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DONORS, DEVELOPMENT AND DEPENDENCE SOME LESSONS FROM BANGLADESH 1971 TO 1986 BY PETER G.R. THOMSON A DISSERTATION SUBMITTED IN CANDIDACY FOR THE DEGREE OF DOCTOR OF PHILOSOPHY (INTERNATIONAL RELATIONS) LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE UNIVERSITY OF LONDON AUGUST 1990 UMI Number: U048683 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U048683 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 -T H £ ■ S 1 r b%£~J i - rt \ ~ 4 POLITICAL tw? Aid is not so much about helping others as it is about helping yourself. Member, Planning Commission 2 TABLE OF CONTENTS ABSTRACT 7 ACKNOWLEDGEMENTS 8 INTRODUCTION 9 Chapter I. THE ISSUE 16 Introduction to the Country The Importance of Bangladesh in the Context of Aid The Foreign Aid Programme Evidence of Increasing Dependence An Aid Dependence Paradigm Some Limitations to the Model A Hypothesis The Evidence Required to Substantiate the Model II. DEVELOPMENT THEORY 63 The International Relations Context Development Theory The Types of Foreign Aid Recipient Aid Motivation Recipient Strategies Development Theory: Bangladesh’s Strategy Evidence Required to Substantiate the Theory III. COMPARISONS 102 The Political Economy of an Aid Dependant Regime The Food Distribution System Agriculture Economic Growth Business and Industry Equity: The Growth of the Upper Classes Foreign Aid Conclusions 3 IV. POVERTY AND DEPENDENCE 166 The Dimensions of Poverty The Trends in Poverty Measures of Dependence V. THE DONORS: AID IS THE ONLY GAME IN TO W N ............................. 187 The Rationale for Development Assistance to Bangladesh Problems in Development Administration Measuring the "Appropriation" of Aid: A Framework for Analysis VI. THE SUCCESSES AND SOME COMPARISONS.......................................241 Selected Successes Selected Comparisons VII. CONCLUSIONS................................................................................................. 255 SELECTED BIBLIOGRAPHY.................................................................................... 266 APPENDIX I .................................................................................................................277 APPENDIX I I ............................................................................................................... 278 4 LIST OF TABLES Table 1.1 Bangladesh’s Aid Receipts from the DAC Countries.........................................28 1.2 Economic Indicators............................................................................................. 31 2.1 Recipient Motivation for Accepting A i d........................................................... 79 2.2 Development Scenario 1975-2000 ..................................................................... 91 3.1 Sectoral Allocation of the First Five Year P la n.............................................. 106 3.2 Sectoral Allocation of the Two-Year P la n........................................................110 3.3 Sectoral Allocation of the Second Five Year P la n.......................................... 113 3.4 Sectoral Allocation of the Annual Development Programmes.................... 114 3.5 Sectoral Allocation of the Annual Development Programmes (Percentage) .115 3.6 The Public Food Grain Distribution S ystem...................................................121 3.7 Selected Market and Food Distribution System Retail P r ic es...................... 128 3.8 Govenmment Funding of Irrigation Schemes, 1973-1977 ........................... 133 3.9 Gross Domestic Product......................................................................................139 3.10 Aid Disbursements............................................................................................... 151 3.11 Sectoral Disbursement of Project A id............................................................... 153 3.12 Sectoral Disbursement of Project Aid (Percentage)..........................................154 4.1 Distribution of Income, 1973/74 and 1976/77 ................................................. 168 4.2 Distribution of Income, 1963/64 and 1976/77 ................................................. 168 4.3 Distribution of Growth in GDP and Per Capita G N P......................................169 4.4 Distribution of Income Prior to Independence..................................................170 4.5 Percentage of Rural Population Below the Poverty L in.............................. e 171 4.6 Distribution of Land Ownership....................................................................... 175 4.7 Land Distribution ................................................................................................175 4.8 Per Capita Nutrient Intake ................................................................................. 176 4.9 Calorie Consumption in Rural Areas by Income 1981/82........................... 177 4.10 Average Daily Food Consumption by Landholding Group............................177 4.11 Balance of Trade and Foreign A id.....................................................................180 4.12 Transfers from the Development Budget to the Recurrent B udget.............. 182 5.1 Donor Motivation for Giving A i d.................................................................... 189 5.2 Development of Indices for the Allocation of Aid to the P o o r....................222 5.3 Apportionment of Targeted Food Aid Resources to the P o o...................... r 223 5.4 Application of Target Factor on the A D P........................................................ 224 5.5 Apportionment of Project A i d.......................................................................... 226 5.6 Apportionment of Targeted and Untargeted Aid 1973/74 ............................ 227 5.7 Classification of Development Expenditure.................................................. 228 5.8 Calculation of Effective Targeted Aid and Untargeted Aid, 1973/74 .... 228 5.9 Average Exchange Rates.....................................................................................228 5.10 Apportionment of Targeted Aid to the Distribution of Income, 1973/74 . 229 5.11 Derived Distribution of Income, 1973/74 to 1976/77 Case I .230 5.12 Derived Distribution of Income, 1973/74 to 1976/77 Case I I .232 5.13 Derived Distribution of Income, 1973/74 to 1976/77 Case III . 233 5 LIST OF FIGURES Figure 1.1 Scatter Chart of Aid Receipts as A Percentage of GNP (1984)....................... 26 1.2 Scatter Chart of Aid Receipts Per Capita (1984).............................................. 27 5.1 Derived Lorenz Curves Without Aid -- Case I .................................................231 5.2 Derived Lorenz Curves Without Aid -- Case I I............................................... 232 5.3 Derived Lorenz Curves Without Aid -- Case III..............................................234 6 ABSTRACT The thesis uses Bangladesh as a model to test a "dependence paradigm". It posits that the sudden influx of resources that foreign aid brings does not necessarily lead to the social development and equitable economic growth which might have been expected because micro-economic forces tend to predominate over conventional macro- economic development theory. Instead it results in increasing inequity. The government and upper classes divert the largest proportion of the resources being provided and use them for reasons other than that for which they were meant. More inequitable distribution of income in turn justifies the continued need for foreign aid. The aid pro­ vided, justified by poverty, becomes a necessary part of the government's resources, discouraging domestic resource mobilisation and self-reliance. The dimensions of poverty and the nature and evidence of the country’s depend­ ence are reviewed. As the amount of aid "appropriated" increases, the government is in­ creasingly dependent on its continuation and more constrained by the conditions attached to it by the donors. The paper then goes on to explain that foreign aid donors tolerate this diversion of aid resources because they measure the results of aid in terms of quantity, not quality. Nor are they prepared to provide adequate means by which to plan, administer, monitor and evaluate the use to which aid is put. The quality of aid is not an issue that serves either their domestic needs or foreign policy objectives. The successes in Bangladesh are shown to be attributable either to market forces or to foreign aid which does not lend itself to diversion by the upper classes. Some com­ parisons show that the phenomenon of a "resource windfall" leading to "appropriation" by the upper classes exists in other countries and is not unique to Bangladesh. The study concludes that unless appropriate aid is provided with sound ad­ ministration, which uses, to the fullest, available expertise in the country, then increasing inequity and dependence are bound to result. ACKNOWLEDGEMENTS During the preparation of this study I have been fortunate enough to receive assistance

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