RETHINKING U.S. INTERNATIONAL ASSISTANCE AS IF PEOPLE AND ENVIRONMENT MATTER

PCDForum Column #43,   Release Date November 20, 1992

by David C. Korten

In Earth in the Balance, America's Vice President elect Al Gore calls for a commitment to sustainability as the organizing principle of public policy. We may hope the new U.S. administration will heed this timely and appropriate call. Given the global nature of the issues any such commitment must include a long overdue rethinking of U.S. international assistance, including that channeled through the multilateral banks. The principles underlying U.S. foreign aid have changed hardly at all during its forty year history, though the world has changed enormously. Application of outmoded assistance principles is inhibiting progress toward sustainability in much of the world. For example:

The presumed goal of aid continues to be to bring poor countries up to an American standard of material consumption by accelerating economic growth--not withstanding evidence that the current American standard is unsustainable even for Americans. Continued emphasis on economic growth as the answer to the problems of a finite planet is deepening inequality and hastening ecological collapse.

The cold war gave international assistance its political impetus. Stable dictatorships were favored so long as they professed to be anti-communist. The majority of U.S. assistance was earmarked for military assistance and "economic support fund" payments for political favors such as military base rights. The cold war is over, but aid to repressive regimes continues.

The Marshall plan, which channelled massive funding to Europe for economic reconstruction after World War II, continues to provide the model for aid to poor countries. Europe had the necessary institutional infrastructure to make productive use of external financing. In contrast, most aid to poor countries strengthens the patterns of elite privilege and blatant corruption that are fueling environmental destruction and widespread economic impoverishment. Consequently, very little international assistance benefits the poor.

Trickle down economics justifies channeling funds to the rich and powerful in the name of alleviating poverty. Poverty is deeply imbedded in institutional structures. In the absence of institutional reform, the benefits of forty years of global economic growth have accrued mainly to the 20% of the world's population that currently receives over 80% of total world income.

A substantial portion of assistance has been loan funded. Debt service payments on public foreign debt from both official and commercial sources have placed poor countries in virtual debt bondage to their creditors and stifled poverty alleviation efforts all around the world. The main prescription offered by the multilateral banks, to which the U.S. is a major contributor, is more foreign borrowing--further increasing the debt. It is time to reverse this process, recognizing that for most poor countries the elimination of foreign debt would free far more foreign exchange to meet domestic needs than would be provided even by significantly increased development assistance.

The following are actions the U.S. might consider if it were serious about advancing economic justice, environmental sustainability, and political participation.

Set an example by getting its own house in order to provide the world a model for sustainable lifestyles and a sustainable modern economy.

Call for an international conference to reform the official multilateral banking system toward the end of eliminating Third World debt. One goal would be to increase the transparency and public accountability of the IMF. A second would give the IMF an additional mandate to support Southern countries in legally repudiating odious debts and negotiating forgiveness of legitimate debts in return for accepting strict IMF supervised limits on new long-term international borrowing. A third would direct the bulk of donor country assistance to an IMF administered debt forgiveness fund. A fourth would phase the multilateral development banks out of existence. By their nature as banks, nearly every action they take adds to Third World debt, endangers the environment, and deepens poverty.

Use the remaining assistance funds, aside from those designated for qualified UN agencies, to fund the existing Latin American, African and Asian regional development foundations, create a new foundation to support U.S. citizen involvement in international people-to-people initiatives, and endow independent, locally managed grant-making foundations in assisted countries to finance citizen led reform initiatives.

Eliminate the Economic Support Fund and initiate a process toward an international convention ending military assistance and international arms trade.

Assign the residual functions of U.S. funded disaster relief and refugee programs to a greatly reduced AID to administer through qualified NGOs.

By advancing such an agenda the new U.S. administration could transform a thoroughly discredited international aid system into a beneficial force for constructive change.

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David C. Korten is a fellow of the People-Centered Development Forum. For more detailed treatment of the underlying arguments see his article "Sustainable Development," World Policy Journal, Winter 1991-92.

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