What Aid Stimulates Development and what Aid Does Not

The recent death of Professor Peter Bauer brought to mind the strong views he held on development aid. He was best known for casting doubt on the official doctrine of aid to under developed countries as promulgated during the 50s and 60s. He believed that money given to one government by another did more harm than good, not least because, in his view, recipient governments used it more for self-aggrandisement than for the benefit of their people. The record of the last century suggests that development aid generates little wealth. Without liberal policies and sound management the money is wasted if not stolen. He refuted many of the beliefs commonly held by experts. He demonstrated that foreign aid, restrictive immigration and population policies and trade barriers hinder economic growth. The following examples may demonstrate some of these beliefs.

Ethiopia in the 80s demonstrated how foreign aid distorted economic growth. Government revenues were almost wholly utilised in attempting to hold the lid down on internal ethnic strife while relying for normal day-to-day and developmental expenditure on foreign aid. The situation was adroitly managed by the judicious release of drought statistics and appealing pictures of starving children, which then attracted unfettered aid and grants such as 'Band-Aid'. This allowed outside organisations undue influence in their utilisation. These tactics are still being used today as Ethiopia claims that the current drought is much worse than during the famine of 1984/5. This was rebuffed officially with the comment that ''you don't get famine without gross misgovernment''.

At the same time in the 80s the Sudan was experiencing a massive inflow of refugees from the conflict in Ethiopia, and from its own ethnic wars in the south. Aid flows, if anything, were even more chaotic than in Ethiopia. Over 200 organisations were working in country with little or no contact with Government, which had difficulty operating as able staff was poached by the multifarious aid agencies at two to three times the Government salary. With government revenues utilised on internal conflict and the multifarious external agencies pressing their own ideas national infrastructure suffered.

A further example of misguided development ideas could be levelled at those who thought up the hugely expensive Transmigration policy in Indonesia which is now unravelling with great disruption to the future development of the outer islands. The inhabitants of Java however were not initially misled in this case. As a participant in the execution of this policy one was aware that the queue to leave Java was millions long in the early 80s. Considerable effort will now be needed to bring back stability to large areas of the country

The opening up of the international markets for local produce is not the whole answer to third world production and prosperity. A number of problems have to be overcome. Physical access to the market, such as roads and suitable transport; animal health considerations and the rapidly changing mores in the northern hemisphere make for very complex planning to meet any perceived export demand. September 11^th and the war on terrorism has also brought a greater need for transparency in financial matters and spotlighted the effects of secret bank accounts on the developing world, both of which have now got to be addressed. The rise of UK Supermarkets sends a message with regard to unbridled development with the take-over of the primary food trade This form of marketing would not be an example for the developing world where prosperity and employment is based on value added, distribution and marketing rather than on the work and output of the primary producer.

A technology block is currently holding up improvement in agricultural development. There is a debilitating argument ongoing between agriculturists and environmentalists, which is confusing if not paralysing the policy makers in the development/donor community. They have in effect been turned away from supporting a science-based agriculture. An extreme example of the outcome of such thinking has been the request of Zambia to the UN World Food Programme to remove its emergency stock of GM maize rather than feed it to a famine starved rural population. This deadlock has to be broken. The fact that with an estimated 10 billion world population by 2025 to feed it is not possible to turn the clock back and use the low yielding technology of an earlier age. The root cause of environmental degradation has been mistaken economic policy, not modern science based technology. Low profits (mainly in developing countries) have kept farmers from investing in resource conservation, while excess subsidies (mainly in developed countries) have caused over use of agricultural chemicals and inorganic fertilisers, with consequent environmental damage. At an international biotechnology conference in London last year Nobel Prize winner Dr Norman Borlaug called for the introduction of compulsory biology studies among wealthy urban nations to improve understanding of food and agricultural issues. He felt that such an understanding would help counter the irrational fears stirred up against genetic modification techniques. He noted that the 'Green Revolution' of the last four decades had led to vast increases in food supplies at lower prices to millions in developing countries but that it needed to be taken further with biotechnology; again with those same countries as prime beneficiaries. Instead the battle over biotech products is being fought mainly in the rich nations, whose governments subsidise their very small farming populations to the tune of over $350bn a year and where many of the major problems of human nutrition are related to obesity.

Future World Trade Organisation (WTO) discussion faces considerable difficulty dealing with agriculture. The farm lobbies in the industrial countries, although minority groups are very powerful and politicians ignore them at their peril. As a result some recent developments have made any agreement more elusive, not less. America's recent farm bill providing large new subsidies has soured the atmosphere. In October the EU appeared to rule out any reform of its massively expensive and massively distorting CAP until at least 2006. Without a deal on agriculture future negotiations will fail. This will inevitably lead to greater exports of agricultural products and result in falling prices in agricultural commodities all over the world. How else, other than by example, can the developing economies be persuaded that trade liberalisation and market competition provide the surest road to wealth and financial stability?

To use a current phrase a true partnership necessitates a level playing field. In recent years Structural Adjustment Loans have been drawn up for a number of developing countries whereby markets have to be liberalised and distorting subsidies withdrawn, among other conditions. These conditions are laid down by organisations mainly representing the developed world where total annual farm subsidies exceed $350bn while at the same time total annual development aid to the third world totals only some $50bn, a truly illogical situation. Even more illogical is the high subsidy applied to US cotton production, a major third world crop of great economic importance. Until this playing field is levelled allowing third world farmers to compete in world markets there will always be friction. The least developed countries depend for their prosperity on the free flow of agricultural products

Cooperation and Aid that may stimulate

Personal involvement in the 60s and 70s in an ongoing commercial cotton development indicated the benefits of partnership with Government. A UN Development mission had identified the site in the late 1950s, in a most inhospitable desert area of NE Ethiopia, 20 kms off the main road. The idea was proposed to a London Holding House, which was already an established trader in the country. A 51/49% (Government/Private Enterprise) Plantation Share Co was formed. The first problem was that Government did not have the development capital to put up its share. This had to be borrowed. There were the usual difficulties at start-up; over ambitious targets, staffing problems but eventually staffing and management fell into place as a result of keeping a team together over a long period. From the start the policy was to push localisation of staffing as far as practically possible. The total area eventually developed covered some 10,000ha, flood-irrigated from the seasonal rise of a deltaic river that did not reach the sea. Although relatively highly mechanised some 3500 local staff had permanent employment and cotton-picking work was provided for up to 20,000 itinerant labour annually. At the same time all cotton produced locally was purchased. At identification it was noted some 60 bags of seed cotton were produced and used locally. By 1974 the Plantation purchased 120,000 bags, some 7,200tons of seed cotton equating to 2400 tons of lint, from local farmers. The enterprise became profitable after about 10 years.

Some of the reasons for the relative success of the enterprise;

Satisfactory partnership arrangements with government

Availability of a vast labour reservoir during the ''hungry gap'' period in the Ethiopian Highlands. Regular payments ensured annual return of itinerant cotton-pickers.

Self contained with long term staff. No visiting experts except for irrigation.

Provision of permanent buying station for local production

Provision of on-site medical service.

Rapid Ethiopianisation with overseas staff in the minority and all on the same salary scale, with foreigners compensated with an overseas allowance.

Good relations fostered with the local inhabitants

Provision of back up to local services; Police, ambulance, food reserve, emergency evacuation, radio/telex communication, at the end of the road!

Aid or assistance from one sovereign government to another should be in the form of a true partnership as in the Share Company above. These forms of cooperation must not however be exploitative as for example in the timber industry in the Far East and South America

A strain of genetically modified rice that can grow in droughts, salty soils and cold climates has been developed by scientists, which could pave the way for a new agricultural revolution for much of the developing world. The scientists behind it have decided to publish their results in the public domain, for free use by any scientists. This compares favourably with certain commercial combines whose control of access to scientific results has been severely criticised. A major issue at the present time is the need for relaxation on intellectual property rights with regard to medicines (the TRIPS agreement) promised at the Doha WTO round in 2001. A years' worth of patented drugs used to treat HIV-AIDS costs $10,000 in America; generic versions in the developing world cost $200. Discussions are ongoing to relax control on treatments for AIDS, malaria and tuberculosis. The drug companies for their part wish to ensure that the cheaper drugs are not re-exported to the rich, full price markets on which they rely to fund their research.

Annually some 600,000 casual workers, mainly from Eastern Europe, Turkey and Morocco are required on mainland Europe for vegetable and fruit picking. European farms depend as much on subsidies as foreign labour. It has been suggested that were the EU to pay farmers less and import more these casual workers might have a job at home!

Finally in the words of the first plenary meeting of the International Policy Council on Agriculture in Belgium in 1988,'' a solution to the problems of modern agriculture would require a sustained commitment from governments around the world, and that the overriding goal of policy makers should be to allow market signals to influence the orientation of agricultural production through a gradual reduction of agricultural support measures that distort the market.''

L N Robertson

December 2002