Eva Cheng
In response to the moral outrage among broad sections of the populations of developed capitalist countries at the growing inequality of wealth and living standards between the rich "First World" countries and poor "Third World" countries, the rulers of the club of rich countries have had to make proclamation after proclamation of their commitment to provide economic aid to the poor countries. They have agreed to set targets for the amount of this aid.
However they have imposed onerous conditions on the provision of aid, conditions that ensure that recipient countries pursue policies that benefit the profit-making of donor-country-based corporations rather than the poor in the recipient countries. The United Nations 2005 Human Development Report (HDR), published in September, provides glimpses on how farcical the situation has become. Examples are:
- Since 1990, per capita income in rich countries has risen by US$6070 (in constant prices), while international aid fell by $1 per capita.
- Even aid to Sub-Saharan Africa, the world's poorest region, was lower at the end of the 1990s than it was at the start.
- As a share of gross national income (GNI), the weighted average for aid from the rich countries is a third lower than it was in the early 1980s and half that of the 1960s level.
- Even though official development assistance (ODA) rose by $12 billion in 2002-04, and the US accounted for two-thirds of it, a significant part of the US increase was directed to "reconstruction" in US-occupied Iraq and Afghanistan, countries that have been devastated as a result of aggressive US policies, including international economic sanctions, and invasion and occupation by the US military.
- The developmental aid funding is on average only 10% that of donor countries' military spending. In the case of the US, it is only 4% of military spending.
- Between 2000-03, military spending increased by $118 billion. Just 3% of that, if deployed on basic health care, could prevent the death of 3 million infants a year.
Empty words
In 1969, the World Bank's commission on international development under Lester Pearson proposed that the rich countries provide development aid to Third World countries of no less than 0.7% of GNI by 1975. But the 2005 HDR revealed that in "the 36 years since the Pearson report there has been no shortage of commitments to the 0.7% target, but rich countries have habitually failed to back promises with actions".
At the UN's 1992 Earth Summit in Rio de Janeiro, for example, most donor governments renewed their pledge for the 0.7% target as compared to a 1990 actual aid provision of 0.33% of GNI. However, by 1997 their aid budgets had shrunk to an average all-time low of 0.22% of GNI, and remained at that level until 2001.
At the 2002 Conference for Financing Development, held in Monterrey, Mexico, the majority of donor countries once again pledged to make "efforts to reach" the 0.7% aid target. However, Japan and the US did not even set a timetable for reaching the target.
The 2005 HDR noted that this year the European Union's 15 richest countries revised their "commitment" to achieve the aid target of 0.7% of GNI by 2015, agreeing to an interim target of 0.51% of GNI by 2010.
Under its 2000 "millennium challenge account", the US government "committed" itself to raise aid spending by 50% ($4-$5 billion a year) by 2006. But in 2005, of the $2.5 billion that the White House asked from the Congress for this scheme, only $1.5 billion was approved. The US remains the world's largest donor in dollar terms, but its aid to GNI ratio was a pathetic 0.1% in 2000. After adding in the "reconstruction" funds the US Congress has approved for the US puppet regimes in Iraq and Afghanistan, that ratio rose to 0.16% in 2004.
Another major set of "commitments" that the rich countries made in 2000 was under a 15-year scheme to reach eight UN-set "millennium development goals". The MDGs are aimed at lifting the world's poorest people out of the worst abject poverty and the most degrading conditions. To achieve them, the UN estimated that international aid needed to double by 2006 before rising to $195 billion by 2015.
The rich countries' aid level is currently around 0.25% of GNI. This ratio would need to rise to 0.3% by 2006 under the 2002 Monterrey projection. But according to the 2005 HDR, even if the Monterrey target is achieved next year, there'll still be a shortfall of $47 billion if the MDG goals are to be met. With no further aid increases, that financing gap is projected to swell to $52 billion by 2010.
A number of "relief" items are categorised as aid, even when they don't amount to a corresponding transfer of resources to the recipient countries, warned the 2005 HDR. In 2000-04, three main items alone accounted for 90% of the $11.3 billion increase in bilateral aid — debt relief, technical cooperation and emergency assistance.
Third World nations simply can't service all of their international borrowings. But the rich countries' Organisation for Economic Cooperation and Development (OECD) allows its members to report the writing off of debt, including debt upon which no interest payments are being made, as aid to debtor countries. "This inflates the actual value of debt relief", noted the 2005 HDR, "and gives a misleading impression of how much aid donors are giving".
"Technical assistance" accounts for one-fourth of rich-countries' aid measured in dollars, but much of it is actually spent in the donor countries. Education is a case in point. According to the 2005 HDR, three-quarters of education aid resources came as technical assistance, being spent on scholarships, external technical advice and consultancy fees. At the same time, under International Monetary Fund (IMF) "structural adjustment programs" — imposed on Third World countries as a condition of access to international banking loans — poor countries were being forced to make deep cutbacks of their funding for critical needs such as teacher training and salaries, and the provision of classrooms and textbooks.
When emergency relief is counted as regular aid, it disguises the scale of the actual shortfall in unfulfilled developmental needs. Emergency relief is often said to be from "additional funding" but the 2005 HDR disputed this claim, pointing out that Japan, for example, "has combined increased aid for Afghanistan and Iraq with deep cuts in overall development assistance" to the Third World.
Strings attached
Most aid is tied to stringent conditions that are designed to shape the policy decisions of the recipient countries. According to the 2005 HDR, while the conditions on IDA loans fell from 30 per loan in the mid-1990s to 15 in 2003, recent analysis of IMF and World Bank programs revealed that the "structural conditions" imposed may be rising again. Most importantly, the remaining strings are no less onerous, ranging from detailed recipient country budgetary targets to sweeping benchmarks for "macro-economic management" of their economies.
The 2005 HDR observed: "Doing business with the World Bank requires compliance with targets set in its country assistance strategies, Poverty Reduction Support Credits and other loan agreements. Bilateral donors and the World Bank have even picked up some of the structural loan conditions dropped by the IMF. Meanwhile, countries seeking HIPC [Highly Indebted Poor Countries] Initiative debt relief have to comply with a further set of spending and economic targets."
Non-compliance with such conditions is often punished by the cutting off of aid. The 2005 HDR notes: "Only one-quarter of IMF programs are completed without interruption — a fact that helps to explain both the volatility and the unpredictability of aid."
Another major problem is "tied aid" — a practice that binds transfers of aid money to the purchase of services and goods from the donor countries. The 2005 HDR reported that the recipient countries lose out in a number of ways:
- The absence of "open-market tendering" to companies providing goods and services means the recipient country may not get the best deal available, with exorbitant contracts absorbing an estimated 20-30% of the aid's face value, and as high as 40% for tied food aid.
- It can lead to inappropriate skills and technologies being transferred.
The US tops the tied aid list, followed by Italy, with Germany and Japan also being key culprits. Two-thirds of Australia's aid to Papua New Guinea, its biggest aid recipient, is delivered through just six Australian companies.
"Some forms of tied aid fly in the face of a serious commitment to the MDGs", the 2005 HDR argued. "In 2002-03 some $1 billion in bilateral aid was in the form of grants for university study in donor countries, heavily outweighing donor support for basic education in some cases."
The report further highlighted that tied aid also skewed resources towards capital-intensive imports or donor-based technical expertise, at the expense of indigenous know-how that could help local and rural development. The donors' tendency to prefer the construction of large trunk roads rather than smaller feeder roads is one example.
The report observed that large amounts of aid "are still spent on non-development objectives, such as disposing of agricultural surplus or creating markets for companies in rich countries.
"For more than 35 years donors have been stating their commitments to quantitative and qualitative targets for aid. With a few exceptions, these have not been met."
Donor governments have expressed concerns on such matters as the supposed negative economic effects of "excessive" aid, the limited ability of recipient countries to absorb the aid without distortion of "market conditions" or the "governance" capability of the recipient governments. The 2005 HDR observed that these concerns "are often smokescreens behind which donors seek to justify the unjustifiable: a legacy of indifference, neglect and failure to deliver on past pledges".
From Green Left Weekly, December 7, 2005.
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