On the edge of lunacy
British foreign aid is now targeted at countries
willing to sell off their assets to big business
Tuesday January 6, 2004
Spare a thought this bleak new year for all those who rely on charity. Open your hearts, for example,
to a group of people who, though they live in London, are in such desperate need of handouts
that last year they received £7.6m in foreign aid. The Adam Smith Institute, the ultra-rightwing lobby
group, now receives more money from Britain's Department for International Development
(DfID) than Liberia or Somalia, two of the most desperate nations on Earth.
Are the members of the Adam Smith Institute starving? Hardly. They work in plush offices in Great
Smith Street, just around the corner from the Houses of Parliament. They hold lavish receptions
and bring in speakers from all over the world. Big business already contributes generously to this good
It gets what it pays for. The institute's purpose is to devise new means for corporations to grab the
resources that belong to the public realm. Its president, Madsen Pirie, claims to have invented the
word privatisation. His was the organisation that persuaded the Conservative government to sell off
the railways, deregulate the buses, introduce the poll tax, cut the top rates of income tax, outsource
local government services and start to part-privatise the national health service and the education
system. "We propose things," Pirie once boasted, "which people regard as being on the edge of
lunacy. The next thing you know, they're on the edge of policy." In this spirit, his institute now calls for
the privatisation of social security, the dismantling of the NHS and a shift from public to private education. It
opposes government spending on everything, in other words, except the Adam Smith Institute.
So what on earth is going on? Why are swivel-eyed ideologues in London a more deserving cause than
starving refugees in Somalia? To understand what is happening, we must first revise our conception of
what foreign aid is for.
Aid has always been an instrument of foreign policy. During the cold war, it was used to buy the loyalties
of states that might otherwise have crossed to the other side. Even today, the countries that receive
the most money tend to be those that are of greatest strategic use to the donor nation, which is why the
US gives more to Israel than it does to sub-Saharan Africa.
But foreign policy is also driven by commerce, and in particular by the needs of domestic
exporters. Aid goes to countries that can buy our manufacturers'
products. Sometimes it doesn't go to countries at all, but straight to the
manufacturers. A US government website boasts that "the principal beneficiary of
America's foreign assistance programs has always been the United
States. Close to 80% of the US Agency for International Development's contracts
and grants go directly to American firms."
A doctor working in Gondar hospital in Ethiopia wrote to me recently to spell out what this
The hospital has none of the basic textbooks on tropical diseases it needs. But it does have 21
copies of an 800-page volume called Aesthetic Facial Surgery and 24 volumes of a book called
Opthalmic Pathology. There is no opthalmic pathologist in training in Ethiopia. The poorest nation
on Earth, unsurprisingly, has no aesthetic plastic surgeons. The US had spent $2m on medical
textbooks that American publishers hadn't been able to sell at home, called them aid and dumped them in
In Britain the Labour government claims to have abandoned such
practices, though only because they infringe European rules on
competition. But now it has found a far more effective means of helping the
rich while pretending to help the poor. It is spending its money on projects that hand public
goods to corporations.
It is now giving, for example, £342m to the Indian state of Andhra
Pradesh. This is a staggering amount of money, 15 times what it spent last year
on the famine in Ethiopia. Why is Andhra Pradesh so lucky? Because its chief
minister, or "chief executive" as he now likes to be
known, is doing to his state what Pinochet did to Chile: handing everything that isn't nailed down, and quite a lot that
is, to big business. Most of the money DfID is giving him is being used to
"restructure" and "reform" the
state and its utilities.
His programme will dispossess 20 million people from the land and contribute massively to
DfID's own report on the biggest of the schemes it is funding in the state reveals that it suffers from
"major failings", has "negative consequences on food security" and does
"nothing about providing alternative income for those
displaced". But it permits Andhra Pradesh to become a laboratory for
the kind of mass privatisation the department is seeking to encourage all over the
In Zambia, DfID is spending just £700,000 on improving nutrition, but £56m on privatising the
copper mines. In Ghana, the department made its aid payments for upgrading the water system
conditional on partial privatisation. Foreign aid from Britain now means giving to the rich the resources
that keep the poor alive.
So there are rich pickings for organisations like the Adam Smith Institute. It is being hired by DfID as a
consultancy, telling countries like South Africa how to flog off the family
silver. It is hard to see how this helps the poor. The South African government's
preparations for privatisation, according to a study by the Municipal Services
Project, led to almost 10 million people having their water cut off, 10 million
people having their electricity cut off, and over 2 million people being evicted from their homes for
non-payment of bills.
What we see here, in other words, is a revival of an ancient British charitable
tradition. During the Irish
potato famine, the British government made famine relief available to the
starving, but only if they
agreed to lose their tenancies on the land. The 1847 Poor Law Extension Act cleared Ireland for the
landlords. Today, the British government is helping the corporations to seize not only the land from the
poor, but also the water, the utilities, the mines, the schools, the health services and anything else they
might find profitable. And you and I are paying for it.
All this was pioneered by the sainted Clare Short. Short's trick was to retain her radical credentials by
publicly criticising the work of other departments, while retaining her job by pursuing in her own
department policies that were far more vicious and destructive than those she attacked. Blair's trick was
to keep her there, to assure old Labour voters that they still had a voice in government, while ensuring
that Short did precisely what his corporate backers wanted.
I never thought I would hear myself saying this, and I recognise that in doing so I may be handing
ammunition to the rightwing lobby groups campaigning for a reduction in government
spending, such as, for example, the Adam Smith Institute. But if this is what foreign aid amounts to,
it seems to me that there is too much of it, rather than too
little. Britain's Department for International Development is beginning to do more harm than