Biz/ed - Development Assistance Philosophy [ Biz/ed Virtual Developing Country ]

Theories

Development Assistance Philosophy

For much of the post-war period, the view of development economics was that of a deficiency model, that poor countries suffered from a savings gap which prohibited development and aid was intended primarily to provide investment funds. This, tied with political considerations of the Cold War, led to command economy-style planning, state-led industrialisation, nationalisation and protectionism.

The prevailing view was that increased government spending would trickle down to those people dependent on it for their incomes. Projects such as the Kariba dam, and the Tanzira railways certainly contributed to Zambia's economic growth of the period, however, there was considerable evidence that whilst growth occurred, levels of absolute poverty continued or worsened.

Increasingly poverty became central to those organisations involved with private development assistance, and in the 1970s much of this was aimed at Basic Human Needs and Integrated Rural Development. This was often at rural community level, such as providing access to clean water and primary health care, and teaching farmers new skills. However, aid projects were often criticised because they failed to involve the institutions and infrastructure of the communities.

The 1980s were a difficult time for the Foreign Aid organisations. The decade produced a number of crises that impacted on the LDCs. Food crises and the World Debt crisis both took their toll with the plight of the LDCs being given high media profile. There was growing public discontent with many Aid organisations considering them overly bureaucratic and failing to target poverty reduction. Populist movements such as Band Aid and Live Aid were seen as having more of an immediate impact than the existing NGOs and Official Aid.

More recently poor countries were seen to be held back by market failures and Official Development Assistance (ODA) focused very much on market solutions and liberalisation of the economy to simulate economic growth. Much ODA was accompanied with strict macroeconomic stabilisation conditions and structural adjustment programmes aimed at creating an economic environment where economic growth might flourish. Some development economists argued that the theory of trickle-down was still underlying much of the assistance.

There was once again a need to find ways in which poverty reduction became the main focus of private development assistance. A new approach to an old problem was needed. In the late 1980s microfinance had emerged as a possible solution. Many microfinance schemes were started up supported by Non Governmental Organisations.

In economic terms, there is perhaps a case for increased aid in support of market-promoting reforms, to part-finance infrastructure (e.g. basic education, primary health care and rural roads), and to combat endemic tropical diseases (such as malaria and HIV/Aids) in the world's poorest countries. There is a view though, that aid is not nearly as important as trade for developing countries and that more should be done in terms of reforming the global market and in particular, liberalising highly protected Western markets for agriculture and textiles.

Next theory - The World Bank >>