Creating a Sustainable Future
Multilateral Aid – The UN, IMF and World Bank
Today, approximately 25% of aid is multilateral, and the remaining 75% is bilateral. Multilateral aid is given through institutions such as the World Bank or the United Nations agencies and is considered less politically motivated, encouraging international cooperation rather than the strategic and commercial interest of donor countries. Bilateral aid is given from one single state to another.
These institutions evolved from organizations originally created to contribute to post-war World War II reconstruction. The development work of the UN began with the United Nations Relief and Rehabilitation Agency (UNRRA) founded during the war, and the World Bank, or the International Bank for Reconstruction and Development, which provided loans for recovering Western European nations.
Known collectively as the Bretton Woods Institutions, the IMF and The World Bank, were founded by the delegates of 44 nations in July 1944 in order to support the economies of their member nations. The agreement between these states introduced an adjustable pegged foreign exchange rate system. Currencies were pegged to gold and later to the US dollar.
The Bank is primarily a development institution, which focuses on poverty reduction and improvement of living standards worldwide. Its initial stated goals were to bring financial support to the reconstruction of the countries that had been devastated by the Second World War; and to grant loans to contribute to the development of backward countries (as developing countries were then called). The IMF was formed as a reaction to the Great Depression of the 1930s and is a cooperative institution between member states, which seeks to maintain an orderly system of payments and receipts between nations and has the authority to intervene when an imbalance of payments arises.
The World Bank Article IV, Section 10, states that: “The Bank and its officers shall not interfere in the political affairs of any member; nor shall they be influenced in their decisions by the political character of the member or members concerned. Only economic considerations shall be relevant to their decisions, and these considerations shall be weighed impartially in order to achieve the purposes stated in Article I.”
Since these loans must be provided “with due regard to the effect of international investment on business conditions in the territories of members," the World Bank’s efforts, as Easterly points out in his book The Tyranny of Experts: “perfectly reflected a technocratic viewpoint – what mattered were the technical solutions to be implemented by the state, not the “political character” of whether a state was authoritarian, abusive or corrupt.” This article made possible an alliance between those who wanted to fight global poverty with technocratic means and those with political motives. It enabled them to ignore the rights of the poor, and allowed tyranny to survive, believing and claiming that “benevolent” autocrats are better for rapid development.
From 1948-1951 the US injected $13 billion (in today’s money approximately $120 billion US, $11 billion of which were grants) to restore the economy and stability of seventeen European countries after the devastation of Word War II. The Marshall Plan replaced the World Bank’s intervention since the US came to the conclusion that reconstruction gifts to Europe would be more efficient and cost-effective than loans. By this time European vulnerability to Soviet Communism was evident and the consensus was that if the USSR was not prevented from extending its influence into Western Europe, then only the Atlantic would stand between it and the United States. Officially known as The European Recovery program, the Marshall Plan prevented this and, importantly, it also ensured US access to European markets. It required these European nations to be responsible for a comprehensive and collaborative plan which would not merely alleviate their immediate predicament, but also enable them to eventually stand on their own. It was a success: it restored the confidence of Europe whose member states may not have otherwise recovered. So it is not surprising that its “success was seen as a model for development elsewhere.” Foreign Aid Effectiveness, Political Rights and Bilateral Distribution Journal of Humanitarian Assistance, Feb, 2004. However, the histories of European nations were very different from those in the then Third World. European governments, institutions, their cities and infrastructure had evolved over centuries; the expertise needed to rebuild their devastated communities was available there, and the need to rebuild and reestablish themselves was self-evident. After the horrors of World War II, Europe was desperate to recover and live in peace.
The World Bank began its Third World development program in Colombia where it had a well-planned program of improvements and reforms, and believed that with a collective effort it could achieve its goals. Unfortunately, Colombia was going through a period of great political unrest. In 1948, Jorge Gaitan, a champion of Colombia’s poor majority, was expected to win the next presidential election, but was assassinated by a lone gunman in Bogotá. A riot raged for days before the army finally stepped in, then Conservatives declared a state of siege and closed Congress. Since the World Bank is prohibited from considering political upheaval or violence an obstacle to development it unavoidably lent legitimacy to a brutal, repressive government. From 1948 to 1956, the political violence raged on, killing as many as 400,000 people.
In the 1980s and 1990s, the IMF and World Bank gave structural adjustment loans to poor countries which mandated changes in their economic policies that would encourage them to move to a free market economy. Such requirements included the liberalization of foreign exchange and import controls (freer trade), devaluation of the currency (encouraging exports), anti-inflationary programs including the abolition of price controls, and the promotion of foreign investment. These measures are meant to encourage responsible fiscal management in order to sponsor growth and sustainable development. Unfortunately most of the recipient countries showed zero or negative growth and were unable to pay back their loans; nevertheless, the IMF and WB continue to give them new loans, forcing them further and further into debt.
The “top down” paradigm that these organizations have adhered to from the beginning has resulted in vast sums being continuously misdirected. According to Deaton, “The behavior of both donors and recipients is fundamentally affected by the existence and magnitude of these aid flows.” Aid stimulates government spending and frees leaders from the need to consult or gain the approval of their citizens, enabling dictators such as Zaire’s Mobutu and his regime to stay in power. Yet authoritarian regimes make up the bulk of aid recipients, and it is not unusual for donor countries to require aid agencies to channel money through recipient governments, rather than NGOs with good local experience and credentials, and give foreign aid to political allies who are corrupt, making these governments even less democratic.
Often, rather than help, aid efforts can inadvertently cause the poorest people unnecessary suffering. In 2005 in Mubende, Uganda, the national forest authority licensed thousands of acres of land to the British-based New Forests Company. With funding from the World Bank and others, the company planned to establish forests and then make timber products, including utility poles intended to deliver electricity to un-served parts of the country. Because of this program tens of thousands of farmers were forcibly evicted from their farms and livelihoods. Many refused to leave, and, five years later, in 2010 the forest authorities sent in armed agents to evict them.
Western donors believed they could achieve great results in Ethiopia by providing President Zenawi with expert advice and increased funding. But Zenawi was an oppressive ruler who rigged elections, jailed opponents, and shot protesters.
Again, to quote William Easterly, he even used donor funds to “blackmail starving peasants into supporting the regime and punishing opposition supporters by withholding donor-financed food relief.” In 2010, the Ethiopian government, in a program supported by the World Bank, relocated 1.5 million families far from essential services and sold their land to foreign investors. Families were forced to leave at gunpoint and many fled to refugee camps in Kenya. Human Rights Watch has condemned the World Bank for their involvement in this obligatory displacement.
On the other side, in spite of the persistence of autocratic governments with their draconian laws and human rights abuses, according to Owen Barder a Senior Fellow and Director at the Center for Global Development, over the last three decades in Ethiopia international aid has made a difference, and there have been great improvements in Ethiopian development. In the 1980’s famine in Ethiopia, about a million people were hit by drought and famine, and a quarter of a million people died of hunger. In 2008 another drought occurred and famine hit again, but this time there was no famine. This time the Ethiopian Government recognized the problem and was willing to do something about it. Early-warning systems put in with the support of donors recognized the problem early on so that food supplies were pre-positioned and “the world’s largest safety net” provided by donors was put in place, allowing people to stay in their homes and look after their crops and animals. So while a great deal of hardship and some hunger occurred, there was no famine. At the same time, across the border in Somalia where the government was not as effective there was a famine and a quarter of a million people died.
Sadly, in 2015 the spring and summer rains failed again in Ethiopia, and this time it has lead to starvation and desperation. The United Nations has warned that more than 15 million people in Ethiopia will be in need of food aid by the beginning of 2016.
When the IMF insists that a country takes austerity measures the results can disturb local politics. For example, having given Ecuador sixteen loans over a 40-year period, in the year 2000 the IMF enforced austerity measures, which caused an increase in fuel and electricity costs and a reduction in teacher salaries and resulted in political unrest.
The United Nations has 193 member states. Besides the UN itself, it comprises more than 30 affiliated organizations (including the World Bank and IMF) each with their own membership, leadership and budget processes, working with and through the UN to promote worldwide peace and prosperity. Among them are:
United Nations Development Program (UNDP): UNDP is the UN’s global development network, focusing on the challenges of democratic governance, poverty reduction, crisis prevention and recovery, energy and environment, and HIV/AIDS. UNDP also coordinates national and international efforts to achieve the Millennium Development Goals aimed at poverty reduction.
Office of the United Nations High Commissioner for Refugees (UNHCR): UNHCR protects refugees worldwide and facilitates their return home or resettlement.
United Nations Children's Fund (UNICEF): UNICEF provides long-term humanitarian and development assistance to children and mothers.
World Food Program (WFP): WFP, which aims to eradicate hunger and malnutrition, and is the world’s largest humanitarian agency.
United Nations Drug Control Program (UNDCP): UNDCP helps Member States fight drugs, crime, and terrorism. Aside from providing laboratory services, this Program helps to improve cross-border cooperation.
World Health Organization (WHO): responsible for global vaccination campaigns, responding to public health emergencies, defending against pandemic influenza, and leading the way for eradication campaigns against life-threatening diseases like polio, malaria and ebola.
United Nations Educational, Scientific and Cultural Organization (UNESCO): UNESCO focuses on everything from teacher training to helping improve education worldwide to protecting important historical and cultural sites around the world.
In today’s world of changing scenarios and sudden crises, the efforts of some of these UN organizations are crucial. For example, the challenges facing the WHO are staggering, as populations increase and move around the world, as communities are forced to flee their countries and live in makeshift conditions. A recent CBS “60 minutes” report on the work of the WFP’s emergency assistance to over a million refugees on the Syria-Jordan border also bears this out.