law.

In these circumstances economies grow, human

welfare improves, trade expands, political stability and capacity deepen, and countries become

more responsible and resourceful members of the

international community. 

There can also be great benefits for the environment. Where the institutions of governance are

strong, access to land, water, and forests is controlled, and private property rights are enforced.

The management of natural assets also is much

more effective.

By contrast, when governance is bad and

undemocratic—or only superficially democratic—

development pathologies inevitably have regional

and global consequences. Poverty becomes

entrenched through corruption and distorted,

wasteful investment. Chronic fiscal deficits drain—

and then drive away—international resources. The

absence of the rule of law permits—and poverty

can drive—wanton destruction of the environment. In the absence of state capacity and will to

address public health problems, infectious diseases

such as HIV/AIDS, tuberculosis, and new viruses

proliferate, mutate, and spread across borders. The

blatant venality and injustice of repressive regimes

foster antimodernist and religious fundamentalist

movements of rage against the West, especially the

United States. In the fertile soil of a weak state and

feckless legal system, organized crime networks

take root, threatening the rule of law internationally through fraud, piracy, kidnapping, terrorism,

counterfeiting, money laundering, and trafficking

in arms, drugs, and people. 

The more inept, lawless, corrupt, and predatory

governance is, the more likely it is to descend into

the violent conflict and state failure that intensify all these factors and produce humanitarian

crises—civil war, famine, genocide, physical

destruction of communities, and massive flows of

refugees. Such crises destabilize entire regions

and cry out for risky and costly international

intervention. It is much safer and cheaper to

build a well-governed, democratic state than to

rescue a failed one. Indeed, the only way to

prevent or reverse the threats that flow from bad

governance is to foster stable, effective democratic governance. Promoting democratic governance is therefore vital to the national security of

the United States and must be a central objective

of any development assistance program. 

Advancing democratic governance is a huge challenge. Superficially, the global state of democracy

appears encouraging. Over the past quartercentury democracy has steadily expanded around

the world and is now the predominant form of

government. But swirling beneath this expansion

has been a dangerous countertrend—a growing

disenchantment among populations that increasingly view their political leaders as corrupt, selfserving, and unable to address their countries’

serious economic and social problems. In many

developing and postcommunist countries people

are losing confidence not just in elected officials

but in democratic institutions.

The rising cynicism of disaffected populations

has much justification. In many new democracies governance is simply inadequate to meet

the challenges of economic and political development. And in the typical authoritarian regime

governance is even more corrupt, arbitrary, and

exploitative. Unless governance becomes more

open, lawful, accountable, and responsive—

and where formally democratic, more deeply

so—it will not deliver sustained development.

Transforming governance will require more

investment in democracy and governance assistance. It will also require a new, more comprehensive strategy to generate the most crucial

ingredient and the one most often missing: the

political will of leaders to risk difficult reforms. 

GLOBAL TRENDS IN DEMOCRACY

The last quarter of the 20th century witnessed the

greatest expansion of democracy in history. If

democracy is defined in the minimal sense—as a

system of government in which the principal

positions of political power are filled through

free, fair, and regular elections—about three of

every five independent states are democracies

today. In the judgment of Freedom House, the

world had 121 democracies at the end of 2001—

the highest number in history.1 Some of these

regimes, possibly as many as 17, may be better

PROMOTING

DEMOCRATIC GOVERNANCE

34

DEMOCRACY AND

GOOD GOVERNANCE

ARE MUTUALLY

REINFORCING: 

WHEN THEY DEVELOP

TOGETHER, RESOURCES

ARE USED TO ADVANCE

THE PUBLIC GOOD
classified as “competitive authoritarian,” since

elections, while competitive, either are not free

and fair or do not confer full power to rule on

those elected. But even by this conservative

count, electoral democracy is now the predominant form of government. When the most recent,

“third wave” of democratization began in 1974,

only about 39 states (28 percent) were democracies.2 Today there are about three times as many

(figure 1.1). 

With the growth in the number of democracies

has come a parallel, though more gradual, expansion of freedom. The share of states rated “free”

by Freedom House increased from 34 percent in

1985 to more than 40 percent in 1991, and today

it stands at about 45 percent, nearly the highest

ever (figure 1.2).3 The average freedom score (on

the Freedom House scale from 7 as least free to

1 as most free) improved from 4.29 in 1985 to

3.61 in 1992. After deteriorating slightly, the score

has continued to improve at a modest pace. The

current average of 3.47 is a full point lower than

in 1974, when the third wave of democratization

began. In most years since 1990 the countries

showing discernible improvement in political and

civil liberty have outnumbered the countries

showing a decline.

Democracy expanded particularly rapidly in the

years immediately after the fall of the Berlin Wall

in 1989 and the collapse of the Soviet Union in

1991. Within just a few years of the implosion of

the Soviet communist empire, democracies

increased from about 40 percent of all states to 60

percent. But since 1995 the number of democracies has remained fairly constant (particularly if

marginal and dubious cases of democratization

are excluded). Transitions to democracy have

been largely offset by reversions from democratic to authoritarian rule. 

Still, democracy has scored strategically and symbolically important advances in the past few years.

In 1999 democracy was introduced in Indonesia

and Nigeria, two of the largest and most influential

developing countries (and among those with the

largest Muslim populations), even as it was breaking down in Pakistan. In 2000 Mexico completed

a transition to democracy with the peaceful electoral overthrow of the seven-decade-long hegemony by a single party. In that same year one-party

hegemonic regimes were also brought down at the

ballot box in Ghana, Senegal, and Serbia, while

Taiwan (already a democracy) moved to a more

competitive system with the defeat of the longruling KMT. In each of these cases the victory of

the opposition party signaled the arrival or deepening of democracy, with promising long-term

implications for the regional status of democracy. 

The march of democratic progress was one of the

defining developments of the late 20th century. By

the mid-1990s democracy was the only broadly

legitimate form of government in the world, and

many nondemocratic regimes had liberalized their

politics at least superficially. Indeed, today well

over half the remaining nondemocratic states

portray themselves as democratic, holding regular,

multiparty elections.4 Few regimes explicitly

condemn the basic principles of democracy. And

most of the nondemocratic states have significant

social movements or critics seeking democratic

political change. Internationally, there has also

PROMOTING

DEMOCRATIC GOVERNANCE

35

BY THE MID-1990S

DEMOCRACY WAS THE

ONLY BROADLY

LEGITIMATE FORM OF

GOVERNMENT IN THE

WORLD

0 100

2001

1987

1974

Electoral democracies more prevalent

Note: Data for 2001 are for the end of the calendar year, from the 

Freedom House survey for that year. Data for 1974 reflect Larry

Diamond’s estimate of the number of democracies in April 1974, at

the inception of the third wave. Data for 1987 are also his estimate.

Source: Freedom House 2002.

Proportion of electoral democracies (%)

0 50 100

1974 39 of 142 countries

1987 66 of 164

2001 121 of 192

FIGURE 1.1

Partly free

Independent states becoming free

Note: Ratings refer to the status of the countries at the end of the 

calendar year. See text for an explanation of the basis of the ratings.

Source: Freedom House 2002.

Not free Free

1972 1985

2001

FIGURE 1.2

Fig. 1.2

Not free Partly free Free

1972 46 25 29

1985 34 34 33

2001 26 30 45
been a distinct trend toward affirming democratic principles, increasingly codified into international law through international and regional

treaties and resolutions.5

Beyond the leveling off of democratic expansion

since the mid-1990s, there have been four other

major caveats to the trend of democratization. 

• First, as democracy has spread rapidly around

the world, it has become shallower. The

quality of governance and the rule of law

have deteriorated in some existing democracies, and the more recently established

democracies have tended to be less liberal

and more corrupt. 

• Second, the spread of democracy has been far

from uniform across regions and subregions.

While some regions are now overwhelmingly

democratic, others have been only partially

touched by democratization. The Arab world

remains without a single true democracy. 

• Third, many of the regimes that once

appeared to be in transition from authoritarian rule (particularly in Africa and the former

Soviet Union) have settled into varying shades

and forms of authoritarian rule that fall well

short of democracy.6

• Fourth—and perhaps the greatest cause for

concern—many of the democracies that have

emerged in the past two decades exhibit

growing problems of governance that are

eroding their legitimacy among the public

and undermining their stability. With the

breakdown of democracy in Pakistan in 1999,

the recent economic and political crisis in

Argentina (which could spread to other Latin

American states), and citizens’ mounting

disgust with corruption worldwide, the global

trend of democratization is at greater risk of

reversal than at any time since the end of the

Cold War.

REGIONAL DISPARITIES

Democratization has been sweeping but far from

universal. Significant regional disparities remain in

its extent, depth, and stability (figures 1.3 and

1.4). The United States and Australia, Canada,

and New Zealand, together with the 24 states of

Western Europe, are all stable, liberal democracies. Stable means that they are consolidated: there

is such deep and widespread commitment to

democracy among major groups of the elite and

among social strata, and major democratic institutions have such strength, depth, and predictability, that there is no prospect of a breakdown of democracy.7 These 28 advanced industrial democracies are also liberal (with an average

score of 2.0 or better—that is, lower—on the twin

7-point Freedom House scales of political rights

and civil liberties).8 Outside Western Europe and

the Anglophone states liberal democracy is much

more uneven and less deeply rooted. 

In Latin America and the Caribbean, Cuba

remains the only country of significant size to

completely resist democratization. Haiti has competitive elections but has increasingly reverted to

its long historical pattern of autocracy and violence. There have also been important breakthroughs in recent years. As electoral administration in Mexico became fairer and more neutral,

the country made a transition to democracy in the

late 1990s, leading to the defeat of the long-ruling

party in 2000. Peru returned to democracy in

2001 with the implosion of the autocratic, military-dominated regime of President Alberto

Fujimori. About 9 of every 10 states in the region

are democratic, but only about half are liberal

democracies.9 And a few, such as Argentina,

Jamaica, and Trinidad and Tobago, have seen the

quality of democracy deteriorate in recent years.

As in other regions, there is much variation

among subsets of countries. Among Caribbean

states, with their British, rule-of-law traditions,

PROMOTING

DEMOCRATIC GOVERNANCE

36

MANY OF THE

DEMOCRACIES THAT

HAVE EMERGED IN THE

PAST TWO DECADES

EXHIBIT GROWING

PROBLEMS OF

GOVERNANCE

Democracy is regional

a. Excludes Djibouti, Gambia, and Sierra Leone even though 

Freedom House rates these countries as electoral democracies at the 

end of 2001. In each case the absence of a free and fair climate for 

elections—because of fraud, intimidation, or civil war—renders the 

system less than minimally democratic. 

Source: Karatnycky 2002.

Proportion of 

democracies (%), 2001

0 50 100

Western Europe and

 Anglophone states 28 of 28 countries

Middle East and

 North Africa 2 of 19

Sub-Saharan Africaa 17 of 48

Former Soviet Union

 (without Baltics) 4 of 12

Asia-Pacific 22 of 37

Latin America and

 the Caribbean 30 of 33

East Central Europe

 and Baltics 14 of 15

FIGURE 1.3
two-thirds are liberal democracies (by virtue of a

strong average freedom score).

Similarly, in the Asia-Pacific region 22 of the 37

states (59 percent) are democracies, and 11 (30

percent) are liberal democracies. But distorting

these proportions is the fact that the small Pacific

island states are much more democratic than

other parts of Asia. Of the 12 Pacific island states,

11 are democracies, and 8 are liberal democracies.

In Northeast Asia half of the 6 economies (Japan,

the Republic of Korea, and Taiwan) are liberal

democracies, but none of those in Southeast and

South Asia is. Half of the 8 South Asian states are

democracies (India and Sri Lanka almost continuously since independence). But only 3 of 11

Southeast Asian states are democratic—Indonesia,

the Philippines, and Thailand—and Indonesia is

only tenuously and ambiguously so. Beyond India,

Japan, the Republic of Korea, and Taiwan (where

democratic regimes confront serious challenges of

economic and political reform), democracy in

Asia tends to be shallow and insecure. Among the

25 states of East and South Asia, only about 2 in

5 are democracies. Moreover, the region is home

to 4 of the world’s 5 remaining communist regimes

(China, the Democratic Republic of Korea, the

Lao People’s Democratic Republic, and Vietnam)

as well as other highly closed authoritarian regimes

(such as Myanmar).

The 27 postcommunist states that were part of the

former Soviet bloc show a similar pattern of divergence. The first group consists of the 3 Baltic

states, which are more European in their outlook

and pre-Soviet histories, and the 12 states of East

Central Europe that were not part of the Soviet

Union. Fourteen of these 15 states are democratic (Bosnia is still an international protectorate), and

11 are liberal democracies. Even such formerly

autocratic postcommunist states as Albania,

Croatia, and Yugoslavia (Serbia and Montenegro)

are becoming more liberal and democratic.

Overall, the region is moving steadily, if still

unevenly, toward economic liberalization, democratic consolidation, and European integration. 

By contrast, of the remaining 12 states of the

former Soviet Union, only 4 are democracies, and

3 of these—Armenia, Georgia, and Ukraine—are

only ambiguously so. In each case electoral fraud

and obstacles to political pluralism and competition make it unclear whether it is really possible

to change the national leadership through the

electoral process. Russia, more clearly beyond this

point, can be considered “electoral authoritarian.” There are no liberal democracies among the

post-Soviet states, and the general trend in this

region is toward less freedom. In the Kyrgyz

Republic, once the lone functioning democracy in

Central Asia, democracy has been undermined

under the weight of corruption, electoral fraud,

and the increasing centralization and abuse of

power by the president.

Among the 48 states of Sub-Saharan Africa,

democracies—or at least popular aspirations for

and appreciation of democratic government—are

more prevalent than at any time since decolonization. But many African “democracies” are

hollow and ambiguous, and many other regimes

stake a manifestly false claim to democratic status.

Only two African states have been continuously

democratic since independence, Botswana and

Mauritius. Both have small populations (around

2 million or less), and both have achieved a pace

of economic development that has eluded most

other countries in the region. 

Since 1990 most African countries have faced

pressure for regime change and have at least legalized opposition parties and opened more space

for civic organization. But only about a third of

the states (somewhere between 14 and 20, and by

this count, 17) have elections that are sufficiently

free, fair, and competitive to meet the standard of

democracy, and only five of these are liberal

democracies. The most important liberal democracy in Africa is South Africa, which has sustained

PROMOTING

DEMOCRATIC GOVERNANCE

37

MANY AFRICAN

“DEMOCRACIES” ARE

HOLLOW AND

AMBIGUOUS, AND

MANY OTHER REGIMES

STAKE A MANIFESTLY

FALSE CLAIM TO

DEMOCRATIC STATUS

Liberal democracy is also regional

Source: Karatnycky 2002.

Proportion of liberal 

democracies (%), 2001

0 50 100

Western Europe and

 Anglophone states 28 of 28 countries

East Central Europe

 and Baltics 11 of 15

Latin America and

 the Caribbean 17 of 33

Asia-Pacific 11 of 37

Sub-Saharan Africa 5 of 48

Middle East and

 North Africa 1 of 19

Former Soviet Union

 (without Baltics) 0 of 12

FIGURE 1.4
high levels of freedom despite political turbulence, economic hardship, and dominance by a

single party. By contrast, Africa’s other big states

are all struggling politically. The effort to build

democracy in Nigeria, the most populous African

country, confronts corruption, religious and

ethnic violence, and a weak and fractious party

system. Sudan remains a highly repressive state

unable to resolve its 19-year-old civil war. The

Democratic Republic of Congo is struggling to

overcome a debilitating legacy of predatory corruption, state failure, and civil war. While a few

countries, such as Ghana and Mali, seem to be

functioning reasonably well as democracies, most

of Africa’s new democracies and quasi-democracies seem to be slipping backward into less

accountable, more abusive, and more personalized rule. Both democratic and authoritarian

institutions are weak and open to change.

The Middle East (including North Africa) is the

region least hospitable to democracy. Of the 19

states in this broad region, only 2—Israel and

Turkey—are democratic (though in Turkey the

military still retains a veto on many important

issues). None of the 16 Arab states is a democracy, though several (Jordan, Lebanon, and

Morocco) have at least some electoral competition and social pluralism. Bahrain is gradually

exploring a possible opening of electoral competition. Yet not a single Arab state affords its

people true political sovereignty, and the tentative

movement toward greater political openness has

been largely arrested and reversed by the growing

fear of terrorism and the mobilization of radical

Islamists in the wake of the September 11 attacks

on the United States. The only liberal democracy

in the region is the only Western-oriented state,

Israel, and there freedom has diminished in recent

years under the stress of terrorism.10

The prospects for developing democracy appear

especially dim in the Arab Middle East, because

of the strong possibility in some countries that a

rapid opening to free and fair elections would

bring the victory of antidemocratic, radical

Islamist forces. The alienation and extremism of

these radical Islamists have been stimulated by the

mix of globalization and the development failures

of their own societies. Now, even those Islamists

pursuing nonviolent political struggle and social

mobilization appear intent on using electoral

competition merely as a vehicle to win power so

that they can impose an Islamic fundamentalist

order on society—and thus in many respects a

more rigidly repressive regime. Unfortunately,

many authoritarian Arab regimes—such as those

in Algeria, Egypt, and Syria—have deliberately

played on this danger to delegitimize political

opposition. This has created a more polarized

political arena and a self-fulfilling prophecy in

which the radical Islamists are the only viable

opposition in the eyes of a growing share of the

population. 

The Arab Middle East, then, is the region with the

strongest obstacles to democracy and the greatest

near-term dangers for U.S. national security. Many

strategically important authoritarian regimes that

have been friendly to the United States and

Europe—such as those in Algeria, Egypt, and

Saudi Arabia—have become less stable. In these

and other states in the region the old “ruling

bargain,” in which society acquiesced to autocracy in exchange for economic and social resources,

has broken down as resources have become

scarcer and social problems and divisions have

intensified. A growing number of observers

believe that these regimes must begin now to construct a new ruling bargain based on better, more

accountable governance, gradually increasing

political freedom and pluralism, and serious

reform of the economy and state. Otherwise,

these regimes will face the prospect of deepening

political instability and perhaps political

breakdown.

THE RISE OF “ILLIBERAL DEMOCRACY”

The third wave of democratization has seen a

growing divergence between electoral democracy

and liberal democracy. The second involves not

only free, fair, and regular elections but also a

strong rule of law buttressed by an independent

judiciary and other institutions of accountability

that check the abuse of power, protect civil and

political freedoms, and thereby help foster a pluralistic and vigorous civil society.11

Along with the dramatic growth in the number of

democracies during the third wave came a

marked increase in “illiberal democracy.” In 1974

more than 80 percent of the world’s democracies

were liberal, and all of them were rated “free” by

Freedom House. Even in 1987 almost threequarters of democracies were liberal. But as

democracy exploded with the demise of communism, liberal democracies declined sharply as a

share of the total (figure 1.5). 

PROMOTING

DEMOCRATIC GOVERNANCE

38

THE THIRD WAVE OF

DEMOCRATIZATION HAS

SEEN A GROWING

DIVERGENCE BETWEEN

ELECTORAL DEMOCRACY

AND LIBERAL

DEMOCRACY
By 1991 fewer than 60 percent of democracies

were liberal, and that share continued to fall with

the expansion of democracy through the mid1990s. While the share has risen again since the late

1990s, the figures tell an important story. The presence of democracy around the world is broader

today but also thinner than a decade ago. There has

been a striking rise of illiberal democracy. Indeed,

some democratic regimes are only ambiguously so,

and many of these function poorly in protecting

human rights, controlling corruption, and addressing economic and social problems.

The shallow and illiberal democracy in so many

states is cause for concern for several reasons. First,

human rights and the rule of law are ends in themselves, and many democracies (and all authoritarian regimes) fall far short of their obligations to

foster and protect the basic rights of their citizens.

Second, there is growing evidence of a strong association between the quality of democracy and its

legitimacy in the mind of the public: citizens’

support for democracy is more robust, and democracy is more stable, where justice, accountability,

civil liberties, and restraint of power are greater.12

Third, underlying this relationship is the strong

connection between the quality of governance and

the stability of democracy. Where democracy is less

liberal, governance is poorer—more corrupt,

wasteful, incompetent, and unresponsive. This

entrenches poverty, obstructs economic development, opens the door to recurrent crises, and prevents poor countries from using international assistance effectively and can lead to state failure.

Liberal democracy is a major building block of

good governance, which in turn fosters and sustains broad-based development.

ELECTORAL AUTHORITARIAN

(PSEUDODEMOCRATIC) REGIMES

After a decade of arrested and reversed political

openings, it can no longer be said that such

countries as Azerbaijan, Cambodia, Cameroon,

Egypt, Haiti, Kazakhstan, Kenya, and Morocco

are in transition to democracy. There were transitions from authoritarian rule.13 But these

imploded or went off course, leaving authoritarian regimes still largely intact. Most of these

regimes did not completely close off political

pluralism, however. Instead, they are electoral

authoritarian: they allow multiple political

parties to contest elections held at regular, constitutionally mandated intervals, but they do not

allow opposition parties and candidates full

freedom to campaign and a fair chance to win.

Formal democratic institutions, like multiparty

elections and parliaments, exist to obscure (and

sometimes to soften) the reality of authoritarian

domination. They are a façade designed to purchase acceptance from the international community and domestic constituencies (thus the

term pseudodemocracy). Such regimes combine

varying degrees of competition, pluralism, and

repression. 

Cambodia is home to one of the more hegemonic of these regimes. The ruling Cambodian

People’s Party, under the former communist autocrat Hun Sen, dominates power and political life

through both corruption and extensive violence

and intimidation. But the political opposition has

a significant presence in parliament and in local

government councils, and there is at least some

space to question government policy and

conduct. 

In the more competitive of these regimes, such as

that in Russia, alternative voices in politics, government, and civil society are stronger and more

numerous. Russian President Vladimir Putin has

largely eviscerated the main independent media.

But opposition parties and leaders still win elections in some regions and challenge government

policy in the Duma (parliament), and the resulting

competition and pluralism inject some uncertainty into political life. With electoral reform,

mobilization of civil society, and relative unity

among opposition forces, such uncertainty can

translate into the surprising defeat of once-hegemonic parties, as has happened in recent years in

Ghana, Mexico, Senegal, and Serbia. But merely

holding regular, multiparty elections does not put

regimes on a path to democracy. Unless there are

fundamental changes in the regimes, permitting

free and fair elections and greater civic and political space, a transition to democracy is most

unlikely.

PROMOTING

DEMOCRATIC GOVERNANCE

39

THERE IS GROWING

EVIDENCE OF A STRONG

ASSOCIATION BETWEEN

THE QUALITY OF

DEMOCRACY AND ITS

LEGITIMACY IN THE

MIND OF THE PUBLIC

Liberal democracies less prevalent

Source: Freedom House 2002.

Proportion of liberal democracies (%)

0 50 100

1974 32 of 39 democracies

1987 48 of 66

2001 75 of 121

FIGURE 1.5
SHALLOW DEMOCRACIES

Since the mid-1990s two global trends have been

colliding, making for a more politically turbulent

and unpredictable world. One has been the surprisingly robust and resilient third wave of

democratization. The other has been a spreading

democratic malaise in many parts of the world. 

Three problems of governance underlie this

malaise and obstruct the consolidation of democracy. Most urgent and pervasive is the weakness—

and often the decay—of the rule of law. No

problem does more to alienate citizens from their

political leaders and institutions, and to undermine political stability and economic development, than endemic corruption among the government, political party leaders, judges, and

bureaucrats. The more endemic the corruption is,

the more likely it is to be accompanied by other

serious deficiencies in the rule of law: smuggling,

drug trafficking, criminal violence, human rights

abuses, and personalization of power. 

Even in the wealthy, established democracies of

Europe, Japan, and North America, scandals

involving political party and campaign finance have

eroded public confidence in parties and politicians.

In the less established democracies political corruption scandals are much more likely to erode

public faith in democracy itself and thereby to

destabilize the entire system. This is particularly true

where corruption is part of a general syndrome

involving growing penetration of politics and government by organized crime, misuse of executive

and police powers to intimidate and punish political opposition, and the politicization and inefficacy

of key institutions of “horizontal accountability,”

such as the judiciary, the audit agency, and even the

electoral commission. In many countries today,

democracy is weak and insecure because political

leaders lack sufficient democratic commitment—

the political will—to build or maintain institutions

that constrain their own power. And civil society is

too weak, or too divided, to compel them to do so.

The second broad source of malaise is economic.

In many developing and postcommunist states

economic reforms—where they have been implemented at all—have not yet generated rapid, sustainable economic growth. A few states have

experienced rapid growth, and some at least

modest growth. But in most new and troubled

democracies economic growth is too slow, and

too narrowly distributed, to lift large segments of

the population out of poverty. In many countries

of Latin America, in some countries of Africa

(such as South Africa), and in some Asian countries (Pakistan, the Philippines) the problem is

compounded by extreme inequality in income

and wealth. In these countries democracy cannot

be consolidated until substantial progress is made

in reducing poverty and inequality. 

The third problem is the inability to manage

ethnic, regional, and religious differences peacefully and inclusively. Cultural diversity is not an

insurmountable obstacle to stable democracy.

India has learned how to manage diversity

through complex institutions of federalism. Spain

largely contained its secessionist pressures with a

system of asymmetrical federalism. And like

Australia, Canada, and the United States, Europe

has learned to adapt its democratic institutions to

assimilate immigrants from a wide range of other

countries and cultures. The problem arises when

one ethnic or religious group seeks hegemony

over others, or when minorities believe that they

are being excluded from power, including any

meaningful control of their own affairs.

These three problems—indeed, crises—of governance intensify and reinforce one another. 

• Visible corruption sharpens the sense of

injustice and grievance associated with

poverty, unemployment, and economic hardship. Corruption has also hindered economic

reforms, especially privatization. 

• Poverty and economic stagnation reinforce

the feelings of discrimination and political

marginalization among indigenous peoples.

Entrenched as the principal means of economic advancement, political corruption and

clientelism exacerbate ethnic and regional

conflict in Africa and Asia by raising the

premium on control of the state and making

politics a more desperate, zero-sum struggle

for control of economic opportunity. 

• Weak rule of law makes it easier for ethnic

and sectarian leaders to mobilize violence at

the grassroots in efforts to win power for

themselves. It also facilitates electoral fraud

and violence. 

Underlying all this in many countries is a lack of

commitment to the public good and to the rule of

law. Citizens and elites have little trust in one

another and in the future. Thus they devise strategies for taking from a stagnant stock of resources

rather than for enlarging that stock. They focus on

PROMOTING

DEMOCRATIC GOVERNANCE

40

OF THE PROBLEMS OF

GOVERNANCE, MOST

URGENT AND PERVASIVE

IS THE WEAKNESS—

AND OFTEN THE DECAY—

OF THE RULE OF LAW
ends rather than means—securing power and

wealth by any means possible rather than in legal

and constitutional ways.

These crises of governance are the main sources

of democratic insecurity in the world today. All

three contributed to the breakdown of democracy in Pakistan in October 1999. Poor governance

and deferred economic reforms led to the implosion of Argentina’s economy and the resignation

of its president amid public rioting and looting in

December 2001. Each of the three crises is visible

in Indonesia and Nigeria as well as in many

other, smaller countries, including in the Andean

region. Weak rule of law and continued economic stagnation and decay now also threaten the

prospects for building democracy in Russia,

Ukraine, and other post-Soviet states. In these

and other countries not only do major political

leaders have at best an ambivalent commitment to

democracy, but democratic political parties and

civil society groups lack the resources, the organizational strength, and the popular bases to

promote successful democratic reform.

Failure to govern effectively takes a toll on the legitimacy and stability of democracy. The democratic

malaise is particularly visible in public opinion

trends in Latin America. The 2001

Latinobarometro survey recorded big drops in

support for democracy in most of the countries it

covered (figure 1.6). Between early 2000 and

April–May 2001 support for democracy as “preferable to any other kind of government” declined

from 60 percent to 48 percent across Latin

America. In the 2002 survey, one year later, support

for democracy improved slightly, and today about

half of all Latin Americans believe that democracy

is the best form of government. But support for

democracy has declined or remained low in several

key countries in the region since 2000—dropping

from 50 percent to 39 percent in Colombia, from

64 percent to 57 percent in Peru, from 71 percent

to 65 percent in Argentina, and from 39 percent to

37 percent in Brazil. These decreases are not always

matched by increases in support for authoritarian

rule. But they do reflect growing apathy toward

democracy. Even in Costa Rica and Uruguay, the

region’s most stable and clearly consolidated

democracies, support for democracy has declined

by 6 percentage points in the past two years.

Latin America’s democratic malaise is driven by

accumulating problems of governance. In 2001

three in five Latin Americans rated their country’s

economic situation as “bad” or “very bad.” A

growing proportion, now four in five, believe that

crime and drug addiction have “increased a lot”

in recent years, and the same proportion also give

this response about corruption. Trust in major

democratic institutions is low and continuing to

decline: only around one in five trusts the national congress or political parties, and fewer than 30

percent trust the judiciary.14 While support for

democracy appears greater in the postcommunist

countries of Central and Eastern Europe, these

democracies also suffer high levels of disaffection,

with only 22 percent trusting parliament, and only

13 percent political parties, in 1998.15 And in the

Republic of Korea support for democracy

declined sharply after corruption scandals and an

economic crisis in 1997, falling from 69 percent to

54 percent in 1998 and to 45 percent in 2001.16

The spread of democracy around the world is

thus impressively broad but worrisomely thin.

The demise of communism and other one-party

socialist regimes, and the failure of the Islamic

fundamentalist state in Iran to become an attractive, dynamic model, have left liberal democracy

as the only system of governance with broad ideological and political appeal. Globally, democracy today is triumphant and dominant. But it is

also under severe and growing strain from the

intersecting crises of governance.

The next decade will thus be a time of both great

danger and great opportunity for democracy.

Without lasting reforms to improve governance—

PROMOTING

DEMOCRATIC GOVERNANCE

41

THE NEXT DECADE

WILL BE A TIME OF BOTH

GREAT DANGER AND

GREAT OPPORTUNITY

FOR DEMOCRACY

Democracy always preferable?

Source: Lagos 2001.

Yes answers (%)

0 20 40 60 80

Colombia

Venezuela

Paraguay

Brazil

Chile

Argentina

Uruguay

Costa Rica

Latin America

1996 2001

FIGURE 1.6

Fig. 1.6

2001 1996

Latin America 48 61

Costa Rica 71 80

Uruguay 79 80

Argentina 58 71

Chile 45 54

Brazil 30 50

Paraguay 35 59

Venezuela 57 62

Colombia 36 60
by reducing corruption, professionalizing the

state bureaucracy (especially economic management), and strengthening judicial, administrative,

and political institutions—many more democracies are likely to disappear. Breakdowns may

come through a military coup (as in Pakistan in

1999), through an executive coup (as in Peru in

1992), or through the slow strangling of democratic pluralism and competition by an overbearing president. But improvements in governance,

even incremental ones, could buy time for

democracy, allowing it to gradually sink deeper

roots in political party life, in civil society, and in

the national culture.

A STRATEGY FOR ASSISTING

DEMOCRATIC GOVERNANCE

Thus the prospects for development, and for

effective development assistance, depend on the

quality of governance—the way in which public

power is exercised and public resources are

managed and expended. Poorly performing

states—those mired in poverty and illiteracy for

decades—will not achieve sustainable development unless they dramatically improve governance. Only when the rule of law ensures property rights and low transaction costs will domestic

capital be invested productively and international capital flow in. But corruption and weak rule of

law will persist until voters have the power to

remove governments that fail to perform—politically as well as economically. 

So, for the world’s poor people, democracy is not

a luxury. It is an indispensable instrument for

securing accountable government and for ensuring that aid is used effectively. Governance has to

be made more responsible, competent, efficient,

participatory, open, accountable, lawful, and legitimate. Unless that happens, poorly performing

states will not experience the kind of vigorous,

sustained development that transforms human

development, achieves economic growth, and

permanently lifts large segments of the population

out of poverty. And badly governed states will

produce diffuse threats to global order and the

U.S. national interest. 

With time, and with thoughtful evaluation and

assessment, USAID is learning more about what

it takes to develop democracy and good governance. USAID’s democracy and governance programs have evolved in important ways since they

became a big part of U.S. development assistance

efforts in the early 1990s. Early on, it became clear

that the freedom, fairness, and meaningfulness of

elections are shaped months in advance by the

quality and integrity of electoral administration,

the design of the electoral system, the rules on

campaign and party finance, the capacity and

openness of political parties, the political awareness of voters, and the level of freedom and security. Consequently, support for elections matured

from a narrow focus on the voting and vote

counting to a broader engagement with the political system and electoral environment, including

extensive assistance for voter education, electoral

administration, and earlier monitoring of electoral

preparations and campaigning. 

In the mid-1990s an evaluation found that technical assistance to judicial systems could not build

a rule of law without political will for reform and

a civil society that is aware and engaged.17 USAID

decided to generate the political demand for

reform, and the capacity to use the justice system,

through wider programs of assistance to civil

society organizations working for human rights,

legal assistance, justice reform, and the like.

Similarly, USAID—and every other major international donor—have become much more aware

of the harmful consequences of corruption for

democracy and development. Thus the priority

given to addressing this problem has increased

substantially, along with analytic insight into the

conditions for genuine reform.

In recent years much more assistance has gone to

nongovernmental organizations (NGOs) and

business coalitions working for greater

transparency and accountability, and to efforts to

strengthen government institutions to monitor

and combat corruption. The surge in complex

humanitarian emergencies during the 1990s was

met with a better capacity to respond, particularly to the political dimensions of postwar recovery,

and with a new ability to move in quickly to assist

political reconstruction after violent conflicts.

Gradually, democracy and governance programs

have been guided by a more nuanced understanding of the political context in each country,

and methods of strategic assessment for country

programs have been honed. 

How can the United States foster stable, effective

democracies in the coming decades? First, the

objective must be clear. The goal is not simply to

PROMOTING

DEMOCRATIC GOVERNANCE

42

PROSPECTS FOR

DEVELOPMENT, AND FOR

EFFECTIVE DEVELOPMENT

ASSISTANCE, DEPEND ON

THE WAY PUBLIC POWER

IS EXERCISED AND

PUBLIC RESOURCES

ARE MANAGED

AND EXPENDED
advance democracy around the world. As the collapse of democracy in Pakistan in 1999 showed,

a country can have vigorously competitive national elections with frequent shifts in power and still

have governance that fails to generate development and loses public confidence. Nor is the goal

simply to promote more capable and transparent

government. Few leaders can deliver and sustain

good governance—with its commitment to promoting the public good and restraining the abuse

of power—without the institutional accountability to other branches of government and to the

people that democracy provides. Even when

nondemocratic leaders are sincerely committed to

reform, the absence of institutional mechanisms

to monitor and restrain power eventually

degrades the quality and legitimacy of

governance. 

In almost every country good governance—

responsible, accountable, public-spirited—must

go hand in hand with democracy. First, democracy provides the people with an indispensable

instrument of electoral accountability—the

opportunity to remove leaders who perform

poorly. Second, when this opportunity is

denied—through obstacles to fully free, fair, competitive, and neutrally administered elections—

the incentive of incumbents to restrain themselves

and serve the public good withers. Corruption

seeps through the financial and political system, as

in Indonesia. Rulers become not only venal and

distant from public concerns, but also increasingly abusive of human rights, as in Zimbabwe.

Third, democracy provides the public with the

freedom and the institutional means, between

elections, to scrutinize the conduct and policy

decisions of public officials and hold them

accountable. Fourth, leaders in a democracy thus

have more pressures, means, and incentives to

explain and justify their decisions and to consult

a broad range of constituencies before passing

laws and making decisions. Fifth, wider public

dialogue and participation in policymaking

produce decisions that are more legitimate and

sustainable.

Free, fair, and competitive elections are the essential factor for democracy. Moreover, other institutions of good governance are much more likely

to be vibrant and effective in a democracy than in

a nondemocracy. These include an independent

judiciary that enforces clear and predictable laws,

an elected parliament that is autonomous and

capable of checking the power of the executive

branch, and a civil society with the freedom and

resources to monitor, evaluate, question, and participate in making and implementing policy.

When governance is open to the scrutiny and

involvement of a wide range of NGOs, interest

groups, think tanks, and mass media, it is more

likely to be transparent, public-spirited, and thus

legitimate. 

There is no guarantee that electoral democracy

will deliver such transparency and inclusion. But

it is illusory to imagine that “liberal autocracy” is

a development option in today’s world. There are

precious few well-governed autocracies, and those

that exist (such as Singapore) have sustained

good governance for highly idiosyncratic reasons

that are not broadly transferable. To develop

truly good governance, the typical recipient of

U.S. foreign assistance needs the openness, competition, and broad and free public participation

of democracy.

The pursuit of stable, effective democratic governance will involve different sequences of political

reform in different countries. In some cases the

basic framework for multiparty democracy is in

place but needs to be deepened and made more

effective and accountable. Some emerging

democracies suffer from more specific obstacles

to consolidation—such as lack of the institutions

of rule of law. And in repressive, corrupt, and

closed regimes, multiparty competition—if it

exists at all—is largely a façade. In these states,

reforming the economy and strengthening civil

society might be more viable in the short term

than making an immediate transition to electoral

democracy.

Where democracy is completely absent, one

plausible—though more gradual—path of transition is to phase in electoral competition beginning

at the local level and then moving up to higher

levels. This is the path that Taiwan followed over

several decades.18 It is also the path by which

many observers believe that China could become

a democracy—by extending competitive elections from the village level to the township,

county, provincial, and then national level while

also eventually allowing competing parties. In

other highly authoritarian countries, such as

Myanmar and Saudi Arabia, introducing free

and fair municipal elections might allow the

gradual accumulation of political trust and mutual

restraint between regime and opposition, and

between competing opposition forces, lowering

PROMOTING

DEMOCRATIC GOVERNANCE

43

THE PURSUIT OF STABLE,

EFFECTIVE DEMOCRATIC

GOVERNANCE WILL

INVOLVE DIFFERENT

SEQUENCES OF POLITICAL

REFORM IN DIFFERENT

COUNTRIES
the risks of transition. The one essential condition

for progress along such a path: when competitive

elections are held, they must be fairly and credibly administered.

Such variation makes it impossible to offer a

general strategy or sequence of political reform.

That is why democracy and governance must be

carefully assessed in each country receiving assistance, especially when resources are limited and

strategic choices must be made. That is also why

assistance for democracy and governance needs to

be pursued with patience and an open mind. No

one sector holds the key to fostering democracy

and good governance. No one solution fits all

cases. And no shortcuts exist. In most countries

that lack stable and effective governance today,

the United States must be prepared to work on

many fronts over long periods.

Even so, countries that need assistance for democracy and governance tend to share a few priorities.

These involve ensuring that democracy advances

development and responds to the needs of

society—generating capacity for and commitment

to using public resources to promote the public

good. Such efforts are not new. The foreign assistance community has worked on most of them,

particularly over the past decade. What is needed

now is not invention but innovation, adaptation,

refinement, elaboration, deeper commitment, and

an expansion of activity in some areas.

Strategic priorities for assistance include:

• Controlling corruption and strengthening the

institutions of horizontal accountability. 

• Strengthening the rule of law and the way it

affects individual citizens—not only through

the judiciary but also through more professional, vigorous, and democratic policing. 

• Strengthening and democratizing political

parties and deepening their roots in society. 

• Helping NGOs committed to democracy and

good governance broaden their domestic

constituencies while using more traditional

interest groups to strengthen democracy.

• Developing stronger, more professional states

better able to respond to growing demands

for better governance. 

Pursuing these priorities requires strengthening

links: 

• Across government agencies. U.S. efforts to

improve democracy and governance most

often fall short because they lack unified, vigorous support from the entire U.S. government. Specific programs of assistance for

democracy and governance cannot succeed if

they are inconsistent with U.S. objectives and

priorities. It is always difficult to persuade

corrupt, undemocratic, or only partly democratic regimes to adopt serious governance

reforms. But there is no chance of doing so if

the regime perceives mixed messages from

the U.S. government, whether across agencies

or over time. And inconsistency within a

region can generate resentment, confusion,

and ambiguity about U.S. aims. 

• Across donors. Development suffers when different donors work at cross-purposes or fund

overlapping objectives at the expense of

unmet needs. Credible, effective diplomatic

pressure for better governance requires that

all major donor countries express similar

expectations of badly governed states. A government is much more likely to pursue

serious reform if these donors deliver similar

messages about what it must do if it is to

receive significant aid and debt relief.

• Across sectors. Among the most important

lessons learned by USAID in the past decade

is that establishing cross-sectoral links—connecting program activities intended to achieve

two or more goals—enhances development

and amplifies the impact of a given investment.19 Linking programs for democracy and

governance with other programs can produce

a triple effect. It advances specific aspects of

democratic governance. It achieves a more

traditional development objective (such as

improving health care). And it generates

additional benefits that neither program

could have achieved alone. Moreover,

investments in other sectors can help build

the economic, social, and cultural foundations for sustainable democracy and good

governance. For example, supporting the

development of small and medium-size enterprises (in part by reducing obstacles to their

legal existence and protection) does more

than stimulate and diffuse economic growth.

In building up a large class of producers

independent of the state, it crystallizes new

interests in better governance, provides new

bases of support for political parties, and generates new resources to support autonomous

interest groups and NGOs. 

• Across borders. Cross-border links enable government agencies, civil society organizations,

thinkers, and practitioners to share experience

PROMOTING

DEMOCRATIC GOVERNANCE

44

NEEDED NOW IS

NOT INVENTION

BUT INNOVATION,

ADAPTATION,

REFINEMENT,

ELABORATION, AND

DEEPER COMMITMENT
and learn from one another. Each takes something back from the other, and a new type of

international pressure may gather in the form

of regional solidarity and commitment to

democracy and good governance. Several

types of regional programs can promote

democracy and good governance. When

regional organizations such as the

Organization of American States, InterAmerican Institute of Human Rights, and

Southern African Development Community

(SADC) seek to establish regional norms of

democracy, human rights, and good governance, the United States should support their

efforts financially. And when they fail to rise to

urgent challenges, as SADC has with

Zimbabwe recently, the United States should

engage them diplomatically and support civil

society organizations within the member

countries that seek a more consistent, forthright, and active regional posture.

• Over time. Successful work on democracy and

governance requires patience, steadfastness,

and a long-term perspective. The more

intractable a country—that is, the longer its

history of poverty and weak governance—the

longer it will take to turn things around.

Development assistance cannot succeed unless

it remains engaged in pressing for democratic

reforms and assisting forces of reform in the

state and society over long periods, possibly

decades. Significant improvements in governance also require political will. In intractable

cases this will take time to generate, and even

as it accumulates, it is liable to erode. Thus

assistance for democracy and governance

requires a strategy for engaging the key actors

in state and society to develop and sustain the

will to reform.

• Across national and local levels. The local

dimension must connect with the national.

Reform of state structures must proceed in

tandem with promotion of civic participation—and vice versa. USAID strategies for

strengthening local government generally

emphasize stimulating local political participation. This not only develops active citizenship but also helps make government more

responsive to citizens’ needs and concerns.

But if government is to respond, it must have

the resources and capacity to do so. This

requires training local government officials to

enhance their capacity to govern effectively

and accountably. But it also requires supporting national initiatives (laws, administrative

regulations, even constitutional reforms) to

transfer more power, authority, and resources

to the local level. Thus providing effective

support for local democracy may involve

assistance to national executive agencies, parliamentary committees, and even political

parties—to identify institutional models and

policy lessons from other countries, to help

draft administrative regulations and laws on

decentralization, and to address the funding

constraints of local governments. In short,

decentralization (from the top down) must

work in tandem with efforts to improve local

governance (from the bottom up).20

• Between the supply and demand for political

reform. Among the major lessons emerging

over the past decade is the need to balance

the demand and supply sides of the political

reform equation. Assistance for democracy

and governance cannot succeed if it works on

only one side or the other. Even if state elites

propose reforms—for example, to privatize

state industries, improve the tax system, or

crack down on smuggling and bribery—these

reforms may not be sustainable unless society

is educated about the need for them and

mobilized to support them. Urgently needed

reforms are often undermined in implementation by a failure to develop broad constituencies for reform among stakeholders. State

officials who want to undertake reforms need

technical assistance in their ministries or

agencies. But sustainable reform also requires

programs targeted to interest groups (such as

trade unions and chambers of commerce),

advocacy NGOs, think tanks, and the mass

media. The momentum for systemic reform

of governance often begins with the formation and mobilization of such groups.

Cutting across all these priorities are lessons

about what it takes to foster stable and effective

democratic governance: political will and clear

and unambiguous leadership by the U.S.

government. 

ASSESSING AND CLASSIFYING COUNTRIES

Countries are not entirely unique. Their political

regimes can be roughly grouped into categories

according to their democratic development.

Strategic priorities overlap across categories, but

a country’s place in a typology of regimes begins

to tell something about what needs to be done.

PROMOTING

DEMOCRATIC GOVERNANCE

45

PURSUING THE

STRATEGIC PRIORITIES

FOR ASSISTANCE

REQUIRES

STRENGTHENING LINKS

ACROSS GOVERNMENT

AGENCIES, DONORS,

SECTORS, AND BORDERS
At one extreme is the consolidated democracy,

which, because of its level of economic and

political development, has “graduated” from

assistance. Botswana and Mauritius, Chile and

Costa Rica, and the Czech Republic, Hungary,

and Poland fall into this group. These countries

can play an important role in U.S. assistance for

democracy and governance to their neighbors, by

providing institutional lessons and human

resources through cross-border links. But with

the possible exception of Botswana, now in the

grip of a catastrophic HIV/AIDS epidemic, they

no longer need significant external assistance. 

Some countries that, because of their middleincome status, either never received or have long

since graduated from development assistance—

such as Argentina, Thailand, Turkey, and

Venezuela—continue to face serious governance

problems. These countries are not consolidated

democracies (or if they once were, no longer are).

Limited, focused assistance could help them

remove obstacles to improving and consolidating

their democratic institutions. At the other

extreme are repressive, closed regimes, such as

the Republic of Congo, Iraq, and North Korea.

Between these extremes are some 75 countries, a

group that includes almost the entire former

Soviet Union, the politically lagging countries of

Eastern Europe, 25 African countries, and most of

Latin America. Few of these countries have a consolidated democracy. Indeed, about half are not

democracies, although they fall short of democracy in varying degrees and ways. These countries

can be roughly grouped into four categories:

1. Electoral democracies with problems of democratic performance. These countries—such as

Bangladesh, Benin, Brazil, Ghana, Mali,

Mexico, Namibia, the Philippines, Senegal,

South Africa, and most of Central and South

America—have relatively free, fair, and competitive elections that are more or less institutionalized. In some of these countries not

even that basic element of democracy is

secure, but in most the threats to democracy

arise from other shortcomings: corruption, an

ineffectual judiciary, weak political parties,

human rights abuses, an incapable state, and,

in a few cases, one-party dominance. 

2. Ambiguous, quasi-democratic regimes.In these

countries—most prominently Indonesia,

Nigeria, and Ukraine—it is not clear whether

elections are free and fair or whether elected

authorities have full power to govern. These

countries have competitive, multiparty elections, but the contests are marred by significant fraud and manipulation or insecurity. All

the formal institutions of democracy are in

place, but most function poorly or with constraints. To the extent that their elections are

not democratic, the regimes in this category

are “competitive authoritarian,” a subtype of

the following category.

3. Electoral authoritarian regimes. These countries have multiparty elections, and the elections may even be quite competitive, but they

are so tainted with fraud and biased toward

the ruling party (and typically the incumbent

president) that they cannot be considered free

and fair. Some of these countries—such as

Georgia, Jordan, Kenya, Lebanon, Morocco,

Tanzania, and Zambia—allow serious competition and pluralism not only in elections

but also in legislative and judicial systems,

which may take prudent steps to break free of

executive domination. The mass media may

also act to erode constraints and induce

accountability.21 But other countries—such as

Azerbaijan, Belarus, Egypt, and most of the

Central Asian republics—merely maintain

the façade of multiparty elections while allowing little real pluralism or freedom. When

these regimes are seriously challenged (as in

Zimbabwe), they can become brutally repressive. Other countries in this category include

Cambodia, Guinea, Haiti, Liberia, and

Uganda.

4. Closed authoritarian regimes. These countries

do not conduct multiparty elections and

generally exhibit the greatest political repression and closure. There is little space for

opposition or dissent in civil society or the

political system. The state executive and the

security apparatus are thoroughly dominant,

at least within the territory they control.

Countries that fall into this category include

Angola, the Democratic Republic of Congo,

Eritrea, Rwanda, Sudan, and Turkmenistan.

This categorization is not an arid academic exercise. It helps organize thinking about strategic priorities. Within these four categories, different

countries will need different mixes of programs.

Even so, common strategies and priorities can be

identified for each group of countries. 

PROMOTING

DEMOCRATIC GOVERNANCE

46

IN MOST COUNTRIES

WHERE DEVELOPMENT

HAS FAILED OR STALLED,

THE MOST IMPORTANT

MISSING INGREDIENT

IS THE POLITICAL WILL

OF THE NATION’S

LEADERS TO IMPROVE

GOVERNANCE
1. Electoral democracies face one overriding

challenge: to improve the quality of governance and political representation. Securing

free and fair elections may be important in

some of these countries. But in most it is no

longer a major problem or it is one that

domestic political actors have learned to

manage through their own organizations and

resources (or can be helped to manage with

modest additional aid). In the countries

where democracy is not yet consolidated and

major governance problems persist, a nearly

universal priority is controlling corruption

and enhancing the rule of law. Nearly all these

countries need significant help in strengthening and professionalizing their judiciaries,

their other institutions of horizontal accountability (such as anti-corruption commissions),

and their political parties. The main goal

must be to make politics more transparent,

accountable, and responsive. In all these

countries civil society has an important role to

play in educating and mobilizing citizens in

support of systemic reform and deeper

democracy.

2. Ambiguous, quasi-democratic regimes share

the program priorities of the first group but

also require electoral assistance. These countries still often need all three types of electoral

assistance: to develop the technical capacity,

independence, neutrality, and professionalism

of electoral administration; to educate and

inform voters; and to empower domestic

monitoring efforts in civil society. In a few

countries, particularly Indonesia, civilian

authorities need help in developing their

capacity to manage the military and subordinate it to their constitutional authority. 

3. Electoral authoritarian regimes vary widely.

Some allow considerable competition and

pluralism and could become democratic if

elections became free and fair. For these

more competitive regimes, electoral assistance is a major priority, as is assistance to civil

society to strengthen demand for reform. A

country assessment might determine (as for

Egypt) that it may be possible (or strategically wise for the United States) to open elections

to genuinely free competition only after

making other improvements in governance.

But in many electoral authoritarian regimes—

such as Belarus, Cambodia, Haiti, Kenya,

Liberia, Zambia, and Zimbabwe—improving

the credibility and fairness of the electoral

process is vital to prevent violent conflict and

to advance governance on other fronts.

Without the uncertainty and incentives generated by truly democratic competition, the

political will for reform is unlikely to emerge.

4. Closed authoritarian regimes fall into two categories: failed states, struggling to reconstruct

a viable political order, and very repressive

regimes in which political opposition is

banned. In failed states, rebuilding state

capacity (even in very elementary aspects of

administration) is essential for improving governance. But unless some means of political

accountability, participation, consultation,

and power sharing emerge, the state is unlikely to gain the legitimacy needed to consolidate

peace and establish effective governance. The

same is true for states still plagued by civil war

or violent conflict, such as Angola, the

Democratic Republic of Congo, and Sudan.

GENERATING (AND ASSESSING) POLITICAL

WILL

In most countries where development has failed

or stalled, the most important missing ingredient

is the political will of the nation’s leaders to

improve governance—the commitment to follow

through on a particular policy course. At its most

resilient, political will involves a broad consensus

among ruling elites, cutting across parties and

sectors of government, in favor of democratic and

good governance reforms. But consensus is

always imperfect, and will is most important at the

top levels of government, among major political

leaders and senior civil servants. There, political

will must be robust and sincere. That is, leaders

must be committed not only to take actions to

achieve the objectives of reform, but also “to

sustain the costs of those actions over time.”22

Without a robust commitment to fundamental

reforms—to control corruption, open the

economy, enhance the rule of law, respect basic

civil and political rights, and allow independent

centers of power both within and outside the

government—foreign assistance will fail to ignite

sustainable development. It may attain limited

sectoral objectives, but these will not add up to

development, and they may be highly reversible.

Children may be inoculated, only to find that

they have no access to education or, later, to jobs

that lift families out of poverty. Schools may be

PROMOTING

DEMOCRATIC GOVERNANCE

47

POLITICAL WILL

INVOLVES A BROAD

CONSENSUS AMONG

RULING ELITES,

CUTTING ACROSS

PARTIES AND SECTORS

OF GOVERNMENT, 

IN FAVOR OF

DEMOCRATIC AND

GOOD GOVERNANCE

REFORMS
built, only to be destroyed in civil war. Clinics

may be constructed, only to fail because they lack

access to medicines. Local participation and local

governance may be improved, only to be undermined by a predatory national government.

Opposition political parties may be strengthened,

only to be marginalized by electoral fraud.

Judiciaries may be helped by technical assistance, only to be corrupted and intimidated by

national leaders.

Country experience underscores the importance

of political will in mediating the impact of foreign

assistance. A study of three countries with sizable

democracy and governance programs in the

1990s (Bolivia, Bulgaria, and South Africa) concluded that USAID’s investments produced substantial returns precisely because the political

leadership was so committed to reform. The

broader and more sustained the elite consensus in

favor of governance reforms, the greater the

impact democracy and governance programs

tend to have. Modest investments go much

further where there is broad will to reform among

political elites, and large investments are wasted

where there is none.

Political will is not an either-or phenomenon. In

the typical country receiving assistance, the will to

reform is mixed and ambiguous. Within the state

and ruling party some elements favor reform (or

would if reform gained momentum), while others

work against it. Different officials may favor different kinds of reform. Some may favor economic reform but only if it does not involve surrendering political power or protected monopolies.

Others may favor democracy but only of the

“neopatrimonial” kind, driven by patronage. A

president or prime minister may promise international donors a package of governance reforms

but then grow cold when he realizes the political

risks. Or he may promise anything to get aid with

no serious intention of ever delivering (box 1.1). 

In the worst cases (often countries with some

strategic importance to one or more donors)

international development assistance takes on the

appearance of a mutual con game: intractable

countries pretend to be developing, and international donors pretend to be helping them. No one

faces up to the reality that development is not

occurring because governance is rotten. The most

urgent challenge for U.S. foreign assistance in the

coming years is how to engage such poor

performers. 

How can the political will to bring about basic,

systemic reform be generated? Such political will

is generated from three directions: from below,

from within, and from outside. Organized pressure from below, in civil society, plays an essential

role in persuading ruling elites of the need for

institutional reforms to improve governance.

There may also be some reform-minded elements

within the government and the ruling party or

coalition who, whether for pragmatic or normative reasons, have come to see the need for reform

but are reluctant to act in isolation. Finally,

external actors in the international community

often tip the balance through persuasive engagement with the rulers and the society and by

extending tangible rewards for better governance

and penalties for recalcitrance.

U.S. foreign assistance can help develop the first

two forms of pressure and has done so in a

number of countries in the past decade. Where

political will for systemic reform is lacking, the

main thing that foreign assistance can do is

strengthen constituencies for reform in civil

society, including NGOs, interest groups, think

tanks, and the mass media. Assistance can

enhance these actors’ understanding of reform

issues, their knowledge of experiences in other

countries, their coordination with one another,

their capacity to analyze and advocate institutional and policy reforms, and their mobilization

of support and understanding in society. 

International efforts to stimulate governance

reform have shown that fundamental reform can

be sustained only where there is homegrown

initiative. If governments merely promise changes

in policies and institutions in response to international pressures, they will not implement the

reforms seriously and consistently. “Imported or

imposed initiative confronts the perennial

problem of needing to build commitment and

ownership; and there is always the question of

whether espousals of willingness to pursue

reform are genuine or not.”23 International

engagement will therefore fail if it simply requires

a government to sign off on a package of dictated reforms, as has often been the case with assistance from the international financial institutions. Its goal must be deeper and more

procedurally democratic: to generate public

awareness and debate and to induce government

leaders to sit down with opposition and social

forces to fashion a package of reforms unique to

and owned by the country. 

PROMOTING

DEMOCRATIC GOVERNANCE

48

POLITICAL WILL IS

GENERATED FROM BELOW,

FROM WITHIN, AND

FROM OUTSIDE
FROM CONDITIONS TO SELECTIVITY

To be successful, international engagement must

shift from conditionality to selectivity in foreign

assistance. In many cases—international lending,

for example—conditionality has been ex ante,

with governments promising policy reform in

exchange for aid. As a result donors, not the governments, “own” the reforms. A better approach

is to dispense aid selectively to reward and

deepen—and thus preserve and consolidate—

reforms that a country has already begun to

implement according to its own design. Selectivity

focuses aid on good performers—countries that

have reasonably good policies and institutions—

and on serious reform efforts, already under way,

by governments and societies that have taken

responsibility for designing their own policies and

institutions.24

Helping to generate authentic, homegrown political will for better governance takes patience,

intelligence, coherence, consistency, and dexterity.

PROMOTING

DEMOCRATIC GOVERNANCE

49

A BETTER APPROACH

IS TO DISPENSE AID

SELECTIVELY TO REWARD

AND DEEPEN REFORMS

The international donor community and the

government of Kenya have been engaged in a

dance over macroeconomic and governance

reforms since the mid-1980s. The donors have

conditioned assistance on the Kenyan government’s agreeing to and implementing a broad

range of reforms—liberalizing the economy,

pursuing prudent macroeconomic policy,

downsizing the public sector (including privatizing state industries), ending corruption, and

increasing democracy. President Daniel Arap

Moi and his government have repeatedly

promised reform but rarely delivered. 

In November 1991 the donor community suspended more than $250 million in balance of

payments and budgetary assistance to Kenya,

stating that the government had failed to follow

through on promises to liberalize the economy,

reduce corruption, and improve its human

rights record. Kenya thus became the first

African country to have its aid suspended for

bad governance. 

In response, President Moi announced that he

was lifting Kenya’s constitutional ban on opposition political parties, paving the way for the

first multiparty elections in 26 years. Kenya also

liberalized its economy, including abolishing

fixed exchange rates. At the same time senior

cabinet members engaged in a phony export

scheme that bilked the Kenyan treasury of an

estimated $350 million, while the Central Bank

printed money to finance the president’s reelection campaign. The result was a 40 percent

spike in inflation and an interest rate hike that

brought the Kenyan economy to a halt.

Although most bilateral assistance agencies,

including USAID, reduced their programs in

Kenya and ended balance of payments assistance, the World Bank and the International

Monetary Fund renewed quick-disbursing aid

to Kenya in 1993 and 1994 when the Moi government promised to follow through on the

reform agenda. Further World Bank lending

followed. But in mid-1997, on the eve of

another election, the international financial

institutions again concluded that aid should be

halted, citing the persistence of massive corruption. They returned in June 2000—the Bank

with a $150 million program to reform the civil

service, the Fund with $200 million. Given their

experience, they conditioned these loans more

tightly on performance than they had earlier

loans, and scheduled disbursement in a series of

tranches. Yet by December, after only one disbursement, both agencies suspended assistance

when it became clear that the Moi government—having received the down payment—

was not serious about delivering on its

promises.

The lesson from the donor dance with Kenya is

clear. The donor community must tightly condition and closely monitor any direct assistance

to the Kenyan government, bypass the government entirely by disbursing funds directly to

NGOs and private contractors, or limit its programs to food aid and humanitarian relief.

USAID has chosen the second option. But the

Bank and the Fund—as required by their programs and bylaws—disburse funds only to the

Kenyan government. 

A comprehensive USAID strategy for dealing

with such cases as Kenya must also consider the

role of the international financial institutions.

Their programs dwarf those of the U.S. government and represent the “big money” sought

by the Kenya government. Unless these programs are tied more closely to performance,

USAID’s efforts to nurture broad-based reform

will be undercut. 

Source: Barkan 1998.

Box 1.1. Doing the donor dance in Kenya 
Toward this end, the following principles should

guide U.S. foreign assistance and the policies of

other international donors:

1. Levels of foreign assistance must be more

clearly linked to a country’s development

performance and to demonstrations of political will for reform and good governance. 

2. Good performers must be tangibly rewarded.

Reform should be encouraged through predictable and meaningful rewards. When

political leaders demonstrate respect for

democratic procedures and freedoms, and

willingness to follow through on difficult

political and economic reforms, they should

receive steady increases in aid from the

United States and other donors. In addition,

good performers—democracies getting

serious about controlling corruption and

strengthening the rule of law—should be

rewarded in other tangible ways: with debt

relief, with incentives for foreign investment

(including publicity about their good governance), and with trade liberalization—such as

the bilateral free trade agreement recently

concluded with Jordan. 

3. Rewards must be granted for performance, not

for promises that may be repeatedly made and

broken. The only way to exit from the “cat

and mouse” game of international conditionality is to make increases in development

assistance and other economic rewards contingent on what governments actually do

(and keep doing), not on what they say they

will do. Rewards should be structured to lock

into place the institutions and practices of

democracy and good governance. For

example, the European Union requires that

democracy and respect for human rights be

institutionalized before a country can be considered for admission, and these conditions

are included in the accession agreements.

The United States might adopt a similar standard as a requirement for free trade agreements (whether bilateral or as part of a multilateral arrangement). And there should be

clear and credible procedures for suspending

countries that depart from this standard. For

heavily indebted poor countries, debt relief

should be granted only to those that have

demonstrated a basic commitment to good

governance by allowing a free press and civil

society, ensuring an independent judiciary,

and establishing a serious anti-corruption

commission. Even in these cases the debt

should not be forgiven in one fell swoop, but

suspended and retired incrementally (for

example, at 10 percent a year), creating incentives for sustaining good governance.

4. If there is no political commitment to democratic and governance reforms, the United States

should suspend government assistance and

work only with nongovernmental actors. The

only exceptions should be humanitarian relief

and responses to global public health threats,

and even then minimal reliance should be

placed on poorly performing states. USAID

has often used such selective suspensions,

which can have important symbolic and practical effects. The United States typically provides only a small share of the foreign assistance to a government, but a highly visible

one. When the United States ceases development assistance to a government, other

donors take notice (and should be lobbied to

follow suit), as do political and social actors in

the country. To be effective, this approach

must have substantial consequences. Political

leaders must learn that they will pay a heavy

international price for bad governance, forfeiting material resources and becoming more

isolated diplomatically. 

5. The United States should use its voice, vote,

and full influence within the World Bank and

other multilateral development banks to terminate development assistance to bad governments and to focus on countries with reasonably good governance.25 The United States

should extend the principles of its foreign

policy into international development, persuading the international financial institutions to stop financing grossly corrupt, wasteful, and oppressive governments. Much

progress has been made on this front over the

past decade, and the United States should

continue to press for greater accountability

and logic in international lending. Where

there is no demonstrated commitment to

reform, development assistance should go to

nongovernmental actors. Beyond humanitarian and public health assistance, the aid

should be aimed mainly at empowering civil

society to change the regime or improve governance in other ways. Otherwise, even if aid

funds are spent directly by aid agencies or

through NGOs, they will simply substitute

PROMOTING

DEMOCRATIC GOVERNANCE

50

HELPING TO

GENERATE AUTHENTIC,

HOMEGROWN

POLITICAL WILL FOR

BETTER GOVERNANCE

TAKES PATIENCE,

INTELLIGENCE,

COHERENCE,

CONSISTENCY, AND

DEXTERITY
for what corrupt officials are stealing from the

national budget and so will do little to reduce

poverty.

6. The United States must work more closely

with other bilateral donors to coordinate pressure on bad, recalcitrant governments.

Reductions in U.S. aid will do little to change

the behavior of political leaders if their governments continue to receive funding from

other donors that far exceeds the U.S. aid.

Leaders will be most likely to change if they

perceive a coherent message from international donors.

7. Where committed reformers can be identified

within the state, donors should work with

them. The United States should identify and

try to strengthen the hand of reform-oriented

ministers, agency heads, and provincial governors. “Assistance can be provided to

reformers to help identify key winners and

losers, develop coalition building and

mobilization strategies, and design publicity

campaigns.”26 Often, nodes of reformers or

even majorities favoring reform can be found

in branches of the state outside the executive,

such as the legislature, the judicial system, and

other agencies of horizontal accountability

that may be deprived of resources and

authority. Even when reformers lack the

power today to effect far-reaching change,

training and technical assistance may enable

them to expand public constituencies for

reform. Such assistance may also represent an

investment in the future, when a political shift

gives reformers real power. 

8. State capacity must be enhanced, but it makes

no sense to strengthen the capacity of state

structures that lack the political will to govern

responsibly. Building effective state structures

must be a major goal of assistance for democracy and governance, but not until state

leaders are serious about governance. Large

investments in the infrastructure and technical capacity of judiciaries and legislatures will

be largely wasted if there is no political will to

use the enhanced capabilities for more

honest, responsive, and accountable

governance.

9. Donors should encourage the global private

sector to accelerate efforts to incorporate judgments about the quality and transparency of

governance into investment decisions. To

continue pressing this agenda, donors should

institutionalize support for Transparency

International and other global anti-corruption

efforts. An important priority is to improve

comparative measures of the quality of governance and then widely publicize them, to

encourage the private sector to invest in countries that are governing well and adopting

promising reforms. Credible (independent)

and publicly disseminated measures of governance are particularly important for smaller,

more peripheral developing countries, on

which reliable information is slower to reach

investors. The United States might also introduce incentives (such as through the Overseas

Private Investment Corporation and the

negotiation of free trade agreements) to

encourage investment in better-governed

countries.

10. International donors must strengthen the

global rule of law, particularly the capacity to

track down and close off corrupt flows of

money in the international banking system.

The United States must work to institutionalize rigorous global standards and procedures for rapidly identifying and recovering

corruptly acquired assets. It must also work

vigorously to ensure that member states of the

Organisation for Economic Co-operation and

Development (OECD) enforce the new

OECD convention against bribery. The

anti–money laundering tools used to combat

terrorism and drug trafficking can also be

applied to fight international crime and

corruption.

“TOUGH LOVE” FOR DEVELOPMENT

Only if governance becomes more democratic

and accountable will development occur in the

poorly performing countries. And only with a

comprehensive, consistent, “tough love”

approach from the international community is

political will for governance reform likely to

emerge and to be sustained. Once there is evidence of such political will, assistance for democracy and governance must work on many fronts

to develop the institutions that fight corruption

and defend the rule of law, to strengthen and

democratize political parties, and to improve the

functioning of representative and administrative

institutions. Where political will for decent

PROMOTING

DEMOCRATIC GOVERNANCE

51

ONLY WITH A

COMPREHENSIVE,

CONSISTENT, “TOUGH

LOVE” APPROACH FROM

THE INTERNATIONAL

COMMUNITY IS

POLITICAL WILL FOR

GOVERNANCE REFORM

LIKELY TO EMERGE
governance is lacking, there is no higher priority

for development than to generate it and probably

no way to do so except through aid to civil

society. But where democratic governance

reforms do take place, the international community must back them with more than words and

more even than assistance for democracy and

governance. 

Countries and leaders that improve governance

must realize rapid, tangible rewards for the

progress they make and the risks they take. Good

performers—and these will be mainly democracies fighting corruption—must see their countries

move onto a different path, one where average

incomes rise, where the quality of daily life visibly

improves, and where resources flow in to improve

health, education, and public infrastructure. 

Although some democracy and governance programs have been in place for some time, sustained

efforts to promote democratic governance are still

at a relatively early stage. But some lessons are

clear. Strategies for promoting democracy and

good governance must focus relentlessly on generating and sustaining political will for systemic

reform, with diplomacy and aid working hand in

hand. Donors must work with one another.

Experience must be shared across borders. And

democracy and governance objectives must

inform and inspire development assistance in

every sector. To have an impact on the difficult

and seemingly intractable cases, the United States

and other donors must do more, more coherently, across a range of objectives, and must sustain

the effort (with periodic assessment and adaptation) over a long period. This will require a

patience and long-term perspective to which

Americans are unaccustomed and which does not

come easily in a democracy with short electoral

cycles. 

NOTES

1. Karatnycky 2002; Freedom House 2002.

2. The first long wave of global democratic expansion ended

with the breakdown of many democracies between World Wars I

and II, and the post–World War II wave of democratization

ended with the “second reverse wave” that began in the early

1960s. See Huntington 1991.

3. Freedom House rates as “free” the states with an average

score between 1 and 2.5 on the combined 7-point scale of political rights and civil liberties. See Karatnycky 2002.

4. Of the 71 regimes not rated as democracies by Freedom

House, 46 have regular multiparty elections and only 25 are politically closed in this respect. See Table 1 in Diamond 2002.

5. Franck 1992; Rich 2001.

6. Carothers 2002.

7. For theoretical perspectives on democratic consolidation,

see Linz and Stepan 1996; Diamond 1999; Schedler 2001.

8. For details on the twin scales, see Freedom House 2002.

9. The classification of countries as democracies in this discussion follows the Freedom House’s annual survey. See Freedom

House 2002.

10. For more discussion of the “democracy gap” in Muslim

majority (especially Arab) countries, see Karatnycky 2002. 

11. Civilian control of the military is also necessary. For a

more detailed conceptualization, see Diamond 1999.

12. See Diamond 1999 for a summary of some of the evidence from public opinion surveys in developing and postcommunist countries.

13. This term (rather than “transitions to democracy”) was

carefully chosen to capture the indeterminacy of the process. See

O’Donnell and Schmitter 1986.

14. The Economist. 2001. “The Latinobarometro Poll: An

Alarm Call for Latin America’s Democrats.” 28 July.

15. Lagos 2001.

16. Chu, Diamond, and Shin 2001.

17. Blair and Hansen 1994.

18. Chao and Myers 2001.

19. Lippman 2001. 

20. USAID 2000.

21. Levitsky and Way 2002. 

22. Brinkerhoff 1999; Brinkerhoff 2000.

23. Brinkerhoff 2000, p. 242.

24. Collier also calls this conditionality “an agency of

restraint.” See Collier 1999, p. 327.

25. For a similar approach, see Collier 2002.

26. Brinkerhoff 2000, p. 249.

BACKGROUND PAPER

Diamond, Larry. 2002. “Democracy and Governance.”

Available at www.usaid.gov/NatsiosReport/backgroundpapers

REFERENCES

Barkan, Joel D., and Njuguna Ng’ethe. 1998. “Kenya Tries

Again.” Journal of Democracy 9 (2): 32–48.

Blair, Harry, and Gary Hansen. 1994. “Weighing in on the Scales

of Justice: Strategic Approaches for Donor-Supported Rule of

Law Programs.” Assessment Report 7. U.S. Agency for

International Development, Center for Development

Information and Evaluation, Washington, D.C.

Brinkerhoff, Derick W. 1999. “Identifying and Assessing Political

Will for Anti-Corruption Efforts.” Working Paper 13. U.S.

Agency for International Development, Implementing Policy

Change Project, Washington, D.C. [http://www.usaid.gov/

democracy/acmodule/Wp-13-ms.pdf].

———. 2000. “Assessing Political Will for Anti-Corruption

Efforts: An Analytic Framework.” Public Administration and

Development 20 (3): 239–52.

Carothers, Thomas. 1999. Aiding Democracy Abroad: The

Learning Curve. Washington, D.C.: Carnegie Endowment for

International Peace.

———. 2002. “The End of the Transition Paradigm.” Journal of

Democracy 13 (1): 5–21.

Carter, Linda. 2001. “Linking USAID Democracy Program

Impact to Political Change: A Synthesis of Findings from

Three Case Studies,” revised fourth draft (unpublished). 8

August. USAID, Washington, D.C.

Chao, Linda, and Ramon Meyers, eds. 2001. The First Chinese

Democracy: Political Life in the Republic of China on Taiwan.

Baltimore, Md.: Johns Hopkins University Press.

PROMOTING

DEMOCRATIC GOVERNANCE

52
Chu Yun-han, Larry Diamond, and Doh Chull Shin. 2001. “How

People View Democracy: Halting Progress in Korea and

Taiwan.” Journal of Democracy 12 (1): 93–145.

Collier, Paul. 1999. “Learning from Failure: The International

Financial Institutions as Agencies of Restraint in Africa.” In

Andreas Schedler, Larry Diamond, and Marc F. Plattner, eds.,

The Self-Restraining State: Power and Accountability in New

Democracies. Boulder, Colo.: Lynne Rienner.

———. 2002. “Making Aid Smart: Institutional Incentives

Facing Donor Organizations and Their Implications for Aid

Effectiveness.” Paper presented at the Forum Series on the

Role of Institutions in Promoting Economic Growth, U.S.

Agency for International Development, Bureau for Economic

Growth and Trade, Office of Emerging Markets, 25 February,

Washington, D.C. [http://www.usaid.gov/economic_growth/

forum-series/f2-collier-keynote.pdf].

Diamond, Larry. 1999. Developing Democracy: Toward

Consolidation. Baltimore, Md.: Johns Hopkins University Press.

———. 2002. “Elections without Democracy: Thinking about

Hybrid Regimes.” Journal of Democracy 13 (2): 36_50.

Eliot, Thomas Stearns. 1948. Notes toward the Definition of

Culture. London: Faber and Faber.

Franck, Thomas. 1992. “The Emerging Right to Democratic

Governance.” American Journal of International Law 86 (1):

46–91.

Freedom House. 2002. Freedom in the World 2001–2002.

Somerset, N.J.: Transaction.

Huntington, Samuel P. 1991. The Third Wave: Democratization in

the Late Twentieth Century. Norman: University of Oklahoma

Press. 

Karatnycky, Adrian. 2002. “The 2001 Freedom House Survey.”

Journal of Democracy 13 (1): 99–112.

Lagos, Marta. 2001. “How People View Democracy: Between

Stability and Crisis in Latin America.” Journal of Democracy

12 (1): 137–45.

Levitsky, Steven, and Lucan Way. 2002. “The Rise of Competitive

Authoritarianism.” Journal of Democracy 13 (2): 51–65.

Linz, Juan J., and Alfred Stepan. 1996. Problems of Democratic

Transition and Consolidation: Southern Europe, South America,

and Post-Communist Europe. Baltimore, Md.: Johns Hopkins

University Press.

Lippman, Hal. 2001. “Linking Democracy and Development: An

Idea for the Times.” USAID Program and Operations

Assessment Report 29. U.S. Agency for International

Development, Center for Development Information and

Evaluation, Washington, D.C.

O’Donnell, Guillermo, and Philippe Schmitter. 1986. Transitions

from Authoritarian Rule: Tentative Conclusions about

Uncertain Democracies. Baltimore, Md.: Johns Hopkins

University Press. 

Rich, Roland. 2001. “Bringing Democracy into International

Law.” Journal of Democracy 12 (3): 20–34.

Schedler, Andreas. 2001. “What Is Democratic Consolidation?”

In Larry Diamond and Marc F. Plattner, eds., The Global

Divergence of Democracies. Baltimore, Md.: Johns Hopkins

University Press.

USAID (U.S. Agency for International Development). 2000.

Decentralization and Democratic Local Governance

Programming Handbook. Technical Publication Series. Center

for Democracy and Governance. Washington, D.C.

PROMOTING

DEMOCRATIC GOVERNANCE

53
D RIVING

E CONOMIC

G ROWTH

CHAPTER 2

T HE UNITED STATES HAS BEEN GROWING ECOnomically ever since 1776, while most of the

world has not. Per person, economic growth in

the United States has averaged only about 1.7

percent a year.1 But over 225 years this growth has

caused a 44-fold increase in per capita income.

Thus high U.S. living standards are explained by

the persistence of growth, not its speed. Sound

institutions and economic governance allow individuals to become wealthier and more productive

over time, secure that the fruits of their efforts will

not be arbitrarily taken from them.

The challenge for developing countries is to

promote growth long enough to achieve prosperity. In many ways it is easier for them to do so than

it was for the United States. Many productivityenhancing tools—discovered during the course of

American growth—can now be easily acquired

and applied. They do not need to be reinvented.

But political, ethnic, tribal, and religious rivalries—and predatory governments—impede

coherent, sound economic policies supported by

the rule of law. Such policies offer the best hope

for rapidly reducing poverty.

Effective economic governance makes development possible. Growth policies can be made to have

the benefits reach the poor. But in most developing

countries the real challenge is achieving any kind of

sustainable growth—and over the long term, a

growing economy is required to reduce poverty. At

least for the next generation, U.S. efforts to reduce

poverty in developing countries must focus on promoting growth in developing economies. 

This chapter examines long-run patterns of economic growth in developing countries, identifying

reasons for sustained growth in certain countries—and for its absence in others. Supporting

agriculture is crucial for many developing countries and for many poor people. In addition, integrating with the world economy—through trade

and foreign investment—helps economies become

more competitive. Ultimately, however, a nation’s

productivity is determined by the productivity of

its workforce—and their success is intertwined

with the quality of the business climate.

NEW THINKING ON DRIVERS OF GROWTH

Economists have conceptualized the process of

economic growth around three basic models:
DRIVING

ECONOMIC GROWTH

55

LACK OF PROTECTION

FOR INTELLECTUAL

PROPERTY RIGHTS WILL

SLOW THE SEARCH FOR

NEW KNOWLEDGE—AND

HENCE ECONOMIC

GROWTH

specialization and trade, investment in machines,

and increasing returns to knowledge. At different

points in the history of economic thought, each

model has been advocated as the fastest road to

riches. Yet all three have a contribution to make.

Adam Smith was highly optimistic about prospects

for raising living standards through the higher

labor productivity that results from specialization.

Because specialization requires trade, low trade

barriers are required so that manufacturers can

access larger markets. Competition—the invisible

hand—then induces greater specialization, raising

labor productivity and living standards.

This trade-intensive strategy for economic growth

requires many transactions, often at long distances

and over time. Thus institutions that defend

property rights and lower transaction costs, such

as the rule of law, have come to be seen as the

foundations of a market economy. This is why

economic governance is considered an essential

starting point for economic growth, not something to be tackled later.

The success of the industrial revolution in the 19th

century, first in Britain and then in France and

Germany, added technological change to strategies

for growth. Such change was seen as embodied in

machines using mechanical power. It was recognized that not all countries could invent and

produce machines. But all were free to import

them and reproduce the factory system that was

making Europe so rich and powerful. This “capital

fundamentalism” stressed accumulating savings

and investing in machines that embodied the

latest technologies. Investment and production

did not have to rely on the profit motive of private

investors, but instead could be directed by national planners. This model was used for German

industrialization in the late 19th century and

Soviet industrialization in the mid-20th century.

But the “machine model” could go only so far. It

raised productivity but did not create selfsustaining growth. The machines involved were

good at producing a fixed set of products but not

at adapting to changing technologies and consumer desires. Only markets and capitalism can

accomplish these tasks. With accelerating scientific innovation in advanced countries, productivity growth came to depend more on knowledge than on machines. Economies such as

Brazil, Israel, the Republic of Korea, and Taiwan

had institutions that could support the absorption of Western knowledge—rather than just

machines—and moved to modern economic

growth. Economies without these institutions,

including the Soviet bloc, nearly all of Africa, and

most of the Islamic world, could not. As a result,

they have slipped into economic stagnation or

decline. Some have slipped even further, into

chaos and conflict.

The model of economic growth that explains this

performance is based on increasing returns to

knowledge. Instead of diminishing returns as

more of the same machines are used in a given

labor force, returns to knowledge increase because

of spillovers to additional users. Large payoffs

from new knowledge, especially where there is

patent protection, encourage entrepreneurs to

develop it, in some cases by adapting findings from

research universities and research centers.

Economic growth is now seen as an endogenous

response to incentives throughout the economic

system. The modern concern for enforcing intellectual property rights as well as property rights for

land, goods, and financial assets is easy to understand from this perspective. Lack of protection for

intellectual property rights will slow the search for

new knowledge—and hence economic growth.

Self-sustaining growth is difficult for developing

countries because generating knowledge and

developing sophisticated human capital depend at

least as much on institutions that ensure strong

property rights and low transaction costs as on

specialization and trade. The belief that there are

shortcuts to the gradual evolution of such institutions is now seen as mistaken. For many developing countries, the quest for growth is quite elusive.2

THE RECORD OF GROWTH

Economists have developed myriad models to

explain the empirical record of growth. The usual

prescriptions—low inflation, macroeconomic stability, openness to trade, good institutions, government investment, democracy—can all be

shown to contribute to growth in a certain set of

countries or during a certain period. But they are

far from a complete explanation.

Specific factors also influence economic growth.

Unstable prices for commodity exports slow

growth. Avoidance of urban bias in education

speeds it up. Trade openness was bad for growth

in the 1930s and 1940s, of little importance in the
1950s and 1960s, and highly significant in explaining rapid growth in the 1970s and 1980s.

Rapid growth in the national stock of capital goods

(such as infrastructure and industrial machinery)

can lift a developing country onto the first rung of

the development process. But eventually, total

factor productivity—efficiency in using capital,

labor, and other inputs—becomes the main source

of higher incomes. This realization led to the

“knowledge model” of development described

above. Difficulties in moving to the “knowledge

model” are evident in the growth record of the

1990s. More than a third of the 108 developing and

transition economies had lower per capita incomes

in 2000 than in 1990. The decade saw some of the

fastest growth ever in global output and international trade, indicating that the external environment was favorable to growth. Thus sources of

poor performance came from within the countries.

None of the 38 poor performers were affected by

East Asia’s financial crisis in the late 1990s. In fact,

none were in Asia. Nearly half (18) had been part

of the Soviet Union. Africa accounted for another

14 countries. And despite reasonable economic

performance for the region as a whole, 4 countries

in Latin America and the Caribbean suffered

decade-long declines.3

Such long-term economic problems point to

deep-seated failures to establish the core elements required for modern economic growth:

provision of public goods and social infrastructure, of a stable macroeconomic environment,

and of a favorable business climate. Why do some

governments fail to provide these essentials for

growth—or even actively undermine them?

Modern political economy has tried to answer

these questions, but with only modest success.

GOOD ECONOMIC GOVERNANCE BOOSTS

ECONOMIC GROWTH

Institutions and rules have to be in place to sustain

growth once it starts. To encourage competitive

markets, governments must overcome vestiges of

mercantilism and protectionism that stifle market

activity and prevent new entrants into the

economy. Good economic governance, founded

on a predictable and fair system of law, is one way

to do so. Since the times of John Locke, economic development has been linked to the protection

of individual rights and especially of property.

In an empirically rich study of this linkage,

Hernando de Soto shows how, without a legally

integrated property system, poor people in developing countries cannot convert their work and

savings into capital.4 Their property, both

immoveable and moveable, cannot be pledged as

collateral for loans that would allow them to turn

their assets into capital, and their assets have no

representation—such as a title pledged against a

mortgage. De Soto calls this lack of representation

“dead capital.” Government has a crucial role to

play in creating this system of representation so

that capital can be mobilized to support investment and growth. Without national capital

markets, economic growth cannot be sustained

even with development assistance and foreign

direct investment.

Good economic governance is the result of strong

public institutions, with an important role for individuals, civil society organizations, and business

and interest groups. Where fairness and equity

exist to a reasonable degree, with an open society

allowing for healthy competition among multiple

interests, there is a greater possibility of developing

policies for the greater good. Yet in many developing countries powerful interest groups impede

economic activity by marginalizing large, potentially productive segments of society that lack legal

and political means to affect public policy.

Democratic processes, equitable and broadly based

popular participation, and transparent laws and

regulations are important for developing good

governance and sound economic policies. They

also result in higher levels of development.

Sound economic governance encourages private

individuals and groups to engage in economic

activities such as taking risks, investing capital,

and, ultimately, exporting goods and services

(figure 2.1). To encourage exports, governments

must at least provide supportive, predictable laws

and regulations. And as discussed below, the

same enabling environment that supports private

sector–led growth encourages foreign direct

investment—because a safe, relatively unrestrictive policy environment encourages foreign as

well as local investment.

GROWTH IS GOOD FOR POOR PEOPLE

Poverty is closely linked to low economic productivity. Low productivity results from supply factors

(such as limited availability of land, skills, or approDRIVING

ECONOMIC GROWTH

56

SOUND ECONOMIC

GOVERNANCE

ENCOURAGES PRIVATE

INDIVIDUALS AND

GROUPS TO ENGAGE IN

TAKING RISKS,

INVESTING CAPITAL, AND

EXPORTING GOODS AND

SERVICES
priate technology) as well as demand factors (such

as low prices for commodities, limited availability

of productive jobs, and poor access to urban

markets). Local markets can ease both types of

shortcomings, providing an affordable and accessible arena of exchange for goods and services produced by poor people. Without market exchanges

it is almost impossible to escape poverty.

The importance of market exchanges illuminates

the role of governance in causing and easing

poverty. Bad governance means poorly defined

property rights, high transaction costs, large economic risks, and outright theft. Markets disappear

in such environments—and with them, poor

people’s hopes for escaping poverty.

Other factors also affect poverty. Cultural and

religious values are often high on the list. At least

in the short run, people’s attitudes, general levels

of trust, traditions, religious taboos, preferences

for leisure, and the like can impede rapid change.

Research is now under way to quantify how value

systems and world views affect growth.6 And once

the links are better understood, they can be incorporated in models of development.

New data eliminate any doubt that rapid economic growth reduces poverty.5 In all but a few

countries economic growth has increased per

capita incomes for the poorest 20 or 40 percent of

the population. Yet despite rapid global growth

since World War II, the world still has a large—

and in some regions, growing—number of poor

people. Are these people forever trapped in lowgrowth environments? Are there circumstances

where economic growth does not reach the poor?

Fortunately, it is possible to understand the relationship between reductions in poverty and

changes in the distribution of income, and to

strengthen the link between economic growth

and poverty alleviation.

Income distribution matters because it reflects

and affects how growth changes the lives of poor

people. The sectors in which growth originates and

the initial distribution of income help shape how

well poor people connect to economic growth (box

2.1). In countries where the gap between the

incomes of the poorest 20 percent and the richest

20 percent is less than twice the average per capita

income—that is, where the income gap is relatively small—growth in both agricultural and nonagricultural productivity improves the distribution

of income. Growth in agricultural productivity is

slightly but consistently more effective in generating incomes for all people.7 Rising agricultural

incomes spur growth in nonagricultural rural production as well. In the long run, the agriculture

sector will absorb a smaller share of productive

resources, and nonagricultural job opportunities

will be more important for poor people. 

Outcomes are strikingly different in countries

where the income gap is more than twice the

average per capita income. In such countries the

poorest fifth of workers are disconnected from the

economy and so do not benefit from growth in

agriculture or nonagriculture. Instead higher agricultural productivity favors the rich—undoubtedly because of an unequal distribution of assets,

particularly land.

Thus the distribution of assets matters. It is

almost impossible to understand the impact of

economic growth on income distribution and of

income distribution on the rate and distribution

of economic growth without considering the distribution of assets in society. Assets are likely to be

distributed even more unequally than income.

Research in Latin America has linked poor people’s

slow income growth to the unequal distribution of

land and education.8 In addition, the higher is the

initial poverty rate, the less effective is nonfarm economic growth in reducing poverty. Recent research

has also shown that the composition of economic

growth matters for poverty reduction in India:

DRIVING

ECONOMIC GROWTH

57

WITHOUT MARKET

EXCHANGES IT IS ALMOST

IMPOSSIBLE TO ESCAPE

POVERTY

Good governance boosts economic growth

Note: Per capita GDP adjusted for purchasing power parity (PPP).

Source: For index values, Transparency International; for growth rates,

World Bank. Hannon and Rhee 2002.

–4

–2

0

2

4

Low growth

(24 countries)

3.0

3.3

3.8

High growth

(23 countries)

Medium growth

(24 countries)

Average corruption index for countries grouped by

growth in per capita PPP GDP, 1990–1999

FIGURE 2.1
poverty has persistently responded far more to

rural than to urban growth. Both theoretical and

empirical work, then, suggest that inequalities may

persist and that certain inequalities particularly

limit opportunities for the poor.

AGRICULTURAL GROWTH IS EVEN BETTER

FOR POOR PEOPLE

In recent years many economists have ignored

agriculture, arguing that market forces will favor

the most appropriate sectors. Moreover, agriculture plays a shrinking role as economies make the

structural transformation to urban-based activities

and to industry and services. But in many

economies agriculture is crucial for connecting

poor people to economic growth. Most of the

world’s poor people live in or come from rural

areas. Rising agricultural productivity offers economywide benefits, the first of which is cheaper

food for urban residents. Pursuing agricultural

strategies in line with market realities and institutional capabilities would provide many benefits to

developing countries, including:

• Better access to technology. Agricultural

exports often pay for imports of foreign technology, mostly machines. 

• Increased capital formation. Income from agriculture can finance investments inside and

outside the sector. Although savings may be

less productive in government than private

hands, public investments in infrastructure

and public goods can raise the profitability of

private investment in agriculture. If agriculture is more easily taxed than nonagriculture

in the early stages of development, it may

provide revenue for this important initial

stage of public investment.

• Better social outcomes. Rural education levels

are affected by growth in agricultural productivity and rural incomes. Such education can

directly increase farm productivity. It can also

make moving to cities much easier and more

economically rewarding for children who

leave the farm.

• A more supportive environment for growth.

There are many reasons economies produce

less than they could. Economic growth is

slowed by weak institutions, ineffective

DRIVING

ECONOMIC GROWTH

58

IN MANY ECONOMIES

AGRICULTURE IS

CRUCIAL FOR

CONNECTING POOR

PEOPLE TO ECONOMIC

GROWTH

In recent decades the main concern about

global economic growth has been that the

international distribution of income is worsening—often interpreted to mean that the rich

are getting richer and the poor are getting

poorer. Economic growth can produce this

result, but it is empirically unusual. More often,

a worsening income distribution means that

poor people’s incomes rise slower than rich

people’s.

This issue is important, because an unequal

income distribution can create class conflict.

But it is also a complex issue, because an

increase in inequality is not necessarily undesirable. The important issue is the source of the

inequality—whether it is wealth creation or

exploitation by the rich.

Growth in Western Europe illustrates the issue.

A thousand years ago the global distribution of

income was much more equal: almost everyone

was poor. Then Western Europe began developing institutions and technology that resulted

in steadily increasing per capita incomes. (The

timing of the region’s rise is the subject of

debate, with its average income moving ahead

of the rest of the world sometime between 1000

and 1750.) From about 1500 onward this

wealth creation caused the world income distribution to become increasingly unequal.

Bourguignon and Morrisson (2001) estimate

that world income inequality increased steadily

between 1820 and 1970, then fell. Dollar and

Kraay (2002) conclude that world income

inequality peaked around 1975 and has been

declining since. (The largest factor in this

decline has been rapid growth in China and

India, which Dollar and Kraay attribute to

these countries’ increased participation in the

global economy.)

Beyond the issue of wealth creation is the issue

of the proper measure of inequality. A broader

measure of inequality—one that takes into

account life expectancy and access to education—would be preferable and would show

more favorable trends than one that relies solely

on income.

Finally, the focus on income distribution is

often a diversion from a more important question: what is happening to the real incomes of

poor people? This issue is more relevant for

reducing deep poverty.

Source: Maddison 2001; Bourguignon and

Morrisson 2001; Dollar and Kraay 2002.

Box 2.1 Income inequality is declining—thanks to the global economy
economic policies, political instability, and

lack of economic freedom. How changes in

agricultural productivity affect these growth

determinants is a matter of much speculation

and little empirical evidence. Still, evidence is

accumulating on two points. Unstable prices

for agricultural products may slow investment. Unstable politics—in the form of restless rural populations challenging political

leaders if they are left behind during rapid

economic growth—may have the same result.

To continue to be good for poor people, agricultural growth has to be sustainable. As global population and income grow, agriculture must be put

on a sustainable footing. Government prices and

policies are key determinants of how ecosystems

are treated. They direct choices on what to

consume and how to manage lands and resources.

A farmer deciding what crops to plant and what

chemicals to use, or whether to increase cultivated

area by clearing adjacent forests, is guided by calculating commodity and pesticide prices as well as

other farm costs. Similarly, economic factors drive

a developer’s choice on where to locate housing or

a factory or a fisherman’s decision on where to fish.

The institutions of governance are also important

for managing the environment. These institutions control access and enforce private property

rights—to land, water, and forests. They also

help in managing natural assets not suited to

private ownership, such as air. Where the institutions of governance are effective, the management

of natural assets is also effective. But where they

are weak—or captured by narrow interests—

aquifers are depleted, forests are overexploited,

and pesticide and fertilizer use is excessive.9

AGRICULTURAL DEVELOPMENT BOOSTS

ECONOMIC GROWTH

In many countries agricultural development has

made crucial contributions to economic growth,

and investments in agriculture have had large economic returns. Lower food prices, stimulated by

rapid technological change in agriculture, have

raised living standards directly (especially for

poor people, who spend a large share of their

household budgets on food) and indirectly (by

keeping real wage costs low in the industrial

sector, fostering investment and economic transformation). Some argue that the benefits of low

food prices can be obtained as easily by importing food as by investing in domestic agriculture.10

But a pure trade strategy risks losing other benefits of agricultural modernization.

These benefits include the backward and forward

linkages that connect cities with the countryside.

Without such linkages societies are more vulnerable to fluctuations in world markets, inequities

between rural and urban inhabitants, underemployment in rural areas, and excess migration.

The returns to strong rural-urban linkages include

a relatively smooth structural transformation—as

in Taiwan, in contrast to Thailand. Surprisingly,

given how long this debate has been going on,

there are still no satisfactory tests of the impact of

changes in agricultural productivity on the mechanisms of “catch-up” growth outlined above, or

on the value of rural-urban linkages. 

RURAL GROWTH REDUCES POVERTY

Rural growth connects poor people to economic

growth. Much progress has been made over the

past decade in identifying how this happens.

Foremost in this effort is John Mellor’s model of

agricultural growth, rural employment, and

poverty reduction, which emphasizes the role of

nontradable goods and services in moving underemployed workers from agriculture into the nonagricultural rural economy.11 This model emphasizes rural incomes as the driver of the demand for

these goods and services and describes how this

economy is linked to urban demand—especially

when it is driven by rising incomes among

workers in labor-intensive export industries.

Mellor’s model is the first to explicitly recognize

this connection between manufactured export performance, the role of the nontradable sector in the

rural economy, and subsequent reductions in

poverty. Thus the model explains why countries

with rapid growth from labor-intensive manufactured exports and substantial agriculture sectors

have had such strong records of poverty reduction.

Yet policymakers and donors often ignore the

nontradable sector precisely because so much

emphasis is placed on the importance of exports

and open economy strategies for economic growth.

Retargeting public spending to support a more balanced strategy will not sacrifice overall growth performance, and it will help reduce poverty.

Two other components of the relationship between

rural growth and poverty reduction should be

DRIVING

ECONOMIC GROWTH

59

IN MANY COUNTRIES

INVESTMENTS IN

AGRICULTURE HAVE HAD

LARGE ECONOMIC

RETURNS
noted. First, political commitments to rural growth

imply a more balanced political economy, with less

urban bias than historically occurred in most industrial countries. In recent years many developing

countries have reduced macroeconomic biases

against agriculture, including overvalued currencies, repressed financial systems, and exploitive

terms of trade. Further progress might be expected as democracy spreads and empowers rural

populations in these countries.

The second component is the linkage between

urban and rural labor markets, often in the form

of seasonal migration and remittances. There is no

hope of reducing rural poverty without rising real

wages for rural workers. Rising wages have a

demand and a supply dimension, and migration

can affect both in ways that support higher living

standards in both parts of the economy. Ruralurban migration also raises other issues depending on whether it is driven by the push of rural

poverty or the pull of urban jobs. Either way, such

migration has clear implications for food security, with urban markets becoming more important

in supplying food for a country’s people. 

Whether the rural economy or the world market

is the best source of this supply is a basic strategic issue for economic policymakers. Countries

should focus their growth strategies on what they

do best, and that frequently means agriculture,

not high-tech manufacturing. That brings the

discussion to the importance of trade—and the

investment it encourages—in promoting growth.

MORE TRADE AND INVESTMENT MEAN

FASTER GROWTH

Success in the global economy comes to countries

that maintain fiscal discipline, open their borders to

trade, privatize inefficient state enterprises, deregulate their domestic markets and invest in the

health and education of their people.

—U.S. President George W. Bush

January 2002 

Globalization—the economic integration of the

world’s countries—has been a defining force of

the past decade. It offers unprecedented opportunities to direct resources toward development.

During the 1990s the exports and imports of

developing countries jumped from less than $1.9

trillion to nearly $4.6 trillion.12 Private capital

flows grew even more dramatically, with net

foreign direct investment in developing countries

rising from $24 billion to $184 billion.13 Countries

that have experienced growth in trade and investment have achieved correspondingly faster economic growth.

Yet globalization involves more than just increasing production. It also expands choices and

creates opportunities for consumers and producers. As global competition pressures governments

to reduce barriers and promote better economic

and social conditions, globalization paves the

way to reform. Governments realize that they

must not only encourage trade and investment

but also establish strong institutions that support

markets and provide social assistance to people in

need.

On balance, globalization and regional integration

have benefited the countries involved regardless

of their stage of development. These benefits have

been identified in studies by the World Bank and

other international organizations, U.S. government agencies, think tanks, and academics.

Globalization has been a boon for countries

willing and able to integrate with global

markets—particularly developing countries that

have adjusted prevailing conditions and mindsets

(figure 2.2).14 Countries resistant to globalization

or lacking capacity to develop investment and

trade have not fared as well. Contrary to widespread expectations, income gaps have shrunk

among countries that have integrated with global

markets. Moreover, global income equality has

improved in recent years (figure 2.3). 

DRIVING

ECONOMIC GROWTH

60

GLOBALIZATION EXPANDS

CHOICES AND CREATES

OPPORTUNITIES FOR

CONSUMERS AND

PRODUCERS

Market integrators grow faster

Note: Countries classified by USAID. Per capita GDP adjusted for

purchasing power parity (PPP).

Source: World Bank. Hannon and Rhee 2002.

6

–2

0

2

4

Highincome

countries

Normal

integrators

Slow

integrators

Oil

exporters

Average annual growth 

in per capita PPP GDP (%), 1990s

FIGURE 2.2

Fig. 2.2

High-income countries 3.58

Normal integrators 5.73

Slow integrators -1.57

Oil exporters 2.15
In 1999 UN Secretary-General Kofi Annan noted

that “the main losers in today’s very unequal

world are not those who are exposed to globalization, but those who have been left out.”15

Similarly, the November 2001 World Trade

Organization ministerial conference in Doha,

Qatar, revealed that most developing countries

want more globalization, not less. The challenge

for developing countries left out is to enhance

their capacity to participate in and benefit from

the opportunities of the global market.16

Poor people in globalizing countries are less poor

than they were a decade ago.17 Higher income

inequalities, as in China, have been caused more

by factors unrelated to globalization (such as

regional differences and social and education variables) than by lower incomes among poor people.

In fact, incomes have increased among the poorest

20 percent of the world’s people, though less

rapidly than among other population groups.

Increased trade usually accompanies faster growth

and does not systematically change household

income distribution, so it is generally associated

with increased well-being among poor people.

Countries are better able to enter global markets if

democracy and the rule of law are in place and corruption and monopolistic policies are held in check

(figure 2.4). There is also a strong correlation

between freedom and growth, in keeping with the

typology that normal integrators are freer than slow

integrators. As a result globalization has been a significant force not only in reducing inequality

between states but also in reducing poverty.18

Globalization favors participants who liberalize

trade—particularly those with industrial and

manufacturing capacity—and leaves behind those

who do not. In the 1960s the East Asian “tiger”

economies (Hong Kong, Republic of Korea,

Singapore, Taiwan) began to change their economic policies and become more integrated with

global markets. Other economies inside and

outside the region soon followed suit, often with

impressive results. During the 1980s and 1990s

many other countries—including Chile, China,

India, Mexico, Uganda, and Vietnam—also recognized the correlation between freer trade and

economic growth. In addition, the fall of the

Berlin Wall in 1989 caused a surge in integration

of regional and global markets. The gains from

lifting the remaining restrictions to trade are nevertheless enormous: on the order of $250 billion

a year, $108 billion of that developing countries,

with 60% from developing country liberalization

and 40% from rich country liberalization.19 Trade

can thus be a powerful engine of growth. Over

time it has become clear that successful globalization requires more than just liberalizing trade:

other essential efforts include liberalizing domestic commodity and capital markets, establishing

the rule of law to enforce property rights, and

implementing effective regulation. (Liberalizing

capital markets too soon and too fast creates other

problems, however, indicating the need for a

well-designed approach.)

Following the September 11, 2001, attacks on the

United States, a close look at countries harboring

DRIVING

ECONOMIC GROWTH

61

Greater freedom means greater integration 

with global markets

Note: Countries classified by USAID. GDP adjusted for purchasing

power parity (PPP).

Source: For Freedom House scores, Freedom Foundation; for GDP, 

World Bank. Hannon and Rhee 2002.

High-income

countries

Normal

integrators

Slow

integrators

Combined average 

Freedom House score, 2000

Not

free

Free Low

income

High

income

GDP (PPP 

$billions), 2000

1.8 $830

$314

$57

3.0

4.6

FIGURE 2.4

Global income inequality, 

up then recently down

Source: Dollar and Kraay 2002.

0 25 50 75 100

Mean log deviation between a typical individual

income and the average per capita income (%)

1820 42.2

1850 48.5

1870 54.4

1890 61.0

1910 66.8

1930 69.0

1950 77.5

1970 88.1

1990 81.4

1995 77.7

FIGURE 2.3
terrorists shows that their economies suffer not

from the excesses of globalization, but from a lack

of it. Some, such as Algeria and Pakistan, are

among the most closed to trade in the world (figure

2.5). Many, including Iran, Iraq, Jordan, Qatar,

Saudi Arabia, Syria, and the United Arab Emirates,

saw real per capita incomes decline between 1985

and 1998.20 These countries also have limited political freedoms and weak human rights, which have

been linked to poor economic performance.

A recent survey of nine Middle Eastern countries

concluded that a lack of trade openness and

significant barriers to private sector development

limit potential for foreign trade. Many of the

barriers to private sector development are internal,

ranging from government red tape and obstacles

to business or product registration to weak or

nonexistent capital markets.21 Indeed, many

Middle Eastern governments have rejected free

trade and open markets as a matter of choice.

Relative to their Asian counterparts, most of which

started from a lower economic base, Middle

Eastern countries have poor productivity, weak

private sector development, scarce job creation,

limited trade (aside from oil), and low incomes.

Excluding fossil fuels, the Arab world exports less

than Finland, a country of 5 million inhabitants.22

The region’s poverty and lack of opportunity have

undoubtedly contributed to the growth of radical

anti-Western terrorist movements. But this

poverty cannot be blamed on the West or on

globalization. Political elites in these countries

have chosen to reject globalization—and in their

efforts to shield themselves from Western values

or the political reaction to those values, they reject

integration as well.

Jordan shows how that can change. Under the

new king’s leadership, reforms were pushed

through to enable the fastest accession ever to the

World Trade Organization. Manufacturers

thought that compliance would force their products off the shelves. Farmers thought that their

products would not compete in Europe and that

European farmers would flood Jordanian

markets. The concerns were unfounded. Indeed,

foreign investors are now coming in to take

advantage of Jordan’s high-tech labor force and

possibly turn the country into an Arab silicon

valley. Opening to the West has also included a

U.S.-Jordan free trade agreement.

WHICH COUNTRIES ARE SLOW

INTEGRATORS—AND WHICH ARE NORMAL?

Two indicators are used to classify countries as

slow or normal integrators with the global

economy:

• The speed of each country’s trade integration

is measured by the change since 1980 in the

share of merchandise trade in GDP (adjusted

for purchasing power parity, or PPP).

• The depth of trade integration is measured by

the share of manufactured exports in total

merchandise exports in 2000.

Of 111 developing countries, 65 are slow integrators and 46 are normal (table 2.1).23 About 87

percent of low-income countries are slow integrators. In 1999 slow integrators contained 22

percent of the world’s population but accounted

for just 9 percent of global GDP, and in 2000 they

accounted for only 5 percent of global merchandise trade. Sub-Saharan Africa is by far the least

integrated region, with 37 of 39 countries considered slow integrators. In 1999 the region’s slow

integrators contained 10 percent of the world’s

population, but in 2000 they accounted for just 1

percent of global GDP. The Middle East and

North Africa and Central Asia also have more

slow than normal integrators.

Among normal integrators annual growth in per

capita GDP rose from less than 2 percent in the

1980s to more than 3 percent in the 1990s. But

DRIVING

ECONOMIC GROWTH

62

MANUFACTURED

EXPORTS PLAY A KEY

ROLE IN ECONOMIC

GROWTH

Open trade means faster economic growth

Source: For index values, Cato Institute; for growth rates, World Bank.

Hannon and Rhee 2002.

7

0

1

0 2 4 6 8 10

2

3

4

5

6

Per capita GDP growth (%)

Tunisia

Trade openness index, 1998

Chile

Costa 

Rica

Kuwait

India

Syria

Pakistan

Egypt

Jordan

Morocco

Croatia

Iran

Algeria

Thailand

FIGURE 2.5

Fig. 2.5

CATO Scores GDP $PPP Per Capita Growth Rate

Kuwait 6.3 5.92

Jordan 6.5 2

Morocco 5.4 1.86

Tunisia 5.6 5

Egypt 6.3 3.84

Syria 3.3 4.09

Algeria 2.8 1.43

Iran 1.7 4.19

Pakistan 4.9 3.49

Chile 6.8 6.58

Costa Rica 8.3 5.38

Croatia 3.9 1.06

Thailand 7.2 5.21

India 4.8 5.31
among slow integrators per capita GDP shrank—

and the annual rate of contraction slipped from

less than –0.5 percent in the 1980s to almost –3.0

percent in the 1990s. Differences in trade, financial, and technological integration were the main

causes of these dramatic gaps in growth rates.24

There are at least three types of slow integrators:

• Failed states—those mired in conflict or civil

war.

• Transition economies—those with problems

caused by the transition from command to

market economies.

• Countries with environments inimical to integration—those suffering from conditions that

impede global integration and unable to

encourage domestic and foreign firms to

engage in activities that promote it.

These problems are rooted in weak governance,

the effects of which—corruption, illegal activity,

limited trade, inadequate fiscal policies—have

already been discussed. Trade generally plays a

catalytic role in integrating domestic and global

economies. Without it, countries cannot take

advantage of global opportunities.

One of the main lessons of 20th century development, particularly from East Asia’s superstar

economies, is that manufactured exports play a

key role in economic growth. Accordingly, over

the past two decades many developing countries

have tried to adjust their export patterns. But

normal and slow integrators have exhibited

extremely uneven changes in such patterns.

TRADE AND INVESTMENT FOR ECONOMIC

DEVELOPMENT

The November 2001 World Trade Organization

(WTO) ministerial conference in Doha, Qatar, initiated a new round of international trade negotiations, known as the Development Round because

of its emphasis on the needs and interests of developing countries—particularly the world’s least

developed countries The plan created at the conference is focused on ensuring that these countries

achieve beneficial, meaningful integration with the

multilateral trade system and the global economy.

The conference advocated a more active role in

international trade negotiations for the

representatives of developing countries, who stated

an unequivocal desire to be integrated with the

global economic system. And for the first time,

industrial countries committed themselves to

addressing the domestic protectionism that has so

DRIVING

ECONOMIC GROWTH

63

FOREIGN DIRECT

INVESTMENT IS ONE OF

THE MOST IMPORTANT

CAPITAL FLOWS THAT AN

OPEN ECONOMY CAN

ACHIEVE

Who’s normal—who’s slow

Developing countries by speed of integration, income, and region

Note: Table includes all developing countries for which data are available for 1980 or 1990 GDP (adjusted for purchasing power parity).

Source: Hannon and Rhee 2002.

Income group

Upper middle income

Lower middle income

Low income

Total

Share of 1999 world population (%)

Share of 2000 world GDP (%)

Share of 2000 world merchandise trade (%)

By region

Central Asia

East Asia and Pacific

Eastern Europe

Latin America and the Caribbean

Middle East and North Africa

South Asia

Sub-Saharan Africa

Share of 1999 world population (%)

Share of 2000 world GDP (%)

Slow integrators

6

14

45

65

22

9

5

4

4

4

8

7

1

37

10

1

Normal integrators

16

23

7

46

63

36

23

0

8

15

14

3

4

2

1

1

Total

22

37

52

111

85

45

28

4

12

19

22

10

5

39

11

2

TABLE 2.1
often thwarted the export potential of developing

countries in sectors such as textiles, agriculture, and

HIV/AIDS drugs. The conference also emphasized the importance of providing technical and

financial assistance to integrate developing countries with the multilateral trade system. During its

first three years the goal of the Development

Round is to improve access to foreign markets for

all participating countries. U.S. government departments and agencies will develop a U.S. government

negotiating strategy for the Development Round. 

OPENING U.S. MARKETS

Between 1985 and 2000 U.S. GDP doubled, from

$4.9 trillion to almost $10 trillion.25 Providing

market access to its economy is one of the greatest benefits that the United States can give any

developing or transition economy. In 1990 U.S.

imports from developing and transition economies

totaled $151 billion. By 2000 these imports had

more than tripled, to $495 billion (figure 2.6). 

Since the 1970s the United States has taken steps

to open its markets to developing and transition

economies. Efforts include the Generalized

System of Preferences, which provides for dutyfree imports from some 146 developing and transition economies. Between 1999 and 2000 dutyfree U.S. imports from the 48 least developed

countries, as classified by the United Nations,

increased from $2.2 billion to $3.3 billion.26

Nearly 90 percent of U.S. imports from the least

developed countries are eligible to enter duty free.

As noted, growth in exports of manufactured

goods is an important indicator of a country’s

capacity to increase economic growth over the long

term. Developing exportable products is often a

challenge. Taiwan, for example, started out manufacturing textiles and apparel but moved on to

becomes one of the world’s leading manufacturers

of capital goods and information technology. Today

countries such as Mauritius, which began developing a vibrant textiles manufacturing industry in

the 1980s, are moving on to manufacture more

sophisticated information technology and provide

related services. Thus many countries have tried—

with varying success—to develop textiles manufacturing as a first step toward competitive exports.

Industrial country quotas on textiles and apparel

have long been a highly contentious aspect of

textiles trade between developing and industrial

countries. This system, called the Agreement on

Textiles and Clothing (which replaced the MultiFiber Agreement during the Uruguay Round of

international trade negotiations), will be phased out

DRIVING

ECONOMIC GROWTH

64

DEVELOPING COUNTRIES

CAN ATTRACT FOREIGN

DIRECT INVESTMENT IF

THEY LIBERALIZE TRADE

AND INVESTMENT

The $500 billion global market of choice 

for developing and transition economies

Note: Manufactured imports correspond to Standard International

Trade Classification (SITC) sections 6, 7, and 8; agricultural imports 

to SITC sections 0 and 1.

Source: U.S. Department of Commerce, U.S. Merchandise Trade

Database. Hannon and Rhee 2002.

500

400

300

200

1990 2000

100

0

U.S. imports from developing and transition 

economies (US$ billions)

Other imports Manufactured goods

Agriculture

FIGURE 2.6

With strong bipartisan support, in May 2000

the U.S. Congress enacted the African Growth

and Opportunity Act (AGOA) to catalyze

Sub-Saharan Africa’s integration with the

global economy. The 35 Sub-Saharan countries covered by the act enjoy duty-free, quotafree market access for 1,800 products on the

U.S. tariff schedule as well as 224 items not

covered by the Generalized System of

Preferences. 

For beneficiaries the most attractive part of this

effort is duty-free, quota-free access to U.S. textiles and apparel markets. In the first half of

2001 the program accounted for 58 percent of

the $11.6 billion in U.S. imports from SubSaharan Africa—a dramatic increase in a short

period. Moreover, the program takes a comprehensive approach to development, promoting good governance through political and economic reforms in beneficiary countries.

Source: Hannon and Rhee 2002.

Box 2.2 Increasing U.S. imports through the African Growth and Opportunity Act

Fig. 3.1

World More Dev Less Dev Least

2000-05 2.68 1.5 3.35 5.24

2005-10 2.59 1.5 3.1 4.93

2010-15 2.5 1.52 2.89 4.57

2015-20 2.44 1.58 2.74 4.23

2020-25 2.39 1.65 2.64 3.9

2025-30 2.34 1.73 2.53 3.56

2030-35 2.28 1.8 2.43 3.3

2035-40 2.24 1.86 2.35 3.04

2040-45 2.2 1.9 2.29 2.78

2045-50 2.15 1.92 2.22 2.51
by 2005. Most U.S. imports from least developed

countries are quota free or subject to the quota

phaseout under the Agreement on Textiles and

Clothing or the tariff rate quotas under the Uruguay

Round Agreement on Agriculture (box 2.2).

IMPROVING THE CLIMATE FOR FOREIGN

INVESTMENT

Foreign direct investment is one of the most

important capital flows that an open economy can

achieve. Such investment has attracted growing

attention in recent years because it is typically

accompanied by transfers of production, marketing, and organizational technology. Just as important, foreign direct investment provides valuable

financial stability because it is much less vulnerable to investor runs and cross-border contagion

than are portfolio investment and bank loans.

Foreign direct investment in developing countries

has also been a harbinger of globalization. During

the 1970s and first half of the 1980s such flows

were essentially flat, hovering around $11 billion

(in 2000 dollars).27 These amounts were small relative to development assistance and other official

flows. But in 1986 these flows began rising sharply,

and between 1990 and 1999 net foreign direct

investment in developing countries jumped from

$30 billion to $188 billion in 2000 dollars. (About

20 percent of that investment went to China).28

Developing countries can attract foreign direct

investment if they liberalize trade and investment

policies, support free domestic markets, and

strengthen the rule of law—particularly to protect

property rights. Clearly defined property rights

have been an important legal development in

many East Asian countries and largely explain the

high foreign direct investment in these countries

in the 1990s. These rights allow foreigners to own

local assets as well as equity in a broad range of

companies. In fact, many of the region’s newly

industrializing economies, including the Republic

of Korea, Malaysia, and Taiwan, offer incentives

to foreign investors, such as guaranteed repatriation of profits and tax relief.29

Still, in many countries the investment climate

remains clouded by corruption, trade barriers,

and market distortions. Evidence from a large

sample of countries suggests that corruption significantly reduces domestic and foreign investment. A favorable investment climate requires

transparent regulations, predictable laws, and

low trade barriers. In developing and transition

economies the environment for foreign direct

investment is also directly related to the environment for private sector development. That brings

the discussion to firms—the drivers of competitiveness in world markets and the main creators

of jobs and wealth. 

A MICROECONOMIC AGENDA FOR

DEVELOPMENT

The traditional approach to economic development—focused on generic macroeconomic, legal,

and political conditions—has delivered significant

improvements in many parts of the world. But

deeper efforts are needed to fully reap the benefits

of past reforms. Indeed, without additional steps

the sustainability of past achievements is in doubt. 

A new microeconomic approach to economic

development provides a framework for taking

those additional steps. It is more country-specific, more long-term, covers more individual policies and activities, and involves far more participants. It is not a quick fix. But it is the primary

way to increase developing countries’ ability to

compete in world markets while improving their

living standards. 

NEW THINKING ON THE MICROECONOMIC

FOUNDATIONS OF COMPETITIVENESS

Many discussions of competitiveness focus on the

macroeconomic, political, and legal features of

successful economies. These features are becoming increasingly well understood. Stable political

institutions, trusted legal mechanisms, and sound

fiscal and monetary policies contribute enormously to a healthy economy. But they are not

enough. Though they provide opportunities to

create wealth, they do not create it. Instead,

wealth is created through an economy’s microeconomic foundations, rooted in company operations and strategies as well as in the inputs, infrastructure, institutions, regulations, and policies

that constitute the business environment in which

a nation’s firms compete. To fully succeed, political, legal, fiscal, and monetary reforms must be

accompanied by microeconomic improvements. 

Many developing countries are continuously

tripped up by microeconomic failures. Growth

DRIVING

ECONOMIC GROWTH

65

A MICROECONOMIC

APPROACH IS MORE

COUNTRY-SPECIFIC,

MORE LONG-TERM,

COVERS MORE

INDIVIDUAL POLICIES

AND ACTIVITIES, AND

INVOLVES FAR MORE

PARTICIPANTS
spurts can be generated through macroeconomic

and financial reforms that exploit comparative

advantages, attracting floods of capital and creating

the illusion of progress. But unless firms can create

valuable goods and services using increasingly productive methods—moving competition to higher

levels—growth will be snuffed out as jobs fail to

materialize, wages stagnate, and investment returns

disappoint. Capital flows and investor attention will

then shift elsewhere. The austerity that results

from such cycles is at the core of the backlash

against globalization that is becoming perhaps the

world’s most pressing economic problem. 

DRIVERS OF COMPETITIVENESS

A central challenge in economic development is to

create conditions for rapid, sustained growth in

national productivity. The microeconomic foundations of productivity rest on two related elements:

• The sophistication of competition, reflecting

the operations and strategies of domestic

companies and of foreign subsidiaries based

in the country.

• The quality of the microeconomic business

environment.

A country’s productivity is affected by the productivity of its companies: an economy cannot be

competitive unless the companies operating in it

are competitive. But the sophistication of companies is inextricably intertwined with the quality

of the national business environment. More

sophisticated company strategies require more

highly skilled workers, better information,

improving infrastructure, more advanced institutions, and stronger competitive pressure.

To support rising prosperity, companies must

transform their ways of competing. The advantages

that a nation’s companies enjoy must shift from

comparative advantages (low-cost labor or natural

resources) to competitive advantages (resulting

from more distinctive products made using more

productive methods). Strengths in competing at

earlier stages of development become weaknesses

at more advanced stages. Copying of foreign technology, for example, must give way to development

of indigenous technology. Yet companies often

resist change because past approaches were profitable and old habits are deeply ingrained. 

Efforts to move to more sophisticated ways of

competing require parallel changes in the microeconomic business environment. This environment is determined by four related features: the

quality of factor (input) conditions, the context

for firm strategy and rivalry, the quality of

demand, and the presence of locally related and

supporting industries (figure 2.7).

STAGES OF ECONOMIC DEVELOPMENT

As economies develop, they move through three

stages of competitive advantage and ways of competing. In the factor-driven stage, basic inputs

such as low-cost labor and access to natural

resources are the main sources of competitive

advantage and international products. During

this stage firms produce commodities or relatively simple products designed in more advanced

countries. Technology is assimilated through

imports, foreign direct investment, and imitation.

Companies compete based on price and lack

direct access to consumers. They have limited

roles in the value chain and are focused on assembly, labor-intensive manufacturing, and resource

extraction. A factor-driven economy is highly

sensitive to global economic cycles, commodity

price changes, and exchange rate fluctuations. 

In the investment-driven stage, efficiency in producing standard products and services becomes

DRIVING

ECONOMIC GROWTH

66

Determinants of the microeconomic business environment

Context for firm strategy

and rivalry

• A local context that 

encourages efficiency, 

investment, and sustained 

upgrading

• Open and vigorous 

competition among locally 

based rivals

Related and supporting

industries

• Presence of capable, 

locally-based suppliers and 

firms in related fields

• Presence of clusters 

instead of isolated industries

Factor (input)

conditions

High quality specialized 

inputs available to firms:

• human resources

• physical infrastructure

• capital resources

• scientific and technological 

infrastructure

• administrative infrastructure

• information infrastructure

• natural resources

Demand conditions

• Sophisticated and 

demanding local customer 

needs

• Unusual local demand in 

specialized segments that 

can be served globally

• Local market needs that 

anticipate those elsewhere

FIGURE 2.7

Source: Porter and Ketels 2002.
the dominant source of competitive advantage.

Products and services become more sophisticated, but most technology and designs still come

from abroad. Technology is accessed through

licensing, joint ventures, foreign direct investment, and imitation. During this stage countries

both assimilate foreign technology and develop

capacity to improve it. The national business

environment supports heavy investment in efficient infrastructure and modern production

methods. Companies mainly serve original equipment manufacturing customers and extend capabilities more widely in the value chain. An

investment-driven economy is focused on

manufacturing and outsourced service exports. It

is susceptible to financial crises and external,

sector-specific demand shocks. 

In the innovation-driven stage, the dominant

source of competitive advantage is the ability to

produce innovative products and services at the

global technology frontier using the most

advanced methods. The national business environment is strong in all areas and contains deep

clusters of related industries. Well-developed

institutions and incentives support innovation.

Companies compete using unique strategies that

are often global in scope. An innovation-driven

economy has a high share of services and is

resilient to external shocks. 

DIFFERENT APPROACHES FOR DIFFERENT

MICROECONOMIES

The traditional approach to economic development uses a generic model for all countries (see

above). In contrast, the microeconomic approach

allows countries to focus on priorities that reflect

their stage of development—resulting in agendas

for action that differ significantly by country.

Specific agendas enable countries to leverage

their advantages and avoid zero-sum competition

based solely on cost. 

Appropriate company operations and strategies,

as well as the influence of various elements of the

business environment, differ for countries at different income and productivity levels. Transitions

between the stages of economic development—

from factor-driven to investment-driven to innovation-driven—are particularly challenging

because the stages involve different bases of competitive advantage and modes of integration with

the global economy. 

Low-income countries: enhancing sophistication in

factor-driven economies. For companies in lowincome countries the main challenge is to move

beyond competing based solely on cheap labor or

natural resources Enhancing company sophistication can involve making production processes more

sophisticated, introducing marketing and developing brands, and beginning to delegate authority. At

this stage it is premature to advance other elements

of corporate operations and strategies. 

Complementary efforts to improve the business

environment can also raise GDP per capita. These

efforts include strengthening transportation and

communications infrastructure, improving public

education and manager training, liberalizing

trade, reducing corruption, protecting intellectual property rights, and introducing a meaningful

antitrust policy. Improving the quality of suppliers and tightening regulatory standards are also

important, as is improving corporate governance

through effective boards of directors. All these

steps create a foundation of efficiency, transparency, and competitive pressure to improve

factor-driven competition. 

Middle-income countries: increasing efficiency in

investment-driven economies. Companies in

middle-income countries must move from the

factor-driven stage to the investment-driven stage.

Corporate priorities take on a stronger customer

orientation, whereas in the factor-driven stage

products were either commodities or designed by

foreign original equipment manufacturers.

Licensing foreign technology, developing capacity to improve technology, and spending on

research and development become important. In

addition, gaining control of international distribution is essential to moving beyond the role of

passive commodity or labor exporter. Employee

training is also important for increasing efficiency. 

The investment-driven stage also places new

demands on the business environment.

Enhancing business efficiency requires reducing

bureaucratic red tape and strengthening the legal

system. In addition, financial markets become

much more important in order to mobilize debt

and equity capital. The investment-driven stage

depends on high investment in products, processes, and technology. Increasing demand is important to foster improvements in producer quality.

Industrial clusters should be fully developed to

support higher efficiency. As countries reach the

upper-middle-income stage, companies must use

DRIVING

ECONOMIC GROWTH

67

ENHANCING BUSINESS

EFFICIENCY REQUIRES

REDUCING

BUREAUCRATIC RED TAPE

AND STRENGTHENING

THE LEGAL SYSTEM
the best available foreign technology, produce

products that meet international standards, and

organize at high levels of efficiency. 

HOW CAN THE U.S. SUPPORT

GROWTH IN DEVELOPING COUNTRIES?

Several forms of U.S. foreign assistance will likely

trump official development assistance in expediting economic growth in developing countries

(see chapter 6). These mechanisms include access

to U.S. markets, foreign direct investment by U.S.

companies, remittances from foreign workers

living in the United States, and the actions of U.S.-

based or -funded nongovernmental organizations

(NGOs). Still, official development assistance has

a role to play by:

• Providing direct financial support for policies, programs, and projects through bilateral

assistance, to improve agricultural productivity, implement competitiveness strategies,

build infrastructure, and provide scholarships

and technical training.

• Engaging developing countries in policy dialogues, often with the explicit or implicit

promise of delivering more aid if policy

actions are taken.

• Producing and disseminating new knowledge

about development through economic

research or project activities funded by

USAID or other U.S. government agencies.

• Involving the United States in broader, often

multilateral, discussions during diplomatic

and trade negotiations—helping to open the

door to the $10 trillion U.S. economy. 

• Connecting to the U.S. economy through

trade and investment provides a vital engine

of growth for developing countries.

• Helping countries build the capacity to

trade—and to take part in multilateral trade

negotiations.

The United States should seek to influence development processes primarily by engaging in policy

dialogues, producing and disseminating new

knowledge, and advocating trade-led growth at

home and abroad.

Engaging in meaningful policy dialogue requires

extensive knowledge of a country’s political

economy and capacity for pragmatic policy analysis. Here the U.S. role as a contracting agent can

help it access knowledgeable analysts, especially

if countries have made a long-term effort to build

the research and knowledge base needed to

produce and retain such analysts. Policy dialogue

and knowledge generation should be thought of

as mirror images that require coordinated support

over long periods. One of the most important

contributions that the United States can make to

economic growth in developing countries is to

participate in international policy discussions,

trade negotiations, and treaty development. 

GETTING AGRICULTURE MOVING

Requirements for agricultural development have

been understood for several decades. Adequate

agricultural technology and sufficient prices for

what farmers produce lead to farm investments

and income streams that increase commodity

output and reduce rural poverty. Educating rural

inhabitants speeds up the process, as does assistance in developing new agricultural technology.

Sub-Saharan Africa’s agriculture has long suffered

from inadequate technology and insufficient

prices in rural markets. Asia has had limited

success in linking the rural nontradable sector to

urban markets and to labor-intensive export

growth. In Latin America many poor rural residents have migrated to urban areas, which now

contain two-thirds of the region’s population. But

Central America and Mexico still suffer from

severe and persistent rural poverty, and strategies

are needed to reduce it.30

Mechanisms for developing agricultural technology and providing rural price incentives have

weakened since the 1960s. The system supported

by the Consultative Group on International

Agricultural Research (CGIAR) has an impressive

record of increasing crop yields for many of the

world’s staple foods. But funding for the system

has been threatened as market prices for these

crops have dropped to historic lows, reflecting

productivity gains in developing countries and

government-subsidized crop surpluses in industrial countries. Few developing countries have the

scientific resources to conduct basic crop

research, so where will agricultural technology

come from to provide food for the additional 3

billion people expected in the next 50 years? 

Biotechnology holds out great promise—it is

largely a product of scientific enterprise, public

and private, in industrial countries. Pest resistance

and drought tolerance are being integrated

DRIVING

ECONOMIC GROWTH

68

ONE OF THE MOST

IMPORTANT

CONTRIBUTIONS THAT

THE UNITED STATES CAN

MAKE IS TO PARTICIPATE

IN INTERNATIONAL

POLICY DISCUSSIONS,

TRADE NEGOTIATIONS,

AND TREATY

DEVELOPMENT
DRIVING

ECONOMIC GROWTH

69

THE UNITED STATES HAS

PROPOSED BOLD REFORMS

FOR AGRICULTURAL

TRADE, INCLUDING THE

ELIMINATION OF EXPORT

AND PRODUCTION

SUBSIDIES

already into crops of great importance to poor

farmers—cotton, maize, and sweet potatoes. The

science may be complex, but once the new varieties are developed and appropriate food safety

and environmental risk analyses have been completed, their incorporation into both farming and

food systems can be relatively swift. Farmers and

consumers in the United States, Argentina, China,

and South Africa are already beginning to realize

the results of this evolution in agricultural science.

With fewer pesticides to apply, production costs

drop. With more resistance to pests and drought,

harvests are greater.

The United States has an obvious role in this.

First, U.S. leadership is essential in restoring agricultural research budgets and can encourage

other donors to do the same. Second, U.S. universities are the best in the world at training scientists in basic biology and applied agriculture,

and could provide the next generation of these

scientists for the developing world.

Third, the United States can press to ease the

damage to developing countries caused by agriculture policies in industrial countries. Industrial

countries protect their farmers against low and

unstable prices, but developing countries cannot

afford such subsidies or defend the trade interventions that would be needed to do the same.

Industrial country policies shift the adjustment

burden to developing countries—sometimes with

devastating effects on local farmers. Agricultureled economic growth is impossible unless it is

profitable.

Some observers hope that World Trade

Organization (WTO) negotiations will solve

problems in global agriculture markets. But such

solutions are unlikely given the reluctance of

Europe and Japan to expose their farmers to free

markets. Strong interest groups in Washington

also support subsidies to help ensure the profitability of U.S. farming—though the U.S.

Department of Agriculture favors reduced subsidies and freer trade in agriculture. The department’s research concludes that eliminating all

global agricultural protection and support could

raise world agriculture prices by 12 percent,

mostly by removing tariffs. U.S. agricultural

exports would grow 19 percent in such a free

market.31 Removing such distortions would also

increase global economic welfare by $56 billion a

year—about the same amount as all foreign aid

provided by industrial countries.

At the November 2001 meeting of the WTO in

Doha, Qatar, the United States joined the 

other WTO members to launch the Doha

Development Agreement, which solidifies the

importance of liberalizing agricultural trade. 

In July 2002 the United States proposed bold

reforms for agricultural trade:

• Eliminate export subsidies, phasing in the

reductions over five years.

• Eliminate the export monopolies of state

trading enterprises, thus allowing any producer, distributor, or processor to export, and

end the special financial privileges of state

traders.

• Prohibit export taxes on agricultural products, except for developing countries that rely

on them for revenues.

• Cut and simplify agricultural tariffs.

• Limit trade-distorting support to 5% of the

total value of agricultural production.31

International negotiations on agriculture desperately require leadership. Part of the challenge may

involve achieving U.S. acceptance of agriculture’s

multiple functions as the basis for policy reforms

with clear social, environmental, or security rationales. With this acceptance the United States

could take the lead in the Development Round of

WTO negotiations, designing rules that recognize

agriculture’s different functions in different countries at different stages of development. For

example, environmental protection is an acceptable objective for agriculture policies in all countries, while policies that stimulate basic grain

production to enhance domestic food security

would be restricted to countries with limited

access to global markets or weak internal marketing systems.

Beyond improving the external climate for agriculture, what are the components of a national

agricultural strategy? The first is supportive

macroeconomic policy—one that yields low

inflation, a reasonably stable exchange rate, positive real interest rates, and perhaps some monitoring of short-term capital flows. Second, getting

prices right extends good macroeconomic policy

to the trade arena, where an open economy with

low barriers to internal and external trade should

generate a level playing field for both producers

and consumers.

Once agricultural technology is in place as the

basis for profitable farming, externalities from
rural growth argue for increasing policy attention

and budget allocations to the rural nontradable

sector. Part of this sector’s profitability will come

from a labor-intensive export sector linked to the

global economy. Rapid growth in such exports

creates demand for labor directly as well as for the

goods and services of the rural economy, which

raise demand for labor indirectly. 

Improving rural financial systems is also essential

to a successful structural transformation, both to

permit farmers to make long-term investments

and to handle intersectoral financial flows such as

savings and remittances. Such improvements will

take time. And while needed changes in agricultural and rural financial markets are not exceptionally difficult, they do require talented policymakers and government administrators. Training

these workers in U.S. universities and empowering them when they return home is a powerful

form of U.S. foreign assistance—and one in which

USAID has considerable experience.

INVESTING IN PEOPLE

Investments in people improve the distribution of

assets in the early stages of economic development. For pro-poor growth this means investing

in rural schools, primary health clinics, household

food security, and rural financial markets. At later

stages it means creating opportunities for high

school education and on-the-job training for

unskilled and semiskilled workers. If broadly

based and of adequate quality, such investments

will keep the distribution of income from becoming highly skewed until well into the development

process, leading to the near elimination of

absolute poverty. The Republic of Korea and

Taiwan managed to maintain such investments

until they achieved middle-income status. Brazil,

the Philippines, and Thailand did not.

Even the poorest countries can set themselves on

a growth path that includes poor people in a fiscally manageable way. But that may not happen.

Political forces or governance averse to investing

in poor people are more likely in countries where

poor people’s lack of assets disconnects them

from the growth process. But donors can deal

with this situation: it gives them a rationale for

investing in the people that country leaders might

choose or be forced to ignore. In such cases the

policy dialogue, and the resources mobilized

behind it, can have dramatic effects.

JUMPSTARTING SLOW INTEGRATORS

Some forms of export-oriented collaboration

between domestic and foreign firms that do not

involve foreign equity—such as international subcontracts and technical or marketing

agreements—can be as effective as export-oriented foreign direct investment in promoting growth.

But foreign firms that are potential sources of

foreign direct investment and other types of collaboration have little interest in slow integrators,

which have the most desperate need for them.

Such collaboration could jumpstart nontraditional or manufactured exports from slow integrators,

especially those in Sub-Saharan Africa.

Innovative approaches to development assistance

can break this vicious cycle. For example, industrial countries can help slow integrators enter

global markets for manufactured goods by:

• Offering preferential market access—such as

that provided by the U.S. Generalized System

of Preferences, Caribbean Basin Initiative, and

African Growth and Opportunity Act, and by

the EU Everything But Arms program. The

declaration from the November 2001 WTO

ministerial conference in Doha, Qatar, addresses the need for preferential market access.

• Building capacity for trade—such as through

the U.S. TRADE program, similar programs

sponsored by other industrial countries, and

programs sponsored by multilateral development banks. Again, the Doha declaration

advocates such efforts.

The United States is well positioned to help build

capacity for trade given its companies’ extensive

experience with and dominant role in trade,

investment, and enterprise collaboration in developing countries. U.S. companies could help

design rational policies and strengthen the firmlevel export capacity of slow integrators.

U.S. programs to build trade capacity among slow

integrators could also promote international

production sharing as an innovative complement

to the other assistance. 

IMPLEMENTING THE MICROECONOMIC

AGENDA

The microeconomic approach to development

has important implications for foreign aid organizations. It can help them set priorities for their

DRIVING

ECONOMIC GROWTH

70

INVESTMENTS IN PEOPLE

IMPROVE THE

DISTRIBUTION OF ASSETS

IN THE EARLY STAGES OF

ECONOMIC DEVELOPMENT
activities and concentrate on areas where they are

best able to help—clarifying the roles of institutions focused on the macroeconomic, legal, and

political preconditions for development and institutions focused on the microeconomic agenda for

competitiveness.

The new approach requires donors to review their

country policies, priorities, and programs. On a

basic level, all country programs must pass two

practical tests:

• Does the activity upgrade the elements of the

business environment most essential to development in this particular country? 

• What is the advantage of a donor performing

this activity to upgrade the business

environment? 

A country’s microeconomic agenda for competitiveness and development is based on assessments

of its current economic performance, its business

environment, and the cluster composition of its

economy. Other factors that influence policy priorities include the country’s location, internal

geography, and often its economic history. Based

on this information, the country can define priority actions to expedite growth and development. 

Foreign aid organizations, public and private,

have a distinct role in developing and implementing a developing country’s microeconomic

agenda. In their traditional role of financing development projects, donors must ensure that their

capital is spent in line with a country’s microeconomic priorities. Often more important, however,

is a new type of technical assistance—to assess a

country’s competitiveness, develop the main elements of its microeconomic agenda, create tools

to track performance, and set up institutions for

implementation and continuing research on the

microeconomic agenda. 

This new technical assistance differs from standard

macroeconomic, legal, and financial assistance in

several crucial ways. Compared with stabilizing

the government budget or fixing the exchange rate

by government fiat, it usually takes much longer to

see behavioral changes and later outcomes from

this assistance. Microeconomic reform requires

permanent, stable changes in many related policies. These policy changes influence company

behavior and expectations. And if policymakers

stay the course, the changes eventually become

evident in economic outcomes. Microeconomic

upgrading is a marathon, not a sprint. 

A push for clean environmental technologies

should be part of the microeconomic reform. U.S.

firms, facing strict environmental standards, have

led in the export of pollution-abating equipment

and services. Developing country firms—in the

face of similar standards, or more likely the stringent demands of overseas buyers—could be

pushed to develop safer, cleaner products and services. And they could be assisted in their efforts

by the new technical assistance.

The new technical assistance also requires the

cooperation of many participants. It must include

private companies, domestic and foreign, in assessing the competitiveness of a location and in implementing improvements. It must include nonprofit, educational, research, and trade organizations to

organize the actions of individuals and companies

and to make changes to the business environment.

And it must include many different functional and

regional parts of government, stretching beyond

the traditional leadership of national ministries. 

Finally, the new technical assistance must recognize the role of clusters and regions as important

units of action. Clusters go beyond individual

industries, which on their own control only some

of the factors that drive their economic performance. But clusters are narrower than large

sectors, such as manufacturing, that are too

diverse to allow the development of policies that

can make a material difference. Similarly, regions

control many of the microeconomic conditions

that determine whether companies are able to

operate productively. But regions also differ significantly in their competitiveness and so require

unique efforts to address their weaknesses. The

national level, however, remains essential to

provide the basic macroeconomic, legal, political,

and social conditions that set the stage for microeconomic competitiveness. 

NOTES

1. Timmer 2002.

2. Easterly 2001.

3. World Bank 2002b.

4. De Soto 2002.

5. Deininger-Squire 1996. See Porter 1998. The concept of

stages was first introduced in Porter 1990. See also Porter, Sachs,

and Schwab (2001) and Porter (2000) for further discussion of

these ideas.

6. Harrison 2000.

7. Collier and Dollar 2001.

8. Birdsall and Londano 2002.

9. World Bank 2002b.

10. Timmer 2002. DRIVING

ECONOMIC GROWTH

71

FOREIGN AID

ORGANIZATIONS HAVE A

DISTINCT ROLE IN

DEVELOPING AND

IMPLEMENTING A

DEVELOPING COUNTRY’S

MICROECONOMIC

AGENDA
11. Timmer 2002.

12. Hannon and Rhee 2002.

13. Hannon and Rhee 2002.

14. The 2001 World Development Indicators were used to

create a set of countries that had a population greater than

500,000 people and purchasing power parity adjusted GDP since

1980. Slow Integrating Countries and Normal Integrating

Countries are defined based on the speed and the nature of their

trade integration with the global economy. One measure is an

increase in the merchandise trade to PPP adjusted GDP ratio of a

given country to determine whether they are slow or normal in

integrating. The other measure is the share of manufactured

exports as a percentage of a country’s total merchandise exports is

used to represent their level of trade integration. Countries with

merchandise trade to PPP adjusted GDP ratios in 2000 were

lower than those in 1980 or 1990 and whose manufactured export

share of merchandise exports were less than 50 percent are classified as slow. Countries with merchandise trade to PPP-adjusted

GDP ratios in 2000 that were higher than those in 1980 or 1990

and whose 1999 manufactured exports share of merchandise

trade was greater than 30 percent are classified as normal.

15. Annan 2000.

16. Hannon and Rhee 2002.

17. Lindert and Williamson 2001.

18. Dollar and Kraay 2002.

19. World Bank 2002a.

20. Maddison 2001.

21. Hoekman and Messerlin 2002.

22. Lewis 2002.

23. Hannon and Rhee 2002. All the developing countries

with a population of greater than half million and PPP-adjusted

GDP data from 1980 or 1990 were included in the analysis. In

addition, 27 high- income countries with a population of more

than half million and PPP-adjusted GDP data were classified as

developed countries. So the global total in our analysis includes

111 developing countries and 27 developed countries. 

According to UN (2001b), as of 2001, 49 countries (34 in

Africa, 9 in Asia, 1 in Caribbean, and 5 Pacific regions) were designated as the Least Developed Countries (LDCs) that are

deemed structurally handicapped in their development process,

and in need of the highest degree of consideration from the international community in support of their development efforts.

Eleven island countries—population of many of these island

countries is less than half million—and 15 land-locked countries

are included in the LDC group.

24. These findings are broadly consistent with recent World

Bank studies on globalization and poverty by Dollar and Collier

(2001) and Dollar and Kraay (2001, 2002) even though the analysis here covers all 111 developing countries—including major oil

exporters—with PPP-adjusted GDP data, while the Bank studies

cover a sample of 72 developing countries.

25. Hannon and Rhee 2002.

26. Hannon and Rhee 2002.

27. Hannon and Rhee 2002.

28. Hannon and Rhee 2002.

29. Hannon and Rhee 2002.

30. Timmer 2002.

31. Timmer 2002.

32. FASonline 2002.

BACKGROUND PAPERS

Timmer, Peter. 2002. “The Role of Economic Assistance in

Developing Countries.”

Hannon, Brian, and Yung Whee Rhee. 2002. “Globalization,

Trade, and Investment.”

Porter, Michael, and Christian Ketels. 2002. “Microeconomics of

Competition.”

Available at www.usaid.gov/NatsiosReport/backgroundpapers

REFERENCES

Abramovitz, Moses. 1989. Thinking about Growth. Cambridge:

Cambridge University Press.

Annan, Kofi. 2000. Address to 10th United Nations Conference

on Trade and Development, 12 February, Bangkok, Thailand.

[http://www.pro-un.org/march%20digest.html].

Birdsall, Nancy, and Juan Luis Londano. 1997. “Asset Inequality

Matters: An Assessment of the World Bank’s Approach to

Poverty Reduction.” American Economic Review 97 (2): 32–37.

Collier, Paul, and David Dollar. 2001. “Can the World Cut

Poverty in Half? How Policy Reform and Effective Aid Can

Meet International Development Goals.” World Development

29 (11): 1787–1802.

Deininger, Klaus, and Lyn Squire. 1996. “A New Data Set

Measuring Income Inequality.” World Bank Economic Review

10 (3): 565–91.

De Soto, Hernando. 2000. The Mystery of Capital: Why

Capitalism Triumphs in the West and Fails Everywhere Else.

New York: Basic Books.

Dollar, David, and Aart Kraay. 2002. “Spreading the Wealth.”

Foreign Affairs 81 (1): 120–33.

Easterly, William. 2001. The Elusive Quest for Growth.

Cambridge, Mass.: MIT Press.

FASonline. 2002. [http://www.fas.usda.gov/itp/wto/proposal.htm]

Harrison, Lawrence. 2000. Culture Matters. New York: Free

Press.

Hoekman, Bernard, and Patrick Messerlin. 2002. “Harnessing

Trade for Development and Growth in the Middle East.”

Council on Foreign Relations, Study Group on Middle East

Trade Options, Washington, D.C.

Lewis, Bernard. 2002. What Went Wrong: Western Impact and

Middle Eastern Response. New York: Oxford University Press.

Lindert, Peter, and Jeffrey Williamson. 2001. “Does

Globalization Make the World More Unequal?” Paper presented at the National Bureau of Economic Research conference Globalization in Historical Perspective, 3–6 May, Santa

Barbara, Calif.

Maddison, Angus. 2001. The World Economy: A Millennial

Perspective. Paris: Organisation for Economic Co-operation

and Development.

Porter, Michael. 1990. The Competitive Advantage of Nations.

New York: Macmillan.

———. 1998. “Clusters and Competitiveness: New Agendas for

Companies, Governments and Institutions.” In Michael

Porter, ed., On Competition. Cambridge, Mass.: Harvard

Business School Press.

———. 2000. “Is Capitalism Good for Social Progress?”

Stockon Lecture, London Business School.

Porter, Michael, Jeffrey Sachs, and Klaus Schwab, eds. 2001.

Global Competitiveness Report 2001. New York: Oxford

University Press.

UN (United Nations). 2001. World Population Prospects

1950–2050: The 2000 Revision. Vol. 1, Comprehensive Tables.

Department of Economic and Social Affairs, Population

Division. New York.

World Bank. 2002a. Globalization, Growth, and Poverty:

Building an Inclusive World Economy. Washington, D.C.

———. 2002b. World Development Report 2003: Sustainable

Development in a Dynamic World—Transforming Institutions,

Growth, and Quality of Life. New York: Oxford University

DRIVING Press.

ECONOMIC GROWTH

72
WHEN IT COMES TO HEALTH, DEVELOPING

countries fall into two groups. In most,

health care has improved dramatically in recent

decades—raising life expectancies, expanding

workforces, and reducing deaths from communicable diseases. As a result, by 2020 these countries

are expected to achieve international objectives

for basic health indicators. They will have smaller

populations under 5, and their median ages will

approach those in industrial countries today.

Moreover, noncommunicable disease will be the

leading cause of death. But these countries will

still have subpopulations with health profiles

similar to those in least developed economies.

Further, there may be unexpected shocks that

could cause countries to regress, such as the

HIV/AIDS epidemic, social upheaval, and natural

disasters.

In a second, smaller group of developing countries—which includes badly managed or conflicttorn economies that have seen little or no growth

in recent years—health indicators have stagnated

or worsened. Fertility and infant mortality rates

are high. Life expectancies are low. And infectious

diseases, including HIV/AIDS, are widespread.

Though some of these countries are seeing slight

improvements in demographics and mortality

rates, they will not approach the levels of today’s

industrial countries by 2020. 

These features offer opportunities—and create

challenges. In addition to maintaining basic

public health services, the first group of countries must decide how to meet the challenges of

changing health patterns. Global health programs can shift their focus from women of reproductive age and children under 5 to entire families, including income earners and elderly

dependents. Better health outcomes will require

better management of chronic diseases, from

prevention through treatment. Sustainable

progress in health will require health care institutions with both capital and recurrent financing. And systems will need to respond to rising

expectations for health care and to the dominance of private flows in its funding. 

In the second group of countries public health

interventions will have to remain focused on

reproductive and maternal and child health—but

must examine the strategies to do so. By 2020

nearly 9 out of 10 people in this group of countries will be African.1 Global health programs will

need to evolve to produce more effective results.

IMPROVING

I MPROVING P EOPLE ’ S H EALTH CHAPTER 3
IMPROVING

PEOPLE’S HEALTH

74

HEALTH INTERVENTIONS

MUST ENCOMPASS A WIDE

RANGE OF NEW

APPROACHES AND

ACTORS

In addition, consideration must be given to external concerns that affect health outcomes—including income growth, education, water, sanitation,

and good governance. 

What do these issues mean for foreign assistance? 

• Health interventions must encompass a wide

range of new approaches and actors. Dealing

with local financing institutions, employer

benefit plans, and telecommunication networks may be just as important as ministries

of health. 

• The increase in noncommunicable diseases

will be permanent, making health care more

expensive. Donors and developing countries

must make complementary investments

involving all parties—public and private—

with vested interests in a country’s long-term

health status, ultimately aiming for selfreliance. 

• Given the rapid and diverse changes in many

developing countries, donors must be flexible. Efforts to accelerate the progress of

countries suffering from traditional health

and disease problems must be combined with

programs to help other countries address new

challenges. 

• Despite 40 years of effort, many countries

have extremely high infant mortality and low

life expectancy, now affected by high

HIV/AIDS rates—suggesting a need to carefully evaluate past public health investments,

develop new approaches, and better define

the role of the private sector.

The changing profile of disease is affecting the

economies of developing countries. Moreover, in

many newly democratic countries, people are

demanding better health care. U.S. medical and

health care organizations have the expertise and

experience to help solve many of their problems.

All these points suggest that U.S. efforts to

improve health care overseas must continue to

evolve to benefit both the public and private

sectors and the citizens of all the countries

involved. 

HEALTH, DEVELOPMENT, AND AID:

CHANGES AND CHALLENGES

Over the past few decades the world has seen significant changes in health indicators and services.

This section and several that follow examine

these changes and project developments over the

next 15–20 years, drawing on the socioeconomic

and health factors that have driven recent

changes.

Health outcomes are closely related to political and

civil freedoms. Open societies generally have lower

mortality. For example, countries considered “not

free” are more than three times as likely as “free”

countries to have infant mortality rates about 50

per 1,000 live births.2 Similarly, a recent World

Bank study found that an increase in any of six

indicators of good governance is associated with at

least a halving of a country’s infant mortality rate.3

Better health is also related to higher incomes and

economic growth, with the effects running in both

directions. Differences in income growth over the

past 30 years explain some 40 percent of differences in mortality improvements between countries.4 Although the direct effects of health on economic growth are difficult to distinguish at the

macroeconomic level,5 decent health is essential for

worker productivity and individual economic

welfare. It is safe to assume that investments in

health contribute to growth in countries with good

governance, institutions, and economic policies.

DIVERSITY AND DECENTRALIZATION

Developing countries are increasingly diverse,

socially and economically. Poor people in these

countries—long the targets of foreign assistance—are no longer just illiterate subsistence

farmers with large families, living far removed

from markets in overwhelmingly agrarian

economies. They are urban and rural, single and

married, young and (increasingly) old, literate and

illiterate, employed and unemployed, skilled,

unskilled, and even professional, and from families both large and small. They live in economies

that mix agriculture, basic manufacturing, and

services, that receive varying amounts of foreign

investment, and that have different levels of

private and public ownership of means of

production. 

Yet within and across many developing countries,

poor people still have one thing in common: they

continue to suffer disproportionately from infectious diseases of global concern, including

HIV/AIDS, tuberculosis, malaria, sexually transmitted diseases, and infant diarrhea. But growing

numbers of poor people are also dying from diseases and conditions more common in industrial
countries. These include hypertension, stroke,

coronary disease, and diabetes, which can be

managed through preventive care delivered at the

primary level. Although these chronic diseases are

of public concern, they have not been the focus

of foreign assistance programs for health.

New, more flexible approaches are needed in

international health care.International institutions

increasingly speak of “global health,” yet most

health services—public and private—are provided locally. The number of democratic countries is

growing, and within them nonprofit organizations, consumer interest groups, and private

providers are emerging and bringing health care

closer to patients. Decentralization requires better

standards and quality control for both public and

private health services.

URBANIZATION AND EDUCATION

Urbanization is generally associated with other

changes that influence health status. Relative to

their rural counterparts, urban households tend

to have better access to education, be closer to

services, and have higher incomes—all of which

increase their use of health services. By standard

health indicators, urban residents are in better

health than rural residents. But changes in diet

and more sedentary lifestyles may create new

health risks for people living in cities, increasing

noncommunicable diseases. Urban crowding can

also increase the risk of communicable diseases,

like tuberculosis, cholera, and meningitis.

According to the United Nations Educational,

Scientific, and Cultural Organization (UNESCO),

education levels in developing countries, a crucial

determinant of health status, are changing. In

1970 just 40 percent of developing countries had

medium or high literacy rates, but by 2005 that

share is expected to be 88 percent. Although

much of this progress is the result of rising literacy in Latin America and Asia, some countries in

Africa—including Cameroon, Ghana, Kenya, and

Tanzania—are projected to achieve literacy rates

of 80 percent by 2005. Still, concerted commitment to education remains essential. In Mali, for

example, literacy is projected to be 50 percent in

2005—and in neighboring Niger, just 19 percent.6

Women’s education is particularly important for

health because it is highly correlated with reductions in infant mortality. Since 1970 there has been

considerable progress on female literacy in the 98

developing countries tracked by UNESCO. In

1970 fewer than one woman in three was literate

in more than a third of these countries. By 2005

only four countries, all in Africa, will have such

low female literacy. In two-thirds of these 98

countries, female literacy will exceed 75 percent

by 2005.7

BROAD PROGRESS, STARTLING

CHANGES, PERSISTENT QUANDARIES

Demographics are changing in developing countries.8 Fertility and infant and child mortality are

falling, while life expectancy is rising. As a result

populations are aging, with broad implications for

economic growth. How will these issues affect

development prospects in developing countries,

and how should assistance programs respond? 

FERTILITY

Around the world, the average number of births

per woman has been declining since the mid1970s. Although there will still be a gap in 2020,

the United Nations projects that by 2050 fertility

rates will be nearly the same in industrial and

developing countries (figure 3.1).9

In a March 2002 report the United Nations

Population Division proposed lowering by 1

billion people its global population projection for

IMPROVING

PEOPLE’S HEALTH

75

FERTILITY AND INFANT

AND CHILD MORTALITY

ARE FALLING, WHILE LIFE

EXPECTANCY IS RISING

Fertility, converging

Note: Developing countries excludes China.

Source: Raymond 2002.

6

0

4

2

2000 2050 2025

Total fertility rate (births per woman)

World Industrial countries

Developing 

countries

Least developed 

countries

FIGURE 3.1

Fig. 3.1

World More Dev Less Dev Least

2000-05 2.68 1.5 3.35 5.24

2005-10 2.59 1.5 3.1 4.93

2010-15 2.5 1.52 2.89 4.57

2015-20 2.44 1.58 2.74 4.23

2020-25 2.39 1.65 2.64 3.9

2025-30 2.34 1.73 2.53 3.56

2030-35 2.28 1.8 2.43 3.3

2035-40 2.24 1.86 2.35 3.04

2040-45 2.2 1.9 2.29 2.78

2045-50 2.15 1.92 2.22 2.51
the end of the 21st century.10 This significant revision was based on trends in some of the most populous developing countries, including Bangladesh,

Brazil, Egypt, India, Indonesia, Iran, Mexico, the

Philippines, and Vietnam. It had been assumed

that fertility in these countries would fall to the

replacement level by 2050, or an average of 2.1

children per woman. But it is falling much faster.

UN demographers predict that fertility in these

countries will ultimately fall below the replacement level, to 1.85 children per woman. In India

alone these revised estimates suggest 600 million

fewer people in 2100 than previously expected.

Although the world’s population will still be

growing at mid-century, reflecting momentum

from higher fertility in the past, 80 percent of the

world’s population is projected to have fertility

rates below the replacement level. As a result,

during this century the world’s population is

expected to stop growing and start slowly shrinking.11 Still, fertility rates will continue to be higher

in the least developed countries (averaging 4.2

children per woman in 2015–20) than in other

less developed countries (2.7 children, excluding

China). 

Fertility is falling for several reasons. First, contraceptive use has risen considerably and should

continue to do so, lagging behind only in SubSaharan Africa (figure 3.2).12 Contraceptive use is

especially high—ranging from 65–85 percent of

women—in countries where fertility rates are

below replacement levels.13 Once families perceive that contraceptives have contributed to

their well-being, they use them consistently.14

Benefits include the reduction of maternal, child,

and infant mortality.15

Second, economic growth is a key factor in causing

fertility to decline because it generally leads

women to believe they are better off with fewer

children. Without economic growth, an important

rationale for having large families does not

change.15 Rather, changes in fertility are driven by

parents weighing economic and personal choices

in the face of falling infant mortality. 

Over the past 20 years there have been two main

debates among researchers and policymakers

about the relationship between fertility and development. The first argues that lower fertility reduces

poverty in developing countries.16 The second

claims that targeted population programs can

change women’s preference for the number of children they have, increase contraceptive use, and

lower fertility.17 These debates offer lessons for

family planning and poverty reduction programs.18

As far back as the mid-1980s it was reported that

demographic factors such as fertility decline and

population growth play a role in economic development—but that good governance, adequate

resources, sound economic policies, and lack of

corruption are even more important.19 More recent

research suggests that once fertility starts to decline,

investments in human and physical capital can help

reduce poverty in countries with good economic

and social policies.20 The conclusion, then, is that

good economic policies do more to reduce poverty

than fertility and family planning programs.21

Various questions arise when looking to the future

of family planning programs in least developed

countries where fertility remains high. First, in

2020 what will be the unmet need for contraception that cannot or will not be met by market

forces? As economies grow and people become

more educated in general and better informed

about family planning in particular, they recognize

the benefits of smaller families.22 With the uncertainty that AIDS poses in some parts of the

world, expectations are that the momentum of

fertility declines will continue unabated.

Second, how will the youth bulge (ages 15–20) in

developing countries affect fertility preferences

and population growth over the next decades? By

2020 most people in this age cohort will be in midIMPROVING

PEOPLE’S HEALTH

76

ECONOMIC GROWTH

CAUSES FERTILITY TO

DECLINE BECAUSE IT

GENERALLY LEADS

WOMEN TO BELIEVE THEY

ARE BETTER OFF WITH

FEWER CHILDREN

Contraception, rising

Note: Developing countries and Asia include China.

Source: Raymond 2002.

80

60

40

20

0

1995 2000 2010 2020

Share of married women ages 15–49 

using contraceptives (%)

Developing 

countries

Asia Sub-Saharan Africa

Latin America 

and the Caribbean

FIGURE 3.2

Fig. 3.2 LDC Africa Asia LAC 1995 56.7 23.5 62.7 67.8 2000 59.8 30.2 65.5 70 2005 62.2 36.5 67.8 71.4 2010 64.2 42.4 69.5 72.2 2015 65.5 47.4 70.2 72.8 2020 66.4 51.8 70.2 73
adulthood. Relative to their parents, they are from

smaller families, are better educated, and have

benefited more from economic growth.23 Studies

indicate that they desire smaller families and will

likely have lower fertility rates than their parents.

As with nearly all measures of progress, countries

with intense HIV/AIDS epidemics may experience very different fertility patterns. The 16

African countries with the highest incidence of

HIV/AIDS are projected to see fertility fall by

23–39 percent through 2020, compared with a 21

percent decline for Africa overall.24 Because

HIV/AIDS is more common among people of

working age, reducing poverty will be even more

difficult in these countries.

LIFE EXPECTANCY

Around the world, average life expectancies are

converging, with rapid increases in developing

countries and flattening rates in industrial countries (figure 3.3).25 In 1950 the average newborn in

industrial countries was expected to live 30 years

longer than in developing countries. By 2015 that

gap will have narrowed to 10 years. But for the

least developed countries a 20-year gap will remain

in 2020, and will not narrow to 10 years until 2050.

No single factor accounts for increases in life

expectancy. Falling infant mortality rates are one

reason, but progress has also come from better

public health and nutrition, expanded access to

health care, improved water and sanitation, more

widespread education, and increased incomes.

But prospects at birth provide only one perspective on expectations for life. At ages 35 and 45,

people in developing countries face much higher

mortality than their counterparts in even the less

affluent industrial countries. Moreover, chronic

diseases may occur earlier in developing than in

industrial countries.

In the 35 African countries hit hardest by

HIV/AIDS, life expectancy at birth is 48.3 years—

6.5 years less than it would be without the disease.

In the 11 countries where more than 13 percent of

the population has HIV/AIDS,26 life expectancy

is 47.7 years—11.0 years less than without AIDS.27

Projecting the demographic impact of HIV/AIDS

is difficult because it is so dependent on varying

assumptions and methodologies.28 Thus the

disease’s impact on population and health, over

time and across countries, is still being studied.

AGING

Populations are aging in the 120 countries categorized by the United Nations as less developed.

(Though not in the 48 countries categorized as

least developed, 34 of which are in Africa.) By

2025 the percentage of the population under 5 in

these countries will be smaller than that over 60

(figure 3.4).29 According to one source, by 2020

the portion of the population over 65 will be

higher in countries such as Sri Lanka and

Thailand than in the United States today.30

IMPROVING

PEOPLE’S HEALTH

77

DEVELOPING COUNTRIES

WILL HAVE MUCH LESS

TIME TO ADAPT TO

THEIR CHANGING

AGE STRUCTURES

THAN INDUSTRIAL

COUNTRIES DID

Life expectancy, also converging

Note: Developing countries excludes China.

Source: Raymond 2002.

100

40

80

60

2000 2050 2025

Life expectancy at birth (years)

World Industrial countries

Developing 

countries

Least developed

countries

FIGURE 3.3 Share of under 5s falling, 

that of over 60s rising

Note: Excludes China.

Source: Raymond 2002.

20

0

10

1950 2020 1985

Share of population in developing countries (%)

Under 5

Over 60

FIGURE 3.4

Fig. 3.4

under 5 over 60

1950 15.6 5.9

1970 18.4 5.8

1990 14.3 6.2

2000 12.6 6.8

2010 11.3 7.5

2015 10.7 8.4

2020 10.2 9.4

Fig. 3.3

World More Dev Less Dev Least

2000-05 66 75.6 62 51.4

2005-10 67.3 76.7 63.5 53.4

2010-15 68.7 77.7 65.2 55.9

2015-20 70 78.6 66.8 58.4

2020-25 71.3 79.3 68.3 60.6

2025-30 72.4 80 69.6 62.8

2030-35 73.4 80.6 70.9 64.8

2035-40 74.4 81.1 72.1 66.6

2040-45 75.3 81.6 73.2 68.2

2045-50 76 82.1 74.2 69.7
Although the timing of the shift between the very

young and the old differs across developing

regions, the changes are similar. The crossover will

occur in South America in 2005, in Southeast Asia

in 2010, in Central America and South-central

Asia in 2015, and in the Caribbean and North

Africa in 2020. In Sub-Saharan African and other

least developed countries this shift will not occur

until 2050, but at that point only 18 countries will

have more children under 5 than adults over 60.

The precise impact of HIV/AIDS on this process

has not been modeled, so these estimates are

subject to change.31

The age shifts are also taking place in very populous countries. In China the shift occurred in

1995, and the pace of aging has gained striking

momentum. In Indonesia the shift will occur in

2010, and in India in 2015. 

Developing countries will have much less time to

adapt to their changing age structures than industrial countries did in the past. In France it took

115 years for the population over 60 to double to

14 percent. In South America it will take 40

years—and that period began in 1980. By 2015

the median age in developing countries will be

nearly 30 years, up from 19 in 1970. Moreover, by

2020 more than two-thirds of the world’s population over 60 will live in developing countries.32

The implications of these changes extend far

deeper into developing countries’ economic and

social structures than health indicators alone

would suggest. Over the short term the changing

age structure creates huge opportunities (figure

3.5). While Western European countries and

Japan are graying (over the next decade Japan will

suffer a 25 percent drop in the number of workers

under 30),33 developing countries will see their

workforces expand, providing an opportunity for

increased growth and productivity and perhaps

absorbing jobs from more established economies.

Although the composition of the non-working-age

population may be different, by 2020 the

dependency ratio—which compares the nonworking-age population (young and old) with the

working-age population—in many developing

countries will equal that in industrial countries.34

Over the next few decades most developing countries will be able to spend less supporting the

young and the old, allowing larger investments in

economic endeavors. But economic growth also

requires a healthy, productive workforce—which

requires identifying and preventing or managing

the deadly and disabling diseases that affect this

age group. 

Over the long term, as the portion of populations

over 60 increases, developing countries will face

tremendous challenges. In Africa 70 percent of

households headed by an elderly person live

below the poverty line. Households containing

one or more older people are also more prone to

unemployment.35 Despite the problems of elderly

poor people, only two African countries have

formal support programs for this age group. 

HIV/AIDS will compound the challenges of

aging populations. The adult children on whom

the elderly depend will be dying faster and in

larger numbers, leaving young children and

elderly parents and grandparents to face economic and social uncertainty. In all countries,

decisions about how to respond to the needs of

the elderly must be balanced with the continued

demand for disease control and public health

care. In Africa these choices will be even starker

given the resources drained by the battle with

HIV/AIDS.

Recent work by the Organisation for Economic

Co-operation and Development (OECD) examines the effect of aging on national resources in

developing countries. By 2020 the direct costs of

aging (pensions and labor force effects) are

expected to absorb an additional 5 percent of

IMPROVING

PEOPLE’S HEALTH

78

HIV/AIDS WILL

COMPOUND THE

CHALLENGES OF AGING

POPULATIONS

Falling dependency ratios 

present huge opportunities

Source: Raymond 2002.

120

40

60

80

100

1950 2020 1985

Non-working-age population (under 15, over 65) 

per 100 working-age persons

High-income 

countries

Sri Lanka Philippines

Egypt

Dominican 

Republic

Ghana

FIGURE 3.5

Fig. 3.5

High-income Egypt Sri Lanka Philippines Dominican Rep. Ghana

1950 54.74 74.35 83.68 89.32 91.3 90.74

1970 57.56 84.16 77.95 93.92 101.18 92.97

1990 49.05 77.82 59.49 78.87 71.59 93.19

2000 49.05 65.24 48.28 69.67 60.77 79.1

2015 49.3 53.23 44.65 58.32 53.91 69.8

2020 51.8 47.25 45.67 52.63 52.8 66.85
GDP on average, and in some cases as much as 7

percent.36 Total costs, including for health care,

could reach 9–16 percent of GDP—equal to

25–40 percent of workers’ taxable wages.37

Even before 2020, changing demographics may

pervade social and economic debates in many

developing countries. The needs of the elderly will

require difficult choices about how and where to

spend public health dollars. The interests of the

young will be weighed against those of the old,

and responsibilities of public funding will need to

be examined relative to individual and family

resources,38 which almost always exceed public

funding as a source of elderly support.39

Only a few developing countries, including Chile

and Morocco, have begun to debate how to allocate resources in the face of changing population

structures. The implications of these debates for

public health policy cannot be ignored.

Structuring the debates and agreeing on financial

responses will be a major challenge.

HEALTH INDICATORS: ADVANCES AND

OBSTACLES

With the sustained long-term effort of the global

health community, people in developing countries

have become much healthier. As a result remarkable changes are occurring in patterns of illness

and death. Still, progress has not been even across

developing countries and regions, and future

improvements will require new approaches to

health care and complementary efforts involving

a range of other sectors.

INFANT AND CHILD MORTALITY

Over the past 20 years developing countries have

also seen a near halving of child mortality, defined

as deaths among children under 5. By 2020

under-5 mortality is expected to fall by another

third in developing countries and by almost half

in the least developed countries.43

By 2020 the average infant mortality rate in developing countries will fall below 50 per 1,000 live

births, surpassing the goal set at the United

Nation’s Summit for Children (figure 3.6).42 In

addition, more than a third of the least developed

countries will have achieved this goal. Sustained

improvements require national commitments to

past investments and continued progress on other

important socioeconomic indicators, including

education, employment, and governance.

Impressive progress on infant mortality is expected to continue over the next two decades, except

in countries with high HIV/AIDS prevalence.

Over the past 50 years infant mortality rates have

fallen by almost half even in the least developed

countries, and by 2020 they are projected to drop

by three-quarters.40 In 1975–80 these countries

experienced an average of 140 infant deaths for

every 1,000 live births; by 2015–20 that rate will

drop to 65.

Progress has been steady in nearly all developing

countries—and in some, startling. During the

1990s alone infant mortality fell 38 percent in

Indonesia, 36 percent in Jordan and Nicaragua,

30 percent in Peru, 28 percent in Morocco and

the Philippines, and 26 percent in Egypt.41

Many reasons explain the declines in infant and

child mortality. Better public health—especially

more widespread immunization, supported by

foreign assistance and the global health

community—has been important. But other

factors are also important. Regression analyses

find that good nutrition, sanitation, and education

are the most important predictors of falling infant

mortality.44

Some of the most extensive literature on the role of

nonhealth variables focuses on women’s education,

particularly for child mortality. Studies from a

variety of settings indicate that women with about

six years of basic education are less likely to see

their children die—to some extent regardless of

IMPROVING

PEOPLE’S HEALTH

79

FUTURE IMPROVEMENTS

WILL REQUIRE NEW

APPROACHES TO HEALTH

CARE AND

COMPLEMENTARY EFFORTS

INVOLVING A RANGE OF

OTHER SECTORS

Infant mortality, plunging

Note: Includes China.

Source: Raymond 2002.

200

50

150

100

1950 2020 1985

0

Infant deaths per 1,000 live births

Least developed

countries

Developing countries

minus least developed

FIGURE 3.6

Fig. 3.6

Less Minus Least Least

1950 178 197

1960 131 171

1970 98 149

1980 80 127

1990 61 110

2000 50 92

2010 38 74

2020 30 58
their income, family size, or access to targeted services.45 Women’s education, therefore, is critical to

infant survival in both developing and industrial

countries.46

Combined, aging and education could accelerate

declines in infant and child mortality over the

next 20 years. In developing countries women

with primary education tend to maintain traditional roles (working at home and bringing goods

to market) while having primary responsibility for

their children.47 With secondary education

women take jobs outside the home, and illiterate

grandmothers care for the children. But when

that happens, mortality rates tend to rise. Thus it

is hoped that when today’s literate mothers

become tomorrow’s literate grandmothers, child

survival will increase.

Recent progress does not mean, however, that

infant and child mortality will continue to fall in

all regions. As with many other indicators, Africa

is a striking exception: infant mortality has been

rising in countries hit hard by HIV/AIDS, reflecting the disease and its opportunistic infections.48

Secondary effects of HIV/AIDS—such as

changes in weaning or care-taking by infected

mothers—can make infants more vulnerable

regardless of their infection rates. Infant and

child mortality also rise when infected parents

suffer declines in their health, nutrition, and

overall well-being. Elsewhere, infant and child

mortality rates may also be rising in Central Asia

and the southern part of Eastern Europe.49

At the same time that food supplies and nutritional status are rising in most developing countries, nutritional deficiencies continue to afflict the

least developed countries. Malnutrition takes different forms in different regions, but always

affects infants and children most profoundly.50

MATERNAL MORTALITY

Quantifying declines is harder for maternal mortality than for infant and child mortality. This is partly

because measuring maternal mortality is methodologically difficult and susceptible to wide margins

of error. It is also because maternal mortality

requires data on causes of death, and such data are

elusive in most developing countries. Where it has

been tracked, maternal mortality appears to have

fallen by as much as half since the 1970s.51 Still, in

many countries initial mortality rates were so high

that even this progress results in startling differences. The lifetime risk of maternal death ranges

from 1 in 4,085 in industrial countries to 1 in 61 in

developing countries and 1 in 16 in the least developed countries (figure 3.7).52 And in some countries

maternal mortality appears to be rising.53

Given the scarcity of good data on maternal mortality, progress over the next 20 years will require

better research and understanding of the source

of the problem. A recent study reaffirms that

maternal mortality does not result solely from

poor health care at delivery or immediately after

birth.54 Further declines in maternal mortality will

require diversifying approaches to caring for

pregnant women and continuing to increase the

presence of skilled attendants at delivery.55

NONCOMMUNICABLE DISEASES

In all developing regions except Africa, noncommunicable diseases—including cardiovascular

disease, circulatory disease, hypertension, stroke,

diabetes, cancer, and injuries—have overtaken

infectious diseases as the leading causes of disability and death.56 Even countries with high

child and adult mortality are well into this transition.57 So are most tropical countries, though

infectious diseases remain a concern.

By 2020 noncommunicable diseases will cause 7 of

every 10 deaths in developing countries (box 3.1).58

Given the aging of developing countries, these

changing disease patterns are not surprising. Older

populations have higher rates of noncommunicable diseases than infectious and parasitic diseases. 

IMPROVING

PEOPLE’S HEALTH

80

IT IS HOPED THAT WHEN

TODAY’S LITERATE

MOTHERS BECOME

TOMORROW’S LITERATE

GRANDMOTHERS, CHILD

SURVIVAL WILL INCREASE

Maternal mortality, still high in Africa

Source: Raymond 2002.

1,200

800

400

0

Maternal deaths per 100,000 live births, 1995

North

America

Latin Europe

America

and the

Caribbean

Africa Asia

1,000

280

190

28 11

FIGURE 3.7
Few developing countries have systems for compiling comprehensive data on health events among

their populations, separated by age, gender, type of

illness, and cause of death. But data collected by

the World Health Organization show that noncommunicable diseases strike earlier in life in

developing than in industrial countries. For

example, in 1990 people under 70 accounted for

27 percent of deaths from cardiovascular disease in

industrial countries—and for 47 percent in developing countries.59 With more intense mortality patterns, developing countries suffer much higher

death rates among their working-age populations. 

Thus developing countries face an enormous

challenge in preventing and managing diseases

that have not been the focus of global health

efforts. Health programs have also not focused on

the working-age population, which is essential to

productivity and growth. 

Consider diabetes. The World Health Organization estimates that by 2025 it will increase by

170 percent worldwide, with most of the growth

occurring in developing countries. If correct, this

means that 25–30 percent of India’s urban population could have diabetes by 2025. Egypt,

Indonesia, Mexico, and Pakistan will also see

large increases.60 Future labor productivity in

developing countries requires more research on

the onset of diabetes, especially among women,

and its implications for other health problems.

Noncommunicable diseases are also starting to

affect younger populations. By 2020 injuries and

noncommunicable diseases will likely account

for 45 percent of the disease burden among children under 15 in developing countries, up from

28 percent in 1990.61

According to some analysts, projections of noncommunicable diseases in developing countries

may seriously underestimate the problem, particularly for cardiovascular disease. External

factors—such as new, higher-sodium diets—may

cause much higher rates of cardiovascular disease

as populations age. Diets also change as incomes

rise, increasing risks for heart disease and diabetes.62 Low birthweight and stunted childhood

growth also may increase the risk of cardiovascular disease later in life.63

These new patterns of illness and mortality can

undermine productivity and compromise economic progress. Moreover, chronic diseases can be

more costly to treat than other diseases, jeopardizing fragile health budgets. As people live longer,

treatment is required over longer periods. Such

treatment also has implications for private health

care initiatives and quality and safety standards.

For both infectious and chronic diseases, early

diagnosis and prevention are crucial and can mitigate the need for expensive hospitalizations and

surgeries. And because the causes of noncommunicable diseases are largely understood, prevention and management systems are fairly well

developed. Unlike an entirely new disease such as

HIV/AIDS, diseases such as hypertension, stroke,

coronary disease, and diabetes follow clear

patterns.

The challenge is to apply current knowledge to

conditions in developing countries. For example,

coronary disease and stroke are more common in

Asia than in Western populations, while in Africa

cardiovascular disease is falling despite no

changes in behavior.64 Where will such trends

lead? How do they differ by region? And what

IMPROVING

PEOPLE’S HEALTH

81

DEVELOPING COUNTRIES

FACE AN ENORMOUS

CHALLENGE IN

PREVENTING AND

MANAGING DISEASES

THAT HAVE NOT BEEN

THE FOCUS OF GLOBAL

EFFORTS

Communicable Noncommunicable

HIV/AIDS Hypertension

Tuberculosis Stroke

Hepatitis Coronary disease

Sexually transmitted diseases Diabetes

Diarrhea Cancer

Measles Chronic lung disease

Mumps Depression

Malaria Osteoporosis

Onchocerciasis (river blindness) Rheumatoid arthritis

Sleeping sickness Osteoarthritis

Schistosomiasis Kidney disease

Box 3.1. Some common communicable and noncommunicable diseases
levels of morbidity, mortality, and associated costs

will ensue? These questions require careful

examination.

INFECTIOUS DISEASES

Also requiring attention are countries—primarily African—still dominated by infectious diseases

and projected to continue lagging behind over the

next 20 years. This disparity is creating a growing

divide between these and other developing countries, though within this lagging group there is

wide variation. Still, among African countries

identified by the World Health Organization as

having very high child and adult death rates,

infectious diseases account for 55 percent of

deaths. Noncommunicable diseases account for

just 20 percent.65 Moreover, nearly half of the

world’s deaths from infectious diseases occur in

Africa.66

Infectious and parasitic diseases have long been a

major concern of global health efforts. Humans

are vulnerable to multiple types of infections

(bacterial, viral, and parasitic) from multiple

sources (people, vectors, water, soil) with varying

epidemiological implications and effects that can

change over time, especially as infectious agents

mutate and develop resistance to known therapies. Thus infectious diseases involve many types

of and responses to disease. 

For example, ebola takes only days to kill its

victims. Thus it requires a very different medical

response than tuberculosis, which is both an

infectious and a chronic disease. Meanwhile, preventing and managing malaria is less a matter of

medicine than of environmental strategies, and so

calls for yet another approach. 

Moreover, infectious diseases have enormous

potential to develop resistance to existing therapies

or to mutate into new agents. New diseases can

emerge, and “super diseases” can develop based on

well-known infectious agents such as influenza.

The probability of such change appears to be

growing in line with increasing mobility, rapid

pathogen resistance, and perhaps climate change.67

The U.S. Centers for Disease notes that as long as

microbes can evolve, new diseases will appear.68

The news is not all bad: significant progress has

been made on controlling infectious diseases in

developing countries. In just five years, between

1993 and 1998, deaths from measles and diarrhea

dropped by a quarter and deaths from lower respiratory infections fell by nearly a fifth.69 Still,

given the nature and diversity of diseases and

overwhelming unknowns, the challenge is to

develop global management capacity for infectious diseases. Priorities include:

• Controlling existing problems where they are

significant.

• Developing mechanisms to signal changes in

disease patterns and respond quickly and

comprehensively.

• Fostering the scientific discovery needed to

keep prevention and cure ahead in humanity’s race against pathogens. 

HIV/AIDS.

70 The ravages of HIV/AIDS require

special attention. Around the world some 37.1

million people are infected with the disease—and

nearly three-quarters are in Sub-Saharan Africa,

which contains just 11 percent of the world’s population. In seven African countries—Botswana,

Lesotho, Namibia, South Africa, Swaziland,

Zambia, and Zimbabwe—20 percent or more of

the population is infected. Women have higher

infection rates than men, with African rates peaking

around age 25 in women and ages 35–40 in men.71

By 2010 AIDS is expected to have created 27

million African orphans72 and to have reduced life

expectancy by 5–15 years in most countries on the

continent and by as much as 40 years in some.73

Elsewhere, HIV/AIDS will become more widespread in some very large countries—China,

Indonesia, Nigeria—where it was once limited to

high-risk groups.

The effects of AIDS are felt across the social spectrum, from farmers with reduced agricultural

output to government employees with reduced

capacity for service provision, including health

care and education. In South Africa AIDS

accounts for one-seventh of teacher attrition, and

the number of pupils entering the first grade has

fallen by one-quarter.74 In Zambia HIV/AIDS is

estimated to cause teacher losses equal to twothirds of the annual output of the nation’s teacher

training colleges.75

The World Health Organization estimates that

the global health care costs of HIV/AIDS could

total $14 billion a year.76 Economic impacts

reverberate even more deeply in Africa. South

Africa’s economy is estimated to face a 0.4 percentage point annual decline in GDP because of

IMPROVING

PEOPLE’S HEALTH

82

SIGNIFICANT PROGRESS

HAS BEEN MADE ON

CONTROLLING

INFECTIOUS DISEASES IN

DEVELOPING COUNTRIES
HIV/AIDS.77 By 2010 nearly one-quarter of

South African workers will be infected with

HIV/AIDS, and benefit payments related to the

disease will rise from 7 percent to 18 percent of

payroll.78 More and better estimates of the macroeconomic effects of AIDS are needed to fully

understand and address its devastating impact.

HIV/AIDS also threatens political stability.

Widespread infection among military and security forces is another concern. So too are the destabilizing effects of broken families, tattered

economies, and losing significant portions of any

nation’s pool of young adults.79

It is extremely difficult to make predictions about

the future effects of HIV/AIDS. Much is known

about how the disease is spread biologically,

socially, and geographically. But many things

about the disease are unclear, making it difficult

to extrapolate from what is known. For example,

new strains of HIV are emerging,80 and continued

mutations are expected over the next two

decades—with unknown effects on the course of

the disease, transmission rates, and the effectiveness of current treatments. And though there has

been success in developing therapies, it is hoped

that AIDS will evolve into a chronic but manageable condition over the next 20 years, but making

this change will be difficult.81 New treatments are

needed, and though new strategies are under way,

their timeframe is unknown.82

What is clear is that the process will be expensive.

Developing a new medication of any type, from

pre-clinical work through clinical trials, costs an

average of $800 million—2.5 times the inflationadjusted cost in 1987.83 Over the next 20 years

there will likely be better treatments, and perhaps

even some type of vaccine. But when, in what

shape, and at what cost is unknown. The efficacy

of any future vaccine will have profound implications for the spread of HIV. The main impact so

far has been in Africa, but the disease is spreading rapidly in India, China, and Russia.

There is no certainty about the nature of the virus

or about the solutions available over the next 20

years. Past experience offers little guidance: for

example, early projections did not anticipate the

extent of Africa’s crisis. There is uncertainty

about why infection rates stabilize at different

levels in different countries and regions, and

about the willingness of public leaders to aggressively tackle the problem. So, even without the

problems created by possible viral mutations, it is

difficult to predict when prevalence rates will

plateau. Moreover, there is intense debate about

the likely pace and progress of the disease among

countries and cultures, because behavioral determinants of infection differ.84 Thus there is much

debate about the ultimate size and pace of the

disease’s demographic impact.85

Leadership, scientific innovation, and integrated

prevention and treatment are essential for progress

on HIV/AIDS. They will also help determine the

utility of new technologies and strategies to combat

it. Over the next few years it will be possible to learn

from and improve prevention and treatment efforts.

Tuberculosis. Once thought to be well under

control, tuberculosis has resurged around the

world. Each year there are 8 million new cases

and 2 million deaths from the disease, and infection rates are growing by 3 percent a year. Less

than a quarter of patients receive proper treatment, and 1 case in 10 is resistant to at least one

therapeutic drug.86

Though 80 percent of new cases occur in just 23

countries, tuberculosis threatens all countries.87

Thirty years have passed since a new drug was

released for the disease, though new drug combinations and protocols have been developed.

Successful treatment requires that patients comply

with detailed therapeutic regimes and so demands

close supervision. The rise of tuberculosis strains

resistant to multiple drugs has made such treatment increasingly difficult in some settings.

Tuberculosis control could be dramatically

improved by a rapid test, a vaccine, or new drugs.

Malaria. Malaria is also a pressing health problem.

Between 1970 and 1997 the number of infections

increased 40 percent.88 Traditional treatments

such as chloroquine have become ineffective in 80

of the 92 countries where malaria is a major

problem.89 In some countries nearly half of

malaria infections are also resistant to newer

drugs, such as mephloquine,90 and resistance is

being acquired at a growing pace. 

Though more than 40 percent of the world’s people

live where there is risk of malaria,91 Africa is the key

global challenge. Malaria deaths have been rising

there since the 1970s and are much higher than in

other regions. Almost 90 percent of malaria deaths

occur in Africa, and for small farmers treatment can

cost 5–13 percent of annual household income.92

IMPROVING

PEOPLE’S HEALTH

83

LEADERSHIP, SCIENTIFIC

INNOVATION, AND

INTEGRATED

PREVENTION AND

TREATMENT ARE

ESSENTIAL FOR PROGRESS

ON HIV/AIDS
Technological innovations to control malaria are

being aggressively sought, such as through the

Global Roll Back Malaria program. But a

country’s health care system is a key element in the

battle. Without striking technological breakthroughs, Latin America cut malaria deaths by 60

percent between 1994 and 1997 through coordinated treatment, vector control, and public education.93 Even simple technology, such as insecticide-treated bednets, matters in interrupting

transmission. 

Related issues and responses. The persistence,

resurgence, and emergence of various infectious

diseases reflect changes, choices, and challenges

around the world. These include:

• Aging populations—and so increased susceptibility.

• Increased travel, with more people moving

within and between countries.

• Urbanization and the crowding that results.

• Inappropriate use of therapies, especially

antibiotics.

• Underinvestment in public health and global

surveillance.

Better understanding of infection’s role in

pathogen-host responses and chronic diseases

will likely increase the attention paid to infectious

diseases during epidemiological transitions.94

Infectious disease pathogens are also receiving

more attention because of their potential role in

bioterrorism. Early global surveillance of infectious diseases and careful analysis of the resulting

data are essential to isolating possible outbreaks

related to terrorism. The related ability of health

personnel to quickly diagnose infectious diseases

with potential ties to terrorists, and to trace infections to their sources, is also essential to control

communicable diseases of natural or bioterrorist

origin.

HEALTH SYSTEMS AND SERVICES:

PROGRESS, LAGS, AND A RISING

PRIVATE ROLE

For the most part few comprehensive data are

available on health care services over time and

across developing countries. An exception

involves data on services for children and

mothers, which can be used to show general

trends. Among the most important of these trends

are changes in financing, with a clear shift toward

private resources to provide and pay for services. 

MATERNAL AND CHILD HEALTH SERVICES

Immunization rates show the progress made as

part of long-standing global concerns for childhood health services. Twenty year ago less than

one child in five was vaccinated against measles in

developing countries. By 2000 nearly four out of

five children received this immunization. As a

result the number of measles cases has plummeted.95 Similar progress has been made in immunization coverage for diphtheria, pertussis, and

tetanus. But there is still a need for better coverage—particularly in Africa, which continues to lag

behind other developing regions (box 3.2).

The challenge is to make developing countries

self-reliant in their immunization efforts. After

nearly half a century of effort, most decisionmakers (for health and nonhealth) understand the

benefits of immunization. Systems for delivering

and managing immunizations are also well understood. And in many countries resources are available for immunization programs, either domestically or from donors.

What country programs often lack is political

leadership and public commitment. These shortcomings have also impeded progress on other

health issues—as when some developing countries have ignored serious health problems or

refused to use donor resources and foreign private

philanthropy to treat serious infectious diseases.

Recent decades have seen a rise in public-private

partnerships between multinational corporations,

nongovernmental organizations, and international donors. Partnerships include efforts to develop

new tuberculosis drugs, HIV/AIDS treatment

and prevention programs, and malaria treatment

and control efforts. Such collaboration has also

occurred at the local level. For example, commercial soap manufacturers have served as

financing and media partners in publicly sponsored hand-washing campaigns. The campaigns

increased hand-washing and reduced diarrhea.96

Such experiences offer a platform for innovative,

collaborative efforts to control diseases and

provide health services.

As in other areas, the least developed countries

have seen much less progress on controlling diseases and providing services. In some African

countries oral rehydration use has increased by

several times in recent years. Yet in countries such

as Burkina Faso and Mali, use hovers below 20

IMPROVING

PEOPLE’S HEALTH

84

THE PERSISTENCE,

RESURGENCE, AND

EMERGENCE OF VARIOUS

INFECTIOUS DISEASES

REFLECT CHANGES,

CHOICES, AND

CHALLENGES AROUND

THE WORLD
percent—even while it is 30–50 percent in countries like Ghana, the Philippines, and Thailand.97

As noted, the presence of skilled attendants at

delivery helps prevent maternal deaths. In Latin

America and the Caribbean trained personnel are

present for 75 percent of births. Yet in Asia only

50 percent of births are attended by skilled personnel,98 and in Africa just 40 percent—and in

some African countries, 20 percent.99

CHANGES IN FINANCING

Financing has long been a central concern of

global health efforts. Funding was traditionally

seen as a matter of increasing and managing

public health budgets, with most revenue coming

from the state. But concerns about the adequacy

of public budgets have grown as costs and public

expectations have increased and as responsibilities of public health authorities have expanded.

More attention is being paid to the role of private

resources in providing and paying for health services in developing countries. Over the past 10

years middle-income countries have experimented with prepaid insurance and service fees. But

private resources are also crucial in low-income

countries. Surveys in Indonesia, Pakistan, and Sri

Lanka have found that most consumers bypass

free public services, choosing to pay for services

at private facilities or though traditional

sources.100 In Burkina Faso just 17 percent of

malaria patients were treated by professional

public or private services. Most purchased treatments at pharmacies or paid traditional healers.101

Data collected by the World Health Organization

show the enormous importance of private spending on health care in most countries—rich and

poor, large and small. By 1998 more than 50

percent of health spending occurred in the private

sector in most developing countries.102 Private

funding exceeds 60 percent in countries as different as Bangladesh (63 percent), China (61 percent),

Egypt (69 percent), India (82 percent), Indonesia

(74 percent), Pakistan (76 percent), Morocco (70

percent), and Uganda (62 percent).103 This spending is almost always out-of-pocket. In most systems

IMPROVING

PEOPLE’S HEALTH

85

MORE ATTENTION IS

BEING PAID TO THE ROLE

OF PRIVATE RESOURCES

IN PROVIDING AND

PAYING FOR HEALTH

SERVICES IN DEVELOPING

COUNTRIES

The new H influenza type B vaccine (Hib) was

first licensed in the United States in 1989 and

recommended by the WHO for routine childhood immunization in 1998. It is now among

the safest of all vaccines. Hepatitis is also falling

to the scientific sword. Hepatitis A (HAV) is

highly endemic throughout the developing

world. Until recently, prevention options were

limited. A vaccine has been available since 1995

for long-term prevention of HAV in persons

two years of age and older. It has not been

widely used and is nor recommended for use

since Hepatitis A is not usually a fatal disease.

In 2001, The U.S. Food and Drug

Administration approved a new combined

Hepatitis A and B vaccine. The remaining challenge is Hepatitis C, a viral infection of the liver

whose causative agent was not identified until

1989, and whose genome is so highly mutable

that vaccine development has been stymied. 

For some diseases endemic in the developing

world, particularly parasitic diseases, scientific

knowledge remains inadequate to generate

technological solutions in the near term. The

examples of significant progress in filariasis and

onchocerciasis hold out hope for broader parasitic solutions in the future. For others, such

as pneumococcus vaccines for children under

two years of age, solutions have proved inadequate in children in the developing world due

to differing serotypes. For others, such as the

development of a vaccine for diarrheas caused

by rotavirus, the cause of between 25 percent

and 60 percent of all pediatric hospitalizations

and 5 percent of child deaths, analysis is still

under way.

Still, the next 15 years will see significant

progress, standing on the shoulders of the

genomic revolution and scientific advance. The

Global Alliance for Vaccines and Immunization

(GAVI) is focusing on three new vaccines

within the next five to seven years, pneumococcal conjugate vaccines, rotavirus oral vaccines, and meningococcal A (or A/C) vaccines.

The GAVI partnership, involving public, academic and industrial players, works at overcoming the financial problems of applying vaccine

research and development to vaccines for highrisk populations in developing world markets.

Private industry is pursing independent

research on vaccine delivery technologies based

on protein carriers that will likely open new

vistas for the specific problems of developing

nations.

Source: Raymond 2002.

Box 3.2. Bringing new knowledge to technology: the example of vaccines
little or no role is played by risk-pooled payment

mechanisms, which can enable individuals and

employers to pay affordable health care premiums

and receive quality care.

These trends have three main implications.

First, people using their own resources are

making choices that affect both the health sector

and other sectors in developing countries (box

3.3). Their choices control the majority of health

resources and will be the main drivers of future

care. Understanding these choices is crucial to

international health assistance strategies.

Donors should study these trends to understand

health care demand and to be able to monitor

drug resistance problems and adverse reactions

that can emerge from both private purchases

and public distribution. Because of poor quality

control in manufacturing, many drugs in

developing countries are substandard or

counterfeit.104

Second, recipients of private spending are also

likely to be private. Again, understanding this

dominant pattern of supply and demand is essential to understanding countries’ health status.

Third, health strategies and initiatives should

take into account these private elements. If private

revenues are not considered, health programs will

miss a large portion of potential health resources,

undermining their ability to develop sustainable

systems in developing countries.

TO REVIEW THE BIDDING: FUTURE

TRENDS AND CURRENT FUNDING

The momentum of past health improvements will

shift health patterns significantly in many developing regions.

A majority of developing countries will experience declining dependency ratios, the time when

fewer children and elderly are dependent on the

working age population for resources. These

countries will have greater opportunity to invest

in productive endeavors. The demographic shifts

will be accompanied by changes in morbidity and

mortality. Many countries have reached or will

soon reach the Summit of Children goal for

infant mortality reduction. For them, the key

public health issues will include those which

affect both the productivity of their labor forces

and the health costs of the elderly. This disease

profile is predominantly noncommunicable and

chronic.

Even as the shift takes place, many traditional

problems will persist, such as infectious diseases

resurging because of resistance. The future

pattern will be one of a growing chronic disease

IMPROVING

PEOPLE’S HEALTH

86

WITH A CHANGING AGE

STRUCTURE, THERE IS

OPPORTUNITY FOR AN

EXPANSION OF FOCUS TO

THE FAMILY AS A UNIT

THAT ENCOMPASSES BOTH

TRADITIONAL AND

EMERGING HEALTH

CONCERNS

Striking progress in technological innovation

outside of the health sector will continue to

create, new opportunities for developing more

effective prevention and therapy services to

populations, including the poor and those

widely dispersed.

Of greatest note, of course, is the future technology for accessing the internet. The availability of wireless and solar powered Internet access

technologies will bring communications technologies to even remote areas. In the more

developed markets of Africa, some research

suggests that market penetration for such services will exceed 25 percent of the population

within the next five years.

Completely integrated touch-screen systems for

web-based public access kiosk applications

were unveiled in mid-2001. The kiosks have

internal wire management systems and sealed

ports and slots, making them adaptable to even

harsh conditions. Market targets include retail

trade, banking, and health care in West Asia,

North Africa and India. The technology exists

to solar power such kiosks, equip them with

everything from telephones to video recorders,

and place them in pharmacies, clinics, examination offices, and even school classrooms for

health education.

Improved telecommunications provides a

range of opportunities for deepening health

capacity without investing in physical infrastructure. Telemedicine, for example, extends

the expertise of advanced diagnostics to paramedical personnel at remote sites. Distance

learning can provide continuing education

without the costs of transport and meeting

space. 

Source: Taylor, Shakoor, Behrens, and others

2001; Hindu Business Line 2001; Mayor and

Daviss 1998.

Box 3.3. New technologies and health
burden overlaid on top of a persisting reservoir of

communicable diseases.

Simultaneously, some countries, many in southern

Africa, will continue to have demographic and

disease patterns more characteristic of past trends—

high infant mortality, low life expectancy, and epidemiology dominated by infectious diseases.

For both old and new problems, the central

concern will be self-reliance so that economic

progress can be tied to the maintenance of public

health progress. In turn, a central concern of selfreliance will be financial diversity, including

private finance that already represents over half of

all health resources. Political commitment is also

key. For many developing countries, self-reliance

in such traditional concerns as immunizations is

increasingly not a matter of inadequate resources.

It is more a matter of political will, commitment,

and management. 

IMPLICATIONS OF TRENDS FOR FUTURE

DIRECTIONS: SHIFTING OPPORTUNITIES

Opportunities in global health are a direct result

of the changing demographics, epidemiology, and

diversity in the populations of developing countries. The opportunities do not imply that humanitarian programs should be eliminated where such

needs continue to dominate national landscapes.

Nor do they imply, in the majority of developing countries currently in the health transition,

that core public health functions dealing with

conventional problems do not need to be maintained. Clearly, the scaffolding of public and

private services that supports progress is a 

pre-requisite to transition itself. In coming

years, however, where economic progress and

democratic governance advance alongside epidemiological change, the burden for maintaining that scaffolding can rest on the countries

themselves. 

INFECTIOUS DISEASES—HELP WANTED:

GLOBAL PUBLIC HEALTH INFRASTRUCTURE

Much has been written about the importance of

global systems for infectious disease surveillance.105 The priority is for using technology to

decentralize data collection and improve data

sharing. An equal need is for improved clinical

and laboratory capacity to diagnose and study

patients with potentially “new” diseases or syndromes, and to quickly disseminate findings,106 as

well as for the local personnel, skills, and systems

needed to intervene.

Given the importance of nutrition to infectious

diseases, the intersection between health strategies

and nutrition and food security is also important.

In contrast to surveillance strategies, however,

nutrition linkages would need to be addressed at

a variety of points within national development

strategies, from households to agricultural strategies to national distribution and financial systems.

Increasing both the availability and quality of

food will remain critical, especially in light of the

World Health Report findings on the importance

of undernutrition and micronutrient deficiency to

child mortality. Future agricultural strategies

should complement the current cadre of successful interventions to reduce micronutrient malnutrition, especially vitamin A deficiency. Agriculture

has a role to play in addressing health and nutrition issues, not only through the production 

of food supplies, but also in generating the

incomes of poor rural populations. New agricultural approaches, such as biofortification of staple

crops, should continue to be explored. Using

crop breeding techniques to improve the density

of three key nutrients (iron, zinc, and betacarotene) in staple crops primarily consumed by

the poor—for example, rice, wheat, maize,

cassava, and common beans—agricultural

researchers could provide a relatively cost-effective

and sustainable means of delivering micronutrients to the poor.107

IMPROVING

PEOPLE’S HEALTH

87

BIOFORTIFICATION TO

IMPROVE THE NUTRIENT

DENSITY OF STAPLE

CROPS COULD PROVIDE

A RELATIVELY

COST-EFFECTIVE AND

SUSTAINABLE MEANS OF

DELIVERING

MICRONUTRIENTS

TO THE POOR

“In poor countries today, there are 170

million underweight children, over three

million who will die this year as a result. All

ages are at risk, but underweight is most

prevalent among children under five years of

age, and WHO estimates that approximately 27 percent of children in this age group are

underweight. This caused an estimated 3.4

million deaths in 2000, including about 1.8

million in Africa and 1.2 million in countries

in Asia. Significantly, it was a contributing

factor in approximately 60 percent of all

child deaths in developing countries.”

Source: The World Health Report 2002.

Geneva: World Health Organization.

Box 3.4. Malnutrition and child mortality
FAMILIES: KEEPING BREAD-WINNERS

HEALTHY AND TAKING CARE OF PARENTS

With a changing age structure, there is opportunity for an expansion of focus from “women of

reproductive age and children under five” to the

family as a unit that encompasses both traditional and emerging health concerns.

The absolute number of under fives will decline

in the first (and larger) group of developing countries with improved health care. In many regions,

the numbers of youth will rise, at least until 2020,

when the demographic “bulge” of this group will

move into mid-adulthood. Grandparents and

great aunts and uncles will survive middle age.108

Whether they live independently or with their

mature children, their health problems will

become a concern for family bread-winners. The

health problems of the mature, productive age

populations will impact family life and economic

viability. The elderly will live longer and develop

their own health care needs and demands. When

both aging dependents and productive breadwinners are chronically ill, then a family’s future

is bleak indeed. Hence, the importance of health

strategies that aid economic growth. 

A full picture of resource flows also makes clear

that families finance health care. Their choices

about sources of care and therapeutics influence

the health care “market.” Their expenditures

power the directions of both content and availability of services.

The near-term challenge is to learn more about

families including the problems they face, their

aspirations and how they are adapting to changes

in living patterns and health status. How are they

allocating their resources to meet changing

demands and how can foreign assistance help that

process?

FINANCE: WHO WILL PAY, HOW, AND FOR

WHAT?

Private payments for health care now represent a

larger part of the health care dollar than public

funds. This is true for large countries and small,

advanced and poor. Linkages to private resources

will be essential in virtually all health programs.109

In addition to this trend, health in the future will

become more expensive, as measured by health

care costs, economic impacts, and social support

costs. As the causes of morbidity and mortality

shift to those more common in industrial countries, unit costs will rise. The estimated cost of vaccinating a child with five antigens is estimated to

be on the order of $20, all costs included.110 Of

that cost, the vaccines themselves cost between $2

and $3. In contrast surgery for breast cancer in the

United States costs on average $14,000 per

case.111

Assuming that the cost of first generation generic

anti-hypertensives is about $1 per month,112 but

must be continued indefinitely, it would cost a

total of $240 in drug costs for a patient living 20

years with managed hypertension to prevent more

serious disease onset. This is more than 10 times

the cost of an immunized child and 120 times the

cost of the vaccine. 

Although the comparable numbers are not available for many developing countries, in the U.S.

health care costs per capita for those over age 65

are 3 to 5 times the costs for those under age 65.113

For developing countries in demographic and

epidemiological transition, the future will mean

that health sectors face complex choices. 

DISEASE MANAGEMENT: TOO LITTLE TO

WASTE PART I

As epidemiology changes to chronic diseases patterns in developing countries, there are disease

management lessons from the more advanced

health care systems. These systems are focused on

improving outcomes, eliminating waste, and

increasing quality. In effect, disease management

converts chronic disease from a therapeutic,

acute-care model to a preventive model. Disease

management combines public awareness, early

identification, risk-factor management and patient

behavior change, with intense patient monitoring,

especially regarding preventive and therapeutic

compliance. 

The key to quality management for noncommunicable diseases is the recognition that many of

these conditions are not binary. In infectious diseases, for example, one has or does not have diarrhea. One has or does not have measles. But vascular disease is much more complex. One may,

indeed, have genetic predisposition to vascular

disease, and even initial stages of vascular disease,

without overt symptoms. And the disease may

IMPROVING

PEOPLE’S HEALTH

88

DISEASE MANAGEMENT

CONVERTS CHRONIC

DISEASE FROM A

THERAPEUTIC, ACUTECARE MODEL TO A

PREVENTIVE MODEL
persist for a long period of time. The key is to

manage the disease so that its more serious binary

incident, stroke, does not occur. 

Even now, the problem of quality in service provision and disease management is a significant one

in developing countries. The quality issue is

crucial both to lagging countries and to the majority of developing countries. 

• In a study of 125 deceased children in

Guinea-Bissau, 93 percent of the children

had been seen at a hospital or health clinic

during the two weeks before death. A previous study in the same geographic area had

found that 78 percent of child deaths had

occurred soon after consultation at a health

facility.114 The analysis indicated that quality

assurance in diagnosis and better discharge

criteria were essential.

• In Bangladesh, a study of infant deaths upon

discharge after diagnosis of diarrhea indicated

that 7 percent of the discharged infants died

within 6 weeks, and the median survival time

was 11 days.115

• In a study of diagnosis and treatment of all

non-surgical general consultations in six

health centers in Burkina Faso, only 2 percent

received treatment that was compliant with

medical guidelines.116 This level was based on

observed treatment; actual treatment behavior absent third-party observation may be

even lower. 

• Examination of 21 hospitals in Bangladesh,

Dominican Republic, Ethiopia, Indonesia,

Philippines, Tanzania, and Uganda found that

14 lacked quality monitoring systems, and 76

percent of children seen were inadequately

assessed, treated and monitored.117

• Studies in Cambodia and Uganda indicate

that health workers trained in the evidencebased practice guidelines “Integrated

Management of Childhood Illness” provided

full assessment and treatment services to

between 80 percent and 100 percent of children visiting health clinics, compared to 5

percent to 30 percent of those without such

training. However, one year later, the diagnosis and treatment behavior of trained workers

had deteriorated by about 50 percent on

some measures, indicating that quality

enhancement is a system problem.118

Tragically, the result of failed quality is illness and

death. It is also a tremendous waste of resources.

Higher quality means lower costs. For even the

poorest countries, such assessments of quality

argue for new approaches. And especially for the

poorest, they testify to levels of waste that are

insupportable on constrained budgets.

SYSTEMS MANAGEMENT: TOO LITTLE TO

WASTE PART II

The diversity of epidemiology, broadening of

demand in an aging of the population, and raised

expectations will make the management of health

services more complex in the future.

Decentralization of responsibility, which has often

accompanied democratization and economic

liberalization, will bring about new challenges in

the public sector, including in health. 

A second management issue of decentralization

and economic reform will be the evolution of

public roles in health. With the rise in private provision alternatives and more diverse financing

schemes, the role of public ministries will change

from service provision to standard-setting, and

oversight. How well such systems are developed

will affect the overall quality and sustainability of

national health systems, both public and private.

Deepened capacity, in both the public and private

health sectors, to manage dispersed networks of

health care delivery, rather than centrally controlled systems of health services, will be required.

With the demographic and epidemiological transition, one significant area of management change

may be in pharmaceuticals. For many noncommunicable diseases, prevention and treatment combine

in disease management. Indeed, many of these diseases entail continuous lifelong pharmaceutical use

compared to communicable diseases, with the

exception of HIV/AIDS therapies, for now. Rising

literacy, education, access to information, and globalization, will also spur demand for pharmaceuticals. Given the effectiveness of modern medications, rising access to therapeutics can contribute to

a more productive workforce at all ages.

Quality and safety concerns are important for

pharmaceuticals since studies show that some

one-third of drugs being sold in developing

country markets are sub-standard. These issues of

sub-standard and counterfeit drugs are particularly relevant to least developed countries where

inadequate treatment of HIV/AIDS and TB can

result in the development of multi-drug resistant

disease strains.

IMPROVING

PEOPLE’S HEALTH

89

DECENTRALIZATION OF

RESPONSIBILITY WILL

BRING ABOUT NEW

CHALLENGES IN HEALTH
Quality management systems, of course, are intimately tied to quality service provision. Where

diagnoses are wrong and prescribing patterns are

inappropriate, the best-managed systems cannot

be efficient. A study in Ecuador, for example,

found that failure of diagnosis and inappropriate

prescriptions nearly doubled the costs of pharmaceutical inputs for childhood illnesses.119

COMMUNICATION AND PUBLIC HEALTH

EDUCATION

Changing demography, rising urbanization, and

spreading literacy may provide opportunities for

pursuing comprehensive approaches to public

health education using new communications

technologies. Indeed, such strategies may be

essential. Many noncommunicable diseases, especially cardiovascular conditions and cancer, have

deep roots in behavior. Encouraging prevention

through health-promoting behaviors brings prevention to the forefront for these diseases and can

be incorporated into existing primary health care

initiatives for infectious diseases.

The future will see greater opportunities for health

education for more people. Research in industrial

countries indicates that as people age, they begin

to be more attentive to health problems and their

consequences.120 The absorptive capacity of the

population for health information deepens.

Technological innovation will make reaching

people easier. Even now, solar-powered, satellitebased Internet connectivity is spreading to rural

areas in many developing countries.121 Cell phone

market penetration is greater than in some areas of

the United States.122 Distance learning methods

and technologies are becoming widespread even

now. The evolution of bottom-up wireless mesh

routing (known as Wi-Fi or 802.11) is rapidly

becoming a low-cost method for weaving networks of wireless telecommunications capacity

without major investments.123 Anticipated extension of such networks into developing countries

will significantly increase the capacity to deliver

health care messages and consultation to larger

populations for lower costs than ever before.

Moreover, economic growth and the strengthening of the private sector will generate a change in

capacity not normally associated with global health

in developing countries. As economic growth proceeds, developing countries will see a deepening of

their own advertising, public relations, media,

and communications industries. This capacity will

provide a powerful future partner for public

health education messages that benefit from new

understandings of what motivates in the marketplace, including what motivates the very behaviors

public health may seek to change. 

COLLABORATION: GLOBAL IMPERATIVE

AND NATIONAL OPPORTUNITY

As epidemiology changes and more diverse health

challenges spread across economies and population segments, the future will see both the opportunity and the imperative to broaden and deepen

partnerships and coalitions. The interests of business, voters, government, of labor and management, of patients and providers can be aligned to

create new opportunities for health leaders to be

seen as partners across national economies.

There is, of course, significant international precedent for cooperative approaches to health, especially as regards infectious diseases. Formed in

1999, the Global Alliance for Vaccines and

Immunization (GAVI) is a collaborative effort of

international organizations, bilateral agencies,

governments, research institutes, philanthropy,

and the pharmaceutical industry to expand

vaccine and immunization research and provision. GAVI is focused on using collaboration to

expand immunization commitment and availability in developing countries. 

Similarly, the Global Alliance for TB Drug

Development combines the expertise and

resources of private industry, academic research,

philanthropy, professional and disease associations, and public agencies in an attempt to spur

the pace of discovery and development of a new

generation of drugs to address the global tuberculosis resurgence. The approach of the TB

Alliance is to invest resources as an incubator

rather than a grant maker, to take advantage of

scientific advances and array its resources to

ensure continued momentum toward drug development, rather than acting as an initial source of

research funding.

Vaccines and tuberculosis do not stand alone, of

course. Similar partnerships have been developed

for malaria, trachoma, guinea worm, onchocerciasis, leishmaniasis, polio, maternal and neonatal

tetanus, lymphatic filariasis, and sleeping sickness. All are problems with complex causes whose

IMPROVING

PEOPLE’S HEALTH

90

THE NEWEST MODEL IN

INTERNATIONAL

COOPERATION IS THE

GLOBAL FUND TO FIGHT

AIDS, TUBERCULOSIS,

AND MALARIA
resolution requires more skill, expertise, and

resources than any one organization can bring to

bear. Multinational pharmaceutical companies are

part of all of these efforts, in tandem with nonprofits, academic medical centers, professional

associations, and public agencies. The newest

model in international cooperation is the Global

Fund to fight AIDS, Tuberculosis, and Malaria.

Within countries, there is promise for creating such

collaborative arrangements that attract professions,

industry, and government within health sectors, and

those who also share health care stakes in other

sectors. In transition countries particularly, changing demographics and disease patterns create longterm stakes for a spectrum of organizations and

leaders. The power of health care as a convening

issue where noncommunicable disease mortality is

overlaid on continued concern for infectious disease

is great because no one is spared risk. Mutual interests in defining better approaches to risk management and, in creating financing mechanisms for

those approaches, may be more easily identified

than in the past. Program portfolios based on collaborative strategies between the U.S. and its

partner countries can be the center of gravity for

drawing wide-ranging networks of institutions

within countries to the health tasks at hand.124

IMPLICATIONS FOR THE PHILOSOPHY

AND PURSUIT OF “FOREIGN

ASSISTANCE”

After more than four decades, foreign assistance

programs in health, focused largely on public

health endeavors aimed at women of reproductive

age and children under five, look out on a

changed health landscape. Decisions about how

to allocate and manage “aid” on that landscape

can be guided by various considerations.

First, resources confront a growing diversity of

complex problems many of which will be of

increasing seriousness. The world is very different

than it was even 20 years ago; it will be different

still 20 years hence. What is striking is the

progress that has been made, albeit with continued serious lags in the least developed countries.

Entirely new generations of public health problems require entirely new portfolios. Health conditions not previously considered part of a

“foreign assistance” portfolio are increasingly

worthy of attention. New skills, such as finance,

become as important as public health credentials. 

Second, progress in health is not just in health programs. Health portfolios must be interdisciplinary,

combining the best of health and medical innovation with simultaneous attention to problems as

diverse as capital investment capacity, biofortification in agricultural systems to correct micronutrient deficiencies, wireless communication distribution systems, and women’s education. In turn,

this will mean that portfolios will need to be fairly

slim; one cannot undertake multiple complex

partnerships in one place (let alone many places)

at once. Limited resources means being selective

about investments with an eye to their economic

contributions, staying rigorous and brutally honest

about measuring impact, and being insistent on

the long-term self-reliance of partners. 

Third, public health challenges of tomorrow

argue for flexibility. No longer are there simple

categories of health challenges, if there ever were.

Nor are the challenges defined by narrow age categories or by gender. Achieving equality in partnerships means that the U.S. must have the flexibility to adapt the discussion to priorities as

defined by the emerging health conditions.

Accelerating the progress of some countries still

in the grip of conventional global health and

disease problems must be combined with the

ability to help other countries address new challenges not conforming to old categories.

Fourth, despite 40 years of effort, health progress

in some countries continues to lag and only slow

progress is projected for the future. Clearly quality,

impact and sustainability have remained elusive.

The prospect of continuing need for future investment in conventional problems argues for frank

and open discussion with partners on new

approaches to achieving results. Newly recognized problems with impact and sustainability

suggest that money is not at the heart of the matter.

The partnership dialogue with countries still struggling to make health progress requires that entirely new strategies be explored and developed.

NOTES

By way of caveat, all projections depend on assumptions

about the present situation, about cause and effect, and about the

continuation of past trends at future times. So, the farther out the

projections, the more vulnerable they are to error.

1. Raymond 2002.

2. Freedom House 2002. Infant mortality reports are from

the World Bank (1999).

3. Kaufman, Kraay, and Zoido-Lobaton 1999.

4. Pritchett and Summers 1996.

5. WHO 2001d. The report acknowledges, “Although all of

IMPROVING

PEOPLE’S HEALTH

91

ENTIRELY NEW

GENERATIONS OF PUBLIC

HEALTH PROBLEMS

REQUIRE ENTIRELY NEW

PORTFOLIOS
the studies mentioned in this paragraph attempt to separate

direct effects of health from a poor institutional, policy and governance environment more generally, we recognize that further

research with more refined data ....will shed further light on the

specific effects of health versus other social conditions that may

be correlated with health.”

6. UNESCO, various years.

7. UNESCO, various years.

8. Unless otherwise specified, demographic data are taken

from the United Nations’ 2000 estimates. See United Nations

(2001). All projections are from the Medium Variant model. The

assumptions behind this model include: that fertility in high fertility countries declines at an average pace of nearly one child per

decade starting in 2005 or later; that fertility in medium-fertility

countries reaches replenishment before 2050; and, that fertility in

low-fertility countries remains below replacement during much of

the projection period, reaching by 2045-50 the fertility of that

cohort of women born in the early 1960s or, if that information is

lacking, reaching 1.7 children per women if current fertility is

below 1.5 children per woman or 1.9 children per woman if

current fertility is equal to or higher than 1.5 children per woman.

9. UN 2001. Unless otherwise noted, data for fertility analysis

is taken from World Population Prospects 2000.

10. UN 2002.

11. UN 2002.

12. UN 1999.

13. UN 2002.

14. Sinding 2000.

15. Bulatao 1998.

16. Merrick 2002.

17. Freedman 1997.

18. For further summaries of alternative views, see Sinding

(2000), Eberstadt (2000), and Hernandez (1981). 

19. National Research Council 1986.

20. Birdsall and Sinding 2001.

21. Merrick 2002.

22. Freedman 1997.

23. Raymond 2002.

24. Stanecki 2002. 

25. UN 2001.

26. The 11 countries are Botswana, Central African Republic,

Kenya, Lesotho, Malawi, Mozambique, Namibia, South Africa,

Swaziland, Zambia and Zimbabwe.

27. UN 2001.

28. See Kault (2000) for an example.

29. See Kault (2000) for an example.

30. Smith and Ebrahim 2001. 

31. Raymond 2002.

32. Ebrahim 2000.

33. UN 2001.

34. Raymond 2002.

35. Walker 2001.

36. OECD 2001.

37. CSIS 1999. 

38. Mason, Lee, and Russo 2000.

39. George 1998.

40. Projections based on the Medium Variant models of the

United Nations’ World Population Prospects 2000. UN 2001.

41. UN 2001.

42. UN 2001.

43. Projections based on the Medium Variant models of

World Population Prospects 2000. United Nations 2001.

44. See for example, Hertz, Hebert and Landon 1994.

45. Rao and others 1996; Vitora and others (1992); Bender

and McCann (2000); Adentunji (1995); Kiros and Hogan (2001);

Mahalanabis (1996). An alternative analysis is presented by Pena

(1999) looking at 30-year influences. Maternal education was

important in fertility decline, which in turn contributed to infant

mortality decline, but direct health interventions in poverty

groups had an important independent influence.

46. The education effect is pervasive around the globe. In

Norway, for example, infants of women with less than 9 years of

education are three times more likely to die of neonatal causes

compared to those of women with 12 years or more of education.

Cnattingius and Haglund (1992).

47. Adentunji 1995.

48. USAID 2001.

49. Data from UNICEF (Raymond 2002) and the U.S. Census

Bureau (2000) point in opposite directions, with the former

showing improvement and the latter deterioration. Possible reasons

for the rise in mortality may involve changes in social safety net and

care giving patterns. The may also, however, reflect changes in data

collection. Under the Soviet system, a child was not declared alive

unless it weighed 1500+ grams. At a lesser weight, or if the child did

not survive 7 days, it was classified not as a death but as a still birth.

These data collection differences are unlikely to fully explain the

mortality patterns, however, as new definitions and registration

systems are not universally applied in the region.

50. Gillespie and others 2002.

51. Kobinsky and others 2000.

52. USAID 2001.

53. Ahmed and others 1999.

54. Ahmed and others 1999.

55. Inter-agency Group for Safe Motherhood. 1998.

56. Though the trends analyzed in this section are clear, they

should be seen as orders of magnitude in causes of death rather

than as reliable data points. Only 77 countries worldwide collect

data on causes of death, often for just 5–20 percent of their populations. Moreover, health systems often have limited diagnostic

capacity. And, absent autopsies or examinations of underlying

causes, multiple diseases make it difficult to attribute deaths to a

single cause.

57. World Health Statistics for 2000 contains data based on

new life tables for 191 countries, and mortality data are calculated for 5 “mortality strata.” Not every stratum is present in every

country; the data presented here utilize the lowest (i.e., highest

mortality pattern) stratum common to all regions.

58. WHO 2001b.

59. Murray and Lopez’s data is presented in Seedat (2001).

60. WHO 1998.

61. Deen and others 1999.

62. See for example, Reddy (1993); Enas, Yusuf and Mehta

(1992). 

63. Pearson 1999.

64. Walker and Segal 1997.

65. From WHO, World Health Statistics Quarterly, various

years.

66. National Intelligence Council 1999.

67. Patz, Engelberg and Last 2000.

68. MMWR 1999.

69. MMWR 1999.

70. Stanecki 2002.

71. Stanecki 2002.

72. Morrison 2001.

73. Collins and Rau 2000; Stanecki 2002. See also Stover and

Way (1998).

74. Estimate from the Health Economics and HIV/AIDS

Research Division of the University of Natal, Durban in 2001.

75. Kelly 1999.

76. Fauci 1999.

77. Estimate by ING Barings. Raymond 2002.

78. Estimate from the Health Economics and HIV/AIDS

Research Division of the University of Natal, Durban. 2001.

79. In 2000, the UN Security Council began to take up this

issue. See also Sepkowitz 2001

80. Fauci 1999.

81. Steinbrook and Danzen 2001. 

82. Steinbrook and Danzen 2001.

IMPROVING

PEOPLE’S HEALTH

92
83. Harris, Gardiner 2001. “Adverse Reaction: AIDS Gaffes

in Africa Come Back to Haunt Drug Industry at Home.” Wall

Stret Journal, 23 April. Harris’s article is about a study of drug

costs by Joseph MiMasi of Tufts University.

84. Raymond 2002.

85. See Kault 2000.

86. Raymond 2002.

87. WHO 2001c. 

88. NIC 1999.

89. NIC 1999.

90. NIC 1999.

91. WHO 1999. 

92. WHO 1999. 

93. WHO 1999.

94. Cohen 2000.

95. WHO, Vaccine Surveillance, 1980–1999.

96. Saade, Bateman, and Bendahmane 2001.

97. Raymond 2002.

98. Inter-agency Group for Safe Motherhood 1998.

99. USAID 2002.

100. Filmer, Hammer, and Pritchett 1998.

101. Phillips and Phillips-Howard 1996.

102. Data calculations based on World Health Status Report,

2000. Raymond 2002.

103. Raymond 2002.

104. Taylor, Shakoor, Behrens, and others 2001.

105. Raymond 2002.

106. Morse 1996.

107. WHO 2002.

108. Raymond 2002.

109. Schieber and Maeda 1999.

110. Estimates vary depending on setting. A four country

study found that $20 per fully immunized child is an approximate average. See Kaddar, Levin, Dougherty and others (2000).

The cost of adding Hib to the mix will be about $10 for the 3-

dose regime.

111. U.S. Congress Joint Economic Committee, as reported

in Morton Kondracke, “Investing Billions in Health Research

Can Save Trillions,” Roll Call, 6 May 2000.

111. This is approximately the public procurement cost in

Russia. Choosing a higher unit cost for anti-hypertensives, of

course, would only magnify the illustration of the life-time costs

of chronic disease management relative to immunization.

113. Peterson 2001.

114. Soderman and others 1997.

115. Islam 1996.

116. Krause 2000.

117. Nolan 2001.

118. Black, Bryce, Burnham, and Troedsson 2001.

119. Raymond 2002.

120. Raymond 2002.

121. Mayur and Daviss 1998.

122. Tri-State Trends 2000.

123. See Harmon, A. 2002. “Good (or Unwitting) Neighbors

Make for Good Internet Access.” New York Times. 4 March.

Also see Markoff, J. 2000. “The Corner Internet Network vs. the

Cellular Giants.” New York Times. 4 March.

124. An interesting example of such collaboration among

professional societies across borders is the Renal Sister Centre

Programme of the Commission to Advance Global Nephrology

of the International Society of Nephrology which is developing

collaborative relationships for kidney disease between Bolivia,

whose domestic resources are virtually non-extent, and nephrology centers in developed countries, with an emphasis on developing protocols which are appropriate to Bolivia and which also

focus on elements of kidney disease which are known risk factors

for cardiovascular morbidity and mortality. See Schieppati,

Remuzzi, and Garattini (2001).

BACKGROUND PAPER

Raymond, Susan. 2002. “Improving People’s Health.”

Available at www.usaid.gov/NatsiosReport/backgroundpapers

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IMPROVING

PEOPLE’S HEALTH

95
MITIGATING AND

M ITIGATING

AND

M ANAGING

C ONFLICT

CHAPTER 4

SINCE PEAKING IN THE EARLY 1990S, THE NUMBERof new internal conflicts has been declining

around the world—reason for cautious optimism.1

Although violence can always reappear or emerge

along new lines in many parts of the world, the politics of violence appear to be slowly giving way to

the politics of accommodation. Much can be

learned from places where this change has

occurred and from places where violence should

have occurred but has not.

Consider the Russian Federation, where the

central government has negotiated autonomy

agreements with 40 of the country’s regions.

Though far from perfect, these agreements may

have helped avert the kind of ethnic and religious

violence seen in Kosovo and Chechnya. They

should serve as models for other countries and

regions grappling with ethnic diversity and secessionist bids. 

A peaceful, stable world order is a top priority for

U.S. foreign policy, as President Bush described in

the National Security Strategy, and foreign assistance can help achieve it. But before assessing the

many programs that might be effective in addressing this challenge, it is crucial to first understand

the issues involved. Otherwise, responses risk

being ineffective at best—and harmful at worst. 

Conflict is complex. It does not happen just

because people are unhappy or greedy, because a

country has resources to sustain it, or because

state and social institutions are weak or perverse.

It happens when causes at multiple levels come

together and reinforce one another. It is the

product of deep grievances, political and economic competition, irresponsible leadership,

weak and unaccountable institutions, and global

and regional forces. 

Thus interventions to contain conflict cannot

focus on a single dimension of it, such as ethnic

tension or political exclusion. Nor can they be

based at a single level, such as the community level

or national level, because gains in one area can

easily be undermined by setbacks in another. It is

important to think about how problems emerge at

multiple levels—and how solutions can be developed or strengthened at each level. 

Such efforts are not a task solely for foreign assistance. They require close collaboration between

diplomacy, the military, international financial institutions, the international business community, and
donors. And to support the collective crafting of

effective and sustainable solutions, there first

needs to be common understanding of the

problem.

CONFLICTS SINCE THE COLD WAR

During the 1990s there were 111 armed conflicts

in 74 locations. Half of these were major conflicts,

defined as involving more than 1,000 battlerelated military deaths . All but three of the major

conflicts were internal—driven by clashes over

control of a state’s government or territory.2

In recent decades internal conflicts have killed

hundreds of thousands of people in direct fighting. Many more have been internally displaced or

forced into refugee status. Moreover, these conflicts fuel religious and ethnic intolerance, creating hatred and fear that can take generations to

overcome.

Civil conflicts have also blunted and reversed economic growth, destroyed investments, and

slashed living standards. Violence takes a heavy

economic toll not only on the countries that

experience it but also on their neighbors. These

wars also place a staggering financial burden on

the international community. In the 1990s donors

pledged more than $60 billion to support recovery in war-torn countries—with World Bank

lending for this purpose increasing by almost 10

times.3 International spending on peacekeeping

jumped from $464 million in 1990 to a high of

$3.6 billion in 1995. In 2001 such spending was

estimated at $2.5 billion.4

Although most recent conflicts are internal, their

causes and consequences are increasingly global.

Recent events in Central Asia, Central Africa, and

the Balkans show that internal conflicts can spill

across borders, sparking regional wars. Among

the most intractable and worrisome are conflicts

that create failed states—anarchic, lawless countries such as Afghanistan, the Democratic

Republic of Congo, Liberia, Somalia, and Sudan.

The National Security Strategy has identified

failing or failed states as a serious threat to U.S.

security interests.

Such settings have enabled transnational criminal

organizations, terrorist networks, and local warlords to amass enormous power and wealth, blurring the distinctions between criminal and political violence. Indeed, many of these groups’ activities—smuggling drugs, trafficking in humans,

defending embattled ethnic and religious

brethren, trading arms—require conflict to exist

and to be profitable. Solving mass violence

requires understanding that for these groups and

individuals, violence is not a problem but a solution: a political and financial step up. 

No single definition captures the many forms that

deadly conflict has taken in recent decades. It can

be explosive and short—in Rwanda genocide

occurred in just a few months. Or it can drag on

for years, as in Afghanistan, Angola, and Sudan.

It can follow a traditional path, pitting military

factions against each other as in Mozambique and

Tajikistan. Or it can spill up from local or regional violence where institutions are weak and

eroding, as it did in Somalia and threatens to do

in Indonesia and Nigeria. Violence can take an

explicit ethnic or religious form, as in Burundi

and the Balkans. It can have a strong ideological

component, as with the Maoist insurgency in

Nepal. It can be nationalist or secessionist, as in

Chechnya (Russia) and Aceh (Indonesia). Or it

can be criminal violence on a new and devastating scale, as in Colombia and Sierra Leone.

UNDERSTANDING CONFLICT

Many in the development community believe

that successful interventions in civil conflict, such

as those in Mozambique and Namibia, have

reflected better understanding of the underlying

conflict dynamics than have unsuccessful ones, as

in Angola and Somalia. Yet in many countries

where the international community has intervened, careful attention to underlying causes has

been missing. 

Indeed, interventions by the development community are often criticized for addressing the

symptoms of conflict—refugee flows, famines,

ethnic riots—rather than the causes. This charge

is exaggerated, not least because such factors

often contribute to the resurgence or expansion

of conflict. But it is true that development agencies have fallen short in their efforts to understand

and address the issues that induce and sustain

violence.

Understanding the mix of root causes in a country

can yield important information about the potential for conflict, what conflict might look like if it

MITIGATING AND

MANAGING CONFLICT

97

CIVIL CONFLICTS HAVE

BLUNTED AND REVERSED

ECONOMIC GROWTH,

DESTROYED

INVESTMENTS, AND

SLASHED LIVING

STANDARDS
emerges, and how its effects will linger once

fighting ends. Motives for violence can indicate

which types of groups might mobilize, along

what lines of division, and in what numbers. They

can also suggest the likely location, scope, and

nature of violence. Attempts to capture and

control areas containing alluvial diamonds, for

example, will look different from attempts to

capture and control a state, which will look

different from attempts to secede by an ethnic

group. Thus root causes can provide information

about the goal of violence, which can provide

information about the resources needed to

achieve that goal (box 4.1). 

But motives are not enough. While root causes

can generate enormous suffering or ambition,

they cannot tell the full story about conflict. As

long as people motivated by grievance or greed do

not organize and mobilize along lines of division,

incentives for conflict will likely remain local or

dormant. 

Without resources to facilitate the mobilization

and expansion of violence, motives for conflict

cannot find expression—no matter how deeply

felt the grievance or strong the desire for economic or political gain. And even if a nation has

such resources , the number of places where these

conditions are met far outstrips the number

where conflict actually occurs. 

State institutions can address tensions and be

responsive to the needs of citizens—or they can

fuel discontent through repression, poor governance, corruption, and inefficiency. Civil society

groups can bridge lines of division—or they can

exacerbate them by aligning with either side.

Institutions can block access to resources for conflict by controlling the flow of arms or finding economic alternatives for potential recruits—or they

can contribute to conflict by providing these

resources to different factions. Perhaps most

important, institutions can constrain the behavior

of elites who see violence as a strategy for gaining

power and wealth—or they can create conditions

that foster their emergence, appeal, and room for

maneuver. 

In many ways it no longer makes sense to talk

about internal conflicts using an exclusively statebased framework (box 4.2). National borders are

extremely porous in most parts of the world, and

many of the networks that sustain conflict—economic, ethnic, religious, political, criminal—are

transnational. 

A number of dynamics and trends have played

critical and growing roles in recent violence: 

• The politics of identity.

• The economics of violence.

• State and social (in)capacity.

• Predatory states and failed states.

• Regional and international causes.

THE POLITICS OF IDENTITY

The growing importance of ethnic and religious

intolerance and extremism is one of the most dramatic features of conflict in the post–Cold War

order. In the former Yugoslavia, throughout

MITIGATING AND

MANAGING CONFLICT

98

WITHOUT RESOURCES TO

FACILITATE THE

MOBILIZATION AND

EXPANSION OF VIOLENCE,

MOTIVES FOR CONFLICT

CANNOT FIND

EXPRESSION

In Indonesia the transmigration program

launched by the Suharto government was one

of the root causes driving recent massacres of

migrant Madurese by local Dayaks.

Traditionally the majority in Central and

West Kalimantan, Dayaks have seen their

political and economic position erode since

the program was launched in the early 1980s.

Although the massacres have been painted as

“spontaneous” uprisings in many accounts,

there is evidence to suggest that local Dayaks

used anti-Madurese rhetoric to garner

support for their political ambitions. 

Source: Morris 2002.

Box 4.1. Transmigration to spontaneous

uprisings 

In eastern Congo, long-standing, informal

trading routes between Uganda, Rwanda,

Burundi, and the Congo have been brought

under the control of various rebel factions.

These groups have used their local monopoly

on violence to intimidate trading rivals, such

as the Nande in Eastern Congo, and to force

local producers to sell at substantially

depressed prices. In some rebel-held zones,

coffee producers have been forced to sell only

to the leadership of the Mouvement de

Liberation du Congo (MLC) and designated

Ugandan buyers. 

Source: Morris 2002.

Box 4.2. Coffee and conflict—forcing 

producers to sell at depressed prices
Africa, and in many parts of Asia and the Middle

East, identity has become more salient, not less.

A number of observers have tried to explain the

resurgence of violent identity politics by referring

to ancient animosities or tribal hatreds.5 This view,

known as the primordialist view, holds that conflict between certain ethnic and religious groups

is inevitable because of deep-seated, enduring historical antipathies. Essentially conflict was there

all along—between Serbs and Croats, between

Somali clans—but it exploded in the early 1990s

because the lid was taken off ancient hatreds

through the rollback of superpower control and

the erosion of an artificial unity imposed during

the Cold War. 

Despite the devastating role of ethnic and religious hatred in recent conflict, most analysts

reject the primordialist approach in favor of one

that views identity as inherently flexible—

something created by leaders and shaped by circumstance. These analysts point out that many

groups who have fought recently, such as Muslims

and Christians in Indonesia, have lived in relative

peace for generations and that many others who

have deeper histories of tension choose not to

take up arms. They argue that even categories that

seem as permanent as “Islamic” or “Serb” have

changed over time and, critically from the perspective of understanding conflict, have adopted

different definitions of threats and enemies.

Finally, they point to the fact that while some

ethnic myths used to justify violence are centuries

old, others have been created in short order, often

just before or after violence broke out.6

In trying to understand how and when identity

turns violent, research has focused on competition, inequality, and discrimination between

groups. If ethnic or religious differences overlap

with other forms of real or perceived grievance,

such as political or economic exclusion, it creates

a volatile mix.7 The existence of a large, distinct

ethnic or religious group in a country also raises

the risk of violence. 

If the largest identity group accounts for 45–90

percent of the population, a country’s risk of

conflict doubles. Similarly, the higher is a

country’s ethnic or religious diversity, the lower is

its risk of conflict.8 Thus violence seems to be

driven by the actual or potential dominance of

one group over another rather than by difference

alone.

Erosion of state authority and legitimacy also

appears to increase the salience of identity. If state

authority is weak or collapsing, many people turn

to more immediate and local forms of legitimacy

such as those based on clan, ethnicity, or religion.

Moreover, membership in a group can provide

benefits—food, protection, justice and order,

social support—that become even more important when the state is no longer able or willing to

provide them.9

If there is one dominant view on how identity

becomes polarized and leads to widespread conflict, it is that elites foment ethnic or religious violence in an effort to gain, maintain, or increase

their political or economic power.10 In the former

Yugoslavia Slobodan Milosevic exploited antiAlbanian sentiment and Serbian nationalism in

his efforts to topple Ivan Stambolic, his former

mentor and leader of the Serbian League of

Communists. Ethnic or religious scapegoating

and “playing the ethnic card” have become

among the most lethal, effective tools for gaining

power. This development highlights the complexity of the relationship between different

incentives for violence, as ambitious elites tap into

deep-seated frustrations to advance a political or

economic agenda—one that often serves their

ends more than those of the group they claim to

represent. 

One reason ethnic and religious conflicts are so

common is that ethnic and religious groups are

extremely effective at mobilizing violence, providing both motives and means (box 4.3). Such

groups can not only forge a sense of solidarity and

articulate group goals, they can also monitor

group members. Participation in violence carries

heavy physical, economic, and emotional costs.

No matter how strong the incentives for it, most

people would rather have others do the dirty

work. People in the same ethnic, religious, or

regional group know each other. They are embedded in dense social and economic networks in

which behavior can be easily monitored, information quickly gathered and shared, and sanctions for not participating put in place. 

For example, genocide in Rwanda appears to

have been facilitated by the country’s dense, hierarchical network of associations. Nearly every

aspect of life, from the highest levels of government to hillside villages, is organized in a set of

overlapping associations and voluntary groups.

When Hutu extremists decided to launch the

MITIGATING AND

MANAGING CONFLICT

99

ELITES FOMENT ETHNIC

OR RELIGIOUS VIOLENCE

IN AN EFFORT TO GAIN,

MAINTAIN, OR INCREASE

THEIR POLITICAL OR

ECONOMIC POWER
genocide, these groups made it easy to convey

information about what was to be done and

when, who was to be killed, and, most important,

who was and was not participating in the killings.

When the price for not participating was the

threat of punishment by neighbors, officials, or,

worse, roving gangs of Interahamwe (the Hutu

extremists), many people had little real choice.

This is not to excuse or justify what happened,

but merely to point out the importance of local

knowledge—that is, the ability to monitor and

sanction behavior at the micro level.11

In turning away from simplistic notions of ethnic or

religious rage, current research on identity presents

a more optimistic assessment of the potential for

conflict. By looking at the benefits that membership

in an identity group provides and at how elites can

use ethnic organizations to advance political and

economic agendas, the research also points to a

broad range of possible interventions for donors. It

does not minimize the power and appeal of ethnic

and religious extremism. It recognizes that once

identity is activated or people are targeted for

belonging to a certain ethnic or religious group,

relationships become more rigid and antagonistic,

leaving little room for moderation or compromise. 

THE ECONOMICS OF VIOLENCE

Economic factors can help cause and sustain violence. New research is examining not only how

factors such as economic decline and corruption

fuel discontent, but also how violence and instability are used to gain access to scarce economic

resources and how war economies sustain violence and undermine efforts to build peace long

after the cessation of hostilities. 

Among the strongest findings in recent research is

that stagnant and negative economic growth are

highly correlated with civil conflict. An economy

growing by 5 percent a year is about 40 percent less

likely to see conflict than an economy declining by

5 percent a year.12 Several factors explain this link.

Economic collapse and deep poverty, particularly

when tied to severe economic inequality between

groups, can feed into a strong sense of grievance.

They also imply limited state capacity to make economic concessions to opposition groups and, on

the coercive side, to exert military or police control

over violent opposition or criminal elements.

Among the most destabilizing effects of economic

decline is that it can generate incentives—particularly among young unemployed people—to participate in violence for financial gain. 

If corruption or patronage is added to the mix,

particularly if corruption flows along ethnic or

other group lines, economic decline and deep

poverty also imply that competition for political

and economic power will be increasingly zerosum. If state power is the only route to wealth and

exclusion from these institutions means abject

poverty, competition for control of these institutions will likely be intense, protracted, and deadly.

Shadow economies, war economies, and greed. As

countries slide closer to conflict, economic activities

MITIGATING AND

MANAGING CONFLICT

100

VIOLENCE AND

INSTABILITY ARE USED

TO GAIN ACCESS TO

SCARCE ECONOMIC

RESOURCES

In 1983 President Numeiri unilaterally abrogated the 1972 Addis Ababa Agreement leading

to a resumption of civil war. But conflict

between northern factions rather than religious

differences appears to be the main factor

driving the resumption of civil conflict. 

Because Numeiri had decimated the Communist

party after its abortive coup in 1971, by the early

1980s radical Muslims were the only viable antigovernment opposition. Young northern university students, together with other radical

Muslims, formed the Muslim Brotherhood and

became the principal threat to Numeiri’s rule.

While interviews among northerners showed

that most supported Numeiri’s moderate policy

toward the south, he abandoned this moderate

position as the power and strength of the Muslim

Brotherhood grew, helped by generous financial

support from Saudi Arabia. 

Numeiri, under threat from his right flank and

forced to negotiate, began to stress his Islamic

credentials by dressing in Arab garb and pressing for the shari’a. Moderate Muslims who

protested, such as the long-time leader of the

Muslim Republican Brothers, were executed to

appease the fundamentalist challenge to his

rule. So, fear of his own radicals rather than the

desire to Islamize the south initially drove

Numeiri to intimidate the south, driving Sudan

into its second civil war. 

Source: Morris 2002.

Box 4.3. Holding on to power at any price
emerge that feed into and sustain it. Often referred

to as war economies or shadow economies, these

include activities such as smuggling drugs, trafficking in humans, illegal logging and mining, looting

and banditry, and providing security in an insecure

environment (box 4.4). 

At a minimum, these activities require weak or no

state control over territory and economic activity.

At a maximum, they require overt violence to be

profitable. As noted, some individuals do extremely well from war. Between 1992 and 1996

President Charles Taylor made more than $400

million a year from the war in Liberia. Since the

early 1990s UNITA (National Union for the Total

Independence of Angola) and its network of local

traders, middlemen, and regional commanders

have controlled 70 percent of Angola’s diamond

trade, generating up to $3.7 billion in revenue.13

Apart from the high stakes associated with controlling valuable lootable commodities such as

coca or diamonds, micro-level economic incentives are also critical components of conflict.

Separate studies of the Balkans point to a

common development in many recent conflicts:

the participation of young men who, with few

economic options, view the theft, smuggling, and

banditry that accompany violence as a route to

status and personal enrichment. These goals, far

more than ardent beliefs in the nationalist appeals

of ethnic demagogues, were the true motivation

for much of the violence in the Balkans.14

Meanwhile, in Indonesia extremist Christian and

Muslim militias quickly sprang up to defend their

embattled brethren across the archipelago. But

many of these groups have been implicated in

predatory economic activity in conflict zones,

from extorting money from refugees fleeing the

violence to smuggling arms. Where the economy

is no longer able or willing to provide legitimate

economic opportunities, many ordinary people

turn to such activities as a survival strategy. 

While these activities can trigger violence as groups

compete over valuable commodities or try to

capture income from illegal businesses or corruption, they also play a powerful role in sustaining violence once it is under way. In many recent conflicts

the income from these resources has been used to

buy weapons, pay recruits, and bribe government

officials. For example, the Armed Revolutionary

Forces of Colombia (FARC) has collected substantial revenue by imposing taxes on coca producers operating in areas under its control. This

revenue is then used to support the war effort.15 It

is also increasingly apparent that diamonds helped

finance the Revolutionary United Front’s bloody

reign in Sierra Leone and have been a major

source of income for Osama bin-Laden’s al Qaeda

network and other terrorist organizations.16

Financing also comes from diaspora communities—particularly those in the West, who are better

off than their counterparts in developing countries.17 One compelling example concerns the

Tamil separatists in Sri Lanka. The rebellion has

been concentrated in the northern and eastern

parts of the country, areas with few valuable

natural resources. As a result the decades-old

conflict has been sustained through an extensive

network of Tamil communities in North America,

Europe, and Asia who provide funds for weapons,

communications equipment, and other supplies.18

Competition for and control of natural resources.

Natural resources—renewable or not, degraded or

not, scarce or not—represent an important source

of wealth and power in developing countries. In

looking at recent conflicts in Kenya, South Africa,

and Zimbabwe, land represents a lucrative prize in

an elite competition driven by political factors.19

Land is also an important tool for elites seeking to

mobilize support. It can be used to buy support,

MITIGATING AND

MANAGING CONFLICT

101

YOUNG MEN WITH FEW

ECONOMIC OPTIONS VIEW

THEFT, SMUGGLING, AND

BANDITRY AS A ROUTE

TO STATUS AND

PERSONAL ENRICHMENT

Drug trafficking has proven to be a crucial

source of revenue for rebel groups, terrorist

networks, and governments in dire economic straits. In Afghanistan revenues from

opium helped to finance the war against the

Soviets in the 1980s. And opium has been

identified as a main source of revenue for

both the Taliban and Al Qaeda.

Afghanistan is home to an elaborate global

system of trade and production, making it the

largest source of opium in the world.

Although the ban led to an increase in opium

prices within Afghanistan, the distribution of

opium from stockpiles controlled by independent drug traffickers along the borders of

Afghanistan ensured ready availability and

low prices outside. This dynamic enabled the

Taliban to continue to finance their control of

the country and support terrorist activities

through selling opium.

Source: Morris 2002.

Box 4.4. Opium for conflict
as in Zimbabwe, or as a powerful psychological

weapon, as in the hands of Milosevic, who gained

strong support among Serbs for his stance on

sacred Serb spaces in Kosovo. 

Environmental scarcity has an indirect link to

violence by heightening tensions between

groups forced to compete over dwindling

resources, causing chronic poverty and eroding

the state’s capacity to respond (box 4.5). But

elites foment violence through their attempts to

control access to natural resources. 

Population, migration, and urbanization. There is

little evidence that population growth is a cause of

widespread violence. But several demographic

shifts have clear links to conflict.20 These include: 

• An expanding agrarian population where land

is scarce or controlled by large landholders. 

• An expanding urban population in the

context of economic stagnation or decline.

• Rapid increases in young, educated professionals who have no opportunities for political or economic advancement.

• The presence of a large youth cohort, or a

disproportionate share of 15–25-year-olds in

the population. 

• The migration of distinct groups into regions

already settled by groups with a strong sense

of identity, or demographic shifts between

these groups. 

Common to all these shifts, and what makes them

so destabilizing, is that population growth or

demographic change is not matched by an

increase in the absorptive capacity of the state,

markets, or society. While this imbalance is likely

to fuel anger among people denied access to political or economic opportunities, many of these

demographic shifts also provide a ready pool of

recruits—landless, jobless, young, and

uprooted—to movements seeking to mobilize

violence. 

Widespread political upheaval is often preceded

by a rapid increase in the number of young

people with an advanced education but few

opportunities for economic or political advancement.21 A large portion of young people in a

society, separate from the question of education,

also appears to be a critical risk factor in terms of

a country’s vulnerability to conflict.22 This demographic group appears to be a particularly easy

target for religious, ethnic, or political ideologues

seeking to mobilize violence—and the larger is the

group with no hope for the future, the easier it

will be to find recruits. 

Another salient demographic shift is the rapid

transfer of rural populations to urban areas. In

1950 less than 30 percent of the world’s people

lived in urban centers.23 But by 2006 a critical

threshold will be crossed, when half the world’s

people will reside in urban areas. Polluted air,

filthy water, and inadequate sanitation affect hundreds of millions of the world’s poorest urban

inhabitants. Infant mortality rates are four or

more times higher in poor or marginal urban

areas than in more affluent neighborhoods.24 A

host of psychosocial ills also accompany rapid

urbanization, including high crime and violence

among young adults. 

Whether rapid urbanization is linked to conflict

depends on a state’s ability or willingness to

implement municipal policies that improve public

welfare and economic growth. Where urban

growth is not matched by an increase in economic growth, the risk of conflict increases. For

example, Sub-Saharan African countries with

high urbanization and below-average GDP

growth are at twice the risk of political conflict as

African countries with above-average per capita

GDP growth. Particularly troubling from this

MITIGATING AND

MANAGING CONFLICT

102

ENVIRONMENTAL

SCARCITY HAS AN

INDIRECT LINK TO

VIOLENCE BY

HEIGHTENING TENSIONS

BETWEEN GROUPS

FORCED TO COMPETE

OVER DWINDLING

RESOURCES

It 2001 it took five cows to buy an AK-47 in

northwest Kenya, down from 15 in 1986.

This drop in price reflects a dramatic increase

in the availability of small weapons worldwide, with massive surpluses in some bad

neighborhoods, such as the Horn of Africa,

the Balkans, and Central Asia. These

weapons are changing the social and political

fabric of many small communities. 

Among the Pokot of northwest Kenya power

used to be vested in village elders. It now

belongs to young men with guns, and traditional rules of engagement no longer apply.

For example, when a neighboring village

used its new found guns to capture Pokot

cattle, the Pokot, also heavily armed, retaliated by killing women and children, breaking

a long-standing taboo. The lethal response

has made it very difficult, if not impossible, to

return to traditional and more peaceful ways

of conflict resolution. 

Source: Morris 2002.

Box 4.5. Cows and guns
perspective is the fact that the two megacities in

Sub-Saharan Africa, Lagos and Kinshasa, are

among the world’s poorest—yet rank near the top

of global megacities in their population growth. 

STATE AND SOCIAL (IN)CAPACITY

The strength and health of political, economic,

and social institutions are a critical—perhaps the

most critical—factor in determining whether

conflict will emerge. Institutions mediate internal

and external pressures. They can either do so well,

or they can fail spectacularly.

The institutions of healthy democracies are able

to engage with many causes of violence, whether

or not they are always able to find solutions to

these problems. A robust and inclusive civil

society can articulate group goals, monitor abuses

of power, and propose effective solutions to many

of the grievances discussed earlier. In a democracy, even if a particular ethnic or economic group

is not able to immediately resolve its most pressing issues, political inclusion and effective participation guarantee that it can continue to engage

in a political search for solutions. Finally, a strong

and accountable security sector and an equitable

and impartial rule of law can guarantee personal

security and property rights, leaving little room

for the opportunistic behavior favored by those

focused on gaining from conflict.

These institutional features of democracies have

a powerful dampening effect on civil conflict.

They keep a country peaceful through more than

the mere absence or elimination of causes; they

are also promote nonviolent solutions to difficult

problems. Conflict is a normal part of political life

and social transformation. Maintaining a legitimate space for opposition and protest can help

keep societies from resorting to violence.

Good governance is a critical component of this

strength. Hugh Miall examines the relationship

between good governance and the emergence of

civil conflict.25 Using measures of good governance derived by the World Bank for 113 countries, he finds that 70 percent of countries that

score well in terms of good governance experience

no violence—while just 37 percent of countries

with bad governance remain free from conflict.

But even if consolidated democratic institutions

are good at managing conflict, the path between

authoritarian regimes and democracy can be

dangerous.26 A large and growing body of evidence shows a relationship between political

change and conflict. Many of the internal conflicts

that erupted at the end of the Cold War occurred

in nations poised on the brink of moving away

from authoritarian rule. In places from Rwanda to

Tajikistan, opening the political system to new

voices and demands led to violent backlashes

from the elite and widespread conflict. 

There are inherent political contradictions in

most partial or transitional democracies: tensions

between demands for more effective participation

and the desire of political elites to maintain or

enhance their control. Any change in the distribution of power creates new channels for competition, draws in new actors, creates new threats or

heightens old ones, leads to new systems of incentives and rewards, opens up new possibilities for

resource allocation and patronage, and often

leads, at least in the short term, to the erosion of

institutional constraints governing the behavior of

powerful actors. In this fluid environment elites

will often try to use violence to advance their

political or economic agendas.

In the context of political transition, elites often

view violence as the best strategy for achieving

political or economic objectives—and in this

sense it is a rational response to certain configurations of threat and opportunity. For example,

there are strong reasons to believe that Milosevic

viewed conflict as inherently useful. Violence

directed against other ethnic groups in the former

Yugoslavia not only rallied faltering domestic

support by deflecting attention from pressing

political and economic issues, it also provided a

“legitimate” pretext for suppressing the media

and elements of the opposition. And it strengthened, at least temporarily, his base of support in

his ruling coalition. 

In addition to the political benefits of violence,

conflict can also lead to financial benefits that can

be used to buy the support of key participants in

a conflict. For example, international sanctions

made the control of illicit trade by a small circle

around Milosevic extremely profitable.27

Similarly, much of the motivation for the continued presence in the Democratic Republic of

Congo of Rwanda, Uganda, and Zimbabwe is the

need to buy off key elites with resources derived

from the conflict.28 The greater is a regime’s vulnerability to political challenges from within the

MITIGATING AND

MANAGING CONFLICT

103

THE STRENGTH AND

HEALTH OF POLITICAL,

ECONOMIC, AND SOCIAL

INSTITUTIONS ARE A

CRITICAL FACTOR IN

DETERMINING WHETHER

CONFLICT WILL EMERGE
ruling coalition, the stronger is the incentive to

contain, neutralize, or buy off these challenges. 

PREDATORY STATES AND FAILED STATES

A special category of political change is the case

of institutional erosion or collapse that manifests

in weak or failed states. In much of Asia, the

Middle East, and Africa, internally divided states,

often lacking political legitimacy, are unable or

unwilling to provide even the most basic services

and security for their citizens, let alone adhere to

democratic principles.29 These states are not transitional in the usual sense of moving from autocracy to democracy or the reverse. Instead, they are

moving toward chaos—but chaos with its own

peculiar logic and structure. 

The erosion of institutions may be due to many

different things, but—returning to the notion that

instability can be a powerful tool in the hands of

elites—there may be groups and individuals in a

society that will deliberately undermine institutions if by so doing they strengthen their political

or economic position. A key tactic of leaders in

shadow states, with Nigeria’s Sani Abacha a prime

example, is to foster conflicts within and between

local communities and factions.30 These divisions, which consolidate elite power, can easily

become the fault lines of future conflict.

The weakening of institutions that safeguard

property rights, collect taxes, provide security,

mobilize in response to natural disasters, and

ensure economic growth not only feeds societal

grievance, it also leaves room for the emergence

of autonomous and competing centers of power

and predatory economic dynamics. As discussed

earlier, as the state retreats, people often turn to

smaller, closer-knit groups—family, clan, religious, ethnic, or militia—for security and survival.

These groups then become involved in conflict as

they compete over access to scarce resources. 

While many risk factors may be in place—ethnic

or religious tension, poverty, environmental

scarcity—whether violence emerges is largely a

function of how well leaders and institutions deal

with these risks. Ethnicity need not become polarized, but it will be if ethnic criteria are used as a

basis for political or economic discrimination

and if elites see ethnic outbidding as an effective

tool for gaining or maintaining power.

Environmental degradation or competition over

land does not have to lead to poverty or destabilizing population transfers, but it probably will

unless political institutions can provide economic alternatives that do not rely on the exploitation

of scarce resources or can mediate between

groups seeking to use the same resource. State

structures can either be flexible enough to incorporate emerging elites or, through inflexibility and

a narrow base of support, can turn these elites

away from engagement with the political system

and toward extrasystemic violence. And even if

there are elites committed to overturning the

existing system no matter its form, effective institutions can undercut their effectiveness and

appeal.

REGIONAL AND INTERNATIONAL CAUSES

As noted, there are clear limits to using a purely

state-centric framework, even when dealing with

something traditionally defined as “internal” conflict. The past decade has seen an exponential

increase in the number of transnational actors.

Many pursue laudable goals of protecting human

rights or monitoring environmental abuses. But

many others are classic conflict entrepreneurs

who feed on instability. 

Hernando de Soto, in his most recent book, The

Mystery of Capital, argues that, by not giving the

majority access to expanded markets, a fertile field

is being seeded with the potential for confrontation between the privileged few able to take

advantage of globalization and those left in

poverty.31 Globalization certainly did not cause

conflicts in places like Colombia and Sierra Leone,

but it has made it easier for warring parties to

establish the transborder economic networks they

need to survive. War economies are rarely autarkic; they depend on global networks and markets.

To the extent that globalization, intensification of

transnational commerce, and information technology have made such access easier, they have

also increased the ability of elites to derive economic benefits from violence and conflict. While

a great deal of international attention has focused

on how the global trade in illegal goods has fueled

conflict, such as the drug trade in Afghanistan and

Colombia, trade in legal commodities bears

greater responsibility for sustaining conflict. In the

early 1990s, for example, Liberian warlord Charles

Taylor was supplying, among other things, a third

of France’s tropical hardwood requirements

through French companies.32

MITIGATING AND

MANAGING CONFLICT

104

A SPECIAL CATEGORY OF

POLITICAL CHANGE IS

THE INSTITUTIONAL

EROSION OR COLLAPSE

THAT MANIFESTS IN

WEAK OR FAILED STATES
Another factor linked to conflict is whether a state

is in a “bad neighborhood,” meaning one where

other conflicts are occurring or have recently

occurred. These regions—the Balkans, the Horn of

Africa, and parts of Central Asia, for example—are

awash in transboundary risk factors. These include

refugee flows, small arms and light weapons, porous

borders, and weak states that can provide sanctuary and serve as a base of operations for both military and economic activity. The easy availability of

small arms has had a particularly devastating effect

on the scope and lethality of recent conflict. The

end of the Cold War freed up massive surplus arsenals in many states, and the black-market trade in

weapons is thriving.33

Kosovo is a compelling example. While not dismissing the underlying causes of the conflict, one

explanation for the timing of the violence is that

during the 1997 riots in Albania a large number of

armories were looted, dramatically increasing the

availability of weapons in the region. The glut of

weapons in the region made a massive buildup by

the KLA much cheaper and easier than it otherwise

would have been, and may have triggered the outbreak of a more substantial military effort.

In these war-torn regions refugee or exile populations can play an extremely destabilizing role. At

a minimum, refugees pose heavy economic

burdens on host countries. At the extreme, they

can bring political, ethnic, or religious ideas with

them that threaten the governments of their host

nations. Their plight can inflame tensions

between communities in host nations by radicalizing populations who share the same ethnicity or

religion. The transboundary character of many of

these problems requires a focus on solutions at

the regional or even global level. Foreign assistance, as currently structured, is not well

equipped to deal with these problems. 

WINDOWS OF VULNERABILITY AND

OPPORTUNITY

If all these causes exist, there will be periods of

vulnerability when certain events—elections,

natural disasters, riots, assassinations—can trigger

full-scale violent conflict in a region, country, or

group of countries. Unlike, say, economic decline

or ethnic outbidding, such events are not causes

of conflict. Instead, they are moments when

underlying causes can come together in a brief

window, a window ideally suited for mobilizing

broader violence. But such events can also have

extremely positive outcomes if the tensions that

tend to emerge are recognized and handled well. 

Many of these windows are random or unpredictable, such as economic shocks or natural disasters. Others, like elections, can be seen in

advance. But while the international community

may never be able to pinpoint the precise election

or political assassination that finally tips a country

over the threshold, it is certainly possible to tell

that some places are ripe for conflict and that it is

probably only a matter of time before it occurs.

For example, if President Habyarimana’s plane

had not been shot down in Rwanda, Hutu

extremists would probably have found another

pretext to launch the genocide.

Many of the more predictable windows of vulnerability involve events, or anticipated events,

that threaten to rapidly and fundamentally shift

the balance of political or economic power.

Elections are the most obvious example. By definition, elections are competitive events with

unpredictable outcomes, and conflict is inherent

to the process. So, under certain conditions elections may catalyze rather than prevent widespread conflict. This is particularly likely if political power is the only route to economic power

or if demographic or other changes threaten to

upset a monopoly on power at the local or

national level. 

While elections are the most obvious example, any

policy change that threatens to alter established

patterns of political or economic control in highrisk environments could lead elites to mobilize violence. Decentralization is an example, as are legislative changes that govern the power of key

players such as the military, or anticorruption

programs that that threaten to strip incumbent

elites of their main source of income.

Other events that are less predictable but equally

destabilizing are those that point out, in a dramatic fashion, the weakness, inefficiency, or corruption of the ruling regime. For example, political unrest often increases sharply after a large

natural or human-made disaster, such as a hurricane, drought, flood, earthquake, or industrial

accident that affects the environment. 

What turns disasters into events triggering political unrest is the amount of blame that can be

placed on the regime for causing a disaster or for

MITIGATING AND

MANAGING CONFLICT

105

FOREIGN ASSISTANCE, AS

CURRENTLY

STRUCTURED, IS NOT

WELL EQUIPPED TO DEAL

WITH TRANSBOUNDARY

PROBLEMS
having a particularly weak or corrupt response to

one.34 For example, because Nicaragua’s

Anastasio Somoza regime treated international

aid flowing into the country after the 1972 earthquake as personal income rather than as resources

for reconstruction, key business elites withdrew

their support from the regime—a critical factor in

its demise. Economic shocks can serve much the

same role, as the events leading to Suharto’s overthrow in Indonesia make abundantly clear. 

FOREIGN ASSISTANCE, CONFLICT

MANAGEMENT, AND CONFLICT

MITIGATION

In thinking about how foreign assistance can

influence the causes of conflict discussed above,

it is useful to think about overt violence or open

conflict as the middle part of a continuum dividing the stages of conflict, from before to after. At

either end of the continuum is relative stability,

not perfect harmony. Disagreements, divisions,

and disputes still exist, but institutions can

manage and channel them. 

The closer a country moves toward conflict, the

less able or willing leaders and institutions are to

manage sources of tension and strain and the

stronger those sources become. Factors that facilitate the mobilization and expansion of

violence—large pools of unemployed young men,

financial flows from diaspora communities,

extremist ethnic militias, hate campaigns in the

media—become more visible and important. In

addition, elite manipulation of identity is likely to

become more pronounced, as is opportunistic

economic behavior. 

The following activities show several ways that

foreign assistance can break into the chain of

events that fuel conflict.

YOUNG PEOPLE AND VIOLENCE

While research has shown a link between large

youth cohorts and violence, large numbers of

young people need not be destabilizing—and in

fact, can be an extraordinary resource for positive

change. At the heart of whether this group is an

easy target for those seeking to mobilize violence

is whether the existing system can offer them

hope for a viable future. In this respect, working

with local governments and business groups to

generate youth employment may be among the

most important contributions that foreign assistance can make to conflict management and mitigation—particularly if these efforts are targeted

to extremely vulnerable populations of young

people, such as young men in urban areas.

Gearing education to available job opportunities

and relevant skills training is another important

intervention. And outside the economic realm

there are a broad range of activities—sporting

events, health programs, cultural events, environmental activities, democratic education, political

participation—that can draw out the constructive

rather than destructive potential of young people.

EDUCATION, TOLERANCE, AND CRITICAL

THINKING

Recent events have brought home in a dramatic

way how schools can be used to instill intolerance,

ethnic and religious hatred, and blind obedience

to authority. Curriculum reform and civic education programs geared to primary and secondary

education can make an important contribution in

this regard by teaching values such as tolerance

and the importance of critical thinking.

Innovative civic education programs in the

Balkans and elsewhere have taught students the

benefits of democratic participation by helping

them identify pressing community problems,

develop possible solutions, and take those solutions to local government officials. To the extent

that these activities are explicitly designed to

bring students from different groups together,

they can help bridge lines of division by showing

in a clear and direct way the benefits of cooperation in pursuit of common goals. 

MEDIA PROGRAMS

If boundaries of group identity are flexible, then

the way ethnicity and religion are portrayed by the

media will shape how people view disagreements

between groups. The Rwanda genocide shows

how the media can fuel hatred and ethnic intolerance. But the media also have enormous power

to bridge divides. For example, programs that

train journalists to report on issues in ways that do

not inflame intergroup tensions can be an essential component of assistance in high-risk settings,

as is support to civil society groups that monitor

the media for intolerant or exclusive rhetoric.

MITIGATING AND

MANAGING CONFLICT

106

CONFLICT MANAGEMENT

ENTAILS LONG-TERM

INTERVENTIONS THAT

STRENGTHEN THE

CAPACITY OF STATES AND

SOCIETIES TO MANAGE

SOURCES OF TENSION

AND STRAIN
Model legal frameworks that address hate campaigns in the press can provide civil society

groups, moderate political leaders, and international actors with the means to oppose inflammatory reporting on legal and ethical grounds.

Finally, people in the midst of conflict have a

pressing need for information, and the media can

provide information about humanitarian assistance or disseminate accurate information to

counteract the damaging rumor mills that

inevitably start to churn during crises. 

BRIDGING INSTITUTIONS

Deeply divided societies suffer from a dearth of

institutions that transcend ethnic or other lines

of division. But foreign assistance can strengthen organizations and associations that bridge—

rather than reinforce—differences in a society.

This can occur at many levels. For example, at

the community level foreign assistance can

strengthen cooperation by bringing ethnic

groups together around shared goals, such as

building a school. At regional and national

levels donors can encourage the growth and

reach of more formal institutions that cut across

ethnic and religious lines, such as business associations, trade unions, or secular political

parties. 

Religious institutions can also do much to help in

resolving conflict, the more so now that political

lenders in developing countries hold less sway

over their electorates. True, religious institutions

can make conflicts worse. To be tapped, however,

is their role as mediator and conciliator, as argued

in the path-breaking work, Religion: the Missing

Dimension of Statecraft.

BUSINESS PARTICIPATION

One underexplored but potentially important

area for foreign assistance is the contribution that

the business community can make to building

peace. Legitimate business groups have a strong

interest in maintaining stability and are often in a

far better position than civil society groups to

pressure actors in government or the security

sector. Recent breakthrough in the decades-old

conflict between the Sri Lankan government and

the Tamil Tigers is a case in point, where the business community appears to have led the charge to

bring the two groups back to the negotiating

table.35

GUIDING PRINCIPLES FOR

ENCOURAGING STABILITY

Several principles must guide donors’ work in

high-risk settings. The first is that there are limits

to what the international community can do to

encourage peace and discourage violence. In

severely divided societies it may be possible to

reduce or manage tensions, but it is not possible

to eliminate them—and policymakers should not

pretend that it is. A durable peace cannot be

imposed from abroad. Outside actors can raise

issues that internal actors might not be able to,

they can monitor events, and they can exert

diplomatic, financial, and military pressure on

leaders walking down a dangerous path. But conflict is ultimately the product of deep grievance

and ambition, reckless leadership, zero-sum competition over political and economic power, weak

or unaccountable institutions, and regional and

global pressures. What is required is a change in

attitudes and power inside a country and the will

to address these issues. The international community has a range of policy tools that might help,

but most of its influence occurs at the margins and

takes years to accomplish. 

Still, donors should recognize that their efforts

matter a lot. All aid is political, particularly in

countries at high risk for conflict. Foreign assistance represents a valuable resource in a highly

competitive environment. It feeds into complex

internal dynamics and often produces explicitly political results. These results can be positive

but—intended or not—they can just as easily be

negative. Donors need to accept and manage

the heightened risks encountered in these types

of environments. To some extent this means

being more aware of the political aspects of any

project and understanding how its design,

implementation, and aims interact with underlying conflict dynamics. It also means consciously attempting to minimize the potential

negative consequences of any project. But doing

no harm does not mean avoiding all action.

Rather, it means adopting a strategic framework

that has at its core an understanding of conflict,

then taking considered risks within that

framework. 

Among the most important things that donors

can do is develop a deeper, context-specific

understanding of what drives conflict. This will

require a significant investment in research and

MITIGATING AND

MANAGING CONFLICT

107

FOREIGN ASSISTANCE

CAN BREAK INTO THE

CHAIN OF EVENTS THAT

FUEL CONFLICT
analysis, both among donors and in countries

where conflict programs are being considered.

Much of foreign assistance’s success in its work on

health and population concerns, for example,

stems from close collaboration between practitioners and researchers. But in conflict there is still

a strong belief among many development practitioners that it is inherently random, driven by

passion rather than calculation, and so not

amenable to rigorous analysis or subject to

outside influence. While there is still a long way

to go on conflict research, since the mid-1990s

scholars have made great strides in identifying the

forces that cause and sustain widespread violence.

If donors wish to emerge as leaders in this area

and to expand the range of programs at their disposal, they need to base their work on the best

available research.

As important as it is for donors to be aware of and

use this research, it is even more critical that they

invest in strengthening the capacity of local institutions to conduct research on conflict, and

support local discussions on these issues. Unless

all the major actors in a society are able to discuss

what they believe to be the central causes of conflict, it will be extremely difficult to set priorities

and devise effective solutions. 

Many donors have programs that take this basic

approach to identifying problems at the local

level. While these local and subnational initiatives

are an essential component of efforts to address

conflict, national and regional efforts should be

pursued as well, because local peace initiatives can

easily be undermined by elites at higher levels. 

Donors need to focus as much on engaging groups

and individuals with incentives to engage in violence as on those committed to peace. Because of

the difficulty of working in environments of conflict, donors tend to seek out like-minded groups:

human rights organizations, religious groups, and

women’s groups committed to dialogue and peace.

These groups have an important role to play in the

search for solutions, but civil society groups have

been asked to carry far too much of the burden in

addressing conflict. Donors need to focus on the

institutions and actors driving the violence,

whether political elites and their followers, religious leaders, or the police. Arguing that most

political elites are corrupt, for example, is not adequate justification for turning away from reformist

elements in these institutions and working with

them to find ways to constrain the behavior of

their colleagues—either by raising the costs of

using violence or lowering the costs of nonviolent

political participation. 

Finally, a cross-sectoral, multidisciplinary perspective is crucial when designing programs in

environments of conflict. Every major focus area

in foreign assistance—from economic growth to

agriculture to democracy and governance—has

some bearing on the causes of conflict. A conflict

lens should be applied to every active area in highrisk countries, rather than assuming that some

areas are more relevant to conflict than others.

This is probably the most important principle to

keep in mind when designing a country program.

Indeed, unless all the different sectors in a country

work together, they often pursue programs that

work at cross-purposes and undercut many of the

important gains of recent decades. 

NEW APPROACHES TO CONFLICT

New approaches to humanitarian aid have moved

well beyond traditional “commodity-based” activities. Two such approaches are developmental

relief and broader programming. In addition, the

special requirements of pre- and post-conflict settings have resulted in a new form of transition assistance. These three approaches involve a broad

array of activities, and debates on their merits are

often limited by lack of common understanding of

what they entail. Moreover, project implementation

has been constrained by many obstacles, including:

• Limited donor resources for nontraditional

programs.

• Insufficient staff with the skills and mindsets

to conduct the more subtle political analysis

that these approaches require.

• A tendency to rely on quick, high-visibility

programming in emergency settings—

neglecting the more far-reaching but less

visible interventions that can flow from nontraditional analyses.

More research and detailed case studies are

urgently needed to determine the effects of these

new approaches. 

Developmental relief. A 1995 workshop defined

developmental relief as an effort to ease people’s

vulnerability to the cyclical effects of disasters and

conflicts by providing aid in ways that build for

the future. Focus areas include:

• Ensuring that relief strategies are tailored to

the situation at hand, rather than relying on

MITIGATING AND

MANAGING CONFLICT

108

AMONG THE MOST

IMPORTANT THINGS THAT

DONORS CAN DO IS

DEVELOP A DEEPER,

CONTEXT-SPECIFIC

UNDERSTANDING OF

WHAT DRIVES CONFLICT
standard approaches or ideas.

• Identifying the capacities and vulnerabilities

of disaster survivors and using the capacities

in the relief process.

• Sustaining the livelihoods of affected groups

in addition to saving lives.

• Strengthening local institutions rather than

undermining or overwhelming them.36

The concept of developmental relief has expanded dramatically since 1995. In a 2001 review of

nine U.S. NGOs, the U.S.-based NGO consortium InterAction describes developmental relief as

aid activities that “in addition to addressing immediate needs, also contribute to sustainable development and peace” (emphasis added).37 With an

expressed commitment to addressing the root

causes of conflict, the NGOs interviewed describe

a wide range of activities aimed at revitalizing economic and agricultural development, strengthening local participation, increasing the capacity of

local partners and civil society organizations, and

building peace and promoting reconciliation. 

Developmental relief often involves improving

understanding and making more creative use of

market forces, ensuring that relief interventions

are well timed (to avoid creating disincentives for

harvesting or planting, for example), discouraging

people from migrating away from their homes

and livelihoods, distributing seeds and tools

rather than food, providing cash for work activities that jumpstart the local economy and invigorate local markets, and supporting programs that

build and expand on a community’s self-help

capabilities. Some of these approaches have been

so well incorporated into agency programs that

they are now considered sound relief practices.

Peacebuilding efforts range from direct standalone interventions (such as peace education,

provision of meeting space to bring together

parties in conflict, and psychosocial work to

promote individual healing as a step toward reconciliation) to programs that indirectly strive for

interaction, collaboration, and interdependence

among groups in conflict. An example of such a

program is the creation of farmers associations

that bring together formerly warring ethnic

groups to buy seed and fertilizer at cost and sell

their products on the market.38

New program design tools involve “lenses” to

better understand the local dynamics of conflict.

Three of the largest U.S. NGOs (among others)

are experimenting with a “local capacities for

peace” framework developed by the

Collaborative for Development Action. The

framework helps aid workers strengthen existing

connections in a society, bringing people together, and avoid reinforcing divisions that perpetuate

conflict.39

Some critics consider developmental relief to be

antihumanitarian in conflict settings. This criticism partly derives from concern that developmental relief places other objectives (such as

capacity building) above lifesaving assistance and

that its multifaceted programming approach

undermines principles of neutrality and impartiality.40 Capacity building and peacebuilding in

conflict settings imply political (non-neutral)

choices on whose capacity will be built and who

will benefit from peace.

Though some aspects of developmental relief

(such as stand-alone peacebuilding activities) may

be more appropriately funded through nonhumanitarian accounts, rejecting this approach in

conflict settings risks throwing the baby out with

the bathwater. The seeds of many good ideas are

still germinating under the rubric of developmental relief and bear continued nurturing and

analysis. 

Broader approaches. While great strides have been

made in delivering material assistance under extraordinarily difficult conditions, little progress is

evident on providing even the most rudimentary

physical security for war-affected populations.41

Many aid agencies have traditionally sidestepped

human rights issues, out of fear that such involvement would interfere with the provision of urgently needed supplies. But many conflicts of the past

decade have brought aid workers face to face with

human rights abuses, forcing reconsideration. “Aid

officials are now more willing to concede the limited

utility of sustaining life only to have it jeopardized

by repressive governments or renegade non-state

actors. The imperative to assist, framed in isolation

from the concomitant commitment to protect, is

now understood to produce humanitarian action of

a short-sighted and threadbare variety.”42

Like developmental relief, the broader approaches come in many forms. They might include

diplomatic intervention, advocacy with politicians, programs that evacuate people at risk, programs that use the presence of international staff

to reduce local violence, programs that help

MITIGATING AND

MANAGING CONFLICT

109

DONORS NEED TO FOCUS

AS MUCH ON ENGAGING

GROUPS AND

INDIVIDUALS WITH

INCENTIVES TO ENGAGE

IN VIOLENCE AS ON

THOSE COMMITTED

TO PEACE
protect women from sexual abuse and other

forms of violence in refugee camps, and livestock

programs that provide livelihood options to fighters who might otherwise engage in violence

against civilians.43

Some major U.S. NGOs as well as UN agencies

like the United Nations Children’s Fund are reorganizing themselves to implement the new programming. Other humanitarian aid groups are

forging partnerships with human rights groups to

create strategies that draw on the strengths of

each. This new collaboration reveals the asymmetry between the relief and human rights communities—with rights groups far fewer and less

well funded.44

As with developmental relief, some fear that the

broader approaches are antihumanitarian because

they elevate rights over access and the immediate

alleviation of human suffering.45 Placing conditions on humanitarian aid (such as respect for

human rights) can lead to the denial of aid if governing authorities do not respect human rights, as

in Afghanistan under Taliban rule. Still, human

rights and humanitarianism are two sides of the

same coin, and ending the “false distinction

between assistance and protection (relief and

rights) within NGO practice must be one of the

great challenges” of the future.46

Transition assistance. Transition assistance is

directed toward countries that are either moving

into or emerging from violence. In post-conflict

settings transition assistance focuses on such key

issues as:

• Improving security—for example, by reestablishing local police forces and reintegrating

former combatants.

• Assisting with the return and reintegration of

refugees and internally displaced persons.

• Improving food security through cash for

work or agricultural programs.

• Restoring livelihoods and converting a war

economy back to a peacetime profile. 

In most cases no pretense is made that transition

assistance is apolitical. Thus it is often disbursed

through donor government contractors and local

government entities rather than NGOs. It is

designed to reinforce prospects for peace by raising

people’s confidence that peace will bring tangible

benefits. USAID and World Bank documents indicate that the process of disbursing aid—and its

potential for unifying and giving hope to destroyed

communities—is as important as the end product

(say, the school built or well rehabilitated). For

example, community-driven development funds

that require individuals in war-torn communities to

identify needs, allocate resources, and work together can shift people’s mindsets away from revenge

and toward a more hopeful future. Such an

approach subtly but effectively facilitates “reconciliation through reconstruction.”47

While transition assistance usually occurs after

conflicts, there is growing interest and experimentation in delivering it to countries in the preconflict stage. Indeed, the World Bank has

renamed its post-conflict unit the Conflict

Prevention and Reconstruction Unit, and the

United Nations Development Programme’s emergency office is now part of a bureau for Crisis

Prevention and Recovery. 

Increasingly, relief, development, and transition

assistance are being implemented simultaneously.

This approach reflects the fact that progress from

relief to development is not linear and that diverse

strategies are required in different sectors and

regions of affected countries to maintain progress

toward peace. This welcome approach essentially dismisses the traditional concept of a continuum from relief to development, which suggests

exclusive applications of different types of aid.

The simultaneous provision of different kinds of

assistance has created opportunities for integrated strategies in donor programs and with host

governments. 

NOTES

1. Current data on conflict trends can be found at the SIPRI

Project on Armed Conflict website http://projects.sipri.se/

conflictstudy/ or the Uppsala Conflict Data Project website.

http://www.pcr.uu.se/. See also Peter Wallensteen and Margareta

Sollenberg 2001.

2. Wallensteen and Sollenberg 2001.

3. Semerad and Hawkins 2001.

4. Figures are from the Global Policy Forum (2002).

http://www.globalpolicy.org/finance/tables/pko$$.htm

5. For an example see Kaplan (1993) and Huntington (1996).

6. A good summary of these two approaches can be found in

Fearon and Laitin (2000). Also see King (2001).

7. Gurr 2000.

8. Collier and Hoeffler 2001.

9. Zartman, ed. 1995.

10. Brass 1997; Goldstone 1998.

11. Fearon and Laitin, 2000.

12. Collier and Hoeffler 2001.

13. Berdal and Malone 2000.

14. Mueller 2000; Woodward 1995.

15. Estimates are that the FARC makes at least $300m from

MITIGATING AND

MANAGING CONFLICT

110

NEW PROGRAM DESIGN

TOOLS INVOLVE “LENSES”

TO BETTER UNDERSTAND

THE LOCAL DYNAMICS

OF CONFLICT
the drug trade every year, in addition to their income from kidnapping and extortion. McDermott, Jeremy 2002. “Colombia’s

Most Powerful Rebels.” BBC World News. January 7.

16. Farah, Douglas. 2001. “Al Qaeda Cash Tied to Diamond

Trade: Sale of Gems From Sierra Leone Rebels Raised Millions,

Sources Say” Washington Post November 2.

17. Collier and Hoeffler 2001.

18. Rotberg 1999. 

19. A good overview and discussion of these trends can be

found in Goldstone (2001).

20. Goldstone 2001.

21. Goldstone 2001.

22. Esty and others 1998.

23. Brennan 1999.

24. Homer-Dixon and Percival 1996.

25. Miall 2001.

26. Håvard and others 2001.

27. Morris 2002.

28. Reno 2000.

29. Ayoob 1996.

30. Reno 2000.

31. De Soto 2000.

32. Duffield 2000.

33. Boutwell and Klare 1999.

34. Goldstone 2001.

35. Friedman, Thomas L. 2002. “Lessons From Sri Lanka.”

New York Times. 7 August.

36. Danish Red Cross 1995.

37. Mancino, Malley, and Cornejo 2001.

38. Mancino, Malley, and Cornejo 2001.

39. Anderson 1999.

40. Fox 2001.

41. Minear 2001.

42. Minear 2001, p. 72.

43. Minear 2001.

44. Minear 2001.

45. Fox 2001.

46. Slim 1997.

47. World Bank 2002. 

BACKGROUND PAPER

Morris, Sharon. 2002. “Conflict in the Post Cold War World”

Available at www.usaid.gov/NatsiosReport/backgroundpapers

REFERENCES

Ayoob, Mohammed. 1996. “State Making, State Breaking, and

State Failure.” In Chester Crocker, Fen Osler Hampson, and

Pamela Hall, eds., Managing Global Chaos. Herndon, Va.:

U.S. Institute for Peace.

Berdal, Mats, and David M. Malone, eds. 2000. Greed and

Grievance: Economic Agendas in Civil Wars. Boulder, Colo.:

Lynne Rienner.

Boutwell, Jeffrey, and Michael T. Klare, eds. 1999. Light Weapons

and Civil Conflict: Controlling the Tools of Violence. Lanham,

Md.: Rowman and Littlefield.

Brass, Paul. 1997. Theft of an Idol. Princeton, N.J.: Princeton

University Press.

Brennan, Ellen. 1999. “Population, Urbanization, Environment,

and Security: A Summary of the Issues.” Comparative Urban

Studies Occasional Paper 22. Woodrow Wilson International

Center for Scholars, Washington, D.C. [http://wwics.si.edu/

urban/papers/brennan.pdf].

Collier, Paul, and Anke Hoeffler. 2001. “Greed and Grievance in

Civil War.” Policy Research Working Paper 2355. World

Bank, Development Research Group, Washington, D.C.

[http://www.worldbank.org/research/conflict/papers/

greedgrievance_23oct.pdf].

Danish Red Cross. 1995. Programming Relief for Development:

Recommendations from the Copenhagen Workshop. 20–22

February. Copenhagen.

De Soto, Hernando. 2000. The Mystery of Capital: Why

Capitalism Triumphs in the West and Fails Everywhere Else.

New York: Basic Books.

Diehl, Paul F., and Nils Petter Gleditsch, eds. 2001.

Environmental Conflict. Boulder, Colo.: Westview.

Duffield, Mark. 2000. “Globalization, Transborder Trade, and

War Economies.” In Mats Berdal and David M. Malone, eds.,

Greed and Grievance: Economic Agendas in Civil Wars.

Boulder, Colo.: Lynne Rienner.

Esty, Daniel, Jack A. Goldstone, Ted Robert Gurr, and others.

1998. State Failure Task Force Report: Phase II Findings.

McLean, Va.: Science Applications International.

Fearon, James, and David D. Laitin. 2000. “Violence and the

Social Construction of Ethnic Identity.” International

Organization 54 (4): 845–77.

Fox, Fiona. 2001. “New Humantiarianism: Does it Provide a

Moral Banner for the 21st Century?” Disasters 25 (4): 275–89.

Goldstone, Jack A. 1998. “The Soviet Union: Revolution and

Transformation.” In Mattei Dogan and John Higley, eds.,

Elites, Crises, and the Origins of Regimes. Lanham, Md.:

Rowman and Littlefield.

———. 2001. “Demography, Environment, and Security.” In

Paul F. Diehl and Nils Petter Gleditsch, eds., Environmental

Conflict. Boulder, Colo.: Westview.

Gurr, Ted. 2000. Peoples versus States: Minorities at Risk in the

New Century. Washington, D.C.: U.S. Institute of Peace.

Håvard, Hengre, Tanja Ellingsen, Scott Gates, and others. 2001.

“Toward a Democratic Civil Peace? Democracy, Political

Change, and Civil War, 1816–1992.” American Political

Science Review 95 (1): 33–48.

Homer-Dixon, Thomas, and Valerie Percival. 1996.

Environmental Scarcity and Violent Conflict: Briefing Book.

Washington, D.C.: American Association for the

Advancement of Science.

Huntington, Samuel. 1996. The Clash of Civilizations. New York:

Simon and Schuster.

Johnston, Douglas, and Cynthia Sampson, eds. 1994. Religion:

The Missing Dimension of Statecraft. New York: Oxford

University Press.

Kaplan, Robert. 1993. Balkan Ghosts. New York: St. Martin’s.

King, Charles. 2001. “The Myth of Ethnic Warfare.” Foreign

Affairs 8 (6): 165–70.

Mancino, Kimberly, Anita Malley, and Santiago Cornejo. 2001.

“Development Relief: NGO Efforts to Promote Peace and

Development in Complex Humanitarian Emergencies.”

American Council for Voluntary Action, InterAction

Transition Working Group, Washington, D.C.

[http://128.121.4.162/disaster/dev_relief_rpt.html]

Miall, Hugh. 2001. “Data Requirements for Conflict Prevention.”

Paper presented at the Conflict Data Conference, 8–9 June,

Uppsala, Sweden. Uppsala University, Department of Peace

and Conflict Research. [http://www.pcr.uu.se/paperMiall.doc].

Minear, Larry. 2002. “Draft Chapter on Human Rights.”

Presented at a conference on promoting human security in the

Democratic Republic of Congo. 27 February–1 March. Tufts

University, Fletcher School of Law and Diplomacy, Institute

for Human Security, Medford, Mass. [http://fletcher.tufts.edu/

humansecurity/con2/ws1/minear-humanitarian.pdf].

Mueller, John. 2001. “The Banality of Ethnic War.” International

Security 25 (1): 42–70.

Reno, William. 2000. “Shadow States and the Political Economy

of Civil Wars.” In Mats Berdal and David M. Malone, eds.,

Greed and Grievance: Economic Agendas in Civil Wars.

Boulder, Colo.: Lynne Rienner.

MITIGATING AND

MANAGING CONFLICT

111
MITIGATING AND

MANAGING CONFLICT

112

Rotberg, Robert, ed. 1999. Creating Peace in Sri Lanka: Civil War

and Reconciliation. Washington, D.C.: Brookings Institution.

Semerad, Kate, and Robert B. Hawkins Jr. 2001. “Conflict

Prevention and U.S. Foreign Assistance: A Framework for the

21st Century.” Institute for Contemporary Studies, Oakland,

Calif.

Slim, Hugo. 1997. “International Humanitarianism’s Engagement

with Civil War in the 1990s: A Glance at Evolving Practice

and Theory.” A Briefing Paper for ActionAid. 19 December.

London. [http://www.jha.ac/Ref/r021.htm].

Wallensteen, Peter, and Margareta Sollenberg. 2001. “Armed

Conflict, 1989–2000.” Journal of Peace Research 38 (5): 629–44.

Woodward, Susan L. 1995. Balkan Tragedy: Chaos and

Dissolution after the Cold War. Washington, D.C.: Brookings

Institution.

Zartman, I. William, ed. 1995. Collapsed States: The

Disintegration and Restoration of Legitimate Authority.

Boulder, Colo.: Lynne Rienner.
T HE INTERNATIONAL COMMUNITY’S EXPERIENCES

with conflicts and natural disasters in the

1990s led to big changes in the scope, funding,

and profile of humanitarian aid—making it much

more controversial. During the decade just over 3

million people lost their lives to these events.1

Conflicts were far more lethal than natural disasters, killing three times as many people. But

natural disasters were far more widespread than

conflicts, affecting seven times as many people.2 In

response, official development assistance for

humanitarian aid nearly tripled, from just over $2

billion in 1990 to almost $6 billion in 2000. In

most of those years the United States provided

three to four times more humanitarian aid than

any other donor.3

HUMANITARIAN AID IN THE 1990S:

HIGHER STAKES, HIGHER PROFILE

There is no reason to believe that the disaster

pattern of the 1990s was exceptional, with natural

disasters being more numerous and affecting

more people but conflicts being more deadly.

Natural disasters will likely become even more

devastating as populations at risk increase. And

most of today’s conflicts are internal—occurring

within states. Both trends guarantee that humanitarian aid will remain enormously important for

the international community and for the United

States. They also guarantee that the controversies

over this aid will continue.

NATURAL DISASTERS

Famines and other natural disasters continued to

take a tremendous toll worldwide. But natural disasters are neither simple nor purely natureinduced. And their devastation in global economic terms and for affected populations far

outstrips the damage caused by conflicts.4

For the 1990s the number of deaths due to natural

disasters is estimated at 665,000.5 This, despite the

benefits of early warning and disaster preparedness

measures as well as advances in such basic services

as clean water and sanitation.6

The number of reported disasters has skyrocketed, with three times as many in the 1990s as in the

1960s.7 Earthquakes and volcano eruptions have

held fairly steady in number, but disasters related

to water and weather have increased dramatically

PROVIDING

P ROVIDING

H UMANITARIAN

AI D

CHAPTER 5
(figure 5.1). During 1991–95 there were three El

Niño-Southern Oscillation phenomena, causing

devastating droughts in Southern Africa in

1991–92, 1993–94, and 1994–95. In 1997–98 this

weather pattern struck again, affecting temperatures and rainfall around the world. South and

Central America experienced devastating floods

and landslides in some areas, droughts in others.8

Southeast Asia experienced droughts and fires,

while East Africa suffered heavy rains and floods. 

In 1998 Hurricane Mitch swept across Central

America, killing 10,000 people and setting development in the region back by decades.9 The 1999

Orissa cyclone in India killed 10,000–40,000

people and devastated the lives of millions.10 And

the 2000 floods in Mozambique were the most devastating to hit the country in 150 years, generating

the largest air rescue operation (by nine national air

forces) ever mounted in a short period.11

While estimates vary widely, a report by the United

Nations Intergovernmental Panel on Climate

Change estimates losses from natural disasters at

$400 billion for the 1990s—10 times the amount in

the 1960s.12 The International Federation of the

Red Cross and Red Crescent Societies puts losses

for the decade even higher, at $780 billion.13

Hurricane Mitch inspired the creation of an equation with logic that applies to most natural disasters: rapid population growth plus urbanization

plus mass poverty plus high inequality plus deforestation plus other environmental degradation

plus a lack of land use and building standards plus

institutional weaknesses equal increasing vulnerability and eventual catastrophe.14 This equation

emphasizes how decisions (or nondecisions) on

development and institutions transform natural

hazards into natural disasters. 

CONFLICTS

Conflict was the defining disaster type of the

1990s, with the decade-long growth in humanitarian aid driven by the devastation that accompanied the increase in internal (within-state) conflicts. Between 1985 and 1989 an average of five

manmade humanitarian emergencies were

declared each year. In 1990 there were 20. After

peaking at 26 in 1994, new manmade emergencies

averaged 22 a year through the late 1990s.15 Most

of these emergencies were directly related to conflict or severe government repression. Countries

from every region made the list, including

Afghanistan, Angola, Bosnia and Herzegovina,

Burundi, Colombia, the Democratic Republic of

Congo, Eritrea, Ethiopia, Haiti Indonesia, the

Democratic People’s Republic of Korea, Liberia,

Rwanda, Sierra Leone, Somalia, Sudan, Tajikistan,

Uganda, and Yugoslavia (Serbia/Montenegro).

By the end of 2000 internal conflict and repression had generated 14.5 million refugees and

asylum seekers worldwide—and nearly 25

million people displaced within their own countries (figure 5.2).16 The number of refugees, just

below 10 million in 1984, peaked at 16.3 million

in 1993–94, then began to fall.17 Significant

refugee repatriations from peace agreements in

Cambodia, Mozambique, Namibia, and Central

America contributed to the decline. But continued conflicts in Africa (especially in the Great

Lakes region) and elsewhere partly offset these

gains. At the end of 2000 the three largest refugee

populations—Palestinians (4.0 million), Afghans

(3.6 million), and Sudanese (460,000)—made

up more than half the total. In addition, 6 of the

top 10 refugee-generating countries were in

Africa.18

The number of internally displaced persons has

increased even more dramatically (see figure 5.2).

From an estimated 1.2 million in 11 countries in

1982, the number rose to 11–14 million in 20

countries in 1986 and to more than 20 million in

40 countries in 1997.19 Sudan and Angola have

the most internally displaced people, followed by

Colombia and the Democratic Republic of

Congo.20 This increase reflects the growing

PROVIDING

HUMANITARIAN AID

114

THE NUMBER OF

REPORTED DISASTERS HAS

SKYROCKETED, WITH

THREE TIMES AS MANY IN

THE 1990S AS IN

THE 1960S

Water and weather disasters rising sharply

Source: Figure taken from World Disaster Report 2001 

(Geneva: International Federation of Red Cross and Red Crescent 

Societies, 2001) based on data supplied by the Centre for Research 

on the Epidemiology of Disasters, Belgium.

400

1990 1995 2000

300

200

0

100

Number of reported disasters

Water and weather

Earthquakes and volcanoes

FIGURE 5.1
number of internal conflicts in the 1990s as well

as more accurate counts of displaced populations. It also reflects the world community’s

efforts to limit refugee flows through assistance

models that try to keep people within their own

countries.21

MONEY MATTERS

In 2000 the United States provided $1.6 billion in

official humanitarian aid—more than the combined total of 12 other OECD donors.22 Moreover,

in 1998–2000 the United States provided about a

third of all official humanitarian aid , up from about

a fifth in 1995–97 (figure 5.3). In addition, in 2000

the United States provided more than half of all

resources for the relief operations conducted by the

World Food Program.23

Although official financing for humanitarian aid

nearly tripled in the 1990s, this growth did not

keep pace with economic growth in OECD

countries. In fact, between 1990 and 1998 global

donor spending on humanitarian aid dropped

from 0.03 percent of these countries’ GDP to

0.02 percent—or to 20 cents of each $1,000 in

GDP.24 Looking at UN agency budgets, in 2000

donors provided less than 80 percent of World

Food Program requirements for long-term relief

and 84 percent of requirements for immediate

relief. Resources for the United Nations High

Commissioner for Refugees peaked in 1992 but

have since fallen by 60 percent.25

Given the differences between the funds required

and provided, some triage occurs. Highly visible,

geopolitically important crises in places such as the

former Yugoslavia are often oversubscribed while

“silent” emergencies such as those in Angola,

Burundi, and Somalia (in the late 1990s) remain significantly underfunded.26

In addition, the dollar amounts of humanitarian

aid mask the fact that large portions of donor

resources are in kind—primarily food. The failure

to provide cash for nonfood needs (such as clean

water and sanitation) in emergencies seriously

limits the benefits of food in many emergencies.

During the 2000–02 drought in the Horn of

Africa, seeds, veterinary assistance, health, water,

and sanitation programs were more than 70

percent underfunded, impeding recovery.27

By the late 1990s donors were funneling at least

a quarter of their humanitarian aid through nongovernmental organizations (NGOs)—and for

the United States, estimates are much higher.28

Donors’ decisions to provide funds through

NGOs or multilaterally through UN agencies will

PROVIDING

HUMANITARIAN AID

115

IN 2000 THE UNITED

STATES PROVIDED $1.6

BILLION IN OFFICIAL

HUMANITARIAN AID—

MORE THAN THE

COMBINED TOTAL OF 12

OTHER OECD DONORS

Estimated number of the world’s people 

in need of emergency humanitarian 

assistance, 1984–2000

a. People who fear persecution or harm if returned to their home 

countries but are not recognized by governments as refugees. 

Some are given temporary refuge or allowed to remain 

undocumented. Information on these groups is fragmentary, 

and estimates of their numbers often vary widely.

Source: NIC 2000.

50

0

25

1984 1988 1992 1996 2000

Million people

Total

FIGURE 5.2

Internally

displaced 

persons

Refugeesa

The United States provides the most 

humanitarian assistance by far

Source: Randel and German 2002.

The major donors of bilateral 

humanitarian assistance, 2000 

US$ million

Netherlands

All other

DAC donors

Norway

Germany

Switzerland

0 1, 500 1,000 500

Japan

FIGURE 5.3

United Kingdom

Sweden

Canada

France

Denmark

United States

Fig. 5.2

Total IDPs Refugees

1984 13 3.9 9.1

85 21 10.9 10.1

86 26.5 12.8 11.7

87 32.9 17.6 13.3

88 36.3 17.5 14.4

89 35.6 15.9 15.1

90 38 21.3 16.7

91 41.5 21.3 16.7

92 43.7 23.6 16.7

93 46.2 24.7 18

94 45.9 25.5 16.3

95 45.9 26.6 16.3

96 41.5 22.6 15.8

97 36.2 19.2 14

98 36 18.7 13.6

99 35 19.3 12.2

Fig. 5.3

The major donors of bilateral

humanitarian assistance, 2000,

US$ million

United States 1165

Netherlands 366

United Kingdom 344

All other DAC donors 337

Sweden 265

Norway 204

Canada 201

Germany 178

France 159

Switzerland 146

Denmark 124

Japan 85
continue to be a source of tension in the humanitarian relief community. Some argue that the

“bilateralization” of this aid makes NGOs less

independent, ties humanitarian goals too closely

to donor geopolitics, and reduces resource allocations based on need. Others charge that UN

agencies lack the speed, flexibility, and operational skills to get the job done, making NGOs

essential to improving operational efficiency and

effectiveness in the field. 

Finally, it is worth noting that humanitarian aid

grew in the 1990s—while overall development

assistance fell. Since 1991 official development

assistance has dropped 11 percent in real terms.29

NEW HUMANITARIAN ACTORS

Lacking support from superpowers, armed

groups have turned to exploiting the natural

resources around them and stripping civilian

assets to finance their operations.

Killing, injuring, and kidnapping aid workers is

also part of the “new war” scenario, as are child

soldiers and gender-specific atrocities (raping

women, executing men). This brutality is facilitated by the greater availability and low cost of a

wide variety of weapons.30

The 1990s saw not only vast human suffering generated by “new wars” and other global threats,

but also a greater interest in addressing them on

humanitarian, human rights, and security

grounds. Humanitarian actors had new opportunities to intervene—their mission to save lives and

reduce human suffering merging with the larger

security interests of the international community,

at times making them an element of larger political and military strategies.31

COMPLEX EMERGENCIES, COMPLEX

RESPONSES

Humanitarian relief workers often refer to conflict

settings as complex humanitarian emergencies,

defined as “internal conflicts with large-scale

displacement of people; fragile or failing political,

economic and social institutions; random and systematic violence against non-combatants; infrastructure collapse, widespread lawlessness and

interrupted food production and trade.”32 This

term reflects the human suffering caused by these

conflicts—though the emergencies are, at heart,

political, with real solutions lying outside the

humanitarian realm.33

The complexity has as much to do with the

nature of responses as with the intricacies of conflicts. Responses in war settings were once the

responsibility of the International Committee of

the Red Cross, as the custodian of the 1949

Geneva Convention and 1977 Additional

Protocols. But today UN agencies, NGOs, and a

range of military actors are on the scene. The relationships within and between these entities differ

in each case, and coordination among them has

become more difficult with the growing number

and type of actors.34

The United Nations Office for the Coordination

of Humanitarian Affairs was created to address

coordination, but for many reasons (including

insufficient authority, financial resources, and

qualified staff), it has been unable to meet the

challenges of complex emergency responses.

Without radical restructuring of the humanitarian architecture (say, by creating a central response

agency or pooling donor resources into a single

response fund in or out of the UN—options

unpopular with both donors and UN agencies),

prospects are poor for resolving the coordination

conundrum in the near term. 

INTERNATIONAL AGENCIES

On the civilian side, the International Committee of

the Red Cross has been joined by a large contingent

of other actors. Three operational UN agencies

(autonomous and funded through voluntary contributions and reporting to separate governing

boards) take the lead in responding to complex

humanitarian emergencies. The United Nations

High Commissioner for Refugees is responsible for

protecting and assisting refugees, the United

Nations Children’s Fund focuses on the needs of

women and children, and the World Food Program

emphasizes food movements and logistics. The

United Nations Development Programme’s role has

been limited by its traditional ties to country governments, but at times it has played an important

coordination function at the field level. It is also

playing new roles in crisis prevention and recovery.

The Food and Agriculture Organization and World

Health Organization, though not central players,

are also positioning themselves to become more

involved in emergency settings. 

PROVIDING

HUMANITARIAN AID

116

BY THE LATE 1990S

DONORS WERE

FUNNELING AT LEAST A

QUARTER OF THEIR

HUMANITARIAN AID

THROUGH

NONGOVERNMENTAL

ORGANIZATIONS
These agencies have changed over the last decade. 

• The United Nations High Commissioner for

Refugees is doing more to help people in

refugee-like situations. In Bosnia and

Herzegovina it mounted a relief operation

during a war for the first time in its history,

aiding refugees, internally displaced persons,

and other war-affected groups. But while its

assistance capacity has expanded to address

conflict settings, its protection abilities have

failed to keep pace. Thus it is working to

improve both legal protection for refugees

and physical protection for all the populations it serves.

• The World Food Program has evolved from a

predominantly development agency to one

focused on emergency responses. In 1990

development programs absorbed about 70

percent of the agency’s resources—but today,

just over 10 percent. New strategic priorities

include a strong commitment to ensuring that

women play a central role in gaining access to

and managing the distribution of food.

• The United Nations Children’s Fund has

taken steps to mainstream emergency

responses throughout its systems. 

Almost all organizations have expanded their

operational ties to each other and to local and

international NGOs, the primary implementing

partners for the United Nations. Two other intergovernmental bodies—the International

Organization for Migration and the International

Federation of Red Cross and Red Crescent

Societies—are often also important responders

and UN partners.

THE RISE OF NONGOVERNMENTAL

ORGANIZATIONS

Like UN agencies, in the 1980s bilateral donors

such as the U.S. government began to rely

increasingly on NGOs to deliver humanitarian

aid in conflict settings, primarily because NGOs

generally have a grassroots orientation and a flexible, results-oriented approach.35 NGOs used to

work at arm’s length from donor governments,

but over time the relationship has become more

intimate.36 Interest in increased impact and

accountability has led to more intense donor

involvement in NGO program designs, while

increased funding has made some NGOs donordependent. For example, three of the five largest

aid programmes in the United States—CARE,

Catholic Relief Services, and Save the Children—

receive around half their funding from the U.S.

government.37

Reflecting this close relationship, the USAID

Office of U.S. Foreign Disaster Assistance channels 60–70 percent of its funds to NGOs. Other

donors also exhibit close relationships with

NGOs.38 Increased bilateral funding has heightened the danger that NGOs will be perceived as

agents of Western governments rather than as

independent, nongovernmental actors. As one

NGO executive has noted, “availing oneself of

government resources to the fullest while retaining independence and remaining true to the

[humanitarian] ethos can be very difficult.”39

With donors and UN agencies increasingly dependent on them, NGOs have at times become the

heart and soul of relief operations. Working in

nearly every crucial intervention area (including

food, shelter, water, sanitation, health, agriculture,

and microenterprise development), they have provided services in situations where governments

and other members of the international community have been unable or unwilling to do so. 

With hefty resources available from UN agencies

and donor governments, the number of NGOs

exploded in the 1980s and 1990s. To illustrate,

some 100 NGOs operated in Rwandan refugee

camps in eastern Zaire (now the Democratic

Republic of Congo), 170 in Rwanda, 150 in

Mozambique, and 250 in Bosnia-Herzegovina.40

While these NGOs have addressed critical needs,

their proliferation has at times led to duplicated

efforts and projects working at cross-purposes,

hampering the development of an overall strategic vision in the field. 

Complicating matters is the enormous organizational and philosophical diversity in this growing

sector. Some NGOS are secular, others are faithbased, and many are increasingly international,

with multiple national headquarters for fundraising

and advocacy and diverse headquarters-field relationships. Some strictly adhere to humanitarian

principles of neutrality and impartiality. Others

openly side with those most severely affected by

emergencies.

These diverse groups often compete intensely

for financial resources and local staff. NGOs’

access to resources makes them powerful local

players, and they can undermine the authority of

PROVIDING

HUMANITARIAN AID

117

ALMOST ALL

ORGANIZATIONS HAVE

EXPANDED OPERATIONAL

TIES TO EACH OTHER

AND TO INTERNATIONAL

NGOS
governments—siphoning off not only legitimate

government duties but also staff and resources.

In Afghanistan, for example, NGOs are paying

skilled workers far more than what the transitional government can afford. 

Other recent NGO trends include the growth in

(and growing donor preference for) local and

national NGOs and the growing number of other

NGOs with which humanitarian NGOs increasingly collaborate. These include human rights

NGOs, conflict resolution NGOs, and women’s

groups. In today’s “new war” settings, the lines

between these various entities are increasingly

blurred, with women’s groups taking up peace

issues, human rights groups concerned about

violations of humanitarian law, humanitarian

groups concerned about peace and justice issues,

and so on.41

MILITARY INVOLVEMENT

While logistical military support has been

common in natural disasters over the past halfcentury, the end of the Cold War prompted the

military to reconsider its role in nonwar settings

(operations other than war).42 As with agencies

that provide humanitarian aid, militaries have

been asked to address emerging threats to human

security. This trend is reflected in the enormous

increase in UN peacekeeping operations. In the

early 1990s there were 8 peacekeeping operations

involving 10,000 troops—while by 2000 there

were 15 operations involving 38,000 troops. (UN

peacekeeping operations peaked in 1993, when

78,000 troops were deployed.)43

Three types of civilian-military collaboration have

occurred in the past decade.44 In the first, ongoing

humanitarian operations, the military deploys

assets to help civilian agencies quickly deliver lifesaving aid. Support usually comes in the form of

logistics, as in the aftermath of the 1994 Rwandan

genocide. After failing to stop the genocide, 11

countries provided military resources in response

to the initial outflow of refugees and resulting

cholera epidemic in eastern Zaire (now the

Democratic Republic of Congo). 

Civilian-military collaboration also occurs when

humanitarian aid is an “add on” to peacekeeping

operations. In these cases, as in Cambodia and

Mozambique, humanitarian operations are

usually part of a comprehensive peace settlement

in which political objectives remain foremost. In

such operations military involvement is consensual and based on principles of neutrality, impartiality, and nonuse of force. Military-civilian collaboration on humanitarian aid is greatly

facilitated when these parameters are established

beforehand. 

The third type of civilian-military collaboration is

forceful humanitarian intervention: when the military is used to protect, through force if necessary,

the delivery of humanitarian aid and sometimes

the civilians receiving that aid. Until the 1990s this

approach was largely theoretical. But no longer.

Forceful humanitarian interventions were widespread in the 1990s, the most visible reflection of

the weakening of the sovereignty principle and

the merging of security and humanitarian concerns. Perhaps the most vivid example was the

“humanitarian war” in Kosovo, undertaken by

the North Atlantic Treaty Organization (NATO)

without authorization from the United Nations

Security Council.

Other examples of forceful humanitarian interventions include Operation Provide Comfort in

northern Iraq (1991), Operation Turquoise in

Rwanda (1994), INTERFET in East Timor

(1999), and UN-sponsored operations in Somalia

(1992), Bosnia (1992–95), and Sierra Leone

(2001). As Kaldor notes, “starting with the establishment of a safe haven in northern Iraq in 1991

and culminating in the NATO air strikes in

Yugoslavia in 1999, the presumption that there is

a right to use armed force in support of humanitarian objectives has become widely accepted.”45

PRIVATE ACTORS

Private, for-profit entities are becoming more

active in disaster responses. Examples include:

• Companies like Microsoft, which help apply

advanced technologies in emergency settings.

• Military contractors, which provide

operational support to the armed forces.

• Private security firms, which offer their services to aid workers and governments.

The role of multinational corporations in generating conflict—say, by buying diamonds and valuable minerals from belligerents—has led to

growing calls for them to be more socially responsible and abide by international humanitarian and

human rights laws. Indeed, if calls for increased

PROVIDING

HUMANITARIAN AID

118

CIVILIAN-MILITARY

COLLABORATION OCCURS

WHEN HUMANITARIAN

AID IS AN “ADD ON” TO

PEACEKEEPING

OPERATIONS
corporate responsibility are heeded, these powerful entities could play a much larger role in

humanitarian aid.

INNOVATIONS, FAILURES, AND THE

CRISIS IN HUMANITARIAN AID

Initiated in 1989, Operation Lifeline Sudan was

the first UN access agreement negotiated with

both a government and a rebel movement to

ensure lifesaving assistance in the midst of a war.

Negotiated access agreements have become a

basic model for delivering aid in conflict settings,

and have been used in countries such as Angola,

Ethiopia, and Mozambique. In a variation on the

theme, the United Nations has also negotiated

“days of tranquility” and “humanitarian ceasefires” to deliver lifesaving aid. 

In Bosnia, eastern Zaire (now the Democratic

Republic of Congo), and northern Iraq logistics

operations reached new heights. The United

Nations High Commissioner for Refugees

described its humanitarian operations in Bosnia as

unprecedented in “scale, scope and complexity.”46

They included the Sarajevo airlift, the longestrunning humanitarian airlift ever—surpassing

even the 1948–49 airlift in Berlin. Civilian-military

collaboration allowed for impressive new logistical

feats as well as new security models. The idea of

safe havens was born, where protection and assistance are provided within a war-affected country. 

Despite (and perhaps partly because of) these

innovations, by the mid-1990s humanitarian aid

was widely considered to be in a state of conceptual crisis. As political analyst William DeMars

has observed, “In the modern history of humanitarian action dating from civilian relief during the

Second World War, never before has the legitimacy of the enterprise been so profoundly and

publicly challenged, while at the same time never

have the services of humanitarian organizations

been more in demand.”47 Why? 

POSSIBLE NEGATIVE EFFECTS OF ASSISTANCE

Part of the answer lies in the unintended negative

aspects of relief, so evident during the 1990s and

now well documented.48 Operation Lifeline

Sudan is a case in point. This remarkable structure has averted and reduced famine in Sudan for

more than a dozen years—but it is also thought to

have prolonged the conflict. Warring parties,

especially the government, deny access to some

locations, and all sides use aid to finance the war.

Military forces use days of tranquility and humanitarian ceasefires to regroup for the next round of

fighting. In addition, aid supports belligerents

who impose “taxes” or steal to obtain relief assets;

makes civilians targets for militias that strip them

of their assets; empowers belligerents by allowing

them to control civilian access to resources; and

absolves ruling parties from their welfare

responsibilities by meeting local needs. Finally,

introducing relief supplies into a resource-scarce

environment may dramatically fuel a war

economy in which many have a continuing, vested

interest. 

Development economist Mary Anderson

describes two kinds of negative aid impacts: tangible ones related to resource transfers that

empower belligerents and reinforce a war

economy, and intangible ones that convey unintended messages. Negotiating access, for

example, unwittingly elevates the status of

armed groups and confers legitimacy on

conflict.49

THE RELATIONSHIP BETWEEN AID AND

POLITICS

The conceptual crisis of humanitarian aid also

derives from its occasional failure to be complemented by effective political and military strategies. Operation Lifeline Sudan shows how aid can

become a substitute for more concerted action to

address the causes of humanitarian need.

Although at its inception Sudanese relief groups

called for Operation Lifeline Sudan to lay the

foundation for a broader peace agreement, that

did not occur. Much political muscle has been

flexed on access for aid—while little progress has

been made on peace. 

Nowhere was this substitution of aid for aggressive diplomatic action more evident than in

Bosnia. The groundbreaking airlift operations

there (as well as in Somalia and Sudan) reflected

the new heights to which the international community would go to deliver lifesaving aid. But they

also showed its inability to prevent the need for

such aid in the first place. The Sarajevo airlift

became a symbol of the international community’s resolve to provide aid but little else in the

context of the war. 

PROVIDING

HUMANITARIAN AID

119

PRIVATE, FOR-PROFIT

ENTITIES ARE BECOMING

MORE ACTIVE IN

DISASTER RESPONSES
This focus on aid in the absence of concerted

action to stop aggression gave rise to the expression, “the well-fed dead.” That is, relief efforts

kept “vulnerable civilians alive only to have them

brutalized by war, human rights violations, and

other forms of abuse.”50

SAFE HAVEN FAILURES

The international community’s willingness to

address the material needs but not the physical

safety of civilians in the midst of war has also been

grimly evident in strategies for so-called safe

havens. The safe haven concept brought with it

some of the most profound tragedies of the 1990s,

largely because the civilian nature of safe havens

was not maintained and because the international community designated “safe” areas that it was

unwilling to defend. 

Only in northern Iraq was this concept initially

well implemented, because Operation Provide

Comfort was backed by sufficient force to protect

hundreds of thousands of returning refugees.

But even there the safe haven concept failed Iraqi

Kurds five years later, in 1996, when the United

States proved unwilling to thwart the Iraqi army

from invading Kurdish areas.51 While the safe

haven created by French troops in Rwanda in

1994 is widely credited with stemming further

destabilizing outflows of refugees into neighboring countries and allowing for the delivery of

urgently needed relief, it also protected some of

the architects of the 1994 genocide. Their presence in the Kibeho camp led to a Rwandan

Patriotic Front assault in which several thousand

people were killed. (Though not in a declared safe

haven, the failure to separate civilian and military

groups in camps in eastern Zaire (now the

Democratic Republic of Congo) led to similar disastrous results.)

The most poignant failure was the Bosnian safe

haven of Srebrenica. Lacking military means to

stop the advance of Serb troops, UN peacekeepers stood by while Serb troops executed 7,000

men and boys—the largest massacre in Europe

since World War II. The Srebrenica debacle

raised profound moral questions for many in the

international community. The question was

inescapable: how can those who claim to protect

and help war victims be held accountable when

they fail, egregiously, to fulfill their mandate? In

a stunning recent development, the government

of the Netherlands, including the prime minister

and his cabinet, stepped down from office as a

result of a damning report on its role in the

Srebrenica tragedy. 

MILITARY ENGAGEMENT, SECURITY, AND

HUMANITARIAN VALUES

The expanded use of military assets in conflict settings has created new dilemmas. For some analysts

the use of force is inconsistent with humanitarian

values, making the idea of a forceful humanitarian intervention an oxymoron. Still, there is little

doubt that a military presence was stunningly

effective in northern Iraq and allowed relief to be

delivered to large, previously inaccessible parts of

Somalia. Military forces also made crucial contributions in eastern Zaire (now the Democratic

Republic of Congo) in rapidly responding to a

cholera outbreak among Rwandan refugees, and

they allowed safe passage of relief supplies in parts

of Bosnia. But the use of military forces has compelled the relief community to examine the extent

to which traditional tenets of humanitarian aid—

rooted in principles of impartiality and

neutrality—can be maintained. For some these

principles are negated by alliances between relief

workers and external military forces intervening

without the consent of warring parties.

On a more practical level, relief agencies recognize that military escorts raise serious risks for

their workers, sometimes drawing fire from belligerents who view military-protected convoys as

legitimate targets. In addition, where military

officers implement aid activities (as currently in

Afghanistan), the concern is that their encroachment on humanitarian space melds political and

military objectives with humanitarian ones.

Military protection also means that relief workers

can stay in war zones to provide humanitarian

assistance, but that as a result they witness

atrocities they are powerless to stop. This presents

a new moral dilemma for humanitarian agencies:

does speaking out about such atrocities further

jeopardize war-affected populations through retribution or denied access to relief, or does it help

them by raising awareness about their plight?

Even more poignantly, does failing to speak out—

in an effort to remain neutral and retain access

rights—make a relief worker complicit in some

way? Faced with such dilemmas, aid agencies

have made different choices depending on

PROVIDING

HUMANITARIAN AID

120

INTRODUCING RELIEF

SUPPLIES INTO A

RESOURCE-SCARCE

ENVIRONMENT MAY

DRAMATICALLY FUEL A

WAR ECONOMY
realities in the field and their views on the relationship between human rights and humanitarian aid.

In sum, the humanitarian innovations of the past

decade brought impressive successes in some

cases and deadly consequences in others—and

more often than not, a bit of both. These experiences have led to evolving practices that point to

future challenges in the field. 

EVOLVING PRACTICES AND FUTURE

CHALLENGES

In response to the perceived crisis in humanitarian aid, a set of initiatives is redefining the nature of

humanitarian responses. Efforts are being made to:

• Improve standards and accountability.

• Improve protection for relief workers seeking

to help civilians caught in conflicts.

• Strike a balance among political, military, and

humanitarian strategies. 

• Address the links between disasters and

development efforts.

IMPROVING STANDARDS AND

ACCOUNTABILITY: PROFESSIONALIZING THE

INDUSTRY

For better or worse, humanitarian aid has become

big business. Concerns about uneven performance among aid agencies, the potential negative

effects of aid, and the blurring of the distinction

between humanitarian and military operations has

led to efforts to root aid more firmly in international humanitarian law and to set higher standards for performance and accountability.

In 1994 the International Red Cross and Red

Crescent Movement and Non-governmental

Organizations in Disaster Relief issued a code of

conduct for disaster assistance organizations. The

code emphasizes the rights of disaster victims to

assistance and affirms the independence of

humanitarian actors from governments. But it has

internal inconsistencies: for example, local societies must be respected, even if their values and

practices violate human rights and humanitarian

law. And more violated in the breach than the

practice, it ignores the existence of predatory

political actors in most complex emergencies.

Building on the code, the Sphere Project—established in 1997 by a consortium of aid agencies—

seeks to recommit agencies to principles flowing

from international humanitarian, refugee, and

human rights law and to set minimum standards

in five core sectors: water supply and sanitation,

nutrition, food, shelter and site planning, and

health care.52 The resulting framework allows for

more formal, consistent evaluations of aid agencies’ performance.

The code of conduct and the Sphere Project documents refer clearly to the rights of people affected by conflicts and disasters and reflect a shift in

the philosophy of many aid organizations: assistance and protection are now seen as rights due,

not privileges granted. From this perspective,

countries and the international aid community

must be held accountable not just for but actually to crisis-affected populations. Two recent initiatives, the Humanitarian Ombudsmen Project

and the Humanitarian Accountability Project,

take the rights of aid recipients to new levels. Both

seek to create accountability mechanisms that

empower humanitarian “claimants” and give

them greater say in the aid process.53

A recent, deeply disturbing report by the United

Nations High Commissioner for Refugees and

Save the Children UK on sexual violence and

exploitation of refugee children in Guinea, Liberia,

and Sierra Leone makes clear the ease with which

personnel of powerful relief organizations can prey

on the populations they are intended to assist and

highlights the importance of making aid agencies

more accountable to aid recipients. Aid organizations need to make explicit to their workers how

principles must be embraced and translate them

into organizational policies, operational guidelines,

and rules of behavior. Better assessment and monitoring will necessarily follow. Absent an independent body with the authority to determine compliance with principles or minimum standards and

to impose sanctions, new and more rigorous selfpolicing will be required. Donor agencies that

control substantial funding flows have an ethical

duty to insist on high standards, whatever the

attempts at self-regulatory codes.

IMPROVING PROTECTION FOR CIVILIANS

CAUGHT IN CONFLICTS

This new code of conduct is just one component

of the international community’s search for better

protection measures for refugees, internally displaced persons, and other civilians affected by

PROVIDING

HUMANITARIAN AID

121

HUMANITARIAN

INNOVATIONS OF THE

PAST DECADE BROUGHT

IMPRESSIVE SUCCESSES IN

SOME CASES AND DEADLY

CONSEQUENCES IN

OTHERS—AND MORE

OFTEN THAN NOT, A BIT

OF BOTH
conflicts. The UN Millennium Declaration’s

pledge to “strengthen the protection of civilians in

complex emergencies” is playing out in many

ways. Proposals for rapid deployment forces to

thwart violence against civilians, peacekeeping

operations with more robust civilian protection

components, greater use of international, regional, and local police forces, and engagement of

private security firms to protect civilians are outgrowths of past protection failures. And the creation of war crimes tribunals for Rwanda and the

former Yugoslavia and the ratification of the Rome

Statute for an International Criminal Court reflect

determined efforts to punish those who violate

internationally recognized standards of protection. 

These initiatives bear special relevance for internally displaced persons, who suffered many protection violations over the past decade. Their

number has grown exponentially as a result of

internal conflicts, and their needs are often more

pressing than those of other war-affected groups.

They are less likely to have adequate shelter, less

likely to be able to earn a livelihood, less accessible

to relief workers due to insecurity, more vulnerable

to assault, and less likely to carry the documentation needed to receive benefits.54 Because no single

international organization has a mandate to protect

and assist them, their needs are usually addressed

on an unsystematic basis by various international

organizations and NGOs. In addition, no binding

legal framework specifically addresses internally

displaced persons (unlike for refugees), though the

1998 UN Guiding Principles on Internal

Displacement are an important step forward. 

UN restructuring to create a lead agency to address

the needs of internally displaced persons has essentially been dismissed, but efforts are being made to

heighten awareness of their problems and to

improve coordination among responders.

Improving assistance and protection of such populations will be an important test of the humanitarian aid architecture over the next decade. Much

will depend on donor’s political will to take on the

relevant security issues and provide the resources

needed to improve both assistance and protection. 

IMPROVING SECURITY FOR RELIEF

WORKERS

Humanitarian aid workers continue to face grave

security threats. Since 1992, 200 UN civilian staff

have been killed, most during humanitarian operations. Similarly, since 1997 the International

Committee of the Red Cross has experienced

120–135 security incidents a year.55 The increase

in the number of workers killed reflects the rise in

the number of conflict settings and of relief personnel working in these dangerous environments.

Less clear is the extent to which relief workers are

being targeted for political reasons (as opposed to

being victims of crime) and why. The central

question is, does perceived neutrality protect

relief workers from attack and improve agency

access (as is the standard refrain)? Understanding

the security threat will better inform debates on

neutrality and impartiality in these contexts. 

UN agencies and NGOs, with strong donor

support, are trying to minimize their vulnerability to security threats while maintaining their presence in insecure areas. Efforts include better

security training, regular field reporting on security, coordination structures that serve as a locus

for exchanges of security information, more hardware (radios, satellite phones), more security personnel (such as guards), increased insurance premiums, and more secure housing for staff. 

Increased protection for aid workers has significantly raised the costs of humanitarian relief.

Interestingly, donors are willing to provide the

resources to cover these costs, allowing aid

workers to take risks that donors are unwilling to

take. Many donors cannot even monitor the relief

programs they fund (as in Afghanistan). What

does it mean when donor governments are willing

to train and pay aid organizations to go where

their civilian personnel will not? The growing

number of deaths in the aid community is another

reflection of the substitution of aid in environments that really require more aggressive

political—and perhaps military—interventions. 

STRIKING A BALANCE AMONG POLITICAL,

MILITARY, AND HUMANITARIAN STRATEGIES

Events in Bosnia, Rwanda, and Sudan show what

happens when relief is delivered in the absence of

effective strategies. These experiences have led to

calls for closer links among humanitarian, political, and military strategies, but such integration

requires careful consideration. Combining political, military, and humanitarian efforts can subordinate relief goals and politicize them to the point

that they are no longer acts of humanity, but

instead exclusively political or military tactics.

PROVIDING

HUMANITARIAN AID

122

AID ORGANIZATIONS

NEED TO MAKE EXPLICIT

THEIR ORGANIZATIONAL

POLICIES, OPERATIONAL

GUIDELINES, AND RULES

OF BEHAVIOR
Donor efforts to selectively provide emergency

fuel to Serbia in the winter of 1999–200056—

focusing on areas opposed to former President

Slobodan Milosevic—and to make food aid to the

People’s Democratic Republic of Korea conditional on political negotiations are examples of

strategies that threaten to equate humanitarian aid

less with reducing human suffering and more with

achieving governments’ political and military

objectives. Many aid agencies and aid scholars

properly call for political and military solutions to

complex emergencies—but then insist on distance, not always practical, between these efforts

and their humanitarian aid efforts.

Striking a balance between aid and politics will

involve not so much merging the two but rather

running them on parallel tracks, “reinforcing but

not preempting the other.”57 Some political objectives can be met while achieving humanitarian

goals of saving lives and reducing suffering. Relief

programs have been used to build confidence in

political negotiations, protect democratic and economic reforms in countries experiencing instability, and support implementation of peace accords.60

But some mixes of politics and aid are better than

others. Where political and humanitarian ends do

not meet, humanitarian aid agencies must vigorously defend the preeminent humanitarian principle of saving human life and reducing suffering,

fiercely resisting incompatible geopolitical agendas.

ADDRESSING THE LINKS BETWEEN

DISASTERS AND DEVELOPMENT EFFORTS

In 1983, far ahead of his time, Fred Cuny (later

tragically murdered on a humanitarian mission to

Chechnya) identified the close connection

between disasters and poorly designed development efforts.59 He argued that the two are interdependent: disasters affect development, and

development efforts often provide the preconditions for further disasters. This perspective was

not well received at the time because embracing

it would have required political and economic

elites in disaster-prone countries to fundamentally alter how they planned, guided, and allowed

development to occur. That is, they would have

had to consider hazard and vulnerability in nearly

every development project.

Not much had changed by 1999, when James

Lewis offered the metaphor of the “disaster

bicycle.”60 One wheel is a cycle of disaster, emergency relief, rehabilitation, reconstruction, and

preparedness—but circling back to disaster. The

other wheel, completely separate, is development. The bicycle metaphor highlights that, institutionally and otherwise, international efforts to

address disasters and development are not connected—precluding “the possibility of a necessarily wider view to take account of crucial political, institutional, social, cultural, economic and

physical factors that are the root causes of vulnerability to ‘natural disasters.’”61 That separation

removes disasters from other fields, particularly

development planning, absolving them of their

responsibilities to help prevent and respond to

disasters.

Those who work on natural, technological, and

conflict-related disasters are pushing development experts to recognize that many development

projects cause or at least increase countries’ vulnerability to disasters. But enormous obstacles—

mainly political—remain. In effect an entire paradigm has to be changed, because the fix is not

technical. Rather, it is rooted in systemic factors

that lie at the heart of development thinking. 

In sum, it has been hard to banish the traditional

view that conflicts and natural disasters are interruptions in—but separate from—the development process. But a clearer understanding is

emerging that development efforts create vulnerabilities that enable conflict to take root and that

transform natural and technological hazards into

disasters. (See chapter 4 for further discussion of

the relationship between conflict and development.) Still, achieving this change in consciousness remains an uphill battle because of the formidable political and economic forces resisting it.

But it is a battle that must be waged, because the

type, number, and severity of future disasters will

partly depend on the outcome of efforts to change

the current development mindset. 

LOOKING AHEAD

As late as the mid-1980s, only a few—and not at

all well-received—pessimists were discussing the

potential for religious nationalism, ethnic conflict,

and intrastate wars that would soon so profoundly affect the world. Still, we must look

ahead as best we can. With that in mind, consider the following:

• In some areas, such as southern Africa, Central

Asia, and countries around the Mediterranean

PROVIDING

HUMANITARIAN AID

123

COMBINING POLITICAL,

MILITARY, AND

HUMANITARIAN EFFORTS

CAN SUBORDINATE

RELIEF GOALS AND

POLITICIZE THEM
Sea, lack of rainfall and higher temperatures

are predicted to dramatically increase water

stress, with concomitantly lower harvests. By

2010 an additional 50 million people will be at

risk of hunger (box 5.1).62

• Economic migrants will continue to swell

urban ghettos, with many in poor housing

lacking water and sanitation. Flood-induced

cholera outbreaks in urban slums will

become more common, requiring emergency

responses. 

• Population pressures will force more people

to move onto marginal lands where human

activity has already caused deforestation,

water shortages, and desertification—or into

lowland areas more prone to floods or

hurricanes.63

• Health emergencies are expected to proliferate, further taxing public health systems.

Mosquito-transmitted diseases such as malaria

and dengue fever are expected to spread well

beyond their current geographic limits.64

• Infectious diseases such as AIDS, tuberculosis, and malaria, already health emergencies,

are significantly deepening the impacts of

conflicts and natural disasters. HIV/AIDS

among drought-affected populations, for

example, is making many people more susceptible to health problems associated with

food shortages (and other infectious diseases).

Related illnesses (and death) deeply affect

food security and will render many families

less able to recover from conflicts and natural

disasters.

• Technological accidents and disasters are projected to increase in number and severity

because of spreading industrialization, aging

plants and technologies, declining resources

for safety and monitoring, and increasing vulnerability caused by ill-informed development

decisions and nondecisions. The consequences of such accidents will not be border

sensitive—entire regions could be affected.65

• Domino effects are also possible, where a

natural disaster triggers a technological

accident in an urban area, creating unforeseen and uncontrolled population movements

and generating conditions for conflict.

• Challenges remain in meeting the needs of

today’s war-affected populations. While

PROVIDING

HUMANITARIAN AID

124

IT HAS BEEN HARD TO

BANISH THE

TRADITIONAL VIEW THAT

CONFLICTS AND

NATURAL DISASTERS ARE

SEPARATE FROM THE

DEVELOPMENT PROCESS

The U.S. government bases its policies to

address famine on five core principles:

A hungry child knows no politics. Food aid will

not be used as an instrument of diplomacy in a

nutritional emergency.

Target the vulnerable. Immediate responses

include food aid to targeted populations.

Companion responses are general immunization of children under 5, water and sanitation

interventions, equitable market interventions to

stabilize skyrocketing prices, and heightened

attention to the most vulnerable, such as the

landless poor and women-led households.

Interventions to support livelihoods and coping

systems are also undertaken by targeting families living in poor, vulnerable areas. 

Develop local capacity and support livelihoods.

U.S. food aid programs develop local capacities in famine prevention, mitigation, and preparedness so that famine-prone countries can

withstand episodic shocks without international help. Some immediate actions can be

adjusting agriculture and livestock practices

(planting alternative famine crops, improved

pastoral practices), building food stocks

(better post-harvest storage practices, lending

programs for purchase of food) and changing

food habits (identifying and harvesting wild

foods). 

Make early warning information available. U.S.

policy is to build commitment among senior

political leaders in affected countries and to disseminate information to help communities

respond to early signs of conflict and famine.

This is done by connecting early warning

systems to the political system and to decisionmakers. Incentives are also provided for affected governments to take more responsibility for

reducing vulnerability and the likelihood of

future emergencies. 

Transparent accountability. Democratic systems

of government are the most effective measures

to reduce the risk of famine. And as Nobel economics laureate Amartya Sen has noted, no

country with a free press has had a famine. One

common characteristic of famines is an authoritarian system of government. Famines are not

identified with democracies. That is why democratic government, transparency, and accountability are priorities for the U.S. government

effort to stop or avert famines. 

Source: USAID staff.

Box 5.1. Five principles for addressing famine
expert opinions vary on whether new internal

conflicts will emerge, ongoing ones are

increasingly intractable and lethal—with

growing numbers of civilian casualties and

increasingly global consequences. 

• Potential chemical, biological, radiological,

nuclear, and explosive disasters loom large in

the aftermath of the September 11, 2001, terrorist attacks, with unknown implications for

humanitarian aid. 

Thus needs for humanitarian assistance show no

signs of abating. Moreover, new dimensions of

disasters will create new exigencies. These trends

indicate an even larger, more complex role for

humanitarian aid in the next few decades. The

United States—the last remaining superpower

with truly global reach—has a crucial role in

addressing today’s challenges and shaping future

trends in disaster assistance.

ACKNOWLEDGING THE U.S.

GOVERNMENT’S UNEVEN RECORD

The United States was at the fore in shaping the

“new humanitarianism” of the 1990s. In 1991 its

military led the effort to send home Iraqi Kurds

trapped in the mountains of northern Iraq, and

in 1992 it landed in Somalia to break the famine

that killed 500,000 people. But this warm

embrace of “assertive multilateralism” by

President Bill Clinton’s administration was transformed after the 1993 deaths of 18 U.S. soldiers

in Somalia. In 1994 Presidential Decision

Directive 25 narrowly reinterpreted conditions

for U.S. engagement in peace operations

abroad.66

Yet even more tragic results followed, with the

United States failing to aggressively address the

genocide in Rwanda in 1994 and taking cautious

approaches elsewhere in Africa—including

Angola, Liberia, and Zaire (now the Democratic

Republic of Congo).67 The policy tide turned

again later in the decade with NATO’s “humanitarian war” in Kosovo, epitomizing the close new

relationship between humanitarian, political, and

military interests. But this effort raised suspicions

that the West favored the needs of Europeans

over those of Africans.68

So, U.S. responses to conflict-related humanitarian

emergencies were disturbingly uneven in the 1990s.

At one extreme, humanitarian responses were overridden by political concerns (as with the famine in

the People’s Democratic Republic of Korea and the

genocide in Rwanda), leading the United States to

do too little, too late. At the other extreme, the

United States engaged in “cure all” humanitarianism,69 substituting large amounts of aid for robust

political action (as in Bosnia prior to the Dayton

Accords, Rwanda after the genocide, and Sudan

until recently).

DEVELOPING A COHERENT STRATEGY FOR

U.S. HUMANITARIAN AID

The sole remaining superpower has a moral obligation to take a stand against human atrocities

whenever and wherever they occur. But humanitarian interventions are also in the national interest: failed and failing states are by definition dangerous to the United States and to global security.

They have destabilized entire regions and provided recruiting grounds and safe havens for

criminals, extremists, and terrorists—a point that

takes on new salience in the aftermath of the

September 11 attacks.

Forging a coherent strategy for U.S. humanitarian aid calls for efforts on several fronts. The relationship between humanitarian aid and foreign

policy objectives needs to be more carefully

assessed and, to the extent possible, more mutually reinforcing. This will require elevating and

more fully exploring the humanitarian dimensions of political and military strategies.

PROTECTING WAR-AFFECTED POPULATIONS

—ESPECIALLY THE INTERNALLY DISPLACED

While the United States has played an important

role in improving relief operations over the past

decade, it must now place special emphasis on

protecting war-affected populations, especially

internally displaced persons. The U.S. commitment to better security for relief workers and

relief goods is clear. Less clear, or at least less reliable, is its commitment to physical protection of

people receiving relief. While discomfort lingers

in the humanitarian community over mixing

human rights and humanitarian aid programs,

and over using military and other security forces

to enforce protection, the problem of the “wellfed dead” must be addressed. 

Though not the only war-affected population,

internally displaced persons have unique assistance and protection needs. Yet even though they

PROVIDING

HUMANITARIAN AID

125

U.S. RESPONSES TO

CONFLICT-RELATED

HUMANITARIAN

EMERGENCIES WERE

DISTURBINGLY UNEVEN

IN THE 1990S
are often among the most vulnerable populations

in conflict settings, they have not received the

attention from donors that their number and

plight demand. But without strong leadership and

sufficient resources from the United States, local

and international responses to internal displacement will remain inconsistent and inadequate.

Today no U.S. financing, government entity, or

authoritative policy document is exclusively dedicated to the problem of internal displacement.70

Addressing the broader issue of protection will

require a far more rigorous, systematic approach

to internal displacement. 

ADDRESSING OTHER EMERGING PRACTICES

AND FUTURE TRENDS

The emerging practices and future trends outlined in this chapter point to a number of other

clear directions for the United States: 

• It should not only support NGO and UN initiatives to improve standards and accountability, it should insist on them (and link financial

support to them). This strategy should be mirrored by internal reviews of U.S. accountability

measures. At the extreme, the extensive review

by the Netherlands of its role in the Srebrenica

massacre should be taken to heart.71

• On the development side, the U.S. government should review all of its development

programs with an eye toward creating a

culture of “development for disaster prevention.” For too long, development efforts have

ignored the fact that they have often

increased vulnerability to disaster, either

through ignorance or misinformation. 

• Reflecting the growing complexity of relief

contexts and operations, USAID should

expand its staff to include human rights

experts, economists, and other social scientists to work alongside technicians on fieldbased disaster responses and in its headquarters and regional offices. 

When should aid be ended? When it has the

potential to do harm. But that does not mean doing

nothing. As the United States learned in Sudan,

Somalia, Ethiopia, and Angola, aid agencies have to

ensure that food aid is not providing the wherewithal to fund the conflict or sustaining the conflict

in other ways. And in the Rwanda genocide, donors

supported refugee camps in Tanzania, Uganda, and

(then) Zaire—camps that provided a haven for

genocidaires and became sources of instability for

the fledgling government and the region. Aid clearly

has to be conditional of the assurance that such

insidious conditions do not exist.

The same is true for U.S. contributions to multilateral efforts. To deliver effective humanitarian

aid in situations of chaos requires understanding

the great operational constraints and the bureaucratic, security, and political subtleties.

Overcoming those constraints and dealing with

these subtleties demands leadership of the type

the United States is equipped—and prepared—

to give.

NOTES

1. IFRC 2001.

2. IFRC 2001.

3. Randel and German 2002. Official development assistance

is money given by members of the Development Assistance

Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD). Members include Australia,

Austria, Belgium, Canada, Denmark, Finland, France, Germany,

Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands,

New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the

United Kingdom, the United States, and the Commission for the

European Union. ODA for humanitarian aid includes (but is not

limited to) food aid, and aid to refugees abroad and in the donor

countries for their first year of assistance. This latter piece distorts

the statistics somewhat since some of the funds counted are spent

in donor countries. See ODI report for fuller discussion of what

is comprised in the humanitarian assistance statistics. The dollar

figures are in 1999 prices and exchange rates.

4. IFRC 2001.

5. IFRC 2001.

6. Abramovitz 2001.

7. OFDA 2000.

8. OFDA 1998.

9. Abramovitz 2001.

10. IFRC 2001.

11. Christie and Hanlon 2001.

12. OFDA 2000.

13. IFRC 2001. 

14. Olson 2001, p. 1, 6. 

15. NIC 1999. NIC used a combination of USAID and UN

data. USAID assistance is triggered by a formal “declaration of

disaster” by the U.S. Ambassador or the U.S. Department of

State. Thus, the reference to “declared” emergencies. 

16. USCR 2001.

17. NIC 1999.

18. USCR 2001.

19. Deng and Cohen 1998.

20. USCR 2001.

21. Deng and Cohen 1998. Consider, for example, Iraq and

Bosnia-Herzegovina, where the international community created

“safe havens” to protect and aid people within their own countries and limit refugee flows.

22. Randel and German 2002.

23. Randel and German 2002.

24. UNHCR 2000.

25. Randel and German 2002.

26. Randel and German 2002.

27. WFP 2002.

28. Randel and German 2002.

29. IFRC 2001.

PROVIDING

HUMANITARIAN AID

126

A MORE CONSISTENT

U.S. APPROACH TO

HUMANITARIAN AID

WILL REQUIRE

SUSTAINED VISION

AND LEADERSHIP
30. NIC 1999.

31. Macrae and Leader 2001.

32. Kracht 2000.

33. Concurrent natural disasters often exacerbate conflicts,

with food insecurity at times so severe that widespread malnutrition and famine result, as in Somalia in 1992 and Sudan in 1998.

34. For a discussion of this issue see Lautze, Jones, and

Duffield (1998).

35. Weiss 1999.

36. Duffield 2001.

37. Stoddard 2002.

38. For more information on this trend, see Randel and

German 2002.

39. Finucane 1999.

40. UNHCR 2000.

41. Kaldor 2001.

42. Weiss 1999.

43. Kaldor 2001.

44. OECD 1998.

45. Kaldor 2001.

46. UNHCR 2000.

47. DeMars 2000. 

48. See for example, Anderson (1999), Prendergast (1996),

and Macrae and Zwi (1994).

49. Anderson 1995.

50. Minear 2001, pp. 70–71.

51. Natsios 1997.

52. The Sphere Project 2000.

53. For more information, see the following websites:

http://www.oneworld.org/ombudsman and www.hapgeneva.org.

54. Kunder 1999. 

55. NIC 2000.

56. Macrae 2002.

57. Minear and Weiss 1995.

58. Natsios 1997

59. Cuny 1983.

60. Lewis 1999, p. 129.

61. Lewis 1999, p. 130.

62. UN 2001.

63. Kent 1997.

64. Kent 1997.

65. Kent 2001.

66. Minear and Weiss 1995.

67. Borton and Tanner 2001.

68. Borton and Tanner 2001.

69. The phrase “cure all” humanitarianism is drawn from

Minear and Weiss (1995).

70. Kunder 1999.

71. Samantha Power, “Bystanders to Murder,” The

Washington Post, 21 April 2002, p. B7.

BACKGROUND PAPER

Esposito, Dina. 2002. “Humanitarian Assistance.”

Available at www.usaid.gov/NatsiosReport/backgroundpapers

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THE FULL MEASURE OF

T H E F ULL

M EASURE OF

F OREIGN

AI D

CHAPTER 6

UNITED STATES AID TO DEVELOPING COUNTRIES ISgenerally measured solely in terms of the official development assistance that the government

provides to the U.S. Agency for International

Development (USAID), Peace Corps, multilateral institutions, and certain programs sponsored by

the State Department and Department of

Defense. But the U.S. government also provides

considerable resources for international assistance

not included in measures of official development

assistance. Moreover, many nongovernment U.S.

sources—including foundations, corporations,

private and voluntary organizations, colleges and

universities, religious organizations, and

individuals—provide direct assistance to people

in developing countries. All these sources must be

taken into account to plan aid effectively.

Better understanding of private giving is needed

to accurately assess American generosity toward

poor people overseas. Such knowledge can also

help USAID use private funds to leverage additional official development assistance. Private

investment and lending have transformed the

economies of many developing countries over the

past 20 years. Less attention has been paid to

private philanthropy—but it too plays an important role. Indeed, this “silent” private financing

has become the dominant expression of U.S.

concern for poor people abroad.

To help understand how these trends will affect

development assistance over the next 15 years,

this chapter first reviews the origins and purposes of the U.S. government’s foreign aid. It then

examines the effectiveness and public perceptions

of this aid—information essential to planning

support for economic and political growth in

developing countries. Finally, the chapter assesses the many nongovernment forces involved in

U.S. aid. Understanding these forces is essential to

shaping future U.S. assistance efforts. Taking into

account both government and nongovernment

sources, the chapter concludes by providing a full

measure of U.S. aid to foreign countries.

OBJECTIVES, OUTCOMES, AND

AMOUNTS OF GOVERNMENT AID

Although early programs focused on supporting

the Cold War and providing targeted humanitarian relief, foreign aid has long been seen as a tool

for promoting economic growth in developing

countries. In 1961 U.S. President John F.
Kennedy said that to productively absorb external capital, recipient countries first had to—on

their own—mobilize resources, implement

reforms, and pursue other self-help measures.1

Yet the Marshall Plan’s success in rebuilding

European nations misled some analysts into

believing that similar capital assistance could be

used to build developing nations. 

OBJECTIVES AND OUTCOMES

Since 1951 Western countries have given developing countries more than $1 trillion in economic and humanitarian aid.2 How has this money

improved the lives of people in these countries?

The different types of U.S. foreign aid—humanitarian relief, security assistance, and economic

development—have had varying success. Disaster

relief and humanitarian aid have been successful

and have also drawn the strongest support from

the American public (box 6.1). The United States

has been a leader in delivering goods, coordinating disaster relief, and leveraging vast resources

from private contributors. USAID has helped

countries implement immunization campaigns,

feeding programs, and public health emergency

measures that have saved countless lives around

the world.

Foreign aid has also been used for security assistance in countries where the United States has

had strategic interests in combating communism,

promoting peacekeeping, maintaining military

bases, and controlling nuclear weapons and narcotics. During initial peace talks and in sudden

crises—such as the Gulf War and the U.S. war on

terrorism—this assistance has contributed to

stronger alliances and agreements. 

But since the terrorist attacks of September 11,

2001, intense scrutiny has focused on the effectiveness of foreign aid in influencing developing

country policies and protecting Americans from

terrorism. In some instances terrorism has been

nurtured by countries that are among the top

recipients of US assistance.3

The emerging consensus in the development

community is that aid reduces poverty only when

economic policies support sustained economic

growth and when the benefits of growth are

widely shared.4 But economists and scholars have

also concluded that countries implement

THE FULL MEASURE OF

FOREIGN AID

130

AID REDUCES POVERTY

ONLY WHEN ECONOMIC

POLICIES SUPPORT

SUSTAINED ECONOMIC

GROWTH AND WHEN THE

BENEFITS OF GROWTH

ARE WIDELY SHARED

Public perceptions of foreign aid reflect U.S.

values and principles. In public opinion polls

Americans have always ranked domestic affairs

higher than international ones. Even before the

September 11 terrorist attacks, the U.S. public

named as its top five priorities reducing the

threat of international terrorism, stopping international drug trafficking, halting the spread of

AIDS around the world, protecting the global

environment, and getting Saddam Hussein out

of Iraq. 

Until the mid-1990s, 65–75 percent of

Americans believed that the country was spending too much on foreign aid. But in 2000 several

surveys found that only 40–47 percent of

Americans still held that view. A study in the

early 1990s, after the end of the Cold War,

found that Americans were becoming more

interested in aid for humanitarian than for

security purposes. Whether that has remained

true since the September 11 attacks is

unknown. But in general, Americans have never

strongly supported economic aid to other countries. For example, three surveys conducted by

the Chicago Council on Foreign Relations since

the end of the Cold War have found that the

U.S. public is divided on whether to give economic aid to other countries. In the most recent

survey, in line with the previous two, only 13

percent of Americans favored increasing federal

spending on foreign economic aid—while 48

percent favored reducing it. 

Americans strongly endorse supporting the

United Nations, ending world hunger, and alleviating human pain and suffering worldwide.

Yet they historically have had doubts about the

effectiveness of foreign aid, including concerns

about corrupt foreign governments. These misgivings may be related to general distrust of the

federal government and international organizations, which consistently rank near the bottom

in U.S. surveys on confidence in institutions.

Much as they advocate self-reliance in welfare

programs, Americans want foreign aid that

shows results in countries with honest and

compassionate governments.

Source: Bostrom 2001; PIPA 2001; Belden and

Russonello 1994; Rielly 1999; Independent

Sector 1999.

Box 6.1. Gauging public support for government aid
economic reforms when they choose to—not

because of aid offered or withheld.5 Recent efforts

to provide debt relief and to tie aid to country

policies have also not achieved their intended

results.6 These approaches do not create incentives for growth. Instead, many governments have

strangled growth by allowing high inflation, black

markets, negative interest rates, corruption, excess

regulation, and failed public services. 

AMOUNTS

U.S. foreign aid goes far beyond official development assistance (ODA)—the “donor performance” measure developed by the Development

Assistance Committee (DAC) of the Organisation

for Economic Co-operation and Development

(OECD). The OECD is made up of industrial

countries that provide the bulk of development

aid to developing countries, and every year the

DAC publishes a report comparing the generosity of donors based on their ODA as a percentage

of their GNP.7

At $9.9 billion, ODA accounts for just 18 percent

of total U.S. assistance—public and private—to

developing countries (table 6.1). Private international assistance, by contrast, is $33.6 billion—60

percent of the U.S. contribution, and projected to

grow to 65 percent by 2010. Every year the publication of the DAC report results in press reports

and statements by academics and opinion leaders

disparaging America’s “stinginess,”8 asserting that

U.S. foreign policy will be ineffective without

more ODA,9 and claiming that U.S. foreign aid

programs collapsed after the Cold War.10 But

ODA is a limited and outdated way of measuring

a country’s giving. Given the enormous growth in

the private sector around the world, donors

should reevaluate the measure. 

Although the United States consistently ranks first

or second in absolute amounts of foreign aid, it falls

last among industrial countries when aid is measured as a percentage of GNP. The DAC has set an

annual target for foreign aid of 0.7 percent of GNP.

But this target has no bearing on the quality of aid

projects, their effectiveness, or their impact on economic development. The idea of a fixed percentage

dates to 1958, when the Central Committee of the

World Council of Churches called for countries to

devote 1 percent of their national incomes to international development.11 Over time the target was

modified, but there was little discussion of why a

fixed 0.7 percent contribution is preferable to a

strategic approach designed to provide aid for the

right projects in the right countries at the right time.

Denmark, Luxembourg, the Netherlands, Norway,

and Sweden are the only countries ever to have

achieved this target. 

In an official DAC report one concerned nongovernmental organization (NGO) argues that

the further countries are from meeting the 0.7

percent of GNP target, the less committed they

are to development. Declaring a “crisis in development policy and financing” and highlighting

the 0.09 percent contribution by the United

States, the critique adds, “Amidst the longest

boom in a generation, it stands as an indictment

of the governments of the developed countries,

and a source of shame for their citizens.”12 But the

same report offers a more realistic view: “Despite

some calls for a doubling of aid volume and for

bilateral donors to meet the United Nations 0.7

percent ODA/GNP target . . . the political reality

of aid suggests that, at the aggregate level, expectations of these magnitudes will not be met. Even

if they were, it would not solve the problem, nor

could many developing countries deal effectively

with any such surge.”13

Moreover, the U.S. government budget for international affairs contains many items not included

in ODA (table 6.2). In 2000 the international

affairs budget totaled $22.6 billion—so at $9.9

billion, ODA accounted for less than half. ODA

consists primarily of allocations to USAID, the

Peace Corps, most multilateral institutions, and

certain programs sponsored by the State

Department and Department of Defense. The

THE FULL MEASURE OF

FOREIGN AID

131

IN 2000 THE

INTERNATIONAL AFFAIRS

BUDGET TOTALED $22.6

BILLION—SO AT $9.9

BILLION, ODA

ACCOUNTED FOR LESS

THAN HALF

More assistance than meets the eye

a. Including volunteer time.

Source: OECD 2002; OMB 2002; USAID 2002; various private sources.

Estimated U.S. international assistance to developing countries, 2000

U.S. official development assistance

All other U.S. government assistance

U.S. private assistance

Foundations

Corporations

Private and voluntary organizationsa

Universities and colleges

Religious congregations

Individual remittances

Total U.S. international assistance

US$ billions

9.9

12.7

33.6

1.5

2.8

6.6

1.3

3.4

18.0

56.2

Share of

total (%)

 18

22

60

100

TABLE 6.1
other $12.7 billion spent on international affairs

represents all other contributions, including those

to “part 2” countries, the International Monetary

Fund (IMF), Export-Import Bank, Overseas

Private Investment Corporation, State Department

operations and other items, and Department of

Defense international security assistance. Part 2

countries, as defined by the DAC, are excluded

from ODA data because they have graduated

from developing country (or part 1) status. These

countries include all of Central and Eastern

Europe, Belarus, Israel, Russia, Ukraine, and a

variety of island states such as Cyprus. In 2000 the

United States provided $2.5 billion in aid to part 2

countries, accounting for 37 percent of their official aid from DAC donors.14

ODA also does not fully include humanitarian

and development activities sponsored by the

Department of Defense. International food drops,

earthquake relief, and medicine deliveries have

been counted since 1991, and these totaled $2.3

billion through 2000.15 DAC reporting also allows

the inclusion, when possible, of military costs

related to monitoring elections, rebuilding infrastructure, supporting in-country narcotics

control, reducing security threats and demobilizing armies, and postconflict peacebuilding. 

But Department of Defense spending on humanitarian and development activities is probably

much higher than currently reported. For

example, in 1999 the department spent $6.2

billion on contingency operations related to

foreign military crises and peacekeeping, including in Bosnia and Herzegovina and East Timor.16

These operations involved humanitarian and

development activities such as building schools,

hospitals, and roads. But because the costs of

these activities are not broken out from the $6.2

billion, they are not included in ODA. 

If the Department of Defense better identified

these budget items, the U.S. government could

include them in its ODA calculations. Included

would be more efforts like those of the hundreds

THE FULL MEASURE OF

FOREIGN AID

132

DEPARTMENT OF

DEFENSE SPENDING ON

HUMANITARIAN AND

DEVELOPMENT ACTIVITIES

IS PROBABLY MUCH

HIGHER THAN

CURRENTLY REPORTED

Nearly $23 billion in all: U.S. government international assistance

Source: U.S. Office of Management and Budget.

Total U.S. government international assistance by agency, classification, and selected programs, 2000

Official development assistance—$9.9 billion

Operations

Development assistance

Child survival, humanitarian

Disaster relief, food aid

Refugees, narcotics

Asia Foundation

International organizations

Humanitarian

Peacekeeping development

Peace Corps

U.S. Trade and Development Agency

Multilateral institutions

Security assistance (Egypt and others)

USAID

State Department

Department of Defense

Other agencies

Other government assistance—$12.7 billion

Israel

Newly independent states

Eastern Europe and Baltic States

Operations

Broadcasting (Voice of America, Radio Marti)

Peacekeeping

 Educational and cultural exchanges

 International organizations

 National Endowment for Democracy

Military education and training

Foreign military loans

 Antiterrorism, nonproliferation

Export-Import Bank

Overseas Private Investment Corporation

Inter-American Foundation

TABLE 6.2
of U.S. Marines called into Honduras after

Hurricane Mitch to distribute donated goods.17

Even if humanitarian activities accounted for just

15 percent of the department’s contingency operations in 1999, their inclusion would have raised

U.S. ODA by $1 billion.

DAC donors devote different percentages of their

ODA to different development activities. For

example, the United States allocates 20 percent of

its ODA to basic social services such as education,

health, population, and water and sanitation

(figure 6.1). Only the United Kingdom, Ireland,

and Luxembourg devote larger percentages of

ODA to basic social services. Compared with the

average for all donors, the United States spends

more of its ODA on emergency, humanitarian,

and government and civil society programs.

Other DAC donors invest larger portions of their

ODA in economic infrastructure, agriculture and

industry, and water and sanitation systems. In the

two-year period 1997–98 the United States gave

developing countries an average of $570 million

a year for population programs, or two-thirds of

the total ODA from all other countries for this

purpose. The United States provided a considerably smaller percentage for health (15 percent of

the total ODA from all other countries for this

purpose), education (10 percent), and water and

sanitation (0.03 percent).18

SOURCES AND AMOUNTS OF PRIVATE

INVESTMENT AND LENDING

Over the past 20 years private capital flows have

had a dramatic effect on developing countries.

Until the early 1990s most international resource

flows to developing countries came from governments. Now these flows are primarily private. The

shift began in 1992, when foreign direct investment and financial markets took off in emerging

economies—and private flows exceeded official

development finance for the first time (figure 6.2).

Private capital flows peaked in 1996 at $273

billion, or 78 percent of resource flows to developing countries. Although this level was not sustainable, especially for bank and bond lending,

foreign direct investment proved resilient, reaching a high of $188 billion in 1999. Growth in

private investment and lending meant that emerging economies were attracting the kind of capital

that creates and sustains development. Progress

has been made in improving trade, governance,

financial systems, and political and macroeconomic stability and in creating a receptive environment for private business. 

In 2000 resource flows to developing countries

dropped sharply, reflecting the global recession.

ODA fell 5 percent, though ODA to the least

developed countries rose slightly to 22 percent

of the total. But net private flows from DAC

THE FULL MEASURE OF

FOREIGN AID

133

COMPARED WITH THE

AVERAGE FOR ALL

DONORS, THE UNITED

STATES SPENDS MORE OF

ITS ODA ON

EMERGENCY,

HUMANITARIAN, AND

GOVERNMENT AND CIVIL

SOCIETY PROGRAMS

U.S. official aid—weighted toward 

basic social services

Source: OECD 2001, table 19.

0 10 20 30

Bilateral official development

assistance by sector (%), 1999

United States

All other Development 

Assistance Committee members

Emergency aid

Other social

infrastructure

Population

Government and

civil society

Health

Agriculture

and industry

Water and 

sanitation

FIGURE 6.1

Economic

infrastructure

Private flows outstrip public flows

Source: OECD 2002.

Note: Private flows include direct investment, international bank and

bond lending, and grants by nongovernmental organizations. Official

development finance includes official development assistance, official

aid, and other official flows. The data for multilateral flows refer to

the disbursements by multilateral institutions, not contributions to

these institutions by Development Assistance Committee members.

300

0

100

200

1990 1995 2000

Total disbursements from Development 

Assistance Committee members and multilateral 

institutions to aid recipients (US$ billions)

Private flows

Official development

finance

FIGURE 6.2

Fig. 6.1

U.S. DAC

Emergency aid 26 11

Other social infrastructure 10 5

Population 6 2

Government and civil society 6 4

Health 4 4

Economic infrastructure 13 17

Agriculture and industry 3 8

Water and sanitation 2 4

Fig. 6.2 Official development finance Private flows 1990 76.5 43.6 1991 84.5 53 1992 78.3 80.1 1993 82.4 86.3 1994 85 135 1995 88 171 1996 74 273 1997 75.4 240 1998 88.8 132 1999 85.9 161 2000 66 117
donors were $117 billion, down dramatically

from 1999 and the lowest since 1993. As

investors pulled out of foreign markets, equity

flows plunged by $50 billion. Foreign direct

investment fell somewhat but remained the

largest transfer. Despite the downturn in 2000,

private investment and lending to developing

countries still far exceeded government aid.

Even at their lowest level since 1993, private

capital flows are still more than twice government aid to developing countries.19

U.S. investors have channeled enormous

amounts to developing countries, especially

since the early 1990s. When these private

investment and lending flows are added to ODA

and other flows, the United States moves into

first place among bilateral donors (table 6.3).

While the United States ranked lowest in terms

of ODA as a percentage of GNP in 2000, it had

the largest total resource flows, at $25.3 billion.

The United States is the clear leader in all measures of private assistance to the developing

world. Again, ODA fails to reflect the full

measure of U.S. commitment, because it does

not include private capital flows—the most

important measure of sustainable development.

Most significantly, ODA does not include

private aid from U.S. foundations, private and

voluntary organizations (PVOs), corporations,

churches, and individual remittances. This

giving is much higher than in other countries

because of the unique U.S. tax structure and the

country’s strong tradition of private giving.

SOURCES AND AMOUNTS OF PRIVATE

AID

Despite their reservations about government aid,

Americans have a long tradition of domestic and

international generosity. U.S. private giving for

international assistance predates government aid

programs, and over the past 25 years such giving

has grown significantly. 

Churches and other religious congregations initially

played the largest role in U.S. international giving,

through relief and humanitarian assistance as well

as overseas missions. Then colleges, universities,

and foundations began responding to international development needs with scholarships and

support for foreign universities and research

centers. The number and budgets of PVOs and

private charities have grown as Americans have

increasingly offered their money and time to international causes. With globalization and changing

immigration patterns, U.S. corporations have also

increased their philanthropy to developing countries. And U.S. immigrants, increasingly from

developing countries, have been sending more

and more money back to their homelands. 

THE FULL MEASURE OF

FOREIGN AID

134

THE UNITED STATES IS

THE CLEAR LEADER IN

ALL MEASURES OF

PRIVATE ASSISTANCE TO

THE DEVELOPING WORLD

The United States leads the world in total flows

— Not available.

Note: Total official development assistance (ODA) includes net flows to developing countries (bilateral ODA) as well as contributions to multilateral institutions (multilateral ODA).

Source: OECD 2002. 

Net aid flows from selected Development Assistance Committee members (US$ millions), 2000

Total ODA

Total

ODA

as % of

GNP

Bilateral

ODA

Multilateral

ODA

Other

official

flows

Grants by

private

voluntary

agencies

Private

flows

Total

flows

Total

flows

as % of

GNP

1,744

1,664

4,105

5,030

1,376

13,508

3,135

1,264

1,195

1,799

4,501

9,955

Canada

Denmark

France

Germany

Italy

Japan

Netherlands

Norway

Spain

Sweden

United Kingdom

United States

0.25

1.06

0.32

0.27

0.13

0.28

0.84

0.80

0.22

0.80

0.32

0.10

1,160

1,024

2,829

2,687

377

9,768

2,243

934

720

1,242

2,710

7,405

583

641

1,276

2,343

999

3,740

892

330

475

557

1,792

2,550

5

–3

14

–456

–103

–5,200

38

—

3

0

–72

562

113

32

—

846

37

231

306

179

—

26

536

4,069

4,621

482

1,439

7,000

9,537

2,725

3,469

–5

22,272

2,127

2,093

10,666

6,483

2,176

5,557

12,420

10,846

11,264

6,947

1,437

23,471

3,952

7,058

25,252

0.95

1.39

0.43

0.67

1.01

0.23

1.85

0.91

4.25

1.76

0.50

0.25

TABLE 6.3
In 2000 nearly 9 of 10 U.S. households gave to

domestic or foreign charities. Americans also give

generously of their time: in 1999 a record 56

percent of U.S. adults over 18 volunteered at

home or abroad. In 2000 that share dropped to 44

percent because the revised survey considered

only adults over 26. Still, volunteers provided

work equal to more than 9 million full-time

employees, with a value of $239 billion.20 In 2000

U.S. universities and colleges gave more to developing countries in foreign scholarships than

Australia, Belgium, Norway, Spain, and

Switzerland each gave in ODA. Remittances from

U.S. immigrants to their homelands exceeded

ODA from Japan—the largest provider (in dollar

amounts) of government aid to developing

countries.21

Political and economic forces driving the increase

in U.S. private giving include the end of the Cold

War, fall of communism, growth in market

economies, and explosion in information and

communications technology.22 New democracies

have given rise to indigenous PVOs and private

entrepreneurs with sources of wealth outside of

central governments. International issues are the

focus of new “mega donors”—such as the UN

Foundation (with funding from Ted Turner),

David and Lucille Packard Foundation, and Bill

and Melinda Gates Foundation—and increasingly of other U.S. grant-makers. In the 1990s low

inflation, growth in personal fortunes, and a strong

stock market nearly doubled the assets held by

foundations. In addition, new community foundations in the United States and abroad have

created new sources of funding with closer ties to

people and communities in developing countries. 

Although private giving far exceeds official government aid, data on such giving are weak, and

the development community knows little about

its nature, its flows, and the full amounts

involved. Donors understand that private international assistance no longer means only relief

efforts or missionaries working in isolated villages. Today this assistance means dollars transferred directly to Salvadoran families from their

relatives in the United States so they can afford

good health care and education. It means dollars

spent to create indigenous foundations in Kenya

that involve community members in creating

grants. And it means going online in Hartford,

Connecticut, and sending mooncakes to a sister

in Hanoi for the mid-autumn festival in Vietnam.

The size and impact of private international

giving create new opportunities for development

agencies. By learning about and working with

the many providers of private assistance, foreign

assistance can enhance its effectiveness and

define its comparative advantage and its role in

the 21st century (box 6.2). 

INDEPENDENT, CORPORATE, AND

COMMUNITY FOUNDATIONS

The number of U.S. foundations—independent,

corporate, and community—jumped from 32,401

in 1990 to 46,832 in 1998. In 1998 these foundations gave $1.6 billion to international activities,

two-thirds more than in 1994.23 Because the latest

surveys are from 1998, they do not reflect large

international grants made by the Bill and Melinda

Gates Foundation and the UN Foundation for

1999–2001. Together, these foundations provide

THE FULL MEASURE OF

FOREIGN AID

135

NEW COMMUNITY

FOUNDATIONS IN THE

UNITED STATES AND

ABROAD HAVE CREATED

NEW SOURCES OF

FUNDING WITH CLOSER

TIES TO PEOPLE AND

COMMUNITIES IN

DEVELOPING COUNTRIES

The Eurasia Foundation has awarded over

6,500 grants, totaling more than $130 million,

to foster democracy and free markets and to

popularize community foundations. Awarding

its first grants in Eastern Europe and the

former Soviet Union in 1993, the foundation

funds programs in Armenia, Azerbaijan,

Belarus, Georgia, Kazakhstan, the Kyrgyz

Republic, Moldova, Russia, Tajikistan,

Turkmenistan, Ukraine, and Uzbekistan. The

foundation receives $20–30 million a year

from USAID, but it has also raised more than

$40 million from non–U.S. government

sources. The Russian government now gives it

funds as well. 

Multinational firms operating in the region

want to be good corporate citizens, but as

Citigroup said to the foundation, “We need to

be bankers first.” To help bridge that gap, the

foundation, operating at the grassroots, finds

both business partners and worthy philanthropy projects for foreign firms. 

To sustain its work, the Eurasia Foundation is

financing a trust fund of $100 million—half

from private sources and half from public—that

will establish indigenous, professional, and privately managed philanthropic institutions.

Source: Rutledge 2002.

Box 6.2. Building democratic and market institutions
some $350 million a year to international projects.

In addition, in 2000 U.S. foundations announced

two major international funding initiatives totaling some $430 million over a five-year period.24

More than a third of international giving by U.S.

foundations goes for health, education, and social

sciences programs. About 30 percent is spent on

international affairs and development activities.

Together, the arts, the environment, and human

rights activities receive 25 percent, divided fairly

evenly. During the 1990s human rights, public and

social benefits, arts and culture, and religion experienced the largest growth in dollar amounts.25

Breaking down U.S. foundation aid by recipient

region is not easy. It is estimated that Western

Europe and Latin America each receive about 22

percent of the total, and Asia and the Pacific and

Sub-Saharan Africa each about 19 percent. But

much of the aid to Western Europe goes to organizations that conduct programs in other countries and regions. For example, among non-U.S.

recipients the World Health Organization, based

in Geneva, Switzerland, receives the most money

from U.S. foundations.26

Independent foundations account for 90 percent

of international giving by U.S. foundations, corporate foundations for 5 percent, operating foundations for 3.8 percent, and community foundations for less than 1 percent. Corporate and

community foundations experienced the fastest

growth in giving in the 1990s.27

In the 1980s international activities accounted for

just 5 percent of U.S. foundation giving. This

share grew with the end of the Cold War and

surged in the 1990s, reaching almost 11 percent

by 1998. In addition, more small and medium-size

foundations are giving international grants.

Nevertheless, the 10 largest U.S. foundations give

60 percent of international grants, and the 25

largest, 74 percent. Foundations must address

several issues as they globalize, including their

openness to outside proposals, their accountability for results, and their organizational structures,

to link private efforts to the needs of developing

countries.

Independent foundations. Independent foundations include some of the oldest and largest U.S.

foundations—organizations that helped transform tropical health and agriculture and expand

foreign scholarships and academic research in

developing countries. The Rockefeller, Ford,

Kellogg, and MacArthur foundations are continuing this long tradition, including through

massive funding for higher education in Africa. 

With $22 billion in assets in 2000, the Bill and

Melinda Gates Foundation is the world’s largest

foundation. Awarding more than half its grants to

international health projects, it is transforming

health services in developing countries. In its

quest to establish standards and accountability in

development projects, the Gates Foundation

requires countries to develop detailed applications and meet inoculation targets under its

Global Alliance for Vaccines and Immunization,

which it launched in 1999 with a grant of $750

million.28

The number of U.S. independent foundations has

grown, with an estimated 24,000 created in the

1980s and 1990s. Though most are small, 8,200

have at least $1 million in assets. Of these, more

than 500 have at least $25 million.29 Giving has

not necessarily grown in line with assets, with

foundations consistently giving about 5 percent of

their assets a year regardless of asset growth.

Many new small and medium-size foundations

are among the most active in international giving.

Among U.S. foundations that give at least half

their money to international activities, 60 percent

were created after 1970.30

Corporate foundations. Corporate foundations

accounted for just 13 percent of international

giving by U.S. corporations in 1998. Many international donations are made through corporations’ foreign affiliates and matching grants programs for employee donations. Although

corporate foundations account for 20 percent of

U.S. foundations making international grants,

they provide just 5 percent of foundation

giving.31

International contributions from U.S. corporate

foundations rose considerably in 1997 and 1998

as companies entered more partnerships with

governments, nongovernmental organizations

(NGOs), and international organizations. These

partnerships reflect increased corporate social

responsibility, employee volunteerism, and causerelated marketing. 

In 1998 six U.S. corporate foundations gave at

least 25 percent of their grants to international

programs, including the Bechtel Foundation (40

THE FULL MEASURE OF

FOREIGN AID

136

MORE THAN A THIRD OF

INTERNATIONAL GIVING

BY U.S. FOUNDATIONS

GOES FOR HEALTH,

EDUCATION, AND SOCIAL

SCIENCES PROGRAMS
percent), Archer Daniel Midlands Foundation

(30 percent), and Bristol-Myers Squibb and CocaCola foundations (28 percent each).32 But in

recent years contributions from corporate foundations have leveled off because of the East Asian

financial crisis and the global recession. Still,

increased giving and new relationships with nonprofits have become established features of international corporate philanthropy.

U.S. corporations are developing strategic relationships that tie their philanthropic activities to

their business interests. For example, Citigroup

Foundation gave $1 million to support Asian

microlending programs that foster economic

development by helping small entrepreneurs—

and create future Citigroup customers.33

Community foundations. A promising development in international giving is the recent growth

in community foundations (box 6.3). There are

now nearly 800 around the world, with threequarters in the United States. Tied to the needs of

communities overseas, a community foundation is

independent, receives funds from a variety of

sources, and makes grants in conjunction with the

people living in the communities.34

Frustration with foreign aid and donor controls

on projects led to the creation of the Kenya

Community Development Foundation. It became

independent in 2001 after three years of managerial and organizational support from the Aga

Khan and Ford foundations.35 This community

foundation brings hope to Kenyans who want to

decide their needs for themselves and determine

how to meet them with their resources. The

United States and other donors could consider

using such foundations as channels for local

development projects.

Some of the most visible work in community and

indigenous foundations has occurred in Central and

Eastern Europe. Between 1989 and 1994 more than

60 European and U.S. foundations spent more than

$600 million to develop nonprofit organizations in

the region. The Ford and Rockefeller foundations

are joining the effort to fund the Trust for Civil

Society in Central and Eastern Europe to support

these philanthropic endeavors.36

Future developments. With the September 11 terrorist attacks and the global economic downturn

since 2000, international giving will see limited

growth in the near future. But the fundamental

changes in foundation giving in the 1990s and the

expanded assets of foundations argue for a continued

expansion of private philanthropy over the medium

and long term. As the U.S. economy rebounds, foundation assets and individual donations will rise.

Recent growth in U.S. foundations—with some

8,000 new ones emerging between 1994 and 1998—

bodes well for international giving.37 As these organizations mature and increase their assets, many will

expand to international activities.

As globalization continues, rising corporate and

personal income in developing countries will

increasingly be channeled to indigenous PVOs

and community foundations. These new sources,

along with older independent and corporate

foundations, will provide partners for donors in

all areas of development. 

Foundation giving is estimated at $1.5 billion

(this estimate excludes corporate foundation

THE FULL MEASURE OF

FOREIGN AID

137

U.S. CORPORATIONS ARE

DEVELOPING STRATEGIC

RELATIONSHIPS THAT TIE

THEIR PHILANTHROPIC

ACTIVITIES TO THEIR

BUSINESS INTERESTS

Following a long tradition of strengthening

international philanthropy, U.S. foundations,

including the Charles Stewart Mott, Ford, and

Soros foundations, have begun supporting the

creation of community foundations overseas.

Ford Foundation Senior Vice President Barry

Gaberman is enthusiastic about this democratization of philanthropy: “What was a uniquely American construct is now providing the

energy for the development of philanthropy

around the world.” 

The Charles Stewart Mott Foundation has

helped create community foundations around

the world, providing $20 million for foundations in Eastern Europe, South Africa, and the

United Kingdom. Concerned that traditional

forms of overseas assistance are not working,

the foundation’s president, William White,

argues that “philanthropy needs to begin on

Main Street. Local neighborhood people know

far better than people from out of town what

their town needs. I believe in empowering

people at the local level.” 

Box 6.3. Exporting community foundations

Source: Greene 2001.
giving, combined with other corporate giving in

the following section). Assuming modest cumulative growth in international giving of 25

percent over a five-year period, rather than the

robust 66 percent that occurred in the 1990s,

foundation giving could reach $2.5 billion in

2005 and $3.1 billion in 2010. Foundation

reporting is underestimated because not all small

foundations report. In addition, some corporate

foundations underreport or do not report at all.

With better data, projected levels could be even

higher. 

CORPORATIONS

As noted, private capital flows surpassed official

government aid in the early 1990s. Less noticed

was the growth in new forms of international philanthropy that are redefining U.S. corporate

giving. International giving by corporations has

expanded to include cash and noncash giving,

cause-related marketing, employee volunteer programs, and expenditures on issues management

and public affairs. Corporations do not systematically collect data on these different types of

international philanthropy, so the full scope of

giving is not recorded. One survey found that

more than 95 percent of corporations support

employee volunteer efforts, yet only 9 percent

reported tracking these efforts globally.38

It may be that not even a small portion of the total

contributions by corporations has been measured. Because such spending is relatively new

and because of different tax, management, and

accounting systems overseas, this spending is difficult to track. 

The two latest, most complete surveys, for 1999

and 2000, cover small samples—with just over

200 companies in each. In the 1999 survey, covering 209 U.S. companies, 83 reported making

international contributions totaling $2 billion.39

The 2000 survey, covering 207 companies, reported international contributions totaling $2.8

billion.40 These amounts include cash and

noncash giving directly by the corporations and

by their foundations. 

Given the history of corporate philanthropy in

America, the lack of rigor in tracking international

contributions is not surprising. Until 1936 it was

illegal for a company to give away shareholder

assets for anything other than company interests.

In 1936 the U.S. Internal Revenue Service started

allowing companies to deduct 5 percent of pretax

earnings from taxable income. But the real shift

in corporate giving came in 1953, when a New

Jersey court set a precedent later followed by all

U.S. states. The court determined that it was legal

for companies to give money for reasons not

directly related to their business. That decision

paved the way for corporate giving to grow from

$30 million in 1936 to $11 billion in 2000. In 1954

General Electric created the country’s first matching gift program, which has since provided

schools with more than $2 billion. Today more

than 6,000 companies and corporate foundations

match employee contributions to nonprofit

organizations.41

New roles and relationships. International philanthropy by U.S. corporations is evolving, reflecting

new relationships with nonprofit organizations,

multilateral institutions, and government agencies. Calling the 21st century the “age of

alliances,” one author predicts that “collaborative

relationships [between corporations and nonprofit organizations] will grow in frequency and

strategic importance. Collaborative relationships

will increasingly migrate from the traditionally

philanthropic, characterized by benevolent donor

and grateful recipient, toward deeper, strategic

alliances.”42 Many such alliances have already

emerged.

The fastest growth in such partnerships has

occurred in pharmaceuticals, the most philanthropic U.S. industry. Between 1998 and 2001

U.S. pharmaceutical companies gave developing

countries nearly $2 billion in financial assistance

and free drugs.43 These companies are working

with UN agencies to provide products free of

charge or at highly subsidized prices. Efforts

address tropical diseases such as river blindness,

filariasis, and leishmaniasis as well as modern

plagues such as HIV/AIDS, tuberculosis, and

malaria. Pharmaceutical companies are increasingly working together to provide overseas

assistance.

U.S. drug companies are also funding domestic

research centers that work with foreign institutions to fight disease and develop research and

medical skills. In 2000 Bristol-Myers Squibb

introduced the Secure the Future program, providing $115 million for training and infrastructure

to treat HIV/AIDS in South Africa. Pfizer provides free antifungal medicines to developing

THE FULL MEASURE OF

FOREIGN AID

138

INTERNATIONAL GIVING

BY CORPORATIONS HAS

EXPANDED TO INCLUDE

CASH AND NONCASH

GIVING, CAUSE-RELATED

MARKETING, AND

EMPLOYEE VOLUNTEER

PROGRAMS
countries most in need, and in 2001 it created the

Academic Alliance for AIDS Care and Prevention

in Africa—financing a $10 million partnership

between the University of Utah Medical School

and Makerere University in Uganda. The alliance

is training African doctors and other health

workers to treat HIV/AIDS and opportunistic

infections.44

In 2000 Merck and American Home Products

joined the Global Alliance for Vaccines and

Immunization—created by the Bill and Melinda

Gates Foundation and supported by USAID—

contributing $140 million in vaccines. Merck has

provided $50 million to Botswana for HIV/AIDS

prevention and treatment efforts. Eli Lilly, one of

the world’s largest donors of pharmaceuticals, has

provided low-cost drugs to the World Health

Organization to treat multi-drug-resistant tuberculosis.45 Pharmaceutical companies are working

more and more closely with one another and with

international donor organizations to finance projects for improving health clinics and training

doctors and to provide donated or deeply discounted medicines to poor people in developing

countries. Their activities are increasingly similar

to those of development agencies.

Strategic philanthropy. U.S. corporations are also

strengthening the links between their giving and

their markets and employees. This strategic philanthropy often takes the form of cause-related

marketing, such as the alliance between Starbucks

and CARE launched in 1996.46 Starbucks began

selling a sampler of coffee beans grown in three

countries where CARE operated, donating $2

from each sale to CARE. Over time Starbucks

and CARE employees began working together,

and Starbucks donated larger amounts. By 1998

Starbucks was CARE’s largest donor, with contributions of $6.2 million.47

More companies are trying to be good citizens. To

carry out these new corporate roles, they have

created management positions in issues management, global social policy, international public

affairs, and global ethics and transparency.

Decentralization and allocation shifts. Most international giving by U.S. corporations—both cash

and noncash—originates at company headquarters. But decentralization is on the rise, with local

and regional business units and foundations

making their own decisions on local giving. In

2000 cash contributions exceeded noncash contributions in international corporate giving. And

cash contributions increasingly come from business units outside the United States, reflecting a

shift in the traditional pattern of corporate

giving.48

Although information on international giving by

U.S. corporations is rarely broken down by sector,

data from 1997 indicate that health and human

services received the largest share, followed by

education, community economic development,

and disaster relief. Decisions about where to give

were based almost entirely on where employees

and plants were located. After that a project’s relationship to the company’s objectives was considered important, and in last place was the likelihood of a project’s enhancing the company’s

market share.49

Amounts. The two most comprehensive surveys

on U.S. corporate international giving (including

cash and noncash gifts and foundation contributions) reported giving of $2.0 billion in 1999 and

$2.8 billion in 2000. But these totals are underestimates, since they include only a sample of U.S.

companies. In addition, much of international

corporate giving—matching gifts, cause-related

marketing, local cash donations, and the value of

volunteers’ time—is simply not tracked and

recorded. 

After pharmaceutical companies, the largest

sources of foreign contributions (cash 

and noncash) by U.S. industries are manufacturers of computer and office equipment;

telecommunications companies; producers of

food, beverage, and tobacco products; and companies engaged in retail and wholesale trade. 

Future developments. International giving by U.S.

corporations should be better documented. As

the global recession recedes and developing countries become more attractive for trade and investment, corporate philanthropy will likely continue

to grow. But it is unclear which type of corporate

philanthropy—foundation grants, direct cash or

noncash grants, cause-related marketing, employee gift matching programs, or volunteerism—will

be most important. 

Though large U.S. corporations are developing

major giving programs in close partnerships with

donors, they will resist becoming the sole support

for failing economies and corrupt governments.

Their philanthropy will likely be targeted to areas

THE FULL MEASURE OF

FOREIGN AID

139

STRATEGIC

PHILANTHROPY OFTEN

TAKES THE FORM OF

CAUSE-RELATED

MARKETING
that contain or support their markets, employees,

and public image interests. U.S. corporations

have new roles to play in development, including

one of the most important: helping affiliates and

other local businesses engage in philanthropy.

Some analysts question whether corporate philanthropy can be replicated in different cultures

and financial systems. Helping developing countries establish the legal framework—that is, the

incentives—to donate and the company procedures to do it are worthwhile objectives for corporations and donors.

The latest survey on international corporate contributions projects growth of only 1 percent a

year, despite the 40 percent increase from 1999 to

2000.50 Based on a conservative projection of 5

percent growth in corporate giving, such contributions could reach $3.6 billion in 2005 and $4.6

billion in 2010—estimates that could increase significantly with better tracking and reporting.

PRIVATE AND VOLUNTARY ORGANIZATIONS

Until the 1970s most U.S. PVOs working overseas were engaged in relief and humanitarian

efforts. Catholic Relief Services, CARE, World

Vision, and Save the Children have been among

the largest recipients of USAID funding for these

efforts. Since then PVOS have become increasingly active in development work such as community development, microlending, and agricultural cooperatives (box 6.4). In addition, during

the 1990s a growing number of PVOs involved in

building democracy and entrepreneurship registered with USAID. 

The definition of a PVO and the benefits PVOs

receive are important in understanding USAID’s

development assistance program. A PVO is a registered nonprofit organization that receives part of

its annual revenue from the private sector, receives

voluntary contributions of money, time, or in-kind

support from the general public, works or wants to

work overseas, is financially viable (with overhead

accounting for no more than 40 percent of expenses), has a board of directors, fits within USAID priorities, and does not have alleged terrorist ties.

Universities, colleges, accredited degree-granting

education institutions, private foundations, hospitals, organizations engaged exclusively in research

or scientific activities, churches, and organizations

engaged exclusively in religious activities are not

considered PVOs for this purpose.

Sources of financing and types of activities.

Registering with USAID offers PVOs considerable benefits. PVOs can receive money from all

USAID accounts, including those for development assistance, economic security, and disaster

relief. USAID has played a large role in developing the capacity of U.S. PVOs and supporting

both U.S. and international PVOs. In addition,

THE FULL MEASURE OF

FOREIGN AID

140

INTERNATIONAL

CORPORATE

CONTRIBUTIONS COULD

REACH $3.6 BILLION IN

2005 AND $4.6 BILLION

IN 2010 

Aided by a small grant from USAID, private

hospitals and individuals created Poland’s first

private voluntary board for a public institution.

The collapse of communism in Poland had decimated the nation’s already meager public hospital budgets. The Litewska Children’s

Hospital, one of Warsaw’s oldest pediatric

teaching hospitals, no longer had hot water.

Doctors had to carry patients from floor to floor

because the elevators were often out of service.

Poland’s new decentralization was forcing hospital managers to find funding and answer to

their communities and patients rather than to

central planners. 

The voluntary hospital board, called Friends of

Litewska, was modeled on that of the New

Rochelle Hospital and Medical Center in New

York. Most of the Poles involved believed that no

one would volunteer, but within six months 60

volunteers were at work. Employees of U.S. and

Polish corporations donated their time as board

members, airlines and hotels donated tickets

and rooms to support exchanges between the

two hospitals, and U.S. and Polish legal, accounting, and advertising firms donated services. 

In just one year—less than half the time it takes

to design, write, and finalize a typical USAID

government contract—Friends of Litewska

obtained commitments of $1.5 million for renovating the hospital. Their volunteer program

was up and running. A nurse training program

involving five U.S. medical institutions jumped

in to donate training. USAID spending for the

program lasted only a year and a half, but the

program is thriving thanks to private support.

Friends of Litewska, headed by many of the

most respected private leaders in Warsaw, has

become a permanent partner of the hospital.

Source: Raymond 1996b.

Box 6.4. A private voluntary board for the Litewska Children’s Hospital
the U.S. Congress has fully supported the integration of PVOs with international development

efforts. In the late 1980s legislation mandated that

13.5 percent of USAID funding go to PVOs, with

a target of 16 percent. Though that legislation is

no longer in effect, PVOs continue to receive

about a third of USAID’s development assistance

budget. 

The number of USAID-registered PVOs has

grown considerably—from 138 in 1979 to 436 in

2000—though in recent years this number

appears to have stabilized. In the 1990s U.S.

PVOs experienced significant growth in public

and private funding of their international programs. Private funding of international programs

has always been higher than public, jumping

from $1.7 billion in 1989 to $3.3 billion in 2000.

Data on private funding are estimated from

USAID financial statistics for USAID-registered

PVOs in 2000. Although several surveys have

tried to gather these data, they have not captured

the full amount.51 With the time of international

U.S. volunteers—valued at an estimated $3.3

billion—included, PVOs provided developing

countries with $6.6 billion in goods and services

in 2000.52

In 2000 the top 20 USAID-registered PVOs

received an average of $43 million in grants and

contracts—for a total of about $854 million, or

two-thirds of PVO funding by USAID. Within

this group, some older PVOs—CARE, Catholic

Relief Services, World Vision, Save the

Children—receive significant private contributions (for both domestic and international efforts),

ranging from $60 million to almost $380 million.

Others also meet the requirement that 20 percent

of overseas expenses come from private sources.

But more than 30 percent meet it only through

exemptions. 

USAID-registered PVOs work in 159 countries in

nearly every area of development. Most are

involved in health, nutrition, and population projects, with a focus on family planning and child survival. The priority given by USAID to funding

family planning and child survival has increased 

the number of PVOs administering such programs. The top 20 U.S. PVO recipients of USAID

funding now include the Academy for Educational

Development, Pathfinder International, Family

Health International, Population Services

International, Management Sciences for Health,

and Engender Health. Other PVO activities

include community development, food security,

food aid, and disaster relief.

Advantages of private and voluntary organizations.

The advantages of traditional PVOs have long

been clear. Most important, they foster pluralism,

volunteerism, and compassion—values that have

characterized the United States throughout its

history. Markets create wealth and prosperity. But

private philanthropy—from communities, charities, religious organizations, and families—is

required to help the needy, complementing government-provided social safety nets. U.S.

President George W. Bush expressed this view in

his inaugural address, when he said that “compassion is the work of a nation, not just a government.”53 PVOs are unique private sources of

money and time.

U.S. PVOs also have advantages in performing

development work abroad, including their ability

to operate in politically sensitive situations, to

conduct programs often faster and more efficiently than contractors or government employees, and to work with governments and communities with which they have established

relationships. 

Challenges for private and voluntary organizations. U.S. PVOs must work to increase volunteerism and private contributions to their overseas

programs, both important factors in the long-term

effectiveness and sustainability of their projects.

The main challenge for PVOs today is to develop

sustainable counterpart institutions that can eventually assume their tasks. Widely shared economic growth will reduce the need for assistance from

outside donors to support development and meet

basic human needs. As countries create wealth

and develop private institutions, their social

welfare needs are best served by their own government systems and private philanthropic organizations. Where social safety nets are required,

local community foundations and indigenous

PVOs can help disadvantaged people. U.S. PVOs

must view their role as a “bridge toward development, not a permanent fixture.”54 The benefits

of indigenous PVOs were well articulated by a

USAID-funded study written more than 20 years

ago.55 The study argued that local PVOs generally deliver services at lower cost, can respond

faster, are more likely to follow through on completed projects, and are more likely to gain cooperation from local governments and support from

beneficiaries. 

THE FULL MEASURE OF

FOREIGN AID

141

PVOS FOSTER

PLURALISM,

VOLUNTEERISM, AND

COMPASSION—VALUES

THAT HAVE

CHARACTERIZED THE

UNITED STATES

THROUGHOUT HISTORY
U.S. PVOs have worked with and transferred

technology and values to thousands of local organizations in developing countries. But there has

been no concerted effort to nurture philanthropy

and volunteerism in these countries, to enable

these organizations to start taking care of themselves. Such change will not happen overnight,

and it will not happen in countries with pervasive

institutional corruption. Still, the United States

should do more to encourage the long-term development of local PVOs.

Future developments. In the short term private

international giving by U.S. PVOs could follow a

path similar to that of foundation giving, reflecting lower contributions resulting from the global

recession and concerns about terrorism. But a

survey of Americans who donated to charities

involved in responses to the September 11 attacks

found that three-quarters planned to maintain or

increase their giving to other charities.56 Whether

this sentiment will endure is unclear. People’s

charitable contributions are strongly influenced

by their immediate financial concerns, so

Americans could cut back on giving now and in

the immediate future. The same survey found that

if the economy worsens, one in five of these

Americans would donate less—and the same

number would stop giving altogether. Volunteer

time will suffer similar effects if people are

focused on earning more income or searching for

jobs. 

But over the medium and long term private

giving for the international activities of U.S. PVOs

should continue to increase. Between 1995 and

2000 such giving grew a little over 10 percent a

year, a solid increase that likely reflected the

strong U.S. economy. Assuming roughly the same

annual growth, these private contributions would

rise to $5.4 billion in 2005 and $6.8 billion in

2010. Adding the $3.3 billion in international volunteer time would raise total international assistance from PVOs to $8.7 billion in 2005 and

$10.1 billion in 2010. 

COLLEGES AND UNIVERSITIES

U.S. colleges and universities educate a huge

number of students from developing countries. In

1955 these institutions had 34,000 foreign students, accounting for 6.4 percent of enrollment.

By the 2000/01 school year there were more than

500,000 foreign students, representing 3.9 percent

of enrollment.57 Because private U.S. funding for

foreign students has not been calculated, this

report uses a methodology based on the share of

foreign students funded by U.S. colleges and universities multiplied by the average cost of a college

education.58 Such funding has skyrocketed in

recent years, from $83 million in 1980/81 to $1.3

billion in 2000/01 (figure 6.3). The share of

foreign students receiving scholarships has also

increased, to 20 percent.

It is not known what effect the recent downturn

in the U.S. economy has had on such scholarships. Nor is it known whether increasing scrutiny of foreign students for possible terrorist 

ties will reduce the number of students coming 

to the United States. In the wake of the

September 11 attacks there has been a sharp

upswing in applications for citizenship among

U.S. immigrants, suggesting that foreigners want

to secure their rights as Americans rather than

return to their homelands. The same phenomenon may be occurring among foreign students

seeking to secure the benefits of studying in the 

United States.

THE FULL MEASURE OF

FOREIGN AID

142

PRIVATE GIVING FOR THE

INTERNATIONAL

ACTIVITIES OF U.S.

PVOS SHOULD RISE TO

$5.4 BILLION IN 2005

AND $6.8 BILLION IN

2010

U.S. colleges and universities—

educators to the world

Source: Institute of International Education 2002; 

U.S. Department of Education 2000.

1.5

1.0

0.5

0

20

15

10

5

0

Private scholarships for foreign students 

from U.S. colleges and universities 

(US$ billions)

Share of foreign students 

receiving private scholarships (%)

1980/

1981

1984/

1985

1988/

1989

1995/

1996

1998/

1999

1999/

2000

2000/

2001

1980/

1981

1984/

1985

1988/

1989

1995/

1996

1998/

1999

1999/

2000

2000/

2001

FIGURE 6.3

Fig. 6.3

Private scholarships for foreign

students from U.S. colleges and

universities (US$ billions)

1980 0.08

1984 0.18

1988 0.38

1995 0.66

1998 0.9

1999 1.01

2000 1.34

Share of foreign students

receiving private scholarships

(%)

1980 8.6

1984 11.6

1988 17.6

1995 16.5

1998 18.3

1999 18.9

2000 19.8
Over the medium and long term, as globalization

continues and foreign investment increases in

developing countries, the trends of the past 20

years should continue. Foreign students will

come to the United States for its high-quality

higher education, and U.S. colleges and universities will award them scholarships. But U.S. government funding of foreign students has fallen,

and it is unknown whether this trend will continue given the renewed interest in promoting

diplomacy and understanding of U.S. culture

since September 11. Between 1996 and 2001 U.S.

universities and colleges increased their scholarships for foreign students by almost half. Even if

future funding grows at just three-quarters that

rate, scholarships for foreign students would

reach $1.7 billion in 2005 and $2.4 billion in

2010. 

RELIGIOUS CONGREGATIONS

There are 354,000 religious congregations in the

United States, accounting for nearly a quarter of

nonprofit organizations. As noted, churches and

other religious congregations were the earliest

private U.S. sources of international giving. More

than 300 years ago, before the creation of the

United States, Cotton Mather, a New England

religious and civic leader, called for Americans to

engage in “a perpetual endeavor to do good in the

world.”59 Funding initially went to missionaries

and their religious activities overseas. 

But international giving has changed, and the

nonsecular activities of religious congregations are

increasing, focusing on international programs for

disaster relief, health care, agriculture, and education. Three-quarters of religious congregations

consider international activities one of their top

three program areas, along with health care and

human services.60 Churches, synagogues, and

mosques give money overseas, often as small

grants, that help pay school tuitions, set up nutrition programs, provide medicines, or pay for

vocational training in the world’s least developed

countries. 

Many congregations channel their donations

through local foundations, disaster relief centers,

global ministries, and women’s societies.

Congregations also contribute to other PVOs and

international organizations that conduct overseas

programs. And in some cases they give directly to

foreign churches, hospitals, or schools.

Amounts. Private giving and volunteering are

expected in religious organizations. The revenues

of such organizations amounted to $81.2 billion

in 1996, with individual contributions accounting

for more than three-quarters.61 Households

directed 60 percent of all their charitable contributions to religious organizations.62

It is difficult to obtain data on international giving

by U.S. religious organizations because statistics

are not broken down by international purpose,

implementing organization, or religious or nonreligious purpose. Moreover, religious organizations are not required to report their contributions to the U.S. Internal Revenue Service. An

early estimate put international contributions by

three U.S. religious groups—Protestant, Jewish,

and Catholic—at a total of nearly $4 billion in

1919–60.63

A more recent survey took the operating expenditures and volunteer time of all congregations

and prorated them among major activities other

than religion.64 This exercise estimated that $480

million was contributed to international activities

in 1992. But while the survey covered a representative sample, the data captured only salaries

and volunteer time, ignoring much larger expenditures for relief and development programs and

in-kind donations. Thus $480 million is a considerable underestimate—a fact supported by estimates of international activities provided by some

religious organizations. 

While much more research is needed in this area,

a rough order of magnitude can be estimated.

One survey reported international giving by the

Catholic Church and by funding agencies it

sponsors as just under $500 million in 1999.65

Another survey has compiled budgets for U.S.

overseas Protestant ministries. These budgets

totaled $2.9 billion in 1999 and included relief

and development work such as medical care, literacy training, and vocational training.66 Thus an

overall estimate for religious international assistance is $3.4 billion. While this estimate does not

cover exclusively secular activities, it is the most

comprehensive assessment of church spending

overseas. But this figure is still likely to be an

underestimate because it does not include the

ongoing collections, projects, and cash and

noncash collections in individual churches

throughout the year. Nor is there any estimate of

the value of volunteers’ time, which is considerable in religious congregations.

THE FULL MEASURE OF

FOREIGN AID

143

SCHOLARSHIPS FOR

FOREIGN STUDENTS

COULD REACH $1.7

BILLION IN 2005 AND

$2.4 BILLION IN 2010
Future developments. Along with corporate

giving, international donations by religious organizations are probably the most underestimated

type of private U.S. giving. Assuming 4 percent

annual growth from the current figure of $3.4

billion, religious giving would be $4 billion in

2005 and could hit $4.8 billion in 2010. (The

assumption of 4 percent growth is based on the

average annual growth of religious giving in the

United States.)67 Although religious giving may

suffer from the same short-term economic trends

affecting foundation and PVO giving, it should

not be adversely affected over the medium and

long term. 

The strengthened sense of community and solidarity in the United States in the wake of the

September 11 attacks will likely continue in

congregations as it has in the general public.

Calls for international volunteerism and engagement with other countries in support of U.S.

values and institutions—like those made by

President Bush in his January 2002 State of the

Union Address—will likely resonate in congregations. Giving by religious organizations offers

advantages similar to those of giving by PVOs.

Funds are usually delivered by PVOs or by U.S.

congregation members, overseas missionaries, or

members of sister congregations in developing

countries. Thus the programs are likely to be

more efficient and to reflect greater knowledge

of community needs. Accountability is also

better, because the administrators of the funds

are more likely to live in the recipient community or country.

REMITTANCES BY INDIVIDUALS TO

DEVELOPING COUNTRIES

The money sent home by U.S. immigrants

accounts for 10 percent of GDP in six Latin

American countries—and for 13 percent in El

Salvador.68 Around the world, remittances from

immigrant workers more than doubled in the past

decade, from $21 billion in 1989 to $50 billion in

1999 (these figures exclude Russia, for which data

were not available).69 Latin America received the

most ($14.5 billion), followed by India ($11.5

billion), the Middle East ($10.4 billion), and

Eastern Europe ($6.2 billion). The amount sent to

Latin America exceeded the region’s financing

from USAID and all multilateral lending agencies.

Despite their significance, such remittances are a

fairly new topic in studies of globalization and

international development, having received far

less attention than trade and investment.

The spread of communications technology has

made it easier to send dollars and gifts back home.

About 44 percent of U.S. immigrant households

own a computer, and affordable wire transfers

and efficient online services are replacing oncecostly money transfers, duties, customs, and

mailing costs. Vilma Iraheta, born in El Salvador

and now living in Maryland, is an example of the

growing number of immigrants sending daily

necessities and even birthday gifts to relatives

abroad. Vilma logged on to elsalvadorpizza.com

to place an order, and the next day a Pizza Hut

1,900 miles away delivered two extra-large pizzas

to her father for his birthday. The local Pizza Hut

business is booming, with $10,000 a month in

sales, three-quarters of that from the United

States. Orders also come in from Salvadoran

immigrants as far away as Australia and Sweden.70

Trends. The U.S. Department of Commerce’s

Bureau of Economic Analysis began collecting

data on remittances from U.S. immigrants in

1986.71 These data cover cash payments and the

value of goods sent to foreign countries from

people in the United States.72 Remittances are

highest in immigrants’ early years of living in the

United States and drop sharply thereafter.

Moreover, single immigrants remit more than

immigrants with family in the United States.

Since data on remittances from U.S. immigrants

to developing countries were first collected, these

remittances have grown impressively—quintupling from $3.6 billion in 1981 to $18.0 billion in

2000 (figure 6.4). The bulk of giving went to Latin

America, followed by Asia, the former Soviet

Union, and Africa.

These remittances have enormous development

implications. Although much more needs to be

learned about how this money is spent and what

impact it has in thousands of urban neighborhoods and rural towns throughout the developing

world, it is clear that this massive private giving—

involving little or no overhead and directly filling

people’s basic needs—is changing the landscape of

development and donor agencies. As one officer of

the Inter-American Foundation said, “the term

‘remittance’ needs to be broadened to include the

full range of resources sent home. Immigrants are

a source of capital, knowledge, experience and

ideas, which they can funnel to the community.”73

THE FULL MEASURE OF

FOREIGN AID

144

RELIGIOUS GIVING

COULD BE $4 BILLION IN

2005 AND $4.8 BILLION

IN 2010
Remittances as international development. Personal

remittances could affect some unexpected areas,

possibly providing an antidote to the “brain drain”

from developing countries. The Internet will fuel

online buying and benefit local businesses: a

Central American executive with the supermarket

chain Paiz set up a Website, misuper.com, for local

shoppers; he was surprised to see that many orders

were coming from emigrants sending their relatives

gift certificates, shampoo, and cereal.74

A few experts on remittances worry that direct

transfers of money will promote dependency rather

than stimulating the local economy. Remittances

may be spent on immediate household needs and

consumer goods rather than go to savings or investment.75 Others argue that remittances have a strong

multiplier effect through consumption that stimulates the supply chain and GDP growth.76

Private giving by immigrants fills basic needs for

poor people in developing countries. Poverty is

much lower among households that have been

left by emigrants.77 And while some remittances

may be spent on entertainment or activities

without development benefits, funds are also

used for development purposes and for productive infrastructure such as roads, clinics, schools,

and water pumps.78

Lower fees for transferring money would be a

major boon to remittances. In some cases as

much as 25 percent of a money transfer goes to

fees. Working with the Haitian Development

Bank, the Inter-American Foundation is helping

to create a new remittance transfer system that

generates development capital from transfer fees.

Besides offering prospects for channeling remittances into economic development, this system

would bypass government customs officials and

thus might reduce corruption. 

The potential for coordinating and leveraging

remittances remains untapped. USAID needs to

gather far more information on this vast resource

and work with it more productively. As long as

the United States absorbs people from developing countries, the benefits of their work here will

be felt in their native countries. Even assuming

modest growth of 5 percent a year, personal

remittances could rise to $23 billion in 2005 and

to almost $30 billion by 2010. 

Today personal remittances to developing countries are almost twice U.S. official development

assistance. By 2010, even with the projected

increases in U.S. official development assistance

through the Millennium Challenge Account—a

new initiative by President Bush that will encourage economic growth and political openness in

developing countries—personal remittances will

still be twice U.S. government aid. This eclipsing

of foreign aid calls for new thinking by USAID on

partners in development aid.

TAKING THE FULL MEASURE OF U.S.

INTERNATIONAL ASSISTANCE

Among international donors, the United States

gives the largest amount of official aid to developing countries, contributing more than 20

percent of total DAC assistance. As a percentage

of gross national income, however, this aid is the

smallest among government foreign assistance

programs. But as this chapter has made clear, the

true measure of U.S. generosity and sustainable

development is not just government aid—it is

total U.S. international resource flows, including

private capital and philanthropy.

When all these private flows are added to official

development assistance, the United States moves

into first place for total resource flows. Table 6.4

summarizes and compares U.S. government and

private international assistance for 2000, 2005,

and 2010. The table also includes estimates for the

Millennium Challenge Account, projected to

increase U.S. government aid by $5 billion a year

in 2006. For private international giving, poorly

documented and therefore underestimated in all

categories, the table provides a range from the

THE FULL MEASURE OF

FOREIGN AID

145

PERSONAL REMITTANCES

COULD RISE TO $23

BILLION IN 2005 AND TO

ALMOST $30 BILLION BY

2010

Sending billions of dollars back home

Source: U.S. Department of Commerce, Bureau of Economic 

Analysis; USAID.

20

10

15

0

5

1981 1985 1990 1995 2000

Individual remittances from the United States

to developing countries (US$ billions)

FIGURE 6.4

Fig. 6.4

1981 3.663

1982 4.009

1983 4.288

1984 4.671

1985 4.919

1986 5.682

1987 6.145

1988 6.8

1989 7.529

1990 7.975

1991 8.598

1992 8.965

1993 9.695

1994 10.4

1995 11.254

1996 12.217

1997 13.425

1998 14.716

1999 16.495

2000 18.111
lowest estimates supported by research to reasonable higher estimates suggested by known

gaps in research. This range of numbers provides

a much-needed starting point for estimating

private international giving. 

The table provides a different perspective on the

common criticism that the United States is not

generous in its overseas contributions. Although

official development assistance is a smaller percentage of gross national income in the United

States than in other countries, it is also a smaller

percentage of total giving. According to the DAC

standard of 0.7 percent of gross national income,

total U.S. international giving in 2000 should have

been $69.5 billion. The actual total of official

development assistance and private giving was

$44.5 billion, or 0.45 percent of U.S. gross national income—well within the average range for

DAC donors.

When other official government and private assistance are added to this $44.5 billion, the United

States moves far ahead in the total amount of

resources provided to developing countries. So

Americans have not given up on foreign aid. They

have simply found new channels through which

they can express their compassion for less fortunate people abroad. Official government aid has

been displaced by a rising tide of private giving

with significantly lower transaction costs, more

client-directed services, and more willingness to

cede ownership to recipients. 

The recognition by the U.S. government of nonofficial development assistance and its importance to

economic and political development has an

enabling quality for global development assistance. It could encourage other donors to improve

their national climate for private giving, such as

through laws allowing tax-deductible contributions. Governments could work to ease the flow of

immigrants’ remittances to their hometowns

abroad and could study new ways of working at

the grassroots level with workers in these towns,

supported by immigrants. Citizens of industrial

countries everywhere no longer expect their governments to do it all. They want to participate in

giving as volunteers—and in ways that ensure

accountability and transparency in their giving.

From America’s earliest assistance to international refugees in Santo Domingo (in today’s

Dominican Republic) and food shipments for

famine-struck Ireland, to the work of the

Rockefeller and Ford foundations, to today’s

THE FULL MEASURE OF

FOREIGN AID

146

CITIZENS OF INDUSTRIAL

COUNTRIES EVERYWHERE

WANT TO PARTICIPATE IN

GIVING AS VOLUNTEERS

—AND IN WAYS

THAT ENSURE

ACCOUNTABILITY AND

TRANSPARENCY IN THEIR

GIVING

The full measure of international assistance

n.a. Not applicable.

a. Provisional. The Millennium Challenge Account is set to increase U.S. official development assistance by $5 billion a year in 2006 and thereafter.

b. Including volunteer time.

Source: U.S. government and private sources.

Estimated U.S. government and private international assistance to developing countries (US$ billions)

U.S. official development assistance (ODA)

All other U.S. government assistance

Millennium Challenge Account

U.S. private assistance

Foundations

Corporations

Private and voluntary organizationsb

Universities and colleges

Religious congregations

Individual remittances

Total U.S. international assistance

U.S. ODA as % of total

Other U.S. government as % of total

Private as % of total

43.7

2.5

7.7

7.0

1.5

5.0

20.0

70.3

4.5

12.8

11.0

3.0

7.0

32.0

55.5

3.5

10.0

9.0

2.1

5.9

25.0

2000

9.9

12.7

n.a.

33.6

1.5

2.8

6.6

1.3

3.4

18.0

56.2

18

22

60

2005

10.4

13.3

3.3

43.5

2.5

3.6

8.7

1.7

4.0

23.0

70.5

19

19

62

2010

10.9

14.0

5.0

55.2

3.1

4.6

10.1

2.4

4.8

30.0

84.9

19

16

65

High

estimates

High

estimates

High

estimates

Low

estimates

Low

estimates

Low

estimates

TABLE 6.4

a
“mega donors”—Ted Turner and Bill and

Melinda Gates—Americans have consistently

given time, money, and in-kind contributions to

international causes, preferring to channel these

donations through private organizations. This

vast assistance should be better documented. As

the United States defines its assistance role in the

21st century, it must understand and work more

closely with providers of private resources. The

future calls for a new approach that recognizes

and incorporates private giving, focusing on grassroots support, local ownership, sustainability,

accountability, and—not least—passion and

commitment. 

NOTES

1. USAID 1989, p. 18.

2. OECD data compiled by William McCormick, USAID,

March 2002.

3. Goldberg 2001.

4. Hay 2000.

5. IFIAC 2000.

6. Easterly 2001.

7. The base has recently been changed to gross national

income, or GNI, but this does not appear to affect the data in

any significant way.

8. Johnson 2000.

9. Gardner 2000.

10. WHO 2001.

11. OECD 1999.

12. OECD 2001, p. 71.

13. OECD 2001, p. 76.

14. OECD 2002.

15. U.S. Department of Defense 2002.

16. U.S. Department of Defense 2002.

17. Raymond 2001. 

18. OECD 2001.

19. OECD 2002. 

20. Independent Sector 2002a. 

21. OECD 2002.

22. Foundation Center 2000.

23. Foundation Center 2000, p. xiii.

24. AARFC Trust for Philanthropy 2001.

25. Foundation Center 2000, p. xx.

26. Foundation Center 2000.

27. Foundation Center 2000, p. 18.

28. Foundation Center 2000, p. 36.

29. Foundation Center 2000, p. 29.

30. Foundation Center 2000.

31. Foundation Center 2000. Based on results from the two

surveys used in Foundation Center (2000), the 5 percent of total

foundation giving from corporate foundations equaled an estimated $80 million in 1998. A higher estimate of $260 million

comes from AAFRC Trust for Philanthropy (2001). Neither is

used in this analysis. Instead, a figure combining all corporate

contributions (regular and through foundations) is used later to

reflect this private giving.

32. Foundation Center 2000, p. 30.

33. Foundation Center 2000, p. 3.

34. Greene 2001.

35. Greene 2001.

36. Foundation Center 2000, p. 4.

37. Foundation Center 2000.

38. Kao 2001, p. 32.

39. Tillman 2000.

40. Kao 2001.

41. Muirhead 1999.

42. Austin 2000.

43. PhRMA 2001.

44. PhRMA 2001.

45. PhRMA 2001.

46. Raymond 1996a.

47. Austin 2000.

48. Tillman 2000, p. 29.

49. Muirhead 1999, p. 30.

50. Kao 2001.

51. The $3.3 billion estimate, covering private support and

revenue that U.S. PVOs spend overseas, was calculated using a

methodology developed by a USAID contractor, Dimensions

International. First, all USAID grants to USAID-registered PVOs

are subtracted from their total overseas expenses, under the

assumption that all USAID grants are for international purposes.

The remainder is assumed to be the amount of overseas expenses

funded from private and other non-USAID sources. The percentage of these expenses funded by private sources is then estimated

to be the same as the percentage of private support and revenue

in all non-USAID funding. This percentage is multiplied by the

remainder of assumed non-USAID overseas expenses to get the

estimate of private support and revenue. The advantage of using

USAID data is that they are collected from USAID financial

systems, which are quite complete. While the analysis is limited

to the PVOs registered with USAID, these organizations probably make up most of the PVOs working overseas. AAFRC Trust

for Philanthropy (2001) provides a lower estimate, $2.7 billion,

recognizing that its number is an underestimate.

52. Independent Sector 2001b, p. 15. 

53. Bush 2001.

54. USAID 1989, p. 68.

55. Bolling and Smith 1982. 

56. Independent Sector 2001a.

57. Institute of International Education 2002. The number of

foreign students is somewhat underestimated because sources of

private funding for foreign students other than colleges and universities—such as employers and NGOs—are not included in

this total. But since some 20 percent of all foreign students are

from Europe and North America, the number provides a rough

order of magnitude for private funding for students from developing countries—at well over $1 billion a year. 

58. College Board 2001; U.S. Department of Education 2000. 

59. USAID 1989, p. 14.

60. Independent Sector 2000, p. 6.

61. Independent Sector 2000, p. 2.

62. Independent Sector 2002b, p. 13. 

63. Curti 1982, p. 39.

64. Independent Sector 1992. 

65. Robinson 2000. 

66. Siewert and Welliver 2001.

67. AAFRC Trust for Philanthropy 2001, p. 89.

68. Bate 2001.

69. IMF 1999.

70. Sheridan 2001.

71. McCormick 2002. McCormick developed the method for

the complex estimation of remittances. The rigorous procedures,

worked on for many years, continue to be refined as better data

are reported to the Bureau of Economic Analysis by institutions

and individuals.

72. Data are collected from decennial censuses of 1980 and

1990 that identify population totals, family totals, average family

incomes by country of origin, and duration of U.S. residency.

Yearly flows are based on data from the U.S. Immigration and

Naturalization Service and the U.S. Census Bureau’s Current

Population Survey. The information is combined with remittance

THE FULL MEASURE OF

FOREIGN AID

147
and income relationships of the foreign-born population from a

sample survey by the U.S. Immigration and Naturalization

Service in 1987 and a follow-up survey in 1996. Independent

checks on this data are obtained from U.S. banks that issue wire

transfers, traveler’s checks, bank notes, and money orders. One

estimate is that some 80 percent of transfers move through banks,

with the rest taking the form of cash carried or mailed abroad.

73. Breslin 2001. 

74. Sheridan 2001.

75. Alarcon 2001.

76. Martin 2001.

77. Serrano 2001.

78. Alarcon 2001.

BACKGROUND PAPER

Adelman, Carol. 2002. “International Development Assistance—

Taking the Full Measure into the Future.”

Available at www.usaid.gov/NatsiosReport/backgroundpapers

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THE FULL MEASURE OF

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For more information, contact

U.S. Agency for International Development

Washington, D.C. 20523-1000

Telephone: 202-712-4810

Internet: www.usaid.gov

PD-ABW-900

Foreign assistance will be a key instrument of foreign policy in the coming decades. 

This report, commissioned by USAID Administrator Andrew S. Natsios, makes that 

argument while focusing foreign assistance on four dominant themes—political 

leadership, effective policy, investment in people, and commitment to partnership. 

• Unless a country’s leaders make smart choices for national priorities and show 

political will to support meaningful reform, development—and development 

assistance—cannot succeed. • Unless sensible policies are put into place to defend 

good governance and the rule of law, development cannot be sustained. Unless 

countries invest in health and education, their people cannot compete in today’s 

global marketplace, and development cannot even begin. • Unless everyone in the 

development arena works better with partners—both traditional and new, public and 

private—many development opportunities will be wasted. • Too much is at stake. 

Political leadership, effective policy, investment in people, and commitment to 

partnership must guide the future of foreign assistance—all in the national interest.
BOX TABLE 1 (page 4)

Incomes rising everywhere, except in Africa, and too slowly in the former Soviet bloc, the Arab world, and even LGrowth in real per capita GDP (%) Total growth, 1980–2000World 29Industrial countries 52Developing countries 3 6East Asia and Pacific 224Europe and Central Asia 1Latin America and the Caribbean 7Middle East and North Africa 4South Asia 9 5Sub-Saharan Africa –16Source: United Nations, Global Population Prospects, 2002.
TABLE 1 (page 27)

More assistance than meets the eyeEstimated U.S. international assistance to developing countries, 2000 US$ billions Share of toU.S. official development assistance 9.9 1 8All other U.S. government assistance 12.7 22U.S. private assistance 33.6 60

Foundations 1.5

Corporations 2.8

Private voluntary organizationsa 6.6

Universities and colleges 1.3

Religious congregations 3.4

Individual remittances 1 8

Total U.S. international assistance 56.2 100a. Including volunteer time.Source: OECD 2002; OMB 2002; USAID 2002; various private sources.
TABLE 2 (page 28)

Nearly $23 billion in all: U.S. government international assistance

Official development assistance—$9.9 billion Other government assistance—

USAID Operations Israel

Development assistance Newly independent st

Child survival, humanitarian Eastern Europe and Baltic 

Disaster relief, food aid

State Department Refugees, narcotics Operations

Asia Foundation Broadcasting (Voice of America

International organizations Peacekeeping

Educational and cultural ex

International organiza

National Endowment for D

Department of Defense Humanitarian Military education and tr

Peacekeeping development Foreign military loan

Antiterrorism, nonprolif

Other agencies Peace Corps Export-Import Bank

U.S. Trade and Development Agency Overseas Private Investment 

Multilateral institutions Inter-American Founda

Security assistance (Egypt and others)

Source: U.S. Office of Management and Budget 2002.
TABLE 3 (page 29)

Much more to comeEstimated U.S. government and private international assistance to developing countries (US$ billions) 2000 2U.S. official development assistance (ODA) 9.9 1All other U.S. government assistance 12.7 1Millennium Challenge Account n.a. U.S. private assistance (low estimates) 33.6 4Foundations 1.5 Corporations 2.8 Private voluntary organizationsb 7.6 Universities and colleges 1.3 Religious congregations 3.4 Individual remittances 18 Total U.S. international assistance 56.2 7U.S. ODA as % of total 17 Other U.S. government as % of total 22 Private as % of total 60 n.a. Not applicable.a. Provisional. The Millennium Challenge Account is set to increase U.S. official development assistance by $5 billion a year in b. Including volunteer time.Source: U.S. government and private sources.
TABLE 6.1 (page 131)

More assistance than meets the eyeEstimated U.S. international assistance to developing countries, 2000 US$ billions Share of toU.S. official development assistance 9.9 1 8All other U.S. government assistance 12.7 22U.S. private assistance 33.6 60

Foundations 1.5

Corporations 2.8

Private voluntary organizationsa 6.6

Universities and colleges 1.3

Religious congregations 3.4

Individual remittances 1 8

Total U.S. international assistance 56.2 100a. Including volunteer time.Source: OECD 2002; OMB 2002; USAID 2002; various private sources.
TABLE 6.2 (page 132)

Nearly $23 billion in all: U.S. government international assistance

Official development assistance—$9.9 billion Other government assistance—

USAID Operations Israel

Development assistance Newly independent st

Child survival, humanitarian Eastern Europe and Baltic 

Disaster relief, food aid

State Department Refugees, narcotics Operations

Asia Foundation Broadcasting (Voice of America

International organizations Peacekeeping

Educational and cultural ex

International organiza

National Endowment for D

Department of Defense Humanitarian Military education and tr

Peacekeeping development Foreign military loan

Antiterrorism, nonprolif

Other agencies Peace Corps Export-Import Bank

U.S. Trade and Development Agency Overseas Private Investment 

Multilateral institutions Inter-American Founda

Security assistance (Egypt and others)

Source: U.S. Office of Management and Budget 2002.
TABLE 6.3 (page 134)

The United States leads the world in total flows

Total ODA Total ODA as % of GNP Bilateral ODA Multilateral ODA Other official flows Grants by private voluntary agencies Private flows 

Canada 1744 0.25 1160 583 5 113 4621 Denmark 1664 1.06 1024 641 –3 3 2 482 

France 4105 0.32 2829 1276 1 4 n.a. 1439 Germany 5030 0.27 2687 2343 –456 846 7000 

Italy 1376 0.13 377 999 –103 37 9537 

Japan 13508 0.28 9768 3740 –5,200 231 2725 Netherlands 3135 0.84 2243 892 38 306 3469 Norway 1264 0.8 934 330 n.a. 179 –5 

Spain 1195 0.22 720 475 3 n.a. 22272 

Sweden 1799 0.8 1242 557 0 26 2127 United Kingdom 4501 0.32 2710 1792 –72 536 2093 United States 9955 0.1 7405 2550 562 4069 10666 

n.a. Not available.Note: Total official development assistance (ODA) includes net flows to developing countries (bilateral ODA) as well as contributions to multilateral institutions (multilateral ODA).Source: OECD 2002. 
TABLE 6.4 (page 146)

Estimated U.S. government and private international assistance to developing countries (US$ billions)

2000 2005 

U.S. official development assistance (ODA) 9.9 10.4 All other U.S. government assistance 12.7 13.3 Millennium Challenge Account n.a. 3.3 

Low estimates High estimates Low estimates High estimates Low 

U.S. private assistance 33.6 43.7 43.5 55.5 Foundations 1.5 2.5 2.5 3.5 Corporations 2.8 7.7 3.6 10 Private and voluntary organizationsb 6.6 7 8.7 9 Universities and colleges 1.3 1.5 1.7 2.1 Religious congregations 3.4 5 4 5.9 Individual remittances 1 8 2 0 2 3 2 5 Total U.S. international assistance 56.2 70.5 U.S. ODA as % of total 1 8 1 9 Other U.S. government as % of total 2 2 1 9 Private as % of total 6 0 6 2 n.a. Not applicable.a. Provisional. The Millennium Challenge Account is set to increase U.S. official development assistance by $5 billion a year in 2006 and b. Including volunteer time.Source: U.S. government and private sources.