A History of International Development Policy

By Robert Sauder

The plan for today

• Introduction – who are we and what do we want to learn?

• A quick stroll through quite complex material. There were many actors and many contexts in play over the past fifty years.

• Periodic opportunities to engage instead listening to the ‘talking head’

Primary themes of the session

International development policy:• Has moved from simple to complex models• Features a series of failed experiments and

slow learning• Fads visible at every stage• Current situation represents several dramatic

shifts from the past

Historical Frame: four main stages

1. Post-war and de-colonization era: modernization and industrialization 1940s - ‘60s

2. Humanization and a focus on poverty 1970s3. Neoliberalism, re-structuring and transition

1980s and ‘90s4. Millennium Development Goals, Paris and

Accra and beyondPost script: what about today?

Post-war and de-colonization era – the Modernization and industrialization period 1940s - ‘60s

Key features of the historical era:• Reconstruction after world war II

– World Bank and IMF established at Bretton Woods Conference 1944– United Nations officially created in 1945– Universal Declaration of Human Rights adopted in 1948– Cold war heats up – spheres of influence drawn– Re-drawing of borders in late colonial era– Birth of EU economic and political arrangements– Canadian International Development Agency (CIDA) created in 1968

• Booming economy in the West– Modern industrial technological growth– Scientism

• Civil rights movement and democratization– Multiple independence and anti-colonial movements

The stages of growth

Key features of development policy thinking:• Modern management and science will do it

– Technical assistance and agricultural extension– Large role for planning

• Nationalist elites and rise of statism to build institutions

• Large role for Western aid funds and expertise• Tied aid policies are common• Need to move beyond colonialism but acceptance of

foreign policy interests as a basis for aid

Modernization Theory

• Linear stages of development

Typical programs

• Bilateral loans and grants• Agricultural extension• Volunteer Sending: PeaceCorps and CUSO were

both established in 1961• Financing for infrastructure projects

o Canada focused on transportion and power generationo Canadian aid was focused on Commonwealth Carribean,

Commonwealth Africa and Francophone Africa• Food and commodity aid

Activity: debate about tied aid

Be it resolved: tied aid is an effective development strategy that brings advantages to both the donor and the recipient.

Classic arguments on tied aidDisadvantages for Recipient

Country• Discourages local economic

growth and can devalues commodities

• Not cost effective• Restrict choice for recipient

country• Ownership of aid is solely in

control of donor country• Often results in inappropriate

technologies e.g. tractors that can’t be maintained

Advantages for Donor Country

• Supports producers and increases export revenue of donor country

• Donor country has more control over content, quality and manufacturing of aid

• Builds long term industrial relationships

2. Humanization and a focus on poverty, the 1970s

Key features of the historical era:• Rapid de-colonization but cold war even hotter• Fragile and captured states common• Growing liberalism in the West

– Leftist as opposed to socialist– Cultural relativism and rejection of Western

dominance• Oil price rise and economic contraction

Whose voice is being heard?

Key features of development policy thinking:• Dependency theory – centre vs. periphery; aid as

imperialism• Growth interest in local context – PRA• Appropriate technology• Need for long-term investment in capacity and social

services – a human needs focus• Goal of 0.7 % of GNI as aid• Concern about brain drain• Rural poverty as the key challenge

Dependency Theory

• Core vs. Periphery

Typical programs

• Bilateral loans and grants• Technical assistance• Rural development• Cooperatives and networks• Capacity development

Activity: discussion on the value of including local voices

• What are the main challenges in listening to and empowering local views on development?

• Are local views sufficient to move the development agenda forward?

3. Neoliberalism and re-structuring 1980 – 90s

Key features of the historical era:• Economic slowing and shocks• Potential collapse of states due to debt• Cold war reaches crescendo• Increased control of global economic

institutions World Bank, IMF etc• G8 as a political factor in development

Tensions between neo-liberal and progressive approaches

Key features of development policy thinking:• World systems theory, post-modernism and globalization• Bloated public sector institutions vs. classic development theory• Rise of national development planning• Emergence of global coalitions on key challenges e.g. HIV/AIDS, vaccines,

etc• Corporate social responsibility • Recognition of key role of gender• Civil society and non-government organizations seen as key development

actors• Rights based approaches• Systems model e.g. health• Micro credit – Grameen Bank

Typical programs

• Implementation of “Washington Consensus”: fiscal discipline, reduced public spending, open markets, trade liberalization

• Structural Adjustment programs: World Bank loans to developing countries under condition of government reform

• Microfinancing • Continued investments in social services like education

and health• Use of non-government organizations (NGOs) in many

domains of development

Structural Adjustment ProgramsTypical stabilization policies comprise:• balance of payments deficits reduction through currency devaluation• budget deficit reduction through higher taxes and lower government spending, also known as austerity• restructuring foreign debts• monetary policy to finance government deficits (usually in the form of loans from central banks)• raising food prices to cut the burden of subsidies• raising the price of public services• cutting wages• decrementing domestic credit.

Long-term adjustment policies usually include:• liberalization of markets to guarantee a price mechanism• privatization, of all or part of state-owned enterprises• creating new financial institutions• improving governance and fighting corruption• enhancing the rights of foreign investors vis-à-vis national laws• focusing economic output on direct export and resource extraction• increasing the stability of investment (by supplementing foreign direct investment with the opening of domestic

stock markets).

Criticisms:• Sovereignty, privatization, austerity

History of the Grameen bankIn 1976 Professor Muhammad Yunus launched an action research project to examine the possibility of designing a credit delivery system to provide banking services targeted at the rural poor. The Grameen Bank Project (Grameen means "rural" or "village" in Bangla language) came into operation with the goal of extending banking facilities to poor men and women:

• eliminate the exploitation of the poor by money lenders;• create opportunities for self-employment for the vast multitude of unemployed people in rural

Bangladesh;• bring the disadvantaged, mostly the women from the poorest households, within the fold of an

organizational format which they can• understand and manage by themselves; and• reverse the age-old vicious circle of "low income, low saving & low investment", into virtuous

circle of "low income, injection of credit, investment, more income, more savings, more investment, more income".

Today Grameen Bank is owned by the rural poor whom it serves. Borrowers of the Bank own 90% of its shares, while the remaining 10% is owned by the government. The repayment rate is very high.

Micro Credit – a powerful innovation

Throughout 15-year history of the Grameen Foundation:

• 9.4 Million of the world's poor have been helped by our MFI partners, enabling them to begin their journey out of poverty.

• More than 1.2 Million new borrowers have received microloans because of our Growth Guarantees program.

• $225 Million in local currency has been leveraged through the Growth Guarantees program to support microfinance programs for 28 poverty-focused organizations in 13 countries .

• More than 200,000 poor, rural farmers have been helped by more than 1,100 Community Knowledge Workers (CKWs) in Uganda.

• 22% higher prices were earned by farmers who had access to a CKW, compared with those who didn't, while these farmers' knowledge levels rose by 17%.

• Leaders of over 270 anti-poverty program have improved their strategy for meeting the needs of the poor by turning to real, objective poverty data from the Progress out of Poverty Index®, a simple poverty measurement tool available in 46 countries.

• More Than 100,000 hours have been contributed by more than 700 Bankers without Borders® volunteers in 600 projects worldwide -- a contribution of in-kind services worth $5.5 million.

Activity: what are the disadvantages of using NGOs?

NGOs have been put forward as an alternative to bilateral (donor to government) aid for several reasons:• Motivated to do social good in a particular sphere• Strong local connections and cultural credibility• More trustworthy than potentially corrupt or inefficient

governments• More cost-effective (cheaper) and can be held accountable to

donors• NGOs can act in consortia to achieve higher impact

BUT are NGOs the magic bullet?

3B: 1990s – donor fatigue but signs of transition to new models

• ODA peaked in 1992 at a high of $17 billion and then fell to $12 billion in 1999

• SAPs were replaced by Poverty Reduction Strategies, which aimed at reversing the negative effects of a decade of Structural Adjustment on welfare and social conditions. Many African countries embarked on at least two generations of PRSPs, mostly to ensure eligibility for debt relief.

• Human Development Report and Human Development Index• Heavily Indebted Poor Countries Initiative• Changing the model from aid to cooperation• Education for All – 1990• Rio conference on climate change – 1992• UN Women Conference in Beijing, rights of the girl child – 1995• Rights-based development model

OECD Trends in Official Development Assistance

- Totals for Development Assistance Committee of OECD

- Very few countries have met the 0.7% target

- In 2013, Canada spent 0.27% of its GNI on ODA

Looking at all dimensions of development

The Human Development Index (HDI) is a composite index that measures the average achievements in a country in three basic dimensions of human development:

• a long and healthy life – as measured by life expectancy at birth• knowledge – as measured by mean years of schooling and expected years of schooling for primary, secondary and tertiary schools• a decent standard of living – as measured by Gross National Income (GNI) per capita in purchasing power parity (PPP) US dollars.

Education for All• The Education for All movement is a global commitment to provide

quality basic education for all children, youth and adults. The movement was launched at the World Conference on Education for All in 1990 by UNESCO, UNDP, UNICEF and the World Bank. Participants endorsed an 'expanded vision of learning' and pledged to universalize primary education and massively reduce illiteracy by the end of the decade.

• Ten years later, with many countries far from having reached this goal, the international community met again in Dakar, Senegal, and affirmed their commitment to achieving Education for All by the year 2015. They identified six key education goals which aim to meet the learning needs of all children, youth and adults by 2015.

• As of 2014, still 75 million children not in school

Activity: discussion of education for all (EFA) as a development strategy

• Is universal primary education sufficient for development to happen?

• How should we measure quality of education?

4. Millennium Development Goals, Paris and Accra

Key features of the historical era:• Continuing democratization

– Many states making the transition to majority rule– Arab spring

• Rise of a multi-pole power structure– BRICS, especially China

• New calls for better global governance but no obvious replacement visible to the UN

• Neo-cold war emerging e.g. Ukraine, Syria, South Asia• Food insecurity• Economic shocks e.g. Finance crisis in 2008 • Climate change concerns become prominent

Aid effectiveness and governance are primary concerns

Key features of development policy thinking:• Continued belief in focus and global collective action

– GAVI – the Vaccine Alliance– IAVI – International AIDS Vaccine Initiative

• New agenda for evidence– Randomized controlled trials– Systematic reviews and impact evaluations

• Targets and metrics• OECD no longer dominant in development thinking• New concerns about fragile and conflict-affected states• Neo-statist model returns

Millenium Development Goals

MDGs progress to date – the example of Africa (2013 report)

On track: MDG 2 – Achieve universal primary education; MDG 3 – Promote gender equality and empower women; MDG 6 – Combat HIV/AIDS, TB, malaria and other diseases; and MDG 8 – Global partnership for development.

Off track: MDG 1 – Eradicate extreme poverty and hunger; MDG 4 – Reduce child mortality; MDG 5 – Improve maternal health; and MDG 7 – Ensure environmental sustainability. Yet, some countries recorded appreciable progress.

Importantly, the report argues that Africa must put structures in place to sustain its development well beyond the MDG timeline.

Highlights• Poverty reduction lags behind growth• Inequality is undermining efforts to reduce poverty• Attending primary school is becoming the norm, but the quality of education remains a challenge• Progress toward gender parity is encouraging• Despite good progress, Africa still has the greatest burden of child and maternal deaths• Africa has halted the spread of HIV/AIDS, tuberculosis and malaria• Mixed progress on ensuring environmental sustainability• Food insecurity is a recurring challenge

What is the Paris Declaration?• 1. Ownership: Developing countries set their own strategies for poverty

reduction, improve their institutions and tackle corruption.•

2. Alignment: Donor countries align behind these objectives and use local systems.

•3. Harmonisation: Donor countries coordinate, simplify procedures and share information to avoid duplication.

•4. Results: Developing countries and donors shift focus to development results and results get measured.

•5. Mutual accountability: Donors and partners are accountable for development results.

What is the Accra Action Agenda?

• Ownership: Countries have more say over their development processes through wider participation in development policy formulation, stronger leadership on aid co-ordination and more use of country systems for aid delivery.

• Inclusive partnerships: All partners - including donors in the OECD Development Assistance Committee and developing countries, as well as other donors, foundations and civil society - participate fully.

• Delivering results: Aid is focused on real and measurable impact on development.

• Capacity development - to build the ability of countries to manage their own future - also lies at the heart of the AAA.

Canada’s ODA Accountability Act

• The ODA Accountability Act came into force on June 28, 2008

• It ensures that Canadian aid is focused on poverty reduction and consistent with aid effectiveness principles

• Under the Act, ODA must:1. Contribute to poverty reduction;2. Take into account the perspectives of the poor;3. Be consistent with international human rights

standards

Post script: what about today?• Development landscape is changing dramatically

– Business arrangements vs. Aid– Acceptance of private sector roles – P3s, Development Finance Insitutions– Increased focus on income inequality and inequality of opportunity

• Post-2015 discourse is very active• Global Partnership emerges: OECD DAC/UNDP share secretariat• The new philanthropy – Foundations playing large roles• New definitions of Official Development Assistance under discussion –

what is concessional finance?• New interest in innovation for development purposes

– Grand Challenges model– Advance market commitment

• Discourse around ‘Dead Aid’

A new picture of financial flows– Foreign direct investment and remittances dwarf

aid flows

Migration is changing significantly – 2013 flows

• South - South: 82.3 (36%)• South - North: 81.9 (35%)• North – South 13.7 (6%)• North – North: 53.7 (23%)

Humanitarian Assistance

• Humanitarian Assistance remains a vital aspect of development

• Recent emphasis on encouraging disaster resilience; the ability for communities to manage shocks and stresses without weakening their prospects for long-term development

• There are currently 102 million people who require humanitarian assistance and five emergencies that are classified as L3 for being at the highest emergency level: Syria, Iraq, Central African Republic, South Sudan and Phillippines (Typhoon Haiyan)

Cooperatives – new partnerships with the private sector

• The Global Development Co-operative (GDC) was launched in New York in November 2011 and aims to support co-operative businesses in developing countries by raising USD 50m to provide access to low cost loans for capital and infrastructure projects.

• The GDC has been developed by the UK’s The Co-operative Bank – part of the world’s largest consumer co-operative - and the Alliance.

• Amongst those who have already pledged their financial support for the initiative include the All China Federation of Supply and Marketing Co-operatives, Credit Cooperatif of France, SOK Corporation from Finland and IFFCO of India. Mid-Counties Co-operative as well as The Co- operative Bank from the UK who have also pledged their support.

The Bottom Billion – Paul Collier, 2007

Development trapsThe book suggests that, whereas the majority of the 5-billion people in the

"developing world" are getting richer at an unprecedented rate, a group of countries (mostly in Africa and Central Asia but with a smattering elsewhere) are stuck and that development assistance should be focused heavily on them. These countries typically suffer from one or more development traps.

The Conflict Trap: Civil wars (with an estimated average cost of $64bn each) and coups incur large economic costs to a country.

The Natural Resource Trap: Countries that are rich in natural resources are paradoxically usually worse off than countries that are not.

– Resources make conflict for the resources more likely.– Natural resources mean that a government does not have to tax its citizens

resulting in less financial accountability for the government.– Dutch disease: where a country's other industries become less competitive

as a result of currency valuation due to the revenue raised from the resource.

Landlocked with Bad Neighbours: Poor landlocked countries with poor neighbours find it almost impossible to tap into world economic growth.

Bad Governance in a Small Country: Terrible governance and policies can destroy an economy.

New in Canada - DFATD

• CIDA was merged into the Department of Foreign Affairs and Trade in 2013 to form the Department of Foreign Affairs, Trade and Development (DFATD)

• The development portion of the department targets 80% of its ODA on 25 focus countries

• It is focused on five priority areas:– Sustaining sustainable economic growth– Increasing food security– Securing the future of children and youth– Advancing democracy– Promoting stability and security

Conclusion: development policy is organic and ever-evolving.

Many development ideas were decades in the making:• Global responses to humanitarian disasters

– We are the World 1985 for Africa relief >>> Haiti earthquake

• Volunteer sending and technical assistance• Support for developing world research capacity• Cooperatives• Public private partnerships on infrastructure• National ownership of development

There are many positive achievements but remember how difficult development is to do