Where Aid misses the point in growing the economy

      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)
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