Aid To Africa

June 17, 2008 10:24 AM

 

Yesterday I took part in a BBC World Service programme to discuss aid to Africa.

In case you missed it, an international panel of the great and the good - everyone from Kofi Annan to Tony Blair - has just issued a report calling for aid to Africa to be increased drastically. The Africa Progress Panel says western taxpayers are falling way behind on the pledge made in 2005 at Gleneagles to double African aid by 2010. Their suggested remedy is to impose new ringfenced taxes - 'Possible sources include currency transaction taxes, global environmental taxes such as carbon taxes, taxes on international air travel and freight transport, and a global lottery'.

A bit of factual background:

  • Since African countries started gaining independence some half century ago, Western taxpayers have pumped in a lot of aid - estimates vary from $600bn to $1 trillion (cf say, the Apollo moon programme which cost $25bn all-in)
  • The UK currently spends £1.25bn pa in direct aid to Africa, and at least the same again in debt write-offs
  • African growth overall has been very disappointing through this period, and many countries remain stuck in poverty: according to the World Bank, getting on for half of the countries still have per capita GDP below $1,000 pa
  • The good news is that growth has picked up in recent years, and we should certainly rejoice at that - the IMF overview chart for sub-Saharan Africa is shown above
  • But growth is still very patchy: oil exporters have naturally done best, with average per capita growth rates over the last five years of 5% pa +; whereas in the quarter of countries the IMF rates as "fragile", per capita GDP growth has been less than 0.5% pa.

The programme was a phone-in with a few studio guests, albeit said guests were sprayed around in soundproof broadcasting booths all over the place, from Guildford to Nairobi. And with the listener calls coming largely from Africa, I confidently expected to be in a minority of one in questioning increased tax-funded aid. But that's not how it turned out - not by a long chalk. In fact, the calls were a revelation.

To start with, the guest from Nairobi - an African with a business magazine called African Executive -called for all development aid to be ended forthwith: only humanitarian aid (disaster relief) should remain. He reckoned Africans are held back by cheque book dictatorship from the West. Left to themselves they would quite rapidly develop their own entrepreneurial skills and businesses, raising their own capital in the process.

A quick calculation told me that approach would save us 90% of our aid budget, since currently only 10% of it is humanitarian aid (about £0.5bn pa out of DfID's £5bn budget).

Then Mohammed called from Liberia - one of the very poorest African countries, with a per capita GDP of just $500 pa- to say virtually the same thing. He believes that aid is deeply corrosive because it makes people lazy and helpless. India and China are growing because they've helped themselves.

Other callers said that aid is pretty useless anyway, since, as currently structured it just ends up with corrupt local politicians (on some estimates, 25% of African GDP is swallowed up in corruption of one kind or another).

What came through loud and clear was a burning desire for Africa to make its own way - not to be held in thrall to the global aid industry (except for one caller who suggested the West send out some people who understand how to run countries so they could take over from bad native rulers: it was gently pointed out to him that used to be called the Empire).

So, far from being on the coconut shy myself, it was actually the man from the global aid industry - Max Lawson of Oxfam - who was on the back foot, essentially having to defend his business.

Which he did very professionally - yes, everyone accepts huge mistakes have been made in the past - corruption, bonkers projects, etc etc - but obviously we're all so much better at it now... aid is not an alternative to self-help - it's not an either/or... today's well directed programmes are having a huge impact... aid can produce economic growth - it was Japanese aid that gave China its economic boom...

Much of what Max said cannot be proved one way or the other, but can that last bit be right? Japanese aid was key to the Chinese miracle? On returning home I checked the numbers. In the last thirty years, Japan has lent China $33bn, an average of about $1bn pa. The Chinese economy is $5,330 bn. So $1bn pa equals a capital injection of 0.02%, which even 30 years ago, was fairly trivial. In fact, the rest of us reckon it was China's own economic reforms that got its economy motoring, just like happened in India. But of course, that explanation doesn't fit The Aid Model.

Conclusions?

The more I find out about tax-funded international aid, the more I think it really is primarily about keeping the global aid industry in business. Of course we should have some tax-funded aid for emergency humanitarian relief, and probably basic disease treatment as well. But so far, I haven't heard anything to convince me the 90% of our aid budget spent on so-called development aid isn't a gigantic waste of money. When even the people in poor recipient countries say development aid is harmful, something is seriously wrong.

Good luck to genuine private charity as practised by Bill Gates - he's not only raising the money, he's also personally directing its proper use. We need more of that. But tax-funded government aid is entirely different. It suffers from all the usual big government problems, and it's quite possibly holding back the world's poor from helping themselves. It's welfare dependency on a truly tragic scale.

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