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Sunday, 24 May 2009

Aid Cronies

An important contribution to the aid debate from Jeff Sachs addresses the contradictions within the growing anti-aid brigade :

The debate about foreign aid has become farcical. The big opponents of aid today are Dambisa Moyo, an African-born economist who reportedly received scholarships so that she could go to Harvard and Oxford but sees nothing wrong with denying $10 in aid to an African child for an anti-malaria bed net. Her colleague in opposing aid, Bill Easterly, received large-scale government support from the National Science Foundation for his own graduate training.

I certainly don't begrudge any of them the help that they got. Far from it. I believe in this kind of help. And I'd find Moyo's views cruel and mistaken even she did not get the scholarships that have been reported (Easterly mentioned his receipt of NSF support in the same book in which he denounces aid). I begrudge them trying to pull up the ladder for those still left behind. Before peddling their simplistic concoction of free markets and self-help, they and we should think about the realities of life, in which all of us need help at some time or other and in countless ways, and even more importantly we should think about the life-and-death consequences for impoverished people who are denied that help.

Nine million children die each year of extreme poverty and disease conditions which are almost all preventable or treatable or both. Impoverished countries, with impoverished governments, can't solve these problems on their own. Yet with help they can. The Global Fund to Fight AIDS, TB, and Malaria, and the Global Alliance on Vaccines and Immunizations are both saving lives by the millions, and at remarkably low cost. Goldman Sachs, Ms. Moyo's former employer, gives out more in annual bonuses to its workers than the entire rich world gives to the Global Fund each year to help save the lives of poor children. And when Goldman Sachs got into financial trouble it got bailed-out by the US Government. Rich people have an uncanny ability to oppose aid for everybody but themselves.

Recently Paul Kagame, President of Rwanda, wrote an op-ed for the Financial Times praising Moyo's fresh thinking. This is extraordinary. His government has depended on aid for more than a decade. Nearly half the budget revenues currently come from aid. Rwanda currently imports around $800 million of merchandise each year, but only earns $250 million or so in exports. So how does it do it? Aid, of course, helped to pay for around $450 million of the imports. Without foreign aid, Rwanda's pathbreaking public health successes and strong current economic growth would collapse. Kagame's op-ed did not help FT readers to understand this.

Americans are predisposed to like the anti-aid message. They believe that the poor have only themselves (or perhaps their governments) to blame. They overestimate the actual aid from the US by around thirty times, so they imagine that vast sums are flowing to Africa that are then squandered. Many believe, typically in private, that by saving African children we would be creating a population explosion, so better to let the kids die now rather than grow up hungry. (I'm asked about this constantly, usually in whispers, after lectures). They don't understand the most basic point of worldwide experience: when children survive rather than die in large numbers, households choose to have many fewer children, in fact more than compensating for the decline in child mortality. Africa's high child mortality is ironically a core reason why Africa's population is continuing to soar rather than stabilize as in other parts of the world.

Of course, most Americans know little about the many crucially successful aid efforts, because Moyo, Easterly, and others lump all kinds of programs - the good and the bad - into one big undifferentiated mass, rather than helping people to understand what is working and how it can be expanded, and what is not working, and should therefore be cut back. Nor do Americans hear that many poor countries graduate from the need for aid over time, precisely because aid programs help to spur economic growth and successfully prepare countries to tackle future priorities. US aid to India for increased food production in the 1960s paved the way for India's growth takeoff afterwards. There are countless other examples in which countries have benefited from aid and then graduated, including Korea, Malaysia, Taiwan, Israel, and others. Egypt is on that path today, and Rwanda, Tanzania, Ghana, and others will be as well if both donors and recipients carry forward with a sensible assistance strategies.

Here are some of the most effective kinds of aid efforts: support for peasant farmers to help them grow more food, childhood vaccines, malaria control with bed nets and medicines, de-worming, mid-day school meals, training and salaries for community health workers, all-weather roads, electricity supplies, safe drinking water, treadle pumps for small-scale irrigation, directly observed therapy for tuberculosis, antiretroviral medicines for AIDS sufferers, clean low-cost cook stoves to prevent respiratory disease of young children. Shipment of food from the US is a kind of aid that should be cut back, with more attention on growing local food in Africa.

Out of every $100 of US national income, our government currently provides the grand sum of 5 cents in aid to all of Africa. Out of that same $100, we have found around $10 for the stimulus package and bank bailouts and another $5 for the military. It is not wonderful that what has caught the public's eye are proposals to cut today's 5 cents to 4 or 3 cents or perhaps zero.
The article is very much a direct echo of two critical posts we have posted on this subject - Dead Aid, By Dambisa Moyo (A Review) and The Kagame Mirage

A point Sachs does not address, and couldn't due to the sensitive nature of the issue,  relates to what this debate says about Africans themselves.  As this debate has evolved it has become clear to me that many of the current generation of Internet savvy Africans suffer from an objective failure to objectively analyse issues. Many of the contributions I have read from Africans on this issue has been symptomatic of our general failure as a continent - we are too lazy or fundamentally unable to hold those in influential positions to account, be they politicians, writers, academics or otherwise. The irony for me is that we want our political leaders to be accountable, but we ourselves can hardly discern the huge analytical flaws in those that would be our opinion leaders. Is the problem really with our leaders or ourselves? I lament!

7 comments:

  1. Before peddling their simplistic concoction of free markets and self-helpAnd the worst is that they refuse to learn from the present crisis - that depending on unregulated free markets is no way to run an economy (or is that not run an economy?). If anyone can sit through this global economic collapse with their faith in deregulation and privatisation intact, that I think says something about how seriously they should be taken on matters economic.

    when Goldman Sachs got into financial trouble it got bailed-out by the US Government. Rich people have an uncanny ability to oppose aid for everybody but themselves.Absolutely, which is why at least from a philosophical point of view, I was disappointed when I heard she was not against bailouts of corporations, just aid to countries (which I'm against because I think it is a shell game to steal money from the mines - pay the market price for Africa's raw materials, and these countries won't need 'donor aid').

    Many believe, typically in private, that by saving African children we would be creating a population explosion, so better to let the kids die now rather than grow up hungry. (I'm asked about this constantly, usually in whispers, after lectures).These are probably the same people who believed that Africa was about to be depopulated by HIV/AIDS. To quote Randi Shilts on 'AIDS in Africa' a quarter century ago:

    As one prominent California AIDS expert says, "We're going to see a significant depopulation of entire portions of Africa."

    And he continues:

    Such estimates mean that the number of infected people in the African AIDS belt is counted in the millions. At least half can be expected to fall ill with AIDS or AIDS-related complex within the next five years - setting the stage for huge death tolls in the 1990s.

    Somehow, that did not come to pass. (As one AllAfrica headline puts it:
    Uganda: 'Population Pressure Affecting Aids Fight'. By the way, they were noticing the steadily growing population back in the late 1990s, early 2000s, the population of Masaka, mentioned in the Shilts article, went from 49,585 in 1991, to 67,768 in 2002.)

    So I am not very fearful of dramatic scenarios that are supposed to happen way in the future, and are usually accompanied by an agenda.

    Of course, most Americans know little about the many crucially successful aid efforts, because Moyo, Easterly, and others lump all kinds of programs - the good and the bad - into one big undifferentiated mass, rather than helping people to understand what is working and how it can be expanded, and what is not working, and should therefore be cut backAnd that is where I again differ with Jeffrey Sachs. The problem isn't that there is good aid and bad aid, the problem is that these governments are not structured in a way to maximize the provision of services to the people. The emphasis on ministries instead of local government, the emphasis on bureaucracy over service delivery is the problem.

    These are not NGO functions, these are local government functions. So let's start to empower local government.

    Shipment of food from the US is a kind of aid that should be cut back, with more attention on growing local food in Africa.This is why he has a PhD in Economics from Harvard. :)

    Now if we'd add capacity building (education, infrastructure) in local government to that, we wouldn't even need NGOs in the first place.

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  2. Jeffrey Sachs:
    1. Wants us to reject Ms.Moyo's arguments against the aid industry as the primary vehicle for fueling african economic development based on the fact that she might have been a beneficiary of a college scholarship.
    2. Wants us to view as 'simplistic concoction’ the idea that a combination of free markets and self-sufficiency should be the primary drivers of economic development and not the aid industry.India,China,S.Korea,and other asian countries developed their economies by using a pragmatic combination of freemarkets and self-sufficiency. He feels that victimology promoted by the aid industry should be the primary driver of African economic development efforts.
    3. Wants us to believe that because western nations bailed out corporations of their citizens then we should support African governments to be bailed out by western governments in the form of aid. He doesn’t address the important issue of African governments bailing out corporations owned by their citizens.
    4. Wants us to believe that the healthcare systems of African nations like Rwanda can only succeed because of the aid industry. What he doesn’t tell us is that if Rwanda promotes the emergence of their own indigenous entrepreneur and industrialist class their government will generate enough income from taxes and private sector initiatives to fund their healthcare system.
    The Aid industry basically promotes a development ideology based on victimology. The romantic notion that the African needs charity not trade. It is actually pathetic that African governments and African ‘intellectuals’ have for so long played along with this flawed world view. Africa needs to be helped primarily through trade. This does not mean when there is a humanitarian crisis the world should not help.

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  3. As a Zambian woman living in diaspora, I appreciate Dambisa desire for African governments to be self sustaining. It is a matter of finding a realistic pathway to that goal, as many have stated the populations in Africa can not be viewed or treated as one homogenous entity as Dambisa erroneous does in her book. It is unrealistic to expect that Somalia and Ghana will have the same access to funds on the international free markets nor is it fair to expect both can collect substantial tax revenue from their citizens.
    In most African states, there are more people dependant on free government services like hospitals,schools, police and army than are able to pay any form of tax, in short African governments will have extreme deficits until a substantial base of their population are able to pay taxes to support their government budgets.
    If they suddenly match their budgets to locally available tax revenue as Dambisa calls for in her book and the west cuts off aid, there would be a substantial population in Africa that would sink deeper into a cycle poverty,disease and strife that would ultimately threaten any gains fiscal discipline and efficient governance can ever hope to create under her premise.

    Chanda, Canada

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  4. Sach's Ad Hominems reflect crass desparation.

    Moyo and Easterley's replies are now up.

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  5. Hi Chanda,

    As a Zambian woman living in diaspora, I appreciate Dambisa desire for African governments to be self sustaining. It is a matter of finding a realistic pathway to that goal, as many have stated the populations in Africa can not be viewed or treated as one homogenous entity as Dambisa erroneous does in her book.

    Neoliberals treat every single economy in the world the same - Malaysia, Chile, Russia, it doesn't matter to them. The IMF's prescriptions are all exactly the same. (Deregulate, privatise, no restrictions for corporate capital.)

    They are economic Utopians, who believe in 'the invisible hand' in the markets, which makes everything ok. Economic disasters are just markets trying to find their equilibrium. Poor people going without services is just survival of the fittest.

    It is unrealistic to expect that Somalia and Ghana will have the same access to funds on the international free markets nor is it fair to expect both can collect substantial tax revenue from their citizens.

    Unless she doesn't care about services being available to the poor. Then, allowing corporations to run away with the nation's raw materials, leaving government taxes to the poor only drives down their incomes and makes it cheaper to employ them.

    In most African states, there are more people dependant on free government services like hospitals,schools, police and army than are able to pay any form of tax, in short African governments will have extreme deficits until a substantial base of their population are able to pay taxes to support their government budgets.

    The first thing the IMF does, is tell governments to cut spending on education and healthcare. There is a hint as to how highly they value the lifes of the people in the countries they 'advise'.

    When it comes down to it, it is all about outcomes. What is the desired outcome of the economy and society Dambisa Moyo and her neoliberal buddies want to see?

    Neoliberals want to create an elite society, where money and opportunity are available to only a tiny few people, who then make decisions on behalf of everyone else. They want to create a feudal society with a small ruling elite, huge masses of impoverishes serfs, and no middle class.

    That is the desired effect of neoliberal economic theory.

    And all their policies point toward that. Take government education and healthcare away from the poor. Don't allow unions (which would protect incomes and work conditions) to become powerful, in fact de-unionise new and existing businesses. Allow complete discretion of labour, environmental, and investment decisions to corporate CEOs, who will in effect run the country instead of the people's elected representatives.

    Benito Mussolini himself stated: When the state takes over the corporations, it is called communism. When the corporations take over the state, it is called fascism.

    And that is what we are seeing. Neoliberal economic theory is an innovative form of ushering in fascism under disguise. It is the rule of the many, by an unelected and unaccountable elite.

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  6. Dambisa Moyo talks about the shame she feels of African governments depending on 'donor aid'. She does not talk of the shame she feels when her neoliberal corporations need to be bailed out by the state. She does not mention the need to tax the mines to the maximum. What is worse, when she does not object to corporate welfare, that is the ultimate giveaway.

    This is the hypocrisy at the core of neoliberal ideology. They pretend to be these objective, dispassionate, hardheaded business people, who 'know how to run things' and (to literally quote her) 'we know what works'. In the end, they only care about maximizing profits, no matter if that takes down the global economy in the process. And if it takes corporate bailouts, so be it.

    What kind of society do we want to create. One where everyone has opportunity and owns something. Or one where wealth is concentrated in the hands of a tiny economic and political elite? A society, which by it's very nature and structure is not only un-democratic, but anti-democratic.

    The alternatives are: creation of internal markets instead of producing for the global market. The empowerment ordinary people through universal healthcare and education, instead of leaving education to the rich. Taxing the mines, instead of funding the government through PAYE of workers. Mobilize the workforce through works projects, instead of hoping for corporations to put in a road to the mine they are going to exploit and believing that somehow other people can make use of it too. Building up local SMEs and businesses, instead of 'attracting FDI'. Reinvesting profits in the economy and finance economic diversification that way, instead of allowing foreign owned corporations to walk away with the profits.

    Sometimes I think the only thing holding Zambia back are the number of MPs and others in society who have taken bribes from the mines to do their bidding.

    And by the way, it is tempting to look at Zambia's case in isolation, but that would obscure the global reality of this phenomenon. Today, Britain itself is in a scandal of MPs of all parties, and the biggest issue in the US is campaign finance reform. This is a matter of governance, that is not unique to Zambia, but must be solved.

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  7. She does not talk of the shame she feels when her neoliberal corporations need to be bailed out by the state.---QUOTE

    Mr.K,
    It is certainly in order for a state to bail out corporations owned by their citizens if their failure might lead to a signficant loss to the entire national economy.
    If western governments want to bail out their corporations they have every right to do that and africans should spend more time asking african governments to bail out corporations owned by their citizens. Infact, if african governments spent most of their time focusing on bailing out local entrepreneurs and industrialists they would manage to create jobs and raise income through taxes and not depend on aid.
    There is nothing shameful about a government bailing out corporations owned by their citizens.
    The view you are espousing attempts to equate bailouts of western corporations by western governments with western governments giving charity to african governments. That is a flawed view and I know you can argue better than that. The former encourages productivity and the latter is focused on charity.
    Charity should not be the primary vehicle for economic development efforts. Ms.Moyo’s arguments are that trade should be at the center of those efforts not charity.
    The problem you are having is that you equate captalism and pro-corporate policies to be equivalent to a bad thing. However, as far as we know you cannot have sustainable wealth creation that can lead to economic development without pro-corporate policies and as far as we know a captalist ideology.
    You are also attempting to categorize her arguments within an ideological frame which occupies most NGOs who discuss the third world economic development policies. The only problem is that her argument seem to support a third way which doesn’t fit into either a strictly neo-liberal model (she seems to favor developing countries using a combination of global liberal policies and building their own local economic capacity) or an anti-neo-liberal model( she favors global liberal policies as a significant component to developing local economies). This is why you are having a hard time recognizing that she making an interesting argument that is not new but as old as the development debate. The only problem is that recently the debate has moved into two strict ideological camps.

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