Debating Foreign Aid: Right vs Left – Jean-Philippe Therein

Summary. Article from Third World Quarterly 2002, Volume 23

The debate over foreign aid has always been framed by the left-right divide. Since the 1940’s, $1 trillion has been transferred. Aid is now almost considered an integral part of international customary law. The aid debate has been shaped by structural changes to the international system (e.g. post-colonialism, the Cold War). It would be foolish to see the Left-Right schism as the only dividing line on the issue, however it goes a significant length in explaining the contemporary debate over aid.

Aid, or Overseas Development Assistance (ODA) refers to loans and grants allotted to developing countries and which fulfil the following criteria:

1) Funding must come from the public sector

2) It must be granted with the aim of fostering economic development

3) It must be partly concessional; for the OECD at least 25% of funding must be a grant

The left has traditionally been more restrictive on the definition of aid – the right sees aid in broader terms.

A Brief History of Development Assistance:

The Origins (1940s)

There are a number of factors that explain the origin of aid payments during the 1940’s. Firstly, there was the creation of the welfare state in liberal-democracies post-WW2. Many argue that aid is an extension of the welfare state to the international scale – a clear arena where public intervention is a necessity. Another factor was the creation of a large non-governmental organisations. At the beginning of the century, there were around 300 NGOs from the industrialised world working abroad. A further factor was the creation of the Bretton Woods system for managing global commerce, finance and trade relations. Although many on the left now view the World Bank as a tool of market colonialism within the Global South, it was orginally applauded by many on the left for its Keynesian agenda. Linked up to Bretton Woods was the Marshall Plan, which when launched in 1947 transferred $13 billion within the space of 4 years to rebuild Europe. This amounted to 20% of US GNP and was a decisive shift in favour of the provision of aid to nations in difficult circumstances.

The Institutionalism of the Aid Regime (1950-70)

Implemented by the left, put into practice by the right in the fight against Communism. US aid was restricted to countries of the ‘free world’. Until 1950, 90% of total global aid was supply by three nations: USA, UK & France. The US was the new global super-power and used aid as a means to exert foreign influence and the two ex-colonial powers used aid as a substitute for colonial domination. Following the 1959 Cuban Revolution there was a sharp increase in aid to Latin America. This period saw the creation of the OECD’s Development Assistance Committee and the International Development Association. Throughout this period aid was viewed as a means to create economic prosperity and targets were centered on GDP growth. The expected trickle-down effect in most cases failed to materialise.

The Aid Regime Called Into Question (1970-80)

The aid regime was heavily debated during the 80’s. Developing countries made calls for greater quantities of aid, mostly through the New International Economic Order, following successive UN Conferences on Trade and Development. Expectations were high as nations like the Netherlands, Sweden and Denmark had gone beyond the 0.7% GNP target for aid funding. It was during this period that many leading political economists challenged the use of traditional modernisation theories of development. This lead to the creation of basic-needs strategies (Hollis Chenery & Paul Streeten – both World Bank) and many rejected trickle-down theories of growth in the Third World altogether. The World Bank led the way with this change in direction and much of its policy shifted towards rural development and subsistence agriculture. Development and ODA required a broader, integrated approach; one size certainly wouldn’t fit all.

The Neo-Liberal Revolution (1980-90)

This decade saw a powerful resurgence of the right-wing particularly thanks to the policies of Margaret Thatcher and Ronald Reagan. The early 80’s depression alongside the shift towards monetarist policy and protectionism caused the total debt held by the Third World to rise from $639 billion to $1341 billion. Structural Adjustment Programmes were a major factor in this. Policies implemented by the IMF and the World Bank, SAPs aimed to scale down the role of the state and open up markets in the Global South. These were justified due to the poor economic performance of developing countries due to poor economic management and a ‘common-sense’ attitude held by leading economists who believed development cannot occur without getting the macro-economic fundamentals right. Aid began to be seen as a method to cushion the impact of these policies which often resulted in drastic public service cuts and massive inflation. During the 1980’s, GDP/capita fell in most nations of Latin America, Africa and West Asia. An important UNICEF study published in 1987 highlighted these devastating consequences, highlighting particularly how it was those who are most vulnerable who were hit hardest. It was during this period that NGOs began to take a strong presence on the international development scene, many of whom brought the arguments of the left to the aid debate.

The Return of the Pendulum (1990-)

This period can be described as a compromise between the Neo-Liberal agenda and the human-orientated goals that rose during the seventies. It began to be fully appreciated that that macro-economic discipline does not equal poverty reduction. The OECD released the publication Shaping the 21st Century: the Contribution of Development Co-Operation. It was based on the conclusions of the successive UN conferences and pinpointed 3 key areas for ODA. These were targetting poverty reduction, a focus on social development and increased attention to the environment. It also set objectives for 2015. This represented a new era for aid – never before had donors agreed on a programme for global action or assistance with such co-operation and never before had NGOs exerted such influence of such an important global issue. Paternalist policies were rejected and it was acknowledged that the target country should have significant control over development policy. Unfortunately, during the period between 1992 and 1997, aid spending fell by 21%.

This generated significant criticism from the left:

1) There have been few concrete efforts towards poverty alleviation. Of all foreign aid 1.4% was spent on education and 1.7% was spent on education (1998). There was also a decline in aid to the poorest 48 nations.

2) ODA not embedded in an overarching vision that views the Third World as being affected by the policies of wealthy nations in area such as trade, commerce, agriculture, immigration and environment. For example, protectionism costs the developing world $100 billion a year, more that the aid budgets directed to these nations.

3) The consensus on development is a model that corresponds to the interests and values of the developed world; a ‘West knows best’ approach. Political conditionality summarises this approach.

Carloline Thomas chose to split views on aid into the following left/right categorisation.

Right: ODA is a foreign policy tool. It is the responsibility of individual states to alleviate poverty and aid is often inefficient. Aid creates a dependency culture that keeps the Global South from progressing and distorts local markets. Much blame is also placed on non-democratic states that have hostility to the West’s values and policies. The key problem is efficiency however and the right wants a shift towards a results based, goal orientated ODA policy.

Left: ‘aid is a moral issue’ and we have ethical obligations. Current aid levels are inadequate and redistributing wealth more equally on a global scale can be considered humane internationalism put into practice. Aid has contributed to massive reductions in birth rates, improved infrastructure, the Green revolution and reducing poverty. It is also in the West’s long-term interests to promote development. Aid is currently too tied to donor interests and this is simply unacceptable when 3 billion people were living on under $2 at the start of this millennium.