Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa (23 page)

There is a push towards greater inclusion of perspectives (from technocrats and policymakers) from the emerging world in the upper echelons of development agencies – who better to help shape the direction of the new development path? In 2008, for instance, the World Bank elected Justin Lin Yifu to the position of Chief Economist (considered the number two job at the international economic institution), which until this point had been occupied only by Americans or Europeans.

And terms like public–private partnerships and private-capital solutions to development financing (such as debt capital markets and diaspora bonds) have seeped into the development vocabulary, placing greater emphasis on the role of the private sector and seemingly now questioning rather than merely perpetuating the existing development model. This is undoubtedly a good start. As are the billions of dollars of smart money (the hedge funds, the international banks, the private equity funds) now going to Africa. Africa’s era of private capital is only now beginning, and this trend has to be nurtured in order for it to continue.

There is more (much more) that needs to be done to undo the ills that have gone before, to rectify what has been an unmitigated disaster, and to get Africa onto a solid economic footing. While international donors and organizations must be commended for shifting the development ideology from the bad economic policies of the 1970s (mainly statist) to the good market policies on the books today (introduced on the back of the Washington Consensus), we need to remind them that without the elimination of
aid effective implementation of the new, better, development regime will remain shoddy, ineffectual and even disastrous.

Africa’s development impasse demands a new level of consciousness, a greater degree of innovation, and a generous dose of honesty about what works and what does not as far as development is concerned. And one thing is for sure, depending on aid has not worked. Make the cycle stop.

The best time to plant a tree is twenty years ago.
The second-best time is now.

African proverb

1
. For details of the Battle of Adowa see
http://en.wikipedia.org/wiki/BattleofAdowa
.

1
. The 2001 Labour Party Conference was held in the City of Brighton and Hove.

1
. Various UNAIDS reports on the global AIDS epidemic.

2
. Freedom House:
http://www.freedomhouse.org
; and International Institute for Democracy and Electoral Assistance:
http://www.idea.int/
.

3
.
http://en.wikipedia.org/wiki/JSESecuritiesExchange
;
http://en.wikipedia.org/wiki/ZimbabweStockExchange
.

4
. In terms of Price/Earnings (essentially a measure of how much value investors predict in the future of African companies), African P/Es, at 15 times, have been roughly commensurate with the emerging economies’ (Brazil, Russia, India and China) average of 19 times.

5
. Data sources are various issues of the World Bank World Development Indicators.

6
. Average child mortality for Africa is 142 per 1,000 under-fives (World Bank World Development Indicators, 2006).

7
. The Africa Progress Panel said in 2007: ‘In 2006, Africa’s growth stood at 5.4 percent . . . far short of the 7 percent annual growth that needs to be sustained to make substantial inroads into poverty reduction.’

8
. Using the International Peace Research Institute, Oslo’s armed conflict dataset, civil war is defined as an internal or internationalized internal armed conflict with at least 1,000 deaths in a year.

9
. ‘The President’s Emergency Plan for AIDS Relief: U.S. Five Year Global HIV/AIDS Strategy’, at
http://www.state.gov/s/gac/plan/c11652.htm
.

1
. The forty-four countries represented were Australia, Belgium, Bolivia, Brazil, Canada, Chile, China, Colombia, Costa Rica, Cuba, Czechoslovakia, Dominican Republic, Ecuador, Ethiopia, France, Greece, Guatemala, Haiti, Honduras, Iceland, India, Iran, Iraq, Liberia, Luxembourg, Mexico, The Netherlands, New Zealand, Nicaragua, Norway, Panama, Paraguay, Peru, Philippines, Poland, South Africa, USSR, United Kingdom, United States, Uruguay, Venezuela, and Yugoslavia:
http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/EXTARCHIVES/0,,contentMDK:64054691[L50513]menuPK:64319211[L50513]pagePK:36726[L50513]piPK:36092[L50513]theSitePK:29506,00.html
.

2
. The Marshall Plan speech:
http://www.oecd.org/document/10/0,3343,en264920118518769381111,00.html
.

3
. Sturzenegger and Zettelmeyer, ‘Sovereign Defaults and Debt Restructurings’.

4
. Lienert, ‘Civil Service Reform in Africa’.

5
. Nellis, ‘Privatisation in Africa’.

6
.
New York Times
, 4 February 1987.

7
. Meredith,
The State of Africa
.

8
. Corruption ranking based on the Transparency International scores.

9
. Democracy is correlated with levels of development, but it is less clear whether democracy has a causal impact on development. Studies on the impact of democracy on economic growth are cautious in their conclusions and suggest no direct link per se between democracy and development.

10
. Interview with Rwanda’s President Kagame,
Time
, September 2007, at
http://www.time.com/time/magazine/article/0,9171,1666064,00.html
.

11
. From Brenthurst Foundation July 2007 Discussion Paper: ‘Speech by His Excellency President Paul Kagame’.

1
. Details of the 1885 Berlin Conference:
http://en.wikipedia.org/wiki/BerlinConference
.

2
. ‘Institutions that provide dependable property rights, manage conflict, maintain law and order, and align economic incentives with social costs and benefits are the foundation of long-term growth. The quality of institutions is key: good institutions are those that provide public offcials with the incentives to provide market-fostering public goods at least cost in terms of corruption and rent seeking. Petty corruption, uncertain property rights, and inadequate courts are the source of problems’: Rodrik,
In Search of Prosperity
.

3
. Radelet,
Challenging Foreign Aid
. The twenty-two countries that have permanently graduated from IDA since 1960 are Botswana, Chile, China, Colombia, Costa Rica, Dominican Republic, Ecuador, Equatorial Guinea, El Salvador, Jordan, South Korea, Mauritius, Macedonia, Morocco, Papua New Guinea, Paraguay, St Kitts and Nevis, Swaziland, Syria, Thailand, Tunisia and Turkey.

4
. Details of the Millennium Challenge Account can be found at
http://www.mca.gov/about/index.php
.

5
. Sen,
Development as Freedom
.

6
. Ferguson,
The Cash Nexus
, p. 349, refers to a study that compared the

‘quality of citizens’ lives’ in over a hundred mainly developing countries and concluded that democratic states meet the basic needs of their citizens ‘as much as 70 percent more’ than non-democratic states.

7
. The International Food Aid Conference VII,
Strengthening the Food

Aid Chain
, was held on 3 May 2005 in Kansas City, Missouri.

8
. Details of the Millennium Development Goals can be found at
http://www.un.org/millenniumgoals/bkgd.shtml
.

9
. From
Foreign Exchange
, with Fareed Zakaria, on the US Public Broadcasting Service (PBS), 2 August 2007. Paul Collier, author of
The Bottom Billion
, cited a conversation in which this remark was made by the Chief Economist of the United Kingdom’s Department of Trade and Industry, when Collier asked why the British charity continued with an aid campaign that was predicated on fundamentally poor economic analysis.

10
. Easterly, ‘Can Foreign Aid Buy Growth?’

1
.
Economist
, ‘Corruption in Kenya’.

2
. See discussion at
http://66.102.9.104/search?q=cache:guiKeYH5SgJ: www.transparency.org/content/download/4425/26684/file/08Legal hurdles.pdf+transparency+international+Mobutu+US%245+billion&hl=en&ct=clnk&cd=3&gl=uk.

3
. Details on the EITI at
http://eitransparency.org/
.

4
. Kurtzman, ‘The Global Costs of Opacity’.

5
. The comments were made by Senator Richard Lugar at the May 2004 United States Senate Committee on Foreign Relations hearing. Senator Lugar was chairing the first public hearing on corruption at the multilateral development banks.

6
. Based on World Bank Uganda Public Expenditure Tracking Studies conducted between 1991 and 1995.

7
. The disappearance of Mr Peter Mulamba, who was expected to be a key witness in two corruption trials around the grain debacle, was reported on the BBC News, 8 September 2004.

8
. See the report by the UK’s Africa All Party Parliamentary Group, ‘The Other Side of the Coin: The UK and Corruption in Africa’, March 2006, p. 14.

9
. Collier, ‘Natural Resources, Development and Conflict’.

10
. Details of the peerage awarded to Lord Bauer can be found at
http://www.parliament.uk/documents/upload/HLLPeerageCreation.pdf
.

1
.
Glasnost
refers to the policy of maximal publicity, openness and transparency in the activities of all government institutions in the Soviet Union, together with freedom of information.
Perestroika
referred to economic restructuring and economic reforms meant to overhaul the Russian economy.

1
. From PIPA, ‘Americans on Foreign Aid and World Hunger: A Study of U.S. Attitudes’, 2 February 2001, at
http://65.109.167.118/pipa/pdf/feb01/ForeignAidFeb01rpt.pdf
.

2
. Statement of Peter Orszag, Director: ‘Estimated Costs of U.S. Operations in Iraq and Afghanistan and of Other Activities Related to the War on Terrorism before the Committee on the Budget U.S. House of Representatives’, 24 October 2007.

1
. There exists also the BRVM, which is the regional stock exchange serving Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo.

2
. Details of the GEMLOC Program can be found at
http://psdblog.worldbank.org/psdblog/2008/02/gemloc-program.html
.

3
. Details of the Pan African Infrastructure Development Fund (PAIDF) can be found at
http://www.harith.co.za/
.

1
. Economists will realize that this point sweeps over wage arbitrage arguments. In practice, low wages do not necessarily imply low costs. What matters are not just wages, but wages relative to productivity,
that is, unit labour costs. Of course many low-wage countries actually have high unit labour costs because productivity is so low. However, one would expect that more rapid technological improvements across Africa would also lead to productivity improvements across the continent.

2
. The World Bank’s Doing Business Project provides objective measures of business regulations and their enforcement across 178 economies and selected cities at the subnational and regional level. See
http://www.doingbusiness.org/
.

3
. Foreword to Kofi Annan (former Secretary-General of the United Nations), ‘UNCTAD Foreign Direct Investment in Africa: Performance and Potential’, New York, June 1999, at
http://www.unctad.org/en/docs/poiteiitm1501.pdf
.

4
. For example, see
Africa Recovery
, 13 (1999), 2–3, p. 26 (part of a special feature on the ECA conference
Financing for Development
).

5
. For more details on the Forum on China–Africa Cooperation, see
http://www.focac.org/eng/
.

6
. China’s January 2006 African Policy Investment Strategy. White Paper. China–Africa Cooperation Forum. China’s Africa Policy.
http://www.China.org.cn
.

7
. ‘China in Africa’,
Economist
.

8
. Ibid.

9
. In Ethiopia, Ivory Coast and Mali, 85, 72 and 81 per cent, respectively, see China’s influence as growing as opposed to 73, 48 and 58 per cent, respectively, who see America’s influence as growing.

10
. Information on Zambia’s Citizens Economic Empowerment Commission can be found at
http://www.statehouse.gov.zm/index.php?option=comcontent&task=view&id=359&Itemid=45
.

11
. Information on the India–Africa Summit can be found at
http://www.africa-union.org/root/au/Conferences/2008/april/India-Africa/India-Africa.html
.

12
. Information on the Fourth Tokyo International Conference on African Development can be found at
http://www.mofa.go.jp/region/Africa/ticad/ticad4/index.html
.

13
. Information on Turkey’s relationship with Africa can be found on
http://www.tuskonafrica.com/en/cnt/stdcnt.php?anahtar=strateji
.

14
. Economist Intelligence Unit/CPII, ‘World Investment Prospects to 2010’.

1
. Speech made by the World Bank’s Chief Economist at the Centre for Economic Studies, Munich, Germany, November 2002.

2
. Information on the African Growth and Opportunity Act can be found at
http://www.agoa.gov/
.

3
. The countries eligible for AGOA are Benin, Botswana, Burkina Faso, Cameroon, Cape Verde, Chad, Ethiopia, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mali, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, Swaziland, Tanzania, Uganda and Zambia.