Britain for its colonies The concept of development aid goes back to the
colonial era at the turn of the twentieth century, in particular to the British policy of colonial development that emerged during that period. The traditional government policy had tended to favor
laissez-faire style economics, with the free market for capital and goods dictating the economic role that colonies played in the
British Empire. , as
Secretary of State for the Colonies presided over a Development Committee for the colonies. He is pictured entertaining
Jamaican recruits for the
RAF. Changes in attitudes towards the moral purpose of the Empire, and the role that government could play in the promotion of welfare slowly led to a more proactive policy of economic and developmental assistance towards poor colonies. The first challenge to Britain was the
economic crisis that occurred after
World War I. Prior to the passage of the 1929 Colonial Development Act, the doctrine that governed Britain (and other European colonizers) with their territories was that of financial self-sufficiency. What this simply meant was that the colonies were responsible for themselves. Britain was not going to use the money that belongs to the
metropole to pay for things in the colonies. The colonies did not only have to pay for infrastructural development but they also were responsible for the salaries of British officials that worked in the colonies. The colonies generated the revenues to pay for these through different forms of taxations. The standard taxation was the import and export taxes. Goods going out of the colonies were taxed and those coming in were also taxed. These generated significant revenues. Apart from these taxes, the colonizers introduced two other forms of taxes: hut tax and labor tax. The hut tax is akin to a property tax today. Every grown up adult male had their own hut. Each of these had to pay a tax. Labor tax was the work that the people had to do without any remunerations or with meager stipends. As the
economic crisis widened and had significant impact on the colonies, revenues generated from taxes continued to decline, having a significant impact on the colonies. While this was going on, Britain experienced major unemployment rates. The parliament began to discuss ways in which they could deal with Britain's unemployment rates and at the same time respond to some of the urgent needs of the colonies. This process culminated in the passage of the Colonial Development Act in 1929, which established a Colonial Development Advisory Committee under the authority of the
Secretary of State for the Colonies, then
Lord Passfield. Its initial annual budget of £1 million was spent on schemes designed to develop the
infrastructure of
transport,
electrical power and
water supply in colonies and
dominions abroad for the furtherance of imperial trade. The 1929 Act, though meager in the resources it made available for development, was a significant Act because it opened the door for Britain to make future investments in the colonies. It was a major shift in colonial development. The doctrine of financial self-sufficiency was abandoned and Britain could now use metropolitan funds to develop the colonies. By the late 1930s, especially after the
British West Indian labour unrest of 1934–1939, it was clear that this initial scheme was far too limited in scope. A
Royal Commission under
Lord Moyne was sent to investigate the living conditions in the
British West Indies and it published its
Report in 1940 which exposed the horrendous living conditions there. Amidst increasing criticism of Britain's colonial policies from abroad and at home, the commission was a performance to showcase Britain's "benevolent" attitude towards its colonial subjects. The commission's recommendations urged health and education initiatives along with increased sugar subsidies to stave off a complete and total economic meltdown. The
Colonial Office, eager to prevent instability while the country was at
war, began funneling large sums of cash into the region. The Colonial Development and Welfare Act was passed in 1940 to organize and allocate a sum of £5 million per year to the
British West Indies for the purpose of long-term development. Some £10 million in loans was cancelled in the same Act. The Colonial Development and Welfare Act of 1945 increased the level of aid to £120m over a twenty-year period. Further Acts followed in 1948, 1959 and 1963, dramatically increasing the scope of monetary assistance, favourable
interest-free loans and development assistance programs.
Postwar expansion in Europe, the first large scale development program. It was designed to boost European economies shattered by
war and prevent the growth of
communist influence. The beginning of modern development aid is rooted in the context of Post-
World War II and the
Cold War. Launched as a large-scale aid program by the United States in 1948, the European Recovery Program, or
Marshall Plan, was concerned with strengthening the ties to the
West European states to contain the influence of the
USSR. Implemented by the
Economic Cooperation Administration (ECA), the Marshall Plan also expanded its reconstruction finance to strategic parts of the Middle East and Asia. Although Marshall aid was initially offered to Europe in general, the Soviet Union forbade its neighbouring states from accepting it. This has been described as "the moment of truth" in the post-
World War II division of Europe. The Soviet Union provided aid to countries in the communist bloc; for instance, on Poland's abstention from the Marshall Plan,
Stalin promised a $450 million credit and 200,000 tons of grain. In January 1949 the inaugural address of U.S. president
Harry Truman announced an extension of aid to "underdeveloped areas" in the form of technical assistance. While the main theme of the speech was strengthening the free world against communism, in his
fourth point Truman also appealed to the motives of compassion and pride in civilization. "For the first time in history, humanity possesses the knowledge and skill to relieve the suffering of these people." The United Nations followed up the US initiative later that year by setting up an Extended Programme of Technical Assistance (EPTA) to help pool international donor funds for technical assistance and distribute them through UN agencies. EPTA was a precursor of
UNDP. But for most of the decade there was no major multilateral body to provide concessional loans. An initiative to create such a body under the UN met with resistance from the U.S. on the grounds that it was premature. Accordingly, when the UN's "Special Fund" was created at the end of 1958, its remit was only for technical assistance not loans. (The Special Fund was differentiated from EPTA by assisting public infrastructure rather than industrial projects.) In 1959, a significant annual amendment to the Mutual Security Act declared that it was "a primary objective of the United States" to assist "the peoples of other lands who are striving to establish and develop politically independent and economically viable units". This shifted the emphasis of U.S. economic aid away from immediate Cold War security needs, towards supporting the process of dismantling the empires of the UK, France and other European colonial powers. The amendment also made clear that Congress expected those industrialized nations which had been helped by U.S. aid to rebuild after the war would now share more of the burden of helping less-developed countries. 1960 also saw the creation of a multilateral institution to provide soft loans for development finance. The
International Development Association (IDA) was created as part of the World Bank (over which the U.S. and other Western countries exerted more influence than they did over the UN). In 1961 several Western states established government departments or agencies to administer aid, including
USAID in the United States.
After the Cold War The quantity of ODA dropped sharply in the seven or eight years after the fall of the Berlin wall (1999–2007). The turn of the 21st century saw a significant proliferation and diversification in aid donors and non-governmental actors. The traditional donors in the DAC have been joined by
emerging economies (China, India, Saudi Arabia, Turkey, Brazil, Venezuela, etc.), some of which are still receiving aid from Western countries. Many of these new donors do not feel compelled to conform to traditional donors' norms. Generally demanding
conditionality in return for assistance, which means tying aid to the procurement of goods and services, they are challenging traditional development aid standards. Multinational corporations, philanthropists, international NGOs and civil society have matured into major players as well. Even though the rise of new development partners had the positive effect of bringing an increased variety of financing, know-how and skills to the development community, at the same time it has shaken up the existing aid system. == See also ==