We give Greening a green light on growth (well, amber, anyway…)

Agriculture, Gender

As the UK Secretary of State for International Development outlines plans for tackling poverty through growth, we welcome her focus on addressing land and gender injustices. 

Justine Greening has usefully highlighted DFID’s approach to economic growth and the role of business in international development. And we’re happy to see some key issues make her agenda. Critically, the issue of land rights

While highlighting the responsibilities of businesses operating in developing countries, Greening acknowledges that, “in most of the developing world, the people who occupy and farm land, don’t have any legal rights to it.”

In this context, Greening highlights the importance of DFID’s work to strengthen land rights.

Justine Greening

Greening also recognises the critical importance of women in growth and business. We agree, that: “investing in women is hugely powerful.”  The great twenty-first century challenge for economists and business leaders is how can we address the grave injustice of marginalisation and discrimination facing women in the developing world? The increased participation of women in western economies drove much of the great increases in productivity and growth last century. We must unlock the great economic potential of women in developing countries, so it’s encouraging to see
that Greening acknowledges the importance of gender issues in driving (the right kind of) economic growth.

Greening’s speech emphasises the great enthusiasm for economic growth sweeping through DFID and among aid chiefs across the world. On the one hand, it’s easy to be a cheerleader for growth, as Greening says:  “wherever long-term per capita growth has been higher than 3%, we have also seen significant falls in poverty.”  But we need to be vigilant in ensuring that we only support genuine pro-poor
growth, particularly when it’s focused on the grave injustices connected to gender and land.

Isn’t private sector focused aid the most effective?

If we need growth to end poverty and the private sector drives growth, isn’t aid most effective where it focuses on the private sector? Well, not necessarily. And a recent report from Canada sheds light on why.

The Canadian Council for International Co-operation and the think-tank the North South Institute have assessed the policies of donors towards promoting growth and the private sector. They break down (very adeptly) what the OECD donors are doing, how they’re thinking about the private sector and where they are falling short. It’s not only a sorely needed assessment of the rise and rise of private sector focused aid, it also reminds us that aid is increasingly promoting a
very specific economic model (thou name is neo-liberal capitalism) with some questionable assumptions that should attract serious scrutiny.

You can read the report here but here are some highlights (quite timely given Greening’s speech), along with a few thoughts from me.

Just feed the growth machine

Donors are focused on plain old growth. They don’t have a meaningful approach to improving the distribution or pro-poor impacts and too often merely pay lip-service to issues to do with the quality of growth. They’re not linking possible interventions – such as support to government capacity to protect labour rights, effectively collect taxes and redistribute the benefits of growth – with their private sector programmes. In addressing gender, too often they simply focus on getting women into markets, ignoring the social and political drivers of gender inequality. And direct
support to the poorest and most marginalised is falling out of favour.

Just feeding the growth machine doesn’t automatically mean the poor will benefit.

While the donors may differ on their rhetoric (some are good at sprinkling in buzz words like “inclusive” and “sustainable” when discussing growth), their private sector work ends up looking eerily similar. French and Belgian aid goes furthest in prioritising equality and accompanying growth with social services. However, for most donors, private sector programmes are effectively stand-alone growth feeders. The report reminds us that sustained growth in many developing countries (particularly in Africa) has failed to put a dent in unemployment. Growth driven by
extractives is one such example that’s cited. So, just feeding the growth machine doesn’t automatically mean the poor will benefit.

Can aid really drive growth?

The report finds that donor’s focus on interventions at the macro (e.g. business enabling environment and international CSR support) and meso (e.g. public-private partnerships and financing investments) levels. However, it’s the micro-level programmes (e.g. training women farmers) that: “have a much larger redistributive impact for poor and marginalised populations.”

But can aid money really be a (meaningful) driver of growth? Why not focus on helping the most marginalised, rather than obsess over catalysing broader economic growth?

Win-win-win-win… always

Public-private partnerships (PPPs) are the new black. For OECD DAC members, it has gone up from US$234m in 2007 to US$903m in 2010. Donor strategies suggest they represent wins for everyone: recipient governments, business, donors and NGOs. But donors seem to ignore the complexity of interests and agendas among those involved in PPPs. The pitfalls and inefficiencies are scarcely mentioned and the politics of the PPP negotiating process is swept under the rug. This, I suspect, comes from an ideological underpinning to private sector
strategies, that business interests align with development interests. Donors need to be reminded that this is only sometimes the case.

Crony capitalism?

Donors are looking to include their national firms in their private sector strategies. For example, Australia’s Mining for Development programme (AU$127m) partners with Australia’s mining giants on a range of projects in developing countries. Denmark’s Business Partnerships programme and the UK’s Food Retail Industry Challenge Fund
 (FRICH) are only open to national firms. 

“Donors sometimes favour their own commercial interests to the detriment of developing countries’ domestic policies for development.”

This all seems dangerously like a veiled attempt to subsidise the foreign investment and CSR strategies of national companies – as long as some development story can come about. And isn’t this neo-tied-aid?  In the report’s own words: “Donors sometimes favour their own commercial interests to the detriment of developing countries’ domestic policies for development.” 

Without more transparency around decision-making and a clear results framework for private sector partnerships (the report finds this is sorely lacking), we are left to interpret decisions and priorities as cynically as we’d like (I bags the cynical view). 

I should note here that in her speech, Greening made explicit criticism of tied-aid, but she did also highlight the positives of the FRICH (seemingly an example of tied-aid). So it remains to be seen whether Greening will really target tied aid.

The Canadian report makes myriad sensible recommendations, including the need to support democratic ownership of the growth agenda and ensure additionality in private sector development programmes (ensuring that an investment, CSR approach or any job-creation wouldn’t have happened anyway without the programme). But what comes flying off the page is the need to question fundamental assumptions about growth and aid. 

Some questions that I’m left with are:

  • What type of growth should donors be promoting? 
  • Can aid really drive growth?
  • Are aid bureaucrats equipped to do business with business (e.g. through partnerships and PPPs)?
  • Why doesn’t aid focus on building the rights and power of the most marginalised?

Notwithstanding these crucial questions, we welcome Greening’s approach particularly if she sticks to her promises on land and women’s rights. What do you think?

Share your views below

Author: Erinch Sahan
Archive blog. Originally posted on Oxfam Policy & Practice.