Aid - enlightened self-interest or gun-boat politics?

Those with a superficial knowledge of the development process often remain convinced that aid is designed to help the peoples of the Third World. Even many environmental institutions still appear to believe this and persist in campaigning for increased aid. Yet, surely, if the governments of the industrial countries were really concerned with the welfare of the people of the Third World, they would have provided some of our vast food surpluses, which cost hundreds of millions of dollars to store, to the starving people of Africa - even if this would not have solved any long-term problems. Alternatively, they could have spent on famine relief the money which the US farmers are paid not to produce food.

Needless to say, no politician has even suggested we do anything of the sort. On the contrary, in Britain, in 1985-86, in the face of the worst and most widespread famine Africa has ever known, our government actually reduced its aid to the people of that continent, so that, as John Madeley notes, "There is more in the kitty for better off countries such as Turkey and Mexico" - which, unlike the countries of Africa, have the money with which to buy British manufactured goods.

This is the crux of the matter. Indeed, the US Department of Agriculture admits that American food aid is a means of creating a demand for imports from the US. It declares that

"Food Aid can pave the way for US commercial exports. For example, in 1956-58, the United States food aid to 17 overseas markets was $3.1 billion, and commercial sales of all goods were $3.6 billion. Two decades later, food aid from the United States to these same countries was only $756 million, and commercial sales had grown to $43 billion."

Aid and trade

One of the main reasons why aid is sound commercial practice is that much of it is officially tied. In the same way that colonies were once forced to buy their manufactured goods from the country that had colonised them, today's recipients of aid must spend much of the money they receive (money that is supposed to relieve poverty and malnutrition) on irrelevant manufactured goods that are produced by the donor countries.

What is more, if they dare refuse to buy any of our manufactured goods or to sell us some resource - generally, because they want to keep it for themselves or to conserve it for the future - they are immediately brought to heel by the simple expedient of threatening to cut off further aid, on which they have become increasingly dependent.

Thus, a few years ago, a WHO study revealed that only a minute fraction of commercial pharmaceutical preparations were of any real therapeutic use. Bangladesh, one of the poorest countries of the world, decided to take the study seriously and announced that it would ban all superfluous drugs. The US government immediately reacted by threatening to withhold food-aid if Bangladesh discriminated in this way against US pharmaceutical manufacturers.

So too, in 1979, the Bangladesh government decided to stop selling rhesus monkeys (a threatened species) to a US company called Mol Enterprises for experimentation in its laboratories. The US government's response was, as New Scientist notes,

"swift and strong ... [and] even included a suggestion that American aid could be cut off, if Bangladesh refused to honour its contract with Mol Enterprises, the monkey importers."

The British government behaved in a similar manner with the government of India, by threatening to cut off aid if India did not go ahead with plans to buy 21 Westland helicopters at a cost of £60 million - an effort which, it is encouraging to note, was bitterly opposed by responsible elements within the Overseas Development Administration (ODA).

All this is simply a slightly more sophisticated means of achieving what Commodore Perry achieved by bombarding Nagasaki, in order to force the Japanese to trade with America and what Britain achieved by going to war with China so as to force it to buy opium from British merchants in India.

Bretton Woods

It was at the Bretton Woods Conference in 1944, held under US leadership that aid was institutionalised as the Industrial World's principal tool of economic colonialism. At that conference, 44 nations agreed to set up the key international institutions. They were: the International Monetary Fund (IMF); the World Bank (IBRD); and the General Agreement on Tariffs and Trade (GATT). These highly interconnected 'agencies' formed a single integrative structure for manipulating world trade, which until the early 70s was basically dominated by the United States of America.

The original role of the IMF was to make sure that member nations pegged their currency to the US dollar or to gold, 72 percent of world supplies of which were in the possession of the USA. This expedient would, among other things, make it difficult for Third World debtors to get out of their financial obligation to the Western Banking System by manipulating their currencies.

The World Bank's first function was to reconstruct Europe's shattered economy after World War II. Its second function was to prevent the recurrence of a 1929-style slump by systematically expanding the western economy. Significantly, as Susan George writes in her latest book, A Fate Worse than Debt, Article I of the IMF's charter prescribes 6 objectives, the principle being:

"to facilitate balanced growth of international trade and, through this, contribute to high levels of employment and real income and the development of productive capacity.. To seek the elimination of exchange restrictions that hinder the growth of world trade"

She goes on to comment,

"Even those objectives described in the first Article that may appear strictly financial are, in fact, geared to a single overriding objective: the growth and development of world trade."

As a result the World Bank soon moved into the business of Third World development, its main activity for a long time being to build roads, harbours, ports etc.- in effect, to supply the infrastructure required to enable the importation of manufactured products and the export of raw materials and agricultural produce. It then invested heavily in energy generation, in particular in hydropower, the adverse consequences of which have been documented in our book The Social and Environmental Effects of Large Dams (Vols. 1-3).

More recently, since the 70s, the Bank has played a leading role in financing the commercialisation of agriculture in the Third World and, in particular, the substitution of export-orientated plantations and livestock rearing schemes for traditional subsistence farming, designed to feed local people. In doing this, it has made a massive contribution to the growth of poverty and famine in Africa and south and south-east Asia.

The role of GATT, the third of the institutions set up at Bretton Woods, was to liberalise trade and hence to ensure that Third World countries did not try to manufacture produce locally, which they could buy from western countries - that is, to indulge in highly frowned-upon 'import substitution'.

IMF conditionalities

The IMF has, of course, complemented the work of GATT in this respect. Loans, either from the IMF itself or the World Bank, have only been provided to governments that have undertaken to observe the IMF 'conditionalities'. This had meant above all, abolishing import quotas and reducing import tariffs to a minimum, thereby preventing Third World countries from protecting their fledgling industries against competition from the established and highly capitalised enterprises of the industrial world - industries that during the early stages of their own development, were themselves well protected from foreign competition and many of which still are.

Third World governments have also been required to devalue their currencies to make their exports more attractive to the industrialised countries - which has also meant that they must pay more for their imports. They are also required to abolish expenditure on social welfare and, in particular, on food subsidies, which are often badly required to protect the mass of the population from the disruptive effects of the rapid socio-economic changes that development inevitably brings about. Such expenditure is seen as being better spent on western imports or on building up a country's industrial infrastructure.

Significantly, if the Fund was really interested in the fate of the people of the Third World, it would not cut down on food subsidies to the poorest people of the world, most of whom only need food handouts because they have been deprived of their land, to make way for large-scale development schemes, largely funded by the West, but rather on the import of non-essential items - armaments being a prime example. Yet, as Susan George notes:

"The IMF consistently demands that its pupils make drastic reductions in civil spending, but arms budgets remain untouched. When asked about this anomaly, Fund personnel recoil and explain in pained tones that such measures would be 'interfering in the internal affairs of sovereign nations' (which is exactly what the fund does every working day) ... "

Similarly, the IMF could insist on a purge on corruption and, in particular, 'capital flight', which could be responsible for the loss of as much as $100 billion a year.

Apart from being made to devalue their currencies and cut social expenditure, Third World governments must also undertake to mechanise their food production - that is, to adopt the Green Revolution - thus providing an important market for Western agricultural machinery and agro-chemicals. They must also replace subsistence agriculture with export-orientated agriculture so as to provide us with the agricultural produce we require, though this they have to do in any case, in order to pay for the capital equipment they need for mechanising their agriculture and for financing the mass of manufactured goods that must now inevitably flow into their countries.

This package of policy prescriptions has been imposed on Third World countries by all the multilateral development banks. Rupesinghe, for example, quotes a report by the Asian Development Bank on Southeast Asia's economy:

"Countries must move away from inefficient import substitution policies and free the economy of import controls and price controls. The Green Revolution must be promoted as a 'genuine dynamic force' of economic development. The agribusiness should be invited to cooperate in a country's drive towards self-sufficiency. Resource allocations must shift from domestic production to export crops for the world market. Local support, generous tax incentives, profit registrations, should be provided for foreign investors, and legislations must be enacted to create a 'climate of stability' for foreign investment."

Recycling 'stranded capital'

Since the early 70s, the amount of capital pumped into the Third World to finance such policies has increased massively, as has the destruction it has financed. One reason has been the need to recycle the vast sums of money accumulated by the OPEC countries into the western economic system. This is fully admitted by the US Government in one of its publications:

"In the I970s the large increase in petroleum prices gave rise to large amounts of what were called petrodollars, since petroleum was (and still is) paid for in dollars. Commercial bankers were enjoined by the United States and international agencies such as the International Monetary Fund to reloan or recycle these dollars to keep the international economy from collapsing. This they did to a fault, giving rise to what later came to be known as the international debt crisis."

Unfortunately, the process is about to be repeated, since, with the aid of the World Bank, we now plan to recycle, via the economies of Third World countries, Japan's annual $80 billion surplus - which is equivalent to the OPEC surpluses of the late 1970s.

The impact that the vast development schemes, which alone can sop up all that money, must inevitably have on the already devastated environment of the Third World is too awful to contemplate.