Private Sector Approach at U.S. Aid Agency: Can Tough Measures Aid U.S. Jobs?

09/13/2011 10:53 am ET | Updated Nov 13, 2011

In the stock market the smart money knows "if you're going to panic, panic early". The same is true for entrepreneurs when it comes to recognizing an idea that isn't working: Try to fail fast. Nothing is worse than throwing good money after bad.

If only the federal bureaucracy could learn that lesson every Tea Party enthusiast would stand up and salute. If only . . .

Too many development programs over the past 50 years have failed slowly, or, having failed, were kept alive for political expediency. The effect has been to create a perception among Americans that too much foreign aid is wasteful. Some see it as being squandered on dictators who hate the United States to begin with, while others are convinced that the people for whom the aid is intended are too primitive to know what to do with it. Another widely held belief is that once politicians get their hands on aid money it goes wherever it does the most good for the least number of people, and that the spigot - once turned on -- can never be turned off.

Whatever may have been the case in the past, change is coming to the bureaucracy. Most recently, the Office of Innovation and Development Alliances (IDEA) was created within the United States Agency for International Development (USAID), the primary agency that distributes aid to countries in need. IDEA is part think tank, part venture capital fund, part humanitarian agency, part bureaucracy, and all business.

It's director, Maura O'Neill, likes to shake things up with creative energy not usually associated with the hidebound traditionalists at USAID. IDEA's concept documents come off like a private sector memo from the head of worldwide operations. They're aggressive. They instill an expectation of excellence. They reserve the right to remain flexible and to make decisions on the fly as circumstances dictate in order to exploit opportunities, but not to protect to sacred cows.

Of course, as a wholly owned subsidiary of the State Department USAID can never fully separate itself from the influence of diplomacy on development decisions. But, politics is becoming more of a sideshow to the real action with cost efficiency now the mantra of Secretary of State Hillary Clinton and USAID Administrator Rajiv Shah.

As Clinton's highest profile and most widely respected aid executive, Shah caught the attention of the professional development community last year when he challenged them to "hold our feet to the fire" in evaluating his agency's efficiency. He brought in O'Neill to build an organization that would stimulate idea flow while keeping a tight rein on costs.

The vehicle through which much of this activity is being funneled is Development Innovation Ventures. DIV's staff talks in ways unfamiliar to most bureaucrats. "Transformative innovation" is a word dripping with sex appeal at DIV; "repeatable disruptive innovation" and "scalable" roll off the tongues of the cool people gathering around the water cooler.

At DIV there are to be no sacred cows. Projects are administered through three stages of growth and at each stage are subject to rigorous evaluation. If they can't match expectations for efficacy, or for producing public support among the people for whom they are intended, or if they can't be scaled up to a level at which the impact can be measured in orders of magnitude, they get cut, according to O'Neill.

Not everyone is a fan, however. Illinois Congressman Donald Manzullo (R, 16th) tried to get DIV'S entire $30 million budget eliminated. He says that a lot of what is being funded through it is duplicative and unnecessary. According to his research the Defense Department, the Energy Department, the National Institutes of Health, and the private sector are conducting similar projects.

Here's a solution: Sponsor a competition. Invite a prestigious panel of American entrepreneurs and NGO executives to review the work of every agency and for-profit entity that seems to be doing the same thing as DIV. Whoever wins the highest praise gets some fraction of the total duplicative funding allocation; everyone else goes home empty handed and looks for funding elsewhere.

This is such a good idea that it should be emulated throughout the federal government so only the most productive, cost efficient government agencies get funded for each project. Certainly, if subject matter experts in each field are the final arbiters of who does the work best there should be a high degree of confidence in their conclusions. As taxpayers with skin in the game they can be relied upon to choose those who will shepherd the peoples' money with greatest efficiency.

Not only will this civilian review process avoid the temptation of one party to punish another at the expense of the country, but it will avoid the turf wars that rage all the time among government agencies. Advocates of reduced government spending will then be left to debate if muscle should be cut from a lean beast rather than arguing over how much fat to trim.

Cutting out funding to DIV altogether, however, seems an intemperate reaction to the possibility of duplication, particularly when DIV is clearly breaking new ground in managing how foreign aid is allocated. It deserves support, not derision. Cutting off all funding smacks of the partisan reprisal that prompts so much disgust for how public policy is created these days.

Foreign aid distributed according to the DIV business model increases the likelihood of it becoming the "investment" that underlies the logic of offering it. We know that the American economy predominately is based on consumer spending and that at the moment it has stagnated with less than two percent estimated growth. Sub-Saharan Africa, on the other hand, is growing at least twice as fast. If we can elevate even a fraction of that population to a point at which it has disposable income we are creating new markets for domestic businesses. Who wouldn't want to make that investment of time and capital on behalf of the American people and American jobs?

Yet, criticism of all manner of foreign development aid has reached a decibel level among latter day isolationists in this country that is reminiscent of the America First Committee of the 1930s whose opposition to American intervention into European political affairs kept us from exerting our influence until 1941 when we were forced to rely on military interventions in both Europe and the Far East.

This time the battlefield is likely to be conference rooms where a more sophisticated marketing presentation by Middle Eastern and Asian business interests will secure market share throughout the developing world at the expense of jobs in the US. This time it is an economic war that we must address. We dare not be caught unengaged again.

* I have an association with USAID.