Rethinking Multilateralism in Foreign Aid

Beyond the Neoliberal Hegemony

Viktor Jakupec, Max Kelly, Jonathan Makuwira

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000068313
• Edition: 1
• Topic: Economics
• Subtopic: Banks & Banking
• Index: Economics

This edited book provides a contemporary, critical and thought-provoking analysis of the internal and external threats to Western multilateral development finance in the twenty-first century. It draws on the expertise of scholars with a range of backgrounds providing a critical exploration of the neoliberal multilateral development aid.

The contributions focus on how Western institutions have historically dominated development aid, and juxtapose this hegemony with the recent challenges from right-wing populist and the Beijing Consensus ideologies and practices. This book argues that the rise of right-wing populism has brought internal challenges to traditional powers within the multilateral development system. External challenges arise from the influence of China and regional development banks by providing alternatives to established Western dominated aid sources and architecture. From this vantagepoint, Rethinking Multilateralism in Foreign Aid puts forward new ideas for addressing the current global social, political and economic challenges concerning multilateral development aid.

This book will be of interest to researchers, academics and students in the field of International Development and Global Governance, decision-makers at government level as well as to those working in international aid institutions, regional and bilateral aid agencies, and non-governmental organisations.

1 Multilateralism and development aid

Concepts and practices

Viktor Jakupec, Max Kelly, and Jonathan Makuwira

Introduction

This introductory chapter provides insight into and a critical analysis of the concept of post-World War II development aid multilateralism with a focus on the rise and hegemony of the Bretton Woods institutions, the emerging increased influence of the so-called Beijing Consensus institutions, the impact of right-wing populism on development aid, and internal and external challenges to multilateralism and the world order. Based on these insights, major themes are identified and analysed. This includes analyses of underpinning concepts and practices embedded in, for example, the Washington (Williamson, 1989, 1990, 2002) and post-Washington Consensuses, the Beijing Consensus, and the right-wing populist constituents including nativism, and anti- and de-globalisation, as well as counterhegemonic development discourse that challenges the very nature of development personified by multilateralism. Collectively these concepts and themes provide a coherent framework for the chapters which follow. Subsequently the chapter provides a brief discussion showing how the individual contributions in this monograph address the nexus between the identified themes, concepts, and practices. In conclusion this chapter offers a basis for a both critical and sympathetic discourse of contemporary notions of multilateralism in a context of foreign aid.

A very brief conceptualisation of multilateralism

For the purposes of this discussion multilateralism is viewed from an international relations perspective. In brief, there are at least two schools of thought as far as the definition of multilateralism is concerned. The first school of thought defines multilateralism by contrasting it with bilateralism and unilateralism. In its simplest form this contrast is based on quantity. In other words, the three concepts are seen as being quantitatively interrelated. Using this definition, the Bretton Woods institutions, for example, are multilateral organisations, for their membership consists of more than two countries, This, simple, numerical definition of multilateralism centred on ‘three or more’ criteria is seen by some scholars as sufficient (cf. Corbetta and Dixon 2004; Keohane 1990).

A more complex definition follows the qualitative approach (cf. Eckersley 2012; Ruggie 1992, 1993; Weber 1993), which proposes that there are three characteristics underpinning multilateralism: (1) indivisibility: is the notion requiring multilateralism to be based on socially structured public good? (2) generalised organising principles; (3) diffused reciprocity. The latter two oblige multilateralism to militate against discrimination and preferential bilateralism, as it is emerging, for example in the USA under the Trump administration. From this vantage point, multilateralism repudiates a ‘case-by-case’ approach to development aid allocation based on the power of the donor organisation, or preferences of individual shareholders in respective aid organisations. If this stands to reason, there is a requirement for mutually acceptable cooperation between donors and recipients.

In conclusion it may be appropriate to mention some subcategories of multilateralism such as regional and plurilateral multilateralism which in turn differentiate between specific interests, functional, and geographic forms of multilateralism. The focus of this volume is on the post-war multilateral institutions, primarily the World Bank and IMF.

Bretton Woods multilateralism

The year 2019 denotes the 75th anniversary of the Bretton Woods conference which led to the establishment of the two major multilateral development aid agencies, namely the World Bank and the International Monetary Fund (IMF). During those 75 years the Western multilateralism emerging from the Bretton Woods conference in 1944 has been subjected to a number of ideological changes. Ideologically, multilateralism as it emerged from the Bretton Woods conference was firmly couched in Keynesian economics. However, in the 1970s Keynesianism was replaced by Thatcherite and Reaganite forms of neoliberal ideology based on the writings of Friedrich Hayek (1948, 1960) and Milton Friedman (2002), amongst others. This gave rise to the Washington Consensus, which lasted unabated until the 2008 Global Financial Crises (GFC). Throughout this era the World Bank changed its focus from post-WWII reconstruction to infrastructure investment, to poverty alleviation, policy reform, and structural adjustment. More recently the World Bank embraced climate and environmental and social and gender equity policies and returned, to a certain extent, to its roots focusing on infrastructure and construction.

Returning to the most recent times, namely the post-GFC epoch, two new events took place. One is in the form of multilateral institutions and the other as a political movement. The former refers to the formation of the China-led institutions and initiatives, namely the New Development Bank (NDB, formerly known as the BRICS Bank) and the Asian Infrastructure Investment Bank (AIIB) and the One Road One Belt (OROB) initiative. The latter refers to the rise of right-wing populism in the developed world and donor countries.

Notwithstanding the above-noted changes over the last 75 years, the Bretton Woods institutions wield unprecedented hegemonic power, which allows them to dictate the discourse concerning multilateral development. However, since the Global Financial Crises in 2008 the discussion and hegemony has been gradually weakened due to the challenges to the neoliberal narrative. The consequences of the GFC as far as development aid is concerned were acute.

Yet, despite the global hegemony of these two multilateral institutions over the last 75 years, strong internal and external challenges are currently at work. Some of the challenges come from right-wing Western populist member countries, others from newly established development banks like the AIIB, the NDB and the OROB initiative. More explicitly, the Bretton Woods institutions and like-minded multilateral development banks are today being challenged on their policies and practices by the emerging political and social movements, inflexible internal structures and academe. That is, following the GFC, people and movements in Western democracies began to question if the elite-led neoliberal project of globalisation has made any real contribution to a more equitable and just world. At the same time an increasing number of developing countries have realised that inequality and the promised poverty alleviation is not only a problem based on a nexus between the global North and global South but also on a principal–agent problem, namely donor–recipient power inequality.

Given these circumstances, there are two paramount questions. First, to what extent can the Bretton Woods institutions continue to shape multilateral development aid politics as they have done over the past 75 years, or are we witnessing the era of the World Bank and International Monetary Fund (IMF) hegemony coming to an end? To answer this question, one would need to focus on ideologies, policies, developments, practices, and procedures that govern the World Bank and the IMF and their relative power over the developing nations. Second, what is the potential impact of the rise of right-wing populism within some of the most powerful donor membership countries and the advent of China-led multilateral development banks on development aid policies based on existing neoliberal ideology driven Washington Consensus institutions? In responding to this question, it may be important to note that the power of the Bretton Woods institutions was always derived from the guidelines and backing received from the most powerful nation state members of the developed world. This political support for the Washington Consensus institutions was maintained until recent times.

The discourse

The contributions in this book lament to a large extent the lack of success of the dominant Washington Consensus-based development aid. The result is the tenaciously large number of poor amongst the population of many developing countries and regions. Arguably this lack of success may be ascribed to the flawed neoliberal policies and practices of development aid and the imposition of neoliberal economic conditionalities, and the limited representation and thus voting power of developing countries within the multilateral development banks (MDBs) and other international forums. If this stands to reason, as is argued in this book by a number of contributors, the consequence of the latter, developed donor countries’ and economies’ ideologies have thus far dominated development aid thinking and practices. From, however, various vantage points the dominant thinking and ideologies have been termed neoliberal, following the aforesaid ideas of Hayek (2001, 1960, 1948), Mises (1944, 1945,1949, 1951), Friedman (2002), and many like-minded economists. However, recently the Washington Consensus has been challenged; but it can only be efficaciously replaced by a more constructive development aid ideology and practice, including an increase of developing countries’ voting rights ensuring a more open decision-making power. This in turn needs to ensure the promotion of non-conventional tailor-made solutions focusing on the lowest socio-economic strata of the population in developing countries, taking into consideration their economic, social, and cultural needs. This argument is in direct contrast to the existing Washington Consensus with its ‘one-size-fits-all’ approach. One of the emerging alternatives is what is referred to as the ‘Beijing Consensus’, which is referred to throughout this volume. Ramo (2004) defines it as:

China’s new development approach … driven by a desire to have equitable, peaceful high-quality growth, critically speaking, it turns traditional ideas like privatisation and free trade on their heads. It is flexible enough that it is barely classifiable as a doctrine. It does not believe in uniform solutions for every situation. It is defined by a ruthless willingness to innovate and experiment, by a lively defence of national borders and interests, and by the increasingly thoughtful accumulation of tools of asymmetric power projection. It is pragmatic and ideological at the same time, a reflection of an ancient Chinese philosophical outlook that makes little distinction between theory and practice.

(p. 4)

However, the term ‘Beijing Consensus’ is contested and there are a range of critiques of whether there is indeed any kind of China ‘model’, whether there is any type of coherence that forms a type of consensus akin to the Washington Consensus, and whether or what impact this may have on international politics, trade, and development (cf. Bräutigam, 2011; Chen, 2017; Dirlik, 2006, 2011; Ferchen, 2012; Kennedy, 2010). The more recent evolution of Beijing-driven multilateral institutions, primarily the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), and the prominence of the One Belt One Road initiative, provide a more pointed analysis of alternatives to Washington Consensus-based multilateral institutions. An in-depth analysis of the diverse and dynamic nature of Chinese aid is beyond the scope of this volume, but these three initiatives are the primary focus of Beijing Consensus discourse here.

Returning to the Washington Consensus, seen from the vantage point concerning development thinking, the canons of the Washington Consensus are in the development aid literature perceived as being couched in the ‘catch-up’ theories, which had their prominence over much of the last decades. This means that in accordance with this theory developing countries and emerging economies should follow the economic policies and practices adopted by developed industrialised counties who act as donors.

With a view on institutions this book offers a critique of the above-stated ‘catching up’ model especially in a context of shaping institutions in development aid recipient countries replicating corresponding institutions in the developed world. This creates problems for developing countries and thus this conditionality is highly questionable. The argument against this approach is that since government institutions in Western democracies are only effective as long as they are trusted and accepted by the majority of the population a consideration must be given to government institutions in developing countries and contextualised within a framework of appropriate country-specific social, cultural, political, and economic context.

Critiquing the Washington Consensus

The contributors are unanimous in their critique of the Washington Consensus, although from differing vantage points. This critique is based on the contemporary academic literature providing a robust discussion regarding the shortcomings and weaknesses of the neoliberal mainstream development policies and practices pursued by the Washington Consensus-based MDBs. In other words, the most severe critique has been leveled at the Bretton Woods institutions and their ideologies, policies, and practices, and mostly from the developing world perspective. The critiques focus on neoliberal ideology, conditionalities imposed on developing countries, lack of developing countries’ voting power in shaping the Bretton Woods institutions policies and practices, an uneven playing field through globalisation (cf. Stiglitz, 2018), and unequitable advantages gained by donors through development aid.

The critique extends to the neoliberal free market ideology, with its opposition to state and public good institutions and enterprises, and advocating a sequential and progressive approach and pragmatic gradualism advanced through the Beijing Consensus. There is a tendency amongst the contributions to argue in favour of a stronger role for the state and for stronger public institutions both for guiding the country-specific form of economy as well as the provision of public good services such as education, health, utilities, to name but a few. It has been also noted that the effects of the critique within Bretton Woods and other MDBs following the Washington Consensus have been mixed. Whilst the critiques have been mostly ignored by the IMF and the World Bank. Other MDBs such as the ADB are rethinking their approaches and are examining the potential to collaborate with the Beijing Consensus-based MDBs.

Much of the discussion in the following chapters centres around the notion that multilateralism and multilateral foreign aid institutions are increasingly being challenged from various quarters and diverse vantage points. However, prior to turning more specifically to multilateralism in foreign aid a few observations may be put in place.

Today multilateral organisations such as the Bretton Woods institutions (World Bank and International Monetary Fund) have specific interests including the promulgation of the Washington Consensus and the function of upholding neoliberal values and norms within the realm of conditionalities. They are not limited to any specific geographic locality, like their regional counterparts such as the Asian Development Bank (ADB), African Development Bank (AfDB), Inter-American Development Bank, and the European Investment Bank, to name a few, but exert their influence globally. Until recently both the World Bank and the IMF were protected by the interests of the USA and the European Union. Both institutions are governed by the dogma that the USA and the European Union represent and are the vanguards of an exceptional and superior form of governance, namely exemplified by neoliberalism, or more specifically neoliberal capitalism. This, of course, was not always the case. As stated above, in the inception stage of the Bretton Woods institutions the dominant ideology was until the 1970s based on Keynesian economics. However, with the rise of neoliberalism and its free market philosophy, under the US presidency of Ronald Reagan and the UK prime-ministership of Margaret Thatcher, the situation changed. Foreign aid generally and development aid specifically moved towards the development aid philosophy of Value for Money and Aid for Trade.

Against the above background this book addresses the threats faced by Western multilateralism and multilateral institutions from either the right-wing populist movement and/or the Beijing Consensus institutions respectively. The contributions provide a discourse on strength and weaknesses, sympathetic as well as antipathetic critique of populism and neoliberalism, and together contribute and develop ideas on how they might be addressed. There is a general view prevailing that the World Bank and other dominant MDBs have succumbed to a degree of contentment, which militates against institutional erudition and thus prevents them to develop and implement strategies for how to address geopolitical, geo-economic, and socio-cultural issues in the developing economies.

An equally important and concomitant view expressed by the contributors is that the failures of the World Bank and other dominant MDBs enhanced the rise of China-led NDB, AIIB, and the OROB initiative. In short, China-led Beijing Consensus-based institutions ...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of illustrations
• List of contributors
• 1 Multilateralism and development aid: concepts and practices
• 2 Multilateralism, global development: unpacking the megatrends
• 3 Populism and a new world order
• 4 Revisiting the Truman version of development and Eurafrica project of underdeveloping Africa
• 5 Seventy-five years of financing and advising development: perspectives on work of the Bretton Woods institutions and Africa’s chequered development
• 6 The Washington Consensus and global civil society: the road traversed
• 7 Shifts in international development aid and their impact on economic growth
• 8 Multilateral development banks: Washington Consensus, Beijing Consensus, or banking consensus?
• 9 Rethinking global financial architecture: the case of BRICS New Development Bank
• 10 The ADB and AIIB: cooperation, competition and contestation
• 11 The World Bank’s resilience discourse: reactive environmental norm diffusion and the crisis of global climate governance
• 12 Challenging the hegemony of the Washington Consensus: the development potential of BRICS ‘from below’
• 13 Multilateral foreign aid and the shadow of Cold War II
• 14 A new ‘new’ multilateralism? The changing space of multilateralism in a contemporary development context
• 15 Competing multilateralisms: development aid under scrutiny
• Index