FINANCING FOR DEVELOPMENT
'Reward and punish' policy
> BY JACK FREEMAN
Copyright © 2002 by The Earth Times. All rights reserved

Ten years ago this month, Bush the elder was making sure that the Earth Summit (officially known as the United Nations Conference on Environment and Development) would have nothing of significance to say about financing for development. His spokesmen at the final preparatory conference (PrepCom) before he summit managed to strip out everything meaningful from the final document. All that was left for the summit to agree to was the ritualistic "reaffirmation" of the UN's long-standing target for official development assistance (ODA) of 0.7 percent of the donor country's GDP. As leverage in the debate, Bush threatened repeatedly to stay away from the summit.

That was then; this is now. President Bush the younger, at the final PrepCom for the UN's Financing for Development summit conference in Monterrey, Mexico, made sure that its final document was stripped of its most meaningful passage: a call for all donors whose ODA has not yet reached the target to double the ODA amount. According to published reports, Bush's emissaries at the PrepCom also threatened that he would stay home unless that language was removed. So it was. Bush the elder went to the summit in Rio de Janeiro, posed for the "class picture" with the other world leaders in attendance, signed on to Agenda 21, and then went home and acted as if it had never happened at all. Yes, he agreed to the reaffirmation of the 0.7 percent ODA target. But, no, he never took action to raise the level of US development aid. Indeed, as the US economy flourished and expanded through the 1990's, the country's static aid budget steadily shrank in proportion to GDP, dipping to below 0.1 percent-by far the lowest aid level of any industrialized nation.

Now Bush the younger has announced that he wants to increase American foreign aid-but not by very much. He has proposed increasing the aid budget by $5 billion, spread over three years. That works out to an increase of about 15 percent over the existing budget of $10 billion a year, but it must cover a wide variety of programs, including the global fight against HIV/AIDS, the effort to narrow the "digital divide" separating rich and poor countries and the task of opening markets to products from countries in Africa.

The president's critics in Congress note that the $5 billion seems insignificant when compared with his proposed increase in military spending: $48 billion. The proposed aid increase was decried by philanthropist George Soros as "totally inadequate. a token gesture instead of something that could successfully impact most of the poor countries." There is another feature to the president's proposal that is sure to attract unfavorable attention as well. He says he wants to give US aid only to those countries that behave as he wants them to behave-that is, those that support human rights and market economies. "We will reward nations that have more open markets and sustainable budget policies," he said, "nations where people can start and operate a small business without running the gauntlets of bureaucracy and bribery." He promised that his administration would develop "clear and concrete and objective criteria" for determining which nations are eligible for US aid, and that those criteria would be applied "rigorously and fairly."

Some cynics might yawn and say it's the same old stuff. The US has long used its meager foreign aid budget to "reward" its friends, those countries that go along with US policy dictates. And withdrawal of that aid has also been used to punish some countries whose policies (such as on family planning and abortion) have run afoul of presidential preferences. What's different this time is that President Bush is proposing that this reward-and-punish policy is not anything to be ashamed of, that it should be made the centerpiece of the US aid program. He called it a "new compact for global development," one defined by "a new accountability" for nations both rich and poor. "Greater contributions from developed nations," he said, "must be linked to greater responsibility from developed nations."

The old "compact for global development," behind the Rio Earth Summit 10 years ago, was based on the understanding that planet Earth would be headed for catastrophe if the people in the poor countries, striving for development, made the same environmental mistakes that the developed countries had made before them. In other words, if the people living in, say, China or India were to consume energy and other natural resources at the same rate as people in the US, the global ecology could not stand the strain. The solution endorsed in Rio was to have both the rich and the poor countries agree to "common but differentiated responsibilities" to keep that from happening. In principle the deal was simple: The poor countries agreed to guide their own growth and development in environment-friendly ways; i.e., with "sustainability." The rich countries, in return, agreed to help them pay for the added costs of such "sustainable development" by increasing the amount of their development assistance.

Unfortunately, nobody ever got to make the leap from principle to practice. Almost immediately after the summit, development assistance levels started to drop precipitously. The developing countries felt betrayed. The rich countries, for the most part, didn't even bother to apologize for not honoring their commitments. And the whole North-South squabble only intensified, exacerbated by the rich countries' reneging on promises they had made during the Uruguay Round of trade talks that they would open their markets to the poor countries' products. All that is why, as we approach the conference that has been dubbed "Earth Summit II," the World Summit on Sustainable Development, starting in Johannesburg, South Africa, in late August, everyone talks of the need for it to be "forward-looking." There is nothing to be gained by looking back 10 years-nothing, that is, except recriminations and acrimony.

Anyway, here is George W. Bush proposing, in effect, that the environmental "sustainability" criterion for aid, endorsed in Rio 10 years ago, be dropped in favor of what might be called a "readiness" (ideological?) test for eligibility. He is also saying that, despite all the rhetoric that has flowed through UN conferences about why developing countries need to "set the agenda" for development programs within their own borders, it is really the donors that have the last word. He is saying that development assistance isn't really a partnership, a form of cooperation, but rather a "contribution"-that is, an act of charity. One hears in his words echoes of Kipling and all the others who used to speak of taking up "the white man's burden." It's not at all surprising that many people in the developing countries are suspicious about the motives of the rich countries. Many think of development cooperation as little more than an updated version of colonialism, as part of an effort by the rich countries to impose their will, their values, their policies. And they see UN conferences as just one more arena in which their own powerlessness can be exploited. These suspicions, combined with the bitterness that still lingers from past disappointments, make it highly unlikely that the 2002 Earth Summit will prove any more fruitful than the one 10 years ago.

A more hopeful sign can be found in the debate that has suddenly blossomed over whether development assistance really does help the poor. US Treasury Secretary Paul H. O'Neill , who has the unfortunate habit of making headlines by putting his foot in his mouth, performed a genuine public service recently when he demanded proof that the "trillions of dollars" that have been poured into foreign assistance have in fact done any good. Several researchers, especially at the World Bank, have tried to provide such evidence, but they have not been able to make a convincing case.

Yes, there have been a few success stories, of countries that have been able to lift the living standards of their people, but they are very few and, in most cases, it is all but impossible to show a clear cause-and-effect relationship-or even a simple correlation-to aid flows.

In far too many poor countries, the evidence suggests that foreign aid has done little if any good and may indeed have done significant harm-by, for example, helping to shore up corrupt and repressive governments. There seems to be no evidence at all that development aid has helped solve global environmental problems.

The good news is that we can show that some approaches to development assistance seem to be significantly more effective than others. The figures show that aid funneled through multilateral agencies, such as the UN agencies or the World Bank, tends to be far more effective than direct country-to-country (bilateral) aid. We also know that aid is more effective when given to countries that have "reasonable" economic policies, and most effective when given to the poorest countries. We also have strong evidence suggesting why aid has, so far, done so little to reduce poverty: It hasn't been directed at that problem. Indeed, much of US foreign aid is directed toward "middle-income" countries such as Egypt, and much of it gets spent not on economic growth factors but on armaments-and it is not at all clear that the new policies President Bush is proposing would change any of that.

Two years ago, at the UN's Millennium Assembly, the nations of the world agreed to lift half of the world's poor people out of poverty by the year 2015. If we really intend to honor that commitment-and not as we have "honored" the commitments we made 10 years ago in Rio-then we had better not waste any more time getting started. Perhaps we had better figure out how we are going to do it before we deal with who is going to pay for it.