The Irony of Donor Efforts to Build Institutions: A Case Study From the Dominican Republic

Author(s): Carrie A. Meyer

Source: Journal of Institutional and Theoretical Economics (JITE) / Zeitschrift für die gesamte
Staatswissenschaft, Vol. 148, No. 4 (December 1992), pp. 628-644
Published by: Mohr Siebeck GmbH & Co. KG
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 Journalof Institutional Economics(JITE) 148(1992),628-644
and Theoretical
Zeitschrift
fürdie gesamteStaatswissenschaft

The IronyofDonor Efforts

to BuildInstitutions
:
A Case StudyFromtheDominicanRepublic
by
Carrie A. Meyer*

Abstract

Donorshavebeenbuildingruralpublicinstitutions in developingcountries
for
over fortyyearsand the changingdonor fads and goals over the yearsare
reflectedin theseinstitutions. This paper applies a theoryof institutional
change to a case studyof the extensionservicein theDominican
agricultural
Republic. It demonstratesthat becausedonors haveledthedemandforinstitu-
tionalchangein theruralsector,institutionsirrelevantto theneedsoftherural
havebeencreatedand thedomesticprocessofinstitutional
clientele changehas
beendisrupted.(JEL: 02)

1. Introduction

Theinternationalaid community has beeninvolvedwith"institution building"

forruraldevelopment inLatinAmericasinceshortly afterthesecondworldwar
and a varietyof approacheshave come and gone. Disillusionment withthe
early"community development"approachsoon broughtefforts to increase
production(Ruttan [1984]).The Cuban Revolutioninspiredthe
agricultural
Alliance Progressto pushforagrarianreform
for programsin theearly1960s
(Grindle [1986]). In the 1970s "integrated rural development"came into
fashionwithan emphasison providing "basic needs"(Ruttan [1984]. Lacroix
[1985]).The privatesectoris the newestalternative (Sarles [1987]).Donors
havebuiltnewlocalpublicinstitutions witheachnewapproach,butresultshave
been disappointing. Internationaland local ruraldevelopment practitioners
havefoundpublicinstitutions to be stumbling blocksforruraldevelopment.1
* Partialfundingforthisresearch Inc. through
Alternatives
by Development the
DESFIL projectis gratefully
acknowledged.Theideasexpressed,
however, shouldbe
totheauthor
attributed alone.I amindebted
toJoanAnderson,
TylerCowen, JackHigh,
JosephReid,KarenVaughn, Richard Wagner,andtwoanonymous referees forcom-
mentsonearlier ofthispaperandtoalloftheDominican
drafts personnel interviewed.
1 For an levelsee Israel [1987]and at thelocal levelin
exampleat theinternational
theDominicanRepublicsee Aquino Gonzalez [1978].

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148/4(1992) TheIronyofDonorEfforts
toBuildInstitutions 629

Thispaperusesinsights fromtheNew Institutional Economicsto re-examine

donorefforts to buildinstitutions.2 Specifically,an economictheoryofinstitu-
tionalchangeis appliedto a case studyof theagricultural extensionservicein
theDominicanRepublic.Changesinducedbydonorssuchas theInterAmeri-
can DevelopmentBank (IADB) and theU.S. AgencyforInternational Devel-
opment(USAID) are examinedin a framework of demandand supplyfor
institutionalchange.I arguethatbecausetherelevantdemandforinstitutional
changeis fromdonoragencies,it is not surprising have
thatruralinstitutions
beenfoundto be inadequateto meettheneedsof theruralclientele.Rather
thanserving theneedsoftheruralclientele, theruralinstitutionsservetheneeds
of thedonors.
Institution buildingeffortsare shownto create,in thisinstanceat least,
institutionsirrelevant to thepurported domesticclientele.But,are thesedonor
financed institutional changesmerelyirrelevant or havetheireffectsbeendam-
aging? The questioncannot be answeredconclusivelybecause donors,by
providing training and newtechniques, positivelyinfluence
thefuturesupplyof
institutional change.However, donors have clearlydisruptedthe domestic
process of institutional change for the rural publicsectorin the Dominican
Republic and have leftthem with public institutionsthatdo not servetheir
public.
The economictheoryof institutional changewhichservesas theframework
for the studyis presentedin section2. Section3 identifies how the theory
appliesto the ruralpublic sectorin the Dominican Republic. 4 and 5
Sections
introducethe ruralinstitutional framework in the DominicanRepublicand
developa case studyapplyingthetheoryofinstitutional changeto thechanges
inducedin theDominicanagricultural extensionservice.Implicationsand con-
clusionsare summarized in section6.

2. Institution
Buildingand Institutional
Change

Social scientistsdisagreewithinand among disciplineson exactlywhat an

institutionis.3 Sociologistssuchas Selznick [1957]forexample,have main-
tainedthat," 'to institutionalize'
is to infusewithvalue beyondthetechnical
requirements ofthetaskat hand."4 The institution buildersofdonoragencies
haveused thisdefinition, focusingon how to infusevalueintotheinstitutions
of developingcountries(Uphoff[1986,8-10]).
Manyeconomists, however, haveadoptedthedefinition thatinstitutions
are
rulesofbehavior- arrangements betweeneconomicunitsthatspecify howthey
2 See Blase
[1986]foran annotatedbibliographyofthe"institution building"litera-
ture.Uphofff19861is also an excellentguideto thisliterature.
3 Variousdefinitions and economistsare explainedin Blase
employedbysociologists
[1986,323-329].
4 As citedin Uphoff
[1986,9].

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630 CarrieA. Meyer <ϋΠΤΠΕ

can be expectedto interactwitheach other(North [1990]. Ruttan and

Hayami[1984].Schultz [1968]).As such,theyreduceuncertainty and struc-
tureincentives. Institutions are recognizedas performing valuableeconomic
functions and as beingcostlyto create.5Withinthiscontext, institutionscan be
viewedas endogenousto theeconomicsystem, responding to forcesof supply
and demand.
Institutionsshouldbe distinguished fromorganizations. The organization is
a decisionmakingunitwithlegalpersonality; or,to use theanalogyin North
[1990]:institutionsare therulesofthegameand organizations are theplayers.
Institutions and organizations haveconsiderably interaction one withanother
- each shapingtheother.
Workingfromthehypothesis thatinstitutions are builtand changedue to
forcesofsupplyand demand,itwillbe shownthatforeign donorscannotonly
failto infusevalueintoinstitutions in developingcountries, butin theirefforts
to build,theycan actuallyteardowninstitutions the
serving developing country
clientele.
TheDemandSide. Manyauthorshaveproducedcase evidenceto showthat
institutional changemay be demand-induced (Demsetz [1967]. North and
Thomas[1970].Ruttan and Hayami[1984]).Changesin relativeproductand
factorprices,changesin technology, and changesin thesize ofthemarketcan
all exertpressureon existinginstitutions creatinga demandforinstitutional
change.Opportunities are created forincreased profitswithnewinstitutional
arrangements to
designed capture economies of scale and reducetransaction
costs.Demsetz [1967].forexample,describeshow increasedpricesof fursin
earlyAmericaencouragedtheemergence of privateproperty rights.
Althoughinstitutional changescan be broughtaboutas a resultofindividual
initiativeto captureincreasedprofits, institutional innovationis essentially a
publicgood. Someinstitutional changeswillbenefita greatmanywhileothers
may benefitrelativelyfew.Revealingthe demandforinstitutional changes
whichwouldbenefit a largeand dispersedclientele Alainde Janvry
is difficult.
[1973]discussestheproblemin termsoftranslating "latent"demandforpublic
institutionsinto"actual" demand.In otherwords,althoughpublicinstitutions
maysupplyservicesbeneficialto many,theirvalue mustbe translatedintoa
demonstrated willingness to pay fortheinstitutional changesrequired.Due to
freeriderproblems, public sector provisionand/or enforcement ofmanyinsti-
tutionsis oftennecessary.The fieldof publicchoice has demonstrated the
inefficienciesinvolvedin thisprocessoftranslation.6 The distribution ofpower
and wealth,along withinterest groupdynamics,helpsto determine how the
demandforinstitutional changefiltersthrough politicaland economicprocess-
es (Olson [1965]).

5 See Williamson
[1985]on theeconomicvalue of majorinstitutions
of capitalism.
6
See, forexample,Buchanan and Tullock [1962],Mueller [1979],and Olson
[1965].

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148/4(1992) TheIronyofDonorEfforts
toBuildInstitutions 631

TheSupplySide.In orderforinstitutional innovationto occur,theremustbe

adequatecompensationto thepoliticalentrepreneurs and innovatorsforthe
necessarymobilizationof politicalresources.Generallytheprivatereturnto
politicalentrepreneurs differsfromthe social returnof theinnovation.This
impliesthat the institutional innovationwill not be suppliedat a socially
optimallevel.The theoryofrentseekingfocuseson thoseinstitutional changes
whichbenefitthepoliticalentrepreneur butnotthegeneralpublic.7Likewise,
sociallybeneficialinstitutional innovationsmay not be suppliedforlack of
appropriateprivatebenefitsto the political entrepreneurs. Ruttan and
Hayami[1984]pointto thelack of institutionalized researchcapacityin Ar-
gentinaas an exampleof the latter.North [1981] arguesthat rulershave
historicallystood in the way of institutional changesthatcould benefitthe
generalpublicifthechangewerenot to theirpersonalbenefit.
Sincethesupplyofinstitutional changealso dependson theexisting stockof
knowledge, thecostofinstitutional design,and theexpectedcostofimplement-
ingnewinstitutions (Feeny [1988]),thesupplyofinstitutional innovationmay
be enhancedbypublicresearchin thesocial sciencesand theabilityto borrow
institutionsand drawon theexperience ofothers(Ruttan and Hayami[1984]).
Researchand legworkwhichincreasethestockofknowledge(or generallevel
ofcomprehension), lowerthecostofinstitutional design,and reducetheuncer-
that
tainty policy makers face are positivesteps toward shiftingout thesupply
ofinstitutionalchange.Educatinglegislators as wellas the generalpublicabout
theprivateand social costsof institutional change could "reducethecost to
of
politicalentrepreneurs introducing socially desirable institutionsand raise
thecost of biasinginstitutional change in a manner that is to
costly society"
(Ruttan and Hayami[1984,215]).
ThePathDependent ProcessofChange.The supplyand demandframework
is usefulillustratively
but theseforcesof institutional changedo not generate
an equilibrium. Institutionalchangeis a dynamicprocess.Responselags are
longand forcesof changeare constantly at work.North [1990]stressesthat
institutionalchangeis a path dependentprocess,heavilyinfluenced by ideas
and byhistory. He pointsout that"the interdependent webofan institutional
matrixproducesmassiveincreasing returns"and thatforthisreasonchanges
are overwhelmingly incremental (North [1990,95]). Othershaveexaminedthe
pathdependentnatureof institutional changein a gametheoretic framework
and have shownhow thiscan lead to thepersistence of inefficientinstitutions
(Binger and Hoffman[1989].de Janvryand Sacoulet [1989]).8

7 See Krueger Γ19741 and Tullock [19671.

8 Nabli and Nugent
[1989,1342-1344]reviewthecontroversy theeffi-
surrounding
ciencyof institutional
change;Bardhan [1989,1391-1393]reviewsotherliterature
on
thepathdependenceof institutional change.

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632 CarrieA. Meyer ΛΠΤΓΙΕ

Certainlytheinstitutionalstatusquo ofanysocietycannotbe expectedto be

perfectlyefficient.9
Thisis so notonlybecauseexistent institutions
maytendto
butalso becauseofproblemsconsolidating
persist, demandforpublicservices
and because of the inevitablegap betweenthe privateand social returnto
institutional
innovation.Thus, were the relevantforcesof demandfor and
supplyof institutional
changepredominantly domestic,certainindividualsor
sectorswould likelybenefitfromthe institutional statusquo farmore than
others.Nevertheless,theinstitutionalchangeswhichoccurredwould be sup-
portedby domesticforcesof supplyand demand.
The questionthispaperdealswith,however, is notthequestionofefficiency
of institutional
change,butof therelevancy of donor-ledinstitutionalchange
to theclienteleofruralpublicinstitutions
in developingcountries.The follow-
ingsectionoutlinesbriefly how thetheoretical framework appliesto thecase
at hand.

3. Institutional
Changein theDominicanRepublic

TheOrganization and theInstitutions. Thispaperdealsprimarily withtherural

public institutionsin the Dominican Republic thatinteractwith such organiza-
tionsas theministry of agriculture. The ministryof agricultureis governedby
(and governs)manyinstitutions orrulesofbehaviorwhichspecify howministry
of agriculture personnelshouldinteractwitheach otherand withthe rural
clientele.It is usefulto thinkof the institution of the agricultural extension
service,forexample,in termsof setsof rulesof behavior.Justas in thegame
of baseballthereare "the rules"as a wholeand individualrulespertaining to
specificactions,so also is the extensionservicean institution - a way of
providingtechnicalassistanceto farmersand it is made up of institutions -
-
culturalnorms,donorrequirementsthathelpto determine exactlyhow the
extensionagentdoes hisjob.
The Pressureof DonorDemand.Donors includechangesin institutions in
ways that have attractedconsiderableattentionin the institution building
literature. The short-term, project-orientedapproachof donors,is foundto
havenegativeconsequences(Uphoff[1986]).Lacroixnotesthat"theemphasis
on shorttermresults, on meetingdeadlines,on disbursement offunds,leadsto
a strategic approach of institution buildingthatis equally short termand is
oftenmeantto servemainlythedirectinterests ofa specificproject"(Lacroix
[1985,12-13]). The projectorientation imposedbydonorson theagricultural
extensionservice,affects therelativepricesfacedbythepersonnelinvolvedat
all levels.A higherreturn is availableto thosewhocan showresultsin theshort
termand delivertheappropriatestatistics and reports.Thus,implicitrulesof

9 heremeansthatthemarginalsocial cost of institutional

innovationis
Efficiency
equal to themarginalsocial benefit.

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148/4(1992) TheIronyofDonorEfforts
toBuildInstitutions 633

behaviorare modifiedand institutional changeoccurs.For the Dominican

extension servicethishappenedrepeatedly at thebeginning and theendofeach
newdonorprogram.
It is also relevantto ask whatkindof domesticdemandforan institution
suchas extensionservicewouldexistwithouttheavailabilityof donorfunds.
The dissemination of thefruitsof agricultural researchis a publicinstitution
thatprovidesbenefits to a largenumberof farmers throughthepotentialfor
increasedproductivity and to an even largernumberof consumersthrough
lowerprices.Thedemonstrated willingnessoftheDominicancitizensto payfor
agricultural extensionservicewouldlikelyunder-represent therealvalueofthis
publicserviceto them.And, in thissocietywherepowerand wealthare dis-
tributedin a skewedfashion,perhapsonly the demandsof wealthyrural
clientelewouldfilter through thepoliticalprocess.In theDominicanRepublic,
however,the relevantdemandforchangesin the extensionservicehas been
externalratherthanlocal.
DominicanPoliticalEntrepreneurs SupplyInstitutional Change.For institu-
tionalinnovationto occurforruralpublicinstitutions in theDominicanRe-
public,Dominicanpoliticalentrepreneurs mustbe adequatelycompensated.
Again, there is no reason for the privatereturn to thepoliticalentrepreneur to
be thesameas thesocialreturn. A ministryof agriculture for
official, example
mayearna largeprivatereturnforinstituting a newdepartment whichhe can
to a
head, carry-out pet project of thepresident; but the social returnto this
institutional be
changemay insignificant. Research in institutionaldevelop-
mentundertakenby donor agenciesshould serveto enhancethe supplyof
institutional innovation.The educationthat recipientcountriesreceiveby
virtueofexperience withdonorsprogramsshouldenhancetheirunderstanding
of therelevantcostsof suchchange.
Path Dependence.The influenceof donor organizationson institutional
changein countriesliketheDominicanRepublicis feltnotonlyon supplyand
demandin thecurrentperiod,but on theentirepath of institutional change.
The factthatextensionservicesare paid forbyU.S. fundscan createexpecta-
tions,farintothefuture, thatit is notnecessary to marshalldomesticforcesto
providethesepublicservices.The educationand experiencereceivedworking
withdonor agencieswill also permanently affectthe path of institutional
change.

4. TheDominicanRuralInstitutional
Framework

DominicanAgriculture. The privateinstitutions

ofDominicanagricultureshow
strong linksto their
colonialroots.Santo Domingo, foundedin 1493,was the
firstcolonyof Spain in theNew Worldand initially
serveda majorport.With
muchlessgoldthantheSpanishcolonieson themainland,sugarroseto be the
primary focusoftheDominicaneconomyearlyin thesixteenth century (Moya

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634 CarrieA. Meyer JJOTEE

Pons [1978]).Sugarwas themainstayof theislandeconomy,accountingfor

over50 percentofexportearnings untiltheearly1980swhensugarquotasfrom
theU.S. werecut(Meyer[1989,31-32]). Othermajorcropsforexportinclude
coffee, cocoa, and tobacco.Rice fordomesticconsumption is themostimpor-
tantcash crop followingsugarcane. Beans and plantain,also fordomestic
consumption, rankwiththeothermainexportsin termsof cash value impor-
tance.
Agricultural land is distributedveryunequally,despiteland reformefforts
beginning in theearly1960s.Censusdata revealsthatin both1981and in 1950
lessthan1 percentoffarmscoveredabout45 percentofthetotalarea in farms,
whilefarmsunder10hectarescomprised around90 percentofthetotalnumber
and littlemorethan20 percentof thetotalarea (Meyer [1989,37]).
TheAgricultural extension service,thatis thefocusofthiscase study,has the
of
primaryresponsibility providing technical assistanceto the smallfarmer.
the of
Unfortunately, productivity principal small farmercropssuchas cocoa,
tobacco,coffee, and beans, shows littleor negativechangeover the period
underquestion(Meyer [1989,35]).
HistoricDonorSupport fortheRuralPublicSector.Donors,notablyUSAID,
have playedan enormousrole in layingthegroundwork forthe Dominican
ruralinstitutional framework. Immediately aftertheCuban Revolution(which
coincidedwiththedeathof longtimedictatorRafael Trujillo)and duringthe
U.S. occupationoftheDominicanRepublicin 1965,thiscountry receivedmore
U.S. aid per capita thanany othercountryin theworld(Wiarda and Kry-
zanek [1982,85]).The majorpublicagricultural agency,theSecretary ofAgri-
culture(SEA), has reliedon foreignaid forapproximately 20 percentof its
budget;however,sincemostof SEA's budgetgoes to maintaining thebureau-
cracy,it has beenestimatedthat80 percentof theoperationsbudgetis from
externalsources(Iica [1989,9]).
The earliestruralpublicorganizations includedtheministry of agriculture,
latercalled the Secretaryof Agriculture (SEA), firstcreatedin Februaryof
10
1854,and theAgricultural Bank,establishedunderTrujilloin 1945. In the
1960s,however,withheavyU.S. aid, manyruralpublicorganizationswere
established.Amongtheseis theDominicanAgrarianInstitute(IAD), estab-
lishedin April 1962 as a resultof domesticpressureto redistribute lands
consolidatedby Trujillo,and hemispheric for
pressure agrarian reform. The
IAD was giventheresponsibility to redistributestateand privatelyownedlands
to the ruralpoor, and to establishirrigation projects,creditprograms,and
otherservicessuchas agricultural extension, marketing and cooperatives.The
InstituteforCooperativeDevelopmentand Credit,(IDECOOP), whosepur-
pose is to promoteand establishcreditcooperatives, was createdin 1963; and

10 A domestic
bytheU.N. andO.A.S. documents
studyfinanced thestateoftherural
in the DominicanRepublicand the historyof theirformation
institutions : Onaplan
[1983,202-221].

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148/4(1992) TheIronyofDonorEfforts
toBuildInstitutions 635

in 1965theNationalInstitute of HydraulicResources(INDRHI), responsible

forconstructing and maintaining irrigationsystems, was created.
Also in 1965,a newlaw was passedto reorganize and establishthelegalbasis
of SEA as thehead of thenationalagricultural policyand coordinatorforall
otheragricultural agencies.The same law establishedthelegaljurisdiction of
the Agricultural Bank, whichbecame the primarysource of creditfor the
agricultural sector.The legaljurisdictionof IAD, IDECOOP, and INDRHI
werealso establishedat thistime.
The National Instituteof Price Stabilization(INESPRE) was createdin
December1969 withthe participation of US AID and is responsibleforthe
commercialization and stabilizationof the pricesof primarycommodities.
CEDOPEX (DominicanCenterforthePromotionof Exports)was createdin
1971 and worksprincipally to promoteagricultural exports.
A ShiftofSupporttothePrivateSector.In theReaganyearsUSAID restrict-
ed funding to thepublicsectorand establishedtwoprivatenonprofit organiza-
tions,the JACC (Agricultural Enterprise Board of Consultingand Co-invest-
ment)and theFDA (Agricultural DevelopmentFoundation),in 1984and 1987
respectively. The JACC is oriented to theagricultural enterpriseratherthanto
thesmallfarmer.Althoughdesignedto be self-supporting in thefuture,cur-
rently, theprojectforAgricultural Enterprise Promotion,forexample,is sup-
ported 37.5 percentbygrants from USAID and 12 percentbytheDominican
1The FDA worksinthearea ofresearchand
government.1 technology develop-
ment.
Ruralpublicinstitutions and theorganizations whichgovernthemare cur-
rently underseverepressures. A 1986reportbyLuis B. CrouchdescribesSEA
as "paralyzed,practicallynon-operational ... it has lost its credibility
with
donor and lendinginstitutions. Donors don't want to give assistanceto re-
searchbecausetheyfearthattheSecretary willsyphonoffresourcesto meet
politicalpressures"(Crouch [1986,6]). Compoundingthecredibility problem
ofSEA, accordingto Crouch,is thepublicfinancial crisiswhichhittheDomini-
can Republicin 1981.
Meanwhile,theprivatenonprofit organizations aregainingpoliticalforce.A
studyelaboratedbytheInterAmerican InstituteforCooperationinAgriculture
(Iica [1989])documentsthatpoliticalstrength in the agriculturalsectorhas
shifted fromSEA - whichhas beenthemajorpoliticalforcein agriculture for
almost150years- to organizations suchas CEDOPEX and JACC.The career-
longDominicanprofessionals in agriculture policy,interviewed by theauthor
inJanuary of1990,12sawpositiveand negativeaspectsto thegrowthofprivate

11 Thisis fora threeand onehalf

yearprojectthatwillcosta totalofUS$ 10.4 million.
See Jacc [1989,71.
12 These are CarlosAquinoGonzalez- JACC(Agricultural
professionals Enterprise
BoardofConsulting and Co-Investment) former
vice-pres, SEA director,
FUNDEJUR

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636 CarrieA. Meyer <ΒΠΤΠΕ

sectorinfluence. Theyagreedthatthepublicsectorhad discredited itself,that

continuity was lacking,and thatfundswerediverted.Althoughtheyfeltthat
theinternational organizationshad good reasonto no longertrustthegovern-
mentagenciesto responsibly carryout theirprojects,all wereinsistent thatthe
publicsectorshouldplaya role.
Thus theruralpublicinstitutionalframework, erectedbydonors,is collaps-
ing since it no longerfillsdonor needs. Dominicanpoliticalentrepreneurs
recognizedomesticdemandsforinstitutions distinctfromexternaldonorde-
mand,butthepayoffforbuildinginstitutions accordingto donorspecifications
is muchgreater. Donorsthen,stilllead thedramaticinstitutional changesinthe
DominicanRepublic,over-ruling domestic demand.
In buttressingthepublicsectorruralorganizations and suddenlywithdraw-
ingsupport, donors helpedto furtherdiscredit therural institutions.Bereftof
credibilityand the of rural
power enforcement, public institutions were dam-
aged. Given the path dependentnature of institutionalchange, loss of confi-
dencein theruralpublicsectoris likelyto be feltforsometime.

5. The Case of theExtensionService

The historyof the Dominicanagricultural extensionservicefromthe early

1960smirrors thechanginggoals of theaid community in LatinAmerica.As
donorgoals changed,extensionprogramsroseand fell,and a myriadof insti-
tutionalchangesoccurred.The promiseof donorfundsand theopportunities
forpersonaladvancementservedas adequate compensationto Dominican
to supplytherequisitechanges.13
politicalentrepreneurs
TheInfluence extensionservicewas
oftheU.S. inthe1960s.The agricultural
establishedin theDominicanRepublicin 1962undertheauthority ofSEA and

(Foundationfor Rural Youth Development)vice-pres;Angel Castillo- Directorof

CenterforAdministration ofRuralDevelopment ofISA (SuperiorInstitute ofAgricul-
ture);FernandoDurán- Directorof ExtensionunderTraining& Visitssystem;Benito
Ferreiras - Rectorof ISA; VirgílioMayol- JACCAgri-Business Specialist,Directorof
ExtensionunderPIDAGRO; Dr. Wilfredo Moscoso- researcher at ISA; BélgicaNúnez
- IAD Β D.R. Agriculture projectofficer,
formerly researcherat UEPA (Agricultural
PolicyStudiesUnit); Dr. AgapitoPerezLuna - IICA (Interamerican Instituteof Coop-
erationin Agricultural Sciences)since1980,previouspositionsin SEA and Banco Agri-
cola; Dr. FranciscoPerez Luna - ExecutiveDirectorof UEPA, formerSecretaryof
Agriculture; AlbertoRodriguez- Peace CorpsProjectOfficer, formerly teacherat ISA;
FrankRodriguez- privateconsultant: of ConsensoAgrário,previousdirectorof IAD,
previouspositionsat INDRHI and IDECOOP; Pablo Rodriguez- researcher at UEPA.
Information andcomments nototherwisedocumented aretakenfromtheseinterviews.
Quotedmaterialis translated fromtheSpanishby theauthor.
13 Thereis no intent,withsuchstatements, anyoftheDominicanperson-
to discredit
nelinvolved, manyofwhomhavelaboredaltruistically. I merelyassumethatall individ-
uals are self-interested.

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148/4(1992) toBuildInstitutions
TheIronyofDonorEfforts 637

was supportedduring1962-1967byloan # 6 betweentheDominicangovern-

mentand USAID (Onaplan [1983,194]). The firstfourregionalagenciesof
extensionwereestablishedin 1963. By 1967 therewere21 agenciesand 70
extensionists in additionto operationalresources(Naut [1984].441-442]).
The Dominicanextension servicewas modeledaftertheUnitedStatesexten-
sion servicebased on land-grantuniversities. Durán commentedthatif the
Dominicanextensionservicedid nothaveall ofthecharacteristics ofthatofits
northern neighbor,at leastit was builtaccordingto theland-grant dream.In
additionto thefunds,in 1965,approximately 65 technicalassistancepersonnel
- enoughto filla wholeflooroftheSEA - weresentin byUSAID. Established
at the end of the "communitydevelopment"era, the extensionservicewas
based on informal educationfortheruralfamily.In keepingwithotherrural
development programsin Latin Americaat thistime,the orientationof the
effort was moresocial and politicalthaneconomic.Rural organizations were
encouragedaccordingto thefollowing types: producergroupsfortheheadsof
thehouseholds,domesticorientedgroupsforhousewives,and "clubes 5 D"
(modeledafter4 H clubs in the U.S.) forthe ruralyouth.Carvajal [1982]
describestheextensionists as missionaries of ruraldevelopment.
Substantial effortsand resourcesweredevotedto theextensionservicein this
periodbutit was notwellacceptedby theruralclientele.Some claimthatthe
U.S. modelseemedforeignand out of place in theruralDominicanenviron-
ment.Aquino Gonzalez,on theotherhand,directorgeneralof SEA at that
time,reportsthattheextensionservicewas acceptedinitially butbeganto fall
out offavorin 1965,theyearoftheU. S. invasion,eventhoughthesupportof
USAID continued.By 1967however,boththeUSAID projectperiodand the
funding ended.
As futurereference for Dominicanpoliticalentrepreneurs, however,the
experience undertheU.S. modelmade lastingimpressions. Aquino Gonzalez,
forexample,is an activepoliticalentrepreneur, helpingto foundmanyorgani-
zationsand lay out theirinstitutions. He has beenparticularly activein FUN-
DEJUR (FoundationforRural YouthDevelopment),a privateorganization
thatresembles4 H in theU.S.
A PeriodofDecline.Between1967and 1973,as "community development"
fellout of favoramongdonors,theextensionservicewas leftto functionon
domesticresourcesand by 1972it had practically disappeared.Severalexten-
sionagencieswereclosed,serviceswerereduced,and training oftheagentswas
deficient(Perez Luna [1989,22]). The end resultwas a destruction of the
credibilityof the extension service
and to a greatextentthat of SEA. The SEA
is citedas "one of themostdramaticexamplesof theerosionof institutional
power,passingfromtherulingorganismof nationalagriculture policy,to a
deficient instrument of technicalassistanceto the farmer"(Onaplan [1983,
14
200]).
14 Translatedfromthe
Spanish.

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638 CarrieA. Meyer ΛΠΤΓΙΕ

Under the USAID programand the promiseof fundingfor a five-year

period,politicalentrepreneurs at thenationallevelfoundit to theiradvantage
to supplytheinstitutional changestheprogramdemanded.Personnel, working
in theextensionserviceat all levels,wererewardedforcompleting theirwork
in such a way to meetthedonor'sapproval.15But,becausetheseparticular
rulesof behaviorwerefollowedto pleasethedonor,whenfunding ended,the
institutional arrangements brokedown.
Revitalization underPIDAGRO. The extensionservicewas revitalizedin
1973-1978 and reorientedaccordingto the objectivesof "integratedrural
development." The programPIDAGRO I (Integrated ProgramofAgricultural
Development) in 1973withthefinancialsupportoftheIADB and
was initiated
technicalassistancefromIICA. Accordingto de León [1982,49] a goldenage
beganfortheextensionservice.Fundedwith$ 39 millionfromtheIADB, 170
newagentswereadded,officesand housingforextensionagentswerebuilt,a
neworganization was setup to coordinateactivities,16 and approximately 40
employees of SEA were for
grantedscholarships study overseas.17Conceived
withtheidea ofintegrating theareasofinvestigation, extension,and financing,
PIDAGRO I also had a largebudgetforloansto smallfarmers. Durán reports
thatthemechanicsof administering thecreditabsorbedall of theextension
agents' time and was the downfall of PIDAGRO I. Whileagentswereconsid-
eredto be technicalassistancepersonnelwiththeobjectiveof increasing pro-
duction,theybecameconvertedintocreditagents.
Under PIDAGRO I donor expectationschangedradicallyand essentially
fundswereexchangedfora newset of institutional arrangements. Personnel,
at all levelsadjustedtheirbehavioraccordingto thenewincentives. Extension
agents,forexample,wereexpectedto administer credit,filereports,and com-
municatetechnicalinformation. Relativeto theearlierperiodof decline,the
rewardsto filling reportsand administering creditweremuchhigher.Addition-
ally,theruralclienteleactivelysoughtouttheextensionagentto receivecredit.
The communication of technicalinformation, however,is an activitythatis
verydifficult to supervise.For thesereasonstheinstitutional arrangements that
governedtheinteraction between and
extensionists rural changed,as
clientele
therelativepricesfacingtheextensionist changed.
15 "Donor will"is usedhere Donororganizationsaremadeup oflayers
simplistically.
of bureaucracy and personneland havean interesting dynamicsof their
organizational
own.Gauthier [1990],forexample,analyzesthedesignofrulesofbehaviorwithinsuch
organizations.I abstractfromtheinternaldynamicsoftheinternational to
organizations
examinetheeffects thatmajorshiftsin donorpolicyhave induced.
16 This was the FEDA (Special Fund forAgricultural Development).
organization
Sarles [1987]has warnedagainsterecting publicagenciessimplyforthepurposesof a
donorprojectbut Pablo Rodriguezclaimsthateverynewpublicagencyerectedin the
DominicanRepublicwas to implement someinternationallypopularidea. FrankRo-
driguezagreesthatpublicagenciesexistbecauseof international funding.
17 Thiswas on
reportedas RD$ 39, however,thepeso and thedollarwereofficially
par at thistime(Perez Luna [1989,23]).

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148/4(1992) TheIronyofDonorEfforts
toBuildInstitutions 639

The "Trainingand Visits"Period.As theprojectperiodsforPIDAGRO I

and II ran out,an international consulting company- TAHAL fromIsrael-
proposeda reorganization of theextensionserviceaccordingto a plan called
"Trainingand Visits" (T & V) (Mazara and Nova [1962,36]). The method
was thengainingpopularitywithprojectsfinancedby the World Bank in
variouspartsoftheworld(Israel [1987]).The planwas adoptedunderPIDA-
GRO III and financialsupportwas providedbytheIADB. The programbegan
in 1978 witha pilot projectand was later extendedto the entirecountry
beginning in 1981. Durán,theRegionalDirectorwhereΤ & V was triedas a
pilot projectand nationalDirectorof Extensionin 1981,reportedthatthe
programhad good resultsas a pilotproject,butwas accompaniedbyenormous
resourcesfor economicand technicalassistance.These resourceswere not
availablein quantityadequate forthe entirecountry;neithercould theybe
suppliedby domesticeffort alone.
Underthenewmethodtheextensionagentnowdirectedhisattention exclu-
sivelyto technicalassistancefora carefully specifiedsetof farmers - a major
switchfromthecreditagentofthepreviousperiodand themissionary ofrural
development of earlierdays. The method was extremely disciplined,requiring
theagentto programand accountexplicitly forall ofhisworkingtimeand was
resistedby theagents.Furthermore, whentheIADB fundsran out in 1982,
counterpart funds from the Dominican government werealso discontinued.
Once again theinstitutional changes demanded under theperiodof donor
funding reversed themselves when the funds disappeared.Withoutadequate
rewardfortheenforcement of thedisciplineof theΤ & V method,no one had
a reasonto imposethemethod.All of thetraining and effortsforinstitutional
development undertaken duringthisperiodwereagainlargelywasted,because
theinstitutionalchangeswereenforcedonlyby donorfunds.
Similarly,thesupplyofinstitutional innovation was onceagainenhanced.In
theshortrun,theΤ & V modelfromIsrael,liketheearlyU.S. extension model
was resistedby Dominicans,accordingto Martinez [1982]. because it was
based on assumptions whichmighthold in otherenvironments butnotin the
Dominicanenvironment. Thus thepossibility of borrowing institutionalinno-
vationdoes not eliminatethecoststo thepoliticalentrepreneur of resolving
conflictsamong interestgroups,and designinginstitutions whichtake into
accountlocal resources,technology, and culturalendowments.18 However,
A. PerezLuna saw advantagesin thedisciplineinvokedbytheΤ & V extension
modelthatcould be incorporated in futureprograms.
The Current Crisis.Perez Luna [1989]reportsthatfromthattimeup until
thepresent, theextensionservicehas beenin crisis.Castillocommented thatat
thefieldlevel,theextensionservicewas non-existent, thatwhentheextension-

18 Not
onlyinstitutions
buttechnology
as wellshouldbe "homegrown."See Bruton
[1985].

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640 CarrieA. Meyer «ΒΠΊΠΕ

istswenton strike,thefarmers werenotaffected. PIDAGRO III was thelast

donorfinancedprogramto workwiththeextensionservice.
Recentstudieshavebeenmade,however, to redesigntheroleoftheextension
serviceand proposalshave been writtento secureinternational funding.An
exampleis a 1989proposalto directtheefforts oftheextension serviceto those
farmers of irrigated land,on thegroundsthattheyhad thegreatestpotential
to take advantageof the technicalassistance(Uepa [1989]). At this time,
USAID had alreadybegunthefinancing of a programwithINDRHI to turn
overmanagement of theirrigation canals to groupsofwaterusers(Usaid/Dr
[1989]).It was hopedthatcomplementary financing could be obtainedforthe
extension program.A. PerezLuna explainedthatdespitetheirefforts SEA now
lackedcredibility withinternational agenciesand financing was notfound.The
experienceillustrates, however,the degreeto whichDominicanpoliticalen-
trepreneurs have accommodated donors goals hopingto receivefundsfor
institutional innovation.
DomesticDemandforAgricultural Extension. Theevidencepresented thusfar
shows donor demand ratherthan local demand drivingthe institutional
changesin theextensionservicein theDominicanRepublic.Interviewees re-
ported that when the extensionists were on strikethe farmers did not even
notice.Doorman [1986,58] reportson surveyresultsof ricefarmers, only14
percent of which sought technicalassistance from SEA. A leader of an associ-
ation of rice farmersis quoted as saying,"all the agencieshave technical
assistancepersonneland not one is worthanything"(Meyer [1989,64]). The
changesinducedin theextensionservicehavebeenmorethanirrelevant, how-
ever.Theyhave disruptedinstitutional arrangements to servedomesticinter-
ests.19
BothMeyer [1989]and Doorman [1986]provideevidenceof domesticde-
mandforextension service.Sinceextension providesa publicservice,thelatent
demandforit would be translatedinto actual demandthrougha difficult
politicalprocess(de Janvry[1973]).Althoughthemajorcatastrophic changes
seenin theDominicanextensionservicehavebeencausedbydonordemands,
less apparentchangeshave beeninducedin theextensionserviceby domestic
demands.Sincedonorshavethesignificant advantageofreadycash to pay for
institutionalchanges, characteristics
institutional appropriateto serveneedsof
theruralclientelehave been sacrificed withtheinitiationof new donorpro-
grams.
The following exampleillustrates theproblem.VirgílioMayol,activeprofes-
sionally in the Τ & V program, noted thatone of theproblemswiththenew
approachwas thatit brokewithculturaltradition.He explained:"In the

19 willnot optimally
Although,as statedearlier,domesticallygeneratedinstitutions
servedomesticinterests, Meyer[1989]showsthatdomesticinstitutions the
representing
interests of land reform arosein theDominicanRepublicduring25 years
beneficiaries
of local efforts.

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148/4(1992) TheIronyofDonorEfforts
toBuildInstitutions 641

Dominicancountryside ruralleadershad arisen.The ruralleadersbehaved

morepoliticallythenleadersof production."Withtheimpositionof theΤ &
V approach,extensionists wereforcedto directtheirattentionstrictly
to tech-
nicalassistancewithfarmers chosenfortheirproductioncharacteristics. The
finerinstitutionalarrangements betweenthe ruralclientele(represented by
politicalleaders)and theextensionist
werebroken.

and Conclusions
6. Implications

Dominicancareerprofessionals in agricultural institutions haveplainlystated

thatdonorshavebeenthedecisiveforcein shapingtheirextensionservice.The
close parallelbetweentheevolutionin donorgoals and thehistoricalchanges
in theextensionservicein theDominicanRepublicemphasizestheirpoint.The
fadsand fashionswhichovertooktheaid community - thecommunity develop-
mentera and thedisenchantment whichfollowed,theintegrated ruraldevel-
opmentera,thepopularity oftheΤ & V methodwiththeWorldBank,and the
shiftto theprivatesector- each foundtheircounterpart in themajorinstitu-
tionalchangesin theDominicanRepublic.International donorshavepaid for
changesin institutions. Dominicannationals,eager to receivefunding, have
supplied the requisitechanges. In the process, numerous institutionalar-
rangements - rulesof behavior- have beenaltered by donor targetcriteria.
The
ruralclientele,althoughtheymay have some latentdemandfor extension
service,have had littleto do with the institutional statusquo. Thus, the
extensionservicein the DominicanRepublic,builtby donorsto servicethe
needs
oftheruralclientele, is responding,notsurprisingly, to thedemandsofdonors.
By viewingdonor effortsof institution buildingin lightof an economic
theoryofinstitutional change,theironyofsuchefforts is revealed.Institutions
arenotsomething thatdonorscan infusevalueintobyspendinglargesums.As
North [1989,242] states,"institutional changeis an incremental process,in
whichtheshortrunprofitable opportunities cumulatively resultin creatingthe
long-runpathsof institutional change."
Donorsmustre-examine theirperspectiveofinstitutional change.Throwing
moneyat institutions ina developing country is a poorwayto buildinstitutions
to servetheneedsof thepopulace.This workhas shownthatinstitutions do
respondto infusions ofcash. Butpublicinstitutions mustbe responsiveto the
country'scitizens.Donor demandsand domesticneedsmightcoincide,butthis
wouldbe highlyunlikely.Evenifan omniscient, benevolent plannerwereable
to optimallydesigninstitutions, plans and money do not filterthroughthe
bureaucracyof the international organizations without adulteration. Donor
financedinstitutional changesmustbe expectedto servedonors.Furthermore,
thesedonorinducedchangesare not merelybenign,but oftendisruptiveof
institutionswhichmaypreviously have serveddomesticinterests.

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642 CarrieA. Meyer ΛΠΤΓΙΕ

Donorscan,and have,enhancedthesupplyofinstitutional innovation in the

DominicanRepublicbymakingnewideas availableto politicalentrepreneurs.
Theirrolein buildingpublicinstitutions
shouldbe limitedto this.Ifdonorsare
to financially
supportand influenceprogramsin organizations and theinstitu-
tionswithwhichtheyinteractin developingcountries, thisworkcan be done
muchmorehonestlyand directly in thenonprofit sector(Meyer [1992]).The
nonprofit sectorunlikethepublicsectoris responsibleto itsdonorsnotto the
generalpublic.
The path dependentnatureof institutionalchangemakesforfar-reaching
consequencesofdonorinducedchangesininstitutions. The taskofresurrecting
viableruralpublicinstitutions
fromthecurrent chaosintheDominicanRepub-
lic differs
fromstarting fromscratch.The historicalframework withinwhich
institutional
changetakesplacehas beenpermanently altered.On theonehand,
forexample,manyagencypersonnelarenowexperienced in alternativeinstitu-
tionalarrangements.On theotherhand,theruralclientelenowexpectinconsis-
tencyand disappointment fromtheirpublicinstitutions. The futurepath of
institutional
change will alwaysbe affectedby theseresults of donoractivity.

Zusammenfassung

SpenderhabenübervierzigJahrein den Entwicklungsländern auf die Land-

wirtschaft öffentliche
ausgerichtete Institutioneneingerichtet. sichimZeit-
Die
laufänderndenSchwerpunkte und Ziele spiegelnsichin diesenInstitutionen
wider.DieserBeitragisteineAnwendung derTheorieinstitutionellenWandels.
Als Fallstudiedientderlandwirtschaftliche
Aufbaudienst in derDominikani-
schenRepublik.Die Fallstudiezeigt,daß die eingerichteten
Institutionenden
Bedürfnissen Republiknichtangepaßtsind,weildie
der landwirtschaftlichen
Spendereine dominanteRolle beim institutionellen Wandel eingenommen
haben.Aus diesemGrundwurdeauch der heimischeProzeß institutionellen
Wandelsunterbrochen.

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Dr. CarrieA. Meyer

WorldResourcesInstitute
1709New YorkAveΝ. W
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