By Diana Furchtgott-Roth
Africa receives about $11 billion a year in foreign aid from America, and an equal amount in loans from the World Bank.
In spite of this largesse, or perhaps because of it, Africa remains the world’s least developed region.
In this time of fiscal crisis in the United States, as evidenced by Standard and Poor’s downgrade on Monday of Washington’s credit-worthiness, it is imperative that Congress reduce spending and borrowing. Aid to Africa is one place to start.
George Ayittey, a Ghanian economist and a professor of economics at American University, offers persuasive reasons in a paper he gave earlier this month to the Association of Private Enterprise Education, which held its annual meeting in Nassau, Bahamas.
“African dictators and the ruling elites are just not interested in reforming their abominable political and economic systems,” he declared. Until this changes, he argues, no matter how much aid African nations receive, they will not progress.
African countries lack enlightened political leadership, Ayittey finds, and most African leaders are more interested in lining their pockets than encouraging entrepreneurship. That’s especially unfortunate, because before Africa was colonized it had a culture of markets and entrepreneurship, a spirit still in evidence in small African towns.
Africa’s economic situation should concern Americans, and not only because of the billions of dollars wasted on foreign aid. A growing, entrepreneurial Africa would be a trading partner for America, a place to sell our exports and a source of low-cost imports. More American exports mean more jobs for Americans.
Professor Ayittey, who grew up in Ghana and who was educated at the University of Ghana and the University of Manitoba in Canada, knows what he is talking about. The author of many books on Africa, including Africa Unchained: The Blueprint for Development (Palgrave/MacMillan, 2004), he founded the Washington, D.C.-based Free Africa Foundation in 1993, whose slogan is “Africa is Poor Because She Is Not Free.”
Last September, in a speech at the International Monetary Fund, he warned that certain African countries, including Algeria, Egypt, and Libya, were about to implode. Few believed him, but surely enough it has happened.
By the World Bank’s own records, the many billions of dollars it has spent in Africa over the past fifty years have been wasted. In 1994, the Bank reported that only six countries out of 29 that had received $25 billion were doing well, namely Gambia, Burkina Faso, Ghana, Nigeria, Tanzania, and Zimbabwe. Later, it removed Gambia, Ghana, Nigeria, and Zimbabwe from the success list.
This is a sobering indictment of those countries and of the effectiveness of World Bank aid.
The World Bank, however, does not admit that its policies have failed. Rather, it states in its Africa Regional Brief that “Africa’s private sector is also increasingly attracting investment, with much of the funding coming from domestic banks and investors. The sector is also creating an emerging African middle class of hundreds of millions of consumers. Returns to investment in Africa are among highest in the world.”
One World Bank report, Doing Business 2010, cites Rwanda, torn by political unrest, as the world’s top reformer. Another report, Africa’s Future and the World Bank’s Support to It, concludes that “Africa could be on the brink of an economic takeoff, much like China was 30 years ago, and India 20 years ago.”
Ayittey’s data are more persuasive than the World Bank, which has an incentive to make its loans appear more helpful.
Ayittey reports that much of the aid has gone into the pockets of African dictators – $5 billion alone to General Ibrahim Babangida, former dictator of Nigeria, $7 billion to Omar el-Bashir of Sudan, and $40 billion to Egypt ‘s Hosni Mubarak.
But he holds some hope for Africa’s future, not from foreign aid, but from a new generation of young professionals. He calls them Cheetahs because they are energetic and quick on their feet. He contrasts them to the old guard, the hippos. They are sluggish, short-sighted politicians, even as the hippopotamus is a near-sighted creature.
Hippos lack vision (hippopotamuses are near-sighted too) “and sit tight in their air-conditioned government offices, comfortable in their belief that the state can solve all of Africa’s problems.”
Cheetahs, Ayittey tells us, don’t accept corruption, inefficiency, and incompetence, and they don’t give tired excuses for failure such as the slave trade, imperialism, or an unjust international economic system. Rather, they seek business opportunities and jobs, and are ready to risk their own capital, energy, and futures.
What should America-and the World Bank and other helping institutions-do? Rather than pouring in money, they must help Africans develop six institutions that are necessary to a country’s acquiring internal ability for sustained economic growth.
Ayittey stressed that the first condition is a free and independent news media, so that Africans will have a free flow of information and so that reform can come from within. In that way, governments will be held accountable.
Second, an independent judiciary to assure that contracts will be respected and the rule of law will prevail.
Third, an independent electoral commission, to ensure free and fair elections.
Fourth, an independent central bank, to make sure that the country has monetary stability, and to avoid capital flight.
Fifth, a neutral military to protect citizens.
Sixth, an efficient and professional civil service, to implement laws without favoring any ethnic group.
As Congress and Western countries consider their foreign aid budgets, helping Africa forge such institutions could be a cheaper and more effective route to economic progress.
Diana Furchtgott-Roth is a Senior Fellow and Director of Hudson Institute’s Center for Employment Policy. She is the former chief economist at the U.S. Department of Labor. This article first appeared at RealClearMarkets.com and is reprinted with permission.