Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa (22 page)

Once the financing plan is in place, and Dongo knows how much it has to find, it must enforce rules of prudence and not live beyond its means. Like a family whose income has fallen, Dongo has two choices. It can either cut back on its expenditure or raise funds elsewhere to support the same level of spending. One would hope that any cutbacks would be on the non-essential, frivolous items (palaces, private jets and shopping trips to the Champs-Elysées in Paris), rather than schools, hospitals and infrastructure. With different forms of financing, without the same opportunity for corruption, the provision of schools, hospitals and infrastructure will anyway become cheaper. But in order to sustain the same degree of spending, Dongo would need to tap other sources of income. Using the
Dead Aid
proposals, the channels of money available will not only help maintain the same level of spending, but will of themselves encourage economic growth and increase the taxable middle classes, thereby broadening Dongo’s financial alternatives.

Of course, nothing can stop a bad government from using the new money for old tricks. Some African leaders have been notoriously susceptible to shopping trips (Grace Mugabe, wife of Zimbabwe’s president, is known for a penchant for shopping at London’s exclusive Harrods department store), and some may be tempted again. But whereas the open purse of aid permits them to do this every year, if they use the private cash of the
Dead Aid
proposal for such ends, they will only get away with it once. If, for instance, a government were to steal the proceeds of a bond, or impose punitive taxes on its exporters, lenders would never lend again, and exporters would stop exporting. Over time, the
economic pie that could be eaten into would grow smaller and smaller – and ultimately shrink into oblivion. Indeed, one could argue that the reason why Zimbabwe’s Mugabe has lasted so long is because he has been propped up by massive foreign aid receipts; it certainly isn’t Zimbabwe’s burgeoning economy – US$300 million in foreign aid was sent there in 2006. In fact, without aid, the likelihood is that Mugabe might have been long gone. And regarding FDI, the Chinese expect something in return. Even if 80 per cent of their cash transfer is stolen, they still require that roads be built and the commodity extracted. Having amounts stolen is nowhere near a perfect solution, but at least a part of the cash benefit must accrue to the country.

The third stage in the
Dead Aid
model is the strengthening of institutions. At the core of the
Dead Aid
proposal is accountability. Those charged with the responsibility of providing public goods and ensuring the transparency and health of an environment within which the private sector can flourish must be held accountable when they fail to deliver. This has been the aid model’s Achilles heel.

In
The Wealth and Poverty of Nations
, David Landes suggests that ‘the ideal growth and development’ government would:

secure rights of private property, the better to encourage saving and investment; secure rights of personal liberty . . . against both the abuses of tyranny and . . . crime and corruption; enforce rights of contract . . . provide stable government . . . governed by publicly known rules . . . provide responsive government . . . provide honest government . . . [with] no rents to favour and position; provide moderate, efficient un-greedy government . . . to hold taxes down [and] reduce the government’s claim on the social surplus.
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Yet this is not the world in which most Africans live. In their world of aid-dependence, governments have failed at all these tasks, and failed spectacularly.

But is all this as easy as it sounds? One phone call, and it all slots into place? Why not? Development is not a mystery; each of the
elements of the
Dead Aid
proposal has been tried and tested and yielded success – and governments and policy-makers know it.

The aid regime has been in place (in one form or another) for sixty years and demonstrably failed to generate economic growth and alleviate poverty. Given that in no other sphere (business, politics) has such a poor record been allowed to persist, why has the phone call not been made?

The
Dead Aid
proposal is dead easy to implement. What it needs, and what is lacking, is political will. Political incentives are stacked against making the call.

Western donors have an aid industry to feed, farmers to placate (vulnerable when trade barriers are removed), liberal constituencies with ‘altruistic’ intentions to allay, and, facing their own economic challenges, very little time to worry about Africa’s demise. For the Western politician maintaining the status quo of aid, it is much easier just to sign a cheque.

For African leaders too there is no immediate incentive to abandon the aid model – apart, of course, from the obvious one that were they to do so their countries’ economic position would quickly improve. To appreciate the economic prospects in a non-aid environment, however, requires a long-term and selfless vision, and not the myopia so many policymakers (at home and abroad) are afficted with today.

Unfortunately, there are still only a handful of (African) policy-makers critical of aid’s dismal performance. In a September 2007 interview with
Time
magazine, Rwanda’s President Kagame commented:

Now, the question comes for our donors and partners: having spent so much money, what difference did it make? In the last 50 years, you’ve spent US$400 billion in aid to Africa. But what is there to show for it? And the donors should ask: what are we doing wrong, or, what are the
people we are helping doing wrong? Obviously somebody’s not getting something right. Otherwise, you’d have something to show for your money.

The donors have also made a lot of mistakes. Many times they have assumed they are the ones who know what countries in Africa need. They want to be the ones to choose where to put this money, to be the ones to run it, without any accountability. In other cases, they have simply associated with the wrong people and money gets lost and ends up in people’s pockets. We should correct that.
²

In a similar vein, Senegal’s President Wade remarked in 2002: ‘I’ve never seen a country develop itself through aid or credit. Countries that have developed – in Europe, America, Japan, Asian countries like Taiwan, Korea and Singapore – have all believed in free markets. There is no mystery there. Africa took the wrong road after independence.’
³
Indeed, now
is
the time to correct, and not be swayed by media hype and populist and ill-conceived banter.

Ordinary people across Africa, the millions who bear the brunt of the economic catastrophe, have an incentive to change the aid regime of course. They would, if they could – who wouldn’t? But they eke out their existence under a veiled (and often not so veiled) threat of intimidation, punishment and even death. In order to overturn the state aid-dependency, Africans need the gritty defiance of the unknown man who stood against the Chinese tanks in Tiananmen Square in June 1989. But such rebellion carries enormous risk, and when pitted against the omnipotent state, more likely than not, will fail.

This leaves it to Western citizens. They have power, and could hold the key to reform. It was, after all, thanks to the 60,000 ordinary Americans who wrote to the US Congress laying out their desire for freer trade access for African countries that the AGOA was born.
⁴
It is this type of activism that is needed to help jump-start Africa’s development agenda, and set it on the right track.

Aid came from the West (and continues to do so), and it’s up
to the West to take it back. Why have people in the West not demanded that something be done? It is, after all, their money being poured down the drain. Maybe some have, but it’s nearly impossible to be heard above the hectoring din of the purveyors of the ‘Africa’s glass is half empty’ view of this world.

They say that aid worked – that the true test of aid’s success is that millions of other Africans would have died were it not for aid. We can never really know if this is true (though we do know for sure that countries that have not relied on aid, including those in Africa like South Africa and Botswana, have consistently done better), and this justification for aid is changing the rules of the game. Aid was not originally designed or intended to be a stickingplaster solution simply aimed at keeping people alive. The goals of aid, as originally set out by the forefathers in the New Hampshire hotel all those years ago, were sustainable economic growth and poverty alleviation, and it is against these goals that aid’s efficacy should be judged, and against these that it has spectacularly failed.

Is there a moral obligation for Western societies to help poor countries? Clearly morality claims hold sway, but surely one would expect Western moralizers to adopt policies which help those in need rather than hinder them in the long run and keep them in a perilous state of economic despair. One solution that the aid proselytizers could adopt would be an egalitarian approach to donor donations. Instead of writing out a single US$250 million cheque to a country’s government, why not distribute the money equally among its population. So in a country of 10 million people (roughly the population of Zambia) each citizen would get US$25 – a tenth of Zambia’s current per capita income. In line with the
Dead Aid
proposals, this would in effect be a remittance ‘donor-style’.

Indefinite grant transfers, however dressed up, are not something
Dead Aid
favours, but one could envisage how such remittances could be part of an effective financing package were the notions of accountability and repayment incorporated.

It is worth pointing out that there has been some notable success with a concept known as ‘conditional cash transfers’; these are cash
payments (in a sense, bonuses) made to give the poor an incentive to perform tasks that could help them escape poverty (for example, good school attendance, working a certain number of hours, improving test scores, seeing a doctor). The idea of conditional cash transfers has met with much success in developing countries such as Brazil, Mexico, Nicaragua and Peru (a similar programme is now being tested in the boroughs of New York City). Studies show the schemes have been instrumental in decreasing malnutrition, increasing school attendance and decreasing child labour.
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The genius of conditional cash transfer programmes (certainly in the context of developing countries) is threefold: they circumvent the government (bureaucracy and corruption are averted); payments are made for actually doing something rather than for doing nothing, which has often been the case with aid (quite simply, if you don’t meet certain standards of behaviour, do certain things, meet specified criteria, you don’t get paid); and the money actually ends up in the hands of the people that truly need it. The scheme has met with a resounding success in developing countries, so why has this type of programme not been rolled out aggressively across Africa? It would seem the logical thing to do given the failure of government-to-government aid.

Leaving the question of morality aside, there are good reasons based on national interest for the West to help. In the fractured world of Iran, Iraq and Afghanistan, Africa’s fragile and impoverished states are a natural haven for global terrorists. Porous borders, weak law enforcement and security institutions, plentiful and portable natural resources, disaffected populations, and conflict zones make perfect breeding grounds for all sorts of global terrorist organizations.

The four horses of Africa’s apocalypse – corruption, disease, poverty and war – can easily ride across international borders, putting Westerners at just as much risk as Africans. Of course, stolen money sent to European bank accounts can fund terrorist activities; disease, poverty and war induce waves of disenfranchised refugees and unchecked immigration, which can place inordinate burdens on Western economies.

The West can choose to ignore all of this, but, like it or not, the Chinese are coming. And it is in Africa that their campaign for global dominance will be solidified. Economics comes first, and when they own the banks, the land and the resources across Africa, their crusade will be over. They will have won.

Whether or not Chinese domination is in the interest of the average African today is irrelevant. This is not to underestimate how much Africans care about freedom and rights – they do. But in the immediate term a woman in rural Dongo cares less about the risk to her democratic freedom in forty years’ time than about putting food on her table tonight. China promises food on the table today, education for her children tomorrow and an infrastructure she can rely on to support her business in the foreseeable future.

The mistake the West made was giving something for nothing. The secret of China’s success is that its foray into Africa is all business. The West sent aid to Africa and ultimately did not care about the outcome; this created a coterie of elites and, because the vast majority of people were excluded from wealth, political instability has ensued.

China, on the other hand, sends cash to Africa and demands returns. With returns Africans get jobs, get roads, get food, making more Africans better off, and (at least in the interim) the promise of some semblance of political stability. It is the economy that matters. Places like Singapore have shown that, even in the absence of democracy, peace prevails when the median citizen is economically better off. In Africa, the 2008 fracas in Kenya may have been much more protracted had the average Kenyan had a lesser stake and vested interest in the economy. The situation may have gone on for as long as it did because, like any other society, there are, unfortunately, always people at the fringe who have yet to become fully fledged economic stakeholders and garner the benefits of a growing economy. The China movement in Africa is on the march – the West ignores it at its own peril.

Is there a role for the staid development formulas and old institutions of yesteryear? Surely, not to help Africa truly achieve
sustainable growth and alleviate poverty as has so often been claimed. To support Africa in achieving this goal requires severing the Faustian bargain of current aid-driven development policy, and doing away with the ossified policies (and processes) that reign supreme in today’s development debate. Fortunately, there has been some, albeit slow, movement in the right direction. Perhaps heeding the proverbial writing on the wall, or fearing their growing irrelevance in the development game where they were once the protagonist, international organizations are changing their tune.