THERE is a growing sense — at least on my part — that the CNMI government has all but given up on reviving the local economy. As an actual economist, Matthew O. Deleon Guerrero, has pointed out, economic development is hard. It becomes more difficult if the government officials in charge are reluctant to familiarize themselves with basic economics.
“Fortunately,” as the governor stated in a recent letter to the CNMI delegate, “we have the federal government.”
I recently mentioned the dismal results of the massive federal aid provided by the U.S. to two Compact nations, the FSM and the Marshalls. Today, let’s talk about how generous and ongoing foreign aid has failed to make a dent in one of the world’s poorest countries, Malawi, which is in southeastern Africa, and has a population of about 21 million.
In an excellent article published last month, The Economist noted how Malawi, its capital city in particular, “runs on aid.” The article’s title says it all: “Aid cannot make poor countries rich. For decades, officials have promised to raise economic growth. For decades, they have failed.”
In the CNMI, many officials believe that a deepening dependence on federal aid — no, don’t you dare call it a bailout — will “solve the problem” of not having enough money to run a bloated government.
Well.
Last year, according to The Economist, rich countries spent a total of $256 billion on foreign aid — “enough to provide sub-Saharan African governments with a sum as large as their total tax revenues.” Development spending accounts for almost three-quarters of all aid, The Economist added. “It most often subsidises favoured industries, frequently funds infrastructure construction and sometimes pays the salaries of teachers. The average Malawian has had more money spent on them by international agencies than by their own government every year since the country gained independence from Britain in 1964.”
That’s right. Over half a century of dependence and not much to show for it. Is this the CNMI’s goal now?
From 2004 to 2014, The Economist noted, foreign aid spending increased by 74%. Result? “The world’s 78 poorest economies grew more slowly than in the decade to 1970, when aid was first emerging.”
In 2004, The Economist added, “William Easterly of New York University and co-authors found that, from 1970 to 1997, aid was just as likely to shrink the world’s poorest economies as to help them grow. A year later the World Bank produced a post mortem on two decades of development aid, poring over the history of its recipients. The researchers concluded that its grants and loans did not move the needle on growth. In 2019 the IMF reached a similar conclusion. As Charles Kenny of the Centre for Global Development, a think-tank, notes: ‘There is no country that has really grown from aid.’ ”
Each generation of development spending has failed in its own way, The Economist added. “In 2005 David Dollar and Jakob Svensson, both then of the World Bank, and Dani Rodrik of Harvard University, looked at disbursals tied to political reforms — and could not find a country where they had produced better policy. National leaders were concerned with staying in power; a desire strong enough to warp whatever advice, and however much money, aid bureaucrats provided. Earlier work by Dollar had found that aid simply magnified governments’ existing tendencies….”
But wait, there’s more!
“Health spending has had some real successes. The provision of HIV treatment helped halve deaths from AIDS in the two decades to 2020, for instance. But it has not prompted economic growth. Similarly, research has found little link between primary-education aid and output…. And instead of strengthening recipient countries’ ability to provide public services, aid often weakens it…. Last year Avi Ahuja of New York University concluded that it produces less competitive political systems, as incumbents wield the cash to win votes.”
Clearly, other people’s money is to government what a credit card is to a shopaholic.
Here in the CNMI, consider the premise of the governor’s request for “repurposing” federal funds. If provided nearly half a billion dollars of federal taxpayers’ money, CNMI politicians, unlike other politicians around the world, would know exactly how to spend other people’s money in a way that is not politically driven and would not lead to greater dependence on such funds.
If you believe that then please avoid anyone who claims to be a Nigerian prince.
All over the world, The Economist said, aid recipient countries “have created entire bureaucracies devoted to planning, securing and documenting aid. The Malawian state, for instance, employs many more people to manage aid than to oversee trade…. Ultimately, their survival depends both on receiving aid and not enacting the sort of policies that might, in time, reduce their dependence on such handouts…. Every year the best-connected and most-educated Malawians return from university abroad not to start a business, but to start a charity” — that is, an aid-receiving organization.
In the CNMI today, many college-educated local residents are pursuing grant writing as a preferred — if not necessary — career, while others would rather work for a federal agency or program than for the Commonwealth government, which is running on fumes. Those without such options are relocating to other parts of their vast nation — the U.S.
It turns out that a U.S. passport, rather than regular democratic elections, is the true “safety valve” for the CNMI and other territories whose fragile economies are at the mercy of federal politicians and bureaucrats.
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