Pearson Report - Why Aid

Key Excerpts from: Partners in Development REPORT OF THE COMMISSION ON INTERNATIONAL DEVELOPMENT CHAIRED BY: LESTER B. PEARSON Chapter 1: A Question of Will WHY AID? This is a basic question which we must examine specifically and directly because it goes to the very root of the weakening of the will…to continue, let alone strengthen, development cooperation.

In trying to answer it we must be clear not only about what aid can do, but also about what it cannot do and should not be expected to do.

Development of the poorer nations is not a guarantee that they will choose any particular ideology or value system. This is not to say, however, that economic and social progress will leave ideologies and value system unaffected. Development involves profound changes in national behavior and often creates threats to national unity and cohesion which may require strong appeals to each nation’s unique historical experience.

Economic organization, social policy, and the mobilization of the will to break with the past will often require pragmatic policies appropriate to local circumstances. It has been amply demonstrated that the political evolution of developing nations follows no single path, not seeks any other country’s image.

Development is not a guarantee of political stability or an antidote to violence.

Change is, itself, intrinsically disruptive. But active participation in necessary change offers a chance to impart a sense of direction and identification. On the other hand, obstructing it or ignoring it almost inevitably means violent disruption of the social fabric.

Nor is development an assurance of peaceful and responsible international behavior. Reasonable success and development may remove some of the sources of external aggressiveness. But history holds too many cases of highly developed or rapidly developing nations which have behaved both aggressively and irresponsibly towards their neighbors.

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What, then, is the objective of cooperation for international development? It is not to close all gaps and eliminate all inequality. That would, in any case, be impossible. It is to reduce disparities and remove inequities. It is to help the poor countries to move forward, in their own way, into the industrial and technological age so that the world will not become more and more starkly divided between the haves and the have-nots, the privileged and the less privileged.

We should say at once that we applaud the increased concern for those in rich and developed countries who have been unable to receive a share in the unequaled prosperity of recent years. Our recommendations for a renewed effort for international development in no way imply any diminution of the necessity and the drive to eliminate the causes of poverty and inadequate opportunity at home.

On the other hand this necessity is no reason for abandoning our concern with less fortunate peoples outside our own boundaries. The war against poverty and deprivation begins at home but it must not end there.

Both wars must be won. Both problems must be solved.

So we return to the question: Why should the rich countries seek to help other nations when even the richest of them are saddled with heavy social and economic problems within their own borders?

The simplest answer to the question is the moral one: that it is not only right for those who have to share with those who have not.

Moral obligations, however, are usually felt with particular force inside national groups to which people belong and with which they identify. Concern with the needs of other and poorer nations is the expression of a new and fundamental aspect of the modern age – the awareness that we live in a village world, that we belong to a world community.

It is this which makes the desire to help into more than a moral impulse felt by an individual; makes it into a political and social imperative for governments, which now except at least a degree of accountability in their relations with each other.

It is a recognition that concern with improvement of the human condition is no longer divisible. If the rich countries try to make it so, if they concentrate on the illumination of poverty and backwardness at home and ignore them abroad, what would happen to

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the principles by which they seek to live? Could the moral and social foundations of their own societies remain firm and study if they washed their hands of the plight of others?

While the moral incentive for cooperation in international development, then, is valid and compelling in itself and should never be underestimated, it is certainly not the whole case. Indeed, it is not the basis on which support for international development mainly rests.

There is also the appeal of enlightened and constructive self-interest. This is a respectable and valid basis for international action and policy. The fullest possible utilization of all the world's resources, human and physical, which can be brought about only by international cooperation, helps not only those countries now economically weak, but also those strong and wealthy. This can be done through direct benefits from a bilateral aid relationship and also, more importantly, by the general increase in international trade which would follow international development. But development will not normally create, nor should it be expected to create, immediate economic windfalls for a donor country.

It is also entirely reasonable that cooperation for development should establish or strengthen a friendly political relationship on the basis of mutual respect. There is nothing to be criticized in that. But such cooperation should not be pursued for the express purpose of transforming it into a political alliance, or of securing short-term political advantage. Aid for development does not usually buy dependable friends. An aid relationship is difficult in the best of circumstances. It becomes untenable if conditions requiring political support are attached to it.

We must not, in short, interpret national interest in a narrow and restricted sense.

Indeed, the acceleration of history, which is largely the result of the bewildering impact of modern technology, has changed the whole concept of national interest. Who can now ask where his country will be in a few decades without asking where the world will be? If we wish that world to be secure and prosperous, we must show a common concern for the common problems of all peoples.

We know now that a war anywhere in the world concerns and may engage us all; that the pollution of the environment in one area can affect life on the whole planet; that epidemics and diseases do not respect national boundaries. Many of the challenges of

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development pose themselves in much the same way in the industrialized nations as in the developing ones. Problems of nutrition, of excessive population growth, and of educational reform are worldwide in scope.

People today are increasingly aware of a world, as well as a national, community.

Young people, especially, seem to have a feeling of oneness in human development and to be alive to the increasingly international character of human events and associations.

Many give their service and their talents to a community wider than their own nation.

This concept of world community is itself a major reason for international cooperation for development. It is an assertion of faith in the future, as well as of the conviction of the need to act now.

As with other articles of faith, however, once accepted, certain consequences, which must also be accepted, flow from it. The most important is the obligation of every government to play its part in cooperation with all others to ensure that all people have a reasonable chance to share in the resources of the world, which should be developed for the benefit of all.

This means a refusal to tolerate the extreme and shameful disparity in standards of life that now exists within and between nations.

All governments have accepted a commitment to help the impoverished nations free themselves from the bondage of want. The fact that such acceptance is not always followed through does detract from the importance of the steps that have been taken.

Indeed, it is the progress that has been made and the lessons that have been learned that would make any weakening at this time of the commitment to international development so foolish and so tragic.

But whatever is or is not done internationally, the poorer countries of the world have made their choice for development. It is part of their unfinished revolution. They are determined to achieve a better life for themselves and their children. The only questions are: how fast, by what means, and at what cost to themselves and to the world can development be achieved; and whether it has a clear and tangible goal.

Our answer is that the goal of the international development effort is to put the less developed countries as soon as possible in a position where they can realize their aspirations with regard to economic progress without relying on foreign aid.

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This goal will not be reached at once. The illusion of "instant development" – as we have already said – only leads to frustration and disappointment. But can the majority of the developing countries achieve self-sustaining growth by the end of the century? For us the answer is clearly yes. In our view, the record of the past twenty years justifies that answer. We live at a time when the ability to transform the world is only limited by faintness of heart or narrowness of vision. We can now set ourselves goals that would have seemed chimerical a few decades ago and, working together, we can reach them.

Even in the best conditions, development will be untidy, uneven, and ridden with turmoil. Great forward movements in history usually are. The thing to remember is that the process, global in scope, and international in nature, must succeed if there is finally to be peace, security, and stability in the world.

If the developed nations wish to preserve their own position in that world, they must play their full part in creating a world order within which all nations, and all men, can live in freedom, dignity, and decency.

In short, we face an essential need and an unprecedented opportunity.

International development is a great challenge of our age. Our response to it will show whether we understand the implications of interdependence or whether we prefer to delude ourselves that the poverty and deprivation of the great majority of mankind can be ignored without tragic consequences for all.

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OUTLINE OF A STRATEGY Our recommendations are presented in the order in which they arise, starting with the over-all framework of the international economy and proceeding to the measures we think should be taken in the field of foreign aid.

When seen as a whole our recommendations embody a strategy for the strengthening of international cooperation for development in which the following are the principal objectives: 1. To create a framework for free and equitable international trade. The first requirement for rapid international development is continued vigorous expansion of world trade. However, many developing countries must become more outward-looking and competitive if they are to take advantage of this expansion. Trade policies of advanced countries also raise many obstacles to the growth of export earnings for less developed economies.

First, with regard to those primary commodities which are not produced by developed countries, the latter should abolish import duties and excessive excise taxes which now discourage the growth of consumption….

In the long run, however, new and dynamic categories of exports from developing countries are indispensable. Exports of manufactured goods, which have shown most promising growth in the past decades, must be encouraged….

Trade among the developing countries themselves should be greatly expanded….Institutions designed to promote regional trade and integration, such as regional development banks and regional payments unions, deserve greater financial support….

2. To promote mutually beneficial flows of foreign private investment. Despite the caution with which they view very large direct foreign investment, developing countries would generally welcome a larger flow of such investment which could make a major contribution to development. The first factor which conditions this flow is the general climate for private activity in the host countries…..

Multilateral and bilateral programs to offset the special risks of investment in developing countries should be strengthened wherever possible....

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Excessive extension of export credits to developing countries has in some cases given rise to acute debt crises. To prevent this must primarily be the task of the developing countries themselves, but some restraint on the part of creditor governments is also called for…

Despite the many contributions of private foreign investment to development, however, in the present state of affairs in developing countries it does not constitute an alternative to public aid. Indeed, for most such countries, official aid to finance roads, schools, hospitals, and other infrastructure is a prerequisite for, and a stimulant to, private investment.

3. To establish a better partnership, a clearer purpose, and a greater coherence in development aid. The motives and purposes of aid policies in the past have been many and varied. However, it has increasingly come to be accepted that a primary objective should be the promotion of economic development, which requires a sustained cooperative relationship between rich and poor. Increases in foreign aid should be clearly aimed at helping the developing countries to reach a path of self-sustained growth at reasonable levels. The target for the 1970's should be to raise the annual rate of growth of their national product to at least 6 per cent from the current average rate of 5 per cent....

Countries growing at a rate of 6 per cent per year will be able gradually to raise their rate of capital formation. If they give adequate attention to the fostering and promotion of exports, they should, before the end of this century, be able to participate in the international economy as self-reliant partners, and to finance the investments and imports they need for continued rapid growth without foreign capital on concessional terms.

This objective cannot be attained simply by foreign aid. It will take hard and protracted effort in the developing countries themselves. Without such effort, development is impossible and development assistance is wasted. This is why increases in development aid should in the future be closely linked to the economic objectives and the development performance of the aid-receivers. But development plans cannot be made without reasonable assurance that resources will be available. Developing countries cannot reach for ambitious goals unless they know that serious programs will find external support….

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4. To increase the volume of aid. With the objectives of aid sharpened, a clearer view should emerge of the need for external resources in developing countries. For the 1970's, studies of development requirements indicate that realistic development policies compatible with the 6 per cent target already cited should give rise to a need for external resources, including both official aid and private investment, of the order of magnitude of 1 per cent of the GNP of the wealthier countries. We therefore endorse the 1 per cent target, to which the donor countries have long since committed themselves, and recommend that it be fully met by 1975, at the very latest. For most of the developed countries, this will require no more than a continuation of recent trends in the growth of their flows of aid and private capital to developing countries.

There is, however, a special need for official development assistance on concessional terms, that is, in the form of grants or loans on soft terms. This is what properly referred to as aid. On the assumption that increases in aid can be more closely linked to efficient use and performance than hitherto, we recommend a substantial increase in official aid flows. Specifically, official development assistance should be raised to 0.70 per cent of donor GNP by 1975, and in no case later than 1980. This compares with average flows of 0.39 per cent in 1968…..

We are mindful of pressing domestic needs; nevertheless, we believe this difficult and demanding challenge must be met if the basis for international community is to be secured.

5. To meet the problem of mounting debts. Debt service difficulties have already made several debt rearrangements necessary, and similar measures will have to be undertaken in other cases in the near future….

6. To make aid administration more effective. To provide and to make effective use of aid has proved to be a difficult administrative task. Cumbersome procedures on both sides often hamper its constructive use…..

The tying of aid to purchases in donor countries imposes both direct and indirect costs on aid-receivers and distorts the channels of world trade….We recommend a sequence of steps leading to progressive untying….

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7. To redirect technical assistance. Technical assistance has been growing at more than 10 per cent per annum in the 1960's. This rapid growth has revealed many shortcomings which seriously impair its value….

Individual technical assistance experts cannot usually be effective without strong institutional support. We recommend that national and international corps of technical assistance personnel should be given adequate career opportunities, and that technical assistance work should be encouraged in both the public and the private sector of donor countries.

8. To slow the growth of population. We believe that the right to knowledge and means of family planning should be available to all, and that no child should be born unwanted. Rapid population growth not only affects parents and their families but also slows up economic and social advance in many developing countries…..

The full dimensions of the population problem go beyond family planning and require deeper attention. In particular, social policies which reduce the dependence on the family as the sole source of security would lessen the need and desire for large families…..

9. To revitalize aid to education and research. Aid to education has mainly served to buttress traditional methods of teaching, and attempts to search for new methods and for a new education conceived by and for developing countries have been too rare.

Greater resources should be made available for educational research and experimentation.

A large effort is needed to increase the capacity to absorb, adapt, and develop scientific and technical knowledge in developing countries. Research institutes and development corporations should be established in potentially rewarding fields.

We also recommend that a share of the research and development resources in the industrialized countries should be oriented toward problems of developing countries, and that high-income countries assist in the establishment of international and regional centers for research and development in fields of general relevance such as tropical agriculture and extension techniques, education, and urban planning.

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10. To strengthen the multilateral aid system. The international organizations must be put in a position to provide more leadership and direction and to make development assistance into a genuinely international effort…..

The international aid system today, with its profusion of bilateral and multilateral agencies, lacks direction and coherence. A serious effort is necessary to coordinate the efforts of multilateral and bilateral aid-givers and those of aid-receivers. There is a need for consistent reviews of performance and for authoritative assessments of aid requirements....

The objective to which our conclusions and recommendations are directed is a durable and constructive relationship between developing and developed nations in a new and interdependent world community.

We believe that international cooperation for development, soundly conceived and wisely executed, can make an essential contribution to the achievement of this objective.

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