Markets and Good Government

by Robert Archer

Table of Content

• PREFACE
  • The Way Forward for Economic and Social Development?
  • Some Definitions
• OVERVIEW
• COMMENTARY
  • MARKETS
  • GOVERNMENT
  • CIVIL SOCIETY
• CRITIQUE
• INTERNATIONAL GOVERNANCE AND AID CONDITIONALITY
• CONCLUSION

INTERNATIONAL GOVERNANCE AND AID CONDITIONALITY

If governments do emphasise poverty alleviation alongside a continued commitment to good government, attention will continue to focus on the issue of aid conditionality. Action to prevent abuse of human rights and to promote democracy is a central tenet of the good government approach; and, as we have seen, abuses of such rights are likely to be frequent where civil institutions are least entrenched - that is to say, in the poorest countries. If official aid is spent increasingly in those countries, it will become harder to withdraw aid on human rights grounds without penalising the poorest people.

Some governments (such as France) have already said they will avoid political conditions on aid. If anything, however, aid conditionality will become more frequent. It is already entrenched in policy and will be used for this reason alone - as the mid-term renegotiation of Lomé is showing. Secondly, aid resources will be limited and donors will take advantage to reduce their expenditure. Thirdly, donor governments are increasingly reluctant to intervene directly in situations of conflict, and will prefer indirect pressures - such as withholding aid - to secure compliance from governments whose policies they find unacceptable. Fourthly, many officials and political leaders in donor countries sincerely believe in human rights, democracy and market principles, and to that degree policy will be influenced by conscience.

At the same time, government policies are driven primarily by national interest, and it is inherently difficult to measure the degree to which decisions taken to protect international law or human rights standards are influenced by national interests.

How can governments show that national interest has been subordinated to higher principles when they intervene against governments they accuse of abusive policies?

In the last few years, international action has been taken in many countries. In the South alone, they include: Angola, Burma, Burundi, Cambodia, China, El Salvador, Haiti, Iraq, Iran, Kenya, Liberia, Libya, Malawi, North Korea, South Africa, Somalia, Sudan, Vietnam and Zaire. Action has been political (China, Sudan, Mozambique, Angola, El Salvador, Zaire), military (Iraq, Libya, Somalia), humanitarian (Sudan, Mozambique, Somalia) and economic (Haiti, Kenya, Iraq, Libya). The reasons given for action have also varied widely: sanctions have been imposed for infringement of UN Charter, for promotion of terrorism, for abuses of human rights, for export of illicit drugs, for abusive purchase of arms, for infringement of the Nuclear Non-Proliferation treaty etc.

Broadly, nevertheless, sanctions in the field of aid have been imposed on four grounds:

• formal breach of international law (as determined by the Security Council).
• failure to comply with a formal contract (SAP agreement, debt contract).
• imputed breach of international law (UN Charter, human rights convenants)
• bilateral dispute or because of donor self-interest.

What distinguishes the "self-interest" category from the other three is the lack of an adequate justification in law. A legal process requires that policies and judgements must be explicable and non-arbitrary. This suggests that conditions on aid (and the consequent attachment of penalties and incentives) should be:

• rule-based - derived from international law or agreed principles;
• replicable - similar cases should receive similar treatment;
• transparent - open to inquiry and explicable.

Acceptance of reciprocity is particularly important. What is right for the recipient of aid must be right for the donor. If governments of poor countries should balance their budgets, so should the United States. If poor countries should not spend large sums on making or buying weapons, it is wrong for the United Kingdom, France, the United States and China to do so. If transparent government is essential for the political well-being of Sub-Saharan Africa, Britian should observe the same standards. If it is important to root out corruption in Indonesia and Nigeria, it is just as essential to do so in Italy and Japan. And so on. Donors should meet the standards of performance that they expect recipient governments to achieve.

Transparency is also essential. If donors fail to explain their decisions, they will not command respect because observers - and even more those who are subject to sanction - will have no means of judging whether a policy is principled or motivated by self-interest. Secondly, collision of interest is one of the principal causes of inconsistent and bad policy judgements by donor governments: explanation ought to reduce the incidence of confused decision-making. Without transparency there can be no accountability.

It should be noted, in saying this, that confidentiality cuts right across the transparency requirement. This is an issue for all donors (NGOs as well as governments) that have partnership or contractual relationships. While respecting principles of confidentiality, donor organisations should accept the need to communicate their policies because accountability cannot be sustained in the absence of information.

In the final analysis, the legitimacy of policies depends on the assent of those who are affected by them. In principle, those who are affected by conditionality policies should be consulted about them. In practice, it is clear that, for political and technical reasons, this is not always possible. For example, punitive sanctions are most likely to be imposed on governments that are least likely to consult, or permit others to consult, their people. Some rules of conduct can be suggested here too:

• Where it is possible to consult, donors should make it a condition of their own participation that those most directly affected by decisions are consulted and involved. This principle should be applied to SAPs.
• Where consultation is not feasible, sanctions must be based in international law, but effectiveness and equity should be taken into account. In particular, decisions should not increase the suffering of vulnerable groups. In Iraq, in Haiti and in Sudan, some of the world's most vulnerable populations have suffered double jeopardy - abused by their government and then deprived by international sanctions of some of the means of life.
• Where one or both parties to a contract is illegitimate or acting illegally, contracts should not bind people who were not responsible for them. This applies to a proportion of third World debt. Where a contract was merely ill-judged, responsibility should be shared (reciprocity). Where criminality was involved, at least in some cases it should be repudiated.

Sanctions or conditions on aid should therefore be based on objective standards. They should be replicable, should be explained and should be accountable. Sanctions or interventions based on national interest alone will end to fail these tests. They will tend to be arbitrary; to privilege the powerful; and to encourage resort to force rather than negotiation in the settlement of disputes.

International governance will continue to be an important issue during the 1990s. In testing the performance of donor powers at this level, there is value in applying some of the core ideas of "good government" to international conduct. Is policy-making transparent and effective? Is there good financial management? Is respect shown for the law and for international rights? Is there a commitment to democratic accountability and pluralism? For "international governance" to pass these tests and emerge as a sustainable project, the major powers will need to change the way they conduct and explain their foreign policies; and significant reform of the UN and the Bretton Woods institutions will be required.