<div>Development assistance employs carrots and sticks to influence regimes and obtain particular outcomes: altered economic policies, democratization, relief of suffering from catastrophes. Wealthy nations and international agencies such as the World Bank justify development assistance on grounds of improving the global human condition. Over the last forty years, however, ethnic conflict has increased dramatically. Where does ethnic conflict fit within this set of objectives? How do the resources, policy advice, and conditions attached to aid affect ethnic conflict in countries in which donors intervene? How can assistance be deployed in ways that might moderate rather than aggravate ethnic tensions?<br></div><div>These issues are addressed comparatively by area specialists and participant-observers from development assistance organizations. This book is the first systematic effort to evaluate this dimension of international affairs--and to propose remedies. Case studies include Russia, Ecuador, Sri Lanka, and Kenya, with references to many other national experiences.<br></div><div>Cross-cutting chapters consider evolution of USAID and the World Bank's policies on displacement of people by development projects, as well as how carrots and sticks may affect ethnic dynamics, but through different mechanisms and to varying degrees depending on political dynamics and regime behaviors. They show that projects may also exacerbate ethnic conflict by reinforcing territoriality and exposing seemingly unfair allocative principles that exclude or harm some while benefiting others.<br></div><div>For students of international political economy, development studies, comparative politics, and ethnic conflict, this book illuminates a problem area that has long been overlooked in international affairs literature. It is essential reading for staff members and policymakers in development assistance agencies and international financial institutions.<br></div><div>Milton J. Esman is the John S. Knight Professor of International Studies, Emeritus, and Professor of Government, Emeritus, at Cornell University.<br></div><div>Ronald J. Herring is Director of the Mario Einaudi Center for International Studies at Cornell, the John S. Knight Professor of International Relations, and Professor of Government at Cornell University. <br></div>
Carrots, Sticks, and Ethnic Conflict
Rethinking Development AssistanceThe University of Michigan Press
Copyright © 2000University of Michigan
All right reserved. ISBN: 978-0-472-11177-0Contents
Preface...............................................................................................................................vii1. Projects and Policies, Politics and Ethnicities Ronald J. Herring and Milton J. Esman.............................................12. The World Bank and Displacement: The Challenge of Heterogeneity Daniel R. Gibson..................................................263. USAID and Ethnic Conflict: An Epiphany? Heather S. McHugh.........................................................................494. Foreign Aid and Ethnic Interests in Kenya John M. Cohen...........................................................................905. Ethnic Cooperation in Sri Lanka: Through the Keyhole of a USAID Project Norman T. Uphoff..........................................1136. Making Ethnic Conflict: The Civil War in Sri Lanka Ronald J. Herring..............................................................1407. Foreign Assistance as Genocide: The Crisis in Russia, the IMF, and Interethnic Relations Stephen D. Shenfield.....................1758. "Indian Market": The Ethnic Face of Adjustment in Ecuador Alison Brysk............................................................2109. Policy Dimensions: What Can Development Assistance Do? Milton J. Esman............................................................235Contributors..........................................................................................................................257Index.................................................................................................................................261
Chapter One
Projects and Policies, Politics and Ethnicities Ronald J. Herring and Milton J. Esman
Ethnic conflict has often jarred the international community with its ferocity and durability. The causes are perplexing-clearly multiple and multidimensional, and situationally specific, dif Despite "aid weariness," the tasks assigned to development assistance have multiplied in number, complexity, and gravity. Discussion of aid in the United States now raises post-Cold War problematics of "chaos," "failed states," "early warning systems," "governance," and "preventive development." Humanitarian assistance in response to horrendous catastrophes takes precedence over traditional development activities, leading to discussions of "development diversion" and mission dilution. Brian Atwood, on retiring as head of the United States Agency for International Development (USAID), criticized the benign neglect of aid in Washington: "What will it take to wake up our political leaders? More failed states? More wars? More south-to-north migration? More transmission of infectious diseases? More terrorism?" The ugly side of globalization stirs fears of broadly gauged threats that substitute for Cold War imperatives as justifications of international aid.
The Asian financial collapse of 1997 found the World Bank not only criticizing its own prior narrowly economistic assumptions about development but assuming a lead role in global crisis management. The president of the bank said in his address to the Board of Governors in 1998: "Today, in the wake of crisis, we need a second framework ... that includes the human and social accounting, that deals with the environment, that deals with the status of women, rural development, indigenous people, progress in infrastructure, and so on." Mr. Wolfensohn spoke of a mission so broad as "empowering the people, writing the laws, recognizing the women, eliminating the corruption, educating the girls, building the banking systems, protecting the environment, inoculating the children" (Wolfensohn 1998, 11, 12). The World Bank asserts here an extraordinary mandate: global crisis management and local social engineering on a global scale. Whether staff of the World Bank buy into such grand visions operationally remains to be seen; rhetoric tends to outrun both capacity and will.
As expectations have escalated, resources have waned. Until the early 1990s, the volume of international development assistance increased annually. By the mid-1990s, however, it had stagnated at the level of about U.S.$70 billion net of loan repayments (OECD 1996). Though its aggregate volume has stagnated, the impact of development assistance may ironically increase over time. Governments facing fiscal and balance-of-payments crises seek both the hard currency of assistance and the legitimation for foreign direct investment that often follows the lead of development assistance agencies. Many aid-recipient countries depend on foreign assistance to finance their development budgets, to ensure fiscal stability, to balance external payments, and to reassure foreign investors. In the United Nations Development Programme's Human Development Report for 1998, 41 countries received aid in excess of 10 percent of GNP. The figure for Mozambique was 72 percent; for Nicaragua, 61 percent. World Bank data for 1998-99 indicate similar patterns. Aid of course constituted a much higher percentage of these domestic budgets than of GNP. Though private resource flows exceed development assistance in some countries, these flows are uneven in distribution and largely avoid the most desperate societies. Aid is especially critical in catastrophes, whether natural or human-made. The Asian financial collapse of 1997 produced at least 20 million poor people very quickly; international development agencies became crisis response managers (Wolfensohn 1998).
Development assistance distributes carrots and deploys sticks to influence regimes and obtain particular outcomes-altered economic policies, democratization, relief of suffering from catastrophes. We believe there are important reciprocal interactions between international development flows-of project monies, loans, grants, policy advice, and conditionality-and ethnic politics, for several reasons. First and most important, aid projects and restructuring policy advice have distributive consequences. Distributive concerns in general, and especially ethnic distributive issues, have been dif In the prevailing international system of sovereign territorial states, ethnic conflicts are common; most "nation-states" in reality govern multiethnic societies. Their component ethnic communities may be quiescent, or they may coexist peacefully while competing for political, economic, or cultural advantage. Yet the trend is toward overt conflict. Ted Gurr concluded his 1993 comprehensive empirical study with the statement "Every form of ethnopolitical conflict has increased sharply since the 1950s" (316). The 1990s have witnessed an expansion of academic interest in ethnic politics, including a number of explorations of the international and transnational dimensions of ethnic conflict. Development assistance has evoked a library of literature, mostly concentrating on its effects on economic growth; a minor theme has been its implications for political development and more specifically for democratic institutions and human rights. Yet linkages between development assistance and ethnic conflict remain obscure.
The aid relationship-increasingly and optimistically called a partnership-could be implicated in this phenomenon in various ways. Some interventions may be conducive to peaceful coexistence and equity; others may aggravate tensions and precipitate conflict. Some present cruel dilemmas. Food and medical supplies intended to sustain the victims of civil wars may be hijacked by military contingents of their own ethnic community, leading their enemies to interdict all humanitarian assistance. Privatization, intended to enhance economic efficiency, may be perceived as or indeed have the effect of favoring members of one ethnic group over others. Majoritarian elections urged on by the development assistance community may condemn an ethnic minority to structural subordination and discrimination. Pressure for multiparty democracy in societies with no programmatic political parties may result in hardening of primordial loyalties as the only basis for mobilization and competition. Resources provided in the project mode may be diverted by governments to favor fellow ethnics, while reductions in public expenditures may be administered in ways that spare one community while imposing costs on others. But development assistance can be designed to minimize such negative consequences, to mitigate the effects of development projects on vulnerable communities, or to promote positive-sum equity. Fairness can be exemplified as much in the processes of allocation as in the actual distribution of benefits. These are the problematics we seek to explore.
Money Movers and Gatekeepers: Conditionality
Development assistance is constrained and shaped by conditions imposed by donors. Conditionality represents a social contract between providers of assistance and recipient governments acting on behalf of societies-a set of expectations on which assistance is premised. Conditionalities have multiplied over the last two decades, growing from accounting requirements and technical and administrative assurances of fiduciary responsibility, to include understandings of preferred-or acceptable-economic policy and sometimes political arrangements. Conditionalities are controversial because the assistance relationship is asymmetric.
By development assistance we mean specifically nonmilitary resource transfers on concessional terms from rich to poor countries. Concessional assistance denotes resources provided on terms more generous than those available commercially, either as outright grants or as "soft" loans at lower-than-market rates of interest and with longer repayment periods. Providers of development assistance include agencies sponsored by about 20 of the higher-income industrialized countries plus the multilateral development institutions, notably the World Bank, the International Monetary Fund (IMF), the United Nations Development Program, and the regional development banks. There are about 170 aid-recipient states and dependent territories, mostly in Africa, Asia, the Middle East, and Latin America; more recently, Eastern Europe and the successor states of the former Soviet Union have been included.
Governments in recipient nations are inevitably gatekeepers of development assistance. Foreign assistance normally reaches a society through the state as an expression of the latter's sovereignty. Development assistance agencies must negotiate with governments the terms and conditions of the resources they provide. Once governments accept foreign assistance, the resultant projects and policies are administered through their bureaucratic agencies. Yet governments may at their discretion set boundaries for their acceptance of foreign aid or exclude it altogether. Though foreign aid operates mostly as official, government-to-government transactions, some donors have employed universities, private firms, and nongovernmental organizations (NGOs) to implement the projects they finance and may even seek to circumvent governments and deal directly with private businesses, educational and research institutions, local authorities, or NGOs. Given the current hostility to state intervention in economies, NGOs have in many instances become a desired alternative to direct transfers to governments.
Donor agencies have deep organizational interests in this relationship. Officials of agencies are interested in "moving money," in maintaining their programs, and in protecting the creditworthiness of client states. These interests endow host governments with considerable bargaining strength, even in asymmetric relationships. When development assistance agencies choose to work through foreign or indigenous nongovernment organizations, the role of the state may be reduced (Korten and Klauss 1984; Carroll and Montgomery 1987). Yet governments must acquiesce in such arrangements, as they retain the power to proscribe the activities of NGOs or to circumscribe their scope. The shrinkage of government and expansion of marketization now promoted by development assistance agencies can limit but not eliminate the intermediary role of governments.
While some governments may attempt to serve as neutral arbiters among ethnic competitors, often the state serves as agent of the dominant ethnic community or of a ruling coalition of ethnic communities that has captured the state apparatus. Under these conditions, rulers may distribute the fruits of development assistance disproportionately, even exclusively, to their constituents as patronage. When the politically dominant ethnic community is a demographic majority, government can privilege its constituents by formal majoritarian democratic processes. When the politically dominant community is a minority, cruder methods are employed, as is illustrated by John Cohen's account of the machinations of the ruling minority in Kenya in chapter 4. Humanitarian assistance intended to provide relief and sustenance to victims of natural disasters or large-scale collective violence requires on the ground cooperation of governments, which is not always forthcoming. The victims, as in Rwanda and Bosnia, may have been targeted on ethnic grounds. Subsequent efforts at rehabilitation to assist victims, including refugees, to rebuild their lives and to become economically productive and self-sufficient stretches standard development practice and the toughness of conditionalities (Kreimer et al. 1998).
Conditionality may be applied by donors to any flows of assistance. Of particular importance are conditions attached to policy-related transactions. Budget support by the World Bank may be contingent on tax reform; IMF loans to support the balance of payments may be forthcoming only if the country's government agrees to devalue its currency or reduce its budget de To enforce conditionality, assistance agencies monitor the performance of governments, releasing funds only in periodic increments, contingent on compliance. Financial flows are normally tied to policy changes. The World Bank and the IMF, for example, may agree to provide resources for a country facing financial stringency, but only after a "policy dialogue" during which the recipient government agrees to implement macroeconomic policy reforms as the condition for loans. Practitioners recognize that achievement of political stability in the process is both a desirable condition for growth and problematic because economic change may induce social disruption (Nelson 1984).
Development assistance provides funds-or more precisely, supervised lines of credit-to implement projects or policies. Projects run the gamut of activities involving the "productive" sectors (agriculture and industry), physical infrastructure (roads, dams, water-supply systems, airports), and social infrastructure (education, health, family planning, public administration). They may be very large, "lumpy" investments, such as hydroelectric power systems, or relatively small, divisible facilities, such as community health services.
In contrast to projects, policies are governmentally enforced measures that affect the entire society or particular sectors of the economy. The most obvious are macroeconomic policies associated with economic stabilization and structural adjustment-increasing revenues, cutting back public expenditures, devaluing the currency, privatizing the ownership and management of public enterprises, reducing protectionism, removing obstacles to foreign private investment, shrinking the role of government in the economy and society. Of growing importance are macropolitical conditionalities relating to democratization and human rights; these include freedom of expression and of political organization, free and fair elections, the rule of law, and protection of minorities.
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