THE UN SYSTEM & WORLD BANK GROUP #3: BEYOND THE WALL – SEGMENT A (1960s-1970s)

January 9, 2013

Introduction 1

After a significant delay, this blog post continues the narrative about the earliest years of the United Nations Development Programme (UNDP). One of the reasons for the delay has been the time required to collect, analyze, and format a substantial amount of primary source data. Given the amount of data presented in this post, I encourage readers to dig deeper by clicking on the highlighted Links.*

This discussion covers two eventful decades from 1960 through 1979 and is divided into three segments. This posting is Segment A. It describes the integration of the Expanded Programme of Technical Assistance (EPTA) and United Nations Special Fund (UNSF) into the new UNDP; the transition from project-specific to “country programming;” and the relabeling of “technical assistance” (TA) to “technical cooperation” (TC). Subsequent segments will address financing and reorganizing UN development efforts (Segment B) and attempts to move beyond conventional assumptions about development and the role of UNDP (Segment C). Following the posting of Segment C, the next full article in series will focus on the increasingly collaborative relationship between UNDP and the World Bank during those same two decades.

International Context

The two decades beginning January 1, 1960 and ending December 31, 1979 witnessed a continuation of Cold-War tensions between the United States and its allies and “Communist bloc2 even as the United Nations (UN) undertook its fifth through thirteenth Peace-Keeping operation (three of which are still underway);3 conflicts in the Middle East continued to bedevil relationships among the United States, its NATO allies, and Israel;4 and the international economy transitioned to floating exchange rates5 and the beginning of the current cycle of financial crises that have occurred at roughly ten-year intervals ever since. Other international events worth noting included the successful completion of India’s first underground nuclear test (1974) as well as a dramatic increase in airplane hijackings and other terrorist attacks that have continued since (although from a variety of different sources).

But the defining characteristic of this period was the transition of 53 territories from colonial to independent sovereign-states (Figure 1); states that now account for about 11 percent of the World’s total population.6

That was not always an unalloyed good. At least in part for reasons discussed in previous blog posts, legal independence was followed in many of these new sovereign-states by the imposition of military or other authoritarian one-party regimes — at least partially in response to the wide-spread but erroneous belief that economic development within “underdeveloped countries” required a level of political stability that could only be provided through long-term planning and disciplined implementation.

At the end of the 1950s, only 82 sovereign-states were members of the UN, of which 65 were also members of the International Bank for Reconstruction and Development (IBRD). Those membership levels amounted to only 42 and 35 percent of their respective memberships today. Nonetheless, by the end of the 1970s; UN membership had increased by another 85 percent. IBRD membership increased even more dramatically; more than doubling (103%; Figure 2). And by the end of that decade, a full 76 percent of UN and 79 percent of IBRD members were composed of non-European or “non-European derivative” countries.7

From EPTA & UNSF to UNDP   

The first 25 years in the life of both UN development-oriented entities and the World Bank Group were characterized by substantial intellectual and organizational experimentation and jockeying for position. By contrast, the two decades reviewed here witnessed attempts to consolidate the structure and staffing of both organizations and recognition of substantial complementarities between them.

Background

As discussed in earlier posts, the period prior to 1960 witnessed a proliferation of various UN entities driven by new thinking about “development” objectives and approaches within a fundamentally changed international political framework. It was in that atmosphere that UNDP’s two predecessor agencies were established; the Extended Programme of Technical Assistance (EPTA) began operations in 1950 to provide technical assistance services, fellowships to citizens of “developing” countries, and limited amounts of equipment required by advisors for demonstration and training purposes. The Special Fund (UNSF) followed nine years later (1959) to finance initial pre-investment activities in a manner that would attract sufficient investment capital to jump-start or accelerate economic growth in “underdeveloped” countries.8 It did not take long, however, before several voices within the Economic and Social Council (EcoSoc) and the UN General Assembly began to argue for a merger of EPTA and UNSF.

Indeed, within only three years after UNSF was established, advocates of merger were arguing that by pooling resources and integrating personnel and organizational structures, policy formulation would be unified, overall planning could be integrated, duplications eliminated, procedures simplified, administrative costs reduced, and the time frame during which technical assistance might be required would be shortened. Further, the integration of all headquarter’s technical assistance staff would facilitate a more coherent representation of UN development interests within its member-states.9

That view was not unanimous however; at least not at the outset. UN specialized agencies did not support the prospect of centralized authority. And the Soviet Union and its allies were afraid that a new combined agency would be dominated by the United States.10

Nevertheless, in response to a report submitted by a UN designated group of “independent experts,”11 the General Assembly authorized establishment of the United Nations Development Programme (UNDP) as the unified successor of both EPTA and UNSF on November 22, 1965 and it was officially launched January 1, 1966.

Priorities Proliferate

During its initial years, UNDP’s strategic priorities expanded dramatically beyond its predecessors’ four areas of interest.12 During its very first year, UNDP’s inherited portfolio had grown by another one hundred and thirty-seven approved projects. But that expansion was not accompanied by increased financial support from United Nation’s members. Instead, annual authorizations by UNDP fell dramatically immediately after its establishment in 1966; a situation that continued for another decade (Figures 3 and 4). 

Nonetheless, by 1968, the list of so-called official “priorities” had quadrupled to no less than sixteen distinct activity areas and approximately 3,000 large-scale pre-investment and small-scale technical assistance projects were underway in about 130 member-states and colonial territories.13

That lack of congruence between real financial constraints and the proliferation of priority activity areas was due, at least in part, to the fact that although EPTA and UNSF staff and programs had been assigned to a single UNDP Administrator, distinctions continued to be made between them for both fund-raising and operational purposes – a situation that continued until January 1, 1972.14 On that date, and in response to yet another study commissioned by the UN Secretariat, both programs were finally fully integrated. That also marked the year in which UNDP became the “developing world’s” largest multilateral provider of technical and pre-investment assistance.

Country-Programming

The study that had been commissioned by the UN Secretariat referenced above had also recommended that UNDP move from a conventional focus on discrete projects toward a broader “country-programming” approach. That recommendation, consistent with the prevailing emphasis on long-term planning, reflected a more fundamental change — from focusing on separate requests for project-specific assistance to a primary emphasis on broader more strategic, development objectives. The hope was that a broader strategic perspective would lead to mutually reinforcing synergies across sectors. That approach more closely reflected EPTA’s earlier approach to allocating technical assistance than UNSF’s project-specific quality competition model. In any event, UNDP began to introduce country-programming during its first year as a fully integrated agency (1972).

Indicative Planning Figures (IPFs)

The objectives of country-programming were to be achieved through “integrated strategic planning” for each individual client country in response to priorities supposedly established by recipient governments themselves. Allocation of grant resources would, in turn, be based on “indicative planning figures” (IPFs) — i.e., estimates of UNDP resources made available to each country (or other regional, inter-regional or global program) during five-year planning cycles. Discrete projects would need to be justified within the parameters of those over-arching five-year planning frameworks.

The emphasis on integrated strategic planning required the improvement of institutionalized capacities to conduct effective public and financial administration and statistical data gathering. It also began to shift attention to such cross-cutting issues as the role of women in development (WID), a focus that emerged in a serious way beginning during the latter 1970s. Indeed, by 1977 detailed guidelines about how to increase the participation of women in UNDP-supported projects had been issued.15 Ironically, those innovations were most often introduced during the early years within lower-income countries with the least capacity (or political interest) to implement them.

From 1st to 2nd Planning Cycles

The beginning of its first five-year planning cycle (1972-1976) began auspiciously with nineteen country programs prepared and ready for launch. In combination with other funds approved by its Governing Council,16 UNDP’s planned expenditures totaled $1.5 billion for this first five-year cycle. However, by the beginning of that cycle’s fifth year (1976), UNDP had accumulated a deficit of $40 million, had almost exhausted its operational reserve, and was suffering from the world-wide inflationary devaluation of the financial pledges on which its operations depended. That, in turn, raised questions about UNDP’s ability to continue to operate at that level – questions that were at least temporarily overcome through the mobilization of extraordinary funds pledged by several member-states to support UNDP projects. Indeed, those specially pledged funds almost met UNDP’s originally planned financial target for the entire first programming cycle (falling short by only $700 thousand), avoided any need for UNDP to retreat from supporting the full sixty-six approved country programs during that cycle, and enabled it to move forward with another sixty-six country programs ready for approval at the beginning of the second cycle (1977-1981).

But before moving the discussion forward here, it is important to note that UNDP was not a particularly large actor in the overall world of “official development aid” (ODA) (Figures 5 and 6).17 During the entire period from 1970 through 1979 (the first decade for which sufficient comparative data is available), UNDP’s share of net “official development” grants and other concessional aid was only three percent (Figures 7 and 8). This decade also witnessed the beginning of the World Bank’s increasingly important place in the overall concessional lending arena. By 1979, the World Bank’s share of overall concessional grants and loans – not including the larger amount of non-concessional lending to middle-income countries – had increased to 31 percent from 18 percent at the beginning of that decade.

Given UNDP’s reliance on funding largely from the same cast of countries as those providing the bulk of bi-lateral aid and funding of other UN system entities, it is not surprising that its policies adhered fairly closely to the broader norms of that constituency. Although UNDP did begin to amass sufficient credibility on its own to embark on a few new path-breaking initiatives that other agencies followed, its overall approach was more evolutionary than revolutionary. A good example of adherence to conventional approaches was retaining direct responsibility for implementing the technical assistance and pre-investment projects financed by it and utilization of project-management units.   

“By-Pass” Model

Although incrementally reinforcing the strategic planning role of recipient governments, UNDP-financed activities continued to be implemented directly by the UN and its specialized agencies rather than those governments. That also contributed toward the already growing tendency to establish temporary project management units outside of recipient governments’ established ministerial structures.

In an attempt to counter that trend, UNDP promulgated its “New Dimensions in UNDP Technical Co-operation” during 1975 to “free the Programme’s joint planning with Governments from the traditional project package of foreign experts, fellowships, equipment and Government personnel.”18 Those new dimensions were also intended to shift lead responsibility for implementing UNDP-financed projects directly to recipient governments by 1977. Nonetheless, the practice of maintaining separate donor-financed project-management units (PMUs) – often termed the “by-pass” model — continues to this day. Discussion of the many reasons why donors’ – both UNDP and many others — continued the utilization of separate project-specific management units is beyond the purview of this blog post. And a rather large literature on this subject already exists.19

The introduction of Integrated strategic planning at the country-level also reinforced UNDP’s commitment to increasingly decentralize many of its planning and support tasks to its rapidly increasing number of field offices; 104 of which existed by 1974. The role of headquarters in New York was to be transformed into supporting those field offices and planning and managing cross-country regional and inter-regional activities.

From Technical Assistance to Technical Cooperation

The provision of “experts11 and educational and technical training “fellowships” had been referred to as “technical assistance” (TA) throughout the 1950s. However, by 1959, the governments of many recipient countries were arguing that “technical co-operation” (TC) would be a more appropriate term. In response, EcoSoc unanimously approved a resolution to that effect on December 22, 1960. From that date until about 2006 — when the term “Capacity Development” was introduced to signify a further shift “from the use of expatriate technical cooperation personnel to the nurturing of national leadership and expertise20 — the term “technical cooperation” was in general use by United Nations agencies. Nonetheless, many bi-lateral aid agencies, the WB Group, and IMF continue to use the term “technical assistance.”

In 1965, EcoSoc delegated responsibility for formulating policy for all United Nations’ technical cooperation to UNDP’s Governing Council, and UNDP increased its advocacy and support of technical co-operation among developing countries (“TCDC”) throughout the 1970s. But it was not until 1980 that UNDP’s Governing Council issued official detailed guidelines to guide the UN System’s technical cooperation efforts.21 That enhanced UNDP role eventually led to its claim to responsibility for coordination of all development assistance provided by multilateral agencies within each recipient country.

Distribution of UNDP Technical Cooperation  

Between 1972 and 1976, UNDP employed an annual average of about 10,000 experts to work in recipient countries (Figure 9) and provided 28,200 fellowships. But over the entire period from 1960 to 1979, the annual numbers were very uneven. The lowest number of experts (3,306) was provided during 1960, grew to a high of 20,198 in 1971, and declined again until by the end of 1979 only about half of the 1971 number (10,396) were in the field. UNDP’s funding of experts exceeded $1 billion for the first time during 1975; half-way through that period of decline.22

Experts: Sectoral Distributions. Agriculture accounted for 24 percent of UNDP projects approved during 1972 to 1981; down from 35 percent during 1969. Nonetheless, agriculture continued to be a major focus even as the industrial sector’s share of allocations grew to 21 percent during that same period. But with reference to the provision of experts, UNDP increasingly directed its assistance toward “general economic and social policy and planning.” Focusing on a fairly wide-range of technical assistance “expertise11 — including evaluating proposed country programs; development planning and pre-investment studies; coordinating international emergency responses to natural or man-made disasters; establishing and strengthening education, training, and research centers focused on teacher training and adaptation of modern technologies (especially water pumps, small-scale sanitation infrastructure, and appropriate alternative cooking stoves); and non-formal in-service training and formal graduate level education to serving government staff – authorized allocations for economic and social policy formulation and planning increased from 10 percent during the first cycle (1972-1976) to 17 percent during the second (1977-1981).

Recipient Regions. The geographical distribution of UNDP’s assistance was fairly constant throughout the 1960s and 1970s; except for Europe and the Middle East (Figure 10). Beginning in 1962, Africa consistently received the largest share; between 23 and 40 percent. Asia eclipsed Africa only twice (1963 and 1978) while dropping below Latin America and the Caribbean (LAC) only once (1966). Overall, Africa received 31 percent of UNDP’s total assistance from 1960 through 1979, followed by Asia (26%), LAC (21%), and Europe and the Middle East (16%) — global, inter-regional, and regional programs received the remaining six percent.

Experts: Countries of Origin. In 1972, UNDP introduced new recruitment and training policies to increase the number of staff from developing countries. Nonetheless, UNDP continued to rely predominantly on European and European-derivative7 countries as the source for “experts11 assigned to recipient countries (Figures 11 and 12).

During the period under review here, the United Kingdom accounted for between 28 percent (1960) and 32 percent (1965) of all TC provided by European experts (Figure 13) while the second largest European provider, France, followed behind within a range between 19 percent (1977) and 25 percent (1973). Those two countries together accounted for between 50 percent (1977) and 54 percent (1973) of all European “experts11 provided during the period under review here (Figure 14). And two “European-derivative”7 countries — the United States and Canada — also provided between twelve percent (1966 and 1969) and 16 percent (1960, 1974, and 1975). Indeed, the United States alone provided 11 percent of all UNDP TC during this same period; second only to the United Kingdom (Figure 15).

India’s dominance as a provider of UNDP experts from Asia is also clear during this period (Figure 16); accounting for between 30% (1971) and 43% (1978) of all TC provided by Asian experts between 1960 and 1979 (Figure 17). That was essentially equal to all other Asian countries combined (excluding Australia and Japan). India was also the only “non-Western” country to rank among the top five providers of UNDP and predecessor TC (Figures 18 and 19).

But it should be noted that India’s “experts11 were clearly significantly “western” in their individual educations, economic orientation, and acceptance of professional norms. And India and Australia alone accounted for between 48 percent (1971) and 58 percent (1961, 1978) of all Asian experts during this period.

By contrast with Europe, Asia and the Middle East, there was no clustering of “experts11 among citizens of Latin American or Caribbean countries (Figures 20 and 21); first-ranked Chile fluctuated between 14 percent and 22 percent most years and only once accounted for upwards of 30 percent (1960). The second largest Latin American or Caribbean provider, Argentina, followed with a range between 13 percent (1961) and 24 percent (1972). Nonetheless, those two largely European-derivative7 countries together accounted for more than 40 percent of the region’s UNDP financed-experts for almost half (4/10) of the years under review here.

The total number of Soviet “experts11 engaged in UNDP TC exceeded those of any other Communist-party state during the twenty-year period under review here (Figure 22). But that number is misleading in at least two respects. First, the total number of experts from the Soviet Union and its Warsaw Pact allies accounted for only seven percent of total UNDP TC during this period; new authorizations for experts from the Soviet Union and its European allies fluctuating between four percent and nine percent during any one year (Figure 23). Second, although the Soviet Union provided almost as much TC as all other Communist-party states combined during the 1960s, its dominance declined during the 1970s when Czechoslovakia, Hungary and Poland increased their shares significantly (Figures 24 and 25). Indeed, Czechoslovakia alone exceeded the number of Soviet “experts11 during 1969 and 1970 while Poland took the lead in 1976 and maintained it throughout the rest of that decade).

As for the Middle East, Egypt, Israel, and Syria alone provided more experts than all other countries within that region combined (Figure 26). Egypt alone never accounted for less than 31 percent (1960) of all Middle Eastern experts. Israel lagged behind from a low of 13 percent (1960) and high of 26 percent (1975). Those two countries combined accounted for more than half of all Middle Eastern experts throughout the nineteen years between 1961 and 1979 and exceeded 70 percent during five of those years (Figure 27).

Sudan clearly dominated among the relatively few Sub-Saharan African country-providers of UNDP experts; accounting for almost a third of the experts provided by nine independent African countries, apartheid South Africa, and the British colony of Rhodesia and Nyasaland (i.e., Zimbabwe and Malawi)23 combined (Figure 28). And with respect to South Africa and British Rhodesia and Nyasaland, it should be noted that attitudes toward recruitment of experts from among those relatively small European elite populations living in Africa changed during the 1960s and 1970s. As late as 1960, of the only 32 TC “experts11 from Africa employed by UN/EPTA, 17 (53.1%) were from South Africa and 4 (12.5%) were from Rhodesia and Nyasaland. By the end of the 1970s, that reliance on “European” elites had been reversed.     

Nonetheless, even though Sudan was the dominant provider of UNDP-financed African experts during this period, it never accounted for more than 18.9% (1967) of all such experts. And from a broader global perspective, Sudanese never exceeded 7/10th of one percent of “experts11 worldwide; second rank Tunisia never ranked higher than 6/10th of a percent; and third ranked Ghana’s highest contribution equaled 3/10th of a percent (Figure 29 and 30). Those three top-ranked African countries together accounted for only between 6/10th (1963) and one percent (1976) of UNDP-financed experts worldwide during the period reviewed here.

Experts: Countries of Assignment. Beginning in 1962, the Sub-Saharan Africa Region was the destination of more UNDP-financed experts annually than any other region (except 1965; Figure 31). Indeed, except that year and the next it received 33-40 percent (Figure 32). Asia was the primary destination of experts during 1960, 1961, and 1965, but fell to third place from 1973 to 1976 and again during 1979. A significant number of experts were also assigned to Latin America, accounting for a full 25 percent of the total in 1979, while the Soviet Union and its allies never accounted for more than 3 percent.  

Fellowships: Sectoral Distributions. During the first years following the transition to integrated UNDP programming, the number of short-term training, study tours, and longer-term graduate education fellowships declined substantially; from about 8,500 during 1968 to about 6,000 during 1969. But by 1978, the number had increased to 13,457; declining a bit to 12,354 the following year.

By contrast with the provision of experts, no sectors consistently dominated the allocation of fellowships during the entire two decades under review here (Figure 33); a full 52 percent of which was for unspecified “education” and “skills training (Figure 34).” The most that can be said is that an emphasis on public works fellowships during the early 1960s began a shift toward an emphasis on social activities and welfare during the latter half of that decade.

Geographic Distribution of Fellowship Recipients. By 1961, both Africa and Asia emerged as the dominant priority regions for educational and skill training fellowships (Figure 35); accounting for 56 percent of total fellowships provided during those two decades (Figure 36). Although those two regions traded up and back between the most and next most number of fellowships between 1961 and 1975, Asia took pride of place for the remainder of the 1970s.

Countries Hosting Fellowship Recipients. By contrast with the relatively large number of countries from which fellowship recipients were selected, the number of significant host-country providers was much more concentrated. More precisely, only nine (6%) of the 150 state-members of the United Nations in 1979 hosted slightly more than half of all UNDP fellowship recipients during the 1960s and 1970s. The United Kingdom and United States alone were the destination of 19 percent of all UNDP fellowship recipients (Figures 37 and 38). But that pales by comparison to the USA’s estimated thirty percent share of all world-wide destinations by students studying in countries other than their own throughout the period under review here.24

For its part, the Soviet Union hosted only three percent of total UNDP fellowship holders (about 7,400) during those two decades. That is in marked contrast to the Soviet Union and its allies’ “almost ten percent” share of all students studying at university level in countries other than their own between 1970 and 1990; a share that reflects the Soviet Union’s “active policy to attract and indoctrinate future leaders” by offering fellowships to Moscow’s “People’s Friendship University (formerly known as Patrice Lumumba University)founded in 1960 with the explicit mandate to prepare future socialist leaders in Africa, Asia, and Latin America24 and other Eastern European universities as well. 

India (5%) and Egypt (2%) were the only “non-Western” destinations among the top-ten host country providers. With the addition of eleventh-ranked Thailand, only three “non-Western” countries were among the nine dominant hosts. But even so, they together hosted only thirteen percent (about 31 thousand) of all UNDP fellowship recipients during the same period.

Persistence of Conventional Approaches: Substitutes & Performers

In 1948, General Assembly Resolution 2000(III) broadened the scope of UN-provided technical assistance to include “promotion of conditions of economic and social progress and development.” The justification for this expansion of advisory and training activities beyond the more limited scope employed during the immediate post-war period in Europe was the “lack of expert personnel and lack of technical organization” in “underdeveloped” countries.21 To fill that gap, the UN provided “operational, executive and administrative (OPEX) personnel” to serve directly as officials of recipient governments, even as they were still employed by the United Nations or specialized agencies at international, rather than local, rates.

Available data illustrate the ebb and flow of OPEX assignments during the period following the establishment of UNDP on January 1, 1966. During that first year, 101 UNDP-financed OPEX personnel worked in 35 countries or dependent territories (45% of which were in Africa). Overall numbers of OPEX “experts11 increased until reaching a peak for the period under review here of 216 personnel working in 49 countries and dependent territories during 1975 (67% of whom were serving in 25 African countries; Figure 39 and 40).

Of equal interest to those aggregate statistics, the numbers serving in a few specific African countries at the peak for that continent during 1974 stand-out – the very small country of Swaziland had a full 23 OPEX staff followed by Botswana (20), Equatorial Guinea, Lesotho, and Malawi (13 each); and Nigeria (12). The only non-African countries hosting anywhere near those numbers that year were Yemen (8) and Trinidad and Tobago, and Western Samoa (7 each).

Beginning in 1976, the number of OPEX personnel began a steady decline – beginning with 190 and ending the decade with a total of 122 personnel in 39 countries or territories. Nonetheless, Swaziland maintained its lead share of the reduced number serving in Africa, followed by Botswana and Malawi (Figure 41 and 42).25

But the decline in the number of OPEX personnel did not signify the end of foreign “advisors” performing direct tasks on behalf of recipient governments rather than transferring skills to local counterparts. Other foreign “advisors,” whether financed by UNDP or other bi-lateral and multi-lateral agencies, continued to perform tasks directly for recipient governments themselves.

One result of the direct performance of tasks rather than the on-the-job transfer of skills was that foreign technical cooperation personnel tended to continue in place for substantial periods – whether as individuals or by virtue of successive replacements with or without minor changes in position titles or job descriptions. Of the 81 countries or territories to which OPEX personnel were assigned for at least one year between the commencement of UNDP operations (1966) and the end of the period under review here (1979), 34 (42%) hosted them for at least seven (50%) of those 14 years.26 And that phenomenon was compounded by a “brain-drain” of many government staff sent to study in European or European derivative7 countries who did not return home.

It is a perverse irony that, although by 1972 almost a third of new UNDP staff members — as distinct from UNDP-financed experts — were from “developing” countries, almost all of them were graduates of Western universities. And many of those were found among earlier recipients of UNDP and other donor fellowships, leading some to criticize donors for contributing to a brain drain and subverting the very purpose of the fellowships in the first place.

The assignment of foreigners as “substitutes27 with direct line responsibilities within recipient countries is now rare almost anywhere other than in UN administered territories and other post-conflict situations.28 However, the dominant role of experts as “performers27 implementing tasks assigned to them directly by UNDP – or another “donor” — has not changed to any significant extent until the present time.

That is the case despite UNDP’s introduction of the “New Dimensions in Technical Co-operation” during 1975 and the UNDP’s Governing Council’s 1979 “invitation” to:

the UNDP Administrator, agencies and Governments to consider alternatives to UNDP-financed, internationally recruited experts and to consider, in particular: increased support to Governments wishing to undertake the direct recruitment of experts; increased use of qualified nationals as experts in projects; increased use of expatriate nationals for service in their home countries; and increased use of institutional twinning arrangements and related methods….”29

In short, getting the immediate job done overrode responsibilities for providing on-the job training to benefit recipient governments in the longer-term. Although this was generally considered appropriate, by the late 1970s an expanding number of development professionals began to argue that such practices were – at least over the longer-term — counter-productive.30  

In retrospect, “performer” approaches have clearly failed to meet expectations even as “donors” continue to finance such roles to this day. The discussion of the failure to provide effective in-service training by on-site residential “experts11 and alternative, non-conventional, approaches to providing such services is deferred to a future posting (look for “From Colonial Administrators to Development Advisors,” forthcoming). For now, we turn our attention to UNDP’s outreach to the financing and reorganization of UN development efforts from 1960 to 1979 (Segment B).    


Dual Economy Theory Revisited

September 1, 2011

The blog has received a number of search queries re. “dual economy theory.” Therefore, during this period of low productivity, I post a paper I wrote and presented to the 4th Annual International Conference of The Society for the Advancement of Socio-Economics (SASE) during March 1992 with the title Dual Economy Theory Revisited.


THE UN SYSTEM & WORLD BANK GROUP #2: BUILDING WALLS (1946-1950s)

March 28, 2011

Before I built a wall I’d ask to know
What I was walling in or walling out,
And to whom I was like to give offence.
Something there is that doesn’t love a wall,
That wants it down
….

Robert Frost, Mending Wall (1874 – 1963)

Introduction1

Depending on the specific agencies involved, relations between the World Bank Group and the United Nations (UN) system have been both cooperative and hostile, often at the same time. A detailed description of those relationships over the last sixty-five years is beyond the scope of a single blog post. Therefore, the focus here is limited to a summary of initial UN overtures and the World Bank’s response as well as examples of both collaboration and tensions during the period from January 1946 through the end of December 1959.

Initial UN Overtures

Only two months after its first meeting in London, a letter from the first President of the Economic and Social Council (EcoSoc), Sir Ramaswami Mudaliar of India, was delivered to the Board of Governors of the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (IBRD) at their first meeting (Savannah, Georgia, March 1946). That letter proposed establishing the IMF and IBRD as UN specialized agencies. However, because neither the Bank nor IMF had a chief executive officer or any staff at that point, Ecosoc was informed that its request had been referred to the first meeting of their respective executive directors to be held two months later. Therefore, just before that meeting on May 6, 1946, a follow-up letter was sent to IBRD and the IMF in Washington, DC. But, this time, the letter was signed by the UN’s Deputy Secretary-General David Owen, a British citizen subordinate only to the UN Secretary-General. Owen was clearly disappointed in the IBRD’s and IMF’s earlier response to what UN staff no doubt assumed was a routine matter. Indeed, agreements between EcoSoc and the International Labour Organization (ILO), United Nations Economic, Social, and Cultural Organization (UNESCO), Food and Agriculture Organization (FAO), and International Civil Aviation Organization (ICAO) had already been completed by the time this second letter was sent.2 But once again, the response of the Bank’s executive directors was that “such action would be premature.” That second rebuff prompted yet a third letter only one month later – this time signed by the Secretary-General, Trygve Lie of Norway, himself – requesting discussions between an EcoSoc negotiating committee and representatives of the IBRD and IMF begin no later than the first joint Annual Meeting of their Board of Governors the following September. But once again, both the IBRD and IMF demurred, arguing that other problems required their priority attention.

There was substantial validity to that claim. The Bank’s first President, Eugene Meyer, had only just arrived on June 18, 1946, he was met by a full staff of only twenty-six professional and administrative staff recruited since the meeting in Savannah, and IBRD was about to officially begin operations on June 25, 1946. In addition, there was the unresolved question of whether the Bank’s Executive Directors or its President was primarily responsible for managing the Bank. Nonetheless, the most important reason for IBRD’s reluctance was the view that, as a “non-political” investment bank, it had a fiduciary responsibility to its financiers. The fear was that private sector investors would not trust IBRD if it was responsible to a UN politically beholden to its membership because its “one country one vote” decision-making structure was divorced from financial responsibilities.

That view is clearly recalled by Richard Demuth, who was at that time a lawyer and Assistant to the Bank’s President, as remembered during an interview on August 10, 1961:

…[during the latter part of 1946,] the UN people…gave us copies of relationship agreements that they’d entered into with some of the other specialized agencies, which made the other agencies very definitely subordinate to them. We said we didn’t know enough about our business to enter into any kind of formal contract with them [yet]…. [But] in any case, we said that we couldn’t enter into the kind of contract that the other agencies had entered into because it would appear to the public that we were in effect an agency of the United Nations, and if it seemed that we were an agency of a political instrumentality, ourposition [in the financial markets] would be impaired.

Those views did not change during the brief five month tenure of the Bank’s first President Eugene Meyer, the three month hiatus before the arrival of its second President John McCloy, or during subsequent years. Indeed, the World Bank’s own Archives characterizes McCloy’s position as follows:

McCloywanted to demonstrate that the Bank was autonomous, free from political interference, and run according to sound financial and organizational principles. The establishment of the executive autonomy of the president, the emphasis that investment decisions would be made on economic rather than political grounds, and the close link between the president and the U.S. executive director were important factors in bolstering the confidence of the U.S. securities market.3

But this too was not the whole story. There was also the less tangible, but no less important, feeling of superiority that emerges time and again from the oral histories of selected IBRD staff serving at that time. Indeed, another high level IBRD staff, Davidson Sommers, recalled the Bank during that period as having a “standoffish” and “supercilious” attitude to other international organizations.4 So when representatives of both the Bank and Fund met together to discuss Trygve Lie’s letter, they agreed that neither organization could sign any kind of agreement like those already signed by the UN with other specialized agencies.

“We Wouldn’t Recommend That They Accept it”

With the arrival of President McCloy on March 17, 1947, the United Nations tried again. As again described by Richard Demuth –

the [UN] Charter required that the United Nations enter into a contractual relationship, that this required a written contract agreed to by both sides, and they raised again with a good deal of insistence the need for a written document. Well, we said, all right, if they really wanted a written document we’d submit a draft that we could accept but they wouldn’t like it and we wouldn’t recommend that they accept it…. So we wrote a draft agreement that was in effect a declaration of independence…. Well, this [led to]…. a very strong, vigorous negotiating session between a committee of the Economic and Social Council and Mr. McCloy [and IMF’s Managing Director Camille Gutt], which went on for a day at the United Nations, in which our draft was reviewed, and we took out a few of our declarations of independence but not very many.

Surprisingly, that proposed text was accepted with only slight changes by the EcoSoc negotiating committee led by Jan Papenek of Czechoslovakia. Selected quotations from the official Text of the Agreement between the United Nations and the Bank signed on August 15, 1947 support Demuth’s characterization as “a declaration of independence:”5

by reason of the nature of its international responsibilities and the terms of its Articles of Agreement, the Bank is, and is required to function as, an independent international organization….

…[action taken by the Bank] is a matter to be determined by the independent exercise of the Bank’s own judgment…

…[it would be] sound policy [for the UN] to refrain from making recommendations to the Bank with respect to particular loans or conditions of financing by the Bank….

…[nonetheless, the UN] may appropriately make recommendations with respect to the technical aspects of reconstruction or development plans, programs or projects….

…[the UN] will take into consideration that the Bank does not rely for its annual budget upon contributions from its members, and that the appropriate authorities of the Bank enjoy full autonomy in deciding the form and content of such budget.

But when presented to EcoSoc’s eighteen elected member-states for approval, it was strongly criticized by the Norwegian, Soviet, and Byelorussian delegates on the grounds that the “special privileges” extended to IBRD and the IMF violated at least four articles of the UN Charter and would seriously endanger the international cooperation for which the UN had been established in the first place. But the American delegation disagreed, defended the Agreement, and it was approved sequentially by EcoSoc, IBRD’s and IMF’s Board of Governors the following September 1947, and the General Assembly on November 15, 1947.

The opposing positions held by the United States and Soviet Union is not fully explained by the emerging Cold War. They also make sense from the perspective of their relative power and influence within the Bank, Fund, and United Nations; especially given the Soviet Union’s decision not to join the IMF and, by extension, IBRD. But with the approval of the General Assembly, both the World Bank6 and IMF became completely independent “specialized agencies” of the UN, allowing their staff to travel on United Nations Laissez-Pass even as their “independence” was institutionalized within the overarching international architecture still in place today.

Collaboration

Although the 1947 Agreement was a “Declaration of Independence,” Richard Demuth has also argued that the limits placed on the UN were misconstrued:

….There’s nothing in this agreement that prevents the Economic and Social Council from making general policy recommendations to us, but the EcoSoc has been so cowed that they feel that it prevents them from making any recommendations on policy to us, which it doesn’t at all…. We [simply] wanted to make it clear that the Economic and Social Council would not attempt to dictate particular loans to us,… but if they wanted to make a policy recommendation,…there was nothing in the agreement that would stop general recommendations of that sort. We wouldn’t necessarily adopt them but we didn’t say that it was inappropriate to make them…. [nonetheless], It’s a very difficult relationship at best, because in the hierarchy of things the UN is the top agency. They’re the central global body, and they feel they ought to be able to exercise authority over all the other international agencies. On the other hand, the Bank has the money….

Nonetheless, the fact is that collaboration at the operational level between IBRD and the UN system has far outweighed areas of largely rhetorical conflict since 1947. Even without an official agreement with the UN, it was clear that IBRD officials were welcome to attend any of the almost continuous series of meetings already being held by EcoSoc during this period.7

The theoretical foundation for collaboration between IBRD and the UN was articulated at about the same time by the ubiquitous David Owen. As reported by Craig Murphy, Owen argued that the UN Secretariat should focus on three key pillars of “development.” The first pillar was the development of skills within underdeveloped countries through provision of technical assistance (TA), a label eventually changed by the UN, but not the World Bank, to technical “cooperation.” The second pillar was the design of appropriate domestic and global institutional environments, including central planning mechanisms internally and appropriate trading mechanisms internationally. The third pillar was the financing of infrastructure required for economic growth and industrialization. Although no doubt thinking that the Secretariat and EcoSoc should be responsible for coordinating activities in all three of those areas, there was no real argument during those early years that IBRD was primarily responsible for the third pillar. But even so, that still left the first two pillars to the UN; especially when an international trade organization was not established for another four decades.

UN Extended Programme of Technical Assistance (EPTA, 1949-1966)8

The UN’s earliest TA efforts consisted of “experts,” student fellowships, and seminars financed from the regular General Assembly budget and managed by the Secretariat. Although the IMF joined Secretariat staff and representatives of FAO, UNESCO, and World Health Organization (WHO) in the UN’s first large inter-agency TA mission to Haiti that same year, IBRD did not accept the invitation to join them on the grounds that participation might imply commitment to finance investment proposals such missions might recommend. Nonetheless, the volume of requests for TA accelerated quickly, at least partially in response to the distribution of a pamphlet by the Secretariat that identified ten sources of available TA. That list was clearly a case of aspiration or wish fulfillment rather than actual capacity because it included not only seven conventional specialized agencies, but also IBRD, the IMF, and an “International Trade Organization” that would not actually exist until the World Trade Organization (WTO) was established forty-six years later. But fortunately for the UN, the desire for a new fund for international TA dovetailed with a desire by United States’ President Harry Truman to expand such assistance. That objective was embedded in Truman’s inaugural address delivered on January 20,
1949 in which he called for –

….a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas…. [in] a cooperative enterprise in which all nations work together through the United Nations and its specialized agencies whenever practicable. It must be a worldwide effort for the achievement of peace, plenty, and freedom….9

In response, the UN Secretary-General summoned representatives from the specialized agencies to a meeting at Lake Success, New York where they were told to formulate a proposal that could be presented to the United States as the UN’s contribution to the American’s proposed “Point Four” program. And that led to establishment of the Expanded Programme of Technical Assistance (EPTA) on November 16, 1949 as a separate, centralized fund financed by voluntary contributions from member-states that, in turn, financed activities conducted by other UN subsidiary and specialized agencies. EPTA’s name distinguished it from the much smaller TA efforts managed by the Secretariat that continued to be financed from the regular core budget.10

This was not, of course, an entirely “bold new program.” In addition to the UN General Assembly’s initiative the previous year, other UN specialized agencies, whether implementing EPTA financed TA or not, also continued to raise additional funds directly from bi-lateral donors.11 And, in the words of a State Department officer at the time –

the [American] Government had for some years been conducting programs of technical assistance in Latin America, and only there…[and] it seemed reasonable that this novel way of conducting international relations might have its uses elsewhere in the world.12

In response to those new initiatives, the Bank announced on June 2, 1949 that it would also begin collaborating with the UN’s expanded TA activities.13 And between the founding of EPTA in 1949 and the UN Special Fund (UNSF) in 1958, IBRD did participate in several joint missions with UN specialized agencies, especially with FAO.14 According to the authors of the World Bank’s own Historical Chronology

This marked the Bank’s realization that deficiencies in technical skills and experience were often a more serious handicap to economic development than lack of capital.

IBRD, for its part, also expanded its own TA services and, on November 1, 1951, Richard Demuth was appointed Director of the Bank’s first Technical Assistance Department responsible for –

planning, coordinating and giving general direction to the Bank’s technical assistance activities, and for coordinating the Bank’s relationships with other international agencies….”

The Bank substantially expanded those TA efforts even further about eighteen months later when it established a Department of Development Services in 1961.

But in parallel, EPTA had extended TA services to 140 countries and dependent territories by the early 1960s and was by then receiving voluntary financial contributions from 85 member-states; although as discussed in an earlier blog post, the United States was the primary contributor throughout the period under review here.

Nonetheless, although EPTA was an important first step, it financed only a limited range of “expert” services, equipment, and a limited number of student fellowships for studies primarily in industrialized countries. Those limitations led, in turn, to increasing demands for grant financing of an expanded range of activities, including capital investment and, ultimately, for proposals to establish a Special United Nations Fund for Economic Development (SUNFED) and, latterly, the United Nations Special Fund (UNSF). Because the proposal to establish SUNFED was strongly opposed by IBRD, it is discussed under the header “Tensions” below. But the UNSF involved close collaboration between the Bank and UN and is, therefore, discussed first.

UN Special Fund (1958-1966)

UNSF was established by the General Assembly in 1958 to finance the pre-investment phase of capital investment projects.15 It too served as a mechanism through which voluntary contributions by member-states could be coordinated by the UN. Although EPTA served as a precedent for the UNSF, they both occupied the same building in New York City, and shared a “Joint Administration Division,” there were four fundamental differences between the two groups.

First, in order to ensure collaboration with other important entities, a “Consultative Board” was established for UNSF consisting of the UN’s second Secretary-General Dag Hammarskjold of Sweden, the World Bank’s third president Eugene Black, and EPTA’s chief David Owen. Second, UNSF did not adopt EPTA’s practice of establishing specific funding entitlements for each of its eligible countries. Instead, proposals were evaluated at UNSF headquarters on a case-by-case basis. Third, UNSF’s pre-investment studies were substantially more expensive than the expert advice and student scholarships financed by EPTA. UNSF mobilized a full $2 billion in constant 2010 dollars (as all dollar amounts are presented in this blog post) for conducting feasibility studies and designing proposed infrastructure investment projects. Fourth, UNSF was connected much more closely to follow-up financing by the World Bank. Once construction began or materials were procured, the World Bank group’s IBRD, International Finance Corporation (IFC), or International Development Association (IDA) often assumed responsibility. In that way, a clear division of responsibilities was established between UNSF and the “World Bank.” Once again in the words of Richard Demuth –

We felt that the Special Fund might have a very real role to play, and Mr. Black has been very anxious that the Bank cooperate with the Special Fund, and in fact we’ve cooperated with them quite effectively. We are one of the executing agencies — some of the other agencies have many more projects, but I think we’ve probably got more completed and under way than most of the others, and on the whole I think this has worked out very well. We’ve been able to put things to them which they’ve financed, and others we’ve carried out with the help of their financing…. [Indeed,] we get all the Special Fund projects. They send them to us for examination and advice, and to get our views on what should be done, and we’re in close touch with what they’re doing.

About eight years after it was established, the merger of UNSF and the older EPTA created the United Nations Development Programme (UNDP), an organization that today is still tasked with the responsibilty for coordinating all UN development activities.16

Tensions

Although collaboration between the World Bank Group and the UN system has been more common than conflict, this segment identifies some of the persistent tensions that emerged between 1946 to the end of 1959. But a word of caution; the presentation of tensions as polar opposites is for analytical purposes only. The reality was a matter of relative emphasis rather than absolute opposites. With that in mind, tensions are discussed in terms of country presence, turf, and substance.

Country Presence

Since its earliest years, the UN has had greater “country presence” than the World Bank Group has had. During the period under review here, the UN was already relying on resident representatives in many client countries to ensure effective implementation of UN activities while also inform headquarters of local conditions. By contrast, the World Bank Group has relied primarily on staff and consultants dispatched from its Washington headquarters (Figure 1 — UN WB Resident Offices 1949-1966) even as the number of its own resident representatives has grown substantially since the 1980s. That was in part a function of the much smaller number of World Bank staff until the latter part of the 1970s; the World Bank’s entire professional and administrative staff totaled only 511 persons on June 30, 1956.

Turf

Two areas of tension over turf are addressed here: the relative attention given to “development” or “reconstruction” from 1946 through about 1951 and the unfulfilled desire for the creation of a separate UN capital investment fund during the 1950s.

Development vs. Reconstruction. IBRD’s original mission was to provide finance without preference for either reconstruction in Europe or development elsewhere. Nonetheless, from its first “reconstruction” loan to France on May 9, 1947 until the approval of its first “post-reconstruction” loan to The Netherlands on August 9, 1948, the Bank extended four loans to Europe in the total amount of $4.5 billion while approving only one “development” loan to Chile for $148 million.17 IBRD’s first loan to an Asian country (India) was not made until August 1948 while the first loan to an African country (Ethiopia) was not extended until September 1950. Indeed, France, Luxembourg, Netherlands, and Belgium remained eligible for World Bank lending throughout most of the 1950s while the last loan to any other western European country (with the exception of Portugal)18 was made to Spain on May 17, 1977 ($67 million). In part because of IBRD’s dual mandate, the United Nations rather than the Bank was the intellectual leader with respect to “development” well into the 1950s.

SUNFED vs. IDA. The perception that IBRD was off to a slow start, that it was too much focused on reconstruction needs in Europe, and that its interest rates were too high increased the dissatisfaction among Latin American governments expressed prior to the 1945 San Francisco Conference. Not long after, India joined that chorus of complaint; a complaint reinforced further by lower cost grants and concessional rates provided to European economies under the terms of the American’s Marshall Plan announced on June 5, 1947. Those dissatisfactions led to a proposal and counter-proposal to establish a low-cost lending arm to either the UN (SUNFED) or IBRD (IDA).

The Marshall Plan created two precedents that remain with us today. First, its success encouraged the application of a “reconstruction” – rather than “development” — model in Africa, Asia, and Latin America. And that played to the comparative advantage of IBRD. It also legitimized demands by developing countries for the same kind of low cost financing that had been provided to Europe.19 IBRD was not prepared to provide that kind of financing. Therefore, the desire for low-cost financing seemed to play to the comparative advantage of the UN – if only the UN had an institutional mechanism for providing it.

In response to that inequity, the Director of the Delhi School of Economics (India) — Vijayendra Kasturi Ranga Varadaraja Rao – suggested that a new “UN Administration for Economic Development” should be established with a dramatically broader mandate than EPTA (which had just been established that same year).20 Rao’s proposal was, however, a direct challenge to IBRD’s mandate as the primary multi-lateral provider of investment finance and raised the specter that a separate UN capital investment fund would be established. The opposition of IBRD managers to a separate UN capital investment fund was summarized by Richard Demuth as follows:

The one threat that has been hanging over us [would be the creation of] a UN capital fund…. The confusion between that sort of fund and the Bank would have been tremendous, and whether the creation of IDA, which was designed in very large part to hold that development off, will succeed in doing so, has yet to be seen. But with IDA getting into many more fields, and the Special Fund active in fields in which we’re interested, our relationships necessarily become closer….

And in the words of Davidson Sommers:

Within the United Nations staff as well as the membership, there’s been a real movement that the United Nations ought to get into the capital financing business. Technical assistance was a first step, and the Hoffman Special Fund is a second step, a compromise, something short of capital financing. But the other — the pure SUNFED idea, if you remember that proposal, is not dead. That will revive again from time to time.

The first attempt to find a compromise between Rao’s proposal and industrialized countries that opposed it was introduced during the 1953 session of the General Assembly by Greece, Haiti, and Pakistan supported by the Soviet Union and Yugoslavia. That proposal authorized a study of the proposed new organization by an intergovernmental committee and gave the proposed organization a preliminary name only slightly different from the one proposed by Rao – i.e., the Special United Nations Fund for Economic Development (SUNFED).21 Following completion of that report, several of SUNFED’s advocates proposed establishment of SUNFED with the specific purpose of providing grant financing for capital investments  and, further, that decisions by SUNFED should be made on the basis of “one country, one vote.” In addition, a few of SUNFED’s supporters also argued for establishment of a new “Economic Security Council” to replace EcoSoc with a voting system somewhere between one country, one vote and the Bank’s system of weighted voting.

With active support for those proposals building within the General Assembly, IBRD pro-actively opposed SUNFED22 even as the proposal to divorce voting power from levels of finance provided was also too much for the
United States Treasury and several members of Congress. Therefore, the United States, with support from several other industrialized countries, joined the World Bank in a counter-proposal to establish IDA for the specific purpose of providing concessional finance for large-scale projects in developing countries. As IBRD’s third president Eugene Black admitted, the establishment of IDA was largely motivated by the desire to scuttle SUNFED – and in that it was completely successful. And that success was assured when India, an original supporter of SUNFED, changed its position in favor of IDA. In the words of Eric Toussaint, India –

was convinced that [it] would benefit from IDA since the major powers predominating in the [World Bank] would understand the necessity of giving India special treatment in view of its strategic position. And India was right: in the first year of IDA activity, it received 50% of IDA loans.

India’s expectations were correct. As of July 17, 2008, India remains the recipient of the largest number of loans and credits (560) and total amount of money received ($80.5 billiion in nominal dollars). It was in that context
that the substantially more limited and collaborative UNSF was also agreed in 1957.

Substance

Substantive tensions between UN system entities and the World Bank were largely about whether “development” was primarily about human “rights” or a narrower concern for economic growth.

Human “Rights” vs. Economic Investment. Much of the “social development23 and “human rights-based” approaches to development that emerged during the 1990s was foreshadowed by the General Assembly’s passage of the Universal Declaration of Human Rights on December 10, 1948. That Declaration, in turn, incorporated President Franklin Roosevelt’s “four freedoms” enunciated on January 6, 1941,24 many of the civil rights incorporated over time in the United States Constitution,24 and several other “rights” not previously articulated in international treaties.26

The Universal Declaration launched a substantial number of UN covenants meant to establish universally-accepted norms about a wide range of specific “rights.”27 Indeed, some legal scholars and other advocates of a rights-based approach have argued that state-signatories of UN human rights covenants are required to oppose any aid project, program, or policy loan within multilateral organizations of which they are a member that violates any of the rights spelled out in those covenants.28

A human rights-based approach to development has clearly not been the primary driver of successive United States government development efforts (until perhaps very recently) or those of the increasing number of multilateral development banks or the IMF. Although the difference is often exaggerated, there is no doubt that UN entities have been strong advocates of a “Human Rights” approach to development while IBRD has historically viewed such approaches as “soft” at best and “political” at worst. Nonetheless, UN calls for eliminating all forms of discrimination against women or ensuring the rights of children while supporting the idea that there is a moral responsibility to promote social progress and better standards of living in all countries provides important benchmarks against which international development efforts can be judged.

Social” Development. From the establishment of both UNESCO and the United Nations Childrens’ Fund (UNICEF) in 1946 and WHO two years later, the United Nations has been well out-front of other international development assistance agencies with respect to the inclusion of “social” aspects of “development.” Nonetheless, throughout the 1950s and 1960s almost all technical cooperation financed by members’ voluntary contributions to EPTA and other UN agencies were devoted to the education sector (Figure 2: Technical Co-operation – Evolution of Extrabudgetary Funds Utilized).29 But those efforts were limited largely to the specification of long-term strategic priorities that would require finance from other bi-lateral and multi-lateral agencies. Such financing was often provided, although there was almost always a significant lag between the UN’s specification of investment priorities and provision of necessary funds.

Indeed, the World Bank’s first education project, an IDA credit in the amount of $36 million approved on September 17, 1962 to build technical education institutes in Tunisia, both proves and disproves that observation. On the one hand, the Tunisian credit was approved following a UNESCO-led identification mission only one year after the Conference of African States on the Development of Education in Africa was held in Addis Ababa. But on the other hand, that credit was approved more than a decade after the UN began to focus significant attention on the importance of education for development. Further, although the World Bank entered into a cooperative agreement with WHO to expand access to clean drinking water and improve waste disposal and storm drainage on September 1, 1971, lending in the health sector was not authorized for almost another eight years (July 24, 1979). Most of the World Bank’s initial lending for those sectors was for the construction of facilities and supply of equipment rather than for development of curriculum, training of teachers or medical staff. Indeed, I was surprised to find when I joined the Bank in 1983 that a large component of the World Bank’s education sector staff were architects concerned with the design of primary school buildings.

Summary Conclusion

Early tensions between the UN and IBRD raise important questions about the expectation that international organizations will serve as instruments of their sovereign-state members. If that was actually the case, tensions between UN entities and the World Bank should not have existed. The membership of both the UN and IBRD was essentially the same, with the exception of the Soviet Union, Byelorussia, the Ukraine, and Hungary (and later Poland, Czechoslovakia, and Cuba). Nonetheless, powerful leadership emerged very early within the both the UN Secretariat and IBRD — and that leadership carved out substantial areas of autonomous actions for those organizations. And although the World Bank’s definition of “development” was, and remains, substantially more limited than most UN entities, it has softened considerably during the last decade or so. One result of that softening has been increasing ambiguity about the division of responsibilities among the UN, World Bank, and IMF. Echoes of that concern can be heard in Larry Summer’s Speech four decades after the period reviewed
here.

Although Robert Frost might not agree, the aphorism “fences make good neighbors” is as true as his assertion quoted above that “something there is that doesn’t love a wall,” especially where it might be necessary to demarcate areas of responsibility within newly settled organizational territories. As will be illustrated in Parts #4 and #5 of this five-fold series, that lowering of boundaries has increased tensions between those two institutional systems.

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NOTES:

[1] Except where otherwise noted, this blog post relies on World Bank, World Bank Group Historical Chronology and John Jay McCloy: 2nd World Bank President, 1947-1949; Craig Murphy, The United Nations Development Programme: A Better Way? (Cambridge, UK: Cambridge University Press, 2006); Louis Emmerij, Richard Jolly and Thomas Weiss, Economic and Social Thinking at the UN in Historical Perspective, Development and Change 36 (2005), p. 211–235; Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997); Edward Mason and Robert Asher, The World Bank Since Bretton Woods (Washington, DC: The Brookings Institution, 1973); and The World Bank/IFC, Transcript of Interview with Richard H. Demuth conducted by Robert Oliver, Archives: Oral History Program (Oral History Research Office, Columbia University, August 10, 1961). Unfortunately, the UN system as a whole has not recorded a similarly large number of staff oral histories as has the World Bank (see Emmerij, Jolly and Weiss). Therefore, there is greater reliance here on the personal recollections of IBRD staff than on UN staff.

[2] See Andrzej Abraszewski and Raúl Quijano, Relationship Agreements Between the United Nations and the Specialized Agencies: Review and Strengthening of Sections Pertaining to the Common System of Salaries, Allowances and Conditions of Service (Geneva: United Nations Joint Inspection Unit, 1993).

[3] The same World Bank Archives clarified McCloy’s position with respect to political involvements as follows: “From the outset there was much concern about the role of political considerations in the Bank’s lending decisions. The discussions at Bretton Woods had dwelt on the importance of insulating the lending decisions of the Bank from politics and ideology. McCloy realized that the Bank did not operate in a political vacuum and that the line between politics and economics was not sharply delineated. His philosophy was that the Bank would not make loans to accomplish political objectives, but it could refuse to make loans where the political uncertainties were so great as to make the loan economically unsound.”

[4] As quoted by Kapur, Lewis, and Webb, The World Bank: Its First Half Century, Volume 1. See also World Bank, Transcript of Interview with Davidson Sommers conducted by Robert Oliver, Oral History Program (New York: Columbia University, Oral History Research Office, August 2, 1961) and Transcript of Interview with Robert S. McNamara conducted by John Lewis, Richard Webb, and Devesh Kapur, World Bank History Project (Washington, D.C.: The Brookings Institution, 1991).

[5] These quotations are from the Text of the Agreement Between the United Nations and the Bank, International Bank for Reconstruction and Development (IBRD), Second Annual Meeting of the Board of Governors, Proceedings (London, September 11-20, 1947), p. 25-27 as cited in Mason and Asher, The World Bank Since Bretton Woods.

[6] Surprisingly, no common agreement exists about when the term “World Bank” first came into use. According to the World Bank’s Office of Chief Legal Counsel, one might legitimately date the introduction of that label to: (i) its first official use in the Bank’s Annual Report 1958-1959; (ii) President Truman’s use of the term in his message of September 23, 1946 to the Chairpersons of the Bank’s and IMF’s Boards of Governors; (iii) the official name of the first meeting of the IBRD and IMF Boards of Governors during March 1946 as the “World Fund and Bank Inaugural Meeting” and related news stories employing the term “World Bank;” or (iv) the earliest reference of all to the “World Bank” in an Economist article dated July 22, 1944. See World Bank, About the World Bank, Law and Development.

[7] As only one example, both IBRD and the IMF were represented by the same person, Dr. Ching Chun Liang, at the first session of the newly formed Economic Commission for Asia and the Far East in Shanghai, China well before IBRD’s “Declaration of Independence” was negotiated. However, it is worth noting that by the second session in Baguio, The Philippines, they were represented separately; IBRD by Raoul de Sercey and the Onternational Monetary Fund by Dr. Wang Yuan-Chao; see Economic Commission for Asia and the Far East, Annual Report to the Sixth Session of the Economic and Social Council: First Session, Shanghai (16 June 1947 to 25 June 1947) [and] Second Session, Baguio (24 November 1947 to 6 December 1947) (Bagio, The Philippines: Economic Commission for Asia and the Far East, December 1947).

[8] Also see UNESCO: 50 Years for Education (Paris: United Nations Education, Social, and Cultural Organization, 1997) and Technical Cooperation Programs – Evolution of UNDP, Encyclopedia of the Nations.

[9] This was one of President Harry Truman’s “Four Points” set forth in his Inaugural Address on January 20, 1949. The first three points were: “First, we will continue to give unfaltering support to the United Nations and related agencies, and we will continue to search for ways to strengthen their authority and increase their effectiveness…. Second, we will continue our programs for world economic recovery. This means, first of all, that we must keep our full weight behind the European recovery program…. Third, we will strengthen freedom-loving nations against the dangers of aggression. We are now working out with a number of countries a joint agreement designed to strengthen the security of the North Atlantic area….

[10] See also Kenneth Auerbach and Yoshinobu Yonekawa, The United Nations Development Program: Follow-Up Investment and Procurement Benefits, International Organization 33 (Autumn, 1979), p. 509-524.

[11] From this point forward, Chapter 8 of Maggie Black’s book, The Children and the Nations: The Story of Unicef (New York: United Nations Children Fund, 1986) is also a key source.

[12] Louis Halle, On Teaching International Relatons,” Virginia Quarterly Review, 40 (Winter 1964) as cited by Murphy.

[13] IBRD was no doubt reassured by the UN Secretariat’s apparent acceptance of limits on the scope of its activities, as demonstrated by its critical response to the Introduction written into the Economic Commission for Latin America’s first Economic Survey of Latin America on the grounds that it included references to subjects beyond its mandate, including “development, industrialization, terms of trade, and many other things that ECLA is not supposed to deal with;” as cited by Murphy. See also Louis Emmerij and Gert Rosenthal, UN Regional Contributions: Latin America and the Caribbean.

[14] Examples include joint missions with FAO including the Bank’s first sector study (in this specific case an agricultural sector survey mission to Uruguay) that departed Washington, DC on October 13, 1950; an agriculture mission to Chile on May 26, 1951; and another agriculture sector survey mission to Peru on June 25, 1958.

[15] With reference to the argument presented in a previous blog post, it is interesting to note the following information provided by Craig Murphy: “….when the Special Fund was in its infancy Singer sent Owen a paper linking ‘pre-investment,’…to distinguish the role of the nascent organization, with the new theory of development articulated in a series of Cambridge lectures by W.W. Rostow, an advisor to Senator Kennedy. At the first of Rostow’s five ‘Stages of Development,’ ‘Traditional Society,’ Singer argued that governments needed broad assessments of resources to help shape sensible requests for technical assistance. At the next stage (the ‘transitional state’), surveys of specific resources and the development of large industrial projects, the basis of requests for large investment, would be desirable. At the stage of ‘Take-off,’ investigations into potential macroeconomic bottlenecks and the design of critical investments to reduce them were essential. In short, the combination of Singer’s and Rostow’s ideas would provide a persuasive argument for building on EPTA’s capacity and for convincing major donors and the World Bank that extensive development financing could be used soundly.” See also, Eric Toussaint, Banque Mondiale: Le Coup d’Etat permanent (Liège: CADTM-Syllepse-Cetim, 2006), Chapter 3 translated into English by Judith Harris as Difficult Beginning Between the UN and the World Bank, and that from this point forward is also a key source.

[16] See also UNESCO: 50 Years for Education.

[17] IBRD’s first “reconstruction” loan was approved in the amount of about $2.5 billion in constant 2010 dollars (half of the requested amount) on May 9, 1947 to France for general budget support; i.e., in the words of the World Bank itself: “This loan, the very first, deviated from what was to be the standard pattern for loans: it was not for a specific project, but rather a general purpose loan, covering almost every sphere of activity in industrial life.” That was followed three months later (August 7, 1947) by the Bank’s first loan to The Netherlands for a reconstruction project ($2 billion) followed rapidly by another reconstruction project loan to Denmark on August 22, 1947 ($402 million) and a loan of $121 million to Luxembourg for a steel mill and railway project six days later. By the following year, IBRD was characterizing its loans to Europe as “post-reconstruction,” the first of which was to four Dutch shipping companies on August 9, 1948 in the amount of $121 million. IBRD’s first “development” loan, approved on March 25, 1948 followed the four earlier “reconstruction” loans to France, The Netherlands, Denmark, and Luxembourg. That loan approved on March 25, 1948 provided $148 million for hydroelectric and irrigation projects in Chile, followed within the next twelve months by IBRD’s first sector loan on January 7, 1949 for an Electric Power Development Project in Mexico ($216  million) and a power and telephone project approved on January 27, 1949 in Brazil ($672  million). The above quotation is from World Bank, John Jay McCloy: 2nd World Bank President, 1947-1949.

[18] The last loan to a western European country was to Portugal for a “Regional Development Project” on April 11, 1989 in the amount of $90 million. In addition, three southern European countries continued to borrow throughout the 1970s: Greece, Romania, and Yugoslavia.

[19] It is worth noting here that the general sentiment among Latin American governments was that they had supported European “reconstruction” during the immediate post-war period and that Europe’s successful recovery “meant that their own children’s needs were now as, or more pressing than, those of Europe;” Maggie Black, The Children of the Nations: The Story of UNICEF (New York: United Nations Children’s Fund, 1986) quoting Roberto Oliveria de Campos of Brazil.

[20] See also D. John Shaw, Turning Point in the Evolution of Soft Financing: The United Nations and the World Bank, Canadian Journal of Development Studies / Revue Canadienne d’Etudes du Developpement 26 (2005), p. 43-61.

[21] Richard Jolly in his obituary of Sir Hans Singer (The Guardian, Wednesday 1 March 1, 2006) recounts the following story: “In the 1950s, as secretary to the committee which recommended the creation of a UN fund for economic development, Singer did much of the technical work to create a soft-loan facility for poor countries. The fund was to be called by the acronym Unfed, until Singer pointed out how unfortunate a name this would be. So, as he delighted in telling, it became Sunfed, the Special UN fund.

[22] World Bank, Transcript of interview with Davidson Sommers (1961).

[23] See
also the Copenahgen Declaration on Social Development and Programme of Action of the World Summit for Social Development
adopted at the Copenhagen Summit on Social Development during March 1995.

[24] The “Four Freedoms,” enunciated in President Roosevelt’s Annual Message to Congress on January 6, 1941, are: “The first is freedom of speech and expression–everywhere in the world. The second is freedom of every person to worship God in his own way–everywhere in the world. The third is freedom from want–which, translated into world terms, means economic understandings which will secure to every nation a healthy peacetime life for its inhabitants-everywhere in the world. The fourth is freedom from fear–which, translated into world terms, means a world-wide reduction of armaments to such a point and in such a thorough fashion that no nation will be in a position to commit an act of physical aggression against any neighbor–anywhere in the world.Transcript of President’s annual message to Congress (January 6, 1941), Records of the United States Senate; SEN 77A-H1; Record Group 46 (Washington, DC: United States National Archives and Records Administration).

[25] I have identified a few examples of consistency between “human rights” articulated in the UN Universal Declaration (UNUDHR) and “civil rights” included in the United States Constitution (USC), as follows: (i) UNUDHR Article 4/USC 13th Amendment; UNUDHR Article 5/USC 4th Amendment; UNUDHR Article 7/USC 14th Amendment; UNUDHR Article 11(1)/USC 5th Amendment; and UNUDHR Articles 18 & 19/USC 1st Amendment. There are additional consistencies and I invite readers to try and find them.

[26] Examples of new “rights” established by the UNUDHR include, but are not limited to, “the right to marry and to found a family…[based on] onlythe free and full consent of the intending spouses [Article 16(1,2)]…; the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment [Article 23(1)]; the right to equal pay for equal work [Article 23(2)]…; the right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay [Article 24]; the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control [Article 25(1); and] the right to education…[that] shall be free [through] at leastthe elementary and fundamental stages…[that] shall [also] be compulsory….”

[27] Perhaps the two most important implementing covenants are the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights. Many UN delegations had originally expected that EcoSoc would prepare a single follow-up Covenant on Human Rights that would provide a mechanism for individual citizens to “write to” the UN Human Rights Commission to complain of any government’s violation of “rights” established by the Universal Declaration. But a schism arose between some member-states that were most interested in civil and political rights, including the United States, and some others more interested in economic and social rights. A diplomatic summary of that dispute was provided in speech by Eleanor Roosevelt, spouse of the deceased American President Franklin Delano Roosevelt and elected head of the UN Human Rights Commission from 1946 to 1952 (Statement on Draft Covenant on Human Rights, Department of State Bulletin, (December 31, 1951). In the event, EcoSoc’s draft follow-up agreement was split into two separate covenants, as referenced above. Those two convenants were negotiated and adopted by the General Assembly on December 16, 1966 with the hope that they would give practical effect to the Declaration. However, although the United States representative signed both covenants on October 5, 1977, the United States Senate did not ratify the one on civil and political rights for another fifteen years (June 8, 1992) while it still has not yet ratified the other one partly because some American Senators originally expressed the view that some its clauses are “communistic.” Other key UN Human Rights treaties, including whether or not they have been signed or ratified by the United States, are listed here:

According to the Human Rights Web, all countries have ratified at least one of the “core” UN human rights treaties, and 80% have ratified four or more. All international treaties registered with the UN Secretary-General as required of all UN member-states, whether or not the treaty is initiated or adopted by a UN organ, is available at the United Nations Treaties Database.

[28] See, for example, Globalising Economic and Social Human Rights by Strengthening Extraterritorial State Obligations published jointly by Brot für die Welt (Bread for the World, Stuttgart), FIAN – Deutschland. e.v. (Cologne), FIAN – International (Heidelberg), and Evangelischer Entwicklungsdienst e.v. (Church Development Service, Bonn) during October 2006.

[29] Examples of UN TA for education included sponsorship of the Inter-American Seminar on Overall Planning for Education (Washington, DC, June 1958); the Regional Meeting of Representatives of Asian Member States on Primary and Compulsory Education (Karachi, 28 December 28, 1959-January 9, 1960); and the aforementioned Conference of African States on the Development of Education in Africa (Addis Ababa, May 15-25, 1961); see UNESCO, Elements of Educational Planning (Paris: United Nations Economic, Social, and Cultural Organization, nd).


THE UN SYSTEM & WORLD BANK GROUP #1: SIMILARITIES & DIFFERENCES

March 17, 2011

Increasingly in recent times we have come first to identify the remedy that is most agreeable, most convenient, most in accord with major pecuniary or political interest, the one that reflects our available faculty for action; then we move from the remedy so available or desired back to a cause to which that remedy is relevant. John Kenneth Galbraith (1908-2006)

On Again, Off Again (Personal Reminiscences)1

It was 1982. I was in Sierra Leone as a World Bank short-term consultant. This was the Bank’s first joint agriculture sector review mission with the International Fund for Agricultural Development (IFAD). This assignment also represented several firsts for me as well. It was my first direct encounter with a UN System agency, my first participation in a World Bank mission, my first visit to West Africa, and my first involvement in long-term sector policy assessment and formulation.

I soon discovered that our IFAD colleagues were worried that Bank staff would ignore their desire to consult directly with smallholder farmers at the village level. But that turned out not to be the case and, as an outsider to both IFAD and the Bank, I found little difference in either style or focus between the staff of those two agencies.

Although I was not aware of it at the time, this collaboration with IFAD was evidence of a shift in World Bank attitudes toward United Nations (UN) agencies.  It also signified a growing interest in more participatory approaches, even if by only a small number of Bank staff. And unbeknownst to me, that had been the reason I had been employed by the Bank for this mission.

About eighteen months later (1984), I was hired as the World Bank’s first Institutional Development Specialist and assigned to a new Institutional Development, Technical Assistance, and Training projects division within what was then the Eastern and Southern Africa regional vice-presidency. There again I found an interesting sign of collaboration between the World Bank and the UN. That collaboration took the form of a United Nations Development Programme (UNDP) staff-unit embedded within our projects division. Indeed, the “training” designation in our Division’s title referred to that unit. I confess that I never really understood then nor do I know now what my UNDP colleagues actually did. All I knew was that, although their offices were integrated with ours, they attended our staff meetings, and were evaluated by our projects division chief, they actually had their own portfolio of activities, retained their status as UNDP staff, and were paid by UNDP. And about three years later the unit was dissolved, staff were reassigned either to UNDP headquarters in New York or to that agency’s field offices.

I did not have occasion to interact with any UN agency again until sometime during 1989 when I approached UNDP with a request for financing. Requests to UNDP or other UN entities for grant financing by World Bank staff were rare, but not completely unknown. In this case, I had proposed and received permission to launch a relatively low-cost effort to “develop local consulting capacity in Africa.” But that approval had come with a catch. Although I would have about twenty percent of my time released at the Bank’s expense, I would need to find grant financing for the actual activities elsewhere. So I prepared a draft scope of work and drafted a cover letter for my regional Vice-President to sign and send to several possible sources of grant financing. The only positive responses were from UNDP and the Netherlands Ministry of Foreign Affairs, together pledging about $650 thousand. I naively thought that once the two memoranda of  understanding had been signed, the money would be released and I could proceed. But of course, that was not the case. The formal agreements still needed to be negotiated separately and appropriate paperwork prepared and  signed before any money would actually be transferred to the World Bank trust fund account established for this specific activity. And as busy as I was with my normal tasks within the Bank, it appeared that my colleagues in The Hague and New York were even busier. A brief visit to the Ministry in The Hague did the trick there. But it soon became clear to me that a truly understaffed office in New York was attaching a relatively low-priority to the processing of the necessary paperwork and, therefore, the UNDP money might never be actually available. As they explained, it was not that they didn’t want to do it, but they didn’t have the staff-time to do it.

So I invited myself to New York, asked them for an office, and examples of paperwork previously completed for other trust fund arrangements and, with their permission, typed the letters required on UNDP letterhead and personally collected the four or five required signatures so that the letters could be sent to my Managers at the Bank; all of which was completed in one full day. Only a few days later, that signed paperwork arrived in Washington, DC, the trust fund was established, and the money was transferred. I tell this story not to embarrass anyone in UNDP those many years ago, but rather to illustrate the fact that degrees of collaboration between agencies like the World Bank and UNDP are not simply a function of policy, but of the relative priorities and incentives among managers and staff of collaborating organizations.

My next encounter with a UN agency was indirect, even if a bit disconcerting. Although I am a political scientist, my advocacy and modeling of participatory approaches led to my assignment in 1995 as Manager of the “UNDP-World Bank Water and Sanitation Program” (WSP) unit for the “East Asia and Pacific Region” (WSPEAP) headquartered in Jakarta. Established in 1979 as a partnership between UNDP and the World Bank, the WSP was an early example of international consortia managed by the World Bank with regular World Bank staff but financed by grants from multiple donors; the most well-known of which is probably the Consultative Group on International Agricultural Research (CGIAR) established eight years before. However, although largely financed by UNDP during its earlier years as a program to develop and test very low-cost hand pump and latrine designs suitable for local manufacture, it had shifted by the early 1990s to the design and implementation of small-scale pilot projects meant to demonstrate the efficiency of demand-driven approaches to the design and implementation of projects for provision of safe water and effective sanitation to poor people.

By the time I came aboard in 1995, UNDP headquarters was no longer providing core financing, although individual UNDP country-programs did continue to finance some WSP pilot projects. Financing for our Program in East Asia was provided primarily by the Australian, Swedish, and Swiss bi-lateral aid agencies and from within the World Bank itself as our approach was increasingly incorporated into the design of the Bank’s larger loan or credit financed projects. My satisfaction as a regular World Bank staff with the increasing integration into mainstream World Bank operations was off-set by our apparent inability to establish effective collaboration with other UN system organizations, especially UNICEF’s separate water and sanitation program in the Lao Peoples’ Democratic Republic.

Although UNDP had been heavily involved in the original establishment of the WSP, UNICEF’s own discrete water and sanitation projects were designed and implemented by its own separate staff that were also resident in many of the same countries as UNDP. And despite similar demand-driven approaches to expanding water and sanitation facilities and services to the rural and urban poor, both groups viewed each other as competitors rather than collaborators. Our own Country Program Officer in Vientiane was bedeviled by what he viewed as UNICEF’s successive rejections of overtures to establish closer operational collaboration. However, although maintaining friendly diplomatic relationships with the UNICEF resident office in Vientiane was valuable, it soon became apparent to me that actual collaborative planning and/or implementation was unlikely because our respective institutional incentives pulled us in separate directions. Both groups were scrambling for money from the same bi-lateral donors and staff were not likely to be promoted on the grounds that they deferred to another organization in the interests of greater overall efficiencies. Eventually, our nominally shared UN system identities disappeared as UNDP financing of the joint program ended and the official name of the Program was ultimately changed to “The Water and Sanitation Program” (WSP) in April 2000 to better reflect the multi-donor nature of its financing. Nonetheless, although UNDP no longer finances the Program, its representative continues to serve on its Program Council.2

Introduction3

The conventional expectation at the end of World War II was that the new International Bank for Reconstruction and Development (IBRD) would focus primarily on providing financial support to member-states while the United Nations (UN) concentrated on global collective security. Nonetheless, it was also expected that IBRD would operate within a broader policy context coordinated by the UN, as implied in Article V of its Articles of Agreement:

The Bankshall cooperate with any general international organization and with public international organizations having specialized responsibilities in related fields…. In making decisions on applications for loans or guarantees relating to matters directly within the competence of any international organizationparticipated in primarily by members of the Bank, the Bank shall give consideration to the views and recommendations of such organization.

True, that single Article is not as specific as the multiple provisions specifying the role of the Economic and Social Council (EcoSoc) within the UN Charter. But there is also other evidence that IBRD was expected to operate within the broader mandate of the UN.
One example is provided by the active lobbying by several Latin American delegations in San Francisco for expanding EcoSoc’s power and responsibilities as a direct channel for post-war financial aid to non-European states,4 a position directly opposed by the Soviet Union’s view that the UN should limit itself to ensuring “collective security” and not much else.5 However, the Latin Americans prevailed as EcoSoc was explicitly tasked with consideration, coordination, and recommendation of proposed economic and social activities (Articles 61-72). But that victory was ultimately incomplete — and therein lays a tale.

The telling of that tale will be presented in a series of five separate blog posts. This first post provides a summary comparison of the UN System and World Bank Group. Part #2 (“Building Walls”) presents the story of their relations during the period from 1946 through the 1950s. Part #3 (“Mending Fences”) extends the story to the evolution of the relationship during the 1960s and 1970s. Finally, Part #4 (“Tensions Re-Emerge”) summarizes relations during the 1980s and 1990s while Part #5 (“Older and Wiser?”) focuses on the period since the year 2000.

Similarities & Differences

The overall structure of the United Nations System and World Bank Group has been described in previous posts. Both of those groups have expanded exponentially since their creation. Given that both the UN and World Bank were born from the same parents almost simultaneously, the extent of differences among organizations both within and between those two broad institutional systems is surprising:

  1. Although membership in all entities within the UN System and World Bank Group is limited to sovereign- states, all members of the United Nations General Assembly are not necessarily members of IBRD (or other World Bank subsidiary bodies or specific UN specialized agencies);
  2. Although sovereign-state members are represented by their respective governments within UN System and World Bank Group entities, different agencies within those governments represent them in those different international bodies (for example, [i] ministries of foreign affairs generally represent their governments in the General Assembly and Security Council, [II] bi-lateral development agencies, ministries of external affairs, or sector-specific line ministries normally represent them in specialized agencies, and [iii] ministries of finance or central banks normally represent them in the World Bank and International Monetary Fund [IMF]);
  3. Although informal agreements existed that the Administrator of the United Nations Development Programme (UNDP) and the President of the World Bank should both be Americans,6 a wide range of other nationalities have always served in the highest leadership position of other UN specialized agencies;
  4. Although senior leaders within both systems stressed the importance of “country-knowledge” among staff, the UN system began posting Resident Representatives to client countries very early-on while the World Bank continues to rely primarily on staff and consultants dispatched from its Washington headquarters; and
  5. Although the UN system fairly rapidly expanded its interests in international development assistance and capacity to provide it, the attention of its overall leadership and Secretariat staff remains focused on, in the words of Craig Murphy, “matters of international high politics.”7

In addition to the differences summarized above, three others are even more fundamental: (1) their respective decision-making structures; (2) their sources of finance; and (3) the terms under which development assistance is provided.

Decision-Structures

It is generally well understood that the United Nations General Assembly operates on the principle of “one country, one vote” without regard to the different amount of dues paid by each individual member-state. That is also true of all other UN “principal organs” except for the Security Council where China, France, Russia, the United Kingdom, and the United States each have an absolute veto. Less well understood is that decision-making structures vary among UN specialized agencies, including the World Bank Group and IMF.

It is impossible to describe that entire range of variation among UN System agencies within this blog post. But in broad terms, there are three broad decision-making arenas within the UN and World Bank Group systems. The first two are the “principle organs” of the United Nations where decisions made by individual member-states are directly represented and the various “secretariats” where the professional leadership and staff of UN subsidiary bodies and specialized agencies make operational decisions themselves.8 The third arena is found primarily within the walls of the World Bank’s headquarters in Washington, DC where, although officially part of the United Nations system, decisions are independently made by its middle and senior managers.9 With that three-fold classification in mind, the remainder of this blog post focuses primarily on the relationship between UNDP and its predecessor agencies on the one hand with IBRD and the International Development Association (IDA) on the other hand.

Financing Development Assistance

Most welfare and development-oriented UN entities provide assistance as grants. Although grants do not require repayment, some cost-sharing is almost always required of recipient governments. Nonetheless, because most UN activities are financed by grants it is most often limited to provision of technical assistance or training.

Although a few, relatively small, grants are sometimes provided by the World Bank, the overwhelming majority of its finance is provided by IBRD in the form of “loans” at or near market interest rates and zero-interest concessional “credits” provided by IDA. Differences between IDA and IBRD are limited to: (1) sources of finance; (2) eligibility for finance; and (3) fees charged borrowers and terms of repayment. The principal amount of IDA credits must eventually be paid back, but only a small fee of half of one percent is charged, there is normally a ten-year grace period before repayment begins, and full repayment is extended for twenty to thirty years beyond that. Since 1970 (the date from which adequate time-series data is available), World Bank financing has been substantially larger than that provided by the UN’s largest agencies.

According to the World Bank’s current classification scheme, member-countries are eligible to borrow from IDA only if their per capita income was less than $1,165 during 200910 and they are not sufficiently credit-worthy to borrow from IBRD. That means that only countries classified as “lower-income” plus a few at the very lowest end of the “lower middle income” range might be eligible. Member-states with per capita incomes above $1,165 but less than $12,196 are eligible for IBRD loans. “High income” member-states with incomes of above $12,195 are not eligible for any borrowing from the World Bank. A few lower middle-income “blend” countries like India and China have been allowed to maintain a mixed-status allowing access to borrowing some combination of IBRD loans and IDA credits that effectively lower the aggregate amount of interest they are charged.

Sources of Finance

Financing formulas and arrangements vary substantially among different United Nations organizations and commissions.  A very brief comparison of the way the UN General Assembly, UNDP, UN Specialized Agencies, IBRD, and IDA are financed is provided below.

UN General Assembly Authorized Core Budget & Peacekeeping. UN member-states are assessed dues for three-year periods. Dues range from a maximum “ceiling” of twenty-two percent of the total core budget to a minimum “floor” of only 1/1,000th of one percent based primarily on estimates of each member’s gross national income (GNI). Since the founding of the UN, the United States has been the only country whose dues are levied at the maximum rate; from at least fifty percent of the UN’s regular core budget in 1945 to one-third in 1955 and twenty-two percent of the UN’s 2010 core budget.11

UNDP. As a subsidiary body of the United Nations General Assembly, the UN’s regular core budget subsidizes a small percentage of its total expenditures. The remainder is raised directly through direct negotiations with UN member-states. At the time that UNDP’s predecessor Extended Programme of Technical Assistance (EPTA) was established in 1949, its leadership understood that its financial survival required two things: (1) continued voluntary support by the United States, including by both Congress and the President, and (2) increasing contributions by Scandinavian countries, especially Sweden, that had escaped relatively unscathed from World War II. Therefore, it is not surprising that the United States voluntarily contributed a full sixty percent of its budget in 1949 and declined only slowly to fifty percent by 1958 at the dawn of the de-colonization era. Nonetheless, by 2004, the United States contribution had declined to only about twelve percent of what had become the UNDP budget.

UN Specialized Agencies. By contrast with subsidiary organs like UNDP, specialized agencies are not normally subsidized even in part by the UN’s regular core budget. Instead, they negotiate the amount of dues with each of their own member-states directly. In addition, several agencies like UNICEF also raise funds from both public and private sources. Some agencies also contract their services directly to individual member-states; as UNESCO, UNICEF, and WHO did to the United States Government in Iraq during 2003 and 2004.12

IBRD. By contrast to all UN principal organs (other than the Security Council), subsidiary bodies, and almost all other specialized agencies, World Bank Group entities and the IMF employ a weighted voting system whereby the share of total votes held by each individual member-state is determined by their relative share of subscribed capital. Nonetheless, the actual voting power of individual member-states varies within each of the Bank Group’s five entities.

With specific respect to IBRD, the minimum number of shares assigned to each member is tied to the financial “quota” that state is required to deposit with the IMF.13 Because the voting power of original and early members of the Bank (Articles of Agreement, Article V) has declined as the number of member-states has increased, the United States’ share of total IBRD votes has been dramatically reduced from the thirty-seven percent of the total in 1944 to today’s sixteen percent (click below for Figure 1).

Figure 1 – WB Voting Shares (1947-2005)

The primary difference between the manner in which the United Nations, IMF, IDA, and IBRD are financed is that, unlike all those others, IBRD member-states are not required to pay-in the full amount of their capital subscriptions. Instead, the overwhelming bulk of IBRD’s resources come from borrowing in the private sector financial markets (Article IV), the collateral for which are the financial guarantees by its sovereign-state members that their unpaid capital subscriptions will be available if required to meet the Bank’s obligations (Article II). Although available, calls on unpaid capital subscriptions have never been necessary. Indeed, the Bank has always posted an annual profit. In 2007, that profit exceeded $1.65 billion.14 That, in turn, has enabled IBRD to provide substantial funding in its own right to IDA and various other multi-donor trust funds managed by the Bank. Because the bulk of IBRD financing is raised through the private sector bond market, the need to establish and maintain a superior credit rating among international private investors has been critical to the IBRD’s financial success. Indeed, IBRD’s “first bonds, issued  in July 1947, were substantially oversubscribed.” According to the private non-profit Bank Information Center (BIC), the IBRD had by 2008:

paid-in capital of US$11.5 billion and callable capital of US$178 billion…. [and] with capital backing of nearly US$200  billion from its member governments.., [had a] “AAA” credit rat[ing] and [is able to on-]lend those funds to  borrowers at rates slightly below those offered by commercial lenders.15

IDA. IDA was established in 1960 for reasons that will be discussed in Part #2 of this five-part series. Although it operates under the terms of  its own Articles of Agreement, it is actually a fund rather than a separate organization. Indeed, the managers and staff of IBRD and IDA are exactly the same. The procedures for identifying, appraising, supervising, and evaluating IDA credits are also the same. As a separate fund, IDA is financed primarily by contributions from its members pledged approximately every three years during “replenishment rounds;”16 the seventeenth of which begins during 2011. Those funds are also supplemented by repayment of previous IDA credits and direct contributions from IBRD profits. Although not very large to date, those repayments will increase as IDA’s very long-term repayment periods are increasingly reached over future years. As in the case of IBRD, voting within IDA is weighted according to the number of shares subscribed, but the amount of shares subscribed is entirely voluntary.17 Because all members of IBRD are not also members of IDA18 and the number of shares is voluntarily subscribed, the share of votes held by each member-state varies from those exercised within IBRD. Thus, while the United States currently holds only sixteen percent of votes within IBRD, it holds eleven percent of votes within IDA.19

Summary Conclusion

As will be illustrated in subsequent parts of this five-fold series, different sources of finance, membership, and voting formulas account for many of the different priorities and behaviors among UN and World Bank organizations rather than different moral principles. Differences in financial sources limited UN system entities largely to technical assistance and education assistance while enabling the World Bank to provide substantial capital for large-scale infrastructure development. As will be demonstrated in the following four parts of this series, those different capacities led their respective organizations in different directions. As only one example, while UNICEF was established in 1946 and WHO two years later, the World Bank did not begin to finance projects in the education and health sectors until 1962 and 1979 respectively (click below for data provided in Figure 3).

Figure 3 — UN/WB Comparisons: Macro-Organizational & Thematic (1947-2011)

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NOTES:

[1]All “Personal Reminiscence” posts are stories told about one or more of my own personal experiences as I remember it. They are true to the best of my ability to recollect them and reflect my view of how they illustrate “lessons learned” from that experience even if one or another aspect of the story as told might not be completely correct in each and every detail. Further, I have done my best to disguise the identity of other persons referred to in these stories, including not using their true names unless references to their presence at that time or circumstance has already been published by others in other media.

[2] WSP’s current donors include Australia; Austria; Canada; Denmark; Finland; France; Ireland; Luxembourg; Netherlands; Norway; Sweden; Switzerland; United Kingdom; United States; The World Bank; and the Bill & Melinda Gates Foundation.

[3] Louis Emmerij, Richard Jolly and Thomas G. Weiss point out that “there is no comprehensive history of the United Nations (UN), either institutional or intellectual…. [even though] several specialized agencies have written or are in the process of writing their institutional histories.” That contrasts with the publication of two large histories of the World Bank, both of which were sponsored by the Bank to commemorate its 25th and 50th anniversaries (Edward Mason and Robert Asher, The World Bank Since Bretton Woods [Washington, DC: The Brookings Institution, 1973] and Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, two volumes [Washington, DC: Brookings Institution Press, 1997]), and the employment of an in-house historian who ensures the capture of its place in history with regular publications (for example, James Boughton, Silent Revolution: The International Monetary Fund 1979–1989 (Washington, DC: International Monetary Fund, 2001). See Louis Emmerij, Richard Jolly and Thomas G. Weiss, Economic and Social Thinking at the UN in Historical Perspective, Development and Change 36 (2005), p. 211–235.

[4] Latin American delegations argued forcefully that EcoSoc’s authority to “recommend” development projects and policies should be understood to have the force of a directive or veto with respect to the decisions of any UN subsidiary or specialized agency. They formulated that position following the Inter-American Conference on the Problems of War and Peace at the Chapultepec “Castle” in Mexico City from February 21 to March 8, 1945 in response to the United States delegation’s statement that its priority for post-war financing – and by extension the IBRD’s priority as well — would be the reconstruction of Allied European economies rather than development of Latin American economies that had largely stagnated during the War. See the Declarations on Reciprocal Assistance and American Solidarity, known as the “Act of Chapultepec,” see United States Army Information School, “Pillars of Peace in Documents Pertaining to American Interest in Establishing A Lasting World Peace: January 1941 – February 1946 (Carlisle Barracks, Pa.: Army Information School Book Department, May 1946). Also see Jean Krasno, A Step Along an Evolutionary Path: The Founding of the United Nations, Global Dialogue 2 (Spring 2000); Colombia’s Resolution on Aggression Introduced at Inter-American Conference; New York Times (February 23, 1945); Harry S. Truman Library and Museum, Reminiscence of William Sanders, written responses to questions as part of Oral History Project (August, 1975); and Jerry Mark Silverman, An International Economic History of Latin America & The Caribbean in Jose de Arimateia da Cruz and Eduardo Gomez (ed.), Latin America in the New International System: Challenges and Opportunity (Boston: Pearson Custom Publishers, 2005), p. 57-96.

[5]See Harry S. Truman Library & Museum, Oral History Interview with August Maffry, interview conducted by Richard D. McKinzie as part of Oral History Project (January 19, 1973).

[6] The informal agreement with respect to the World Bank Group is still apparently in effect, although increasing noises are made to end it. The informal agreement with respect to UNDP ended with the appointment of Mark Malloch Brown, a citizen of the United Kingdom and at the time the World Bank’s Vice-President for both External Affairs and United Nations Affairs, as UNDP’s 6th Administrator on April 23, 1999. He was the first UNDP Administrator who was not a United States citizen to serve in his own right since the establishment of UNDP in 1966. He was succeeded by Kemal Dervis, a citizen of Turkey and also former World Bank Vice-President, in  August 2005 and by Helen Clark, former Prime Minister of New Zealand on April 17, 2009.

[7] Louis Emmerij, Richard Jolly, and Thomas Weiss assert that “…UN secretaries-general basically confirm that political and security crises tend to fill all the available time, and that economic and social issues assume a lower priority.” They quote Javier Perez de Cuellar, UN Secretary-General from January 1, 1982 to December 31, 1991, to bolster that statement: “Coming from the Third World, I was especially unhappy during my ten years as Secretary-General with the failure of the United Nations to work as a system more effectively for economic and social development . . . It can be persuasively argued that, over the years, there has been inadequate leadership on the part of the Secretary-General and the UN Secretariat in placing the United Nations in the forefront of economic thinking . . . Moreover, the political and administrative demands on the Secretary-General have always come first. See Louis Emmerij, Richard Jolly, and Thomas Weiss, Economic and Social Thinking at the UN in Historical Perspective, Development and Change 36 (2005), p. 211–235. Javier Perez de Cuellar’s quote is from his Pilgrimage for Peace (New York: St Martin’s Press, 1990) while Craig Murphy’s quote is from The United Nations Development Programme: A Better Way? (Cambridge, UK: Cambridge University Press, 2006). A history “commissioned by UNDP” that is nonetheless “an independent publication” in which the “views expressed do not necessarily reflect the views of the United Nations Development Programme.

[8] The identification and formulation of two of these four “arenas” is borrowed from Louis Emmerij, Richard Jolly and Thomas G. Weiss who differentiate within the UN system between the “arena where states make decisions” and “the leadership and staff of international secretariats.” See Louis Emmerij, Richard Jolly and Thomas G. Weiss, Economic and Social Thinking at the UN in Historical Perspective, Development
and Change
36 (2005), p. 211–235 and Thomas Weiss, David Forsythe, and Roger Coate, The United Nations and Changing World Politics 4th edition (Boulder, CO: Westview Press, 2004).

[9] For reasons discussed in a forthcoming blog post (“From United States to World Bank Dominance”), the World Bank’s executive directors do not significantly affect World Bank Group decisions.

[10] The IDA-eligible per capita income ceiling is recalculated by the World Bank on July 1st of each year using its Atlas method.

[11] For illustrative purposes, the top ten member-state assessments for the UN regular core budget for 2005-2007 (the most recent year for which I could find data) were: United States (22.0%); Japan (19.5%); Germany (8.7%); United Kingdom (6.1%); France (6.0%); Italy (4.9%); Canada (2.8%); Spain (2.5%); China (2.1%); and Mexico (1.9%); United Nations, Questions and Answers about the United Nations (June 30, 2006). See also the United Nations Association of the United States of America, U.S. Dues and Contributions.

[12] I have personal knowledge of UNESCO’s, UNICEF’s, and WHO’s participation in that part of the Coalition Provisional Authority’s program administered by USAID in Iraq for only the years 2003 and 2004. I do not know how long they individually or collectively continued that involved beyond April 2004.

[13] According to IBRD’s Articles of Agreement (Article IV), “each member shall have two hundred fifty votes plus one additional vote for each share of stock held.” See also World Bank, Voting Powers, Board of Directors.

[14]Bank Information Center (BIC), World Bank (IBRD & IDA).

[15]Ibid.

[16] Article III of IDA’s Articles of Agreement suggests that replenishments will occur “approximately five years” apart, but in fact several member-states have refused to make commitments beyond three years at a time.

[17] According to IDA’s Articles of Agreement (Article VI), “each original member shall, in respect of its initial subscription, have five hundred votes plus one additional vote for each $5,000 of its initial subscription.”

[18] As of June 25, 2010, IDA’s total membership consisted of 170 sovereign-states equivalent to 91% of IBRD’s total membership of 187. The 17 IBRD members that have not joined IDA to date are: Antigua and Barbuda; Bahrain; Belarus; Brunei; Bulgaria; Jamaica; Lithuania; Malta; Namibia; Qatar; Romania; San Marino; Seychelles; Suriname; Turkmenistan; Uruguay; and Venezuela.

[19] See International Bank for Reconstruction and Development, Management’s Discussion and Analysis, The World Bank Annual Report 2010 (June 30, 2010).

Keywords: agriculture, Argentina, Asia, August Maffry, Australia, Austria, Bank Information Center, BIC, Bill and Melinda Gates Foundation, Blend countries, Canada, capacity-building, CGIAR, Chapultepec Conference, China, Coalition Provisional Authority, collective security, Community-based social development projects, Consultative Group on International Agricultural Research, consulting capacity in Africa, Craig Murphy, credits, David Forsythe, Decade for Deserts and the Fight Against Desertification, Decade for Disabled Persons, Decade for Eradication of Poverty, Decade for Industrial Development in Africa, Decade for Sustainable Development, Decade for Women, Decade for World’s Indigenous People, Decade to roll back malaria in developing countries, particularly in Africa, Denmark, Department for International Development, development banks, development corporations, DFID, East Germany, Eastern Europe, Economic and Social Council, EcoSoc, education, Egypt, EPTA, FAO, Finland, First Development Decade, Food and Agriculture Organization, Fourth Development Decade, France, General Assembly, Germany, health, Harry S. Truman Library and Museum, Helen Clark, Human Development Reports, IARD, IBRD, IBRD Articles of Agreement, ICSID, IDA, IDA Articles of Agreement, IFAD, IFC, ILO, IMF, industry, Inter-American Conference on the Problems of War and Peace, integrated rural development projects, integrated urban development projects, International Bank for Reconstruction and Development, International Centre for Settlement of Investment Disputes, international civil servants, International Development Association, International Finance Corporation, International Fund for Agricultural Development, International Labour Organization, International Monetary Fund, International Water and Sanitation Decade, Iraq, Ireland, Italy, Japan, Javier Perez de Cuellar, Jean Krasno, Kermal Dervis, Lao PDR, Latin America, Literacy Decade: Education for All, loans, Louis Emmerij, Luxembourg, Mark Malloch Brown, MDGs, Middle East, Millennium Development Goals, MIGA, Monroe Doctrine, Multilateral Insurance Guarantee Association, National Institute of Planning, Netherlands Ministry of Foreign Affairs, North Africa, North America, Norway, peace-keeping, policy-based lending, ports, programs, projects, PSM, public administration, public sector management, public utilities, railways, Richard Jolly, roads, Roger Coate, Russia, Sadat Academy of Management, SAMS, San Francisco Conference, Scandinavia, Second Decade for Eradication of Poverty, Second Decade for Industrial Development in Africa, Second Decade for Transport and Communications in Africa, Second Decade for World’s Indigenous People, Second Development Decade, Second World War, Security Council, Sierra Leone, South Asia, Southern Europe, Soviet Union, Spain, Special United Nations Fund for Economic Development, structural adjustment, Sub-Saharan Africa, SUNFED, Sweden, Switzerland, Third Development Decade, Thomas Weiss, training, transport, UK, UN, UN Charter, UN System, UNDP, UNDP-World Bank Water and Sanitation Program, UNESCO, UNFPA, UNHCR, UNICEF, UNRWA, UNSF, United Kingdom, United Nations, United Nations Childrens’ Fund, United Nations Development Programme, United Nations Economic, Social, and Cultural Organization, United Nations Expanded Program for Technical Assistance, United Nations High Commissioner for Refugees, United Nations Population Fund, United Nations principal organs, United Nations Relief and Works Agency, United Nations Resident Representatives, United Nations Secretariats, United Nations Special Fund, United Nations specialized agencies, United Nations subsidiary bodies, United Nations System, United States, United States Agency for International Development, United States Congress, United States President, USAID, Vientiane, Water and Sanitation Program, Water for Life Decade, West Africa, Western Europe, WFP, WHO, William Sanders, World Bank, World Bank Group, World Bank Resident Representatives, World Food Programme, World Health Organization, World War II, WSP, Yalta Conference.


HISTORY MATTERS: GROWING THE UNITED NATIONS & ITS SPECIALIZED AGENCIES

March 3, 2011

In politics, what begins in fear ends in folly. Samuel Taylor Coleridge  (1772-1834)

The United Nations

The United Nations Charter was agreed by forty-eight internationally recognized sovereign-states plus three other governmental entities1 at the San Francisco Conference from April 25 to June 26, 1945; although the United Nations (UN) was not actually established until October 24, 1945 when twenty-nine countries acceded to the Charter.

United States, United Kingdom, & Soviet Union Take the Lead

The UN Charter was the result of compromises negotiated primarily between the United States and United Kingdom on one side and the Union of Soviet Socialist Republics (USSR; Soviet Union) on the other. Those negotiations began when the four “sponsoring powers” of The United States, United Kingdom, Soviet Union, and China met at Dumbarton Oaks in Washington,
D.C. from August 21 to October 7, 1944 to prepare the draft design of a permanent “World Organization.” Negotiations continued among President Franklin Roosevelt, Prime Minister Winston Churchill, and Premier Joseph Stalin at the Yalta Conference between February 4th and 11th 1945, and was finally concluded at the San Francisco Conference four months later. Whatever their differences, all three of the UN’s initial sponsors viewed its primary purpose as political, to provide for the “collective security” of its member-states following World War II. Indeed, the UN was viewed as one part of a new four-part international architecture with each part established to address one of the four pillars of a new peace. While the UN addressed collective security, the other three pillars included a new International Monetary Fund (IMF) to “smooth” fluctuations in balance of payments among states, a new International Bank for Reconstruction and Development (IBRD) to provide investment finance for post-war recovery and economic growth, and a new international trade organization to promote “free trade” by fostering reductions in trade barriers.2

UN Structure

Article 7 of the UN Charter established six “principal organs of the United Nations,” including a Security Council, General Assembly, Economic and Social Council (EcoSoc), International Court of Justice,3 Trusteeship Council, and Secretariat headed by a Secretary-General. The last UN “Trust Territory,” Palau, attained independent sovereign-state status and UN membership on October 1, 1994 and, therefore, the Trusteeship Council suspended operations one month later.4 Nonetheless, the UN’s organizational arrangements at the end of 1946 reflected that original overarching structure and not much else (click on “Figure 1 – United Nations: Structure 1946″ below).

Figure 1 — United Nations: Structure 1946

At that time, the only development oriented UN entities were UNICEF, the Commissions on Status of Women and Population, and three semi-autonomous “specialized agencies.” Nonetheless, Article 7 also provided for the future establishment of “such subsidiary organs as may be found necessary.” Under the umbrella of that future oriented clause, the “United Nations System” now encompasses a vast collection of entities (click on Figure 2 – United Nations: Structure 2010″ below), including about forty-

Figure 2 — United Nations: Structure 2010

three “development” and three “humanitarian” oriented entities distributed across the General Assembly, Secretariat, and EcoSoc. The remainder of this blog post is limited to discussion of the UN System’s development and humanitarian functions5 rather than its parallel collective security6 and regulatory activities.7

Evolution

As late as 1959, the number of development and humanitarian oriented entities within the UN System had grown to fourteen. But in response to the accelerating pace of de-colonization during the UN’s First Development Decade (1960-1969), that number jumped to thirty-five by 1989 and increased by another eleven since then. Provision of significant amounts of development assistance was clearly not part of the founder’s original vision. Although the Food and Agriculture Organization (FAO) was founded in 1945, followed the next year by the United Nations Educational, Scientific, and Cultural Organization (UNESCO), United Nations Children’s Fund (UNICEF), and the Commissions on the Status of Women and Population, the first two multi-purpose development-oriented UN entities (the Expanded Program of Technical Assistance [EPTA] and United Nations Special Fund [UNSF]) were not established until 1949 and 1958 respectively.

Indeed, it was not until the United Nations Development Programme (UNDP) was founded in 1960 that an attempt was made to centralize coordination of all technical assistance financed by UN entities. But the position of Director-General for Development and International Cooperation did not follow until seventeen years later. And that position was, in turn, abolished in 1992 as the UN’s centralized approach to coordinating technical assistance was largely abandoned in response to increasingly separate efforts by specialized agencies to mobilize their own resources directly from individual donor countries. As a result, UNDP transformed itself around 1995 from a central fund to a direct provider of development assistance grant-financed projects. But only two years later, the perceived need for coordination of the vast array of UN development and humanitarian efforts resulted in the newly designated United Nations Development Group chaired by the UNDP Administrator and the designation of the UNDP Resident Representative in each country as the UN Resident Coordinator ostensibly responsible for creating positive synergies among proliferating efforts of various UN development entities within those countries with a UNDP presence.8

Resource Allocations9

A full forty-three percent of average contributions to the UN budget for the period 2006 to 2008 were allocated to “development-related activities;” followed by peacekeeping (22%), humanitarian assistance (21%), and global policy, advocacy, norms, and standards (14%). Within the “development” and “humanitarian” arena, the distribution among sectors was as follows: health (28%); general development issues (19%); social development (11%); agriculture, forestry, and fisheries (7%); education and population (6%); the environment (5%); human settlements (4%); industry (2%); and miscellaneous other (9%). Nonetheless, only ten of today’s forty-six development and humanitarian oriented UN entities absorbed a full ninety-percent of total contributions to the UN System’s aggregate 2008 budget.10 The remaining ten percent was allocated to the other thirty-six entities combined.

UN Subsidiary Bodies & Specialized Agencies

Of the forty-six development and humanitarian oriented entities within the UN System, twenty-four (52%) are found within the ambit of EcoSoc; another twenty are responsible to the General Assembly; and the remaining two are found within the UN’s Secretariat. In addition to these more or less permanent entities, various ad hoc bodies are also created by vote of the General Assembly or Security Council from time-to-time in response to one or another temporary crisis. The extent to which any UN entity is actually responsible to one or another of the six “principal organs” of the UN varies substantially. Nonetheless, the most fundamental difference is found between entities responsible to the General Assembly plus the EcoSoc commissions and other bodies on the one hand and, on the other hand, specialized agencies within the ambit of EcoSoc.

General Assembly Entities

Entities responsible to the General Assembly are established by majority vote of all members of the United Nations. The General Assembly has supervisory rights with respect to those organizations and includes at least partial funding of those entities within the regular UN budget approved by all UN member-states (although the budgets of only a few such individual entities are financed completely by that budget). All member-states of the UN are automatically members of those entities.

Economic & Social Council Entities

According to the UN Charter, EcoSoc was established to create –

conditions of stability and well-beingnecessary for peaceful and friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples…[by] promot[ing] higher standards of living, full employment, and conditions of economic and social progress and development; solutions of international economic, social, health, and related
problems; and international cultural and educational cooperation; and universal respect for, and observance of, human rights and fundamental freedoms for all without distinction as to race, sex, language, or religion
(Article 55).

EcoSoc consists of fifty-four member-states elected for three-year terms by vote of the entire General Assembly (Articles 61). It is authorized to conduct –

studies and reports with respect to international economic, social, cultural, educational, health, and related matters and may make recommendations with respect to any such matters to the General Assembly, to the Members of the United Nations, and to the specialized agencies concerned [including]…. recommendations for the purpose of promoting respect for, and observance of, human rights and fundamental freedoms for all,… prepare draft conventions for submission to the General Assembly…. [and organize] international conferences on matters falling within its competence (Article 62).

Commissions & Other Bodies. EcoSoc’s authority to establish “commissions” is embedded in Article 68. Such commissions and other bodies are established, as well as other decisions taken, by majority vote of its fifty-four elected member-states (Article 67) and are included in its budget (although as in the case of General Assembly entities, few are financed completely by that budget). Twenty-four development-oriented entities are within the purview of EcoSoc, thirteen of which (54%) are directly responsible to it as functional or regional commissions or “other bodies.” The executive heads of specific EcoSoc Funds and Programs report directly to EcoSoc after appointment by the UN Secretary General and confirmation by the General Assembly.11 Although EcoSoc maintains a “Chief Executives Board for Coordination” and high-level committees on Programs and Management, its most effective operational entities are its five regional commissions. Three of those are styled Economic Commissions: for Europe (ECE, established in Geneva 1947); Latin America and Caribbean (ECLAC, Santiago [Chile] 1948); and Africa (ECA, Addis Ababa 1958). The other two are styles Economic and Social Commissions: for Asia and Pacific (ESCAP, Bangkok 1947) and Western Asia (ESCWA, Beirut 1973).

Specialized Agencies. United Nations “specialized agencies” range from completely autonomous to semi-autonomous membership organizations with their own directors, management, and budgets. They are each established separately under
the terms of their own individual Charters or Articles of Agreement12 and do not require approval by any Principal Organ of the United Nations prior to being established. UN members are not required to join specialized agencies nor is membership in any specific specialized agency guaranteed to UN members. Indeed, several specialized agencies existed prior to the establishment of the United Nations itself.13

According to the UN Charter, EcoSoc’s overarching responsibility with specific respect to specialized agencies is to bring them –

into relationship with the United Nations [Article 57]…. subject to approval by the General Assembly…[and] may co-ordinate the activities of the specialized agencies through consultation with and recommendations to such agencies….[To achieve that objective,] the Economic and Social Council may enter into agreements with any potential or existing special agencies…defining the terms on which the agency concerned shall be brought into relationship with the United Nations. [Article 63]…. such agencies thus brought into relationship with the United Nations are hereinafter referred to as specialized agencies [Article 57].

In addition to that recruitment function, EcoSoc is also authorized to –

make recommendations for the co-ordination of the policies and activities of the specialized agencies [Article 58]…. [as well as] take appropriate steps to obtain regular reports from the specialized agencies…. [and] may make arrangements with the Members of the United Nations and with the specialized agencies to obtain reports on the steps taken to give effect to its own recommendations and to recommendationsmade by the General Assembly [Article 64].

With those responsibilities of EcoSoc in mind, there are currently eleven development oriented specialized agencies that report in one way or another to EcoSoc.14 That includes all five of the World Bank Group’s constituent entities; and therein lays a tale. Indeed, this blog post is meant to lay the foundation for that next blog post.

­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­_________________________________

NOTE:

[1] For reasons identified below, the Ukraine and Byelorussia Soviet Republics were admitted to the United Nations as “Charter” members, even though both of those “Republics” were constituent parts of the Soviet Union, and India (including what later became Pakistan and later yet Bangladesh) as another “Charter” member even though India did not gain legal sovereign-state status until August 15, 1947.  For those reasons, the United Nations claims fifty-one Charter Members, although only forty-eight of those entities were internationally recognized sovereign-states in 1945.

[2] In the event, an “international trade organization” was not established until the creation of the new World Trade Organization (WTO) on January 1, 1995. Nonetheless, a General Agreement on Tariffs and Trade (GATT) was established on October 30, 1947 that, through its several sequential negotiation rounds, was directed toward that same objective. The WTO did not replace the GATT. Instead, the WTO institutionalized in organizational form the responsibility for managing the GATT’s ongoing negotiations process and enforcing decisions agreed during that process. Click here for information about the WTO.

[3] The International Court of Justice (ICJ) established as a Principal Organ of the United Nations by the UN Charter, effective in 1946, and located in The Hague should not to be confused with the International Criminal Court (ICC) established by the Treaty
of Rome
(July 17, 1998) made effective July 1, 2002. According to the ICJ’s website, it “has a dual role:settling legal disputes between States submitted to it by them and giving advisory opinions on legal matters referred to it by duly authorized United Nations organs and specialized agencies.” By contrast, the ICC, also located in The Hague, is not a part of the United Nations System and operates as a completely independent Court. According to its website, the ICC was “established to help end impunity for the perpetrators of… genocide, crimes against humanity and war crimes.” The United States is a member of the ICJ but not of the ICC. Click here for further information about the International Court of Justice and here for the International Criminal Court.

[4] The Trusteeship Council was responsible for monitoring the administration of dependent “Trustee” territories governed by external countries supposedly on behalf of the United Nations. The Council itself was composed of the five Permanent Members of the Security Council, three of which (France, the UK, and USA) were also “Trustees” of UN Trustee Territories (China and the Russian Federation did not have direct “Trustee” responsibilities). In 1946, there were a large number of UN Trust Territories;
almost all of which were former Austro-Hungarian, German, Italian, Japanese, or Ottoman territories or colonies prior to either World War I or World War II. However, there are no UN Trust Territories today; although a relatively few dependent territories of several countries still do exist. Therefore, the Council suspended regularly schedule meetings on May 25, 1994 in favor meeting only “occasionally” when deemed necessary by its President or request of a majority of its members, the General Assembly, or the Security Council. Click here for more information about the Trusteeship Council.

[5] UN System entities have been classified by Jerry Mark Silverman as focusing primarily on regulatory,” “development,” “humanitarian,” or other miscellaneous functions. See endnote 7 for a list of entities classified as “regulatory.” The following UN
entities are classified here as being primarily focused on “development:” the International Trade Center (ITC) responsible to UNCTAD and WTO; Joint UN Programme on HIV/AIDS (UNAIDS), UN Children’s Fund (UNICEF), UN Conference on Trade and Development (UNCTAD), UN Democracy Fund (UNDEF), UN Development Programme (UNDP), UN Environment Programme (UNEP), United Nations Fund for International Partnerships (UNFIP), UN Human Settlements Programme (UN-HABITAT), UN International Research and Training Institute for the Advancement of Women (UN-INSTRAW), UN Office for Project Services (UNOPS), UN Population Fund (UNFPA), UN Research Institute for Social Development (UNRISD), UN University (UNU), and World Food Programme (WFP) all of which are responsible to the General Assembly; UN Development Fund for Women (UNIFEM), UN Volunteers (UNV), and UN Capital Development Fund (UNCDF) all of which are responsible to UNDP and through it to the General Assembly; and the Department of Economic and Social Affairs (DESA) and Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS) both of which are responsible to the Secretariat. There are eleven “development-orientedspecialized agencies within the ambit of the Economic and Social Council (see endnote 9). Finally, three entities are classified here as primarily focused on “humanitarian” rather than “development:” the Office of the UN High Commissioner for Refugees (UNHCR) and UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) both of which are responsible to the General Assembly and the specialized World Food Programme (WFP) agency within the ambit of EcoSoc.

[6] The following United Nations entities are classified here as primarily focused on collective security: Counter-Terrorism Committee, Military Staff Committee, Peacekeeping Operations and Missions, Sanctions Committees, Working Group on Children and Armed Conflict, and the 1540 Committee all of which are responsible to the Security Council; the UN Peacebuilding Commission responsible to both the Security Council and General Assembly; UN Institute for Disarmament Research (UNIDIR), Organization for the Prohibition of Chemical Weapons (OPCW), and Preparatory Committee for the Nuclear-Test-Ban Treaty Organization (CTBTO Prep.Com) all of which are responsible to the General Assembly; and Department of Peacekeeping Operations (DPKO) and Office for Disarmament Affairs (UNODA) both responsible to the Secretariat. See United Nations, Structure and Organization and UN Organization Chart.

[7] The following United Nations entities are classified here as primarily focused on regulating some specific actions within the international political system: the International Atomic Energy Agency (IAEA) reporting to Security Council; UN Drug Control Programme (UNDCP) responsible to UNODC; EcoSoc Commission on Narcotic Drugs; World Trade Organization (WTO,  autonomous); and the International Civil Aviation Organization (ICAO), International Maritime Organization (IMO), International Monetary Fund (IMF), International Telecommunications Union (ITU), Universal Postal Union (UPU), World Intellectual Property Organization (WIPO), and World Meteorological  Organization (WMO) all of which are autonomous “specialized agencies.” Other organizations are classified as Administration (14), Human Rights and Criminal Justice (8), and Miscellaneous (3).The total number of entities specified in these endnotes and the main text do not total the same numbers because some labels are generic rather than discrete; Ibid.

[8] Nikhil Seth, United Nations Reform III: Operational Activities for Development, PowerPoint presentation at UNITAR Training Course (New York, November 19, 2010).

[9] The summary of the UN’s resource allocations here is based entirely on Nikhil Seth, Ibid.

[10] The ten development and humanitarian oriented UN entities that absorbed a full ninety-percent of total contributions to the UN System’s aggregate 2008 were: World Food Programme (WFP, 24%); UNDP (23%); United Nations Children’s Fund (UNICEF, 15%); United Nations’ High Commissioner for Refugees (UNHCR) and World Health Organization (WHO, each 7%); Food and Agriculture Organization (FAO, 4%); United Nations Population Fund (UNFPA) and United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA, each 3%); International Labour Organization (ILO) and United Nations Educational, Scientific and Cultural Organization (UNESCO, each 2%); see Nikhil Seth, United Nations Reform III: Operational Activities for Development, PowerPoint presentation at UNITAR Training Course (New York, November 19, 2010).

[11] Nikhil Seth, United Nations Reform III: Operational Activities for Development (above).

[12] The essentially autonomous “development” oriented specialized agencies are the Food and Agriculture Organization (FAO, Rome 1945); International Fund for Agricultural Development (IFAD, Rome 1977); International Labour Organization (ILO, Geneva 1919/1946); United Nations Educational, Scientific, and Cultural Organization (UNESCO, Paris 1946); World Health
Organization
(WHO, Geneva 1948); and United Nations Industrial Development Organization (UNIDO, Vienna 1966/1985) plus the World Bank Group’s International Bank for Reconstruction and Development (IBRD, 1946), International Finance Corporation (IFC, 1956), International  Development Association (IDA, 1960), International Centre for Settlement of Investment Disputes (ICSID, 1966), and Multilateral Insurance Guarantee Association (MIGA, 1988; all in Washington, DC).

[13] Several specialized agencies pre-existed the United Nations and were incorporated incrementally during the late 1940s and 1950s, including the International Telecommunications Union (ITU) established in 1865; World Meteorological Organization (WMO) established originally as the International Meteorological Organization (IMO) in 1873; Universal Postal Union (UPU) established in 1874; International Labor Organization (ILO) originally established in 1919; World Tourism Organization (UNWTO) preceded by the International Congress of Official Tourist Traffic Associations established in 1925  and International Union of Official Travel Organisations (IUOTO) after World War II until adopting its current identity in 1974; and International
Civil Aviation Organization
(ICAO) established initially as the Provisional International Civil Aviation Organization (PICAO) in 1945.

[14] See endnote 12.

Keywords: Austro-Hungarian Empire, Bangladesh, Byelorussian Soviet Socialist Republic, CTBTO Prep.Com, Chief Executives Board for Coordination, China, collective security, Commission on Population, Commission on the Status of Women, Department
of Economic and Social Affairs, DESA, Developing Countries and Small Island Developing States, Director-General for evelopment and International Cooperation, DPKO, Dumbarton Oaks, ECA, ECE, ECLAC, Economic and Social Council, EcoSoc, ESCAP, ESCWA, FAO, First Development Decade, Food and Agriculture Organization, Franklin Roosevelt, Free Trade, GATT, General
Agreement on Tariffs and Trade, General Assembly, Germany, health, High-Level Committee on Management, High-Level Committee on Programs, humanitarian assistance, IAEA, IBRD, ICA, ICAO, ICC, ICJ, ICSID, IFAD, IFC, IDA, ILO, IMF, IMO, India, International Atomic Energy Agency, International Bank for Reconstruction and Development, International Centre for Settlement of Investment Disputes, International Civil Aviation Organization, International Congress of Official Tourist Traffic Associations, International Court of Justice, International Criminal Court, International Development Association, International Finance Corporation, International Fund for Agricultural Development, International Labour Organization, International Maritime Organization, International Meteorological Organization, International Monetary Fund, International Trade Centre, International
Telecommunications Union, International Union of Official Travel Organisations, Italy, ITC, ITU, IUOTO, Japan, Joint UN Programme on HIV/AIDS, Joseph Stalin, MIGA, Multilateral Insurance Guarantee Association, Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, Office of the UN High
Commissioner for Refugees, OPCW, Ottoman Empire, Pakistan, Palau, peace-keeping, PICAO, Provisional International Civil Aviation Organization, Regional Economic Commission for Africa, Regional Economic Commission for Europe, Regional Economic Commission for Latin America and Caribbean, Regional Economic and Social Commission for Asia and Pacific, Regional Economic and Social Commission for Western Asia, Russian Federation, San Francisco Conference, Second World War, Security Council, social development, Soviet Union, Treaty of Rome, Trust Territory, Trusteeship Council, Ukrainian Soviet Socialist Republic, UN, UN-HABITAT, UN-INSTRAW, UN-OHRLLS, UNAIDS, UNCDF, UNDCP, UNCTAD, UNDEF, UNDG, UNDP, UNDP Resident Representative, UNEP, UNESCO, UNFIP, UNFPA, UNHCR, UNICEF, UNIDIR, UNIDO, UNIFEM, UNODA, UNOPS, UNRISD, UNRWA, UNU, UNV, Union of Soviet Socialist Republics, United Kingdom, United Nations, United Nations 1540 Committee, United Nations Capital Development Fund, United Nations Charter, United Nations Childrens’ Fund, United Nations Commission on Narcotic Drugs, United Nations Conference on Trade and Development, United Nations Counter-Terrorism Committee, United Nations Democracy Fund, United Nations Department of Peacekeeping Operations, United Nations Development Fund for Women, United Nations Development Group, United Nations Development Programme, United Nations Drug Control Programme, United Nations Educational, Scientific, and Cultural Organization, United Nations Environment Programme, United Nations Expanded Program of Technical Assistance, United Nations Fund for International Partnerships, United Nations Human Settlements Programme, United Nations Industrial Development Organization, United Nations Institute for Disarmament Research, United Nations International Research and Training Institute for the Advancement of Women, United Nations Office for Disarmament Affairs, United Nations Office for Project Services, United Nations Military Staff Committee, United Nations Organization for the Prohibition of Chemical Weapons, United Nations Peacebuilding Commission, United Nations Peacekeeping Operations and Missions, United Nations Population Fund, United Nations Preparatory Committee for the Nuclear-Test-Ban Treaty Organization, United Nations Research Institute for Social Development, United Nations Resident Coordinator, United Nations Sanctions Committees, United Nations Secretariat, United Nations Secretary–General, United Nations Special Fund, United Nations Specialized Agencies, United Nations System, United Nations University, United Nations Volunteers, United Nations Working Group on Children and Armed Conflict, United States, Universal Postal Union, UPU, USAID, USSR, WFP, WHO, Winston Churchill, WIPO, WMO, World Bank, World Bank Group, World Food Programme, World Health Organization, World Intellectual Property Organization, World Meteorological  Organization, World Trade Organization, World War I, World War II, WTO, Yalta Conference.


HISTORY MATTERS: ESTABLISHING THE WORLD BANK & IMF

February 21, 2011

The whole history of civilization is strewn with creeds and institutions which are invaluable at first, and deadly afterwards.                       Walter Bagehot (1826-1877)

The international framework for development assistance that continues with almost no real changes until today was officially agreed between July 1944 and October 1947. The first piece of that institutional architecture was agreement by forty-four countries to establish the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) during the Bretton Woods Conference in New Hampshire (July 1-22, 1944).1 The second piece was the agreement by fifty countries to establish the United Nations during the Conference on International Organization in San Francisco (April 25 – June 26, 1945) while the third piece was the agreement of twenty-three states to abide with the draft terms of a General Agreement on Tariffs and Trade (GATT) on October 30, 1947. All of those entities were established largely at the initiative of American and British intellectuals and political leaders for purposes substantially different than many of the missions pursued today by those organizations, including the World Trade Organization (WTO) that has since January 1, 1995 served as the organizational expression of the GATT. This post focuses on the establishment of the IMF and the IBRD. Future posts will focus on the establishment of development-oriented United Nations’ specialized agencies and the inauguration of the Marshall Plan.

Precursor Programs (1941-1943)

The primary precursors of today’s development assistance architecture were the Lend-Lease program established in 1941 and the United Nations Relief and Rehabilitation Administration (UNRRA) established in 1943. Both of these were established as temporary agencies with no expectation that they would be continued much beyond the end of World War II. Lend-Lease initially provided for the transfer of food, machinery, war supplies, and services to China and the countries of the British Commonwealth, although it was expanded almost immediately to the Soviet Union and the “Free French.” The Lend Lease Act authorized the American President to sell, transfer, lend, or lease such goods and services and to establish the terms for such transfers.  Repayment could be –

in kind or property, or any other direct or indirect benefit which the President deems satisfactory.

By the time of its official termination in August 1945, total Lend-Lease commitments exceeded $ 606.60 billion in constant 2010 dollars (all dollar amounts are presented in constant 2010 dollars throughout the remainder of this post).

When UNRRA was established In 1943, the United Nations as we know it today did not exist. Although President Franklin Roosevelt had used the term “United Nations” in 1941 to describe countries fighting against the “Axis,” the first official use of the term was on January 1, 1942, when twenty-six states signed the “Declaration by the United Nations” committing them not to enter into any separate peace with the Axis Powers.

Although the Lend-Lease program was established to meet immediate needs faced during the War, UNRRA’s mission was to provide assistance to areas liberated from German, Italian, and Japanese occupation.2 About $40 billion of emergency assistance was disbursed through UNRRA, including financing of food and medicine, the restoration of public services, the revitalization of agricultural and industrial production, and, ultimately, the return of approximately seven million displaced persons to their home countries. By the time its functions were transferred to other newer United Nation’s specialized agencies in Europe (1947) and Asia (1949), fifty-two countries had participated in UNRRA’s programs. Of the total amount disbursed, approximately sixty-two percent went to the United Kingdom followed by the Soviet Union with about twenty-two percent. China, Czechoslovakia, Greece, Italy, Poland, the Ukrainian SSR, and Yugoslavia were the other primary recipients.

The most interesting aspect of the UNRRA experience was that it served as an organizational and financial model for future multi-lateral assistance agencies. More than half of UNRRA’s budget was financed by the United States, but the remainder was provided by other member-countries through financial subscriptions equivalent to two percent of their 1943 gross national incomes (GNI). As will be discussed in a future blog post with respect to the World Bank, financing through member-country subscriptions has been the primary way most international organizations have been financed since the end of World War II.

The Foundation of The Current System

The period between 1944 and 1947 differed from the present in two significant respects. First, in 1945 the international political status of the world’s peoples remained largely divided among those in independent and dependent territories. Second, as already discussed in The More Things Change: Development’s Colonial Heritage posted January 10, 2011, the economic landscape in 1945 was littered with post-World War II wreckage over which the United States dominated as a largely unscathed economic colossus, holding approximately ninety percent of the entire non-communist world’s official gold reserves and producing at least seventy percent of the entire non-communist world’s GNI. 

It was in that context that delegations representing almost all of the Allied anti-Axis countries convened at Bretton Woods to consider the establishment of the IMF and IBRD to provide short-term loans to sovereign-state governments when necessary to meet immediate international debt repayments and long-term investment capital to sovereign-state governments. Seventeen months later, on December 27, 1945, both organizations were officially established.3

Similarities

Although the original objectives and membership of the IMF and World Bank have changed dramatically since 1945, the international balance of power existing at the end of World War II continues to be reflected in the Articles of Agreement of both organizations. In addition to both organizations being headquartered in Washington, D.C., members of both organizations adhere to the original tacit agreement that the President of the World Bank is always an American nominated by the United States’ Government and that the Managing Director of the IMF is always a European. Further, the United States and its current allies together still retain a majority of weighted voting rights within the IMF and World Bank.

The IMF and World Bank are organized and managed in similar ways. They are both membership organizations, the members of which are sovereign-states represented by their respective governments. Only member-states may serve as guarantors of any financing received by their governments or other entities within their jurisdiction. Both organizations assign weighted voting shares to their indivudal sovereign-state members proportional to the number of “Quotas (IMF) or “Shares” (World Bank) assigned to them. The IMF and World Bank are each governed separately by their own Board of Governors consisting of senior serving officials of member-state governments. These Boards normally meet only once a year during joint IMF/World Bank Annual Meetings. The on-going governance of both organizations is delegated to resident Executive Directors, a few of whom are appointed by countries that have sufficient voting rights to cast their own whole vote, one or two others who choose to be represented full-time even though they have only a partial vote, and the remainder elected by a combination of member-states that together have the equivalent of approximately one vote.

Differences

Despite similarities, there are substantial differences between the IMF’s and IBRD’s purposes, organizational arrangements, and operational procedures. 

International Monetary Fund

As clearly laid out in the IMF’s Articles of Agreement,” its purpose is not “development;” nor is that its main purpose today. Rather, it was established to facilitate the balanced growth of international trade through the maintenance of market-determined currency exchange rates and balance of payments among trading partners. Its primary mechanism for achieving those objectives was the provision of short-term loans to governments in countries not able to pay their immediate foreign currency denominated international debts. Why was this viewed as important during 1944 and 1945? 

By 1944, the United Kingdom and the Soviet Union alone had already accumulated a Lend-Lease debt of $384.7 billion and $136.5 billion respectively. More than $86.9 billion had been borrowed by China, France, and other countries of the British Commonwealth under Lend Lease and another fifty-two countries had borrowed an additional $49.6 billion from UNRRA. World War II had devastated European and Soviet economies. Their own currencies were worth even less in 1944 than they had been in 1939. By normal market standards, those currencies had no real value internationally at all. So how could the victorious European countries be reasonably expected to get their hands on sufficient amounts of United States’ dollars to pay back both current and projected debt while also financing imports of both capital and consumption goods? Institutionalizing an organizational mechanism to meet those requirements was the immediate issue that the IMF was expected to address when created in 1945.

But the founding members of the IMF were concerned not only with that immediate short-term problem. They also recognized that maintaining balance within the global international trading system over the longer term could not reasonably be expected under the conditions prevailing at the end of World War II. The need to smooth-out short-term international currency shortfalls and maintain stable international exchange rates was perpetual. Responsibility for responding to those longer range issues was also assigned to the IMF.

Powers of the IMF. Most founding members of the IMF and World Bank viewed the former as more important for international peace and stability than the latter. The IMF’s assigned responsibility to “oversee the international monetary system” was extremely comprehensive. As outlined in the IMF’s Articles of Agreement

In order to fulfill its functions.., the Fund shall exercise firm surveillance over the exchange rate policies of members…. Each member shall provide the Fund with the information necessary for such surveillance…. The Fund may determinethat international economic conditions permit the introduction of a widespread system of [currency] exchange arrangements based on stable but adjustable par values [Article IV]…. A proposed par value shall not take effectif the Fund objects to it…[Schedule C]. 

The primary mechanism for surveillance are “Article IV Consultations” normally conducted every year with each member-state to assess whether or not –

a country’s economic developments and policies are consistent with the achievement of sustainable growth and domestic and external stability.

The original intention was that Article IV Consultations would focus exclusively on a country’s –

exchange rate, fiscal, and monetary policies; its balance of payments and external debt developments; the influence of its policies on the country’s external accounts; the international and regional implications of those policies.

However, such consultations have been expanded to include –

all policies that significantly affect the macroeconomic performance of a country, which, depending upon circumstances, may include labor and environmental policies and governance…; [as well as] capital account and financial and banking sector issues… [and] the identification of potential [international financial] vulnerabilities

Penalties made available to the IMF to punish member-states that pursue exchange rate policies not approved by the Fund are potentially draconian — equivalent to being “cast-out” into the international financial wilderness. Article XXVI provides for a three-step sequence of actions: (1) suspension from access to loans; (2) suspension of voting rights; and (3) expulsion from the IMF itself. And again, if expelled, what then? Article XI is clear enough –

Each member undertakes (i) not to engage inany transactions with a non-member or with persons in a non-member’s territories which would be contrary to the provisions of this Agreement or the purposes of the Fund; (ii) not to cooperate with a non-member or with persons in a non-member’s territories in practices which would be contrary to the provisions of this Agreement or the purposes of the Fund; and (iii) to cooperate with the Fund with a view to the application in its territories of appropriate measures to prevent transactions with non-members or with persons in their territories which would be contrary to the provisions of this Agreement or the purposes of the Fund.

According to Chittharanjan Felix Amerasinghe, the expulsion power has only been used once against Czechoslovakia in 1954 for failing to provide data requested by the Fund. That action followed Czechoslovakia’s explusion from the World Bank for non-payment of its authorized share capital that same year. And although attempts to expel Zimbabwe have been under consideration for years, no action has yet been taken. But when those powers were first authorized for the IMF in 1944, the objective was to ensure compliance of members in future — it had no history at that point. And it is clear that the objective of establishing and maintaining stable exchange rates linked to the needs of international trade were of sufficient importance to the founding members to provide for those previously unheard of powers by the IMF; powers that it still has today. And it is likely that Article XI reinforced the “Iron Curtain” separating the United States and its allies from the Soviet Union and its allies into not only different political camps but into distinct financial and economic camps as well. Indeed, it is likely that the Soviet Union did not become a member of the World Bank in 1945 because it was not willing to accept the IMF’s powers to interfere in its internal monetary affairs. And membership in the IMF is a pre-condition for membership in IBRD even though membership in the Bank is not required to join the IMF. Finally, it is important to keep in mind that the governments willing to accept the extensive powers of the IMF in 1945 were substantially more like-minded than is the case today. Almost all of those countries shared similar political cultures and basic premises about their national interests.

Financing the IMF. The IMF’s primary source of financing are “Quotas;” which consist of the capital subscriptions paid by each member-state revenues generated from the investment or use of Quotas. A member-state must pay its entire subscription in full; a major difference from the way the IBRD is financed. At the time the IMF was created, the requirement was that twenty-five percent of the subscription was payable in gold pegged to the United States dollar with the option of paying the remainder in the member-state’s own currency; although the requirement for payment in gold was abandoned in 1978.4 

Poverty Reduction.  Given those international trade and monetary objectives, why is the way the IMF was organized in 1945 important for the way attempts to reduce poverty within developing countries is implemented today?  There are at least two important reasons. First, the IMF was provided with substantial powers to intervene in the internal decision-making of its sovereign member-states – even though at that time those powers were limited essentially to currency exchange rate policies. Second, those powers were carried forward when the IMF expanded its limited original role to the fundamental reform of domestic economies (late 1970s) and, more recently, policies directed to the reduction of poverty (late 1990s).

World Bank

When established, the IBRD was viewed as having a relatively limited mandate. For economic and financial matters, Keynes clearly viewed the IMF as substantially more important; one of the reasons why membership in the fund is a pre-requisite for membership in the bank but not the other way round. It certainly was not the dominant organization in the development assistance arena; indeed there was no such thing in 1944 or during the years immediately following World War II. And no one envisaged anything like today’s “World Bank Group” consisting of five distinct organizations: (1) IBRD; (2) International Finance Corporation (IFC,1956); (3) International Development Association (IDA; 1960); (4) International Centre for the Settlement of Investment Disputes (ICSID, 1966); and (5) Multilateral Investment Guarantee Agency (MIGA, 1988). Each of those five organizations are governed according to their own Articles of Agreement (IBRD, IFC, and IDA) or Conventions ICSID and MIGA). Indeed, the designation “World Bank” has never been formally adopted; instead it is the result of evolving usage and is most often limited to the IBRD plus IDA.   

With specific reference to IBRD’s Articles of Agreement, its purpose is to —

 (i)   …assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes….

(ii)   …promote private foreign investment by means of guarantees or participations in loans and other investmentsand…supplement private investment…for productive purposes out of its own capital, funds raised by it and…other resources. 

(iii) …encourage[e] international investment in the productive resources of members, thereby assisting in raising productivity, the standard of living and conditions of labor in their territories. 

(iv) …arrange…loans made or guaranteed by it…so that the more useful and urgent projects, large and small alike, will be dealt with first. 

(v) …conduct its operations with due regard to the effect of international investment on business conditions in the territories of members assist in bringing about a smooth transition from a wartime to a peacetime economy. 

It is clear that almost all of the early advocates of the proposed international investment bank viewed reconstruction – the “R” in IBRD — as the “more useful and urgent” and, therefore, that it should “be dealt with first. Development was clearly intended to take a back seat during the years immediately following World War II, much to the dismay of the Latin American counties. But it is important to remember, as was discussed in The More Things Change: Development’s Colonial Heritage, that “development” was understood to mean improvement of the infrastructure required for efficient extraction of raw materials rather than today’s emphasis on macro-economic growth and the reduction of poverty.

Powers of the World Bank.  The IBRD was invested with nothing like the expansive powers assigned to the IMF. IBRD’s Articles include no provisions analogous to the IMF’s powers to “oversee the international monetary system or to “exercise firm surveillance” over the economic policies or investment decisions of its member-states. Nor is it suggested anywhere that economic policy or investment decisions not financed by the Bank are subject to approval by it. Nor are there any Articles specifying the “General Obligations of Members,” restrictions on the relations between member and non-member states, or compulsory withdrawal (with the exception that if a member-state of the World Bank ceases to be a member of the IMF, its membership in the Bank automatically ceases after three months). Although the Bank may “suspend” a member, it does not have the IMF’s power to expel. Thus, a member of the Bank may be expelled only if that action is taken by the IMF. And finally, while the IMF was clearly empowered to interfere in the financial and economic policies of its member-states, the Bank was explicitly prohibited from doing so:

The Bank and its officers shall not interfere in the political affairs of any member; nor shall they be influenced in their decisions by the political character of the member or members concerned.

Only economic considerations shall be relevant to their decisions, and these considerations shall be weighed impartially in order to achieve the purposes stated in Article I” [Article IV]. 

The closest the IBRD’s Articles come to providing authority to intervene in the domestic affairs of member states is the provision that –

the Bank shall make arrangements to ensure that the proceeds of any loan are used only for the purposes for which the loan was granted, with due attention to considerations of economy and efficiency and without regard to political or other non-economic influences or considerations [Article III]. 

That provision to “make arrangements to ensure…” has been interpreted to allow continuing “supervision” of activities financed by its loans. And that has ultimately served as an effective instrument for the World Bank’s direct involvement in the economic policy and investment decisions of its member-states. 

Financing IBRD.  The primary difference between the manner in which the IMF and IBRD are financed is that the Bank’s member-states are not required to pay-in the full amount of their capital subscriptions. Rather, the overwhelming bulk of IBRD’s resources come from its borrowing in private sector financial markets, the collateral for which are the guarantees represented by the unpaid capital subscriptions of its member-states.

Summary Conclusion

The first IMF and IBRD loans were made to France one day apart on May 8th and May 9th 1947 respectively. The transition by IBRD from a primary focus on “reconstruction” to “development” and subsequent redefinition of “development” is discussed in several forthcoming blog posts. Suffice it to state here that today’s world is substantially different than it was when the World War II allies gave birth to the IMF and IBRD in 1944. Clearly, the Articles of Agreement of both organizations have been sufficiently flexible to allow for the many adaptations deemed necessary over the last half-century. But the core institutional architecture created those many years ago still dominates the process through which international development assistance is provided today.     

­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­_________________________________

NOTE:

[1]  The IMF’s Articles of Agreement have been amended only four times since first adopted at the United Nations Monetary and Financial Conference (Bretton Woods, New Hampshire) on July 22, 1944 while IBRD’s Articles, also adopted on the same date at the same Conference, have been amended only twice. The IMF’s amendments are: (1) effective July 28, 1969 to introduce Special Drawing Rights (SDRs) as the Fund’s unit of account of the Fund; (2) effective April 1, 1978 that completely rewrote Article IV to promote a “stable system of exchange rates” through “firm surveillance” by the IMF over each member’s exchange rate policies; (3) effective November 11, 1992  to suspension of voting and other membership rights for members that do not fulfill financial obligations to IMF; and (4) effective August 10, 2009 to expand the Investment Authority of the International Monetary Fund to allow all members to receive an equitable share of cumulative SDR allocations. See IMF Chronology: IMF Evolves in Response to Over Half a Century Of Challenge and Change available at http://www.imf.org/external/pubs/ft/survey/sup0998/14.htm and, for the first two amendments, James Boughton, Silent Revolution: The International Monetary Fund 1979–1989 (Washington, DC: The International Monetary Fund, 2001) available at http://www.imf.org/external/pubs/ft/history/2001/front.pdf. IBRD’s amendments are: (1) effective December 17, 1965 to allow loans from IBRD to the IFC in support of IFC’s own lending program loans and (2) effective February 16, 1989 to change the percentage of votes required to settle a disagreement between the Bank and any of its members from 85% to 80. For 1965 amendment to Article IV, see http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,,contentMDK:20049603~pagePK:43912~menuPK:58863~piPK:36602,00.html and for 1989 amendment to Article IX  http://go.worldbank.org/XKTZCBVRE0

[2]  George Woodbridge et al, UNRRA: The History of the United Nations Relief and Rehabilitation Administration, 3 volumes (New York: Columbia University Press, 1950).

[3]  The requirements for the official establishment of the two organizations were different. In the case of the IMF, 80% of Quotas assigned to the initial group of forty-five countries expected to join were required to be subscribed (including an 18% share to the Soviet Union that, in the event, did not join). That was not expected to be a problem since the Quotas assigned to the United States and United Kingdom alone equaled 58% of the total required (39% and 18.5% respectively). For IBRD, the signature of countries holding only 65% of assigned Shares was required. And again, the United States and United Kingdom alone were together assigned 49% of those required shares.

[4]  See Tamir Agmon and Robert Hawkins (eds), The Future of the International Monetary System (Lexington, Kentucky: Lexington Books, 1984) and Robert Hormats, Reforming the International Monetary System: From Roosevelt to Reagan (New York: Foreign Policy Association, 1987).

Keywords:  Allies, Axis, Bretton Woods Conference, British Commonwealth, China, Conference on International Organization, Czechoslovakia, Declaration by the United Nations, development, France, Franklin Roosevelt, Free French, GATT, General Agreement on Tariffs and Trade, Germany, Greece, IBRD, ICSID, IDA, IFC, IMF, IMF Quotas, International Bank for Reconstruction and Development, International Centre for the Settlement of Investment Disputes, International Development Association, International Finance Corporation, International Monetary Fund, Italy, Japan, Lend-Lease, Marshall Plan, MIGA, Multilateral Investment Guarantee Agency, Poland, reconstruction, San Francisco Conference, Second World War, sovereign-states, Soviet Union, Ukrainian SSR, United Kingdom, United Nations, United Nations Relief and Rehabilitation Administration, UNRRA, United States, USSR, World Bank, World Bank Shares, World Trade Organization, World War II, WTO, Yugoslavia.


FROM COLONIAL ADMINISTRATION TO DEVELOPMENT FINANCE

February 15, 2011

Insanity is doing the same thing over and over and expecting different results.                               Albert Einstein (1879-1955)

Papua New Guinea: Where are the Americans? (A Personal Reminiscence)1

It was sometime in 1980 and I was making my first trip to Papua New Guinea (“Papuaniugini” or PNG), a country that only five years before had achieved independent sovereign-state status from Australia. My purpose was to scout marketing opportunities for my employer, an American consulting firm providing technical assistance services primarily to the United States Agency for International Development (USAID). It was my hope that a former Ph.D. student of mine teaching political science at the University of Papua New Guinea would introduce me to key PNG Government decision-makers responsible for designing and implementing decentralized rural development efforts.

Up to this time, my career had been largely limited to service in or on behalf of USAID and I was struck by the absence of a USAID mission in PNG. Instead, the Australians completely dominated international development assistance there. As I subsequently learned, Australia’s overwhelming dominance in post-independence PNG followed a pattern set by European colonial powers following the transition of their colonies to sovereign-state independence beginning in the 1960s.

PNG’s entire territory had been administered as a single “integrated” colonial entity for only thirty years before independence as different regions were colonized at different times by different colonial powers. In 1883, the Australian territory of Queensland annexed southeastern New Guinea and that territory plus various offshore islands became a British Protectorate the following year. That same year Germany annexed northeastern New Guinea and various other off-shore islands. In 1906, the United Kingdom transferred colonial responsibility to Australia for the southeastern section. In 1914, Australia invaded and occupied the northeastern section administered by its World War I enemy Germany. Australian administrative responsibility for those segments of today’s PNG was affirmed by the League of Nations in 1920. Japan invaded and occupied most of New Guinea and several of the outer islands in 1942, but Allied forces reoccupied those territories during the waning years of World War II, Australia’s jurisdiction was re-established, and the United Nations reaffirmed its authority in 1947. Two years later the two Territories of Papua and New Guinea were merged administratively, followed by self-governing status as the single entity of Papua New Guinea in 1973. And full independent sovereign-state status was achieved only two years later.2 Indeed, Australia established the Australian Development Assistance Agency (ADAA) in 1974, the first of three predecessors to today’s Australian Agency for International Development (AusAID),3 in anticipation of PNG’s scheduled independence the following year.

Australia’s initial focus on PNG was emblematic of the priority given to former colonies by the British, French, and Belgians before them. Thus, despite a more than five-fold increase of total Australian foreign aid worldwide between 1975 and 2003 and its role as the largest bi-lateral donor in Southeast Asia, PNG remained the primary beneficiary of Australian aid until the early 1990s. Indeed, PNG accounted for a third of all AusAID assistance worldwide between 1995 and 1999 and a significant sixteen percent as recently as 2003. And although PNG’s share of Australia’s expanding bi-lateral aid budget has decreased significantly, the real value has remained fairly constant and still accounted for eighty-five percent of total bi-lateral aid received by that country as recently as 2003.4  Even today, USAID’s assistance to PNG is limited to assisting that Government to —

improve…the capacity, quality, and effectiveness of programs…[to] prevent.., care, support, and treat…at-risk populations and people living with HIV/AIDS

plus access of that country to a regional Responsible Asia Forestry and Trade (RAFT) program.5   

Overview: Distribution of Bi-Lateral Aid

With sixteen bi-lateral development assistance agencies each providing $1 billion or more during 2004,6 it is easy to forget that only a very small number of development assistance agencies existed before January 1, 1960. At the beginning of that decolonization decade, only four multi-purpose multi-lateral agencies had been established7 while the United States was the only country with an established bi-lateral aid agency.8 That changed dramatically after the 1960s as former colonial powers, Japan, and the Scandinavian countries also established significant aid programs. But among those various bi-lateral aid programs, those of the most significant former colonial powers were marked by the connections between them and their respective dependent territories. Perhaps more significantly, as late as 2004 a full twenty-three countries received more than a third of their bi-lateral official development assistance (ODA) from the country that had previously exercised sovereign authority in their territories and, of that number, thirteen had received more than half from such sources.9 Although the United Kingdom and France accounted for fifty-nine percent of all dependent territories between 1949-60, the transition from colonial administration to bi-lateral aid by Belgium, The Netherlands, and Portugal is also instructive.

United Kingdom

The United Kingdom was clearly the “big elephant” among colonial powers. Indeed, more than a quarter (28%) of today’s United Nations’ member-states were at one time or another British colonies or protectorates, accounting for a third of all colonies world-wide.10 Included among those former dependencies were some of the largest: India, Bangladesh, Nigeria, and Pakistan. The transition from that vast colonial empire to today’s Commonwealth of Nations began in 1867 when Canada was the first colony to achieve self-governing “Dominion” status. But it was another thirty-four years before Australia too achieved that status in 1901; followed by New Zealand (1907), South Africa (1910) and the Irish Free State (1922). The British Commonwealth of Nations was established as an association of autonomous Dominions “united by common allegiance to the Crown” by the Statute of Westminster in 1931.11 But as discussed in “The More Things Change: Development’s Colonial Heritage” (posted January 10, 2011), the British were not committed to granting independence during the years immediately following the end of that war. Instead, they established the Colonial Development Corporation in 1948 to finance projects for “developing resources of colonial territories.”12

But by the 1960s half of all British colonies existing at the end of World War II (34) gained their independence; requiring a transition from former colonial to post-colonial development policies and organizations.

Responding to the Government’s assertion in a 1960 White Paper that:

the best way to lift poorer nations out of poverty is through economic development…,

a Department of Technical Cooperation was established in 1961 –

to deal with the technical side of the aid programme…. [by] bring[ing] together the expertise on colonial development previously spread across several government departments [emphasis added].13

Two years later, the Colonial Development Corporation was transformed into the Commonwealth Development Corporation (thus retaining the same initials)14 and the functions of the Colonial Office were split between the Ministry of External Affairs and an entirely new Ministry of Overseas Development (ODM) in 1964.15

But whatever the sequential reorganizations of the United Kingdom’s international development program and the claim One year later, the Government issued its first post-colonial White Paper on “development” asserting that it had a — 

moral duty for development and development is in the nation’s long-term interest,16

But as argued by a senior staff of the United Kingdom’s Department for International Development (DFID), the policy set forth in that White Paper: 

did not make an entirely clean break with the past…. Not only were many of the ODM staff former colonial civil servants, the Overseas Development and Service Act was perceived and drafted as the latest in a long line of Colonial Development and Welfare Acts…. Right up to the present time, a prevailing self-image of ODA has been a Whitehall Department with special skills and responsibilities connected with working overseas to promote the development of former colonies or the welfare of their people [emphasis added].17

The transfer of many Colonial Office staff from both headquarters and the colonies to the new Ministry of Overseas Development in 1964 reinforced that evolutionary approach to relations with former colonies. Indeed, a former Governor of Colonial Kenya served as Chairman of the Colonial Development Corporation as it was transformed into the Commonwealth Development Corporation. And although it is not possible to precisely determine the exact numbers or percentages, anecdotal evidence suggests that the bi-lateral aid agencies subsequently established by Australia, France, Belgium, and The Netherlands were also largely staffed by former colonial administration officials. The United Kingdom’s direct bi-lateral aid was also heavily skewed toward former British dependencies, accounting for more than eighty percent of the United Kingdom’s total world-wide bi-lateral aid between 1965 and 1984. Former British colonies still received more than sixty percent of British aid throughout the 1990s. Similar patterns hold for France and Belgium and, to a lesser extent, The Netherlands and Portugal.

France 

France first transitioned from its policy of imposing self-financing on its colonies to a new policy of providing “development” investment by establishing an Investment Fund for Economic and Social Development (FIDES) in 1946. The establishment of FIDES was a dramatic shift from France’s pre-World War II colonial policies.18 Nonetheless, FIDES’ objective was still premised on the continuation of the French Empire. However, with French colonies beginning to achieve independence in 1960, FIDES was replaced in 1963 by a Ministry of Cooperation with responsibility for providing grant assistance to Africa and a Department of Cooperation to provide concessional credits to selected developing countries worldwide. But even more important was the establishment of the African Financial Community (the “Franc Zone” or “CFA”) on December 26, 1945 only months after the end of World War II.

The CFA manifests itself in both currency19 and organizational forms. Organizationally, it consists of seven former colonies in the West African Economic and Monetary Union (WAEMU) and another six former French colonies plus the former Spanish colony of Equatorial Guinea in the Central Africa Economic and Monetary Community (CEMAC); each of which share a Central Bank. France was represented directly in both Central Banks and guaranteed a fixed exchange rate between the CFA and the French Franc until the mid-1990s. That meant that decisions to devalue the CFA required the agreement of France; an issue that became a source of tension between France and both the World Bank and IMF during the 1980s and early 1990s. Nevertheless, following the major devaluation of the CFA on January 12, 1994, France’s role shifted to ensuring unlimited convertibility of the CFA pegged, since January 1, 1999, to the Euro. In exchange, the CFA central banks are required to maintain at least sixty-five percent of their foreign exchange reserves in operating accounts within the French Treasury.20

The distribution of post-independence French bi-lateral aid reflects its attempt to preserve its pre-eminent role as the primary source of international development assistance to its former colonies; especially in Africa.21 French Government ministers did not hesitant to remind World Bank managers and staff that the countries of the CFA Franc Zone were “an important dossier” of France.22 The importance of that commitment was clearly demonstrated when France effectively assumed responsibility for financing the re-payment of the CFA’s member-countries’ debt to the World Bank, IMF, and other multilateral organizations as their economies declined during the 1980s23 and the fact that more than sixty percent of France’s world-wide bi-lateral assistance was provided to former French dependencies between 1965 and 1999. The share received by the thirteen former French colonies of the CFA Zone, representing fifty-four percent of France’s former colonies, received sixty-three percent. But more importantly, thirteen of the fourteen CFA Zone countries received more than thirty percent of their bi-lateral financial assistance from France; and eight of them received more than fifty percent. Only six of France’s former dependencies (25%) received less than thirty percent of their total bi-lateral financing from France between 1960 and 1999 and, of those, Cambodia, Laos, and Viet Nam (50%) had been “inherited” by the United States – at least until 1975 followed by the early 1990s by the World Bank.

Belgium

All three of Belgium’s former colonies are located in Africa and achieved independence between 1960 and 1962. Belgian aid has also conformed to the pattern established by the United Kingdom and France. During the period from 1960 to 1994, Belgian aid to its three former colonies averaged forty percent of Belgium’s worldwide total. More important, between 1960 and 1974, Belgium accounted for sixty-three percent of all bi-lateral financing received by Rwanda and for sixty-six and fifty-nine percent received by the former Zaire and Burundi respectively through 1979. However, it is also important to note that from 1995 to 1999, the total amount of Belgium’s worldwide bi-lateral assistance directed to its three former colonies dropped to only ten percent.

The Netherlands

Only two Dutch colonies have achieved independent sovereign-states status; Indonesia in 1949 and Suriname in 1975. Indonesia incorporated Western New Guinea in 1969. Most of the remaining Dutch overseas dependencies are small islands in the Caribbean and have the legal status of internal Departments of the Netherlands itself. The pattern of Dutch bi-lateral assistance to Suriname and Indonesia both conforms to and contradicts the British, French, and Belgian pattern summarized above. The Netherlands never accounted for more than fifteen percent of total bilateral assistance to Indonesia and dropped to five percent or less from 1965 to 1969 and again from 1990 to 1999. However, the pattern of Dutch assistance to Suriname conforms to the more usual pattern; as that country has relied almost exclusively on The Netherlands for bi-lateral aid since independence in 1975. The Dutch share of assistance to Suriname ranged between eighty-six and ninety-eight percent through 1999. But with the exception of the period prior to 1965 and again from 1970 to 1974, less than twenty percent of total Dutch bi-lateral aid has been allocated to its two former colonies. That low share of total Dutch aid is due primarily to that country’s substantially increased global aid budget between the early 1960s through the 1990s; from the equivalent of $250 million to $24 billion in constant 2010 dollars.

Portugal

Portugal emerged as a powerful colonial power during the fifteenth century; maintaining that position for almost 300 years until defeated in a series of wars with the Dutch, British, and French. By the middle of the twentieth century, Portugal retained colonial authority in only seven overseas territories. Among those territories, Goa and Macau were peacefully transferred to India and China respectively. Indonesia invaded Timor-Leste and asserted its sovereignty over that Portuguese territory in 1975. Portugal never officially recognized that act, and Timor Leste was able to wrest its own sovereignty from the Indonesians in October 1999 during a period of political instability in Jakarta. The other five former Portuguese territories — Angola, Cape Verde, Guinea-Bissau, Mozambique, and Sao Tome and Principe — all achieved independence during 1974 and 1975 when Portugal abruptly withdrew in response to its own domestic revolution at home. That revolution led to Portugal’s withdrawal from the OECD/DAC in 1974, requesting that it be included in the list of DAC eligible recipient countries. Portugal rejoined the OECD/DAC in 1991 and, therefore, data on the allocation of its bi-lateral aid is only available from that date forward. The pattern of its assistance conforms to that of The United Kingdom, France, and Belgium. Portuguese assistance to its five former independent territories during the last decade accounted for a full sixty-one percent of its total worldwide bi-lateral assistance. More important, Portugal alone accounted for more than half of the bi-lateral aid received by Timor Leste and Sao Tome and Principe during the 1990s, while Guinea-Bissau and Cape Verde depended on Portugal for thirty and twenty-five percent of such financing respectively. Nonetheless, it now appears likely that Brazil will exceed Portugal’s level of aid to Angola, Cape Verde, Mozambique, and Sao Tome and Principe, suggesting that some aid flows are determined by shared language.

The United States of America

The United States is not easily classified with respect to the discussion here.24 Technically, it has exercised colonial authority over only eight territories not located in North America: Cuba, Guam, Hawaii, the Marshall Islands, Palau, The Philippines, Puerto Rico, and American Samoa.25 However, fifty percent of those territories were administered for fifty years or less while Hawaii was incorporated as the 50th State in 1959. Today, only Guam (1898), Puerto Rico (1898), American Samoa (1899) and the United States Virgin Islands (1917) remain as American dependencies. However, the United States also intermittently exercised administrative responsibilities in Mexico and several Central American and Caribbean states during the nineteenth and twentieth centuries and more recently in Iraq from mid-2003 through much of 2004. Notwithstanding such engagements, neither formal nor de facto “dependencies” have received significant amounts of United State’s bi-lateral assistance; although nine of them received more than thirty percent of their total bi-lateral assistance from the United States in 2004.26 Finally, given American foreign policy objectives during the post-WWII Cold War period, it has exercised an important role in support of its political and economic objectives in such countries as Korea, Viet Nam, the Middle East, The Persian Gulf, and The Balkans.  That expansive involvement in the global political and economic arena, combined with an increasingly reduced foreign aid budget, has resulted in the absence of any priority extended to its own former colonies.

Summary Conclusion

The notion that aid flows are determined by the need of potential recipients, the quality of project or program proposals, and adherence to sound economic policies without political considerations is belied by the patterns of bi-lateral development assistance summarized above. The pattern of United States’ bi-lateral aid is not influenced by its colonial legacy to the extent of the United Kingdom, France, and Belgium. However, its status as a superpower and current focus on aggressively defending against international terrorist threats strongly influences the allocation of its development assistance. This will be discussed further in the forthcoming blog post “From ‘Reconstruction’ to ‘Development’” available at www.internationaldevelopmentshould.com no later than March 8, 2011.

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NOTE:

  [1]    All “Personal Reminiscence” posts are stories told about one or more of my own personal experiences as I remember it. They are true to the best of my ability to recollect them and reflect my view of how they illustrate “lessons learned” from that experience even if one or another aspect of the story as told might not be completely correct in each and every detail. Further, I have done my best to disguise the identity of other persons referred to in these stories, including not using their true names unless references to their presence at that time or circumstance has already been published by others in other media.

  [2]   See Diane Conyers and R. Westcott, Regionalism in Papua New Guinea, Administration for Development 13 (1979) and Roger Berry and Richard Jackson, Interprovincial Inequalities and Decentralization in Papua New Guinea, Third World Planning Review 3 (1981).

  [3]    The Australian Government officially traces its bi-lateral aid program back to resources transferred to the various regions of PNG beginning in 1946, although those transfers were managed by several different Australian Government departments. In any event, the Australian Development Assistance Agency (ADAA) was followed by the Australian Development Assistance Bureau (ADAB) within the Ministry of Foreign Affairs two years later, the Australian International Development Assistance Bureau (AIDAB) in 1987, and finally AusAID in 1995. See Australian Agency for International Development, Brief History of AusAid available at http://www.ausaid.gov.au/about/history.cfm.

  [4]    The remaining 3.5% of development assistance to PNG during 1980 was provided by Germany, Japan, and The Netherlands. Statistics reported throughout this story for Australia’s direct bi-lateral development assistance to PNG and world-wide, as well as the data about aid received by PNG from Australia and all OECD sources were calculated by Jerry Mark Silverman from data provided by the Organisation for Economic Co-operation and Development (OECD), Development Assistance Committee (DAC), International Development Statistics (IDS) online: Databases on aid and other resource flows available at www.oecd.org/dac/stats/idsonline.

  [5]   United States Agency for International Development (USAID), Papua New Guinea, USAID Asia available at http://www.usaid.gov/rdma/countries/png.html .

  [6]       The sixteen bi-lateral ESA’s providing $1 billion or more during 2004 were, in rank order: USA ($19.0); Japan ($8.7); France ($8.5); UK ($7.8); Germany ($7.5); The Netherlands ($4.2); Sweden ($2.7); Spain ($2.6); Canada ($2.5); Italy ($2.5); Norway ($2.2); Denmark ($2.1); Australia ($1.5); Belgium ($1.5); Switzerland ($1.4); and Portugal ($1.0). See Larry Nowels, Foreign Aid: Understanding Data Used to Compare Donors, CRS Report for Congress (Washington, DC: Congressional Research Service, UNT Digital Library, May 23, 2005) available at http://digital.library.unt.edu/ark:/67531/metacrs7336/m1/. Excluding the more than fifty percent of USA economic assistance provided for Iraqi Reconstruction ($8.1 billion), Egypt ($663 million), and Israel ($555 million) alone, the United States still ranked first in total amount of economic assistance ($9.6 billion). The UK’s economic support of “reconstruction” in Iraq during 2004 accounted for about four percent of that country’s worldwide economic assistance. See Organisation for Economic Co-operation and Development, Development Assistance Committee, International Development Statistics (IDS) online: Databases on aid and other resource flows; available at www.oecd.org/dac/ stats/idsonline.

  [7]    The four multi-lateral agencies with a world-wide and multi-sectoral mandate established prior to January 1, 1960 were: (i) the International Bank for Reconstruction and Development (IBRD, 1946); (ii) the United Nations’ Expanded Program of Technical Assistance (EFTA; 1949) and (iii) the United Nations Special Fund (1958) to complement and expand on the work of EFTA (both replaced by the United Nations Development Programme in 1965); and (iv) the European Economic Community’s European Development Fund for Overseas Countries & Territories (1957). The Inter-American Development Bank was the only one of the nine regional development banks already established as of January 1, 1960. Further, only nine of more than 50 other multi-lateral agencies had yet been established.

  [8]    With the end of the Marshall Plan in 1952, the European Cooperation Administration (ECA) was succeeded by two different American agencies. The Department of State’s Technical Cooperation Administration (TCA) was responsible for assisting non-European “poor” countries while responsibility for all other non-military foreign aid was assigned to a new self-standing Mutual Security Agency (MSA). “Food for Peace” was inaugurated in 1954 and integrated, along with all other American non-military foreign aid programs, into the new International Cooperation Agency (ICA) that, in turn, became the United States Agency for International Development in 1961. See United States, Agency for International Development, About USAID (January 7, 2005) available at http://www.usaid.gov/about_usaid/usaidhist.html.

  [9]    All of the statistical data presented below with respect to British, French, Belgian, Dutch, and Portuguese bi-lateral aid flows was calculated by Jerry Mark Silverman from data provided by the Organisation for Economic Co-operation and Development, Development Assistance Committee International Development Statistics (IDS) online: Databases on aid and other resource flows; available at www.oecd.org/dac/ stats/idsonline.

[10]   We count 68 sovereign-states as former dependencies of the United Kingdom here. Technically, however, a complete number would be 69.5 current states because the territories of three of today’s sovereign-states (Cameroon, Somalia, and Yemen) were divided between the United Kingdom and one or another colonial power.

[11]      The Commonwealth of Nations has provided a framework for relationships between the United Kingdom and its former colonies since 1931, but membership accelerated in the early 1960s. Membership in the Commonwealth is strictly voluntary and decisions are not binding on members. Today’s 54 members are all former British colonies except for Mozambique and Rwanda; former Portuguese and Belgian colonies respectively; see Commonwealth Secretariat, History available at http://www.thecommonwealth.org/Internal/191086/34493/history/ and Member States available at http://www.thecommonwealth.org/Internal/191086/142227/members/.

[12]    It is also interesting to note that on January 1, 1950 the British “discontinued” negotiations with the World Bank for loan of approximately $5 million (equivalent to 2010’s $45.75 million) to the United Kingdoms’s Colonial Development Corporation because the CDC “was unable to accept certain of the Bank’s requirements, especially the non-financial covenants,” that would impinge on its colonial prerogatives. See World Bank, World Bank Group Historical Chronology: 1950-1951 (Washington, DC: World Bank, 1949) available at http://go.worldbank.org/0K2T0GA1I0.

[13]   United Kingdom, Department for International Development, History, About DFID available at www.dfid.gov.uk/About-DFID/History1/

[14]    United Kingdom, Competition Commission, Commonwealth Development Corporation: A Report on the Efficiency and Costs of, and the Service Provided by, The Commonwealth Development Corporation (1992) available at http://www.competition-commission.org.uk/rep_pub/reports/1992/320commonwealth.htm#full .

[15]    The Ministry of Overseas Development (ODM) was the United Kingdom’s first bi-lateral aid agency. But that function was downgraded from ministerial to agency status when the Overseas Development Agency (ODA) succeeded ODM in 1979 until that status was upgraded again with the establishment of the Cabinet level Department for International Development (DFID) in 1997; see United Kingdom, Department for International Development, History, About DFID available at www.dfid.gov.uk/About-DFID/History1/.

[16]    Rosalind Eyben, Globalisation: Implications for How We Work, presentation within the United Kingdom’s Department for International Development in London on May 30, 1997.       

[17]      Ibid.

[18]   See Richard Fanthorpe, Fonds d’Investissement pour le Développement Economique et Social (FIDES) in Kevin Shillington (ed.), Encyclopedia of African History, Volume 1 (London: Routledge Taylor & Francis Group, 2004), p. 905-909 available at http://books.google.com/books?id=Ftz_gtO-pngC&pg=PA905&lpg=PA905&dq=french+Investment+Fund+for+Economic+and+Social+Development+fides&source=bl&ots=IuDIvkkzlU&sig=bu_yS2n6AejZ0J7LW97_YITE-5s&hl=en&ei=zp1ZTabBDIeWtweCs_23DQ&sa=X&oi=book_result&ct=result&resnum=1&ved=0CBMQ6AEwAA#v=snippet&q=fides&f=false.

[19]   As currency, the CFA was first established as the “Franc of the French ‘Colonies’ of Africa” on the same day that France ratified the charters of the World Bank and IMF. Anticipating de-colonization in 1958, the CFA became the “Franc of the French ‘Community’ of Africa,” even as it also retained its earlier initials. One year later, separate monetary unions were established for West and Central Africa and the common initials since then denote two different currencies: the “Franc of the African Financial Community” in West Africa and the “Franc of Financial Cooperation” in Central Africa; see Banque de France, What is Franc Area? (November 26, 2004) and La Banque Centrale des États de l’Afrique de l’Ouest,  History of the CFA Franc (no date).

[20]   Ibid.

[21]   Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997), p. 769 recommend Guy Martin, “Continuity and Change in Franco-African Relations,” Journal of Modern African Studies, 33 (March 1995), p 1-20 as a good summary of the extensive literature devoted to analyses of French political and economic power in Africa. 

[22]    As only one example of the French Government’s assertion of primary influence within the CFA zone, see Memorandum, Jean-Louis Sarbib to Edward Jaycox, through Edward Lim, “Meeting between Mr. Qureshi and the French Minister of Cooperation,” August 23, 1991; cited in Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997), p. 776.

[23]    Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997), p. 76, 776, 1072.

[24]   Total United States’ development assistance to non-European areas between 1946-61 amounted to $26.9 billion – almost equal to the $28.3 billion provided to Europe during that period; United States, Agency for International Development, About USAID (January 7, 2005) available at http://www.usaid.gov/about_usaid/usaidhist.html.

[25]    Of the eight United States’ colonial territories, Cuba was administered directly for only four years (1898-1902) and The Philippines for 49 years (1898-1946) following several centuries of Spanish rule. The Marshall Islands was under American authority for 43 years (1943-1985) following colonization by Germany in 1885 and administration by Japan between 1914 and 1943. Palau was administered by the United States for fifty years (1944-1994) following 300 years under Spanish (c. 1600-1899), German (1899-1914), and Japanese (1914-1944) colonial rule. The Hawaiian Islands were incorporated as the 50th State of the United States by the popular vote of its residents in 1959 following 61 years of colonial administration (since 1898). American Samoa (1899), Guam (1898) and Puerto Rico (1898) remain dependencies of the United States today.

[26]      As classified and calculated by Jerry Mark Silverman, the ten “de facto dependencies’ that received more than thirty percent of their total bi-lateral assistance from the USA during 2004 were: the Dominican Republic (35%), Guatemala (40%); El Salvador (46%); Panama (57%); Haiti (59%); Liberia (60%); Palau (67%); Marshall Islands (90%); and The Federated States of Micronesia (92%). As calculated by the Author from data provided by the Organisation for Economic Co-operation and Development (OECD), Development Assistance Committee (DAC), International Development Statistics (IDS) online: Databases on aid and other resource flows available at www.oecd.org/dac/stats/idsonline and United States, Agency for International Development (USAID), U.S. Overseas Loans and Grants: Obligations and Loan Authorizations July 1, 1945 – September 30, 2003 available at http://pdf.usaid.gov/pdf_docs/PNADH500.pdf.

Keywords:  ADAA, ADAB, Africa, African Financial Community, AIDAB, American Samoa, Angola, AusAID, Australia, Australian Agency for International Development, Australian Development Assistance Agency, Australian Development Assistance Bureau, Australian International Development Assistance Bureau, Balkans, Bangladesh, Belgium, bi-lateral aid, bi-lateral donor, Brazil,British Commonwealth of Nations, British Empire, British Protectorate, Burundi, Cambodia, Cameroon, Canada, Cape Verde, Caribbean, CEMAC, Central Africa Economic and Monetary Community, Central America, CFA, China, Colonial Development and Welfare Acts, Colonial Development Corporation, Colonial Office, colonies, Commonwealth Development Corporation, Commonwealth of Nations, Commonwealth Secretariat, Cuba, DAC, Denmark, Department of Cooperation, Department of Technical Cooperation, Development Assistance Committee, development assistance, DFID, Dominican Republic, Dominion, ECA, EFTA, Egypt, El Salvador, Equatorial Guinea, Euro, European Cooperation Administration, European Economic Community’s European Development Fund for Overseas Countries and Territories, Federated States of Micronesia, FIDES, First World War, Fonds d’Investissement pour le Développement Economique et Social, Food for Peace, Franc Zone, France, French Empire, French Franc, Germany, Goa, Guam, Guatemala, Guinea-Bissau, Haiti, Hawaii, IADB, IBRD, ICA, IMF, India, Indonesia, Inter-American Development Bank, International Bank for Reconstruction and Development, International Cooperation Agency, International Monetary Fund, Investment Fund for Economic and Social Development, Iraq, Irish Free State, Israel, Italy, Japan, Kenya, Korea, Laos, League of Nations, Liberia, Macau, Marshall Islands, Marshall Plan, Mexico, Middle East, Ministry of Cooperation, Ministry of External Affairs, Ministry of Overseas Development, Mozambique, MSA, Mutual Security Agency, Netherlands, New Guinea, New Zealand, Nigeria, Norway, ODA, ODM, OECD, official development assistance, Organisation for Economic Co-operation and Development, Overseas Development and Service Act, Pakistan, Palau, Panama, Papua New Guinea, Papua, Papuaniugini, Persian Gulf, Philippines, PNG, Portugal, protectorates, Puerto Rico, Queensland, Responsible Asia Forestry and Trade (RAFT) program, Rwanda, Sao Tome and Principe, Scandinavian countries, Second World War, Somalia, South Africa, Southeast Asia, sovereign-states, Spain, Statute of Westminster, Suriname, Sweden, Switzerland, TCA, Technical Cooperation Administration, Timor-Leste, UNDP, United Kingdom Department for International Development, United Kingdom, United Kingdom, Competition Commission, United Nations Development Programme, United Nations Special Fund, United Nations, United Nations’ Expanded Program of Technical Assistance, United States Agency for International Development, United States, USAID, Viet Nam, Virgin Islands, WAEMU, West African Economic and Monetary Union, Western New Guinea, World Bank, World War I, World War II, Yemen, Zaire.


THE COLD WAR: SUPPORTING AUTHORITARIAN REGIMES #2

February 8, 2011

This land is your land and this land is my land – sure – but the world is run by those who don’t listen to music anyway.                                  Bob Dylan (born 1941)

As implied in Part #1 of this topic (posted January 23, 2011), current events in Egypt are partially the fruit of political and military decisions made by the United States and its allies during the Cold War. That motivation was subsequently replaced by the new “terrorist” threat following the American Embassy bombings in Nairobi and Dar Es Salaam on August 7, 1998. Nonetheless, the desire to build anti-communist coalitions during the Cold War also dovetailed nicely with the perceived theoretical requirements for economic development current at that time.

Economists’ Rule

During the two decades of the 1960s and 1970s that bound the period under review in this blog post, thinking about the most effective road to “modernity” reflected the two mutually reinforcing economic theories of “linear growth1 and “dual economies.”2 Although there are different versions of those theories,3 most presented both good and bad news for “underdeveloped” countries. The bad news was that economic development must follow the same path experienced by western industrialized countries;4 a path that meandered through European history over a period of more than 200 years.5 The good news was that a correct understanding of that long history provided the opportunity to substantially accelerate the trip along that path.

Despite the Cold War competition between the “Communist” and “Free” worlds, both Marxist and non-Marxist theories shared the view that the rapid growth of European economies during the eighteenth century was the result of an “industrial revolution.” Indeed, the basic premise of those theories is generally credited to both David Ricardo (1772-1823) and Karl Marx (1818-1883). That shared premise was that economic growth depended on a shift from supposedly “traditionally static” agricultural economies to more dynamic and highly organized forms of industrial production. And that transition began when improved agricultural and animal husbandry techniques were incrementally introduced into increasingly integrated agricultural economies over many decades. Those innovations eventually led to investment in export-oriented cash crops, increased agricultural profits, and ultimately reinvestment of those profits in an exponentially expanding industrial sector. Eventually, an expanding industrial sector displaced agriculture as the primary employer within European and North American economies.

Nonetheless, there were also differences between Marxist and non-Marxist approaches. First, Marxist theory posited a linear progression from feudalism through capitalism and socialism to communism while non-Marxist economic development theory posited a linear progression from subsistence agriculture to surplus agricultural production to industrialization. Indeed, equating “modernity” with industrialization and consequent urbanization is taken for granted by many people today. 

Second, the projected beneficiaries of Marxist theory would be industrial workers (the “proletariat”) worldwide without respect to state borders or national identities while for the non-Marxist theoretical descendents of Ricardo the beneficiaries would be “underdeveloped” sovereign-states. Third, the ideal Marxist society was a universal classless society without differentiated state borders to be achieved sometime in the indefinite future while for non-Marxists the ideal state was simply a replication in “underdeveloped” countries of the socio-political economy already achieved by “modern industrialized” sovereign-states within a single generation. 

“The People:” Means or Ends?

Unfortunately, both Marxist and non-Marxist theories were transformed into an ideologically-rooted policy prescription for the rapid “development” of non-European people. And the stereotypically undifferentiated view held by many foreign and indigenous elites was that most of them were illiterate “peasants,” bound by counter-productive traditional beliefs and traditions, and living in parochial and inward looking rural villages. Ordinary people were perceived as simply too ignorant or selfish to voluntarily behave in the sacrificial ways posited by either of the two economic development theories dominant at the time. It is not surprising that both theorists and policy-makers identified the “people” as the primary obstacle to development – another demonstration of the notion that the “people are the problem” (see post dated January 3, 2011 and this blog’s Mission statement). And that view led inexorably to viewing “the people” merely as factors of production and consumption. 

Authoritarian Imperative?

It was only a short logical leap from the notion that the “people” were an obstacle to achievement of their own “best interests” to the view that they would need to be forced to behave “correctly” to achieve a greater economic good in future.6 Thus, within only a few years after gaining independence, the overwhelming majority of underdeveloped countries were officially governed by single political parties or military regimes; many of whose organizational structures mirrored those of the Soviet Union’s Communist Party even as they were not necessarily Marxist in the ideological sense.7   

Another important difference between the authoritarian regimes of Stalin’s Soviet Union and those emerging within newly independent underdeveloped countries was that the former implemented forced industrialization by using that country’s own domestic resources8 while the rulers of most newly independent underdeveloped countries viewed foreign finance as crucial.9 But attendant with foreign finance was the view that neither the first generation of political leaders or the extremely limited number of educated persons available to staff their governments had the requisite understanding of the development process or skills required to implement it. Therefore, if the pre-requisites for the success of the Marshall Plan did not already exist in newly independent African and Asian countries, then they would need to be created from scratch. And that would, in turn, require reliance on scientifically-trained “experts” who had proved their worth during the process of reconstructing Europe after World War II10 (see my next blog post, “From Colonial Administration to Technical Assistance,” forthcoming). And reliance on the limited pool of foreign-experts resulted almost inexorably in a centralized approach to planning development projects and programs; characterized in many case by the initiation of five-year planning cycles.11 In that way, a belief in efficiencies of central planning was not the exclusive mantra of “evil communists” or “misguided socialists.”12 And although the rationale for authoritarianism was clearly circular, it nonetheless influenced many international decision-makers and “free world” aid agencies continued to be strong advocates of central planning well into the 1970s.

Expansive Role of the State

Planning is to Implementation as Alchemy is to Wealth.

                              Jerry Silverman (born 1942) and George Honadle (born 1944)

Clearly, comprehensive planning, however “scientific” it might be, was not enough. It was also necessary to “control” implementation of plans while also ensuring political stability. Thus, to ensure that projected profits were re-invested in the industrial sector, many governments resorted to direct ownership of all domestic “strategic” industries and establishment of state-owned monopoly “marketing boards” tasked with squeezing largely non-existent agricultural surpluses from farmers while capturing profits from higher agricultural export prices. But to ensure political stability, many governments also: (1) established controls on consumer prices in an attempt to avoid inflation; (2) provided food to urban populations at artificially low prices essentially subsidized by the equally low prices paid to farmers by “marketing boards;” (3) promised to provide an expansive array of social services that, in the event, they failed to produce; (4) tried to control rural to urban migration by requiring permits to reside in cities (resulting in “illegal” slums without public services); (5) ultimately looked to the military and/or police to protect them against their still potentially volatile population; and, particularly in Africa, (6) employed large numbers of unskilled people without qualifications in largely non-productive jobs through “social employment” programs.

Consequences

The rationale for relying on authoritarian regimes and their expert advisors required at least two things: (1) correct theoretical assumptions and (2) policies likely to achieve the objectives posited by those assumptions. Neither of those conditions were met, as illustrated by declining agricultural incomes and the vicious cycle of borrowing and ever increasing debt.

Declining Agricultural Income

The decision by farmers not to produce above subsistence requirements or to favor consumption over reinvestment were clearly rational responses to both: (1) the counter-productive domestic policies adopted by their own interventionist governments and (2) the practice by many European and North American industrialized countries to subsidize their own farmers and dump resulting agricultural surpluses (often in the form of food “aid”). As rural land became less valuable for agricultural purposes, people began to migrate in droves from rural villages to rapidly expanding urban slums drawn by the possibility of securing higher income urban jobs rather than the actual availability of such jobs; creating increasing levels of unemployment.13

Doubling-Down

Reliance on an expansive role by artificial states in equally artificial economies did not achieve either political stabilization or economic development objectives. External financing did provide the opportunity to invest in both agricultural and industrial sectors at the same time rather than sequentially. However, non-mechanized small-scale agriculture continued to employ a majority of the population throughout most of Sub-Saharan Africa and much of Asia well into the 1980s.14 New industries failed to produce predicted rates of economic return and were unable to employ the burgeoning urban population.  Nonetheless, countries on whose behalf governments had borrowed money for economic development were required to repay the loans and credits they had received. 15

That, in turn, led to a vicious cycle of more borrowing to both repay past loans and further increase investment in the hope that sufficient profits would eventually be produced. That problem was compounded by the knowledge among many government officials that repayment of monies borrowed in the immediate-term would not need to be paid back until a future time well beyond their own tenure. Repetitive cycles of disappointing economic growth combined with recurrent borrowing finally culminated in the partially successful movement to “forgive debt” (HIPC) to the most heavily indebted countries beginning in 1996.

Formal Democracy or Participatory Involvement

It is clear in retrospect that “winners” and “losers” would inevitably result from decisions about who would and who would not receive development assistance and, therefore, that such decisions were inherently political. And although it is not always clear who those winners and losers would be, experience suggests that smallholder farmers, tenants, agricultural laborers, and residents of urban slums were among the biggest losers.

I will argue in a future blog post (“A World Without Poverty”) that local community-based “participatory” approaches to poverty reduction16 are more effective than either expert-driven development or attempts to aggregate diverse demands within centralized formal structures of electoral democracy. An incipient movement toward grassroots participatory approaches began to take hold within DFID, USAID, and the World Bank during the late 1980s and early 1990s.17 Nonetheless, those initiatives have remained at the margins of development assistance while the primary ethos of the World Bank and most other “donors” continues to be expert-driven. That ethos is perhaps best illustrated by remarks by Lawrence Summers at the World Bank’s Country Director’s Retreat on May 2, 2001.18

The suggestion that there would be a generalized improvement in decision making processes by giving more weight to local community is a proposition for which there is very little evidence…. there is little to be found in [the] success of [Asian countries] that points to the wisdom of much of what is said today in the name of empowerment or in the name of enfranchising those who have not been enfranchised…. I am concerned that the move toward empowerment rather than an economic approach is standing in some ways for a reduced emphasis on the analytic element in the Bank’s work…. [Thus,] I am deeply troubled by the distance that the Bank has gone in democratic countries toward engagement with groups other than governments in designing projects.

Summers was arguing primarily against the World Bank’s attempts to empower non-government stakeholders within countries with ostensibly “democratically” elected governments because he believed that “there is a real possibility…of significantly weakening [those] governments.” Nonetheless, he also clearly implied opposition to World Bank support of demand-driven participatory approaches in countries with authoritarian regimes as well. Thus, Summers continued — 

It has to be recognized that in many cases governments are not allied with many of the forces professing to represent civil society within countries…. I think the issue is a much more difficult one where the quality of democracy is questioned, where governments less legitimately speak for their people. But here, too, there is a basic tension between the notion of being closer to governments and having better partnerships and more effective engagement with civil society…. But I rather think that on those occasions when the Bank is encouraging and pushing greater involvement with civil society — which I suspect is on a large number of occasions — the issues are perhaps a bit more complex than has been faced…. [But] I think it would be a great tragedy in terms of the Bank’s potential contribution to reducing global poverty if, in the name of demonstrating its compassion and moral energy, it were to lose sight of the rigorous analytic basis and emphasis on supporting genuine market forces that have allowed the Bank to make such a great contribution to the global poverty reduction efforts over these last 50 years.19

It would be difficult to find any better illustration of the intellectual triumph of scientific theory and expertise over the socio-political rights of ordinary people.

Summary Conclusion

Scientists have odious manners, except when you prop up their theory; then you can borrow money of them.                                                          Mark Twain (1835-1910)

Authoritarianism, not democracy, was the historical norm well before the beginning of the Cold War (Part #1) or the introduction of international development assistance. Therefore, the argument presented here is not that either of those phenomena caused authoritarian regimes. Nonetheless, foreign policy and economic theory did combine to justify support of authoritarian regimes in many developing countries. And that no doubt contributed to the sub-optimal performance of “development aid” since the 1960s.

The Spotlight currently shining on Egypt presents an opportunity to shift from an expert-led to a demand-driven approach to development. But as protesters continue to occupy Tahrir Square in Cairo, are we listening to what they are actually saying and do we have any better idea about how to effectively meet their demands than authoritarian rulers like Hosni Mubarak? Is it likely that local community or occupationally-based institutions capable of aggregating public preferences about priorities and influencing decision-makers will be established following Mubarak’s departure from the Presidency? An affirmative answer to those questions is unlikely precisely because that would require a fundamental change away from the stereotypical view of people in developing countries as lacking the capacity to make the “correct” choices. That stereotypical view was not true in the past and it is clearly not true today.

When I served as a technical assistance advisor in Egypt during 1975, 1976, and again in 1981, I worked with many Egyptians whose graduate education and professional experience mirrored my own. But looking back, that itself was a fundamental problem because indigenous “experts” continue to design and implement top-down supply-driven development assistance programs in much the same way that foreigners urged their governments to do in the past.

We do not, of course, know what the outcomes might have been if “the people” had had the opportunity to make their preferences known and if from the beginning a demand-driven approach had been supported instead of the commitment to ideologically determined policies that actually occurred. But it is hard to believe that it would have been any worse than the actual outcomes achieved after the investment of trillions of dollars in so-called “development.” Thus, achieving political reforms without commensurate changes in the way we do development or, more specifically, poverty reduction will, I predict, find the Egyptian poor in much the same place twenty years from now as they find themselves today. And that will be the case no matter how well-intentioned a democratically elected successor to Mubarak might be.

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NOTES:

  [1]    During the 1960s, perhaps the most generally known linear growth theorist was Walt Rostow (see The Stages of Economic Growth: A Non-Communist Manifesto [Cambridge: Cambridge University Press, 1960]). The strong influence of the Cold War in this context is suggested by the sub-title.

  [2]   The initial version of dual economy theories emerged during the eighteenth century to explain the causes of a series of economic crises in France. However, that initial theory was substantially changed by the classical dualism of David Ricardo and Karl Marx. It is important to note that “dual economy” theories are not the same as “parallel economy” theories. Indeed, as we will illustrate below, while “dual economy” theories of the 1950s through the early 1970s provided a foundation for centrally planned “controlled” economies, “parallel economy” theories provide an analytical foundation for the dismantling of “controlled” economies in favor of open markets.

  [3]    Although a substantial variety of modern dual economy models are presented in the academic literature, most are categorized as being either “classical” or “neo-classical.”

  [4]    For the history of the transition from reliance on agricultural to industrial production in Europe, see Paul Bairoch, Economics and World History (London: Harvester-Wheatsheaf, 1993); Walt Rostow, How It All Began: Origins of the Modern Economy (New York: McGraw-Hill Book Company, 1975); and Heinz Arndt, Economic Development: The History of an Idea (Chicago: University of Chicago Press, 1987).

  [5]    In Great Britain around 1810, agricultural employment exceeded industrial employment by about 70% but that ratio was reversed as industrial sector employment rose to more than 60% by 1840; see Paul Bairoch cited in endnote 4.

  [6]   The need to “force people to be free” is a theme woven through “western” political philosophy since Jean-Jacques Rousseau’s discussion of the “Social Contract;” even though his own interpretation of that phrase is often misunderstood (see On the Social Contract first published in 1762). A common, and simplistic, interpretation of that notion is that independent “states” once legitimately established in history have the “sovereign” right to force their citizens to behave in ways the government of such states believe are required for the greater collective good. Although the focus is on the greater good in Rousseau, the practical application of that principle is that the ‘greater good” is almost always defined by governments to conform to their own particular interests.

  [7]   An important contribution of Vladimir Lenin to Marxist theory was the assertion of the need for a vanguard party of the proletariat prior to the Bolsheviks successful 1917 coup in Russia. The focus of that approach, articulated in his 1902 pamphlet What is to be Done? was further refined by Joseph Stalin’s subsequent focus on enforced introduction of accelerated industrialization within the Soviet Union. See Vladimir Lenin, What is to be Done? Burning Questions of Our Movement, published in 1902 and republished in English by International Publishers (New York, 1929) and in Lenin’s Collected Works (Moscow, Russia: Foreign Languages Publishing House, 1961) as well as on-line by Paul Halsall, Fordham University during August 1997 at www.fordham.edu/halsall/mod/1902lenin.html).

  [8]   During the 1920s, Russian economists were also engaged in an important discussion over the best way to progress from a predominantly agrarian society to a modern industrialized economy; a debate very similar to modern classical dual economy theory. See, for example, Evgenii Preobrazhenskii, The New Economics (1924), English language reprinted edition (Oxford: Clarendon Press, 1965).

  [9]   Very few states have voluntarily attempt to pursue explicitly “autarkic” policies of complete economic self-sufficiency; the most notable are the Democratic People’s Republic of Korea (North) and Myanmar (Burma).

[10]    For a seminal formulation of “scientific public administration,” Max Weber, Economy and Society, edited by Guenther Roth and Claus Wittich (Berkeley: University of Califonia Press, 1978).  See also, Max Weber’s Construction of Social Theory (New York: St. Martin’s Press, 1990); Gunnar Myrdal, Asian Drama: An Inquiry Into the Poverty of Nations, 3 Volumes (New York: Twentieth Century Fund, 1968).

[11]   At least three precedents presented themselves as central planning prototypes prior to the period of accelerated decolonization beginning in the late 1950s: (1)  the Soviet’s preparation of multi-year plans and state ownership of both agricultural production and industrial enterprises; (2) the subsequent requirement for comprehensive multi-year plans imposed by the United States on European recipients of post-World War II Marshall Plan aid and the provision of American “experts” to assist recipients to prepare those plans; and (3) the early adoption by the World Bank of requirements for comprehensive planning and provision of technical assistance similar to those of the Marshall Plan, including a Ten-Year Development Plan for the Belgian Congo during 1951, India’s first five-year development plan in 1956, and comprehensive “economic survey missions” to eighteen different countries or colonial territories by 1959.

[12]   That outlook was also reinforced by the election of majority democratic socialist governments or coalition governments in least six Western European states by the beginning of the 1960s de-colonization era that were also committed to the principles of an expansive role for Government in centrally planned economies.

[13]    More recent theories of economic development have assumed some level of unemployment will exist within the formal urban sector even in a relatively efficient economy. As an early example, see Michael Todaro, A Model of Labor Migration and Urban Unemployment in Less Developed Countries, American Economic Review 59 (1969), p. 138 – 148.

[14]   Of the 142 countries currently on the OECD’s DAC List of ODA Recipients, sufficient same-source agricultural employment data is available for only 89 (62.7%). Of those 89 countries, a full 69 percent (61) still employed more than 50% of their active labor force in agriculture as late as the period under discussion here (1980); including the entire Sub-Saharan Africa region (67.1%) and South Asia and East and Southeast Asian sub-regions (82.5% and 56.3% respectively). See the Organization for Economic Cooperation and Development, DAC List of ODA Recipients used for 2008, 2009 and 2010 available at www.oecd.org/dac/stats/daclist as revised in DAC List of ODA Recipients: Effective for Reporting on 2009 and 2010 flows available at http://www.oecd.org/dataoecd/32/40/43540882.pdf. All of the statistics presented here were calculated by Jerry Mark Silverman from data provided by the United Nations’ Food and Agriculture Organization (FAO), FAOSTAT data available at http://faostat.fao.org/default.aspx and International Labour Organization (ILO), LABORSTA Internet available at http://laborsta.ilo.org/data_topic_E.html. NOTE: China is the most significant country on the DAC List for which insufficient same-source data is available. 

[15]   Distinctions are normally made between “grants,” “credits” and “loans.” A “grant” is finance that does not require repayment of any kind and is usually provided as bilateral aid by one country to another. A “credit,” often referred to as “concessional finance,” requires repayment of the original principal amount in the constant value of currencies determined by the lender but at a lower rate of interest than normal market rates – or without any interest at all. In the case of credits, repayment normally does not begin until an extended grace period has elapsed.  Development “loans” are extended to lower and upper middle income countries at or very near international market rates with both principal and interest repaid over an extended period of time.

[16]    The definition of “Participation” adopted here conforms to the World Bank’s Participation Sourcebook: “a process through which stakeholders influence and share control over development initiatives and the decisions and resources which affect them;” see The World Bank Participation Sourcebook (Washington, DC: The World Bank, 1996) available at http://go.worldbank.org/R3WF0ID3N0.

[17]    It was during that time that a “participation working group” was established within the World Bank that eventually produced the “Participation Sourcebook” referenced above as well as the multi-million dollar “Voices of the Poor” trilogy: Deepa Narayan et al, Can Anyone Hear Us? (New York: published for The World Bank by Oxford University Press, 2000, available at http://go.worldbank.org/6Z9P1DKL51); Crying Out for Change (New York: published for The World Bank by Oxford University Press, 2000, available at http://go.worldbank.org/XMWSK7EMS0); and  Voices of the Poor: From Many Lands (New York: published for The World Bank by Oxford University Press, 2000, available at http://go.worldbank.org/JYUSMEJ0M0).

[18]   Lawrence Summers has had long-term influence on the way development assistance programs are formulated and assessed by virtue of his service as the World Bank’s Chief Economist and Senior Vice-President for Development Economics (1991-1993) and, within the United States’ Treasury, Undersecretary for International Affairs (1993-1995) and Deputy Secretary (1995-1999) prior to his ultimate appointment as Secretary of the Treasury from 1999 to 2000 and, most recently, President Obama’s Chief Economic Advisor from January 2009 to January 2011.

 [19]    Cited in Stephen Fidler, Who’s Minding the Bank?, Foreign Policy 126 (September-October 2001), p. 40-50.

Keywords: authoritarian regimes, central planning, Cold War, DAC, decolonization, Department for International Development, dependent territories, development, development assistance, Development Assistance Committee, DFID, Egypt, Food for Peace, IBRD, IDA, IMF, India, Indonesia, industrialization, International Bank for Reconstruction and Development, international development, International Development Association, International Monetary Fund, international organizations, international relations, Marshall Plan, modernizing elites, ODA, OECD, official development assistance, Organization for Economic Cooperation and Development, China, poor people, sovereign-states, Soviet Union, states, United States Agency for International Development, USAID, USSR, World Bank.


THE COLD WAR: SUPPORTING AUTHORITARIAN REGIMES #1

January 23, 2011

When the people contend for their liberty they seldom get anything by their victory but new masters.                                     George Savile, Lord Halifax (1633-1695)

Many politicians of our time are in the habit of laying it down as a self-evident proposition that no people ought to be free till they are fit to use their freedom.  The maxim is worthy of the fool in the old story who resolved not to go into the water until he had learnt to swim.  If men are to wait for liberty till they become wise and good in slavery, they may indeed wait forever.    

                                                   Thomas Babington Macauley (1800-59)

De-Colonization

In 1945, people throughout the world remained divided among fifty-three sovereign-states and 148 “Non-Self-Governing Territories.”1 Twenty-one states (11%), including slightly more than half of the twenty-two largest bi-lateral donors, governed colonies at one time or another. Sixty years later, only thirty-three dependent territories still exist while Montenegro became the 192nd sovereign-state member of the United Nations following its withdrawal from its union with Serbia during 2006. Montenegro’s UN membership marked an increase of 262 percent from the number of independent states existing at the World War II. During the single decade of the 1960s forty-four countries gained their independence; more than during the previous seventy years combined.

That process of decolonization was infused with the hope that previously disadvantaged people would finally have direct influence on “their” governments; as well as indirect influence in international organizations whose membership consists only of sovereign-states. Unfortunately, many of the states created during the period since the 1960s are defined geopolitically by arbitrary borders that group several, often hostile, nations within the same country or, alternatively, split nations among different countries. By contrast with theoretical economists, many “modernizing” elites within such countries recognized the socio-economic and political distortions resulting from that situation; as did those political scientists producing a new “political development” literature during the 1960s/1970s.2 That political perspective posited the need to forge new national identities consistent with the citizenship arbitrarily assigned to people who found themselves residing within the borders of new sovereign-states if  “development” was to have any chance of success.   

Non-Interference in Political Affairs

Despite the artificialities of many new states, official international development assistance agencies continued to operate as if the absence of nation-hood and resultant social, economic, and political distortions did not exist. Although ignorance no doubt played a part, equally important was the norm strongly held by many development professionals that their work was technical rather than political. Nonetheless, the norm of “political neutrality” pre-dated that “liberal” decade. Instead, it was clearly reflected in the language of Article IV, Section 10 of IBRD’s3 Articles of Agreement:

The Bank and its officers shall not interfere in the political affairs of any member; nor shall they be influenced in their decisions by the political character of the member or members concerned. Only economic considerations shall be relevant to their decisions, and these considerations shall be weighed impartially in order to achieve the purposes stated in Article I.4

That view was subsequently reinforced by legislation mandated by the United States Congress during the 1970s legally separating USAID and Peace Corps programs from direct interaction with American security related agencies.

By the time that bi-lateral development assistance agencies began to proliferate among other “developed” countries during the 1970s, the political neutrality norm had been well established by the United States and World Bank; at least at the rhetorical level. That was the case even though the governments of many new states had transitioned from idealistic expectations of populist democracy to single-party authoritarian rulers who often served the interests of their own ethnic groups at the expense of other fellow citizens.

Nonetheless, support for authoritarian regimes was not justified by the principle of “political non-interference” alone. Indeed, two other beliefs widely-held by political leaders in the “West” also tended toward justification of authoritarian regimes in newly independent states. First, there was the belief that the political and military defence of the “Free World” against “International Communism” was more important than establishing open economies, liberalizing international trade, or maintaining democratic systems of governance. Second, development was believed by many to require levels of internal political stability and “discipline” that only authoritarian governments could ensure.5

The remainder of Part #1 briefly summarizes the impact of Cold War competition on the content and structure of development assistance. Part #2 will summarize how “Linear Growth” and “Dual Economy” theories of economic development were together interpreted so as to justify support for authoritarian regimes and an expansive role for developing country governments.   

The Cold War Exception

The Basic features of the “Cold War”6 are sufficiently well known and do not require much discussion here. Suffice it to say that the Cold War also had a direct impact on the membership and lending decisions of both the World Bank and International Monetary Fund (IMF),7 as well as the content and recipients of America’s bi-lateral foreign assistance programs.  

During the waning years of World War II and the period immediately thereafter, the Union of Soviet Socialist Republic (USSR) was expected to become a member of both the IMF and IBRD. Thus, the Soviet Union was listed among the projected Founding Members and its IBRD Shares and IMF Quotas were specified at the Conference in Bretton Woods, NH at which the structures and objectives of both organizations were largely agreed. But in the event, the USSR (and Hungary) did not join either organization and, although Poland and Czechoslovakia had joined both IBRD and the IMF by January 1946, they both subsequently withdrew during the early 1950s amidst accusations that IBRD was nothing more than an appendage of the American Marshall Plan whose establishment in April 1948 they viewed as nothing other than a vehicle for United States’ domination of Europe.

Under the terms of the Marshal Plan (officially the European Recovery Program), up to the 2010 equivalent of $185 billion was made available to meet two closely related objectives. First, the rehabilitation of Western and Southern Europe’s industrial capacity, the improved value and stabilization of their various currencies and the facilitation of international trade through, among other mechanisms, the General Agreement on Tariffs and Trade. Second, it was meant to counteract increasing support for domestic Communist Parties; especially in Czechoslovakia, France, and Italy. And it was in that latter context that the United States’ followed with the “Truman Doctrine” in 1947 with the specific purpose of financially assisting Greece  and Turkey against communist supported insurgencies.

With the advent of the Korean War in 1950, United States’ foreign assistance began to focus increasingly on military equipment and supplies to perceived allies. That was followed by the establishment of the United States’ Mutual Security Agency in 1951 with responsibility for managing most official American foreign aid. On the non-military side, the Food for Peace program was inaugurated in 1954 to provide surplus American agricultural commodities as an additional form of foreign aid. Nevertheless, responsibility for most United States’ non-military foreign assistance was not transferred to the Department of State until 1955 with the establishment of the International Cooperation Administration; the predecessor to today’s Agency for International Development (established in 1961).8    

The Non-Aligned Movement

Increasing Cold War polarization of international relations led to an attempt by the leaders of many newly independent states to establish a “Non-Aligned Movement.” Officially created on September 6, 1961 at a Conference in Belgrade, Yugoslavia9 following preparatory discussions in Bandung, Indonesia attended by representatives of twenty-nine African and Asian countries during 1955; many of which were not yet legally recognized as sovereign-states.10 The purpose of that Movement, at least for most of its sovereign state-members, was to differentiate themselves from the supposed allies of either the United States or USSR. In addition, the Non-Aligned Movement was viewed by most of its members as an arena for the discussion of issues that directly affected them but were largely ignored by both the United States and USSR or were defined by them only in terms of the Cold War. As Kwame Nkrumah, then President of Ghana, is quoted as saying in a speech on April 7, 1960: “We face neither East nor West; we face forward.”11 But there can be little doubt that from the perspective of the United States, its allies, the Soviet Union, and the Peoples’ Republic of China, the targeting of much foreign aid was a function of the global political competition between them. 

Nonetheless, the absolute amount of non-military assistance provided by the Soviet Union and the Peoples’ Republic of China (PRC) was miniscule compared to that provided by the United States and the World Bank. During the most hostile years of the Cold War from 1954 through 1977, total public sector “overseas loans and grants” provided by the Soviet Union and PRC were $12.9 billion and $8.9 billion respectively; compared to $66.4 billion by the United States and $47.9 billion by the World Bank during that same period. And only four countries alone — India, Egypt, Afghanistan, and Turkey – accounted for $10.7 billion (49 percent of all Soviet and PRC aid during those years) compared to a total of $12.9 billion to those same countries by the United States. Total foreign aid provided by all Eastern European states was even lower; amounting to only $7.5 billion. And of the thirty-five Sub-Sahara African countries receiving assistance from one or more communist regimes, only seven received more than US$100 million from the Soviet Union, any Eastern European communist countries, or the PRC. At the same time, security-related assistance to other countries increased from 33.4% percent of total United States’ “Public Sector Loans and Grants” in 1954 (as defined in endnote 14) to a high of 88.3 percent in 1964 before leveling off to an average of 33 percent of the total thereafter.12

Finally, in addition to considering the amount and distribution of aid, it is also important to consider the terms and conditions under which such assistance was provided by “Communist-Party” and “Free World” governments. As only one example, much of the aid extended by the USSR, PRC, and Eastern European governments was in the form of barter or aid provided in-kind. Accepting aid, even in the form of barter, permitted “modernizing” elites to diversify their political and economic relationships while demonstrating their neutrality in the Cold War. Further, in the perceived zero-sum atmosphere of the Cold War, the mere threat to negotiate such agreements even if not particularly valuable in themselves provided opportunities to leverage them by developing country governments to secure goods and services from the “West” that might not have been financed otherwise. And such leverage with both sides was clearly used to the advantage of otherwise fragile states; even if only minimal benefits resulted for poor people within those states. Thus, while the United States, the USSR, and PRC might have viewed their competition as zero-sum, the authoritarian rulers often viewed it as providing a potentially expanding resource pie. As only one example, Turkey received $4.5 billion from the PRC in addition to $1.2 billion from the USSR while the United States provided only $1.7 billion even as it remained a member of the North Atlantic Treaty Organization (NATO).

Part #2 of this topic (to be posted in the next few days) will carry this discussion forward to a consideration of how contemporary interpretations of both “linear growth” and “dual economy” theories combined to justify support for authoritarian regimes and an expansive role for developing country governments until well into the 1970s; after which the policies of the United States Government, World Bank, and IMF with respect to the role of the state were reversed (perhaps temporarily?).­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­_________________________________

NOTES:

  [1]         The euphemism “Non-Self-Governing Territories” was employed in the Second Annual Report to the Board of Governors 1946-1947, Ended June 30, 1947 of the International Bank for Reconstruction and Development (IBRD; Washington, DC: International Bank for Reconstruction and Development, 1947) available at http://go.worldbank.org/JXHPJ8KYK0.

  [2]    As perhaps the most prominent examples from that time, see the extensive writings of James Coleman, Lucien Pye, and Fred Riggs.

  [3]    The International Bank for Reconstruction and Development (IBRD) was the first of five organizations now collectively known as The World Bank Group. References to the “World Bank” are today most often limited to the IBRD plus the International Development Association (IDA). The other three organizations within the World Bank Group are the International Finance Corporation (IFC, 1956), the International Centre for the Settlement of Investment Dispute (ICSID, 1966), and the Multilateral Investment Guarantee Agency (MIGA, 1988).

  [4]    International Bank for Reconstruction and Development (IBRD), Articles of Agreement available at http://siteresources.worldbank.org/EXTABOUTUS/Resources/ibrd-articlesofagreement.pdf. IBRD’s Articles of Agreement became effective December 31, 1945 with the official signatures by the governments of Chile, Mexico, and Peru; see World Bank, World Bank Group Historical Chronology: 1944-1949 available at http://go.worldbank.org/QEKNM08HO0.

  [5]    See Jerry Mark Silverman, An International Economic History of Latin America and The Caribbean in Jose de Arimateia da Cruz and Eduardo R Gomez (ed.), Latin America in the New International System: Challenges and Opportunity (Boston: Pearson Custom Publishers, 2005), p. 57-96.

  [6]    There is no general agreement about when the “Cold War” started, or which “side” started it, or why?   But whatever the “correct” answer to the above question, it was clearly in full effect by the time Communist governments were established in Poland and Czechoslovakia during January 1947 and February 1948 respectively and the beginning of the Berlin Blockade and Airlift in June 1948.

  [7]    The Government of the now defunct Yugoslavia was the only officially designated Communist regime that remained a member of both organizations from the late 1940s through its effective replacement by Serbia in 1993. Cuba also withdrew from both the World Bank and IMF soon after Fidel Castro seized power there on January 1, 1959. Although China was a founding member-state of both the IMF and IBRD (having signed the Articles of Agreement of both organizations on December 27, 1945), its seats were occupied by the “Nationalist Government” (which fled to Taiwan on September 8, 1949) until May 15, 1980; even though the Government of the People’s Republic of China had taken over China’s seat in the United Nations itself nine years earlier on October 25, 1971. Romania broke ranks and joined in 1972, Hungary in 1982, and Poland re-joined in 1986. Finally, with the collapse of the USSR, the Russian Federation joined the World Bank and IMF on June 16, 1992.

  [8]    See United States, Agency for International Development, USAID History, About USAID available at www.usaid.gov/about_usaid/usaidhist.html.

  [9]    As described more recently, “the founders of the Non-Aligned Movement and their successors recognised that the Movement would probably be best served if it operated without a formal constitution and a permanent secretariat. The practice of a rotating Chair was instead created which at the same time place the onus of an administrative structure on the country assuming the Chair. The Summit Conferences are the occasions when the Movement formally rotates its Chair to the Head of State or Government of the host country of the Summit. The Foreign Ministry and Permanent Mission in New York of the Chair at the same time assume the responsibility of the administrative management of the Movement;” see The Non-Aligned Movement: Description and History available at http://www.nam.gov.za/background/history.htm

[10]    The People’s Republic of China participated in the Bandung Conference. However, neither North or South Korea were invited. Although the Non-Aligned Movement still technically exists, its role has changed substantially with the end of the Cold War.

[11]    This statement by Kwame Nkrumah is oft-quoted in books of popular quotations. However, the attribution by Oladele Ogunseitan, Editor-In-Chief, African Journal of Environmental Science and Technology in his Editorial in Volume 3 (October, 2009) serves here as a legitimate academic source available at www.academicjournals.org/AJest/PDF/pdf%202009/Oct/AJEST-%20Editorial%20-%20October.pdf.  

[12]     The data on non-military foreign assistance to non-Communist Party states by the USSR, Eastern European Communist states, and the Peoples’ Republic of China is from United States, National Foreign Assessment Center, Communist Aid to Less Developed Countries of the Free World, 1977 (Washington D.C.: United States, National Foreign Assessment Center, 1978), Tables 4 and 5.  I am indebted to Joseph Pinczewski-Lee, internet researcher, of Lexington Kentucky for the collection and reporting of that data.The comparative data on “non-military foreign assistance” reported here for the United States and World Bank was calculated by Jerry Mark Silverman to include all loans, concessional credits, and grants other than financing of military equipment, operations, training or other military, “defense,” or “security” purposes; non-proliferation; anti-terrorism; de-mining; “peace-keeping;” and other related expenditures plus all grants and loans in “inactive” status for 10 or more years. Therefore, these statistics are less inclusive than those reported for “Total Public Sector Loans and Grants (Foreign Assistance)” that include financing for military purposes but are more expansive than “Official Development Assistance (ODA)” that exclude non-concessional loans and financial transfers to any country not included by the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) on its List of ODA Recipients available at least for the years 2008 through 2010 at www.oecd.org/dac/stats/daclist. For relevant definitions and statistics on ODA, see Development Assistance Committee, Organisation for Economic Co-operation and Development, AID Statistics available at http://www.oecd.org/statisticsdata/0,3381,en_2649_34447_1_119656_1_1_1,00.html and United States, Agency for International Development, U.S. Official Development Assistance Database: Statistics on U.S. Flows to Developing Countries available at http://usoda.eads.usaidallnet.gov/about/#definitions; for statistics on “Total Public Sector Loans and Grants [Foreign Assistance]” see U.S. Overseas Loans and Grants, Obligations and Loan Authorizations (“The Greenbook“) available at http://gbk.eads.usaidallnet.gov/data/. See also the Foreign Assistance Act of 1961 (Public Law 87–195, as amended up to July 30, 2008) available at http://democrats.foreignaffairs.house.gov/111/FAA61.pdf.

Keywords: Afghanistan, Bandung, central planning, citizenship, Cold War, Czechoslovakia, DAC, decolonization, dependent territories, development, development assistance, Development Assistance Committee, Egypt, ethnic identity, European Recovery Program, Food for Peace, France, Free World, GATT, General Agreement on Tariffs and Trade, government, Greece, Hungary, IBRD, IDA, IMF, India, Indonesia, industrialization, International Bank for Reconstruction and Development, International Cooperation Administration, international development, International Development Association, International Monetary Fund, international organizations, international relations, Italy, Marshall Plan, modernizing elites, Mutual Security Agency, national identities, NATO, North Atlantic Treaty Organization, ODA, OECD, official development assistance, Organization for Economic Cooperation and Development, Peace Corps, Peoples Republic of China, Poland, poor people, PRC, sovereign-states, Soviet Union, states, Truman Doctrine, Turkey, Union of Soviet Socialist Republics, United Nations, United States Agency for International Development, USAID, USSR, Warsaw Pact, World Bank.


THE MORE THINGS CHANGE: DEVELOPMENT’S COLONIAL HERITAGE

January 10, 2011

Plus ça change, plus c’est la même chose (“the more things change, the more they remains the same”).                                                  Alphonse Karr (1808-1890)

Although a system may cease to exist in the legal sense or as a structure of power, its values (or anti-values), its philosophy, its teachings remain in us. They rule our thinking, our conduct, our attitude to others. The situation is a demonic paradox: we have toppled the system but we still carry its genes.                              Ryszard Kapuscinski (1932-2007)

Understanding the historical roots of basic concepts commonly used in international development assistance efforts is important because the social, economic, and political context within which they were formulated continues to affect the way we look at such things today. However, links between the many assumptions, values and institutions existing during the latter years of the colonial period and current development efforts are not often acknowledged1 and even less often understood.

This blog post is the first of three intended to identify and discuss a few of those links. It focuses on the post-World War I colonial period, including the period following World War II. The second and third posts will expand this discussion to cover the immediate post-colonial period of the 1960s and 1970s as well as provide more depth regarding how those links have affected current views of international development objectives and methods.

Assumptions & Concepts

Below I take a look at four key concepts: “sovereign-states,” “development,” “welfare,” and “reconstruction.” The first two terms “development;” and “welfare” reach back to policies and practices current before the Second World War — even as their meaning has evolved. The distinction between “reconstruction” and “development” was embedded in the name first given to the World Bank in 1944 – i.e., the International Bank for Reconstruction and Development (IBRD) – while the organizing legal principle of the “sovereign-state,” on which the entire structure of official development assistance is based, goes back to the Treaty of Westphalia of 1648.

Sovereign-States

Almost all official development assistance moves from, to, and through sovereign-state governments or multi-lateral sovereign-state membership organizations like United Nations’ agencies, The World Bank, and the International Monetary Fund (IMF). The legal recognition of that sovereign-state system 362 years ago confirmed a uniquely European process of both nation and state building already underway for several centuries. But socio-economic groups targeted for development assistance in Africa, Asia and some areas of Latin America and the Middle East have not had that same historical experience. Instead, the introduction of the sovereign-state structure during the colonial period was both foreign and abrupt.

Indeed, sovereignty contrasts sharply with pre-colonial patterns of authority in those non-European areas where political authority was attributed to emperors or other monarchs and was not based in formal legal agreements that established clearly demarcated borders within which a Monarch was recognized by other monarchs as having complete and ultimate legal authority.2 Instead, indigenous authority in many of those areas was based primarily on: (1) a chief, monarch, or other leader’s ability to enforce it; (2) mutually beneficial trading relationships among leaders or people engage in commerce; and/or (3) reinforcing culturally defined relationships.3 The European notion that a monarch was vested with independent sovereign authority within specifically geographically demarcated borders was foreign in the most fundamental sense of that term when extended to non-European areas. And that “foreigness” was compounded by the colonial variant whereby the exercise of legal authority within colonies was reserved to officials of sovereign European governments located far away. It is instructive that when we talk about the post-colonial era we refer to the transition from colonies to independent states, not independent people. As a consequence, the sovereign-state system has taken deeper root in some places than in others, resulting in ineffective and illegitimate development programs and policies in many of those countries. 

The belief that sovereign-state governments alone govern is the foundational assumption on which the entire institutional architecture for delivering official development assistance has been built. The consequences of that assumption have only recently been recognized: (i) boundaries of sovereign-states that do not often correspond to the requirements of true nation-states; (ii) development projects and programs designed and organized for sovereign-state “citizens” rather than social, economic, and political affinity groups; and (iii) fundamental disconnects between non-formal parallel governance systems and officially recognized states and governments.

Development & Welfare

Today development is most often viewed as the reduction of both income and non-income poverty – the process through which fewer and fewer people live on less than $1 or $2 a day and/or do not have affordable access to formal education and effective health services. But that has not always been the case.  Britain’s Colonial Development and Welfare Act of 1939 viewed “development” as improvement of infrastructure required for efficient extraction of raw materials.  By contrast, the term “welfare” applied to the provision of improved health, education, housing, and urban wages in the “colonies,” “protectorates” or “mandated” or “trust territories” (hereinafter synonymously “colonies” or “dependencies”).  While development was directed toward enhancing the economies of the colonial powers, welfare was directed toward elimination or reduction of labor strikes, protests, and rebellions.4 

Reconstruction

In 1944, European and Asian landscapes were littered with wreckage over which the United States stood as a largely unscathed colossus.  The USA’s gross national income (GNI) equalled 216.7 percent of France, the United Kingdom (UK), and the USSR combined; the USSR and the UK respectively owed the equivalent of $136.5 billion and $384.7 billion in current 2010 currency values; other British Commonwealth countries, China, and France had borrowed the equivalent of another $99.3 billion, and another fifty-two countries owed $49.6 billion received from the United Nations Relief and Rehabilitation Administration (UNRRA). All that debt was owed to the United States and the American Government alone held the overwhelming majority of the world’s monetary gold stocks. As a result, European currencies had lost almost all of their international value. The immediate problem for the USA, UK and France was how to continue providing large cash transfers from the Americans to its European allies while simultaneously reducing European debt. 

Until the establishment of France’s Ministry for Cooperation in 1961, the USA was the only bi-lateral “foreign aid donor.” Between 1946 and the end of 1952, the United States provided economic assistance worldwide worth approximately $231.5 billion today; of which forty-three percent went to Europe (including France as the largest borrower and Belgium, The Netherlands, Italy, Greece, and the United Kingdom).5 By contrast, World Bank lending to Europe between 1946 and 1952 was the equivalent of only $5.1 billion.6 The Bank’s first four loans were made during 1947 to France, The Netherlands, Denmark, and Luxembourg7 while its first “post-reconstruction” (i.e., “development”) loan was approved in 1948 for the purchase of reconverted warships by four Dutch shipping companies.8 By the end of the colonial era (1970), the Bank had extended loans to seventeen European countries; twenty-one percent of which was specifically for investments in eighteen Belgian, French, and UK colonial territories.9

Values & Assumptions

The focus on European reconstruction was a function of both the distribution of power and unexamined assumptions, experience, and persistent values. For Westerners without significant experience in colonial territories or newly independent countries, the projection of their own values onto unknown people should not be surprising. Westerners with actual experience among “native” peoples often explicitly rejected the non-European beliefs and values of “those” people. A communiqué sent by John Maynard Keynes to the UK Treasury during preparation for the 1944 Bretton Woods Conference convened to establish the World Bank and IMF reflects such attitudes:

Twenty-one countries have been invited which clearly have nothing to contribute and will merely encumber the ground, namely, Columbia, Costa Rica, Dominica, Ecuador, Salvador, Guatemala, Haiti, Honduras, Liberia, Nicaragua, Panama, Paraguay, Philippines, Venezuela, Peru, Uruguay, Ethiopia, Iceland, Iran, Iraq, Luxembourg. The most monstrous monkey-house assembled for years. To these might be added: Egypt, Chile and (in present circumstances) Yugo-slavia [sic].10

Various comments by delegates to the United Nations’ Trusteeship Council between 1947 and 1951 reinforce the notion that “development” was viewed as a process directed toward bringing “a Western mode of reasoning” to the people of the colonies;11 as do the references to “less highly developed regions,” “young and immature nations” or “old but underdeveloped nations.”12Nations” in that context were clearly understood to be synonymous with “states” while subsequent formulations – “newly industrializing,” “newly emerging,”  “third world,” “fourth world,” and so forth – reinforced the notion that development was essentially the same as the economic growth of sovereign-states. 

It is also important to note that America’s experience during the Great Depression prior to World War II combined with John Maynard Keynes earlier criticisms the Treaty of Versailles ending World War I13 were much in evidence when the form and functions of the World Bank and IMF were agreed at Bretton Woods. The World Bank was to lend long-term investment capital to sovereign-state governments and the IMF was to regulate currency exchange-rates and provide short-term loans to countries not able to meet occasional foreign exchange deficits. More generally, there was a prevailing belief that scientific approaches to complex planning, management, and technological issues would overcome whatever obstacles might arise. That optimism prevailed in large part because of broadly shared beliefs, values, and desires among Americans and European allies alike. At the same time, intellectual inertia appears to have carried the pre-War distinction between “development” and “welfare” forward into the post-War period. 

Colonial Development 

While European countries were themselves a major constituency of the USA and World Bank from the mid-1940s through the end of the 1950s, those same economies were also closely interwoven with their respective colonies and dependencies. The United Kingdom and France provide examples of an almost seamless organizational and staffing transition from colonial administration to direct bi-lateral international development assistance. 

United Kingdom.  Fifty-four of the United Nations’ 192 current sovereign-state members (28%) have been British colonies or protectorates at one time or another. With the exception of India from 1858 and Burma from 1937, responsibility for staffing, managing, and financing the development of British colonies was assigned to the Colonial Office.14 Although in the immediate aftermath of the Second World War the new Labour Government was officially anti-colonial, it was nevertheless faced with the need to alleviate severe shortages of food, fuel, and natural resources at home. Reflecting fears current during November 1947, the UK’s Minister for Economic Affairs Sir Stafford Cripps believed that…  

the whole future of the sterling group and its ability to survive depends in my view upon a quick and extensive development of our African resources,

even as Foreign Secretary Ernest Bevin argued that –

If only we pushed on and developed [our colonies in] Africa, we could have [the] United States dependent on us, and eating out of our hand in four or five years.15

Britain’s Cabinet Secretary summarized the apparent contradictions between the Government’s public rhetoric and actual actions in a report to the Prime Minister in 1948:

At recent meetings there has been general support for the view that the development of Africa’s economic resources should be pushed forward rapidly in order to support the political and economic position of the United Kingdom…. [The policy] could, I suppose, be said to fall within the ordinary definition of “Imperialism.” And, at the level of a political broadcast it might be represented as a policy of exploiting native peoples in order to support the standards of living of the workers in this country. This policy is doubtless inevitable – there are compelling reasons…. But if it is disclosed incautiously or incidentally, without proper justification and explanation, may it not be something of a shock to Government supporters – and indeed, to enlightened public opinion generally?It can, of course, be argued that the more rapid development of Africa’s resources will bring social and economic advantages to the native peoples in addition to buttressing the political and economic influence of the United Kingdom.16

Therefore, in 1948 Government established a Colonial Development Corporation (CDC) in parallel with the continuing responsibilities of the Colonial Office.  The CDC was tasked with achieving more rapid development in the colonies by: (i) fostering integration of the heretofore separate physical infrastructure (“development”) and assistance for human health, education, and domestic food production (“welfare”) arenas and (ii) mobilizing private investment to meet the increased costs that such integration was thought to require.17 From that point on, the term “welfare” has been implicitly subsumed within the concept of “development.”

France.  Twenty-four sovereign-state members of the United Nations (13%) are former French colonies. France’s transition from colonial authority to provider of bi-lateral finance followed a path similar to the UK’s. French colonial officials had also begun to argue for substantially increased Government funding to meet both development and welfare objectives during the 1930s. In 1945, the Government established the Economic and Social Investment Fund for the Overseas Territories (FIDES); followed the next year by inclusion of all overseas Departments, colonies, and self-governing “Associate States” within the “French Union.” That arrangement effectively replaced the formerly separate colonial administrative service. FIDES continued with responsibility for planning and financing investments, but the administrative responsibilities of the former colonial service were distributed among other ministries and agencies of the French Government.

World Bank.  By 1949, IBRD managers and staff concluded that its comparative advantage was in “development” rather than “reconstruction.” By 1960, at least fifty-two percent of its cumulative lending was for development purposes; nineteen percent of which was for investments in colonial territories.18 During the period 1953-1961, India and Japan alone received twenty-seven percent of total World Bank lending (16% and 11% respectively), South Africa received thirty-one percent of lending to Sub-Saharan Africa, and twenty percent of total lending was directed toward Latin America. The UK borrowed a total of $265 million for agriculture, energy, “land settlement,” and transport in nine colonies between 1952 and 1963.19 However, it never did borrow from IBRD for investments in its own home islands, relying instead on financing by the USA directly for that purpose.  

Lending for investments in colonial areas was anticipated in IBRD’s Articles of Agreement; i.e.

to members whose metropolitan territories have suffered great devastation from enemy occupation or hostilities… [and] shall pay special regard to lightening the financial burden and expediting the completion of restoration and reconstruction…. [while] not interfer[ing] in the political affairs of any membernor…[be] influenced in their decisions by the political character of the member or members concerned.

Colonies were not members of the Bank while four “metropolitan” powers – Belgium, France, the Netherlands, and UK — were members and, along with the USA, held sixty-two percent of voting shares within IBRD in 1947.20 In the event, ten percent of IBRD’s total 1947-60 lending commitments were allocated to project investments in European colonial territories in Africa.21

Loans for colonial “development” were attractive during the 1950s for at least two reasons: (1) outside of Latin America and the Middle East, infrastructure development project opportunities were largely limited to colonial Africa and (2) European colonial officials were most able to prepare investment plans to technical standards required by the Bank. Nonetheless, such lending also meant that European governments would benefit from those loans.  As an example, the first of those loans (to Belgium) in 1951 consisted of two component parts: (1) $40 million to the Belgian Congo Development Authority primarily for development of transport infrastructure and (2) $30 million directly to the Central Bank of Belgium to defray the indirect costs of Belgium’s own colonial expenditures.22 

The issue of World Bank lending for investments in “Dependent Overseas Territories” was raised again during discussions leading up to the establishment of the World Bank’s International Development Association (IDA) in 1960. The United Kingdom and France argued that “territories” should be eligible for IDA’s concessional finance while many of the Bank’s senior managers and advisors were opposed. The tenor of those discussions is best captured by notations in various internal memoranda by four American and two British members of the World Bank’s Loan Committee during the period 1959-1960; as follows –

Peter Cargill (UK):23      If the United Kingdom wanted to step up development in [its] colonies it could afford to do so…. 

Eugene Black (USA):        [IDA loans to colonies would result in] siphoning major portions of [its] subscriptions back to the metropolitan countries….

J. Burke Knapp (USA):           Lending by IDA to colonial territories was a very dubious proposition. The Committee expected…not to have IDA pick up the white man’s historical burden [note the use of colonial language here even by those opposed to financing  in colonial territories]. Were there not cases in which countries were sufficiently established as wards of the United States to be treated paramountly as colonies[?] If IDA financed African wards of France and the United Kingdom, it might just as well finance wards of the United States….

S. Raymond Cope (UK):           [Indeed, that should be the case with respect to such] wards of the United States, [as for example] Korea. 

Eugene Black (USA):                IDA would only be able to invest in Korea and Viet-Nam on a token basis….

Davidson Sommers (USA):     It would be helpful to the Bank and to these countries occasionally to have relations with the Bank instead of having them all with the U.S…..

Richard Demuth (USA):         Korea and China [Taiwan] should be eligible if a good project came along, butkeep the amount low.24

The ultimate decision was that both colonies and “less-developed member countries” would be eligible for IDA borrowing. Nonetheless, that decision was ultimately made moot by the rapid pace of decolonization and, therefore, no projects were actually ever financed by IDA in colonial territories.

The early post-war period had at least four lasting consequences for the structure of development assistance today. First, the creation of the United States’ Economic Cooperation Administration (ECA) to manage Marshall Plan assistance in 1949 provided a model for subsequent bi-lateral agencies established by other countries. Second, the initial seeds of subsequent European integration were planted through the establishment of the Organization for European Economic Cooperation (OEEC) as the counterpart to ECA. Third, the penchant for long-term planning was presaged by the ECA’s requirement that European recipients prepare detailed plans specifying how its financing would be used. Finally, and most importantly for our purposes here, western beliefs, values, and desires were institutionalized within the world-wide development system.

The key conceptual and structural links between the post-World War I colonial period and the decade or two following World War II provide the historical foundation for the discussion of the post-colonial period that followed. As discussed further in the next two posts of this three part series, the meaning of “development” has evolved over time. Nonetheless, both in terms of formulation and pursuit, it is clearly rooted and driven by Western notions of progress and European-centered experience.  __________________________________

NOTES:

  [1]   Although William Easterly’s book The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good (New York, NY: Penguin Books, 2007) implies a focus on the link between colonial policies toward “development” and contemporary efforts, his narrative does not discuss the roots of specific “development” concepts and attitudes in the period under review in this series of three Blog posts. Instead, that book focuses instead on the deficiencies of expert-driven planning approaches to development at the expense of indigenous knowledge and priorities.

  [2]   James Brierly, The Law of Nations (London: Oxford University Press, 1928). 

  [3]    Jerry Mark Silverman, Historic National Rivalries and Contemporary Inter-State Conflict in Mainland Southeast Asia in M. Zacher and R. S. Milne (eds), Conflict and Stability in Southeast Asia (Garden City: Anchor Books, 1978), p. 45-78.

  [4]    Ronald Chilcote (ed.), The Political Economy of Imperialism (Lanham, Maryland: Rowman and Littlefield Publishing, 2000) and Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997).

  [5]    Truman Library, (1993) Oral History Interview with August Maffry conducted by Richard McKinzie, Oral History Project (January 19, 1993) available at www.trumanlibrary.org/oralhist/maffrya.htm.

  [6]    International Bank for Reconstruction and Development (IBRD), Eighth Annual Report to the Board of Governors 1952-1953 (Washington, DC: International Bank for Reconstruction and Development, 1953) available at www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2000/02/28/000178830_98101911112711/Rendered/PDF/multi_page.pdf.

  [7]    International Bank for Reconstruction and Development (IBRD), Second Annual Report to the Board of Governors 1946-1947, Ended June 30, 1947.

  [8]    World Bank, World Bank Group Historical Chronology: 1944-1949 (Washington, DC: World Bank, 1949) available at http://go.worldbank.org/Z99GVEV0T0.

  [9]    International Bank for Reconstruction and Development (IBRD), Eighteenth Annual Report to the Board of Governors 1962-1963 (Washington, DC: International Bank for Reconstruction and Development, 1963) available at www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1999/12/02/000178830_98101911111996/Rendered/PDF/multi_page.pdf and World Bank, World Bank International Development Association Annual Report 1970 (Washington, DC: The World Bank Group, 1970) available at www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1999/12/02/000178830_98101911110773/Rendered/PDF/multi_page.pdf.

[10]    Quoted in Elizabeth Johnson and Donald Moggridge (eds), The Collected Writings of John Maynard Keynes: Volume 26, Activities 1943-46: Shaping the Post-war World: Bretton Woods and Reparation (Cambridge, UK: Cambridge University Press, 1980), p. 42; incorrectly quoted in Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997), p. 62.

[11]    Pierre de Senarclens, How The United Nations Promotes Development Through Technical Assistance in Majid Rahnema with Victoria Bawtree (eds), The Post-Development Reader (London: Zed Books, 1997), p. 190-206.

[12]    International Bank for Reconstruction and Development (IBRD), Second Annual Report to the Board of Governors 1946-1947, Ended June 30, 1947 (Washington, DC: International Bank for Reconstruction and Development, 1947) available at www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2000/02/28/000178830_98101911112817/Rendered/PDF/multi_page.pdf.

[13]    See John Maynard Keynes, The Economic Consequences of the Peace (New York, NY: Harcourt, Brace and Howe, 1920).

 [14]  United Kingdom, Government of, Maps and Plans: Overseas Relations Overseas Records Information 6 (London, UK: The National Archives, 2003) available at www.nationalarchives.gov.uk/records/research-guides/maps-plans-overseas-relations.htm.

[15]    Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997).

[16]    Mike Cowan, Early Years of the Colonial Development Corporation: British State Enterprise Overseas during Late Colonialism, African Affairs, 82 (1984), p. 67-68 as quoted in Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997), p. 96.

[17]   Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997). 

[18]   International Bank for Reconstruction and Development (IBRD), Eleventh Annual Report to the Board of Governors 1955-1956 (Washington, DC: International Bank for Reconstruction and Development, 1956) available at www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1999/12/02/000178830_9810191111268/Rendered/PDF/multi_page.pdf; Twelfth Annual Report to the Board of Governors 1956-1957 (Washington, DC: International Bank for Reconstruction and Development, 1957) available at www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1999/12/02/000178830_9810191111246/Rendered/PDF/multi_page.pdf; Thirteenth Annual Report to the Board of Governors 1957-1958 (Washington, DC: International Bank for Reconstruction and Development, 1958) available at www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2000/02/28/000178830_98101911111690/Rendered/PDF/multi_page.pdf; and Fourteenth Annual Report to the Board of Governors 1958-1959 (Washington, DC: International Bank for Reconstruction and Development, 1959) available at www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1999/12/02/000178830_98101911111792/Rendered/PDF/multi_page.pdf.

[19]   International Bank for Reconstruction and Development (IBRD), Seventeenth Annual Report to the Board of Governors 1961-1962 (Washington, DC: International Bank for Reconstruction and Development, 1962) available at www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1999/12/02/000178830_98101911111995/Rendered/PDF/multi_page.pdf

[20]   International Bank for Reconstruction and Development (IBRD), Second Annual Report to the Board of Governors 1946-1947, Ended June 30, 1947.

[21]   International Bank for Reconstruction and Development (IBRD), Eleventh Annual Report to the Board of Governors 1955-1956; Twelfth Annual Report to the Board of Governors 1956-1957 (Washington, DC: International Bank for Reconstruction and Development, 1957); Thirteenth Annual Report to the Board of Governors 1957-1958; and Fourteenth Annual Report to the Board of Governors 1958-1959 (Washington, DC: International Bank for Reconstruction and Development, 1959).

[22]   Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997). 

[23]    Peter Cargill (UK) had, prior to joining the staff of IBRD during its early years, been an increasingly senior member of the UK’s colonial India Office. Eugene Black (USA) had served as a senior vice president of Chase National Bank since 1933 prior to being appointed as IBRD’s United States’ Executive Director in 1947 and IBRD’s third President in 1949; serving in that position until 1962. J. Burke Knapp (USA) had served as an Economist at the United States Federal Reserve Board (1940-44) and in several post-World War II positions related to international economic relations prior to joining IBRD in 1952 and eventually serving from 1956 as one of its three Vice-Presidents. S. Raymond Cope (UK) had spent most of his life in commercial banking prior to joining IBRD’s Loan Department at the end of 1947 and serving as Assistant Director of Operations for Europe, Africa, and Australasia beginning in 1952 and Director of Operations, Europe, Africa, and Australasia from June 1955. Davidson Sommers (USA) had served as an Assistant to the Secretary of War John McCloy in the Pentagon prior to joining IBRD as a lawyer in the law department in 1949 and as Vice President and General Counsel from 1956 to 1959. Richard Demuth (USA) was a lawyer in private practice and then during World War II within the United States Government prior to joining IBRD during 1947 as an Assistant to the first President of IBRD Eugene Meyer (USA) before serving as Director of its Department of Technical Assistance and Liaison from 1951 and Director of the Development Services Department and the International Relations Department from 1961 until 1973.

 [24]   Quoted in Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, Volume 1 (Washington, DC: Brookings Institution Press, 1997), as paraphrased and re-sequenced by Jerry Mark Silverman.

Keywords: Bretton Woods Conference, Burma, Chile, Colonial Office, Colonialism, colonies, Columbia, Costa Rica, development, Dominica, Ecuador, Egypt, El Salvador, Ethiopia, fourth world, France, Guatemala, Haiti, Honduras, Iceland, IDA, IMF, India, International Bank for Reconstruction and Development, International Development Association, International Monetary Fund, international relations, Iran, Iraq, John Maynard Keynes, Liberia, Luxembourg, Marshall Plan, newly emerging, newly industrializing, Nicaragua, Panama, Paraguay, Parallel Governance, Peru, Philippines, protectorates, reconstruction, sovereign-state, third world, trust territories, underdeveloped country, United Kingdom, United Nations Relief and Rehabilitation Administration (UNRRA), United Nations, Uruguay, Venezuela, welfare, World Bank, Yugoslavia.


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