2. The beginnings of DA
• Modern DA begins after World War II, following
the creation of the Bretton Wood institutions
• The International Bank for Reconstruction and
Development (World Bank) had the initial task of
raising capital for the reconstruction of Europe
and Japan after WW2
• Its main aim was to avoid the painfully slow
recovery that poisoned international political
and economic life after 1918
3. The Marshall Plan
• The first major example of
DA came in 1947, with the
setting up of the Marshall
Plan (the European
Recovery Program) to
assist European recovery
• Although offered to the
whole of Europe and the
Soviet Union, Stalin
refused to accept it
4. Marshall Aid
• Between 1948 and
1953, Marshall Aid worth
$13bn speeded up the
economic recovery of
Western Europe
• Marshall Aid was seen
as a resounding success
and a potential model for
future programmes
5. The beginnings of wider DA
• In 1949 US President Truman announced the
long-term goals of US aid:
• “We must embark on a bold new program for
making the benefits of our scientific advances
and industrial progress available for the
improvement and growth of underdeveloped
areas. The old imperialism — exploitation for
foreign profit — has no place in our plans.”
6. Decolonisation
• The case for DA
became all the more
urgent with the
beginning of
decolonisation, the
break up of the former
European empires
• By the late 1960s,
most of Africa and
South Asia had
gained independence
7. Cold War priorities
• With the Cold War
intensifying, much DA
reflected political
priorities
• Marshall Aid and the
Truman speech reflected
US fears that the USSR
would dominate a
weakened Europe
8. Cold War competition
• The Soviet Union provided
DA to its satellites and the
PRC after the victory of the
Chinese Communists in
1949
• The Soviet bloc then gave
DA to newly independent
countries where it was
competing for influence
with the West
9. China and Africa:
beginnings under Mao
• The PRC also launched
many agricultural initiatives
in Africa in the 1960s
• Under the ‘One China’
policy, recipients of
Chinese aid had to break
off relations with Taiwan
• African votes in the General
Assembly proved crucial in
giving the PRC a seat on
the Security Council in
1971 (Resolution 2758)
10. Who gives now?
• The picture of DA is
now more complex
• The biggest donors
are the richer
countries in the
Organisation for
Economic
Cooperation and
Development (OECD)
11. DA donors by GNP
• It was originally
agreed that donors
needed to provide
0.7% of GNP
• However, very few
donors achieved this:
only the Scandinavian
countries such as
Norway, Sweden and
Denmark, but not the
USA and the UK
• Since the 1980s aid
levels have been
falling from around an
average of 0.36%
GNP to 0.22%
12. How aid flows
• Around 70% of all DA is bilateral aid
(government-to-government)
• The other main source of assistance is through
international organisations, including the WHO,
WFP, UNDP and UNICEF, IMF, World Bank,
and regional development banks such as the
Asian Development Bank
13. The World Bank approach
• At first, the World Bank lent money only for
specific projects
• With each project needing evaluation, the
process was laborious and time consuming
• Under the leadership of Robert McNamara from
1968, the World Bank moved to a broader
approach of funding wider programmes (health,
education and agriculture) and promoting good
governance
14. The Washington Consensus
• The World Bank approach changed radically
in the 1980s, with the triumph of neoliberal
economics
• Much DA became dependent on structural
adjustment programmes aimed to reduce
obstacles to the proper functioning of markets
• The package became known as the
‘Washington Consensus’, and involved the
reduction of the role of the state and the
freeing of markets
15. Controversies
• The structural adjustment
programmes were
controversial
• In many countries, the
reforms brought disruption,
increased poverty and a
reduction of public services
• Trade liberalisation often
damaged local economies
16. The softer approach
• Many regard the 1980s as the ‘lost era’ of
development, thanks to the rigid adoption of
neoliberal economic policies
• The approach softened in the 1990s, when
donors realised a broader approach was
necessary, while still insisting on ideas of good
governance
• This approach led to the formulation of the
Millennium Development Goals
17. MDGs: the background
• The MDGs were approved at the Millennium Summit, a UN-
sponsored meeting of heads of state held in 2000
• The goals all derived from earlier international development
targets
• The eight goals – to be achieved by 2015 – aim to reduce
poverty through sustainable development
• Each goal has several quantifiable targets to allow the
measuring of progress
• To assist the achievement of the goals, the developed
countries were to provide 0.7% of their GNI as Official
Development Assistance
19. Monitoring progress
• Progress has been monitored on a regular
basis, with annual reports gathering data
collected by more than 20 UN and
international agencies
• Individual countries also provide national
assessments of progress towards the
goals
20. Progress to date
• Much of the quantifiable progress in
reducing poverty – especially with the key
Indicator 1.1 – has been achieved in China
and India, thanks to sustained economic
growth in those countries
• Progress elsewhere, especially in Sub-
Saharan Africa, has been very uneven,
with many countries unlikely to achieve
most of the goals
21. Significance of the MDGs
• The MDGs are an important step in
formalising and strengthening the
developed countries’ commitment to
helping the developing world
• They serve as a concrete action plan for
improving the lives of the poorest
• The goals provide clear targets allowing
the measurement of progress
22. Criticisms of the MDGs
• The choice of MDGs
• The lack of a focus on local participation
• Insufficient focus on the sustainability of
development
• Problems with reliable data collection, especially
in the poorest countries, make it difficult to
assess progress
• Many developed countries have failed to meet
their commitment to donate 0.7% of GNI to fund
Official Development Assistance
23. Controversies: Dead Aid
• In 2009, Dambisa
Moyo’s Dead Aid was
published
• This claimed that DA
had only fuelled
dependency and
corruption in Africa,
and had done little to
promote development
24. Dead Aid (2)
• Moyo claimed that aid had made African leaders
unaccountable to their citizens
• She claimed that donors needed to ‘turn off the
tap’
• Liberated from dependency, Africa would turn to
its own resources
• Africa could develop by borrowing on the
international bond markets
• Africa should also promote development also by
encouraging micro-finance
• She also stressed that Africans would benefit
from Chinese investment
25. Criticisms of Dead Aid
• Critics have noted many weaknesses in Moyo’s
work
• Her use of statistics and evidence is very
selective
• She fails to highlight any positive achievements
of DA
• She fails to highlight the link between the poor
performance of DA and the political motives
behind much DA
26. Is DA effective?
• Like any other form of expenditure, DA needs to
be evaluated properly
• Many of the criticisms of DA have proved
misguided, but several have some validity
• To assess the importance of DA, we have to
identify what factors can reduce its effectiveness
• Some of these factors are connected to the
donors, while others reflect problems in the
recipient countries
27. Factors reducing the
effectiveness of DA
• On the donor side:
• DA given for political rather than developmental
purposes
• Tied aid and other forms favouring the donor
• On the recipient side:
• Corruption
• A lack of expertise to use the funds
28. ‘Political’ DA
• Much DA awarded during the Cold War was
politically motivated
• Donors rewarded allies or sought to buy the
support of recipient states
• During the Cold War, donors rarely asked too
many questions about governance in recipient
countries
• Donors still prefer to reward their allies or those
who support they valued
29. Examples of ‘political’ DA
• In 1991, the biggest recipients of American DA
were Egypt and Israel
• In 1991, the USA discontinued DA for Yemen
after Yemen voted against the Gulf War in the
Security Council
• Much Japanese DA goes to states that support
Japan’s stance on whaling
• In 2009, Russia gave Nauru – the UN’s smallest
member state – DA worth $50m after Nauru
recognised South Ossetia and Abkhazia
30. Consequences of political DA
• With large sums of DA being awarded for political
purposes, the likelihood that the funds will be
used for genuine development purposes is much
reduced
• Recipients of political DA were rarely those who
needed DA the most – the 48 least developed
countries received only 18.2% of US DA in 1996
(less than Egypt)
31. Tied aid
• Tied aid – when a donor’s DA has to spent on
goods and services from the donor country –
is another factor reducing the effectiveness of
DA
• Such aid often reflects the donor’s priorities
and can be used to subsidise industries or
companies in the donor country
• For some donors, a considerable percentage
of DA is tied, though this has been reduced in
recent years
