Western Aid at a Crossroads

The End of Paternalism

Øyvind Eggen, Kjell Roland

• Publisher: Palgrave Pivot
• Year: 2013
• Print ISBN: 9781137380319
• eBook ISBN: 9781137380326
• Topic: Social Sciences
• Subtopic: International Relations
• Index: Social Sciences

The new growth patterns and shifting wealth in the world economy fundamentally alter the basis for Western aid. This book demonstrates how Western development aid has been transformed over time, in particular in the 1990s, when the West enjoyed world hegemony. Western aid, once a helping hand to other countries' development strategies, has increasingly been seen as a tool for large-scale attempts to transform states, societies and minds according to Western models. The authors claim that this has made aid more complex and less useful to poor countries in their fight against poverty.Emerging economies, such as China, have demonstrated that other paths to growth and poverty alleviation are available. They are attractive partners in development, offering collaboration without paternalism. Most poor countries experience growth, and are able to finance development with homegrown resources or in collaboration with non-Western partners. Having other options, they may increasingly challenge and reject Western aid if it is accompanied with goals of transforming the recipients based on Western blueprints.The authors claim that aid has a role in the fight against poverty in the future, but only if Western donors are willing to adapt to the new world order, leave paternalism behind and rethink their role in development. Donors must change the way they relate to poor sovereign states, redefine the meaning of 'development', and reinvent aid to make it simpler and more manageable.

1

Introduction

Abstract: The chapter presents how the authors’ different experiences with research and consultancies have made them develop the view on Western aid presented in the book. One social anthropologist and one macroeconomist, they used to see each other as representing opposing views on development . Over time, they have found that they were both part of an aid apparatus that shares a view of development, where Western leadership is taken for granted.

Eggen, Øyvind, and Roland, Kjell. Western Aid at a Crossroads: The End of Paternalism. Basingstoke: Palgrave Macmillan, 2014. DOI: 10.1057/9781137380326.0004.

The days when the West could dictate development are over. In this book we claim that Western aid has changed over time until a point where it became less useful for poor countries in the fight against poverty. If aid is to become relevant to development in future, Western donors must radically reconfigure aid to fit better with the world order we see emerging today.

We came to those conclusions after having worked with aid and development over a long time from very different academic backgrounds and work experience: Kjell Roland, a macroeconomist, started his career promoting structural adjustment together with the World Bank. Øyvind Eggen, a social anthropologist, supported ‘bottom up’ development with grassroots organizations, often in opposition to the World Bank. According to a common dichotomy in Western development discourse, we represent opposite views on development, even contradictory definitions of the term.

However, having observed changes over time, we have developed a common understanding of Western aid in which the roles of the macroeconomist and the anthropologist merge. Aid, once primarily consisting of projects and programs to support soon-to-be or newly independent states in their own development, has gradually shifted into being a tool for attempts by Western states and non-state agencies to full-fledged, large-scale transformation of poor countries’ governments, institutions, policies, societies and cultures. Once focusing on concrete, achievable tasks to support growth or welfare, aid has over time become an experiment in social engineering of unprecedented magnitude.

Some of the most important events in this change happened in the period from the late 1980s to the late 1990s, when the debates about Washington-led structural adjustment and aid conditionality were tense. The disciplines of the two authors represented opposing views in that debate, as practically all macroeconomists and anthropologists lined up neatly at each pole. Later, Western ambitions to transform poor countries’ states and societies expanded way beyond the macroeconomic agenda of the 1980s. Macroeconomists and social anthropologists still disagree on development policies, in line with different schools of thought in the West. But in the latter phases of aid, the opponents in the conditionality debate joined forces as both eagerly took part in the attempt to transform poor countries. Both saw it as the main role of foreign expertise not only to solve specific problems, but also to be agents of change on behalf of a grand Western plan to transform poor countries in their own image. Economists did not only promote growth, but aimed at reforming government institutions, policies and societies according to rather dogmatic models based on ideals of Western states and societies of today. Many anthropologists, taking pride in a ‘bottom up’ approach, took part in something that was indeed ‘top down’ albeit still grassroots oriented, in its ambitions to transform local societies and individuals based on models imported from outside and introduced from above. Together they made an almost perfect match in a large-scale attempt to produce Western-style states and societies.

How we got here

To explain why we have come to believe that Western aid needs to be re-invented, and to illustrate some of our key arguments, we will share some of our own professional experiences. Kjell Roland started a consulting company with some colleagues in Oslo in 1986, after six years in a government research institution where he had focused on how the oil sector affected the Norwegian economy. At the centre of his work was the rapidly growing body of literature on renewable and non-renewable resources, in particular advanced economic theory on how to optimize extraction of oil resources in an inter-temporal space.

One of his first assignments in the new consulting company was a World Bank project, where the mission was to apply the theory of non-renewable resources to the Pacific island Kiribati. Kiribati is an island largely made up of bird residues, guano, exported as a valuable fertilizer. By extracting the guano, people literally dug out the ground under their feet and converted natural resources into consumption. The theory of how to optimally extract non-renewable resources made perfect sense for policy advice to the government.

At this first encounter with the World Bank, Roland was impressed by the way the Bank founded its policy and advice on economic theory. As one of the most important intellectual powerhouses of the world, the Bank managed to attract the attention of policymakers to economic theory in ways that Roland and his colleagues struggled to achieve in the Nordic countries that constituted the main market of the consulting company.

This was the heyday of structural adjustment and aid conditionality. For a Norwegian economist, it made a lot of sense. States all over Africa obviously needed to do away with corruption and malpractices, and apply prudent macroeconomic policies with sensible budget control. Because governments did not know, or at least did not do what was best for their countries, they had to be coerced by strict rules for how and when to disburse money. This would make more difference than the myriads of aid-funded micro interventions that often only made a difference as long as aid money was coming along, and seldom led to sustainable processes controlled by the people affected. With governments overstretched and lacking skills and capacity, it also made sense to limit governments to what governments are best at, and leave to the market what the market does best. Thus, Washington consensus at the time recommended to privatize anything that was not core government responsibility, liberalize trade and currencies, remove impediments to competition and getting the prices right.

Although primarily working in the Nordics, Roland made sure to have a few assignments for the World Bank and other development institutions every year. In early 1993, he was member of a World Bank mission asked to negotiate budget support with the government of Mozambique, four months after the peace accord. Arriving in Maputo, crowded by internally displaced people living in terrible conditions, he felt that Mozambique was really not an economy by any standard. It was rather a global soup station fuelled by emergency relief and foreign aid. He took part in a number of meetings with the very able Minister of Finance and his staff and became impressed by the practical and solution-oriented approach of the World Bank. The mission was there to make a difference. The approach was pragmatic and accepted the fact that Mozambique did not lend itself to dogmatic experiments or structural adjustment. There was hardly anything to adjust!

An International Monetary Fund (IMF) mission visited Maputo at the same time. To Roland’s surprise, the IMF approach was entirely different. The IMF team appeared dogmatic and totally unhelpful to the country. Their starting point was Milton Friedman’s monetary ideas. In a place where everything was desperately needed and the economy had to be kick-started, they applied the same medicine as in countries with a well-functioning economy, concerned about the expansion of monetary supply and inflation. The IMF stood in stark contrast to the World Bank team that saw as its tasks to find best possible ways to help the government get back on track and fuel economic growth. In the coming decade, however, the Bank and the IMF developed more of a common platform for policy advice.

In the early 1990s, Roland was involved in restructuring the Nordic electricity sector as well as a number of aid projects to the electricity sector in many developing countries. One of his early experiences was a study of the electricity sector in Laos. The national electricity utility EdL was far from perfect, but still it turned out to be one of the best-run entities in the country. Financial aid and advice from Western engineers explained much of this success. The message to take home from Laos was that aid works.

However, Norway’s and the World Bank’s aid to the electricity sector gradually changed. Rather than being practical and engineer-driven, it turned out to be a testing ground for Western style restructuring of the sector: unbundling utilities, setting up regulators and preparing for competition in power generation. Few really asked whether this was the right medicine in countries where the electricity sector was at a similar stage as the Nordics in the 1920s.

Building power stations was now seen as and old-fashioned aid strategy, something that should rather be left to the market. Donors should instead assist the development of – or, rather, themselves write up – laws and policies, help countries set up new regulatory bodies, and build capacity with civil servants. Donors did not even limit themselves to that one sector. The trend of the time was to integrate all development policy interests, such as social and environmental concerns, in each intervention.

Environment and social issues must of course be considered, and there were good reasons to distrust many governments’ willingness to balance industrial interests against those concerns. However, the solution – that the donors took responsibility of balancing and integrating all policy interests – was problematic. The balance between different interests is in essence a result of political trade-offs, and not a technical challenge. When aid bureaucrats and Western non-government organizations (NGOs) took on board policymaking in great detail, they took on a political role of balancing policy interests, which should be conducted by national decision-makers.

Donors often argued that the government was not democratically accountable, even in recipient countries that had recently gone through fairly well-organized elections. But it does not help democratic accountability that the donors make decisions of political nature on behalf of the government. Often it did not even seem to improve decisions: instead, it often resulted in an endless game of studies and decisions that halted progress rather than improve outcomes. For instance, the Kihansi hydropower project in Tanzania, built to provide desperately needed power, were delayed for several years when studies found that one particular species of toad – the Kihansi Spray Toad – was threatened by extinction from the project. After years of delay and extensive power blackouts, the plant was finally built, and the toad disappeared from its ecosystem (it survives in a zoo and in laboratories). The government in Dar es Salaam was hardly consulted and completely sidetracked in decision-making, only informed about the conclusions arrived at in Washington.

The Asian miracle

In the early 1990s, Roland evaluated a number of bilaterally funded aid projects and programs in Africa. This was a depressing story. Far too often, aid had not led to sustainable processes or institutions. When aid money stopped, projects grounded. It caused Roland to stop ‘doing Africa’ from 1996. The next decade, his development-related assignments were all in Asia, in countries different as China, Vietnam, the Philippines and Laos. Asia offered a fundamental optimism and belief that poverty alleviation was possible. Here, governments applied policies that seemed much like those of Norway in the 1950s, with a strong government implementing industrial policies, promoting export-led growth, and investing in infrastructure. It was a medicine strikingly different from the Washington consensus applied in Africa at the time, and it led to serious doubts about the World Bank medicine for Africa.

The World Bank told a different story about the Asian miracles, in a way that made it seem that the Asian successes were a result of the Bank’s policy advice. Instead of using the opportunity to go back and see what went wrong in Africa, and try to understand why the Reagan and Thatcher recipes had not worked, ambitions were elevated. The Bank policy advice grew increasingly patrimonial, aiming at reforming all kinds of policies and institutions. The Bank, for decades known for infrastructure and other projects involving engineering skills, had shifted focus to political, institutional and social engineering. The Word Bank machinery also increased its endless production of reports, most of which had little impact on policymaking or advise.

Also on the sector level the response to past failures was to raise the ambitions. Take energy. Africa desperately needed more energy, and the potential for increased power generation was huge – for instance, only 5 per cent of Africa’s hydropower potential is utilized. Since investment in power generation and expanding the electrical system was historically rarely achieved by private capital alone even in Western countries, this would be a good candidate for public aid. Until the early 1990s, Western aid to the energy sector consisted mainly of support to state-owned utilities, technical assistance, and subsidies for investment in generation and transmission.

But Western donors stopped supporting power generation and focused instead on advising African governments on power sector reform according to Western models of the day. In poor countries like Uganda, the advice was to unbundle the energy sector by separating generation, transmission, distribution and power trade, to set up new government agencies and to write new and complicated laws and regulations. It was then left to the market to add more generation capacity to the system if and when needed. The recipe was surprisingly similar across countries and continents. The World Bank even invented concepts about regional power pools and markets. Tens and tens of millions of dollars were spent on consultants to design regional power pools in Africa. To Roland it seemed absurd to invest in regional integration of a sector that did not work even at local and national level. Africa needed installed generating capacity, not Western-style power pools.

What at a first glance could seem like a Western model was in fact not: no Western countries had unbundled the sector and invested in power pools at a similar level of development of their own energy sector. Even in the Nordic market today, an absolute precondition for countries to be part of the common market is that each country is able to maintain reliability and quality of its own system. Nobody would like to invest in transmission only to risk importing the instability or failure of their neighbours. In hindsight, it is easy to conclude that it did not work. Almost no new capacity was installed since the early 1990s, too little even to keep up with population growth. As a result, per capita generating capacity declined for the first time in decades – about 20 per cent from 1990 to 2008 (Eberhard et al. 2011). Where new capacity was installed, it was often based on heavy fuel oil, a very expensive and polluting technology, which could be installed rapidly and alleviate the short-term pains in the system.

The World Bank and donors did not, however, ask whether their recipe had been wrong. Informally, their explanations for the failure of developing the energy sector over the last two decades seem to be incompetence and corruption on the recipient side. The response was capacity building and fine-tuning of regulations. Seeing the Bank’s attempt to rewrite the success stories of the Asian tigers to fit with its own advice, as well as the reluctance by the Bank to change policies in Africa, for instance similar to those that worked in Asia, Roland started asking why the Bank did not seem to learn from past mistakes. Was the intellectual powerhouse in the end guided more by ideology than evidence and science?

At this point, Roland had come to the conclusion that blueprint application of Western institutions of the 1990s was not useful. The consultants and bureaucrats from Washington (and Norway) did not seem to understand the problems that they were attempting to solve, but instead brought readymade solutions from home founded in a strong patrimonial attitude. Even worse, they did not learn from experience when they failed. Roland started to believe that Western aid had over time become less useful in fighting poverty .

Roland’s first intellectual fascination with the World Bank had been seriously challenged. The Bank’s policy of structural adjustment in the 1980s and early 1990s seemed so right at the time, when prudent macroeconomic policies were desperately needed. The knowledge gap of the time, to be filled by the World Bank through institution and capacity building, was obvious. But how could it be that the Bank’s thousands of highly educated staff members from all of the best Western universities were not more successful in their advice? Roland felt that aid had become less driven by practical problem-solving and learning by doing, and more of Anglo-Saxon dogmatic ideology. The ideological bend in the Bank had become evident with the inability and what Roland felt was intellectual dishonesty in explaining the successes of the Asian tigers: instead of learning from the successes, the Bank had tried to rewrite history. Roland’s experience with the electricity sector added to the disappointment over the World Bank and finished his personal 180-degree turn around. What had initially seemed like a pragmatic, problem-solving approach had turned into an ideologically driven, dogmatic export of Western blueprint models that seemed of little use and often harmful.

Over-successful NGOs

Øyvind Eggen started his career in international development in 1998 as director of an NGO consisting of a handful of people concerned about social and environmental aspects of large dams. They were critical to a ‘Washington’ approach and often took pride in criticizing infrastructure projects promoted by the World Bank. This was the same NGO that had earlier become associated to the toad that had halted the hydropower project in Tanzania, to the frustration of Roland and his colleagues.

Eggen and his colleagues primarily wanted to draw attention to social and environmental concerns in a setting where decision-making was dominated by economic considerations and powerful companies with vested interests. That position was easy to justify, as those to be negatively affected by large dams were normally – not coincidentally – people who were politically marginalized and thereby easy to ignore in national decision-making. Eggen had no intention to stop industrial development, just to influence on the balance of power.

To Eggen’s surprise he saw that the work of only ...

Table of contents

• Cover
• Title
• 1  Introduction
• 2  The History of Aid Paradigms
• 3  A Journey into the Unknown
• 4  The Knowledge Gap
• 5  What Can Aid Do?
• 6  The New World Order
• 7  The Future of Aid
• References
• Index