INTERNATIONAL ASSISTANCE: A PROBLEM POSING AS A SOLUTION

Published in Development, 1991:3/4, pp. 87-94 by the Society for International Development

David C. Korten
The People-Centered Development Forum

This article builds from the arguments set forward in David C. Korten, "Development as Transformation: Voluntary Action in the 1990s," Development, 1990:3/4. That article argued that pursuit of a growth-centered development vision has led to a growing global crisis of deepening poverty, environmental destruction, and communal violence. Continued pursuit of solutions to the crisis based on this vision may result in a complete collapse of the global ecology and the remaining bonds of human community--the foundations of life and civilization. A global people's movement is emerging calling for a basic reorientation in how development is defined and approached. Its people-centered vision gives priority to the transformation of societal values and institutions consistent with the principles of justice, sustainability, and inclusiveness.

In this article Korten examines why conventional international assistance poses an active barrier to this transformation. He argues that it may be time to dismantle the existing international assistance system and build a more appropriate approach to international cooperation able to resolve problems shared in common by all of human society.


It is common practice to assess the aid performance of high income countries by the percentage of their GNP they transfer to low income countries as concessional financial assistance. The currently accepted target among international agencies is 0.7 percent.(1) The actual average for OECD countries in 1988 was .36 percent. A strong presumption prevails that more is better.(2)

More May Not Be Better

According to the OECD, total annual assistance to the South from OECD, Arab, and Socialist countries (including $3-4 billion in voluntary contributions) reached nearly $60 billion in 1988.(3) Yet as we enter the fourth official United Nations Development Decade we face the reality that more people now live in desperate poverty than ever before, environmental destruction has reached crisis proportions with no sign of abatement, communal violence is pervasive, the number of political, economic, and environmental refugees is increasing, and many Southern economies are hamstrung by debilitating debts. Clearly something is desperately wrong--and official assistance is not fixing it.

Growth: Solution or Problem

Most official international assistance is driven by a growth-centered development vision--with an underlying premise that the central task is to increase economic output. This premise has never had a stronger hold on official thinking than it does currently. Growth is accepted as the key to providing jobs for the poor and taxes for government and to creating the surplus that will allow us to clean up the environment and control crime and violence.

Unfortunately, this seemingly self-evident logic runs contrary to historical experience. The Worldwatch Institute notes that global economic product has increased by four times since 1950. This means that on average, in each of the past four decades total economic output has increased by an amount equal to the growth in output achieved from the beginning of human civilization until 1950. (Brown, 1990, p.3) If growth is the answer, surely growth of that magnitude should have resulted in substantial progress toward eliminating poverty, stabilizing the environment, and eliminating the causes of violence. It has not. The reasons are readily enumerated.

Increases in economic output, as traditionally measured, are highly correlated with increased demands on environmental resources.

Where institutional structures concentrate economic and political power, new increments to wealth flow to the already powerful and increase their power to command available resources--pushing the poor to ever greater desperation at the margins of subsistence.

Treating labor as a commodity forces people to place impersonal market employment above all other considerations and results in persistent disintegration of family, community, and culture--the basic fabric of human society.

The 1980s: Turning Point for Human Society

The 1980s brought the world to the threshold of a new era, shaped by powerful yet relatively unfamiliar forces with which we have not yet fully come to terms.

We began to reach ecological limits. Contrary to expectations, the first limits we face are not limits to the extraction of oil and mineral resources. Rather they are ecological limits to the demands we place on hydrological and soil systems, and the disposal of our wastes into the air, water, and soils.(4) With respect to earth's ecological system there is no longer an expanding pie. What one person takes to increase his wealth, directly increases another's poverty. We completed the transition from life on an open frontier to life in a closed system, an event that coincided with an abrupt reversal of North to South capital transfers from net positive to net negative.

At the same historical moment, an almost invisible process has created a new institutional force in society--the transnationalization of capital. This force transcends the state and poses a greater threat than any dictator in arrogating the right and ability of people to control their own affairs and demand accountability from the state.

Role of International Assistance

Many of the official international assistance agencies have been important players in the transition processes of the 1980s. They have steadfastly promoted growth as the answer to the global crisis, without addressing the inherent conflict between growth and ecological demand. Thus they have continued to fund large projects that deprive the poor of their means of livelihood and destroy the ecology to allow the relatively more privileged to continue expanding their consumption.

For many years the major international assistance agencies contributed to strengthening the state at the expense of civil society. In the late 1980s they shifted their ideological orientation, strengthening the forces of transnational capital at the expense of both the state and civil society. In both instances they have contributed to the separation of power from place--loosening the bonds of community and democratic control essential to community harmony and environmental stewardship. All the while they contributed to the debt burdens that now give them the power to dictate economic policies in favor of transnational capital, reducing the ability of the state to regulate its own economy, leaving people increasingly subject to forces over which they have no control, and sustaining the ecological subsidies that the South provides to support the North's unsustainable over-consumption.

Created to serve a growth-centered development vision that is the source of their legitimacy, they have been reluctant to challenge the premises of that vision, to think the unthinkable--that their very existence may be part of the problem.

SOUTH TO NORTH RESOURCE FLOWS

In 1988 net South to North financial transfers reached $32.5 billion. Overall, developing countries transferred a net $115 billion to developed countries from 1983 to 1988, not counting capital flight (UNDP, p. 79.). Financial transfers, however, are only part of the story. Money is an insubstantial human artifact, a means of keeping track of our respective claims on real resources. It may dominate our lives, but we cannot eat it, wear it, live in it, breath it, drive to work in it, or drink it. What is far more significant than the net financial transfers from South to North are the net transfers of real resources--finite ecological resources on which all life and wealth ultimately depends.

Sustaining Over-consumption

The industrial nations, with roughly 20 percent of the world's population, account for some two-thirds of the world's use of important metals and three-fourths of its energy use. Their economies have generated two-thirds of the greenhouse gases that are altering the global climate, three-fourths of the sulfur and nitrogen oxides that cause acid rain, most of the world's hazardous chemical wastes, and 90 percent of the chloroflourocarbons that are destroying the ozone layer (During, p. 156).

An American consumes more than sixty times as much paper and paperboard as an African--half of it for packaging--and more than twelve times as much as a Latin American--whose forests North Americans express great concern about saving (Postel and Ryan, p. 87). The products of the soil--such as food, wood, and natural fibers--consumed by a Dutch person requires five times as much land outside the country as inside--much of it in the South (During, p. 156).

Here we see the real bottom line. Northern lifestyles depend on the extraction of a disproportionate share of natural and ecological resource inputs from the South. The South is then expected to absorb a disproportionate share of the waste generated by the use of these resources. We live in a world divided between the over and under-consumers of earth's natural wealth--the over-consumption of one being dependent on the under-consumption of the other. The reversal of North-South financial flows that occurred in the 1980s gave the over-consuming nations of the North a new lever for dictating economic policies to Southern countries to sustain their profligate life-styles a bit longer. Its financial "assistance" to the South, both concessional and commercial, created the debt that now creates a desperate need for ever greater borrowing to cover debt servicing, thus giving this leverage to the multilateral agencies that control access to further borrowing.

Development by Eviction

North-South patterns of expropriation exist within, as well as, between nations and are reflected in many official development projects. Dams, commercial tree farms, agricultural estates, industrial projects, market development, transmigration projects, mines, prawn farms, nuclear power plants, tourist resorts all require access to land and water resources. The appropriation of these resources for officially sanctioned projects deprives the urban poor of their homes, farmers of their lands, and fisherfolk of their access to the sea, while destroying forests and fish breeding grounds, eroding fragile soils, depleting ground water, polluting local rivers and fouling the air.(5)

It is estimated that in India more than 20 million people have been displaced since independence to make way for large development projects, and the number is accelerating as population pressures and resource competition grow (Maloney, 1990-91). In each instance the weak are evicted from their homes and livelihoods--in the name of development and the national interest--usually without compensation--almost without exception to benefit those already better off than themselves. In many instances the projects are planned and funded by international assistance agencies, leaving behind the debt that then allows the North to dictate Southern economic policies.

Southern poverty is not a measure of the insufficiency of Northern charity. It is a measure of the North's expropriation of the South's rightful share of ecological surplus. Efforts to increase the charity obscure this basic reality.

TRANSNATIONAL CAPITAL: BEYOND STATE POWER

The market ranks with the modern state as one of the most important of human creations. Private ownership and competitive local markets have been cornerstones of political pluralism and economic accountability, and an important stimulus to technological innovation and productivity. Their success and significance have been dramatically underscored by the fall of the communist empire in Eastern Europe. However, like the power of the state, if unrestrained, market forces can turn destructive and oppressive. They must be balanced by the forces of the state and civil society, and the power of both state and market must be connected to place and held accountable to people.

Unfortunately, the fall of communist regimes has not marked the passing of ideological extremism posing as economic science. While the extremists who advocated all power to the state, in their own hands of course, have been thoroughly discredited, their fall has temporarily strengthened the hand of an equally dangerous group of ideological extremists who advocate all power to the market--in effect to transnational capital. International assistance has shown a propensity to follow power and the institutions that concentrate power--largely to the detriment of civil society. Until the 1980s, it supported the concentration of state power. In the 1980s, as transnational capital began to transcend the power of the state, the international assistance system, wittingly or not, aligned itself with this new force, becoming its ideological champion in the name of structural adjustment and export-led economic growth, and setting to itself the task of removing the policy barriers to transnational capital's ascendence over state and people as the arbiter of economic power.

Eroding Legitimacy of Capitalism

The principle of private ownership of capital is the foundation of capitalism's legitimacy. The owner, an identifiable person known to the people of his or her community, controls the use of capital and ultimately is accountable under the law for the consequences of its use.

The past several decades have witnessed the professionalization of corporate management, a broadening of participation in stock ownership, and the emergence of investment funds and institutions that manage other people's capital. Each has contributed to separating the management of capital from its ownership and eroded capitalism's original basis of moral legitimacy. With the transnationalization of capital, we are confronted with a new form of capitalism in which that legitimacy has all but evaporated.

Capital's professional managers are now no more accountable to its "owners" than to the states that issue their well used passports. While richly rewarded for their services, these managers are employees, not owners. Yet without real accountability to the owners, their jobs generally depend on their ability to make the capital they manage grow, i.e., to replicate itself. In a sense they work for capital itself.

Separating Power from People and Place

As capital has become transnationalized, it has become a largely autonomous force transcending national interests, with allegiance to no state, and accountable only to itself. It represents free floating economic power unattached to people or place, mocking the power of both state and people and rendering democratic institutions impotent as instruments of citizen control.

The countries where transnational capital chooses to base production facilities are temporary locations of convenience, of interest only so long as wages and taxes are low, and environmental and health restrictions minimal. Transnational capital has completely separated power from place, and even from people--establishing itself as the ultimate absentee landowner. Daly and Cobb have put it succinctly:

Free traders, having freed themselves from the restraints of community at the national level and having moved into the cosmopolitan world, which is not a community, have effectively freed themselves of all community obligations (Daly and Cobb, 1989, p. 234).

Gerald Epstein (1990-91), demonstrates what this has meant for the United States. He documents how U.S. incorporated transnationals, by basing their production facilities abroad to capitalize on cheap labor and then importing their products back to the United States, account for a major portion of the enormous U.S. trade deficit and resulting foreign debt. Similarly, their practice of avoiding U.S. taxes by sourcing profits in low tax countries accounts for the substantial budget deficits of the U.S. government. Furthermore, with their production facilities located abroad they have no direct self-interest in maintaining the social and physical infrastructure of the United States, now in a critical state of deterioration. Rather their self-interest lies in maintaining a strong global U.S. military presence to assure the security of their international investments. The combined effect of exporting jobs and reducing social services has created sharp increases in the disparity between the incomes of America's rich and poor.

Shifting Power from Labor and State to Capital

Every student of introductory economics learns the theory of comparative advantage, which tells us that under conditions of free trade each nation applies its resources to producing those goods and services for which it is the most efficient producer relative to other nations. Free trade thus maximizes economic efficiency and benefits everyone by making quality goods available at the most favorable prices.

Unfortunately, free trade advocates seldom mention the essential qualification on which the theory is based. The factors of production, including capital, must be confined within national boundaries--forcing the owners of capital to employ domestic labor in the production of those goods and services in which their country has a comparative advantage. If not so confined, capital simply moves its factories to countries that offer the least overall production costs (lowest wages, taxes, social benefits and health, safety and environmental standards), exports back to the high cost markets, and increases the returns to capital and management relative to those of labor (Daly and Cobb, 1989)--exactly as Epstein describes the U.S. experience.

Laborers who have successfully achieved high wages and attractive working conditions suddenly find themselves competing for their jobs with the world labor market, including vast numbers of unemployed willing to work on whatever terms are offered. National governments find that with the flow of goods and capital beyond their control, they no longer have the means to regulate their own economies. The critical decisions increasingly are made by international bankers and investment managers who are largely beyond the reach of national laws.

Eroding the Power of Democratic Institutions

The clearest statement of transnational capital's policy agenda is found in proposals being spearheaded by U.S. negotiators in the current round of GATT (General Agreement on Trade and Tariffs) negotiations.

Elimination of barriers to the free flow of trade and investment capital across national borders--which removes from national governments the ability to regulate their own economies and restrain the economic power of transnational capital.

Assignment of authority to a Geneva based agency accountable to national delegations on which transnational corporations are heavily represented to set maximum health and safety standards that could be exceeded by individual nations or community only on presentation of conclusive scientific proof of harmful effects--effectively removing from both nations and localities the right to set standards higher that those deemed adequate by the regulated industries.

International guarantees of intellectual property rights--thus assuring the North's perpetual technological monopoly and the South's unfavorable terms of trade.

In the aftermath of the fall of communism in Eastern Europe, the advocates of unrestrained international markets have presented themselves as champions of democratization. Their claim falls wide of the mark. Democracy depends on citizen action. Its building blocks are active, self-governing communities that control their own resources, manage their own political and economic affairs, and build a sense of civic stewardship and attachment to place. The proposals of the free trade advocates would enshrine in international law the transfer of control from people and community to impersonal institutions driven by an economic logic that assigns no intrinsic value to community, ecology or future generations.

BALANCING MARKET, STATE, AND CIVIL SOCIETY

In the 1980s most international assistance agencies made an ideological commitment to export-led, free-market growth strategies, emphasizing production for international markets and calling for removal of all barriers to the free flow of trade and investment across national borders. In so doing they aggressively aligned themselves with the interests of transnational capital.

Historical Foundations of Export-Led Growth

Export-led economic orientations are not new to Southern countries. The colonial period featured enclave economies that commanded the most lucrative national resources to produce for export. Foreigners and a wealthy local elite who controlled the enclave profited handsomely. The majority of the population was left to fend for itself with whatever resources remained.

We might presume that breaking down these dualistic structures in favor of integrated, diversified, domestic economies serving local markets would have been the first priority of any newly independent Southern nation. Yet in the majority of Southern countries these structures persist to this day. Now we see multilateral agencies and Northern governments actively promoting policies that, when implemented within the context of dualistic structures, severely exacerbate existing social and economic disparities--as dramatically demonstrated in Brazil--previously touted as one of the free trade success stories.

East Asia's Economic Experience: Ideological Mythology versus Practical Reality

The experience of Japan, South Korea, Taiwan, Singapore, and Hong Kong is commonly invoked to demonstrate the miracles of export-oriented, free-market capitalism unrestrained by the oppressive hand of government. Singapore and Hong Kong--small cities--one still a colony--with no rural sectors--are of limited relevance.

The economic histories of Japan, South Korea, and Taiwan do provide important insights, but bear little resemblance to the free market myths attributed to them. Each built its economic success on a foundation of radical land reform, massive investments in basic education, strong family planning programs that stabilized population growth, and dense networks of rural organizations that integrated the rural economy and supported broad participation in early economic growth.

Because of land reform, farms were small, management was intensive, and the income benefits of improved productivity were widely shared. A strong rural market resulted, which stimulated the emergence of small and medium rural industries to meet local demand. Larger firms supported by backward and forward linkages to an integrated diversified national economy were well positioned to compete in growing international markets at a time when there was little competition from other low wage countries.

Government provided strong guidance and protected producers in the domestic agricultural and industrial sectors from foreign competition. Government policies strongly favored domestic ownership of productive assets and control of technology.

Limited Models

While South Korea and Taiwan enjoyed temporary success from a narrow economic perspective, they face growing social, environmental, and even economic crises (Bello and Rosenfeld, 1990). Both have sacrificed social and environmental concerns for high levels of economic performance. Taiwan has severely poisoned its soil and polluted its waters. South Korea is experiencing growing social tension as demands from the working class for a greater share in prosperity grow. Japan has become one of the world's wealthiest nations. This wealth has built a vast international economic empire that is spreading environmental disaster throughout the world, while the living standards of Japan's people remain relatively modest.

East Asia provides little support for the ideologically pure free market approach advocated by many official assistance agencies. Its economic success resulted from an intelligent melding of the forces of both state and market. Its social and environmental failures resulted from the lack of a well developed civil society able to moderate both state and market power and balance social and environmental with economic priorities (Korten, 1990). Its successes and failures point to the need for balanced pluralism, a dynamic mix of market, state, and civil society--each bringing distinctive contributions to the collective national interest (Broad, Cavanagh, and Bello, 1990-91).

The most important institutional challenge of the 1990s is to strengthen the institutions of civil society as instruments of social innovation and a counter to the excesses of both state and market power. Most official assistance agencies are poorly equipped for this task. The use of their funds to turn NGOs from social critics and innovators into public service contractors, which is the predominant consequence of their recent interest in NGOs, is stimulating the growth of market oriented NGOs. It is doubtful that it will constructively strengthen civil society, a more complex task requiring wholly different orientations and institutional capabilities.

THE USES OF INTERNATIONAL ASSISTANCE

The World Bank, in its first annual report on The World Bank and the Environment, (1990, p. 11) acknowledges there have been "...a few well-publicized cases in which Bank projects actually had negative environmental consequences such as contributing to the destruction of tropical rain forests and posing threats to wildlife, indigenous people, and established human settlements..." It is true that only a few of the many such cases involving Bank and other donor funding have been well publicized. Many others have escaped public notice, as for example the expensive Asian Development Bank projects in Bali that replaced fully functional farmer-built facilities in the traditional Subak irrigation systems with facilities that were often either nonfunctional or unsuited to farmer needs. Or the Japanese funded irrigation project in Ilocos Norte, Philippines that threatened to obliterate the sophisticated Zanjera irrigation systems at a cost of more than $100 million (Siy, 1986).

From Selective Cases to Aggregate Statistics

Given the vast resources being poured into international assistance, we might expect serious efforts to assess the effectiveness of that investment. Surprisingly, there have been remarkably few attempts to determine the aggregate long-term outcomes of foreign assisted development projects, even against purely economic criteria.

A few years ago multi-agency study of foreign aid headed by Robert Cassen (1986) reported that from two-thirds to three-fourths of aid projects (somewhat higher in the case of the World Bank) were judged by their sponsoring organizations to be satisfactory by rate-of-return or other standards. However, such evaluations are usually made at the time of project completion, are carried out by agencies that have a substantial self-interest in favorable evaluation findings, and depend on heroic assumptions about the extent to which the flow of project benefits will be sustained beyond the withdrawal of project staff and financing.

One of the rare efforts to test the validity of these assumptions is reported by Michael Cernea (1986) based on special follow-up studies by the Operations Evaluation Department of the World Bank of 25 Bank assisted agricultural projects. Cernea's sample was limited to projects that Bank staff, at the time of project completion, had rated successful with good prospects to generate a continuing stream of benefits. Conducted several years after project completion, the follow-up studies found that thirteen of these twenty-five "successful" projects had in fact failed. They did not produce a continuing stream of benefits sufficient to justify the investment.

Most donors would seriously protest any effort to extrapolate from such limited data. However, in the absence of more complete data, we may note that taking relatively optimistic estimates that 75 percent of projects are successful at the time of project completion and 50 percent of these subsequently fail to sustain an acceptable flow of benefits suggests that less than 40 percent of development projects may produce sufficient net returns to justify the investment. Based on my own field experience I would be inclined to the view that this is probably an optimistic estimate.

Discipline

Whether or not international assistance contributes to self-reliant development depends in substantial measure on the discipline with which it is used by the recipient. Moderate amounts of assistance applied in highly disciplined ways to increase domestic productive capacity can certainly strengthen the domestic economy in ways that build local control and self-reliance.

Where discipline is lacking, assistance is more likely only to produce profits for suppliers and contractors, finance profligate life styles for the rich, relieve pressures for domestic tax collection, subsidize the exploitative extraction of natural resources, mask economic mismanagement, release other funds for military expenditures, reduce pressures for essential social reforms, aid capital flight, add to debt burdens, and make recipient governments beholden to foreign interests.

It all comes down to what has become a widely recognized, though freely ignored, truth. International assistance is only useful in supplementing domestic resources within the context of a disciplined national policy environment that encourages the efficient and equitable use of all available resources, both foreign and domestic. In the presence of such conditions the need for external assistance is greatly reduced. In their absence, aid is of little help--and is usually counterproductive.

INTERNATIONAL ASSISTANCE AND EXTERNAL DEPENDENCE

Growth alone can be achieved with other people's money, labor, management and technology. Development of a nation's capacity to use its own resources to meet its own needs is another matter. This reality is illustrated by the oil producing countries of the Middle East that have achieved spectacular growth by selling off a nonrenewable resource, but depend on others for everything--from managers and engineers to laborers. Only by the most narrow definition could one maintain that they are "developed."

Of course there is the possibility of using other people's money while using one's own labor, management and technology. Here the differences between domestic savings, and international transfers as sources of investment capital for development become important.

Domestic savings are in local currencies. These purchase local goods and services, thereby strengthening local technical capacity and stimulating the local capital goods industry. This process may be slow and produce few showcase projects, but it builds local capacity and self-reliance. Returns on investment are in local currency and stay in the economy.

International transfers provide foreign exchange to purchase goods and services abroad, thus strengthening foreign productive capacities. Results are more dramatic and provide a greater sense of progress within the enclave. Domestic capacity building will be reduced and dependence increased. If transfers are in the form of foreign loans or investments, repayment or profit repatriation must be made to foreigners in foreign exchange.

A substantial portion of official assistance comes in the form of loans, to the extent that in 1988 debt from official sources averaged 60.3 percent of total foreign debt for the 44 Southern countries for which the World Bank reported data.(6)

The Debt Trap

If capital transfers in the form of loans or investments are invested in productive activities that generate sufficient foreign exchange to cover repayment then repayment may not be a problem. Neither is there a problem if the country owns advanced technologies that command a high value added in international markets and earn it a robust trade surplus. Such situations are rare among Southern countries, leaving four options when payments come due.

Borrow more foreign exchange. This option, if available, is the easiest in the short-run, but it prolongs and worsens the problem.

Sell off natural resources such as forests, minerals, and oil in international markets. This reduces future productive potentials, may result in environmental damage, and leaves the country dependent on foreign purchases once its own resources are depleted.

Sell or lease productive assets such as agricultural lands, fishing rights, and industrial facilities to foreigners. This transfers control of the nation's productive assets to foreigners, displaces local producers from the lands and fisheries on which their livelihoods depend, and weakens local control and the possibilities for economic self-reliance.

Export migrant workers and/or sell cheap local labor to export-oriented foreign investors, taking steps to keep labor costs low and minimize health, safety, and environmental regulation. This commits a country to low social and environmental standards to attract mobile investments that will move elsewhere whenever more favorable terms are offered.

It is rare that consideration is given at the time an international loan agreement is signed to how it will be repaid. The annual payments look relatively small and the magic of inflation and economic growth are expected to make repayment relatively painless. The official bankers, whose promotions depend on their ability to obligate funds, assure the borrower that taking the loan is the responsible path to modernization.

While even grants tend to create a growing dependence on foreign exchange, there is no need to repay. With loans, however, domestic resources that might otherwise improve domestic living standards must be diverted to earn the foreign exchange for debt service, now nearly $200 billion a year for all developing countries (UNDP, 1990, pp. 78-79).

Role of the Multilateral Banks

The standard response of the international assistance agencies to a country experiencing a debt crisis is to recommend further loans. However, such loans are contingent on the country meeting certain conditions. Some conditions are quite sensible, such as selling off inefficient public enterprises, increasing domestic tax collections, and eliminating a variety of subsidies that benefit primarily upper and middle classes.

However, other measures call for orienting the economy toward production for exports, removing barriers to imports and facilitating foreign ownership of the country's resources and economic activities. Each of these measures tend to shift control of the economy from local people to transnational capital--trading increased economic dependence and foreign claims on the country's resources for possible short-term improvements in economic statistics.

INTERNATIONAL COOPERATION: AGENDA FOR THE 1990S

Our task for the 1990s is to come to terms with our global reality. We must learn to live in constructive balance with earth's ecology, achieve some semblance of economic justice, and bring the forces of transnational capital under human control.

The day of international assistance as capital transfers is passed. We cannot buy our way out of the global crisis. Our efforts to do so are based on a misdefinition of the nature of the problem--a misdefinition that is inherent in organizations whose primary function is the transfer of capital to finance economic growth. These organizations necessarily define the problem in terms of the only solutions they are capable of offering--even as it becomes evident that these "solutions" are deepening the crisis.

This is particularly true for the multilateral banks, and it is not surprising to find them in the lead in assuring all who will listen that increased international lending is the answer to whatever problem presents itself. In pursuing their own bureaucratic interests, they increasingly have become instruments of the forces of transnational capital, draining power from the state and ultimately undermining the forces of democratization that are our hope for strengthening civil society. Applying their traditional "solutions" under new labels, such as an environmental lending facility, is not likely to produce more beneficial results.

Most of the conventional assistance organizations have become a problem posing as a solution, erecting active barriers to more appropriate action. It is time to dramatically reduce their roles and funding, and to consider the possibility that many of them should be completely dismantled.

The essential task is the opposite of that to which the traditional assistance agencies are dedicated. It is to reduce the extractive flow of environmental resources from South to North so that Southern people may apply them to improving the quality of their own lives. This can only be accomplished by bringing Northern lifestyles into line with ecological reality, reducing the North's dependence on the resource subsidies that the South has been providing Northern consumers since the beginning of the colonial era, and reallocating the use of global resources so that all people have the opportunity to live a decent life. This effort must be backed by negotiations leading to international debt settlements that substantially wipe out existing debts under terms that preclude recreating them, and by measures to strengthen the ability of civil society to hold both the state and transnational capital accountable.

This is no small agenda. It requires bringing to bear enormous quantities of human intelligence and voluntary energy of a type that emerges more readily out of the self-motivated commitment of social movements than government funded projects.

If public policy and funding are to play a nurturing role we will need to create a new system of international organizations appropriate to an agenda very different from the one most of our current development assistance agencies were created to serve. The centerpiece organizations of this new system will function as public foundations to facilitate people-to-people and government-to-government problem solving action. The creation, strengthening and shaping of appropriate institutions into a support system for a global development cooperation movement presents one of the major challenges of the current decade.(7)

References

ACFOD, ANGOC, APROTECH ASIA, MINSOD, and WALHI, Southeast Asia Regional Consultation on People's Participation in Environmentally Sustainable Development. Vol. II: National & Regional Reports, Manila, Asian NGO Coalition (1990).

Bello, W., and S. Rosenfeld, Dragons in Distress: Asia's Miracle Economies in Crisis, San Francisco, The Institute for Food and Development Policy (1990).

Broad, R., J. Cavanagh and W. Bello, "Development: The Market is not Enough," Foreign Policy, No. 81, Winter 1990-91, pp. 144-62.

Brown, L. "The Illusion of Progress," in Lester R. Brown, et. al., State of the World 1990 New York, W. W. Norton (1990).

Cassen, R., "The Effectiveness of Aid," Finance & Development, March 1986, pp. 11-14.

Cernea, M., "Farmer Organizations and Institution Building for Sustainable Development," Regional Development Dialogue, Vol. 8, No. 2, Summer 1987, 1-19.

Daly, H., and J. Cobb, Jr. For the Common Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future, Boston, Beacon Press (1989).

Development Assistance Committee, 1989 Report: Development Cooperation in the 1990s, Paris, OECD (1989).

Durning, A., "Asking How Much is Enough," in Lester R. Brown, et. al, State of the World 1991, New York, W.W. Norton (1991).

Epstein, G., "Mortgaging America," World Policy Journal, Vol. VIII, No. 1, Winter 1990-91, pp. 27-60.

Korten, D., Getting to the 21st Century: Voluntary Action and the Global Agenda, West Hartford, CT, Kumarian Press (1991).

Maloney, C., "Environmental and Project Displacement of Populations in India. Part I: Development and Deracination," Field Staff Reports, Asia 1990-91/No. 14, University Field Staff International, Indianapolis, Indiana.

Postel, S, and J. Ryan, "Reforming Forestry," in Lester R. Brown, et. al, State of the World 1991, New York, W.W. Norton (1991).

Rich, B., "The Emperor's New Clothes: The World Bank and Environmental Reform," World Policy Journal, Spring 1990, pp. 306-29.

Siy, R., "Averting the Bureaucratization of a Community-Managed Resource--The Case of the Zanjeras," in David C. Korten (ed.), Community Management: Asian Experience and Perspectives, West Hartford, CT, Kumarian Press, (1986), pp. 260-73.

United Nations Development Program, Human Development Report 1990, New York, Oxford University Press (1990).

World Bank, The World Bank and the Environment, Washington, D.C., The World Bank (1990).

World Bank, World Development Report 1990: Poverty (Oxford: Oxford University Press, 1990).

Notes

1. Development Assistance Committee (1990), Policy Statement by DAC AID Ministers and Heads of AID Agencies, paragraph 31.

2. Ibid., Table 23, page 227.

3. Compiled from tables in Ibid.

4. The evidence and its consequences for the daily lives of most people in the world has become so pervasive as to need no further documentation here. Readers who feel a need for documentation on the limits we face in regard to fertile soils, water, and the alteration of earth's weather and ozone layers are referred to the annual State of the World reports issues by the Worldwatch Institute in Washington, D.C.

5. See Rich (1990). Numerous case studies are documented or referenced in ACFOD, et. al. (1990).

6. World Bank, "Table A-12: Composition of Debt Outstanding, 1970 to 1988," World Development Report, p. 168.

7. For further discussion see Korten (1990).

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