Where Aid misses
the point in growing the economy
In
the past four decades, at least a dozen developing countries have experienced
phenomenal economic growth. Many, mostly Asian, countries which have grown by
almost 10 per cent of GDP per year,
surpassing the growth rates of leading industrialized economies, and
significantly reducing their poverty
levels . there are also instances where poorer countries have leap-frogged the
per capita income levels of leading developed economies, a trend set to continue: by some estimates, star
emerging-market performers such as Brazil, Russia, India and China are
projected to exceed the economic growth rates of nearly all industrialized
economies by the year 2050. Yet, over the same period, there are as many other
developing countries mostly in sub-Saharan Africa, which have failed to generate consistent
economic growth, and have even regressed.
Among
the many scholars who have attempted to offer reasons to account for why
African countries are not working, a geographical determinists, Jared Diamond
in his “Guns, Germs and Steel (1997)”, proposed that a country’s wealth and
success depended on its geographical environment and topography, arguing that
Certain environments are easier to manipulate than others and, as such,
societies that can domesticate plants and animals with relative ease are likely
to be more prosperous. However recent research has shown that Africa’s broad
economic experience for oil- and mineral-rich countries such as Nigeria,
Angola, Cameroon and the Democratic Republic of Congo is that of abundance of
land and natural resources but has not guaranteed economic success.
An
Oxford University and ex-World Bank economist, Paul Collier, also attepted
to reason this out by adopting a nuanced
approach to the endowments issue. He
clasified African countries in three groups:countries which are resource-poor
but have coastline; those that are resource-poor and landlocked; and countries
which are resource-rich . He found that the three groups have remarkably
different growth patterns, the coastal resource-scarce countries performing significantly better than their resource-rich
counterparts whether landlocked or coastal; leaving the landlocked,
resource-scarce economies as the worst performers. Collier reckoned that these
factors cost these economies around one percentage point of growth. much as to
some extent these gave a convincing explanation, latest research finds that With
average summer temperatures reaching 49°C (120°F) Saudi Arabia is rather hot,
and, of course, Switzerland is landlocked, but these factors have not stopped
them from getting on with it.
The
cultural norms, social mores or religious beliefs argument has also been cited
as the reasons for differences in development between different peoples. The
German political economist and sociologist Max Weber who authored this ideology
offered two routes to Africa’s development quandary: one in which Africans are
viewed as children, unable to develop on their own or grow without being shown
how or made to; and another which offers a shot at sustainable economic
development – but which requires Africans be treated as adults. This was on the
basis that in his mind there were two broad groups: the Calvinists, who
believed in predestination and, depending on their lot, may or may not acquire
wealth; and the believers in the Protestant work ethic who could advance
through the sweat of their brow. This was after his argument that the Protestant
work ethic contributed to the speed of technological advancement and explained
the development seen in industrial Britain and other European nations
Another
argument posited for Africa’s economic failures has been the continent’s disparate tribal groupings
and ethno-linguistic makeup with roughly 1,000 tribes across sub-Saharan
Africa, most with their own distinct language and customs. Paul Collier
postulated that the more a country is ethnically divided, the greater the
prospect of civil war. This is why, it is argued, Africa has much higher incidence of civil war than other
developing regions such as South Asia. Very little can rival a civil war when
it comes to ensuring a country’s (and potentially its neighbours’) decline –
economically, socially, morally. In pure financial terms Collier has estimated
that the typical civil war costs around four times annual GDP. In Africa, where
small countries exist in close proximity with one another, the negative
spillover cost of war onto neighbouring countries can be as much as half of
their own GDP. Even during peaceful times, ethnic heterogeneity can be seen to
be an impediment to economic growth and development .Nigeria for instance has an estimated
population of 150 million people yet it
has almost 400 tribes; and Botswana have
just over one million inhabitants but with at least eight large tribal
groupings. In contemporary times the ghastly examples of Biafra in Nigeria
(1967–70) and the ethnically motivated genocide in Rwanda in the 1990s loom
large.
According
to Collier, the difficulty of reform in ethnically diverse small countries may
account for why Africa persisted with poor policies for longer than other
regions. Ethnically diverse societies are likely to be characterized by
distrust between disparate groups, making collective action for public service
provision difficult.Global economist Dambisa
Moyo, in agreement further argues that even in democratic societies, the prospect of achieving policy consensus
amongst fractious ethnically split groups can be challenging. Invariably, where
there is infighting, an impasse or split across ethnic lines slows down the
implementation of key policies that could spur economic growth.Global
economist Dambisa Moyo however
attributes this catastrophe to the aid dependency model in her book,
Dead aid
The Marshall Plan
Most
hysterics account the Marshall Plan as an overwhelming success in rebuilding
the economies of war-torn Europe. The Marshall Plan not only guaranteed
economic success, but also reestablishment political and social institutions
crucial for Western Europe’s ongoing peace and prosperity. Although the idea of
aid to Africa was born out of the success of the Marshall Plan in Europe, in
practical terms the two have completely gone different as Moyo elaborated. Pointing to the Marshall Plan’s achievements
as a blueprint for a similar outcome for Africa tomorrow should not be taken
entirely as gospel truth, but picking a few
lessons from this original Marshall Plan; we not that European countries
were not wholly dependent on aid. Despite the ravages of war, Western Europe’s
economic recovery was already underway, and its economies had other resources
to call upon. At their peak, Marshall Plan flows were only 2.5 per cent of the
GDP of the larger recipients like France and and Germany, while never amounting
to more than 3 per cent of GDP for any country for the five-year life of the
programme in contrast to African economies
already flooded with aid.
Presently, Africa receives development assistance worth almost 15 per cent of
its GDP – or more than four times the Marshall Plan at its height.
The
Marshall Plan was also finite. The US had a goal, countries accepted the terms,
signed on the dotted line, money flowed in, and at the end of five years the
money stopped. In contrast to the Marshall Plan’s short, sharp injection of
cash, many of our African economies have received aid continually for at least
fifty years. Aid has been constant and relentless, and with no time limit to
work against. Dambisa reckons that without the inbuilt threat that aid might be
cut, and without the sense that one day it could all be over, African
governments view aid as a permanent, reliable, consistent source of income and
have no reason to believe that the flows won’t continue into the indefinite
future. There is no incentive for long-term financial planning, “no reason to
seek alternatives to fund development, when all you have to do is sit back and
bank the cheques”
Crucial
to note also is the context of the Marshall Plan differing greatly from that in
Africa. All the war-torn European nations had had the relevant institutions in
place in the run-up to the Second World War. They had experienced civil
services, well-run businesses, and efficient legal and social institutions in
place, all of which had worked. All that was needed after the war was a cash
injection to get them working again. The Marshall Plan aid was, therefore, a
matter of reconstruction, and not economic development. Whereas despite the
legacy of colonial infrastructure in Africa, it was effectively undeveloped. Building,
rather than rebuilding, political and social institutions required an still
requires much more than just cash
Finally,
whereas Marshall Plan aid was largely (specifically) targeted towards physical
infrastructure, aid to Africa permeates virtually every aspect of the economy.
In most poor countries today, aid is in the civil service, aid is in political
institutions, aid is in the military, aid is in healthcare and education, aid
is in infrastructure, aid is endemic. The more it infiltrates, the more it
erodes, the greater the culture of aid-dependency.
NB:this peiece is largely dependent on the Dead Aid book ;By Dambisa Moyo
Emmanuel Nambaale is a young Economist With
Economic Hub Uganda (EHU)
P.O Box 1337, Kampala- Uganda | Tel +256779373114/+256703744999 |
Email:economichubuganda@gmail.com|enambaale@gmail.com;
facebook;emmanuelnambaale|twitter.@enambaale_|
