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.
Comment by Meg Brindle on 15 September 2010:
In response to the review of John Hancock’s book, Lords of poverty:
I am using the book in my graduate class on International development for these reasons: 1) We need a review of the agencies, many of whom originated in the post WWII era, such as the World Bank, IMF and UN by a documented reviewer without special, vested interests. Such an individual would be hard to find who also holds insider knowledge; 2) We need to get a grip on what agencies are doing wrong so that we can learn from it and do better; 3) We use the book in contrast to those by social entrepreneurs, such as How to change the world, that propose better solutions.
Having said that, let’s also be mindful that the book was published in 1989, with data of the period. A mindful assessment would be to ask if we are repeating the same mistakes of the earlier period of aid and relief, or have the agencies learned over the 21 years since the book has been published? And, what can individuals at the helm of as well as entering these agencies learn to do better? Abolishing the agencies seems not only ill-advised, not feasible, but if the lessons have not been learned, even brand new agencies will repeat them.
It would be useful to consider lessons learned and adjustments, rather than repeating the same old. Let’s hope the book prompts students to do so.
Professor Meg Brindle
George Mason University
Comment by Upali Magedaragamage on 24 April 2011:
I agree with Prof.Meg Brindle. The analysis was done several years ago it may be not the same situation today. However, when recently discussed the matters discussed in the book with a colleague he was telling me that no lessons were learnt from these findings so far. It seems some of these aid agencies are not changing although they advise always the receivers to change!
Comment by Luna on 5 June 2011:
Ребята , нужно Ваше мнение , кто знает или сталкивался.
Хочу приобрести колечко с бриллиантом массой от карата, но понимаю , что это стоит безумных денег и мне не по карману.
Но читала , что есть облагороженные бриллианты, которые ничем не отличаются от обычных, но стоят дешевле в
два раза.
Кто-нибудь вообще держал такие в руках, они правда великолепны ?
Comment by Lisbeth Elmquist on 20 October 2011:
Although the book was published in 1989, not much seems to have changed. Some of the UN agencies have again changed name and I would imagine that checking the statistics for the last 2 decades would reveal no improvement at all. UN, World Bank, the development agencies from various countries etc etc still waste an incredible amount of taxpayers money. Just look at the failure of the World Bank in Juba, South Sudan, to properly manage and distribute donor funds. Duplication and in-fighting within the UN and its agencies continues. Nepotism is still rife as is abuse of power, the inability/unwillingness to dismiss those permanent staff that do not perform well continues, while those who do actually work and achieve something are generally not given a new contract! Staff from headquarters i.e. New York, Geneva prefer not to rotate to the field and the UN failed in it’s last attempt to reorganise and streamline the entire body as well as to cut expenditure. The number of consultants on short-term employment projects is every increasing. Why should the appointment of the top directors always be political in these international organisations and generally go to somebody who has absolutely no experience in that particular field. We tend not to trust politicians when they are in power, so why should they be awarded such prestigious appointments? Visits of government heads/directors of the UN and celebrities to see the progress in disaster relief actually hamper the relief efforts on the ground. The tsunami in 2004/5 being a case in point when no aircraft with relief supplies could land in Aceh because the US president and co were visiting together with UN top staff.
It seems that in this time of austerity (2011) many countries are increasing their budgets for aid and development while at home people lack jobs, pay ever increasing taxes, student fees rise, health care deteriorates and infrastructure is not being properly maintained. Why, I ask myself do tax payers accept this situation and why do they not protest? The countries receiving donor/development funding are in many instances corrupt and like the World Bank/UN and company do not consult the recipients as to what might be most beneficial. I have seen first hand the damage and destruction done to land by forced relocation projects. As pointed out by Graham Hancock they expat development workers live in their own little world in their well secured compounds and jealously guard their perks, fringe benefits, particularly those available in “hardship posts” i.e. in Juba generally UN and many of the staff from western development agencies and embassies have R&R every 6 weeks…this again is being funded by the tax payers. I hasten to add that the UK’s development agency and FCO have in fact cut back on this R&R and for the Danes and Swedes the “travel costs” on R&R is calculated into the annual salaries and the time comes out of annual leave.
If we look back at what has been achieved in the last 2 decades, it seems very little in fact. The only thing is that the salaries for the World Bank/UN and company staff has increased considerably
Comment by Dhedu Badar on 29 November 2011:
A lot has happened in the last two decade since this book was written. The world has changed and the western dominance has eroded considerably in the world of politics as well as in the world of aid. There has been huge reorganization efforts within the UN and the World Bank and it is harder than ever to get a full time job in these institutions. However, some efficiencies still remain as they are structural in nature and determined by politics than by the desire of the staffers in these organizations to talk about poverty in exotic places. At the same time the world of aid and development lending has changed with the foundations, and countries like China taking the lead and share of organizations like the World Bank has reduced by more than 50 per cent in the last 20 years. So its time for another review and another book perhaps rather than criticizing the aid organizations blindly based on old evidences.
Comment by Bihari Krishna Shrestha on 30 November 2011:
Graham Hancock’s 1989 seminal work, Lords of Poverty, had quoted rather at some length my own 1983 article on the working of foreign aid in Nepal. However, after 22 years of Hancock’s scathing attack on the workings of the donor agencies, and several billion dollars of foreign aid flow into my own country during the period, the Nepalese remain apallingly poor and deprived. According to 2010 Human Development Report, a whopping 65 percent of Nepal’s population of 27 million continue to struggle under poverty line. Corruption is rampant in the country, and donors know and experience this but generally look the other way for their own survival in Nepal. Bureaucracy is completely paralysed and has abdicated their role in favour of the numerous donor agencies that use the attractions of various perks to reduce the host agency to merely being a rubber stamp to legitimise the documents and proposal the latter submit to the former for official endorsement. Two donors in particular–UNDP and the Danish aid agency, DANIDA–have done the greatest harm by wrecking Nepal’s domestically innovated decentralisation initiative. The Decentralization Act of 1982 laid special emphasis on the empowerment of the users themselves at the grassroots, leading to, at least, two world class development successes in the country. The devolution of authority to the Forest User Group in 1988 to manage their own forest led to accelerated rejuvenation of Nepal’s totally depleted forests, thus making her an acknowledged leader in community forestry in the world. Similalry, the introduction of Mothers’ Groups, also in 1988, as the user instititons for managing primary healthcare in the communities has now placed Nepal at the top of the table in achieving MDGs in Child Survival and Maternal Mortality Rate Reduction, the former MDG projected to be achieved ahead of 2015. However, the two donor agencies successfully intruded into the decentralization picture of the country in the Nineties. Despite lacking in proper understanding of Nepal’s development experience both in its breadth and depth, they perniciously competed, through the power of their purse, to gain ownership of Nepal’s decentralization initiative that was Nepal’s one of the most successful development achievement. Today, the so-called Local Self Governance Act of 1999 that took the power away from the user groups, probably inzdvertantly, now remains the instrument for rampant corruption in the communities with the politicians and their colluding officials leading the pack and siphoning off almost one-third of he country’s development budget each year. Today, Nepal’s predominantly rural landscape (80% population being rural)remains home to, among others, massive underemployment(47%), lack of food security affecting more than 70 percent of population, and massive under-5 malnutrition (50%). So, as far as Nepal is concerned there is very little for her to be grateful to foreign aid, and she is also not likely to benefit from it unless the very structure of foreign aid undergoes fundamental overhaul. it is time for Graham Hancock to come back again and take the irresponsible and self-serving donor agencies to task on behalf of the billions of suffering humanity around the world.
Pingback by Book Review: Lords Of Poverty: The power, prestige, and corruption of the international aid business by Graham Hancock – David Osterfeld « Bharata Bharati on 18 December 2011:
[...] aid business.” Hancock does a remarkable job. His book deserves wide readership. – The Freeman, Irvington-on-Hudson, NY, June [...]
Comment by Dr. O. P. Sudrania on 19 December 2011:
It is interesting though to read this review on Graham Hancock’s book even if it was published in 1986. What is interesting is not what he has revealed but what he has not revealed as a Western Christian.
Two most striking features that he did not mention are: (1) The religious conversions and their proportion being channelled via the Christian missionaries. This is even more important in the ongoing superior weapon wars in the Middle East Arab Spring. There are reports of even mass conversions of Muslims into Christians in Iraq if you believe the YouTube video clips. The Christian missionaries are well known for their such activities. They were very active in Haiti after the devastating earth quake when ex President Clinton and Bush oversaw the US aids, only to ward off the Muslim seminaries
over their; and who wins the conversion war game more?
Secondly the Western powers employ their clandestine military war contractors to gather intelligence and billions of dollars is spent only to fund the pockets of the most powerful in the western lords. Dick Cheney has become an infamous name after the US/Af war along with his clever daughter. So in the name of aid, “Who must be their intel collectors and siphoning the major chunk of that aid, is not discussed. It is highly relevant to discuss, even if to exclude it.
Thirdly it is humiliating to denigrate the local gullible poor masses but it is the weaker always pays the price. This may be a natural fallout of this corrupt powerful human society which preys on the masses in the name of relieving their poverty only to gain their sympathy to rule by proxy, only to cheat them. Neither the indigenous nor the colonial governments have been an exception to this rule. Shame to both the aiding and the reciient nation governments.
Comment by Gb TAYLOR on 7 February 2012:
The situation described by the author aptly portray itself 20years later. A critical review of development indices in 3rd world countries unfortunatel reflect a retrogression as against the quantum progression of human-capital growth in 1st world communities. Until underdeveloped nations of the world embark on conscious, deliberate and well-defined SELF rejuvination (i.e. internally-responsive structural re-adjustments policies and programmes), the rate and tale of poverty and social malaise will persist.
Comment by Aminah on 27 February 2012:
A fantastic book,
Nothing much has changed and it will never change for a number of reasons, Africa and other third world countries is what is really sustaining the developed world.External debt is used as tool for oppresion.The IMF/World bank are now pushing for globalisation and privitisation of poverty. This makes countries cheap reserves for cheap labour and natural resources. Indonesia is one such country,its people are now slaves to the many cooperations that operate their in the economic processing zones.GAP,Nike and many other super brands.
that is what is called ‘free market’
Distroying local capacity and governments is their agenda,they feed in human misery