Dutch development policy lacks an alternative economic vision
Dutch Minister for Foreign Trade and Development Cooperation Lilianne Ploumen’s new white paper, published at the beginning of April, arouses at best mixed feelings. On first reading, ‘What the world deserves: A new agenda for aid, trade and investment’ leaves a positive impression. It contains all the right concepts and terms: sustainability, policy coherence, corporate social responsibility, inclusive growth, international public goods, etc., etc. Another hopeful sign is that the paper also presents clear criteria for corporate social responsibility, which could lead to binding standards for Dutch and foreign businesses, including multinationals and the small and medium-sized enterprises (SMEs) that may be subsidized through the Dutch Good Growth Fund to the tune of 3 x €250 million.
The intention to adopt a regional rather than a national approach in respect of some developing countries is also a step in the right direction. The regional dimension of development and also of security in, for example, the Great Lakes region and the Horn of Africa, not to mention the Sahel, West Africa, Central America or Afghanistan and Pakistan, is often neglected in policy analyses, which are consequently far from adequate. And although the paper does not offer a very clearly defined security policy, it does devote specific attention to the protection of citizens during peace operations and to conflict prevention. That strengthens the development dimension in any possible cooperation with the Ministry of Defence within the €250 million international security budget.
These are markers in Ploumen’s battle with cabinet colleagues who have their eyes on the development budget. The minister’s party, the social democratic PvdA, is part of a coalition government with the right-wing liberal party (VVD), headed by prime minister Mark Rutte. VVD ministers Henk Kamp (economic affairs) and Jeanine Hennis-Plasschaert (defence) want development funds to be used partly for activities falling under their mandate, Kamp for export subsidies for SMEs and Hennis-Plasschaert for overseas military operations. Ploumen’s message is clear: after the historical €1 billion in cutbacks on development cooperation that the VVD has already achieved, bringing the Netherlands far below the 0.7% threshold for development assistance for the first time in almost 40 years, the budget must not be contaminated any further.
The white paper also says that available information on dormant and escalating conflicts must be converted into concrete action in good time. That implies (though it is not stated explicitly) investment in better information and knowledge provision and greater attention to strategic policymaking. That would be a great leap forward in the currently fragmented and technocratic development policy.
So much for the positive aspects. Closer reading reveals a less optimistic picture. ‘What the world deserves’ reads like a hotchpotch of fine-sounding concepts, but their consequences have not been thought through. It reads as though each of the ministry’s departments have made their own separate contribution. On the one hand, these concepts show yet again that development cooperation operates in a parallel universe of ideal types: human development, human security, corporate social responsibility, etc. All very worthy goals, of course, which should most certainly be the starting point of policy, but which have become increasingly divorced from reality. On the other hand, they present a patchwork that reflects the fragmentation of the ministry. On one page, the paper talks about the need for a comprehensive approach and a broad approach to poverty, while elsewhere it returns to the Millennium Development Goals and their successors, based on an absolute poverty criterion of $1.25 a day.
The paper presents a picture of the latest in a long line of ministers in the grip of a ministerial apparatus with all its unassailable ‘mini-empires’. It is not so much a conspiracy or bad intentions on the part of specific individuals, but the internal dynamics of an inward-looking organization in which rivalry, egos, career ambitions, substantive and ideological differences, and personal hobby horses have created a bureaucratic jungle in which there is no scope, and none is created, for visions and strategic choices based on the bigger picture.
The ‘new agenda’ in effect continues and therefore perpetuates the policy pursued in recent years by the first government under prime minister Mark Rutte, which was a coalition of the VVD and the Christian democrat CDA with the parliamentary support of the right wing populist PVV led by Geert Wilders. This policy aims to give greater influence to the Dutch private sector, and the export sector in particular, and consequently focuses more directly on the Netherlands’ own economic interests. This may not be Ploumen’s intention, but it is nevertheless a logical consequence of the lack of a coherent alternative vision of the international financial and economic system and of how global cooperation should be remoulded on the basis of new relationships.
The policy outlined in the white paper is in many ways not at all new. The minister returns to the vocabulary of her predecessors Bert Koenders and Ben Knapen on ‘new actors’: we should think not only in terms of government-to-government relations or development organizations that carry out aid projects. There are now many more actors, including businesses, investment banks, charity organizations and wealthy foundations, while the NGO world has also become very diverse.
The paper reiterates the idea that we should make as much use of these actors as possible, but fails to say how or to ask whether all these actors have the same goals in mind. It is actually based on a very traditional technocratic idea of development that, if we all do our best, the poor countries will catch up with us. This ignores the political differences, conflicts of interest and global processes that are causing inequality, scarcity and international system crises to increase.
Ploumen also sticks with predecessor Ben Knapen’s thematic focus. That she chooses the same four themes – security and rule of law, food security, water, and sexual and reproductive health and rights (SRHR) – is in itself reasonable. As she rightly says, there is no need for each new minister to change things just for the sake of it, at the expense of continuity. The differences should lie in the substance of the themes, i.e. in the underlying vision, in how they are explained, and in their analysis of the problems facing us and their causes. In the white paper, however, that analysis goes no further than a number of familiar open doors. Superficial observations on emerging powers, ‘new’ actors, international public goods, growing scarcity and the 70% of the poor who now live in middle-income countries.
The choice of partner countries also continues in the same vein as under Koenders and Knapen. There are three categories: aid to fragile states, transitional ties with countries that are performing slightly better, and the promotion of trade and investment. The last category entails ‘activities that primarily contribute to the growth of our economy and employment. The focus lies on Australia, Belgium, Brazil, Canada, China, Colombia, France, Germany, the Gulf States, India, Iraq, Japan, Malaysia, Mexico, Nigeria, Poland, Romania, Russia, Singapore, South Africa, South Korea, Turkey, the UK, Ukraine, the US and Vietnam’. This final category has nothing to do with development cooperation, but focuses more on foreign trade, with the paper stating explicitly that policy is based on the Netherlands’ self-interest. This category is new under minister Ploumen and the fact that she refuses to establish clear budgetary demarcation lines increases the risk of further contamination of the development budget.
The discussion, including the responses to the white paper, has so far focused on the need to replace ‘traditional’ aid with ‘modern’ cooperation, giving priority to private sector development and economic progress in developing countries. The rhetoric that accompanies this argument – by distancing yourself from a fossilized and obsolete aid sector, you can present yourself as innovative – shows that the global economic crises are actually crying out for a genuinely innovative and progressive agenda for broad international policy, which addresses the structural causes of scarcity and crisis.
First, the argument that we need to jettison traditional aid. There is some truth in this. A few organizations still work on the basis of charity and project aid but are now exceptions, at least among NGOs funded by the Dutch Ministry of Foreign Affairs. The aversion to this form of aid expressed by the minister and other critics recalls the overblown words with which development minister Eveline Herfkens, in the late 1990s, denounced the ‘cans of white development workers’ – by that time also nearly extinct – that Dutch aid agencies would open up to help poor Africans. For Herfkens, these old ways had to be replaced by a focus on economic progress. Trade had to be made more just, for example by combating European agricultural subsidies and other international trade arrangements that were detrimental for African countries. As with other ministers before and after Herfkens, this ‘policy coherence for development’ has found its way back into minister Ploumen’s new agenda, though in a much vaguer form.
The white paper is reminiscent of the now much maligned Herfkens in other respects. Herfkens, too, wondered what had happened to the Third World movement that had been much more active in the 1980s. Ploumen refers to this as the ‘watchdog’ role that civil society should be playing. The call for a countervailing power is justified. And halving (!) the already severely reduced budgets for civil society organizations – under Knapen they were cutback by more than €100 million a year and by the end of Ploumen’s term of office, they will be cut by a further €230 million – may be exactly what they need to become genuinely critical again. They will no longer have to watch their words for fear of their grants being reduced if they oppose the government’s policy too vociferously. It is more likely, however, that it will be precisely those organizations that play a more political and critical role that will be hit the hardest, as they have fewer independent sources of income from, for example, a church-based network or another independent support base. You don’t attract donors with complex arguments about political conflicts and economic interests, but with pictures of poor people who need help.
In the rhetoric of the ministers white paper and its proponents, this much derided traditional aid is juxtaposed with modern, innovative cooperation: promoting economic activity and growth so that poor people and poor countries can develop themselves. The self-declared innovators speak of win-win situations, in which the Netherlands’ economic interests and those of developing countries coincide. Their argument goes as follows: traditional aid over-reacts to anything related to the private sector. All attention to economic development, trade and the active involvement of the business community is rejected by the aid sector, based on the ‘old’ idea that this only leads to ‘tied aid’. Critics of the ‘modern’ policy are accused of ‘old-left acrimony’, a term reminiscent of the way in which the governments of the early 1990s – also coalitions of the VVD and PvdA, together with the small central liberal party D66 – paved the way for their neoliberal economic policies: anyone who questioned the drive for privatization and global liberalization was accused of being ‘old fashioned’ and ‘traditional’. Back then, it was indeed very appealing to believe that rapidly advancing modernization, globalization and technological development, including the emerging internet, were goldmines that would bring prosperity for all. We know now that they were largely bubbles, offering instant riches based on speculation and rising debt. They were hardly grounded in growth of the real and productive economy, but only in the simultaneously encouraged deregulation of international financial traffic. The policy of export promotion now being proposed differs very little from the direction advocated in those years.
In short, the currently hyped debate between traditional aid and modern cooperation (itself an echo of the ‘modernization’ initiated around five years ago by minister Koenders) is a false one. There is no question that development cooperation should focus on offering poor people in the rest of the world economic opportunities, together with security, democratization, human rights and other, more political, opportunities. The question is how. That is what the debate should be about.
You would expect a new agenda from a Minister of Foreign Trade and Development Cooperation to present a vision of the global economy, and proposals for alternatives to current economic and financial relations, which have brought very serious recurring international crises. Now, more than ever, we need to explore new macroeconomic directions at international level that go beyond blind faith in the working of the market and the private sector.
The passages in the new agenda on international public goods also go little further than the usual platitudes. Recent discussions on, for example, growing inequality in the world and how it is connected to the economic model that has dominated over the past 30 years, seem to have passed the ministry by completely. It is these kinds of insights that can give substance to concepts like ‘sustainable and inclusive growth’. The section on a global development agenda and the post-2015 process (the successor to the MDGs) states that it is of great importance to set goals to combat poverty and inequality. But it does not elaborate further, and there is little evidence of the focus on inequality in the minister’s current strategy for post-2015. In practice, Ploumen’s main concern is gender inequality. This is of course very important but it has little to do with economic income inequality, at least directly. What is interesting is that the minister expresses her intention to work towards a living wage and a social protection floor, through the ILO’s ‘Decent Work Agenda’.
As for what inclusive growth entails and what is required to achieve it, we have to be content with a few snippets of sentences, such as ‘a better distribution of income and equal opportunities’. Although the downside of globalization is addressed briefly (increasing scarcity and vulnerability as a result of crises), there is great praise for the enormous benefits for low- and middle-income countries through their ‘further integration in production chains’. Within the negotiations at the World Trade Organization (WTO), the Netherlands wishes to promote trade facilitation (i.e. lowering the costs of trade by simplifying the rules) and knowledge for middle-income countries, and the setting up of a legal aid centre to assist poor countries with trade disputes, so that they are better able to stand up for themselves in international negotiations on trade rules. ‘In addition we want to make discussions on trade liberalization possible, naturally on the basis of a thorough analysis of the wishes of the business community in low- and middle-income countries.’ This sounds very much like a continuation of the free-trade agenda that has been advocated for developing countries for many years.
It may be useful to compare Ploumen’s new agenda with another white paper published on almost the same day in April, ‘Sharing for prosperity: Promoting democracy, fair distribution and growth in development policy’, by the Norwegian Minister of International Development Heikki Eidsvoll Holmås.. It then becomes painfully clear not only what is missing in the Dutch paper, but that it is perfectly possible to set out a distinct vision and policy.
With inequality between countries on the decline, the Norwegian white paper gives priority to inequality within countries. The term ‘inequality’ is hardly mentioned in the Dutch document, despite minister Ploumen announcing several months earlier that it would play an important role in her policy. On the contrary, she gives centre stage to traditional poverty reduction and calls for the post-2015 agenda to focus on ‘getting to zero’, i.e. eradicating poverty completely. Behind these apparently similar perspectives (‘less inequality’ or ‘less poverty’) there is a world of difference. Reducing poverty means in practice ensuring as many people as possible live on slightly more than a dollar a day, but it does nothing to address the increasing inequality within countries.
‘Sharing for prosperity’ also calls for a socioeconomic policy in which redistribution is part of economic policy. It opposes the dominant idea that there must first be growth before there is anything to redistribute, proclaiming that greater equality actually stimulates growth. In addition, the paper calls for an active policy to encourage productive investment and create jobs in developing countries, and to stimulate a social dialogue and collective negotiations between trade unions and employers. Ploumen’s new agenda is a stark contrast to this forceful alternative vision, calling repeatedly for inclusive growth, but without going into detail about what the concept means.
Half of the extra money that Norway is putting into its Risk Capital Fund for Developing Countries – which promotes investment and employment in developing countries – is destined for the sustainable energy sector. By contrast, it is not yet clear where the money from Ploumen’s ‘Good Growth Fund’ is to go, so the question remains open whether the 3 x €250 million will be allocated to export grants for Dutch SMEs or invested in Southern businesses. The government’s coalition agreement stated explicitly that the money is for SMEs and, although it seems logical that these development funds should be spent on small and medium-sized enterprises in developing countries, economic affairs minister Henk Kamp believes that they should go to Dutch SMEs.
The Norwegians also adopt a political approach. They are aiming to transform formal and informal power relations in the direction of democratization, respect for human rights, transparency and reducing inequality. ‘What the world deserves’, on the other hand, chooses a technocratic approach: it glosses over political differences and conflicting interests, despite the odd reference to ‘interests’ that might ‘conflict’, ‘for example, in relation to the speed with which markets are opened up, maintaining product standards, and sustainability requirements’.
Fair distribution and tackling global crises are at the centre of the Norwegian approach. They support measures to strengthen national tax systems (increasing government’s financial capacity and forcing them to be accountable to tax-paying citizens) and prevent tax flight, and to promote global taxes, for example a tax of 0.005% on currency transactions. Redistribution can also be achieved by direct transfers to weaker groups in society. Ploumen writes only that, together with State Secretary for Finance Frans Weekers, she aims to review the legislation on tax havens. This looks like a way to postpone the discussion, because she made similar remarks about taking the issue up with Weekers in January. Moreover, like her predecessor Ben Knapen, she endorses the idea of ‘international public goods’, but offers no concrete details of her policy in this area.
The biggest missed opportunity in minister Ploumen’s new agenda is therefore its lack of an underlying vision. At least, of a new vision of her own, a social democratic interpretation of development policy. There is now a perfect opportunity to do this, given that her colleague at the ministry, Minister for Foreign Affairs Frans Timmermans, is a fellow member of the PvdA, the Dutch Labour Party. The new agenda, however, hardly reflects the party’s resolution on foreign affairs, which both ministers helped to draw up.
With two social democrats running the ministry together, there is no need for the stalemate that has so often occurred in the past, caused by having ministers from different parties (e.g. social democrat Bert Koenders and Christian Democrat Maxime Verhagen). The message that emerges from the new agenda, however, is the complete opposite: the need for the coalition parties to reach a compromise within the cabinet has actually strengthened the existing paradigm and further institutionalized the policy of the first Rutte government, by merging foreign trade and development cooperation. Instead of instigating necessary financial and economic reforms, or at least aiming to do so, the new agenda serves us up an old and familiar story about integrating developing countries into the global market and promoting Dutch exports.