LONDON — Last weekend the finance ministers of the Group of Seven industrialized countries met in London. British Finance Minister Gordon Brown tried to bounce his colleagues into setting up the largest aid program the world has ever seen: an International Finance Facility (IFF). He called it a new Marshall Plan (referring to the aid program that the United States set up after World War II to finance Europe’s reconstruction). The IFF, however, would supply aid only to Africa, a continent that Brown recently visited for the first time.
Brown failed to get the agreement of his fellow finance ministers, thank goodness. He has warned, however, that he intends to press the plan on the G7 heads of state when they meet in Britain later this year. In the second half of this year, Britain will chair the G7 as well as the presidency of the European Union.
To help the leaders take the aid issue seriously, the British government has announced that, along with English white wine, it will be providing French red Chateau Latour 1961 for dinner. At more than $3,000 a bottle, this wine costs more than 10 years’ income of the average African worker. That should concentrate the leaders’ minds on the aid issue. I hope the wine is corked; then the heads of state just might follow the lead of the finance ministers and continue to deny Brown his IFF. I hope so.
The IFF would operate by selling bonds on the world’s capital markets using future aid donations from the participating rich countries as collateral. In other words, it would not be additional aid, just future aid made available over the next 10 years, after which aid flows would drop drastically as the bonds were paid off. Brown believes that by concentrating massive amounts of aid on Africa — and he has talked about billions of dollars over a 10-year period — poverty there could be eradicated. “Make poverty history” is the catchphrase.
Brown has also proposed that the International Monetary Fund revalue its multibillion dollar stock of gold and, by this accounting sleight of hand, write off the debts to it from the poorest countries, all in Africa. He would also like the rich countries to assume the interest and capital-repayment obligations of those poorest countries to the World Bank and African Development Bank. I hope these proposals fail, too.
It’s not that I am against rich countries tackling the poverty problem in Africa and elsewhere — there are hundreds of millions of people living in abject poverty in Asia as well. It is just that I believe that the IFF (and the associated debt write-offs) would not be the world’s biggest-ever aid program; it would be the world’s biggest-ever waste program.
There are three reasons why aid programs such as the IFF must fail: absorptive capacity, corruption and cost.
First of all, the poorest countries in Africa cannot even handle existing aid flows effectively. Their very poverty, compounded by the damage left by colonial governments and now by brain drains, means that they do not have the bureaucratic capability to manage aid inflows properly. Nor do they have the logistic capability to carry out the projects to be funded by aid.
Africa is littered with failed aid projects. The commercial and physical infrastructure that would be required to cope with the massive jump in activity implied by the IFF is just not there.
Second, the governments, both politicians and officials, of most African countries are corrupted to varying degrees, mostly by the governments and corporations of the rich countries providing the aid but also by aid agencies.
Think arms sales, think kickbacks. The supporters of the IFF do not address this problem. They talk about making aid conditional on good governance, but such conditionality has failed for the last 40 years. There are no indications that the staff members of the British Treasury who designed the IFF have any new ideas on how to deal with corruption. Indeed some of them worked for the World Bank, an aid agency that knowingly provided aid finance to corrupt governments for decades and continues to do so. Bankers in Switzerland will be rubbing their hands and hoping that the IFF proposal is adopted.
Third, aid is a costly business. The officials from the bilateral and multilateral aid agencies (and their families) live in palatial properties in the most expensive parts of town and drive the most expensive cars. Their kids are sent, on the aid budget, to expensive schools back home. When just passing through, they fly full-fare business class and stay at the most expensive five-star hotels.
Goods and equipment provided under many aid programs are not always competitively priced and often are not appropriate for the conditions in which they will be used. (Why does an Australian dairy plant provided as a coconut milk-processing plant spring to mind? Or Parisian street mopeds provided for rural agricultural extension workers in Africa?)
Aid actually delivered after the waste, corruption and high costs of delivery have taken their toll would be a small part of the notional amount provided. Because of extensive ignorance of local conditions, it may actually do more harm than good.
So I hope that the G7 heads of state will not be swayed by the Chateau Latour 1961 and will refuse to support Brown’s proposal for an IFF. There is no quick-fix for poverty in Africa. It is going to take generations to eradicate the causes of poverty.
If Brown really wants to have a short-run impact on the quality of life in Africa, he should spend his political energy persuading the G7 to open up their markets to exports from Africa, free of duty and free of quotas. He could get the European Union and the U.S. to stop dumping subsidy-supported food surpluses that impoverish African farmers. He could also talk to immigration ministers in the G7 countries about opening their frontiers to more workers from Africa. Now it’s my turn to dream.
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