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UK Aid Conditionality must Finally be Addressed


The poor quality of aid from rich to poor countries has been a major concern for poverty campaigners for several years. The main problem was articulated well by Make Poverty History (MPH) in 2005. In a letter to Tony Blair, MPH stated:  “Many donors, including the UK, critically undermine the effectiveness of their aid by attaching economic policy conditions. These conditions include privatisation of basic services and trade liberalisation. Such conditions are undemocratic and unfair, and often work to entrench rather than overcome poverty.” [1] In 2006, Christian Aid stated that by attaching aid to these exploitative policies, rich countries were “paying for poverty”.[2]  The problem persists to this day. The European Network on Debt and Development explains that "After much debate, some development agencies have claimed that they will reduce conditions… However, recent official and civil society reports show a lack of progress in this area."[3]  Here we discuss how the problem of aid conditionality has been allowed to continue and what activists can do to address the situation.

The Conditionality Problem

Donors such as the UK government provide aid in two ways: multilaterally and bilaterally. Multilateral aid is that which is provided jointly with other donors. The most important multilateral donor institutions are the World Bank (the Bank) and International Monetary (IMF) sister organisations, known together as the Bretton Woods Institutions (BWIs). These two organisations were established at the end of the Second World War at the Bretton Woods conference to provide loans to assist Europe with its reconstruction and provide short term balance of payments support to prevent financial crises respectively. However, by the 1980s one of the main functions of these organisations had become making loans to poor countries on the condition that they took on neo-liberal economic programs (privatisation, trade and financial liberalisation, reduced government spending etc) – then known as ‘Structural Adjustment Programs’ (SAPs). The programs were highly unpopular throughout the world as they were associated with rising unemployment, poverty and a reduction in services on the one hand, and booming profits for the rich on the other. They sparked ‘IMF riots’ in countries throughout the South, and eventually mass protests from solidarity movements in the North.

The global resistance forced a change in tactics from the BWIs and SAPs were officially dropped in 2000 in favour of Poverty Reduction Strategy Papers (PRSPs), which have been in force since. These PRSPs are supposed to be ‘participatory’ in that they are based on ‘broad based consultation’ with different sectors of poor country populations. However, in reality, the IMF and Bank continue to dictate the content of the papers, cynically presenting their views as those of populations within poor countries. Numerous extensive studies on the PRSP process point to the illusory nature of the ‘participatory’ aspect. A Swedish based poverty reduction coalition, including Save the Children Sweden, has reported in its study of the PRSP process that there is both “a widespread failure to facilitate broad based participation and poor quality participatory processes for those who can participate.”  “Examples of the failure to facilitate broad based participation” include, a “Lack of frameworks for the participation of… Women… young people, indigenous groups and rural communities and their consequent exclusion…”  Furthermore, “Parliaments have been barely involved in the process undermining their role in national policy making…”  Examples of “poor quality participation processes for those who do participate” include that “Most governments equated notification with consultation”, that is, telling their populations what economic programs they had decided on without allowing the populations to have a say in the decisions.[4]  These findings are backed up by a study covering several years by the network of German development non-governmental organisations (NGOs), VENRO, which found that “For most of the countries examined, the poverty reduction strategies are dominated by an alliance of technocrats of the respective governments and influential international institutions, in particular, the IMF, the World Bank and a handful of bilateral donors.”[5]  Other reports document similar findings.

By 2005 the World Bank was openly back-tracking on its commitment to “participatory” programs. Instead, they only demanded that countries had “ownership” of the program – an intentionally ambiguous term. In a review of its conditionality policy a 2005 World Bank document stated that “Ownership is an elusive concept. It does not imply or even require full consensus… some form of conditionality can sometimes play a useful role in helping champions of reform push through effective measures against the determined resistance of vested interests.”[6]  The term “vested interests”, when used by the Bank, refers to workers, rural peasants, women’s’ groups and anyone else that gets in the way of investor profits. Furthermore the Bank only required that “lending should support … policies and programs for which there is some clear evidence of ownership.”[7]  It continues to explain that “In low-income countries, policies described in a poverty reduction strategy adopted by the government after broad-based consultations typically meet that expectation.”[8]  (This position was reaffirmed in 2007).[9] By this logic PRSPs can be said to show country ownership simply by existing and with the population having been informed about them. As the Jubilee Debt campaign explains, the “Bank’s definition of ‘ownership’ seems to come from a parallel universe” whereby “a country ‘owns’ any policy  chosen by the Bank and IMF behind closed doors, as long as the government agrees to go along with it. It measures ownership by whether a country implements a policy, not how it was chose.” [10]  We can therefore see that by funding the BWIs, a large proportion of UK aid comes with conditions.

UK bilateral aid is also conditional in that it is generally provided on the condition that these PRSPs are followed. In 2005, under pressure from the Make Poverty History campaign the government released a position paper entitled “Partnerships for Poverty Reduction: Rethinking Conditionality”.[11]  In the paper it explained that “We will not make our aid conditional on specific policy decisions by partner governments, or attempt to impose policy choices on them (including in sensitive economic areas such as privatisation or trade liberalisation).”[12]  However, this was undermined by a later sentence in which it states that aid may be stopped if any country deviates from PRSPs. The sentence reads: “The circumstances in which the UK will consider reducing or interrupting aid” include if “countries move significantly away from agreed poverty reduction objectives or outcomes or the agreed objectives of a particular aid commitment (e.g. through an unjustifiable rise in military spending, or a substantial deviation from the agreed poverty reduction programme)”.[13] 

It is worth noting here that the government is not actually concerned about poor countries spending large amounts of their budgets on their militaries. The UK is actually one of the leading exporters of arms to poor countries. In the above quotation, flowery words aside, the government is simply stating that it will stop providing aid if governments deviate from poverty reduction programmes – meaning PRSPs. It is in this way that UK aid remains dependent upon IMF/Bank programmes.

Case Study: Conditions on Aid to Tanzania

One example of Britain’s donor relationship with poor countries is the conditionality attached to its loans to Tanzania.[14] On the Tanzania ‘Project Details’ page of DfID’s website is a document titled “Conditions attached to 105373: Tanzania Poverty Reduction Budget Support”.[15] One of the conditions is that Tanzania shows “Commitment to achieving MKUKUTA (National Growth and Poverty Reduction Plan) [Tanzania’s version of a PRSP] objectives”.[16]  A look at this ‘National Growth and Poverty Reduction Plan’ reveals that the plan looks very much like old-fashioned neoliberal SAPs. The paper includes a commitment to “Parastatal Sector Reform” (meaning privatisation), stating that “major outstanding issues refer to the privatisation of some financial sector entities as well as that of public utilities.”[17] Trade liberalisation is also a part of the plan. It is explained that “the National Trade Policy (NTP) will provide a guide” for developing the economy.[18] In the National Trade Policy it is stated that “Tanzania commits itself to one direction of change, namely that of trade liberalisation.”[19] The MKUKATA paper also states Tanzania’s commitment to “Deepening financial sector reforms, in particular implementation of priority reform measures under the Financial Sector Assessment Programme (FSAP).”[20] The FSAP is a document produced by IMF and World Bank staff in 2003, in which the main suggestion is the privatization of the financial sector. In the 2010 update of this document, this time written solely by IMF staff, sweeping financial liberalisation measures are recommended. [21] It is worth noting here that some economists argue, with good reason, that capital account liberalisation is the most exploitative, anti-development policy being foisted upon Africa.[22]

We can therefore see that when the UK government states that its aid is dependent upon Tanzania following its own poverty reduction strategy; it is actually stating that UK aid is dependent upon papers which are dominated by neoliberal IMF/Bank recommendations (designed carefully in the interests of donor countries).

Previous Campaigns

There have been campaigns aimed at ending aid conditionality. However, they have each suffered from major flaws which have undermined their effectiveness. We will now discuss these campaigns and their flaws, looking for possible ways forwards.

Trade Justice Movement

The first major UK campaign in which aid conditionality was addressed was the Trade Justice Movement. In 2003 they organised a national day of action to raise awareness of their demands which included: (1) an end to rich countries using aid and trade deals in order to promote economic liberalisation in poor countries; and (2) the EU ending farm subsidies (which results in poor countries being flooded with cheap produce and also prevents them competing on international markets). The government’s stance towards the campaign was explained in a brief, yet revealing Guardian report, which stated in full:

NEXT WEEKEND the Trade Justice Movement is organising a lobby of MPs to campaign for fair trade for developing countries and it's comforting to see the Labour Party embracing this issue with all its heart – when it can find it. Leaked guidance from the Labour spinners urges MPs to greet campaigners warmly, smile and disagree with one of the movement's main aims – to stop the United States and European Union forcing developing countries to open their economies further to Western businesses. Truly the party of the people.”[23]

 

In practice, government personnel did not even articulate their disagreement with TJM campaigners. They simply did not acknowledge that allowing poor countries to choose their own protectionist measures was a part of the campaign. In this way they were able to claim that they were in full agreement with trade justice campaigners. The Trade Minister, Patricia Hewitt, wrote in the Guardian:

  We fundamentally agree with the Trade Justice Movement - the umbrella group coordinating this demonstration – that trade rules must be reformed to benefit the poor. We are in no doubt that the current system does not work for many developing countries. In particular, we need to do more to help all developing countries secure better access to rich countries' markets… The current levels of protectionism are scandalous. [24]

 

No mention was made in the piece of the need to stop pressuring poor countries into liberalising their economies. After the statement, the Guardian reported:

“TJM organisers responded scathingly, dismissing her statement as "naked spin". There's a huge gulf between what they (the government) will sign up to and what we want," says a spokeswoman.”[25] 

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