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Editor: Nagaraja.M.R.. Vol.17....Issue. 18...........02/05/2021
Western Aid Myth
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By Syed Ehthisham
The West seeks to preserve present relations, which enable
it to make immense profits by exploiting natural and manpower resources of the
whole world. It also molds socioeconomic development of neo-colonial states to
the purpose, by adopting development models, which will be based on foreign
capital for finance, technology and know-how. There is good reason behind the
billions of easy credit.
When colonized states won independence, capitalism lost some
spheres of influence, commodity markets and source of raw materials.
Independent states started taking a stand in economic spheres, tried to curb
foreign capital in circulation and in production sphere and nationalized
property.
But even after independence, they remained dependent upon
capitalist economy and foreign monopoly capital leading to neo-colonialist
imposition of political, economic, military and ideological relations and
exploitation.
The idea of internal accumulation of sources and development of
state sector initially gained favor in Less Developed Countries-LDCs. But due
to lack of development, they needed external resources for modern industrial
technology and raising the level of consumption.
Over accumulation of capital in capitalist countries requires
international lending.
Debt grows exponentially and is an effective instrument of
control (lending agencies ‘sold’ the unpaid loans which they had given to
African countries to predators, who strong armed the countries to hand over
natural resources at the rate of pennies to a dollar). (1).
Terms of loan and its use should be in line with the country’s development
strategy and not for unsustainable projects thrust upon weak, stupid and
corrupt rulers.
From the capitalist point of view, aid is an instrument of
expansion of political/economic goals to help their monopolies to penetrate
L.D.Cs (2). If public policy could be prosecuted for misleading advertising,
the label foreign aid would be an obvious case for the courts. Aid used
properly could increase assets, consumer goods, science and technology. So aid
is a two pronged lever on which two antagonistic forces, progressive and
regressive, are bearing down.
In fact, LDCs should be compensated for the damage inflicted by
colonization.
Western agencies claim that L.D.C’s can solve their social
problems with aid, without any progressive transformation in society and
without reconstruction of aid system. That is obviously not correct.
Analysis of the instruments of aid, and its orientation and
influence on economy of the recipient:
Aid as capital export:
State and state guaranteed private capital, patent licenses of
know how, brain drain, migration of labor, struggle among capitalist countries
and groups of countries, constitute new international socio-economic relations.
From 1950’s, all L.D.C’s joined the ranks of creditor countries.
Export of capital is one of the most essential features of capitalism, though
its form and mechanism have changed with time. Material conditions of
reproduction are ensured by help from monopolies to market their products and
obtain raw material (outsourcing gives additional advantage of cheap labor,
control over ruling class and increases profits). Social base of capitalist
relations in the countries ensures continued dependence by urging adoption of
non-regulated private enterprise.
Most aid is low interest or interest free, but it serves as
infra-structure and is necessary for purchase of the means of production and
labor power. Profit is obtained by Multinational Corporations (M.N.C’s) and
conditions are created for their expansion and lead to suppression of
development of industrial base in the recipient country in order to curb
competition.
Food subsidies help export of agricultural business; technical
assistance favors further export, increases labor productivity and indirectly
suppresses the working class movement in both donor and recipient countries.
They get access to unorganized labor which is cheaper and easier to control.
Investment is from non-productive-state taxes. Only a little
comes from corporate taxes.
In colonial times international movement of capital and foreign
trade were the main instruments of capitalist reproduction. With
decolonization, it became a bit more difficult. Now the state uses aid to
stimulate export and assets are protected by armed force, subversion, indirect
violence and war, division of labor and unprofitable expenditure by the
government.
Easy credit covers budget deficit, so the aid goes straight into
monopolies. The debtor country can be coerced to pass legislation to encourage
investment (Iraq directly, Asian crisis countries, indirectly), as well as
ensure markets for shipping and consultants. Spare parts are bought from
monopolies and handed over as aid. It perpetuates unequal position in division
of labor. L.D.C’s export raw material, import equipment, know how and
experience. Development of backward socio-economic structure, school, health,
infra-structure, welfare and labor productivity is not considered.
In the past, imperialism was not interested in developing
capitalist relations in colonies fearing competition with the local
bourgeoisie. They now develop a stratum of entrepreneur, which control the
assets and resources there; crony capitalism-dependent comprador brand.
It is important for imperialist states to ensure a guaranteed
supply of raw material especially oil.
L.D.C’s, in an effort to strive for rapid economic development,
take large loans, and technical aid, but end up enhancing their dependence. Aid
amounts to a small percentage of the budget of developed countries (DCs). “OECD
…official assistance is directed to countries…with normal market incentives
which…can be expected to respond “(3).
Credit to L.D.C’s stimulates only those branches of LDC economy which supply
goods to DC’s. Reactionaries want it tied to monopolies and direct
subordination to its military goals. Liberals would like aid directed to
welfare in their own countries. America
spent more on potted plants ($ 5 billion) than on aid” (4).
Aid is tied to buy goods or services from D.C ‘s and or use it
for specific purpose. Technical aid is tied to resources used to pay for
specialists, who can not be hired from other countries. Experts instinctively
recommend machinery from own countries.
Tying aid is to channel own exports; $ 1 million in aid, creates
$ 760,000 worth of goods, besides salaries of consultants and technical
imports. Together with increased exports plus interest on past loans, US
actually runs up a balance of payment surplus. It also helps to export
non-competitive products. Aid officials exhort recipients to spend funds in the
USA. In 1976, only $ 25 million out of 760 million of aid was spent outside the
USA. For example, the U.S gives $ 1.4 billion per year to Egypt, most of which
is spent in buying U.S arms. The British do the same. (4a).
Some aid is tied to actual products which help industries at home in donor
countries. When recipient countries defer payment, further aid goes to
repayment of past loans. Germans are the same (5). French are a little better,
but compensate for it by more dependency of former colonies; aid covers the
deficit trade with France.
Economic impact of tied aid:
Dean Rusk, addressing foreign relations committee hearings,
“Aid is the business of exporting US goods and services, not US dollars”. Same
goes for other western countries. (6).
Construction and running of projects entails import of spare
parts and specialists from the USA. The funds can not be used to buy spare
parts elsewhere . Aid Administrator William Gaud 1975, “Lists are made of
commodities…relatively less competitive…unlikely to export in any great value”
(7).
Clarence Long Congress subcommittee of foreign relations
committee on apportionment, “Lot of business firms… can’t sell it in this
country at the price they want…sell it abroad at American tax payer expense
(8). Elite types made vast sums of money out of foreign aid. It
has…enriched the will to do it” US rulers pursue unabashed protectionism…to
sell products at higher than market prices. PL 480 food aid would not be given,
if it will not lead to increase of commercial food export to the recipient. In
1977, Egypt was due to pay out $ 1,600 million in debt service, still US and
Europe increased its quota of obligatory wheat import from 2.2 to 2.6 million
tons (9).
For projects for which L.DC’s do not have the money to buy
equipment and machinery, they have to go to capitalists who get a market with
out competition and lot of jobs to which L.D.Cs cannot hire their own people.
Donors choose designs to increase import component and cut back local material
and manpower.
Creditors offer assistance for projects which suit their own
industry, often not what the recipients need.
Limit on freedom to choose supplies results in monopoly price
hikes. Transportation costs for the USA are higher than in Europe. Tunisia had
to pay $ 17/ton for freight from USA (adding 10-13
% C.I.F price. Aid is tied to increased interest (actual) to
cover commercial rate by overpricing of up to 30%). (10).
In 1965, Tunisia got 85 buses under U.S.AID at 30% above
European rate. There was design fault in the buses. Spare parts cost 30 to 50 %
more than the European one would. There was a long delay in spare parts; seller
paid less attention as buyer was bound by contract. (10 a).
Foreign Resources:
Usefulness of the loan depends on the ratio of long term low
interest loan (15 to 20 years at 3-5%) and short term (3-5 years) high interest
at 17%.
Capital export ties in accumulation of international lending to
L.D.C’s to make them dependent on capital accumulation in D.C’s. It ensures
unconditional priority of private resources. Dean Acheson, “It would be
contrary to our policy to place government funds in competition with private
funds” (11).
Aid to Africa:
In 1980, Africa received $ 3,132 million worth of multilateral
aid. Capitalist aim is to bolster regimes which keep them dependent, reproduce
capitalist economic system and offer funds to uphold elites who maintain
archaic social systems. L.D.C’s are divided into spheres of influence.
Secretary of state Al Haig, “The new administration has redirected to specific
and vitally important objectives” (12).
Africa magazine, “US state department lists 60 primary
materials…to keep US economy functioning…imported from Africa” (13).
Uncompetitive industries like steel get support through foreign
aid (14).
Under PL 664, 50% aid was delivered by US vessels. US government
financed aid along the following channels; 16.4 % steel, 25% fertilizer, 15.7%
rail road, 8.5% textiles. Steven Weizman, “Aid also used to subsidize farm
products” (15)
“One $ into W.B generates $ 10 in contracts for the US
companies” (16).
Aid helped Britain save 54,000 jobs (17).
Among OPEC countries, Saudi Arabia is the biggest exporter of
capital; in 1982 it was $ 4482.00 millions. Western powers use foreign exchange
reserves of OPEC to fit them into credit financial system of capitalism. (17
a).
There is an Evil Triad- West technology, OPEC money and funds on
market terms.
Most economic aid takes the form of project aid. In 1982, 53.1%
of the aid helped giving countries expand their commodity exports.
Aid missions follow every stage of the project and put pressure
on local government to accept programs according to the former’s wishes.
Borrower’s creditworthiness is determined from the point of view
of donors.
Commercial profitability is the most important consideration.
Food and Agriculture aid:
In many African countries, the policy is to give precedence to
production for sale to food for consumption, a carry over from colonial times
to meet the needs of metropolis “(Sisal, coffee, cocoa, cotton,
tobacco, and wheat, not maize though). Import is suggested for local
consumption. Food aid is always small and leads to hunger, rural-urban divide,
rapid urbanization, Capitalist agrarian protectionism, which produce all the
machinery. (18).
LDC population growth is much faster (Pak, India, BD started
with 400 million in 1941, 70 years later it stands at 1620 million). They are
always falling behind as they do not have the means and the will for birth
control. (18 a).
Rural emigrants to cities can’t find jobs and that leads to
social conflict. Capitalists suffer from the crisis of overproduction (19). In
a world of hunger, US can apply its agricultural capacity as a lever to promote
policies beneficial to this nation. US PL 480 brought an acute agricultural
crisis; world prices went down. (19 a). Assistance to agricultural development
is related to the need for market of industrial farms.
Technical assistance accounts for most of the funds to L.D.C’s,
specialists, advisers and their families, salaries; all expense comes from aid
funds. Foreign private capital remains hostile to training LDC technical
cadres.
Debt Problem:
LDC debt increases along with outflow of resources. The theory offered is that
in 60-70 years internal accumulation in L.D.C’s will be such that they will be
able to pay the external debt. (19 b). It ignores the importance of foreign
markets. Rudolph Peterson “Debt…pressing problem, endangered imports…investment
and development. (20).
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