Money, Damn Money, and Development

Dan Watson

The 2012 report of the MDG Gap Task Force

United Nations Millennium Gap Task Force Report 2012. Focussing on MDG 8: Develop a global partnership for development.

I want to talk about the release of the UN’s 2012 MDG Gap Task Force Report. The story begins with the Doha Development Round in 2001 that started precisely the grand thinking and bold action that may be most effective in empowering nations to redress the unfair economic balance of the world today. These talks were a means to tackle the ultimate causes of stalled development rather than a narrow concentration on proximate manifestations of poverty. However, that bright start was followed by a decade of wrangling and disagreement that makes uncertain the future of the discussions today.

Somewhere along the line between the UN’s report and the media the big picture message has been largely lost. The headline that came out of this review, as reported by the Guardian and the Washington Post, was that aid cooperation has declined due to the financial crisis. This is worrying but I don’t think that this resembles the whole image. The central question that has been raised in response to this report, that of whether government expenditure on aid can be maintained when it is facing the more immediate concern of keeping its own financial house in order, is not the focus of the UN’s paper. This question rests on three false premises.

Firstly, that aid expenditure is directly linked to treasury coffers on an intractable golden thread. Secondly, that a reduction in aid money in one form is a direct indicator of the government’s wider outlook on aid. Thirdly, and most importantly, an assumption that there’s nothing that can be done to alleviate the problem of decline in aid contributions in terms of structural changes to trade convention and protectionist policy.

It is certainly tempting to criticise governments for, as it could be seen, withdrawing financial aid to pay for their own predicament. Akin to stealing your neighbour’s spartan chair as you’ve gambled away the 3 piece suite. True, the government has been left shame-faced clutching the cushions, but aid funding cannot be so neatly linked to a drained public purse. The reality is that government money does not flow directly from the treasury to aid programmes, rather many tributaries coalesce to form the stream of revenue that these schemes rely on.

DFID’s finances are far from a simple cashflow, for instance. Just as an indication of their complexities, the value of its assets decreased by 40% in the last year whilst its current liabilities have risen 14% from the previous year. The change in assets reflect DFID’s continued focus on value for money in its programme disbursement: “Where advances are required these are only given on a quarterly basis to minimise the risk of underspent funds”. Liabilities have grown as a result of promissory notes deposited but as yet not cashed by the recipients. The largest liability a consequence of DFID’s stated commitment to the replenishment of the International Development Association. These both indicate a more positive picture for the future of aid disbursement by the UK than the headlines would suggest.

Changes in funding allocation to international development by governments should not be provided as an excuse to cut programme disbursement. As DFID has demonstrated, greater efficiency and careful spending can, absolute budget cuts notwithstanding, weather the financial storm. As I hope I have demonstrated, it is not responsible to draw the conclusion from the data charted by the report that aid spending must fall in hard times. (I make this comment with the caveat that Greece and Spain’s financial woes are very special cases that have necessitated dramatic cuts throughout the government portfolio and that, as such, I do not include under my perfunctory bracket of “hard times”).

Futhermore, once money leaves the UK it’s route to the recipients is not always direct. Simply put, if there is less aid contribution, multilateral schemes are much less likely to suffer than bilateral aid. The DAC define these types of assistance as, broadly, contributions to international organisations and contributions to a partner country respectively. The slack left by the countries withdrawing aid in response to domestic financial crises may be largely picked up by other contributors.

What has been less widely reported, but is hardly buried in the UN report, is a strong improvement in the money channelled into “Aid for Trade”. This is my second point about aid in another guise. There is a real terms drop in aid amounting to 2% of the Development Assistance Committee of the Organisation for Economic Cooperation and Development (DAC/OECD) funding to least economically developed countries through Official Development Assistance. But, predictable Aid for Trade, a constituent of ODA, has seen a dramatic rise, 12% over 2009 levels, 80% in real terms over that between 2002-2005. It is distinctly unhelpful to ignore these figures. They point towards the resounding success of a workplan that cites my favourite development term, “ownership” felt in the host country, as one of it’s key insights.

Improvements in the transparency of aid delivery have been at the forefront of the UK’s aid policy for recent years and with this concern has come a drive for greater efficiency, as the DFID administration example illustrates. As we can see, great structural movements in how aid is administered are afoot, and it might be churlish of us to not expect a downturn in aid contributions as this step change is fully absorbed. Bodies have been created to help facilitate discussion of this change however. It is encouraging to see the UN take the lead in identifying the need for the United Nations Development Cooperation Forum (DCF) that will seek to broaden the development effectiveness agenda within its dedicated sessions.

It’s the third point about structural change to trade barriers that the Guardian’s piece does highlight, the comments in the UN report that relate to greater international cooperation in breaking down barriers to poverty alleviating trade and ending protectionist policies. The UN report is not an impartial piece, the key motive of the report is to encourage intergovernmental cooperation in reducing barriers to reliable trade and resultant development. The real motif of the report is a heavily critical stance towards the lack of a holistic approach towards achieving the development goals; an approach that might necessitate a change in trade practices.

We must try to look beyond the present financial crisis, try to recontextualise the aid discussion a little. In doing this we can look to our trade system as a whole and observe that changes need to be made on a larger scales; changes like WTO’s “Aid for Trade” scheme. Perhaps the time is finally right for some alterations to foreign policy that were first proposed more than a decade ago.

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