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] 

As can be seen, the lesson for campaigners from this episode is that that if they want the government to respond to demands such as ‘no forced liberalisation’, they should campaign on this issue on its own, without combining it with demands the government is more likely to be favourable to. This way, they can avoid giving the government the opportunity to censor the campaign aims and cherry-pick which demands to respond to (which in this case was EU farm subsidies because Britain does not benefit from them).

Make Poverty History

The next major campaign which covered aid conditionality was Make Poverty History in 2005. With regards to aid, the first demand of MPH was as follows: “Donors should immediately cease forcing developing countries to privatise their services and deregulate and open their markets. Instead, aid should be provided in ways that allow poor countries and communities to determine their own paths out of poverty.” [26]  

The UK government responded with half measures. The only action taken was publication of the “Partnerships for Poverty Reduction” paper discussed above. As noted, the paper in parts promised improvements, but in other parts revealed that the government intended to continue to align aid with IMF/Bank conditions. Furthermore, the paper did not even consider the prospect of ending UK funding for the IMF and Bank.

The reason the UK government was able to get away with half measures was that MPH had not set out clear instructions to the government on how aid should be provided in order to make sure it was not conditional. Instead, they were leaving it up to government initiative as to which changes to introduce. This was a mistake because the government is completely resistant to making real changes, and therefore is always bound to respond to campaigners with half measures and delays tactics if given the opportunity.  

We will here consider what clear instructions MPH could have given in order to ensure the UK government ended aid conditionality. In order to make sure aid is not conditional, two main changes are necessary. The first is that no aid is provided through the BWIs or any other multilateral institution which makes its aid dependent upon BWI programmes (e.g. the EU). The second required change is that aid decisions are taken out of UK government hands. One simple way of making these two changes is to put all aid through the UN Development Programme (UNDP), which does not provide conditional aid, and let that organisation choose how to spend it.

Returning to MPH, the second problem with the demands was that there was no specific deadline given to the UK government for action, at which point the campaign would be stepped up. The result was that campaigners never stepped up the campaign at all. Instead of moving forwards with the campaign and making strong proposals for changes to aid, MPH simply waited for the government to act, which never happened.

We will now look at the second of MPH’s aid conditionality demands in its initial letter to Tony Blair. MPH stated, “Donor governments and institutions, including the UK are dictating priorities in poor countries... Policies imposed by donors have often hurt, rather than helped, people living in poverty. The UK must use its influence to put an end to economic policy conditionality, and ensure aid works effectively for poor people.” [27]  The last sentence is the key one for us to consider. Here, Make Poverty History is asking the UK to influence all other donor governments and multilateral institutions to end aid conditionality. The request was completely unrealistic. Even assuming that the UK government was opposed to aid conditionality, which it is clearly not, it is difficult to see how it could influence other rich countries to change their policies. In fact, the limits of the UK government’s influence over other countries was displayed in 2005 with  its inability to get a date set for ending EU agricultural subsidies, which the UK is actually opposed to because the UK does not benefit from them. Thus MPH’s request that year that the UK get global aid conditionality stopped was simply nonsensical. Making such a request simply diverted campaigners from the realistic task of changing only UK policies.

It is worth noting here, however, that if campaigners were successful in by getting all UK aid to be provided in a non-conditional way, including not putting aid through the BWIs, campaign groups in other countries could replicate this campaign, and the wider global problem of aid conditionality would be addressed. Thus, by setting a successful example, UK campaigners would be indirectly contributing to the end of donor conditionality world-wide.

Christian Aid – Stop Paying for Poverty

In 2006, the year after Make Poverty History, Christian Aid ran a campaign with regards to UK funding of the IMF and World Bank. Christian Aid stated that by funding these organisations, the UK government was ‘paying for poverty’ and requested the government to withhold all funding until the IMF and Bank had stopped imposing conditions.

The government responded by re-announcing a long-standing policy that it would give the Bank a £50m bonus if the Bank provided evidence that it was “implementing reforms to the way it attaches conditions to its aid.”[28]  The then Development Secretary, Hilary Benn, said, “We will hold the World Bank and IMF to the commitments they have made to work closely with governments to ensure their conditions are drawn from national strategies and reflect national priorities, and my decision on the release of the £50 million additional payment to the World Bank will depend on satisfactory progress”.[29] 

Instead of castigating the UK government for its refusal to withhold any funding, Christian Aid applauded the government, stating that it had taken a “significant first step ... in accepting the wisdom of [Christian Aid’s] long running campaign to halt conditionalities in the Bank and the International Monetary Fund.”[30]   This was essentially letting the government off the hook without it even coming anywhere near to meeting the Christian Aid demands.

This problem continued later. Three months on, in December 2006, after zero significant change in World Bank behaviour on conditionality, the £50m bonus was given to the World Bank by the UK. In a response statement Christian Aid complained that the World Bank had not made any significant changes, saying, “The World Bank’s latest report shows that it is still attaching economic conditions to aid. It continues to push for privatisation and liberalisation, sometimes even under the guise of improving governance.”  However, instead of criticising the UK government for providing the £50m bonus, Christian Aid wrote “‘Christian Aid applauds Hilary Benn’s initiative on this issue. We urge him to continue to be bold and to push for deeper, genuine reform.”[31] Again, Christian Aid had let itself be fobbed off by half-measures. Actually, less than half measures.

Unfortunately, the problem has become worse since. Instead of stepping up the campaign to end UK funding of the IMF and Bank, Christian Aid has decided to indulge in self-adulation over their ‘success’, contributing to the myth that the government took a serious stand. For example, a 2010 Christian Aid publication states: “In 2006 Christian Aid campaigners secured a campaign win when the UK government withheld £50m from the World Bank as a result of the Stop Paying for Poverty campaign.” [32]  As discussed above, this was not the case. The government actually gave the World Bank a £50m bonus. Christian Aid’s distortion only harms the chances of achieving genuine change.  

UKAN

Since Make Poverty History, responsibility for UK aid advocacy has lain with the UK Aid Network (UKAN). It has been at the centre of all major UK aid advocacy work apart from Christian Aid’s ‘Stop Paying for Poverty’ campaign. On its website it is explained that UKAN “continues to have concerns” with “UK practice around conditionality”, including that “The UK government still commonly aligns itself with the policy frameworks of the World Bank and the IMF, who continue to routinely apply economic conditionality.”[33] However, this concern has not resulted in any good quality campaigning or advocacy aimed at addressing these concerns. Improvements in aid conditionality has been briefly and vaguely mentioned as part of requests for global agreements on improving the effectiveness of aid, but such mentions are unlikely to have any impact (in fact nor are UKAN’s general requests for global agreements  on improving aid effectiveness, for reasons we cannot go into here but that are fairly obvious).[34]   

Lessons from past campaigns

What is needed is a new aid conditionality campaign by any willing and able group(s), which pays attention to the lessons of the past and follows the following principles:

Firstly, as discussed above, aid campaigners need to explain exactly how they want aid to be provided. For example, campaigners could push for all aid to be channelled through the UNDP. Without making clear exactly how aid should be provided, campaigners are leaving it up to government initiative as to what actions to take. This is a mistake, because as discussed above with regards to the Make Poverty History campaign, without being presented with precise instructions, the government will always take the opportunity to respond to campaigners with delay tactics and half measures. In this regards, campaigner proposals should also include deadlines.

Secondly, if the government responds to aid demands with half measures or delay tactics, campaigners should not accept this in the slightest (as Christian Aid did with their ‘paying for poverty’ campaign). They should simply intensify their demands. For example, if campaigners demand that all aid is put through the UN, and the government responds by stating that it will increase its UN funding, whilst still continuing to provide much aid bilaterally and through the IMF/Bank, this should not be accepted. Campaigners should simply keep making their original demands until they are met.

Thirdly, aid campaigners must acknowledge as UK citizens, we cannot directly influence the aid policies of other governments or multilateral institutions, for reasons discussed above. In this context, when campaigners make aid demands, they must be made solely at the UK government. Thus, if aid campaigners decide to push for all UK aid to go through the UN, they should not try to get an international agreement for all donor countries to do this. They should only aim the demand at the UK government. If the UK government states that it will try to get an international agreement on the issue, campaigners should dismiss such a suggestion as a delay tactic.

Fourthly, aid conditionality campaigners need to give their demands the best chance of being responded to by not mixing conditionality requests in with other requests. Presenting the government with several demands runs the risk of the government ‘cherry-picking’ which demands to respond to, as it did during the Trade Justice Movement campaign. Thus any aid conditionality campaign should ideally be carried out in isolation.

Only a campaign which follows these principles stands a chance of ending the problem of aid conditionality. 
 

David Dominic blogs at www.daviddominic.blogspot.com.