Showing posts with label aid. Show all posts
Showing posts with label aid. Show all posts
Sunday 3 December 2023
Saturday 17 June 2023
Economics Essay 72: Trade versus Aid
“Trade is better than aid.” Discuss the extent to which this is true for less economically developed countries in terms of raising their level of economic development.
Trade refers to the exchange of goods and services between countries, typically driven by market forces and the pursuit of comparative advantage. Aid, on the other hand, refers to the provision of financial, technical, or other forms of assistance from one country to another, often with the aim of promoting economic development and addressing poverty.
Now, let's evaluate the statement "Trade is better than aid" in the context of less economically developed countries (LEDCs) and their level of economic development:
- Trade as an Engine of Economic Growth: Trade has the potential to stimulate economic growth in LEDCs by opening up opportunities for market access, promoting investment, and transferring technology and knowledge. By participating in global trade, LEDCs can leverage their comparative advantages, such as low-cost labor or abundant natural resources, to generate income, create employment, and attract foreign direct investment. Trade allows LEDCs to integrate into the global economy and tap into larger markets, which can contribute to long-term economic development.
For example, countries like China, Vietnam, and Bangladesh have experienced significant economic growth by becoming major players in global manufacturing and exporting industries. Their engagement in international trade has led to the expansion of industries, increased job opportunities, and higher standards of living for their populations.
- Challenges and Vulnerabilities in Trade: While trade can bring significant benefits, LEDCs may face challenges and vulnerabilities in participating in global markets. Limited diversification of exports, dependence on a few key commodities, and unequal terms of trade can expose LEDCs to economic shocks and fluctuations in global demand. Additionally, trade barriers, such as tariffs and non-tariff barriers imposed by developed countries, can hinder the growth potential of LEDCs' exports.
For instance, many African countries heavily rely on the export of commodities like oil, minerals, or agricultural products. The volatility in global commodity prices can significantly impact their economies, leading to economic instability and limited progress in overall development.
- Aid as a Development Tool: Aid plays a crucial role in supporting LEDCs by providing financial resources, technical expertise, and capacity building. It can be targeted towards areas such as healthcare, education, infrastructure development, and poverty reduction. Aid can address immediate needs, alleviate humanitarian crises, and support long-term development projects that may not be immediately profitable but have significant social benefits.
For example, foreign aid has contributed to improvements in healthcare systems, access to education, and infrastructure development in many LEDCs. Aid can be instrumental in addressing basic needs, reducing poverty, and improving social indicators.
- Challenges and Limitations of Aid: However, aid effectiveness can vary, and there are concerns about its dependency-creating effects and potential for mismanagement and corruption. In some cases, aid inflows have not translated into sustainable economic development or poverty reduction. Aid dependency can create disincentives for domestic resource mobilization, hinder local entrepreneurship, and perpetuate a cycle of reliance on external assistance.
Moreover, aid can be subject to political considerations and conditionality, which may not always align with the priorities and long-term development strategies of the recipient countries.
In conclusion, while both trade and aid have their merits, trade generally holds greater potential for sustainable economic development in LEDCs. Trade can provide opportunities for economic growth, technological transfer, and diversification of production. However, trade should be complemented by well-designed aid programs that focus on capacity building, human development, and addressing structural constraints. The effectiveness of trade and aid in raising the level of economic development in LEDCs depends on various factors, including domestic policies, global economic conditions, and the strategic alignment of trade and aid initiatives with national development priorities.
Friday 31 December 2021
Monday 7 January 2019
Corbyn's opposition to Brexit is vindicated by the EU state aid rules
Jonathan Ford in The FT
Some six years ago, British minicab company, Addison Lee took Transport for London on a journey through the law courts that ended up in 2015 at the European Court of Justice. At issue was a rule that allows only black cabs to use London’s bus lanes.
Hardly an EU matter you might think, worrying about transport policy in Britain’s capital. But think again. The minicab company argued not only that the rule infringed its freedom to provide services; it was also illegal state aid. Letting black cabs use a bus lane was, in effect, selective support for a specific participant in the wider taxi trade.
Admittedly the argument did not prevail in Luxembourg and London’s bus lanes remain limited to buses and traditional taxis. But while the ECJ failed to deem the policy state assistance, it did not entirely rebut the principle.
The justices recognised that TfL’s policy could affect trade between member states because it potentially made it harder for European-owned minicabs to penetrate the market. The definitional ratchet of unfair state aid turned gently another notch.
“It illustrates how the definition of state aid has expanded over the years,” says James Webber, an antitrust partner at the law firm Shearman & Sterling. “Originally designed to contain industrial subsidy competition, state aid is now much wider than commonly assumed, covering many public spending decisions such as infrastructure investment and tax changes which could be seen to benefit a specific region, sector or even just to incentivise desirable corporate behaviour.”
Quite right too, you might say. Unfettered subsidy competition is not only wasteful; it is ultimately pointless, for any advantage is lost if it descends into a free-for-all. Which is why it was so uncontentious when Theresa May conceded early in Brexit negotiations that the UK would stick with EU state-aid rules. But in practice what has been signed up to is far from uncontentious. The prime minister’s agreement has contrived to put the UK into a uniquely disadvantageous place, forced to follow the EU’s state-aid rules but not protected by them in return.
The mischief lies in the so-called Irish backstop, which would leave the whole of the UK still subject to single market regulation in state aid even though the country was formally outside the EU. As a consequence, Britain will continue to apply not only those substantive state-aid rules that existed at exit, but any new ones too.
The rules are only part of any state-aid decision. What really matters is the discretionary power possessed by the commission to approve or disapprove — sometimes with conditions — any plans member states propose which trigger state-aid concerns. That is inevitably a political process. The UK’s Hinkley Point nuclear project was generously state-aided. But the commission blessed it because two big member states — Britain and France (which was supplying the technology) — had the clout to ram it through.
While that clout disappears along with Britain’s representation in Brussels at Brexit, UK interests are in theory protected because the discretionary power passes from the EU to the Competition and Markets Authority. But really it does not. In practice the UK regulator will have to get the European Commission’s sign-off, and the final arbiter will be the ECJ. And that is just in Great Britain. In Northern Ireland, the commission will remain in total control of the whole process itself.
Its discretion may not be used in Britain’s favour. Not only will the UK no longer have insider clout, but it will also be seen as a strategic competitor. Just last week, the foreign secretary Jeremy Hunt was in Singapore, talking admiringly about its economic model, which extends fiscal support to favoured industries. It remains to be seen how keen the commission will be to sign off fiscal measures designed to enhance UK competitiveness and offset any exit bumps.
Worse, Britain’s anomalous backstop status may mean that while it cannot protect its own industries, it will be defenceless against EU states dangling subsidies to encourage British companies to relocate. State aid in the EU is not problematic if it attracts jobs to the union from non-EEA countries. European goodwill is the only backstop here.
There is no certainty too that this will be unravelled in any trade deal. Given the permanence of the backstop, the EU has no incentive to offer Britain more favourable terms than the ones in the withdrawal agreement.
The deal would unwittingly lock Britain into a regulatory iron maiden of Brussels’ manufacture. As with such contraptions, extraction once inserted may prove harder than clambering in.
Some six years ago, British minicab company, Addison Lee took Transport for London on a journey through the law courts that ended up in 2015 at the European Court of Justice. At issue was a rule that allows only black cabs to use London’s bus lanes.
Hardly an EU matter you might think, worrying about transport policy in Britain’s capital. But think again. The minicab company argued not only that the rule infringed its freedom to provide services; it was also illegal state aid. Letting black cabs use a bus lane was, in effect, selective support for a specific participant in the wider taxi trade.
Admittedly the argument did not prevail in Luxembourg and London’s bus lanes remain limited to buses and traditional taxis. But while the ECJ failed to deem the policy state assistance, it did not entirely rebut the principle.
The justices recognised that TfL’s policy could affect trade between member states because it potentially made it harder for European-owned minicabs to penetrate the market. The definitional ratchet of unfair state aid turned gently another notch.
“It illustrates how the definition of state aid has expanded over the years,” says James Webber, an antitrust partner at the law firm Shearman & Sterling. “Originally designed to contain industrial subsidy competition, state aid is now much wider than commonly assumed, covering many public spending decisions such as infrastructure investment and tax changes which could be seen to benefit a specific region, sector or even just to incentivise desirable corporate behaviour.”
Quite right too, you might say. Unfettered subsidy competition is not only wasteful; it is ultimately pointless, for any advantage is lost if it descends into a free-for-all. Which is why it was so uncontentious when Theresa May conceded early in Brexit negotiations that the UK would stick with EU state-aid rules. But in practice what has been signed up to is far from uncontentious. The prime minister’s agreement has contrived to put the UK into a uniquely disadvantageous place, forced to follow the EU’s state-aid rules but not protected by them in return.
The mischief lies in the so-called Irish backstop, which would leave the whole of the UK still subject to single market regulation in state aid even though the country was formally outside the EU. As a consequence, Britain will continue to apply not only those substantive state-aid rules that existed at exit, but any new ones too.
The rules are only part of any state-aid decision. What really matters is the discretionary power possessed by the commission to approve or disapprove — sometimes with conditions — any plans member states propose which trigger state-aid concerns. That is inevitably a political process. The UK’s Hinkley Point nuclear project was generously state-aided. But the commission blessed it because two big member states — Britain and France (which was supplying the technology) — had the clout to ram it through.
While that clout disappears along with Britain’s representation in Brussels at Brexit, UK interests are in theory protected because the discretionary power passes from the EU to the Competition and Markets Authority. But really it does not. In practice the UK regulator will have to get the European Commission’s sign-off, and the final arbiter will be the ECJ. And that is just in Great Britain. In Northern Ireland, the commission will remain in total control of the whole process itself.
Its discretion may not be used in Britain’s favour. Not only will the UK no longer have insider clout, but it will also be seen as a strategic competitor. Just last week, the foreign secretary Jeremy Hunt was in Singapore, talking admiringly about its economic model, which extends fiscal support to favoured industries. It remains to be seen how keen the commission will be to sign off fiscal measures designed to enhance UK competitiveness and offset any exit bumps.
Worse, Britain’s anomalous backstop status may mean that while it cannot protect its own industries, it will be defenceless against EU states dangling subsidies to encourage British companies to relocate. State aid in the EU is not problematic if it attracts jobs to the union from non-EEA countries. European goodwill is the only backstop here.
There is no certainty too that this will be unravelled in any trade deal. Given the permanence of the backstop, the EU has no incentive to offer Britain more favourable terms than the ones in the withdrawal agreement.
The deal would unwittingly lock Britain into a regulatory iron maiden of Brussels’ manufacture. As with such contraptions, extraction once inserted may prove harder than clambering in.
Monday 16 July 2018
Buzzwords and crazes for clinical trials won't fix a broken aid system
Fifteen leading economists, including three Nobel winners, argue in The Guardian that the many billions of dollars spent on aid can do little to alleviate poverty while we fail to tackle its root causes
Economist Esther Duflo at MIT’s Poverty Action Lab recently argued in Le Monde that France should adopt clinical trials as a guiding principle for its aid budget, which has grown significantly under the Macron administration.
But truly random sampling with blinded subjects is almost impossible in human communities without creating scenarios so abstract as to tell us little about the real world. And trials are expensive to carry out, and fraught with ethical challenges – especially when it comes to health-related interventions. (Who gets the treatment and who doesn’t?)
But the real problem with the “aid effectiveness” craze is that it narrows our focus down to micro-interventions at a local level that yield results that can be observed in the short term. At first glance this approach might seem reasonable and even beguiling. But it tends to ignore the broader macroeconomic, political and institutional drivers of impoverishment and underdevelopment. Aid projects might yield satisfying micro-results, but they generally do little to change the systems that produce the problems in the first place. What we need instead is to tackle the real root causes of poverty, inequality and climate change.
Two classes share one classroom, in the Mpati area of North Kivu province, DRC. Photograph: Christian Jepsen/NRC
Handing out performance bonuses to teachers, for example, is an inadequate response to education budgets that have been slashed in order to pay down onerous external debts. As the UN special rapporteur on extreme poverty and human rights argued in his recent report, social protections need to be ringfenced against fiscal adjustment. The most fragile members of the population need more than classes in financial literacy. They need robust, universal services and access to public education and healthcare.
Water purification tablets are too little in the face of droughts induced by climate change; what is at stake is an ecological emergency that demands coordinated public policy strategies. In agriculture, real progress requires putting an end to the excessive subsidies paid by rich nations to large producers, regulating food commodity derivatives markets, and ending the land grabs that dispossess the small-scale farmers who play vital roles in feeding the world.
We need to ensure that the governments of global south nations are able to claim a fair share of taxes owed to them by the multinational companies operating within their borders. This means, in line with the Organisation for Economic Co-operation and Development’s recommendations, putting an end to the trade mis-invoicing and transfer mispricing practices that large firms employ, and regulating the tax havens and secrecy jurisdictions that are controlled by a few nations in western Europe and North America.
Much more than microcredit services are needed to improve the incomes of poor workers. We need to introduce and enforce real labour legislation, which has proved to be instrumental in helping millions of people to escape poverty. On top of this, we need to explore ways to consolidate regulations across borders in order to mitigate globalisation’s race to the bottom for exploitable labour.
Makeshift houses along a breakwater in polluted Manila Bay, the Philippines. Photograph: Ezra Acayan/Barcroft Images
In all these areas, there is still an enormous amount to be done. If we are concerned about effectiveness, then instead of assessing the short-term impacts of micro-projects, we should evaluate whole public policies. In this respect, there is a wealth of underused data provided by decades of household surveys by national statistical offices. Combined with satellite data, recently made public, they can now be used for detailed analysis, capable of providing clear information on the public policies that have been most successful. In the face of the sheer scale of the overlapping crises we face, we need systems-level thinking.
People of the south deserve better. The sustainable development goals we agreed in 2015 hold both for northern and southern countries; they acknowledge that our crisis is a collective one: that fighting against poverty, inequality, biodiversity loss and climate change requires changing the rules of the international economic system to make it more ecological and fairer for the world’s majority. It’s time that we devise interventions – and accountability tools – appropriate to this new frontier.
Palestinian children in a poor neighbourhood in Gaza City. More than 4 billion people worldwide live on less than £4 a day. Photograph: Mahmud Hams/AFP/Getty Images
Development efforts over the past few decades have not been as effective as promised.
Global poverty remains intractable: more than 4 billion people live on less than the equivalent of $5 (£3.80) a day, and the number of people going hungry has been rising. Important gains have been made in some areas, but many of the objectives set by the millennium development goals – to be reached by 2015 – remain unfulfilled. And this despite hundreds of billions of dollars of aid.
Donors increasingly want to see more impact for their money, practitioners are searching for ways to make their projects more effective, and politicians want more financial accountability behind aid budgets. One popular option has been to audit projects for results. The argument is that assessing “aid effectiveness” – a buzzword now ubiquitous in the UK’s Department for International Development – will help decide what to focus on.
Some go so far as to insist that development interventions should be subjected to the same kind of randomised control trials used in medicine, with “treatment” groups assessed against control groups. Such trials are being rolled out to evaluate the impact of a wide variety of projects – everything from water purification tablets to microcredit schemes, financial literacy classes to teachers’ performance bonuses.
Development efforts over the past few decades have not been as effective as promised.
Global poverty remains intractable: more than 4 billion people live on less than the equivalent of $5 (£3.80) a day, and the number of people going hungry has been rising. Important gains have been made in some areas, but many of the objectives set by the millennium development goals – to be reached by 2015 – remain unfulfilled. And this despite hundreds of billions of dollars of aid.
Donors increasingly want to see more impact for their money, practitioners are searching for ways to make their projects more effective, and politicians want more financial accountability behind aid budgets. One popular option has been to audit projects for results. The argument is that assessing “aid effectiveness” – a buzzword now ubiquitous in the UK’s Department for International Development – will help decide what to focus on.
Some go so far as to insist that development interventions should be subjected to the same kind of randomised control trials used in medicine, with “treatment” groups assessed against control groups. Such trials are being rolled out to evaluate the impact of a wide variety of projects – everything from water purification tablets to microcredit schemes, financial literacy classes to teachers’ performance bonuses.
Economist Esther Duflo at MIT’s Poverty Action Lab recently argued in Le Monde that France should adopt clinical trials as a guiding principle for its aid budget, which has grown significantly under the Macron administration.
But truly random sampling with blinded subjects is almost impossible in human communities without creating scenarios so abstract as to tell us little about the real world. And trials are expensive to carry out, and fraught with ethical challenges – especially when it comes to health-related interventions. (Who gets the treatment and who doesn’t?)
But the real problem with the “aid effectiveness” craze is that it narrows our focus down to micro-interventions at a local level that yield results that can be observed in the short term. At first glance this approach might seem reasonable and even beguiling. But it tends to ignore the broader macroeconomic, political and institutional drivers of impoverishment and underdevelopment. Aid projects might yield satisfying micro-results, but they generally do little to change the systems that produce the problems in the first place. What we need instead is to tackle the real root causes of poverty, inequality and climate change.
Two classes share one classroom, in the Mpati area of North Kivu province, DRC. Photograph: Christian Jepsen/NRC
Handing out performance bonuses to teachers, for example, is an inadequate response to education budgets that have been slashed in order to pay down onerous external debts. As the UN special rapporteur on extreme poverty and human rights argued in his recent report, social protections need to be ringfenced against fiscal adjustment. The most fragile members of the population need more than classes in financial literacy. They need robust, universal services and access to public education and healthcare.
Water purification tablets are too little in the face of droughts induced by climate change; what is at stake is an ecological emergency that demands coordinated public policy strategies. In agriculture, real progress requires putting an end to the excessive subsidies paid by rich nations to large producers, regulating food commodity derivatives markets, and ending the land grabs that dispossess the small-scale farmers who play vital roles in feeding the world.
We need to ensure that the governments of global south nations are able to claim a fair share of taxes owed to them by the multinational companies operating within their borders. This means, in line with the Organisation for Economic Co-operation and Development’s recommendations, putting an end to the trade mis-invoicing and transfer mispricing practices that large firms employ, and regulating the tax havens and secrecy jurisdictions that are controlled by a few nations in western Europe and North America.
Much more than microcredit services are needed to improve the incomes of poor workers. We need to introduce and enforce real labour legislation, which has proved to be instrumental in helping millions of people to escape poverty. On top of this, we need to explore ways to consolidate regulations across borders in order to mitigate globalisation’s race to the bottom for exploitable labour.
Makeshift houses along a breakwater in polluted Manila Bay, the Philippines. Photograph: Ezra Acayan/Barcroft Images
In all these areas, there is still an enormous amount to be done. If we are concerned about effectiveness, then instead of assessing the short-term impacts of micro-projects, we should evaluate whole public policies. In this respect, there is a wealth of underused data provided by decades of household surveys by national statistical offices. Combined with satellite data, recently made public, they can now be used for detailed analysis, capable of providing clear information on the public policies that have been most successful. In the face of the sheer scale of the overlapping crises we face, we need systems-level thinking.
People of the south deserve better. The sustainable development goals we agreed in 2015 hold both for northern and southern countries; they acknowledge that our crisis is a collective one: that fighting against poverty, inequality, biodiversity loss and climate change requires changing the rules of the international economic system to make it more ecological and fairer for the world’s majority. It’s time that we devise interventions – and accountability tools – appropriate to this new frontier.
The ECONOMISTS
Sabina Alkire Oxford Poverty and Human Development Initiative
Florent Bédécarrats French Development Agency
Angus Deaton Princeton University, Nobel prize in economics
Gaël Giraud chief economist, French Development Agency
Isabelle Guérin French National Research Institute for Sustainable Development
Barbara Harriss-White Oxford University
James Heckman University of Chicago, Nobel prize in economics
Jason Hickel Goldsmiths, University of London
Naila Kabeer London School of Economics and Political Science
Solène Morvant-Roux University of Geneva
Judea Pearl Columbia University
Cécile Renouard Codev-Essec Business School
François Roubaud French National Research Institute for Sustainable Development
Jean-Michel Servet Graduate Institute
Joseph Stiglitz Columbia University, Nobel prize in economics
Sabina Alkire Oxford Poverty and Human Development Initiative
Florent Bédécarrats French Development Agency
Angus Deaton Princeton University, Nobel prize in economics
Gaël Giraud chief economist, French Development Agency
Isabelle Guérin French National Research Institute for Sustainable Development
Barbara Harriss-White Oxford University
James Heckman University of Chicago, Nobel prize in economics
Jason Hickel Goldsmiths, University of London
Naila Kabeer London School of Economics and Political Science
Solène Morvant-Roux University of Geneva
Judea Pearl Columbia University
Cécile Renouard Codev-Essec Business School
François Roubaud French National Research Institute for Sustainable Development
Jean-Michel Servet Graduate Institute
Joseph Stiglitz Columbia University, Nobel prize in economics
Wednesday 18 April 2018
Visas and global poverty
Rafia Zakaria in The Dawn
IN a recent report, the Centre for Global Development made a surprising and somewhat startling observation. Looking at the data from several recent studies, they noted that even the very best international development programmes to reduce global poverty could only produce outcomes that were 40 times less successful than the income gain people in poor countries experienced when their citizens were provided greater labour mobility. In simple non-economist terms, it means that visas work faster and better to reduce global poverty by a lot than even the very best international development programmes.
The visa, then, with the promise of mobility that it holds, is one of the few single things that has the greatest capacity to eliminate global poverty than anything else in the world.
What is true, however, is not always popular, and this is certainly true of the visa solution. While this may be true, the extent of the discrepancy between the effectiveness of international aid programmes versus work visas is quite alarming. A study published in Science magazine reveals how intensive and highly targeted programmes directed at poor countries like Pakistan and Ethiopia were successful at reducing poverty even if they were far more expensive to implement and produce.
Even so, the mood of the announcement was triumphant; pricey as it may be, their study had found that international aid could work. The fact that work visas and access to labour markets work better was never mentioned.
The international aid system is a moral hierarchy, with the aid grantors at the top.
The omission is not surprising. As another study has noted, the infrastructure of aid depends on hierarchies in which Western experts imported into impoverished environments diagnose how and what poor countries must do to escape persistent poverty. Even while development lingo has evolved to include terms like ‘local involvement’ and ‘community input’, no project is complete without the messenger experts of the West arriving to impart their pearls of wisdom.
Behind all of this, there is a hierarchy at work and it always involves donor countries and their experts being at the top. This is even more visible in public presentations of development work at this or that conference; in one example, noted in the report (but recurrent everywhere), an organiser had to fight to ensure that at least one Arabic speaker be included in a panel on international development in the Middle East and the North African region.
It’s not just panels and experts that are the problem; it is also the impact of these interventions on local populations. Take, for instance, the issue of ‘capacity building’, a term of art deployed when aid is handed out in poor communities but little improvement is seen in their metrics.
At this point, ‘capacity building’ enters to save the day, that is, to introduce skills, such as financial management, entrepreneurship, etc that would hypothetically enable better results and prove the development programmes effective after all. Few of these ‘capacity-building’ programmes actually deliver the promised, improved results.
The reason is simple. Contrary to the assumption that aid grants exist solely to eliminate global poverty in the world’s most wanting populations, the international aid system is also a moral hierarchy. The aid grantors are at the top; they have the most and know the best, but in addition to all that they are also morally superior, willing to grant assistance with little expectation in return. They are the world’s altruists, whose purity of purpose lends them the authority that no others possess. They can pretend that they are doing good while expecting nothing at all in return.
When this moral aspect of international aid and aid giving in general is noted, the international aid system can be recast not as a means of actually helping the poor (because visas and labour mobility would accomplish this with far greater efficacy) but rather a means via which a moral hierarchy is created and maintained — the world’s wealthy, also the world’s noblest, inhabiting its summit, and the wanting at the bottom.
Seen against this, the purpose of development programmes may not actually be to reduce poverty or eliminate it but rather to enable the continued existence of this moral hierarchy. Per its dimensions, the world’s poor are not simply to be pitied but also morally wanting, often too lazy or devoid of initiative to figure out how to lift themselves out of their hapless circumstances. They are the ignoble, always awaiting alms from the good and noble.
Permitting some programme of labour mobility would dismantle this structure, whose moral currency permits the West to justify wars, trade restrictions and so much else that enable the maintenance of Western dominance. Research shows that an individual’s own desire to change his or her circumstances, one that aligns with the provision of work visas, is the best predictor of success in escaping poverty. Even while development professionals create metrics for this and that, measure effectiveness through complex statistical models, these basics that show a better route than the system of international aid are ignored.
Even while virtual platforms of communication enable organisation and discussion across national and continental boundaries and time zones, even as jet travel puts the world at our disposal and makes movement across borders a regularity, Western countries continue to rely on the archaic premises that borders are real, racial and religious difference are threats and the basis on which opportunities are distributed. It is not the lack of capacity or initiative among farmers in sub-Saharan Africa or shepherds in Ethiopia, then, that explain the persistence of global poverty, it is the inability of these people to travel freely to work where the jobs are.
IN a recent report, the Centre for Global Development made a surprising and somewhat startling observation. Looking at the data from several recent studies, they noted that even the very best international development programmes to reduce global poverty could only produce outcomes that were 40 times less successful than the income gain people in poor countries experienced when their citizens were provided greater labour mobility. In simple non-economist terms, it means that visas work faster and better to reduce global poverty by a lot than even the very best international development programmes.
The visa, then, with the promise of mobility that it holds, is one of the few single things that has the greatest capacity to eliminate global poverty than anything else in the world.
What is true, however, is not always popular, and this is certainly true of the visa solution. While this may be true, the extent of the discrepancy between the effectiveness of international aid programmes versus work visas is quite alarming. A study published in Science magazine reveals how intensive and highly targeted programmes directed at poor countries like Pakistan and Ethiopia were successful at reducing poverty even if they were far more expensive to implement and produce.
Even so, the mood of the announcement was triumphant; pricey as it may be, their study had found that international aid could work. The fact that work visas and access to labour markets work better was never mentioned.
The international aid system is a moral hierarchy, with the aid grantors at the top.
The omission is not surprising. As another study has noted, the infrastructure of aid depends on hierarchies in which Western experts imported into impoverished environments diagnose how and what poor countries must do to escape persistent poverty. Even while development lingo has evolved to include terms like ‘local involvement’ and ‘community input’, no project is complete without the messenger experts of the West arriving to impart their pearls of wisdom.
Behind all of this, there is a hierarchy at work and it always involves donor countries and their experts being at the top. This is even more visible in public presentations of development work at this or that conference; in one example, noted in the report (but recurrent everywhere), an organiser had to fight to ensure that at least one Arabic speaker be included in a panel on international development in the Middle East and the North African region.
It’s not just panels and experts that are the problem; it is also the impact of these interventions on local populations. Take, for instance, the issue of ‘capacity building’, a term of art deployed when aid is handed out in poor communities but little improvement is seen in their metrics.
At this point, ‘capacity building’ enters to save the day, that is, to introduce skills, such as financial management, entrepreneurship, etc that would hypothetically enable better results and prove the development programmes effective after all. Few of these ‘capacity-building’ programmes actually deliver the promised, improved results.
The reason is simple. Contrary to the assumption that aid grants exist solely to eliminate global poverty in the world’s most wanting populations, the international aid system is also a moral hierarchy. The aid grantors are at the top; they have the most and know the best, but in addition to all that they are also morally superior, willing to grant assistance with little expectation in return. They are the world’s altruists, whose purity of purpose lends them the authority that no others possess. They can pretend that they are doing good while expecting nothing at all in return.
When this moral aspect of international aid and aid giving in general is noted, the international aid system can be recast not as a means of actually helping the poor (because visas and labour mobility would accomplish this with far greater efficacy) but rather a means via which a moral hierarchy is created and maintained — the world’s wealthy, also the world’s noblest, inhabiting its summit, and the wanting at the bottom.
Seen against this, the purpose of development programmes may not actually be to reduce poverty or eliminate it but rather to enable the continued existence of this moral hierarchy. Per its dimensions, the world’s poor are not simply to be pitied but also morally wanting, often too lazy or devoid of initiative to figure out how to lift themselves out of their hapless circumstances. They are the ignoble, always awaiting alms from the good and noble.
Permitting some programme of labour mobility would dismantle this structure, whose moral currency permits the West to justify wars, trade restrictions and so much else that enable the maintenance of Western dominance. Research shows that an individual’s own desire to change his or her circumstances, one that aligns with the provision of work visas, is the best predictor of success in escaping poverty. Even while development professionals create metrics for this and that, measure effectiveness through complex statistical models, these basics that show a better route than the system of international aid are ignored.
Even while virtual platforms of communication enable organisation and discussion across national and continental boundaries and time zones, even as jet travel puts the world at our disposal and makes movement across borders a regularity, Western countries continue to rely on the archaic premises that borders are real, racial and religious difference are threats and the basis on which opportunities are distributed. It is not the lack of capacity or initiative among farmers in sub-Saharan Africa or shepherds in Ethiopia, then, that explain the persistence of global poverty, it is the inability of these people to travel freely to work where the jobs are.
Saturday 14 January 2017
All those in developing countries please look away now - Aid in reverse: how poor countries develop rich countries
Jason Hickel In The Guardian
We have long been told a compelling story about the relationship between rich countries and poor countries. The story holds that the rich nations of the OECD give generously of their wealth to the poorer nation cheats of the global south, to help them eradicate poverty and push them up the development ladder. Yes, during colonialism western powers may have enriched themselves by extracting resources and slave labour from their colonies – but that’s all in the past. These days, they give more than $125bn (£102bn) in aid each year – solid evidence of their benevolent goodwill.
This story is so widely propagated by the aid industry and the governments of the rich world that we have come to take it for granted. But it may not be as simple as it appears.
The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published some fascinating data. They tallied up all of the financial resources that get transferred between rich countries and poor countries each year: not just aid, foreign investment and trade flows (as previous studies have done) but also non-financial transfers such as debt cancellation, unrequited transfers like workers’ remittances, and unrecorded capital flight (more of this later). As far as I am aware, it is the most comprehensive assessment of resource transfers ever undertaken.
The flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction
What they discovered is that the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction.
In 2012, the last year of recorded data, developing countries received a total of $1.3tn, including all aid, investment, and income from abroad. But that same year some $3.3tn flowed out of them. In other words, developing countries sent $2tn more to the rest of the world than they received. If we look at all years since 1980, these net outflows add up to an eye-popping total of $16.3tn – that’s how much money has been drained out of the global south over the past few decades. To get a sense for the scale of this, $16.3tn is roughly the GDP of the United States
What this means is that the usual development narrative has it backwards. Aid is effectively flowing in reverse. Rich countries aren’t developing poor countries; poor countries are developing rich ones.
What do these large outflows consist of? Well, some of it is payments on debt. Developing countries have forked out over $4.2tn in interest payments alone since 1980 – a direct cash transfer to big banks in New York and London, on a scale that dwarfs the aid that they received during the same period. Another big contributor is the income that foreigners make on their investments in developing countries and then repatriate back home. Think of all the profits that BP extracts from Nigeria’s oil reserves, for example, or that Anglo-American pulls out of South Africa’s gold mines.
But by far the biggest chunk of outflows has to do with unrecorded – and usually illicit – capital flight. GFI calculates that developing countries have lost a total of $13.4tn through unrecorded capital flight since 1980.
Most of these unrecorded outflows take place through the international trade system. Basically, corporations – foreign and domestic alike – report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions, a practice known as “trade misinvoicing”. Usually the goal is to evade taxes, but sometimes this practice is used to launder money or circumvent capital controls. In 2012, developing countries lost $700bn through trade misinvoicing, which outstripped aid receipts that year by a factor of five.
Multinational companies also steal money from developing countries through “same-invoice faking”, shifting profits illegally between their own subsidiaries by mutually faking trade invoice prices on both sides. For example, a subsidiary in Nigeria might dodge local taxes by shifting money to a related subsidiary in the British Virgin Islands, where the tax rate is effectively zero and where stolen funds can’t be traced.
GFI doesn’t include same-invoice faking in its headline figures because it is very difficult to detect, but they estimate that it amounts to another $700bn per year. And these figures only cover theft through trade in goods. If we add theft through trade in services to the mix, it brings total net resource outflows to about $3tn per year.
That’s 24 times more than the aid budget. In other words, for every $1 of aid that developing countries receive, they lose $24 in net outflows. These outflows strip developing countries of an important source of revenue and finance for development. The GFI report finds that increasingly large net outflows have caused economic growth rates in developing countries to decline, and are directly responsible for falling living standards.
Who is to blame for this disaster? Since illegal capital flight is such a big chunk of the problem, that’s a good place to start. Companies that lie on their trade invoices are clearly at fault; but why is it so easy for them to get away with it? In the past, customs officials could hold up transactions that looked dodgy, making it nearly impossible for anyone to cheat. But the World Trade Organisation claimed that this made trade inefficient, and since 1994 customs officials have been required to accept invoiced prices at face value except in very suspicious circumstances, making it difficult for them to seize illicit outflows.
FacebookTwitterPinterest Protest about tax havens in London in 2016, organised by charities Oxfam, ActionAid and Christian Aid. Photograph: Carl Court/Getty Images
Still, illegal capital flight wouldn’t be possible without the tax havens. And when it comes to tax havens, the culprits are not hard to identify: there are more than 60 in the world, and the vast majority of them are controlled by a handful of western countries. There are European tax havens such as Luxembourg and Belgium, and US tax havens like Delaware and Manhattan. But by far the biggest network of tax havens is centered around the City of London, which controls secrecy jurisdictions throughout the British Crown Dependencies and Overseas Territories.
In other words, some of the very countries that so love to tout their foreign aid contributions are the ones enabling mass theft from developing countries.
The aid narrative begins to seem a bit naïve when we take these reverse flows into account. It becomes clear that aid does little but mask the maldistribution of resources around the world. It makes the takers seem like givers, granting them a kind of moral high ground while preventing those of us who care about global poverty from understanding how the system really works.
Poor countries don’t need charity. They need justice. And justice is not difficult to deliver. We could write off the excess debts of poor countries, freeing them up to spend their money on development instead of interest payments on old loans; we could close down the secrecy jurisdictions, and slap penalties on bankers and accountants who facilitate illicit outflows; and we could impose a global minimum tax on corporate income to eliminate the incentive for corporations to secretly shift their money around the world.
We know how to fix the problem. But doing so would run up against the interests of powerful banks and corporations that extract significant material benefit from the existing system. The question is, do we have the courage?
We have long been told a compelling story about the relationship between rich countries and poor countries. The story holds that the rich nations of the OECD give generously of their wealth to the poorer nation cheats of the global south, to help them eradicate poverty and push them up the development ladder. Yes, during colonialism western powers may have enriched themselves by extracting resources and slave labour from their colonies – but that’s all in the past. These days, they give more than $125bn (£102bn) in aid each year – solid evidence of their benevolent goodwill.
This story is so widely propagated by the aid industry and the governments of the rich world that we have come to take it for granted. But it may not be as simple as it appears.
The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published some fascinating data. They tallied up all of the financial resources that get transferred between rich countries and poor countries each year: not just aid, foreign investment and trade flows (as previous studies have done) but also non-financial transfers such as debt cancellation, unrequited transfers like workers’ remittances, and unrecorded capital flight (more of this later). As far as I am aware, it is the most comprehensive assessment of resource transfers ever undertaken.
The flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction
What they discovered is that the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction.
In 2012, the last year of recorded data, developing countries received a total of $1.3tn, including all aid, investment, and income from abroad. But that same year some $3.3tn flowed out of them. In other words, developing countries sent $2tn more to the rest of the world than they received. If we look at all years since 1980, these net outflows add up to an eye-popping total of $16.3tn – that’s how much money has been drained out of the global south over the past few decades. To get a sense for the scale of this, $16.3tn is roughly the GDP of the United States
What this means is that the usual development narrative has it backwards. Aid is effectively flowing in reverse. Rich countries aren’t developing poor countries; poor countries are developing rich ones.
What do these large outflows consist of? Well, some of it is payments on debt. Developing countries have forked out over $4.2tn in interest payments alone since 1980 – a direct cash transfer to big banks in New York and London, on a scale that dwarfs the aid that they received during the same period. Another big contributor is the income that foreigners make on their investments in developing countries and then repatriate back home. Think of all the profits that BP extracts from Nigeria’s oil reserves, for example, or that Anglo-American pulls out of South Africa’s gold mines.
But by far the biggest chunk of outflows has to do with unrecorded – and usually illicit – capital flight. GFI calculates that developing countries have lost a total of $13.4tn through unrecorded capital flight since 1980.
Most of these unrecorded outflows take place through the international trade system. Basically, corporations – foreign and domestic alike – report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions, a practice known as “trade misinvoicing”. Usually the goal is to evade taxes, but sometimes this practice is used to launder money or circumvent capital controls. In 2012, developing countries lost $700bn through trade misinvoicing, which outstripped aid receipts that year by a factor of five.
Multinational companies also steal money from developing countries through “same-invoice faking”, shifting profits illegally between their own subsidiaries by mutually faking trade invoice prices on both sides. For example, a subsidiary in Nigeria might dodge local taxes by shifting money to a related subsidiary in the British Virgin Islands, where the tax rate is effectively zero and where stolen funds can’t be traced.
GFI doesn’t include same-invoice faking in its headline figures because it is very difficult to detect, but they estimate that it amounts to another $700bn per year. And these figures only cover theft through trade in goods. If we add theft through trade in services to the mix, it brings total net resource outflows to about $3tn per year.
That’s 24 times more than the aid budget. In other words, for every $1 of aid that developing countries receive, they lose $24 in net outflows. These outflows strip developing countries of an important source of revenue and finance for development. The GFI report finds that increasingly large net outflows have caused economic growth rates in developing countries to decline, and are directly responsible for falling living standards.
Who is to blame for this disaster? Since illegal capital flight is such a big chunk of the problem, that’s a good place to start. Companies that lie on their trade invoices are clearly at fault; but why is it so easy for them to get away with it? In the past, customs officials could hold up transactions that looked dodgy, making it nearly impossible for anyone to cheat. But the World Trade Organisation claimed that this made trade inefficient, and since 1994 customs officials have been required to accept invoiced prices at face value except in very suspicious circumstances, making it difficult for them to seize illicit outflows.
FacebookTwitterPinterest Protest about tax havens in London in 2016, organised by charities Oxfam, ActionAid and Christian Aid. Photograph: Carl Court/Getty Images
Still, illegal capital flight wouldn’t be possible without the tax havens. And when it comes to tax havens, the culprits are not hard to identify: there are more than 60 in the world, and the vast majority of them are controlled by a handful of western countries. There are European tax havens such as Luxembourg and Belgium, and US tax havens like Delaware and Manhattan. But by far the biggest network of tax havens is centered around the City of London, which controls secrecy jurisdictions throughout the British Crown Dependencies and Overseas Territories.
In other words, some of the very countries that so love to tout their foreign aid contributions are the ones enabling mass theft from developing countries.
The aid narrative begins to seem a bit naïve when we take these reverse flows into account. It becomes clear that aid does little but mask the maldistribution of resources around the world. It makes the takers seem like givers, granting them a kind of moral high ground while preventing those of us who care about global poverty from understanding how the system really works.
Poor countries don’t need charity. They need justice. And justice is not difficult to deliver. We could write off the excess debts of poor countries, freeing them up to spend their money on development instead of interest payments on old loans; we could close down the secrecy jurisdictions, and slap penalties on bankers and accountants who facilitate illicit outflows; and we could impose a global minimum tax on corporate income to eliminate the incentive for corporations to secretly shift their money around the world.
We know how to fix the problem. But doing so would run up against the interests of powerful banks and corporations that extract significant material benefit from the existing system. The question is, do we have the courage?
Wednesday 10 August 2016
Legal aid is a national institution like the NHS, so why is it not properly funded?
John Briant in The Guardian
The media jump on high-profile cases of criminals like Ben Butler and Jennie Gray receiving huge amounts in legal aid. The real outrage is successive governments’ policy to limit access to it
Legal aid cuts have led to surge in DIY defence, says charity
It’s frustrating for a number of reasons. Of the £1.5m, approximately £300,000 went towards legal aid for criminal proceedings, and accounted for a month-long trial involving complex medical evidence for an original child cruelty and GBH trial, Gray’s case involving perverting the course of justice, and Butler’s murder trial. One would hope that in all of these cases, the legal aid lawyers were working to the best of their ability using the highest quality lawyers willing to conduct work at legal aid rates.
What is also true, is that the lawyers involved will have undertaken an immense amount of work that they weren’t paid for. Had they been privately funded, the fees would have been many multiples higher.
As a criminal practitioner of more than 20 years, I know the workloads that are undertaken daily by legal aid lawyers. In London, the going yearly salary for a duty solicitor is about £30,000 but may reach £40,000 with experience. Barristers’ chambers are paid £50 for sending a barrister to a hearing. This covers travelling time, the two hours waiting to get into court and the actual time spent representing a client in court – and the barristers will only get a cut of that money.
If you attend the police station, the firm is paid £150-£250 per case, which includes the initial attendance, plus any further bails to return to the station on other days – which might include ID parades or second or third interviews. Those who freelance at the police station are paid less than £100 per visit, which can mean a couple of hours travelling as well as up to 12 hours of waiting and advising. Police station advisers’ fees therefore range from an hourly rate of £30 down to £7 – it doesn’t vary with bank holidays or the fact that most of this advising occurs at ungodly hours of the night or weekends.
Legal aid solicitors have similar qualification periods to doctors: after completing a first degree they undergo a year of practical qualifications, then two years of on-the-job training. The qualification for barristers is a year shorter – but the cost of this in London has been estimated by the Bar Council as more than £120,000. Graduate salaries in legal aid firms are usually at the Law Society’s minimum of £18,590 pa for London. Of the respondents surveyed by Young Legal Aid Lawyers(whose membership consists of those within 10 years of qualification), 50% had salaries under £20,000 in 2013.
A well-known London plumbing firm is delighted to share its call-out rates with the public – they are “100% transparent charges and we have a clear, upfront, open and honest pricing system”. These charges range from a weekday daytime rate of £95 per hour at a minimum of one-hour call-out and 15 minute increments after this, to a 12am-7am rate of £200 per hour. Trust me – legal aid firms would kill for these rates.
Legal aid is a national institution, like the NHS. We all hope that we will never need it, that we won’t have unfounded rumours triggering a social services investigation or family proceedings; that we won’t be falsely accused of a crime. Even if we have done something wrong, or criminal or stupid, we should still have someone who understands the law fighting on our behalf to put our side of the story and explain our circumstances. This is part of what has separated us as a “civilised society”, these rights and freedoms and the privilege to be served by those who choose to sacrifice massive incomes to do relatively poorly paid legal aid work.
The unfortunate thing is that it is the abnormal cases like this (which are often the only things that allow a legal aid practice to survive the otherwise dreadful legal aid rates), and the abnormal earnings of barristers with huge experience dealing with the most serious cases and working insane hours, that get reported. Legal aid is not a vote winner; it doesn’t fall into the category of being tough on crime, and it always seems to be paid to people we like to blame – immigrants, good-for-nothings, so-called scroungers. It’s just your money being spent on someone else.
The difficulty comes when that someone else is you. Teacher, doctor, police officer, journalist, city trader, engineer, labourer, English, Scottish, white, black, depressed, addicted, sober: I have represented all of you, without judgment, to the best of my abilities, 24 hours a day for over 20 years.
Ellie Butler's grandfather: 'The devastation is complete and utter'
re
What makes me sad is this. Ellie Butler’s grandparents were not entitled to legal aid. Despite spending their life savings and working extra jobs, they could not fight for custody of their grandchild, whom they were concerned may be at risk. They couldn’t afford to pay their private legal fees and had to represent themselves and lost. This is the tragedy: not that £1.5m went on legal aid, but that Neal and Linda Gray didn’t get any help to fight for their granddaughter.
The media jump on high-profile cases of criminals like Ben Butler and Jennie Gray receiving huge amounts in legal aid. The real outrage is successive governments’ policy to limit access to it
‘Even if we have done something wrong, or criminal, or stupid, we should still have someone who understands the law fighting on our behalf.’ Photograph: Andrew Cowie/AFP/Getty Images
It is with a mixture of intense frustration and sadness that I read the reports about the amount of legal aid that Ben Butler, convicted of murdering his six-year-old daughter, and his partner Jennie Gray, guilty of child cruelty, received. The figure is quoted at approximately £1.5m over a 15-year period, with £1.2m in civil legal aid.
It is with a mixture of intense frustration and sadness that I read the reports about the amount of legal aid that Ben Butler, convicted of murdering his six-year-old daughter, and his partner Jennie Gray, guilty of child cruelty, received. The figure is quoted at approximately £1.5m over a 15-year period, with £1.2m in civil legal aid.
Legal aid cuts have led to surge in DIY defence, says charity
It’s frustrating for a number of reasons. Of the £1.5m, approximately £300,000 went towards legal aid for criminal proceedings, and accounted for a month-long trial involving complex medical evidence for an original child cruelty and GBH trial, Gray’s case involving perverting the course of justice, and Butler’s murder trial. One would hope that in all of these cases, the legal aid lawyers were working to the best of their ability using the highest quality lawyers willing to conduct work at legal aid rates.
What is also true, is that the lawyers involved will have undertaken an immense amount of work that they weren’t paid for. Had they been privately funded, the fees would have been many multiples higher.
As a criminal practitioner of more than 20 years, I know the workloads that are undertaken daily by legal aid lawyers. In London, the going yearly salary for a duty solicitor is about £30,000 but may reach £40,000 with experience. Barristers’ chambers are paid £50 for sending a barrister to a hearing. This covers travelling time, the two hours waiting to get into court and the actual time spent representing a client in court – and the barristers will only get a cut of that money.
If you attend the police station, the firm is paid £150-£250 per case, which includes the initial attendance, plus any further bails to return to the station on other days – which might include ID parades or second or third interviews. Those who freelance at the police station are paid less than £100 per visit, which can mean a couple of hours travelling as well as up to 12 hours of waiting and advising. Police station advisers’ fees therefore range from an hourly rate of £30 down to £7 – it doesn’t vary with bank holidays or the fact that most of this advising occurs at ungodly hours of the night or weekends.
Legal aid solicitors have similar qualification periods to doctors: after completing a first degree they undergo a year of practical qualifications, then two years of on-the-job training. The qualification for barristers is a year shorter – but the cost of this in London has been estimated by the Bar Council as more than £120,000. Graduate salaries in legal aid firms are usually at the Law Society’s minimum of £18,590 pa for London. Of the respondents surveyed by Young Legal Aid Lawyers(whose membership consists of those within 10 years of qualification), 50% had salaries under £20,000 in 2013.
A well-known London plumbing firm is delighted to share its call-out rates with the public – they are “100% transparent charges and we have a clear, upfront, open and honest pricing system”. These charges range from a weekday daytime rate of £95 per hour at a minimum of one-hour call-out and 15 minute increments after this, to a 12am-7am rate of £200 per hour. Trust me – legal aid firms would kill for these rates.
Legal aid is a national institution, like the NHS. We all hope that we will never need it, that we won’t have unfounded rumours triggering a social services investigation or family proceedings; that we won’t be falsely accused of a crime. Even if we have done something wrong, or criminal or stupid, we should still have someone who understands the law fighting on our behalf to put our side of the story and explain our circumstances. This is part of what has separated us as a “civilised society”, these rights and freedoms and the privilege to be served by those who choose to sacrifice massive incomes to do relatively poorly paid legal aid work.
The unfortunate thing is that it is the abnormal cases like this (which are often the only things that allow a legal aid practice to survive the otherwise dreadful legal aid rates), and the abnormal earnings of barristers with huge experience dealing with the most serious cases and working insane hours, that get reported. Legal aid is not a vote winner; it doesn’t fall into the category of being tough on crime, and it always seems to be paid to people we like to blame – immigrants, good-for-nothings, so-called scroungers. It’s just your money being spent on someone else.
The difficulty comes when that someone else is you. Teacher, doctor, police officer, journalist, city trader, engineer, labourer, English, Scottish, white, black, depressed, addicted, sober: I have represented all of you, without judgment, to the best of my abilities, 24 hours a day for over 20 years.
Ellie Butler's grandfather: 'The devastation is complete and utter'
re
What makes me sad is this. Ellie Butler’s grandparents were not entitled to legal aid. Despite spending their life savings and working extra jobs, they could not fight for custody of their grandchild, whom they were concerned may be at risk. They couldn’t afford to pay their private legal fees and had to represent themselves and lost. This is the tragedy: not that £1.5m went on legal aid, but that Neal and Linda Gray didn’t get any help to fight for their granddaughter.
Sunday 20 January 2013
Saturday 10 November 2012
Britain And India: A Convenient Scapegoat In A Time Of Economic Crisis
By Colin Todhunter
07 November, 2012
Countercurrents.org
India is likely to be told this week that Britain plans to slash its 280 million pounds a year aid to it following growing domestic pressure on Prime Minister David Cameron to stop funding emerging economic powers such as India at a time when Britain is in serious economic crisis.
International Development Secretary Justine Greening during her visit to New Delhi is expected to discuss a timetable for winding down British aid commitment to India. She is expected to make it clear that the UK’s commitment to India will change radically at the end of the current eight-year 1.6 billion pound programme which lasts until 2015.
The idea to cut aid has been building for some years and has received added impetus from recent events. In 2011, Cameron led one of the largest-ever business delegations to India, comprising six cabinet ministers and around 60 business leaders. He lobbied heavily in favour of supplying India with the British built Eurofighter. But in 2012 as Britain seemed destined to lose the contract for 126 fighter jets, the knives came out in Britain – both for Cameron and for India too.
Instead of the British media attacking the sordid nature of the heavily taxpayer-subsidised arms industry and the way its massive profits are made by stoking tensions and war, it saw better mileage from cashing in on fear mongering by telling the public that the apparent loss of the contract to the French company Dassault, which makes the Rafale fighter, could jeopardise thousands of British jobs. It would have been much more constructive for the media to have regarded the loss any jobs in the arms sector as an opportunity to reinvest arms industry subsidies in more socially useful ventures, such as renewable energy.
As a backlash over India’s decision, however, sections of the public and various self-appointed opinion leaders took it on themselves to also apportion blame to India by linking the loss of the contract to the issue of aid. They were quick to point out that the British Government’s aid package is around 15 times larger than what France sent to India in 2009.
They asked, “Where is the trade dividend?” – especially in light of former International Development Secretary Andrew Mitchell saying that the aid relationship with India is very important and its focus included seeking to sell Typhoon jets. He made it clear that aid was linked to trade. In order to get the government off the hook, this stance (and claims that aid was being used as a bribe) was soon being strenuously denied by various members of the government in light of the French seemingly bagging the prize.
Public pressure has subsequently grown over sending aid to India, especially at a time when massive public sector job losses and slashes to services are being made in Britain. The issue has certainly struck a chord with sections of the British public.
Egged on by politicians and the media, sections of the public began to ask why should the overburdened British taxpayer give aid to a country with 300 billion dollars worth of foreign reserves and year on year growth that has been over 8.5 per cent? It did also not go unnoticed that India has funds not just for its own aid and space programmes, but for nuclear weapons too, while Britain itself has no space programme and has been debating scaling down its own nuclear weapons systems.
Many in Britain also questioned why aid should be given to India, which has an economy on course to overtake Britain’s in the next ten years, and that, according to financial advisers Merrill Lynch, has 153,000 dollar-millionaires – a number that grew by 20 per cent in just one year, compared with Britain’s own increase of less than one per cent.
The argument proceeded along the lines that India might do better to scrap its space programme, aircraft carriers, nuclear weapons and its huge aircraft buying programme worth billions and redirect all those funds to invest in improving the plight of the poor.
And then there was the matter of giving money to India being a waste anyhow, seeing that rich Indians and politicians have salted away billions in Swiss bank accounts since independence. The accusation is that much aid money to India is thus chewed up by corruption and fraud. The lavish spending of India’s rich has been targeted too, with much focus on multi-storey Mumbai penthouses, Formula 1 and the like.
Cut through the tabloid-type hysteria and the media’s agenda, and there is indeed a certain logic behind many such criticisms. But what has often been ignored during this tirade against India is that, as a strategy for poverty alleviation and within the broader context, the impact of aid is minimal at the very best.
There is no denying that, despite India’s rising power on the world stage, poverty remains rife and the country is home to a third of the world’s malnourished children. India’s annual average income per person is around 2.5 per cent of Britain’s.
However, much of the hardships are today fuelled by rising inequality brought about by neoliberal economic policies. Inequality in India has increased significantly since it opened up its economy in the early 1990s (1). India’s rich elites have benefited enormously, and this has often been at the expense of the poor. Look no further than the real estate speculators and the land grabs from the poor, the rising obesity levels and the persistent malnourishment, the corporate rich and the theft of natural resources in the tribal areas and the high GDP and the low poverty alleviation statistics. Aid is like using a plaster to stem a burst dam.
Regardless of whether India even wants this relatively small sum of aid in the first place from it’s former colonial oppressor, which so many Indian politicians have openly stated it patently does not, it’s a pity that sections of the British media and certain politicians do not highlight the fact that the sum given by Britain to India is anyhow only less than one per cent of Britain’s debts – hardly a drain on the British economy as it is too often made out to be. It’s also a pity that they don’t focus more on the real drain placed on the British economy via the hundreds of billions that are being picked from the pockets of ordinary Brits via bank bail outs, corporate subsidies and fraud and tax avoidance and evasion by the rich.
According to economics professor John Foster (2), the aggregate wealth of Britain’s richest 1,000 people was in 2010 some 333 billion pounds. In 2010, Britain’s aggregate national debt was half that amount. In 2009, the top 1,000 increased their wealth by a third, meaning that the amount they actually increased their wealth by in just one year was half of the national debt!
But that is a taboo issue. It’s not up for public debate or scrutiny. It’s not to be questioned. The dirty machinations of capitalism are to be hidden away – preferably in an offshore bank account.
Much easier to point the finger at India in order to divert attention from the predatory capitalism that continues to fuel Britain’s economic woes and exacerbate poverty in India. Much easier to use aid to India as a convenient whipping boy.
But can we expect much better? Not really. The British press, politicians and establishment mouthpieces have been using welfare provision within Britain itself as a convenient scapegoat for capitalism’s failings for decades!
Tuesday 7 February 2012
My Weltanschhaung - 7 Feb 2012
- Am I glad that England lost 3-0 to Pakistan at cricket. You can blame Ajmal's action, you can blame the DRS but you still are unable to score enough runs. The cry of World number 1 is not so shrill now and I can remove my ear plugs.
- I am not really sure the NHS bill is privatisation by the back door or is it the vested interests of doctors, managers and nurses crying foul. Unfortunately, only time will tell and by then it maybe too late.
- India refuses to take UK aid, the UK wants India to continue to take its aid. Am I the only person wondering where all this decades long aid has gone and who benefitted from it?
- Its a pity that Sarah Palin will not win the Republican nomination.
- The US, UK and France are upset that they did not receive a carte blanche to invade Syria. Afetr Libya, they were deluded to think the Russians would cooperate.
- Who will benefit from a war with Iran?
- I am not really sure the NHS bill is privatisation by the back door or is it the vested interests of doctors, managers and nurses crying foul. Unfortunately, only time will tell and by then it maybe too late.
- India refuses to take UK aid, the UK wants India to continue to take its aid. Am I the only person wondering where all this decades long aid has gone and who benefitted from it?
- Its a pity that Sarah Palin will not win the Republican nomination.
- The US, UK and France are upset that they did not receive a carte blanche to invade Syria. Afetr Libya, they were deluded to think the Russians would cooperate.
- Who will benefit from a war with Iran?
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