Interview: A Business-Like Approach to Foreign Aid
A conversation with USAID administrator Rajiv Shah on expanding public-private partnerships and integrating development and emergency intervention.
The son of Indian immigrants from Ann Arbor, Mich., and a graduate of the University of Pennsylvania Medical School and the Wharton School of Business, Rajiv Shah began his career at the Bill and Melinda Gates Foundation, where he ran the organization’s agriculture program and went on to serve as chief scientist at the U.S. Department of Agriculture (USDA). In December 2009, at the age of 37, he was sworn in as head of the U.S. Agency for International Development (USAID) — only days before a devastating earthquake hit Haiti.
In an interview for Foreign Policy, Samuel Loewenberg spoke with Shah about how he is reinventing USAID, an often-embattled agency charged with helping the world’s poorest countries develop, while at the same time dealing with crises around the globe.
Foreign Policy: Dr. Shah, you’ve hopscotched your way into running the U.S. foreign aid agency at a relatively young age after a career at the Gates Foundation. How does your Gates experience shape your approach?
Rajiv Shah: What was great about the opportunity to work with Bill and Melinda Gates and their very talented team was this insistence that when we were making financial commitments to address a problem, we were going to be business-like in ensuring that we literally solved that problem over time. Both at USDA and certainly at USAID, I’ve tried to bring that business-like rigor and the tendency to ask questions — some would say I ask far too many questions — to make sure that when we’re spending taxpayer resources, we’re doing it with that absolute focus that we are making an investment against generating a result.
FP: Fixing the world is a lot more complicated than fixing Microsoft Windows — and even that usually doesn’t go very well. Foreign aid — and USAID in particular — is frequently criticized as doing more harm than good. What did you find when you arrived at the agency?
RS: When I joined, we launched a strategy review of our areas of work. We looked at our education investments, for instance, and decided they were not generating as much results as they could. While we got 39 million additional kids into schools over the last 12 years in sub-Saharan Africa, literacy levels hadn’t moved up. In some cases, they had even gone down, as schools got more crowded and the quality of instruction waned. So we built a data tool that allows us to, at a very low cost and very rapidly, assess literacy outcomes at grade level for primary school kids. That’s why it is important to measure outcomes and develop strategies focused on results.
FP: The Republican-led House of Representatives has been trying to cut the foreign assistance budget. If I’m a congressman, tell me why it is in America’s interest to help people overseas when we have so many problems at home?
RS: President Obama and Secretary [of State] Clinton are elevating development and crisis response as part of our foreign policy. At the end of the day, without stability, you cannot get economic development. At the same time, security is ultimately linked to economic stability. [Former Defense] Secretary Gates was right when he said development is a lot cheaper than sending soldiers. Right now, Americans think that foreign aid is 20 percent of our federal budget, but in fact it is less than 1 percent. And for that 1 percent we are able to generate real concrete results.
FP: USAID frequently gets criticized for wasteful practices and spending millions on U.S. contractors without doing much to help the countries you are ostensibly trying to help.
RS: Under the prior administration we saw a 40 percent decline in our staffing coupled with a 300 percent increase in our programmatic responsibilities, especially in war zones like Iraq and Afghanistan. That led to the problem of outsourcing way too much work to contractors and doing it without enough oversight. We will shift $4 to $6 billion annually to local institutions and small-scale efforts that we can manage and document carefully. These efforts will strengthen the private sector and governments, and reduce the need for aid over time.
FP: Some of the $4 to $6 billion is also going toward "partnerships" with big U.S. corporations like Wal-Mart, Coca-Cola, Chevron, and Monsanto. Why does subsidizing U.S. companies help people who are poor?
RS: One of the big failings in food security in particular has been a lack of working with the private sector effectively. For instance, in Honduras and Guatemala our work with Wal-Mart is reaching more than 15,000 farming families. In that case, the farmers are producing potatoes and onions, and Wal-Mart works with farmers on training and preparation. They also provide guidelines that help farmers determine what to grow and when in order to sell to Wal-Mart. This type of engagement has led to a doubling and tripling of farmers’ household incomes. Yet over the last several decades, it’s been controversial to have companies like Wal-Mart in the development solution. I think it is the kind of long-term development program that is needed to succeed at scale over time. (Note: Regarding the recent allegations of Wal-Mart’s widespread bribery in Mexico in a recent New York Times article, USAID press spokesperson Ann Doyle said, "We will not comment on the ongoing Wal-Mart investigation or how it might affect our partnership.")
FP: So you are saying that the United States can do well by doing good?
RS: In the coming years, Africa is going to be a 900 million-plus person common market that is growing three times faster than the global economy. China has been making a big investment in Africa, and we’re going to want to make sure that American enterprises are part of the picture as well. Ten of the largest 15 trading partners we have were foreign aid recipients. South Korea was a major recipient of U.S. aid for decades, and today we have more jobs created in the U.S. because of our trade relationship with South Korea than we do with France.
FP: From what I’ve seen in my reporting, what poor people in places like Kenya, Ethiopia, and Guatemala really need are water and roads to keep them from these recurrent hunger crises. Yet for the last 30 years USAID has largely ignored those issues.
RS: We are now rebalancing and getting back into that, but in a way that’s leveraged. We need to partner with the private sector. In our partnership with Pepsi in Ethiopia to reach chickpea farmers, we’ll do things like invest in feeder roads, and Pepsi and the Ethiopian government will make parallel investments in things like better technologies and guaranteeing purchase [of chickpeas from Ethiopian farmers]. That helps move 30,000 women-headed households out of poverty. It’s those kinds of leveraged partnerships that actually allow us to transform infrastructure. Those aren’t things we have the capacity or resourcing to do alone.
FP: In the Horn of Africa last year, you had 13 million people going hungry — 4 million in Somalia and about 9 million in Kenya and Ethiopia combined. In Somalia, your options to intervene were limited because of the [internal] conflict, but not in Kenya and Ethiopia or in the refugee camps for Somalis in those two countries, which were in woeful shape. You had nearly a year of advance warning about the drought. There were a lot of interventions that could have been done to mitigate the crisis in areas such as water, sanitation, and livelihoods. What happened?
RS: I would argue that a lot of our resources went into these types of activities last year, perhaps not as early as they could have, but they ultimately did, and that’s what allowed people to get through the period of hunger. But I agree with you that we can always — and we should always — be pushing ourselves to do much better. Part of the challenge is that we are able to use humanitarian resources quickly and aggressively in times of crises, but the core development programs in many of these countries — and I’m not just speaking about USAID but rather the entire development community — move on a much different time horizon. To help correct for that, we are making sure that what we call "resilience programs" are being built into core development budgets and are prioritized by both local governments and development partners.
For example, resilience programs are part of national policy in both Kenya and Ethiopia, and without them, last year’s crisis would have been far worse. Ethiopia has a program called the Productive Safety Net Program, which USAID has supported since 2005, and that program has effectively kept 7.6 million more people from requiring emergency assistance. Kenya established a Drought Management Authority in 2011, which has helped coordinate efforts to build resilience and has increased funding in its national budget for livestock development and infrastructure in the drylands, which are just the kinds of things that can help protect Kenyans against the next drought. The challenges remain fierce, but we are excited about the momentum we are achieving through our resilience work around the world and with specific countries.
FP: Yet even with those programs in place, the populations in the Horn are already going hungry again; an estimated 8 million people are already food insecure, which is about what it was last year at this time. In total, USAID’s famine-monitoring agency projects 13 countries with serious hunger problems this year. Only five of them recently suffered war or natural disaster. Most of the problem is chronic poverty. It seems lots of resources go into dealing with the emergency situation at the last minute and not enough into dealing with the underlying issues. How do we break the cycle?
RS: For too long, development and emergency intervention had been thought of as separate things. We’re now working with critical partners like the World Bank and others to create this field of resilience, planning, and investment. For decades, there has been a tendency to think of development as urban industrialization or things of that nature and not recognize that agricultural development, pastoral-community resilience, and building on people’s existing risk-management systems are as critical to moving people out of poverty.
FP: If I go back to countries with hunger crises like Kenya and Ethiopia and Guatemala and the Sahel this summer, am I going to see something different than I saw last year and the years before?
RS: I don’t want to promise. It wouldn’t be honest or realistic to expect the phase of poverty and vulnerability to change in a one-year, two-year time frame. But the track record is that if we stay focused and if we persist with the approach, we have the opportunity to help tens of millions of people move out of that condition of vulnerability.
Look, I wished it happened faster, and I could sit here and guarantee that people won’t be worse off next year. But I can’t do that. I just have to stay committed to making sure we measure results, we do the things that we believe are correlated with creating the same systems that are effective over time. And that even though it’s hard, we bring that kind of business-like approach to this work and do the best we can to help ensure that we’re not just putting band-aids on problems but we’re actually solving them. Because ultimately, solving them is in our deep national interest.