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REINVENTING FOREIGN AID ACROSS BORDERS BY JERRY M. ROSENBERG*, Ph.D – DIRECTOR OF THE CENTER FOR MIDDLE EAST BUSINESS STUDIES AT RUTGERS, NJ, USA.

REINVENTING FOREIGN AID ACROSS BORDERS

Economic aid is traditionally given by a donor(s) to one nation; a Marshall Plan is universally accepted as funds provided to several or many countries. Historically, there is no better platform of humanitarian and economic assistance than studying carefully and utilizing the best from the European Recovery Program, globally known as the Marshall Plan. Following World War II victorious leaders realized that the punitive Versailles Peace Treaty following World War I had helped pave the way for Hitler. Therefore, in 1948, the U.S.Government established the generous Marshall Plan.

These models and flowcharts attempt to summarize the events from 1945 to 1951 with the reconstruction of Western Europe.

1945-1951 WESTERN EUROPE

END OF WORLD WAR II

DESTRUCTION POVERTY AND DISEASE

NATION-BUILDING

COMMUNIST THREAT

U.S.CONGRESS AID


MARSHALL PLAN FOR 16 NATIONS

EUROPEAN RECOVERY PROGRAM

EUROPEAN COMMUNITY (UNION)

STABILITY AND PROSPERITY

Likewise, the following models and flowcharts in sequence, identify present-day events, with potential organized aid to conflicting regions.

2014- GLOBAL CONFLICTS

NO END TO KILLINGS

SUICIDE BOMBINGS

INSURGENCY


POVERTY AND DISEASE

NATION-BUILDING

TERRORIST THREATS

U.S.CONGRESS/UNITED NATIONS/MULTINATIONAL AID

REGIONAL RECOVERY PROGRAM

REGIONAL ECONOMIC COMMUNITY

STABILITY AND PROSPERITY

Exploring the past with financial aid and later economic integration, a viable collection of ascending nations of the European Union indicated that a great, long-term experiment could evolve with a crossroad of trade and peace. The founders stepped outside the immediate crush of events and constructed a context in which people would live for the next several decades. They established certain norms and created a framework for a civil society in Europe.

The objectives which the framers of the Marshall Plan set themselves were the rehabilitation of the ruined countries and the reconstruction of the European economies with a view to containing Communism and reducing the dangers of domestic subversion. Today, the substitute of a communist threat is poverty and terrorism.

The primary lesson was that the Marshall Plan paved the way for a genuine possibility to reinvent Europe with a future of stability and prosperity. Without the hundreds of million dollars of aid, Communism would possibly have taken control of the peoples and governments of Western Europe. Without the Marshall Plan, the one last hope for a new start in European life would have been impossible, assuredly a dramatic lesson heaped on today’s regional conflicts.

Ideally, foreign aid and its organizational implementation should follow cessation of all violence in the area. The Marshall Plan of 1948 didn’t make peace, for it followed the conclusion of war. Still, the lexicon of peace is more than just the end of killing. There is the peace of stability, the peace from claiming victory over destitution and starvation, the peace resulting from raising living standards, the peace following recognition of another’s right to exist, the peace of trust, the peace of cooperation, the peace from transparency along with government accountability, and critically, the peace resulting having basic institutions of governance and legitimacy in place, ready to absorb the flow of funds.

Timed release of monies can be determined. Long-term aid should be tied to non- aggressive acts against, as well as peaceful overtures. Clearly war is many more times expensive than peace. The promise of still more funding will assuredly stir participation. A regional approach of aid will start slowly, perhaps with just two nations, but when proven valuable, it can become a great experiment of multinational promise, as with Europe.

Economic assistance, across borders, in a recovery package can go a long way towards restoring a more civil and just society. The list of expenditures of hundreds of billion of dollars, should go beyond the more traditional, appropriate, and obvious needs, such as humanitarian support, infrastructure development, housing construction, employment creation, educational building, etc.

Foreign aid to participating countries purports to assist those nations by:

(1) Promoting industrial and agricultural production in order to enable the participating 
country to become independent of extraordinary outside economic assistance;

(2) Taking financial and monetary measures necessary to stabilize its currency, 
establishing or maintaining a valid rate of exchange, balancing its governmental budget as soon as practicable, and generally to restoring or maintaining confidence in its monetary system.

(3) Facilitating and stimulating increased interchange of goods and services among the participating nations and reducing barriers to trade among themselves as well as with others.

(4) Making efficient and practical use of the resources of each participating nation. 


Aid comes in many packages. Obviously, financial contributions to needy communities is but one. In a more general definition, aid can come from foreign direct investments, loans, debt forgiveness, insurance and other financial instruments.

For me, assistance is most successful when giving to two or more nations, usually neighboring countries. Why?

A.With Size Comes Strength. Evidence – The European Union has become a suction cup drawing both aid, foreign direct investment and profits. Contiguous and surrounding nations, continue to seek membership anticipating clout that will be derived from sheer size and global influence. With increased clout, there will be a greater ability to fend off intrusions from across borders.

B. The Quest For Unity Unites Others. Evidence – Not since Napoleon’s push to unite Europe has anything so ambitious been attempted and today the EU’s gross domestic product accounts for 20 percent of world output. Statistics readily impress global nations who are seeking ways out of poverty and low efficient productivity.

C.There Will Be Quantum Leaps In Technology and Research – Evidence – the EU and member governments have released billions of dollars for mega-research programs. 
With new directives, revised tax laws permitted greater expansion in the venture capital markets and substantial increases in foreign direct investments. Regional integration has allowed for the combining of people, talents, ambitions, and resources to assert a unique and determined leadership in science and technology, all 
promising to raise the living standards of its member populations.

D.        Regional Integration Helps Build Global Markets – Evidence – for most of the EU’s life, strong ties have been building around the world, all with determination and confidence. By building natural links from the nation’s history, a common language and traditional bridges and networks with nations throughout Europe.


E.         Foreign Direct Investments Will Flow – Evidence -The World Bank and other authority institutions decry the poor level of foreign direct investment in many countries. The first requirement, to develop FDIs indicating a positive approach in investment. This attitude is too often neglected while governments concentrate on being attractive competitively by offering generous incentives to potential investors. For FDIs to increase in any region, there must be: societal attractiveness, infrastructural attractiveness, factors (natural and human) attractiveness, governability attractiveness, and competitive attractiveness.

F.         Devastation Turns To Profit. – Evidence – As nations seek ways to leap out of poverty and illiteracy; to leave the so-called underdeveloped world behind, the recent history of Western Europe is most attractive. Leaders from around the globe remain amazed at the marvels of European reconstruction and revitalization.

G.         Regional Economic Agreements Can Counter Other Regional Trade Accords –Evidence – The agreement between Canada and the U.S. in March 1985 to “explore all the possible ways” of reducing trade barriers is illustrative of the cooperation force of the day. The two governments concluded a free-trade agreement on October 4, 1987. Shortly thereafter, the Mexican government sought a free trade accord with the U.S. (Canada would participate). The results was the North American Free Trade Agreement (NAFTA) becoming effective on January 1, 1994.

H.        Regionalism Improves Health Services – Evidence – Working together nations can better deal with diseases, such as Ebola, the spread of agricultural blight underground where boundaries are meaningless.

I.          Empowers Regional Participants In Dealing With The Spread Of Terrorism. – Evidence – Israel and Jordan are engaged in efforts to confront the spread of Hamas and ISIS.

In addition, assuming a future dedicated to raising living standards and promoting stability, promising goals of regionalism resulting from donor aid will be to:

  1. present the concrete meaning of peace;
  2. create confidence-building measures;
  3. establish commitments that will reduce the likelihood of hostile activities;
  4. promote regional and national economies, and promote increased employment;
  5. create additional sources of income to raise the standard of living;
  6. present an order of priorities for development of joint projects across borders and for
allocations of resources for their implementation;
  7. enhance the ability to provide social services;
  8. discourage the by-passing of assistance to local public institutions;
  9. create a structure whereby neighboring nations can compare the use and misuse of 
donor funds, as establishing an evaluation system of fairness and equity;
  10. gives recourse to nations, and local institutions with the countries, to receive 
comparative data and information on how the distributed funds are utilized;
  11. receive needed feedback on examples of corruption, embezzlement, and money lost, 
with approaches used by individual nations to deal with these problems;

l. contribute statistics for comparison by governments as to benefits received, as data shows the distribution to the poorest people and families;

m. open a dialogue across borders with teams reviewing present events and projected plans;

  1. working together on common interest problems, such as human disease, underground spread of agricultural blight, levels of education;
  2. with combined strength and experience, recipient nations can counter claims by donors of waste and corruption, and also have increased power to argue against misuse of expectations by donors;
  3. narrow the communication gap between governments and local institutions; and
  4. reinforce recipients abilities to assure that aid funds are spent as intended; giving clout 
to assure that protectionist policies of donors do not limit products from the open 
market;
  5. envision how differing nations effectively transfer donors funds to local institutions;
  6. the participating nations form a unit from cross-border nations to feedback accurate 
reports to donors on the use of funds received to assure that monies are used to help 
the world’s poor and that it is not given to promote U.S. policy objectives; and
  7. enable cooperating nations to more readily fend off external aggression and terrorism.

 

Let’s take one present day issue, where foreign aid is desperately needed. There are 43,000 Hamas employees in the Gaza Strip with no internal support. Its only native source of water, an aquifer, is 90 percent polluted. It is estimated that as many as 50 percent of its adults are unemployed. Some 56 percent of Palestinians in Gaza are food insecure. So what will be the fate for its 1.8 million people?

The recommendation is not to just offer aid only to Gaza and the West Bank. There are other neighboring countries in dire need of fiscal help. After close examination on the way to a Middle East Economic Community, donors can create a mini-Marshall Plan that would include the most needy populations found in Gaza/West Bank, Iraq, Syria, Egypt, Lebanon, etc. Less needy countries can join in when they wish.

Long-term with rehabilitation succeeding, a Middle East Recovery Program would evolve into an economic community. But, it must start with economic assistance to those calling out in desperation, not in bits-and-pieces, but collectively organized with requests for aid made, followed by checking on the validity of the requests and the ability of the nations to provide some of these funds. The items listed above (a. to t.) will be more efficiently dealt with by this evolving economic community that in a loose definition has created a mini-government.

For aid to succeed, with minimal theft, corruption and waste, certain criteria must be met. A carefully organized, detailed system must be prepared in advance. Under the model represented in this proposal the following must be attended to:

1. Qualifying For Assistance – The mechanism should be outlined, first by studying the forms for information and compliance. They then should be adjusted and revised to meet current needs of aid. Recommended forms must be circulated to all interested parties, whether they initially qualify or not. Copies should be freely offered to interested nations and agencies seeking assistance to enable the world’s bystanders to witness global support. Most, if not all sessions of inquiry and study will be transparent, with government accountability, as well as open to cameras and the media.

2.Initial Funds To Be Released With Transparency And With Accounting Procedures Established, All Monitored – All released funds must have an accountable audit trail, with full entry of expenditures, listed and reviewed. A timetable and calendar of events for each nation are to be presented on a continuous basis to an administrator, who will, along with an advisory group, decide on the merits and costs of the projects. Approval must be made by the administrator, and transmitted immediately to the coordinator in each nation, as well as to directors in all participating countries.

The administrator should:

  • review and appraise the requirements of participating nations for assistance;

  • formulate programs using the aid, and approve specific projects which have been submitted by the participating countries;

  • provide for the efficient execution of any such programs as may be placed in operation; and

  • if found appropriate and supported by fact, with the approval of all parties, terminate financial aid.

3. Review By Visiting Teams – Visiting groups are to review on-site project development and assess the fulfillment of expectations from proposals to determine whether commitments have been met. Standards of accomplishment should as best as possible, be consistently applied for all nations and projects evaluated.

4. Potential New Members Are To Be Considered And Evaluated, With Rapid Decisions Made For Their Eligibility And Acceptance – Potentially-eligible nations should receive documentation describing the progress and success record, resulting from inclusion. Each non-member nation should be encouraged to apply and become eligible for aid funding. Of course, any country may join and not receive funding – this scenario would occur if their resources are sufficient to achieve national prosperity and stability without assistance.

5. Financial Aid Can Be Terminated As Well As Amended, Also Possibly Extended – A means must be provided to allow for the cancellation of financial assistance to a particular nation, for a specific project, or indeed if judged so, the entire program. Should it be necessary to withhold funding, a mechanism must be instituted, with conditions and procedures for reducing, or eliminating funding. The promise of success, accompanied by increased prosperity should serve as the catalyst for fairness, honesty, and trust.

Lack of transparency and accountability, and widespread corruption exists in many nations of the world. Funds have been stolen or wasted. Some aid has been transferred to personal accounts both locally and overseas. For example, fraud has been found in the construction of fictitious factories and land deals that existed only on paper.

 

CONCLUSION


Any multi-nation release of aid, should include cross-border free-trade flow. Assuredly, free trade agreements, with all the promises of opportunity, have risk. Inflation rates may climb excessively, and a high degree of currency volatility is dangerous. Currency fears can impact policy standardization, one of the preconditions for trade integration. In addition, infrastructures as they presently are, hinder progress on most fronts. Roads, ports, terminals, and means for telecommunicating are often woefully inadequate and antiquated. More importantly, the education, health, and social welfare needs are so great that people left unfilled can tumble the entire enterprise. And assuredly, without confidence-building within boundaries and across borders, trust, utilizing appropriate existing and newly created institutions, new reforms, and negotiating openly and fairly, the endeavor will stumble and fall.

With sufficient international aid and support in place, renewed energy and resources will be used to upgrade living standards, create greater employment, and bring long-term stability for all.

 

REFERENCES


Acheson, D. (1970), Present at the Creation: My Years in the State Department, London: Hamilton.

Aron, R. (1987) The Imperial Republic: The United States and the World-1945-1973, Washington, University Press of America.


Avineri, S., (2001, November 14). An Arab Marshall Plan, Jerusalem Post.

Bland, L. Machado B, Oliver, George (2006), Insights from the Marshall Plan for Post- Conflict Reconstruction and Stabilization. George C. Marshall Foundation-unpublished.

Blumenthal, B. & Wilner, J. (1995) Building on Peace: Toward Regional Security and Economic Development in the Middle East. Washington: Washington Institute for Near East Policy.

Covey, J. and M.J.Dziedzic, L.R. Hawley, (2005), the Quest for Viable Peace: International Intervention and Strategies for Conflict Transformation, Washington, D.C., U.S. Institute of Peace Press.


Custer, Samantha, Is Foreign Aid Effective?, AidData Newsletter, Sept.24, 2012.


De Lombaerde, P. (Editor) 2006, World Report on Regional Integration and Governance 2006: Multilateralism, Regionalism and Bilateralism in Trade and Investment. (Unpublished, United Nations University).

Dobbins, J. et al. (2003). America’s Role in Nation-Building from Germany to Iraq. Washington, D.C., Rand Corporation.


Economist, The, (2014, (August 16), After the Storm.


El-Agraa, A.M., (1997) Economic Integration Worldwide. London: Macmillan Co.

Fukuyama, F., (2004) State-Building: Governance and World Order in the 21st Century, Ithaca, Cornell University Press.


Foreign Affairs Magazine, (December 12, 2013) Rethinking Foreign Aid: Five Ways to Improve Development Assistance, New York.


Gates, Bill and Melinda, 2014 Gates Annual Letter, January 2014.


Machado, S. and Oliver, G., (2006) The Ramifications of the Marshall Plan for Contemporary Postconflict Transformation, George C. Marshall Foundation (unpublished).

New York Times, The, (2003, February 4). With Rise in Foreign Aid, Plans for a New Way to Give It.


Rosenberg, J., (2003), Nation-Building: A Middle East Recovery Program. Lanham, Md. University Press of America.


Rosenberg, J. (2009), Aftermath of the Arab Uprisings: The Rebirth of the Middle East. Hamilton Books.


Sokolsky, R., & McMillan, J., (2002, February 12). Foreign Aid in Our Own Defense, The New York Times.

 

*Jerry M. Rosenberg, Ph.D. is Professor Emeritus of Global Business and Founder/

Director of the Center for Middle East Business Studies at Rutgers University Business
School, N.J.  His awards include two Fulbright Grants,  a Marshall Foundation Fellowship
and he has lectured around the globe, including several times at the U.S. State Department.
He is author of 28 books, the most recent « Aftermath of the Arab Uprising: The Rebirth of 
the Middle East. »

email – ejrosenber@aol.com

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