Guyana and Aid

Jun 07, 2009 Features / Columnists, Ravi Dev

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Earlier this year, Dambisa Moyo, a young Zambian graduate of Harvard and Oxford with stints at the World Bank and the crème de la crème investment bank Goldman Sachs, set the “development” world abuzz with her book “Dead Aid”. Her thesis was direct and radical. Aid, Dr Moyo asserted, is the cause of present-day African poverty and ought to be jettisoned pronto – actually in a five-year phased withdrawal program.

A trillion dollars in aid in sixty years, she claims, has left Africa in a worse position than at independence. Ms Moyo is not against humanitarian or direct intervention aid, just the government-to-government and International Financial Institutions’ (IFIs) interventions that are putatively designed to foster “development”. The blue-chip financial adviser believes that ordinary Africans would be better served if their governments would rather finance development through a combination of issuance of bonds in the domestic and international markets and through micro-financing in the Grameen Bank tradition.

While some have pointed out that Ms Moyo may be conflating correlation with causation on aid and poverty and that a number of her assumptions are questionable, her high-profile book promotion tour has served to raise the old, lingering doubts about the overall impact of aid on the recipient countries to the fore. And this is positive: not just for Africa but for other countries like ours that have a high aid component in our development financing. We have long advocated that we wean ourselves away from such aid that invariably comes with a web of strings, and develop a more interventionary “Catalytic Entrepreneurial State”.

We also are not sure whether aid actually causes poverty – there are so many other variables such as low social capital, poor governance, institutional weaknesses etc. that enter the mix – but we know for sure that not a single third world country like ours has raised itself out of poverty through the aid route. The successful US Marshall Plan that helped to rebuild Europe after WWII and more recently the European aid programs that helped to create the Celtic Tiger in the 1990’s offer a clue that it is not the aid per se but the conditionalities that accompany it that is the problem.

First and foremost, the successful plans were explicitly devoted to economic growth – not “poverty reduction” – and were crafted to provide employment. Ireland, for instance, produced a National Development Plan that received thirty-eight percent of its 1990’s thirty-billion Euros funding from several funds from the EU. Key areas such as Agriculture, fisheries, forestry, tourism and rural development, Industry and services were identified and given funding. Secondly, while the spending was monitored in both plans, the monies were transferred to the recipient countries in a manner that ensured they had control over the entire process.

The single most destructive aspect of the present aid regime to the third world is the insistence that the donors know what’s best for the recipient country and the dependency syndrome that is fostered through their insistence on control. At the strategic level, the local entrepreneurial drive is stifled as we focus only on collecting more aid and at the operational level, local self-belief is undermined. The parameters on the use of the aid is established by the donors – such as the Poverty Reduction Strategy Paper (PRSP) we had to produce to qualify for debt write-off and which we are faithfully following – which invariably have no targets (such as the aid to Ireland did) to bring the economy up to a particular level (as with Ireland, up to the level with the rest of Europe).

Hosts of “experts” are deployed like Roman centurions into poverty-ridden capitals where they ensconce themselves in the one or two top air-conditioned hotels for a couple of weeks at best. We pay for all of this – an incredible 25% of “aid” goes towards consultants and administrative costs. They deliberate in similar surroundings over numbers produced by the eager host government; return home and issue reports. These pronounce on whether we have satisfied “macro-economic fundamentals” and other such criteria set by their governments or institutions.

The result is that these aid-recipient governments become conditioned to becoming responsive to the aid-donors (Moyo calls them Alms givers) rather than to the needs of their people. We are not sure, for instance, how much comfort the recent seal of approval on our economic performance given by the IDB – before they announced our qualification for another round of concessional (but directed) funding – brings to the ordinary Guyanese citizen, who is caught in the whiplash of falling remittances and increased layoffs. However, the control issue sometimes flares up, as for instance, in the recent contretemps between the Secretary of the Cabinet and the British Representative over funding for “security reform”.

Because of the global financial crisis, we should expect that the level of aid will decrease during next few years. Even if the administration does not share our deep scepticism on aid as presently constituted, they should at least begin to demand a more nuanced form or look at other forms of financing to wean ourselves off aid. The President will be unveiling a low-carbon development strategy based on the Reduced Emissions from Deforestation and Degradation (REDD) usage of our forestry resources. He has announced that will be seeking inputs from the general citizenry.

Right off the bat, we would hope that the administration would be very wary of the control that the “donors” to the funding will seek to impose. If these “green development” friends are serious, why don’t they fund (or assist us to fund) the Amelia Falls Hydro Project? This is as “low carbon” as you can get. Or, they could work to have developed countries remove their subsidies on agriculture – leaving us not only sustainably self-sufficient, but independent of aid. But then that would put the whole aid industry out of business – and we can’t have that, can we?
We do not want to jump from the pot of the IFIs into the fire of the conservationists. An industrial policy and jobs creation is what we need to be funded.

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