development aid and structural violence: the case of rwanda

Development Aid and Structural Violence:The case of Rwanda

Introduction

Development practitioners and academics increasingly face unanswered ques-tions about the role of the aid enterprise. Questions relate to aid’s weakness inpromoting genuine improvements in the quality of living of the vast majorityof the poor; its top-down, external, and often unsustainable nature; and itsinteraction with the forces of exclusion, oppression, and powerlessness that arethe root causes of continued poverty and disempowerment. The ‘game’ ofdevelopment, played out in an almost ritualistic manner between governments,bilateral agencies, and international organizations (with increasing NGO par-ticipation), often contributes to exclusion, inequality, frustration, cynicism, anda potential for conflict.

The case of Rwanda is extreme, both because of the horrific nature of the vio-lence, and because of the fact that, almost up to the last day, Rwanda was con-sidered by most people in the development community to be a model developingcountry, at least by African standards. What does ‘development’ mean if acountry that is seemingly succeeding so well at it can descend so rapidly intosuch tragedy? And, on a different, more operational, level: how did developmentaid, as well as the presence of an expensive battalion of technical assistants andexperts, interact with the processes that led to genocide?

Development. Copyright © 1999 The Society for International Development. SAGE Publications(London, Thousand Oaks, CA and New Delhi), 1011-6370 (199909) 42:3; 49–56; 009798.

Local/Global Encounters

PETER UV IN ABSTRACT Peter Uvin analyses the case of Rwanda as a contributiontowards understanding how development aid interacts with theinternal processes of exclusion and division that eventually led tothe genocide. He asks: What does ‘development’ mean if a countrythat is seemingly succeeding so well at it can descend so rapidly intosuch tragedy? He focuses on one of the key issues raised by his book‘Aiding Violence: The Development Enterprise in Rwanda’: structuralviolence in relation to both acute violence and development aid.

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Structural violence

Almost three decades ago, Johan Galtung (1969:167–91) wrote about the condition of structuralviolence, in which the poor are denied decent anddignified lives because their basic physical andmental capacities are constrained by hunger,poverty, inequality, and exclusion. Galtung definedviolence as ‘those factors that cause people’s actualphysical and mental realizations to be below theirpotential realizations’. As such, violence of thistype can be built into the structure of a society,‘showing up as . . . unequal life chances’. Oneexample:

in a society where life expectancy is twice as high in theupper class as in the lower classes, violence is exercisedeven if there are no concrete actors one can point todirectly attacking others, as when one person killsanother. (Galtung 1969: 169–171)

According to Khan (1978: 834–57), structuralviolence can take four forms:

• classical, or direct, violence; • poverty – deprivation of basic material needs; • repression – deprivation of human rights; • alienation – deprivation of higher needs.

The latter category includes such intangibles asmental and emotional harm, denial of dignity andintegrity, and the ‘destruction of the individual in apsychological or spiritual sense’. Human needstheorists have long agreed that violence againstbasic non-material needs for identity/recognition,security, and autonomy/self-determination can bebuilt into the structure of society, and may well bethe foremost cause of acute violence in this world(Burton, 1997). And Paul Farmer (1996: 261)writes about ‘insidious assaults on dignity, such asinstitutionalized racism and sexism’, adding that‘for many [Haitians], life choices are structured byracism, sexism, political violence, and grindingpoverty’.

Here we define structural violence as consistingof the combination of extreme inequality, socialexclusion, and humiliation/assaults on people’sdignity. The concept thus includes attention to themore social and spiritual dimension of people’slives, unlike that of development, which has toooften been reduced to the economic or physical

aspects of life. It tries to capture in a holisticmanner the meaningfulness and dignity of life asseen by people themselves.

Structural violence in Rwanda

Notwithstanding positive macro-economic indi-cators, Rwanda has been characterized for decadesby a high degree of structural violence; during theyears prior to the genocide, this structural violencegreatly intensified. This reality contrasted sharplywith the dominant image of Rwanda, shared bydonors and government officials alike, of a countryin which development was proceeding nicely,under the capable leadership of a free-market ori-ented government.

Contrary to appearances, Rwanda was charac-terized by great inequality of both assets andincome. According to the 1984 National Agri-cultural Survey, approximately 15 percent of thefarmers own 50 percent of the land; at the sametime, 26 percent of the population has becomelandless; most of the farmers in the middle livebelow subsistence. Although Rwanda has a policythat forbids the purchase of land by those withthree or more hectares, farmers have been able tocircumvent that through long-term leases, or bybuying in black markets. Data from André andPlatteau (1995: 22) for a particularly denselypopulated region show that land sales constituteapproximately 30 percent of all land owned byhouseholds; up to 65 percent of these sales are dis-tress sales.

Like elsewhere in Africa, the majority of these landpurchases are not by small farmers who throughsheer hard work manage to buy a few acres more,but by ‘big men’ with money earned outside agri-culture in government and aid agency wages orcommerce. Erny and many others describe the popu-lation as ‘extremely unhappy with the accumulationof land by the privileged of the regime and the consti-tution of large pastoral domains’ (1994: 80). Thesituation in Rwanda, where almost all the poordepend on agriculture and where public policyrenders migration to the city or employment in theinformal sector nearly impossible, leaves people withlittle hope for the future, and with no possibilities ofescaping extreme poverty.

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Income inequality has grown faster, and ishigher, than asset inequality. Data by Maton(1994) suggest that the income share of the richestdecile in Rwanda has increased from 22 percent in1982 to 52 percent in 1994. And according toMarysse and his colleagues (1993), in a ruralregion of the Province of Butare, the 20 percentrichest earned 66 percent of all income in 1992. Atthe same time, 43 percent of the households spentnothing on education, while one-fifth had nothingleft for health care. The same holds for salaries inthe formal sector. According to 1988 Ministry ofthe Plan data, the lowest paid 65 percent of allpublic employees earned less than 4 percent of allsalaries, while the share of the top 1 percent was45.8 percent. These data do not include the well-known salaries and lifestyles of technical assistantsand consultants, which are significantly higher stillthan those of top civil servants, and hundreds oftimes higher than those of farmers. They also donot include, by definition, illegal earnings fromsmuggling, corruption, and the like, accruing tothe major dignitaries of the regime.

All in all, approximately half of all Rwandans areultra-poor, i.e. incapable of feeding themselvesdecently or investing productively. Up to 40 percentmore are poor, while 9 percent are non-poor, andperhaps 1 percent are positively rich. The latterconsist of a few thousands of mostly foreign tech-nical assistants and experts as well as a small eliteof local ‘big men’ using their state and aid connec-tions for rapid enrichment. It is this latter obser-vation that brings us to the next element ofstructural violence, i.e. social exclusion.

Social exclusion can be defined as a property ofsocieties in which ‘the rules which enable and con-strain access and entitlements to goods, services,activities and resources are unjust in the sense thatcertain categories of people are denied oppor-tunities which are open to other persons who arecomparable. Social exclusion is a property ofsociety if racial, sexual, and other forms of dis-crimination are present, if the markets throughwhich people earn a livelihood are segmented, or ifpublic goods, which in theory should be available toeveryone, are semi-public’ (ILO/UNDP 1996: 11).In Rwanda, like elsewhere in Africa, social exclu-sion was deeply embedded in the functioning of

society. In Rwanda, this exclusion was foremost ofa social and regional nature, with ethnicity cominga distant third. Such social exclusion processes canbe seen at work in development projects, as wit-nessed in studies by Lemarchand (1982) andmyself (Uvin 1998).

Clientelism, corruption, and abuse of power con-stantly intervene in project execution, determiningmuch of their impact on poverty, inequality, andexclusion. This starts at the drawing board of theproject, when decisions are made on where tolocate projects. According to some data, from 1982to 1984, nine-tenths of all public investments – themain proportion of it financed by development aid– was in the four provinces of Kigali, Ruhengeri,Gisenyi, and Cyangugu (the first is the capital, theothers are provinces in the North), while Gitarama,the most populous province after Kigali, received0.16 percent and Kibuye 0.84 percent. This is thesame pattern of regional inequality observed byReyntjens (1994: 33), who writes that more than athird of the 85 most important government pos-itions, as well as the quasi-totality of directionfunctions in the army and the security apparatus,were held by people from Gisenyi, the president’snative province.

The wheels of the machinery of social exclusionare further oiled when project-related jobs are allo-cated to the well-connected; when project employ-ees use project cars, buildings, and work time forpersonal purposes; when farmers are required topay kickbacks to get credits and when these creditsgo to the family members and friends of the projectemployees; and when significant proportions ofimproved or reclaimed land end up in the hands oflocal administrators, political cadres, provincialcivil servants, military men or traders, etc. Thewheels turn further when, even if such abuses arediscovered, no sanction follows. The number ofcorrupt administrators promoted to better jobs andunprofessional or unethical managers protectedagainst all evidence and eventually given betterpaid positions, for example, is much larger than thenumber of those who receive punishment. In thisrespect, it is instructive to look at the population’sattitude toward development projects. Anyone whohas worked in Rwanda will agree that distrust isprobably the predominant attitude, combined with

Uvin: Development Aid and Structural Violence

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lack of involvement, if not outright resistance.Thus a team of World Bank experts (1987: 12–13;27) writes with a straight face:

the local population does not, in general, question thenature of the projects to be carried out, provided,

• they participate as paid labour (thereby earning extracash income);

• land developments do not affect their farm holdings(requisition of land or encroachment for infrastruc-ture or other works);

• the works can be reversed (erosion control measures);and

• most of all the projects do not involve compulsory par-ticipation in the form of labor or result in heavy finan-cial charges.

This paragraph should provoke some very seriousthinking: it states quite correctly that most poorpeople manage to live with/survive developmentprojects and the associated administration as longas these projects do not hurt them or force them toparticipate. The main merit of projects for poorpeople seems to reside in the fact that they create aplethora of (temporary) salaried jobs. This is a farcry from the original intentions of the developmentmission.

On occasion, people’s sense of alienation and dis-content with the way the development systemworks goes beyond passivity and distrust to moveinto active resistance. Indeed, there are many docu-mented cases of farmers destroying project realiza-tions supposed to benefit them, such as wells,electricity generators, reforestation areas, andother project-created infrastructures. Other docu-ments report farmers invading uncultivated landsowned by churches or dignitaries of the regime.Some technical assistants have told me of stonesrepeatedly thrown on their vehicles by angryfarmers. As a former Rwandan student of minewrote,

this resistance denotes a sense of disapproval, of indig-nation by people against the humiliation that is inflictedupon them in the treatment of ‘their problems’ and in thesatisfaction of ‘their needs’ . . . and denounces the derail-ment of the integrated rural development programmes.

From the moment, in mid–1990, that multipar-tism was allowed and the control by the single partyrelaxed, peasants increased their acts of vandalism,

defiantly pulling out coffee plants, destroying anti-erosive structures on their own lands, and invadingcommunal and project demonstration areas as wellas reforestation areas. As a 1992 USAID reportnotes:

in the last 2 years, . . . people have attacked local authori-ties for launching development projects that brought littleor no benefit to the community, for being personallycorrupt, and for being inaccessible to and scornful of citi-zens in general. . . . Those who felt themselves injured bypast communal decisions on such matters as land-holdingare taking matters into their own hands to reclaim theirrights. People are refusing to do compulsory communitylabor and to pay taxes. They are refusing to listen to theburgomaster and even lock him out of his office or blockthe road so that he cannot get there. (USAID, 1992)

During the chaotic months of the genocide, therewas further vandalism, including the complete andsystematic destruction of most developmentproject housing complexes, offices, storage places,and experimentation fields.

The latter quote’s mention of officials’ scornfulattitude to farmers brings us to the third element ofstructural violence, i.e. humiliation. Prejudiceexisted in Rwanda not in one but in two forms. Onewas the official, racist ‘Hutu’ ideology, designatingall Tutsi as evil, dangerous, cunning, and intent onpower; this racism, in its most radical form, consti-tuted the moral basis for the genocide. The other isthe prejudice of what are locally called the evolués –the urban, educated, modern, ‘developed’ people –versus their backward, rural, illiterate, ‘underdevel-oped’ brothers. Some observers have written abouta ‘fourth ethnic group’, that incorporates all thosewho have acquired an education and a Europeanknowledge and who tend to denigrate the rural wayof living. This group has a lifestyle that is radicallydifferent from the majority of the population. It istheir lifestyle, culture, language, and dress code thatis upheld as the only desirable, modern one. For thefew who have acquired it, it accompanies an oftenextremely condescending, rude, and manipulativeattitude toward the masses. Even family membersare treated as inferior and their habits oftenridiculed. As Ntamahungiro writes,

A bad habit has installed itself in our mores, in which therich, the powerful, the civil servant, the educated personalways has priority over the poor, the weak, the


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non-educated, the ‘non-civil servant’. This can beobserved in court, at the doctor, in the administrationand even in taxis. . . . This lack of respect towards peas-ants manifests itself amongst others in the way they areaddressed. The are spoken to in a commandeering tone,often with disdain. They are required to behave as inferi-ors, to make themselves very small. (Ntamahungiro,1988)

A large part of the population has internalizedthese values, accepting this lifestyle as the only‘good’ one, and judging its own fate as primitive,inferior, and extremely undesirable. Little is left ofthe ‘traditional’ pride of the African farmer in hisculture, in Rwanda as elsewhere. Most farmers,especially the young, consider the need to farm ademonstration of failure and lowness, and wouldgive up farming immediately to become a simplesentry, cook, or, especially, driver, in any develop-ment project, and to live in the city.

In addition, relations between the administrativeand technical state system and the population inRwanda were vertical and authoritarian, making italmost impossible for ordinary people’s voices to beheard. State personnel, whether agriculturalextension agents, health personnel, livestockofficers, etc., tend to be ill-trained and largely inca-pable of doing more than relaying messages fromabove. They, like their superiors, typically displaycondescending attitudes toward most farmers, ifthey do not seek to avoid meeting them at all. Thisis typical for Africa, but, given the omnipresence ofthe state and the development machinery inRwanda – much more so than in other Africancountries – it led to an almost military styledevelopment approach, an ‘encadrement’ on theverge of forced labour.

From structural to acute violence

Structural violence promotes explosions of acute,physical violence, whether in its organized com-munal/nationalistic forms, or in its more diffuse,individualistic criminality/domestic abuse mani-festations. There are a number of processes that doso, and here we will focus on those that facilitatecommunal violence. All components of structuralviolence promote despair and cynicism. Socialexclusion undermines the moral fabric of society

through impunity on the one hand, and loss ofcredibility and legitimacy on the other. Humiliationcreates a need for regaining self-respect, often donethrough scapegoating and prejudice.

If there is only one point that almost all people inRwanda are willing to agree upon, it is probablythat impunity was, and is, one of the key under-lying problems in society. There were two types ofimpunity in Rwanda, and each contributed to vio-lence in different ways. One was the well knownand oft-discussed impunity enjoyed by the perpe-trators of violence. Before 1994, the organizersand perpetrators of violence were basically neverpunished – not surprisingly, as they usually workedclosely with the powers-that-be. It is widely felt thatif this kind of impunity for grave human rights vio-lations does not end, the cycle of violence inRwanda will continue, for unpunished violenceprovokes further violence. This is the main reasonfor significant donor investment in the judicialsector in post-genocide Rwanda.

But there existed in Rwanda, as in many coun-tries, a second kind of impunity, which was amatter of daily life and worked hand-in-hand withthe process of exclusion. Where judicial proceduresoften see the highest bidder prevail; where entryinto secondary and tertiary education is the resultof money and influence rather than knowledge andperseverance; when the best jobs are allocated noton the basis of competency but connections; andwhen cases of manifest incompetence or abuse ofpower often end in promotion of their perpetrators,people lose their faith in the system, becomecynical, and are easily tempted to break laws them-selves.

Social exclusion leads to an accumulation ofanger and cynicism directed at the institutions andideologies of the state and the aid system, for it isthey who embody the development discourse thathas lost its meaning, who transmit the humiliation,and who benefit from the processes of exclusion. Asa former technical assistant from the ILO in Kigaliadmits with rare candor:

our projects tell the farmers and artisans that if theyorganize and work hard, they will develop. But what is forthese people the real-life model of success? . . . Who is theperson that becomes wealthier fast? . . . Most of the time,the person who becomes richer did not have to join


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cooperatives, did not have to attend training sessions, didnot need project credit. He became richer very fastbecause he had ‘friends’ in the right places, and becausea little present given can always lead to a little presentreceived. In that case, with our development model thattakes so much time and effort, do we have any credibilityat all?

In addition, when people are treated in a humiliat-ing and prejudicial manner, when they are made tolose their self-respect, the result is frustration andanger, as well as a strong need to regain self-respectand dignity. Recourse to ethnic identity, scapegoat-ing, and the projection of hostility onto weakergroups constitute important effects of structuralviolence. As Staub explains elsewhere:

For many people, the hatred of ‘the Other’ served tocombat the low self-esteem due to chronic unemploy-ment and squelched aspirations; these young, frustratedmen were the ones most vulnerable to the kind of ethnicappeals that led to genocide. (Staub, 1990: 47–64)

By way of conclusion, the notion of structural vio-lence allows us to understand the little people whoexecute the acute violence – the adolescents whoeverywhere, from Rwanda to Liberia, are the firstones to do the killing and to be killed; the ordinaryfarmers who take up arms against their neigh-bours; the women who betray other women. Struc-tural violence, defined as the constant andhumiliating reduction in the physical, intellectualand social life chances of people, tells us about howdaily life becomes characterized by constraint andforce – not of the gun (although that is usuallynever too far behind), but of biased structures andpractices. It makes us understand how people’ssense of self-respect is reduced, their acceptance ofthe rules of decency and good society put into ques-tion, their knowledge base reduced to slogans. Inmany ways, structural violence thus lays thegroundwork for acute violence.

Furthermore, structural violence lowers the bar-riers against the use of violence. As the norms ofsociety lose legitimacy; as people’s knowledge baseis reduced to slogans; as progress becomes a mean-ingless concept; as communities are riven by con-flict and jealousy; as people’s sense of self-respect isreduced; and as segments of society show theircontempt for the rules of decency as well as for

farmers, people become increasingly unhamperedby constraints on the use of violence to deal withproblems.

In the specific case of Rwanda, genocidal vio-lence emanated from a racist/genocidal ideologythat, in turn, fed on two basic structural processes,one emanating from the top, and one from thebottom. For decades, anti-Tutsi racism had servedas a deliberately maintained strategy of legitimiza-tion of the powers-that-be, and was kept alivethrough a systematic public structure of discrimi-nation, in which the ‘Tutsi problem’ was neverallowed to be forgotten. Under threat by politicaland economic processes, parts of the elite increasedtheir use of the old strategy and effectivelymanaged to spread it throughout society.

At the same time, racist prejudice was a meansfor ordinary people, subject to structural violence,to make sense of their predicament, to explain theirever-growing misery through projection andscapegoating. State-supplied racism provided poorHutus with a sense of value, as well as an ‘expla-nation’ for the mal-development they faced daily intheir lives. As Simpson and Yinger stated in theirseminal work on prejudice:

the designation of inferior groups comes from those ontop – an expression of their right to rule – as well as fromfrustrated persons often near the bottom, as an expres-sion of their need for security. (Simpson and Yinger,1953: 83)

In Rwanda in the 1990s, the interaction betweenstructural violence and racism created the con-ditions necessary for genocidal manipulation bythe elites to be successful. It is the unique combi-nation of these three factors that explains theRwandan genocide. Structural violence is whatprovoked a need for scapegoating among ordinarypeople; the existence of longstanding racism iswhat allowed parts of the elite to build a genocidalmovement on the basis of his need. Without long-standing racism, we would have found not geno-cide but ‘ordinary’ communal violence in Rwanda(as in so many other places in Africa). Without elitemanipulation, structural violence could have led tomore diffuse, anomic, modes of violence such aspetty criminality, sorcery, domestic abuse – all ofthem also increasingly widespread in Africa.


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The role of the aid enterprise

What is the role of development aid in this? Thisquestion is not easy to answer. One can begin byobserving that the development aid system stillneglects most of the non-economic aspects ofdevelopment in favour of a narrow economic-tech-nical approach. It does not include addressinghuman rights violations, income inequality,authoritarianism, humiliation, fear, or persistentimpunity in daily life as part of its core mandate.There are little or no working relations between thedevelopment aid system and organizations dealingwith these issues, such as political movements,human rights organizations, or unions. Even in the1990s, when these issues became very visible inRwanda, the development aid community by andlarge continued its own trajectory, unable torethink its mission. Of course, this wilful ignorancedoes not make these issues disappear, nor does itlimit their impact on development, even narrowlydefined. Rather, it allows the processes of exclusionand humiliation to continue unabated, if not tobecome strengthened, to the greater pleasure of

those benefiting from them. Hence, much develop-ment aid helps to lay the groundwork for furtherinequality and mal-development, as well as struc-tural and, eventually, acute violence.

Rhetoric notwithstanding, most of the develop-ment aid system also continues to function alongtop-down, externally defined lines, bypassingpeople’s own creativity, capacities, histories, andsense of value. At the same time, development aidgreatly contributes to social inequality, bothdirectly, by its own spending patterns which verylargely favour the wealthier strata of society, andindirectly, through its support of mechanisms ofexclusion and clientelism. All this goes hand inhand with the functioning of the state system that,for political and ideological reasons, is highly top-down, authoritarian, inequality promoting, andignorant of local dynamics. Thus the ideologicaltenets of the ‘developers’ and the political dynam-ics of the powers-that-be join in defining develop-ment largely without people’s input, without muchrespect for poor people, and often without muchbenefit to them.


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References

André, C. and J.Ph. Platteau (1995)Land Tenure under UnendurableStress: Rwanda Caught in theMalthusian Trap. Namur: Centrede Recherche en Economie duDéveloppement, Faculty ofEconomics, University of Namur.

Burton, J.W (1997) ViolenceExplained: The Sources of Conflict,Violence and Crime and TheirPrevention. Manchester:Manchester University Press.

Erny, P. (1994) Rwanda 1994. Paris:L’Harmattan.

Farmer, P. (1996) ‘On suffering andstructural violence – A view frombelow’, Daedalus, 125.

Galtung, J. (1969) ‘Violence, Peace,and Peace Research’, Journal ofPeace Research, 6(1).

Khan, R. (1978) ‘Violence andsocio-economic development’,

International Social Science Journal,XXX(4).

ILO/UNDP (1996) Overcoming SocialExclusion. A Contribution to theWorld Summit for SocialDevelopment. Geneva: ILO.

Lemarchand, R. (1982) The WorldBank in Rwanda. The Case of theOffice de Valorisation Agricole etPastorale de Mutara (OVAPAM).Bloomington: University ofIndiana, African StudiesProgramme.

Marysse, S. et al. (1993)Appauvrissement de la populationrurale et ajustement structurel:causalité au coincidence? Le cas deKirarambogo (Rwanda). Antwerp:Centre for Development Studies.

Maton, J. (1994) Développementéconomique et social au Rwandaentre 1980 et 1993. Le dixiemedécile en face de l’Apocalypse.Ghent: Faculty of Economics, Unit

for Development Research andTeaching, State University ofGhent.

Ntamahungiro, J. (1988) ‘Eloge dupaysan rwandais’, Dialogue,Sept.–Oct., 130.

Reyntjens, F. (1994) L’Afrique desGrands Lacs en crise. Rwanda,Burundi: 1988–1994. Paris:Karthala.

Simpson, G.E. and J.M. Yinger(1953) Racial and CulturalMinorities: an Analysis of Prejudiceand Discrimination, 3rd ed. NewYork: Harper and Row.

Staub, E. (1990) ‘Moral Exclusion,Personal Goal Theory andExtreme Destructiveness’, Journalof Social Issues, 46(1).

USAID (1992) Democratic Initiativesand Governance Project.Washington, DC: USAID.

Uvin, P. (1998) Aiding Violence. TheDevelopment Enterprise in Rwanda.

West Hartford, CT: KumarianPress.

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Development. Washington, DC:South, Central and Indian OceanDepartment.


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Global Linkages, Vulnerable Economiesand the Outbreak of Conflict1

Introduction

During the past 20 years one half of the poorest countries have been seriouslyaffected by civil strife or war, one-third of them since 1990. The incidence ofthese conflicts is increasing: they are predominantly within rather thanbetween established states, and often involve situations of state failure or terri-torial secession. Only recently have studies turned to the impact of armed con-flict on economic and social conditions (FitzGerald and Stewart, 1997: 1–10),and little or no attention has been paid to the role that changes in the worldeconomy might play in this process.

The historical legacy of the colonial independence struggle on the one hand,and the geopolitics of the Cold War on the other, continue to produce conflicts asthe state structures created during the past 50 years adjust to a new worldgeopolity, of which economic globalization is an integral part. The high depen-dence of poor economies on international commodity markets and development



VALP Y F ITZGERALD ABSTRACT Economically vulnerable countries appear to be prone toarmed conflicts which exacerbate poverty and make sustainableeconomic development difficult. Changes in the world economyseem to have considerable effects on the outbreaks of such conflicts.Valpy FitzGerald looks at the effects of the globalization process –trade liberalization, commodity price trends and capital mobility –and the process of international development co-operation – aidprogrammes, debt overhang and adjustment policies – on armedconflicts. He argues that the economic uncertainty, weakened statesand wealth dispersion which arise from international economicintegration may exacerbate the insecurity and resentment which lieat the root of armed conflicts. He suggests that internationaleconomic action might reduce the likelihood of armed conflict inthe more vulnerable of least-developed countries, even if it is notpossible to identify in advance where conflict is most likely to breakout.

assistance means that shifts in these processes leavethem particularly vulnerable to the instability ofeconomic globalization.

Levels of poverty, declining per capita incomes,or ‘economic regression’ – and thus by extensiondeteriorating terms of trade or the burden of debtservice – are not in themselves the causes of con-flict. Rather, it is sudden changes in economic cir-cumstances that give rise to economic uncertaintyamong social groups, weaken the capacity of thestate to deliver the public goods which underpin the‘social contract’, and create a perceived injustice onthe part of particular groups or regions.

The political economy of theoutbreak of conflict

The question of the direct relationship betweeninternational economic arrangements and domes-tic conflict is assumed to result indirectly fromdomestic social conditions which may be related tothe process of integration into the world economy.

The international financial agencies – particu-larly the World Bank (World Bank, 1996) and theIMF (IMF, 1997) – appear to claim that there is apositive relationship between integration into theworld economy and the reduction of conflict. Thisis attributed to two expected outcomes of structuraladjustment as a country becomes integrated intothe world economy: an increase in economicgrowth which will generate more remunerativeemployment and permit greater expenditure onsocial services in the long run; and a process of pri-vatization which reduces the discretionary powersof the state. This should be reinforced by a refocus-ing of welfare programmes through the targetingof limited public expenditure on the poor alone.Conflict is seen as arising in cases of ‘state failure’associated with corruption, rent-seeking behav-iour, neglect of small-scale agriculture, govern-ment control over the economy and financialrepression – in other words, the problem is domes-tic and political in origin, although aid donors canuse conditionality appropriately in order to makethe state more efficient and democratic.

This contrasts sharply with the view of other UNagencies – such as the UNRISD (1995) and theUNCTAD (1996) – to the effect that rapid integration

into the world economy can actually reduce socialcohesion and make conflict more likely. The mechan-isms identified are the creation of open unemploy-ment as firms attempt to recover competitiveness byshedding labour and governments reduce the civilservice in order to service debt on the one hand; andthe reduction of social services coverage generallyand especially of marginal social groups or ruralregions as the state is scaled back. The process of pri-vatization can actually worsen this situation as statemanagers become private entrepreneurs. Moreover,income distribution tends to worsen as the result ofglobalization and there is a weakening of solidaritywithin communities and neighbourhoods. Underconditions of social regress effective and legitimizedgovernment becomes almost impossible as the statebecomes increasingly less relevant to the satisfactionof their everyday needs.

Of the 48 ‘least developed countries’ (LLDCs)defined as such by the United Nations,2 24 haveundergone serious conflicts during the past threedecades. The World Bank’s somewhat different ‘lowincome countries’ (LIC) group3 – defined by GNPper capita of less than US$725 in 1994 – includes64 countries, of which over one-third have experi-enced serious conflict. Some countries in theBank’s ‘lower middle-income’ group are also con-flictive, such as Colombia, Peru, Guatemala,Lebanon, Iraq, Iran and Angola, and even uppermiddle-income countries such as Yugoslavia; butthe main grouping of conflict-prone countries isclearly among poor economies.

Even if difficult to ascertain,4 the main causaleconomic factors in conflict creation in vulnerableeconomies are three.

First, the sudden widening of disparities inincome or wealth within a society, which can ariseboth from the impoverishment of some groups orthe enrichment of others. The disparities can be ver-tical (between social groups), leading to what issometimes termed ‘class conflict’, or horizontal(between territorial groups), which leads to‘regional conflict’. In both cases the creation of a col-lective sense of injustice and resentment on the partof prejudiced groups undermines the legitimacy ofexisting institutions and makes violence appear asthe only solution; but vertical tensions usually leadto attempts to overthrow the government, while


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horizontal tensions lead to attempts at secession andthe creation of an independent state.

Second, an increase in uncertainty as to theeconomic prospects of dominant or subordinategroups (or both), in terms of real incomes and assetownership (including access to commonresources), which generates collective insecurity.This sense of insecurity may be subjective but isnone the less perceived as real, and increases thetendency towards aggressive behaviour in wealthaccumulation (that is de facto or de jure theft) and‘self defence’ which challenges the legitimacy ofthe state monopoly over military force. Again, thiscan lead towards either a collapse of central auth-ority or the constitution of separate territorial enti-ties, but it can also lead to suppressed conflict underan increasingly authoritarian state.

Third, the weakening of the economic capacityof the state to provide public goods, which under-mines the legitimacy of the existing administrativesystem. Lack of financial resources can mean thatthe government no longer provides all social andterritorial groups with an acceptable access tosocial services and economic infrastructure, normediates between ‘winners’ and ‘losers’ in theeconomic development process (particularlyduring major economic reforms) by appropriateresource transfers, nor even maintains law andorder. In consequence, the ‘social contract’ nolonger receives wide support, and allegiance istransferred to those actors (ranging from securitycompanies to warlords) who can apparently fulfilmore limited ‘group contracts’.

It should be stressed that it is the interactionbetween these three factors, in economies whichare already vulnerable, which brings about armedconflict. A weak state in an economy withoutsudden changes in equity or security can survivefor long periods without conflict – as was the casein Rwanda or Cambodia after independence. Incontrast, a strong state perceived as broadly ‘fair’ bythe majority of the population (and by the poor inparticular) can survive considerable shocks andgroup insecurity (as has been the case in Tan-zania) or even attempts at secession (such as in SriLanka), while in other cases legitimate states withlow inequality can be effectively destabilized byexternal intervention which increases insecurity

(as in the case of Mozambique or Nicaragua). Mytask in this article is to explore the extent to whichthe international economic linkages of vulnerableeconomies affect these three conditions.

Trade, investment and conflict

Exports, imports and foreign investment are closelyrelated to increasing vulnerability and the proba-bility of conflict leading to humanitarian emergen-cies. Inequality can be increased by changes in theexport sector. Generally, development economistsassume that the primary export sector is morelabour intensive than others,5 and thus the slowgrowth of exports in vulnerable economies pre-sumably increases income inequality by failing tocreate employment. Three other consequences ofexport fragility are important in vulnerableeconomies. First, slow growth in real exportincome means slow GDP growth and rising aiddependency, so that with a rapidly rising popu-lation the employment prospects for most of thepopulation are extremely poor – further increasingthe dispersion of incomes and making ‘parallel’activities such as smuggling, drug-running, pettycrime, prostitution and membership of armedgangs increasingly attractive.

Second, the specific territorial location ofprimary export capacity – often in remote or under-developed regions of the country – means thatchanges in prices (or new investment projects) canlead to sudden fluctuations in the regional distri-bution of income, leading to strong feelings ofinjustice among other regions other than the one tobenefit, or a feeling of marginalization and resent-ment if the movement is negative. Where the statehas a limited capacity to redistribute incomebetween regions in order to buffer large losses ofincome and employment, or to otherwise compen-sate less favoured regions, the legitimacy of theexisting order can be undermined or pressure forsecession can emerge.

Third, the instability of export incomes not onlycauses uncertainty among producers and thus lowinvestment and a propensity to capital flight. Mostvulnerable economies are highly reliant on exporttaxes and royalties, which, as they are primaryexporters, is essentially a negotiated share in

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natural resource rents in return for exploitationrights rather than a profits tax as such. Fluctua-tions in fiscal income due to the volatility of globalcommodity prices make regular planning of theprovision of infrastructure and social servicesextremely difficult to attain, while the almostcasino-like nature of fiscal income inevitablyencourages short-term expenditure decisions andfosters corruption.

The immediate effect of imports on inequalityderives from the effect of import compression onthe distribution of imported inputs and consumergoods, which tend not to reach rural areas andlower income groups as a consequence of govern-mental allocation decisions for official imports andthe high market cost of unofficial imports. The indi-rect effect of these shortages on the capacity of thestate to provide basic social services and ensureadequate food supplies in remote areas then has theconsequence that local support for the administra-tive system is eroded, thus weakening the state atthe same time as regional inequality is increased.6

Further, the low level of imports not only leads toloss of tariff revenue but also to falling productionin the ‘fiscal industries’ (refining, alcohol, tobaccoand soft drinks) which also undermines therevenue base of the government.

Trade liberalization under these circumstancesof extreme foreign exchange shortage is unlikely toreduce these inequalities. The composition ofimports shifts towards that dictated by marketdemand, but as this reflects the disposable incomesof better-off urban dwellers – who may indeedrespond positively politically – the real incomes ofthe poor and rural inhabitants can actually fall,causing widespread resentment. This is why, ofcourse, that trade liberalization should be accom-panied by sufficient concessional finance to ensurethat basic needs are met until exports (eventually)recover. Trade liberalization, as in the case of exportprice shifts, can also cause considerable uncer-tainty among particular groups if other groups(e.g. immigrants) are felt to be the main benefici-aries; or among the commercial groups if there is alikelihood of reversal. In principle, trade liberaliz-ation should reduce the discretionary power (andcorrupt income) of government officials, but inpractice it may just mean shifting the rent arising

from import scarcity from the public to the privatesector.7

As much of the import bill is financed by aid,this should allow for the disruptive effects ofimport compression and trade liberalization to beameliorated. However, because aid disbursementsare rarely certain for more than a year or so inpractice, future import levels become highlyuncertain in vulnerable economies. This uncer-tainty has negative effects on both the public andprivate sectors. In the public sector, reliableforward planning becomes impossible and thusthe provision of social services such as health andeducation, as well as vital infrastructure functionssuch as road maintenance, cannot be guaranteedand their quality invariably deteriorates. In theprivate sector, productive investments – even bysmall farmers in (say) pasture improvement –become extremely risky if there is no guarantee offuture input supply. What is more, there is a logicalincentive to buy and hoard consumer durables andnon-perishable food stocks in order to avoid theconsequences of future shortages. In conse-quence, economic activity becomes more uncer-tain and speculative behaviour is encouraged,while longer-term commitments to productionand employment becomes less attractive. All thesefactors inevitably increase the degree of tension inan already fragile society.

The nature of foreign direct investment invulnerable economies is such as to create a con-siderable potential for increasing inequality, risinguncertainty and a weakened state. Whether theseconsequences come about depends to a consider-able extent on the behaviour of the foreigninvestors themselves, rather than any particularpolicy on the part of government. However, allthree types of foreign investors discussed earlierhave no particular shareholder interest in thebroad-based investment required to make theseeconomies less vulnerable. Even basic utilities(such as telecommunications, water, power andhighways) can be provided directly by the investorfor his or her project alone, as can the specificskills required for the labour force. In this theydiffer sharply from the foreign investors inmanufacturing or services in middle-incomeeconomies.


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Debt, aid and conflict

The question that concerns us is whether the waysin which debt is managed and aid distributed affectsocial inequality, economic uncertainty and statestrength, and thus make conflict less likely. There isno necessary connection between aid and debt,which are the two facets of public capital flows tovulnerable economies.

The way in which debt has been re-negotiated inpractice does not seem to have increased privateinvestment or export growth. Government expen-diture compression is likely to increase inequalitiesof access to employment and consumption,although the degree of injustice and resentmentgenerated will depend on the capacity of the stateto redistribute resources ‘fairly’. Probably moreimportant is the uncertainty caused by therepeated re-negotiation of debt and the continuedinsolvency problem. The patent inability to repaythe debt implies that at some future date somemajor fiscal shift and import restrictions will beneeded in order to generate the resources requiredfor repayment, or that default will occur withserious consequences for creditworthiness of thecountry and the firms located there. This uncer-tainty reduces private investment and makessoundly planned provision of public services moredifficult. Finally, the fiscal resources required toservice debt clearly reduce the capacity of the stateto mediate between opposed social groups;although again this could in some cases be com-pensated by reductions in other expenditure cat-egories.

Aid is designed to reduce poverty and strengthensocial service provision, and thus would, prima facie,reduce vulnerability and state weakness. Nonethe-less, high and prolonged aid dependency may notreduce vulnerability unless increased productivecapacity is built up, particularly in the export sector,and regional or inter-group inequalities are specific-ally addressed. In addition, reliance on ODA tofinance the public sector through counterpart fundsreduces the perceived need for tax reform and thusfiscal solvency. The uncertainty caused by thevolatility of effective ODA disbursements has anegative effect on public services provision and evenon the extent of corruption. These problems do not

arise by design as aid donors clearly wish to reducevulnerability and the probability of conflict in prin-ciple, although the small proportion of total ODAallocated to poor countries does throw some doubton the priority given to this goal in practice. Rather,it is the consequence of the lack of effective coordi-nation between donors and the lack of an effectiveapproach to economic policy conditionalitydesigned to address these problems specifically.

Conclusions and policyimplications

Even the restricted list of vulnerable economiescontained in the UNCTAD ‘Least Developed Coun-tries’ category contains some 550 million people,while the broader World Bank ‘Low Income Coun-tries’ definition contains over one-third of thepopulation of the globe. The linkages of vulnerableeconomies to the global economy can increaseinequality, uncertainty and state weakness.Current international arrangements are not‘responsible’ or ‘the cause of ’ such conflicts, butthey can exacerbate or ameliorate the domesticpolitical tensions and state failures leading to con-flicts. It is not possible to regard a conflict situationas merely a local problem which the internationalcommunity does its best to resolve. It is a questionof examining the way in which vulnerable societiesare integrated into the global economy and ensur-ing that this does not actually increase tensionsbetween social groups or geographical regionswithin the national territory and undermine thecapacity of local public institutions to mediateeffectively between the winners and losers duringthe process of modernization.

International linkages can worsen the combi-nation of economic vulnerability and a weak statewhich can trigger off conflict. Economic vulnera-bility is not just a question of low levels of per capitaincome or high ratios of debt to GDP, but rather ofthe degree of perceived inequality between groups,uncertainty as to their respective futures, and thecapacity to resolve social stress by public action.This has also long been the general consensus ofhistorians: rising expectations among key socialgroups and the loss of legitimacy by the existingsocial order, rather than economic deprivation as


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such, has been at the root of most revolutions in thepast (Davies, 1962: 5–19).

The influence of international economicarrangements on armed conflict in poor countriesis due to an increased sense of injustice generatedby the consequences of trade and financial liberal-ization; an increased sense of insecurity generatedby the effect of international market shocks ondomestic income and asset positions; and the effectof aid conditionality on the ability of the state tomediate between conflicting parties. It is clear thatsuch external vulnerability is not just the charac-teristic of those economies affected by armed con-flict.

There is a strong case for reconsidering inter-national economic arrangements and makingspecial provision for vulnerable countries. Thisdoes not necessarily mean a large transfer ofresources to these countries in the form ofincreased grant aid – even if this were to be desir-able it is politically unfeasible. Rather, it means thecreation of special provisions to reduce the effectsof economic globalization on distributive injustice,economic uncertainty and state weakness.

There are two separate tasks here for the inter-national community: on the one hand, to reduce theeconomic vulnerability of poor economies (i.e. toremove them from the ‘conflict prone’ group); andon the other, to ensure that those countries remain-ing in the vulnerable group do not slide into conflict.The first task might seem to be merely that of‘development policy’ in the conventionally acceptedsense of market orientation, macroeconomic stab-ility, investment in human capital and so on. Whilethese may well make up a sufficient strategy for themiddle-income countries, it is far from clear that thisis the best course for the low-income economieswithout sufficient assets or institutions to enter theinternational market directly. Possible internationalpolicy measures include:

• Schemes to stabilize the incomes of primarycommodity exporting LLDCs so as to reduceuncertainty about foreign exchange income;and preferential access to regional and multi-lateral trade arrangements to increase exportcapacity. These should reduce the potential forconflict by stabilizing fiscal income, making

long-term satisfaction of the social entitlementsof citizens possible; and stabilize income andemployment – particularly in primary exportsectors which are crucial to livelihoods in remoteand rural regions.

• The focusing of structural adjustment assistancetowards strengthening export capacity beforeimport liberalization; and the securing of long-term credit to investment before reforming thefinancial sector. This should stabilize incomesand jobs for vulnerable groups in the short term,while reassuring the population as a whole as tothe benefits of integration into the worldeconomy in the longer term – both of whichshould reduce the potential for conflict.

• Establishment of external solvency by cancellingall outstanding official debt, with the conditionthat the fiscal resources released from debtservice are used only for the reduction of mone-tized deficits and net additions to the provision ofpublic health and education. This should havethe effect of not only improving the lot of thepoor and stimulating long-term human develop-ment, but also that of giving greater content tothe ‘social contract’ between the public sectorand all social groups, and thus reducing thepotential for conflict.

• The explicit reorientation of development assist-ance towards reducing inter-group and inter-regional inequality, and towards strengtheningthe capacity of the state to deliver the publicgoods of health, education and security to allcitizens. This would imply the adoption of thereduction of conflict potential (and by extension,the reduction of vulnerability) as the key priorityin development cooperation with poor countries,rather than broader notions of ‘economicdevelopment’ which can disguise redistributionof income and assets between social or regionalgroups which increase conflict potential.

• The international regulation of internationaltrade and investment in ‘sensitive’ commoditiessuch as arms, oil, gems, and timber with a viewto minimizing the destabilizing effects of theseactivities in vulnerable countries. This could beachieved within existing multilateral tradeagreements and the multilateral investmentarrangements currently under negotiation, by


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creating specific transitory conditions for poorcountries.

At present, humanitarian relief is usually mobil-ized after conflict has broken out, and thus has toface collapsed administrative, production andtransport systems as well as large population move-ments leading to health and nutrition emergencies.It is widely agreed that such intervention would bebetter used in preventing such emergencies fromoccurring in the first place. The arguments pre-sented earlier suggest that appropriate inter-national economic measures would have to beapplied to all vulnerable countries as it is notmeaningful to attempt to forecast conflict situ-ations in individual countries with adequate pre-cision sufficiently far ahead to take correctiveaction. In other words, the various ‘early warning’systems can only identify upcoming conflicts whenconditions have deteriorated to such a point that

they are almost irreversible. These arguments alsoimply that the design of humanitarian aid inresponse to conflict-related emergencies shouldtake into account the following considerations:

• Closer coordination between donors in order toensure that the large part of imports that theyfinance directly does in fact bring about povertyalleviation and reasonable inter-group fairnessas condition for further support.

• Careful consideration of the way in which statesand non-state groups are recognized as validrecipients of aid, which provides the most power-ful economic incentive to increase or reduce thepotential for conflict.

• Care that the destabilizing effects of donors’ par-allel interventions in poor countries (in fieldssuch as drugs supply repression) do not under-mine the positive effect of humanitarian assist-ance.


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Notes

1 This article is based on a muchlonger paper written as part of aresearch programme funded bythe MacArthur Foundation,whose support is gratefullyacknowledged.

2 Afghanistan**, Angola**,Bangladesh*, Benin*, Bhutan,Burkina Faso, Burundi**,Cambodia**, Cape Verde, CentralAfrican Republic*, Chad*,Comoros*, Djibouti, EquatorialGuinea, Eritrea**, Ethiopia**,Gambia, Guinea, Guinea-Bissau,Haiti**, Kiribati, Lao PDR*,Lesotho, Liberia**, Madagascar,Malawi, Maldives, Mali,Mauritania, Mozambique**,Myanmar*, Nepal, Niger,Rwanda**, Samoa, Sao Tome,Sierra Leone**, Solomons,Somalia**, Sudan**, Tanzania,Togo**, Tuvalu, Uganda*,Vanuatu, Yemen**, Zaire**,Zambia. Source: UNCTAD LeastDeveloped Countries Report 1996(Geneva, 1996). ((*) indicates

serious conflict since 1970, (**)since 1990.)

3 Burundi*, Comoros*, Eritrea*,Ethiopia*, Kenya, Lesotho,Madagascar, Malawi,Mozambique*, Rwanda*, Somalia*,Sudan*, Tanzania, Uganda*,Zaire*, Zambia, and Zimbabwe* inEast/Southern Africa; Benin*,Burkina Faso, Cameroon, CentralAfrican Republic*, Chad*, Congo*,Cote d’Ivoire, Equatorial Guinea,Gambia, Ghana, Guinea, Guinea-Bissau, Liberia*, Mali, Mauritania,Niger, Nigeria*, Sao Tome, Senegal,Sierra Leone* and Togo* in WestAfrica; Cambodia*, China, LaoPDR*, Mongolia, Myamar*,Vietnam*, Afghanistan*,Bangladesh*, Bhutan, India,Nepal, Pakistan*, Sri Lanka* inAsia; Albania, Armenia*,Azerbijan*, Bosnia*, Georgia, andthe Kyrgyz and TajikistanRepublics in Eastern Europe andCentral Asia; Yemen* and Egypt*in the Middle East; and Guyana,Haiti*, Honduras* and Nicaragua*in Latin America.

4 This point is covered thoroughlyin a much longer and moredetailed analysis presented in theoriginal article (ed.).

5 Although the evidence for this isambiguous: while small-holderexport agriculture presumablydoes have this effect, mines andplantations can actually be lesslabour-intensive than the rest ofthe economy, even compared tomanufacturing.

6 In other words, the ‘socialcontract’ has been broken.

7 Of course the new entrepreneursare often the old bureaucrats!

References

Davies, J.C. (1962) ‘Towards atheory of revolution’, AmericanSociological Review 27 (1).

FitzGerald, V. and F. Stewart (eds.)(1997) ‘War, Economy andSociety’, Oxford DevelopmentStudies (ODS) 25 (1).

IMF (1997) World Economic Outlook.Washington, DC: IMF.

UNCTAD (1996) The Least DevelopedCountries Report. Geneva:UNCTAD.

UNRISD (1995) States of Disarray:the social effects of globalization.Geneva: UNRISD.

World Bank (1996) WorldDevelopment Report. Washington,DC: World Bank.


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The Politics of Aid: Moving towards anattention economy

Taming the global casino

Today, the search for more comprehensive and dynamic models of oureconomies is driven by globalization and electronic markets. Forecasters frommany disciplines such as economics, technology assessment, game theory,ecology, or chaos and complex adaptive system models now agree that equilib-rium models drawn from Cartesian–Newtonian worldviews of a deterministic,‘clockwork’ universe no longer apply. The tightly interactive global economy isincreasingly dynamic – creating a world in a hurricane of change. Nations andinstitutions are restructuring due to such forces.

Many national governments still shirk their responsibilities to their broaderconstituencies in favour of serving the interests of global corporations andfinance. In fact today’s globalization of finance and mega-corporations is a func-tion not only of technology but of this conscious government deregulation ofbanking and finance since the 1980s. This private sector agenda is buttressedby the neoclassical economic policies of the Washington Consensus promotingfurther deregulation, privatization, open markets, free currency exchange andconvertibility, trade liberalization – all equated with the spread of democracy.The US$1.5 trillion daily global currency markets in financial cyberspace nowloom over national leaders ‘disciplining’ their policies instantaneously at thepush of a trader’s computer key. Most market players and global corporationsapplaud this loss of sovereignty. Indeed they lobbied their governments for suchde-regulation.

Citizens worldwide are moving beyond cynicism and apathy to work for



HA Z E L HENDERSON ABSTRACT Hazel Henderson argues that the politics of aid cannotbe divorced from global geopolitics and must be seen in the contextof today’s accelerating globalization. She argues that citizens’groups need to harness today’s communication technologies toexpand and empower an attention economy that can create changein economic behaviour on a global scale.

reforms. A coalition of citizen organizationslinked on the Internet was able to scuttle theOECD’s attempt to impose the MAI – the bestrecent evidence of the power of dedicated, organ-ized citizens. These citizens now oppose attemptsto shift the MAI into the WTO. On the other hand,the United Nations (UN), with 186 membergovernments and a broader charter from ‘We, thepeople’, has achieved in its 50 years a broaderset of global agreements on universal humanrights, employee rights, and environmental pro-tection, while raising humanitarian and develop-ment resources and providing peace-keeping.All these globalizations involve loss of nationalsovereignty and mobilize different nationalconstituencies in the public, private, and civicsectors.

Even for its own players, the global casino needsregulatory harmonization of rules on accounting,disclosure, insider trading, money laundering, etc.Beyond all this, global financial markets need bettersettlement systems and custodial reserve require-ments – indeed a ‘Global Securities and ExchangeCommission’ to deal with future Mexican andAsian-type crises, as the G–7 and US Treasury Sec-retary Robert Rubin have acknowledged. MichelCamdessus of the IMF warned the New York Econ-omic Club in April 1997 that ‘the next Mexico’would start with a banking crisis. In future,investors may not be bailed out, but ‘bailed-in’ toaccept their risks and losses.

Working towards change

Can we not redesign malfunctioning central banksand misguided government macroeconomic poli-cies to close the gap between the rich and poor? Ofcourse we can! This will require building strongcitizenship skills and civic societies in all countriesand cleaning up cronyism and collusion in our cor-rupted western democracies, in Asia and else-where. The social sciences have provided thenow-misused tools of random public opinionsurveys, enabling the location of consensus onpolicies among millions of voters – as effectively asin the local town meetings of yore (Kay, 1998). Wehumans have always been instigators of powerfulmovements for social change towards universal

human rights, democracy, environmentalism,feminism, ethical responsibility for future gener-ations, and socially responsible investing. TheUnited Nations, with its 50 years of global-stan-dard setting, is itself a powerful social innovation.So are business codes of conduct and such NGOinventions as the Costa Rica-based Earth Council’sEarth Charter.

Today, the politics of aid must be seen in thecontext of global struggles – employees, citizens,voters, consumers, farmers and investors versusfaceless mega-corporations, banks, and financialinstitutions. Ambitions of the global privateplayers for their MAI should be subordinated tothe urgent need to regulate investments andcreate a ‘Global Securities and Exchange Commis-sion’ to hold investors, traders, brokers, and allmarket players to the highest ethical principlesand enforceable standards for human rights,labour, and environmental protection. Our electedpolitical leaders and business lobbies can nolonger hide behind the supposed exigencies of‘global competitiveness’. Grassroots global coali-tions are still pressing the WTO, which is largely acreature of global corporations and financialgroups. These special interests manoeuvred theirrespective national governments through earlierGATT rounds. The WTO has moved somewhattoward transparency and lip service to labour andenvironmental issues.

We need to move more rapidly towards capital-izing the clean, greener, more energy-efficienttechnologies that can address sustainable humandevelopment, equity and climate change infundamental ways, beyond ‘end-of-the-pipe’ andother palliative approaches, such as emissionstrading. After the UN Kyoto Climate Conference inDecember 1997, the International Bank forEnvironmental Settlements (Chichilnisky, 1996),mentioned earlier, emerged from the delibera-tions, and will be discussed further in BuenosAires in late 1998. This new bank would be gov-erned by all signatory nations, allocated carboncredits and debits between nations (hopefully, onan equitable, per capita-basis), and eventuallyoversee an electronic derivatives exchange forenvironmental commodities, including water andbiodiversity.


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The new attention economy

In OECD countries we are well into a new era of the‘Information Age’. We are transiting to the Age ofKnowledge, where scarce human time and atten-tion as well as living ecosystems are recognized asmore valuable than money. At the same time, welive in ‘mediocracies’ where a few media mogulsnow control the attention of billions of peoplewhich – for better or worse – has changed politicsfor ever.

In the new Attention Age (Henderson, 1996),we are now living in Attention Deficit societieswhere each of us is bombarded with informationoverload from advertisers, media, politicians,teachers, health providers, not to mention junkmail. The good news is that this is forcing us to lookinside ourselves and ask such basic questions as:What do I want to pay attention to? Who am I andwhat do I want written on my tombstone? Suchbasic defensive reactions will define the growingsectors of our Attention Economies and their inex-orable shift from material goods (measured by tra-ditional GNP/GDP per capita) to services and moreintangible factors in living standards, measured bynew scorecards such as my Country Futures Indi-cators (CFI).1 As our economies dematerialize, itwill be harder for governments to hype goods-basedGDP-growth in the global economy without alsomeasuring toxic wastes, resource-depletion, dirtierand shrinking water supplies, polluted air, unsafestreets, drugs, money-laundering, poverty andglobal epidemics.

In mature OECD countries, the limiting factor isnow time rather than money. There are only 24hours in each day and already, in the USA forexample, the average citizen now spends 9-1/2hours per day (up from 7-1/2 hours in the 1980s)watching TV, movies, etc., or online. If GDPs werere-categorized and re-calculated for the USA andsimilar OECD countries, we would find that theseinformation services sectors are already dominant.For example, mass media and entertainment are agrowing percentage of global trade and tourism isthe world’s largest industry at 10 percent of globalGDP. In response, 28 percent of US citizens are‘down-shifting’ – a form of tuning out – this domi-nant culture of information overload and costly

mass consumption oriented value system. They arechoosing more free time and less money incomeand moving to quieter, less expensive, rural townswhere life is slower and communities are still intact.Consumers are seeking their own (not advertisers’)definitions of ‘quality-of-life’.

These Attention Economy characteristicsinclude concern for more caring, attention-basedhealth services geared to self-knowledge, preven-tion, and wellness, as well as cleaner, ‘greener’products, eco-labelling (e.g. Germany’s Blue Angeland US Green Seal) and the newer ‘social’ seals ofapproval (e.g. CEP SA8000 labour standards) aswell as socially responsible investing, which hasreached US$1.3 trillion in the USA alone. In addi-tion, there are increasing demands for global cor-porations to reduce emissions and employ fairlabour standards and promulgate Codes ofConduct (e.g. the CAUX and CERES and McBricleprinciples). The clash is escalating between indi-vidual value changes, concern with communityand quality of life vis-à-vis market-driven globaliz-ation of finance and trade. This leads to furtherdomestic political turmoil in OECD countries, astheir information-overloaded citizens try to sortout all the issues of globalization. Meanwhile, theirpoliticians’ mixed messages do not help, i.e. theysupport more free trade and globalization and thencite the resulting ‘global competitiveness’ as anexcuse for their own powerlessness to solve domes-tic issues: loss of macro-economic managementoptions, unemployment, shredding of social-safetynets, social and environmental deregulation, taxshortfalls, and budget deficits. Global corporationscontinue to demand tax holidays and more deregu-lation in their location decisions. National govern-ments must soon face up to the new Era ofCorporate Mega Mergers, which further erodenational sovereignty.

The possibilities of cyberspace

As more citizens and businesses move into cyber-space, what are some key broader implications? Letus start with electronic commerce. Most companiesassume that money-based transactions willmonopolize cyberspace through better security,encryption systems, credit card handling, and

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e-cash systems. However, electronic commercedoes not require money-based transactions, butcould lead to pure information based transactions,i.e. high-tech barter. The implications of this areclear: money and information are now equivalent –we are already off the money and gold standardand on the information standard worldwide. Banksthrive on money-based scarcity and, understand-ably, are trying to control cyberspace transactions.Yet billions of dollars of services and goods arebartered each year in the USA by corporations andindividuals on PC-based electronic trading net-works. The implications for the world’s centralbankers are clear: if they fail to improve their cur-rency issuance and monetary management andcontrol operations through overhauling theBretton Woods institutions and making creditwidely available (not just to their cronies in govern-ments and corporations), then they will bebypassed by pure info-based transactions. Today’sstate-of-the-art computer-based markets in cyber-space can make such info-based, high-tech barter-ing efficient with minimal transaction costs.Developing countries will no longer need to earnforeign exchange but can trade all their commodi-ties among themselves – doing three, four, five andsix-way trades with the computers, keeping theaudit-trails as to settlement agreements (which iswhat money is and does).

Nations will need to regain some of their lostsovereignty in order to maintain their politicallegitimacy and manage their domestic economiesdemocratically for the benefit of the majority oftheir citizens. All this will now require inter-national agreements to set up new ‘Bretton Woods-type’ global mechanisms to protect human citizens,employees, and investors as opposed to paperfinancial institutions. A Global Securities andExchange Commission can harmonize securitiesmarkets and their regulations – full disclosure,accounting protocols, safeguards against money-laundering, insider-trading, bear raids (Millman,1995), and the kind of speculations that helpedthreaten even the Hong Kong dollar and other well-managed currencies like Brazil’s real. As the inepti-tude of central bankers and the corruption of‘crony capitalism’ are revealed, I expect a shift to‘safe haven’, high-tech barter transactions both

locally and globally. Local currencies and PC-basedtrading systems are flourishing in the USA,Canada, Europe, Australia, and New Zealand.Indeed, I have used them as leading indicators ofthe incompetence of central banks and macro-economic management authorities in many coun-tries. Let us now look at the taxation issue moreclosely. At the global level, tax evaders are cateredto by increasing numbers of small, island countriesand regimes deliberately offering anonymity,dummy corporations, money-laundering, and tax-havens. Internet-based commerce and intranet-based trading make all of this easier (The Economist,1997: 15). Nation-states, now with chronic budgetdeficits due to tax losses from deregulation, arebreaking up and some predict that there will beabout 1300 countries in a few years time. Con-servative financial advisers are telling investorshow to move offshore, obtain duplicate passportsand dual citizenship, buy small islands and othermanoeuvres to evade taxation.

The continued growth of electronic commerceinto today’s autonomous global casino will con-tinue to erode the power of governments while alsodenying them the tax revenues they formerlyreceived from domestic bricks and mortar com-merce. On the national and micro-level, the taxissue will involve a fight for equitable tax treatmentbetween traditional bricks and mortar businessesand those in cyberspace (Barnett, 1998). There arealready two kinds of web-based businesses: thosewhich link and empower existing bricks andmortar retailers (such as those in the jewelry busi-ness linked to the Colorado-based, worldwidePOLYGON network), and those which bypassbricks and mortar local retail businesses (such asthe bookseller AMAZON.COM). When the Clintonadministration, prematurely pandering to the‘digerati sector’, announced that it would not taxtransactions on the Internet, it heard an instantchorus of complaints from state governments andthe bricks and mortar businesses across the USA,which might thus be condemned to penury. Yet theInternet itself is very fragile, with few voluntarystandard-setters and little legal underpinning toprotect the growing global activity it carries.

Global financial markets are now in a newdomain of volatility on which traders thrive. US


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Federal Reserve Chairman Alan Greenspan haspointed to the preponderance of market playerswho now benefit from this volatility. This continuedvolatility will bring acceleration of the efforts ofG–8 leaders to cobble together a rudimentaryGlobal Securities and Exchange Commission. I alsoexpect central bankers will soon wise up and stopsitting around the same table in the global casinowith profit-maximizing currency traders speculat-ing on large margins. The central banks may decidethat their role as protectors of their nations’ cur-rency demands that they set up their own FXE withthe United Nations and the Bretton Woods insti-tutions as a ‘public utility’ – with specificallydesigned state-of-the-art electronic tradingsystems and audit trails (Kay and Henderson,1999). These could be designed to capture infor-mation on money-laundering and speculativemovements while offering systems for user-fees andcircuit breakers (Cordell, 1997). Instead of relianceon now ineffective open market buying operations,interest rate hikes, and the domestic recessionsthey engender, central banks can use such newtools. There is no reason why central banks cannotmanage their currencies and financial markets asclosely as they manage their sovereign bonds. Chileand China have shown how some restrictions on‘hot money’ work well.

New partnerships for socialinnovation

New partnerships for social innovation are essen-tial. New global systems of political risk-manage-ment are now possible, which can reduce theworld’s military budgets by employing insuranceinstead of weapons. For example, the Global Com-mission to Fund the United Nations has proposedthe United Nations Security Insurance Agency(UNSIA), a public–private–civic partnershipbetween the UN Security Council, the insuranceindustry and the hundreds of civic, humanitarianorganizations worldwide which engage in conflict-resolution and peace-building (Henderson andKay, 1995). Any nation wanting to cut its militarybudget and redeploy its investments into its civiliansectors could apply to UNSIA for a peace-keeping‘insurance policy’. The insurance industry would

supply the political-risk assessors and write thepolicies. The ‘premiums’ would be pooled to fundboth properly-trained peace-keepers and a rapid-deployment, on-line network of existing civichumanitarian organizations ‘on the ground’ tobuild trust and confidence. The UNSIA proposal isnow backed by several Nobel Prize winners, includ-ing Dr Oscar Arias and other leaders, and is taughtat the London School of Economics and othermajor institutions. UNSIA was debated in the UNSecurity Council in April 1996, the first time thatbody had considered the need to bring civichumanitarian organizations into peace-keepingoperations. In May 1996, the Security Councilcalled on the Secretary General to investigate thefeasibility of ‘a rapid-deployment humanitarianforce’ and, in October 1996, the Norwegiangovernment pledged US$1 million to this project.

It is imperative that at least one global TVnetwork be devoted to exchanging information onthe many paths to sustainable development. Globaland multi-cultural public access TV is now a reality.Here Canada has provided global leadership inlaunching WETV (the WE stands for ‘We thePeople’ and the ‘Whole Earth’).2 Citizens in‘mediocracies’ and ‘attention economies’ arealready sick of much of the content of online,cable, and broadcast media. They demand moreuseful content and coverage of communityproblem-solving, higher quality entertainment,education, and children’s programming. WETV,headquartered in Ottawa, is a public–private–civicnetwork with a state-of-the-art multimedia back-bone now in 30 countries with programming forhuman development, allowing self-expression fromNGOs and the grassroots on global and local issues.We are learning that cultural diversity is as impor-tant as biodiversity, and both are the bedrockwealth of nations. WETV is growing through pro-gramme-bartering and partnering with similarmedia. Funded by the humanitarian aid pro-grammes of seven countries, led by Canada’s IDRCand CIDA, WETV has obtained rights to all UN tele-vision programming and that of many other publicservice producers. WETV is now opening someownership to private investors and I am proud to beone of its first. As a member of its Business Advis-ory Council, I am now working to bring in other

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socially responsible investors and businesses whowill accept WETV’s stringent code of conduct andstandards for all private sector partners. Even moreinnovative is WETV’s proposal for equity partici-pation by civic groups and NGOs which provideprogramming for WETV distribution. This kind ofentitlement to shares in WETV can both incentivizetheir audience-building outreach and earn divi-dends when WETV is profitable. Such creativehybrids as WETV are typical of Information Age-based companies and can open up new grassroots,multi-cultural communications far beyond thereach of the Internet alone (still unavailable tomost people in the world).

The politics of aid is transforming into strategiesof global co-operation. Companies and countriesare shifting slowly from obsolete textbook econ-omics, which focus on competitive, money-based,self-maximizing behaviour of ‘rational actors’while ignoring (and thereby punishing) altruism,volunteering, co-operation, sharing and caring.The United Nations Human Development Report in1995 estimated this altruistic unpaid economy as

US$16 trillion worth of production of goods andservices simply missing from global GDP statistics.In all other social sciences, including psychology,sociology, anthropology, game theory, systems anddecision sciences, the full repertoire of humanbehaviour from competition to co-operation isacknowledged and studied. Only in market econ-omics, underlying today’s globalization of financeand trade, is the focus only on competition, i.e.‘win–lose’ strategies. Expanding to a multidisci-plinary focus for both domestic and globalizationpolicies can reveal all the positive-sum, ‘win–win’games, the new public/private/civic partnershipsand new strategies that can help all actors imagine,develop, and build toward a win–win world in thenext century. Humans must now acknowledgetheir responsibility for their active roles in the evol-ution of societies. Today, in a world we have madeincreasingly interdependent, we are learning thedifferences between money and wealth and findingthat we share common interests. In a planetarycontext, morality has simply become pragmatic –poverty can and must be eradicated.


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Notes

1 The first version of CIF is availableas the Calvert-Henderson Qualityof Life Indicators atwww.calvertgroup.com.

2 WETV can be accessed on the webat http: //www.wetv.com.

References

Barnett, Th.W. (1998) ‘Is the NewGlobal Economy LeavingState–Local Tax StructuresBehind?’, presented at theNational Conference on StateLegislators, National League ofCities, National Governors

Association, Annapolis,Maryland, USA.

Chichilnisky, G. (1996)‘Development and Global Finance:The Case for an InternationalBank for EnvironmentalSettlements’, Discussion Paper 10.New York: UNDP.

Cordell, A.J. (1997) The New Wealthof Nations: Taxing Cyberspace.Toronto: Between the Lines.

The Economist (1997) ‘TheDisappearing Tax-payer’, 31 May.

Henderson, H. and A.F. Kay (1995)‘A United Nations SecurityInsurance Agency’, Futures,February.

Henderson, H. (1996) Building a

Win–Win World: Life beyond globaleconomic warfare. San Francisco:Berrett-Koelher; Europe: McGraw-Hill.

Kay, A.F. (1998) Locating Consensusfor Democracy. Americans TalkIssues Foundation.

Kay, A.F. and H. Henderson (1999)‘The Foreign Exchange TradeReporting System (FXTRS)Patents Pending’, Futures,October.

Millman, G. (1995) The Vandals’Crown: How the World’s CurrencyTraders Beat the Central Banks.New York: Viking Press.

Public Support and the Politics of Aid

First the good news

Just before cutting the 1997–8 overseas aid budget, Australia’s Minister forForeign Affairs spoke of ‘a desire by the vast majority of Australians to assist theworld’s poor’.1 The Minister was right: in poll after opinion poll, Australians, aswell as Europeans, Japanese and North Americans, demonstrate that publicsupport for development assistance is high, and has remained high for years. AUNDP survey of opinion polls found that in 1995, on average, 79 percent ofthose polled in 19 different countries supported development assistance (UNDP,1996). This was one point higher than the average in 1983. Even in the UnitedStates, where the average is much lower, recent studies by the University ofMaryland have shown that when respondents are told how little of the federalbudget is actually devoted to aid, the approval rating rises significantly.

Compassion fatigue

Are there other ways of knowing what the public thinks about foreign aid? Obvi-ously, individuals who donate money to NGOs are favourably disposed to theconcept – however vaguely understood – of aid. So if there was a significantchange in donations – downward, say – it might indicate an important changein attitude among supporters. Then, this could perhaps be extended to thegeneral public, a signal, perhaps, of ‘compassion fatigue’. A recent OECD-widestudy has found that in most countries, donations to NGOs over the past five orsix years are up, not down. In the United States, for example, where competitionfrom domestic charities has increased dramatically because of government



IAN SM ILL IE ABSTRACT In his review of public opinion on aid, Ian Smillie arguesthat leadership must listen to the polls showing that many people inthe North do care and want to help the economically poor. Hesuggests that leadership must convince and inspire ordinary peopleas well as the media, that long term self-interest lies in long-termdisaster prevention rather than short-term advantage and short-term crisis management.

cutbacks to social welfare programmes, the incomeof the 11 largest major international NGOs hasgrown. In two cases it did not keep pace with infla-tion, but overall, the total growth between 1990 and1996 represented a healthy 6 percent per annum.

In Switzerland, donations to NGOs declined by7.2 percent between 1992 and 1995. But whendonations for emergencies are subtracted from thetotal, the volume remains constant, and by 1996the total was back to peak-year 1992 levels. InCanada, the cumulative fundraising of the 13largest organizations increased by 11.6 percentbetween 1991 and 1996, more or less keeping pacewith inflation. In Britain, the 35 largest inter-national NGOs raised approximately £250 millionin voluntary contributions from the public in1993. By 1997 the figure had risen almost 20percent, to £300 million. In the face of growingcompetition from domestic sector charitableorganizations, continued international NGOgrowth demonstrates a remarkable resilienceamong supporters of development assistance, andsuggests that despite the ease with which theexpression ‘compassion fatigue’ rolls off tongues,there is little evidence of its existence where thepublic are concerned.

Now the bad news

Support notwithstanding, it is widely concededthat the public knows little about internationaldevelopment or about the connections betweendevelopment there and life here. Politicians knowthat, in general, public support for developmentassistance is a mile wide and an inch deep. Hencethe massive aid cutbacks throughout the OECD inrecent years, accomplished with very little publicoutcry. In this, the media must accept a major shareof the responsibility. The public in industrializedcountries – conditioned by images of disaster, badweather and conflict – has developed an over-whelmingly negative set of beliefs about the plightof the Third World. If it is not famine or flood, it isslums and poverty; if not ethnic cleansing andgenocide, then wanton destruction of the environ-ment and the slaughter of elephants for ivory. Asnegative images and beliefs harden and becomemore firmly established, it is even more difficult to

convince the public that aid can and does work,and that its successes, however obscure, are bothtangible and replicable.

It is, of course, easy enough to blame ‘the media’.James Fallows, who became editor of US News andWorld Report in 1996, says,

Say that coverage is shallow or sensationalistic, andreporters will reply that they are already serving up moreextensive, thoughtful news analysis than a lazy publicwill bother to read. If they don’t feature crime and goreon the local TV news or run celebrity profiles in the paper,they’ll lose their audience to competitors that do.(Fallows, 1997: 53)

Not only has news become completely mixed upwith entertainment, TV has managed to segregateevents into airtight compartments. Fallows talks of‘TV’s natural tendency to see the world in shards. Itshows us one event with an air of utmost drama,then forgets about it and shows us the next’. If itisn’t on TV (as Somalia and Rwanda no longer are),it is not happening.

NGO complicityThroughout the industrialized world, somedevelopment organizations have attempted topresent a different image of development throughwhat is called ‘development education’. Started byNGOs and supported by many governments,development education is no longer a newphenomenon. In many countries there have beenprogrammes to introduce development issues intoschool curricula, with the production of materialfor both teachers and students. Books, films, radio,games, television programmes, video and morerecently the Internet, have all been called into play.But there is a limit to what NGOs can do withlimited resources. In recent years, many govern-ments, including those of Canada and Australia,have dramatically curtailed their support to NGOsfor development education work. US governmentdevelopment education grants, which were bud-geted at US$2.5 million in the early 1990s, had by1998 fallen to US$500,000, less in absolute termsthan the overall amount spent by the governmentof Finland. France and Britain provide virtuallynothing.

For many NGOs, the issue is not how to spendmore on development education, it is how to


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maximize income for overseas programming. Mostnorthern NGOs are not in business to present theirdonors with ideas or to educate the general public.Essentially, they offer small feel-good opportunitiesto ‘do something useful’ for busy people living in acrass, materialistic world. The best example of thisis child sponsorship which, almost unnoticed, hasbecome not only the most successful fundraisingtool in the North, but the pre-eminent lens throughwhich a very large and growing number of north-ern citizens view the South. The number of chil-dren under the sponsorship of three agencies alone– World Vision, Foster Parents Plan and ChristianChildren’s fund – grew from 701,000 in 1982, to4.5 million by 1996. This is probably the most sig-nificant growth statistic in the entire aid business.Most of the donors, however, are not told that‘their’ child needs help because its parents do nothave an adequate livelihood; they are not told thatthe child is the symptom of a problem. They areessentially given an opportunity to be – literally –paternalistic.

GovernmentsThere is little consistency in how governments viewtheir role in contributing to public awareness.Some, such as Sweden, the Netherlands andNorway, invest fairly heavily in it, and have well-targeted strategic plans. Others invest so little thatone might be forgiven for suspecting a plot toundermine public awareness. Understandably,many have as a primary agenda a public relationsrole for their own aid efforts. Public relations,however, should not be mistaken for public edu-cation. Building public support for a general hospi-tal is not the same thing as building public healthawareness. In 1996 and 1997, the top 17 OECDbilateral development agencies spent about US$80million combined on information and developmenteducation. Of this, 40 percent was spent by theNetherlands and Sweden alone. The entire amountspent by all donors combined was about three-quarters of what was reportedly spent by Chanel tolaunch its Egoïste perfume.

The private sectorIn all of this, one might well ask about the role of theprivate sector in building a domestic constituency for

aid. American foundations established by the privatesector – e.g. Ford, Rockefeller and MacArthur – havemade international development research a priorityfor many years, and have contributed to significantinternational achievements in health and agricul-ture. The Pew, Mellon and Carnegie foundationshave contributed to a better understanding ofdevelopment and humanitarian issues.

The World Business Council for SustainableDevelopment was established in 1993 to encouragethinking among business and financial institutionsabout environmental issues. It has demonstratedconvincingly that poverty, war and pollution aresimply bad for business. It is becoming clear toinsurance companies that oil spills, melt-downsand weather-related claims – which are on theincrease worldwide – are not good for businessunless much higher premiums are charged.Bankers are becoming increasingly vulnerable toenvironmental risk, as are investors. Bond ratingfirms and accountants are also beginning to takeenvironmental questions into consideration inadvising their clients on risk calculation (Schmid-heiny and Zorraquin, 1996). There is, the Councilargues, a logical and compelling role for the privatesector in working towards and advocating goodand sustainable development.

These examples, however, are mostly exceptionsrather than the rule. Each year, US$30 billion ormore worth of bilateral ODA is tied to the purchaseof domestic goods and services, most of it in theprivate sector. United Nations agencies and inter-national financial institutions patronize the privatesector extensively. Since its inception, the WorldBank has channelled a quarter of a trillion dollarsto companies that provide goods and services for itsprojects. In 1995 it disbursed US$17 billion, 56percent of it to companies in the industrializedworld. US companies have received US$24 billionin World Bank business over the years (Caufield,1996: 242–3). And yet the private sector is simplyabsent from most of the public discussion about thefuture of aid.

Does it matter?

The answer to the question ‘Does all this matter?’begs another question: ‘Does aid work?’ When this

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question is asked, there should be a furtherquestion: ‘Which kind of aid?’ The evidence of suc-cessful poverty outcomes, for example, from invest-ments in primary education and basic health careis powerful and incontrovertible. For many poorpeople within poor countries, aid does matter. Butaid matters for the industrialized world as well.Development, as noted earlier, is good for business.Its reverse is not. And in many countries there havebeen reverses that have led to increasing poverty,governmental collapse, environmental degra-dation and globalized pollution.

The last two decades of the 20th century have infact been as bloody as almost any other period ofhistory in terms of loss of human life, destructionof property and the reversal of development. Theend of the Cold War and the collapse of commu-nism in Eastern Europe served to break alreadyoverflowing floodgates of disaffection, nationalismand ethnic division. Unpopular regimes, cut loosefrom their patrons’ influence, military support andeconomic patronage, alternately lost or clung totheir moorings in a surge of civil wars and upris-ings that gave new meaning to the term ‘conflict’,and new urgency to the search for prevention andsolution.

Between 1980 and 1995, more than half of theworld’s poorest countries experienced conflict. Inthe eight years after the fall of the Berlin Wall, 4million people were killed in violent conflicts(Carnegie Commission, 1997: 3). Today there aremore than two dozen major armed conflicts aroundthe world and perhaps two dozen smaller flashpoints. Many of these conflicts have persisted foryears, with devastating consequences. In 1996,there were 20 million displaced people – half ofthem in Africa – and there were almost 15 millionrefugees and asylum seekers. In some countries, anentire generation has grown up in the shadow ofwar. Here too, in both cure and prevention, aidmatters.

Building public support fordevelopment assistance: somepolicy implications

British journalist Jon Snow believes that ‘if a jour-nalist were to arrive from Mars . . . his lead story

would surely be the discovery that some 1.3 billionpeople on earth live in absolute poverty’ (Snow,1998). For earth-bound journalists this is mostlynot the case, hence vague public support for theremedy. There are essentially three approaches tobuilding public support for any complex and costlyenterprise:

• do nothing and hope it sells itself;• leave it to the media, schools, NGOs, the infor-

mation superhighway or some other vaguechange agent;

• recognize that the issue requires a more pro-active role on the part of those most involved.

The ‘do nothing’ approachA DAC Meeting on Public Opinion and Develop-ment Assistance in 1983 recognized that:

• the main rationale for aid in the public mind wasand remains emergency relief;

• ignorance about aid programmes and about theSouth remains widespread;

• there was growing doubt then – now more or lesssolidified – about the effectiveness of official aid.

A similar meeting took place in 1994. At the end ofit, the Director of the DAC’s Development Co-oper-ation Directorate, said:

The issues, tone and results of [this] meeting differedsharply from those of [the] 1983 meeting on publicsupport for aid. The meeting confirmed that theapproach today needs to be wider and deeper, and to lookat the issues of development and development co-opera-tion in the total marketplace of public concerns, in amore balanced, comparative perspective. (BernardWood)

In fact the issues of 1994 were not so different fromthe issues of 1983. Nor have they changed in1999, except that the problem has become moreprofound in three ways: absolute poverty hasincreased, aid has decreased, and the difficulties ingetting any message across to a public bombardedwith racket from a larger and more competitiveinfotainment industry have grown. Certainlywhere spending is concerned, the ‘do nothing’approach seems to be the one preferred by mostgovernments.


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Leave it to the informationsuperhighwaySome place their faith in the ‘information super-highway’. They believe that the disintegration ofmass audiences and mass media will encouragelike-minded people to seek out unfiltered news. Thepublic will be better informed because there will be150 television channels to choose from instead ofthree or four. News from the South will no longer bescreened. Much more of it will come into ourhomes directly, at our discretion, rather than at thediscretion of editors and gatekeepers in commer-cially driven networks. This may well be true, butthere will be a lot of other channels – more cartoonnetworks, comedy networks, home marketing net-works. The idea ignores the fact that discerningreaders and viewers already have access to goodsources of cogent and coherent information, andthat even though there are 30 or 40 televisionchannels in most North American homes today,one American in two cannot name the President ofRussia.

A ‘do something’ approachGeorge Orwell and Aldous Huxley both predictedthe information superhighway, but they saw infor-mation becoming the tool of unscrupulous poli-ticians in a totalitarian world. The opposite has infact happened. Too many politicians are now led bythe media, attempting to stay one step ahead of theopinion polls, constantly checking the barometer ofpublic opinion to see whether they should movethis way or that on minor issues, while shying awaycompletely from the larger ones. And aid official-dom worries, or should worry, about what thepublic might say if it knew the facts about aidspending; if, for example, it was known that mostbilateral donors actually spend very little on basichealth and basic education. The average unin-formed taxpayer might be interested in knowingwhat our aid agencies are actually spending theirmoney on, in the name of poverty reduction, if it isnot on things like basic education and basic health.One might well ask why all the bilateral aid donorscombined, looking at all the countries of the South,cannot find good investment possibilities inprimary education that add up to more than 1.2percent of their combined budgets.

A first agenda item, therefore, might be to reformaid spending, so that more than 25 percent of ODAgoes to poor countries, and that regardless of whereit goes, it is spent on efforts that have a clear povertyfocus. It is doubtful that aid can ever be explained totaxpayers when only 10 percent of it is spent onwater, sanitation, education, health and popu-lation. The truth, in fact, may be worse. A recentODI study on donor strategies and practice onpoverty reduction found a growing donor consen-sus on the importance of poverty reduction. But italso found that in their country assessments andstrategies, and in their interventions on theground, poverty reduction – both implicit andexplicit – remains ‘strangely lacking’ (Cox andHealy, 1997).

A second agenda item would be to establish somerealistic budgets for telling the public why aid isimportant. This would require considerably morethan the pittance that is currently devoted to thesubject. UNDP once suggested a figure of 2 percentof ODA for public information. This would be about14 times more than is currently spent, so there isactually nowhere to go on this issue but up.

A third agenda item would be to bring more alliesand stakeholders into the effort to build publicawareness. Governments could encourage or evenrequire their partner organizations – NGOs and theprivate sector – to develop public communicationsstrategies on the purpose and impact of partneredprojects. Multilateral agencies could do the same.This might represent a small proportion of aproject’s cost, but cumulatively it could go a longway to developing better public understanding of,and support for, development assistance. In theprocess, it might be helpful for government todevelop, with NGOs and the private sector, abinding code of conduct on fundraising and adver-tising associated with development assistance.Enforceable advertising standards are common inbusiness, why not in fundraising? There is littlepoint in putting out positive development news if itis constantly undermined by emotive, misleadingand semi-truthful (or semi-untruthful) fundraisingclaims.

A fourth agenda item would be to agree on whyaid is important, so that the messages make senseto ordinary people. In the past it has been sold on

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the basis of humanitarianism, when in fact muchof it was tied to the short-term domestic and stra-tegic interests of the giver. Humanitarianism is nota bad motivator. Self-interest is not a bad motivatoreither, but in looking at a world fraught withunacceptable levels of war, poverty and disease, allof which are taking a toll on the North, self-interestneeds to be better understood and more broadlydefined. If these problems are not reversed in thenext decade, they may become irreversible, and thenegative impact on the lives of today’s northernchildren – not to mention those in the South – mayvery well be enormous.

All of this would surely include a recognition inaid programmes, as in North–South trade and busi-ness relationships, that development is much morethan a short-term sideline; an admission that if weare to remedy problems, the effort will have to bemuch greater. The effort may be a costly one for thisgeneration, but the alternative will be considerablyless costly for the next generation than will be thecase if action is not taken now.

All this would require uncommon national andinternational leadership, leadership that can riseabove, or at least make workable bargains with,short-term economic and political self-interest. Itwill require leadership that can inspire ordinarypeople as well as the media, that can draw manymore constituencies into the task and obtain theirsupport rather than their animosity. It requiresleadership that itself understands and can conveythe message that long-term self-interest lies inlong-term disaster prevention rather than short-term advantage and short-term crisis manage-ment. This will have to be a leadership that has faithin what hundreds of opinion polls and simplecommon sense tell governments about people inEurope and North America and Japan and Aus-tralia – that they do care, that they want to help;and that they will make sacrifices if they under-stand them to be in the genuine interest of a betterand more secure life for their children.


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Note

1 Following the circulation ofAustralia’s Overseas Aid Program1997–98 by the Minister forForeign Affairs in May 1997,Australian ODA increased slightlyin 1998.

References

Carnegie Commission on PreventingDeadly Conflict (1997) Preventing

Deadly Conflict. New York:Carnegie Corporation.

Caufield, C. (1996) Masters of Illusion:The World Bank and the Poverty ofNations. New York: Henry Holt.

Cox, A. and J. Healy (1997) PovertyReduction: A Review of DonorStrategies and Practices. London:ODI.

Fallows, J. (1997) Breaking the News:How the Media UndermineAmerican Democracy. New York:Vintage Books.

Schmidheiny, S. and F.J.L. Zorraquin(1996) Financing Change: TheFinancial Community, Eco-efficiencyand Sustainable Development.Cambridge, MA: MIT Press.

Snow, J. (1998) ‘One World, OneMessage’, Developments. London:DFID.

UNDP (1996) Development Aid: Whatthe Public Thinks. New York: Officeof Development Studies, UNDP.

Traditional Aid is Passé . . . And there isnot enough of it

The prognosis of aid for the world’s poorest countries

Development assistance remains the key to both growth and human developmentadvances in most of the poor countries. While annual ODA levels have stabilized aroundUS$60 billion, the end of the Cold War, increasing concern with domestic issues, andthe felt need to produce saleable annual new fads in foreign aid policy of donor countrieshave all contributed to rampant cynicism and donor fatigue. However, the accompany-ing advice for recipients to increase their reliance on private capital flows is not realisticfor poor countries in the short term. The new vision of development focusing on insti-tutional change and decentralization can be implemented with relatively small contri-butions from abroad.

Both the Bretton Woods institutions and the UN system have declared their interest infocusing more on good governance, public management, accountability and humandevelopment objectives, to be achieved via country-specific institutional changes. Thenew leadership of the World Bank, in particular, has recently articulated an effort toreshape the institution and make it more accountable, effective and collaborative, focus-ing especially on the eradication of poverty. However, it is still unclear whether theseinstitutions’ activities in terms of their lending practices can change as much as therhetoric in their front offices. Even in those countries where the human capacity is notas advanced, it is clear that, increasingly, the developing countries themselves must takethe initiative to determine their own objectives and their willingness to make sacrificeson behalf of reforms that they have designed for themselves.

If countries lack human resources and technical capability to undertake the



G USTAV RANI S ABSTRACT Gustav Ranis discusses the seemingly contradictoryproposition that traditional aid is no longer valid and yet we do nothave enough aid. He looks at this statement by dividing recipientcountries into three groups: the poor countries of Africa, South Asiaand some pockets of Central and South America; the middle-incomedeveloping countries, including most of South-East Asia; thetransition countries of Eastern Europe and most of Latin Americaand the emerging market economies including Singapore, Taiwan,Chile and Mexico.

necessary articulation of policies and reform pri-orities, it is always possible to seek the collaborationof independent technical assistance agencies andindividuals, including the NGOs. One would notexpect donors to simply accept proposals for assist-ance and associated reform but at least to take themas a point of departure for negotiation. However,what is clear after 40 years of development assist-ance is that the ‘business as usual’ game of aid andconditionality has run its course and needs to befundamentally re-visited. Global knowledge, andnot necessarily the old Washington Consensus,needs to be combined symbiotically with localknowledge and, most importantly, local initiative.Implementation of any reform programme canonly be expected if the country itself is fully con-vinced of the reform path it should take, what risksought to be assumed and what sacrifices accepted.

Aid problematics for middle-income developing countries

Turning to the large majority of middle-incomedeveloping countries, including those in South EastAsia and many in Latin America, which have notyet quite ‘made it’, it is here where a critique of aid,bilateral and multilateral, is most needed.

The World Bank and the IMF have historicallyperformed in a highly centralized fashion. Deci-sions have generally been made in Washington,supplemented by short-term visiting missions,some focused on the macro-picture, some onspecific structural changes, and, in the case of theWorld Bank, sectoral investment programmes.Typically IFI staff members have spent less than 10percent of their time on recipient country contacts.Given their brief in-country presence and theoverall lack of transparency in international insti-tutions, it was easy for developing countries,including those in Asia, to get away with their ownlack of transparency. As a result, the advice maylack realism and depth with respect to the insti-tutional and political economy dimensions of thetask. Institutional knowledge and a large measureof subtlety are critical if the advice and the aid pro-vided are to be relevant and effective.

In brief, while the Fund and the Bank preachdecentralization to their developing middle-income

customers in the context of the current emphasison governance, they have not really practised it. Inorder to avoid ‘localities’ they have incurred exces-sively high costs in terms of lack of continuity andinsufficient nuance in viewing different countries’institutional, political, and sometimes even theireconomic characteristics.

A most telling criticism of past foreign aid is thatthe donors, bilateral and multilateral, are in toomuch of a hurry to lend. Notwithstanding all therhetoric about the importance of quality, neitherside wants to take the time to carefully assess moreprecisely what needs to be done in a broader socio-political and institutional context and to ensurethat the package is more than superficially ‘owned’by the recipient. Both parties know very well that,while the structural adjustment loan instrumentmay be loaded with conditionality, ultimately theneed to lend will overcome the need to ensure thatthose conditions are indeed met. What usuallyoccurs is a rather time-consuming and expensiveritual dance. If both lender and borrower knowthat the lender must commit to a fast-disbursingloan to meet its internal lending targets, it is clearlydifficult to maintain a credible threat of cutting offloans in case of non-compliance. Aware of thisdynamic, both parties have an incentive to fashiona superficial agreement.

This same basic problem has also affected projectlending. While there has been a continuous evol-ution of what is meant by ‘quality’, given the everchanging set of topics warranting priority atten-tion, the quantity of lending has consistently over-come all else as an indicator of ‘success’. Theconsequence of concentrating a large number ofadmittedly highly qualified professionals within theBretton Woods institutions – anxious to show theirwares to superiors, within hierarchies dominatedby a fairly standard set of views – continues to rep-resent an excessive and costly insularity. In thissomewhat closed system there is relatively littledissent and little controversy.1

The so-called ‘Washington Consensus’, the con-ventional wisdom endorsed by the Bank and theFund, is undoubtedly less monolithic and moresubtle and differentiated today than many criticshave asserted. The recent official shift from a puremarket orientation to the acceptance of ‘market


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friendly’ government interventions, plus theacknowledgment that governments may do well byorganizing ‘contests’ and rewarding (or punishing)performance, is a case in point. But the kernel oftruth remains: the Bank is populated by largenumbers of highly talented professionals, mainlyeconomists, who have traditionally shown littlewillingness to dissent or deviate from the in-houseconventional wisdom applied, without adequateregard to typological differences and varying stagesof development. They are convinced that they canout-manoeuvre, certainly out-live, any incomingpresident. The resulting lack of flexibility and open-ness to alternative perspectives constrains thebreadth of policy options that countries canexplore when designing economic reform pro-grammes for themselves.

There is no subject under the sun that the WorldBank does not take on, from human developmentto corruption, even to the building of viable democ-racies. The IMF is now involved in poverty reduc-tion programmes and gearing up on governancesubjects far from the very much locality-specificissues of its charter. The alternative of staying outof a given area and instead helping to build up therelevant capabilities of others within a necessarilyflexible division of labour is generally viewed as toothankless and time-consuming. At any rate, insti-tutional hubris and overwhelming regard for turfseem to win out consistently.

Finally, inadequate emphasis has been given tothe changing relationship between the IFIs and theprivate capital flows which are increasingly dwarf-ing public capital flows to these countries. Quiteaside from what the banks can do directly in sup-porting domestic private sector activities – given thecharter restrictions relevant to most – their mostimportant function remains one of signalling, i.e.providing information and housekeeping seals ofapproval on countries’ economic conditions. PrivateUS investors depend heavily on both published andunpublished country analyses provided by theWorld Bank. Unfortunately, while early versions ofcountry reports may contain candid assessments ofcountry conditions, by the time they reach pub-lished stages differences in the assessment betweencountries and the IFIs have often been sufficientlypapered over to diminish their discriminatory value.

The basic difficulties are two-fold. There isinsufficient transparency within those very insti-tutions which preach it to their clients. And thereis a wide cleavage between the front office analyti-cal networks capable of providing high quality,penetrating assessments of a country’s status,prospects and additional reform requirementsand the actual lenders, primarily interested ingetting on with it and in maintaining good rela-tions with the recipient. Thus, in the end, thememos are sanitized or suppressed, the ritualdance continues, and even the independent infor-mation flow to private capital markets is adverselyaffected. Secrecy in these matters has a short half-life – and it certainly has adversely affecteddonors’ ability to be of possibly preventive assist-ance in Asia.

Structural adjustment lending remains anindispensable tool for facilitating major reformand achieving graduation in these middle incomecountries. Policy-based non-project lending,accompanied by properly negotiated and fully‘owned’ self-conditionality, remains the bestdevice to help countries achieve a return toprivate capital markets. This will not, however,occur easily or painlessly; if it is to happen,present practice will have to give way to a sub-stantially altered way of doing the business offoreign aid. Most importantly, donors must recog-nize that, in the absence of full joint conceptualiz-ation and prior agreement as to what needs to bedone in the way of reform, and what additionalresources are required to get there, no amount ofconditionality will really work. Recognition ofthis critical – if obvious – point implies, however,something less obvious, namely the abandon-ment of the ‘dribbling out’ of public capital flowsagainst country lending targets. Major ‘humps’ inaid, associated with major changes in policy,should be negotiated on a ‘when and if ’ basis,with the lenders more passive and the borrowersmore active.

While some level of ‘business-as-usual’ lendingwould, realistically, continue, major ballooning ofcapital inflows would be associated with longer termreform packages. Formulating these packages couldindeed be carried out with the help of outside teams,while drawing upon the substantial expertise and

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experience that has accumulated both within theborrowing country and its neighbours.

High income developingcountries

With respect to the high income developing coun-tries seemingly immune from financial crises, it isclear that in these cases traditional foreign aid nolonger plays a role. They increasingly rely almostcompletely on private capital, largely of the directforeign investment or portfolio variety. What aidmay have contributed in the past, in spite of protes-tations to the contrary, is difficult to define sincedevelopment is a multi-cook, multi-instrumentproject. Any honest assessment of past aid effec-tiveness would have to compare economic con-ditions in similarly situated countries exposed tothe same exogenous shocks, which did, and thosewhich did not, submit to such a conditionality cumaid supported reform programme in the past.Structural adjustment or programme lendingundoubtedly can exact pain in the short term, but– as in the case of Chile – it clearly left the patientstronger and healthier over time.

It is a clear indication of relative success in coun-tries like Chile, Mexico, Colombia and Taiwan thatthe initiative has been relatively local, with theinternational community responding, rather thanthe more typical process of a Washington-initiatedreform programme receiving the necessary officialsignatures but not really deeply imbedded in thebody politic of the recipients.

Forward thinking aid policy

A device which should be considered is the pro-cedure adopted during the Marshall Plan days inWestern Europe, with recipient countries recog-nizing their interdependence and the reality of con-tagion effects, and taking the initiative on aregional basis, mutually monitoring each other asto their financial needs and required reformmeasures.

In Asia, this could mean a much larger role forJapan, the ADB or APEC. In this particular context,the proposal for the creation of an Asian Fundwhich had been quickly rejected by the IMF and the

US has been given another look. Such a fund, ifviewed as more than a ‘piggy backing’ addition toIMF or World Bank packages, would not onlysecure additional financial commitments fromcountries in the region, including Japan, Australia,Singapore and Taiwan. It could also help develop amultilateralized system of country policy packagessensitive to local conditions. It is utterly unreason-able for the US to continue to prod Japan to play alarger role in the aid business but to consistentlyreject specific initiatives that Japan puts forwardwhich seem to threaten US hegemony. A closerrelationship between the depth of one’s pocketsand the pitch of one’s voice seems highly desirable.

Any serious effort at enhancing the quality ofthe fast-disbursing policy loan process mustinclude donors’ willingness to enhance their credi-bility by occasionally refusing to lend and occasion-ally curtailing their lending in midstream. Thesuggested rather infrequent ballooning of resourceflows would take place in only a handful of coun-tries at any given time, while ‘business as usual’, aspreviously defined, continues elsewhere. This com-mitment to honour structural adjustment agree-ments, even when those agreements imply acredible threat that funds will not be disbursed,should infuse the process with the required sense ofa contractual, arms’ length banking relationshipbetween lender and borrower. It can also beassumed that the anticipated success of such anapproach would itself serve to reverse the presentaid malaise and lead to a greater willingness by theindustrial countries to support foreign aid to bringmore developing countries to graduation. Once aidis no longer passé, it would be easier to increase it,achieve IFI replenishments, etc.

Although many donors, including bilateralagencies, have in the past been involved in struc-tural adjustment lending, the Bretton Woods insti-tutions carry the main burden today. Iffast-disbursing loans were to operate in a moreeffective manner, the regional development bankscould be assigned responsibility for contributingcountry-specific information for any economicreform package in concert with the recipientcountry and the World Bank. The World Bank,however, would also have to show a greater willing-ness to share responsibility with the regional banks


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on a country-by-country basis. Given its admittedlysuperior analytical capacities, it would probablymake sense to have it focus more on macro analysisand policy and to work out arrangements so thatthe various regional development banks can maketheir own microeconomic, sectoral, and insti-tutional contributions.

Admittedly, the Bretton Woods institutions havenot covered themselves with glory during thecurrent Asian financial crisis. Not only did theFund fail to adequately warn the countries ofimpending problems but its initial response was toomuch based on prior Latin American experience, afunction of government rather than private sector-generated difficulties. It took several rounds ofFund programmes in Indonesia, for example, andrenegotiations elsewhere to modify these pro-grammes and to stop urging the further liberaliz-ation of the capital account. It is also necessary toreassess the precipitous closure of commercialbanks in Indonesia and of finance companies inThailand. With public capital flows dwarfed by theprivate variety, including those in the hands of thecitizens of the countries themselves, foreign aidactions must be geared to a return of confidence asthe essential precondition for the resumption ofsustainable development en route to graduation.

Country-specific measurements of poverty –both in terms of (largely market-related) dispos-able income poverty and (largely government ser-vices-related) social income poverty – remaininadequate; this is even more true with respect tohow the ‘bottom line’ indicators of welfare, suchas life expectancy, infant mortality and literacy, aredistributed across a population. An urgent needfor more country-specific analysis remains. Behav-ioural issues, utilizing such data, and focusing onhow the links between the nature of the growthpath and the reduction of poverty are affected bythe extent of decentralization, the character of thefiscal system, and the strength and direction oftechnology change, need to be addressed prior tothe fashioning of effective reform cum lending pro-grammes. Such work requires a detailed under-standing of local institutions and human resourceavailabilities – a domain in which the regionaldevelopment banks, working with indigenousinstitutions, would seem to have a comparative

advantage – with the IFIs contributing the macroanalysis of growth cum poverty reduction, theassessment of borrowing needs, and the identifi-cation of requisite macroeconomic policychanges.

Along the same lines, it should be possible tomove toward a flexible country and/or sectoral div-ision of labour. It might make sense, for example, todelegate to regional banks the responsibility forsome small countries and/or some specific sectoralactivities in which they have accumulated special-ized competence, without necessarily moving toany ironclad separation of functions. The occa-sional chairing of Consultative Groups by the Inter-American and Asian Development Banks should beencouraged rather than resisted. The most difficultobstacle blocking significant change in the waypublic capital flows are organized undoubtedlyresides in deeply entrenched habits among thedonors. As long as the signals governing personnelevaluations and promotions continue to favourshort-run inputs at the expense of long-runoutput, i.e. recipient performance, any ‘newwindow’ or ‘new procedure’ option will have diffi-culty getting off the ground. Since such an outputis likely to be long-term, and difficult to attribute toany one actor, the task of changing the internaldonor rewards systems is not an easy one, requir-ing careful thought and a good deal of subtlety. Evi-dence of greater sensitivity to differences incountry conditions, more openness to recipient, aswell as third party expertise, greater willingness todecentralize decision-making in general, would allprobably be relevant. At times, concessionalforeign loans which help restore confidence andthus induce the return of private sector flows maybe necessary. More resources are always betterwhen they are well deployed.

Policy-based foreign aid still has the potential toserve as an important tool for promoting additionalgraduations. In the past the process has beenincreasingly plagued by routine, has becomefatigued, and is today not very effective in deliver-ing on its promise. If policies have been improvingin some developing countries, it is mainly becausethe East Asian financial crisis has concentratedborrowers’ minds. It seems increasingly likely thatthe lending cum conditionality process works well

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only when local polities have decided, largely ontheir own and possibly with outside technical help,to address their reform needs, effect certain policychanges sequentially, and approach the inter-national community for financial help in gettingthere.

As a result of rapidly changing developingcountry attitudes toward the economic and politi-cal changes associated with effective reforms,modified to suit individual country situations, thisis indeed a propitious moment to consider a new

approach to foreign aid as an effective tool ofdevelopment. If countries can enter into an adjust-ment dialogue with an increased sense of initiative,involvement and ownership, public flows coupledwith ‘self-conditionality’ have the potential to behighly effective. With the demonstration of successin rescuing some countries from illiquidity andmoving others to graduation, the total volume ofresources available, public and private, may even beenhanced.


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Note

1 Wolfensohn, the President of theWorld Bank, is trying withdifficulty to bring about needed

and welcome institutional reformin the Bank.

development aid and structural violence: the case of rwanda

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