The Roles of Aid in Politics Putting China in Perspective

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Stokke, Olav (1989), “The Determinants of Norwegian Aid Policy,” in Stokke, Olav (ed.), Western Middle Powers and Global Poverty: The Determinants of the Aid Policies of Canada, Denmark, the Netherlands, Norway and Sweden, pp. 159-230, Uppsala, Sweden: The Scandinavian Institute of African Studies.

Most of the conclusions arrived at here have been set out in the previous section. Here, the relative impact of the determinants on the different aspects of aid policy will be assessed. In some areas, the different determinants move the policy along more or less the same path, which makes any assessment of their relative impact difficult. In others, however, they conflict, facilitating such assessments.

The main conflict dimension is between altruism, in the first place associated with socio-political norms, and self-interest, in the first place associated with the systemic and business interest in export promotion, both belonging to the domestic environment. This conflict is manifest for most dimensions of the aid policy, in particular as concerns the magnitude of the multilateral aid component, the principle of geographical concentration of bilateral aid and the selection of priority countries, the principle of untied aid and, in general, the commercialization of aid.

  1. Most aspects of Norwegian aid policy are attuned to the dominant socio-political norms of the domestic environment. This applies to the reasons for providing development assistance and to the development aims established. It also applies to the two main strategies, in particular, to the welfare strategy, but also to the industrialization and trade strategy, in so far as they relate to development objectives in the Third World and efforts to bridge the gap between poor and rich countries by reforms of the international economic system, a new division of labor and improved trade relations. The established guidelines are also in tune with these norms.

The dominant socio-political norms, therefore, constitute the main determinants of Norwegian aid policy. They have in substantial part been strong enough and shared sufficiently widely across the political spectrum to be able to deflect attempts by Norwegian systemic and economic interests to bend the aid programme significantly to their advantage. This applies, in particular, to the heyday of altruism, in the years between 1970 and 1976. During this period, two major White Papers were presented by the government (Labor) and adopted by Parliament. However, the increased commercialization of ODA during the second half of the 1970s and the early 1980s – in particular, the way in which the principle of untied aid has been defined and implemented, and the use of ODA in the promotion of Norwegian exports – justify a modification of this general conclusion.

  1. The overarching systemic interest in the maintenance of peace and economic stability and in an international regime to enhance these values has been decisive for some dimensions of the aid policy. This transpires from the motives given for aid. Some aspects of aid policy are directed to this objective, in particular the large component of multilateral aid. Peace and economic stability belong to a cluster of international common goods that also includes poverty alleviation and economic and social growth in the Third World. Although there could be conflict, in the distribution of ODA, between development objectives and peace objectives, this rarely happens. The social bearers of the dominant socio-political norms are in favor of both ‘peace’ and ‘development’. A large, multilateral aid component conflicts, on the other hand, with the systemic and business interest in export promotion. On this dimension of the aid policy, the systemic interest in the maintenance of peace and economic stability has been the decisive one.

  2. Some elements of aid policy are direct to the systemic and business interest in export promotion. This applies to the motives given for aid, though not prominently, and to the long-term aid objective, though this is formulated in general terms, approaching the mutual interest in, inter alia, expanded trade. The industrialization and trade strategy is also geared to this interest, and, by definition, the commercialization of aid policies. After 1976, aid policy has increasingly been oriented towards this interest, in particular the introduction of a commodity aid component, the interpretation and implementation of the principle of untied aid, the freezing of the multilateral component at 0.5 per cent of GDP, instead of the 50 per cent of ODA contained in the 1984 White Paper along with the interpretation of this guideline provided by Parliament in 1987, and the many mechanisms established with the explicit purpose of promoting Norwegian exports financed through the ODA budget.

Export promotion by means of ODA conflicts (as perceived) with several of the dominant socio-political norms and the social bearers of these norms have been ardent opponents of the commercialization of aid. Since 1976, however, the proponents of export promotion have increasingly kept the initiative, although the gains have not been too impressive in quantitative terms, and Parliament, again in 1987, has put up a forceful resistance.

Other aspects of aid policy are, on the other hand, dysfunctional to this interest. This applies, in the first place, to the large, multilateral, ODA component and to several of the other established guidelines: the principle of geographical concentration, the criteria for selection of priority countries and the selection that has been made (poor countries), the poverty orientation reflected in the welfare strategy and the target groups (the poor, women), untied aid, aid as grants, and recipient-oriented aid. As noted, some of these guidelines were adapted to the interest of export promotion after 1976, and several of the exemptions from the principle of geographical concentration were accommodations of this interest. Even so, the guidelines have constituted barriers to the use of ODA for the promotion of Norwegian systemic and business interests in export promotion and have for this very reason been under attack from the social bearers of these interests.

On questions that really mattered, however, involving the principle of untied aid, the export-guarantee system and mixed credits, substantial concessions were made after 1975, against the protests of the social bearers of the dominant socio-political norms. However, even in these areas, the gains were circumscribed. In areas where the interest was affected in a more general way, viz. the multilateral component or aid as gifts, the impact was less.

  1. The prevailing economic situation in Norway was suggested as a major, potential determinant, involving several dimensions of the aid policy. The main changes in the domestic and external economic situation after 1975 were the following:

  1. A rate of inflation during the early 1970s, continuing at a relatively high level even later, with a bearing on the level of Norwegian costs. The North Sea oil discoveries – creating opportunities for industries, job opportunities at a far higher salary level than in other branches of industry, and the prospect of large state revenues – were a major cause of this development, affecting adversely the competitiveness of Norwegian mainland industries and exporters, including industries that faced competition from Third World producers on the domestic and international markets (textiles, shipbuilding).

  2. An acute, structural crisis in the shipbuilding industry that was perceived as a temporary crisis and dealt with accordingly. Norwegian shipbuilding enterprises constituted the core industry in many minor towns. The crisis had, therefore, the potentiality of creating unemployment in many districts, as a close-down would also affect the employment provided by supportive enterprises. It became a matter of priority for the government to rescue the shipbuilding industry by an active search for new contracts and various forms of subsidies. The new oil riches of the North Sea became instrumental, both in strengthening the financial basis, thus allowing for public subsidies, and in easing the efforts to convince prospective oilfield operators to place order with Norwegian firms. The ODA budget was also used as an instrument in this policy.

  3. During 1975-77, Norway experienced high balance-of-payments deficits. Gradually, however, the new incomes stemming from oil revenues and oil-related activities improved the public income and economic growth (GNP) and affected the balance-of-payments situation positively. During the early 1980s, foreign debts were reduced.

The adverse trends in the Norwegian economy were reinforced by the international recession during this period. They were all working in the same general direction, along with the systemic interest in export promotion and a high employment rate and business and labor interests to the same end. It was also expected that they would adversely affect the aid volume and terms of aid.

The actual effects were, however, less than expected. The strained economic situation affected the volume of aid, but only temporarily and rather mildly. On this dimension, it was balanced by the socio-political norms which were reinforced by the deteriorating situation emerging in the Third World. Although strained, the main characteristic of the Norwegian economy during these years was that of an economy in sustained growth – Norway improved its relative position among the richest industrial countries. This also explains why the strained economic situation did not affect the financial conditions of aid. It was, however, most decisive for the increased commercialization of aid during the second part of the 1970s and early 1980s, reinforcing the systemic and business interest to this end, involving increased emphasis on the return flow of aid, including the redefinition of the principle of untied aid and mechanisms to promote Norwegian exports. Its effects on most other aspects of aid policy, were small, even marginal.

  1. Although Norwegian aid policy is in many respects different from the mainstream aid policy of the Western powers, several aspects also reflect values (norms, standards and interests) being pursued in the external environment. The Norwegian aid policy has been well attuned to the policies of other Nordic countries, in particular, to Swedish aid policy. The similarities are to be found especially in the large volume of ODA on favorable financial terms, the poverty orientation, involving poor recipient countries, poor target groups and recipient governments that are expected to be geared towards social justice, the selection of priority countries, the principle of untied aid and the large multilateral aid component, although the pattern varies. The detailed, formal policies established in the 1972 and 1975 White Papers have similarities with other Nordic countries’ policy statements. Several of the changes since 1975, including the commercialization drive, the weakening of the principle of untied aid and the conditionality reflected in the rephrasing of the principle of recipient country orientation in the 1984 White Paper, came in the wake of changes in the same direction in Swedish aid policy, though with a time lag. The frequent appearance of Social Democratic governments on both sides of a common border may be part of the explanation. It is, however, difficult to assess whether Nordic co-operation – or, rather, close proximity, involving communication, co-operation and competition – has had a decisive impact on the various aspects of aid policy or has only reinforced a policy which has emerged from genuinely domestic, political processes. The values operating in the systems are basically similar.

  2. The norms established by the OECD (DAC) have also influenced some aspects of aid policy, although the impact has probably not been strong, as Norway has been far ahead of the targets and standards set (less aid tying, more aid on better financial terms, especially to the LLDCs, increased aid through multilateral agencies, etc.). The standards set by most DAC members, in their aid performance, may even have influenced Norwegian aid policy in a negative direction, from the point of view of these norms, although such effects are not easily traced.

The main partner in the regional security policy co-operation, the United States, has had some influence, though a rather marginal one, in the area in which its influence could be expected to be the strongest: the choice of partners for bilateral co-operation. The influence of minor allies in NATO has been even less, as is indicated by the support given to the liberation movement of Portugal’s African colonies when the wars of liberation took place.

  1. The multilateral institutions – the World Bank and the United Nations system – have influenced several aspects of Norwegian aid policy, particularly during the initial stage. This applies, in the first place, to aid philosophy, strategies and targets, although after 1975 Norway was ahead of the volume targets established by the UN. Some of the guidelines – in particular, aid as grants and the principle of untied aid – have been influenced by the multilateral aid agencies. Their main role, however, has been to reinforce the effects produced by the dominant socio-political norms of the domestic environment. The World Bank, in particular, has underpinned the philosophical basis of the industrialization and trade strategy.

  2. Multilateral aid agencies and priority countries have – in their capacity as aid channels – had a substantial impact on Norwegian aid, though not necessarily on aid policy. Although several dimensions of the aid policy are attuned to the interests of the priority countries’ governments (viz. a large volume of ODA on grant terms, country planning with long-term commitments, and the principle of recipient-oriented aid), it does not necessarily follow that these governments are the main determinants. Still, in spite of the asymmetrical power structure of aid relations, they have also influenced, indirectly as much as directly, some aspects of aid policy.

These tentative conclusions are based on the correspondence between actual policy manifestations and the assumed outcome if the potential determinants were to be decisive. Although process analysis may add to or even modify the conclusions, the approach used has made it possible to identify the basic determinants of the aid policy.

Attention has not been directly focused on the actors who would be important in any process analysis with a similar purpose. These have been included in broad, aggregate units. This applies in particular to political parties, although their positions in relation to the main issues have been indicated. Variations in the aid policy over time, to some extent, coincided with changes in government along a Right-Left dimension, although these variations have been small and the Right-Left division somewhat blurred. One reason for this is the strong aid commitment of the parties belonging to the centre, in particular the Christian People’s Party (CPP) and the Liberals, which, together with the Socialist Left Party (SLP), have been the most ardent supporters of altruistic aid and increased aid.

The predominant consensus between the political parties (excepting the PP) has occasionally been broken by the parties to the Left and to the Right. The main conflicts have involved ODA volume, the selection of bilateral aid recipients, and, increasingly, the commercialization of aid, in particular the mechanisms established with the primary purpose of promoting Norwegian exports.

Whereas the main political parties, and especially Labor, have actively sought a broad consensus on aid issues, the minor parties to the Right and Left have not accepted such self-imposed restraints. The selection of recipient countries for bilateral aid is a case in point. Here, the SLP has argued for more aid to countries with a Socialist orientation, the inclusion among priority countries of additional countries with this orientation (Angola, Cuba, Nicaragua, Vietnam), the exclusion of countries with market-oriented, conservative regimes (Kenya, Pakistan, Sri Lanka) and more support to the liberation movements of southern Africa. As noted, the party has not been alone – the left wing of the Labor Party (and on some issues, the whole party), the Liberals and the CPP have adopted similar positions on several of these issues. Even on the more fundamental issue of whether to provide aid at all, there is a cleavage between the parties, as the tiny Progress Party has advocated the abolition of all public aid, in particular multilateral aid and any aid that does not engage private Norwegian enterprises and business.

The main division – within the broad consensus among the main political parties – has been between the Right (Conservatives) and the Centre-Left (Centre Party, CPP, Labor, Liberals, SLP). However, the participation of smaller parties in coalition governments in which the Conservatives have been the main partner has modified the positions of the parties belong to the Centre on many issues, thus blurring this division. This applies in particular to the CPP during the 1980s, when the party in a government position (in charge of the Ministry of Development Co-operation) gave legitimacy to several mechanisms identified with the commercialization of Norwegian aid and accepted ODA budgets far below its commitments – and even below what Parliament might have accepted on the basis of the electoral platforms of the parties. On balance, the party managed to commit the Conservatives to a poverty-oriented aid policy and volume targets above 1.15 per cent of GDP. The Conservatives have been dependent on the parties in the Centre to form a government – a fact that has influenced the aid policy positions adopted by the party and blurred the conflict along the Left-Right axis.

The conflict between altruism and self-interest, manifest above all in the commercialization-of-aid issue, involves the political parties along a Right—Centre-Left axis, though this split is also found within Labor. During the late 1970s and early 1980s, however, the conflict appeared first of all as one between the national political institutions: the governments (Ministry of Foreign Affairs) and Parliament.61 The export-promotion drive was carried out by the government administration (in particular by the Ministry of Trade and Shipping and the Ministry of Industry), in liaison with private sector, economic interest groups. In 1980, in a report to Parliament (Report No. 35), the government (Labor) made an effort to transform the practice of aid established during the second half of the seventies – the increased commercialization, in which aid was geared towards broader economic co-operation – into policy norms. In 1981, Parliament rejected reorientation and insisted that the old guidelines be maintained – with an emphasis on the poverty orientation of aid geared to social justice and the channeling of aid to poor countries. Although the principle of untied aid was modified, the redefinition was made with the intention of containing the way in which it had been implemented. In Parliament, all the parties represented on the Foreign Affairs Committee backed this position, including the governing Labor Party.

Several factors contributed to these political pirouettes, in particular the feeling that practice had become too far removed from established principles. Manifestations of double standards are probably more conspicuous in the cluster of policy areas to which aid policy belongs (together with social security, employment, etc.) than in other areas of domestic or foreign policy. The government issue also influenced the positions of the political parties. The general election of 1981 was close, and political parties were in the process of formulating their manifestos – a fact that facilitated a pre-occupation with norms and values. The government (Labor) was a minority government and had parties both to the Left and in the centre which were opposed to the increased commercialization that had taken place. The main opposition parties had agreed to form a non-Socialist government if the elections allowed. In this setting, the Conservative could not afford an open clash with the CPP on an issue which that party – sensitive to strong signals from the Council of Foreign Relations of the Church of Norway – had at heart. For this reason, the CPP played a decisive role in the outcome.

The crucial role of the parliamentary situation, and in particular the consequences involved in partnership in a coalition government, is also illustrated in some specific issues during the period up to mid-1983 with minority governments (Labor and Conservative). When in 1980 the government (Labor) decided to apply for membership of the Inter-American Development Bank (IDB) financed by ODA, Parliament turned the proposal down. When the government (Conservative) in 1982 proposed that NOK 145 million should be allocated in the aid budget for 1983 to cover losses under the special export-guarantee system, contrary to the yearly limit previously agreed on (NOK 20 million), Parliament unanimously turned the proposal down.

Under the new majority regime from mid-1983 to late 1985, matter changed. With the CPP included in a majority coalition government, these issues were decided in line with the position of the Conservatives. The various mechanisms for the promotion of Norwegian exports were reinforced in the Government’s White Paper (1984) and new mechanisms were added, including mixed credits, an arrangement which was rushed through Parliament ahead of the White Paper and obtained the votes of the three coalition parties and (somewhat hesitantly) Labor’s as well. The White Paper also included the proposal to use ODA extensively to cover losses on export guarantees in the future too (NOK 200 million a year) and membership of the IDB. The redefinition of the principle of untied aid concluded this course of events. Clearly, the government structure was instrumental in bringing about the quite fundamental changes that took place on these issues – as it had been a few years earlier in defense of the then established policy.

These changes – in favor of self-centered Norwegian economic interests – are important but do not provide the full picture. The CPP did not abandon all the altruistic principles with which it had been previously identified. The poverty orientation came out stronger than ever in the White Paper – a fact that implies set-back for a policy directed towards satisfying self-centered Norwegian economic interests. Another important aspect in this programme of continued growth – safeguarding long-term, development assistance and restricting the utilization of ODA to mechanisms geared to stimulating ‘broader economic co-operation’. Such utilization of ODA was restricted to the allocations above the 1.1. per cent of GNP which was to be used for humanitarian aid and long-term development assistance. The financial framework of the new mechanisms introduced was rather rigid – with the exception of the funds to cover losses on old export guarantees, which had to be covered by the state anyway. Here, safeguards were introduced against future losses.

However, once new mechanism are introduced, they may well open up future avenues for economic interest groups that are well placed and experienced in manipulating the system. The full implications of the new mechanisms – modest as they are today in financial terms – will only be appreciated in years to come.

The most striking feature of Norwegian aid policy is its continuity and the high degree of consensus-seeking among the main political parties. On some issues – in particular, issues which have a bearing on self-centered, Norwegian interests – there has been a continuous conflict along the axis between altruism and self-interest. Although a shift of emphasis took place during the second half of the 1970s and early 1980s – involving, above all, increased commercialization – in most aspects, altruism has maintained the upper hand, though with modifications and variations as regards its strength over time.

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