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British aid and the return of the trickle-down myth

United Kingdom
Development (Aid)

Where British aid money is going: investing in business rather than people. Phalinn Ooi under a Creative Commons Licence

Last week’s Guardian exposé of the investment of millions of pounds of British aid money in gated communities, high end shopping centres and luxury hotels came as a shock to people who have fought for the aid budget over many years. What’s even worse is that these projects are not aberrations, but represent a dangerous trend in aid spending, which has been taken to new levels by the current British government.

The Guardian reported on Saturday that the ‘investment arm’ of Britain’s Department for International Development (DfID), known as the CDC Group, has invested more than US$255 million in property and construction companies in Latin America, Africa and Asia. This includes companies that have built 10 gated communities in El Salvador, a high end property complex, business hotel and shopping centres in Kenya, and luxury beachfront homes and an elité British boarding school franchise in Mauritius.

Such ‘investments’ are central to the CDC’s so-called ‘development’ model. This body, formerly known as the Commonwealth Development Corporation, places public money in financial vehicles, which then invest in private enterprises that supposedly have difficulties finding finance.

In other words, it is based on the idea that ‘free’ financial markets are the best way to allocate capital. It is premised on the completely discredited notion, as shown in the examples above, that wealth ‘trickles down’ in a society. And it confuses return on investment with people’s lives getting better. Five years after the financial crash showed everyone the deeply anti-social impacts of unregulated financial markets, these concepts are clearly absurd.

Yet the British government is leading the charge to redefine development along exactly these lines. Former Secretary of State for International Development Andrew Mitchell published a pamphlet claiming, 'In my view it is not an unreasonable proposition to suggest that in 50 years time CDC will be seen as the principal British development structure, rather than DfID.'

Mitchell’s successor, Justine Greening, who appears to see herself more as a minister of investment than of genuine development, seems to share this view. Almost every other week, Greening launches a new private sector initiative or ‘financial vehicle’ (most recently, ‘development bonds’) which increasingly turn DfID into a facilitator of big business and big finance in Africa.

The World Development Movement recently revealed in New Internationalist that US$1 billion in British aid money is being channeled through the New Alliance for Food Security and Nutrition, a scheme that is helping the world’s most powerful agribusinesses get their hands on land, labour and markets in African countries.

The British government is by no means alone in its quest. The investment arm of the World Bank, the mighty International Finance Corporation (IFC), is the bank’s fastest growing section. In a brilliant exposé last year by journalist Cheryl Strauss Einhorn, the IFC was found to be funding some of the most expensive hotels in the world, in combination with superrich investors including Saudi royalty.

The report found: ‘[The IFC] has funded fast-food chains like Domino’s Pizza in South Africa and Kentucky Fried Chicken in Jamaica. It invests in upscale shopping malls in Egypt, Ghana, the former Soviet republics, Eastern Europe, and Central Asia. It backs candy-shop chains in Argentina and Bangladesh; breweries with global beer behemoths like SABMiller and with other breweries in the Czech Republic, Laos, Romania, Russia, and Tanzania.’

Another report, by the Bretton Woods Project watchdog, has shown that since the financial crisis, the World Bank has thrown US$36 billion into the financial sector – three times more than it has spent on education. With these investments have come serious allegations of water pollution, land grabbing and even murder.

There are similar institutions at a European level too – the European Bank for Reconstruction and Development, based in London, is currently set on restructuring Ukraine, Egypt and other ‘post shock’ countries.

So this view of ‘development’ is not new, but it is fast becoming the orthodoxy, with the encouragement of the British government. At such a time, it isn’t good enough for campaigners to simply defend aid budgets. DfID has never taken such an explicitly pro-finance, pro-big business approach before, yet ironically it now gets less criticism from campaign groups than at any time in its history. If we don’t want to see what we have fought being turned against us, we need to clearly call out what is going on, and help define a real development agenda for the 21st century.

Nick Dearden is director of World Development Movement.

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