Neocolonialism & national interest: The politics & inequalities of Foreign Aid

6 May 2016

By Elizabeth Harrop for Live Encounters magazine May 2016 issue

Kondoko children Pibor cropped colourApril 2016 saw the biggest leak of private data in history: 11.5 million documents dubbed the Panama Papers, pointing the way to potential tax evasion by numerous political figures including 12 national leaders, one of whom has since resigned (Iceland’s prime minister Sigmundur Davíð Gunnlaugsson).

The global tax justice cause received a PR coup, at a time when pressure is mounting to make what is immoral, illegal: the avoidance of tax, to the detriment of States and their populations, and to the benefit of wealthy individuals.

The use of the UK’s crown dependencies and overseas territories (CDOTs) as tax havens have led economists to chart “an unrelenting, escalating transfer of wealth, enabled by the offshore system, often from the very poorest to the very richest nations” (Juliette Garside, Guardian)[i].

However this is just one example of how global financial flows are based on inequality and outdated paradigms in which the rich are seen to deserve ever more wealth – a wealth which automatically imbues them with prima facie moral superiority – while the poor are side-lined, marginalised and blamed for their own poverty.

Challenging the narrative of foreign aid

Analisa Furia in her book The Foreign Aid Regime: Gift-Giving, States and Global Dis/Order outlines two significant and convenient hypocrisies. Firstly, in developed countries domestic poverty is not framed as a matter of development, thus creating an arbitrary separation between types of poverty and the country which owns it. Secondly, there is a failure to frame the poverty of countries receiving aid in the context of international power relations, structural conditions and the detrimental role played by rich countries, thus obscuring the roots of and influences on poverty in developing nations.

This segregation between donor and donee, is exemplified by the now ubiquitous fortified humanitarian aid compound, which “merges into and reproduces the global trend toward social segregation and defensive urban living” (Mark Duffield)[ii]. Duffield urges that in considering these militarised structures “it is legitimate to ask what sort of impression they make on the public and, not least, those aid beneficiaries that agencies claim to empower and better. In their appearance and intent, these buildings are the very opposite of empowering; they are intimidating structures designed to keep the public out”.

Furthermore, through the use of such structures, the physical location where international aid meets underdevelopment is “marked as dangerous” reinforcing the notion of them and us.

This narrative, of the generous but at-risk benefactor West, and a developing South which is lucky to have the West’s money and (expensive) expertise, through humanitarian and development assistance, needs continually challenging.

However the industry itself is unlikely to take on that role. As Duffield explains: “For many, the dangers facing aid workers stem from the politicisation of aid. A root solution would be the disentanglement and distancing of aid agencies from the ideology, practice and aims of liberal interventionism, the public rejection of state funding and the promotion of independent action. It would also involve talking back to Western foreign policy. For an embedded aid industry, this is an impossible political choice”.[iii]

Tax evasion preventing development

Boys in AmharaIn terms of the West as philanthropist, is it really so generous? Perhaps not when you consider that the figures associated with tax evasion are similar to donations made in the Foreign Aid sector.

Net official development assistance (ODA) from the 29 members of the Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee (DAC) stood at $131.6 billion in 2015[iv]. However according to the United Nations Conference on Trade and Development (UNCTAD) [v], there are “an estimated $100 billion of annual tax revenue losses for developing countries” due to foreign investment channelled through offshore hubs. Indeed ActionAid claims that 98 of 100 of the UK’s biggest companies use tax havens[vi].

The link between tax avoidance and development is obvious according to UNCTAD: “Profit shifting out of developing countries can have a significant negative impact on their prospects for sustainable development”.

Agendas in aid

Meanwhile, back to the question of aid. Overseas interventions have long be dogged by accusations of self-interested political meddling under the guise of do-gooding, typified in 2003 when journalist Robert Fisk famously said of the unfolding Iraq war “Don’t tell me America would have invaded Iraq if its chief export was beetroot”[vii].

In 1997, the Economist profiled neo-colonialism in Mozambique, noting that “One, largely unmentioned, reason why Mozambique is getting plenty of foreign aid is that much of the country is not run by Mozambicans … aid now constitutes around 60% of Mozambique’s budget… and some 160 foreign aid agencies operate in the country”[viii].

The situation for Mozambique got worse before it got better. In 2000 aid was 74% of total government expenditure[ix], falling to 25% in 2016[x].

Echoing Duffield, the Overseas Development Institute (ODI) reported in 2001 on how humanitarian action was becoming increasingly tied to political objectives. This changing role of humanitarian aid became characterised by “the forced repatriation of refugees, attempts at conflict resolution in conjunction with humanitarian aid, and the withholding of aid to meet political objectives”[xi]. Just such a scenario was played out in South Sudan last year, with threats by the USA of UN sanctions unless the August 2015 peace deal was signed.

The main point is there are different kinds of aid which have markedly different results. “Real Aid” in a nutshell, is the teaching someone to fish versus giving them fish handouts cliché. ActionAid defines Real Aid as “The kind of aid that helps support dramatic decreases in aid dependence … aid which empowers poor women and men to realise their rights, and reduces inequality. It might do this directly, by supporting smallholder farmers, empowering women or building schools. Or it might do it indirectly, by supporting tax systems, better governance or economic development.” And it is worth noting here that supporting tax systems also means reforming the global tax system which keeps poor countries poor.

Real Aid is accountable, transparent, maximises impact and supports developing countries to make their own decisions. ActionAid chimes a warning: “Substandard aid does not do this – and there’s still a lot of it out there.”

Lack of transparency

Illustrating once more with Mozambique, it is hard to make an assessment of whether aid is effective when a vast proportion of aid does not use government budgetary execution, reporting, procurement, or audit procedures. A report on aid and budget transparency in Mozambique[xii] concluded “this makes it all but impossible for the government, parliament or civil society to monitor clearly how this money is being spent. The United States was the largest donor to Mozambique in 2009 but not one dollar of this money was channelled through Mozambican systems”.

The report also found that the African Development Bank, the World Bank and Portugal also bypass national systems in Mozambique.

The UK’s Department for International Development (DFID) states that “UK aid is spent where it is most needed”[xiii], the presumption being this is where people are the poorest, most marginalised, their human rights most violated.

However, a recent project by students from Bath Spa University claimed that “overall all evidence suggests that the UK government participates in biased aid more than fair practice”. The students noted that in 2013, the least developed country in the world, Niger (last out of 186 countries in the Human Development Index 2013[xiv]), received nothing in bilateral aid[xv].

Meanwhile the Republic of Korea (South Korea), had a higher ranking in the 2013 HDI than the UK (the Republic of Korea was ranked 12th, the UK ranked 26th) and is itself a DAC donor, but received £1.3 million from DFID[xvi]. The student’s report noted: “With the Republic of Korea making the single largest contribution to the UK goods export growth in 2012[xvii], it can lead to the questioning of the morals surrounding UK’s aid contribution”.

Robert Carter, one of the Bath Spa students, comments: “I agree that we should send money to ex-colonial countries, as we should be responsible for what we have done and the state we have left these countries in. On the other hand, I do question the true reason for giving aid. For example, is the money being sent to a country such as India, one of the biggest recipients of UK Aid, done to assist human development?

“I feel our government is more interested in the trade deals they get, from things such as defence and arm deals. This is not just seen with the UK but with countries such as the US, France and Germany. It seems to me that what the donor gets in return is more important than aiding human development and reducing poverty.”

Meanwhile corruption remains a concern for DFID. A 2014 report by the Independent Commission for Aid Impact (ICAI)[xviii] concluded that “DFID recognises corruption as a critical development challenge … (but) has not, however, developed an approach equal to the challenge, nor has it focussed its efforts on the poor. DFID’s willingness to engage in programming that explicitly tackles corruption generally is often constrained by political sensitivity in-country”.

A new narrative

However, DFID is not actually claiming to be unbiased in its aid spending. In its new aid strategy published in November 2015[xix], DFID pledges to tackle “the great global challenges of our age, in order to eliminate poverty and – crucially – also advance the UK’s national interest”.

Thereby DFID embraces the criticisms of New Humanitarianism, namely the convergence of humanitarian values with the politicised liberal security agenda, and the convergence of humanitarian and development programming.

However this new narrative (the UK government is not alone in reframing its aid policy) also involves significant private as well as political interests. According to the World Bank[xx], Public-private partnerships (PPPs) are now used in more than 134 developing countries, contributing 15–20 percent of total infrastructure investment. Nonetheless, the World Bank Group says expanded use of PPPs are needed to help overcome inadequate infrastructure which constrains economic growth.

To give an example from just one donor country, USAID has engaged in 1,600 PPPs worth $16.5 billion in the period 2000–2014[xxi].

However with the rising trend in PPPs, comes rising concern. In February 2016, more than 50 civil society organisations (CSOs) wrote to the World Bank Group to push for more financial transparency around PPPs, citing threats to social and environmental impacts, respect for human rights, and democratic accountability, and macroeconomic problems, including hidden public indebtedness[xxii].

A call to action

On 12 May 2016, the UK will convene a global anti-corruption summit[xxiii], to help transform how the international community tackles corruption. The government has also stated its commitment to invest more in tackling tax evasion and avoidance. However transparency in all global financial transactions, including PPPs and development aid, has to be part of that call to action.

Such timely initiatives are desperately needed to create a new narrative around aid and development in which governments in the developing and developed world, are all culpable partners. And in which transparency is the watchword.

Photos: © Elizabeth Harrop South Sudan and Ethiopia 2015

End notes
[i] A world of hidden wealth: why we are shining a light offshore 3 April 2016
[ii] Risk Management, Field Security and Urban Pathotholy: The Bunkering of the Aid Industry in Sudan, Mark Duffield, 2009
[iii] ibid
[iv] OECD Development aid rises again in 2015, spending on refugees doubles 13 April 2016
[v] UNCTAD World Investment Report 2015
[vi] ActionAid, Levelling Up: Ensuring a fairer share of corporate tax for developing countries July 2015
[vii] Robert Fisk, Oil, war and a growing sense of panic in the US 30 September 2003
[viii] Economist, Mozambique Neo-colonialism 9 October 1997
[ix] ActionAid Real Aid: Ending Aid Dependency 2011
[x] Mozambique’s Budget 2016 Sees Reduced Dependence On Foreign Aid 10 December 2015
[xi] Humanitarian Policy Group at the Overseas Development Institute, Politics and Humanitarian Aid: Debates, Dilemmas and Dissension 2001
[xii] The Informal Governance Group and Alliance, Aid and Budget Transparency in Mozambique 2015
[xiii] Media reports on UK aid projects: setting the record straight 9 April 2016
[xiv] HDI 2013
[xv] Additional tables: Statistics on International Development 2015
[xvi] Ibid
[xvii] South Korea state visit delivers UK trade boost 6 November 2013
[xviii] Approach to Anti-Corruption and its Impact on the Poor 2014
[xix] UK aid: tackling global challenges in the national interest 2015
[xx] World Bank Group Support to Public-Private Partnerships: Lessons from Experience in Client Countries, FY02–12
[xxi] Brookings Global Economy & Development Working Paper 94 February 2016
[xxii] Eurodad(the European Network on Debt and Development) Comments on World Bank’s “A Framework for Disclosure in Public-Private Partnerships” February 2016
[xxiii] Anti-Corruption Summit 2016

Liberty & Humanity

With thanks to Bath Spa University students for inspiring this article at a recent conference:

Elinor Burgess; Robert Carter; Stephen Dunning; Lawrence Evry; Laura Talbot.

Bath Spa Global Development & Sustainability BSc (Hons).