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Unformatted text preview: EXTERNAL FACTORS AID (I) ECONOMIC Dr Michael Keating Rich World Poor World PLT/SCL 206 12 November 2007 Economic Aid Who Gives Aid? IFIs (International Financial Institutions) Bilateral Donors International Monetary Fund (IMF) World Bank (IBRD, IDA, IFC, MIGA) USAID, DfID, DANIDAS etc How is it Spent? (2000 Data) 66.9% Bilateral 23.3% Multilateral 9.8% EU Economic Aid How Much is Spent? As %GDP from OECD states Top Five (1998): 0.23% in 1999 down from 0.48% in 1965 MDG target 0.7% Denmark 0.99%; Norway 0.91%; The Netherlands 0.80%; Sweden 0.71%; France (0.41%) Total (1998): US$51,521,000,000 (+8.9%) Private Flows (1998): US$100,200,000,000 Total per country (1998) Top Three: Japan US$10,683,000,000 (0.28%GDP) USA US$8,130,000,000 (0.10%GDP) France US$5,899,000,000 (0.41%GDP) Economic Aid Who Gets It? (2000 data) 28.8% SubSaharan Africa 7.9% NorthofSahara Africa 21.1% East Asia 12.4% South Asia 7.7% Middle East 7.0% South America 6.4% North and Central America 4.7% Oceania 4.2% Europe The IFIs IMF/World Bank relatively small financial contribution to Development Aid But `lead' on Bilateral Aid and Private Investment Aid conditionality The practice of linking financial disbursements to economic policy changes from the receiving state... Bilateral Aid conditionality tends to be linked to IMF/World Bank conditionality packages `structural adjustment packages' Forums for the development, expression and institutionalisation of development theory... Fashion in Development 1950s and 1960s 1970s Infrastructure and largescale investment projects Keynesian economic policy Stateled development Antipoverty, Health, Education, Housing, Nutrition... Borrowingled Development (...Debt Crisis) Basic Needs 1980s 1990s Neoliberalism and Structural Adjustment Loans Marketled Development Good Governance Democratisation, Transparency, AntiCorruption 2000s? Millennium Development Goals (MDGs)? The Fashion Police IMF Rules VOTING/CONTRIBUTION 85% Voting Threshold (US Veto) Managing Director Always a European Vote Distribution basically unchanged since 1945 (to be reviewed?) United States 17.08% Japan 6.13% Germany 5.99% France 4.95% United Kingdom 4.95% The Fashion Police World Bank President appointed by largest shareholder Voting Share (IBRD) UNITED STATES 16.39% JAPAN 7.87% GERMANY 4.49% FRANCE 4.30% UNITED KINGDOM 4.30% WTO States are members 1 vote each `Green Room' vs. Developing States? Evaluating Aid What is the impact of all this money? Ambiguous Too much money or not enough? Rapid economic growth and social development not apparent Expenditure on basic infrastructure, and education crucial Supporting budget expenditure in World's poorest countries (sometimes up to 50%) MDG aim to double aid spending... Poor Governance Postcolonial state collapse AIDS Crisis Corruption, mismanagement, bad luck? Poorly organised and implemented? Donorcentric; lack of `ownership' > Aid conditionalities... > Return to top of slide! Debt crisis, debt repayments undermining Aid? SAPs in the 1980s Following the Debt Crisis of the midlate 1970s and the rise of neoliberal governments in UK/US Structural Adjustment Programmes based on neoliberal economic theory Resulted in the `lost decade of development' Perhaps the most important period in the history of postwar economic aid Stabilization and Adjustment Stabilization (shortterm recovery) Pursue Macroeconomic Stability as Government economic policy priority Slashing Budget Deficits Not unemployment oor industrial development Adjustment (longterm restructuring for growth) Economic Liberalization Public sector wagefreeze Eliminating `inefficient' subsidies and price constraints Privatization of inefficient stateowned enterprises (SOEs) Civil Service Downsizing Tax Cuts (for the rich the `trickledown effect') Open economies to FDI, MNCs Costs and Benefits Shortterm costs apparent: Particularly intense impact on lower socioeconomic groups The Poor Women Children Urban Poor Civil Servants (extensive job losses) Increased basic services costs including in education and healthcare Increased costs of basic foodstuffs Costs and Benefits Ignored social development priorities Education Healthcare Child mortality Environmental impacts Switching subsistence food production to cashcrops (and monocropping) created food insecurity Costs and Benefits Minimum promise of neoliberal economic theory was that SAPs whatever the shortterm costs would generate economic growth Negative economic growth standard in sub Saharan Africa in the 1980s Rising Inequality the `trickleup effect' 1960 wealthiest 20% owned 70.2% of global wealth, by 1990 it was 80.8% Poorest 20% from 2.3% to 1.3% Lost Decade of Development Severe economic recession in Sub Saharan Africa: Declining per capita income Declining foreign investment Increased unemployment, interest rates and inflation Decline of social infrastructure Decline in almost all social development indicators Sub-Saharan Africa Africa debt rose from US$6 billion in 1970 to US$134 billion in 1988 Debt levels = total annual GDP Monocropping reached 40% export earnings while the price of these crops in global markets dropped 40% through the 1980s (see Thomson pg 180) Economic Aid? Recognition of a range of problem with SAPs as a framework for promoting development Ownership Need for political support from states, elites, social coalitions, civil society Too theoretical difficulty applying to reallife conditions in subSaharan Africa and India where starvation and death resulted Political support contingent upon a `new politics' of development? Rise of Good Governance and political conditions attached to aid in the 1990s... ...
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