Missing Links

Rogue Aid

What's wrong with the foreign aid programs of China, Venezuela, and Saudi Arabia? They are enormously generous. And they are toxic.

My friend was visibly shaken. He had just learned that he had lost one of his clients to Chinese competitors. "It's amazing," he told me. "The Chinese have completely priced us out of the market. We can't compete with what they are able to offer."

Of course, manufacturing jobs are lost to China every day. But my friend is not in manufacturing. He works at the World Bank.

His story begins in Nigeria. The Nigerian government operates three railways, which are notoriously corrupt and inefficient. They are also falling apart. The World Bank proposed a project based on the common-sense observation that there was no point in loaning the Nigerians money without also tackling the corruption that had crippled the railways. After months of negotiation, the bank and Nigeria's government agreed on a $5 million project that would allow private companies to come in and help clean up the railways. But, just as the deal was about to be signed, the Chinese government offered Nigeria $9 billion to rebuild the entire rail network -- no bids, no conditions, and no need to reform. That was when my friend packed his suitcase and went to the airport.

It is not an isolated case. In recent years, a variety of wealthy, nondemocratic regimes have begun to undermine development policy through their own activist aid programs. Call it rogue aid. It is development assistance that is nondemocratic in origin and nontransparent in practice; its effect is typically to stifle real progress while hurting average citizens.

China has backed such deals throughout Africa; its funding of infrastructure there has boomed from $700 million in 2003 to between $2 and $3 billion for each of the past two years. Indeed, it is a worldwide strategy. In Indonesia, Beijing agreed to expand the country’s electrical grid. Too bad the deal calls for building plants that use a highly polluting, coal-based Chinese technology. No international agency would have signed off on such an environmentally unfriendly deal. In the Philippines, the Asian Development Bank, which lends money at low interest rates to poor countries, had agreed to fund Manila's new aqueduct. It too was suddenly told that its money was no longer needed. China was offering lower rates and fewer questions.

What's behind this sudden Chinese drive to do good around the world? The three short answers are: money, access to raw materials, and international politics. The coffers of China’s Central Bank are bursting with nearly $1.1 trillion in foreign exchange reserves -- the world's largest. Beijing is increasingly leveraging this cash to ensure its access to raw materials while also boosting international alliances that advance China’s growing global influence. What better than a generous foreign-aid program to ensure the goodwill of a petropower like Nigeria or a natural resource-rich neighbor such as Indonesia?

China is not the first country to rely on aid as a tool to advance its interests abroad. The Soviet Union and the United States spent decades giving "development aid" to dictators in exchange for their allegiance. Even today, American largesse to Egypt and Pakistan is rooted in geopolitical calculations. But, beginning in the 1990s, this system slowly began to improve. With greater media scrutiny, many developed countries were shamed into curbing these practices. Today, the projects of organizations like the World Bank are meticulously inspected by watchdog groups. Although the current system is far from perfect, it is certainly more transparent than when foreign aid routinely helped ruthless dictators stay in power.

Nor is China the only regime offering rogue aid. President Hugo Chávez has not been shy in using his nation’s oil-fueled international reserves to recruit allies abroad. Indeed, Venezuela’s ambassador to Nicaragua, explaining his country's large aid packages to the region, bluntly announced in early January, "We want to infect Latin America with our model." Thus, hopes for Cuba's opening as a result of Fidel Castro's demise and the island's bankruptcy will likely be dashed by the roughly $2 billion in rogue aid that Chávez supplies to Cuba every year. Worse, his generosity ultimately harms Cubans who, because of these artificial lifelines, will be forced to wait even longer for the indispensable reforms that will bring their society opportunities for true prosperity.

Iranian aid to Hamas in Palestine or Hezbollah in Lebanon is equally damaging to the people there. Clearly, this financial support has boosted Iran's influence in the region. Far less clear is whether average Palestinians and Lebanese will ever be better off thanks to Iran's generosity. The same can be said of Saudi Arabia's massive overseas educational aid program. Are Pakistani boys whose parents cannot afford to send them to school well served by attending Saudi-sponsored religious schools that fail to equip them with the skills needed to get a job? They are surely better off going to any school than being in the streets. But why should these be the only two options? Why can’t the Saudis fund education, the Chinese pay for infrastructure, and Chávez help Cuba's economy without also hurting poor Pakistanis, Nigerians, or Cubans?

Because their goal is not to help other countries develop. Rather, they are motivated by a desire to further their own national interests, advance an ideological agenda, or sometimes line their own pockets. Rogue aid providers couldn't care less about the long-term well-being of the population of the countries they "aid."

What we have here -- in states like China, Iran, Saudi Arabia, and Venezuela -- are regimes that have the cash and the will to reshape the world into a place very different from where the rest of us want to live. Although they are not acting in concert, they collectively represent a threat to healthy, sustainable development. Worse, they are effectively pricing responsible and well-meaning aid organizations out of the market in the very places where they are needed most. If they continue to succeed in pushing their alternative development model, they will succeed in underwriting a world that is more corrupt, chaotic, and authoritarian. That is in no one's interests, except the rogues.

Missing Links

Chronic Neglect

Meet the developing world's new health emergency: The rich world's diseases.

The forgotten diseases of the poor world are finally getting some attention. Warren Buffett's $31 billion donation to the Bill and Melinda Gates Foundation is just the latest and most spectacular milestone in an increasingly aggressive campaign against infectious diseases, including tuberculosis, malaria, and HIV/AIDS. But even as the rich world finally grapples with this challenge, a new and more menacing threat to the developing world's health is gathering.

Chronic ailments such as diabetes, cancer, and heart and respiratory disease are hitting poor countries faster and harder than expected. Perversely, economic growth and development is hastening the arrival of rich-world diseases before poor countries' health systems can prepare.

Revolutionary changes in transportation, advertising, and food production have conspired to alter lifestyles abruptly in many parts of the developing world. Popular Western junk food, cheap cigarettes, and a flood of new automobiles mean that many citizens of poor countries eat worse and exercise less than they did only a decade ago. The movement of people from the countryside to more lucrative jobs in the cities has exacerbated the trend. Public health awareness in most poor countries hasn't caught up. This new affluence means that the poorest countries are now fighting a two-front war on disease.

Diabetes -- a disease usually associated with affluent societies -- is particularly dangerous. In countries with weak health infrastructures, it is anything but the manageable condition it can be in the rich world. A person in Mozambique who requires insulin injections, for example, will probably live no more than a year. In Mali, the average life span after onset is 30 months. According to the International Diabetes Federation, the number of people around the world suffering from the disease has jumped in the past two decades from 30 million to 230 million. Almost 40 million Chinese over the age of 20 have diabetes. Neighboring India ranks second with an estimated 30 million, or 6 percent of its population. In some countries in the Caribbean and the Middle East, 12 to 20 percent of the population is diabetic. Seven of the 10 countries with the most diabetics are in the developing world.

The world's leading killer, cardiovascular disease, is also stalking poor countries. Eighty percent of all deaths from heart disease now occur in low- to middle-income countries. Between 1990 and 2020, heart disease is expected to increase by 120 percent for women and 137 percent for men in developing countries, compared with increases of only 30-60 percent in developed countries.

When it comes to chronic diseases, the trend lines in the rich world and the developing world are moving in opposite directions. In highly industrialized countries, aggressive public-health measures and medical intervention have cut cardiovascular mortality dramatically. Death rates for heart disease have fallen by as much as 70 percent in Australia, Britain, Canada, and the United States during the past 30 years. Last year, the United States saw the first decline in the number of cancer deaths in more than 70 years.

By contrast, the victims of heart disease in the developing world are growing younger and more numerous. In China, 300 million men smoke cigarettes and 160 million adults are hypertensive. Many of them will contract chronic diseases at young ages, and the economic consequences will be profound. China alone lost an estimated $18 billion in national income in 2005 to heart disease, stroke, and diabetes. The cumulative loss between 2005 and 2015 will likely be $556 billion, a staggering sum for an economy that is still modernizing.

The causes of the looming health storm are not mysterious: The risk factors for chronic disease are the same in every country. What is so surprising is the speed with which chronic diseases are storming the developing world. The poor and uneducated in developing countries are increasingly smoking, eating diets rich in saturated fats, and leading sedentary lives. The body-mass index (BMI) and total cholesterol levels increase rapidly as the national income of poor countries rises. In China, BMI and cholesterol levels have spiked sharply in urban areas. One study found that between 1984 and 1999, mean total cholesterol levels among 25- to 64-year-olds in Beijing jumped 16 percent. A similar story is unfolding in Vietnam, where 15 percent of people in the Hanoi area are now overweight.

Overhauling the public-health systems of poor countries is an obvious solution. But that kind of change can take decades and often depends as much on politics as on money. International aid agencies and private donors should focus on cheap and effective tools, such as tobacco advertising bans, public information campaigns, and simple medical intervention. A recent study in India, for example, found that treating suspected heart attacks with aspirin could save millions of lives at a mere $3 per life saved. In Mauritius, substituting soybean oil for palm oil has slashed cholesterol levels. Vietnam, which faces an acute dual challenge of infectious and chronic diseases, is working with the World Health Organization on a chronic disease control plan that emphasizes reducing tobacco use and increasing physical activity. International funds and expertise can help launch similar programs elsewhere.

The money and minds of the rich world are finally focusing on the health of the poor. That is a good thing. But when the rich world looks to fight the diseases of the developing world, it may be surprised to encounter enemies it knows all too well.