The Neoliberal Creep - Part 2

While Part 1 dealt with the neoliberal agenda influencing Bill Morneau's retraction of his pharmacare promise, today's post deals with that same influence, this time on Canada's 'evolving' position on foreign aid.

International Development Minister Marie-Claude Bibeau says she wants to use the new $2 billion in extra aid dollars in the new budget to attract insurance and pension funds to invest in fight against global poverty.

Bibeau said her priority is going after wealthy private-sector investors, because governments can’t provide the level of spending needed to do development in a world where conflicts are lasting longer and displacing people for decades at a time.

Given the aversion too many people have to taxes and government expenditures, on the surface this proposal would seem to spread out the costs of doing good. A win-win situation, right?

Maybe. Maybe not.

The need for foreign aid is beyond question, both for the well-being of the recipient countries and the security of the larger world. Those who are suffering and disenfranchised today are the recruits for terrorist organization tomorrow. However, if improving the well being of those in the targeted countries is the overall goal, one has to ask a fundamental question: Is private investment the best vehicle by which to accomplish it?

Private investors, whether institutional or individual, are seeking a decent return on their money. If the goal of foreign aid is better the recipients' lives, how, exactly, is entering into partnerships with pension and insurance funds going to accomplish that? Unfortunately, Ms. Claude-Bibeau leaves that question unanswered. Perhaps she felt that given most Canadians' shallow engagement on public policy, simply making an announcement on cost-saving measures would satisfy them. But the key question to ask is whether or not the goals of private profit and foreign aid are compatible.

A report by the OECD-DAC sheds some much-needed light on this issue:


As you can see in the above, the first unspoken 'rule' is that 70% of the private investor's funds are guaranteed against loss. Guranteed by whom? The taxpayer, of course.

But surely that is not enough to attract such investment. There must also be the prospect of earning a healthy return on investment. And therein lies the tension and potential conflict between development and private sector goals. A 2013 study into the American experience with PPPs (Public-Private Partnerships) may shed some light:

Some development officials are concerned that opportunities to access private resources through partnerships can pull mission staff away from established country plan priorities. The availability of private funding, they argue, is hard to ignore, even when a proposed partnership does not fit well within an established mission priority. Given very limited staff resources at many USAID missions, the opportunity cost of following through on PPPs that are not necessarily aligned with stated mission priorities can be high.

In other words, the prospect of 'free money' can subvert a government's development goals.

There is a host of other problems associated with these partnerships, including overlooking needier countries in favour of more-developed ones so as to provide greater opportunities for the private sector to profit. This issue and many more you read about in the above report.

Will Canadian go blindly into this brave new world of foreign aid PPPs? Given the decidedly neoliberal bent of the Trudeau government, I think that is a distinct possibility.

Canada, and its foreign-aid recipients, deserve much, much better than this.