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The Problems and Promise of Foreign Aid

In the last 30 years, Africa has received $1.2 trillion in aid. However, not enough real improvement has been seen. It is still underdeveloped as a continent, lacks thriving industry, and has large amounts of poverty and hunger with little prospect of improving as quickly as is necessary. The aid they have been provided with is unequally distributed within the continent and is mostly used for emergency and relief purposes with no investment in long-term solutions. In a continent with 54 countries, reasons for these disparities are many, ranging from colonialism to corruption to traditions. So, how successful is aid? How much has Africa benefited and how could it do so even more?

The Scramble for Africa began during the late 1800s when European nations invaded and annexed Africa. In 1870, only 10% of the continent was under European control, a figure that increased to 90% by 1914. During this time, Britain’s balance of trade was beginning to showing signs of growing deficit and Africa offered a new market opportunity. Capital was more profitable, materials were abundant and cheap and there was limited competition meaning countries such as Britain, Germany, France and others raced to take control, on many occasions leading to violent fighting. The problems this has caused are extensive. Colonial powers established political structures and bureaucracies inherently incompatible with the way of life of the indigenous people and the opportunities presented by the countries they took over. Complex political and social policies were forced in countries with weak institutions and collapsed economies resulting in Africa not having the opportunity to create its own economy based on its opportunities and needs. This has reduced its ability to expand and develop in the same way other countries have.

Another problem is the absence of strong, transparent and credible institutions due to corruption and bad governance. 50% of the county remains under non-democratic rule.

The resulting misallocation of resources has limited Africa’s ability to use aid. Corruption has meant aid is often being poured into poor, inefficient ‘white elephant projects’ which don’t foster growth, rather than being spent in building good, profitable institutions.

Democratic governments answer better to their citizens and their needs and have greater accountability for decisions on spending but when leaders feel they act with impunity, they are more corrupt and aid is then used to subsidise authoritarian governments instead. Ethiopia, for example, is a country with over 875,000 refugees, a civil war and epidemic outbreaks. They rely on humanitarian aid to meet their basic needs but in the past few years, the government has used this as a tool to suppress or punish criticism by denying access to aid to those perceived as political opponents. The image above shows how, although much is destined to medical purposes, over $100,000 is used for defensive purposes and government security which is important but relative to other problems Ethiopia faces, not a priority.

Additionally, loans are frequently forgiven. They are given as concessional loans or grants with prospect of repayment meaning the government is encouraged to use them wisely to get profit from them to then use to repay. The truth is, that most donating nations are aware that these countries cannot pay back the loans. However, not having to pay back means there is no incentive for the governments to cut back on spending and they can come to count on aid as a continuous source of income, creating aid-dependent economies.

Likewise, aid usually comes with conditions. This ends up creating relationships based on pressure where richer nations coerce poorer ones into doing things which are usually not beneficial and might be a set back to their development. In 2005, for example, the US pledged $15 billion over 5 years to help fight AIDS. However, 2/3 had to go to pro-abstinence programmes and none of it was available to any organisation offering abortion services or family planning programmes. As a consequence, many communities and groups of people, specially women could not benefit from this help. As seen by the table on the right, of the countries that receive the most aid, the majority are in states of chaos, conflict and have very underdeveloped economies.

In places like sub-Saharan Africa, there are over 1000 tribes, each with their own customs, traditions and ways of life. In many occasions, this ends in violent conflicts that exacerbate the situation by destroying communities and leaving families without resources. Apart from the obvious, direct effects of this, all the time countries spend their time fighting is time wasted that could have been used to build the economy causing a huge drain of money and time.

The results of this is that Africa receives $6billion in lifesaving humanitarian assistance every year and yet, the Horn of Africa faces the most severe food security crisis in the world: 21 million people are in urgent need of food assistance, 75% of the world’s poor live in Africa (a figure that has risen from 10% in 1970), and 1/7 children die before they are five. It is undeniable that aid can save lives: smallpox, tuberculosis, or leprosy have been controlled due to targeted efforts and development campaigns. Deworming, malaria nets and education subsidies have helped millions. However, the target must be to use this money to promote long-term sustained growth.

Africa does have geographical disadvantages. 31% of the continent is covered by a desert. Nevertheless, Saudi Arabia, for example, has average summer temperatures of around 49 degrees Celsius and yet, their gross domestic product is expected to expand by 7.6% making it one of the world’s most fastest-growing economies in the world. Therefore, educating people on the possibilities the land offers and the most effective ways to make use of these is vital to allow countries in Africa to succeed.

A large proportion of the aid that has been provided in the past has been used as emergency/relief aid after a natural disaster. To overcome this, programmes should be put in place to help countries reinvest in resilience to natural disasters to mitigate the impacts of these. If another natural disaster was to occur, the impacts would not be as severe and economic damage reduced. Once this is achieved, a ‘Marshall Plan for Africa’ would be initiated. Like in the original US plan, recipient governments’ plan would be to restore private sector-led growth to avoid instabilities. Well-built, transparent institutions would set the precedent to a strong economy and sustained growth leading to genuine job-creating and livelihood-improving development. A shift from agrarian-based production to manufacturing and technology would be encouraged. In time, these countries would start to generate their own sources of income to support themselves. This would also subsequently attract investors and foreign aid causing the economy to become stronger.

Finally, education is imperative. The poverty trap is a huge problem in much of Africa and is a drain on aid which doesn’t give any rewards in the long-term. Therefore, investing in education will give children the opportunity to pursue a degree at university and get a job somewhere where they are paid enough to be able to send all of their children to school. If this doesn’t occur, their children are likely to remain in the poverty trap where they don’t have enough money to buy necessities or pay for education and the cycle is repeated. Therefore, a good public education is vital for the growth of any economy.

In conclusion, aid is not a bad thing, depending on how it is provided, the motives behind it, what it’s used for, domestic policies and quality of political leadership. However, if it continues to be provided as it has been in the last 30 years, it will destine Africa to fail. Despite being the largest recipient of foreign aid, few countries have reached rapid economic growth like that seen in China, or India. Multilateral collaborations with countries who have already established technology frontier will be hugely important but always taking into account Africa’s possibilities. Until now, aid has meant a continuous input of money to Africa without any real results. Nevertheless, there is still a solution. Africa will have to go through an industrial revolution 200 years after much of the rest of the world. The downsides of relief aid will have to be faced but once they are, economic growth will come hand-in hand and will allow Africa to thrive on it's own. By Ana H, Year 13 Image: Oxfam East Africa at It was reviewed on 5 August 2011 by FlickreviewRand was confirmed to be licensed under the terms of the cc-by-2.0.

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