Technology Can Cut Off Corrupt Governments

One of the most monotonous but true arguments deployed by people who are instinctively opposed to foreign assistance is that foreign aid raises corruption in many developing countries. The argument is very difficult to rebut because in many respects, the foreign assistance business is in the hands of developing country governments filled with dishonest people who face no disincentives for stealing public money. On a political economy level, it is also possible that foreign assistance displaces local sources of revenue and thereby isolates these governments from the pressures of responding to domestic business owners who would demand improved services. 

And yet for all these potent arguments, one is surprised that the solutions usually rest with the ideological position that because managing this assistance creates risks of embezzlement, then assistance should cease. My view is that as an ideological position, this stance is legitimate but it is less so as an analytical result. Henry Jackelen and Jamie Zimmerman write in Slate that the use of electronic payments would not only reduce the costs of administering aid programs but would also cleverly circumvent corrupt bureaucratic structures in which developing countries excel.  As they state, there is precedent for use of direct payments in executing development projects and their record suggests that the costs of implementing electronic payments into delivery of assistance would be recovered very quickly.