To claim that the decades’ worth of aid Africa has received from the West has achieved little would be an understatement. Africa still remains the poorest continent in the world with a virtually non-existent economy, corrupt and inefficient governments, brutal civil wars, and a population ravaged by diseases such as malaria and AIDS. It may be clichéd to say that “insanity is doing the same thing over and over again and expecting different results,” yet that is exactly what politicians, NGOs and Irish rock stars do when they tell us that only more aid can help Africa. But what if aid is not the solution? What if aid — or, at least, our management of it — is actually the problem? This is the claim of Zambian economist Dambisa Moyo in her book Dead Aid, in which she argues that the bankrolling of corrupt governments has led to the miserable state Africa is in.
Moyo claims that the best way to get Africa out of poverty and towards economic development, to rival China and India, would be for the West to announce that within five years all aid would be completely cut off. This course of action, however, seems to be politically unfeasible. Instead, we in the West should look at ways to better spend our money to ensure we are actually helping the people of Africa. To do so, we should follow a few key guidelines when enacting aid programs.
The first is specialization. Currently, Canada shells out five billion dollars in foreign aid. This amount seems substantial, but it becomes significantly less so when we realize that it is spread across many jurisdictions. Instead of giving small amounts of money to multiple countries, Canada should focus the entire sum on one or two. It would be hard to argue that five billion dollars would make little difference to, say, Gabon or Congo-Brazzaville. This would also raise accountability on both sides by making the system more transparent. Canadians could look to Gabon and clearly see how their aid money were being spent without having to factor in the actions of several foreign governments.
The concept of partnership could be taken further by allowing the free flow of money and people between Canada and countries in Africa. Canadians could easily invest their money in businesses in Congo-Brazzaville without tariff restrictions, while Congolese students could attend Canadian universities and work in the Canadian economy as if they were native citizens; such a program was adopted in post-war Europe through the Marshall Plan. Southern Europeans worked for several months of the year in more developed European countries for competitive wages that were sent back to their home countries. From the received amount, workers’ families commanded significantly more purchasing power. The second practice the West should adopt is targeted investment in infrastructure. Moyo explains that this has been a driving force behind China’s rapid rise. Telecom, roads, rail, airports, sea ports, canals — these not only employ the local population throughout their construction, but also create an environment within which private businesses can more easily compete and grow.
Throughout the development process, however, the West must maintain a focus on rights, demanding freedom of speech, the press, movement, economic exchange and the right to own property. Ethical arguments for these rights aside, there are practical developmental reasons why they should be enshrined in law and fervently protected. Peruvian economist Hernando de Soto argues in his book The Mystery of Capital that the reason capitalism does not produce the same results in the Third World as it does in the West is that most Third World nations lack real property rights laws. The solution then would be to deed the lands of shantytowns and tribal villages to the people that inhabit them, ensuring they have a stake in economic growth. Furthermore, in his book The Rational Optimist, science writer Matt Ridley explains that an open society is the best assurance of economic prosperity because ideas are allowed to freely compete, combine, and evolve. This has also been a strong critique of the potential for China’s economic supremacy in the world — because speech is so restricted, China has an economy based on imitation rather than innovation, which handicaps the potential for real development in the long term.
If foreign aid is merely the cost Western citizens bear to feel good about themselves, then there is no reason to change our approach. However, if we actually desire to see real development in Africa then Canada will have to adopt a new approach to foreign aid. If we focus our efforts on one or two countries, ensure the aid is invested in infrastructure, and that rights are upheld, we can unleash the potential of an entire continent and pull hundreds of millions of people out of grinding poverty to create a brighter future for generations to come.
-David Woolley
In recent years, China has not only become the second-largest economy in the world, but has also begun to invest massively in the developing world — particularly Africa. Nearly overnight, China became a key player in the international development arena. However, its approach consists not of aid but direct investment. So far, its efforts have been hugely successful. Brazil and India are likely only ten to fifteen years behind China. If Canada (and indeed, the rest of the developed world) wants to continue to matter in development, it is time that they get serious.
This means making big changes to the status quo. Most aid programs are ineffective to the point of irrelevance. Not only do they fall short of their objectives, but they also lead to dependence, and according to their harshest critics, neocolonialism. Attempts to tie aid to development goals are universally branded as draconian. As a result, there is little change, and conditions in the developing world continue to worsen. By contrast, the Chinese approach generates significant economic growth and has nearly immediate, tangible impacts. However, far too much of the benefits are enjoyed by Chinese companies — state-sponsored or otherwise — and local business and political elites.
It is time for a new approach to development that emphasizes true economic sustainability. This means that the benefits from development should not only persist through time, but also help as much of the population as possible. Otherwise, development efforts do more to fatten offshore bank accounts than provide the basis for true prosperity. Moreover, it is crucial that the new approach to development emphasize experimentation.
One way of building economic sustainability is using bottom-up approaches to development. Microfinance, which sees community banks make very small loans to individuals to help them start businesses, is the best known approach. Another approach might have a bank or other institution purchase something for a small business and receive in exchange a small stake in the businesses’ future earnings. Eventually, these efforts might culminate in the development of a more modern financial and legal system, which would better allow people to start and benefit from businesses. The key effect of these efforts is to take power from elites and distribute it to citizens.
Another approach to economic sustainability is building appropriate infrastructure, which can be easily scaled up as the economy grows. Some of the required infrastructure should be traditional, particularly in the area of transportation, where road-building, electrification, and laying rail may make the difference between nineteenth and twenty-first century for remote areas. However, some of the infrastructure could be more modern, such as improved telecommunications networks to allow entrepreneurs and their clients to communicate and interact more effectively. These infrastructural improvements should be carefully designed so that they can be mostly built and maintained by local firms. These goals of economic sustainability and the improvement of infrastructure are not new ones, but they remain priorities. The challenge is how to implement them. In order to develop better ways of reaching these goals, the new approach to development should consciously conduct experiments to improve the design and delivery of their programs. These efforts should aim to take after Esther Dufflot, an MIT economics professor whose rigorous experiments proved the power of incentives to convince parents to vaccinate their children. Her experimental approach could be applied to the gamut of development efforts, to identify which ones make effective use of incentives and which fall short.
The ideal result of this new approach would be increased economic growth, obtained primarily by making it easier for local firms to get started and to do business. However, in several cases, it is likely that we would find that there is not enough money available to take advantage of expensive opportunities, such as in mining. In this case, it would be desirable for companies from the developed world to continue being involved, as Chinese firms have been in recent years. However, it is crucial that Canada update the laws governing foreign operations to ensure that the profits of Canadian companies do not come at the expense of human rights.
While Canada will not be able to compete with China on the scope of its investments in the developing world, it surely can compete on their effectiveness. Indeed, Canada can and should come to lead the developed world in pioneering a new approach to development, which combines traditional approaches with newer ones and recognizes the importance of economic growth. Ideally, the result will be a safer, more stable world, and several new trading partners for Canadian firms and individuals.
Patrick Baud
