Development Cooperation in a Fractured Global Order.

A new and as yet fluid world order is in the making as we begin the transition to the 21st century. Profound changes in all aspects of human activity are challenging established habits of thought and forcing a reinterpretation of what is meant by progress and development. As a consequence, the concept and practice of international cooperation for development are under close scrutiny and are undergoing major transformations. Our times are the product of a particular set of historical processes that have unfolded over the last four centuries, which have witnessed the rise and worldwide spread of Western civilization. With the benefit of hindsight, it is possible to argue that what gave this period of human history its unique character was the articulation and implementation of what may be called the Baconian program, whose main architect was the philosopher Sir Francis Bacon, Lord Chancellor of the British Crown. Whereas the specific methodological and scientific contributions of Bacon have been the subject of debate, he was, during the early 17th century, the first to put forward a coherent view of how the power of modern science could be used to improve the human condition (Sagasti 1997b). The Baconian program has been defined in the following terms: “to aim knowledge at power over nature, and to utilize power over nature for the improvement of the human lot” (Jonas 1984, p. 140). Three key features distinguish this program from other views of the production and use of knowledge current in Bacon’s time: an awareness of the importance of appropriate research methods (scientific methodology), a clear vision of the purpose of the scientific enterprise (improving the human condition), and a practical understanding of the arrangements needed to put the program into practice (scientific institutions and state support). In later times, and particularly during the Enlightenment, the idea of indefinite, linear, and cumulative human progress would become the driving force of the Baconian program and give it a powerful and unique character that would allow it to withstand the test of time and endure until our days. Through the application of this idea, the human condition has improved in ways that Bacon and his contemporaries could hardly have imagined. The main engine that made the Baconian program run was a belief in the unending, linear, and steady advance of humanity — the idea of progress — which mobilized human energies during the 18th and 19th centuries. Beginning with the Hellenistic and Roman notions that knowledge can be acquired step by step through experience and through trial and error, the idea of progress has evolved over the whole history of Western civilization. Cyclic conceptions of the universe in which events repeat themselves over the course of a “great year” had to be overcome before embracing a belief in the open-ended and cumulative character of advances in human history (Bury 1960; Jaki 1974; Nisbet 1980). Faith in a divine design for the cosmos played a major role in the evolution of the idea of progress during the Middle Ages. The Renaissance added a revaluation of the individual and of human actions as a means to improve the human condition while the scientific and geographical discoveries of the 16th and 17th centuries laid the ground for a belief in the inevitability of progress through the accumulation of knowledge (Heller 1981). With the emergence and subsequent triumph of rationalism during the 17th, 18th, and 19th centuries, the idea of progress gradually lost its religious underpinnings. During the Enlightenment, it became a thoroughly secular idea, in which divine providence played a marginal role, if any. Progress acquired a distinctively social character and was seen as the almost inevitable result of human actions. Through the early 20th century, the general idea of progress would remain ingrained in Western minds as a positive driving force for improvements in the human condition, as the engine that made the Baconian program run. However, the events that took place during the first 40 years of what Eric Hobsbawm has called the “Short Twentieth Century” challenged our beliefs in any notion of continuous and indefinite human progress. “The decades from the outbreak of the First World War to the aftermath of the Second, was an Age of Catastrophe for [Western] society. For forty years it stumbled from one calamity to another.” This period stands in stark contrast to Hobsbawm’s “Long Nineteenth Century” (from the 1780s to 1914), “which seemed, and actually was, a period of almost unbroken material, intellectual and moral progress.” (Hobsbawm 1994, pp. 7, 13, his emphasis). The decades that saw the carnage of World War I, the emergence of communism, the rise of fascism, the Great Depression, the Holocaust, World War II, and the atomic bombing of Hiroshima and Nagasaki could hardly be considered conducive to harbouring and nurturing the idea of progress. With the waning belief in the inevitability of progress, the achievements of the Baconian age also began to be seen as suspect. Yet, the end of World War II changed the mood of gloom and despair of the “Age of Catastrophe.” The triumph of the Allied forces over the Axis brought to the victors a new sense of optimism, satisfaction, and euphoria. The belief that purposeful interventions could improve the human condition was thus reinstated, but with considerable help from the availability of new techniques for managing the economy, planning investments and production, and organizing large-scale enterprises. Wartime advances in science and technology also found many civilian uses and spilled over into the private sector. The Age of Catastrophe was left behind, and a renewed faith in human progress took hold.

The development-cooperation experiment

One key expression of the renewed belief in progress was the emergence of the concept of development, which can be considered the latest incarnation of the idea of progress within the framework of the Baconian program. The notion of development implicit in the various definitions offered at that time could be summarized in the following terms: to achieve in the span of one generation the material standards of living that the industrialized West achieved in three generations or more, but without incurring in the heavy social costs the West had to pay or inflict on others. Development was also supposed to guarantee a minimum level of material comfort to all human beings. Faith in the possibility of development was sustained and reinforced by the economic successes of the postwar decades. During the period from the late 1940s to the early 1970s, the world economy grew practically everywhere at an unprecedented pace. Jump-started by the financial resources, capital, consumer goods, and technical assistance offered under the Marshall Plan, European economies recovered and grew at nearly 5% a year. Led by Japan, the economies of Asia registered an average annual growth rate of 6%, and Eastern Europe grew at 4.7% a year; Latin America, at 5.3%; and even Africa, at 4.4%. As Angus Maddison put it, The years 1950 to 1973 were a golden age of unparalleled prosperity. World per capita GDP [gross domestic product] grew by 2.9 percent a year — more than three times as fast as in 1913–1950. World GDP rose 4.9 percent a year, and world exports 7 percent. The dynamism could be observed in all regions. In all of them, GDP per capita grew faster than in any other [period]. The acceleration was greatest in Europe and Asia. (Maddison 1995, p. 73) This “Golden Age” of world economic growth was also a period of considerable international generosity. Added to a variety of other motivations, linked to economic and political interests, this generosity helped to expand international cooperation. Following the success of the Marshall Plan to support the postwar economic recovery of Europe, the United States launched the Point IV Program to expand bilateral aid to developing countries in 1949 and created the Technical Cooperation Administration to implement the Point IV Program (CCSTG 1992; Foreign Affairs 1997). The development-cooperation experiment was launched, and for the next two and one-half decades resources to assist poor countries increased continuously, which led to the creation of a large array of bilateral and multilateral institutions to channel and administer these resources. However, right from the beginning, the onset of the Cold War hijacked the concept of development and the development-cooperation experiment, making them hostage to East-West rivalries. Two alternative ways of achieving development were put forward: one based on market economies and liberal democracy and the other based on central planning and a single-party system. In the decades that followed, each trumpeted its successes and sought to enlist the poor countries, many of which were emerging from decades or centuries of colonial rule in their camp. Developing countries became contested ground for trying one or another set of recipes to promote economic growth and improve living standards. Moreover, the East-West struggle became the lens through which practically all political, economic, and social events would be filtered and seen. The Golden Age came to an end in the early 1970s, and the world entered into what Hobsbawm called the “Crisis Decades,” which extended (although not uniformly) into the early 1990s: “The history of the twenty years after 1973 is that of a world which lost its bearings and slid into instability and crisis. And yet, until the 1980s it was not clear how irretrievably the foundations of the Golden Age had crumbled” (Hobsbawm 1994, p. 403). The sharp reductions in economic growth of the early and mid-1970s led to average rates of growth during the period of 1973–92 that, with the exception of the average growth rate in Asia, were substantively below those of the Golden Age. The slowdown was most noticeable in Eastern Europe and Africa, where the average rate of growth of gross domestic product (GDP) per capita was negative (−0.1% in each), and in Latin America, where the rate of economic growth barely exceeded that of population increases. The world average growth rate of GDP per capita during this period was 1.2%, in comparison with 2.9% for 1950–73. During the early 1980s, the debt crisis in a large number of developing countries threatened the international financial system, and in advanced economies, both unemployment and social discontent increased significantly. The reversal of the socioeconomic gains of the previous 25 years made the 1980s a “Lost Decade” for most developing regions, with the notable exception of Southeast Asia. The major upheavals experienced by the Soviet Union and Eastern Europe during the second half of the 1980s and the early 1990s led to precipitous declines in living standards in these countries, and in Western Europe the economic recovery of the late 1980s and early 1990s did not manage to reduce unemployment rates. Following a prolonged period of economic stagnation in the early 1990s, Japan was seriously affected by the collapse of East Asian currencies and stock markets in 1997. Income inequalities worsened everywhere (with the exception of some East Asian countries), and for the first time since the Great Depression, poor and homeless people became highly visible in several cities in advanced industrial nations. The concept of “social exclusion” emerged, first in France and later in the European Union, to account for the reemergence of social problems that were thought to have been solved decades earlier (Rodgers et al. 1995). The Crisis Decades that ended the Short Twentieth Century witnessed profound changes in all realms of human activity. We have seen the end of the Cold War, the spread of ethnic and religious violence, and the emergence of new international security concerns; the globalization of production and finance, the restructuring of international trade, and the transformation of productive and service activities; the disappearance of centrally planned economies and the worldwide expansion of capitalism (in many cases into areas that lack the supporting institutions for a functioning capitalist economy); and a host of social transformations, which include the demographic changes experienced by both rich and poor countries, the explosion of social demands in the developing regions, and the emergence of serious unemployment problems in both rich and poor nations. To these transformations, it is necessary to add the extraordinary advances in scientific research and the accelerating pace of technological innovation; the renewed interest in ethical and spiritual matters; the growing role played by religious concerns, ethnic allegiances, and cultural identity in domestic and international politics; the prominence acquired by concerns for the environment and the sustainable use of natural resources; and the challenges posed by the need to renew governance structures at all levels, from the local to the global. Such a bewildering and turbulent combination of changes and transformations, crystallizing in the emerging “fractured global order” (Sagasti 1989 a, b), has created deep unease and uncertainty, which Hobsbawm described: The Short Twentieth Century ended in problems, for which nobody had, or even claimed to have, solutions. As citizens of the fin-de-siècle tapped their way through the global fog that surrounded them, into the third millennium, all they knew for certain was that an era of history had ended. They knew very little else. … The century ended in a global disorder whose nature was unclear, and without an obvious mechanism for either ending it or keeping it under control. The reasons for this impotence lay not only in the genuine profundity and complexity of the world’s crisis, but also in the apparent failure of all programmes, old and new, for managing or improving the affairs of the human race. (Hobsbawm, 1994, pp., 558-559, 562, 563) The turbulence we are experiencing in the transition to a new century and a new millennium signals more than just the end of a Golden Age, of the Cold War, or of the Short Twentieth Century. It is an indication of the exhaustion of the Baconian program that organized and mobilized human endeavours for nearly four centuries and of the need to reassess the idea of progress that became its driving force. In this light, the concept of development can be seen as the latest, and possibly the last, attempt to reinterpret the idea of progress within the framework of the Baconian program. We are now beginning a transition to the post-Baconian age, whose main features cannot as yet be discerned. Because of the lags involved in reflecting on our experience and in transmitting what we learn to the next generation of leaders and policymakers, we run the risk of confronting the problems of the 21st century with the outmoded mindsets of the Short Twentieth Century. Most political authorities, business leaders, and policymakers acquired their knowledge and experience during the Cold War, some of them during the Golden Age of prosperity, and still others during the Crisis Decades. The Cold War disappeared with surprising swiftness; the Golden Age is long past; the Crisis Decades still bewilder us; and we are beginning a long and uncertain journey into the post-Baconian age. If we are to enter the 21st century with a minimum of surety and aplomb, we must assimilate the lessons of experience while unlearning the habits of thought that constrain our perceptions and limit our capacity to apprehend the new realities. Against this background, it can be seen that the development-cooperation experiment of the past 50 years took place at a very special time in history. It was also designed, organized, and carried out in ways that suited the spirit of those times, which are now gone. The Cold War provided a stark ideological backdrop to the experiment and helped justify allocating resources to it. An unprecedented period of world-trade growth and economic expansion made it easier to accommodate the development-assistance needs of the poor nations. The dominance of the economic and technological position of the United States, amply demonstrated through the success of the Marshall Plan, made the spread of the “American Way of Life” one of the implicit objectives of Western development assistance in its first decades. A sense of moral certitude, optimism, and generosity ensured ample public support for aid, first in the United States, and later in Europe and Japan. The Soviet Union and its allies also expanded development assistance, focusing on those developing countries closely aligned with their ideological point of view. Soviet aid was seen as another weapon in the fight against Western capitalism and took the form primarily of subsidized exports of oil and machinery, as well as purchases of primary commodities above world-market prices. In addition, massive fellowship programs were established in practically all academic fields for developing-country nationals within their sphere of influence. All of this was in addition to the extensive provision of military assistance, a practice also common in the West.

A changed context for development finance and international cooperation

Over time, the institutions, ideas, and practices of development cooperation evolved and experienced many transformations. However, as the 20th century draws to a close, a multiplicity of signals indicate that the development-cooperation experiment, as we knew it, is coming to an end. Western official development assistance (ODA) flows to developing countries, which are usually channeled through bilateral and multilateral development-assistance agencies, have lost ground in relation to direct foreign investment, portfolio flows to emerging stock markets, and commercial bank lending, even though these private flows concentrate mostly on a few countries. Private firms that rate the risks of investments in countries and corporations (Moody, Standard & Poor, Duff and Phelps) have acquired enormous influence in the economic affairs of developing countries, as their views steer the flow of private funds in one or another direction. With the end of the Cold War, development-assistance flows from the former Soviet Union and East European countries were abruptly cut, and developing countries that relied on Soviet aid found themselves in a very difficult situation. The problem was particularly acute for countries such as Cuba, which depended on the Soviet Union for subsidized oil to its supply energy needs. Development-assistance budgets have been cut in practically all donor countries at the same time as new tasks demand a growing share of a diminishing pool of public funds for international cooperation. Postconflict reconstruction, humanitarian relief, and assistance to refugees now compete with the support of democratic institutions, improvement of governance structures, assistance to transition economies, and efforts to fight drug traffic and crime. This has been squeezing out resources allocated to fields that once were the main focus of development assistance: health and population, food and nutrition, education and training, small and medium-size enterprises, technical assistance, and balance-of-payments support. Moreover, the poorest countries of Africa and Asia, which have relied primarily on concessional flows, have been most affected by reductions in foreign assistance budgets. By the mid-1990s, the United States had abdicated its traditional leading role in the field of development assistance. The US Congress refused to honour contribution pledges made by the Administration to the United Nations Development Programme (UNDP) and to the International Development Association (IDA) and also refused to pay its assessed contributions to the United Nations central and peacekeeping budgets. This made France, Japan, and other European countries the main contributors to development cooperation. However, after years of steady increases, at a time when other rich countries were slashing their cooperation budgets, Japan reduced its foreign aid by 10% in 1996. Even what were once called the “like-minded” countries, owing to their unwavering support for development assistance (Canada, Denmark, the Netherlands, Norway, and Sweden) have reduced the budgets they allocate for this purpose and have increased the conditions on access to these funds. Despite the setbacks experienced during the last decade by traditional bilateral and multilateral mechanisms for development cooperation, new possibilities are opening up for rich and poor countries to collaborate in some specific fields, such as environmental sustainability, the prevention of weapons proliferation, and the fight against drug traffic and international crime. At the same time, private sources of funds are becoming more important in a few aspects of development cooperation, such as building policy-research capabilities in transition economies, helping to fight diseases in the developing world, and removing antipersonnel mines. Nongovernmental organizations (NGOs) have acquired greater prominence and are providing international leadership in some specific fields, particularly in environmental conservation, social conditions, and human rights. In December 1997, the Parties to the United Nations Framework Convention on Climate Change approved the Kyoto Protocol, which seeks to limit, and even reduce, the emission of gases that contribute to global warming. The Kyoto Protocol establishes a “clean-development mechanism,” which is designed to assist developing countries, and this mechanism could eventually lead to the transfer of hundreds of millions of dollars a year from rich to poor countries. Although a lot of ground still needs to be covered to make this mechanism operational, there are early indications that developing countries can reap substantive benefits from the sale of unused emission rights if their forests can absorb greenhouse gases in amounts above their emission limits. On other fronts, concerns about the proliferation of nuclear weapons in the post-Cold War period have prompted some highly industrialized nuclear powers, particularly the United States, to offer financial and other incentives to developing countries to renounce the use and development of nuclear weapons. Financial and trade rewards have also been offered to drug-producing countries that collaborate with US and European efforts to curb the international drug trade. Private financial flows to developing countries, which include direct foreign investment and portfolio investments in emerging markets, have experienced major increases during the 1990s. They are now five times larger than official flows provided by government agencies and international organizations, in contrast to the situation prevailing in the mid-1980s, when they represented about 50% of total financial flows to developing countries. However, private financing is concentrated in a fairly small number of emerging and transition economies, while the vast majority of developing countries still depend on official aid for external financing. Grants provided by private foundations (Ford, Rockefeller, Pew, MacArthur, Carnegie Corporation, Tinker) remain a relatively small component of international development cooperation, but their impact is magnified because they focus on training, building local capabilities, and strengthening public and civil-society institutions. During the last decade, a few wealthy individuals have joined the ranks of private philanthropy, once the province of well-established foundations and religious organizations that focused primarily on humanitarian relief. The three most visible examples of this new breed of philanthropist are George Soros, who has contributed hundreds of millions of dollars to humanitarian organizations, human-rights activists, and policy-research centres in Eastern Europe; Ted Turner, who in late 1997 pledged $1 billion (US dollars throughout) to support the United Nations; and Bill Gates, who has recently established two foundations to donate hundreds of millions of dollars annually. They have also been joined by internationally known musicians and media personalities. A series of rock concerts broadcast on television in the early 1990s, linked to a phone-in campaign soliciting pledges from viewers, raised more funds to combat AIDS in Africa than did formal-pledging conferences organized under United Nations auspices. Toward the end of 1997, and in just a few weeks royalties from a compact disc issued in memory of Lady Diana generated more than $100 million in just a few weeks for campaigns to remove antipersonnel mines in war-torn countries. Countries until recently heralded as major successes of the development-cooperation experiment, such as the four Southeast Asian Tigers, experienced severe financial difficulties during 1997, which are likely to impair their growth prospects for several years. For example, 1 year after joining the rich-countries club of the Organisation for Economic Co-operation and Development (OECD), South Korea’s currency and stock market plunged more than 40%. From being the 11th largest economy in the world, the country slipped to 20th place in just a few months. After about 8 weeks of preparation and in less than 1 hour of discussion in early December 1997, the World Bank approved up to $10 billion in emergency loans to South Korea, more than it had loaned to that country in the previous three decades and about half the total annual lending volume of this multilateral financial institution. The economic and financial crises of 1997–99, which first hit several developing countries in East Asia, eventually affected economies in nearly all regions of the world, including the Russian Federation and Latin America. The overall crisis has had consequences that far transcend the world of financial markets; it has had a significant impact on the development efforts of countries such as Indonesia, where, in just a few weeks, the number of poor increased dramatically. Analysts initially explained the crisis on the basis of weaknesses in the financial systems and economic policies of individual developing countries like South Korea and Thailand, together with the close integration of global financial markets, as a result of which disturbances are rapidly transmitted beyond national borders. However, the serious global impact of the crisis has led a growing number of analysts to search beyond these factors for a systemic cause (Bezanson 1999). This in turn has shifted attention to the apparently inadequate role of multilateral institutions like the World Bank and the International Monetary Fund (IMF) in ensuring stability and promoting sustainable development (The South Letter 1998). Moreover, it has been observed that the East Asian crisis and its repercussions “have led to serious questioning of the relevance of the Washington Consensus as a standard development template and about whether a new development model or ‘paradigm’ is needed” (Bezanson 1999, p. 17). All of these changes suggest that the international context, the channels, and the mechanisms for cooperation between rich and poor countries and the structure of financial flows to developing regions are changing fundamentally in the transition to a new century, and it cannot be expected that the institutional arrangements designed and put in place four or five decades ago will continue to be effective in this new situation. In this sense, the development-cooperation experiment — as we knew it — is coming to an end. Yet, both enduring motivations and new rationales will give rise to new forms of cooperation, policies, and institutions more in tune with the spirit of the times.