Aid =/= Help
 Aid =/= Help Over the past couple of decades, a major problem has been dogging foreign aid: where its leading institutions hold sway, poverty tends to get worse, not better. The drivers of aid have always been political: managing spheres of influence, rewarding clients, punishing adversaries, penetrating and expanding markets, pandering to domestic constituencies…a long, shifting and inconsistent list of aims. Foreign aid is on the march again. Its banners bear heart-warming slogans like "promoting compassion" (the Bush administration), "a world free of poverty" (the World Bank) and "mutual respect and solidarity" (Tony Blair's Commission for Africa). Aid is getting media attention galore thanks to rock festivals, the launch of yet more doorstopper reports on poverty, and UN deliberations about poverty reduction and other Millennium Development Goals. (For more on the latter, see the article on p19 of this issue.) So poverty in Africa and such places is going to get tackled, once and for all, right? Well perhaps, but don't count on it-especially if the aid industry is expected to do the heavy lifting. Wider and deeper poverty Foreign aid has sometimes been a very good thing. It has been rightly credited with solid contributions, such as in boosting post-war recovery in Western Europe, Taiwan and South Korea; rolling back some nasty tropical diseases; and (arguably) helping usher in majority rule in South Africa. Without foreign aid and the geostrategic interests driving it, such outcomes would probably not have been reached as rapidly or as smoothly. But on the huge canvas of late-20th century history, it's hard to detect many more cases of sustained success, certainly on the poverty front. Indeed for over the past couple of decades, a major problem has been dogging foreign aid: where its leading institutions hold sway, poverty tends to get worse, not better. Take sub-Saharan Africa. Since the late 1970s, major aid institutions-the IMF, the World Bank and a phalanx of other agencies they help steer-have called most of the shots in African economic policy and public investment. In no other region has the aid system held such commanding political and financial positions for so long. African capitals have had some room for maneuver, but their sovereign control - particularly over key economic and social policies - has been subordinated for decades to powerful outsiders, especially those based in Washington, DC. Now according to World Bank researchers, the number of Africans living in extreme income poverty ($1 per day or less) in the two decades after 1981 nearly doubled from 164 to 316 million, or from 42 to 47 percent of the sub-Saharan population. Just above them, another 30 percent in 2001 occupied the $1 to $2 per day stratum at the edge of wretchedness. Yet even that grim total estimate of 77 percent is probably too optimistic; experts have disputed World Bank data as seriously understating poverty's true scope and depth. In Eastern Europe and the former Soviet Union, the commanding heights of the foreign aid system have held decisive influence since around 1990. Before then, poverty in those places had been confined to tiny pockets, mainly in isolated rural areas. But under the auspices of Western aid institutions, poverty spread everywhere. By 2001 some 94 million people, about a fifth of these countries' combined populations, were scraping by on $2 a day or less. Poverty was thus six times more prevalent than in 1987. Of course, other factors also pushed East Bloc economies toward collapse, but the top of the aid system-ostensibly on hand to prevent economic calamity-made sure that there would be no "soft landings." Jeffrey Sachs, a prominent economist with intimate knowledge of and responsibility for what happened, told a probing BBC interviewer in 2003 that Washington's fundamental purpose had been to "finish off" the economies of these countries. That is, aid and its institutions can be deployed not only for development but also for demolition. Inequalities between richer and poorer in almost all former East Bloc countries have increased massively and conspicuously. Diverging life-chances, assets and self-respect widen fissures between regional and ethnic groupings, thereby inflaming a collective sense of fear and injustice. In the Caucasus, the Balkans and Central Asian republics, there came spasms of bloodletting. In one Central Asian land, the Kyrgyz Republic, recently shaken by street protests and a palace coup d'etat, foreign aid has become as intense as in sub-Saharan Africa. Yet in few other ex-Soviet republics have living standards collapsed so dramatically. World Bank researchers recently heard Kyrgyz villagers say things like this:
The big idea A main thread connecting these stories of tragic and unnecessary suffering is that aid is pushing a Big Idea. Indeed the main aid institutions basically pay recipients to adopt that Big Idea. The idea is Market Fundamentalism. It requires countries to open their economies, push down labor costs, restrict consumption, sell off assets and radically reduce central government taxing and spending except to repay foreign debts. In Eastern Europe and the Soviet Union, the top of the aid system sought to push these reforms with all possible speed, hence "shock therapy." The former Yugoslavia was the first laboratory experiment. When the laboratory eventually blew up, aid system experimenters were at a safe distance away in Washington. "It was the International Monetary Fund," concludes Jude Wanniski, a former editor of the Wall Street Journal, "that tore the Yugoslav Federation to pieces with its 1987 'shock therapy'." Market fundamentalist measures have usually led to lower growth and greater economic instability, capital flight, joblessness and inequality. Mercifully, the resulting social upheavals have not everywhere sparked the kind of bloodletting seen in the Balkans. Yet the usual outcomes can also be pretty ugly: the low-intensity violence of social exclusion, human trafficking and gangsterism. The appalling corruption and criminalization of Eastern Europe and the former Soviet Union led ex-World Bank chief economist and Nobel Prize-winner Joseph Stiglitz to describe the aid system's approach as "like using a flame-thrower to burn off an old coat of house paint, and then lamenting that you couldn't finish the new paint job because the house burned down." In short, circumstantial evidence looks pretty damning: where aid and its new doctrine prevail, impoverishing forces get unleashed that tend to swamp positive advances. The outcome: wider and deeper poverty. And in a world where access to health care, education and support for a decent old age are determined less by public action and more by "free market" forces-a world celebrated and promoted since around 1980 by the top of the aid system-then income poverty means you are free to stay poor no matter where you turn. "Aid" is not necessarily "help." The purpose of aid But hang on. Was foreign aid supposed to fight poverty in the first place? Certainly talk about poverty has saturated public utterance, beginning with President Truman's 1949 oration at the birth of the aid system. Yet under all the earnest professions of concern, rooting out poverty has never been among aid's main purposes. Rather, its drivers have always been political: managing spheres of influence, rewarding clients, punishing adversaries, penetrating and expanding markets, pandering to domestic constituencies…a long, shifting and inconsistent list of aims. French aid has been geared to sustaining neo-colonies, chiefly in its cultural sphere of la francophonie. British aid shows a comparable pattern. For just about every donor (including the Scandinavians, often thought to be above such crass interests) aid has greased the skids for national trade and investment interests. American agribusiness and shipping companies gained commanding market positions in non-Western places thanks to early and sustained promotion of food aid. An apparently benign branch of the aid system, it reflects the continuation of commercial war by other means. In emergencies, food aid has indeed saved lives, but as a supply-driven routine it has often pre-empted or destroyed livelihoods and food security at receiving ends. (See box.)
For its first 40 years, aid controlled or orchestrated by the USA (thus including aid managed by the World Bank, regional development banks and the IMF) had one overriding purpose: combating Soviet communism. In this sense, foreign aid has been a stunning success. From Managua to Monrovia to Moscow, aid has propped up dozens of pro-Western client regimes. As a US President once said of a certain client dictator, "He may be a son-of-a-bitch but he's our son-of-a-bitch." Observance of elections and other trappings of formal democracy are today required of clients, but the pyramid of power remains essentially unchanged. Aid appears to be no better at improving governance than tackling poverty. Indeed a number of studies indicate that the greater the intensity of aid, the worse the quality of public institutions and democratic politics. Aid revenues can undermine public politics just as oil revenues do. They enable elites to survive and prosper thanks to closed-door relationships with powerful institutions abroad; at the same time they help political classes avoid the headaches of managing political contracts of reciprocity with citizens at home. Such findings call into question the wisdom of boosting foreign aid spending in the absence of measures that build and protect the political space in which citizens-especially poor majorities-at the receiving end can see aid monies spent in ways responsive to their needs and wishes. Coherence and democratization There are no sure ways to escape the current spirals of stagnation and decline. Yet some clues can be detected in the histories of countries that have tackled poverty successfully: Taiwan, South Korea, Vietnam, Kerala State in India and (as even former World Bank president James Wolfensohn admitted) Cuba. Among their common denominators have been strong public sectors, sustained investments in basic health, education and other public goods, and the strictly limited use of foreign aid. As Harvard economist Dani Rodrik recently observed, success has come more commonly for those pursuing their own, highly disciplined models of internal development and refusing subordinate status as aid clients driven by aid-imposed ideas-in particular, the idea that countries must rapidly and unconditionally open their economies to external trade and investment, or be damned. If today's brand of foreign aid figures in hardly any antipoverty success stories, yet is complicit in many stories of impoverishment and malgovernance, what can be done? From a plethora of Northern and Southern proposals (and a few modest initiatives already underway) I would distil two key slogans: Coherence and Democratization. Achieving these in a skewed world of aggressive mercantile and geopolitics might seem utopian. Yet these politics are mainly constructed not of immutable material interests but of ideas. And ideas can change if critical masses develop to dethrone old ones and promote new ones. A hundred years ago, anyone proposing ideas like Keynesian capitalism and the United Nations would have met disbelief and ridicule. Yet by 1960 those ideas were among the most successful the planet has ever seen. Coherence would mean letting go of failed economic doctrines and restraining some powerful interest blocs. Gains in coherence would mean cutting through, sector by sector, hundreds of institutionalized knots that favor those powerful interests including:
Coherence would mean ending systems that transfer amounts from poor to rich that dwarf aid flows from rich to poor. Democratization would mean enforcing transparency and public accountability. One place to begin is with the payments private entities, such as oil companies, make (or don't) to public institutions and political classes, and holding a wide-angle public focus on lopsided structures of political influence that result. Facts about aid flows-most of them currently held beyond public oversight-would be made open. Democratization would mean extending powers over development choices from the realm of the economists and central bankers to the realm of public politics, thereby allowing such purposes as reduced inequality, social protection and improved employment to gain status and traction in public policy; overhauling the mandates and control of global institutions, meaning the break-up of aid industry oligopolies and the abolition of especially dysfunctional bodies-as Joseph Stiglitz and others have urged in the case of the IMF. Pursuit of coherence and democratization are certainly not easy. But to borrow some current mainstream phrases, there is probably no alternative if we are serious about promoting compassion and bequeathing to future generations a world of mutual respect and solidarity, free of poverty. Copyright 2005 Conscience |
