Conditionality Bad Arguments Not Competitive

Conditionality Bad Arguments Not Competitive

Tony Killick et al, Overseas Development Institute, 1998, Aid and the Political Economy of Policy Change, p. 4

These views were not, of course, confined to the economic sphere. There has also been a powerful move to link aid with the promotion of “good governance” (accountability, transparency, the rule of law, the prevention of corruption, etc.), the observance of human rights and the promotion of multi-party democracy. There has been a growing use of conditionality in these areas, particularly by bilateral donors but also by the World Bank (which has tried, with only mixed success, to limit its stipulations in this area to the tenets of good governance).
MANY DONORS EMPLOY AID CONDITIONALITY

Tony Killick et al, Overseas Development Institute, 1998, Aid and the Political Economy of Policy Change, p. 5

The substantial use of condtionality by bilateral donors is quite a recent development, although it has some history in the case of the USA and has never been entirely absent among other donors. So far as adjustment conditionality is concerned, the bilaterals have mostly contented themselves with “piggy-backing” on the conditionality of the IFIs, although with varying degrees of enthusiasm. The UK has gone furthest, with the USA, Germany and the Netherlands also firm supporters but with France, Japan and the European Union slower to come fully on board.

Conditionality Bad Arguments Not Unique – Inevitable

Paul Mosely, Jane Harrigan & John Toye, Economics Professors- University of Reading, Manchester, and Sussex, 1995, Aid and Power: the World Bank and policy-based lending, volume 1, p. 27

Unsurprisingly, perhaps, the World Bank has never made unconditional loans. Even when virtually all of its loans were for development projects – that is, discrete chunks of physical investment – these loans carried conditions to which the borrower had to agree; and, more importantly, some of these conditions required policy changes. An obvious and familiar example would be a power station project, for which the Bank might not agree to lend unless the developing country borrower agreed to an overhaul of its electricity tariff. The basic rationale for this was not only that the loan had to be serviced, but also that projects should not be supported when pricing encouraged wasteful consumption. Certainly in the 1950s, if not earlier, the Bank exchanged development finance for this kind of policy reform. But a specific project was also still involved at this time; the required policy change could be interpreted as one designed to facilitate the success of that project; and the extent of the policy change was sectoral or sub-sectoral in scope.
ALL LOAN CONTRACTS INVOLVE SOME LEVEL OF CONDITIONALITY

Paul Mosely, Jane Harrigan & John Toye, Economics Professors- University of Reading, Manchester, and Sussex, 1995, Aid and Power: the World Bank and policy-based lending, volume 1, p. 65-6

The vehicle which the Bank chose as a means of changing the economic policies of LDC governments – conditionality – is new neither in international finance, nor in human relations more generally. Conditionality is simply a side condition designed to ensure the execution of a contract. A contract is a promise by one party to do something now in exchange for a promise by the other party to do something else in the future. Since the borrower, in a loan contract, fulfills his [sic] side of the bargain later than the lender, he may be tempted to default on repayments; the lender needs a threat to discourage this. The threat normally employed by commercial banks is to require the borrower, as a condition of the loan being given, to pledge a capital asset such as a housee or a piece of land, known as collateral, to the lender; if repayments fall into arrears, the borrower has a legal obligation to hand the asset over to the lender.
AID CONDITIONALITY INCREASING

Carlos Santiso, Johns Hopkins University, 2001, The World Bank and Conditionality, Georgetown Public Policy Review, Vol. 7, No. 1, Fall, [http://www.sti.ch/fileadmin/user_upload/Pdfs/swap/swap108.pdf], p. 11

Aid selectivity has been criticized on a number of grounds. First, despite these research findings, the use of conditionality has expanded in scope and depth in the course of the 1990s. As the IMF itself recognizes, the share of programs with structural conditions and the average number of conditions per program have increased significantly during the past decade: from 1989 to 1999, share of programs with structural conditions has increased from 60% to 100% and the average number of structural conditions per program has increased from 3 to 12. Figures 1 and 2 summarize the burden of conditionality.

AT: Conditionality Violates Sovereignty

Tony Killick et al, Overseas Development Institute, 1998, Aid and the Political Economy of Policy Change, p. 94-5

In broad terms, Zormelo answers in the negative: IFI conditionality does not breach sovereignty, provided only that the agencies remain within the terms of their Articles of Agreement, and that the credit agreements are not coercive and are freely entered into by borrowing governments. Some types of conditionality do come closer to infringing sovereignty than others, including attempts to use it to influence borrowing governments’ defense spending, or even to change their systems of government, but even here conditionality can be defended.

Confusion arises, Zormelo suggests, in mistakenly thinking that sovereignty is located in the government of the day, whereas in legal terms it adhere in the institutions of the state, which have a life beyond the transience of particular governments. When it comes to the use of donors’ financial leverage to reform systems of governance, he points out that the Universal Declaration of Human Rights states that “The will of the people shall be the basis of the authority of governments whereas many of the governments targeted by “political” conditionality are deficient in authority so derived:

“where unaccountable and imposed governments are careless with the use of a country’s resources and do not respect the rights of the citizens, and the citizens themselves are clamoring for change, then political conditionalities can be justified if the aim is to correct the situation.” (Zormelo, 1996)