Documento(s) 3 de 11

The development experience: concepts andinsights
Four decades of institutional arrangements for development cooperation
Concluding remarks

This chapter reviews the evolution of ideas since the late 1940s on how to bring about development and reviews how these ideas led to a rather complex set of institutional arrangements for development cooperation. The discussion focuses on development cooperation provided by the Western countries, primarily because the assistance provided by the former Soviet Union and its allies did not reach the level of institutional and conceptual elaboration that development cooperation attained in the West. In addition to providing military assistance and armaments (which were also provided by the West), East-block countries exchanged oil and manufactured goods at subsidized prices for primary commodities, such as sugar and minerals, as well as providing fellowships and arranging training programs for nationals of developing countries of strategic importance. Moreover, in a stunning reversal, countries once part of the former Soviet Union and its allies became recipients of Western development assistance during the 1990s.

The development experience: concepts and insights

Ideas on how to bring about development and how to organize development cooperation have changed and evolved during the last half century (Meier and Seers 1984; Montoliu-Muñoz 1990; Cowen and Shelton 1996). For example, at different times between the late 1940s and the early 1970s, development thinking and practice were based on concepts such as the need for a “big push” of investment and capital to initiate self-sustaining economic growth, as advocated by Paul Rosenstein-Rodin and Ragnar Nurkse; the priority of investments in human capital, whose main proponents were Theodore Schultz and Hans Singer; the importance of fostering import-substitution industrialization and exploiting backward and forward linkages, which were argued for by Raul Prebisch and Albert Hirschman, respectively; and Walt W. Rostow’s imperative of advancing through a well-established sequence of stages that lead to a take-off into self-sustained growth (Rostow 1971).¹

Over time, notions such as “unlimited supply of labour” (Arthur Lewis), “deterioration of the terms of trade” (Hans Singer, Raul Prebisch), “poles of development” (Francois Perroux), “development planning” (P. Mahalanobis, Jan Timbergen), “circular cumulative causation” (Gunnar Myrdal), “unbalanced growth” (Albert Hirschman), “dependency theory” (Fernando Henrique Cardoso, Osvaldo Sunkel), “structural underdevelopment” (Celso Furtado), “unequal exchange” (Aghiri Emmanuel), “redistribution with growth” (Hollis Chennery), “basic needs” (Hans Singer, Paul Streeten, Richard Jolly, Manfred Max Neef), “export-oriented industrialization” (Ann Kruger, T.N. Srinivasan), “small is beautiful” (E.F. Schumacher), “another development” (Marc Nerfin), “ecodevelopment” (Ignacy Sachs, Maurice Strong), among many others, were used to interpret the reality of developing countries and to offer policy recommendations.

In addition, some religious groups, most notably the Roman Catholic Church, had a significant influence in development thinking. For example, during the 1950s and 1960s, Father Louis-Joseph Lebret, a French priest who worked extensively with developing countries, put forward the idea of developing a “humane economy” based on the concept of solidarity, and this idea greatly influenced the development of Social Christian political thought. Similarly, during the 1960s and 1970s, the views put forward by Peruvian priest Gustavo Gutiérrez on “liberation theology” focused on the need to eradicate poverty and provided an ethical and moral underpinning to many grass-roots development efforts in Latin America and elsewhere in the developing world.

Several schools of thought emerged during the last five decades to organize these ideas. Even though these schools competed with each other, at any given time a dominant view of how to bring about development prevailed in most development-cooperation agencies and international financial institutions. The promotion of investment and project planning held sway in the 1950s; growth-oriented “trickle-down” and import-substitution strategies were prevalent in the 1960s; and basic needs and redistribution with growth became the key ideas of the 1970s. During the Crisis Decades, when structural adjustment policies dominated the scene, development thinking and practice appeared to be in disarray. This prompted calls for a major overhaul and renewal of development theory and policies, as well as leading to spirited debates on the future of development economics as a profession (Sen 1983).

One of the recurrent themes in the evolution of the idea of development is the tension between the diversity of situations in developing countries and the use of standard models and theories to interpret these situations and to give policy advice. During the past two decades, the recognition of the growing heterogeneity of the developing world — one of the main features of emerging global order — has shifted the balance in the direction of paying more attention to diversity and the variety of development experiences.

The preoccupation with diversity in development thinking and practice has taken many forms over time and encompasses a wide range of contributions. For example, Albert Hirschman has been one of the leading figures in the development scene and has insisted on the diverse character of economic experience across countries, across time, and even across individuals. This insight led him to resist the temptation to apply reductionist theories and uniform prescriptions to developing countries (Rothschild 1995). Amartya Sen’s inquiry into the meanings of equality and inequality starts by acknowledging the empirical fact of pervasive human diversity, and he proceeds to develop a framework with concepts such as functionings, capabilities, and effective freedom that allows him to incorporate ethical considerations when examining the different types of inequality embedded in social arrangements (Sen 1992, p. xi).²

The concern about ignoring the diversity of specific situations and basing policy prescriptions on the prevailing conventional wisdom was clearly articulated by Jacques Lesourne nearly a decade ago in his concluding remarks at a symposium to celebrate the 25th Anniversary of the OECD Development Centre:

We ... have to be wary of the latest fads in the development field. They are frequently transformed into simplistic and extremist ideologies which often cruelly mark the life of nations. The current welcome emphasis on markets is no reason for disregarding their shortcomings, and highlighting the weakness of the State as a producer must not lead us to overlook the contributions government policies have made to development in certain countries. Conversely, the failure of many attempts to foist doctrinaire socialism irrespective of realities on societies with their own long-standing structures must be acknowledged. There is not just one possible development model, although this does not mean that all models can work.

(Lesourne 1989, p. 298)

At another level, the “case-by-case” and “country-focus” approaches adopted by international financial institutions during the second half of the 1980s, most notably the World Bank, can be seen as attempts to cope with diversity within the framework of their mandates. These approaches can also be considered a response to the criticism that international financial institutions and, to a lesser extent, bilateral cooperation agencies provide the same standardized policy advice to developing countries facing very different situations and impose an inflexible and rigid set of conditions on obtaining access to their resources and those of other financing agents. The policies advocated by the IMF to cope with the 1997–98 collapse of currencies and stock markets in several East Asian countries, which critics have considered inappropriate (Feldstein 1998), have revived the debates on the question of whether international financial institutions are oblivious to the differences between country situations and between the situation at different times in the same country.

Parallel to the development community’s growing preoccupation with diversity, the search has continued for conceptual frameworks that can accommodate widely diverse situations while helping to identify common features and allowing us to learn from the mistakes and successes of others. As a consequence, during the last decade, a more eclectic and flexible set of ideas on how to bring about improvements in living standards has been gaining ground. For example, rather than viewing concepts such as state intervention and market forces as opposites or treating structural adjustment and human development as irreconcilable, these new ideas focus on how such concepts and approaches might complement each other, and these new ideas have led to such conceptions as “market-friendly strategies,” put forward by the World Bank (1991), and “adjustment with a human face,” advocated by the United Nations Children’s Fund (UNICEF) (Cornia et al. 1987). Perhaps one of the best expressions of this synthesis of concepts and experience is the World Bank’s World Development Report 1991: The Challenge of Development, prepared under the direction of Vinod Thomas and supervised by Stanley Fischer (World Bank 1991). This report was rather unusual for the World Bank series of annual reports on development because, instead of focusing on a single topic — such as health, poverty, infrastructure, environment, labour markets, or transition economies — it provided an overview of the development experience of several decades and outlined the challenges of the future. World Development Report 1997, which focused on the new role of the State in economic development, also argued for a more eclectic approach to designing development strategies and policies (World Bank, 1997d).

During the last 15 years, development thinking and practice have placed greater emphasis on the institutional and social aspects of development, including poverty reduction, building capable states, good governance, and conflict prevention and resolution. In particular, Ralph Dahrendorf’s concept of “vital opportunities” (Dahrendorf 1983) and Amartya Sen’s criticisms of utility theory, which led Sen to introduce the concepts of “functionings,” “capabilities,” and “entitlements” (Sen 1992, 1984; Nussbaum and Sen 1993), constitute the most promising avenues for the renewal of ideas about development and how to bring it about.

The concept of “sustainable human development,” put forward by the UNDP, is a recent addition to the evolving set of ideas about development. It attempts to integrate economic growth, social development, and environmental sustainability within the same framework (Speth 1994). Sustainable human development aims at providing all individuals, both now and in the future, with equal opportunities to enlarge their human capabilities to the fullest possible extent and to put those capabilities to the best use in political, economic, social, environmental, and cultural fields. As such, it can be considered more as a statement of aspirations than an operational concept.

Considering such a rich and evolving array of concepts and ideas, what has been the result of five decades of attempts to promote development? Not surprisingly, the development efforts of the past five decades have been neither a great success nor a dismal failure. On the positive side, a handful of low-income countries, particularly in East Asia, have in one generation achieved the standards of living of the industrialized nations; life expectancy and educational levels have increased in most developing countries; and income per capita has doubled in countries like Brazil, China, South Korea, and Turkey in less than a third of the time it took to do so in the United Kingdom or the United States a century or more earlier.

On the negative side, poverty has increased throughout the world; income disparities between rich and poor nations and between the rich and the poor in both developed and developing countries have become more pronounced; the environment has been subjected to severe stress, both in developing countries that have remained poor and in those that industrialized rapidly; and social demands have grown many times over throughout the developing world (World Bank 1991; UNDP 1994b).

The extent to which development assistance — which includes grants, long-term loans at below-market rates, technical cooperation, and food donations — was responsible for the successes or contributed to the failures has been the subject of considerable debate (Bauer 1984; Hancock 1989; Cassen 1994; Griffin and McKinley 1994; DAC 1995b). Considering the high expectations of the late 1940s and 1950s (particularly after the resounding success of the Marshall Plan) and the actual results several decades later, it may be appropriate to state that the results of the development-cooperation experiment have been inconclusive. It worked in some places at some times (and in a few instances, where it was not expected to do so!), but it certainly did not lead to the worldwide levels of prosperity envisaged five decades ago.

Both successes and failures provide valuable insights on how to accelerate economic growth and improve social conditions (Bezanson and Sagasti 1995). We have learned, for example, that environmental considerations must be adequately integrated into the design of development strategies and policies so as to ensure that improvements in living standards achieved by the current generation do not limit the opportunities of future generations. Remedial actions have proven rather costly and often ineffective.

We have also learned that the capacity to acquire, generate, and use knowledge in all its forms — including the recovery and upgrading of traditional knowledge — has been one of the most important factors in the improvement of material standards of living. This is consistent with the view that development is a reinterpretation of progress within the framework of the Baconian program, which emphasizes the key role that scientific and technological knowledge plays in improving the human condition. The experience of the handful of developing countries whose incomes and living standards have reached those of the rich nations indicates that major investments in education, research, technology acquisition, and scientific and technological services — which allowed these developing countries to bridge the knowledge divide between rich and poor nations — have all played a crucial role in their success (Sagasti 1997a, b; World Bank 1998).

Perhaps one of the most important insights we have acquired during five decades of development efforts is the recognition of the importance of institutional factors. Institutions comprise patterns of behaviour, long-standing social relations, organizations, and formal rules and regulations, all of which give structure to the fabric of society, allow its members to develop shared purposes and commitments, provide the basis for more cooperative behaviour, and create the stability and predictability needed for effective human actions (North 1990; Putnam 1993; Stiglitz 1995; Eggertsson 1997). We have also found, especially since the fall of the Berlin Wall, that institutions stand a better chance of responding adequately to the growing and rapidly changing demands of the increasing interdependence of nations and economies in our times if the institutions are flexible, participatory, decentralized, pluralistic, and capable of accommodating a diversity of views and perspectives.

In the political realm, the institutions associated with democratic governance have proven most effective in channeling and processing a wide variety of social demands toward the centres of power, primarily through mediating institutions, such as political parties. A well-functioning democracy also allows for orderly changes in the exercise of political power, through periodic elections, and prevents the excessive concentration of power, by establishing checks and balances. These characteristics have also made democratic governance a powerful force for maintaining peace and preventing deadly conflicts (CCPDC 1997).

In the economic realm, the institutions associated with markets and competition have proven most effective in promoting economic growth and improving performance in many fields of human activity. However, societies that can strike a balance between competitive pressures, on the one hand, and considerations of trust and solidarity and concerns for the disadvantaged, on the other, are likely to be more effective in improving living standards and avoiding social exclusion. There is a strong interaction between effective governance, economic growth, and active networks of civic and social engagement, all of which combine to reduce the likelihood of the “nothing-left-to-lose” syndrome that may drive some social groups toward violent actions (Sagasti 1998).

At the same time, most of the serious problems and challenges that development now faces — for example, limiting environmental degradation, maintaining economic stability, reducing poverty, and preventing deadly conflicts — no longer have purely local or national solutions. Preserving peace, improving living standards, and creating of opportunities for all increasingly depend on cross-border exchanges of goods, services, knowledge, and information. This makes it necessary to focus more attention on the critical role that regional and international institutions of all types play in the development process.

During the last few years, particularly since the end of the Cold War, we have also realized that for most of the past five decades culture, religion, and ethnic allegiances were all but ignored in development thinking and practice. Yet, beyond meeting survival needs, most of humanity is driven by ethical and spiritual motives. Values and nonmaterial aspects of human activities play a most important role in development efforts, especially in the prevention of violent conflict. But cultural identities, ethnic loyalties, spiritual concerns, religious allegiances, and ethical principles may conflict with each other (Ryan 1995). This highlights the importance of tolerance as a precondition for the incorporation of other values and nonmaterial considerations into the idea of development. The paradoxical lesson is that in order to accept the diversity of value systems, it is essential to first recognize the primacy of certain universal values, such as tolerance, respect for the views of others, and freedom to express dissent.

These insights have focused our attention on the need for developing broader perspectives on the process of development and to acknowledge its inherent complexity. Economic, social, political, cultural, and psychological perspectives must all be considered and integrated in any attempt to improve the human condition, specifically in the attempt to prevent deadly conflict.

Four decades of institutional arrangements for development cooperation

As mentioned in the introductory chapter, the development-cooperation experiment of the past 50 years took place at a very special time in history. The first decades of the development-cooperation experiment, which covered the Golden Age of world economic growth, were characterized by efforts to “modernize” what were considered “backward” societies and coincided with a widespread belief in the effectiveness of government interventions and planning as ways to ensure the rational allocation of resources.³ Modern science and technology were almost without exception seen positively as the means of improving living standards and the quality of life, whereas little or no attention was paid to the negative impact of economic growth on the environment. Traditional values and religious beliefs were largely seen as a hindrance to modernity and economic rationality. The development cooperation experiment was a thoroughly secular enterprise, notwithstanding the active participation of churches and religious organizations in some of its aspects, such as offering views on the nature of development and organizing humanitarian relief and assistance to the poorest countries. The United Nations Universal Declaration of Human Rights, adopted in 1947, provided practically all the ethical guidance required.

The Marshall Plan was designed and carried out during the late 1940s and early 1950s to assist European countries in the reconstruction of their war-shattered economies. Its successful implementation inspired a belief in the effectiveness of foreign-aid programs and gave a major boost to the development-cooperation experiment. In a display of exceptionally enlightened self-interest (Jenkins 1997), the United States injected, between 1947 and 1951, the 1997 equivalent of $88 billion in balance-of-payments support, financial assistance, and soft loans to most countries in Western Europe, as well as providing technical assistance and access to US managerial and manufacturing know-how. Although the immediate objective of the plan was, as George C. Marshall stated in his famous 1947 Harvard address, to fight “hunger, poverty, desperation and chaos” (Marshall 1947), the longer term aim was to lay the foundations for financial recovery, economic growth, political stability, and military security in the face of a Soviet threat. The Marshall Plan, which Winston Churchill once referred to as “the most unsordid act in Western history,” has also been linked to the subsequent surge in world trade during the 1950s and 1960s, to the drive toward European integration, and to global economic stability (Rostow 1997).

Fifty years after the Marshall Plan was launched, several of its key features still make it highly regarded as a model for development-assistance programs. These include the cooperative and multilateral nature of the plan, which involves both donor and recipients in its design and implementation; the incorporation of a training program for European businesspeople, which transfers valuable know-how to the private sector; and the clear link between the provision of balance-of-payments support, on the one hand, and monetary discipline and trade liberalization, on the other. The limited and temporary nature of the plan has also been highlighted as a desirable feature, as it has been considered “the model of what a foreign aid program ought to be. It ended ahead of schedule and under budget, the last significant program of its kind to do that” (Holt 1997, p. 7).

However, it is also clear that the Marshall Plan’s success owed much to the specific historical and geographical context in which it was carried out, because it involved the industrial reconstruction of countries that had decades or even centuries of manufacturing experience, a well-educated labour force, the well-developed institutional structures needed to support a modern economy, and high living standards before World War II. The Marshall Plan was a historically unique experience and probably cannot be exactly replicated in developing regions today (Gordon 1977; Hoagland 1997). Indeed, the various calls during the last decades for “a Marshall Plan” to address a specific development problem can only be understood in the most general sense as appeals to the enlightened self-interest of rich countries, attempts to mobilize political will, and efforts to promote an allocation of resources commensurate with the task at hand.

Between the late 1940s and the early 1960s, development assistance was almost exclusively bilateral. In addition to helping European reconstruction through the Marshall Plan, the United States took the lead in promoting economic growth in developing countries through the Point IV Program, articulated by President Truman (CCSTG 1992). Strategic and security interests, linked to the containment of communism during the Cold War, provided the main motivation for engaging in international cooperation for development. The United States also had a reasonably strong capacity to design and implement reconstruction and development-assistance programs, particularly following the Foreign Assistance Act of 1961, which created the United States Agency for International Development (USAID). The United States accounted for more than 50% of total ODA during the 1950s and for about 45% in the early 1960s, out of which more than 85% was provided through bilateral channels, by USAID in particular.

A common practice of bilateral assistance, especially during the early years of the development-cooperation experiment, was to tie aid to the donor country’s provision of goods and services. The reasoning was that tying aid would allow donor countries to build greater political support for development assistance while at the same time reducing their financial burden. However, tied purchases of goods and services usually led to the recipient country paying a higher price and thus to a reduction in the value of bilateral aid. Similar considerations apply to the provision of technical assistance and consultant services.

There were only four major multilateral institutions responsible for concessional aid through the early 1960s: IDA, attached to the World Bank and created in 1960; the Fund for Special Operations of the Inter-American Development Bank (IDB), which was established in 1959; the cooperation fund of the European Economic Community (EEC), created in 1959; and the UNDP, which was organized in 1965 through the merger of several United Nations financial facilities, including the Special Fund and the Expanded Program of Technical Assistance. The contribution of these four institutions to total ODA was less than 10%, and decision-making in most of these multilateral agencies was dominated by the United States. The concessional windows of international financial institutions complemented their regular lending programs and provided resources to borrowers at very low interests rates, with loans to be repaid over 30 to 40 years. Growth-oriented trickle-down conceptions of development prevailed in this period, and financial and technical assistance tended to concentrate on large physical-infrastructure projects that served the bilateral economic interests of major donors, generally through the involvement of private corporations in procurement.

The period from the mid-1960s to the mid-1970s saw a rapid growth in multilateral concessional development assistance. The Pearson Report, published in 1969, indicated that in the mid-1960s bilateral aid accounted for almost 90% of ODA to developing countries, and the report argued that it was necessary to strengthen multilateral channels (which at the time were perceived to be more efficient and less politicized) (Pearson Report 1969). Multilateral assistance expanded faster than bilateral aid, and its share in total development assistance grew to nearly 25% in the mid-1970s, even without counting the funds the EEC provided. Multilateral concessional aid also began to diversify, with the creation of several new mechanisms to provide low-interest loans and grants to developing-country borrowers, including the African Development Fund, attached to the African Development Bank (AfDB); the Asian Development Fund (AsDF), attached to the Asian Development Bank (AsDB); and the development funds of the Arab-Organization of Petroleum Exporting Countries (OPEC). All these institutions were established in the early and mid-1970s. Complementing the range of multilateral development-assistance programs and institutions were the regional initiatives, such as the Regional Program for Scientific and Technological Development of the Organization of American States and the Colombo Plan, through which several bilateral donors provided support for education in South and East Asian countries.

NGOs played a limited role in channeling the assistance provided by religious groups and private foundations in the early years of the development experiment but became more visible and active during the 1960s and 1970s in both donor and recipient countries. As a growing number of donor-country NGOs began to play the role of aid intermediaries, a symbiosis evolved between the NGOs and the bilateral development-assistance agencies providing the funding. NGOs were often very helpful in this period in reaching small groups of beneficiaries difficult for government agencies and multilateral institutions to reach, but in many cases they increased the cost of delivering assistance; they became excessively dependent on resources provided by official agencies; and they generated frictions with government agencies, local organizations, and grass-roots groups in the recipient countries. Multilateral institutions remained largely aloof from NGOs and would only begin to work with them in the late 1980s.

A major reorientation of aid philosophy toward the perceived common global problems — poverty alleviation, urban development, and basic human needs — also contributed significantly to strengthening donor support for multilateral initiatives. During the 1970s, total multilateral concessional assistance expanded by a factor of 6.5 in nominal terms; concessional flows through IDA increased nearly sevenfold; flows through EEC and the United Nations system increased about five times each; and concessional resources channeled through the regional development banks (comprising the funds for special operations of the AfDB, AsDB, and IDB) almost tripled. This expansion occurred for three reasons.

First, the United States became more interested in multilateral initiatives, particularly as the capacity of its aid-delivery organizations began to reach its limits. The growing demands of an increasing number of developing countries, following the process of decolonization, together with the shift from reconstruction of war-torn economies to more complex development programs, made it more difficult for the United States to respond adequately on its own to these demands. In addition, under provisions of the 1973 “New Directions” amendment to the Foreign Assistance Act, resources for development assistance were reoriented toward issues such as poverty alleviation, basic human needs, and agricultural and rural development, which were common to many developing countries and could be better addressed through multilateral initiatives.

As a result, between the mid-1960s and the mid-1970s, the US share in multilateral development assistance more than doubled to 30%. A concern with “burden-sharing” between donors emerged. Moreover, with the expansion of the postwar world economy, other industrialized countries became interested in development assistance as a way to maintain international political and economic stability. This led to the widespread use of matching-funds arrangements for multilateral concessional assistance, in which each donor pledged to cover a predetermined proportion of the total cost of a program.

Second, Canada, the Netherlands, and the Nordic countries (Denmark, Finland, Norway, and Sweden) responded quite vigorously to the United States’ appeal for burden-sharing and gave high priority to multilateral channels. The aggregate share of these six countries in total ODA increased from 2.7% in 1960/61 to 10.4% in 1975/76, whereas the US share decreased from 46.3 to 21.2%. This was due in part to the strong domestic constituencies these non-US countries had to support poverty alleviation in the developing regions and the disproportionately large size of their assistance in relation to the technical and administrative capacities of their aid agencies. (The ratios of ODA to gross national product [GNP] of the Nordic countries have been exceptionally higher [at around 1.0%] than the average of 0.35% for all donors.) As well, these countries actively promoted the idea that aid should be provided through mechanisms that involve the participation of both donors and recipients. As a consequence, these countries tended to allocate significant resources for development assistance through multilateral institutions, particularly through the agencies of the United Nations system, such as UNDP.

The third reason was that multilateral development-cooperation institutions significantly improved their administrative and technical capacities and were thus able to attract strong support from bilateral donors. Particularly notable were the major changes brought about in the World Bank under the McNamara presidency (1968–81), including a significant reorientation toward antipoverty projects, the creation of entirely new units to address poverty-related problems, and the strengthening of the World Bank’s research capacity. The UNDP also expanded its in-house technical and administrative capabilities, particularly during Bradford Morse’s term as UNDP Administrator, and built a strong network of resident representatives in most developing countries.

However, even as official aid began to shift from bilateral to multilateral channels, which were presumably less politicized, several critics did not see multilateral organizations as any less likely to pursue the political and commercial interests of rich donor countries than the well-being of the poor in the developing regions (see Chapter 5). Hidden motivations were suspected behind the policies of major institutions like the World Bank, IMF, USAID, and other development-assistance agencies, which critics saw as engaging in a conspiracy to preserve an unjust international economic system (Hayter 1971; Hensman 1971). Other authors saw increasing multilateral-aid flows as disguised bilateral transfers, with harmful effects less obvious but no less real than those of bilateral aid (Goulet and Hudson 1971).

Following this rapid rise through the mid-1970s, the share of multilateral channels in total development assistance stabilized at about 28–30% during the 1980s (including contributions to the EEC). However, this stability concealed a trend toward “bilateralism in multilateral aid,” which became evident as the international context for development assistance began to change. The dominant position of the United States weakened significantly in the second half of the 1980s as its share of total ODA declined to about 18% and its share of multilateral concessional aid declined to about 16%. This reduction coincided with a shift toward greater emphasis on bilateral security and political interests in the provision of aid, in contrast to the priority awarded to multilateral initiatives a decade earlier. For example, the security-oriented Economic Support Fund, which provides assistance to countries of strategic interest to the United States, grew faster than other types of development assistance and accounted for about 50% of total United States bilateral aid in the late 1980s, with 90% of its funds earmarked for five countries (Egypt, El Salvador, Israel, Pakistan, and the Philippines).

All through the 1960s and 1970s, Japan was among the top five donor countries, but during the 1980s its development-assistance program expanded rapidly and shifted from rather narrow bilateral economic interests, such as promoting exports and investments in the Asian region, to broader multilateral considerations related to international economic and political stability. Japan’s increasingly important role in the world economy, added to the relative weakness of its development-assistance organizations, led to a growing reliance on multilateral institutions to channel Japanese aid. This took the form of greater participation in multilateral concessional assistance funds, such as IDA at the World Bank and AsDF at the AsDB, cofinancing arrangements, and trust funds of international financial institutions. These initiatives allowed Japan to exert greater influence on the policies and practices of these organizations, maintain a separate identity for its aid funds, and pursue a policy of “moderate bilateralism” in multilateral assistance.

European donors also expanded their participation in multilateral channels for concessional development assistance during the 1980s, particularly through the European Community. Nevertheless, with the exception of the Nordic countries and the Netherlands, European donors continued to rely on their long-standing bilateral-aid arrangements — or on regional funds administered by the European Community (such as the European Development Fund linked to the Lomé Convention) — rather than on United Nations agencies or on international financial institutions, for channeling their aid.

Following the international debt crisis triggered in 1982 by the Mexican default of its commercial loans, the role of multilateral development finance changed significantly. The IMF established the Structural Adjustment Facility and the Enhanced Structural Adjustment Facility (ESAF), and the World Bank launched Structural Adjustment Lending. This helped many developing countries to weather their liquidity and insolvency crises during the 1980s, but at the price of adopting painful economic-adjustment policies. The “disciplinary functions” of these institutions increased with the growing importance of highly conditioned lending, and having an agreement with the IMF became a condition not only on loans and concessional assistance from multilateral institutions but also on cofinancing from bilateral donors and loans from commercial banks. The Special Program of Assistance to Low-Income Debt Distressed Countries in Sub-Saharan Africa, launched in 1988, provided a clear example of the increasing reliance of bilateral donors on multilateral institutions. A Policy Framework Paper, drawn primarily by the IMF and the World Bank (in consultation with government authorities), became a prerequisite for mobilizing large amounts of bilateral funds from donor countries.

The structural adjustment programs designed by the World Bank for a number of Sub-Saharan countries have been particularly controversial examples of the disciplinary functions exercised by multilateral institutions in the 1980s and 1990s. Although these mostly very poor nations made dramatic liberal reforms, their economies have nevertheless shown “exceptionally poor performance” (Mkandawire and Soludo 1999, p. 81). This conclusion applies not only to indicators of economic growth but also to the fight against poverty. The World Bank itself has tended to blame this poor economic and social performance on the African governments’ poor implementation or the bank’s ineffective imposition of its conditionality, rather than looking at flaws in the model behind the design of the adjustment programs. It has been argued that although it is easy for the multilateral organizations to impose this type of external conditionality on the poorest countries, as they have few alternatives for development financing, it is unlikely to work. Rather, what is needed is more indigenous “ownership” of policies, along with local approaches to development work, rather than having governments — and societies — carrying out programs they do not believe in and have never participated in designing (Helleiner 1997).

In short, from the late 1940s to the late 1980s — a period that spanned Hobsbawm’s Golden Age and most of the Crisis Decades — development-assistance organizations grew in number, size, and complexity, and their mandates shifted and evolved to accommodate changing circumstances. New institutions, programs, funding mechanisms, and procedures were created in most developed countries to assist developing nations. The World Bank significantly expanded its regular lending program, using resources obtained from international capital markets; established the IDA as a soft-loan window, with contributions from donor countries; and created an affiliate to provide financing to the private sector. New multilateral development banks were created at the regional level; specialized institutions served the needs of Africa, Asia, and Latin America; and other institutions, such as the European Investment Bank and the Islamic Development Bank, focused on narrower constituencies.

The European Community and Japan significantly expanded their development-assistance programs. Several technical- and financial-assistance programs were merged in the United Nations to create the UNDP. New agencies were established to cater to some specific needs of developing countries. In parallel with these government and intergovernmental initiatives, private giving by foundations, charitable institutions, and religious groups supported a growing number of programs and projects throughout the developing world. Following a trend toward reliance on multilateral institutions during the 1960s and 1970s, there was a shift toward bilateralism in multilateral and regional development assistance in the following decade.

Concluding remarks

While the events described in the preceding sections unfolded there emerged a vast, dense, and at times almost impenetrable forest of development-assistance organizations. As these agencies demanded counterparts, a corresponding assortment of government organizations and NGOs was often established in developing countries to work with donor agencies, international financing institutions, and private aid entities. By the time the development experiment reached its fourth decade, in the late 1980s, the growing and increasingly complex set of organizational arrangements (a result of incremental institutional innovations) became too heavy and unwieldy. Turf battles became the norm; accountability all but disappeared; many development-assistance organizations lost their sense of purpose and direction; and all these problems were exacerbated by a diminishing amount of resources available for development cooperation.

During the 1980s the limitations and shortcomings of the decades-old institutional arrangements for development cooperation became evident. This coincided with a new ideological orientation of the governments of many industrialized nations. Seeking to reduce government spending, conservative politicians in several developed countries found an easy target in foreign-aid programs, which were depicted as being wasteful and ineffective. Individual initiative and the private sector were heralded as the new harbingers of economic growth and development, and government programs to assist the poor were questioned and abandoned. In its more extreme manifestations, the “greed-is-good” syndrome portrayed development assistance as nothing but a series of dependency-generating handouts. This happened at a time when a large number of developing countries had experienced several years of economic downturn and a severe debt crisis, which made the 1980s a “lost decade” in terms of any improvement in living standards for most of Africa and Latin America and many Asia countries.

Before examining how the development-cooperation experiment began a radical, and as yet unfinished, transformation during the 1990s, it is useful to examine the main features of the international order that began to emerge clearly during the 1980s. A multiplicity of trends and changes, crystallizing in the emerging fractured global order, provide a backdrop against which to explore the future of development cooperation as we move into the 21st century.

1. There have been many accounts of the history of the idea of development. For reviews of the evolution of development thinking, see, among others, Van Nieuwenhuijze (1972), Hettne and Wallensteen (1978), UNESCO (1982), Meier and Seers (1984), Lewis and Kallab (1986), Arndt (1987), Coquery-Vidrovitch et al. (eds.) (1988), the special issue of Daedalus (Daedalus 1989), and Oman and Wignaraja (1991). In addition, three other articles provide an interesting perspective on development theory, written by Hirschman (1981), Sen (1983), and Krugman (1995). Return
   
   
2. Russell Ackoff, professor of system science at the Warthon School of the University of Pennsylvania, commented on the difficulties of taking into account the diversity of development experiences and on what he considers the futility of attempting to construct a theory of development. He has argued that “development is an exception and theories are not constructed to account for exceptions” (R. Ackoff, University of Pennsylvania, Philadelphia, PA, personal communication, Apr 1982). Albert Hirschman has made a similar point: “When change turned out pretty well it was often a one-time unrepeatable feat of social engineering, an outcome that only gives confidence that a similar unique constellation of circumstances can occur again; but trying to repeat the sequence of events formulaically in another context won’t work” (Hirschman 1995, pp. 314–315). Return
   
   
3. Some influential figures in the early stages of the development-cooperation experiment had a clearly unsympathetic attitude to non-Western cultures and values. For example, Eugene Staley proclaimed the superiority of Western modern culture: “In the Orient, until recently, the standard way to seek happiness has been to cut down on desires. The West in modern times has sought happiness by increasing possessions. There can be no doubt that the ascetic philosophy of the East is losing ground to the activist philosophy of the West. In many Eastern communities the most respected person was the man who withdrew from society, but abnegation is no longer held in such high esteem. The man who tries to better his community and himself is gaining respect” (Staley 1954, pp. 20–21). Return
   

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