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. Last Updated: 07/27/2016

Good Aid Is Concrete, Accountable

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This week World Bank representatives met with top Cabinet officials to discuss new lending. There's a $600 million loan on the table, for example, to reform the Russian education system. The Bank is pondering the idea.

Now an old saw of the aid business is: Give a man a fish and he'll eat for a day, but give him a fishing pole and he'll eat for life (or something like that).

The World Bank loan — like most such loans — seems to violate that rule. If it's approved, Russia will get an up-front flood of fish, much of which will be used wastefully if for no other reason than because there will be so much of it all at once. The nation will then spend a generation's time paying for those fish, at interest, out of the federal budget. So … why not buy the fishing pole, and fund slow, steady education improvements out of the budget over the long-term? (Then Russia might have to start asking tough questions like: Can we continue to afford this big of an army, this many bureaucrats and so on.)

There is a place for Western aid programs in Russia — particularly those that go after real health emergencies and potential threats, like the spread of AIDS or of bioweapons technology. But as illuminated in a six-page report about one prominent aid program — The U.S. government-funded Defense Enterprise Fund — useful and effective aid is devilishly difficult to fashion.

In general, those aid organizations that focus on small, specific projects — on-the-ground groups like the EBRD, or funds such as the DEF or the U.S.-Russia Investment Fund — have the best potential to do good.

At the same time, these organizations also take the most flak: Because they involve themselves in concrete projects, failures are highly visible. When the EBRD invests in Tokobank and Tokobank crashes, there is no end to critics. Moreover, the criticism may well be justified: A careful reading of the DEF's investment record shows some embarrassing missteps that could have, and should have, been avoided.

But rest assured, the men and women who brought Tokobank to EBRD or MZA to the DEF suffer their share of self-recrimination, ridicule and sleepless nights. That's because they are held responsible for the money they've invested.

Not so at the World Bank or the IMF. These organizations drop enormous sums for the vaguest of purposes — and the very vagueness protects them from judgments. Nor do they take responsibility for bad investments — ordinary Russians do, because they pay the World Bank back in full regardless of whether "education reform" is a success or a $600 million fiasco.