What’s below is again summarised from Arundhati Roy’s ‘Capitalism: A Ghost Story’ (2014). It could be used in the Global Development topics on ‘Organisations in Development’ or ‘the role of Private Aid in Development’
A flow chart of what’s below would run something like this…
TNCs (pump their profits into their) – Charitable Foundations (who established) – The Council of Foreign Relations (which influences) – The World Bank (which sets the economic policies of) – Developing Countries
Basically Roy argues that in the early 20th century, three of the largest corporations in the world (one of which was Ford) set up Philanthropic (charitable) organisations – In the middle of the 20th century, after World War Two, these organisations were key to establishing the Council of Foreign Relations, the World Bank, the United Nations and the CIA. Essentially, Roy is arguing that US Corporations run the biggest international organisations in the world, which in turn coerce Developing countries into doing what these Corporations want.
The enthralling history of ‘philanthropic foundations’ began in the United States in the early 20th century. Among the the first was the Rockefeller Foundation, endowed in 1914 by J.D Rockefeller, founder of Standard Oil Company.
Rockefeller was America’s first billionaire and the world’s richest man. He believed his money was given to him by God. Among the institutions financed with Rockefeller’s money are the United Nations, the CIA, and the Council on Foreign Relations.
Philanthropic Foundations are non tax-paying legal entities with massive resources with an almost unlimited brief. They are wholly unaccountable, wholly non transparent, and are basically about translating economic power into social, political and cultural capital.
They emerged in the 1920s because it was then that US Capitalism began to look outward for raw materials and overseas markets. Foundations began to formulate the idea of global corporate governance. In 1924 the Carnegie and Rockefeller Foundations formed the Council on Foreign Relations (the CFR), also funded by the Ford Foundation as well. By 1947 the CIA was working closely with the CFR and over the years the CFR’s membership has included 22 secretaries of state, and all eleven of the World Bank’s presidents have been members of the the CFR. The CFR also contributed a grant of £8.5 million to pay for the land in New York on which the United Nations building now stands.
Given that the World Bank has more or less directed the economic policies of the Third World, coercing them to open up their markets in return for loans and aid, and given that the World Bank is steered by the Council of Foreign Relations, which in turn is steered by Transnational Corporations, it seems to follow that it’s TNCs which really have really determined the foreign policies of third world countries over the past few decades.
By the 1950s the Rockefeller and Ford Foundations were funding international educational institutions began to work as quasi-extensions of the US government, which was at the time toppling democratically elected governments in Latin America, Iran and Indonesia.
The Ford Foundation established a US style economics course in Indonesia at the Indonesian University. Elite Indonesian students, trained in counterinsurgency by US army officers, played a crucial part in the 1965 CIA backed coup in Indonesia which bought General Suharto to power. He repaid his mentors by slaughtering hundreds of thousands of communist rebels.
Twenty years later, young Chilean students who came to be known as the Chicago Boys were taken to the US to be trained in neoliberal economics by Milton Friedman and the University of Chicago (endowed by J.D Rockefeller), in preparation for the 1973 CIA backed coup that killed Salvador Allende and brought General Pinochet and a reign of death squads, disappearances and terror that lasted for seventeen years. Allende’s crime was being a democratically elected socialist and nationalising Chile’s mines.
Like all good Imperialists, the Philanthropoids set themselves the task of creating and training an international cadre that believed that Capitalism and by extension the hegemony of the United States was in their own interests.
Corporate foundations also provide scholarships at universities for courses in development studies – and many of these are for people from the middle classes in the developing world – these are the future finance ministers, corporate lawyers and bankers of the developing world. Of course the courses funded are the ones which sing the virtues of neoliberal economic policy, rather than the ones which are critical of neoliberalism.
According to Roy, not only do Philanthropic Foundations control the agendas of International Economic Organisations, governments and education systems, they also control the media and social movements which emerge to protest neoliberal policies – she gives a few examples of how, but probably the best piece of supporting evidence for this point of view is that we don’t question the role of philanthropic foundations in society. When Corporate funded philanthropic foundations first appeared in the United States, there were debates about their accountability, and people suggested that if they had so much money they should maybe raise the wages of their workers instead, nowadays we just don’t question them.
In summary, Roy argues that Philanthropic Foundations are simply a way of using a minuscule percentage of profits to run the world.
A Question to Consider….
The largest philanthropic foundation on earth today is the Bill and Melinda Gates Foundation. Roy points out that it’s odd that Bill Gates*, who admittedly knows a thing or two about computers, is now designing education, health, and agriculture policies, not just for US governments but for governments all over the world.
The question that Roy makes us ask is this – Is Bill Gates really trying to help people through his organisation, or is the Bill and Melinda Gates Foundation really a just a way for Gates to translate his economic capital into global political power, and to make sure that government policies the world over benefit Microsoft?
*Or to refer to him by his full name – ‘The Man Child Bill Gates’.
This is a brief summary of the case Jeffry Sachs made for International Development Aid in his 2005 book ‘The End of Poverty’. Taken mainly from chapters 12-16
(1) Why is Aid needed?
Sachs argues that injections of aid are needed to break the poverty trap –because there is no where else money is going to come from when there is insufficient income to tax or save.
Sachs uses a description of a visit to Sauri village in Western Kenya to describe the poverty trap – the villagers face a range of poverty related problems including poor food yields due to lack of fertilisers and nitrogen-fixing trees, the fallout from diseases such as AIDS and malaria and the fact that children cannot concentrate in school because of malnutrition. All energies and money are basically spent on combating disease and staying alive.
As a result of the poverty trap the village faces under investment in the following five areas
Power, transport and communications infrastructure
Sanitation and water.
Aid needs to be spent boosting whichever of these areas are undeveloped (and all of them, all at once, if necessary) because a weakness in one can mean money is wasted on another (it’s pointless spending billions on education if disease means kids can’t concentrate in school, or lack of roads means they can’t get to school.). This should be based on what Sachs calls a ‘clinical diagnoses‘ of a countries requirements.
(2) How much aid is needed?
There’s a number of ways of looking at this>
$70 per person per year for at least 5 years would being sufficient to provide suitable investment in these five areas for the poorest regions on earth (basically the bottom billion who are stuck in the poverty trap). After an initial 5 year period, Sachs believes that this figure should reduce considerably and that 10 years should be sufficient for a country to be self-sustaining financially.
Looked at globally The World Bank estimates that meeting basic needs costs $1.08 per person per day – 1.1 billion people lived below this with an average income of 77 cents. Making up the short fall would mean $124bn/ year, or 0.7% of rich world GNP.
(3) Arguements for providing International Development Aid
Firstly, using aid to eradicate poverty will make the world a more secure place
The US spends 30 times as much on its military as it does on aid (for the UK it’s about 8 times as much, 2002 figures), but spending money on military solutions is not going to make an insecure world more secure.
A CIA task force examined 113 cases of state failure between 1957 and 1994 and found that three explanatory variables are the most common:
High infant mortality rates (which indicate low levels of material well-being)
Openeness of the economy – the more open, the less stable
Democracy – the more democratic, the more stable.
Sachs rounds off by listing 25 countries which America has intervened in following State Failure since 1962. His point is that state failure typically leads to US intervention, which is more costly than the price of providing aid which would prevent such interventions.
Secondly, Official Development Aid is crucial to provide health, education and infrastructure, and because it makes up a significant part of the total income of many countries.
Thirdly,The public will support a massive increase in aid if there’s leadership on the issue – nearly 90% of the US public support food aid (it depends how you frame the question). Also, broad support was garnered for The Marshall Plan, The Jubilee Drop the Debt Campaign and The Emergency AIDS campaign.
Fourthly – There is evidence that Aid can work:
Besides the usual green revolution and eradication of smallpox examples Sachs also cites…
The Global Alliance for Vaccines and Immunisation
The Campaign against Malaria
The Eradication of Polio
The spread of family planning
Export Processing Zones in East Asia
The Mobile Phone Revolution in Bangladesh
Five – the West can easily afford it
Sachs points out that the richest 400 individuals incomes stand at just under $70 billion dollars, and the first two years of the Iraq War, which was an unexpected cost, was $60 bn a year, so basically yes. He also recommends a 10% additional tax on the richest for the purposes of development.
(4) Sach’s view of why Aid Doesn’t Always Work – Poor Countries Aren’t Getting Enough Aid! (**This can be used to criticise Dambisa Moyo”s views on aid. )
Poor countries are receiving no where need enough aid to make a difference to development – To demonstrate this he uses the West African Water initiative as an example – Worth $4.4 million over 3 years, but this only worked out at less than a penny per person per year, no where near enough to make a difference.
He also cites the case of Ethiopia – in 2003 it would have needed approx $70 billion to kick start development – half for health and most of the rest split between food productivity and infrastructure. It was then receiving $14 per head per year which was well short of the money needed. At the time the IMF acknowledged in private that this was not sufficient but in public made no mention of this.
Another way of outlining how limited current ODA is lies in the following:
in 2002 of $76 billion total assistance….only $12 billion amounted to what might be called development support to the poorest countries (most of the rest was emergency aid, with $6 billion being debt relief and $16 billion going to middle income countries.
As a result of this countries often don’t get anywhere near what they need – Sachs cites Ghana as an example – it requested $8 billion over 5 years in 2002 and got $2 billion. His point is that $2 billion is no where near enough to kick-start development.
(5)) Myths about why aid doesn’t work (**these could be used to criticise Dambisa Moyo)
He actually lists 10, but I’ve only included the first three!
Myth One – Giving aid is ‘money down the drain’
It is common to hear Americans bemoaning the fact that there is nothing to show for the amount of aid given to Africa. This is, however, unsurprising. The total amount of aid per Africa works out at $30 per head, but of this $5 goes to consultants, $4 was for food aid, $4 went to servicing debts and $5 for debt relief, leaving $12 per African.
Of the $3 of US aid to Africa, approximately 6 cents makes it on the ground African projects.
Myth Two – Aid programmes would fail in Africa because of backward cultural norms
Sachs points out that he frequently encounters prejudiced views based on African stereotypes even among those in senior positions in the aid industry – Such as the idea that Africans don’t understand western concepts of time. He dispels this by simply drawing on his own experiences telling him different things.
Myth 3 – Aid won’t work because of corruption
Nearly all low income level countries have poor levels of governance. However, corruption is not a reason to not invest in a country because the causal relationship runs in the direction of wealth reduces corruption. This is because when incomes increase people have more of an interest in keeping governments in check and there is more money to invest in good governance through better communication systems and a more educated civil service for example.
Looking at cross national comparisons reveals two things – Firstly that African countries governance levels are similar to similarly poor countries. That is to say that governance is not especially poor in Africa, and secondly there must be something else going which results in poverty other than poor governance – there are still some very poor countries in Africa with good governance yet high poverty, he cites Ghana as one such example.
Statistical indicators reveal that African countries grew at 3% percentage points slower than countries with similar levels of governance and income between 1980 and 2000. The reason for their low growth is geography and poorly developed infrastructure.
(6) A more ambitious approach to Development Aid
Ultimately Sachs believes we should be spending more on aid rather than less!
Sachs outlines ‘a needs assessment approach’ to development which basically involves identifying a package of basic needs, figuring out the investments required,, figuring out what poor countries can pay and then working out the finance gap which is what rich countries should meet. The list of basic needs includes such things as:
Primary education for all children, including teacher pupil ratios
universal access to antimalarial bednets
I kilometre of paved road per person
nutrition programmes for all vulnerable populations
access to modern cooking fuels
Access to clean water and sanitation.
To establish these poor countries would need $110 per person per year for 10 years (calculated by the UN for five countries – Bangladesh, Ghana, Cambodia, Tanzania and Uganda.
Of this Sachs believes that households and poor country governments could pay $10 and $35 dollars respectively meaning that $65 per person per year is the finance gap
Who should pay? Basically it breaks down like this…
USA – 50%
Japan – 20%
UK, Germany, France, Italy – 20%.
‘Fifteen years ago, German journalist, Ulli Schauen helped compile a book of the top 500 global aid programmes… they ranged from schools for Maasai nomads to support for organic farming to training for volunteer sexual health workers.
The question is did they succeed or fail? Ulli travels to Kenya to see how the projects in that country fared. Ulli sets out to find if Aid really does make a difference.’
International Aid money has helped all of the projects below….
Project One – OSIGILI
in 1995 the Laikipiak Maasai formed an organization called OSILIGI (which means ‘Hope’.)
In one of the first projects OSILIGI organized reading and writing courses geared to the nomadic life. In April, August and December, when the nomadic herdsmen are settled, a teacher comes to the village. During these weeks children have concentrated lessons. This made-to-measure education is considerably cheaper than state elementary school. In 4 years, OSILIGI has reached 380 children with this programme, mainly from poor families.
However, the broader issue OSILIGI campaigns for is to establish land rights – to pasture and watering holes, and here they appear to have lost. The Maasai still have no formal rights and their land, and thus way of life, is under threat from agribusinesses and eco-tourism and in the programme we discover that the Maasai live amongst miles and miles of fences – which fence off private farms – one farm being as large as the island of Malta, which houses shipped-in Rhinos for eco-tourism, but this leaves little room for the Maasai.
Osigili seems now to be focussing on the education aspect, but the land rights issue has been taken up by another organisation – IMPACT. It is possible that more progress will be made in this area in the future.
Project Two – A Voucher System for Health Care
In the far West of Kenya the German Government Trained volunteer health advisers – 20 000 community health workers for 10 years. Unfortunately this terminated in 2006 and so no evaluation or final report can be found, the argument here, however, is that a lasting legacy
The German government now funds a voucher programme for the poor where they can use vouchers to receive free or subsidised contraception, maternal health services and HIV treatment.
Through the voucher programme local (privately run) hospitals receive $50 for maternal treatments and $12 for AIDs screenings (from the German Aid fund, they don’t get state funding) – 3/4s of the money goes on medicine and food, but the rest is available to allow for hospital expansion.
To give an example of how it works – one woman is interviewed who is HIV positive, and giving birth in the hospital meant that the infection was not passed on to her two children.
Despite the above, Kenya still failed to reach two of its MDGs -reducing infant mortality and improving maternal health.
But German Government trying to influence Kenyan health policy into the bargain. Germans wand to promote health insurance, Americans want to promote other issues – donors don’t co-ordinate their programmes.
This is a cooperative of 4000 women, who initially set up a library, primary school and a health centre. They also established a range of small businesses devoted to weaving, water, candlemaking, bakery.
However, all of this stopped working years ago… 75% of the initial money went into other people’s pockets – so they couldn’t pay workers or for materials to keep the projects going.
However, what these women learnt in the early days of this project allowed them to establish their own businesses, many of which are today successful and export to other countries.
Project Four – Environmental Protection on Lake Victoria
Lake Victoria is heavily overfished and polluted.
This projects aims were to build water treatment plants and limiting the spread of the water hyacinth. There are laws in place about catch size (enforced by the mesh size of nets). However, it seems that everyone is happy about breaking the law and the aid-funded environmental organisation doesn’t seem to be enforcing the rules.
The World Bank Project labelled this one as unsatisfactory.
Project Five – A Foot Pump for Water
An Australian company called Kick Start (originally known as Aprotec ) which focussed on developing just one product – a small, foot operated water pump, claims to have lifted almost one million people out of poverty. Aid has been essential in this. The CEO says that it is not profitable to develop such products for people – it’s high risk, low return, and high cost – so it’s a market failure – thus subsidies in the form of International Aid, with this money going mainly into Research and Development and marketing (radio ads).
The pumps themselves are sold for $130 – and they have sold 250 000, which means about 900 000 will have been lifted out of poverty. We visit a tree nursery to see how this works – where an employee is using the foot pump (like a step machine) to pump water to water the young trees – this has allowed the company to grow a lot more trees and it is now much bigger than it used to be.
Question – Has development aid worked in the above five cases?
The programme finishes off by noting that we see all of the classic problems associated with Aid in the above examples, but it is the positive impacts which stick in his mind, especially the fact that when official projects collapse, the people who have gained skills carry on campaigning in different ways.
Find Out More…. There are another two episodes in the series if you wish to listen further!
Why Nations Fail: The Origins of Power, Prosperity and Poverty (2013) by D. Acemoglu and J.A. Robinson
Developed countries are wealthy because of ‘inclusive economic institutions’ – Basically a combination of state and free market in which
The state creates incentives for people to invest and innovate – (through guaranteeing private property rights and enforcing contract law)
The state enables investment and growth through providing education and infrastructure, which private business uses, and
The state is controlled by its citizens, rather than monopolised by a small elite. Crucially, there needs to be a democratic principle at work in which people in politics establish institutions and laws which work for the majority of people, rather than just working to make them rich.
The state also needs to maintain a monopoly on violence.
The authors come to this conclusion through a number of comparative studies of countries which are in close geographical proximity to each other such as
South/ North Korea
They argue that the only factor which can explain why one of these countries is poor and the other rich is because of the institutional infrastructure which has been established through the last few decades/ centuries.
In contrast to the above ‘inclusive economic institutions’ which encourage development, the authors suggest the opposite ‘extractive economic institutions’ (think corrupt dicator and his clique sucking money into a Swiss bank account) can generate growth in the short-term, but in the long term result in poverty.
They also suggest that there has been ‘a vicious circle’ at work in many underdeveloped countries over the last three to four centuries – With their globalised history starting off with extractive institutions established by a colonial power (typically built on already existing internal extractive institutions), which, on independence, became even more extractive under postolonial rulers, which in turn lead to civil war as competing factions fought for control over the extractive institutions – which then led to a decent into chaos and failed states. The authors see little hope for such countries.
In contrast, developing countries such as the US and the UK have benefitted from three to four centuries of a virtuous circle in which institutions have become gradually more inclusive, which has created increasing incentives for entrepeneurialism and economic growth.
The gist of the book is, handily enough, covered in the intro and chapter one….
Countries such as Egypt are poor becuase they have been ruled by a narrow elite that have organised society for their own benefit at the expense of the vast mass of people. (This also applies to North Korea, Sierra Leonne, Zimbabwe)
Countries such as Great Britain and The United States are wealthy because their citizens overthrew the elites who controlled power and created a society where political rights were much more broadly distributed, where the government was accountable and responsive to its citzens and where the great mass of people could take advantage of economic opportunties. (This also applies to Japan and Botswana).
Chapter one – so close and yet so different
Starts with a comparison of the two sides of Nogales, half of which lies in Arizona, in the US, the other half in Mexico.
In the Arizonan half the average income is $30 000 U.S dollars, the majority of adults are high school graduates, the roads are paved, there is law and order, most live until over 65. In the Southern half, the average income is three times less and everything else is similarly worse.
The authors point out that the difference cannot be because of environment or culture, it must be because of politics and economic opportuntities.
They also argue that in order to understand the difference, you need to go right back to early Colonialism in the 16th and 17th centuries.
Mexico was the first to be colonised, under a system of slavery and extraction. In the 15th century, the Spanish basically used already existing systems of slavery to their own benefit and extracted mountains of gold and silver, leaving a legacy of elite-governance and a dearth of politcal rights for the majority.
In North America, settled by mainly the English 100 years later, the absence of slavery amongst indiginous populations and much lower population densities meant that slave systems simply would not work, although this didn’t stop them trying for the first twenty years or so. Eventually, however, the orginal settler company (The Virginia company) back in England realised the only way colonialism was going to work was to provide incentives for the settlers – So they offered them land in return for work. It was this that set the basis for the democratic constitution and congress of the US, which then went on to create problems for the English government.
The rest of chapter goes on to argue that the next 300 years of history are crucial to understanding why the US is now so wealthy, and why most of Latin America is so poor.
America has had 300 years of political stability, where poltical institutions control economic institutions, at least to an extent (the authors cite the breaking up of the Microsoft Monopoly as an example) broadly making them work for everyone. Other factors such as the patent system, credit systems, and education provide opportunities for anyone to make it rich and enjoy the benefits of the wealth.
By contrast in Latin America (Mexico), up until the 1990s most countries saw political turmoil and a series of dicatorships where a series of small elites ruled for their own benefit. This instability has lead to the rise of monopoly power, and it acts as a disincentive for anyone to try and do well and become rich (the next dictator might just take all your money away), also lack of finance and education prevents competition anyway.
Crucially, historical good fortune appears to be central to explaining why a country is rich now, so figuring out how a current poor country can develop is not that straight forward if a culture of monopoly, corruption and lack of political rights are the norm…..
Chapter three – the making of prosperity and poverty
This chapter contrasts North and South Korea, divided along the 38th parellel after world war two. In the late 1940s these had similar levels of development, today, however, their economies have diverged.
South Korea has living standards 10 times higher than North Korea, the former being similar to Portugal, the later similar to sub-saharan African countries. People in North Korea also live ten years less than those in South Korea.
The differences cannot be explained by anything other than institutions.
In the South, private property and markets were encouraged (albeit by dictators initially) and thus investment and economic growth were encouraged. At the same time, the government invested in education and new industries took advantage of a better educated population.
In North Korea, privated property and markets were banned, and a centrally planned economy instigated. This simply led to stagnation.
Extractive and Inclusive economic instiutions
Countries differ in their economic success becasue of their different institutions – the rules influencing how the economy works and the incentives that motivate people. Crucial is private property rights – which needs to be backed by the state…. In South Korea, people know that they will be rewarded for their efforts, in North Korea, there is no incentive to innovate and invest because the state will expropriate the benefits of any such initiatives.
In order to develop a society needs to have ‘inclusive economic institutions’ – A state that guarantees prosperity for the massess – Such a state provides a degree of infrastructure that is necessary for economic growth – for example enforcing private property rights, contract rights for all, not just a minority, and providing education and physical infrastructure such as roads. Private enterprise uses and needs such institutions.
What doesn’t work for development is extractive insitutions – where the state is used to extract wealth from one subset of the population to another…. Such as slave and colonial systems (and the Tories in the UK today?)
Engines of Prospertity
Education for the masses is crucial for innovation in an advanced technological world – This is what all developed nations have, and what many undeveloped nations lack. Education needs to be well financed and parents need to have the incentive to send their kids to school.
Inclusive and extractive political institutions
A state needs to be inclusive for economic growth to occur – that is, it needs to both be chosen by its citizens and have a centralized control over legitimate violence.
Extractive political and economic insituttions tend to support eachother (which then means the masses don’t support them…. there is disincentive!)
Why not always choose prosperity?
The simple fact is that where technological change is the engine of economic growth, this means social change, and with change there are winners and losers… Thus existing elites may resist changes that make institutions more inclusive even if this means greater prosperity for all, because it will mean less prosperity for them. (Think industrial revolutions in Europe).
The long agony of the Congo
The Congo has not developed since independence because it has not been in the interests of the ruling elite to build a centralised state which includes all voices, or in their interests to use the state to provide public services which will benefit the masses – instead the institutions remain extractive.
As an independent polity, Congo experienced almost unbroken economic decline and poverty under the rule of Jospeh Mobutu between 1965 and 1997. Mobutu created a set of highly extractive economic insitutions. The citizens were impoverished but Mobutu and the elite around him (known as the Grosses Legumes or The Big Vegetables) became fabulously wealthy. Mobutu built himself a palace at his birthplace, Gbadolite, with an ariport large enough to land a supersonic Concord jet, a plane he frequently rented from Air France for travel to Europe. In Europe he bought castles and owned large tracts of the Belgian capital Brussels.
The simple truth is that if Mobutu had introduced more inclusive economic institutions he would not have been as rich.
Growth under extractive institutions
Growth can occur under extractive instiuttions – as in Russia and South Korea at first and China today but this is unlikely to be sustained unless both economic and political insitutions become inclusive.
Chapter twelve – the vicious circle
The authors paint the vicious circle as starting off with extractive institutions established by a colonial power (which builds on previous extractive institutions), which, on leaving, becomes even more extractive under corrupt post-colonial rulers, which in turn leads to civil war as competing factions fight for control over the extractive instittions – which then leads to a decent into chaos!
Or in more detail… The British Colonial Authorities built extractive instititions which many post independence African politicians were only too happy to continue in order to enrich themselves. This happened in countries such as Sierra Leone, Ghana, Kenya and Zambia. The postcolonial rulers used their wealth to build personalised security forces which were answerable to them and also to rig elections – money thus became essential to maintain power, with only those who have money able to maintain power. This creates incentives among the opposition to depose the existing leaders in order to gain power and wealth themselves, and to protect themselves from being killed off by the said existing leaders. The point here is that power has become an end in itself rather than as a means to developing a country.
This is best illustrated through the example of Sierra Leone –
All of the West African nation of Sierra Leone became a British colony in 1896. The British identified important rulers and and gave them a new title – paramount chief. In Eastern Sierra Leone, for example, they encountered Suluku, a powerful warrior king, who was made Paramount Chief Suluku.
In 1898 the British tried levying a hut tax of five shillings, which resulted in a civil war known as the hut tax rebellion. It started in the north, but was strongest and lasted longest in the South.
In 1904, the British stopped construction of a railway line from Freetown to the North East and instead diverted it south, to Bo, in Mendeland, to give them quick access to put down this rebellion.
When Sierra Leone became independent in 1961 the British handed power to to the SLPP, which attracted support from the South, and in 1967 this party lost the election to the opposition party, the APC which drew support from the North.
Though the railway line was initially established to rule SL, by 1967, its role was economic – it allowed transportation of the country’s exports – coffee, cocoa, and diamonds, which came mostly from Mendeland in the south.
The then leader of the APC, Siaka Stevens, who drew his political support from the north, ripped up the railway line and sold off the track and rolling stock in order to weaken the oppostion in the south and consolidate his political power. This decimated the SL economy, but when it came to a choice between consolidating power and economic growth, the consolidation of power won out. Today, you can’t take the train to Bo anymore.
There is continuity between Colonial rule and Steven’s government – both extracted wealth from the people.
The Colonial rulers did this through agricultural marketing boards – farmers had to sell their goods to these boards, which typically paid much less than the market price (impovershing farmers and enriching the elite). When Stevens took power, he kept these marketing boards in place, but it got worse – under colonial rule, the colonialists extracted about 50% of the value of agricultral products, under Stevens, the rate of extracting rose to 90%.
Along with marketing boards, the old system of Paramount Chiefs remain in place today…. They control local politics at the village level, and local land rights and taxation – Paramount chiefs are elected, but only members of the ruling house can stand – and in 2005 the victor was Sheku Fasuluka, King Suluku’s great, great grandson.
The combination of these two institutions means there is very little incentive for farmers to increase productivity – because they have insecure land rights due to the paramount chief system and are the victim of extractive insitutions in the form of the marketing boards.
Thirdly, there was the control of the diamond mines – The British essentially set up a monopoloy for the entire country and handed it to DeBeers in 1936, and shortly after independence, Stevens simply nationalised this arrangement, through which he effectively personally controlled 51% of the diamonds in SL.
Stevens used his vast fortune to buy political influence and to set up his own private security forces – the ISU (known locally as the ‘I Shoot You’ and the Special Security Division – known as Siaka Steven’s Dogs).
All of this set the scene for the brutal civil war, outlined below….
Chapter 13 – Why Nations Fail Today
In the year 2000 Zimbabwe held a national lottery for everyone who had kept more than 5000 Zimbabwean dollars in their bank account (following a period of hyperinflation). The fact that it was Robert Mugabe who won this lottery just goes to show the extent of his control over Zimbabwe’s institutions and just how extractive those institutions had become.
The most common reasons nations fail today is because they have extractive institutions – and Zimbabwe illustrates the economic and social consequences of these…. By 2008 its per capita income was half that when it gained its independence, and 2009 the unemployment rate stood at 94%.
The roots of the political and economic instiututions lie in the colonial period. Orginally apartheid institutions were establised for a white elite to extract wealth from the country, but when Zimbabwe gained its indendence, these institutions were simply maintained by Mugabe. Eventually (because of lack of inclusivity) his support waned until by the year 2000 he had to find further resources to buy political support – so he expropriated the farms owned by white people and when that wasn’t enough he printed money, which led to massive hyperinflation.
Nations fail today because their extractive institutions do not create the incentives to save, invest and innovate. In many cases politicians stifle economic activity because this threatens their power base (the economic elite) – as in Argentina, Colombia and Egypt. In the cases of Zimbabwe and Sierra Leone this led to total state failure and economic stagnation. The countries in which this has happened include…
And the civil war, mass displacement, famines and epidemics that accompany them… in terms of development many of these countries are poorer today than they were in the 1960s.
A children’s crusade…
This section outlines the causes of the civil war in Sierra Leone. The authors put this down to decades of extractive institutions by the tyrannical APC government (the economy was collapsing by 1985, and they use the example of the TV transmitter being sold by the minister of information in 1987 and in 1989 the country’s main radio antena collapsed, ceasing radio transmissions.) By this point, the army had been dispanded because of the ruling elite feared it might overthrow them, which meant by the time Charles Taylor’s RPF crossed the boarder in 1991 there was no one there to stop them…. And then that brutal and chaotic civil war carried on for a decade – in which competing factions competed over resources in order to keep fighting each other – diamonds/ children (soldiers) and weapons.
So in summary, the historical precendent of the SL civil war is extractive institutions… the hollowing out the state to the point that was incapable of fending off rebels.
The authors now go on to outline three other countries which have suffered from different types of extractive institutions – Colombia, Argentina and Egypt, and then Uzbekistan…. a country languishing under the absolutism of a single family and the cronies surrounding them, with an economy based on the forced labour of children….
Cotton accounts for 45% of the exports of Uzbekistan. When the country was created in 1991, its first and still only president Islam Karimov, divided up the land among farmers, but each was required to devote at least 35% of their land to cotton, a valuable export crop. However, because the farmers themselves receive only a fraction of the world market price of the crop, they had no incentive to maintain, let alone invest in, cotton harvesting machinery.
No matter, however, because the country has turned to children to harvest the cotton, and every September-November the schools are emptied of approx. 2.7 million schoolchildren. Teachers, instead of being instructors, become labour recruiters.
Each child is required to pick between 20-60KG a day, depending on age, and the lucky ones who live close to their allocated farms can walk or bus to work, but the unlucky ones have to sleep over in sheds, with no toilets or wash facilities. And it’s BYO food.
While the market price for cotton was $1.40 in 2006, the children were paid somewhere in the region of $0.01 per kilo.
All of this has come to pass because Karimov has established a regime where opposition is repressed and there is no free media or NGOs allowed.
Why do nations fail?
What all of the countries loooked at in the book have in common is that they have an elite who have designed economic instiututions in order to enrich themselves and perpetuate their power at the expense of the vast majority of people in society.
Despite differences the bigger picture is that in each of these countries extractive political institutions that have created extractive economic insitutions which transfer wealth and power toward the elite.
The solution is to transform the extractive institutions into inclusive ones…
Chapter fourteen – breaking the mould
This chapter looks at three case studies – Botswana, The South of America, and China, which all managed to move from, or negotiate their way around (in the case of Botswana) extractive to inclusive political institutions which encouraged econonomic development.
Of particular interest to me is the case of Botswana – which today has the same level of development as some Eastern European countries, despite being as poor as most of the rest of Sub-Saharan Africa in the 1960s (at which time there were less than 100 graduates in the entire country).
What’s especially interesting about Botswana is that in that particular region of Africa a broadly inclusive political system was in existence pre-colonialsm – in the sense that any individual could rise up to become head of one the various different chiefdoms in the region, and so chiefdom was not hereditory, it was meritocratic, and someone could only be chief with the will of the people. Thus the principal of ruling with the will of the people, and on behalf of the people had been established for generations.
Another factor which promoted development was the fact that the English weren’t particularly interested in Botswana. In fact in the 1890s, three Twsana chiefs visited England and negotiated with the government to be part of a British Protectorate (different to a colony) – In return for protecting the region against Rhode’s South African expansionary policies (the guy who colonised Zimbabwe and Zambia, and look how they turned out!) all Enlgand wanted was enough land to build a railway in order to open up the intererior. For this the Twsana were pretty much left alone, crucially unextracted and without interefering institutions which had been set up to allow the extraction to take place.
Also signficant is that, following Colonialism and the discovery of diamonds, the Tswana chiefs passed a law that all diamond wealth was to be national property, rather than giving the rights to individuals or Corporations (like neoliberals would claim should be done, and like what happened in Sierra Leone). The effect of this was masses of public money which was then used to pay for public services. Hence development……
Something else emphasised in this chapter is that in all three cases certain key actors made important decisions at crucial junctures in the country’s history (when an existing leader died, such as Mao, creating a power vaccum, or when Independence was gained in Botswana) – The decisions taken at these crucial points in history in these countries involved either fighting the power of entrenched elites (as in China) or establishing laws which would prevent political corruption (like nationalising the diamond supplies in Botswana) – it was these decisions, in contrast to decisions in countries like Sierra Leone where a national railline was sold off to benefit an elite, which led to economic development.
Chapter 15 – understanding prosperity and poverty
The most interesting section of this concerns the predictive power of the theory – which is limited given the role of agency and contingency in said theory. However, the authors do predict that…
America and Europe are likely to get even richer than countries in most of the rest of the world, because these are the most inclusive institutions (I’d beg to differ given Tory Policy). Nations that have undergone no signficant state centralisation such as Afghanistan, Somalia and Haiti are unlikely to witness any development. Some Latin American countries are set two grow – most noteably Brazil, Chile Mexico as are some African countries – Tanzania and Ethiopia for example. Growth will not be sustained in China.
The irresistible charm of authoritarian growth…..
This section reminds us that modernisation theory is flawed – economic growth (more Mcdonalds as Thomas Friedman might put it) does not necessarily lead to to more inclusive political institutions.
Plenty of repressive regimes have pursued and achieve very rapid economic growth in the last 60 years – Germany, for example, Russia, and China.
This chapter also deals with what probably won’t work in terms of development… Firstly, any attempt at engineering policy changes such as those attempted by neoliberalisation throughout the 1980s and 90s – Because if a country is politically corrupt, they just subvert the policy changes – Privatisation happens, but the people winning the contracts are the brothers of the ministers for example, or the country says it implements a policy but they just carries on as normal!
You can’t engineer prosperity
…because the actors within developing countries are constrained by their institutions, and if these are extractive then any programmes designed to engineer change will ultimately result in further extraction.
This is true of two approaches to foreign aid preferred by the West – both the neoliberal ‘restructure your economy’ type approach and the micro-economic approach which focuses on specific institutions.
The failure of foreign aid
As above, any aid money going into a country with extractive institutions will ultimately end up being extracted. The authors do argue, however, that even if only 20% of aid money reaches its ultimate destination then it’s worth it!
The chapter and book round off by going back to the English and US revolutions which resulted in institutions becoming more inclusive – what is required for development is a plurality of voices demanding to be heard by government and actually being heard. This cannot be imposed from above, but seems to have to become from below.
In this sense, any attempt to engineer growth and provide aid seem pointless – the only things that make any sense are programmes oriented towards empowerment and making sure media is free because the later fosters the former.
Thoughts and comments….
The comparative analysis of countries and territories in close geographical proximity does seem to rule out the role of environmental and cultural factors in explaning divergent patterns of development, leaving only political and economic institutions.
It fully recognises the importance of the legacy of extraction identified by dependency theory, however, it also puts more emphasis on the already existing extractive institutions which the early colonisers extracted and it recognises the continuation of extraction post-colinalism, acknowledging the fact that corrupt elites also play a role.
This seems to deny the validity of neoliberal theory – the state seems to be crucial in helping development, and the absence of the state seems to be crucial in explaining the descent into chaos and civil war.
This isn’t a deterministic theory – it stresses the importance of agency and contingency at crucial historical junctures.
This is quite a generalist analysis – ‘extractive’ and ‘inclusive’ institutions are very general, broad terms, and there’s lots of variation possible within these voluminous concepts.
The book only draws on a relatively few case studies – and lacks the statistical rigour of, for example, Paul Collier’s Bottom Billion Theory.
The book doesn’t seem to deal with the globalised context of the nation state today within a ‘world system’ – There is no mention (as far as I can see) of the role which TNCs, trade rules, the World Bank might play in allowing a global elite (rather than nationalised elites) to extract regions of the world.
As a final word, what’s maybe most timely (or not timely?) about the book is its suggestion that some kind of political infrastructure which allows a plurality of voices to be heard and wealth to be distributed so it benefits all is crucial to development – it’s time more of us started asking how we might do this at a global, rather than a national level.
The recent factory collapse in Bangladesh in which over 1100 workers died makes this the second worst industrial accident in world history – after the Union Carbide disaster in Bhopal, India.
For Sociology students studying Global Development this is a good example that seems to offer broad support for the continued relevance of dependency theory.
One article highlights the following factors which contributed to the 1000+ death toll –
Bangladeshi factory workers cannot afford to not work when wages are only around the $50/ month mark. Behind this, of course, lies Western demand for cheap and fast fashion – We only get £2 because of those low wages…..
The lack of long-term commitment to suppliers on the part of Corporate buyers – which means that it is economically irrational for many factory developers to invest in health and safety measures in their factories. As I see it behind this lack of commitment lies transnational firms’ desire to take advantage of the ‘race to the bottom’ – short contracts means the parent company can move out of Bangladesh at short notice to take advantage of cheaper labour elsewhere….
International Corporations effectively wash their hands of responsibility for monitoring health and safety through outsourcing – As a result, many of our high street shops have scant representation themselves in Bangladesh, leaving monitoring of health and safety to the Bangladeshi authorities, which basically means effective monitoring doesn’t take place.
‘A common reaction in the UK media and from NGOs has been to focus anger on brands sourcing from Bangladesh. But the view in Dhaka is rather different. Newspapers here have concentrated almost exclusively on the failure by government agencies to implement the law on occupational safety and health (OSH) and the building code. This in turn is blamed on the nexus between garment factory owners and politicians – sometimes the same people.
According to the 2008 building law, any new structure, for any purpose, has to obtain an occupancy certificate from a government agency before it can be used; only six certificates have been issued since 2008, although it is estimated 4,000 – 5,000 new buildings come up every year.’
The ETI also aruges that the lack of unionisation of workers is an important contributory factor in these deaths – As the article above says, the workers could clearly see the cracks in the walls of the factory, but were forced to go in and work – Unionisation may have given them the sense of empowerment to stand up for their rights and stay alive.
Of course both of these perspectives – one blaming the TNCs, the other blaming the Bangladeshi elite – still offer broad support for the continued relevance of Marxist Theory – At the end of the day this is still a situation where the poor and powerless are dying so the powerful can maintain their profits.
Garment workers’ unions and human rights groups recently held a people’s tribunal in Feburary to investigate the state of povery pay in the Cambodia garment industry. The tribunal called for evidence from a wide variety of stakeholders including over 200 workers who work for factories manufacturing clothes for Adidas and Puma.
All of this follows strikes involving 200 000 workers, dismissals of 1000 union leaders and mass faintings induced by malnutrition of garment workers.
The tribunal concluded that workers are not being paid sufficient wages to lift them out of poverty, one of the main causes being that massive inflation in Cambodia has seen a real wage of loss of over 14% in real terms.
The problem today is that “Despite experiencing sustained growth in the sector, Cambodia’s minimum wage allowance is US $66 a month and is currently the lowest of all its neighbouring states. This wage amounts to around half that required to adequately meet the average worker’s basic needs.”
It also concluded that despite their PR talk, big clothing manufacturers are still failing to do enough to sort out ‘supply side issues’
Just thought I’d post this briefly as a succinct update on the latests evidence of sweat shop labour – students can obviously use the example in any essay on the failure of TNCs, the downsides of economic globalisation, or the continued relevance of dependency theory.
The above is summarised from an extract in the latest consumer magazine.
In this blog post I summarise Dambisa Moyo’s views on the problems with Aid as a strategy for development – she is talking about Official Development Aid rather than Emergency relief aid.
I’m mainly drawing from her writing at the end of chapter 3 and the whole of chapter 4 – and I offer up a few criticisms all the way through – before you read this through – please note my main criticism of Moyo’s work –
The main criticism I have of Moyo is that she uses statistics that show correlations between a high level of aid receipts and poor economic growth and then attempts to imply causality (aid causing poor growth) by using emotive, highly selective, anecdotal and even hypothetical (she invents a country – Dongo) ‘evidence’ to back up her case.
I say ‘imply causality’ because she never actually uses the word ‘cause’ – but the reader is left with the impression that this is what she is driving at. The end result for the less well informed reader is that they are stuck with a number of ‘easy to understand memorable case studies’ which imply that aid causes poverty – even though Moyo never actually says as much.
Anyway, here is my interpretation of the criticisms Moyo makes about the role of aid in development and a few criticisms that some people might make of Moyo’s work.
Criticism 1 – Aid does not bring about economic growth
At the end of chapter 3 – Aid is not working, Moyo starts to outline her basic criticism of Aid – This basic criticism being that aid has not effectively promote economic growth in Africa – Over 1 trillion dollars has been pumped into Africa over the past 60 years and there is little to show for it. In fact, according to Moyo, aid is malignant, it is the problem!
Moyo explains this through the following hypothetical example
‘There’s a mosquito net maker in Africa. He manufactures around 500 nets a week. He employs 10 people, who each have to support upwards of 15 relatives. However hard they work, they cannot make enough nets to combat the malaria-carrying mosquito.
Enter vociferous Hollywood movie star who rallies the masses, and goads Western governments to collect and send 100, 000 mosquito nets to the affected region, at a cost of $1 million, the nets arrive, the nets are distributed and a good deed is done.
With the market flooded with foreign nets, however, our mosquito net maker is promptly out of business. His ten workers can no longer support their dependents.
Now think of what happens 5 years down the line when the mosquito nets are torn and beyond repair, we have now mosquito nets, and no local industry to build any more. The long term effect of the ‘aid injection’ has been to decimate the local economy and make the local population dependent on foreign aid from abroad.’
Backing this up with some stats, Moyo goes on to point out that ‘even the most cursory look at the data suggests that as aid has increased over time, Africa’s growth has decreased with an accompanying higher incidence of poverty. Over the past thirty years, the most aid-dependent countries have exhibited growth rates averaging minus 0.2 % per annum.
Moyo also argues that a direct consequence of aid-driven interventions has been a dramatic descent into poverty – citing Zambia as an example, and the fact that when aid flows were at their peak between 1970 and 1998 – poverty in Africa rose to a staggering 66%.
The problem Moyo has here is that she fails to present sufficient evidence to make her case – it’s well known that the later part of the period above was a time of global economic slowdown compared to the previous 20 years, which itself could play a major role in Africa’s poverty, as could be the case with the debt crisis. One could also simply cite Botswana and Ghana as case studies of aid-recipient countries that have grown to counter her one example of Zambia.
Criticism 2 – Aid Encourages Corruption, which in turn retards growth
Unlike the previous section, Moyo does use a reasonable amount of statistical (drawn mainly from Transparency International) and case study evidence in this section…
According to Moyo – If the world has one image of African statesmen, it is one of rank corruption on a stupendous scale. One of the best examples of this is Mobutu, who is estimated to have looted Zaire to the tune of $5 billion. He is also famous for leasing Concorde to fly his daughter to her wedding in the Ivory Coast shortly after negotiating a lucrative aid deal with Ronald Reagan in the 1980s.
Having provided a couple more examples of ‘classic African Dictators’, Moyo then cites that classic statement made in n 2004 by the British envoy to Kenya, Sir Edward Clay, who complained about rampant corruption in the country, commenting that Kenya’s corrupt ministers were ‘eating like gluttons’ and vomiting on the shoes of foreign donors. In February 2005 (prodded to make a public apology), he apologised, saying he was sorry for the ‘moderation’ of his language, for underestimating the scale of the looting and for failing to speak out earlier.
Moyo further argues that at least 25% of World Bank Aid is misused. One of the worst examples is in Uganda in the 1990s – where it is estimated that only 20% of government spending on education actually made it to local primary schools.
According to Moyo, while it is not the only cause ‘aid is one of the greatest aides to corruption’ – arguing (Actually it might be more accurate to say ‘asserting’ given the lack of evidence in this section of her book) that ‘with aid’s help, corruption fosters corruption, nations quickly descend into a vicious cycle of aid’.
However, Moyo now drifts from the data and starts implying causality by asserting that growth cannot occur in an environment where corruption is rife, citing the following (un-evidenced) reasons (among others).
Corruption leads to worse development projects – corrupt government officials award contracts to those who collude in corruption rather than the best people for the job. This results in lower-quality infrastructure projects.
Foreign companies will not invest in countries where corrupt officials might siphon off investment money for themselves rather than actually investing that money in the country’s future.
Aid is corrosive in that it encourages exceptionally talented people to become unprincipled – putting their efforts into attracting and siphoning off aid rather than focusing on being good politicians or entrepreneurs.
Criticism 3 – Aid Corrupts Civil Society
OFFERING NO CONCRETE EXAMPLES OR EVIDENCE TO SUPPORT HER POINT, in this section Moyo asserts that Africa needs a middle class which trusts each other in order for development to occur. The problems is that in an aid environment, governments are more interested in lining their own pockets rather than encouraging entrepreneurs, meaning that the middle class cannot expand until it reaches that ‘critical mass’ which leads to sustained growth.
Criticism 4 – Aid undermines social capital
ONCE AGAIN OFFERING NO CONCRETE EXAMPLES OR EVIDENCE TO SUPPORT HER POINT, here Moyo argues that… In an aid dependent environment, there is no need for you to trust your neighbour and no need for your neighbour to trust you… Foreign aid weakens social capital by thwarting accountability mechanisms, encouraging rent-seeking behaviour, siphoning off scarce talent from employment positions and removing pressures to reform inefficient policies and institutions.
On the above two points it is also worth noting that these criticisms are really just fusions of the previous two criticisms of aid – that it prevents economic growth and breeds corruption.
Criticism 5 – Aid and Civil War
Moyo points out that there are three fundamental truths about conflicts today: they are mostly born out of competition for control of resources; they are predominantly a feature of poorer economies; and they are increasingly internal conflicts.
She then goes on to say that ‘this is why foreign aid foments conflict. The prospect of seizing power and gaining access to unlimited aid wealth is irresistible’. Unlike in the previous two sections, here she offers up one example to support her argument (Sierra Leone) before reminding us that aid also causes conflict more indirectly by reducing the prospects for economic growth.
The Economic Limitations of Aid
Having outlined five downsides of aid, Moyo then outlines its economic limitations – suggesting that there are four – once again lacking examples
Aid reduces savings and investment – assertion, no examples
Aid can be inflationary – assertion no examples
Aid chokes off the export sector (Dutch Disease) – cites unreferenced IMF studies
Aid causes bottlenecks due to low absorption capacity – Uses Uganda as an example
Aid and Aid Dependency
The end result of all the above is that aid leads to Aid Dependency – to the extent that aid makes up 13% of the average African country’s GDP. According to Moyo, this throws up the following problems
It makes Africans lazy
It leads to low tax revenues (no need to tax the citizenry if money is flooding in from outside!)
Citing Boone (1996) – it leads to bloated inefficient public sectors.
Finally, it leads to Western donors being able to call the shots.
In the final section of the chapter, Moyo pays homage to Peter Bauer, and briefly mentions that both William Easterly and Paul Collier disagree with the ‘one size fits all’ aid approach to development – before introducing the next sections of the book which are devoted to explaining why Africa should adopt free market (encouraging FDI/ Issuing bonds etc.) rather than aid driven solutions to underdevelopment.
Criticisms of Moyo
Really, I’d just like to go back to what I said at the beginning and say that…
The main criticism I have of Moyo is that she uses statistics that show correlations between a high level of aid receipts and poor economic growth and then attempts to imply causality (aid causing poor growth) by using emotive, highly selective, anecdotal and even hypothetical (she invents a country – Dongo) ‘evidence’ to back up her assertions.
I say ‘imply causality’ because she never actually uses the word ‘cause’ – but the reader is left with the impression that this is what she is driving at. The end result for the less well informed reader is that they are stuck with a number of ‘easy to understand memorable case studies’ that imply aid causes poverty – even though Moyo never actually says as much – possibly because she might think that, really, there is insufficient evidence to make the case which she alludes to.
One has to reflect on why Moyo is so selective – I think it unlikely that an Oxford and Harvard Graduate has failed to read widely enough for this to be innocent – Especially when the author has 8 years at Goldman Sachs under her belt….so could it be that this is simply an overt attempt to promote a neoliberal anti aid agenda?
Water Aid works in 23 countries in Asia and Sub-Saharan Africa, with a total of 606 staff. Its mission is to ‘transform lives by improving access to safe water, hygiene and sanitation in the world’s poorest communities’
According to this 2010-11 annual review – Last year they spent about £50 million – of which £32 million went to water and sanitation delivery service, £11 million on fundraising and £6 million on governance. You might criticise the £11 million on fundraising, but given that nearly 3/4 of their income comes from donations (the rest mainly from grants – which still need to be chased) – one imagines that without this, they’d have considerably less to work with…
The stats really add up – Last year Water Aid helped 1.5 million people gain access to clean water, and improved sanitation for 1.6 million people.
I’m in the middle of writing a critique of Dambisa Moyo’s Dead Aid – mainly because the book uses highly selective evidence to promote neo0liberal ideology – but I will concede that the way Moyo conceptualises the history of development aid from the 1940s is a fairly useful teaching tool for A level Global Development – so here’s a brief summary of the second chapter of the book – (NB I said useful conceptually for A level, I’m not actually implying that her account is factually accurate – thankfully when you’ve got an exam board that lives in a 1980s timewarp, the actual facts aren’t necessarily that important for the exam)
Moyo splits ‘the history of aid’ up into ‘seven phases’ – starting with the earliest days of Bretton Woods in the mid 1940s – which saw the establishment of institutions such as the IMF, then outlines details of the Marshall Plan in the 1950s – but I’m going to start my brief summary with the third phase in the 1960s -which are followed in each successive decade with next four phases.
The 1960s – The decade of Industrialisation –
Here there was a shift to to the development of large scale industrial projects, with funding going directly to governments in African countries and coming primarily from the USA, but also from European governments.
A good example of this is the Kariba hydroelectric dam that straddles the boarder between Zambia and Zimbabwe – began under British colonial rule in the 1950s and finally completed in 1977 at a cost of $480 million.
While pointing out that records from the 1960s are not perfect, Moyo sites the following stats for country receipts of aid by the mid 1960s –
Ghana – $90 million
Kenya, Malawi and Zambia – all having recieved an averge of about $315 million
The 1970s – the shift to a poverty focus
This historical period starts with the 1973 Arab embrago on oil, which lead to oil price rises, followed by food price rises and recession across Africa. In 1975, for example, Ghana’s eGDP contracted by 12% and inflaction had risen to more than 100% by 1977.
In practical terms this lead to aid being redirected away from large infrastructure projects and towrds rurual projects in agriculture and rural development and social services – such as innoculation programmes, housing and literacy campaigns. By the end of the 1970s, the proportion of aid allocated to social service had increased from 10% (in the previous decade) to over 50%. Much of this aid came in the form of concessional loans which would need to be paid back.
Moyo also notes that despite the increasing inflows of aid, increasing numbers of people in Africa were falling into poverty.
The 1980s: Neoliberalism, Structural Adjustment and the lost age of development
Moyo begins – By the end of the 1970s, Africa was awash with aid. In total, the continent had ammassed around $36 billion in foreign assistance. This decade saw a shift away from governments giving aid and towards multilateral aid – with the World Bank and the IMF playing a more central role. Also, aid became focussed less on poverty reduction and more focussed on assisting (some may read coercing) developing world governments to adopt free-market policies.
The 1979 oil spike, precipitaed by the Iran-Iraq war lead to more financial problems for Africa as Western financial institutions responded to the corresponding price increases by raising interest rates – which meant that Africa’s debt service payments reached around $8 billion in 1982, while at the same time, worldwide recession meant declining income from exports, meant that in the 1980s, 11 African countries were eventually defaulted on their debts.
The solution to this crisis was to ‘restructure the debt’. Thus the IMF formed the Enhanced Structural Adjustment Facility – to lend more money to defaulting nations to help them. Of course this in itself did little to actually alleviate Africa’s problems – it was still dependent on concessionary loans from the West.
At the same time as this restructuring – there was also an ideological shift amongst donors – towards ‘neoliberalism’ – and aid now shifted so that when governments received it they had to agree to instigate ‘free-market reforms’ – minimising the role of the state, privatising previously nationalised industries, liberalising trade (less restrictions on private companies and exports/ imports) and reducing the number of government employees.)
Between 1986 and 1996 six African countries – Benin, the CAR, Guineas, Madagascar, Mali and Uganda shed more than 10% of their civil workforce, and overall across Africa, many industries were privatised.
The 1990s – A question of good governance
By the end of the 1980s, emerging-market countries’ debt was at lest $1 trillion — and the cost debt servicing had become so substantial that from 1987-1989 there was a net outflow of money from poor to rich countries of $15 a year.
Having seen the failure of aid in previous decades, donor institutions now laid the blame for Africa’s economic woes at the door of weak political leadership and institutions and there was an increased focus on the need to link aid to the promotion of good governance – in other words, credible institutions, transparent rule of law and freedom from corruption. There was also a growing belief that African countries needed a dose of Western Democracy in order to develop.
Moyo also notes that the increasing link between aid and democratic accountability was aided by that fact that in the 1990s, the cold war was thawing, which meant an end to the US and Russia providing aid to politcally dubious regimes in Africa for military purposes.
Finally, the later part of the 1990s saw the rise of ‘donor fatigue’ – ODA peaked in 1992 at a high of $17 billion and then fell to £12 billion in 1999.
The 2000s – the rise of glamour aid
While I think her overview of the preceding decades of development aid is useful, her casting of ODA in the most recent decade is flippant. She
fails to even mention that aid targetting came to be better informed by the 8 Millennium Development Goals, or the new philanthropy headed up by Bill Gates. Instead Moyo simply casts the 2000s as the era in which a new army of moral campaigners took to our TV screens – most noteably Bono, who not only wrote the forward to Jeffrey Sach’s 2005 ‘End of Poverty’ but also met with world leaders to discuss development issue and campaing for more aid to combat Africa’s problems. The only other substantive example she mentions about aid in the 2000s is the ‘Jubilee debt campaign.
So there you have it – with the exception of the last decade, a useful, if somewhat generalised account of the history of Western Development aid over the last half century.
What with the UK news focussing on the riots and the financial crisis, you may also have missed the fact that 12.5 million people are in need of urgent humanitarian assistance in Somalia, Ethiopia, Kenya and other countries in the region.
The World Food Programme has put together a very useful web site to provide information on the famine with lots of links to how you can help – the most easiest way being to donate by text message
This Guardian Development Post looks at what countries are donating to the humanitarian relief effort – Unsurprisingly The USA is the biggest relief donor – having committed to provide approx. $0.5 billion but the UK as committed to providing around $160 million in humanitarian aid – making us one of the biggest donors per head of population.
This may sound like a lot of money – bur keep in mind that this is money committed not money yet spent, and also the UN notes that another $2.5 billion is needed to prevent half a million people from starving.
If you want to know more about hunger around the world – the World Hunger Index provides details of percentages of malnourished children around the world.
This Guardian podcast focusses on Somalia and provides details of what it’s like for some of those suffering from famine and the problems with mounting large scale aid programmes in the area.
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