Essay on Why Foreign Aid Is Hurting Africa Article by Dambisa Moyo

Why Foreign Aid Is Hurting Africa is an article by Dambisa Moyo that appeared on the March 21st 2009 edition of The Wall Street Journal. The author argues that funds from developed nations are responsible for the rampant corruption, poverty and stunted economic growth. Moyo is of the opinion that cutting off the aid would be much more beneficial. He raises a number of points to give weight to his argument.

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Charity-based and humanitarian aid may come in handy when African nations are faced with emergencies. However, it is worth bearing in mind what this type of aid can and cannot do. For instance, while aid-supported scholarships have helped African girls attain education, they cannot find employment opportunities in their own countries once they graduate. While this type of aid can offer temporary solutions to immediate sufferings, it cannot pave way for long-term sustainable growth.

Aid to African nations lead to problems with debt payment. In the 1990s, an aggressive debt-relief campaign was launched. Despite this, African countries still part with almost $20 billion every year in debt repayments- a vivid reminder that aid is never free. To maintain the system in operation, debts are repaid at the expense of healthcare and debt in Africa.

The most prominent argument against aid is its ties to rampant corruption. Flow of aid meant to assist the average African end up being diverted towards bloated bureaucracies that take the form of donor funded non-governmental organizations and poor-nation governments. According to a 2002 African Union estimate, the continent was losing $150 billion annually to corruption. It seems that donors were ignoring the simple fact that aid funds were unintentionally fuelling graft. Given that there are few strings attached or none at all, it is easy for aid money to be used for anything apart from the purpose of development for which they were meant for.

A regular flow of free funds presents an ideal of keeping a bad or inefficient government in power. There is nothing more for it to do as the aid flows. It does not have to raise taxes or sort the issues facing its citizens as long as it pays the military. All it really has to do is court and please foreign donors in order to remain in power. Stuck in a world of aid without incentives, governments have no reason to seek other independent ways of raising finance.

For a country to advance its economic prospects, its government has to have an efficient civil service. However, such a civil service is naturally susceptible to bureaucracy. Also, there is always the risk of self-serving cronyism and the inclination to subject citizens to a time-consuming and endless red tape. Foreign aid is capable of making such a situation a grim reality. Hence, doing business in an average African country is a rather uphill and unpleasant endeavor.

Historically, food aid has not done much for the benefit of African farmers. Every year, millions of dollars are spent in purchasing food grown in the United States under the tutorage of the US Food for Peace Program. It is puzzling as to how flooding African markets with foreign food actually helps the continent become better considering that it makes local farmers go out of business. It would be much better if the aid money was used to purchase food from farmers within the African country, and then use the food to feed needy local citizens.

The articles author talks of a term called the Dutch disease. It describes how huge inflows of money can kill off the export sector of an African country by inflating its home prices in a way that makes goods produced there to be too expensive for export. Foreign aid has a similar effect. Large aid windfalls dominated by foreign currencies directed towards a fragile third-world economy can cause its domestic currency strengthen. Such a situation is disastrous for employment opportunities in the nation where the livelihoods of its citizens depend on relative competitiveness in the world market.

Discussion Questions

Does foreign aid cause debt problems to African countries?

Growing debts presents a serious problem for underdeveloped African countries. Despite the increasing importance of loans from private banks, debt on previous aid still accounts for most of third world debt. A large percentage of the debt of some of the poorest nations in Africa happens to be the official debt to other countries. However, loans offered by multilateral sources such as the IMF and the World Bank will be necessary as long as poverty-stricken African nations get insufficient revenue from their exports and hence need more external capital.

Have African economies been hijacked by foreign aid?

African countries that receive aid report an incredible paradigm shift in their respective GDPs. However, the perceived economic growth does not involve a tangible change in the livelihoods of a significant portion of the countries populations. It is puzzling that a certain report can indicate a substantial increase in GDP and yet the citizens standards of living do not reflect such a growth. Foreign aid traps a nations economy into a long-term cycle of debt, which can be equated to a hijack of the economy.

Is foreign aid a necessary evil?

Despite its harmful effect on African nations, foreign aid will always be a necessity in the continent. It seems as if most third world countries are so dependent on that, in its absence, they would be unable to fulfill almost half of their annual budgetary commitments. For instance, in 1992, aid made up 12.4% of GDP, more than 70% of gross domestic investments and savings, and more than 50% of all imports sub-Sahara Africa. It appears as if aid is not meant to ensure that those who receive it become self-reliant. If this was the case, the developed nations would no longer boost about who is offering more aid than the other.

What can be done to prevent dependence on aid by African countries?

Poor African nations need to establish non-corrupt, diligent and non-bureaucratic institutions whose duty would be to scrutinize the contracts that accompany foreign aid. This way, they can avoid the pitfall of trading off their economy blindly. These institutions should put on their payroll high value contract specialists to deal with any matter to do with incoming aid. By adopting this strategy, foreign aid can be changed from its current path of negative effects to become a mega positive boost to African economies.

How is Africa to blame for allowing foreign aid to cause widespread poverty?

The continent of Africa has struggled with underdevelopment and chronic poverty for decades since the dawn of political independence in the mid-twentieth century. According to some Africans, this issue is one of the continents own making. Academics and development experts have pointed accusing fingers at foreign aid for the unrelenting and apparently obstinate development crisis facing Africa. The continents battle against poverty is seen as amounting to submissiveness and begging, resulting in reforms that only make Africans poorer. Experts unanimously agree that the more western nations co-operate with third world countries, the poorer Africa becomes.

Which social class in Africa benefits more from foreign aid?

Even tangible generosity from western nations is increasingly failing to impress many Africans. Generally, foreign aid benefits the ruling African elites. It does this by facilitating and perpetuating the grip on power by corrupt governments and, to a certain extent, embedding the prevalent underdevelopment. Over the last five decades or so, foreign emergency assistance to the continent may have helped forestall hardship for many of its poverty stricken inhabitants. However, it has not succeeded in bringing about any noteworthy economic development. Aid is offered with the belief that real economic growth starts with an emphasis on offering it to poor urban and rural communities.

How was the United States involved in the advent of foreign aid?

When U.S. foreign aid was conceived after the Second World War, it was meant to achieve two interdependent but conflicting set of goals. The first one was the strategic and diplomatic goals that advance American short-term and long-term political interests. The other was the humanitarian and development that sought a short-term mitigation of suffering as well as long-term political stability and economic growth. The U.S. Foreign Assistance passed in 1973 emphasized the need to promote per capita growth, minimum standards of living, and equity.

Do Western nations pursue their own interests when giving aid?

Some developed countries offer aid on a basis of global politics as opposed to any humane consideration. For instance, the American position as perceived by development experts is that humanitarian and developmental programs get significant funding only when they match with U.S. strategic and diplomatic interests. In spite of the huge injection of aid over last several decades, Africa has become even more dependent instead of achieving economic growth and development. Also, the standards of living have experienced an overall decline. According to studies, there is overwhelming proof that foreign aid contribute to the misguided policies of bloated and corrupt government bureaucracies across the continent.

How is aid distribution mismanaged?

As a result of political necessities, donor countries often pile pressure for policy and political reasons, thus making dependence on aid unreliable and shaky. In addition, the people tasked with overseeing aid allocation generally are not well versed with the issues facing poor developing countries. As a result, the rationales behind most decisions to do with aid disbursement are full of inconsistencies and poor judgments.

Are Western nations the only ones that offer aid to Africa?

Eastern countries such as China are known to give aid to poor African nations. China has a commanding presence in the continent. Many people in Africa can point out roads, buildings and general infrastructure funded by the Chinese government. It is common to observe several Chinese faces within construction sites and various projects across the development sector. As China grows economically and claims its stake as a world superpower, its aid to Africa will also increase.

Glossary Terms

Foreign aid-Monetary assistance offered by one country to another.

Humanitarian assistance- Relief after disasters such as earthquakes and hurricanes.

Economic stabilization- Funds given to assist stabilize the economic system of a country.

Developmental assistance- Helps individuals improve their standards of living.

Marshall Plan- A foreign aid program that helped rebuild Western Europe after World War II.

Debt relief- When the government rescinds part of a debt owned.

Infrastructure- The features or framework of a country or organization.