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Development aid for development's sake

Jeffrey D SachsJeffrey D Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. His last Webdiary contribution was Who beats corruption?

by Jeffrey D Sachs

Almost daily, the United States and Europe brandish threats to impose economic sanctions or cut off development assistance unless some vulnerable government accepts their political strictures. The most recent threats are towards the new Hamas-led government in Palestine. Other recent examples include threats vis-à-vis Chad, Ethiopia, Haiti, Kenya, Bolivia, Uganda, and long-standing sanctions against Myanmar.

Such tactics are misguided. The use of development aid as a political stick merely deepens the suffering of impoverished and unstable countries, without producing the political objectives sought by donors.

To understand why requires taking a long-term view of geopolitics, particularly the gradual decline of US and European global domination. Technology and economic development are proliferating across Asia and the developing world, while the spread of literacy and political awareness during the past century made national self-determination by far the dominant ideology of our age, leading to the end of colonialism. Nationalism continues to produce powerful political “antibodies” to American and European meddling in other countries’ internal affairs.

The failure to understand this lies behind repeated US foreign policy debacles in the Middle East, at least since the toppling of the Shah of Iran in 1979. The US naively continues to view the Middle East as an object of manipulation, whether for oil or for other purposes. In the Middle East, the Iraq war is widely interpreted as a war for US control of Persian Gulf oil – a rather plausible view given what we know about the war’s true origins. Only incredible hubris and naiveté could bring US (and UK) leaders to believe that Western troops would be greeted as liberators rather than as occupiers.

The politicisation of foreign aid reflects the same hubris. Even as the US rhetorically champions democracy in the Middle East, its first response to Hamas’s victory was to demand that the newly elected government return $50 million in US aid.

Hamas’s doctrines are indeed unacceptable for long-term peace, as even some Arab states, such as Egypt, have made clear. But cutting aid is likely to increase turmoil rather than leading to an acceptable long-term compromise between Israel and Palestine.

A newly elected Palestinian government should be treated, at least initially, with legitimacy. Later, if it behaves badly by sponsoring terror, policies can change. An aid cutoff should be a policy of last resort, not a first strike.

Aid cutoffs regularly fail to produce desired political results for at least two reasons. First, neither the US nor European countries have much standing as legitimate arbiters of “good governance.” Rich countries have long meddled, often with their own corruption and incompetence, in the internal affairs of the countries that they now lecture. The US preaches “good governance” in the shadow of an unprovoked war, congressional bribery scandals, and windfalls for politically connected companies like Halliburton.

Second, US and European threats to cut off aid or impose sanctions are in any case far too weak to accomplish much besides undermining already unstable and impoverished countries. Consider the recent threats to cut Ethiopia’s aid, which is on the order of $15 per Ethiopian per year – much of it actually paid to US and European consultants. It is sheer fantasy to believe that the threat of an aid cutoff would enable the US and Europe to influence the course of Ethiopia’s complex internal politics.

An aid cutoff to Ethiopia would nonetheless lead to a lot of death among impoverished people, who will lack medicines, improved seeds, and fertilizer. Indeed, the track record of on-again-off-again aid is miserable. Stop-and-go aid has left Haiti in an unmitigated downward spiral. The decade-long sanctions against Myanmar have not restored Aung San Suu Kyi to power, but have deepened the disease burden and extreme poverty in that country. Threatened aid cutoffs in Kenya, Chad, and elsewhere would make desperately bad situations worse.

None of this is to suggest that the US and Europe should abide every move by every corrupt dictator. But realism in international economic affairs requires accepting that official development assistance can help achieve the broad political objectives of stability and democracy only in the long run. The most reliable path to stable democracy is robust and equitable economic progress over an ample period of time.

The overwhelming standard for supplying official development assistance should therefore be whether official assistance actually promotes economic development. As such, it must be reliable, predictable, and directed towards development needs in ways that can be monitored, measured, and evaluated. Can the aid be monitored and measured? Is it being stolen? Is it supporting real development needs, such as growing more food, fighting disease, or building transport, energy, and communications infrastructure?

If development aid can be directed to real needs, then it should be given to poor and unstable countries, knowing that it will save lives, improve economic performance, and thus also improve the long-term prospects for democracy and good governance.

Copyright: Project Syndicate, 2006.

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How it all works

Jeffrey D Sachs: "A newly elected Palestinian government should be treated, at least initially, with legitimacy. Later, if it behaves badly by sponsoring terror, policies can change."

At that point, the United States will be accused of;

a) having "supported" Hamas in its bad behaviour "all along", but now

b) be conducting "genocide" against the Palestinians by imposing "murderous" sanctions, until

c) someone is caught busting the sanctions at which point they will be denounced as guilty of "indirectly supporting tyranny" for commercial gain, unless

d) the USA can otherwise be accused of beating up any official inquiry into the sanctions busting at point 'c' to make the folks at point 'b' look like they were supporting Hamas all along.


Did I say that?

Keep the pressure on

"Hamas is "ready to recognise" Israel if it gives the Palestinian people their full rights and a state in lands occupied since 1967, says the Palestinian Prime Minister-designate."

Yeah, right.

I reckon the Yanks will keep the pressure on if this is any indication.

belling the cat

I wonder if folk will connect the substance of this article to things like the Australia - US free trade "agreement" and the surprisingly swift, aggressive and well-organised attack on the wheat marketing "single desk", in the wake of the AWB scandal?

Well off topic.

Sorry to be off topic, but news has just come in that people all over the USA will be learning where to find Norway on a map.

It seems that, any minute now, we'll be told of the terrible Norwegians and their nuclear ambitions.

Did somebody mention WMD?

Invasion in 3...2...1...

rum and coca-Kohler

From Alan Kohler's Sunday morning show came an interesting story about the exponential increase in steel production the Chinese have achieved, which has what remains of the Australian steel industry quaking.

Norway also indicates that western countries no longer can rely on their manufacturing or resources sectors and must develop clever industries to survive in the new world. Which is why we are so clever when we continue to cut funding to universities, CSIRO, R&D incentives, etc, etc, yes?

And run a dumbed down media that refuses to allow reportage of real issues, instead favouring guff about footballers sex lives or Britney's lunch-box.

One fears Australians are handcuffed to the local kleptocracy and the US, for good or ill, for the foreseeable future.


Paul Walter: "One fears Australians are handcuffed to the local kleptocracy and the US..."

The US economy is about 10 to 11 times greater than the Chinese economy. That's the attraction of the US/Australia FTA. But the general point about manufacturing no longer being a first world economic activity is right.

By the way, I've heard Mitsubishi 380s are not selling. I've noticed very few of them on the roads, too. So I guess that's about to go down the tubes.

The "local kleptocracy" thinks it's going to grow markets in Australia by increasing our population to 50 million. They really think this will work. A kind of demographic Keynesism. They'll do anything to avoid having to compete in a global market. Even pay kickbacks to Saddam Hussein if they must.

Anything except develop talent and imagination, of course.

Well, well....

C Parsons, looks as if you and I may not so diametrically opposed on some issues as much as I may have thought.

My response to Mitsi 380 was, "too old a concept". Ford and Holden , take note!

These days, cars have to be comfortable, yet nimbler and above all more fuel-efficient. Mitsubishi guessed wrong concerning petrol prices heading north or south.

Dining with the Devil

Many thanks, Jeffrey, for a thought-provoking piece.

Realistically, it is impossible to ensure that every dollar in aid will be used in a worthy manner. Hypothetically, should we give aid to a country knowing that some of that aid will be used to support policies we find abhorrent?

It's somewhat relevant to the current wheat scandal. Was it right to trade $2billion worth of wheat to Iraq, knowing that $200million was going to Saddam?

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