“Two historic transformations are sweeping much of the world today — the establishment of open market economies and the movement toward more accountable democratic governance.” This assertion, extracted from a US Agency for International Development (USAID) document, reflects a belief widely held among government officials and media pundits alike, who seem to take it for granted that these two “transformations” naturally go hand in hand. Thoughtful observers know better: In much of the Third World, genuine democratization is more likely to hinder than to facilitate imposition of the socially catastrophic, one-size-fits-all program of “structural adjustment” decreed by the International Monetary Fund and pushed by Washington. This is because political freedom would provide those sections of the population most grievously hurt by such measures — massive cuts in social spending, the reduction or elimination of subsidies on basic goods, the dismantling of state enterprises and large-scale layoffs — greater opportunity to resist being so brutally “adjusted.”

Now the US government, through USAID, is trying to figure out how to deal with this problem. As usual, USAID is turning to Washington-area consulting firms for help, and those firms, excited by the prospect of lucrative contracts, have been racing to assemble their own teams of experts on the Middle East and to formulate their bids. Those experts are largely drawn from the ranks of academia, putting scholars at the very heart of what USAID itself thinks of as the first overtly political project it has undertaken since the dark days when it was involved up to its neck in the US war in Indochina.

USAID calls its new initiative the Democratic Institutions Support Project. The version being put together by USAID’s Near East Bureau is called the Governance and Democracy Program. According to USAID documents made available to Middle East Report, the purpose of the Program is to “strengthen the political and legal institutions which underlie democratic governance.” Very nice so far, but then comes the real agenda: “Of particular concern to NE GDP is the relationship between political and economic liberalization, and the challenge of supporting processes of democratic institutional reform that will further economic liberalization objectives.” In plain English: how can we foster reform of the state apparatus and expanded political participation in a way that will induce governments of poor, heavily indebted and politically dependent countries like Egypt, which have been resisting (however feebly) the full IMF treatment, to fall into line?

To help develop the project’s analytical framework, USAID commissioned Alan Richards (of the University of California-Santa Cruz) and Raymond Baker (of Williams College) to do a “political economy review” of Egypt, through a contract with Management Systems International (MSI), a Washington consulting firm. Political economy was once a euphemism for Marxism, back in the days when that term could not safely be used in polite company; now it seems to be the hottest analytical tool in official Washington. Richards and Baker deployed it to produce an interesting and often perceptive portrait of which social groups are likely to benefit and which to suffer as Egypt undergoes IMF-style economic reform, whose necessity they seem to take for granted.

Though they identify “better-off farmers” as a potentially important but relatively under-mobilized support group for structural adjustment in Egypt, Richards and Baker readily acknowledge that the losers are likely to be far more numerous than the winners, leaving only a narrow constituency for economic reform. Yet they also reject the argument that Pinochet-style authoritarian regimes which ignore or repress popular opposition are best able to effect reform. Their way out of this dilemma is to call on the Egyptian government to offer a “new social contract” whereby, as they put it with refreshing candor, broader sections of Egypt’s people could “participate in the design of their own pain,” trading short-term suffering for greater political participation and (they assume) eventual prosperity. (Perhaps it is only a coincidence, but in the US the neoliberal Democratic Leadership Council, one of whose leading lights is Bill Clinton, has also called for a “new social contract” whereby poor and working-class Americans will “lower their expectations” and accept the pain of cuts in social spending so that the federal government can be overhauled, the budget deficit reduced and US big business can compete more effectively in the global market.)

When USAID officials actually got down to formulating their initiative, their approach was a lot less benign than that of Richards and Baker. The “new social contract” idea seems to have fallen by the wayside. “One of the central development challenges facing Near East countries in the 1990s,” a Near East Bureau statement declares, “will be how to move forward with political liberalization in ways that support rather than undermine progress on critical economic reform.” The document goes on to acknowledge that “only a limited segment of these [Middle East] populations would be constituencies for critical economic reform…. The project therefore limits provision of resources under the public accountability objective to activities that will enhance rather than undermine short term reform priorities.” USAID’s view of democracy is entirely instrumental: It has value only to the extent that it facilitates economic liberalization.

“For example,” the document continues, “state-owned enterprise union workers generally resist economic reform. Assistance under the DIS Project for union development would be largely aimed at assisting local unions to explore compromise conditions under which they can support reforms and still protect the interests of their workers.” Given that structural adjustment entails the privatization of state enterprises and massive layoffs of their employees, one can only wonder what “interests” those “assisted” unions will be able to protect.

This kind of blatant political intervention in the affairs of other countries is nothing new, of course. In the labor field, for example, the CIA, assisted by the AFL-CIO, began to infiltrate and reorient European and Third World labor unions more than four decades ago. In those days, the rationale was anti-communism; now the goal is to finesse opposition to the economic policies the US government wants countries like Egypt to adopt. USAID may also see this foray into the political liberalization business as a way to enhance the agency’s image, protect its turf and keep the taxpayer dollars flowing at a time when the end of the Cold War and domestic economic problems have heightened public opposition to foreign aid and raised questions about USAID’s future status.

The proposals put together by the various consulting firms competing for the USAID democratization contract in the Middle East faithfully echo the party line. MSI’s proposal, for example, stresses the need to enhance “the ability of selected organizations and institutions to bring internal pressure on policymakers and the bureaucracies which serve them, to opt for and implement policy reforms” and to support “selected institutions and organizations intended to help citizens make their views heard and thus develop a commitment to otherwise unpalatable reforms.” “Selected” is the key word here: “Pressure” from groups which are likely to suffer from, and therefore to oppose, these policies is not welcome. Democracy is apparently to be reserved for supporters of structural adjustment.

At first, MSI seemed to have the democracy contract, reportedly worth some $10 million, in the bag. It had helped USAID with the initial formulation of the Governance and Democracy Program, it is involved in similar projects in Africa, Haiti and the Philippines, and its proposal proudly claimed that it was a women-owned firm which regarded gender “as a crucial variable in all sector and multi-sectoral development projects and programs” (demonstrating how feminism, like political economy, can be coopted for dubious ends). As its candidate for “senior social snalyst” — head of the Washington-based full-time core team — MSI proposed Marius Deeb. But its ace in the hole was Alan Richards, who has done much work for USAID in Egypt and from the start has played a key role in setting this project’s tone.

As the summer of 1992 turned into fall, though, MSI’s lead evaporated. Worried that USAID might not consider Deeb sufficiently strong in political economy, MSI scrambled to beef up its team by signing up other academics. (For the record: Some Middle East Report editors, board members and authors have also been contacted by, and have agreed to work in various capacities with, one or another of the firms bidding on this contract.) But Richards signed on as a consultant with a rival firm, Chemonics. (Chemonics, with annual revenues of $18 million, 200 employees and branches in Africa, Latin America and South Asia, is a subsidiary of Erly Industries, Inc., which produces and markets food products worldwide.) MSI protested to USAID about Richards’ move, but to no avail: in September word had it that Chemonics had been awarded the coveted USAID contract.

An aggrieved MSI has reportedly obtained a restraining order against Richards, prohibiting him from beginning work with Chemonics until its protest against his defection is sorted out. So it is not yet entirely certain that Chemonics will be the Washington consulting firm chosen to bring democracy American-style to the Middle East. Or to parts of the Middle East, anyway: For obvious reasons, none of the proposals have much to say about democratization (or economic liberalization, for that matter) in Saudi Arabia, Kuwait and the other Gulf states.

How to cite this article:

Al Miskin "USAID’s “Free-Market” Democracy," Middle East Report 179 (November/December 1992).

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