Ann Jones:

The story of success in Afghanistan was always more fairy tale than fact — one scam used to sell another. Now, as the Bush administration hands off “peacekeeping” to NATO forces, Afghanistan is the scene of the largest military operation in the history of that organization. Today’s personal email brings word from an American surgeon in Kabul that her emergency medical team can’t handle half the wounded civilians brought in from embattled provinces to the south and east. American, British, and Canadian troops find themselves at war with Taliban fighters — which is to say “Afghans” — while stunned NATO commanders, who hadn’t bargained for significant combat, are already asking what went wrong.

The answer is a threefold failure: no peace, no democracy, and no reconstruction. [...]

But there’s more to the story than that. To understand the failure — and fraud — of such reconstruction, you have to take a look at the peculiar system of American aid for international development. During the last five years, the U.S. and many other donor nations pledged billions of dollars to Afghanistan, yet Afghans keep asking: “Where did the money go?” American taxpayers should be asking the same question. The official answer is that donor funds are lost to Afghan corruption. But shady Afghans, accustomed to two-bit bribes, are learning how big-bucks corruption really works from the masters of the world.

A fact-packed report issued in June 2005 by Action Aid, a widely respected NGO, headquartered in Johannesburg, South Africa, makes sense of the workings of that world. The report studied development aid given by all countries globally and discovered that only a small part of it — maybe 40% — is real. The rest is “phantom” aid; that is, the money never actually shows up in recipient countries at all.

Some of it doesn’t even exist except as an accounting item, as when countries count debt relief or the construction costs for a fancy new embassy in the aid column. A lot of it never leaves home. Paychecks for American “experts” under contract to USAID, for example, go directly from the Agency to their American banks without ever passing through the to-be-reconstructed country. Much aid money, the report concludes, is thrown away on “overpriced and ineffective Technical Assistance,” such as those very hot-shot American experts. And a big chunk of it is carefully “tied” to the donor nation, which means that the recipient is obliged to use the donated money to buy products from the donor country, even when — especially when — the same goods are available cheaper at home.

The U.S. easily outstrips other nations at most of these scams, making it second only to France as the world’s biggest purveyor of phantom aid. Fully 47% of American development aid is lavished on overpriced technical assistance. By comparison, only 4% of Sweden’s aid budget and only 2% of Luxembourg’s and Ireland’s goes to such assistance. As for tying aid to the purchase of donor-made products, Sweden and Norway don’t do it all; neither do Ireland and the United Kingdom. But 70% of American aid is contingent upon the recipient spending it on American stuff, especially American-made armaments. Considering all these practices, Action Aid calculates that 86 cents of every dollar of American aid is phantom aid.