The WRR report should have been more critical and political

Development Policy09 Jun 2010Bert Meertens

Bert Meertens responds to the background article “Getting the basics right” in the context of the online debate about Dutch development cooperation triggered by the report Less Pretension, More Ambition by the Dutch Scientific Council for Government Policy (WRR).

Bert Meertens is a freelance consultant

The WRR report states that different motives such as self interest and international solidarity behind development aid do not have to be a problem. It can even be an advantage when these differing motives create more political and public support for development aid. According to the WRR report such an enlightened self interest in donor countries will be a good basis for obtaining successes on global issues such as climate change and financial crises. This WRR view is stunningly naïve. As if there are no forces in our globalized world that keep self interest above international solidarity. I fully agree with Jan Pronk that the WRR report supplies a splendid analysis but is apolitical in its recommendations. The WRR report presents for example no concrete ideas how to improve coherence in national policies concerning development aid. Without any clear proposals on these crucial topics, changes will not come easily. A more critical and political standpoint by the WRR report would have been more appropriate as the following will show.

The flow of aid is dwarfed by global trade flows and was in 2009 almost equal to the bonuses dished out by US banks to their employees. Moreover EU protectionism deprives developing countries annually of nearly 5 times the total aid flow in export income. Fair trade rules would therefore have more financial impact on developing countries than aid. The trade rule negotiations taking place within WTO are meant to obtain fairer trade among all member states. However, the USA and EU, the chief custodians of the open global trading system, are increasingly becoming the main opponents of further trade liberalization. The US has backed out of several global agreements, and it is using bilateral free-trade agreements with developing countries to get around the restrictions that multilateral conventions impose on the freedom of action of American corporations. In Haïti for example the tariff on rice was cut from 35 percent to 3 percent under pressure from notably the IMF and the USA. Local rice production fell by 27 percent and rice imports increased by 30 times. Most rice imports are of subsidized USA rice. The EU on the other hand is engaged in concluding Economic Partnership Agreements (EPA’s) with their former colonies in Africa, the Carribean and the Pacific. These regional free trade agreements request ACP-countries to open 80 percent of their markets, which goes much further than what the WTO asks from developing countries. These agreements are presented by the EU as development chances for the ACP-countries but in fact the EU is going to benefit considerably more from the EPA’s.

Paying back their debt costs the developing countries about 4 times the total aid flow per annum. From developing Africa there is nowadays a reverse transfer of capital (new borrowing minus debt service on past loans). The social and economic cost of servicing Africa’s debt has been immense. Year on year greater proportions of shrinking national budgets were diverted to repaying Western creditors at the expense of welfare or productive investment. In 1999 creditor pressure forced the Zambian government to spend $14 million more in debt service than on its collapsing healthcare system as the AIDS pandemic reached new heights. To qualify for the Highly Indebted Poor Country (HIPC) scheme a country must successfully pass through three testing and time consuming stages before it is granted any debt relief. Each is policed by the IMF and the World Bank. On average, this HIPC scheme will only cut the Highly Indebted Poor Countries’ expenditure on debt servicing by a third. If the G8 were serious about writing off Africa’s debt they could do it at a stroke. There was, for example, no problem cancelling Iraq’s $120 billion debt when it suited their interests after the invasion in 2003.

Self-interest has almost always trumped altruism in how development aid money is spent. Its primary purpose is to serve the immediate and short-term security and national interests of the donors. From the early stages, it was evident that aid was to be a form of patronage serving the political and commercial interests of its donors. All manner of aid reforms have been proposed. But donors are as influential as ever. Development cooperation is in fact just an excuse for keeping the present economic power relations in place.

The WRR report failed to highlight that self-interest of donors stands often in the way of international solidarity. To get the basics right donors have to reduce their focus on self-interest and increase their international solidarity. The WRR report could have supplied us with some strategies to reform the aid business to obtain more international solidarity but unfortunately it restricted itself to promoting an enlightened self-interest among the donors.