Some International Neglect Would Be Good for Africa
Foreign Aid Has Unintended Consequences
AUGUST 01, 1994 by JAMES C. W. AHIAKPOR
Many African governments and leaders of thought fear increased marginalization and neglect of their continent in the so-called New World Order following the collapse of Communist regimes in Eastern and Central Europe and the former Soviet Union. This fear has been triggered by the enthusiasm of governments in the industrialized West to help financially the former Communist countries develop into democratic and private-enterprise economies.
Africans believe that the countries of Europe and the former Soviet Union receive far more sympathy in attracting funds from governments of the industrialized countries than their own. After all, it has been suggested frequently in the West that helping the former Communist countries financially is in the West’s own security interest. Such help, it has been argued, is far cheaper than spending on armaments to protect against renewed Communist threats, should these countries revert to their bad old regimes. This is why President Yeltsin, for example, receives billions of U.S. aid money while little by way of serious economic or political reform takes place in Russia.
Africans also have heard or read such comments as “It would be far easier to absorb people from Europe into American society than, say, a thousand Zulus from South Africa.” In sum, many African governments and their Western sympathizers believe that given the closer ethnic affinity between peoples of the former Communist countries and the industrialized West, help to Africa is liable to receive little consideration on the international agenda. The recent withdrawal of U.S. troops from Somalia adds to this fear.
But the anticipated neglect of Africa has potential benefits for Africans that are seldom discussed. The benefits include (a) a much better functioning of their economies, (b) escaping from further international indebtedness at the governmental level, and (c) relief from their countries being used as proxies to fight East-West ideological wars. Consider these points in turn.
Most African economies took a turn for the worse during the 1970s, and many continued on that path throughout the 1980s. Today many are characterized by inadequate production of food and other basic necessities, high rates of inflation, low interest rates that penalize saving (nominal returns are wiped out by inflation), official currency exchange rates that bear little relation to the demands for their currencies in international exchange, severely under-utilized capacity in public sector manufacturing industries (less than 50 percent), large and persistent government budget deficits, and bloated government bureaucracies. These features are, of course, the creations of African governments, although Marxists and neo-Marxists may claim otherwise. But the conditions also have been exacerbated by governments of the industrialized West as well as international agencies, even if unintentionally.
Inadequate production of food and other necessities, which is really part of a general decline in production, has arisen mainly from African governments’ misguided attempts to make food available cheaply to urban populations by dictating low, unrewarding prices to their rural food producers. (Many Western governments do the opposite, subsidizing their farmers and storing up excess produce, later to be used as foreign aid.) Farmers have reacted predictably by cutting back their production, some turning to subsistence cultivation.
Enter Western governments and other international “donors” with food aid (e.g., the World Food Program) and loans to alleviate the shortages created by the price controls. This international “good will” also attempts to alleviate the shortage of savings by granting loans at below-market rates of interest and on easy repayment terms. The loans are also meant to fill the so-called foreign-exchange gap incorrectly believed to be responsible for the countries’ inability to import enough raw materials to increase capacity utilization in industrial production.
Indeed, some of those responsible for these unwise international “assistance” programs truly believe that market forces do not work well in the less developed countries. They are unable to make good meaning of trading on black markets in food, foreign currencies, gasoline, or spare parts in Africa. Others correctly understand that the black market reflects the economic rationality of its participants, but nevertheless feel constrained by their relations with African governments, or the dictates of their agencies, not to focus on removing the injurious policies themselves. When pressed on the ineffectiveness of their actions for the overall good of the economies, international “helpers” plead the necessity of going slow or employing palliatives lest the host governments are overthrown by their own people. Thus one now reads excuses from the International Monetary Fund (IMF) and the World Bank about not insisting on the quick removal of bad economic policies as a condition for granting “Structural Adjustment Program” loans in the Third World.
Facing Up to Reality
But suppose these governments do not receive any “food aid” or concessionary term loans to deal with their economic hardship. A few may stick with their unwise policies if they are strong enough to contain their citizens’ anger, as countries such as North Korea and Myanmar (Burma) have done. But most would finally face up to reality and take the necessary painful steps toward an efficient economic system.
Take the case of Ghana, for example. While the country’s economy tumbled during the mid-1970s in response to several unwise and inward-looking government policies, external aid increased (from $40 million in 1970 to $82 million in 1978, and to $129 million in 1980). But there was a sharp drop in 1982 (to $94 million) when Marxist rhetoric-reciting radicals took over the government. Failure of the government to acquire as much aid as they demanded from the World Bank and the IMF, and the sharp contraction in the economy that year (negative 7 percent in real terms), finally forced some dramatic changes in economic policy in 1983, particularly with respect to rigid price controls. Although international financial assistance later increased, those reforms culminated in the removal of practically all price controls by 1988. Today open markets in foreign currencies (a phenomenon abolished by law in 1961) flourish in Ghana and more private funds flow in than out.
Some of the international aid money has gone to finance government budget deficits in Africa. In some cases, such foreign financing amounts to more than 75 percent of the budget deficit, e.g., in Burundi, Cameroon, Chad, Congo, Gambia, Madagascar, Mali, Mauritania, Nigeria, Senegal, Togo, and Zaire during the 1980s.
Now anyone who runs the family budget on such a principle must soon be burdened with unmanageable debt and go bankrupt. Indeed, some of these countries in 1990 had debt greater than 100 percent of their national income, including Mali (101 percent), Nigeria (101 percent), Madagascar (134 percent), Congo (204 percent), Mauritania (227 percent), and Somalia (277 percent). Others with equally disturbing amounts of debt as a percentage of income in 1990 include Zaire (141 percent, Zambia (261 percent), Tanzania (282 percent), and Mozambique (385 percent). And who bears the burden of repayments? Not the governing elite, but the poor producers of export crops such as cocoa, coffee, peanuts, palm oil, and in some cases local labor employed in oil and other mineral extracting industries. This is why General Olusegun Obasanjo, a former military ruler of Nigeria, believes that the “most humiliating index of [Africa's] decline is the increase in infant and child mortality resulting directly from our debt problem.”
Although the peace dividend from the end of the Cold War may have evaded the people of the United States, for example, Africans stand to gain a great deal from the New World Order, if they could be left alone. Several of the civil wars in Africa, including those of Angola, Ethiopia, Mozambique, Somalia, and Zaire, really have been proxy ideological wars between the United States and its allies and the former Soviet bloc. Indeed, it was to contain “Marxist” Ethiopia that the United States sustained the Somalian dictator, Siyad Barre, in power with military and financial support until the end of the 1980s. Thus, “Operation Restore Hope” may justifiably be considered an atonement to the people of Somalia for past collaboration in their repression and economic ruin, rather than mainly altruism.
A Soviet academic put it best when he suggested, at a Soviet-Canadian African Studies conference held in Moscow in 1990, that debts owed by their African clients, especially Angola and Ethiopia, be canceled since they took the form of armaments with which those countries destroyed their own economies. The same can be said for Somalia and Zaire with respect to their governments’ debt to the United States.
What about foreign economic advisers as part of foreign aid to Africa? Would African economies still benefit if Western governments and international financial institutions such as the IMF and the World Bank did not send them technical advisers? In the first place, these advisers must be paid for by the recipient countries, and thus are part of their international indebtedness. Second, they may offer good advice but cannot force their implementation. Third, many of them offer bad advice. And in the case of Africa, as Mahbub ul Haq of the United Nations Development Program (UNDP) was recently quoted in The Economist to have observed, the continent “has perhaps received more bad advice per capita than any other.”
A recent autobiographical account of foreign advising by Benjamin Higgins tells it all. His client states included Lebanon, Haiti, Sri Lanka, Brazil, Indonesia, (pre-oil) Libya, Malaysia, Mauritania, Morocco, and the Philippines, mainly during the 1950s, 1960s, and 1970s. Other international development experts have focused on Bangladesh, India, Pakistan, Mexico, Kenya, and Tanzania. But when one looks for success stories in economic development, one finds Hong Kong, Singapore, Taiwan, and South Korea—countries that largely escaped the attention of development experts during the 1950s through the 1970s.
The experience of Eastern and Central European countries that followed advice from Western economic experts during the 1990s is not encouraging either. This is why it is most instructive that Higgins rates the success of the “international development effort” not in terms of how countries most affected have fared, but by the establishment of a “genuine ‘international civil service,’ of which the top members are of very high quality and thoroughly committed . . . . and who have achieved a certain unity of ideas . . .” and against whose policies and proclamations, “governments the world over are reluctant to be in open opposition.”
Besides some specific details of implementation, the kinds of economic policy that encourage economic growth and development in a country have been outlined in Adam Smith’s Wealth of Nations. These have been restated time and again by the likes of Milton and Rose Friedman and Peter Bauer. Governments around the world have resisted heeding such policy prescriptions because they do not suit their interventionist tastes or political ends. This is why foreign economic experts frequently are of little help in the Third World.
Of course, the flow of aid money to African governments will not cease in the New World Order. Donor countries still want to retain their spheres of international influence. But the adoption of efficient economic policies that would likely follow the curtailment of Western aid would be good for the continent. 
- World Bank, African Economic and Financial Data, 1989.
- World Bank, World Development Report, 1992.
- O. Obasanjo and H. d’Orville, eds., Challenges of Leadership in African Development (New York: Crane Rus-sak, 1990), p. 28.
- Benjamin Higgins, All The Difference: A Development Economist’s Quest (Montreal & Kingston: McGill-Queen’s, 1992).
- Ibid., p. 267,