Governments need cash
The fact of the matter is, governments need cash. This is true regardless of political leanings – whether a socialist government, which endeavours to provide all goods and services to its citizens, or a more market-driven government, which relies on the markets to provide some public goods (that is, goods and services for which there is a broad public benefit, but for which no one person bears the cost, like, again, a lamppost).
Perhaps nowhere is the role of government more crucial – as a strategist, as a coordinator and even, to some extent, as a financier – than in poor developing countries. For at the early stages of development, the nascent private sector is simply not large enough to assume a central developmental role. Traditionally, this is where aid stepped in. But, as this book has argued, aid has not delivered any meaningful or substantial economic performance. Even if it were true that aid had contributed to economic growth, there are two compelling reasons why Africa should seek alternatives to finance its development.
The donors are growing weary. As shown earlier, over the past twenty years foreign aid to Africa has been on the decline. Whether it is because donors don’t believe it works, they don’t have the cash or they simply don’t care, the fact remains that the donors’ African aid purse is slowly shrinking.
Despite the outpourings of Live 8, one survey found that the US public’s desire to reduce foreign aid outranked its fear of nuclear war. In a 1980 poll 82 per cent of respondents said foreign economic assistance should be cut.1 This may, at least in part, explain why, when it comes down to it, most donor countries have failed to meet their pledges of 0.7 per cent of GDP made in Monterrey in 2002.
Another reason for the decline in aid flows may be that donor countries are facing their own financial pressures. It has been estimated that Bush’s war on terror – being fought in Iraq, Afghanistan and Pakistan – will cost the US almost US$3 trillion.2Demographic shifts are putting further strain on Western economies. Increasing numbers of retirees and fewer productive young people (owing to the ageing baby boomers and lower birth rates) means increasing health costs, lower tax revenues and less to give away. And of course it is worth remembering that the 2008 credit crisis has put immense pressure on the fiscal balances of rich (and rapidly emerging) countries; yet another stark reminder that foreign donor support is an unreliable if not dangerous palliative. For African policymakers to view aid as permanent (even with the noise made by aid proponents for it to be increased) is foolhardy.
Weaning off the addiction: no one said it would be easy
Africa is addicted to aid. For the past sixty years it has been fed aid. Like any addict it needs and depends on its regular fix, finding it hard, if not impossible, to contemplate existence in an aid-less world. In Africa, the West has found its perfect client to deal to.
This book provides a blueprint, a road map, for Africa to wean itself off aid. This goal cannot be easily achieved without the cooperation of the donors. And like the challenges someone addicted to drugs might face, the withdrawal is bound to be painful. Drug-taker, or drug-pusher, in the end someone has to have the courage to say no.
What follows is a menu of alternatives to fund economic development across poor countries. If implemented in the most efficient way, each of these solutions will help to dramatically reduce Africa’s dependency on aid. The alternatives to aid are predicated on transparency, do not foster rampant corruption, and through their development provide the life-blood through which Africa’s social capital and economies can grow.
The Dead Aid proposal envisages a gradual (but uncompromising) reduction in systematic aid over a five- to ten-year period. However worthwhile the goal to reduce and even eliminate aid is, it would not be practical or realistic to see aid immediately drop to zero. Nor, in the interim, might it be desirable.
A reasonable person could, for example, argue that aid in Africa has not worked precisely because it has not been constructed with the idea of promoting growth. The politically driven aid and tied-aid examples discussed in earlier chapters underscore the point that these types of aid flows do not promote development, and nor were they intended to in the first place. That, if executed in a moderate way, Botswana’s experience with aid (detailed earlier) is exactly what we would want to see: a country that began with a high ratio of aid to GDP uses the aid wisely to provide important public goods that help support good policies and sound governance that lays the foundation for robust growth. Over time, the ratio of aid to GDP would fall as a country developed. In this way, Botswana would seem like the poster-child for what aid can do in a well-managed country.
It might very well be the case that more-modest aid programmes that are actually designed to address the critical problems faced by African countries can deliver some economic value. The Dead Aid proposal does allow for this perspective, by leaving room for modest amounts of aid to be part of Africa’s development financing strategy. Systematic aid will be a component of the Dead Aid proposal, but only insofar as its presence decreases as other financing alternatives take hold. The ultimate aim is an aid-free world.