‘Case of the Week’ 7 Three Years [yeah, it’s back]: The Case to Cut Aid to Russia

CotW Lesser Disclaimer: As a free service, Case of the Week cases are not subject to the same editorial process as the COG 2010 sourcebook, and don’t generally have extensive work put into them. You may find material and sources in these cases that would not appear in the sourcebook. We hope this case will be useful to you; enjoy!

About the Author: Samir Patel is one of COG 2010 authors. He qualified to nationals after achieving 4th place and 2nd seeding at R4 2010 Regonals, in addition to many other achievements (see his bio on the COG website). He is also the proud creator of dreaded Smoking Ban case.

Three Years [yeah, it’s back]: The Case to Cut Aid to Russia

[in Soviet Russia, aid cuts you!!!]

By Samir Patel

“Aid has become an end in itself, and, in prominent instances, has resulted in conflicts of interests or self-enrichment of aid-financed advisers. Because providing official funds to countries in transition is an inherently political process, reform efforts often backfire when they are perceived to follow an agenda set by Western governments. Those efforts have been further discredited by the West’s strategy of supporting specific groups or individuals in Russia whose actions depart from their purported interest in liberal “reform.””

This quote, from research fellow Janine R. Wedel, shows that aid to Russia has been a failure.  Thus, we stand Resolved: That the United States Federal Government should significantly reform its policy toward Russia.

Observation 1: Narrowing the Resolution

Let’s examine two quick definitions and a criterion for our comparative advantage case.

Russia: (definition from Merriam-Webster Online Dictionary)

officially Russian Federation, independent country in E Europe & N Asia bordering on Arctic & Pacific oceans & on Baltic & Black seas; a constituent republic (Russian Republic or Soviet Russia ) of the Union of Soviet Socialist Republics 1922–91 ∗ Moscow area 6,592,812 square miles (17,075,383 square kilometers), population148,000,000

Okay, now we know that Russia is a country.  Surprise!  Anyway, let’s also define

Foreign Aid to Russia: (information from USAID)

Since 1992, USAID has devoted more than $2.6 billion to Russia’s development. Today, USAID supports projects in the areas of health, civil society, rule of law, local governance, and conflict mitigation.

Unfortunately, as we’ll be seeing today, this policy of giving foreign aid to Russia isn’t really the most effective use of money.  Therefore, we propose a criterion of Fiscal Responsibility for today’s debate round – we’ll show you how our plan makes better monetary sense.  With that, let’s move to

Observation 2: The Status Quo

Fact 1: US gives Russia $71M per year

US Agency for International Development 2011 Budget http://www.usaid.gov/policy/budget/cbj2011/2011_CBJ_SummaryTables.pdf

Russia – 71,595 [thousand]

With federal debt spiraling out of control, we have to see if this expenditure is fiscally responsible. Another fact:

Fact 2: Russia is eighth-largest holder of US debt

US Department of the Treasury, May 2010, “MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES” http://www.ustreas.gov/tic/mfh.txt

[read: Russia holds about 126 BILLION dollars in US debt]

We all know that China is the largest holder of US debt, but Russia isn’t that far behind.  Taking a step back here, we see two things – first, Russia apparently has enough money to buy up over a hundred billion dollars of US treasury securities, equivalent to over a thousand years of current levels of aid.  Second, the US just hands out $71 million dollars to Russia each year, supposedly to help women and children.  Giving free money to a country that we’re in debt to makes about as much sense as buying a Prius to tow a camper.

Of course, we all donate to charity and love that warm, fuzzy feeling you get in your chest when you help out an orphan.  Unfortunately, though, we actually have no idea where USAID’s money goes.  It’s much more likely to be lining the pockets of a politician or mob boss than helping promote rights and reforms.

Problem: Aid isn’t accountable

Claudia Williamson (PhD in economics, post-doctoral fellow at Development Research Institute researching microeconomics, political economy of development, and effectiveness of development policies), July 2009, Appalachian State University Economics Department, Springer Science/Business Media, “Exploring the failure of foreign aid: The Role of Incentives and Information”, http://dri.fas.nyu.edu/docs/IO/12361/WilliamsonRAEAid.pdf (page 5-6)

Not only do special interests influence aid policy but bureaucracy does as well. Bureaucracies face their own set of incentives. Aid agencies operate in a perverse environment that hinders their abilities to succeed. These perverse incentives stem from such problems as negligible feedback from beneficiaries, hard to observe outcomes, and low probability that bureaucratic effort will actually translate into favorable outcomes. To respond to these incentives, aid bureaucracies organized themselves “as a cartel of good intentions, suppressing critical feedback and learning from the past, suppressing competitive pressure to deliver results, and suppressing identification of the best channel of resources for different objectives” (Easterly 2003, p. 34). Rashid (2005) provides support for this argument, stating that aid agencies suffer from considerable mismanagement, and questioning their performance is equally important. Due to multiple donor agencies, incentives to be held accountable for aid failures are weak, and thus, no one agency is held responsible.

We see that right now, aid agencies just aren’t accountable.  We don’t know where the money goes, and we don’t know whether or not the money we’re spending is working.  We can see this effect specifically in Russia, which happens to be terribly corrupt.

Impact: Aid to Russia has failed.

Janine R. Wedel (research professor of anthropology and a research fellow in the Institute of European, Russian, and Eurasian Studies at The George Washington University, author of Collision and Collusion (book about Western aid to Eastern Europe)), March 1999, The Cato Institute (nonprofit, nonpartisan think tank), Cato Policy Analysis No. 338, “U.S. Assistance for Market Reforms:”, http://www.cato.org/pubs/pas/pa-338es.html

Since the fall of the Berlin Wall in 1989 and the subsequent breakup of the Soviet Union in 1991, the governments of the United States and other Western countries have provided massive aid to promote a transition to the free market in Central and Eastern Europe and the former Soviet Union. But aid for market reforms in the region has been largely ineffective. Whether provided in the form of technical assistance, grants to political groups or nongovernmental organizations, loans and guarantees to the private sector, or direct financial aid to post-communist governments, that aid has been plagued by a number of problems. The failed $22.6 billion bailout of Russia by the International Monetary Fund in July 1998 only confirmed the flawed nature of the aid-for-reform approach.

Clearly, we’ve thrown a truckload of money at Russia and said, “Here, please use this wisely.”  Well… it just didn’t work out.  Sadly, that tends to happen when you write checks to corrupt regimes.  Fortunately, there is a pretty simple solution that benefits everyone involved – and we offer that with

Observation 3: The Plan

Enforced by all necessary agencies upon an affirmative ballot.

Mandate 1: all USAID foreign aid to Russia, excluding military aid, shall be phased out over three years.

Mandate 2: Funding for programs cut in Mandate 1 shall be frozen and redirected to repaying US debt to Russia.

Mandate 3: At Russia’s request, current USAID expertise and assistance can continue if funded by Russia.

Since current funds are simply redirected, this plan requires no additional funding.  Finally, let’s examine:

Observation 4: Comparative advantage

Advantage 1: Practical solution

The first reason you should vote for the plan is… it makes sense.  Russia is clearly rich enough to buy our debt, so they clearly aren’t lacking for money to devote to helping their citizens.  In fact, they’ll still be receiving the same amount of money from us – just as a debt payment instead of a gift.  They can use that same money to CONTINUE the same programs USAID offers in the status quo, except they’re paying for it with the money we’ve used to repay our debt.  Win-win situation: Russia doesn’t lose money, but we get to cut out some debt.

However, removing foreign assistance is actually beneficial, as we see from:

Advantage 2: Development better achieved by eliminating government

Claudia Williamson (PhD in economics, post-doctoral fellow at Development Research Institute), July 2009, Appalachian State University Economics Department, Springer Science/Business Media, “Exploring the failure of foreign aid: The Role of Incentives and Information”, http://dri.fas.nyu.edu/docs/IO/12361/WilliamsonRAEAid.pdf (page 15)

Fortunately, we do possess a different approach that achieves development through aligning the right incentives and gathering the necessary information. Instead of relying on collectivist mechanisms, we could turn to private, decentralized actors operating in the market to achieve marginal successes. These private actors spontaneously emerge, can adapt to local conditions by tapping into the decentralized knowledge, and rely on feedback mechanisms for success. For example, this market process is highlighted by Bauer’s small scale trading where entrepreneurs act as middlemen facilitating economic exchange and ultimately advances in economic development. This has a radical implication for aid policy: Donor agencies should be removed from the development process. In its place, the market should be allowed to coordinate the activities that promote economic success. This does not suggest that private, non-government-supported charitable organizations operating with a bottom-up approach should be removed from developing countries; however, it may be more beneficial to the development process if largescale, top-down government-supported aid agencies are eliminated.

Aid has a noble goal, but flawed implementation.  A free-market aid approach would benefit everyone involved by providing more opportunities to Russian citizens, more flexibility for the Russian government, and less debt for the USA.  In conclusion, we return to the words of Janine R. Wedel:

“The United States and other donor countries should not continue their dubious aid-for-reform approach if they wish to encourage the development of democracy and true market reform.”

Would you buy a Prius for its towing power?  Nope, that’s a waste of money, just like aid to Russia.  Aid is wasteful and actually harms the poor in Russia by creating a cyclical dependency that allows the Russian government to pillage the citizens of the tundra, at the cost of the US taxpayer.  Vote affirmative for less debt for the US and better development for Russia.

A little bit of 2A [also see COG’s Aid – BAD brief]

Please don’t try to run this case with just what’s on the page.  If you’re planning to run it, go back and fully cite the cards from the URLs – check them, too, because I pulled these out of old India files.  The URLs may have shifted.  Do more research!

Accountability backup

Government Accountability Office, April 2007, http://www.gao.gov/products/GAO-07-486

“USAID’s Office of the Administrator did not centrally track the obligations and expenditures of USAID missions and bureaus. As a result, the Office was limited in its ability to determine whether funds were used for allocated purposes.”

Humorous quote/card about ‘self-evaluation’ of aid agencies

William Easterly, professor of economics at New York University, April 2006, http://www.cato-unbound.org/2006/04/03/william-easterly/why-doesnt-aid-work/

Although evaluation has taken place for a long time in foreign aid, it is often self-evaluation, using reports from the same people who implemented the project.  My students at NYU would not study very hard if I gave them the right to assign themselves their own grades.

‘Relations’ DA RE: Aid doesn’t help relations

http://www.iht.com/articles/2005/01/06/bloomberg/sxmuk.php Commentary: As aid donor, India displays larger ambitions By Andy Mukherjee International Herald Tribune (global edition of New York Times) Published: FRIDAY, JANUARY 7, 2005

After receiving $935 million in U.S. assistance between 1993 and 1998, India voted against the United States in the United Nations 81 percent of the time -a more formidable show of opposition than by China, Libya and Iran.

Heritage Foundation http://www.heritage.org/research/internationalorganizations/FYI101.cfm

[Some] say foreign aid supports America’s interests overseas and claim that U.S. aid helps America gain influence with countries around the world and that these countries generally support America’s foreign policy goals. A quick look at the facts, however, shows that these arguments are groundless.

Doug Bandow, CATO institute http://www.fee.org/pdf/the-freeman/bandow0802.pdf

Some have pointed to the fight against terrorism to justify more aid. But global poverty has nothing to do with terrorism, else America would have been under siege for years from terrorists from Sub-Saharan Africa, India, and China.

Debt is bad.

http://www.globalresearch.ca/index.php?context=va&aid=6288

Global Research Institute “Spiraling US Federal Debt Triggers Decline of Dollar” July 2007

The U.S. federal debt has reached crisis proportions, approaching $9 trillion in 2007. U.S. Comptroller General David M. Walker has warned that just the interest on the debt will soon be more than the taxpayers can afford to pay. He observed: “We cannot simply grow our way out of [the national debt]. . . The ultimate alternatives to definitive and timely action are not only unattractive, they are arguably infeasible.”

Development Homegrown

William Easterly, professor of economics at New York University, April 2006, http://www.cato-unbound.org/2006/04/03/william-easterly/why-doesnt-aid-work/

Economic development happens, not through aid, but through the homegrown efforts of entrepreneurs and social and political reformers. While the West was agonizing over a few tens of billion dollars in aid, the citizens of India and China raised their own incomes by $715 billion by their own efforts in free markets.

Aid agencies inefficient:

William Easterly, The White Man’s Burden (it’s a book.  Read it if you plan to run a cut aid case) 2006

In aid, 95 percent is implementation. The 95 percent has a long chain of poorly motivated and sometimes corrupt actors in between money and poor people.

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5 Responses to ‘Case of the Week’ 7 Three Years [yeah, it’s back]: The Case to Cut Aid to Russia

  1. Elena Forman says:

    I’ve just enrolled with a debate club, and I hope to run a very similar case. I expect to find this very helpful.

  2. Michael DeBellevue says:

    Hey Samir!

    You know what’s funny? My partner and I wrote a virtually identical case completely independently!

  3. Annonymous says:

    My partner and I just won a tournament with 50 teams running a very similar case. It works! ;)

  4. Giovanni says:

    Here’s what I’ll say about this case.

    1. Insignificant.

    2. Barely has any Russia specific evidence.

    I tried running this case and completely failed. Now I’m running a pwnage version of increase foreign aid and I win most rounds. Don’t take up this case unless your team name is Kemp/Love. <— they are successful with it, which is amazing, but somehow they do it.

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