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The Therapy Sessions
Monday, January 24, 2005
 

Long boring post


(I love to read the Cranky Liberal because he is a thinking person who enjoys a good argument (I don't know if I'm a thiker or not, but I do love to fight). Anyway, a few weeks back he caught me glossing over a topic and he called me on it. It was just a quick post about the superiority of trade to aid in promoting Third World development (if you're a Blog Explosion reader who find such things terminally boring, now might be a good time to avert your eyes...). Cranky was right on everything he said, and much of what he'd said were things that I had wanted to touch on but did not - mainly because I was being lazy. So here I expound a little further to provide more clarity):

When I was a Peace Corps teacher in Sierra Leone, my principal surprised me one day with a gift: several cans of fish from Norway. My diet was low in protein and I enjoyed eating them. A few days later, I saw him and thanked him. He replied that I could thank him by helping him. He wanted to get a US government grant to build a pig farm for his school, and I could help.

The principal was a wealthy man, and he probably could have financed the pig farm with his own resources. The more I heard about his little project, the more it repelled me. The pig farm, which he said would be “for the students,” would be located behind his house, out of sight behind a wall. His wives and his seventeen children would take care of it.

But nothing raised my suspicion as much as this: I soon learned that the World Food Program had given him the cans of fish. They were for his students, and the principal was giving them away to make friends. Later, he started selling them to vendors in the market and pocketing the money.

Food intended to feed children was being used by the principal to make himself into a “big man,” a wealthy power broker in Africa.

Aid in Africa – and throughout the world - is often the story of unintended consequences.

When people argue about the necessity of giving more money in foreign aid to the poor countries of the world, I remember that “big man.” More foreign aid means more people like him being created. Foreign aid fans are horrified that one day the rich countries of the world will just stop giving foreign aid.

I’m ambivalent about that prospect: I think aid’s absence will make as little difference as its presence has in the last thirty years.

Africa, in particular, has systemic problems that will not be solved by a check from the West. We need new approaches to Africa.

Forty years of post-colonial guilt and aid money have not produced a single notable economic success. Not a single one. Nigeria, an oil-rich country which has received abundant aid, is every bit as poor per capita as Mauritania, which receives little aid and has little to sell. Kenya has received much: its economy is a mess, its government is increasingly repressive and its people are still very poor; Botswana has received little and its government is benign and its people are the wealthiest black Africans in Africa. Economic stagnation has affected all of these countries, with virtually every country in Sub-Saharan Africa facing a real decline in standards of living since the 1960’s.

I’m not talking about one time disaster aid; I’m talking about long term, government-to-government development aid. There is no correlation between this kind of aid received and economic growth. In contrast, the relationship between trade and development is sound. Countries that trade freely become rich. Half of Asia has already learned this lesson.

Aid, at least as it is currently known, does not generally solve problems in Africa. In the West, it may soothe consciences (the primary reason for it). But in Africa, aid is often part of the problem. It reinforces a toxic idea: in order to advance economically, Africans must curry favor with Western politicians.

The problem can be put bluntly: African governments are fakes. They have all the trappings of governmental authority: big buildings, presidential palaces, leaders in limos, and abundant office workers. But at the head of almost every agency is a corrupt man on the take, and the closer to the top you get, the more corruption you will see. Leaders pretend to fill a few vague criteria for donor nations, and then when the donor’s back is turned, they do pretty much as they please with the money in hand that they need to continue ruling. A typical country runs a budget that is largely financed by foreign aid, and every year these governments do precious little with it.

In addition, most foreign aid is tied; that is, it is to be used to purchase goods from the donor nations. Much of the aid money flowing into Africa comes in the form of food credits, allowing these countries to buy subsidized, artificially cheap grain from American and European farmers.

What danger is there in cheap food? The results can be seen in African markets, where food prices are kept so low that farming can never be made into a profitable enterprise. Food is Africa’s most pressing concern. Farming in Africa is difficult enough, even when farmers have a decent economic incentive to farm. But if you make grain as cheap as dirt, people will have to eat mud, because no one is going to grow anything.

Government officials somehow always end up with the cheap imported grain (a coincidence, certainly). They use it to make friends, much like my principal did. The lucky vendors with connections (instead of farms) can sell at any price, mainly because they have no farms and no overhead. All of the price is profit for them! Thus, connections to big men matter more than work and effort. Hard working farmers produce little, because there is no profit in doing so. They would be fools to invest in their farms, even if they could make enough money.

What do they do? The young enterprising farmers quit the farms altogether, and head for the cities where they hope to get jobs. There they live in huge shanty ghettoes. These de-facto cities are sanitation nightmares, and these young men, released from their obligations to Africa’s extended family network, often turn to crime to feed themselves.

And what do they eat? The cheap imported subsidized grain!

Of course.

According to the World Bank, African farms could potentially produce 100 times what they do today; yet most of the fields are fallow and most young men view farming as backward, impoverishing profession (imagine that!). Meanwhile, most African children suffer from malnutrition.

Imported subsidized grain helps keep farmers poor and keeps dictators in power. No one in Europe or the US intended this; they intended to “save family farms,” keep domestic food prices protected or feed the malnourished Africans.
The road to hell is paved with good intentions.

Sadly, too, most of the cash that gets to Africa is wasted. There are thousands of examples of “white elephants,” foreign aid projects that have run amok in Africa: half-built dams that ran over budget because of corruption, tractors rusting in weedy fields, and paved roads that end mysteriously in the middle of nowhere.

Saying that the current strategy is not working is not the ranting of a conservative nutjob; it is recognizing an obvious fact. Americans are frustrated with achievements of all the aid, and this is understandable. The question is where we go from here. We shouldn’t merely continue as we are doing out of frustration.

The liberal bong dream right now is something along the lines of a Marshal Plan for Africa. Though certainly well intended, it would fail miserably. Europe – where th Marshall Plan did work - was a different case entirely. We had an advantage in Europe in working with modern, but devastated, economies (it was, in effect, disaster relief). If you wanted to build a hospital in West Berlin, you would be able to find plumbers, electricians, bricklayers, doctors, nurses…In Africa, you will find none of those things. What do you do when the electricity goes out? (Light a candle, just like the Africans do.)

This plan would see corrupt leaders grow fat and rich, their small apartments on the French Riveria replaced by luxurious villas and mansions. Africa would continue to fester.

I suggest a different approach. I think that in most Sub-Saharan African countries, most aid given to the governments should be ended, and we should marshal our resources for the few countries that are willing to take the painful steps needed to solve their problems. This will concentrate our aid in countries that might just use it wisely. The painful steps are the very structural adjustment programs liberals describe as “harsh.”

They are harsh, but they are necessary.

What are the painful steps? They are basic steps that any are the foundation of any working economy.

African nations must reduce budget deficits (which are the highest in the world). They desperately need to end price controls, particularly on food and energy. Price controls favor the rich in the cities while they impoverish farmers, encourage scarcity, and create black markets. Countries must stop recklessly printing worthless currency (which causes inflation), develop fair systems of taxation (so that citizens will develop a proprietary understanding of their governments), and clamp down on corruption (which is difficult if people do not have a proprietary understanding of their government).

It is vital for countries to open their borders to trade with (at least) other African countries. Right now, working for the customs department is the road to wealth for mid-level African bureaucrats: the bribes and tariffs are wealth creation, African style. Freeing trade will improve access to needed goods (especially food), stimulate competition and improve efficiency. Standards of living and diets will not be far behind.

State-owned enterprises, which fill the pockets of corrupt leaders, should be sold. Most of them divert government money and attention, and the collusion of business and government interests inevitably leads to corruption. (Imagine if the owner of your company could have you arrested and tortured for not working hard enough. This has been the case in the Congo. Cotonniere, the state-owned cotton monopoly, makes government officials rich and the police beat farmers when they fail to grow enough cotton.) Business and government interests are best kept separate. African property ownership thoroughly needs to be reformed and legitimized. Currently, Africans are allowed to work lands that have been in their families for centuries, but they do not own them and they can lose them at any time. Formal ownership of land would make households wealthier, give homeowners collateral so that they can formally borrow money, and reduce tribalism. It would also strengthen African legal systems, which in most cases are in their infancy.

What countries would practice such radical economic policies?

We live in one: these are the very same policies practiced by the rich nations of the world, and they are the primary reason that these countries maintain their wealth. Africa has suffered for thirty years with nationalized industries, Marxist leaders preaching economic self-sufficiency and independence from the outside world. Bad economic policy is at the heart of African poverty.

What can the U.S. do? We could certainly stop dumping cheap subsidized food on them, for one. But the most important thing is simple: give African countries freedom to sell their products on the American market. West Africa would love to sell its fine cotton and cloth to Americans, not to mention its fruit; Haiti (by any measure an African nation) would love to sell us sugar. If it weren’t for US law, the flood of hard currency would certainly transform these economies much more than any aid package would. The opening of the US market could be used as a reward for any country that is willing to undergo such painful structural reforms.

If countries are uncooperative, should we just give up? No, of course not. When we cannot work with governments, we should work with NGO’s. NGO’s are more credible and they are more concerned with results. Many dictators will find this unacceptable. They will insist that any money that is spent in their countries pass through their hands first. That should be all we need to know.

What policies will work? Who knows? Experiment!

Establish microcredit loaning programs with women in Ghana (something only an NGO could accomplish). Women will be more likely to save and spend profits on their children, improving nutrition and education.

Help NGO’s work with existing cooperatives to buy trucks to transport food from areas where it is plentiful to places where it is scarce. For example, helping coastal fishermen bring fish two hundred miles inland (or maybe even someday across borders) where they will fetch five times the price for the people who caught them.

Give start-up money to an NGO that wishes to start for-profit fish farms in Malawi. Cooperative fish farms were a dismal failure: a single farmer did all of the work, and his neighbors ate his fish. But there was nothing wrong with the ponds! An NGO wants to work with the farmer to sell his fish on the market? Think it won’t work? Let’s find out!

What works in Africa will be small scale and small impact, but at least it will work.

Africa’s situation is desperate. If it grows twice as fast as it grows now, it will still fall behind the rest of the world. Desperation, though, does not justify the rampant corruption and financial mismanagement that is so woefully common around the continent.

We are not using our brains if we think with our hearts. We should not give money just because it feels good. Such generosity helps no one. Africa’s situation is precarious, but there is still hope. But we must have the courage to discontinue failed policies.

Africa and the other poor nations of the world will not be saved by good intentions.

In fact, too many more “good intentions” just might do them in.


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