G8 Summit 2005—One Year On
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The 2005 G8 Summit at Gleneagles, Scotland, promised a lot of debt relief, aid and other benefits, particularly for Africa. However, though the media reported a lot on the amazing sounding deals there was much less said on the use of fancy accounting and spin by G8 leaders in their declarations. Due to the 2005 G8 Summit’s prominence and the massive global public pressure at the time, a number of people have asked one year on whether there has been any positive progress.
On this page:
Some limited progress
Oxfam, one of the organizations leading the pressure on G8 nations to deliver on various anti-poverty measures feels that there is not enough being done, though there has been some progress.
For example, debt cancellation is already making a difference:
Similarly, the UK government’s Department for International Development2, is quite upbeat about progress so far, though these and others are all quick to warn about complacency.
However, some may wonder that surely they would say positive things would they not? After all, highlighting as many positives as possible reduces criticism.
Authors and critics of global foreign aid programs such as economics professor, William Easterly, feel that many of these are large, top-down driven programs which are doomed to fail. In some regards, he is quite convincing. In his book, The White Man’s Burden; Why the West’s Efforts to Aid the Rest have Done So Much Ill and so Little Good (Penguin Press, 2006), Easterly suggests that instead, smaller more targetted steps should be taken, where accountablility is based on results, not in inputs (such as how much debt is cancelled, how much aid is given, etc.) He suggests free markets are the way though he does concede that the
shock therapy kind of free market imposition as witnessed in the former Soviet Union is top-down and disastrous (he consulted and promoted such steps with the World Bank before realizing this was not helpful).
However, perhaps Easterly too is being oversimplistic? For example, as Oxfam also notes,
That Zambia was able to provide free health care after debt cancellation suggests that some aspects of
top down or aid through governments are important. However, as the OECD warns, when looking at aid in the form of government budget support, it requires political will from the recipient government and only when present, can be successful:
As an aside, the same OECD evaluation also found that
The team of evaluators found no clear evidence that budget support funds were, in practice, more affected by corruption than other forms of aid. This is interesting because many argue aid sent to governments are more likely to be corrupted away. However, the OECD report also warns that
that donors should be prepared to better analyse political risks and gauge support for poverty reduction by a government. In some cases, the evaluation found that political risks had been under-estimated by donors. It was also too early to see clear benefits to the poorest in society:
While there were increases in expenditure in areas such as health and education, any increase in the incomes of the very poor is not yet evident.
In addition, foreign aid is often criticized when all it does is add to the budgets of governments that are usually over bureaucratic and so is wasteful. The OECD notes that
OECD donor countries now channel about US$ 5 billion—some 5 per cent of their aid—directly to the budgets of developing country governments which may not be as high as some get the impression, but furthermore,
this system of delivering aid can be an effective way to strengthen the management of public financial systems in developing countries, and has helped to improve access to services like healthcare and education.
Like most studies, cautious optimism is perhaps warranted. The evaluation being referred to is a report, independent of the OECD, called An Evaluation of General Budget Support (1994-2004). It was carried out by the University of Birmingham on behalf of more than thirty donor and partner countries looking at the experience of Burkina Faso, Malawi, Mozambique, Nicaragua, Rwanda, Uganda, and Vietnam. The evaluation notes many recommendations along the lines of being careful, as this is not a panacea and that care must be taken with regards to accountability, political will, ensuring the poorest are effectively targeted, etc.
But many reasons to be concerned about poor progress
Where pessimism from Easterly seems warranted is because so many recipient governments appear not to have this will, or accountabilty. What Easterly also argues, (and, as he also notes, so do many organizations and aid charities that are critical of rich country government aid/debt relief programs) is that the donors themselves are often unaccountable. What if they do not deliver on their promise? What if they (as has often been the case) knowingly lend to corrupt governments, or sell them arms, or in some way, make things worse? Where is their accountability?
Oxfam is also critical of some of the progress by G8 countries. Noting that after the July 2005 Summit much of the time since has
involved intense wrangling over the details by the rich countries.
Some rich countries and the World Bank and IMF themselves have made a number of attempts to water down the deal. For example,
In order to save money, the World Bank deal now only covers debts up to the end of 2003 [rather 2004, which was initially agreed]; a stroke of the pen costing poor countries $5 billion in debts that will not now be cancelled;
- Many massively indebted countries still remain excluded from the deal;
- Countries are still subject to what are generally considered as harmful economic conditions in return for the debt relief;
There is no recognition of the illegitimate origins of much of this debt in irresponsible lending such as debt incurred by unelected leaders in the 1980s. For example, the current South African government is paying back billions lent to the former Apartheid regime.
- Aid delivery contains spin: for example, though there is a pledged increase, this is still only half of what was pledged back in 1970! (The accumulated shortfall in aid in 2003 figures is over $2 Trillion5.)
- A deal at the 2005 Summit promised increased aid. Although 2005 aid levels did increase accordingly, 80% of that increase
is made up of one-off debt cancellation deals for Iraq and Nigeria—it is not actually new money in the fight against poverty. Together these two deals add up to $17 billion of the $21 billion increase.
- Technical assistance from rich countries is often expensive, and counted as part of the aid.
The World Bank calculates that just one day’s consultancy costs can pay a teacher’s salary for a year.
What is the effect of this fancy accounting by rich country governments? Oxfam summarizes:
It is worth quoting Oxfam again on the examples and dangerous effects of disingenuous double-counting:
(This site’s section on foreign aid8 goes into more depth, looking at issues around the aid numbers vs. the aid promises, the quality/effectiveness of aid, and more.)
As Easterly has strongly criticized, given these and other concerns, making poverty history will likely not come from rich country governments, or even publicized concerts by celebrities, though the latter may indeed importantly help raise awareness.
Furthermore, as many argue, trade is equally, if not more important than, aid and debt relief because these latter forms of assistance are short term measures, but trade is the way towards long term prosperity. International policies and forums are typically dominated by the bigger, richer countries, often defending their own interests. This is understandable in some regards, but that is often accompanied by spin about how their preferred measures are beneficial for the poor. A major World Trade Organization meeting in Hong Kong, December 2005, proved to be unsuccessful for developing countries