Trillions of dollars of developmental aid have been given to Africa over the past sixty years. However, more than half of Africa’s people live on less than a dollar a day. This amounts to over 350 million people, a number which has doubled since the 1980’s (Moyo “Why”). Clearly foreign aid is not working effectively and is even hurting developing countries in the long run.
The International Monetary Fund, a leading aid lender, has cautioned its donors about having hope in the developmental change that aid can achieve, and told governments and aid organizers not to be so exuberant in stating how aid can solve everyone’s issues (Moyo, Dead, 47). Shoving money into struggling economies, conflict ridden nations, and corrupt governments does not help in any way, and even causes a downward spiral of aid dependency. Foreign Aid, especially money from the World Bank, has been proven to be ineffective and harmful in the long run in Africa, and something needs to be done about it.
In the 1990’s, there were 27 major armed conflicts around the world, and 17 of those conflicts were in Africa. Africa also receives more foreign aid than any other region of the world. There are other factors, such as the takeover of natural resources and tribal disagreements, that contribute to conflicts and wars, but foreign aid is another incentive for different political groups to try to take over a certain country. Countries that receive foreign aid become almost too desirable for factions to resist taking over because they want control over those resources.
For example, some say that the civil wars fought in Somalia were fought for control of large-scale food aid (Moyo, Dead, 59). Also, when civil wars break out, aid agencies think that sending more aid, money or supplies, will help the problem or help the people affected, but really, in the long run, it just makes the conflict more heated because more is at stake (Easterly 151). Foreign aid causes more corruption. Donors are rightly concerned that foreign aid money that is supposed to be used for development is being used to fund corrupt and unproductive expenditures.
Experts say that 100 billion dollars of the World Bank’s loans for development have been used corruptly (Moyo, Dead, 52). Africa is known for its corrupt government officials. Monbutu, president of Zaire, stole five billion dollars from the twenty billion dollars the World Bank had given Zaire from 1965 to 1997. The sad thing is, the World Bank found out that Monbutu was stealing money in 1978 but did nothing to stop him and continued to give Zaire aid with no restrictions. Monbutu continued his greedy spending until he was finally cut off in 1990 (Easterly 149).
In 2009 Bakili Muluzi, former president of Malawi, was accused of stealing twelve million dollars of aid money, showing that the problem is improving very little (Moyo, “Why”). Because aid is not kept track of very closely and aid conditions have been shown to be ineffective, it is easy for corrupt officials to use it for their own benefit. Development agencies tell people that aid helps stop corruption by providing funds for ethics training and creating higher wages for public officials so there will be no need for corruption (Moyo, Dead, 48). However, in reality this does little to help.
If there was no aid, there would be nothing to tempt officials. Aid allows government officials to be lazy and not pay any attention to their people. Since the people do not have to pay taxes, because of the aid given to the country, they do not have a say in how the money is being used. This amounts to “no taxation without representation” in reverse. All that the government has to do is ask donors for the money and be poor enough to receive aid and they can stay in power without doing any work (Moyo, “Why”). Aid also allows corrupt governments to prosper and continue their rule of stealing from the people.
Not just aid money, but land and other personal property, making that country a risky place to invest in businesses. With fewer investments, the economic growth decreases, and with that, there are fewer job opportunities and increased poverty levels. Donors then give more aid because of the increasing poverty levels, which starts the whole cycle all over again (Moyo, Dead, 48). Corruption hinders growth. As previously described, entrepreneurs are less likely to invest in businesses that are in corrupt countries because they fear corrupt officials will take over the business.
If there are fewer investors investing, the economic growth will severely suffer. Corruption with public contracts also hurts growth, because public contracts are often given to those whose goal is not to do the best job for the lowest price, but to steal as much money from the project as they can. This produces low quality infrastructure projects, and poorly managed public services. Also, corrupt officials are prone to choose development projects that are easy to steal from, rather than what the public really needs to grow (Moyo, Dead, 50).
Foreign aid is not free, and countries still have to pay back some of the money being loaned to them. Twenty billion dollars is paid back by African countries to creditors each year, money which could be used for development projects like building schools and hospitals. Aid is not being used for development purposes because of corruption, and more money is being taken from the public to pay back aid that has been used corruptly (Moyo, “Why”). Foreign aid hurts the country’s economy by causing higher demands for all goods and therefore causing inflation.
Inflation is not bad in a normal economy when it is on a small scale, but aid places a vast amount of money into an economy that cannot support it, causing artificial inflation. As an effort to fix the high inflation rates, domestic policymakers hike up interest rates. By raising interest rates, fewer people will want to pay the high interest rates for investments causing investments to fall, and again, with fewer investments, the economic growth decreases and with that there are fewer job opportunities and an increase in poverty levels and more aid is brought in (Moyo, Dead, 62).
Foreign aid causes diminishing exports. This issue is known as “the Dutch disease”. Putting money into the struggling economy makes that country’s currency much stronger than it was before and stronger than the countries that it exports to. That means that the country’s exports will cost more in the international market, and therefore they will be unable to compete with other countries, destroying the export sector of their economy. This is devastating because, according to Dambisa Moyo, exports are a key ingredient for a developing country to start growing and providing for itself.
When aid hurts the export sector of the economy it really hurts the entire growth of the country (Moyo, Dead, 62). To stop the inflation and the diminishing exports that aid causes, the government has to use up the aid money. They do this by issuing bonds. For example, Uganda had to issue bonds to use up 700 million dollars in 2005. Tax payers have to pay 110 million dollars in interest a year (Moyo, Dead, 65). Bringing foreign aid in the form of goods into developing countries hurts local business owners.
For example, consider a family that owns a small business doing well enough just to support itself, but a foreign aid agency comes in and starts giving away the same product that the small business sells. The small business then goes out of business and that family cannot support itself. If the product that was given away becomes unusable, there is no one to buy or get it from because the aid has run out and the business that was selling the product is now gone as well.
In the long run it helps no one. Instead, if the foreign aid agency invested in the small business and equipped it with the resources needed to grow its business, they would have created more jobs and boosted the country’s economic growth. Even if the help was slight, at least it would be helping in some way. This idea was put into practice when a new approach to food aid was discussed at the 2005 Food Aid conference in Kansas City which has potential to help African farmers.
The approach discussed was to buy food from developing countries’ farmers to distribute to those in need, instead of bringing in American food and putting African farmers out of business (Moyo, Dead, 44). More ideas like this are what Africa needs in order to be rescued from the cycle of aid dependency. As shown one of the biggest problems with aid is that it is not being used responsibly by African governments. “In many cases, giving aid to Africa has been like giving money to a drunkard down the street expecting him to spend it on food.
Current approaches provide an illusion of progress while forestalling real breakthroughs” (Calderisi 220). In Robert Calderisi’s book Trouble with Africa: Why Foreign Aid Isn’t Working he lists “ten ways of changing Africa”. Many of them deal with cutting aid, making the government more transparent and Democratic. I would like to focus on a few of his points. One of Calderisi’s points is that he would like to see aid be drastically cut back in all countries. He says that if they have less money they would be forced to use it more wisely and thus it would cut frivolous spending.
Also cutting aid will hopefully make the country more independent and make them develop their own recourses and economy instead of relying so heavily on aid. Of course before they are able to receive any aid they need to make sure that all high government officials bank records are kept public. Another of his main points is that the aid should be focused on building a better infrastructure. By building better roads and communication lines it will bring countries and villages together and grow commercial markets (Calderisi 207-216). So you are probably thinking, “Well
this sounds nice, but how are we going to implement a plan like this? ” That is the hard part. It will be incredibly difficult. One way would be to increase supervision of aid agencies like the World Bank, but also NGOs. In the book, The Bottom Billion the author, Paul Collier, talks about how these agencies are incredibly controlled and hindered by public opinion. He says this about aid agencies: “They have to give unconditional debt relief. This is the fault of ordinary citizens who support vociferous lobbies without bothering to get informed. No aspect of domestic policy is run this badly.
The aid agencies are not run by fools; they are full of intelligent people severely constrained by what public opinion permits. ”(Collier 184). Another problem that aid agencies have with controlling and monitoring aid is that there are so many different agencies that conflict each other (Lancaster and Van Dusen viii. ) If we stream line agencies we will make them more effective. Calderisi also talks about how important it is to combine major aid agencies, especially the World Bank, International Monetary Fund, and the United Nations Development Program.
They all have different focuses and often their agendas contradict each other. If they were combined thy would be able to all be on the some page and be more effective. They would also need less administrators freeing up employees to be able to go out in the field and monitor what the aid is doing and how it could be better administered (Calderisi 216-217. ) “The problem is that aid is not benign—it’s malignant. No longer part of the potential solution, it’s part of the problem—in fact, aid is the problem. ” (Moyo Dead 47). Foreign aid causes conflicts, corruption, and poor economic conditions.
Aid also causes poor growth, both economical and social, and makes the poor poorer, thus making countries dependent on aid. Growth in Africa has decreased as aid, which is supposed to be increasing growth, increases. It is clear that something must be done to stop what aid is doing, to fix the damage that aid has caused, and to wean aid-dependant countries off aid.
Works Cited Calderisi, Robert. Trouble with Africa: Why Foreign Aid Isn’t Working. Gordonsville: Palgrave Macmillan , 2006 . eBook. Collier, Paul. The Bottom Billion: why the poorest countries are failing and what can be done about it.
New York: Oxford University Press, USA, 2009.eBook. Easterly, William. The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. London: Penguin Books, 2009. Print. Lancaster, Carol, and Ann Van Dusen.
Organizing U. S. Foreign Aid : Confronting the Challenges of the 21st Century. Washington, DC: Brookings Institution Press , 2005 . eBook. Moyo, Dambisa. Dead Aid: Why Aid is Not Working and How There is a Better Way for America. New York: Farrar,Straus and Giroux, 2009. Print. Moyo, Dambisa “Why Foreign Aid is Hurting Africa” Wall Street Journal 21 Mar. 2009. Wall Street Journal. Web. 3 Feb. 2011.