Strings attached
The form and content of aid underwent a decisive shift in the Reagan-Thatcher years of the 1980s. Since then, aid grants have become increasingly tied to demands on the recipients. They have been forced to loosen trade barriers, open their markets to external corporations and purchase goods and services from the donor countries – often at inflated prices. Development campaigners dub this arrangement 'boomerang aid'.
Poorer countries remain massively in debt to richer countries. Thailand's annual debt service (debt repayment, including interest) stands at $17.9bn, while Indonesia's stands at $13.7bn. The Maldives, with a population of only 318,000, carries an annual debt service of $20.8m. The donation of aid to poorer countries has become increasingly enmeshed with the recall of debt from them. Some donors use partial debt relief to justify giving lower levels of aid.
To qualify for debt relief, however, recipient governments have to make structural adjustments (fulfil key conditions) to 'liberalise' their economies. This prevents them from nurturing and protecting their own producers. Simultaneously, providers of goods and services from donor countries are strengthened. These policies widen the gap between rich and poor within recipient countries.
Because aid practice has shifted towards goods and services, recipient countries now spend a smaller proportion of their aid on health and education. Yet it is good health and education that enable individuals and communities to lift themselves out of poverty.
Indonesia received $1,308m of aid in 2002. It spends 4% of its central government expenditure on education and a mere 1% on health. It has an under-five mortality rate of 31 per 1,000 births. The United States, in contrast, spends 22% of its central expenditure on health. Its under-five mortality rate is 8 per 1,000 births. Nearly every American child receives a secondary school education. Only 58% of Indonesia's children do so.
India is a larger recipient of aid. Currently, 2% of its central government expenditure goes on health and another 2% on education. In India, under-five mortality is 87 per 1,000 births. Its secondary school enrolment is 56% for boys and 40% for girls. According to the Norwegian development corporation, Globalis, nearly 35% of India's population subsist on incomes of less than $1 per day.
Poorer countries remain massively in debt to richer countries. Thailand's annual debt service (debt repayment, including interest) stands at $17.9bn, while Indonesia's stands at $13.7bn. The Maldives, with a population of only 318,000, carries an annual debt service of $20.8m. The donation of aid to poorer countries has become increasingly enmeshed with the recall of debt from them. Some donors use partial debt relief to justify giving lower levels of aid.
To qualify for debt relief, however, recipient governments have to make structural adjustments (fulfil key conditions) to 'liberalise' their economies. This prevents them from nurturing and protecting their own producers. Simultaneously, providers of goods and services from donor countries are strengthened. These policies widen the gap between rich and poor within recipient countries.
Because aid practice has shifted towards goods and services, recipient countries now spend a smaller proportion of their aid on health and education. Yet it is good health and education that enable individuals and communities to lift themselves out of poverty.
Indonesia received $1,308m of aid in 2002. It spends 4% of its central government expenditure on education and a mere 1% on health. It has an under-five mortality rate of 31 per 1,000 births. The United States, in contrast, spends 22% of its central expenditure on health. Its under-five mortality rate is 8 per 1,000 births. Nearly every American child receives a secondary school education. Only 58% of Indonesia's children do so.
India is a larger recipient of aid. Currently, 2% of its central government expenditure goes on health and another 2% on education. In India, under-five mortality is 87 per 1,000 births. Its secondary school enrolment is 56% for boys and 40% for girls. According to the Norwegian development corporation, Globalis, nearly 35% of India's population subsist on incomes of less than $1 per day.