Thursday 16 March 2017

International Development Assistance: Or, why you won't shut-the-fuck-up about foreign aid

“The evolution of foreign aid has been largely shaped by structural changes in the international system, such as decolonisation, the failure of the New International Economic Order, the end of the Cold War and the acceleration of globalisation…the USA used it as an instrument of containment…; the UK and France turned it into a substitute for colonial domination…in France, development co-operation was confined essentially to French-speaking prĂ© carrĂ©, while the bulk of British aid resources went to Commonwealth members…development assistance was used in these two countries to maintain their positions world powers at a time when their status was being eroded by the progressive dismantling of their empires”.

Jean-Hilippe Therien 2002, 449-454

“The plain fact is that  the Neo-Liberal policy reforms have not been able to deliver their central promise – namely economic growth.  When they were implemented, we were told that while these ‘reforms’ might increase inequality in the short and possibly in the long term as well, they would generate faster growth and eventually lift everyone up more effectively than the interventionist policies of the early postwar years had done.  The records of the last two decades show that only the negative part of this prediction has been met…growth has markedly decelerated during the last two decades, especially in developing countries, when compared to the 1960-1980 period when ‘bad’ policies prevailed”. 

Ha-Joon Chang 2013, 127-128





Politicians with hair far exceeding their IQs are actualising the end of the world by manically posting FB memes about 'looking-after-our-own-backyard', before those disgusting-needy-foreign scum, but the reality is that Official Development Assistance (foreign aid) is at a historic low under the current Australian Coalition government. First pledged as a target in 1970, The United Nations (UN) sets a minimum of 0.7% of Gross National Income (GNI) to be spent by developed countries on foreign aid. On perusal of the websites of the three major Australian political parties, the Australian Greens are the only party with a clear commitment to achieving this foreign aid spending target.

Primarily a fact-checker addressing quantitative aid spending, this recent Conversation article does not scrutinise the quality of donor aid. Traditionally seen as a developed country’s selfless effort to alleviate poverty, some critics acknowledge donor states use it as a foreign policy tool. Foreign aid is also used as a method, for both developed donor nations and multinational corporations, to pursue their commercial interests (Engel 2014, 1385-1386).

Susan Engel (2014) highlights some problems with the ability of the international aid system to meet its goal as a development device.  In 2005, for example, only 37% of foreign aid was spent on programmable aid, the rest going to extraneous issues (Engel 2014:1379).   Donor states have been criticised for what they count as aid, including the cost of maintaining militaristic refugee regimes, technical assistance and debt cancellation (Engel 2014, 1386). Donors often highlight the problems of governance in recipient States (Therien 2002, p.460-461; Nunnenkamp & Thiele 2013, 77).  In striking contrast to the donors’ rhetoric, the empirical findings point to a vicious circle of donors granting aid indiscriminately to inefficient and dishonest governments (Nunnenkamp & Thiele 2013,77).  Some theorists scrutinise the neoliberal policy imposed by developed donor countries on developing recipients.  In practical terms, these policy reforms involved reducing public spending, devaluing currencies, liberalising trade, restricting credit and promoting free enterprise (Therien 2002, 456).  Nair (2013, 641) points out that the Australian aid agency (AUSAID) adopts fundamentalist ideas about economic growth, compromising foreign aid.





To further deconstruct the myth of the generosity of donor states, it is necessary to examine the broader processes affecting development (Engel 2014, 1383). While foreign aid was once crucial for development, today, money flows from finance and trade far outweigh the amounts allocated by governments as foreign aid.

In discussing trade, for example,

“the protectionism of the developed countries entails an annual cost of around US$100 billion for the developing countries, that is, much more than the total volume of aid. In the agricultural sector alone, it is estimated that the trade policies of the rich countries generate losses of $20 billion a year in export earnings for the Third World.  In short it seems increasingly evident that the benefits of aid can be neutralised by the deleterious consequences of other policies”.

(Therien 2002, 459)

Some theorists recognise that a key step in addressing poverty and inequality is the transformation of both the international economic order and the organisation of international trade (Engel 2014, 1385).  Neoliberal policies (e.g. structural adjustment) imposed on developing states (in the 1980s and 90s) sometimes barred these countries from accessing the same trade policy options (e.g. infant industry protection) that fostered massive development in their own countries.  Chang (2003, 51-52) adopts a historical approach to the study of trade to reveal that,

"It was the USA, and not Germany as is commonly believed, which first systemized the logic of infant industry promotion that Britain has used so effectively in order to engineer its industrial ascent...The US government put this logic into practice more diligently than any other country for over a century (1816-1945).  During this period, the USA had one of the highest average tariff rates on manufacturing imports in the world...it is clear that the US economy would not have got where it is today without strong tariff protection at least in some key infant industries".

Chang (2003, 51-52)





In the Australian media, in the words of Australian politicians, and in wider public discourse, it is rare to hear discussion of the historical and structural causes of inequality.  We could look to Engel's (2014, 1384) review of books on foreign aid (that made an academic and media impact), in the ten years since 2001, to conclude that the 'true' left have disappeared from a critique of aid.  When I see the shallow level of debate within the academic sphere, I wonder if the general public have any grasp on the key issues surrounding aid and development.  Are they aware of the international aid architecture?  Are they well versed in the history of the international economic order?  Have they grasped the problems with integrating countries into a historically and socially constructed world economy (Nunnenkamp & Thiele 2013: 82)?  What about a history of industrial, trade and technological policies?  Can peeps summarise the evolution of international institutions involved in managing transnational capital flows and international monetary stability? What about the history and evolution of sovereign states? Do FB crazies have a clue about the politics of international trade, and the extent to which preferential trade deals compromise the multilateral trade system?  Do they have an understanding of the connections between the international financial system, the global division of labour, the international trade system, and the international migration system?  Have they studied the best methods in international development policy making?  Do peeps have the fucking guts to evaluate the covert forms of power operating in the structures of international organisations?  Do they have any ability to apply the work of theorists such as Marx, Gramsci, Foucault, Agamben and Mauss? Just sayin'. Just askin’.

I wonder if the result of this lack of nuance, the inability to acknowledge the role of history, and the incapacity to understand the complex workings of power leads to a meme-aliscious Facebook, urging white trash to fester in their own self-congratulatory generosity. While the West appear to give and give, Kimmy, (and histrionic, racist people with too much dumb on their hands manically offer pats-on-the-back to their sloppy friends who are part of the 1% who have the guts to share their meme-aliciousness on FB), an examination (you know, using actual peer-reviewed, evidence-based research, not some shit someone shit posted on FB) of the practices of international organisations (i.e. The World Bank, the IMF and the UN) governing foreign aid, trade and finance reveals that these left-wing-loony organisations are often right wing loony organisations.  Torres (2007, 446) explains that the IMF's decision-making process is heavily weighted towards developed countries, (the G7 countries having 41.72% of votes, and advanced economies having 61% of voting power).  Therien (2002, 454) examines the complex workings of power in the World Bank, concluding that, “the postwar multilateral system was consistent with the economic interests of the major powers and contributed to the strengthening of US hegemony” (Therien 2002, 453).   Many theorists in International Political Economy have begun to examine how the conditionalities at the centre of the IMF, the World Bank and the WTO limit the ability of developing countries to catch up to the developed world.

More recently, a proliferation of peer-reviewed literature across the social sciences  (in disciplines such as international relations, international political economy, history and sociology...using methods including historical materialism, postmodernism, post-colonialism, critical geography and critical anthropology) has critically analysed the negative effects of neoliberal development policies on developing/poorer countries (Nunnenkamp & Thiele 2013).  Both mainstream economists and the key international institutions (responsible for governing finance and trade) have begun to question neoliberal practices in the areas of aid, trade and finance (Thirkell-White 2007).  There are growing signs of resistance to neoliberalism at popular are elite levels in the developing world (Thirkell-White 2007, 36).  While reform of both Australian aid, and the wider international aid architecture, is important, failure to pay attention to trade and finance makes an narrow examination of foreign aid seem like tinkering at the edges.



Questions

To what extent has the modern Liberal Party adopted the evidence about the failure of neoliberalism in addressing development and inequality?  What can an examination of AUSAID reveal about their continued adherence to these dangerous policies?

Can foreign aid be understood as one element in the wider structures of the international systems, which include the international financial system; the global division of labour; the international trade system; and the international migration system? What can we learn from an examine of the history and structure of these systems?

To what extent are developed countries restricting paths to development by dictating the rules for developing countries?  In what ways can international organisations and non-government organisations (NGOs) help facilitate room to move in development policymaking?


References

Chang, Ha-Joon (2003).  Kicking Away the Ladder: Development Strategy in Historical Perspective, Anthem Press, London.

Engel, Susan (2014). The not-so-great aid debate, Third World Quarterly, Vol 5, No 6, 1374-1389.

Nair, Sheila (2013).  Governance, representation and international aid, Third World Quarterly, Vol 34, No 4, 630-652.

Nunnenkamp, Peter & Thiele, Rainer (2013).  Financing for development:  The gap between words and deeds since Monterrey, Development Policy Review, Vol 31, No 1, 75-98.

Therien, Jean-Philippe (2002).  Debating foreign aid: Right versus left, Third World Quarterly, Jun 2002, Vol.23, No 3, 449-466

Thirkell-White, Ben (2007).  The International Financial Architecture and the Limits to Neoliberal Hegemony, New Political Economy, Vol 12, No 1, 19-41.

Torres, Hector (2007).  Reforming the International Monetary Fund - Why its legitimacy is at stake', Journal of International Economic Law, Vol 10, No 3, 443-460.