The New USAID Administrator: Transactional or Transformational?

As the Obama Administration’s pick for USAID Administrator, Dr. Rajiv Shah is highly credentialed and experienced in the field of foreign assistance and development as well as in the political ways of the world. The question I have for him is whether he will be a transactional or a transformational leader? Will he continue business as usual or finally do the much needed makeover of foreign aid – one that recognizes that the developing world and the delivery of foreign assistance have fundamentally changed, now needing an entirely new government aid business model. (See my previous work with Nick Eberstadt in the Weekly Standard, or in AEI’s Development Policy Outlook.)

If he listens to the concerns of most in the development field, he’ll be transactional – busy moving boxes on organizational charts at USAID and throughout the rest of the government, fighting for more money and people, trying to make USAID a preeminent and independent agency, and decrying the number of USG offices that dispense foreign aid and the lack of coordination therein. In short, he’ll be focusing on much loved topics among government officials and the contractors and NGOs who receive billions of USAID dollars.

The topics, however, are of little concern to the people in poor nations. They would much prefer a transformational leader who views developing countries and the people in them as partners, not “recipients,” who expects those partners to have local ownership in aid projects by contributing their own resources and time, and who demands the utmost transparency and accountability in the management of aid funds. They would prefer a leader who focuses on the results of a project in the field, who surveys people in developing countries on what their problems are and how USAID projects could be improved, who provides funds for locally identified problems which will vary from country to country and not necessarily fit into all the earmarks and special interests in Washington, DC.

U.S. Government foreign aid is now a minority shareholder – only 9 percent in the total U.S. financial flows to the developing world. Philanthropy, private investment and remittances make up the rest and dwarf USAID’s budget. This is the new reality of how assistance and investment to the developing world is being delivered. The new USAID Administrator should open up the USAID bidding process to the thousands of privately funded programs by foundations, corporations, PVOs, religious organizations, and individuals, so they can more easily compete with their ongoing successful initiatives or their new innovative ideas.

Most importantly, the new USAID Administrator – to be transformational – needs to understand that the current USAID business model is very broken. By that I don’t mean broken organizational charts, lines of reporting, coordination or morale. (All the new USAID Administrator has to do is read up on what African and other leaders, have been saying about our foreign aid to know that they don’t care which government aid agency is providing resources, or whether Dr. Shah or Deputy Secretary Jack Lew is signing off on projects, or whether aid officers are demoralized or not.)

They care about being a real partner in USAID projects, having their own skilled, local talent used in projects, and having money spent to develop local capacity and institutions so that they can help themselves and graduate from foreign aid the future. They prefer this demand driven assistance versus the predominant top down project design process where USAID gives huge awards to expensive contractors with high overheads, who then write a lot of reports, make a lot of trips, and hold a lot of meetings with astonishingly poor evaluation of results. (See previous work by Bill Easterly, Raj Desai and Homi Kharas.) President Obama expressed his concerns on how “western consultants and administrative costs end up gobbling huge percentages of our aid overall.” Also, in this same radio address he has noted the importance of demand driven ideas, good governance, and value of investment in addition to aid.

Once the broken business model is fixed, the government aid development community won’t have to call for new organization charts, new seats at the National Security Council, or elevating the topic of “development” as a core pillar of U.S. foreign policy. All this will miraculously happen when there are results that everyone can see and that are delivered at reasonable costs. USAID slipped onto the back burner because it lost its way and didn’t adjust to a new developing world with local talent to work with and a large and vibrant private sector engaging in innovative, faster and more efficient ways of delivering foreign aid. Its new role is still very important – as a convener of resources, helping to identify and support those private and public programs that are working and to bring them into countries that need them – to work with local talent.

Dr. Shah, leave the org charts alone and just find 12 good people who share a new vision for foreign aid, hire them, and get on with it. Nothing raises the stature of any USG agency than projects that work.

Carol Adelman
Director & Senior Fellow
Center for Global Prosperity


2 thoughts on “The New USAID Administrator: Transactional or Transformational?

  1. Phil November 19, 2009 / 2:22 pm

    I think this evidences a pretty naive evaluation of the capacity and trasparency of local actors and organizations in a lot of partner (currently recipient) countries around the world. Carol– have you ever been on the ground looking for capable local partners? Do you know how much time and money it takes to build local capacity in places that are severely broken, and where the culture has degenerated into kleptocratic free-for-all? The current system is broken, but I fear that your proposal would not reduce aid dependency nor deliver more funding to intended beneficiaries. More likely, it would enrich local elites who know how to market themselves to well-intentioned next generation AID leaders, and who care less about the people of their countries than the contractors do.

  2. P November 24, 2009 / 12:04 am

    The defeatism expressed in the comment above is an example of the things that have handicapped reform efforts at USAID. Other bilateral and official donors, led in many ways by the USG's own MIllennium Challenge Corporation, are moving in the direction called for by Carol Adelman, and showing that (i) the issues of local implementation, while difficult, are not impossible, and (ii) the fears raised in the last sentence are hypothetical, not real. In contrast, staying with the existing approach–the comment's author suggests no alternative-is a recipe for continued failure.

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