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Global flows of foreign aid have historically been intertwined with broader trends in world politics and economics, and this remained the case in the Cold War's aftermath. Within the global development-aid regime, which originated in the early 1960s at the peak of African decolonization, aid policies conformed to a "new development paradigm based on markets, competition, and private initiative and enterprise" (OECD, 1995a: 12). As in the case of private capital, aid transfers were predicated upon the ability of recipients to convert the concessional resources into prolonged economic growth, a process that presumably would not only benefit recipients but create markets and expanding investment opportunities for donors.

This new paradigm may be contrasted with previous phases in the evolution of foreign aid, which focused on the role of aid in facilitating the take-off of nascent economies, in meeting basic human needs or promoting human rights, and in redressing structural inequities between North and South.

In the 1950s and 1960s, amid the decolonization process and the creation of more than sixty new nation-states, prominent economists and political scientists devised linear models of economic and political development they perceived to be more or less common to all economies (Rostow, 1971; Nisbet, 1969; and Organski, 1965). Their models, based upon projected stages of growth, were compatible with the liberal international economic order (LIEO) led by the United States following World War II and codified in the Bretton Woods system. By 1970 they had been widely adopted by major development organizations and multilateral financial institutions that served as conduits for foreign aid.

Finding fault with these "deterministic" models, other scholars (e.g., Cardoso, 1972; Myrdal, 1971; and Gunder Frank, 1967) called attention to the subordination of LDCs to the preferences of wealthy states. They encouraged leaders of poor states to pursue independent, self-sufficient paths to economic development directed toward meeting basic human needs, reducing material inequalities, and minimizing their economic (and often political and military) dependence on industrialized countries. This approach favored assertive state intervention in economic development, import-substitution strategies designed to promote self-sufficiency, and the protection of developing countries from foreign competitors. Within the UN General Assembly and the UN Conference on Trade and Development (UNCTAD), leaders from developing regions pressed their case for a new international economic order (NIEO) that would encourage economic self-determination and greatly expand aid transfers from North to South.

The Third World, never a coherent or cohesive collectivity, fragmented along several lines in the 1970s and 1980s, and the uneven progress of LDCs led to a reappraisal of both orthodox and revisionist development theories. Among the first such fissures occurred in the early 1970s after members of the Organization of Petroleum Exporting Countries (OPEC) suspended oil exports to several industrialized states and precipitated the first of two energy crises. OPEC's ability to exploit the vulnerability of industrialized economies encouraged other commodity cartels in the developing world to attempt (unsuccessfully) to emulate the OPEC model. The OPEC states pledged to share their oil profits with other LDCs and to exploit their new-found political leverage to recast the terms of the North-South dialogue. Their promises to share their wealth were largely unfulfilled, however, as OPEC fell victim in the 1980s to internal discord and growing competition from other oil-producing regions.

Also during this decade, Japan and NICs along the Pacific Rim demonstrated how a combination of low labor costs, government protection, and export-led industrialization could produce rapid economic growth (see Johnson, 1982). Japan's model of guided capitalism, replicated by other states in East Asia, stood in stark contrast to the development models advanced by advocates of the NIEO, whose efforts to foster self-sufficiency and to compel the redistribution of wealth from rich to poor foundered in the 1980s.

Most other LDCs, however, struggled with economic stagnation, social and political unrest, and ongoing dependence on affluent states. Their needs for development aid grew as their populations swelled and as the availability of productive farmland diminished because of inefficient planting and harvesting techniques. With their leaders barely able to retain power, and then only through repression, these countries were hardly in a position to recreate the East Asian "miracle" (World Bank, 1993c). Flows of development aid to these states nonetheless continued, provided largely by the United States and other OECD donors, which by now had discovered foreign aid to be an effective tool in achieving their foreign-policy goals. For the United States, aid relationships with more than 100 LDCs continued into the 1980s, solidifying an American presence at a time when neo-Marxist development models competed for influence in many poor areas.

The Cold War's collapse prompted yet another reevaluation of foreign aid and a shift toward sustainable development as the guiding principle of the aid regime. Specific environmental issues identified at the 1992 Earth Summit included global warming, soil degradation, and the loss of biodiversity in tropical forests. All of these problems were aggravated by rapid population growth in the developing world, further limiting the abilities of governments to control development and its impacts. Although market factors received growing emphasis in development aid, leaders recognized that "environmental protection is one area in which government must maintain a central role. Private markets provide little or no incentive for curbing pollution" (World Bank, 1992: 1). Political leaders, at least rhetorically, accepted responsibility for ensuring that long-term development was sensitive to these environmental and demographic concerns. The UN encouraged this effort by establishing a Commission on Sustainable Development, and forty countries established their own such agencies in 1992 and 1993. Together, they devised dozens of standards for environmental protection and applied them to private industrial development and aid programs.

This effort, however, was fraught with problems. Signatories to environmental protocols did not specify their costs and did not address their domestic policy ramifications, the interpretation of which was ultimately left to member states. As a result, conditionalities attached to aid packages were often ambiguous, inconsistent, and unenforceable. The emphasis among aid donors on "good governance" proved equally problematic. Unresolved debates over the meaning and connotations of democratic development were revived, and the presumed causal linkage between such political considerations and long-term economic growth in LDCs was unclear.

Skeptics of this view observed that during the 1970s and 1980s the most rapidly expanding economies -- including Japan, China, South Korea, Taiwan, and several Latin American NICs--often violated widely accepted standards of good governance with little criticism from wealthy states. The United States, for example, renewed China's preferential trading status despite its repression of human rights. The United States also established closer economic relations with Mexico through the North American Free Trade Agreement (NAFTA) despite the ongoing dominance and autocratic practices of its one-party government. In the texts of many World Bank reports exalting the East Asian "miracle," these countries were held up as blueprints for modernization and economic integration to be emulated by other LDCs. . .

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