Development Issues...

I've got a bombshell to drop... I don't support giving development aid to developing countries.

Not a very traditional socialist view, is it? The Labour Party championed the 2005 G8 conference pledging billions in debt relief and development aid. We all remember those white bands demanding that something be done to "end poverty now". But does development aid really end poverty? Can it really help developing countries drag themselves out of the pre-industrial age?

First of all let me state what I mean by development aid: Multilateral (World Bank/IMF) and bilateral (USAID, our own DFID, etc...) grants and loans that are used to develop infrastructure, some public services or build economic assets such as the infamous Tanzanian shoe factory or Uzbek cotton mill. This does NOT include aid to help conquer diseases such as malaria or AIDs or famine relief. I also do not believe that we should cut down on the amount we spend on aid, but that it should be focused on, say, malaria, giving everyone access to malaria drugs and preventative treatment. We will help these countries far more by eradicating easy-to-cure diseases that decimate the working population than through handouts of development aid.

My essential point regarding development aid is this: The aid givers (rightly) demand some level of control over how the aid is used and in what context. Also, development aid is not sustainable because it is, like any charity, dependent on the goodwill of the donor. Because of these points, governments become less accountable and by the very nature of aid being charity, can be withdrawn at any time.

One consequence of the conditionality from the aid programs is that development will take place according to the templates and theories of development that the donor institution subscribes to. Given that there are many, many different institutions active in development, the programs differ greatly. It cannot be argued that the World Bank offers the same aid and conditionalities as does, say, the Norwegian government or ActionAid. These organisations operate in many different countries and in any one country you can find programs run by dozens of multilateral institutions, foreign state development agencies and aid organisations. This confuses the picture greatly and adds up to a situation where billions of dollars may be spent over a few years, but are spent on so many uncoordinated programs that there is not any single part of these countries that can develop effectively. How can a good, universal and effective education system be implemented when so many different organisations are involved, each imposing their own conditions? How can the needs of the local economy be met when the education system developed with aid is unsuitable to that country?

Disorganisation and a multitude of competing incentives is not the only problem associated with conditionality. Even if there was only one over-arching program of the programs of development aid in each country, these countries would still be subject to the conditions imposed by the donors. Conditionality in and of itself is not wrong - we have seen the massive corruption that occurs when leaders are just handed hundreds of millions of dollars and given free reign to do what they wish with it.

The biggest problem is that for as long as the majority of a government's income is funded by foreign donors, the government will be more accountable to them than to their own people. I am not saying that only democracies can develop - I think the experiences of Asian countries has proven this - but I am saying that a government which is dependent on taxes for all or nearly all their income is far more dependent and accountable to their own people. The success of their economy is the success of their government. A Thai leader can be undemocratic and put tanks on the street, as has happened, but at the end of the day they still draw their salary, pay for their tanks and for their police with money collected from the Thai people and not from the IMF. The same cannot be said for a country such as Uganda. In Uganda aid makes up 11.5% of their GDP. Taxes are 12.1% of GDP. This means that even should the Ugandan government take on no debt whatsoever, for every £1 spent by the Ugandan government another 95p is spend by aid agencies, largely through the government. How can the Ugandan government exercise freedom and control over it's affairs when nearly half of all they money passing through their hands comes from foreigners, imposing conditions on it's use?

Development aid hobbles the social and political development of developing countries. It maintains the colonial mindset of dependency on foreign countries and foreign wealth. It is also completely unsustainable.

We saw throughout the Cold War massive amounts of aid and other assistance, often in the form of loans, being given to developing countries. But as soon as the competition for third world countries stopped, the need to keep these countries on side fell by the wayside. There was no need to prop up these friendly governments anymore. The ones backing the Soviet Union had to fend for themselves and the ones who had backed us were progressively ignored as we embraced the 'peace dividend'. This experience on a global level has been re-enacted dozens of times in specific countries around the world. The developed world takes an interest in them, whether for political reasons, economic reasons or honestly altruistic reasons, and begins aid programs. But these programs are completely dependent on the will of the developed world. Should we encounter any tough times, you can be guaranteed that one of the first parts of the budget to be cut will be development aid - What government is going to make the massive PR mistake of continuing to hand out hundreds of millions to foreign countries but becoming stingy with pensions?

All this though is just my explanation for why I think development aid has failed and will continue to fail. I think it's a fairly accurate, if very brief, description of the failures of development aid. The strongest point I have to make about aid and development though is this:

There has never been a single country which has developed because of development aid. Not a single one. EVER.

We have been spending billions and billions and billions of dollars, pounds, roubles, yen and euros on development aid since the end of the Second World War. Yet where are the results? Undoubtedly, many countries have developed or are industrialising. South Korea was one of the poorest countries on earth in the 40s and 50s and yet now has companies selling goods and services around the world and enjoys a standard of living that no Briton or Frenchman would criticise, except, perhaps, the long hours. But South Korea did not develop because of development aid -they did obviously have foreign help, but this was foreign investment and not foreign charity. It was not done on the basis of kindness or friendship, it was done because the foreigners who gave the money and help to South Korea expected a tidy profit at the end of it. The same goes for China, Chile, Brazil, Greece, Israel, Mexico, Thailand and every other middle income country. Using foreign wealth has been shown to be essential to increasing wealth and production yet it has never occured where this wealth is done on a charity basis not on a profit basis.

I spend a lot of my time criticising the profit motive, saying that it has no place in education or healthcare or our prison service. But it cannot be denied that it is a very powerful motive and that in development, it is one of the only ways to ensure that foreign capital is locked into a developing country. An aid agency or development ministry can walk away from a recipient country with nothing but a sense of failure - they never expected to get that money back. But a company? They won't walk away from a multi-million dollar investment easily. And even if they do, the factory they built might not have a guaranteed customer anymore, but the products manufactured in these developing countries are hardly as market-specific as the laser tools built at a British factory. A sweatshop making t-shirts has a large market that isn't just limited to a few customers.

The morality of sweatshops and such I'll debate later, but suffice it to say, I don't think it's awful and I don't think we should stop it.

The essential point is that development can only take place if the states in these countries become accountable if not to their own people then at least to their own economy. If the local companies don't depend on aid which has more conditions about including women than about profitability. It's great to get women involved, but how much does it really help women to get them jobs that they lose once the aid dries up? We like to think of ourselves as these enlightened modern people, who're anti-racist and pretty internationalist.

But one of the most common arguments I've run up against is that these countries aren't capable of running themselves. They don't have the good governments necessary. And I think in many ways that's true, but I always ask: How can they have good governments when we never give their governments a chance to govern?

Equally, how can these countries develop until we give them a chance to develop?