Last August, some friends of mine and I went to Turin to watch a U2 concert, and while we were queuing, a group of volunteers were talking to the people and raising awareness about ONE, an organisation cofounded by Bono, frontman to the famous band U2, and other campaigners, and which is a grassroots advocacy and campaigning organization by pressuring political leaders to support smart and effective policies and programs that will help save lives, help put kids in school and improve futures, particularly in Africa. Whatever its strengths and weaknesses, such charity-based aid is relatively small when compared to the sea of money that floods Africa each year in government-to-government aid or aid from large development institutions such as the World Bank. This made me question whether aid is in real fact helping Africa develop or whether it is making the situation worse.
Many argue that the West has taken on too much responsibility for solving Africa's problems, and many are of the belief that the West has essentially educated them to call for foreign aid when problems arise rather than trying to find solutions themselves. This type of self-incapacitation is one of the most detrimental results of development. Poorly designed development aid has made people dependent and accustomed them to a situation of perpetual assistance, preventing them from taking the initiative to develop their countries. It is this situation which represents the greatest damage, which is far worse than the enormous material losses stimulated by failed aid projects. Evidence overwhelmingly demonstrates that aid to Africa has made the poor poorer, and the growth slower. The dangerous aid culture has left African countries more debt-laden, more inflation-prone, and less attractive to higher-quality investment. It is evident that economies that rely on open-ended commitments of aid almost constantly fail, and those that do not depend on aid succeed. The latter is true for economically successful countries such as China and India. Their strategy of development emphasizes the important role of entrepreneurship and markets over a staid aid-system of development that preaches hand-outs. Aid in Africa can thus be seen as an unmitigated political, economic and humanitarian disaster.
Giving aid to Africa remains one of the biggest ideas of our time which is overtly manifested by millions of people who rally for it; by governments who are judged by it; and by celebrities who proselytize the need for it. Calls for more aid to Africa are growing louder and louder, with advocates pushing for doubling the roughly $50 billion of international assistance that already goes to Africa each year. A transparent and accountable government and an efficient civil service to help meet social needs are vital for an emerging economy. Its people need jobs and a belief in their country's future. An excess of aid has been shown to be unable to help achieve these goals.
In "Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa," Zambian economist, Dambisa Moyo, argues that although development aid to Africa has been flowing for decades, the results have been worthless. Instead, recipients have merely become more and more dependent and initiative has been extinguished, and she believes that it is time to reform the system. Moyo argues that Africa needs Western countries to cut long term aid that has brought about dependency, distorted economies and fuelled bureaucracy and corruption.
Dambisa Moyo states 'aid is defined as the sum total of both concessional loans and grants' [1] and she makes it clear that the aid she is referring to is not humanitarian or emergency aid mobilised in response to calamities, nor does she mean charity-based aid given to specific organizations and people in order to achieve specific things. When she talks about aid she means systemic aid, that is, the vast sums of money which are regularly transferred from government to government or via institution and aims her harshest criticism at the flow of aid from the governments of developed nations to African governments and also aid from institutions such as the World Bank.
Proponents of aid argue that the millions in aid of the post-World War II Marshall Plan helped pull back a broken Europe from the brink of an economic abyss, and that aid could and would work if Africa had a good policy environment. The aid advocates, however, fail to point out that the Marshall Plan interventions were short, sharp and finite, unlike the open-ended commitments which instil governments with a sense of entitlement rather than encouraging innovation. No country has ever achieved economic success by depending on aid to the degree that many African countries do.
Over the past 60 years at least $1 trillion of development-related aid has been transferred from rich countries to Africa. Yet real per-capita income today is lower than it was in the 1970s, and more than 50% of the population -- over 350 million people- live on less than a dollar a day. Even after the very aggressive debt-relief campaigns of the 1990s, African countries still pay close to $20 billion in debt repayments per year which is a stark reminder that aid is not free. In order to keep the system going, debt is repaid at the expense of African education and health care. Well-meaning calls to cancel debt mean little when the cancellation is met with the fresh infusion of aid, and the vicious cycle starts up once again. It was evident by the 1990s that while Asia and Latin America were back on a growth path, the African countries stagnated. The donor community thus converged on the idea that governance- good governance, needed for sustainable economic growth- was lacking across most of sub-Saharan African states. By good governance, they meant a strong and credible institution, transparent rule of law and economies free of rampant corruption.
In developing countries, especially in Africa, foreign aid often arrives with the best intentions. Yet, too frequently it arrives with little coordination among donors over accountability to where the funds are actually going. This raises the question whether foreign aid sent to African countries is money well spent or is it just easy money that in the end is squandered by corrupt political leaders. A constant income of "free" money is a perfect way to keep an inefficient or bad government in power. As aid flows in, there is nothing more for the government to do - it does not need to raise taxes, and it does not have to take account of its discontent citizens. Stuck in an aid world of no incentives, there is no reason for governments to seek other, better, more transparent ways of raising development finance such as accessing the bond market. To advance a country's economic prospects, governments need efficient civil service but this is naturally prone to bureaucracy, and there is always the danger of self-serving cronyism and the desire to bind citizens in endless, time-consuming red tape. What aid does is to make that danger a grim reality.
Aid also affects local trade and Dambisa Moyo argues that even what may appear to be a kind intervention can have negative consequences. She demonstrates this by portraying a mosquito-net maker in an African town who employs 10 people who together manufacture 500 nets a week, and these 10 employees support about 15 relatives each. A Western government-inspired programme generously supplies the affected region with 100,000 free mosquito nets which promptly puts the mosquito net manufacturer out of business, and now his 10 employees can no longer support their 150 dependents. In a couple of years, most of the donated nets will be torn and useless, but now there won't be a mosquito net maker, and so they'll have to get more aid.
However, one must point out that aid can also be beneficial when trade is fair. There are several examples in Africa, like the case of coffee farmers in Uganda, where aid has been used effectively to improve the overall quality of the coffee seeds, thereby giving farmers better prices for their produce. When they have access to markets at home and abroad, they generate income which is ploughed back into increased output, better access to health and education, and overall improvement in the quality of their lives. To make this happen, developed countries need to stop procrastinating and put in place fair trade practices. However, very often this isn't the case.
In her book, Dambisa Moyo presents her prescription for economic stability and long-term economic growth, and she believes that governments need to become accountable to their people and responsible for themselves, and argues that countries like China and India are good role models. She acknowledges that in many African countries the government is basically not involved in society and have completely abdicated their responsibility. The continent is covered with thousands of NGOs who provide these goods, very often in inefficient ways because they can only target a small number of people. She also criticises African governments for abandoning their responsibilities and for allowing celebrities to become the face of Africa. She argues that these celebrities are not the elected officials, and that there are elected African officials who are charged with the responsibility of providing public goods, and who are not doing their job. So aid allows these governments to just sit around.
Thus one may question: Why have many aid-dependent countries in sub-Saharan Africa failed to generate consistent economic growth and have regressed, and there can be several reasons for this.
A country's wealth and success depends to a large extent on its geographical environment and topography. A country's climate, location, flora, fauna and terrain affect, in one way or another, the people's ability to provide food for consumption and for export. Although all societies have approximately similar abilities to manipulate nature, the raw materials with which they start with differ. African countries can be classified in three groups: countries which are resource-poor but have coastline; resource-poor countries which are landlocked; and countries which are resource-rich, where it matters little whether the country is landlocked or has a coastline. On an economic performance basis, coastal resource-scarce countries perform significantly better than their resource- rich counterparts whether landlocked or coastal.; thus leaving the landlocked, resource-scarce economies as the worst performers.
Colonialism can also be put forward as an explanation for Africa's underachievement, that is, the suggestion that the colonial powers delineated nations, established political structures and fashioned bureaucracies which were fundamentally incompatible with the way of life of the indigenous populations. The 1885 Berlin Conference, which saw the production of a map of Africa littered with small nations with arbitrarily drawn border, made it much more difficult for African nations to stand on their own feet, both in terms of politics and economy.
Cultural norms, social customs or religious beliefs have alo been cited as some of the reasons for the difference in development between different people. Many even argue that there is in Africans, deeply embedded in their psyche, an inability to embrace development and improve their own nation in life without foreign guidance and help. Another argument is concerned with the African continent's different local groupings and ethno-linguistic make-up. Ethnic rivalry can lead to civil unrest and strife since the more a country is ethnically divided, the greater the prospect of civil war. A civil war can cost the country around four times its annual GDP. One must also point out that even during a peaceful times, ethnic heterogeneity can still be seen as an impediment to economic growth and development.
The ideal growth and development model is one which is guaranteed by efficient political institutions which secure personal liberty, private property and contractual rights, enforced rule of law. One must add that a country's underlying legal and political institutions make a system conducive to investment and innovation which includes the enforcement of the rule of law, avoidance of excessive government expenditures and constraints on the executive. Furthermore, the levels of corruption in Africa are extremely high. Most leaders crown themselves in gold, seize land, hand over businesses to relatives and friends, and divert billions to their foreign bank account. This, of course, is not limited to just the leaders since there are many people at many different level of the bureaucracy who funnel away billions of money over the years. The point about corruption is not that exists, but that systemic aid seems to fuel it. With aid, corruption appears to foster more corruption. These corrupt governments interfere with the rule of law, with the establishment of transparent civil institutions and protection of civil liberties, and encourage them to hold on tightly to their power since corruption makes being in power worthwhile.
One of the most important factors in a state is a middle class which is vested with economic interests, which respects and defends the rule of law, and which works towards seeing the country being run under a transparent legal framework. Furthermore, it is of utmost important in order to hold its government accountable. In such an environment driven by aid, governments are less interested in fostering entrepreneurs and the development of their middle class than in furthering their own financial interests. Without a strong economic voice, a middle class is powerless to take its government to task. Moreover, with easy access to cash, a government remains all powerful, accountable only to its aid donors and not to its people. In most functioning and healthy economies, the middle class pays taxes in return for government accountability, and foreign aid short-circuits this link.
In 'Dead Aid,' Dambisa Moyo offers four alternative sources of funding African economies which would not have the same deleterious side effects as aid: 1) African governments should follow Asian emerging markets in accessing the international bond markets and taking advantage of the falling yields paid by sovereign borrowers over the past decade; 2)They should encourage the Chinese policy of large-scale direct investment in infrastructure; 3) They should continue to press for genuine free trade in agricultural products, thus meaning that the US, EU and Japan are to scrap the various subsidies they pay to their farmers, in order to enable African countries to increase earnings from primary product export; and 4) They should encourage financial intermediation, and foster the spread of microfinance institutions.
Therefore, to conclude, one can say that the high levels of corruption in African states and the lack of efficient institutions are but some of the main reasons why aid does not work in Africa. Furthermore, aid is killing trade in these countries and it makes governments less accountable. Infinite aid makes countries dependent on it and does not encourage them to develop their own economies. At the end of the day, although the alternative to aid is harder, more demanding and more difficult, it is the road to growth, prosperity and independence for the continent.
