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Demand And Supply

World Bank
Development (Aid)

Steve Hellinger has spent many years trying to make aid work better.
He now says it’s time to take sides: the major aid institutions have
to demonstrate that they are worthy of continued support.
He spoke with David Ransom.

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Hard truths have to be told and unpalatable facts faced to find the way forward.

DR: What do you see as the current state of foreign aid?

SH: Aid is on the decline, and I don’t think we’re going to recognize it in five or ten years. The traditional top-down approach was implemented with a vengeance during the 1980s, transforming economies from above without local input. The fall-out was that, more than ever before, those who had access to money and to power gained and those who did not lost. This just fed the scepticism of the public in the North, especially the United States, about foreign aid. They recognized that their aid wasn’t reaching the people who really needed it. Combined with government budget cuts in the North, this led to a squeeze on foreign aid.

By 1990, those in power knew that this was unsustainable. Since they weren’t about to change the nature of aid, they began throwing out relatively small amounts of money to treat the symptoms of the problem – support for poverty reduction, an emphasis on social funds, the creation of environmental funds, and so on – to remove the pressure to deal with the real cause of growing poverty and inequality. A lot of NGOs – certainly in the United States – followed the aid establishment and its money, while continuing to focus on the quantity rather than the quality of aid. This has diverted them from the main event, which is the type of aid and development process that is screwing things up in the first place.

DR: How exactly is this process screwing things up?

SH: Around 1980, Northern governments determined that they could help their commercial banks recover the large number of loans they had made to the South during the 1970s by making foreign aid contingent upon the adoption of structural-adjustment policies by Southern governments. These policies of deregulation, wage suppression, investment, trade liberalization and privatization also created ideal conditions for Northern corporate investors looking for low-cost production bases. The US Treasury, the Exchequer and the other finance ministries today are making not just multilateral and bilateral aid policy but the core of foreign policy as they transform the world economy.

Not only is the imposition of these measures highly undemocratic and the policies themselves extremely detrimental to local populations and local producers around the world, but they are also polarizing and destabilizing societies from Mexico to Russia and throughout Africa and Latin America. People are increasingly alienated and disengaged. The policies of aid are being made from afar and creating an environment that makes local-level development more difficult than ever. People are being forced to look continually outward for answers – for money, markets, advice, technology. The solutions are being found less and less often within these societies. It is so debilitating. Many in the South feel that this is reason enough to disengage from the foreign-aid game.

DR: Would you suggest getting rid of the entire aid industry?

SH: No, there are many good institutions – private and a few public – which do excellent work helping to build capacity at the local level, which has been absolutely critical. It’s been done in partnership, the way it should be done, and the people in the South have taken the lead. But the great majority of aid funds has been misused and done much to create this adverse situation in the South.

DR: Are Americans suffering from ‘aid fatigue’?

SH: In the US there has long been a public disillusionment with foreign aid, because people have understood implicitly that it isn’t going, by and large, where it needs to go – to people at the local level. Most Americans are suspicious about big institutions dispensing money, and we’re much more isolationist, historically. ‘Aid fatigue’ in Europe has started emerging in the last few years for a lot of reasons, not least of which is the fact that things aren’t working, especially in Africa. And it is very hard for us to ask taxpayers to continue to pay the bill for something that they know is not working. Yet some NGOs continue to do so, saying that aid to Africa, for example, should continue at high levels. People see through this, and their disenchantment has intensified as a result.

Clothed in confusion: improvised self-help in Mogadishu, Somalia.

DR: Is it a matter, then, of simply dumping official aid programs?

SH: No, it’s more complex than that. There are some hard choices we have to make. In the US 50 Years Is Enough Campaign, for example, we had to deal with the very real issue of IDA [International Development Association, the soft-loan window of the World Bank]. You have people in Africa saying that they need money to sustain social programs and for medical and industrial imports. But IDA money is being used by the World Bank for structural adjustment: 30, 40, 50 per cent of it in many cases. The Bank and some Northern NGOs say that IDA must be supported un-conditionally because its resources are indispensable to the poorest countries. Yet the Bank itself is adamant about conditioning the provision of IDA funding on the adoption of draconian adjustment policies. So we have suggested as an answer to this dilemma pulling institutions like IDA out of the World Bank. We should move towards new, smaller mechanisms that can, for example, reach out and support emergent movements and organizations of civil society. These can help build, along with civil society, a strong ‘middle level’ in these countries so that important development work can be undertaken at the provincial and municipal levels.

DR: So what’s the connection between aid and structural adjustment?

SH: The failure of structural adjustment, the beginning of a decline in the advances that had been made in infant mortality and illiteracy, the growth of poverty and inequality in these countries – these are not unfortunate by-products of foreign aid. They are the logical outcome of programs that concentrate wealth and ratchet down labor and environmental standards in the name of efficiency and competitiveness. This was not only predictable; it was predicted. Aid programs have been explicitly geared to creating attractive conditions for foreign investors. They have done this in part by keeping domestic interest rates high – and this has contributed, along with the inflow of cheap imports, to wiping out small and medium-sized local firms and farms and the jobs they provide. So has a policy of wage ‘constraint’, as this has sharply reduced consumer demand. Producers are pushed into the export markets, where competition is going up and therefore prices are going down. In the cocoa and coffee markets, for example, for every one-per-cent increase in production there was recently a two-per-cent decrease in price. It doesn’t take a genius to see that such policies are a recipe for disaster.

DR: Where do you suggest we go from here?

SH: I think we have to go through a number of sequential realizations. The first is that there is a global battle going on between vested Northern and Southern financial and business interests on the one hand, and civil society on the other. We have to understand what side of this battle we’re on. Then I think we have to conclude that the current system of official aid cannot work. It’s had its shot. Fifteen years ago it made a shift from a liberal paradigm of throwing money at the problem, which didn’t work, to one of opening up economies for the private sector, and that hasn’t worked either. If we conclude that there’s a battle going on and that the official structure is actually helping the other side; if we recognize that the best way to help is to support civil society in solving its own problems; then I think that leads us to the creation – in partnership – of new, much less ambitious structures and the elimination of the failed ones.

DR: What would these structures look like?

SH: Take USAID, for example. It currently has as good a leadership as it’s ever had, but for all the efforts that the good people inside have made, it is still an arm of US foreign policy. You can see this, for example, in its commitment to structural adjustment, even in tinderboxes like Haiti. You need a fundamental restructuring so that aid institutions are fully open to engagement with civil society at the bottom and fully closed to interference on behalf of vested and political interests at the top. There has to be a strong role for civil society in the North through NGOs, but they cannot be as dependent as they are at the moment on public monies. This has affected the way they deal with policy issues. Instead of representing the interests of people in the South, they are increasingly supporting the interests of the aid institutions.

DR: What do you see as the job of NGOs?

SH: To help create the capacity for development and social change at the local level. But this is insufficient unless we also, by working in the North, help create space for people in the South. As long as Northern-controlled institutions like the World Bank and IMF effectively run the economies of the South, there is no way that Southern governments, even the enlightened ones, can respond to the demands of their own citizens. We have to transform these structures totally. The only way to do that is to push to have their funding cut back if real change isn’t forthcoming.

DR: How successful do you think the campaigns for change have been so far?

SH: Up to a point, the global citizens’ campaigns are working. But we’re only at the first stage. Can the new leadership of the World Bank transform itself? We’re engaged in a process with that leadership to determine exactly that. How sanguine are we? Well, quite honestly, we don’t see very much in the history and structure of the Bank that makes us think we should be all that sanguine, but we’re going to find out. If such institutions can’t make fundamental changes as the world economy deteriorates for the vast majority of people, then they will eventually lose so much credibility that they will disappear. But not before tremendous damage is done.

So, as a community we have to come together and work for change based on a healthy respect for the capacity of people locally to understand their own situations and shape solutions. Not only in the South but in the North as well. You cannot dismiss citizens in the North as know-nothings. People are pulling back from foreign aid not because they are irrational, stupid or racist. They’ve supported foreign aid all these years with their tax money, and what have we given them? If we want public support for foreign aid we’re going to have to go the extra yard to create a program worth supporting.

Steve Hellinger is co-founder and president of The Development Group for Alternative Policies (The Development GAP) in Washington, DC. He has worked extensively overseas with both citizens’ groups and the major aid agencies, and is co-author of Aid for Just Development (1988).

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