FPI Bulletin: Investing in Human Capital Abroad

April 13, 2016

This bulletin is adapted from Dr. Moyar’s new book, Aid for Elites: Building Partner Nations and Ending Poverty through Human Capital, published in March by Cambridge University Press.

Americans have long been skeptical about the impact of foreign aid, and with good reason. Assistance to developing nations has too often failed to deliver the economic and social progress that proponents expected. Yet some aid programs have been highly effective in strengthening third-world nations, not only in terms of their economies but also in terms of their ability to promote peace and stability. These programs have been directed at improving a nation’s human capital—the stock of skilled individuals responsible for running the public and private sectors.

The primary reason for the effectiveness of these programs is their focus on the talent, skill, and motivation that a population needs to maintain its security, freedom, and prosperity. Only with effective leaders in both the public and private sectors can underdeveloped nations advance to the point where they can be weaned off of aid. A focus on human capital is particularly salient to the post-September 11 era because it is crucial for combating terrorism.

Extremist leaders constitute a variant of what can be called “negative human capital” – people whose education and other forms of acculturation have motivated them to employ their capabilities toward harmful political, social, or economic ends. Little known is that American aid programs have achieved significant success in turning human capital from negative to positive in the few countries where they have funded educational programs that stress religious moderation, such as Morocco and Pakistan.

Human capital is also an essential ingredient in indigenous capabilities for countering terrorism, which directly reduce the need for U.S. counterterrorism expenditures in the long run. The primary determinant of a state’s effectiveness in combating extremist organizations is its ability to provide security and governance, which is a function of its human capital. Al Qaeda and other international terrorist organizations thrive in countries where the government cannot secure and govern the entirety of its territory, such as Mali, Somalia, and Yemen. By contrast, countries with well-led security forces and civil administrations, such as Oman and Qatar, are much better at finding and incarcerating terrorists and hence have far fewer terrorists running loose within their borders.

Human capital is even more important in counterinsurgency and civil wars than in counterterrorism, because those types of conflicts involve every aspect of governance. Success demands the participation of effective battalion commanders, town mayors, and district police chiefs who can gain the support of the population. If the government has only a few good police chiefs or mayors, the enemy can evade them by moving to locations where the chiefs and mayors are weaker.

Democratization in the developing world also hinges on human capital. Democracies have been subverted when their leaders and the cultures that shape them do not adhere to critical principles that have enabled democracy to endure in the West, such as pluralism and respect for the rule of law. Failed democratic experiments have often resulted in humanitarian catastrophes and the spread of violent extremism, as for instance in Libya and Yemen. They have compelled the United States and other countries to provide humanitarian relief and military assistance and, in some cases, their own military forces.

Another way to reduce the need for American or European boots on the ground is by channeling human capital assistance to the peacekeeping forces of partner countries. Improvements in the leadership of non-Western armed forces, to which Western assistance has contributed greatly, have already permitted those forces to participate in peacekeeping missions that might otherwise have required U.S. forces. In Africa, nations such as Uganda, Ethiopia, Kenya, Burundi, and Rwanda have contributed the bulk of manpower for a host of peacekeeping missions. Not all of these missions have been shining successes, but they have prevented the resumption of conflict in such hot spots Liberia and Sierra Leone.

Improvements in human capital can also play a role in combating the flow of illicit narcotics into the United States. The countries where narcotraffickers prosper usually suffer from human capital shortfalls and the attendant problems of weak governance and insecurity. No country, regardless of how much foreign aid it receives, can suppress drug trafficking if it lacks lengthy rosters of honest policemen, courageous mayors, and skilled criminal investigators. Recent victories in reducing the flow of South American cocaine into the United States have resulted primarily from human capital improvements in Mexico and Colombia. 

In the current climate of fiscal restraint and skepticism about the effectiveness of foreign aid, the American people must be convinced that investing in the developing world will both enhance American security and save American money. Human capital investments meet both of these criteria, as they are inexpensive in relation to the threats they mitigate and they often yield dividends at rates that rapidly recoup the initial outlays. Through training, education, and other forms of support, the United States can and should transform other nations so that, like South Korea and Chile, they cease requiring foreign assistance and instead become trade partners, military allies, and providers of foreign assistance to nations that still need it.

Mission Statement

The Foreign Policy Initiative seeks to promote an active U.S. foreign policy committed to robust support for democratic allies, human rights, a strong American military equipped to meet the challenges of the 21st century, and strengthening America’s global economic competitiveness.
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