vital aid if the neo-colonial governments fail to adopt policies favouring the
interests of the donor government or firms based in the donor economy. In
this way the donor government secures strategic and diplomatic advantages,
as in 1983 when the United States Congress made economic assistance to
developing countries conditional upon support for American foreign policy.
Economic interests which the donor represents secure a profitable policy
environment. Special loans from a multilateral agency such as the IMF or
the World Bank come with conditions attached, such as a requirement to cut
public expenditure programmes, particularly food subsidies and social
services. Implementing them can lead to political unrest. Multilateral agen-
cies such as the World Bank enforce ideological objectives in return for
development assistance. Other conditions on which bilateral aid is given
have included the purchase of arms and the award of contracts to firms in
the donor country.
Aid affects the power structure of neo-colonial society (Mack and Leaver,
1979). It increases the power of those in command of the state apparatus rel-
ative to any opposition. The power of the bureaucracy is enhanced by aid,
this being the channel through which aid flows. Technical assistance pro-
grammes to national defence and police forces strengthen these sections of
the political élite. Much of the aid from developed countries is in the form
of military assistance which has affected the distribution of political power
in neo-colonial society. Food aid distorts the neo-colonial economy and
society by enabling recipient governments to avoid land reforms and
changes in methods of agricultural production which would reduce external
dependency and the power of the landed classes. Radical critics of aid have
been joined by conservatives such as Lord Bauer, claiming that aid empow-
ers the state at the expense of free markets and increases the power of ruling
groups at the expense of the people generally (Bauer, 1971). Aid has also
biased development towards urban rather than rural society (Lipton, 1977).
In the mid-1990s international aid acquired a new dimension, that of debt
relief, especially for the most heavily indebted poor countries. International
indebtedness remains on a large scale and for some poor countries, particu-
larly in Africa, at an unsustainable level even after rescheduling agreements.
The cost for developing countries of servicing debt, both as a percentage of
GDP and a percentage of exports rose in most regions of the Third World
during the 1990s (see Table 4.1). Aid in the form of debt relief has the
potential to increase the autonomy of Third World governments by freeing
resources previously used for debt servicing for developmental purposes.
However, budgetary restraints coupled with public scepticism about the
effectiveness of aid in donor countries actually led to a 25 per cent fall in the
Neo-colonialism and Dependency 83