The Abuses of Aid

Foreign aid has been getting a bad press this year – and not without reason. For a long time bilateral aid in particular has been seen as too small and scattered, too politically motivated, too supportive of the interests of donors (especially of the business interests of donor countries) rather than oriented to real  benefits for intended recipients. Now, governments of poor developing countries that were earlier grateful for any crumbs from the rich countries’ table are less welcoming, especially of aid that comes tied to various economic and political strings. The improvement in their terms of trade over the past six years, as well as the emergence of new markets and new sources of aid and investment from other emerging nations and oil-exporting countries, have all played a role in this changed perception.

The relationship of the UK government with foreign aid has become particularly complicated in recent times – but it may well be symptomatic of a wider problem in many developing countries. The Cameron government announced that it was going to “ringfence” foreign aid from the sweeping budget cuts that it has already announced or plans to implement over the next few years. But this has come under attack from both Left and Right for various reasons. Revelations in the British media that a significant part of the funds has been directed to highly paid consultants based in the UK whose output is often of dubious relevance or usefulness to the so-called “beneficiary” country or its people may have come as a surprise to many within Britain, but such patterns have been apparent in the developing world for some time now.

Another widespread suspicion – or perception – among people in recipient countries, that much of the foreign aid is actually directed towards promoting the (often problematic) interests of business interests of the donor nation, is now confirmed by a study conducted  by Mark Curtis for the NGO War on Want. The report (The entitled The Hunger Games) notes that a significant amount of bilateral foreign aid from the UK – through the Department for International Development or DfID – is directed towards agricultural projects.

At one level, this is eminently desirable: agriculture remains a critical concern since it still accounts for half or more of total employment in poor countries,  the majority of livelihoods still depends directly or indirectly on it – and this sector has been languishing or in a state of near-crisis despite a decade of relatively high though volatile global crop prices. But it turns out that this aid has not been directed towards improving conditions for small cultivators, who are the ones facing the most problems and are therefore most in need of assistance in various forms.

Instead, much of DfID’s aid is designed to extend the power of agribusiness corporations over the global food system, thereby reducing the market power and bargaining strength of these small cultivators. The model that DfID has championed in the developing countries where it works is one based on free trade (regardless of how flawed and imbalanced is the playing field for such trade), corporate monopoly of technology and private (rather than public) corporate control over the production and distribution of food.

Indeed, the report suggests that DFID is at the centre of an intricate nexus of corporations and donor-sponsored institutions seeking to maximise private profit from agriculture. Personal connections play a vital role, and there is a significant ‘revolving door’ of staff between DFID and agribusiness corporations, with the personal links going beyond DFID to the heart of the UK government and its economic policy. The report also reveals DFID’s involvement in a network of private enterprises and investment fund managers incorporated in the “tax haven” jurisdiction of Mauritius.

This strategy increasingly finds expression in “public private partnerships”, which also dominate the aid paradigm. For example, in Africa, DfID supports a network of input dealers who are trained by and then disproportionately source from a particular company (Monsanto) that is a partner in its project, thereby locking poor framers into expensive reliance on a package of chemical fertilisers and pesticides, hybrid seeds and other inputs that make them dependent on that particular company. Because DfID does not support alternative public or cooperative structures of knowledge dissemination and agricultural extension, the company and the input dealers it trains become the basic source of knowledge and information about current cultivation techniques for the farmers. In Malawi, for example, Monsanto is now responsible for providing 67 per cent of all agricultural inputs!

It is not even as if these large agribusiness corporations are in need of much support. Following two decades of horizontal and vertical consolidation, the global agribusiness industry is now one of the most concentrated economic sectors in the world. Four seed companies control more than half the global seed business. They are also among the list of ten biggest pesticide companies, which covers over four-fifths of world pesticide sales. The top ten food processing companies account for almost thirty per cent of that global market, and just fifteen supermarket chains account for nearly one-third of retail food sales across the world.

This is obviously bad news for farmers, especially small cultivators confronting the substantially increased market power of multinational corporations that increasingly control both input and output markets for crops. The harms caused to farmers across the developing world can be so extreme that analysis by lawyers has noted that this can be construed as a violation of the basic right to food of cultivators themselves.

But it is also bad news for consumers who are faced with less actual choice in a world dominated by a few mega agribusinesses.  A fascinating study by Barry Lynn and Philip Longman a couple of years ago showed how multinational conglomerates have constrained livelihoods and control the bulk of offerings on supermarket shelves in the United States – to the point that consolidation and monopolisation can explain to a significant extent both weak job creation in the US recovery and the higher distribution margin for goods that affect both direct producers and ultimate consumers.

In such a context, it is surprising and even alarming to note that aid policies of major donors like the United Kingdom, which are paid for out of taxpayers’ money in a wider context of fiscal cuts, and which are presented as examples of the UK government fulfilling its international responsibilities, are in fact operating to support the interests of the big corporations in a world that is already characterized by far too much private concentration of assets and excessive market power of a few companies.

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