All Commentary
Saturday, June 1, 1991

Book Review: Lords Of Poverty: The Power, Prestige, And Corruption Of The International Aid Business by Graham Hancock

Atlantic Monthly Press, 19 Union Square West, 11th Floor, New York, NY 10003 • 1989 • 226 pages • $17.95 cloth

Foreign aid has reached immense proportions. If one excludes the billions spent yearly by private voluntary organizations such as the Hunger Project, Oxfam, and World Vision, and looks just at money raised by taxation and distributed by government agencies, the figure hovers around $60 billion a year. The budgets of most multinational corporations, including Standard Oil, IBM, Phillips, Nestlé, and Volkswagen, pale in comparison. And yet this figure, Graham Hancock, a former aid worker for the British Overseas Development Administration, points out, doesn’t even include the billions more in government-to-government loans, unless they are “soft” or concessional loans. The question Hancock asks, and answers, in this explosive book is just whom is this “aid” aiding.

The chief, if not the sole beneficiaries of foreign aid, Hancock shows, are the local elites in the recipient countries, special interest groups in the developed counties, and the aid bureaucracy itself. The chief losers? The First World taxpayers and the poverty-stricken in the Third World.

The aid “industry” is quite lucrative for those who administer its programs. Incomes for employees of international agencies are determined by the “Noblemaire Principle,” named after Georges Noblemaire, an employee of the League of Nations in the 1920s. According to this principle, salaries for employees of international organizations should be high enough “to attract as employees citizens of the country with the best-paid national civil service.” United Nations pay rates, Hancock notes, must therefore exceed “those of the federal civil service of the richest country on earth—the United States.”

As a result, not only does base pay for U.N. officials exceed that for U.S. civil servants by an average of 25 percent, but the fringe benefits are also far more lucrative. Promotion comes twice as fast for U.N. employees than for U.S. civil servants. It takes a U.S. civil servant 14 years to accumulate as much sick pay as a U.N. staffer is entitled to on his very first day. U.N. pensions exceed those of the U.S. civil servant by 43 percent. And this is only the beginning.

An increasingly large part of aid budgets is for travel (first class, of course). And most of the travel is not to poverty-stricken areas in the less-developed world, but to poverty seminars normally held at posh hotels in exotic and very attractive locations. In just one year, Hancock notes, the Executive Board of the Educational, Scientific and Cultural Organization received $1,759,584 for travel and lodging. During the same time it spent $49,000 on education for handicapped children in Africa, and $1,000 to train teachers in Honduras.

Interestingly, despite the Noblemaire Principle which is supposed to attract experts, U.N. agencies increasingly rely on the expertise of “outside consultants.” The minimum salary for a consultant is $100,000. The average salary is probably closer to $150,000. Since the number of consultants exceeds 150,000, this puts the cost at more than $22 billion. When the salaries of the regular employees are combined with the costs of consultants, the amount is well over half of all that is spent by governments on aid each year. In fact, “personnel and associated costs,” Hancock notes, “today absorb a staggering 80percent of all U.N. expenditures.”

Groups with political clout in the First World are also major recipients. The purpose of food aid was and is to help dispose of farm surpluses in the First World. The tragedy of this is that struggling Third World farmers are often driven out of business by the influx of food aid. Similarly, the real rationale of other aid projects, as Hancock amply demonstrates, is not to help the poor in the Third World but the giant corporations in the First. Thus, between 80 percent and 99 percent of all aid money distributed to the Third World is actually spent in the First World in the form of purchase orders. “Western aid,” as Hancock puts it, is used “to create profits for Western companies.”

And finally, Hancock shows that it is no accident that some of the world’s richest people live in the world’s poorest nations. Aid has been regularly siphoned off by Third World leaders. Often this has been done, it should be noted, with the knowledge and thus implicit approval of the aid agencies themselves. The agency term for this larceny is “leakage.” The figures reach into the billions of dollars: an estimated $10 billion for the Marcoses in the Philippines and perhaps $4 billion for President Mobutu in Zaire, to name just two.

Who pays the cost? The taxpayers in the First World and, more important and tragic, the poor in the Third World. To cite just a single example, the Akosombo Dam on the Volta River in Ghana was built with World Bank and other agency money. Its purpose was to provide inexpensive power to the U.S.-owned VALCO aluminum plant and to the wealthy sections of Accra, Ghana. In the process thousands of villagers were displaced, without compensation, when the dam flooded their lands. And since the dam’s completion, well over 100,000 people living in the vicinity have been permanently incapacitated by river blindness. This is far from a unique case.

Aid programs in places such as Indonesia and Brazil have resulted in massive losses of life. Brazil has received $434.3 million to fund its huge resettlement program. The result was the needless destruction of millions of acres of tropical rain-forest (3.6 million acres a year) and the decimation of many of the indigenous Indian tribes. Of the 13,000 settlers arriving in the resettlement areas each month, Hancock writes, “Their prospects for supporting themselves are virtually zero and, in addition, more than 200,000 are estimated to have contracted a particularly virulent strain of malaria . . . to which they have no resistance.” Even the World Bank has acknowledged that the program has been “an ecological, human and economic disaster of tremendous dimensions.”

Very similar has been the Bank-funded resettlement program in Indonesia: the destruction of millions of acres of rain-forest, bloody and savage fighting between ethnic tribes, and the death of 150,000 indigenous Timorese who opposed having their land used as a resettlement area for Javanese.

Hancock’s conclusion is that the aid programs are so corrupt they are “utterly beyond reform” and should be abolished.

If there is any criticism of Lords of Poverty it is that, as John Hogan wrote in Commonweal (June 15, 1990), Hancock “offers no alternative.” And since the problems are so immense, critics contend, it would be inhumane to abolish all aid. The point is well taken. The reader is left with the feeling that if only the rascals could be thrown out (admittedly a big if) and replaced by good, public-spirited bureaucrats, foreign aid could achieve its noble purpose. What is needed in Lords of Poverty is an explanation why foreign aid, by its very nature—by politicizing society, by generating large bureaucracies, by encouraging or even requiring recipient governments to pursue highly interventionist policies that scare off private investors and generate inefficiency—retards economic development.

But perhaps one shouldn’t criticize an author for not doing what he never intended to do. As the book’s subtitle indicates, the Lords of Poverty focuses on the “power, prestige, and corruption of the international aid business.” Hancock does a remarkable job. His book deserves wide readership.

Professor Osterfeld teaches political science at Saint Joseph’s College in Rensselaer, Indiana.

  • Dr. Osterfeld was assistant professor of political science at Saint Joseph's College, Rensselaer, Indiana.