The Economic North–South Divide

The Economic North–South Divide

Six Decades of Unequal Development

Kunibert Raffer and H. W. Singer

The Economic North–South Divide explores the structural roots of the debt crisis and considers the impact of debt management on North–South economic relations, exposing certain double standards that tilt global markets further against the South. Encouraged by recent successful opposition to neoliberalism, the authors finally propose ideas for a world where people seem to matter.

Chapter 5: Aid to Development and the Bipolar World

Kunibert Raffer and H. W. Singer

Subjects: development studies, development economics, economics and finance, development economics


‘Foreign aid originated’, as Chenery (1989, p.137) rightly points out, ‘from the disruption of the world economy that followed World War II.’ Development aid is a phenomenon of the post-1945 period. Although quite a few independent countries existed before World War II which would have to be characterized as ‘developing’ according to present criteria, they did not receive transfers comparable to present Official Development Assistance (ODA). When the post-war order was discussed at Bretton Woods the intention was to provide international finance for Europe - albeit at terms too hard to qualify these flows as ODA according to the present OECD defintion. The Bretton Woods twins came into being. The IMF was to stabilize exchange rates vis-à-vis the dollar, considered equivalent to gold at that time, a far cry from its present activities. Originally, the Bank was intended to serve mainly as a financing institution for the reconstruction of Europe. The OECD (1985, p.140) describes the initial tasks of the Bretton Woods twins: ‘The IBRD was there to guarantee European borrowing in international (North American) markets; the IMF was there to smooth the flow of repayments’. The words ‘and Development’ were added to the initial name, ‘International Bank for Reconstruction’ as a result of the presence of SCs, mainly from Latin America, at Bretton Woods, insisting on their share in resources. The first aid programme after the war was the Marshall Plan, officially known as the European Reconstruction Programme (ERP). The initiative’s original intention also included the Soviet Union,...

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