For many African countries, particularly those heavily dependent on aid, (where aid constitutes more than 5% of GDP), there has been for a long time no real alternative but to agree to structural adjustment reforms and conform to a particular ‘recommended’ policy package, of that of the World Bank and IMF, EC, DFID, USAID etc... To understand the motives and patterns of aid giving, we will first look briefly at the history of the aid industry, from a political economy approach. Then, in examining each of the 5 principles of the Paris Declaration on Aid Effectiveness, we will highlight some of the issues which came about with the Washington consensus’s ascendancy and persist in the era of the so-called ‘post-Washington consensus’. The country case of Mozambique shall be used to reify the discussion of theoretical and practical flaws. For each tenet of the Paris Declaration we will consider what potential there is for new donors, particularly China, to transform the position of recipient governments in Africa, to some extent giving power back in terms of bargaining power and policy space.
A BRIEF HISTORY OF AID
As far back as 1940s and 50s aid has been linked by some to imperialism, and specifically, preventing the spread of communism; after 1959 fears of ‘another Cuba’ were felt acutely in the US (Veltmeyer & Petras; 2005). The discourse of nation-building and the reformist mentality were ideologies propagated via hefty financial backing, and still today the Maastricht Treaty of 1992 saw the EU explicitly commit to using aid in order to promote democracy. The Cold War was the main reason that aid quantities increased in 1980s (Oya; 2008) because competition between the two superpowers led not only to proxy wars in the developing world, but also benefited those countries who pledged their loyalty to one or other camp with varying degrees of boldness. The collapse of the Soviet Union and apparent victory of the free market recast the US in a ‘global leadership’ role in some minds (Fang; 2004). Eastern European countries, who had never given as much aid as OECD countries, not only ceased to disburse aid, but became aid recipients, cementing the west’s power to set the agenda and putting extra strain on limited resources provided (Degnbol-Martinussen & Engberg-Pedersen; 2003). Especially after 1983’s debt crisis therefore, donors had the leverage to dictate terms and loans began to be premised on the adoption of certain pro-market policy reforms by recipient governments, which were chiefly to the benefit of donor countries (Veltmeyer & Petras; 2005). Justifications for such intrusion have included the argument that these policies and governance choices are innately ‘good’ or ‘correct’; that widespread corruption in the developing world necessitates paternalism to ensure that aid is not siphoned off; and that to achieve pro-poor growth, (the rhetorical emphasis) poverty reduction, democracy, human rights and free-markets could only arrive as a package.
Poor countries in Africa have seen large amounts of aid go towards paying off previous debts – despite seeing little gain from the money that was loaned originally due to the stringent policies attached to it. Aid levels dropped in the 1990s due to ‘aid fatigue’, and, more importantly the fact that there was no longer a competitive element to aid-giving. As part of a geopolitical strategy, aid has been given to strengthen military and political alliances, such as the USA’s funding of counter-revolutionary forces Renamo in Mozambique and the Contras in Nicaragua (Veltmeyer & Petras; 2005). Since September 11th 2001, poverty-security linkages have become a priority (Oya; 2008), and the wars in Iraq and Afghanistan, hotbeds of ‘terror’ in the ‘axis of evil’ prompted an aid influx. Developing countries can be said to have been negatively affected by the increasing globalisation of the world. Aid has been associated with damage rather than progress and seems to be undermining prospects for long-term development. Conditionalities were never imposed on the likes of South Korea or Taiwan when they received substantial financial aid, starting in 1954, and therefore they have been able to steer their own development paths successfully (Veltmeyer & Petras; 2005). Despite liberalisation leaving them vulnerable in the 1997 economic crisis, they have recovered. By contrast, many countries that have undergone structural adjustment, have had almost no room to manoeuvre even when policies imposed by donors failed, and until China’s emergence the prospects of a counter-hegemonic power base supporting alternative policies had looked unlikely.
HARMONISATION
In terms of aid delivery, recipient countries have suffered very high administrative costs due to the sheer numbers of operational donors, and projects. With neoliberalism, the rise of NGOs has added to the proliferation of organisations which drain state capacity. Among official organisations there are around 200 bilateral and multilateral organisations (IPC; 2007) and approximately 60,000 official aid transactions were recorded in 2005 (IPC; 2007). Many of the bigger self-important agencies, suck talented civil servants away from government functions (Birdsall; 2008, Oya; 2008). It would seem common sense, and much more efficient to ‘harmonise’ these numerous actors as the Paris Declaration asks. Yet Oya (2006) points out that “an ideological consensus on policies and conditionality is very dangerous” and will only enhance ‘effectiveness’ as judged by donors’ criteria of success. This is because, although there is some heterogeneity within the western donor community (the dominant Anglo-Saxon model differing from the ‘Nordic variation’) an increasingly hegemonic New Aid Agenda is, under which 4 pillars – democratisation, poverty reduction, good governance and neoliberal reform - are lauded (Oya; 2006). This cartel creates an environment in which orthodox beliefs are taken for facts and space for deviation from the norm is minimal. Importantly, many smaller donors require World Bank or IMF approval that recipient countries are on the ‘right track’ before they will commit funds (Oya; 2006). So, while certain public goods such as the Global fund to Fight AIDS, TB and Malaria (Birdsall; 2008) do require collective work, from the perspective of recipient countries, some degree of pluralism or ‘fragmentation’ can be useful. For example India chooses its donors carefully (Oya; 2008). Despite lower administrative costs, the narrowing of choice that would occur if Roger Riddell’s vision of an ‘International Development Aid Fund’ and ‘International Aid Office’, were a reality significant. This is not to say that all international bodies, and universal pronouncements (such as the Declaration of Human Rights) are oppressive – but that in the case of political economy, space for innovation needs to be retained. If a government was deemed ‘incompetent’ they would either receive no aid or accept an external implementation agency, Riddell envisions. Arguably this is merely a ransom, which could be abused dangerously if subjective issues like the ‘best’ policies are deemed to be universal, and democratic sovereignty undermined by a single authoritative body.
According to Birdsall, donors are neither competing nor collaborating but ‘colluding’ in the absence of a competitive market for aid suppliers. This is where China’s role becomes significant because it may stimulate the ‘market’ for aid provision, as in many ways it provides a contrasting donor profile. Dealing between China and Africa have been characterised by much less bureaucracy and lower transaction costs (Oya; 2008). The Forum for China-Africa Co-operation (FOCAC) within China’s government co-ordinates much aid through the state, avoiding a multiplicity of NGOs[1][1]. One of 3 state banks, EXIM saw almost 40% of its loans go to Africa in 2007 into about 300 projects with a total worth of about $23.9 billion (Oya; 2006). China’s so-called ‘coalition engagement’, incorporating both state and market has seen Beijing increase spending dramatically especially since the turn of the millennium, and while there are commercial reasons for this engagement, China nonetheless might serve as a positional ‘counterweight’ imposing as it does, no conditions on financing (Oya; 2006). We will discuss conditionalities shortly – meanwhile it is important to acknowledge the risk that China could simply be absorbed as part of even bigger cartel. A Memorandum of Understanding (MOU) between China and World Bank was signed, and a first potential collaboration may be Mozambique’s Mphanda Nkuwa dam. For Patrick Bond (2006), China are simply a essentially new exploitative player in the long tradition of ‘looting Africa’ and instead of positive South-South co-operation this might be another brand of imperialism. However, despite signing up to the Paris Declaration, it seems probable that China will continue its own practices regardless, and while not necessarily a better or worse donor, it is a clear alternative.
MANAGING FOR RESULTS
The Paris Declaration does not explicitly address issue of conditionality or donor self-interest, but in urging aid to be ‘judged by results’ it signals several intentions. One is that the quality of aid should not be dependent on its value alone – an attempt to combat the ‘spending culture’ within the aid industry. The practice of dumping for example, is thus implicitly discouraged, and geopolitical motivations for aid alliances are downplayed in favour of humanitarian, altruistic motivations. We should expect to see as much aid going to small, strategically insignificant resource-poor countries, in an ideal world, but of course ulterior motives may well be impossible to eliminate. It’s important to keep in mind that when we discuss how ‘effective’ or ‘successful’ aid has been, different people’s varying objectives will result in different evaluations (Birdsall; 2008, IPC; 2007). Castell-Branco (2008) explains that Mazambique can thus be seen either as a great success of failure, depending on party judging and the objectives they had in mind. Usually of course, it is the aid agencies, and not poor people, who conduct evaluations, and thus DFID’s glowing report from the OECD is not as legitimising as might be assumed (Benn & Easterly; 2006). Easterly advocates bypassing governments in order to reach the poor directly and bureaucratic channels are sometimes avoided due to donors’ desire to implement ‘their’ projects easily, besides the prevailing attitude of hostile towards the state. Sustainability, however, may require government involvement (Birdsall; 2008).
A major problem is the difficulty of measuring poverty (and reduction), for which proxies such as economic growth are often employed instead (Hudson; 2004). This practice inevitably leads back to a focus on macro-economics. Easterly accuses DFID of having too many broad and vague aims, claiming that ‘if you are responsible for everything, you are responsible for nothing’ (Benn & Easterly; 2006) and indeed a lack of specialisation is a severe problem. ‘Managing for results’ as a mantra may also discourage long-termism among donors, as tangible successes are politically preferable. Birdsall cites Impatience as one of seven ‘deadly sins’, and it is one which China has not been guilty of, with proven long term funding infrastructure, construction, even slow maturing and much needed agricultural investments which the market based model neglected. Birdsall seems to contradict herself by declaring that reluctance to exit when aid is ‘not working’ is equally as bad as ‘impatience’. This contradiction and confusion is latent in the Paris Declaration itself which seems to ignore the multiple results which projects produce. For China, managing for results means not only opening up markets for their products and tapping sources of energy, but also visible set-pieces which make a political statement.
MUTUAL ACCOUNTABILITY
The two related strands which donors hold ‘partners’ accountable for relate to ‘good policies’ being implemented (or not – ‘slippage’) and ‘good governance’ which encompasses, transparency, anti-corruption and more. The lack of trust between donors and recipients manifests itself in an ‘obsession’ with corruption. Benn believes that forcing institutional reform is acceptable because it is ‘not enough to focus on symptoms alone’, (Benn & Easterly; 2006) thereby implying that governance issues are the cause of long-standing poverty (open to debate). He names the Kenyan government as “too risky” to channel funds through, instead describing a system operating completely separately with an independent bank account which provides aid to the education sector. There is seen to be a dilemma of whether to work outside governments and risk undermining democracy or work through government and encourage corruption – so the latter option is accompanied by specific conditions. It must be noted however, that transparency is hardly an area in which donors themselves excel. Indeed, James Putzel (1998) has documented the paucity of information that is provided by the European Commission on its activities. This makes it almost impossible for the EC to be held accountable by European taxpayers, let alone recipient countries. He stresses that although multilateral aid agencies may avoid the issue of national self-interest to some degree[2][2], their supra-national status exacerbates the problem of accountability because ‘territorial boundaries of systems of accountability’ are structured around the nation-state. So on the one hand he believes, with David Held, that re-formulating the regulations governing international organisation is an urgent task, and on the other he proposes simple, cheap ways to increase accountability. Presently there are “no public guidelines outlining the criteria upon which it judges who is and who is not eligible to receive its funds” (Putzel; 1998) and nor are intended projects publicised widely enough (IPC; 2007). Lack of information not only limits participation (civil society groups must wait to be consulted) but leaves space for potentially abusive business practices. The closed market for consultantcy contracts also leads to inefficient outcomes - the system works in favour of large established forms and thus against public interest. The barriers to recipient country firms winning contracts were lessened by 1992 regulation that allowed discretion to EC in choosing whether or not to offer the opportunity to all bidders. Essentially, this is tied aid, and represents “an implicit subsidy by donor governments to donor country companies”(Oya; 2008).
Mechanisms for holding donors accountable for volatility, and unpredictability, or pro-cyclical aid giving are weak. When evaluations are made, conclusions which “challenge conventional wisdom or raise awkward questions” are rarely taken on board (Birdsall; 2008) and wholly independent assessments are badly needed. Evaluations of EC projects are almost entirely conducted from within the EC itself, not necessarily insulated from pressure, and results seldom made publicly available thus compromising their purpose (Putzel; 1998). The aid nexus in which constituents in recipient countries are affected by the operations of donor powers from the western world is an almost entirely non-democratic space. No sanctions are imposed on agencies when promises made are broken (IPC; 2007, Benn & Easterly; 2006).). Hilary Benn, formerly head of DFID, seems content with these broken promises at least signalling movement ‘in the right direction’ but this is not good enough. His talk of ‘shared responsibility’ and the ubiquitous euphemism ‘development partners’ portrays an equal relationship where in fact a clear power imbalance exists There has been a bias for ‘liberal democratic regimes’ because of the perception that aid works more effectively in such an environment (Hudson; 2004), and there has also been at attempt to make ‘poverty efficient allocation’ – demanding ‘good policies’ - take precedent over the simple principle of those who need aid most. Mozambique’s annual Programme Aid Partners’ Performance Assessment Framework (PAP’s PAF) was agreed in a 2004 MOU but it is narrowly focused in aid administration so “does not point in the direction of increasing policy space” (De Renzio & Hanlon; 2007). Instead a ‘pathological equilibrium’ exists, which entails a tolerance of corruption by donors, provided neoliberal reforms are executed, showing that accountability has been inconsistent. What might China’s presence alter? Its grants, interest free loans and concessional loans are considered non-transparent. Western donors’ professed principles can clearly be stretched, perhaps because, just as Putzel identified perverse incentives of private consultants, it is in the interests of development professionals to appear to ‘succeed’ in pet-cases like Mozambique. China makes no attempt to hide its commercial motivations and clearly prioritises resource-rich countries, tying aid to the use of Chinese firms and importing Chinese labour forces (IPC; 2007). However, the competitively priced firms are arguably still preferable to the high numbers of technocrats hired from the west. While China cannot be held particularly accountable, it does not demand accountability either – so while it can lead to support for dictators, it does not impose conditions or constraints on any government. In general there is a lack of domestic pressure on the Mozambican government, which cannot be combated by artificially creating civil society groups. If, at present the government is more accountable to donors than citizens, an indirect bonus of China’s presence may be that civil society, perceiving their government to have made a choice between Chinese and traditional donors, will more actively hold ministers to account for results (Castel-Branco; 2008).
ALIGNMENT
In theory alignment means that donors align their support to recipients’ priorities, but in practice it seems that the opposite occurs. ‘Alignment action plans’ would not be necessary if donors did not have a preconceived agenda attached to their aid giving. The process of alignment takes the form of a compromise in which recipient countries actually do most of the adjustment (Oya; 2008). The constructed rules governing aid, like trade via the WTO, are established by the global powers and will naturally reflect their interests and beliefs therefore. By a process of soft indoctrination, developing countries’ future leaders are given grants for learning and training and their education, often in the developed world, often consists of the blueprint ‘augmented Washington consensus, taught as if the gospel (Castel-Branco; 2008). The African technocrats who internalise these principles or at least appear to conform by self-censoring, will receive positive judgement from the World Bank officials. In the case of Mozambique when a PARPA was produced with striking similarity to the PRSP, praise was lavished for the high quality of the report (Castel-Branco; 2008). Hilary Benn reveals, by declaring his relief that the World Bank is moving away from the ‘wrong kind’ of conditionality, his belief that there is a ‘right kind’ (Benn & Easterly 2006). He seems to have an ‘alignment-within-reason’ attitude, stating that if three principles are adhered to, a government deserves aid – yet he shows no awareness that the universal rectitude of these principles might be questionable. Unfortunately, despite the talk of partnership, there is a strong vein of paternalism in his language, and the assumption that Britain can advise on the ‘best policies’ comes from a mentality which casually states, as he does “that’s how we did it”. The belief that poor countries must follow same path as rich countries implies that we are therefore more advanced and qualified to ‘lead the way’ and is endorsed by the very language of the ‘development community’ when is speaks of ‘developed’ and ‘developing’ countries (Veltmeyer & Petras; 2005). Besides, the economic policies pushed on developing countries are very far from policies Britain practice in its period of industrial leadership.
Has China made more genuine alignment attempts? Its engagement may be due to an interaction between aid and commercial incentives and Bond (2006) accuses China of investing primarily in ‘prestige projects’ and ‘white elephants’ such as stadiums of little benefit to ordinary people (Bond; 2006). But it has delivered much needed funds for important projects as well. Multi-country physical infrastructure projects have sometimes gone under-funded because of the system of single country loans – but China built the TAZARA railway linking Tanzania & Zambia (Oya; 2006). Ethiopia’s Takazee Dam will increase its power generating capacity considerably and even if it also benefits China’s energy needs, is thus long-term incontrovertibly a positive development. In some respects though, China seems to be pursuing its own interests above those of recipient countries, for instance in the creation of several special economic zones, the first of which, in Zambia’s Chambishi copper belt appears to be extracting minerals for China’s manufacturing industries first, and ‘aiding’ the country second, since Bond (2006) has highlighted the high environmental costs of extractive industries (PB). Chinese National Petroleum Corporation (CNPC) and two other large Chinese oil firms are active in 17 African countries and China’s growing energy needs clearly motivate this. The China Africa ‘Development’ Fund mat essentially be intended to finance market entry of Chinese firms into African economy, more than it is intent on alleviating the poor. Ultimately therefore, we should be aware that from the point of view of African governments it may be useful to have China as a threat and rival to the west’s dominance, and a business partner, primarily on order to gain more strength relative to these traditional donors, whose financial backing is still much greater.
OWNERSHIP
The concept of ownership has been exploded by Castell-Brancos (2008) in that he demonstrates it can mean anything from truly generating policies without external interference to merely exercising leadership on implementing policies. The very idea of ‘good’ and ‘bad’ on fiscal, monetary and trade issues is open to question since if some policies were indisputably good countries would not need persuasion to adopt them. The notion has been used to penalise some countries unfairly (Hudson; 2004). We could similarly interrogate the idea of ‘good governance’ which self defines as superior but is a normative question. Low budget deficit, high trade openness and low inflation are usually demanded by neo-classical economics, but have failed to deliver growth to Africa. Investment depressing conditions have been created by high interest rates in many countries (IPC; 2007) and the IMF’s fear of pushing up the exchange rate, the ‘Dutch disease’ has meant that spending has been severely constrained (IPC; 2007). Forced liberalisation (along with unpredictability of aid) necessitated reserve accumulation (Lapavitsas; 2007) and in the case of Mozambique’s cashew industry held disastrous consequences for the country but no consequences for World Bank. Easterly implies that the idea of ownership is merely a ‘dysfunctional contradictions’ and ‘evasion of responsibility’, a way of shifting the blame on to developing country governments when policies back-fire. Badly designed deflationary policies geared at repaying debts from the 1980s caused recession in several countries, but the Washington-consensus, even in augmented form, has changed little. It should be remembered that the IMF doesn’t have the sectoral expertise to involve itself everywhere, and macro-economic choice pertain to “fundamental social choices that should be left to national political processes” (IPC; 2007). But the rather than questioning its own foundations, the World Bank’s CPIA is used to assess the quality of a country’s policies.
The fact that donors twice withheld food aid from Mozambique – in 1983 and 1986 – to force the country to join the Bretton Woods institutions and to pressure it to agree to structural adjustment respectively is pertinent. There were disastrous consequences for many hungry Mozambicans (De Renzio & Hanlon; 2007). So although subservience is a choice in itself, Mozambique’s history and the lack of donors content to be only donors and not policy-makers meant the country complied with donor demands and has been seen as a success, growing at an average of 8%. Castell-Branco’s very nuanced Gramscian analysis of power relations between Mozambique and its donors includes the point that it has not simply been a story of domination from one side and subordination despite resistance on the other. Indeed, there are two clear examples of defiance, the first on land privatisation where agrarian populism among the people contributed vitally to the government resisting the World Bank’s pressure. The second has been a more passive resistance to anti-corruption measures, but crucially, donors have been tolerant and pragmatic. At the same time, President Guebeza’s desire to create a development bank to give rural has been refused by donors. But, public protests in 1990s by progressive bilateral donors against the IMF’s unpopular policies restricting social spending and capping spending on civil service salaries saw an easing of these measures – and instance of positive fragmentation. Such fluid power play leads to an overall “loss of policy coherence” (Oya; 2006) and prevents the emergence of a developmental state with a long-term strategic vision. If it is true that “the only developing countries that did well in the [globalisation] context, were those that ignored the policy prescriptions of the WB and the IMF” (Veltmeyer & Petras; 2005), why did African countries acquiesce? Had China been as powerful twenty years ago, and its historic support for the liberation-movement cum governing party FRELIMO was of more value, this might have precipitated a split in the party. In reality the faction of the party which was against neoliberal reform simply became marginalised but were relatively powerless to prevent the new order and saw no reason to break away due to lack of potential support. Perhaps a contest might have ensued and China’s experience could have provided valuable concrete lessons, rather than beng the source of a complete ‘alternative model’. China’s own development has for a long time been non-ideological, and its economy mixed. The policy of non-interference and such drivers of growth as the State Owned Enterprises, show China to be a very different success story to that of Anglo-American capitalism. China has liberalised trade only slowly and partially, on its own terms, and like other East Asian countries have retained subsidies, licenses, price control mechanisms in industrial policy. Under the aegis of the IFIs, developing countries have had little true ownership, but China’s arrival on the scene may provide more room for assertion of sovereignty.
CONCLUSION – IFS AND BUTS
Donors are keen for success. Despite the Paris Declaration, official policies have not penetrated well at country level, and tangible development results are still placed before these principles by a plethora of contradictory incentive structures (IPC; 2007). Even the move towards General Budget Support can be seen as introducing donors closer to the heart of government, rather than empowering recipient governments. We shouldn’t over-estimate China’s wealth – its official aid target for 2009 was $1billion compared to the OECD’s annual figure of around $30billion. (Oya; 2008). China’s indirect and symbolic use may well be its greatest asset for African countries at present. In the long-term however, China’s growth and increasing engagement with Africa and the rest of the world, might herald a possible global alternative to neoliberal capitalism help developing countries to escape the narrow policies which have held back growth and kept them reliant on aid.
Bibliography
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Oya C. (2008). 'Greater Africa-China Economic Cooperation: Will This Widen 'Policy Space'?', Development Viewpoint n. 4, Centre for Development Policy and Research, SOAS, London.
Putzel, J., (1998) 'The Business of Aid: Transparency and Accountability in European Union Development Assistance', Journal of Development Studies, Vol. 34, No. 3, (February)
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[1][1] Though it could be argued that NGOs are more likely than states to have humanitarian and no other motivation for their work, it could equally be said that NGOs sometimes unwitting serve geopolitical interests unconsciously (NL).
[2][2] But in this case he identifies Asia as a deliberate target area for the EU and believes aid policy there to be part of a broader strategic plan for the Union’s external relations.
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