Smart Aid and the Unchaining of Africa
An Interview with George Ayittey
YJIA: Foreign aid has become an increasingly hot topic, particularly among students and in academia. Aid arguments often fall into one of two camps: that the aid industry is inefficient and ineffective, and should therefore be drastically reformed and even reduced; or that aid can effectively fight poverty, especially if scaled-up. Do you think this dichotomous framework is useful? Do you favor a side?
GA: No, I don’t think this dichotomy is useful because there is much confusion surrounding the aid debate. There are three types of foreign aid: humanitarian relief aid, given to victims of natural disasters such as earthquakes, cyclones and floods; military aid; and economic development assistance. Few have qualms with humanitarian aid and I am sure most would agree that military aid to tyrannical regimes in Africa is the least desirable. Much misconception, however, surrounds the third, also known as Official Development Assistance, or ODA. Contrary to popular misconceptions, ODA is not “free.” It is essentially a “soft loan,” or loan granted on extremely generous or “concessionary” terms. For example, an African government that needs $50 million to build a dam may borrow the said amount from a foreign private bank at 10 percent rate of interest for ten years – a prototype of a typical foreign commercial loan. However, a Western government aid agency, say the U.S. Agency for International Development (USAID), may provide the funds at two percent interest for 20 years, with a five year grace period. This ODA differs from a normal foreign commercial loan in three respects: It has a lower rate of interest, a longer term to maturity and provides a “grace period.” Still, it is a “soft loan” that must be paid back; it is not free. This “soft loan” or aid proper is a “government-to-government” transfer from, for example, the U.S. government to an African government under bilateral agreements or from a multi-lateral development bank (MDB) such as the World Bank to an African government. Efforts were made by the Bush administration through its Millennium Challenge Accounts (MCA) to convert ODA into grants, which are free.
On ODA itself, there are several strands in the debate. I can identify at least four of them:
Do rich countries have a moral obligation to provide development assistance?
How effective has aid to Africa been?
Does Africa need more or less aid?
How best can Africa be helped?
I would leave morality out of the analysis because the case for helping Africa can be made on economic grounds as well. If Africa were prosperous and growing, it would buy more American goods and services. On the effectiveness of aid, some point to the Marshall Plan that was used to rebuild Western Europe after WWII and the experience of the Asian Tigers.
However, the record of foreign aid to Africa over the past four decades has been one of dismal failure. I am in favor of reforming aid but getting Western aid policies changed is like asking African governments to implement political reform. They perform the “Babangida boogie” – one step forward, three steps back, a flip and a sidekick to land on a fat Swiss bank account. Similarly, reforming aid is a frustrating experience because of vested interests and institutional resistance. Aid has become an “industry,” with its own powerful lobbyists who seek a continuation of current programs at increased funding. Since Congressional requirements and regulations channel over 70 percent of all U.S. aid projects to American contractors and sub-contractors, there is every incentive on the contractors’ part to clamor for continued funding. According to a Clinton administration review report, the United States spent $27.7 billion on foreign assistance in the 1980s. However, “about 75 percent of that money was spent in the United States to purchase such items as food and equipment sent abroad or the salaries of aid workers”.[1] As George Soros once said, “Foreign aid generally serves the interests of donors rather than recipients”.[2] Evidently, it is not surprising that it will be difficult to reform aid or stop it.
Regardless or whether aid can be reformed, the issue is moot or irrelevant in my view. The fact is, the foreign aid resources Africa desperately needs for self-sustaining growth and prosperity can be found in Africa itself. The problem is that Africa’s begging bowl leaks horribly. In August 2004, an African Union report claimed that Africa loses an estimated $148 billion annually to corrupt practices, a figure which represents 25 percent of the continent’s Gross Domestic Product (GDP). But this is a gross underestimate. According to one United Nations estimate, $200 billion or 90 percent of the sub-Saharan part of the continent’s GDP was shipped to foreign banks in 1991 alone. Civil wars continue to wreak devastation on African economies, costing at least $15 billion annually in lost output, wreckage of infrastructure, and refugee crises. The civil wars are over power, not redrawing artificial colonial borders. They are caused by the adamant refusal of African leaders to relinquish or share political power, and they are started by a politically-excluded group. Additionally, preference of industry over agriculture and misguided statist policies of price controls and marketing boards have devastated Africa’s agriculture, making it difficult for Africa to feed itself. By 2000, Africa’s food imports had reached $18.7 billion, slightly more than donor assistance of $18.6 billion to Africa.
YJIA: You have extensively detailed the myriad instances of the gross mismanagement and outright squandering of foreign aid by corrupt leadership regimes across Africa. Yet development experts like Jeffrey Sachs are calling for a tripling of aid to between $135 and $195 billion a year by 2015 to help strengthen the government sector’s poverty alleviation capacity. How do you respond to this?
GA: I am sure Professor Jeffrey Sachs means well. Unfortunately, his approach flies in the face of reality. He does not acknowledge that past aid programs in Africa have failed miserably. Second, his approach is premised on a rather naïve assumption that there exists in each African country an entity called “government” that cares about its people, represents the people and responds to the needs of the people. That assumption confutes reality.
What exists in many African countries is what I call a “vampire state” — a government hijacked by a phalanx of bandits and crooks, who use the instruments of the state to suck the economic vitality out of the people to enrich themselves, their cronies and tribesmen. All others are excluded. The richest persons in Africa are heads of state and ministers. Quite often, the chief bandit is the head of state himself. A stake needs to be driven through the heart of this vampire state, not given more resources to strengthen its poverty creation capacity. The “government” in many African countries has been the cause of worsening poverty – not one of alleviation.
YJIA: Some say that recent global changes like the election of Barack Obama and the international financial crisis provide a unique opportunity for re-thinking aid. Do you agree, and if so, what should a new aid paradigm look like?
GA: The global financial crisis has hit Africa severely, and I believe that rich countries should help Africa, but not by pushing more aid through the same dysfunctional channels, as Professor Jeffrey Sachs wants to. Business as usual is no longer an option, which is what both Dambisa Moyo [author of Dead Aid] and I are against. Moyo wants all aid stopped in five years. This won’t happen because there are too many vested interests.
With the current global financial crisis and tight budgets all around, I believe that there should be some rethinking about aid. In my view, there are better ways of helping Africa effectively with less aid money – if aid programs can be reformed. This approach is what I call “smart aid”.
The basic problem with current aid programs is that it is “leader-centered” and “partnership-driven.” Aid is provided by “development partners” for budgetary support on condition that certain reform initiatives be implemented by the recipient country. But, as we all know, Africa’s autocrats are not interested in reform, period. They play the donors for a dupe.
The reform process has stalled through vexatious chicanery, willful deception, and vaunted acrobatics. Only sixteen out of the 54 African countries are democratic and fewer than 8 African countries are “economic success stories.” Intellectual freedom remains in the Stalinist era: only 8 African countries have a free and independent media. But without new leadership and genuine reform, more countries will implode. No amount of increased aid or debt relief will help Africa until the ruling elites clean up their act. And without reform, more African countries will implode.
Smart aid is that which would empower the African people (African civil society groups) to monitor how the aid money is being spent and to instigate reform from within. Empowerment requires arming the African people with information, the freedom and the institutional means to unchain themselves from the vicious grip of poverty and oppression. Further, to effect change from within and assure better governance, Africans need the following institutions and foreign aid should be tied, not on promises of African leaders but to the establishment of these critical institutions:
An independent central bank to assure monetary and economic stability, as well as stanch capital flight out of Africa. If possible, governors of central banks in a region, for example West Africa, may be rotated to achieve such independence. The importance of this institution resides in the fact that the ruling bandits not only plunder the central bank but also use its facilities to transfer the loot abroad.
An independent judiciary, which is essential for the rule of law. Supreme Court judges may also be rotated within a region.
A free and independent media to ensure free flow of information. The first step to solving a social problem is to expose it, which is the business of news practitioners. The state-controlled or state-owned media would not expose corruption, repression, human rights violations and other crimes against humanity. In fact, it is far easier to plunder and repress people when they are kept in the dark. The media needs to be taken out of the hands of government.
An independent Electoral Commission to avoid situations where African despots write electoral rules, appoint a fawning coterie of sycophants as electoral commissioners, throw opposition leaders in jail and hold coconut elections to return themselves to power.
An efficient and professional civil service, which will deliver essential social services to the people on the basis of need and not on the basis of ethnicity or political affiliation.
The establishment of a neutral and professional armed and security forces.
The establishment of these institutions would empower Africans to instigate change from within. For example, the two great antidotes against corruption are an independent media and an independent judiciary. But only eight African countries have a free media in 2003, according Freedom House. The leaders or the ruling elites cannot establish these institutions; they must be established by civil society. Leaders won’t establish institutions that will check their own arbitrary use of power.
For example, Ethiopia is a country of 80 million people, but it has only one radio and television station, both of which are government-controlled. Obviously, there is no point in talking about curbing corruption in that country because the state-owned media won’t expose it. Therefore, fund the establishment of independent or private radio stations. If the tyrannical regime of President Meles Zenawi shuts its down, cut off Western aid to the country.
I was one of the architects of change in Ghana, and we could not have done it without the help of FM radio stations. The media has been instrumental in ensuring free and fair elections in Africa recently. In Ghana’s December 2000 elections, for example, private FM stations were crucial in enforcing transparency. “Live radio, it turned out, is a better and cheaper monitor of elections than the local and international observer teams, whose reports will emerge only after the battle has been lost and won” said The Economist regarding Ghana’s election.[3] As Thomas Friedman, a New York Times columnist, also pointed out, the four most democratic countries in West Africa today — Benin, Ghana, Mali and Senegal — all have private, flourishing FM talk radio stations. “Let’s stop sending Africa lectures on democracy. Let’s instead make all aid, all IMF-World Bank loans, all debt relief conditional on African governments’ permitting free FM radio stations. Africans will do the rest,” he wrote.[4]
Finally, the West should stop its arcane guilt tripping over Africa. Africa is not a child to be smothered in compassion. Neither does Africa need tough love. What it needs is a cold bath. That is, the West should treat Africa in just the same way as it dealt with the former Soviet Union and the Eastern bloc. There, the West did not form “partnerships” with communist regimes and hand over aid money on vain promises of reform. Instead, it helped civil society groups, such as Solidarity in Czechoslovakia and established Radio Free Europe. Why isn’t the West helping civil society groups in Africa? Why hasn’t the West established Radio Free Africa? When I mentioned this to Secretary of State, Hillary Clinton, on July 28, 2008 at a State Department dinner, she said she liked the idea.
Africa is poor because it is not free. Radio Free Africa will do for Africa what Radio Free Europe did to the former Soviet Union. For more information, visit our website, www.radiofreeafrica.org.
YJIA: Thank you for your time.
GA: Thank you.
Endnotes
Thomas W. Lippman, “U.S. Foreign Aid Overhaul Urged; Goals, Not Nations, Would Be Funded,” The Washington Post, September 18, 1993, p. A8.
David Bank, “Soros Insists Government Funding Must Raise Philanthropy for Gains,” The Wall Street Journal, March 14, 2002, p. B1.
“Ghana: Taking Part,” The Economist, December 16, 2000, p. 54.
Thomas Friedman, “Low Tech Democracy,” The New York Times, May 1, 2001, p. A13.