In the past two weeks, the people of the world have opened their hearts and their wallets to an unprecedented degree in order to help the people of Haiti recover from the recent earthquake. The amount of money collected for relief and reconstruction has been staggering. Yet no one has asked how much money is enough, and whether so much money can really be spent effectively.
Just how much money has been collected so far? Within days of the earthquake, the United States and the World Bank each made commitments of $100 million in aid. According to the Chronicle of Philanthropy, Americans sent private donations worth another $150 million -- more than they gave after the Asian tsunami and Hurricane Katrina. A recent international telethon raised another $57 million.
To put these amounts in perspective, consider that the annual value of all the goods and services produced by Haiti's economy is about $7 billion. Pledges of aid from around the world already total about 10 percent of that figure, if not more. And so far, aid has been collected based on people's willingness to give, not on the size of the need. There has been a tacit assumption that the amount donated cannot possibly be excessive.
That may indeed be true, but it does not mean that so much money can be put to immediate use. As aid groups on the ground in Haiti have found, the country's infrastructure -- roads, the power grid, etc. -- are not very well developed, and it has few businesses capable of taking on big logistics and construction projects. In this environment, it is not easy to spend a lot of money productively in a short period of time.
This problem is similar to the "resource curse" facing poor countries that discover major reserves of fuels and minerals. When they begin extracting those natural riches (or selling the rights to do so), their economies receive sudden inflows of hundreds of millions or billions of dollars. But they can't always use all of that money right away; even if you have good intentions, you can't double the size of an education or public health system overnight. Nor can you simply distribute the money to your people; if the economy doesn't produce more goods and services, all that extra cash sloshing around will just raise prices. Left to sit, the money has a way of disappearing; for decades in Nigeria, billions in oil money were siphoned away annually by elites and corrupt bureaucrats.
Even saving the money for the future, as East Timor has done with its newfound oil wealth, can be dangerous. Several years ago, the Timorese knew that their government was starting to build up billions of dollars in saved funds -- the process was actually quite transparent -- but they wanted to see the money spent sooner, to create jobs and improve their quality of life. Riots and a change of government ensued.
If Haiti wants to spend its aid money now, it will clearly need help from overseas. But doing so will create an additional danger: that given Haiti's lack of infrastructure and capacity, it will be dominated by foreign contractors in the same way as Iraq or Afghanistan. Foreign donors will undoubtedly employ their compatriots for big rebuilding projects -- doing so makes giving aid that much easier -- and they'll risk falling into the same old traps of cronyism and unaccountability, as evidenced by no-bid contracts, shoddy work, and lack of buy-in from local people.
To avoid these outcomes, coordination of aid and engagement with Haitians will be extremely important. Donors will have to sit down with Haitian authorities and plan, so that they can avoid duplicating effort, wasting money, misplaced priorities, and monopolization of aid projects by a few big contractors. At the same time, they will have to employ as many Haitians as possible in the rebuilding process. No one knows what Haiti needs better than Haitians themselves.
Through coordination with each other and with Haitians, donors can ensure that they do not dispense aid money until well-thought-out projects are available. It will be hard to go slow, because the situation is Haiti is obviously so desperate. Yet it is crucial to avoid mistakes in Haiti. If money is lost or wasted in a place that has become the focus of so much attention, donors will be discouraged from giving when disasters strike in the future.
For these reasons, Haiti urgently needs a trustworthy coordinating body that has the
confidence of donors and the Haitian people, with representatives of both. President
Préval and UN Secretary-General Ban could lead the creation of such a body. Doing so would achieve three things: 1) it will ensure that aid money continues to flow, 2) it will help to guarantee the proper use of that money, and 3) it will allow Haitians themselves to decide the right pace for spending, balancing their immediate needs with their long-term priorities for rebuilding.
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