Suas The Aid Industry

1. SuasThe Aid Industry Carol Healy, DERN Carol.healy@nuigalway.ie www.nuigalway.ie/dern

2. Synopsis • Definitions and Statistics • Current Aid Policy • Issues in Aid • Case Studies • Discussion

3. Definitions and Statistics • ODA – official development assistance • DAC: Development Assistance Committee • 1950s- 1970s: the objectives of aid evolved from a focus on industrialisation to a broader focus on poverty and welfare • 1980s: debt crises: aid strategies to induce economic reforms through policy conditionalities (SAPs) • In 2000, aid from DAC states was lower than at any time since the 1940s. • From 2001, huge increases in aid • Irish Aid aiming to achieve 0.7% GNP by 2012

4. Irish Aid • Irish aid spends: • 54% of its budget on social sectors (above the 30% DAC average) • 20% of its budget on health (DAC average 3.8%) • Emergency assistance has been increasing • Funding for local government and civil society organisations increasing: 2% in 1995 to 15% in 2005 (mostly on Irish-based NGOs: €1million in 1995 to 129million in 2005)

5. Aid Policy • Driven by the Monterrey Consensus 2002 • Paris Declaration in 2005

6. Reasons for aid • In pairs, think of as many reasons as possible as to why people/countries give aid • Guilt – a type of distributive justice • Self interest – military or political • Morality – Justice demands equitable resource distribution, obligatory for rich to help poor • Equality – to create equality among partners • Charity – the benevolence of the rich – Recipients do not receive as a right and donors do not give as a duty • Empathetic altruism – uses emotional and rational argument

7. Does aid work? • US $1 trillion of foreign aid has been spent since the 1950s • Low income countries that had been receiving aid for half a century are still experiencing deteriorating standards of living, poverty, conflict and poor economic growth • Aid has failed to improve economic growth rates of low-income countries. For the last 25 years, growth rates in Africa have been less than the nearly 3% annual increase in population • Between 1990 and 1998, the absolute number of people living in extreme poverty around the world only fell from 1,276 million to 1, 175 million and the proportion of people suffering from hunger is still at approx 826 million.

8. Does aid work? • Ethiopia: received more relief aid than any other country. • 9 million people still dependent on food aid in Ethiopia • 18 countries with a combined population of 460 million had a lower human development index (HDI) in 2005 than in 1990; (Reality of Aid 2006)

9. Issues in Aid • Tied aid • 40% of global aid is tied • Increases the cost of purchased items • Skews development priorities • Undermines the development of the local economy. EU: Italy, Austria and Spain give very high proportions of tied aid.

10. Issues in Aid • Technical Assistance • Constitutes 25% of global aid (consultants working in the country, training and research). Expat consultants more expensive than local ones

11. Issues in Aid • Poorly coordinated aid • Flag-wavers problem • Parallel Funds • Budget Support, Donor Harmonisation • Short term • Volatile Aid flows • Aid Dependency

12. Issues in Aid • Conditionality • Since 1990s, aid has been conditional on good governance and on countries carrying out market reforms • Harmonisation may lead donors to apply more conditionality as they align themselves to IMF and WB priorities

13. Issues in Aid • Aid not focused on Poverty Reduction • Macro-micro paradox • Military Spending • Accountability

14. Debate around concepts and definitions of Aid • ‘Real Aid’ – aid that is neither inflated, nor phantom aid and therefore makes a difference. Action Aid (2003): 39% of ODA is ‘real aid’. • Inflated aid: debt cancellation, foreign student costs, refugee spending in the donor country – do not directly reduce poverty in the South. • Phantom Aid: inflated aid + aid that reaches poor countries, but is of bad quality EG tied aid, technical assistance, poorly coordinated aid, aid that is heavily conditional, aid that is not focused on poverty reduction and military spending.

15. The Real Motives of Aid • Moral and humanitarian motives the ‘official’ reasons • Reality: political, strategic and welfare interests of donor countries are the driving force behind the aid programs

16. Political Motives • Aid from the US during the Cold War was based on considerations of national security and preventing the spread of communism • Collapse of SU – decline in US aid flows • Post 9/11 environment: Bush increases bilateral aid once again. • EU explicitly expresses its commitment to using aid to promote democracy

17. Economic Motives • Privileged access to resources and markets • Opportunities through Trade

18. Should aid flows be increased? • Oxfam: Conflicts in Africa since the end of the Cold War have cost the continent $US300 billion, equivalent to all the foreign aid it has received over the same period • Botswana, Indonesia, Bolivia and Uganda are some of the countries that have gone from crisis to rapid development over the last 50 years with the help of foreign aid. • Need for more aid : Achieving the MD of halving the proportion of people living in extreme poverty by 2015 is estimated to require a doubling of world aid at a minimum • Who are we asking – is aid working? Are we asking the givers and the takers of aid? Are we asking those who need the aid most?

19. Should aid flows be increased? • Need for “country ownership” of policies and strong domestic commitment to change • EU and Japan are the products of aid • Issue of aid quality and the way it was given • Aid is needed, but it should be structured to focus on infrastructure and on human capital

20. Should aid flows be increased? • Need for better accountability? • Aid is a catalyst towards a country get on its own feet • Aid alone is insufficient. Also need domestic and international investment, trade issues, more participation in the global arena • Africa is changing – forecasts of 6-7% growth in the coming years: is this because of aid? • Aid has a positive effect on growth but only when good policies are present in the recipient country. • WB “Low income countries with bad policies should receive ideas rather than money” • Criticisms: Shouldn’t focus on ‘good or bad’ policies, but instead on stability of aid flows

21. Case Studies • Scenario 1: The Ethics of Aid without Justice • Scenario 2: The Ethics of Humanitarian Disengagement • Scenario 3: Truth Telling versus Humanitarian Aid

22. Topics for debating • Local staff and international staff should be paid the same salary • There is no role for international staff in the South • Business and Trade, not aid is required for developing countries

23. Useful Websites • http://betteraid.org • www.eurodad.org • Reality of aid: www.realityofaid.org • www.oecd.org/dac • www.dochas.ie • www.irishaid.gov.ie