Corruption can derail the best of development intentions

In 1986, American newspapers ran a series of stories suggesting that humanitarian aid funding supplied by the United States had been diverted into the bank accounts of the Duvalier family. The Duvalier regime had assumed power in Haiti in 1957, backed by a paramilitary security force called the Tonton Macoutes. Seven years later, Duvalier pronounced himself president for life. His rule became synonymous with terror, human rights abuses, and corruption, and when he died in 1971, he anointed his son, Jean-Claude, as his lifelong successor. By 1986, the Duvalier regime was coming undone, and in the face of nationwide protests and unrest, Jean-Claude fled to France with U.S. assistance. The Tonton Macoutes formally disbanded — though its members continued to terrorize local populations — and the U.S. government authorized emergency aid to Haiti under Public Law 480, commonly known as Food for Peace. However, by October of that year, USAID’s regional inspector general, or IG, had serious concerns about whether funds had been properly deposited, and whether the program was achieving its objectives. After an internal audit, the IG reported that “neither the Title II (emergency) or the Title III programs were meeting their goals.” The incident evinces what aid organizations, development professionals, and local partners have long known, but not always stated overtly: For all the development projects that currently exist or that are being envisioned — and for all the funding and material investments that come with them — corruption has the potential to doom any well-intentioned effort. A lack of good governance has a direct effect on whether aid projects will be sustainable or scalable. “If you come as an outsider through aid or through advice, you just have to recognize that no progress will be made on anything unless the people that hold the local power or influence want to dance with you,” said Stefan Dercon recently on a podcast for the Devex Book Club. Dercon is a professor of economic policy at the University of Oxford and was the former chief economist of Britain’s Department for International Development. “The outsider must be cognizant and totally willing to understand what the interests are of the other players that you have to deal with; otherwise, we’re not going to make progress.” Within corrupt regimes, those interests often include retaining power, suppressing local dissent, and diverting resources to intimate circles of oligarchs, personal connections, or business partners. That results in far less aid reaching those in need — or, in some cases, never reaching certain populations at all. Such was evident in the USAID response to the civil war in Syria. Between 2012 and 2020, the U.S. provided more than $5.6 billion in humanitarian assistance, much of it implemented through the International Rescue Committee, or IRC. By 2015, however, USAID had uncovered complex fraud schemes at the local level affecting the delivery of aid to refugee camps, according to its own inspector’s report. By 2017, according to the OIG, investigations had received “109 allegations of fraud schemes including bid-rigging, bribery, collusion, kickbacks and product substitution.” Eventually, the IRC was forced to repay $6.9 million to the U.S. government as a settlement for violating the False Claims Act, and another leading charity, the International Medical Corps, laid off 800 employees and fired three others suspected of taking part in the scheme, according to Reuters. At the time, Acting USAID Inspector General Thomas J. Ullom stated that the settlement “sends a strong message that USAID-funded implementers must have systems in place to detect, deter, and prevent fraud in humanitarian assistance programming.” Yet despite best efforts by policymakers and law enforcement to prevent fraud and corruption, the reality is that it continues to persist — in part because regional and local knowledge is not always accounted for in the design stages of a project. “Development projects often place a higher premium towards global practices and technical knowledge than local expertise,” Elton Skendaj told Devex. Skendaj is the director of the Democracy and Governance Program at Georgetown University and a scholar of corruption. “But local expertise is critical to determine how programming might be interpreted. Sometimes we start programming around corruption without strong theories of change or regionally relevant ways to address it,” Skendaj said. Local partners in recipient nations have long been aware of such issues, and have often counseled foreign donors to take it more seriously. That sentiment emerged in a recent survey that asked stakeholders on the ground in the global south what they wished to see most from development work moving forward. Instead of alleviating poverty or tackling climate change, for example, it was eliminating corruption and improving governance that scored the highest. “Public, private and civil society sector leaders in developing countries want international assistance to address systemic barriers to progress such as high levels of corruption and poor financial management,” the survey authors reported. “High levels of corruption and poor financial management were frequently cited as persistent constraints impinging on progress in all seven policy areas:” accountability, jobs, services, inclusion, macroeconomics, business, and security. Tackling corruption, though, is a wicked problem — and sometimes the very donor nations whose aid is stymied by local corruption are complicit in creating the conditions for corruption to exist. In a rejoinder to Stefan Dercon published in the journal Development Policy Review in May 2023, Naomi Hossain, a research professor at the Accountability Research Center at American University, argued that the United Kingdom “continues to protect tax havens and financial sector secrecy in ways that are designed to shield elites from being held accountable for corruption.” The same paradoxes apply in the American context. For years U.S. foreign policy tolerated and even financially supported the Duvalier regime in Haiti, despite knowing of its corruption and brutality. Both Presidents Dwight D. Eisenhower and John F. Kennedy saw communist Cuba as the gravest threat in the Caribbean and justified maintaining “friendly and helpful relations” with the Duvalier government to prevent a Fidel Castro intervention. U.S. actions enabled the very corruption that would later undermine its aid efforts. As part of its current Strategic Framework for Haiti, USAID states clearly that limited oversight, accountability, and corruption still limit public and private investment in Haiti’s future. The framework notes that Haiti still ranks 168 out of 180 countries on the Transparency International Corruption Perceptions Index. “Some influential private sector actors in Haiti have also benefited from widespread corruption and have actively used their political influence to perpetuate the status quo,” the framework notes. Today, the vise grip of that status quo maintains its fierce hold on Haiti, with gang violence, poverty, disease, and instability still felt throughout the country, presenting enormous challenges for outside players to help. The influential Austrian economist Ludwig von Mises is often quoted as saying that “there is no more dangerous menace to civilization than a government of incompetent, corrupt or vile men.” In the development world, there is perhaps nothing more damaging to a well-intentioned project than corrupt or fraudulent actors who seek to divert resources intended for the neediest toward their personal gain.