The Multinational Monitor


T H E   F R O N T

AID's Bigness Complex

IN 1987, CONGRESS passed "microenterprise loan" legislation mandating a new, experimental structure for development aid loans. The new program involved targeting indigent individuals with small infusions of cash, and many advocates believed that it offered a creative remedy for some of the poverty in the Third World. But now, evaluations from several sources are reporting that the United States Agency for International Development (AID) has not complied with the spirit of the law.

Congress passed the legislation only after many compromises with AID. The final version required AID to allocate $57 million to microenterprise loans in fiscal year '88 (less than 1 percent of AID's total annual budget for that year) and recommended that the loan size not exceed $300 and that the loans be directed toward businesses owned and operated by the poorest 20 percent of the population. These recommendations were not binding, however, and Congress left it to AID to establish specific guidelines.

"The purpose of foreign assistance is to help the poor," said Michael Rigby, the Legislative Director of Results, a citizen group which supported the microenterprise legislation. "When you make large loans to wealthy businesses, you're doing something completely different." He says that the guidelines that AID established fundamentally altered the effect of the program. AID opposed targeting loans to single-person businesses and generally favored larger loans over small ones.The disagreement between supporters of the microenterprise loan program and AID came down to one question, says Rigby: "Were we going to make loans to individuals living in poverty or were we going to make loans to establish businesses in the hope that they would hire poor people?"

Paul Berkowitz, an assistant to Representative Ben Gilman, R-NY, a co-sponsor of one of the original microenterprise bills, said he thought the money allocated for microenterprise loans was being misspent. "We have been trying to get the figures from AID, but we haven't had much luck," said Berkowitz. "We don't know what the hell they've been doing, but the general feeling is that the money is going to larger loans."

Lynn Herbon, who worked with the House Select Committee on Hunger, explains that the microenterprise loan program was intended to address a credit gap that the Hunger Committee determined was preventing poorer people from running successful businesses. "Poor people have always worked in a deficit situation. To get these people out of the continuous cycle of poverty, we decided to look at them as credit-worthy borrowers."

A microenterprise loan to one business, says Herbon, is an injection of money which can affect a whole microeconomic system. What she describes is a kind of trickle-around theory of development. "If someone were to buy parts from one person, then that person would be able to buy bread from someone else and then that person would be able to buy seeds from someone else ... Microenterprise loans get people out of the unproductive and untaxed informal economy ... They deal with employment problems and stimulate the economy from the bottom up."

Even though the loans are aimed at the bottom of the economic ladder, the risk factor is not very great. Fewer than 2 percent of the smallest microentrepreneurs default on their loans, according to Danielle Yariv of the Results Education Fund.

Microenterprise loans are sometimes, however, expensive and difficult to administer. Because there are thousands of small loans instead of one big one, the administration costs for microenterprise loans tend to be higher than for other kinds of loans, according to Thomas O'Keefe of AID.

Steven Gross of ACCION, a private volunteer organization which receives AID funds to provide microenterprise loans, defended AID's approach. "It's not so much that AID wanted to change the legislation," he said, "but that they see it as counterproductive. They think that an equally effective way to reach the poor is to give loans to semi-small businesses to create jobs."

According to Yariv, however, AlD's methods of operation do not address the problems of the poorest people. "[W]hen you look at where [these loans are] actually going, you find many examples of the money being targeted a few rungs up ... [T]he bulk of AID's microenterprise appropriation is going to the 'private sector strategy.' For AID, it's just business as usual."

In fact, in a preliminary study that looks at 55 percent of the total microenterprise budget, Yariv cites problems with "inaccurate reporting of programs that by no stretch of the imagination could be considered in keeping with the Congressional intent of the definition of microenterprise ... [and] repeated failure to separate the microenterprise component from programs which also served the private sector." Yariv gives the example of a $2.575 million Jordanian program that gave loans to firms with assets of $25,000-$50,000 and a $5.7 million Honduran program which only spent $555,000 on a program that made loans of under $300. The rest went to small businesses.

According to Rigby, AID did not even make new microenterprise loans for fiscal year 1988. He says, "AID defended its estimate that $57 million was being spent for microenterprise support in FY 88 by claiming that such an amount was being spent to support businesses generally employing 10 or fewer workers."

Herbon acknowledged that there is a problem, saying, "It's hard to get the bureaucracy to focus on giving out new microenterprise loans. They have a large tendency to want to just rename small businesses as microenterprises and not change their policy."

When the microenterprise legislation was before Congress in 1987, it was very popular. More than 100 newspapers editorialized in favor of it and the bill had bi-partisan support. Still, AID was against the program. AID, according to Rigby, "preferred to target assistance 'a few rungs up' rather than focus on the poorest 20 percent of the population."

Joseph Lieberson, an AID economist, defended the program implementation. He said, "By any of the measures, we have reached the poor people effectively and [are] helping them grow." But AlD's own stocktaking report admitted that none of the loans reached the poorest segments of the population.

"What makes this all very difficult is that AID is being very uncooperative. They won't provide a breakdown of where the money is going, and they won't acknowledge that they aren't providing loans under $300," Yariv said. "If they would have been frank and stated that they had different goals than we did and that they weren't implementing microenterprise loans, then we wouldn't have this mess. We don't want them to abandon the loans that they already have, we would just like for them to comply more with the intent of the law."

Sam Harris, the director of Results, says that it will continue to try to get AID to comply with the original spirit of the law. "Immediately, our agenda is to tighten up the language of the 1990 earmark. In the long term, we are waiting to see the outcome of more research as to how we can best help get these loans to the poorest of the poor."

- James Harmon

Agent Orange and the CDC

THE CENTERS FOR Disease Control (CDC) undertook an extensive Agent Orange study several years ago to assess the exposure of U.S. ground troops in Vietnam to the highly toxic defoliant, Agent Orange. After spending $43 million on the effort, however, the director of the study announced that it was not possible to make the intended exposure assessments and shut the operation down. His conclusion reinforced the U.S. government's longstanding refusal to compensate veterans for Agent Orange exposure. CDC was effectively saying, as government officials have all along, that it is not possible to award compensation for such damage because there is no way to evaluate the legitimacy of the claims of the 35,000 veterans who insist that Agent Orange caused them to contract skin disease or cancer or caused birth defects in their children.

A subsequent congressional investigation, however, concluded that the decision to halt the study may not have been entirely scientific. "The CDC study was flawed and perhaps designed to fail," declared Representative Ted Weiss, D-NY, head of the House subcommittee that investigated the matter. "Either it was a politically rigged operation, or it was a monumentally bungled operation."

Weiss recently convened hearings on the ill-fated study and aired some damning evidence in support of his contentions. He released, for example, a 1987 memo from the CDC director to the head of the White House Domestic Policy Council concerning the Agent Orange research. The memo was written shortly before the study was killed, and implies that the program was axed for political reasons.

The testimony from a researcher involved in the study is also incriminating. "We were doing bad science at the CDC," he declared. "We knew we were doing bad science ... A number of us were saying so." A statistician, who was collecting data on troop movements and on the areas where Agent Orange was applied, said that CDC administrators restructured the study and altered its variables so routinely that his efforts ultimately became meaningless. "[P]eople lost track of what was true and what was false," he said. The researcher concluded that the claim that it is impossible to assess troop exposure from available information is "baloney" and "completely false."

Vernon N. Houk, director of the Center for Environmental Health and Injury Control of the CDC, flatly disagreed. "Those allegations are incorrect," he told Multinational Monitor. The researcher who testified, Houk said, "basically doesn't know what he's talking about."

Houk explained that the CDC's criteria for accurately determining exposure levels requires being able to place an individual soldier in a particular place within two kilometers (1.2 miles) and six days of an Agent Orange spraying. He emphasized that it is possible to measure dioxin levels among those who were, according to his definition, undoubtedly exposed to the poison; for example, handlers and mixers. But he said that it is "not possible in the ground troops to get exposure levels to do a study." Houk argues that "People who had definite exposure you can measure 20 years later," but that the ground troops show no such measurable level.

But Jeanne Stellman, Ph.D., an associate professor in the department of clinical public health at Columbia University and the director of an American Legion study on Agent Orange, says that the CDC is "setting up a level of definition of exposure which is virtually unmeetable." According to Stellman, "the whole notion" that you can't conduct a proper study "is nonsensical."

The American Legion's study contradicts the CDC's findings, showing that it is possible to classify the soldiers' exposure levels with an acceptable degree of accuracy. "The CDC holds their conclusion out as the gold standard of dioxin research and anyone who contradicts their findings is invalid," says John Sommer, director of veteran affairs and rehabilitation for the American Legion. "We say that's absurd. You can do research on those who were exposed."

Sommer explained that the CDC's methodology was flawed because "it eliminated those who had the opportunity to be sufficiently exposed." For example, the CDC study limited its findings to only those soldiers who were in Vietnam for more than six months but less than a year. It excluded all officers and senior noncommissioned officers and anyone who served more than one tour of duty (a tour being one year). Sommer argues that this practice skews the CDC's findings.

"It's all a big game," says Stellman of the argument that a proper study can't be conducted. The American Legion's Sommer says the CDC claim flouts common sense. "They sprayed 12 million gallons of Agent Orange in an area the size of New Jersey," and yet the CDC still maintains that an accurate report is an impossibility.

- Garth Bray and Stuart Gold

Labor Unity in Guatemala

GUATEMALA CITY--On August 17, the teachers and public employees of Guatemala signed an agreement with the government to end their 11-week strike. The labor dispute had led to increasingly violent confrontations throughout Guatemala and heightened tensions in a country already racked by economic upheaval. In the week before the strike ended, police clashed with protestors in several cities. Four teachers were shot by police and dozens more were arrested.

The teachers, 40,000 strong, walked out of their classrooms in late June, demanding a pay increase. Other public employee unions struck in support of the teachers and about their own salaries.

"I can't live on what I make," said Conchita Rodas, 47, a single mother who has taught primary grades in the capital for 25 years. Rodas explained that half of the 500 quetzales ($200) she earns each month is spent on her own day-to-day needs and those of her three children.

Sergio Arturo Carranza, a middle school teacher, pointed out that inflation, currently running at about 16 percent, has steadily reduced the value of his 560 quetzal ($230) paycheck. He says that Guatemala's poor economic condition has not just affected the poorest citizens. "It's true that most of the teachers are members of the middle class," said Carranza. "But we've included in our demands the lowering of prices for basic food stuffs such as corn, beans and rice, on which the poor depend."

Indeed, Guatemala has been undergoing the worst economic crisis in its history. In early 1987, the Bank of Guatemala concluded that the value of real wages had fallen by 46 percent in just three years. Carranza explains, "We're an agricultural country and we're importing basic grains while international aid goes to the military and other things."

In July, Defense Minister General Hector Alejandro Gramajo publicly rejected the option of military intervention but a few weeks later, as the strike continued, army spokesperson Colonel Arturo Isaacs announced, "the army is ready to intervene if the president asks us to."

On July 13, the teachers gained international attention when they blocked exits of the National Congress during the celebration of the bicentennial of the French Revolution. Government ministers and the Guatemalan diplomatic corps were trapped for six hours. That move led the government to reopen negotiations with the strikers but the talks fell apart a few days later.

The frustrated strikers responded by blockading the major highways entering and leaving the capital, a move that focused political pressure on President Vinicio Cerezo to resolve the conflict but also weakened public support for the teachers.

Meanwhile, pressure mounted from parents demanding a resolution of the conflict before it was too late for students to make up the lost time in the 1989 school year (which normally ends in late October). Cerezo's government worked unsuccessfully to promote parental opposition to the strike, organizing committees in the schools. The recently organized national student association of high school students came out in support of the teachers, adding greatly to the public perception of the strike's legitimacy.

Still, Cerezo refused to grant the striking teachers a raise, claiming there was no money in the budget. Workers, angered at the lavish raises received by the president and top government and military officials in March, rejected this claim. The teachers at Belen pointed out that Cerezo had never abided by a 1985 decree he signed, promising that public sector wages would keep pace with inflation. Frank LaRue, a Guatemalan labor lawyer representing the Guatemalan opposition in the United States, said the teachers "were just asking for what was legitimately theirs."

After six weeks of intransigence by negotiators on both sides, Cerezo offered teachers earning 500 quetzales or less per month a one-time bonus of 35 percent and a 25 percent bonus to teachers earning between 500 and 1,000 quetzales a month. Although many workers were reportedly willing to settle for the government offer, the sticking point in negotiations was the government's insistence on legal sanctions against strikers.

Despite a law permitting government workers involved in a legal strike to receive their pay, Cerezo refused to pay teachers their July salaries. He also refused to restore the jobs of the 590 fired educational employees. The state employees unions, however, accepted Cerezo's offer the following week and returned to work.

After an appeals court upheld Cerezo in declaring the strike illegal, the president threatened to use police force against the teachers who did not return to work by August 14. On that day, thousands of teachers carried out coordinated protests and acts of civil disobedience in 11 departments, or states, of Guatemala. Violence between strikers and police erupted in several towns.

The agreement reached on August 17 included concessions by both parties. The accord specified that fired workers would be rehired, but not necessarily to their original jobs and that teachers would lose 15 days pay and would work until the end of November in order to allow students to complete the school year. The government agreed to establish a commission to study price controls on basic foodstuffs.

LaRue says that Cerezo was able to use time against the strikers. The government could hold out longer than the workers because there is no strike fund in Guatemala and the teachers had been without work for more than two months. Although LaRue concedes that the economic gains of the strike were minor, he says, "From a political point of view it was very successful." By consolidating many different teachers' organizations and maintaining their unity over a difficult 11-week period, Larue says, the teachers established an organization that will be important to the future of labor in Guatemala.

- Sandy Smith

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