The ‘aid industry’ fooled many into believing it was a necessary tool for development. But following the Busan forum on aid effectiveness, its time to rethink a world without it, writes Yash Tandon.
The Fourth High-Level Forum on Aid Effectiveness (HLF4) was held in Busan, Korea, 29 November – 1 December 2011. It is an end of a long journey that began with the Paris Declaration on Aid Effectiveness (PDAE) in 2005. It was a misguided journey right from the beginning. Its authors were probably well-intentioned, but they legitimised and built on a monstrous global aid industry that is largely Eurocentric and self-serving, and that has nursed illusions for over half a century. HLF4 was launched with much fanfare; but it ended with the recognition – finally - by the architects of the PDAE that they were on a wrong course. The Outcome Document talks of not ‘aid effectiveness’ but of ‘development cooperation’, which is what it should have been from the start; and it sets out the schedule for the ‘phasing out’ of the aid structures by June 2012. This paper is part of a larger story of how the ‘aid industry’ has managed to fool the rest of us for so long. It gives the main highlights of Busan’s final burial of this self-reproducing aid industry. The ‘industry’ will no doubt try and find other reasons to survive. Nonetheless, those not taken in by the industry must now rethink of a world without ‘aid’.
AID DIPLOMACY AT BUSAN
READING BETWEEN THE LINES
Professional politicians and diplomats have a particular way of making public speeches. They send important and often critical messages encrypted in coded language. One has to be able to interpret the code, to read between the lines, in order to get to their hidden messages. At Busan, when the US Secretary of State Hillary Clinton said ‘Beware of those who want to take your resources with quick fixes’, you can be reasonably sure that the warning was levelled at African countries and the pointer was at China. (I was once a politician and a diplomat; I have learnt to read between the lines).
Clinton said much more at Busan. Below I give an account of the main content of her speech, and of speeches of other dignitaries at the closing session of Busan. I supplement summary reportage by extrapolating from the diplomatic speeches reasonable elaborations in order to bring to the surface their more hidden messages and implications. (I was largely an observer; and I took copious notes of what I saw and heard. I depart from the ‘normal’ method of writing. Long diplomatic usage – especially of ‘experts’ in UN meetings – forces authors to write in a contrived, artificial, style that stifles thinking outside the ‘diplomatic norm’. What is needed is a bit of innovation, a bit of ‘out of the box’ thinking).
CLINTON CONFIRMED THAT DEVELOPMENT AID IS INEFFECTIVE
Clinton, in a short but ‘sufficiently’ passionate speech for the occasion, made three points.
One, the ODA (Overseas Development Aid) is no longer the main source of development financing. ‘It used to be 70% of total financial flows in the 1960s; now it is only 13% -- even as aid quantity has increased’. So, then, what is the purpose of aid? It should be, she said, ‘to facilitate private sector investment’.
ELABORATION: Aid, in other words, is an adjunct, an accessory, to something else. (I agree with Clinton on this – aid has no ‘independent’ life of its own. I return to this point later).
Two, ‘donor aid is driven by donor agenda…We should follow partner lead’. By ‘partner’ she meant the recipients of aid. There should be, she added, ‘genuine mutual accountability’. She gave the example of recipients’ insistence that donor aid should be ‘untied’ to donor procurement sources. She claimed that the US was trying its best to do so. But, in a frank admission, she went on to add that some US aid will remain tied in order for the Administration to secure political support of the Congress.
ELABORATION: The reference to the need for ‘genuine mutual accountability’ clearly implies that this is presently lacking, further reinforced by her point that ‘donor aid is driven by donor agenda’. (Clinton is on good ground evidentially; i.e. on the lack of mutual accountability). Also, and this is an important point, she acknowledged that aid is a means to promote certain politically-backed US exports. We know from other sources that the US Congress is a hothouse for business lobbyists, and that the USAID has been used by, for example, the farm lobby to promote US grain exports to Africa and other third world countries, and that these have had disastrous effect on local food production and domestic food security. (Besides Africa, Haiti is a good example of the disastrous effects of US food aid – limitation of space prevents further elaboration).
Three, and this is a telling statistic that put to question the whole issue of aid effectiveness. Clinton said that an independent study undertaken just before the Busan meeting revealed that out of 13 objectives set out by the Paris Declaration on Aid Effectiveness, only one was met. Here is the full quotation from the independent study: ‘Although the Paris Principles continue to demonstrate their relevance over time, progress in implementing the agenda has undoubtedly fallen short. The preliminary results of the 2011 survey show that only one of the original 13 targets set for 2010 has been met’.
ELABORATION: There is (sadly, an almost too human) tendency to reject the verdict of empirical evidence (especially among professional politicians and diplomats, joined as I recount below, by international bureaucrats). Whilst acknowledging that only one out of 13 targets for 2010 were met by the ‘development aid’ (i.e. over 90 per cent of the aid failed to meet its objectives), the 50 ‘prominent thinkers in international development’ went on to say that the ‘Paris Principles continue to demonstrate their relevance over time’. On what basis these ‘thinkers’ came to that wishful thinking defies logic. It is like the well known fact that the gap between the poor and the rich countries has increased ‘over time’, and yet, in the diplomatic and political world, it is necessary to go on reiterating, ad infinitum, that the ‘principle’ of narrowing the gap is ‘relevant over time.’ Of course, it is ‘relevant’. (So are the Ten Commandments). But what has ‘relevance’ got to do with the achievability of these hallowed principles?
This is a serious question, and needs deeper thinking. The question is: Are there not some inherent dynamics within the global system of production and distribution that inexorably lead to the widening of the income gap not only between countries but also within countries, (not excluding the United States)? Is this not what the ‘Occupation Wall Street’ movement is all about? As with income disparities, so with ‘development aid’. Aid has failed; that is the simple, unadorned truth. The principles of the Paris Declaration on Aid Effectiveness do not address the underlying dynamics of ‘aid’. The PDAE takes ‘aid’ for granted as a ‘virtue’, and gets on to the ‘technical’ task of making it ‘effective’. Deeper thinking (not a forte of ‘normal’ professional politicians and diplomats) would show that the PDAE principles obscure, obfuscate, reality of life; they encourage muddled thinking on aid.
For good measure, Clinton ended her speech by taking a passing shot at what she called the ‘ruling elite’ of aid receiving countries. They ‘have to make tough choices to remove their special privileges’. (I agree)
PAUL KAGAME TELLS IT LIKE IT IS FROM A RECIPIENT PERSPECTIVE
The President of Rwanda made a cool, dispassionate, speech covering the following issues.
One, ‘massive aid transfers have been ineffective’.
Two, there is a contradiction in the growth statistics of Africa. On the one hand, African economies have grown 7 to 8 per cent over the last several years; on the other hand, the per capita income has fallen.
Three, many African countries are unlikely to meet the Millennium Development Goals (MDGs) by 2015. This is the hard reality.
Four, there is a ‘huge aid industry’ that has now become ‘a permanent feature’ of north-south relations. This ‘industry’ is undermining the essential linkages between aid, trade and investment.
ELABORATION: Aid has occupied an undeserved place in the pantheon of financial flows, often to the detriment of trade and investment.
Five, the Paris Declaration on Aid Effectiveness states ‘mutual accountability’ as one of its principles. ‘In reality there is no mutual accountability’. Kagame pointedly added: ‘When a country is not managing its resources how can it be held accountable?’ (Good question)
ELABORATION: Kagame went beyond Clinton: There is not only no ‘mutual accountability’; Africans do not even manage their resources. I agree with Kagame. African economies are still by and large in the control of foreign corporations – mining, manufacturing, trading, banking, services, etc. This is an all-pervasive phenomenon about Africa which distinguishes the continent from, for example, many large Asian countries such as China and India and now also several Latin American countries such as Brazil and Venezuela. Africa still does not ‘own’ its economy in spite of its ‘political independence’. How can its leaders be made accountable for, for example, ‘aid effectiveness’, when foreigners control its economies?
Six, Donors only talk about channelling aid through country systems; ‘in practice they refuse to use national systems’. There is a ‘need for greater mutual trust’.
ELABORATION: Mutual trust between the donors and the recipients is lacking; the donors do not want to put their money into a system they do not trust. Actually, it is not just a problem of trust; it is an existential or institutional problem. Donors argue, understandably, that they are dealing with public money and are accountable to their accounting procedures and legislatures. In other words, by its nature, and despite wishful thinking by President Kagame, the issue is inherently impossible to resolve. (Excuse us, Your Excellency, take it or leave it; we are accountable to our accounting procedures, not yours; but you take our money, so you are accountable to us for the money we give you).
Paul Kagame ended his speech with: ‘So fundamental rethinking is necessary’.
This fundamental rethinking came from an unexpected quarter.
QUEEN RANIA AL ABDULLAH OF JORDAN – THE MOST ENLIGHTENED AND FUTURIST SPEECH OF THE WHOLE BUSAN CONFERENCE
In a slow, compassionate (not diplomatic) and measured tone, the Queen delivered a few ‘truths to power’, challenging the prevailing orthodoxy about aid and development, and putting to shame the more compromising and subdued stance taken by the civil society organisations present at the Busan meeting.
Busan, she said, is different from Paris or Accra. ‘We live in a different world; it is a world of Tahrir Square, and Wall Street occupation’. The world, despite all talk about globalisation, is ‘growing apart, not coming close’. In some countries such as Argentina and Malaysia they have narrowed income gap. But global inequality is increasing. We need ‘a new development paradigm’. Development has to be based on equity; growth itself does not bring equity. We must give everyone an opportunity to develop his or her potential. ‘Sixty percent of our people are youth and a quarter of them are unemployed. They want jobs not aid’. Government should facilitate development of people not sit on top of them. The education curricula in our countries are ‘outdated’. (By the way, the Queen is a radical innovator of education policy in her country).
ELABORATION: It was a speech delivered from the heart. While most presentations, including those of other eminent speakers on the panel, and civil society organisations, made their points within the prevailing and dominant paradigm of development with its emphasis on growth, the Queen challenged its underlying assumptions. She was thinking ‘out of the box’. Economic growth is necessary, of course, but it does not bring equity. The evidence on the ground, both at the national and the global level, contradicts the naive assumption that growth brings equity. ‘The world is falling apart, not coming together’. Tahrir Square and the Occupy Wall Street are not only symbolic or heuristic reactions of the youth against the prevailing order; they are also a demand for a new international economic and political order. It is necessary to learn from the street. The path ahead is not clear (yet); but the path left behind is clearly not the path ahead. A new cognitive framework is needed to move forward. (These are my words)
ANGEL GURRIA, MYUNG-BAK LEE AND BAN KI MOON TREAD OLD, OBSOLETE, PATHS
Angel Gurria, the Secretary General of the OECD, President Lee Myung-bak of Korea, and Ban Ki-Moon, UN Secretary-General were treading old, worn out, paths in their presentations. Interestingly, they had the same message, as if they had sat together and planned what to say. Their arguments can be briefly summarised as follows:
One, Korea is a shining example of a country that has ‘moved from being a recipient of aid to a donor’. (This message was played up, insensitively, almost nauseatingly, in speeches and in large poster displays at the Bexco Convention Centre).
Two, aid will end poverty, improve gender equality, bring education to girl children, and so on and so forth.
Three, the world has fallen behind achieving the Millennium Development Goals (MDGs). ‘Therefore’ (sic!), rich countries need to ‘give more aid’.
Four, the 2008 financial crisis has shown that when countries work together they can prevent contagion. Etc, etc.
ELABORATION: Korea was presented as a ‘success story’; that may be the case. But the period when Korea was able to carry out land reform under American occupation; pursue state-aided and bank-rolled programs for encouraging Daihatsus; industrialise without having to pay massive intellectual property rents for technology; and export to the US almost duty-free at a time when the latter needed a dependable ally in Asia to contain communism – this period and its circumstances are not the same as today. Korea cannot be repeated by, for example, African countries. Korea is no ‘model’. Furthermore, the two Koreans (Lee Myung-bak and Ban Ki-Moon) conveniently ignored the fact that their country’s development owes itself largely to their hard-working working classes rather than ‘aid’. As for the argument that ‘because’ the world has fallen behind MDGs, ‘therefore’ the rich should give more aid to the poor is so seriously flawed of logic that it defies common sense.
THE BUSAN OUTCOME DOCUMENT
As I have recounted, the arguments of the principal proponents of aid at Busan (the Secretary Generals, respectively, of the OECD and the United Nations – and the host country) are seriously flawed on grounds of logic as well evidence on the ground. Some of these were acknowledged by the panel of eminent speakers, including the US Secretary of State. But these flawed claims are reproduced in the ‘Outcome Document’ with the usual ‘diplomatic’ cover-up (such as that the Paris Principles are ‘relevant’ or that they will work out ‘over time’). Once these weaknesses are exposed to the light of the sun (i.e. out-of-the-box thinking), it should be clear that HLF4 was not a success of the ‘Aid Effectiveness’ agenda, but its total negation.
Here is a brief analysis of the outcome document.
ONE: To start with its title, ‘Busan Partnership for Effective Development Co-operation’. ‘Effective aid’ is now replaced with ‘effective development’. This is a more telling indictment of ‘aid’ than is realised at first glance. After all, in 2005 the OECD countries had set out to redesign the architecture of ‘aid’, not development. After six years, and following vastly exaggerated claims of ‘success’ at Accra HLF3, the OECD aid architects seem to have abandoned the ‘aid’ project, and they have come down to embrace the larger, and even more complex, concept of ‘development’. The HLF4 Outcome Document confirms the point made by Hillary Clinton that ‘aid’ has no life of its own outside of ‘private investment’, or as Paul Kagame put it, aid has been ‘ineffective’ as a resource for development, a sentiment echoed by many African leaders.
It is only when we come to paragraph 28 of the Outcome Document that this ‘change of focus’ is explicitly acknowledged. It says: ‘Aid is only part of the solution to development. It is now time to broaden our focus and attention from aid effectiveness to the challenges of effective development.’ It then goes on to set out principles that are radically different from the principles set out by the Paris Declaration on Aid Effectiveness.
TWO: HLF4 was largely an affair between the ‘poor’ countries of the so-called ‘third world’ and the so-called ‘traditional donors’ of the OECD countries. Conspicuously absent were the BRIC countries (Brazil, Russia, India and China). They were not present at the ‘high tables’ during the inauguration or the closing sessions; they made practically no contribution in the debates in the various fora and side events; they were represented by senior officials but these kept their counsel to themselves; and they were not actively engaged in the negotiation of the Outcome Document except to say that they were not part of this game called ‘aid effectiveness’. In other words, BRIC countries illegitimated HLF4 simply by their silence.
This was reflected in the telling opening of paragraph two of the ‘Outcome Document’ with the words ‘The nature, modalities and responsibilities that apply to South-South cooperation differ from those that apply to North-South cooperation.’ (This sentence needs to be re-read to grasp its significance). However, in order palpably to save face of the hosts and the UN and OECD Secretaries General, the paragraph ends with: ‘The principles, commitments and actions agreed in the outcome document in Busan shall be the reference for South-South partners on a voluntary basis.’
ELABORATION: There is no question that the bigger countries of the south (India, Brazil and China) as well as Russia have distanced themselves from the ‘aid effectiveness’ agenda of HLF4. Their agreement to refer to the principles of North-South relations on a ‘voluntary basis’ can only be interpreted as a political rejection of those principles. (Excuse us, Messrs Ban Ki-Moon and Angel Gurria, but we are not part of your game; count us out).
THREE: In paragraph 36(d), the Outcome Document invited the OECD and the UNDP ‘to support the effective functioning of the Global Partnership on their collaboration to date and their respective mandates and areas of comparative advantage.”
ELABORATION: The OECD has dumped the ‘aid baby’ on to the lap of the UNDP.
FOUR: The aid denouement is officially announced in the Outcome Document in paragraph 36(c). It calls on the Working Party on Aid Effectiveness (WP-EEF) to ‘convene representatives of all countries and stakeholders endorsing this document… in preparation for the phasing out of the WP-EFF and its associated structures in June 2012.’ By implication, the BRIC countries, possibly others, do not have to be part of this process; they are not part of the ‘associated structures’ in any case.
ELABORATION: The WP-EEF is a structure created under the Paris Declaration on Aid Effectiveness – an insular, self-serving organ of the OECD that was created to monitor the whole scam of ‘aid effectiveness’. It is called to self-destruct in June 2012. It is therefore now official: The aid industry is … finally … dead.
CONCLUSION AND WAY FORWARD
Aid effectiveness of the OECD club of the rich is, for all practical purposes, dead, buried, pulverised, vaporised – in short, gone. Busan was its burial site.
However, the ‘aid industry’ has been in existence since the Second World War and is not likely to self-destruct that easily. Like the mythical English Cheshire cat, the whiskers will still be seen even as the body has disappeared.
The ‘aid industry’ or ‘complex’ (recall Eisenhower’s ‘military-industrial complex’) is at least a million-strong, largely inhabiting the North Pole (or a bit south of it) in countries like England, France, Germany, Canada, and the US, and its octopus-like NGO tentacles in the South Pole. It is a gargantuan network of self-styled pseudo-experts on development; well-intentioned do-gooders; hard-headed realpolitik operators in aid-dispensing Western countries; and a bunch of illiterate idealists.
What will happen to this ‘complex’? I can only make some indicative suggestions and tentative predictions. BetterAid – an NGO genie that was taken out of the bottle by the OECD in order to reach out to civil society, mostly in the Polar South, to peddle (and legitimise) the concept of ‘aid effectiveness’ will need to consider its future. Since BetterAid is aid-dependent, this is probably the only genie that could be pushed back into the bottle if the OECD so desires.
A bigger challenge confronts ‘charity’ organisations such as the Oxfam. ‘Aid’ (or charity) is their way of life, a sub-culture, with its priests, rituals… and yes, illusions. Oxfam alone has thousands on its payroll, and hundreds of shops where it sells tens of thousands of second-hand clothing, books, music, movies, etc donated by Oxfam supporters, generating literally millions of dollars in order to ‘fight poverty’ in the third world. What will Oxfam – and the likes of Oxfam – do? It is time for them to do some out-of-the-box thinking. Charity will remain as long as there are people like Geoffrey Sachs, Bob Geldof, rock musicians, do-good charity organisations, and the like, around. But they must realise that charity helps the givers: It uplifts their (Christian and other delicate) souls; but charity destroys the takers: It kills their spirit of self-reliance.
What, then, of the bigger and richer countries of the South (such as China, India and Brazil)? The first thing to acknowledge is that for a while they too were using the concept of ‘aid’ in describing some of their financial south-south transactions However, they now know better. HLF4 vindicates them for refusing to associate with this self-serving creation of the Europeans and the Americans. As the Busan document says, ‘The nature, modalities and responsibilities that apply to South-South cooperation differ from those that apply to North-South cooperation.’ They will now have to work out their own modalities of operation outside the framework of ‘aid’.
In the light of HLF4, what will the aid-dependent political-bureaucratic leaders of the countries of the South do (or should do)? Here I can only repeat Hillary Clinton’s advice: Strip your elite privileges. To this I add my own: Learn to be self-reliant on the strength of your people’s ingenuity and labour and intellectual resources, and your countries’ and region’s natural resources.
What, then, of the UN agencies on aid? As noted earlier, the OECD has dumped the ‘aid baby’ on the laps of the UNDP. Here is my suggestion: the UNDP must stay clear of the donors’ aid agenda. Also, the UN’s Development Cooperation Forum (DCF) must clear its decks and method of operation. Its present composition is OECD donor-dominated; it is funded largely out of donor funds, such as the various German development funds; and it is ‘legitimised’ by civil society organisations that are themselves aid-dependent. Other institutions such as the UNITAR might focus their training and research on designing methodologies to enable countries of the South to be more self-reliant nationally and regionally.
Finally, a word on those in the north who work with their ‘partners’ in the south on the basis of solidarity – based not on ‘aid’ or charity but on shared values of equity and justice. Solidarity is a complex concept – more so in practice than in theory. There are those who define it as action based on a ‘universal social protection system’, or as an essential component of the ‘common good of humanity’. However, they need to revisit these concepts, because they could easily lend themselves to manipulation by the Big Powers of the North (such as those in the North Atlantic Treaty Organization) to bomb innocent civilians in the name of ‘humanity’, ‘social protection’, ‘democracy’, ‘good governance’, ‘fighting corruption’ and the like.
BROUGHT TO YOU BY PAMBAZUKA NEWS
* Yash Tandon is a writer on development theory and practice, chairman of SEATINI and senior adviser to the South Centre.
* Please send comments to editor[at]pambazuka[dot]org or comment online at Pambazuka News.
 I am author of two recent publications on aid. One – ‘Ending Aid Dependence’ -- was published on the eve of HLF3 at Accra by the South Centre and Pambazuka Press in 2008; and the second – ‘Demystifying Aid’ – was published on the eve of HLF4 at Busan, by the Pambazuka Press in 2011.
 This is a reference to the roundtable event at the Brookings Institution in the US where 50 prominent thinkers in international development came together to discuss ‘a new role for global development co-operation’. Its report “The Road to Busan: Pursuing a New Consensus on Development Cooperation" came to this sobering conclusion about aid effectiveness. (http://bit.ly/s7zbjF)
 Aid and solidarity are two separate rivers, about which I shall write from my experience some time in the future. Suffice to say for now that I have over three decades of experience working on the issue of solidarity with friends in the North.