Ending Aid Dependence

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In such an environment, Yash Tandon argues in Ending Aid Dependence that putting into action an exit strategy from aid must become a top political priority for all countries heavily dependent on aid as current policies aim to perpetuate aid before promoting development.

When many hear brow-raising statistics about the billions of dollars in development assistance transferred from global North to Africa alone, they begin to question the utility of aid, but few question first whether the statistics are right. The book highlights how official development assistance (ODA) statistics become misleading when the methodology by which ODA is determined allows donor countries to include indirect costs incurred within their nation to develop awareness. To apply this to a practical example: is Save Darfur giving aid effectively and efficiently to Darfur by building awareness in the United States? Would the grassroots Sudanese human rights activist working with limited budget in Darfur feel comfortable with millions of dollars being allocated annually toward informing a foreign audience over directly assisting Darfurians with basic needs and military support (which is also called into question). As aptly noted in Ending Aid Dependence, the current practices regarding aid fail to hold economically empowered nations accountable to internationally accepted benchmarks, nor do development practitioners call into question the outflows from aid dependent nation to the donor nation, which in some cases outweigh the inflows.

As Ending Aid Dependence makes plain the complexity of aid by classifying contributions according to the underlying intentions of the donor, Tandon brings to light the prevailing problems of "red aid" - aid allocated in order to encourage a specific ideological framework within a government or to perpetuate imperial influence – and "orange aid," which comes with leashes aimed in large part to empower donor countries in entering recipient markets with leverage. He continues by imploring readers to examine "yellow aid" or military aid (e.g., AFRICOM and covert operations in Somalia and Uganda) carefully for its dual-potentiality to prolong or prevent independent developmental progress.

Ending Aid Dependence offers country-specific examples on the effects of aid to national development trajectories in countries like Zimbabwe, which suffered terribly after initiating the first structural adjustment loan (red aid) through the IMF that facilitated the pivotal devaluation of Zimbabwean currency and disarming of importation regulation. Through the case studies, a pattern of economic sabotage via aid reappears across terrains in Africa, Asia, and Central/South America, which in the 21st century is old news represented necessarily as a reminder that tactics have already been used to abuse the global South.

What makes Ending Aid Dependence a particularly useful contribution is that it presents a possible framework for success - a "Seven Steps to Heaven" exit strategy. Beginning with removing the mental enslavement that holds so many of us dependent psychologically on foreign aid, the journey to independence entails a process of restructuring budgets to prioritize domestic market need and develop domestic savings that can lead to ultimately limiting aid to national democratic policies.

The author specifically notes that the anti-Apartheid liberation movement originally drafted a reconstruction plan, “Restoration Development Programme,” that was changed in 1994 with World Bank / IMF support into GEAR, the economic development platform that has set South Africa on the presently continuing trend of foreign capital-based development, leaving many of its people disenfranchised. He aptly notes that while the donor-oriented development analysts criticize development programs like that in Cuba, their strategy places them high within the UNDP Human Development Index.

Ending Aid Dependence is recommended for all political leaders in the global South from local to national posts and particularly for newly independent nations seeking alternatives to colonial domination. I personally recommend it to Wyclef Jean and others considering a swift transition into international affairs in nation states with limited leverage against the imperial machine. As it incorporates positions along the spectrum of thought regarding aid, it is similarly suitable for secondary and university level discussions.

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Yash Tandon writes about falling into demagogy or the "leftist" utopian ideas… Long from condemning all types of outside aid and using all the necessary nuances, he proposes, for seeing more clearly in the industry of aid, a classification of aid following five colors (as a glimpse at the classifications of subventions, authorized or not, by the WTO).

Finally, Yash Tandon dedicates an entire chapter to a realistic and feasible strategy for putting an end to aid dependence in seven steps, pointed out in proper order, the most important of which consisting of radical changes in the mentalities (of the South and North) and the revitalization of the national project (a term wrongfully tarnished in our days).

In sum, a practical book, written simply, without stonewalling, which has the advantage of proposing concrete solutions to escaping from bad development, and running completely against pseudo technical and cosmetic measures adopted by the signatories of the Paris Declaration on the efficiency of aid (which increases dependence). A book that should make its mark.

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Both authors eloquently illustrate how aid has failed to deliver the promise of economic growth and poverty alleviation in Africa. Moyo's caustic attack is greater than Tandon’s. She forcefully argues that not only has aid often been stolen by corrupt governments, it has often been unproductive; it has led to indebtedness and as President Paul Kagame of Rwanda poignantly states, since 1970, much of the US$300 billion allocated to Africa was spent on creating and sustaining client regimes of one type or another, with minimal regard to developmental outcomes on the continent (p. 27). Moyo claims that aid 'is the silent killer of growth’ (p. 48). In chapter four she gives a cogent critique of the damaging effects of aid in that it reduces savings and investment as a result of the 'crowding-out effect’ of aid; it discourages private finance capital; causes inflation; stifles the export sector and inculcates an aid dependent psychology in African people (pp.61-66).

On the other hand, Tandon’s 'aid taxonomy’ is a far greater analytical breakdown of the five different types of aid, compared to Moyo’s simplistic three forms (humanitarian or emergency aid, charity aid and bilateral/multilateral forms of aid). Using a colour classification Tandon identifies purple aid as based on the principle of solidarity; green/blue aid encompasses humanitarian aid and transfer of technical assistance; yellow aid is given on the principle of geo-strategic and security interests; orange aid are concessionary grants given for commercial gain – and in Tandon’s opinion should not be considered as aid – and lastly red aid is given on the basis of ideological principle to influence countries to implement the policies of the Washington Consensus (pp. 18-22). Tandon contends that it is this latter aid that permeates and dominates the kinds of aid given by the DCD-DAC.

Central to both books are their strategies for extricating African countries from their addiction to aid and setting them on paths of economic development. Moyo argues that ‘the cornerstone of development is an economically responsible and accountable government’ (p. 57). Yet Moyo fails to define what she means by development. However, implicit in her overall arguments and vision is a model of development that imitates the West. In contrast, central to Tandon’s arguments is that one must be clear on clarifying what development means for the discourse on development has been considerably enmeshed in ‘conceptual traps’ (p. 128) that engender false questions and false solutions.

For Tandon, development is essentially ‘self-defined; it cannot be defined by outsiders’ and ‘is a process of self-empowerment’ (p. 12). For Tandon development is a process that needs to be in the hands of Africans rather than imposed and directed by policy makers in the North. Therefore, in his seven steps to ending aid dependence the first and major step of ‘adjusting the mindset’ places the emphasis not only on African leaders, development experts and officials but African people to make this psychological shift. Such a change in mentality, which is essentially ‘an act of political will’ (p.77), cannot be achieved immediately. The subsequent steps are: ‘budgeting for the poor and not the donors’, followed by ‘putting employment and decent wages upfront.’

Step four involves ‘creating the domestic market and owning domestic resources’ such as water, land and all natural resources. ‘Plugging the resource gap’ is step five and step six involves ‘creating institutions for investing national savings.’ Whilst Moyo recognises national savings as important, she focuses on the role of the private sector in doing this, whilst Tandon focuses on the state and the community sector, which have been relatively neglected in the literature.

The last step in Tandon’s proposals involves ‘limiting aid to democratic priorities’. He contends that ‘before we decide what role aid plays in the development process, we have to understand what development means and what constitutes aid.’ (p.78) Like Moyo Tandon sees a positive yet very limited role for certain kinds of aid.

Moyo’s exit strategy is clearly wedded to the neoliberal paradigm reflected in the title of chapter 6: ‘A Capital Solution.’ For her, African countries need to issue bonds, increase trade with the Chinese and other partners such as India, Russia and Turkey; engage in greater micro-financing, and increase domestic savings. Whilst Tandon is of the view that ‘the role of foreign investment should be treated just as carefully as aid’ (p. 79) Moyo sees it as a critical plank in her proposals for Africa. She considers wooing potential investors is fundamental and though she accepts that ‘in order for borrowers (countries or companies) to access bond investors, they need a credit rating,’ (p. 83) such a hurdle is often determined by the same ‘white blue-eyed bankers’ that President Lula of Brazil characterised as causing the current financial implosion of the West. Moyo appears to accept the dictum that he who pays the piper calls the tune.

It appears Tandon’s emphasis is on Africa seeking to forge new ways to engage and simultaneously change the global economy with an agenda focused on the ‘national project’ and with greater South to South cooperation. Moyo’s prescriptions seek to integrate Africa into a system that is weighted against Africa’s interests. To illustrate this, Moyo argues: ‘But, most of all, acquiring credit ratings and experience in the capital markets is the passport for Africa’s participation in the broader world architecture. It is incumbent on African governments to play ball.’ (p.88)

Perhaps the Achilles heel of Moyo’s thesis is that her exit strategy from aid dependency for Africa may be unlikely or very difficult in the current global economic recession. For in the present economic crisis in which capitalism is being discredited, it raises questions as to what kind of economic system is desirable to provide the maximum benefit to the majority of African people?

Another weakness and disturbing observation is that Moyo is cited in the Foreword by Niall Ferguson, as calling for ‘a decisive benevolent dictator to push through the reforms required to get the economy moving.’(p. xi) It is necessary to ask, has Africa not had too many ‘benevolent dictators’ since independence, who have promised economic betterment when in reality standards of living have worsened catastrophically for Africa’s poor?

Furthermore, whilst Moyo hails the Chinese as Africa’s new friends, she fails to examine the example of the pink revolution that has recently swept Latin America by leaders such as Evo Morales of Bolivia, Rafael Correa of Ecuador, and Hugo Chavez of Venezuela. The rejection of the neoliberal paradigm in this corner of the globe has practical relevance for Africa where similarities of a colonial past and continued economic exploitation remain. There is also greater scope for not only trade but equally an ideological vision of ways in which wealth can be redistributed more fairly which can be learned by African countries from these pink countries.

Moyo’s peripheralising of African people is demonstrated in the following point she makes:

‘Ordinary people across Africa, the millions who bear the brunt of the economic catastrophe, have an incentive to change the aid regime of course. They would, if they could – who wouldn’t? But they eke out their existence under a veiled (and often not so veiled) threat of intimidation, punishment and even death. In order to overturn the state of aid-dependency, Africans need the gritty defiance of the unknown man who stood against the Chinese tanks in Tiananmen Square in June 1989. But such a rebellion carried enormous risk, and when pitted against the omnipotent state, more likely than not, will fail. This leaves it to Western citizens. They have power, and could hold the key to reform. It was, after all, thanks to the 60,000 ordinary Americans who wrote to the US Congress laying out their desire for freer trade access for African countries that the AGOA was born. It is this type of activism that is needed to help jump-start Africa’s development agenda, and set it on the right track.’ (p. 149).

There is certainly a role for Western citizens to play in holding their governments, banks and multi-national companies accountable for the unfair trading rules of an unjust economic system that also includes the WTO. Such Western citizens must also encourage the loot that resides in Western bank accounts as a result of African dictators safeguarding money that belongs to African people, to be returned to the African majority.

Yet, to argue that challenging aid-dependency lies with Western citizens to ‘jump-start Africa’s development’ is to make African people passive subjects in a process of economic transformation that African people should ultimately be in control of. In addition, Africa has many unknown men and women who have stood against the crushing forces of the state, in a similar way to the unknown Chinese man. The deaths of hundreds of Ethiopians in 2005, Kenyans in 2006 and Zimbabweans in 2008 are testimony to African people’s active desire for reform of their societies.

Moyo claims to outline ‘another way for Africa’ yet her proposals will continue to perpetuate the neo-colonial system many African countries continue to be entrapped by. The challenge for any African leadership with the political will and courage to embrace Tandon’s seven steps is to do so within a Pan-Africanist vision and in collaboration with other African countries within a medium to long-term timescale.

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The structure of the present global system means that many experts in poor countries, trained at great expense, leave for the rich countries in a "brain drain' because their home nations cannot employ them. In the "aid' industry rich countries send their unemployed and unemployable "experts' to poor countries to show them how to become "modern' and "civilised'. "Aid' may also be a form of dumping in which goods are exported below cost to undermine local industries.

In political terms "aid' is tied to certain "conditionalities' as defined by the IMF, World Bank and other agencies controlled by the USA and Western Europe. In the Cold War period receivers of western "aid' could not have relations with countries from the socialist bloc: now they have lists of undesirable countries such as Cuba, Iran, North Korea and in Bush's "axis of evil'. As part of the "aid' package, the Fund and Bank send "experts' to the Ministry of Finance and the Central Bank to ensure that policies favourable to the dominant powers are implemented.

By coincidence, these are the former colonial powers such as England and France and the "victor' of the Cold War, the United States of America. Leaders of the poor countries forget the independence struggles of their countries in which many took the extreme resort of wars of national liberation, and cannot see that "aid' now performs the same functions once achieved by tanks, aircraft and machine guns.

Ending Aid Dependence by Yash Tandon takes a critical look at the "aid' industry with a view of freeing poor countries from addiction to it. Although Tandon is from the left, the recognition of the ideological nature of the concept is not a left-wing position.

When asked by a supporter why America was wasting its "aid' on poor countries which did not support his country, the very right-wing Nixon explained that "aid' was not for the benefit of the poor but for a very rich America which used it to keep the poor in line.

Tandon starts by defining "aid' so it could be analysed in a scientific manner. He follows this with a classification of different forms of "aid' so that scholars and policymakers could determine which "aid' was beneficial and which was harmful. While snow shoes and overcoats were of no use in tropical countries in crisis, food aid for starving people was okay as long as it did not undermine local food production as surplus grain and meat - from western subsidised production - did in many African and Caribbean countries.

"Aid' which was tied to advice was pernicious. Whenever poor countries experienced financial crises, the IMF and World Bank offered "assistance' on condition that they raised interest rates, devalued their currencies and deregulated their financial systems. The result was increased poverty and the purchase of their companies by western corporations at giveaway prices. Under no circumstances should governments assist their companies to stay afloat.

In the current "financial crunch' in the west, the advice is the exact opposite: the dollar has risen against most other currencies, interest rates have been dramatically reduced, and trillions have been given to prop up banks, mortgage and insurance companies. Regulation has been increased and the nationalisation prohibited in the poor countries resorted to with a vengeance. China and India which resisted western advice because they did not need "aid' emerged relatively strong compared to the USA and Europe.

Countries in Africa and the Caribbean which have gone backwards because of addiction to "aid' should consider the harm the users of heroin and cocaine experience because of their "need'.

To wean themselves of their "need', drugs addicts must cut themselves off and build up their mental and physical resistance. For Tandon the cure for "aid" is the cultivation of reliance on the people, democratic politics which is of the people, by the people, and for the people. Leaders of poor countries who tell their people to accept subsistence wages to attract "investments', need to ask these people if such "investments' are worthwhile.

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Aid is a decidedly suspicious word. It implies that whatever comes under such a name is inherently helpful, and that problems can only arise in situations in which there is not enough of it to go around.

Rich countries have long encouraged this kind of assumption. Discussions about how much they should give to their less fortunate counterparts are incredibly popular, and hardly a summit goes by without promises of more aid. But it is largely bluster. Forty years ago, the Organisation for Economic Cooperation and Development and its member states undertook to earmark at least 0.7% of their Gross National Income. They haven't done it yet, and an awful lot of time and energy is wasted in reminding them of their pledge and working out how far they still have to go. People are thereby distracted from questioning both the choice of this arbitrary figure and the content of what is supposed to be development assistance.

Excuses abound for this seeming inability to deliver. Questions are often met by expressions of concern over the ability of developing countries to use any extra finance, worries about corruption, fears that additional money will place too great a strain on bureaucracies, and talk of developing countries having institutions plagued by inefficiency and wastage.

The High Level Forum on Aid Effectiveness is designed to address such hesitations. Donors and recipients are now contemplating ways of ensuring that funds set aside for development actually end up reducing poverty. Buzzwords are everywhere. Ownership, alignment, results-oriented management, mutual accountability and harmonisation are the key principles said to be the answer. They have been subject to discussion before, and still more assurances of progress were elicited at the time. Ghana is hosting the third of a series, following a similar assembly in Italy in February 2003 and another gathering in France in March 2005. Participants will once again evaluate how little they have managed to achieve since their last discussion and solemnly vow to improve matters within another couple of years.

An interesting book to be launched this week suggests that the whole process is merely a tactic to assist in maintaining the supremacy of rich nations. The South Centre, an inter-governmental organisation of developing countries, puts forward this idea in a volume by its Executive Director, Yash Tandon, entitled 'Ending aid dependence'. It argues that what is really needed is a strategy for giving up on aid.

Mindset is apparently the principal barrier. Governments and public opinion in their respective constituencies often believe that they simply cannot manage without development assistance.

The South Centre proposes a fresh approach that starts from a new definition of what constitutes aid. The Organisation for Economic Cooperation and Development and its member states currently decide for themselves what is meant by the term. Aid therefore now encompasses any money from official sources given on a concessional or even slightly less than market basis to developing nations.

It is important to be clear about what is on offer. Rich countries provide a good deal of funds that have to be used on products and services from their own corporations, which often ends up being more expensive for recipients than commercial borrowing. Donors also count money spent on refugees and funds given to non-governmental organisations for educational work on relevant topics at home as part of their development assistance. Administration costs are included too. Debt relief on loans made to illegitimate regimes is another example of aid that isn't really useful. Rich nations also direct considerable amounts of money to trying to persuade recipients to change their policies on everything from governance of the financial sector to university curricula and staffing policies, and ideology doesn’t often transfer into results in eradicating poverty. Technical assistance makes up almost half of all flows from donors, and payments to expensive consultants for advice of dubious quality on subjects of questionable utility are rife in the aid industry.

The South Centre wisely discounts all of this out of hand. It is the first stage in understanding that there are other ways of moving forward.

Developing countries must then accept that there is still work to be done on their national projects. Political independence from colonial powers was only the initial step, and further struggle is also needed to get out of the resulting asymmetrical economic, power and knowledge relationships.

The South Centre points out that there are other ways of closing the resource gap between income and expenditure. Aid is not the most important financing stream to developing countries. Remittances play a big role in many places. It is also well known that considerably greater sums of money flow back the other way in illegal private transfers, in profits from multinational companies and in legal theft of various other kinds. Leaks should be plugged before turning to aid. Budgets are often drawn up while craving plenty of things other than what is necessary for development. Plans have to focus on creating decent employment and promoting the domestic market before anything else. The South Centre elaborates on these issues to set out a number of actions to be taken in a process of weaning a country off aid.

Rich nations will undoubtedly be worried by this prospect. Brazil has recently escaped from the aid system, having adopted strongly nationally-oriented policies in the trade, investment and monetary areas. India and China never became addicted in the first place, and they made sure that their agricultural and manufacturing sectors were in a position to compete before exposing them to the international market. Look at where these states are now.

It obviously isn’t that easy. India, China and Brazil all have large populations to depend upon, so their use of specific policy measures cannot necessarily be replicated elsewhere. But other countries who are taking slightly different routes are on the verge of success too.

The High Level Forum on Aid Effectiveness is about finding a way of keeping developing countries hooked on the aid drug and therefore also under the spell of rich nations for as long as possible. Imperial projects haven’t been forgotten yet either.

Buzzwords might sound hollow, but they do have meanings as well. Harmonisation is about donors coming together to jointly support budgets rather than each funding a selection of individual projects, which only increases their collective power. Mutual accountability is a cunning way of adding to demands on recipients, for sanctions never affect the other side. Results-oriented management sounds like an administrative detail, and indeed it is hard to know what might ensue. Alignment is supposed to imply using the existing systems of organisation, procurement and so on, but it can just as easily give donors an excuse to insist that these are changed to meet their particular standards. Ownership is the gloss that is applied to make everything seem alright, as donors pretend that none of it was their idea.

Poverty doesn’t seem to come into the equation. The answer to the riddle being discussed this week starts to look a bit clearer when one remembers that all of the money spent on the conference is likely to come from budgets for development assistance. Maybe it will help in convincing a few people that their nation had better start planning a future without aid.

4. Creating a domestic market and owning domestic resources;

5. Plugging the resource gap;

6. Creating institutions for investing national savings; and

7. Limiting aid to national democratic priorities.

One of the shortcomings in Tandon’s book is that it does not show how countries such as Malaysia, Singapore and Brazil weaned themselves off aid or what policies or strategies they employed to dramatically boost living standards and reduce poverty levels.

In many of these countries, committed leadership made all the difference, not democratic institutions. Often, it is not "people-centred democracy" that delivers high per capita incomes and reduced poverty levels, but visionary dictatorship as the Singaporeans and Chinese will attest.

The vision should ensure that economic growth does not increase levels of inequality (which can be politically and socially destabilising and which can adversely impact growth in the long term).

The vision must also focus on developing people’s skills and strengthening institutions that enhance productivity.

In addition, it should focus on eliminating corruption in order to gain citizens’ trust. Without these, it is unlikely that governments will be in a position to say no to aid.

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Tandon argues that "Developing countries reliant on aid want to escape from this dependence, and yet they appear unable to do so. This book shows how the developing countries can liberate themselves from the aid that pretends to be developmental but is not. Exiting aid dependence should be at the top of the political agenda of all countries." Tandon plans to launch his book at a side event at the High Level Forum in Accra which seems somehow a bit late given that one of his recommendations is that of the South beware against endorsing the Accra Action Agenda (AAA) offered by the OECD which he says “if adopted, it would subject the recipients to a discipline of collective control by the donors right down to the village level.”

Jonathan Glennie's new book “The Trouble with Aid” also calls on poor countries to reduce aid dependency. Less damning about the effects of aid than Tandon, Glennie nonetheless is concerned that we are missing the real issues by investing so much energy into campaigns to “double aid to Africa”.

I am looking forwards to more more spare time after Accra to be able to read these two new books. And whilst I am adding to the Accra hangover, I may also try and read “Missionaries, mercenaries and misfits: an anthology” by Kenyan columnist Rasna Warah. Pambuzaka describes it as “an anthology that brings together some of the region's best and best-loved writers, whose individual essays enable a kaleidoscopic view of developmentalism in East Africa, its discontents, its hubris, its smugness, its ability to kill through often genuine and well-meant kindness.”

At least if donors refuse to agree to anything at all tangible in Accra, I can then at least make myself feel better by letting myself be convinced that it was never going to do any good anyway.

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Two visions of development emerge from this analysis. One is that of the donors. The other is that of poor countries of the South. The two are diametrically opposed to each other.

A number of case histories are described to illustrate the effect of conditionalities on the economies of the reciepient countries. The case of Zimbabwe is fascinating. Tandon, who was personally involved in the events, describes chronologically the role that aid and donors played in bringing the Zimbabwe economy to its knees.

Reciepient countries were forced to open their fragile economies to the full force of global competetion by donor conditionalities. As a result their fledgling industries were swept away. Their agriculture was destroyed.

Tandon proposes seven steps to ending aid dependence. Unless Africa comes off aid, she has no hope of achieving development. The present aid archicteture is an obstacle to Africa achieving economic independence.