Many reasons have been offered to account for why African countries are not working: in particular, geographical, historical, cultural, tribal and institutional. While each of them is convincing in explaining Africa’s poor showing, they do not tell the whole story.
One argument, advanced by geographical determinists such as Jared Diamond in Guns, Germs and Steel (1997), is that a country’s wealth and success depend on its geographical environment and topography. Certain environments are easier to manipulate than others and, as such, societies that can domesticate plants and animals with relative ease are likely to be more prosperous. At a minimum, a country’s climate, location, flora, fauna and terrain affect the ability of people to provide food for consumption and for export, which ultimately has an impact on a country’s economic growth. Diamond notes that all societies and cultures have had approximately similar abilities to manipulate nature, but the raw materials with which they had to start were different.
Africa’s broad economic experience shows that the abundance of land and natural resources does not guarantee economic success, however. In the second half of the twentieth century, natural-resource dependence has proved to be a developmental curse, rather than a blessing. For example, many African countries were unable to capitalize on commodity windfalls of the 1970s, leaving their economies in a state of economic disaster (the good news is that at least five African countries – Chad, Equatorial Guinea, Gabon, Nigeria and Sudan – have had the good sense this time around to establish savings funds and to put aside some of their commodity windfalls). Having squandered much of their natural wealth through questionable investment and even, in some cases, outright theft, oil- and mineral-rich countries such as Nigeria, Angola, Cameroon and the Democratic Republic of Congo recorded dismal economic results in this period. They had nothing to show for it.
In ‘Africa: Geography and Growth’, an Oxford University and ex-World Bank economist, Paul Collier, adopts a nuanced approach to the endowments issue by classifying African countries in three groups: countries which are resource-poor but have coastline; those that are resource-poor and landlocked; and countries which are resource-rich (where it matters little whether the country is landlocked or has a coastline). The three groups have remarkably different growth patterns. Historically, on an economic performance basis, coastal resource-scarce countries performed significantly better than their resource-rich counterparts whether landlocked or coastal; leaving the landlocked, resource-scarce economies as the worst performers. Collier reckons that these factors cost these economies around one per centage point of growth. This is a pattern which exists globally as well as being true for the African continent. Unfortunately, Collier notes, Africa’s population is heavily pooled around the landlocked and resource-scarce countries.
Clearly one’s environment matters, and of course the conditions in parts of Africa are harsh – notably the climate and terrain. But, harsh as they may be, these aspects are not insurmountable. With average summer temperatures reaching 49°C (120°F) Saudi Arabia is rather hot, and, of course, Switzerland is landlocked, but these factors have not stopped them from getting on with it.
Historical factors, such as colonialism, have also often been put forward as explanations for Africa’s underachievement; the idea being that colonial powers delineated nations, established political structures and fashioned bureaucracies that were fundamentally incompatible with the way of life of indigenous populations. Forcing traditionally rival and warring ethnic groups to live together under the same flag would never make nation-building easy. The ill-conceived partitioning of Africa at the 1885 Berlin Conference did not help matters. The gathering of fourteen nations (including the United States, and with Germany, Britain, France and Portugal the most important participants) produced a map of Africa littered with small nations whose arbitrarily drawn borders would always make it difficult for them to stand on their own two feet – economically and politically.1
There is, of course, the largely unspoken and insidious view that the problem with Africa is Africans – that culturally, mentally and physically Africans are innately different. That, somehow, deeply embedded in their psyche is an inability to embrace development and improve their own lot in life without foreign guidance and help.
It is not the first time in history that cultural norms, social mores or religious beliefs have been cited as the reasons for differences in development between different peoples. The German political economist and sociologist Max Weber argued that a Protestant work ethic contributed to the speed of technological advancement and explained the development seen in industrial Britain and other European nations.
In his mind there were two broad groups: the Calvinists, who believed in predestination and, depending on their lot, may or may not acquire wealth; and the believers in the Protestant work ethic who could advance through the sweat of their brow. As with Weber, Africa’s development quandary offers two routes: one in which Africans are viewed as children, unable to develop on their own or grow without being shown how or made to; and another which offers a shot at sustainable economic development – but which requires Africans be treated as adults. The trouble with the aid-dependency model is, of course, that Africa is fundamentally kept in its perpetual childlike state.
Another argument posited for Africa’s economic failures is the continent’s disparate tribal groupings and ethno-linguistic makeup. There are roughly 1,000 tribes across sub-Saharan Africa, most with their own distinct language and customs. Nigeria with an estimated population of 150 million people has almost 400 tribes; and Botswana with just over one million inhabitants has at least eight large tribal groupings. To put this in context, assuming Nigeria’s ratio, imagine Britain with its population of 60 million divided into some 160 ethnically fragmented and distinct groupings.
At least two potential concerns face nations with strong tribal divisions. The most obvious is the risk that ethnic rivalry can lead to civil unrest and strife, sometimes culminating in full-blown civil war. In contemporary times the ghastly examples of Biafra in Nigeria (1967–70) and the ethnically motivated genocide in Rwanda in the 1990s loom large.
Paul Collier postulates that the more a country is ethnically divided, the greater the prospect of civil war. This is why, it is argued, Africa has a much higher incidence of civil war than other developing regions such as South Asia in the last thirty years. Very little can rival a civil war when it comes to ensuring a country’s (and potentially its neighbours’) decline – economically, socially, morally. In pure financial terms Collier has estimated that the typical civil war costs around four times annual GDP. In Africa, where small countries exist in close proximity with one another, the negative spillover cost of war onto neighbouring countries can be as much as half of their own GDP.
Even during peaceful times, ethnic heterogeneity can be seen to be an impediment to economic growth and development. According to Collier, the difficulty of reform in ethnically diverse small countries may account for why Africa persisted with poor policies for longer than other regions. Ethnically diverse societies are likely to be characterized by distrust between disparate groups, making collective action for public service provision difficult. This is particularly true in (even nominally) democratic societies, where the prospect of achieving policy consensus amongst fractious ethnically split groups can be challenging. Invariably, where there is infighting, an impasse or split across ethnic lines slows down the implementation of key policies that could spur economic growth. Kenya’s turbulent democratic elections in 2008 are a recent example where tribal tensions between the presidential incumbent Mwai Kibaki (a Kikuyu) and Raila Odinga (a Luo) seeped into and infected the political process and institutions (the compromise was a coalition government made from the two groupings).
No one can deny that Africa has had its fair share of tribal fracas. But by the same token it is also true that there are a number of African countries where disparate groups have managed to coexist perfectly peacefully (Botswana,
Ghana, Zambia, to name three). In the quest for a solution to Africa’s economic woes, it is futile to cite ethnic differences as an excuse – born a Zulu, always a Zulu. But Zulus, like people from any other tribe, can and do intermarry; they live, work and play in integrated cities. In fact people in African cities live in a more integrated way than you might find in other cities – there are no ethnic zones such as exist in Belfast, London or New York, for that matter. Besides, once locked into the ethnic argument there is no obvious policy prescription: it’s a dead end. Better to look to a world where all citizens can freely participate in a country’s economic prosperity, and watch the divisive role of ethnicity evaporate.
Yet another explanation put forward for Africa’s poor economic showing is the absence of strong, transparent and credible public institutions – civil service, police, judiciary, etc.
In The Wealth and Poverty of Nations, David Landes argues that the ideal growth and development model is one guaranteed by political institutions. Secure personal liberty, private property and contractual rights, enforced rule of law (not necessarily through democracy), an ombudsman-type of government, intolerance towards private rent-seeking and optimally sized government are mandatory.
In Empire: How Britain Made the Modern World, Niall Ferguson points to the common-law system and the British-type civil administration as two institutions that promoted development. Ferguson also notes that it is a country’s underlying legal and political institutions that make it conducive to investment (and counter-disinvestment through less capital flight) and innovation. This necessarily includes enforcement of the rule of law, avoidance of excessive government expenditures and constraints on the executive. In turn, this yields a transparent fiscal system, an independent monetary authority and a regular securities market that foster the growth in size and number of corporations.
Professor Dani Rodrik from Harvard University is equally adamant in arguing that institutions that provide dependable property rights, manage conflict, maintain law and order, and align economic incentives with social costs and benefits are the foundation of long-term growth. In his book In Search of Prosperity, Rodrik points to China, Botswana and Mauritius as examples of countries which largely owe their economic success to the presence (or creation) of institutions that have generated market-oriented incentives, protected the property rights of current and future investors, and deterred social and political instability. (Botswana had a GDP per capita of US$8,170 in 2002, more than four times the sub-Saharan-Africa average, US$1,780, much of its success attributed to the probity of its political institutions.)2
Conversely, he suggests, Indonesia and Pakistan are countries where, in the absence of good public institutions, growth has been difficult to achieve on a sustained basis. Even when growth has occurred intermittently it has been fragile (as in post-1997 Indonesia) or incapable of delivering high levels of social outcomes in areas such as health or education (as in the case of Pakistan). Rodrik’s estimates imply that changes in institutions can close as much as three quarters of the income gap between the nations with the best and those with the worst institutions.
While public institutions – the executive, the legislature and the judiciary – exist in some form or fashion in most African countries (artefacts of the colonial period), apart from the office of the president their real power is minimal, and subject to capricious change. In strong and stable economic environments political institutions are the backbone of a nation’s development, but in a weak setting – one in which corruption and economic graft reign supreme – they often prove worthless.
Africa’s failure to generate any meaningful or sustainable long-run growth must, ostensibly, be a confluence of factors: geographical, historical, cultural, tribal and institutional. Indeed, it would be naive to discount outright any of the above arguments as contributing to Africa’s poor growth history. However, it is also fair to say that no factor should condemn Africa to a permanent failure to grow. This is an indictment Africa does not deserve. While each of these factors may be part of the explanation in differing degrees, in different countries, for the most part African countries have one thing in common – they all depend on aid.
Does aid work?
Since the 1940s, approximately US$1 trillion of aid has been transferred from rich countries to Africa. This is nearly US$1,000 for every man, woman and child on the planet today. Does aid work? Proponents of aid point to six proofs that it can.
The Marshall Plan
First, there is the Marshall Plan. As discussed earlier, between 1948 and 1952 the United States transferred over US$13 billion (around US$100 billion in today’s terms) to aid in the reconstruction of post-Second World War Europe. By most historical accounts the Marshall Plan was an overwhelming success in rebuilding the economies of war-torn Europe. The Marshall Plan not only guaranteed economic success, but many credit the programme with the re-establishment of political and social institutions crucial for Western Europe’s on-going peace and prosperity. Although the idea of aid to Africa was born out of the success of the Marshall Plan in Europe, in practical terms the two are completely different. Pointing to the Marshall Plan’s achievements as a blueprint for a similar outcome for Africa tomorrow is simply wrong.
Why?
For one thing, European countries were not wholly dependent on aid. Despite the ravages of war, Western Europe’s economic recovery was already underway, and its economies had other resources to call upon. At their peak, Marshall Plan flows were only 2.5 per cent of the GDP of the larger recipients like France and Germany, while never amounting to more than 3 per cent of GDP for any country for the five-year life of the programme. In marked contrast, Africa has already been flooded with aid. Presently, Africa receives development assistance worth almost 15 per cent of its GDP – or more than four times the Marshall Plan at its height. Given Africa’s poor economic performance in the past fifty years, while billions of dollars of aid have poured in, it is hard to grasp how another swathe of billions will somehow turn Africa’s aid experience into one of success.
The Marshall Plan was also finite. The US had a goal, countries accepted the terms, signed on the dotted line, money flowed in, and at the end of five years the money stopped. In contrast to the Marshall Plan’s short, sharp injection of cash, much of Africa has received aid continually for at least fifty years. Aid has been constant and relentless, and with no time limit to work against. Without the inbuilt threat that aid might be cut, and without the sense that one day it could all be over, African governments view aid as a permanent, reliable, consistent source of income and have no reason to believe that the flows won’t continue into the indefinite future. There is no incentive for long-term financial planning, no reason to seek alternatives to fund development, when all you have to do is sit back and bank the cheques.
Crucially, the context of the Marshall Plan also differed greatly from that in Africa. All the war-torn European nations had had the relevant institutions in place in the run-up to the Second World War. They had experienced civil services, well-run businesses, and efficient legal and social institutions in place, all of which had worked. All that was needed after the war was a cash injection to get them working again. Marshall Plan aid was, therefore, a matter of reconstruction, and not economic development. However damaged, Europe had an existing framework – political, economic and physical; whereas despite the legacy of colonial infrastructure Africa was, effectively, undeveloped. Building, rather than rebuilding, political and social institutions requires much more than just cash. An influx of billions of dollars of aid, unchecked and unregulated, will actually have helped to undermine the establishment of such institutions – and sustainable longer-term growth. In a similar vein, the recent and successful experience of Ireland, which received vast sums of (mainly European) aid, is in no way evidence that aid could work in Africa. For, like post-war Europe, Ireland too had all the institutions and political infrastructure required for aid to be monitored and checked, thereby to mak
e a meaningful economic impact.
Finally, whereas Marshall Plan aid was largely (specifically) targeted towards physical infrastructure, aid to Africa permeates virtually every aspect of the economy. In most poor countries today, aid is in the civil service, aid is in political institutions, aid is in the military, aid is in healthcare and education, aid is in infrastructure, aid is endemic. The more it infiltrates, the more it erodes, the greater the culture of aid-dependency.
The IDA graduates
Aid proponents point to the economic success of countries that have in the past relied on aid, but no longer do so. These countries are known as the International Development Association (IDA) graduates. They comprise twenty-two of some of the most economically successfully emerging countries of recent times – including, Chile, China, Colombia, South Korea, Thailand and Turkey, with only three from Africa: Botswana, Equatorial Guinea (its improvements mainly spurred by its oil find) and Swaziland.3 Supporters of aid suggest that these countries have meaningfully lowered poverty, increased incomes and raised their standards of living, thanks to large-scale aid-driven interventions.
However, as in the case of the Marshall Plan, their aid flows have been relatively small – in this instance, generally less than 10 per cent of national income – and their duration short. Botswana, which is often touted as a prime example of the IDA graduate success story, did receive significant foreign assistance (nearly 20 per cent of the country’s national income) in the 1960s. It is true that between 1968 and 2001 Botswana’s average real per capita economic growth was 6.8 per cent, one of the highest growth rates in the world. However, aid is not responsible for this achievement. Botswana vigorously pursued numerous market economy options, which were key to the country’s success – trade policy left the economy open to competition, monetary policy was kept stable and the country maintained fiscal discipline. And crucially, by 2000, Botswana’s aid share of national income stood at a mere 1.6 per cent, a shadow of the proportion it commands in much of Africa today. Botswana succeeded by ceasing to depend on aid.
Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa Page 5
