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18 December 1998

The giving age has been postponed

Geoffrey Lean reveals a shocking and precipitous fall in aid from rich countries to the world's poor

By Geoffrey Lean

Good King Wenceslas had better look out. Not that his virtue, to which we attest, more or less tunefully, at this time of year, is in doubt. But is the tenth-century monarch on message?

Certainly not, if you ask most of the governments of the world’s richest countries. Aid to the world’s poor has never been lower on their agendas. They now devote a smaller proportion of national wealth to official development assistance (ODA) than at any time since records began in 1950. It is falling so precipitously that, at the present rate, it will cease to exist altogether within 17 years.

Britain, which led the assault on aid under Margaret Thatcher, has been a magnificent exception since Labour’s election victory. It has been almost alone in announcing that it will increase aid, and has led attempts to reduce third-world debt. But even here there are signs – as in last week’s grumbling over Clare Short’s justifiable refusal to lobby for British firms while on an aid mission to China – that generosity may be going out of fashion.

Perhaps Wenceslas should swap his page for a pager, and privatise his operation; he could, doubtless, do quite nicely as chief executive of Flesh, Wine and Pine Logs plc. As aid falls, multinational companies are being hailed as saviours. Ten years ago the flow of private money to developing countries was only three-quarters the level of ODA; now, it is four times as great. Charity must be the last thing on the minds of the emperors of commerce, but even the redoubtable Clare seems strangely optimistic about their role in fighting poverty.

But more of that later. Where the International Development Secretary is resoundingly right – and at one with the Bohemian virgin king – is to focus on destitution. Some 1,300 million people live in extreme poverty, subsisting, if they can, on a dollar a day. Many more are little better off. In all, three-quarters of the world’s people live on less than $750 a year.

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The vital statistics of poverty are grindingly familiar. Twelve million children under the age of five die needlessly each year from malnutrition and easily preventable diseases. Two in every five third-world children of the same age are stunted by hunger and sickness and will thus never reach their physical or intellectual potential. One hundred and thirty million children of primary school age, mostly girls, are denied education and thus the chance of a better future. And 250 million – a quarter of all those aged between five and 14 – are losing their childhood to labour.

Too huge a weight of destitution ever to be shifted? Too expensive a task? Not at all, according to the United Nations Development Programme. Its 1997 Human Development Report estimated that lifting all the world’s poorest people out of extreme poverty would cost less than 0.5 per cent of global annual income (and less than the combined wealth of the seven richest people on the planet).

Much has already been done. Thirty years ago, average life expectancy in developing countries was just over 50, now it is 63. The proportions of children dying before their first and fifth birthdays have fallen by half. So has the percentage of the third world’s people living in extreme poverty. In 1960, half of all children of primary school age in developing countries were out of school; now less than a third are. Conditions in developing countries have improved more in the four decades or so since aid began than in the previous five centuries.

How much is down to aid? Impossible to say, but quite a lot – even though enormous sums have been wasted in grandiose boondoggles, the pampering of elites, and the shameless promotion of donor- country businesses ill-suited to recipient nations. Aid also kick-started the Korean and other Far Eastern tiger economies (as well as reviving Europe through the Marshall Plan). A US government report estimates that it has cut 500 million off population growth through family planning programmes, and has saved the lives of five million infants a year.

But that is the long-term picture. Over the past 15 years or so, progress has slowed, even gone into reverse. During the 1980s the per capita incomes of three-quarters of African countries fell by over 15 per cent. Even the recovery of the 1990s, which renewed growth in many developing countries, did little for their poor.

There are many culprits. The prices of the commodities that developing countries export have been falling. Servicing their rising debt burden absorbs money that could otherwise be spent on health and education. Programmes imposed by the World Bank and International Monetary Fund, as a condition of financial help, have prescribed Thatcherite policies that have deepened destitution. And, far from least, the policies of most third-world countries have been heavily biased against their poorest people.

Aid is very far from being the whole answer (or even most of it) but it is the most visible test of industrialised countries’ commitment (or lack of it) to world development. The good news is that in May 1996 OECD countries formally adopted a new aid strategy aimed at halving the proportion of people living in extreme poverty by 2015.

The bad news is that it is not happening. Aid has continued its precipitous decline. In 1997 ODA, at 0.22 per cent of rich nations’ GNP, fell to less than half of what it was in the 1960s, even though almost all industrialised countries have committed themselves to a target of 0.7 per cent. As recently as 1992, the figure was 0.33 per cent and, if it had stayed at that level, $24 billion more would have been spent on aid in this year alone.

Even in cash terms, aid is falling – by more than a fifth since 1992. The poorer the country, the worse it has fared. The proportion of ODA going to the officially designated least developed countries fell by 14 per cent in 1996.

In all, developing countries are now paying rich ones more in interest on their debts than they are receiving in aid.

The boom is in private investment, which totalled some $206 billion in 1997. The Conservative government used this as an alibi for cutting what Thatcher memorably called “handouts”. “It is not simply a question of what we give directly through state aid,” protested Dr Liam Fox, then a junior aid minister, in early 1997, “but what is given by the private sector.” “Given” may seem an odd word for what most private sector boards would call investment.

Labour’s victory promised to change this – and to buck the dismal global trend. “There can be no higher moral purpose than working to eradicate poverty and promote sustainable development in the world’s poorest countries,” said Tony Blair a week before polling day. And the new government set about the task with a rare radicalism. It has laid out plans to increase ODA as a proportion of GNP, after the Tories had cut it by more than half over their years in office. Clare Short, whose passion is unquestionable, has promised to focus it on eradicating poverty, rather than on promoting British business, and has axed the slush fund that helped finance the Pergau dam. Meanwhile Gordon Brown has pushed for a more generous attitude towards writing off debt, and even Peter Mandelson has come in on the side of the angels.

And yet, at times, the old tunes can be heard again. Britain took a lead in promoting the Multilateral Agreement on Investment, now thankfully dead, which would have given multinationals free rein in developing countries at the expense of local industry. Last month Clare Short said that private investment “was bigger and more important in improving economic growth and poverty reduction” than ODA. “This is not to say that aid is not important,” she added reassuringly, explaining that it “can help create the conditions” for private investment. It was an uncanny echo of Lady Chalker, her Tory predecessor, who said the role of aid was “to promote the right enabling environment” for the private sector.

Private foreign investment is indeed vital, but it does little to reduce poverty. It goes overwhelmingly to the wealthiest developing countries. The top 12 out of 108 of them get about three-quarters of it; the whole of Africa about 1 per cent. It tends to finance capital-intensive industries that provide few jobs, or mining or other extractive ones which are only temporary.

So I would have a better Christmas if I knew that the members of Tony Blair’s somewhat preachy cabinet were listening to the last lines of “Good King Wenceslas”: “Therefore, Christian men, be sure,/wealth or rank possessing,/ye who now will bless the poor/ shall yourselves find blessing.”

The writer is environment correspondent for the “Independent on Sunday”