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
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

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.


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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