First posted on my Cuentos y Chismes blog on 17 April 2006, while working in Mexico City.
The now-developed world has spent much of its energy in the last few hundred years ripping off today’s poorer countries. Most Mexicans I know are well aware of this, while at the same time despising their own political elite for doing the same. That the Spanish and Portuguese plundered Latin America is not a matter of dispute – nor is the USA’s heinous involvement in some of the worst dictatorships of the modern era. Astonishingly, Haiti had to pay $21 billion (in today’s money) to the French as the price of its independence in the early 19th century – it has never recovered from its history of plunder and debt. God knows where Colombia’s gold is.
Britain has its own rather less than glorious history of taking other people’s things and justifying it in various specious ways. But we, along with other Western countries, appear more or less oblivious to this, regarding it as something like ancient history. I gave a talk recently in one of England’s top schools and asked when the students thought Britain’s last colony gained independence. The first answer was, "1905?"
When Tony Blair announced the G8’s promises at Gleneagles he said he wanted to replace our relationship of "charity" with poor countries with one of "partnership". Apart from this being nothing new – the same rhetoric has been used for decades – it was annoying that he can still get away with the idea that we are charitable. We are not. Cancelling debt is portrayed as an act of tremendous generosity – our complicity in the roots of debt and poverty is not examined. British civil society has a job to do to remind people of some of the facts as revisionist theories of Empire (such as Niall Ferguson’s dire TV series) appear to be gaining ground. In France, apparently, they have actually passed a law insisting that a positive spin is put on French history in schools.
The present emphasis in development circles in the North on ramping up aid is linked to this skewed view of our past and present. What is an important but relatively minor element in the fight against poverty has been elevated to the position of cornerstone (architects will forgive me if this is in fact impossible).
More poor people (living on less than $2 a day) live in Mexico than in the whole of Central America. But doubling aid to Mexico will mean that inflows still account for only 0.04% of GNI – insignificant. What are significant are the vast outflows, both legal and illegal, that leave Mexico every year to be invested in the USA or hidden in tax havens. What is significant is the continued failure to levy sensible taxes – tax revenue is well under 20% of GDP compared to almost 40% in the UK. What is significant is the continued pressure to free up trade, which will hurt those who most need help and investment. What is significant is the continuing fallout of Mexico’s debt crises (debts of middle income countries have grown exponentially in the last two decades – the occasional rescheduling or bailout has done little to mitigate this trend). The same is true for most countries in the region and the world – 2.3 billion of the world’s 3 billion poor live in countries that receive under 3% of their GNI in aid (most receive a lot less).
There are a few dozen countries for which aid is of great significance. Nicaragua is one of them, receiving more aid per head than almost any other country in the world – most others are in Africa or are small islands. But then another set of problems arise – might there be negative impacts of increased aid? Probably, yes. It is perfectly sensible, regrettably, to conclude that the biggest impacts of official aid to poor countries in recent decades have been the neoliberal conditions attached to it. Changes in trade rules, bad privatisations, and the liberalisation of financial flows may well have had a more serious negative impact than the benefits of more cash in hand. And aid can retard institutional development too, with most evidence suggesting that countries receiving aid have less incentive to raise taxes, perhaps the fundamental step developing countries need to make, both to increase the resources available to the public sector to finance development and to improve governments’ accountability to their citizens.
The Ugandan government presently gets as much money from aid as it does from tax revenue. Under some projections aid to Africa is set to triple by 2015 – few believe that tax revenues will follow suit. Despite serious attempts by DFID and other donors to improve accountability and ownership it is naïve to suppose that present complaints about governments being more responsive to donor preferences than to their own citizens will improve as the statistics get more skewed.
Talking of evidence, there is simply no robust evidence suggesting that aid leads to economic growth (which is unfortunately the best proxy we have in the literature for poverty reduction). Even those studies that find a positive relationship under certain circumstances cannot agree what those circumstances are. In a paper published last year Nancy Birdsall, Dani Rodrik and Arvind Subramanian (respectively the head of a respected, relatively orthodox, think tank, an eminent, slightly less orthodox, Harvard economist and the IMF’s head of research) argued that "financial aid and the further opening of wealthy countries' markets are tools with only a limited ability to trigger growth, especially in the poorest countries. The tremendous amount of energy and political capital expended on these efforts in official circles threatens to crowd out attention to other ways in which rich countries could do less harm and more good." The paper goes on to suggest actions rich countries could take which would have a far greater poverty reducing impact: reforming TRIPs, giving countries far more policy space, confronting bribery and corruption by western actors, investing in technology that would benefit poor countries, and improving the cross-border mobility of labour. There are many others, most importantly helping prevent capital flight and helping ensure that foreign investment has a better impact on poverty reduction.
None of this is to discount the important role aid has played, and will hopefully continue to play, in improving the lives of millions of people. NGO aid in particular has been shown to respond to the needs of the poorest and has few harmful conditions. But we have to get real. Aid is a bit player in the history of poverty reduction. It has become the centrepiece of the new era of development because it is the easiest thing rich governments can do to respond to their electorates’ occasional horror at continuing extreme poverty (and in the case of Gordon Brown, Hilary Benn and others, an inspirational passion to end it), not the most important. In the post-9/11 context, it is also likely that aid will continue to be used to augment political partnerships. While DFID has made bold statements on reforming conditionality (largely because of immense campaigning pressure) there is little sign yet that other donor governments will follow suit.
The Independent newspaper, in one of its lucid editorials on Iraq, suggested that history students a hundred years from now would get poor marks if they claimed that the Iraq war was about WMD. They would do better if they demonstrated an understanding of the political and economic drivers of the war, oil being important. This is a helpful way to analyse the present day. While the British civil service (and public) spent the nineteenth century believing it was playing a civilising role in the affairs of its colonies, history students today understand the economic exploitation that was tied up with occasionally generous instincts. What will history students write in 2106? Is aid partly a smokescreen to disguise continued exploitation?
A lot changed in the 20th century – compassion in particular appears to have made a welcome return to humanity’s list of priorities (despite the eighties!). But whichever way you look at the world its plentiful resources, financial as well as natural, continue to satisfy the desires of only a very small minority. The world is more unequal than ever and until we become less fixated on trash TV (guilty) and mobile phones (not guilty) and more concerned with actually sorting this shameful trend out it will continue. Giving more aid will simply not do it, even if it is also ‘better aid’.
In the nineteenth century the British claimed to be "civilising" the world (you may have noticed the rhetoric of "civilised" and "uncivilised" making a triumphant comeback in recent years). I wonder whether today, despite our rhetoric of "charity", we realise how similar our practices are to those of our predecessors. The time is long overdue to explode the myth of charity.
The now-developed world has spent much of its energy in the last few hundred years ripping off today’s poorer countries. Most Mexicans I know are well aware of this, while at the same time despising their own political elite for doing the same. That the Spanish and Portuguese plundered Latin America is not a matter of dispute – nor is the USA’s heinous involvement in some of the worst dictatorships of the modern era. Astonishingly, Haiti had to pay $21 billion (in today’s money) to the French as the price of its independence in the early 19th century – it has never recovered from its history of plunder and debt. God knows where Colombia’s gold is.
Britain has its own rather less than glorious history of taking other people’s things and justifying it in various specious ways. But we, along with other Western countries, appear more or less oblivious to this, regarding it as something like ancient history. I gave a talk recently in one of England’s top schools and asked when the students thought Britain’s last colony gained independence. The first answer was, "1905?"
When Tony Blair announced the G8’s promises at Gleneagles he said he wanted to replace our relationship of "charity" with poor countries with one of "partnership". Apart from this being nothing new – the same rhetoric has been used for decades – it was annoying that he can still get away with the idea that we are charitable. We are not. Cancelling debt is portrayed as an act of tremendous generosity – our complicity in the roots of debt and poverty is not examined. British civil society has a job to do to remind people of some of the facts as revisionist theories of Empire (such as Niall Ferguson’s dire TV series) appear to be gaining ground. In France, apparently, they have actually passed a law insisting that a positive spin is put on French history in schools.
The present emphasis in development circles in the North on ramping up aid is linked to this skewed view of our past and present. What is an important but relatively minor element in the fight against poverty has been elevated to the position of cornerstone (architects will forgive me if this is in fact impossible).
More poor people (living on less than $2 a day) live in Mexico than in the whole of Central America. But doubling aid to Mexico will mean that inflows still account for only 0.04% of GNI – insignificant. What are significant are the vast outflows, both legal and illegal, that leave Mexico every year to be invested in the USA or hidden in tax havens. What is significant is the continued failure to levy sensible taxes – tax revenue is well under 20% of GDP compared to almost 40% in the UK. What is significant is the continued pressure to free up trade, which will hurt those who most need help and investment. What is significant is the continuing fallout of Mexico’s debt crises (debts of middle income countries have grown exponentially in the last two decades – the occasional rescheduling or bailout has done little to mitigate this trend). The same is true for most countries in the region and the world – 2.3 billion of the world’s 3 billion poor live in countries that receive under 3% of their GNI in aid (most receive a lot less).
There are a few dozen countries for which aid is of great significance. Nicaragua is one of them, receiving more aid per head than almost any other country in the world – most others are in Africa or are small islands. But then another set of problems arise – might there be negative impacts of increased aid? Probably, yes. It is perfectly sensible, regrettably, to conclude that the biggest impacts of official aid to poor countries in recent decades have been the neoliberal conditions attached to it. Changes in trade rules, bad privatisations, and the liberalisation of financial flows may well have had a more serious negative impact than the benefits of more cash in hand. And aid can retard institutional development too, with most evidence suggesting that countries receiving aid have less incentive to raise taxes, perhaps the fundamental step developing countries need to make, both to increase the resources available to the public sector to finance development and to improve governments’ accountability to their citizens.
The Ugandan government presently gets as much money from aid as it does from tax revenue. Under some projections aid to Africa is set to triple by 2015 – few believe that tax revenues will follow suit. Despite serious attempts by DFID and other donors to improve accountability and ownership it is naïve to suppose that present complaints about governments being more responsive to donor preferences than to their own citizens will improve as the statistics get more skewed.
Talking of evidence, there is simply no robust evidence suggesting that aid leads to economic growth (which is unfortunately the best proxy we have in the literature for poverty reduction). Even those studies that find a positive relationship under certain circumstances cannot agree what those circumstances are. In a paper published last year Nancy Birdsall, Dani Rodrik and Arvind Subramanian (respectively the head of a respected, relatively orthodox, think tank, an eminent, slightly less orthodox, Harvard economist and the IMF’s head of research) argued that "financial aid and the further opening of wealthy countries' markets are tools with only a limited ability to trigger growth, especially in the poorest countries. The tremendous amount of energy and political capital expended on these efforts in official circles threatens to crowd out attention to other ways in which rich countries could do less harm and more good." The paper goes on to suggest actions rich countries could take which would have a far greater poverty reducing impact: reforming TRIPs, giving countries far more policy space, confronting bribery and corruption by western actors, investing in technology that would benefit poor countries, and improving the cross-border mobility of labour. There are many others, most importantly helping prevent capital flight and helping ensure that foreign investment has a better impact on poverty reduction.
None of this is to discount the important role aid has played, and will hopefully continue to play, in improving the lives of millions of people. NGO aid in particular has been shown to respond to the needs of the poorest and has few harmful conditions. But we have to get real. Aid is a bit player in the history of poverty reduction. It has become the centrepiece of the new era of development because it is the easiest thing rich governments can do to respond to their electorates’ occasional horror at continuing extreme poverty (and in the case of Gordon Brown, Hilary Benn and others, an inspirational passion to end it), not the most important. In the post-9/11 context, it is also likely that aid will continue to be used to augment political partnerships. While DFID has made bold statements on reforming conditionality (largely because of immense campaigning pressure) there is little sign yet that other donor governments will follow suit.
The Independent newspaper, in one of its lucid editorials on Iraq, suggested that history students a hundred years from now would get poor marks if they claimed that the Iraq war was about WMD. They would do better if they demonstrated an understanding of the political and economic drivers of the war, oil being important. This is a helpful way to analyse the present day. While the British civil service (and public) spent the nineteenth century believing it was playing a civilising role in the affairs of its colonies, history students today understand the economic exploitation that was tied up with occasionally generous instincts. What will history students write in 2106? Is aid partly a smokescreen to disguise continued exploitation?
A lot changed in the 20th century – compassion in particular appears to have made a welcome return to humanity’s list of priorities (despite the eighties!). But whichever way you look at the world its plentiful resources, financial as well as natural, continue to satisfy the desires of only a very small minority. The world is more unequal than ever and until we become less fixated on trash TV (guilty) and mobile phones (not guilty) and more concerned with actually sorting this shameful trend out it will continue. Giving more aid will simply not do it, even if it is also ‘better aid’.
In the nineteenth century the British claimed to be "civilising" the world (you may have noticed the rhetoric of "civilised" and "uncivilised" making a triumphant comeback in recent years). I wonder whether today, despite our rhetoric of "charity", we realise how similar our practices are to those of our predecessors. The time is long overdue to explode the myth of charity.
posted by Anonymous @ 15:02
3 Comments:
What a perfect example of how to conflate different issues that have no relevance to one another.
If charity and aid often do more harm than good (agreed), what is your proposal?
You really could have written this article in a single sentence: "Western nations are awful, but aid still doesn't work."
Simply to trash historical actions does little to explain how we engage with poorer nations for our mutual benefit today and into the future.
Thanks for your thoughts Arthur. What are the different issues that I am wrongly conflating? Jonathan
The way I see it, colonial history and empires did cause a lot of damage in the past and some of those effects are still visible today but I did get the impression from your post, maybe I was wrong, that the failures of aid were somehow caused by this legacy.
My impression is that you link Spanish and Portuguese plundering of Latin America to a failure of aid; that you link a $21 billion pay off by Haiti to France in the early 19th century to failures in aid.
I just do not get the link. Yes, immigration of Spanish and Portuguese people, not to mention African Slaves, has made it difficult, when combined with indigenous peoples in Latin America, for the continent to settle into a peaceful and harmonious existence. Yes, there was a great contradiction in the British Empire and ideas of British freedom and liberty, but what do these things have to do with aid?
But on reading the post again, perhaps your point is that justifications for historical actions are not that dissimilar to justifications for today's actions. However, I am still unsure what our fixation with free trade, global money markets and the like actually has to do with aid.
Surely the central weakness of aid is that it breeds dependence in the recipient. What Britain, Spain or Portugal did or did not do centuries ago is of little relevance except perhaps to fuel our misguided guilt that seems to convince us that aid is a self evident good.
Apart from that, you make some thoughtful points.
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