Globalisation: Issues in World Change
Development Funding A Critical Evaluation.
Development Aid or Foreign Aid is an issue at the centre of much current contentious debate, but even if we ignore the specific current argument, there has long been controversy about what aid is, what it is for and who should benefit.
The debate is further obfuscated by the various forms of capital outflow from the AIS that are currently characterised as aid. In the case of the UK government in particular there are additional concerns that as the European Nation with the deepest ties to an Imperial past is one of the least forthcoming in the role of donor.
If we start examining what is meant by aid by attempting a taxonomy based on the type of institution through which funds are channelled some clear differences in emphasis are also obvious. There are in simple terms three types of channels through which capital flows are directed to the developing world. Government Agency (both Bilateral and Multilateral aid in grants and loans) Commercial Funding via Privately owned Financial Institutions and Non-Governmental Organisations the best example of which is Oxfam.
The NGOs certainly have established a reputation for immediate relief in the event of the major traumas that periodically arise due to drought, famine or war. In addition many, and again Oxfam has been at the forefront of this development, have become invovled in long term development projects which are in general responsive to the needs and wishes of the local communities.
Whilst the importance of NGOs in terms of their impact on the lives of individuals and collectives in the Third World should not be underestimated it must be borne in mind that the volume of funds that are channelled in this way is relatively small.
The involvement of NGOs in development funding has however lead to some confusion between this type of funding and the more common commercial and strategic aims of other types of aid. There is without doubt an association with the term "Foreign Aid" and altruistic or "charitable" work - a belief that Foreign aid is, or at least should be, directed to providing respite for the condition of the poorest in the poorest Nations.
Aid, in the best tradition of the Victorian philanthropist, is carried out as much through a sense of moral obligation as enlightened self interest. This confusion is such that even straightforwardly commercial transaction carried out by Financial institutions, where they invest funding at commercial rates in the developing world can be, and have been, characterised as altruistic activities.
The NGOs for all their relatively small size have a well deserved reputation for responding to immediate crises and for directing development project aid to areas of most need, providing a positive example of good practice to which other projects can be compared. In addition many NGOs in the UK and Europe, particularly, have and do campaign for more effective aid, and on occasions have been instrumental in exposing inefficient or corrupt practice in Development aid. For the most part the development projects run under the auspices of NGOs are not tied or conditional and are carefully directed at small scale projects of immediate benefit to the rural populations most often marginalised by the process of incorporation into the world economy. If anything the development projects of The NGOs provide a yardstick by which other development aid can, or should be, measured.
Governmental Aid both bilateral- between two countries and multilateral, provided via a supragovernmental agency, like the aid provided by NGOs is asserted to be both "a relatively new part of the international scene" and "not determined by the same principles that govern normal flows of trade and capital" (E K Hawkins "The Principles of Development Aid")
The history of Government aid to aid in the development of other nations does indeed appear to start only in the post war period with the US financial intervention in the post war development and reconstruction of Europe and Japan. Development aid to this day is asserted to be following the same pattern as the Marshall plan -indeed development aid has been called a Marshall Plan for the World.
In the case of the UK there has over the last twenty years been a major shift in emphasis away from bilateral aid-to multilateral aid. Much of the capital outflow that the UK government claims as "aid" in channelled via various international development organisations (such as the EBRD, UNCTAD) so that the percentage of GNP that is represents has steadily, if erratically fallen. The UK now directs a smaller proportion of it's development budget to bilateral aid that any other European nation.
The form that aid takes varies between grants and deployment loans- grants as is implied have even been compared to the type of aid that the NGOs undertake. Government development grants are however usually conditional and may even take the form of goods and services rather than finance. The government or supra-national organisation may impose conditions which guarantee that the recipient government involved responds to the economic, socio-political and military or strategic needs of the donor organisation.
Grants are in any event a rare form of aid- the bulk of the capital that is transferred to the Third World in the form of loans. This is not to say that these development loans are to be considered as equivalent to the commercial private funding of industrial and commercial enterprise that is provided by the Banking Industry. Although the international banking institutions do loan capital to Third world governments they do so purely as a normal financial investment, and increasingly such institutions channel development funding to local private companies or to the local branch companies of TNCs.
Government loans (or grants) are negotiated between governments and thus funding is largely intergovernmental. Indeed this has lead some right wing critics of development aid (Notably Lord Peter Bauer) to suggest that it should end since this is detrimental to development in itself. The logic of this argument runs that since funding is directed at government this automatically guarantees a role for the state in the economy, leading to it's politicisation. The concentration of economic power and political power in too few hands leads to either corruption or some form of socialism based on state control of the economy.
Both corruption and socialism inhibit the development of private enterprise and therefore even when entrepreneurial skills are well developed -which they rarely are in the Third world- economic development will be retarded. Bauer goes as far as to suggest that the creation of the Third World is a consequence of the way in which aid has been dispensed to "client" States. Competitive use of local resources for example is given no incentive if the West will simply "bail out" a failing economy.
The central thrust of Bauer's critique of course is based on the notion of development being possible only as, or at least as a consequence of, economic growth. The assumption is that problems relating to the provision of basic needs to a nations poor will be solved if a robustly growing economy based on private enterprise develops. The weakness of this argument has ben at the centre of much we have discussed during this unit and therefore need detain no longer.
If we approach the problem from the slightly different perspective of the beneficiary an alternative analysis suggests itself though there are, it must be said, points of commonality.
If we specifically look at food from the EC to the Third world there are a number of features that suggest that far from being suedo-charity or even reparations to nations that historically provided the capital resources for Europe's economic and industrial growth aid is directed to meet the needs of the First not the Third World.
Even the relatively unproblematic area of food aid the effect in many cases has been detrimental to those groups we might imagine that it is most intended to help.
In the area of major project development loans it is increasingly obvious that the conditionalities set on the States of the South assure that the real beneficiaries of this "transfer" are the multi national construction and engineering corporations who provide the materials and labour for the projects. If the current controversy over the Pergau Damn Project indicates that the UK government at least is set to abandon any pretence that these projects actually benefit those who most need western financial assistance then perhaps we can begin to disentangle the morass of motives in "which self-interest, politics, global responsibility, charity and humanitarianism are all hopelessly mixed up together." ( H. W. Singer " The ethics of Aid" (ISD 1984).
