by Robert Guest
Somalia has no public health service, so the WHO has to work with the only local authority that exists, which is to say, the warlords. It is a difficult and nerve-racking task, but somehow they manage it.
In each fiefdom, they make contact with the local thugocrat and ask, in language oozing feigned respect, his permission to carry out hut-to-hut vaccinations. They are careful to hire members of all the big local clans to help and to rent the cars they need – but no more – from whomever the local warlord nominates. The cars come with drivers and gun-toting guards but cannot be used to transport vaccines over long distances. If driven into a rival clan’s territory, they are liable to be hijacked.
In Somalia, the men with guns make the rules, and aid workers have to adapt to this, just as locals do. Somali women make money by building stick-and-plastic shacks at road blocks and selling tea to all the travelers forced to stop and wait there. The WHO learned from their example and placed a vaccinator with a cooler at every possible road block to catch peripatetic children. As described above, the men with guns sometimes help, in their own bossy way.
The obstacles are numerous but not insuperable. Some Somali parents refuse to let their children be vaccinated. In an oral culture rumors proliferate, including the rather unhelpful ideas that vaccines are un-Islamic or that they give you AIDS. But the WHO persuades the reluctant by getting people from their own clans to talk to them and by driving trucks around broadcasting pro-vaccine messages over loudspeakers.
To reach more dangerous areas, the vaccinators wait for a pause in the fighting and then pounce. There is a polio officer in every district. Because anyone with a foreign employer is assumed to be rich, they are obvious targets for kidnappers so some sleep in a different house each night. Whenever it looks safe enough to fly in the coolers, they holler. When I visited, in April 2002, their task was nearly done. There had been no new polio infections reported since the beginning of the year, and they were hoping soon to declare Somalia polio-free.
It was a staggering achievement, of which the WHO can be proud, as can UNICEF and Rotary International, who also helped. Vaccination campaigns are universally and rightly applauded. But there is more to aid than jabbing babies, and many of the other ways in which rich countries have tried to improve the lives of the poor have been much less successful.
A deep hole
Running through the rocks beneath northern Zambia is one of the world’s richest seams of copper, and there’s plenty of cobalt down there, too. Large deposits were first discovered near Nchanga in the 1920s1 and there could be another fifty years’ supply still to dig up.2 An opencast mine has been established there since 1955, a vast pit almost five kilometers long and 500 meters deep that makes the mechanical diggers scrabbling at the bottom look no bigger than the plastic sort that fall out of cereal boxes.3
Drop a coin into the pit at Nchanga, and it is gone forever. Drop in a million dollars, and you’ll lose most of that, too. Some notes will be buried in the earth as it is churned beneath the shovels or blown off into the bush to be eaten by browsing antelopes. Some will disappear into the foreman’s pockets. Several lucky workers will grab an armful and perhaps then stop working. The people in the surrounding villages will maybe find a few dollars in their backyards, but not enough to make a real difference to their lives.
This is pretty much the story of foreign aid to Zambia. Perhaps because the country is, unlike Somalia, marvelously peaceful, or perhaps because Zambians are such nice people, donors have lavished more aid on Zambia, per head, than almost any other country in the world. The aid was supposed to make Zambians less poor. It failed. Between independence in 1964 and 2000, average incomes in Zambia actually fell, from $540 to $300.4 The main difference between aid to Zambia and throwing a million dollars down a mine is the amount. By one estimate, between 1980 and 1996, counting only grants, not loans, 5,944 million-dollar bundles were thrown into Zambia.5
Six Marshall Plans
African leaders sometimes talk of the need for a “Marshall Plan” for Africa, a reference to the generous American aid program that helped Western Europe to recover after the Second World War. In fact, Africa has already received aid equivalent to six Marshall Plans.6 But whereas the original Marshall Plan was a triumph, aid to Africa has failed to alleviate the continent’s poverty.
This is also true of aid to poor countries in general. Few studies have found any robust link between aid and faster growth.7 Countries that receive lots of aid do no better, on average, than those that receive practically none.
Why is this? One reason is that faster growth is not always donors’ first priority. A hefty whack of Saudi Arabian aid, for example, is aimed at alleviating spiritual rather than material poverty by handing out free Korans. Much aid from some countries is a sly way of slipping money to domestic interest groups. Japanese donations, for example, have often been made on condition that the recipient buys chemicals or machine tools from Japanese firms.8
During the Cold War, the superpowers dished out much of their aid for strategic reasons. In the 1980s, for example, American aid kept the murderous (but anti-communist) Liberian President Samuel Doe in power, for which other Liberians are not particularly grateful. Soviet aid was less generous, but the possibility of pocketing a few million roubles led several African governments to nationalize industries, collectivize farms, and generally pursue policies that kept their citizens poor and hungry. (Greed was not the main reason for adopting statist policies – many African leaders believed in them – but aid doubtless encouraged a few waverers.)
Today, strategic considerations continue to guide much aid. Iraq swallows a huge chunk of American aid because America, having conquered the place, feels morally obliged to rebuild it and has a powerful interest in seeing it become a functioning democracy. Israel has long floated on American largesse, partly because it is the only (more or less) stable democracy in the Middle East and partly because a large domestic lobby demands that it be supported. Russia and Ukraine receive large sums for fear that they would otherwise sell their surplus nuclear warheads to terrorists. France hands out millions of euros to countries where French is spoken.
Even where aid has been intended to spur development, it often hasn’t. Until recently, big donors liked to finance big, showy projects such as dams and sometimes failed to notice the multitudes whose homes were flooded. When individual Westerners empty their drawers and cupboards to find things to donate to Africa, the results are often laughably inappropriate: starving Somalis have received heartburn pills; barefoot Mozambicans have been sent high-heeled shoes.9
Shoddy research can render aid worthless. In Mali, donors once built a fish farm in canals that, had they asked the locals, they would have learned were dry for half the year. In Kenya, the government of Mwai Kibaki, which won office in December 2002, argues that although the country receives plenty of aid, it is hard to find time to govern when ministers have to receive half a dozen delegations of donors each day to explain what they plan to do with it.
Turmoil in recipient countries can prevent aid from bearing fruit. I once stood on a dock in Kinshasa and watched medical aid workers close to tears as they described how a power failure, caused by a rebel attack on a hydroelectric dam, had shut down their refrigerators, destroying the vaccines they contained.
Less spectacularly but more commonly, corruption, incompetence, and bad economic policies can often be relied on to squander any amount of donor cash. The Zambian example speaks for many.
A “Z” grade for Zambia
At independence in 1964, Zambia seemed poised for success. The second-wealthiest nation in Africa, after South Africa, it had a popularly elected government committed to helping the poor, some of the world’s best copper mines, and a generous stream of aid. Most donors at the time believed that the main obstacle to development was lack of money and that giving poor governments cash to invest would spur rapid growth.
It was not so simple. Zambia’s first president, Kenneth Kaunda
, set up a one-party socialist state and nationalized everything from the copper mines to hair salons and dry cleaning shops. In order to promote “self-sufficiency,” he erected tariff walls and currency controls, thereby shutting the Zambian economy off from the rest of the world. His officials told farmers what to grow, bought their crops, and then sold them at heavily subsidized prices. Generous loans were granted to farmers, and little attempt was made to make them repay. Zambians came to see government loans as a perk of freedom from colonial rule.
In state hands, Zambian industry withered. Kaunda assumed that the copper mines would be an inexhaustible source of revenue. Thousands of unnecessary hands were hired. Contracts to supply the mines with anything from pencils to pickaxes were awarded to ruling party cronies, who gleefully padded their invoices. When mining tools broke down, they were only occasionally mended. Copper production peaked in 1969, just before nationalization, at 825,000 tons a year. By 1999, it had plunged to less than a third of this level.10
From 1974, the copper price fell, and suddenly the government could not pay its bills. But any shortfall was picked up by foreign donors. As Kaunda’s economic policies grew more foolish, aid climbed steadily, reaching 11 percent of GDP by the early 1990s. IMF loans in the 1980s were tied to free-market reforms, but these were enacted without enthusiasm and frequently reversed. Aid kept the treasury full even as Kaunda destroyed most of the productive businesses in the country. A gentle and amiable man, and not a bad guitar-player besides, Kaunda is still widely respected in Zambia. But when he left office in 1991, after twenty-seven years in power, he left his countryfolk poorer. Zambians remember his rule as a time when the shops were so bare that even the well-off had trouble buying soap.
In the end, Kaunda’s disastrous handling of the economy led to his downfall. In 1990, donor pressure forced him to allow opposition parties. The next year, donors pushed him into calling an election. To his surprise, he lost. Frederick Chiluba, a former union leader, won on a platform of allowing greater democracy and liberalizing the economy.
Donor funds rose anew. Buoyed with foreign cash and goodwill, Chiluba enjoyed some early successes. He brought inflation down from over 100 percent to only 20 percent in 1999. He cut tariffs, repealed exchange controls, and welcomed foreign investors. This filled the shops with fancy foreign goods: wine and lawn furniture from South Africa, Japanese televisions, and dozens of flavors of ice cream. But only the wealthy could afford these things, and most Zambians continued to grow poorer under Chiluba, despite receiving roughly $900 a head in aid and debt relief during the 1990s.11
The torrent of foreign aid allowed Chiluba to delay or avoid essential reforms. For instance, before coming to power, he promised voters that he would trim the bloated and inert civil service he inherited from Kaunda. Instead, he recruited yet more bureaucrats in the hope that they would be grateful and vote for him. Without aid the wage bill would have bankrupted the government, but with donor support Chiluba was able to pay thousands of the brightest Zambians to shun the kind of productive enterprise that might have made the country less poor.
Worse, Chiluba failed for almost a decade to privatize the copper mines. Even after years of decay, the mines were still Zambia’s only significant exporter. Apart from foreign aid, they were the only way the country could get hold of hard currency, which they needed to buy things that could not be produced in Zambia. These included oil and practically everything more technologically advanced than a bowl of stew.
Under state control, copper output fell by the year, and the mines recorded huge losses. Without aid, the government would have had no choice but to sell them immediately. But donor support allowed Chiluba to dawdle. The idea of privatization was not popular with ordinary Zambians – many saw it as surrendering the country’s most prized asset to foreigners. But probably a more important reason for the delay was that in state hands the mines were a tremendous source of patronage. If anything, they were looted more systematically in the 1990s than they had been under Kaunda.
Under pressure from donors the government put the mines on the auction block in 1997 but then rejected all offers. Exasperated donors starting cutting aid, which forced the government to try again in 1999. By this time, most foreign mining groups had lost interest. But in 2000 Anglo American, the firm from which the mines had originally been expropriated, bought most of them for $90 million. By one calculation, the delay cost Zambia $1.7 billion – about half a year’s GDP.12 No French or American president could have cost his country as much, in relative terms, without using nuclear weapons. To cap it all, two years later Anglo pulled out of Zambia, saying that the mines were in an even worse state than they had realized and could not be salvaged.
Meanwhile, Chiluba filled his government with an astonishing array of crooks, arms-traffickers, and drug-dealers.13 One of his former cabinet ministers, who resigned in disgust in the mid-1990s, handed me a parliamentary report into the misappropriation of state assets which would have been enough to bring down any normal government but which Chiluba’s regime simply suppressed. Another told me how even the money intended to buy corn for starving Zambians was stolen by Chiluba’s cronies. According to William Easterly of the World Bank, if aid had had the predicted accelerating effect on growth between 1961 and 1994, Zambians’ average income would have exceeded $20,000.14 Today, it flounders at less than a sixth of that.
An “A” grade for Botswana
Aid failed in Zambia. But in neighboring Botswana it helped fuel a protracted economic boom. It is a remarkable story.
Botswana was, at independence in 1966, one of the poorest countries in the world. Cows grazed the few patches of ground that were not desert. Herdsmen herded them. That was pretty much the sum total of economic activity in Botswana.
To begin with, aid funded virtually all government investment and much of its recurrent expenditure, too. In 1971 aid was equivalent to 98 percent of state revenue.15 But shortly after independence prospectors found diamonds under the Botswanan desert.
Unlike successive Zambian governments, Botswana’s did not squander the windfall. Diamond dollars were ploughed into infrastructure, education, and health. Private business was allowed to grow unmolested, and foreign investment was welcomed. A group of South Africans came and set up safari lodges in the Okavango delta, where a river runs into the desert and stops, forming a 15,000-square-kilometer oasis for all the wildlife in the country. Tourists flocked to gawk at the elephants and wild dogs and to be punted around water-bird sanctuaries in hollowed-out logs.
Donors’ suggestions were carefully evaluated; projects were only approved if the proposers could demonstrate that they were sustainable and did not duplicate work being carried out by others. Aid programs were transparent, too. Donors could come at any time and observe how their money was being spent.
In the last thirty-five years, Botswana’s economy has grown faster than any other in the world. Yet cabinet ministers have not awarded themselves mansions and helicopters, and even the president has been seen doing his own shopping. Exchange controls were abolished in 1999, the budget has usually been in surplus (although this has slipped recently), and GDP per head tops $3,000. The country remains vulnerable to swings in the price of diamonds and has not diversified enough into other industries. But all in all its record is impressive. Their task completed, donors are packing their bags.16 The country still has a horrific AIDS problem, but the government is now rich enough to offer drug therapy to people who need it.
Why the difference?
Aid helped lift Botswana out of poverty but was wasted in Zambia. Why the difference? Both countries had minerals. The two countries’ cultures are quite similar. Educational levels were different at independence, but it was Botswana that had the less literate population. What really mattered, however, was that Botswana had good economic policies, soundly administered, whereas Zambia did not.
All around the developing world aid works or fails according to whether the recipient country competent
ly implements sensible economic policies. We’re talking about the basics here: spending approximately within your means, not cutting yourself off from the rest of the world, and not allowing civil servants to steal too much. A recent study by two economists at the World Bank sorted fifty-six aid-receiving countries by the quality of their economic management.17 Those with good policies (low inflation, a budget surplus, and openness to trade) and good institutions (little corruption, strong rule of law, effective bureaucracy) benefited from donor funds. Those with poor policies and institutions did not. Badly run countries showed negligible or even negative growth, irrespective of how much aid they were given. Well-run countries that received little aid grew steadily, at 2.2 percent, per head, per year. Well-run countries that received a lot of aid grew much faster, at 3.7 percent, per head, per year.
This huge difference can be explained by a number of factors. In badly managed countries, aid is sometimes stolen. When it is not, it tends to displace, rather than complement, private investment, perhaps because there are fewer opportunities to choose from in such countries. In countries with good management, by contrast, aid tends to “crowd in” private investment. This is probably because if an economy is growing fast, the returns on, say, road-building or setting up a new airline are likely to be greater.18
For aid to be most effective in lifting people out of poverty, it should be directed toward well-managed countries with lots of poor citizens. But too often it isn’t. Bilateral aid tends to favor allies and ex-colonies. A 1998 study by Alberto Alesina and David Dollar found that a former colony with a closed economy received about twice as much assistance as a non-colony with an open one.19 Undemocratic ex-colonies also received twice as much as democratic non-colonies. After controlling for population and average income, badly run countries received just as much bilateral aid as well run ones. (Nordic aid was a notable exception to this dismal trend.)
