Foreign Aid & Underdevelopment in Africa.
By Mathew K. Jallow
Africa has struggled with chronic poverty and underdevelopment for over fifty years, and many Africans see this problem as one of their own making. In recent years, Africans academics and development experts have blamed foreign aid for the continued and seemingly intractable development crisis confronting the continent. Africa’s war against poverty is perceived as amounting to begging and submissiveness, and leading to reforms that have made Africans even poorer. The contention among many Africans is that the more the north cooperates with the south, the poorer Africa becomes. Increasingly, even tangible western generosity has failed to impress many Africans. Foreign aid has generally benefited the ruling elite by among other things helping to perpetuate corrupt governments’ hold on power, thereby entrenching pervasive underdevelopment. Over the past five decades, foreign emergency assistance has helped to avert hardship for many of Africa’s poor, but nonetheless failed to promote economic development for them. Foreign aid is provided with the conviction that real economic development could only begin when emphasis is placed on providing aid to the poor rural and urban communities. The provision of assistance to Africa's poor is a noble cause, but this decades long campaign of aid has turned out to be a theater of the absurd. The record of western aid to Africa has been significant, with more than $500 billion in assistance, the equivalent of four Marshall Plans, being pumped into sub-Saharan African countries between 1960 and 1997. Today, the national budgets of most sub-Saharan African countries are dependent on foreign aid transfers for upward to fifty percent of their annual national budgets.
Apart from relief aid and economic development, foreign assistance was also provided to support reforms and policy adjustment programs. Between 1981 and 1991, The World Bank provided $20 billion towards Africa’s structural adjustment programs. The purpose of these programs was to make institutions, government agencies, and the bureaucracy in Africa more transparent, effective, efficient and accountable. As it would turn out, it is dubious that Africa suffers from a poverty trap especially considering the depth of corruption and the missing millions in export earnings from oil, gas, diamonds and other resources. To the extent that the idea of foreign aid was compatible with the central theme of economic development, it was accepted as a possible escape from the underdevelopment that is characterized by undeveloped infrastructure and dualistic economies. The persistence of deplorable economic conditions in Africa became the major reason for the relentless search for realistic and durable solutions to the continents development woes. But, the need for foreign aid is intermittently reinforced by the fact that Africa's underdevelopment is accentuated by periodic global economic recession.
Since it’s inception after World War II, U.S. foreign aid as an example, was designed to serve two conceptually interdependent, but potentially conflicting set of goals: first, its diplomatic/strategic goals are the advancement of U.S. short-term political and long-term strategic interests; and secondly, is the development/humanitarian goals which seek to long-term economic growth, political stability, and the short-term alleviation of suffering. The U.S. Foreign Assistance Act of 1973 stressed the need to promote equity, minimum standards of living and per capita growth. Since then, the U.S. foreign assistance statutes have gone through several changes, each with its own objective, and some would argue, defined more by global politics than by any humane consideration. The concept of “Basic Human Needs” under the Foreign Assistance statute can be seen as paradoxical if one considers the foreign assistance legislation as the expression of the primary function of foreign aid. The position of the U.S. as observed by development experts is that developmental and humanitarian programs received substantial funding only when they coincide with U.S. diplomatic and strategic interests. Despite the massive injection of aid over the past five decades, Africa rather than achieve economic growth and development, has become more dependent, with standards of living experiencing a net decline. Now, studies show that there is overwhelming evidence that foreign aid has helped to underwrite the misguided policies of the corrupt and bloated government bureaucracies across Africa. The Oxford International Group revealed that the external stock of capital held by Africans in overseas accounts is between $700billion and $800 billion, and nearly 40% of Africa's aggregate wealth has fled to foreign bank accounts in Europe, United States and now even Japan. Africa’s foreign assistance is significant when we look at the overall economic situation, and its leaders have increasingly become dependent on it for the survival of their people and governments.
But, the concept of aid as we know it today is relatively new, and it is basically the transfer of resources from the rich countries to poor ones for the purpose of development. Aid, however, is primarily the official government-to-government transfer of financial and other resources for the program of social and economic development. The objective of aid is to produce accelerated economic growth combined with higher standards of consumption, and as we have already seen, very much influenced prevailing regional or global political climate. Due to political exigencies, however, donors can and often do exert pressure for political and policy reasons, thus making reliance on aid shaky if not impossible. Additionally, those charged with making the decisions on aid allocation, generally do not have a good grasp of the issues facing developing and poor countries, consequently, the rationale behind aid disbursement decisions are usually fraught with poor judgments and inconsistencies. Among the disadvantages of aid is that the funding provided is usually tied to the fact it must be spend in donor country without regard to the high cost of goods and services there. Rather than create wealth, prosperity and economic development, most Africans have over the past few decades realized a net decline in their standards of living. Research shows that over the period that foreign aid was being pumped into Africa, the per capita GDP declined by an averaged of 0.59 percent annually between 1975-2000. The Heritage Foundation in 1985 reported that aid is not the answer to Africa's troubles; in fact the organization maintained that aid might be the major culprit contributing to Africa's anguish. Foreign aid has been found to do more harm to Africa leading to a situation where Africans have failed to set their own pace and direction of development free of external interference. The United Nations Conference on Trade and Development admits that aid to Africa has not been successful, and that despite many years of policy reform, hardly any sub-Saharan country has completed its adjustment program or achieved sustained economic growth. Similarly, a Heritage Foundation study found that foreign aid retards the process of economic growth and the accumulation of wealth. It pulls entrepreneurship and intellectual capital into non-productive activities, thereby blunting the entrepreneurial spirits of many Africans. Decades of financial transfers to Africa have not fostered economic growth, rather, seventy developing countries are poorer today than they were in 1980, and 43 are worst off than they were in 1970. The United Nations Development Program describes the 1980's, the period of highest foreign aid transfer to Africa, as the “lost decade.” Over much of that decade, 100 countries mostly in Africa suffered major economic decline or stagnation, and the conclusion is that aid has failed abysmally to create economic growth for Africans. The old belief that aid transfer allowed poor countries to escape the poverty trap has been refuted, because research has proved that poverty contrary to the popular belief, is caused by capital shortage. In fact, the paradox is that studies show that there is no correlation between aid levels and economic development, rather, most aid recipient countries have become and remain dependent of foreign aid.
The World Bank also disclosed that food aid budgets were primarily guided by prospects for commercial exports of surplus from donor countries, rather than being determined in accordance with the needs and objectives of recipient countries to reduce their dependence on imported food. Donors reduce their food aid budgets when the prospects for commercial exports are good, and increase them when the prospects are poor. In 1993, the U.S. General Accounting Office, in a report, criticized the USAID for having no strategy for assessing the impact of its programs in enhancing the food security for people in recipient countries, nor could the agency determined whether food aid is an efficient means of accomplishing this goal.
Poor policy choices in Africa have caused development there to first stagnate and then to decline over the past decades. In 1960, South Korea was as poor as most African countries, but thirty years later, it was rich enough to offer aid to Africa. Most South East Asian countries have made tremendous progress and have joined the industrialized countries of the world, and critics say that foreign aid to Africa must be changed for a number of reasons, but mainly because it has not worked. In addition, few aid initiatives are really well thought out, and most of the money intended for projects rarely reaches the intended target groups. A study found that in Uganda, less than 30 per cent of aid earmarked for primary school education actually reached the schools. The missing money is usually stolen, wasted or re-apportioned to other priorities identified by politicians or middle level and senior government officials.
In order to address the persistent failure of sub-Saharan Africa, donors identified capacity building as the answer to the perennial problem of underdevelopment in Africa. Consequently, since 1980, about 4 billion dollars a year was spent on training, technical assistance and other institutional strengthening capacities. Notwithstanding, Africa's latent capacity has not budged, and moreover, professionals from around the continent are moving to other countries in the west at an alarming rate.
Today, many aid agencies are acknowledging repeatedly that there is greater pressure to commit money grandly than to spend it wisely in Africa. In 1976, Tanzania began the $220 million Mufundi paper mill factory project financed by the World Bank. The project turned out to be a total failure, but for twenty years, Tanzanians paid the bill for that ill thought out experiment. Again, in the early 1990's, the UNDP spent $900,000 over a three year period trying unsuccessfully to show farmers in northeast Ivory Coast how to grow onions. Meanwhile, just 90 miles north in neighboring Burkina Faso, farmers there were growing onions profitably under similar agricultural conditions, but without any aid.
The World Bank released a study on food import into Somalia in 1998, and concluded that aid had methodically undermined Somalia's civil society. Somalia had become, alarmingly and more than any other country in Sub-Saharan Africa, dependent on imported food. The report noted that until food aid began to arrive in Somalia, the economy was predominantly agricultural and pastoral, and up until the early seventies, the country was self-sufficient in food grains. The share of food imported in total volume of food consumption in Somalia rose from less than 33 per cent in 1979 to over 63 per cent in 1984. This coincided with the period of highest food aid distribution to that country. By increasing the supply of food aid, domestic food prices were dampened, and the prices were prevented from rising, thereby reducing the incentives for domestic food crop producers. This inevitably exacerbated the national food deficit in Somalia as in many other countries.
Mismanagement and corruption in the administration of aid is pervasive in Africa in the absence of efficient and accountable institutions to oversee the fair distribution of aid. But, critics of aid say donors are also complicit in the failure of aid distribution in Africa as there is no effective monitoring, which gives politicians and bureaucrats the opportunity to rob what is intended for their people. U.S Ambassador to Ghana, Edward P. Bryan, admitted that foreign donors have allowed what he describes as “a small, clever class that inherited power from the colonial masters to take us to the cleaners.” It will take a lot of money and time to turn Africa around. In March 1990, a Paris daily, Le Monde wrote, “every franc we give to impoverished Africa comes back to France or is smuggled into Switzerland or even Japan. The critics contend that donor agencies knew or should have known the motivation and activities of corrupt and kleptomaniac African leaders who spirit away billions into Swiss Banks and other western bank accounts. Even famine relief food assistance is not spared. As early as the late 1980's, the head of Medicine Sans Frontiers, Dr. Rory Branman, lamenting on the failure of foreign aid to Africa, admitted, “we have been duped. Western governments and humanitarian groups”, he said, have “unwittingly fueled and are continuing to fuel an operation that will be described in hindsight in a few years' time as one of the greatest slaughters of our time.” The World Bank admitted that in most cases Western donors knew that up to 30 per cent of their loans to African government went directly into the pockets of corrupt officials, for their personal use, yet the World Bank considered these officials and their governments as partners in development.
But, foreign aid is full of ambiguities and double bottoms. It does not fit neatly into any one of the three ways people are said to go about their material transaction; coercion, exchange and gift giving. Because it is tied with geo-politics, trade and banking, foreign aid cannot be classified as purely gift-giving. During its first four decades, victory in the Cold War was the compelling and pre-eminent drive in the regime of aid giving. Today, specialists have identified the predominant motives for aid giving as follows: strategic socio-political motives, mercantile motives, and humanitarian and ethical motives. Official aid is seldom the tool of altruism, because the direction of foreign aid is as we have already mentioned, dictated by political and strategic considerations, much more than the economic needs and policy performance of the recipient. However, the motives behind aid never come in fixed and stable proportions. Perhaps the safest generalization to make is that foreign aid, when used alone or in combination with other policy instruments has a unique ability to allow the donor to demonstrate compassion while simultaneously pursuing a variety of other ulterior objectives. In the U.S, the realization that foreign aid has failed to provide economic growth and development over several decades, prompted the U.S. Government to try new and different ways to administer aid. Officials in the Reagan administration promoted direct local participation in the planning, implementation and overall control of projects. USAID further made efforts to recruit field staffs that are experienced in and sensitive to the local development processes and institutions in Africa. Administration officials recommended that Congress monitor the activities of USAID, but without getting involved in any of the operational decision-making. Yet, this did not address the goal conflict that has created the paradox of foreign aid. Countries receiving foreign and funds in amounts that are sufficient to stimulate distributed development along the lines of Basic Human Needs mandate, are precisely those countries that are too important to the diplomatic and strategic goals of the United States. But, The Cato Institute found that there is little evidence that better targeting and management would enable foreign aid to achieve self-sustaining growth in poor countries, particularly in Africa. Additional, Cindy Williams of the Congressional Budget Office, warned that aid can inhibit the commitment to reform of even more responsible governments, and without reform, aid can reinforce policies that do not further development. By masking the pain of Africa’s economic failure, development assistance allows poor countries to delay reform, thereby worsening the underlying problems. Empirical evidence suggests that the greater a country's dependence on aid, the worst the quality of its public institutions. Poverty is a justification for aid, but it is seldom the main criterion used for allocating it.
The public image of aid is that of Western beneficence, nevertheless, studies show in some cases, foreign worker remittance far exceeds annual aid transfers from some European countries. In 1998, officially recorded remittance from the Netherlands to forty-two low-income developing countries totaled about U.S. $1 billion, a sum equivalent to 115 percent of Dutch aid to those countries. In the non-oil producing countries in Africa, the trade losses between 1970 and 1997 represents almost minus 120 % of GDP. Ironically, the World Bank estimates that the purchasing power in these African countries will be considerably lower in 2010 than they were in 1997.
Foreign aid serves a very useful purpose when it is provided to alleviate temporary hardship as in cases of droughts and other natural disasters. But, experiences in Africa over the past five decades has proved that recipients could easily construe aid as a substitution to their productivity. Across the continent, aid in the form of food has suppressed food production and undermined prices of locally produced foods. Agricultural production has declined significantly too, as farmers in migrate to urban centers to create a shortage of farm workers, resulting in the deficit in food production.
One of the most debilitating by-products of foreign aid in Africa is the culture of corruption, which has taken root at every level of every government institution across this vast continent. Today, corruption has become a way of life in every country in sub-Saharan Africa, and theft, bribery and embezzlement of aid and other government resources have become so endemic that they are no longer considered crime. Politicians and government officials across Africa, engage in corruption and corrupt practices, and a World Bank Report, showed in the 2004-2005 fiscal year alone, $148 billion was embezzled by Africa politicians and bureaucrats a significant amount of it being aid and loans earmarked for
development activities to benefit Africa’s poor. Without good governments that are transparent, accountable, and committed to national development rather than personal enrichment, Africa’s future, as half century of foreign aid has proved, will remain bleak for generations to come.