Ineffectiveness of Development Aid For Developing Countries

In 1945, the United Nations Organization (UNO) was established to avoid a new world war. Another goal of the UNO was to eradicate poverty in the developing countries. This goal was and is still is a very important reason for the existence of the UNO. The most important ‘instrument’ to fulfill was the creation of the International Bank for Reconstruction and Development (IBRD) or better known as the ‘World Bank’. In October 2005, the UNO celebrated its 60th anniversary. What has it accomplished in terms of eradicating poverty in developing countries? The sad truth is that 80% of the world population controls only 20% of the world’s resources; this means that 20% of the population controls 80% of the world’s resources. This is not some sort of ‘secret’ fact, but something that most people know. Why is this sad reality a fact?

The first problem is related to the policy process itself. This process is unfortunately not being done in a straightforward and rational way; on the contrary. It is full of ambiguities and conflict. The second problem I would like to discuss in this article can be found in the theories of development. I have never encountered a universal theory of development. This is not surprising because the strong impact of theories of development on policies for development is not fully realized. Consequently, policies of development are always incomplete because there is no universal strategy available to cope with the problem of development.

Development aid policy
In general, the literature concerned with the policy process is dominated by a particular view. This view is connected with the ‘rational-actor paradigm’. In this rational-comprehensive-policy model, the decision-making process is purely based on rational and objective criteria. The role of objectively acquired information forms the basis of policy in this model. This standardized model is assumed to be universally applicable in every policy ‘system’, sector, or problem.

The following aspects represent this model:

1. Clarification of values or objectives distinct from and usually a prerequisite to empirical analysis of alternative policies;
2. Policy formulation is therefore approached through means-end analysis. First the ends are isolated, then the means to achieve them are sought;
3. The test of a good policy is that it can be shown to be the most appropriate ‘tool’ to achieve certain ends;
4. Analysis is comprehensive; every important and relevant factor is taken into account;
5. Theory is often heavily relied upon.

The separation of policy preparation or planning and execution or implementation is a vital characteristic in the rational comprehensive methodology. Implementation is being seen as a logical outcome of a well-prepared and formulated plan. But in the implementation of the aid policy, numerous projects failed due to negligence of the execution of the goals formulated. This implementation problem is not only limited to development aid policies, but it has also been traced in numerous other policy fields.

A second property of the rational-comprehensive model is the consensus of the problem. It is being presumed that the development of a certain country is not problematic at all. All parties involved (donor and developing country) have reached an agreement and the strategy chosen is therefore the result of a consensus of all parties involved. None of these are true in reality. Development aid policy is the result of negotiations between the actors involved. Actors with business interests, actors from the developing countries self and last but not least, the actors with political interests are constantly engaged in negotiations. It is not difficult to imagine that the actor with the strongest bargaining position possesses the power to overwhelm the actor actors. It is not the objective scientific planner or other kind of specialist who has the final word. In most cases, it is the most powerful actor(s) who wins.

A final aspect related to this model is the role of objective knowledge as an important pillar in the decision-making process. It is being assumed that knowledge is the key to success. The more knowledge about the issue is available, the easier it is to solve the issue, in this case, the ‘development problem’. This knowledge does not come from a magic box. On the contrary, it comes from strict scientific research. So, scientific research is the source of knowledge and henceforth plays a crucial role in policy-making processes. The influence of the actors is neglected because they have reached a consensus. In reality, scientific research plays a very marginal and minor role in the policy-making process. Policy makers only use scientific findings when it is in accordance with their own ideas. Policy makers draw policies on the bases of their own good judgments and experience and not on scientific findings. Afterwards, they tend to seek objective findings which actually support their policy which has been formulated long before.

Theories of development

The reader should be warned because I cannot give a complete sketch of the existing theories of development, only a few important theories will be discussed. In the fifties, modernization theories dominated the foreign aid of the ‘developed to the underdeveloped countries’. Development is being seen as a linear progressive movement of a ‘traditional’ society into a state which can be perceived as being a ‘modern society’. The example of the emergence of the nations in the Northern hemisphere is being used to define the term ‘modern’. Furthermore, the development is being seen as a result of technological innovations. The World Bank can nowadays still be identified as the major producer of the modernization theory. Economic growth is the key concept in this theory. If the shortage of capital problem in the developing countries is solved, poverty will vanish and an autonomous process of development will come into motion. Economic dualism – the existence of, on the one hand, a modern export-oriented sector in the economy and a local sector producing domestic commodities on the other hand – is being seen as an obstacle. The traditional sector (or informal sector) must be eliminated in this view.

The developing countries in turn, reacted by introducing their own theories. In the years 1949-1950, Prebisch (the secretary of the Economic Commission for Latin America) posed a theory called the center-periphery vision. The economies of the Latin American countries are situated in the periphery, whereas the industrialized western countries are situated in the center. In order to change this situation, which only preserved underdevelopment, Prebisch proposed to introduce rapid industrialization by substitution. The dependencia school (advocated by Frank and Dos Santos) goes even further than the center-periphery school. In this school, the importance of the form and intensity of international relations are being stressed as a strong variable which affects economic progress in developing countries.

In the west, new thoughts arose as a reaction to the deficiencies of the ‘traditional’ views. The so-called unified approach emerged (advocated by Myrdal and Gamini Corea – secretary of UNCTAD and UNRISD). The most important argument of this approach is that aid must be directed towards the groups with lowest incomes or who are the poorest. But the developing countries did not accept this modified view because they experienced it as an intervention in their own internal affairs. In addition, the developing countries demanded a New International Economic Order. This New Economic Order should be based on justice, sovereign equality, mutual dependency, common interests and cooperation between all states. Unfortunately, the structural changes of the international system in favor of the third world have not happened. But the discussion around the New Economic Order resulted in the so-called Rio-project. The members of the Rio-project developed a new development strategy where the emphasis is laid on the self-reliance aspect of the developing countries. But the western nations have not stimulated this self-reliance concept.

Personal reflections

I have lived for more than 30 years in a developing country (Indonesia) and this country has received billions of dollars in terms of aid and loans. What is the end result? Tens of millions still live in poverty. With the exception of the lucky few, some have been able to improve their lives thanks to a combination of education and luck. A minority (mostly of Chinese descent) has been able to improve their situation due to their skills as traders. However, corruption is rampant and the new-born democracy has not been able to solve all these problems. It will take many years before so-called ‘sustainable development’ can be achieved. Even with educating more people, the situation will not improve in the short term. Despite the availability of abundant natural resources, the situation remains dim. If nothing is done against deforestation, all the tropical forests in this country will be gone in 2010; that is only four years from now. The situation might even get worse due to the inability of the majority to compete with other countries in terms of industry, trade, and services.

Better future?

Nowadays, everybody is talking about globalization as the ‘cure for all diseases’.
The developing countries, however, are still suffering from underdevelopment, poverty, and human rights violations. How can globalization solve all these problems? The dawn of the 21st century is not marked by a better global situation, but by more global instability with individual states scrambling for nuclear weapons, a senseless ‘war against terrorism’, destruction of the environment, and doubling of the population in the next 40 years. It will take a lot effort from all people in the developed and the developing world to solve all these problems and create a better world for our children and grandchildren.