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| Columns |
| Economic and Business Forum |
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by
D.D Phiri, 31 October 2005
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07:07:58
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Foreign Aid: Dissent and defence
For more than 40 years most African countries have received billions of dollars in foreign aid. During the same period countries of the Pacific Rim and those of South Asia have been receiving aid on a declining scale. African countries with a few exceptions such as Mauritius and Botswana have remained under developed despite the assistance. Those of Asian countries have performed marvellously.
What role does aid play in the development of a country? Some economists like the late Professor Pater Bauer of the London School of Economies say foreign aid at least contributes nothing to the development of a country. At the worst it causes a country’s stagnation. This is startling in view of the eagerness with which all developing countries seek the assistance of donors.
Developing countries seek aid from developed countries and the latter give aid for a variety of reasons. Balance of payments problems compel a developing country to go hat in hand and seek the assistance of donors.
Most developing countries earn foreign reserves by exporting commodities like coffee, tea, tobacco and copper. For several years a country may be earning substantial dollars, pounds or euros. Its government may undertake major development projects while private firms may be expanding factories. Both the public and private sectors may have access to ample foreign reserves for the purpose of importing capital goods including raw materials from abroad. But then suddenly prices of these commodities tumble down. Very little foreign reserves are earned. At that time the public and private sectors may be in desperate need of additional equipment to complete projects already started. Government then approaches donors and international financial organisations to assist with the reserves.
It seems the alternative to receive foreign aid is to abandon the projects already started and not to start new ones. Modern governments are democratically elected. To be elected politicians promise the electorate all manner of services, jobs, schools and hospitals. How do these politicians look the people in the face when the economy is stagnant or in decline?
Foreign aid is a stabilising factor in developing countries. Without it there would be political and social disturbances. Even donors have a stake in the stability of recipient countries.
Some foreign aid is justified on moral grounds. Just as a rich person is expected to give food or financial assistance to a poor neighbour so wealthy countries are expected to transfer some of their wealth to poor developing countries.
Those who are against foreign aid say it encourages irresponsibility on the part of developing countries. In times when foreign earnings are ample governments indulge in wasteful expenditures such as sending their ministers on wasteful trips abroad, purchasing expensive official and private vehicles.
It is said that so long as they know that donors will give them the gap filling reserves when export earnings tumble down those spend-thrift politicians do not need calls for prudence in their habits.
Aid has been given to Africa to save millions of people from starvation following inadequate or bad rains. This has been going on for decades but the aid recipient countries have done their best to ensure lasting food security as India has managed to ‘When there is looming hunger we will declare our situation as disaster and receive famine relief,” they seem to think and say.
Aid is defended as a form of reparation. It is said that during the colonial era most developing countries were robbed of their wealth and resources by those countries that are now developed and prosperous. The latter must therefore restore some of the wealth they took away.
The anti-foreign aid lobby deny this historical argument. They say countries which are now developed have developed through their own efforts, without foreign aid. They cultivated those traits and spirits of inquiry, endeavour that are the basis of progress.
Foreign aid is said to discourage self-reliance. It is those countries which have not learned to accumulate reserves locally and to engage in research and development that have failed to develop despite the massive aid they have received.
Foreign aid cannot create an entrepreneurial spirit if none exists in an aid recepient country. The right ethos for development has to be cultivated democratically. It cannot be brought from abroad. Fundamentally it’s the human capital rather than natural resources of foreign aid that ensures development.
Those who see a positive role of foreign aid in developing a country cite Marshall Aid as an example. Opponents of foreign aid see no analogy between the situation in which European countries were at the end of world war II and that in which developing countries have been since they gained independence. The United States offered aid to European countries to rebuild economies that were already developed but had been shattered by the war. The qualities for economic success were already in existence. There were entrepreneurs, managers technicians ready to make good use of the equipment they were receiving from the United States. Marshall Aid primarily aimed at restoring a situation that had existed in the pre-war period.
Foreign Aid is sent to countries which lack the capacity or morality to make good use of it. Quite often governments misuse the aid funds, some of the money is banked in private accounts or transferred to overseas personal accounts. Sending foreign aid to countries with corrupt officials is a waste of tax payers money. That is taxpayers of developed countries.
Advocates of foreign aid say if developed countries transferred one per cent of their GDP to developing countries this would ensure that the latter have enough resources to develop. Opponents insist that developing countries should either cultivate the development spirit or perish-foreign aid works only where it supplements domestic resources not where is supplants them.
These rather negative views about foreign aid deserve to be examined seriously. We have been independent for more than 40 years. All this period we have been receiving foreign financial and technical assistance. What is it in our national character that has prevented us from making fruitful use of the aid we have been receiving?
There must be some soul searching about this. |
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