PROMOTING EQUITABLE DEVELOPMENT
Political and Social Affairs Division
PERILS OF STRUCTURAL ADJUSTMENT
AID: TARGETING HUMAN DEVELOPMENT
ENVIRONMENT AND POVERTY
AND HUMAN RIGHTS: CREATING A BASE FOR DEVELOPMENT
POLITICS OF AID
CONTINUING DEBT CRISIS
THE RULES OF INTERNATIONAL TRADE
PROMOTING EQUITABLE DEVELOPMENT
has become routine for international observers to point out the extraordinary
changes that have taken place in the global political landscape in recent
years. While it is still too early to render any definitive judgment,
it is indisputable that the liberation of Eastern Europe and the dissolution
of the Soviet Union have produced a historical watershed. Within four
years, international politics have been transformed and a new era has
a genuine "new world order" remains elusive. While experts may
hail the global spread of democracy and the lifting of the threat of nuclear
war, political and economic instability has reached an unprecedented level.
One need look no further than the Third World. Developing countries remain
mired in economic crisis as the disparities between North and South become
increasingly pronounced. The gap between rich and poor has doubled in
the past 30 years, so that we now live in a world in which 20% of its
people consume more than 80% of its wealth. During the 1980s, per capita
incomes fell in many developing countries; in sub-Saharan Africa, for
example, per capita income dropped 25% from levels that were already severely
depressed. Poverty, famine, and disease remain widespread. Ironically,
the changes in Eastern Europe and the former Soviet Union have exacerbated
the problem, as the Third World is now competing with this region for
scarce Western aid. As more than one authority has suggested, the "lost
decade" of the 1980s has continued into the 1990s.(1)
international community often blames the developing countries themselves
for their own failed development. They suggest that Third World governments
should spend less on the military and inefficient government enterprises
and more on structural adjustment programs and priority areas of human
development such as basic health care and primary education. But clearly
there is a critical international dimension to development. Third World
countries cannot reverse the current trend on their own; in an increasingly
inter-dependent world, they need the assistance of the industrial North.
paper will examine the role that developed countries might play in promoting
equitable development between North and South. In doing so, it will also
attempt to explain why international assistance has failed in the past
to produce more tangible results in the struggle to close the gap between
the developed and developing countries of the world.
recently, most experts defined Third World development in exclusively
economic terms; for example, GNP growth, income and wealth, the production
of commodities and the accumulation of capital. No one will deny that
these criteria remain important, but over the past several years the social,
political and environmental components of development have come under
closer scrutiny. As a result, new definitions of development are emerging,
much broader in scope and more reflective of the basic needs of people
living in the Third World.
all of these definitions bear a common theme. The Dag Hammarskjold Foundation,
for example, has stated that "development is a whole; it is an integral,
value loaded, cultural process; it encompasses the natural environment,
social relations, education, production, consumption, and well-being."(2)
The World Bank, in a major departure for the international financial institution,
pointed out in its 1991 World Development Report that the ultimate
goal of development should be to enhance the quality of life. While economic
productivity and income are certainly important in achieving this goal,
development also encompasses "better education, higher standards
of health and nutrition, less poverty, a cleaner environment, more equality
of opportunity, greater individual freedom, and a richer cultural life."(3)
Finally, the United Nations Development Programme (UNDP), in its first
Human Development Report, expanded on this theme and offered perhaps
the most comprehensive definition of all:
development is a process of enlarging people's choices. The most critical
of these wide-ranging choices are to live a long and healthy life, to
be educated and to have access to resources needed for a decent standard
of living. Additional choices include political freedom, guaranteed
human rights and personal self-respect.
enables people to have these choices. No one can guarantee human happiness,
and the choices people make are their own concern. But the process of
development should at least create a conducive environment for people,
individually and collectively, to develop their full potential and to
have a reasonable chance of leading productive and creative lives in
accord with their needs and interests.(4)
then, encompasses two concepts: the economic pursuit of a pattern of growth
that ensures the productive use of a developing country's most abundant
resource, its labour; and the widespread provision of basic social services,
thereby meeting the human needs of the population.(5)
Unfortunately, the international community has learned from experience
that economic and human development are not always complementary; indeed,
if not carefully coordinated, they can often be mutually exclusive. Any
aid strategy formulated by developed countries must address this central
PERILS OF STRUCTURAL ADJUSTMENT
the 1980s, industrial countries and international agencies such as the
World Bank and the International Monetary Fund stressed the need for continued
economic growth in order to promote development in Third World countries.
The prevailing sentiment was that such growth could be achieved only through
"structural adjustment programs" (SAPs). IMF and World Bank
loans were disbursed only to those developing countries that implemented
tough domestic policies whose main thrust was to reduce government expenditure
and make the over-all economy more competitive. These long-term, market-oriented
reforms were based on a simple premise: better government was less government.
the late 1980s, studies revealed that adjustment measures were not working;
many countries receiving IMF or World Bank assistance had made little
or no progress in improving their economic performance. What is more,
many of the reforms - such as reducing the size of government, raising
interest rates, lowering budget deficits by cutting subsidies, abolishing
price controls and curbing wage increases - were resulting in wide-spread
unemployment and causing particular hardship among poor people and vulnerable
groups dependent on food subsidies and agricultural, educational and welfare
services. Women were especially hard hit. In other words, the people most
in need of assistance were being left to fend for themselves, with inevitable
adjustment programs continue to be implemented, however. Over the last
two years, Canada, for example, has become more directly involved in their
initial formulation, and there has been an increased linking of Canada's
bilateral aid to SAPs. This policy shift has come under considerable attack
from Canada's NGO, church and academic communities, as the social costs
of structural adjustment continue to inflict serious damage on the poorer
segments of the Third World's population.(6)
AID: TARGETING HUMAN DEVELOPMENT
focus on structural adjustment and the need for economic stabilization
and growth in the 1980s and early 1990s have left human development in
the shadows. While few would deny that SAPs are necessary so that developing
countries can build market-oriented economies and learn to balance their
budgets, it is becoming increasingly clear that adjustment will not ensure
sustainable economic growth if a country's population is illiterate or
in poor health. Most experts now agree that in order to make structural
adjustment work (while at the same time reducing the severity of some
of its side-effects), more effort must be made to target the poorest through
support for the social sector, specifically primary health care and basic
education. Within these areas, women, who comprise the majority of the
world's poor, must be given special priority.
a healthy population is not only an end in itself, but also releases resources
that can be used to achieve other development goals. By raising workers'
productivity, for example, it yields sustainable economic benefits. Primary
health care is for many countries the cheapest and quickest way to improve
health standards. The 1991 Human Development Report estimated that
it costs between $100 and $600 to save each additional life through preventive
health care; in the case of curative care, the cost rises to as much as
$5,000. However, most developing countries spend a large proportion of
their health budgets on hospitals, while very high infant mortality rates
continue. Moreover, when a country is undergoing a severe economic adjustment
program, primary health care is often the first social service to be cut.(7)
the same lines, education in not only a noble aim in itself and a true
measure of quality of life but promotes economic growth and puts other
development goals within reach. Primary education, in particular, yields
high economic returns, often twice those of higher education. Moreover,
it is an excellent means of channelling resources towards the poor, since
a far greater share of the benefits of primary education accrue to those
less well off. Unfortunately, primary education accounts for less than
half the total expenditure on education in developing countries. It has
been estimated that over 100 million children worldwide receive no primary
education, while a further 200 million receive no education beyond the
age of 12.(8)
aid constitutes a high proportion of many Third World countries' development
budgets, and for this reason, it should be carefully directed. Clearly,
the industrial states can offer tremendous help to the poor in developing
countries by directing their aid towards the social sectors, in particular
primary health care and education. Unfortunately, the record up to now
has not been impressive. Dr. Mahbub ul Haq, project director of the
Human Development Report, has estimated that less than 7% of industrial
countries' official development assistance (ODA) is currently being channelled
into human priority areas: health care, education, family planning and
nutrition.(9) In 1978-79 the figure was
17%.(10) Moreover, only 7% of educational
aid is aimed at primary schooling; likewise, only 27% of aid delivered
to the health sector is for primary health. Dr. ul Haq has lamented that
"in country after country in the Third World, human infrastructure
is being left behind..."(11)
to the North-South Institute, Canada's record in this area follows the
international trend. In 1989, for example, only 20% of Canada's ODA budget
went to the health and education sectors. Of this 20%, approximately a
quarter was directed to primary health care, basic education and water
and sanitation. In other words, only 5% of Canada's ODA reaches those
sectors that specifically affect the poorest.(12)
By contrast, New Zealand allocates over half of its aid to the social
donor countries prefer to pour money into capital intensive schemes that
happen to require machinery and technical assistance from the same donor
countries. For example, much of the $15-billion technical assistance received
by developing countries is reserved for the salaries and travel of foreign
experts and equipment and technology from industrial countries. Unemployment
of trained personnel and a national civil service demoralised by low salary
levels often exist side by side with large numbers of foreign, high-priced
experts and consultants.(14)
1993 Human Development Report argues that the time has come to
change this trend. It suggests that at least 20% of total aid should be
allocated to human priority concerns.(15)
In a previous report, UNDP officials stated that if only one-third of
existing aid were committed to human priority areas, the aid allocation
to these sectors would increase fourfold.(16)
They have also argued that technical assistance should be carefully scrutinised
to ensure that it builds human capabilities and institutions in developing
countries. This would not only reduce the cost of assistance, it would
also release millions of dollars that could be put to more productive
could also enhance human development in the Third World by offering new
conditions for cooperation - for example, by specifying that human development
programs should be the last, not the first, to be reduced in an adjustment
period or by making it clear that external assistance would be reduced
if a country's military expenditure exceeded its social expenditure. Finally,
aid channelled into the social sector might also serve as an incentive
to reluctant finance ministers to devote a larger share of domestic resources
to social spending, as Third World governments often need to be encouraged
to set up food and health subsidies that transfer income and other economic
opportunities to the very poor. The erection of such safety nets would
cost only a small fraction of GNP and would prevent more costly political
and social disturbances later.
ENVIRONMENT AND POVERTY
aid strategy aimed at human development in the Third World can neglect
the environment, for there is ultimately a fundamental link between a
healthy environment and a healthy society and economy. It is no coincidence
that the vast majority of the world's poor live in the most ecologically
vulnerable areas of Latin America, Asia and Africa. In these societies,
there is no choice between rapid economic growth and environmental protection.
Indeed, growth is not an option but an absolute necessity. Many choices
that degrade the environment are made not because of lack of concern for
the future, but because of the imperative for immediate survival. As the
1992 Human Development Report explains, "it is not the quality
of life that is at risk - it is life itself."(17)
countries of the North and South define environmentally sustainable development
in different ways. The industrial states focus on such "global change
issues" as the depletion of the ozone layer and global warming; the
Third World, on the other hand, is more concerned with localized issues
such as soil degradation and polluted water. Clean water and safe sanitation,
along with adequate food, are the foundations of human development. But
the demands of poverty often clash with the environment, and vice versa.
The poor, for example, overuse their marginal lands for fuel wood and
for subsistence and cash-crop production. This endangers their physical
environment, which in turn reinforces their poverty and threatens the
health and the lives of their children. It is a vicious cycle.
industrialized countries must come to terms with this connection between
the environment on the one hand, and poverty and human development on
the other. Approximately $10 billion is spent each year on water supplies
in developing countries, but nearly 80% of this total is aimed at the
better off. Approximately 50% of rural and 20% of urban households in
the Third World, most of them poor, have no safe water supply.(18)
Human development experts suggest strongly that the industrial countries
must provide more environmentally sound technologies and additional resources
to confront these basic problems. Global ecological security, at whatever
level, can be seen as a unifying link rather than a divisive issue between
the North and South.
AND HUMAN RIGHTS: CREATING A BASE FOR DEVELOPMENT
Weinstein of Washington's Centre for Democracy has stated that "people
cannot afford not to have a democracy. It is not a luxury, it's a necessity."(19)
It is clear that democratic values - respect for human rights, political
accountability, the rule of law and transparency in the exercise of power
- are pivotal in sustaining development. Only in a political system that
recognizes the potential of people can development, in all its myriad
forms, truly take place.
experts, for example, agree that, given time, democratic government will
further economic development by increasing demand and productivity and
enhancing income distribution.(20)
Democracy creates a climate that allows the free market to operate efficiently.
It also improves the quality of life and strengthens human development.
The United Nations Development Programme has stated bluntly that "human
development is incomplete if it does not incorporate freedom."(21)
More and more experts are stressing the link between political freedoms
and civil liberties on the one hand and progress in health, education
and the status of women on the other. Democracy unleashes the creative
energies of the people and gives them perhaps the greatest freedom of
all, the freedom to make their own choices. Ultimately, "people are
the best advocates of their own interests - if they have the opportunity
to do so. Ensuring full participation in the community and in the nation
is thus often the best route for reform-minded governments to take."(22)
In short, a government's development policies are destined to fail if
they do not have the support of the people.
again, countries such as Canada, steeped in the democratic tradition,
have a critical role to play in ensuring that stable democratic governments
are established in the Third World. All forms of ODA will help developing
countries strengthen their democratic institutions, but technical assistance
is perhaps the most critical of all. Many of these countries have absolutely
no democratic legacy whatsoever, and for that reason need to be taught
the fundamentals of democratic government and human rights. Whether drafting
constitutions or helping organize and monitor elections, the developed
countries can lend vital assistance. At the same time, those countries
that consistently refuse to embrace democracy and continue to abuse human
rights, can be singled out. Former Prime Minister Brian Mulroney made
it clear that Canada would channel its aid increasingly to those countries
that respected basic freedoms. He insisted that Canada would "not
subsidize repression and the stifling of democracy."(23)
POLITICS OF AID
we have seen, there is a growing consensus in the aid community that a
considerable portion of the international aid budget should perhaps be
restructured to focus on human development concerns that help the poorest
elements of Third World societies. The first step in ensuring this is
to target the poorest countries.
many years one of the basic motivations of aid donors was the wish to
win friends in the cold-war confrontation between capitalism and communism.
In other words, the dominant objective was often political. With the end
of the Cold War, it was expected that this trend would change and "need"
would become the main criterion. However, this has not been the case.
According to the UNDP, bilateral ODA (which comprises 70% of total international
aid) is still badly allocated. Only a quarter of ODA is delivered to the
ten countries containing three-quarters of the world's poor, while the
richest 40% of the developing world's population receive more than twice
as much aid per capita as the poorest 40%.(24)
According to the North-South Institute, only about 30% of Canadian aid
is offered to the world's poorest nations.(25)
strong argument can be made that aid allocation is still suffering from
the scars of the Cold War (twice as much aid per capita goes to high military
spenders rather than more moderate spenders) and from a preoccupation
with nation states rather than people. UNDP officials believe that ODA
should be given to people rather than countries, and that it should go
where the need is greatest, to the poorest people wherever they happen
development experts will acknowledge that the countries of Africa, especially
those south of the Sahara, should be given priority in any concerted international
effort to improve human development in the Third World. Africa has the
lowest life expectancy of all the developing regions, the highest infant
mortality rates and the lowest literacy rates. Its average per capita
income fell by a quarter in the 1980s, and by the end of the century more
than 400 million people on the continent are expected to be below the
poverty line.(27) Long-term development
restructuring is needed to strengthen Africa's human potential and the
momentum of its growth. However, Canada's recent decision to cut bilateral
aid to Central and East Africa - including Tanzania, Rwanda, Ethiopia,
Kenya, Uganda, Madagascar and Burundi - and focus more on middle-income
nations has raised eyebrows in Canadian aid circles. Since the mid-1980s,
Canadian aid to Africa has dropped considerably, although it maintains
a larger share of the ODA budget than any other region.
focusing on human development issues and ensuring that more aid goes to
the poorest countries should perhaps be priorities for developed countries,
a more fundamental problem remains. Quite simply, without greater external
financing, the development effort will continue to struggle.
industrial countries currently provide about $54 billion a year in international
aid, the equivalent of approximately 0.35% of their combined GNP. Many
experts question whether this amount of ODA can truly make a difference
for the one billion poor living in the Third World. By contrast, the industrial
nations allocate roughly 25% of GNP to their 1.2 billion people,
of whom only 100 million (less than a tenth of their populations) live
below the poverty line.(28)
the same time, ODA budgets everywhere are contracting, partly because
of tough financial times and partly because of the competing demands of
Eastern Europe and the former Soviet Union. Canada's ODA budget has suffered
severe cuts in recent years; it is expected to drop to 0.4% of GNP by
1994-95, the lowest figure in 20 years. Few countries, with the exception
of those from Scandinavia, meet the UN target for ODA of 0.7% of GNP.
Arguments that a 10% cut in the military spending of NATO countries could
potentially double the amount of international aid should not be dismissed
out of hand.
CONTINUING DEBT CRISIS
aid, whether in greater quantities or not, could make a tremendous difference
to the Third World, but the promotion of equitable development must still
be conceived in a larger framework. For example, the developed countries
must address the critical issue of the international debt.
1983 and 1989, rich creditors received $242 billion in net transfers on
long-term lending from indebted developing countries. The foreign debts
of the Third World now total nearly $1.3 trillion, requiring $200 billion
a year in debt servicing alone. Many countries devote up to a third of
their export earnings to service their debt or else accumulate unpayable
arrears. According to the World Bank, over half of the international debt
is held by just 20 countries - with Brazil, Mexico, India and Egypt leading
the way - but it is the least developed countries in regions such as Sub-Saharan
Africa that have suffered the most social and economic damage. With the
debt continuing to increase, these countries' troubles will persist long
into the future, paralysing economic initiatives and blocking much-needed
expenditure on human development.(29)
the 1980s and early 1990s, the industrial countries attempted to devise
debt rescheduling and reduction schemes. The Brady Plan to reduce commercial
debt and debt service was touted as a major turning point but it did little
to help the least developed countries. The G7 industrial countries, including
Canada and Great Britain, devised their own strategy in Toronto in 1988
and the Organisation for Economic Co-operation and Development (OECD)
announced plans to help low-income African countries; however, once again,
there was little progress. Some headway has been made recently. A breakthrough
of sorts was achieved with the Paris Club meeting of December 1991, which
set out a strategy to reduce the present value of debt by 50%. Canada
has taken some important initiatives on its own, including forgiving $1.2
billion of ODA debt since 1978; however, it is still owed $3 billion by
developing countries.(30) Great Britain
has promised to write off two-thirds of the debt of low-income countries.(31)
But ultimately, a broad solution is still waiting to be found.
repeated failures, it is imperative that the developed countries continue
to search for a way out of the debt impasse. If the rich nations do not
start transferring resources to the poorer nations soon, the Third World
will have little hope for the future. Whichever path is chosen, debt relief
must be pursued, and the developed countries should continue to throw
their full support behind it.(32)
THE RULES OF INTERNATIONAL TRADE
addition to debt relief, developing countries desperately need a liberal
and expanded trade environment to encourage economic growth and human
development. Dr. ul Haq has commented that "what the poor ultimately
need is not charity, except as a temporary measure, but access to markets,
whether domestically or internationally."(33)
However, global market opportunities for the Third World are extremely
limited. The 24 countries of the OECD dominate 80% of world trade, and
over the past decade 20 of them have become more protectionist.(34)
As a result, developing countries are being denied critical markets. It
has been estimated that if the Third World were granted unrestricted access
to northern markets, especially in such heavily subsidized sectors as
agriculture and clothing and textiles, some $55 billion in additional
export earnings could be generated, equal to the amount the less developed
states receive in aid.(35)
North-South Institute claims that Canada fits in with this unfortunate
trend. While Canada has made important contributions to the GATT Uruguay
Round of multilateral trade negotiations and has also supported the Cairns
Group (a 13-country coalition that is tackling agricultural issues), only
12% of its imports originate in the Third World, a low total even among
OECD members.(36) Canada also imposes
an average tariff of over 10% on industrial imports from less developed
countries, while the average tariff faced by developed states is less
than 5%. There are also heavy quotas on clothing imports - the largest
single export category from developing countries in an industry which
is a major stepping-stone to industrialization.(37)
the world trading system requires concerted international action. Protectionist
measures continue to increase as the Uruguay round is dragged out, and,
with the continuing trend toward regional trading blocs - the European
Community and the North American Free Trade Agreement, for example - there
is a danger that markets might shrink even further. Unless the trading
interests of developing countries are protected through careful negotiations,
these countries may become completely blocked out, with expected results.
It is up to the developed countries to ensure that the Uruguay Round does
industrial countries of the world clearly have an important yet daunting
task ahead of them as they attempt to help bridge the economic and social
gap that exists between North and South. There is much work to be done
in attempting to expand and refocus international aid while at the same
time opening up international markets and solving the debt crisis. It
is critical that the developed countries focus their attention on these
issues immediately. It is not only compassion that should generate new
initiatives, but self-interest as well. All countries, both North and
South, have a stake in development. By the end of the decade, 80% of humanity
will be living in the developing world. If the Third World explodes, its
problems - poverty, drugs, pollution, terrorism, and AIDS - will explode
with it. Political boundaries will then be of little use.
M. O'Neill and A. Clark, "Canada and International Development: New
Agendas," in Fen Osler Hampson and C.J. Maule, eds., Canada Among
Nations 1991-92: A New World Order?, Ottawa, 1992, p. 219.
Quoted in D. Roche, A Bargain for Humanity: Global Security by 2000,
Edmonton, 1993, p. 84.
World Bank, World Development Report 1991: The Challenge of Development,
Washington, 1991, p. 4.
United Nations Development Programme, Human Development Report 1990,
New York, 1990, p. 1.
See World Bank, World Development Report 1990, Washington, 1990,
See O'Neill and Clark (1992), p. 224-25.
Human Development Report 1991, p. 51.
Minutes of Proceedings, House of Commons Standing Committee on External
Affairs and International Trade (SCEAIT), 2 February 1993, 51:13.
Human Development Report 1990, p. 80.
Proceedings, SCEAIT, 51:14.
O'Neill and Clark (1992), p. 225. See also K. Mundy, "Human Resources
Development Assistance in Canada's Overseas Development Assistance Program:
A Critical Analysis," Canadian Journal of Development Studies,
XIII, No. 3, 1992, p. 385-409.
Human Development Report 1991, p. 54.
Human Development Report 1990, p. 80. One World Bank report states
that there are as many as 80,000 consultants at work in Africa alone,
some charging $1,500 per day, more than many locals make in a year. See
R. Taylor, "A Rigged Game," Canada and the World, May
1993, p. 15.
Human Development Report 1993, p. 7.
Human Development Report 1991, p. 53.
Human Development Report 1992, p. 2.
Human Development Report 1991, p. 52.
Time, 10 June 1991, p. 46-47.
See, for example, Phillipe C. Schmitter and Terry Lynn Karl, "What
Democracy Is...and Is Not," Journal of Democracy, Vol. II,
No. 3, Summer 1991, p. 85.
Human Development Report 1991, p. 21.
Ibid., p. 71.
Speech delivered to the Commonwealth Heads of Government Meeting, Harare,
Zimbabwe, 16 October 1991.
Human Development Report 1992, p. 45.
Proceedings, SCEAIT, 51:13.
Human Development Report 1993, p. 7-8.
Human Development Report 1990, p. 5.
Human Development Report 1992, p. 44.
Human Development Report 1992, p. 45.
O'Neill and Clark (1992), p. 230-31.
See Commonwealth Currents, December 1991/January 1992, p. 6.
See M. Ahmed and L. Summers, "A Tenth Anniversary Report on the Debt
Crisis," Finance and Development, September 1992, p. 2-5.
Proceedings, SCEAIT, 51:15.
World Development Report 1991, p. 11, 150. See also Taylor, "A
Rigged Game" (1993), p. 16.
O'Neill and Clark (1992), p. 231.
Ibid., p. 232.