aid for the sake of aid

January 31, 2012 was a big day for people watching the MMRCA competition of the Government of India, for that day, the Government of India announced to the world that Dassault Aviation had emerged as the lowest bidder among six, and between two after the down-selection. The Rafale, a highly capable plane, had beat the Eurofighter on a number of technical specifications and was, which was apparently the deal maker, the cheaper of the two.

That is all over and done with and hopefully the deal will be officially signed on paper and India and France can get on with whatever wonderful technological things they have planned over the next many years.

The reaction to the news that Eurofighter has not won the bid has really not gone down well with the British public and political class, and its actually very surprising to see the intensity of reaction from their press. While most of the reaction of linking the over GBP 200 million in aid to India to the MMRCA deal is that of "ingratitude" by India, there are at least a few media outlets that ask the question - is it fair to connect this aid to expectations of winning a major defense contract?

The truth is that aid for trade is nothing new, and history is replete with examples where the rich seller goes to a third world nation with an agenda in mind. In Africa, examples of China building schools and infrastructure in return for the former's natural resources are a good example of this "quid pro quo" set-up that many sellers, backed by their powerful governments, favour.

For the developed economy giving the aid, the aid industry is a huge multi-billion dollar enterprise that has many, many vested interests who benefit directly from it. I have already written a few times about it. In Britain's case, as some news items point out, its also about 'feeling good about themselves.'

Aid For Trade is an official policy of the World Trade Organization, and perhaps can be a very effective way of transferring the expertise and good business practices of developed nations to the third world by channeling the aid provided to build institutions that will allow that nation to be more financially independent. Of course, as pointed out by many, that is never the case. There is a precedent set that aid for trade is illegal. It was in Britain, in fact, in 1994, when the British aid to fund the Pergau dam in Malaysia by the then British secretary was found to be linked directly to the arms sales to that country.

When it comes to giving aid to India, I think all the nations in the world who still keep the practice going should stop immediately. It is for all to see that India has turned into a highly unequal and socially and economically divided nation with an unprecedented level of governmental incompetence and an alarming inability to implement policies and procedures. If India can't take care of itself, then nobody can take care of it. As Rahul Bedi writing in The Mail points out - it only enriches a corrupt elite.

There are still many who argue that India does need aid still, and point to the shamefully high number of extremely poor in our population. Indian apologists write that India needs aid because we're not a poor country but poor people but nobody really questions our own incapability, or should I say, unwillingness, to actually invest in improving the lives of the poor.

A good article in the British tabloid, The Sun, asks why is all this aid going to a country that has more billionaires than India, that huge money making venture called IPL, and a multi-billion dollar space program? Good questions for them to ask themselves, and good questions to once again look at India and wonder why are we such a rich country with such poor people?

So when everybody knows that the money rarely reaches the intended beneficiary, why keep it up? That is where the many vested interests start showing their head. Keeping third world dictators well fed and happy has been a state policy of the US for many decades. Similarly, keeping people in governments in these poor nations have allowed many corporations to do business there smoothly and exclusively.

So if you think about it, aid fits well into the kleptocracies that many third world nations have transformed themselves into. Now they are simply not poor, now they are poor and thoroughly incapable of getting out it. I wonder why rich nations simply shut their eyes and give aid, when they should be raising their voices most vehemently and forcing the third world nations to manage their resources better and cut graft and increase efficiency of welfare schemes. But doing that is much more difficult that doing business, and since the mantra of globalization and capitalism is that trade is the real antidote to poverty, it is thus the most effective way to reduce poverty. For chunks of the third world which have nothing to produce or sell, then the only way remains is lots of aid and arms sales.