Foreign Aid is Hurting, Not Helping Sub-Saharan Africa
Providing
developing countries and in particular Sub-Saharan Africa with aid – under many
forms, social, economic, humanitarian – has been our priority since the
post-independence era in the 1960s. International NGOs are in their thousands[1]
trying to make the world a better place, fighting fatal illnesses, handing out
food and water, providing teachers, the list goes on. There is an unmistakable
moral imperative for humanitarian organisations to get involved in crisis
situations like the Tsunami in South East Asia or the earthquake in Haiti. This
type of aid is efficient in lessening immediate suffering; however it is not
the solution in the long-run and does not help provide a stable platform for
these countries to sustainably, politically and economically develop. It may have been a success with the
US’s Marshall Plan in the late 1940s but more recent foreign aid efforts have
been found to hinder development where it is indispensable, and they involve so
much more money than was needed to rebuild Europe after WW2…
So,
richer governments are judged by it and famous faces don’t stop campaigning in
plead for it but foreign aid doesn’t seem to be showing any significant
progress to alleviate poverty, in African countries at least, and in
Sub-Saharan Africa more particularly: home to the largest portion on the
world’s “bottom million” in extreme poverty. Since the 1950s traditional
development economics has been dominated by the idea that large donations[2] is
the solution to the savings gap in developing countries but evidence shows that
large influxes of foreign aid can end up doing more harm than good. An analysis
of the economic growth in Asia over the past decades, which has received little
foreign aid in comparison to Africa, is a good starting point (we must however keep in mind that the living conditions in both regions to begin were not quite the same, bit still). Reports from the
World Bank show that out of the 700 million people who were pulled out of
poverty between 1981 and 2010, 627 million of them were in China. That leaves
us with 73 million throughout the rest of the world. In other words, 89.6% were
from China, giving us an indication that foreign aid isn’t the answer. Like
Jeffrey Sachs[3], I
thought that foreign aid was the way forward when it comes to eliminating
extreme poverty but since the 2000s the “big push” theory has been subject to
heated debate highlighting the negative consequences of aid which seem to have
left developing countries worse off than they were to start with. Here is why and here is
how changes can be made to see real progress.
Let’s
focus on Sub-Saharan Africa. We hear about all these efforts but when we take a
look at the statistics of foreign aid budgets to Chad, Angola or Nigeria[4], the
level of progress suddenly appears to be very low in comparison to the huge
sums received. The continent as a whole receives roughly $50 billion of international
assistance annually. Yet, instead of drastically improving the living
conditions of the 600 million people who live below the poverty line, this aid makes the rich
richer, the poor poorer and hinders economic growth in the region, not to
mention catalysing the vicious cycle of corruption.
Official
Development Aid (ODA) is the official financing that is distributed among
developing countries with the aim of promoting economic development and welfare
in these countries. The money that floods into Africa comes not only from
individual government-to-government aid programs but also international
development programs such as the World Bank and the IMF, which act as a
channelling intermediate between the donor governments and receiving
governments.
- Foreign Aid is Synonymous With Promotion of
Corruption and Dependence -
Powerful groups but weak institutions
Aid
strengthens corruption in countries where it is already widespread.
Unfortunately this is the case for many of the countries that make up
Sub-Saharan Africa. The largest recipients of foreign aid are in Sub-Saharan
Africa, which happens to be where the world’s lowest ranked countries in many
areas of governance are, especially in terms of corruption, according to
Transparency International. This shows that foreign aid simply reinforces the amount
of resources available to already corrupt specific elite groups of people, thus
tipping or keeping the balance of power into the hands of the executive branch
of government. There is a clear correlation between increased aid and
statistically significant increase in corruption.
The
money is not distributed evenly among the population or used to promote growth
and to help the poor but is instead used on military equipment, white elephant
projects, dishonest procurements, etc. It is also used by leaders who are short
of time with policies and want to achieve them quickly, i.e.: increasing the
size of the government with civil servants (who don’t necessarily contribute
anything more to the system or development) to cut down the unemployment rate.
Another consequence is aid dependence. These countries have become used to
receiving such large sums of money that they don’t promote local business
because they have “free” money at their disposal instead. This prevents any
form of improvement in terms of human development and per capita income.
- So why are we still giving? -
It
ultimately makes our politicians look like they all look out for each other and
care about each other. The political and strategic interests of the donors dictate
the aid giving process more than concerns of good governance in the recipient
nations. This makes African countries look like a helpless civilisation led by
corrupt kleptomaniac elites. Colonial history also plays a huge role in the foreign aid process. France tends to gives a lot to its former colonies as
a consequence of guilt of the past. Australia and Nordic countries
have a tendency to discriminate, or unlike France and the UK they “can” choose to give only to
the less corrupt countries because they have no colonial legacies thus freeing
them from political pressures. Remember when the EEC (now EU) discriminated against
the dictatorships of Spain, Greece and Portugal prior to their membership; only
allowing them entry to the Union once they had democratised? Well, perhaps the IMF
and World Bank should do something similar because at the moment there doesn't seem to be much discrimination against
corrupt recipients, financially speaking.[5]
- Can economic growth in the region be
steered back in the right direction? -
[1] There are 40,000 international NGOs operating worldwide and millions of national/local NGOs.
[2] In the last half-century, foreign aid donations have amounted to $1 trillion, to Sub-Saharan Africa only - Kasper, W (2006b). Make Poverty History: Tackle Corruption. The Centre of Independent Studies, Vol 67.
[2] In the last half-century, foreign aid donations have amounted to $1 trillion, to Sub-Saharan Africa only - Kasper, W (2006b). Make Poverty History: Tackle Corruption. The Centre of Independent Studies, Vol 67.
[3] Economist and author of The End of Poverty in which he argues that the world’s “bottom
billion” can be pulled out of extreme poverty by 2025 through massive aid
transfers and massive socioeconomic reforms.
[4] Last year DfID announced Nigeria was to receive £300
million in aid yet 70% of Nigerians live below the poverty line of £1.29 a day.
[5] Alesina, A & Dollar, D (1998). Who gives Foreign Aid to Whom and Why?. National
Bureau of Economic Research Working Paper No. 6612
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