TCS Daily


An Easterly Aid Wind Blows Out of Canada

By Jeremiah Norris - March 15, 2007 12:00 AM

In 2000, the then-Secretary General of the United Nations, Kofi Annan, succeeded in passing a unanimous Resolution in support of the Millennium Development Goals (MDGs). These ambitious aims called for, among other things, halving world poverty by 2015. Then, in 2005 at the G8 Economic Summit in Scotland, Prime Minister Tony Blair, in his position as Chair, presented a report which stated that the world had fallen behind on its pledges to the poor in it had made five years earlier. He went on to comment that nowhere is this clearer than in Africa, where the world "is furthest behind in progress to fulfill those solemn promises." He proposed a doubling of aid to Africa through 2015, and in turn African leaders promised to designate 15% of their national budgets to health.

Last month, G8 Member Canada made a stand on an inconvenient truth. After two years of study, and taking testimony from 400 witnesses in the U. S, Europe and Africa, a Standing Senate Committee of Foreign Affairs and International Trade, issued a report on issues related to African aid. In unsparing language, the Committee determined that after 40 years of aid, little has been done with its $12.4 billion in bilateral assistance to propel Africa from economic stagnation or to improve the quality of life on the continent. "Development assistance has been a holding pattern for Africa at best, and a direct facilitator of poor governance and economic mismanagement at worst."

It went on to find that the country's own development arm, the Canadian International Development Agency (CIDA) "has failed to make a foreign aid difference in Africa ... it is ineffective ... costly ... and unresponsive to conditions on the ground." An immediate policy review was ordered of CIDA, with the view that either it be abolished or merged into some other department of government.

To drive its point home to readers, the Committee printed a graph on the front cover of: "Overcoming 40 years of Failure." After an allocation from all other donors of $570 billion, it showed the per capita GNP in Sub-Saharan Africa at 17.1% of the world average in 1965, falling to 9.7% in 2004. In many areas the people are worse off than before and "ordinary citizens have paid the highest price for these failures."

The Committee determined that it was unrealistic for the international community to expect African countries to make economic gains without shifting its focus towards the things that African citizens and leaders actually want—assistance in generating investment, creating jobs, and facilitating trade. Donor countries must deliver aid to Africa in partnership with the private sector and civil society groups in Africa as much as possible. It went on to state that the international community itself must radically change its approach to development and re-direct its assistance towards building stronger economies on the continent. Equally important, donors should only give assistance to countries that are instilling a pro-growth business environment. Rather than a focus on providing social welfare programs, such as education, Canada should re-direct its assistance on economic development and agricultural productivity.

The Committee recommended that Canada target all bilateral assistance on a select number of countries, and focus the assistance that is given on governance and economic development. Moreover, Canada should orient its foreign policy to assist only those African countries that are making a real effort to strengthen their political and economic governance, to build healthy private-sector economies, to improve their economic infrastructure, and to generate employment opportunities for their citizens.

The Committee also concluded "that international development assistance is not the long-term answer for Africa. Vibrant economies and good governance are the answer for Africa. These are the conditions that can only be generated and sustained from within Africa, not from without."

Since the MDGs were endorsed by the UN in 2000, the flow of Official Development

Assistance (ODA) from rich to poor countries has almost doubled. In 2000, ODA was $53.7 billion, rising to $106.8 billion in 2005. Yet, none of the African countries which promised to dedicate 15% of their national budgets to health at the G8 Summit of 2005 has done so. In the period 2002-2005 alone, Africa was the recipient of $108 billion in ODA funds.

Whether through the MDGs or the G8 Summit, there are fiscal and institutional implications associated with large aid increases, particularly since almost all are destined for the public sectors of developing countries and thus will be used for consumption rather than investment. These aid increases are referred to as the "Big Push." In 2005, the Center for Global Development (CGD) in Washington, D. C., published a report on the potential institutional impact of the "Big Push" in 52 low-income countries. The CGD found that nearly half of these countries are receiving aid worth more than 50% of government expenditures and more than one-fifth are above the 75% level. It went on to comment that "Big Push" aid flows can give governments even less of a reason to go through the tedious task of building and improving tax administration if they can get more resources from donors than their own citizens. Finally, the report found that as donor financing of national budgets increase, the budget process becomes directed more towards satisfying donors rather than domestic preferences.

Back in 2004 the International Monetary Fund (IMF) expressed its concerns when reviewing large resource flows of $8 billion for HIV/AIDS alone. It found that there are macroeconomic risks associated with them, including high inflation, which retards growth and acts like a tax on the poor, and a real appreciation of the currency, which can hinder the rural poor from exporting commodities vital to their livelihood.

Apparently, Canada's Standing Senate Committee on Foreign Affairs and International Trade has read the CGD and IMF reports and discovered an inconvenient truth. While the Committee knew with certitude the levels of ODA that have gone into Africa, it couldn't determine their effect on the intended beneficiaries—with the sole exception that they were worse off than before.

This must mean that these same funds have found a way Out of Africa.

Jeremiah Norris is Director, Center for Science in Public Policy at the Hudson Institute.

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10 Comments

Out of their pockets
All this negativity is irrelevant anyway since easing poverty in Africa is only one of the minor goals of Canada's largesse. In fact it isn't even surprising since canadian beaurocrats already know that most of what they spend off their long suffering people's tax money is wasted. Their other 'aid bussinesses' like the 'Indian business' also cost billions a year, with dismal results, their 'equalization payments business' also billions for two provinces to support all the others, equally dismal, the 'welfare business', just as disastrous. Billions more on a military(social workers in camoflage) that when they finally decide to do a bit of fighting, have to beg the States to give them a lift to the field. So Canada's apparachniks can only pretend to be surprised about african aid. It's just amazing though that they finally admit to some of their dismal failures.

Hope
Another piece of evidence that welfare doesn't work. (Maybe Canada will apply the same critique to their welfare state?)
OK, maybe too much to ask.

Free markets and free people are the solutions to poverty.

The Problems In Africa And A Root Cause
I'm making a point today. It isn't a solution to the problem. It's merely an observation. Africa suffers from a lack of civil order. If anybody in sub-saharan Africa could accumulate wealth, another group of natives would probably rob them by force. The degree of unlawful violence in African countries is terrible.

For example, if one tribal group started accumulating some wealth; another tribal group might attack them. So the motivation to work hard and make money is undermined by the constant threat of violence.

Absolutely
I live here, and those were my thoughts as I was reading. If only things here could be less hostile to private-sector solutions, capitalism and dynamic thinking in general. Here, everyone wants to be the unAmerican, the nice, internationally popular country that readily complies with all popular political fads and at any cost. This is such a pervasive mentality here, and so adolescent. This is a "do as I say" for sure.

Realistic Assistance for African Nations
I agree with your "observation". Law and Order are necessary for commerce (much less international trade) to flourish. A realistic policy to help would have three basic principles:
1) African nations are offered support to build democratic governance, establish law and order, facilitate domestic commerce and encourage international trade/investment. Little direct foreign aid is required to achieve these objectives.
2) Any monetary "aid" would be primarily directed towards the private sector. African nations should study and more or less just copy what has happened in China in the last 10-15 years.
3) Humanitarian aid should be primarily the realm of private charities.

I can't argue with either of you
The continent as a whole, certainly with many exceptions, simply resists coming out of the stone age.

Therefore, ...
all assistance should be focused on those who are willing to move forward; and, the "governments" in the rest of the continent should be informed precisely what has been done, why it was done and the conditions under which it could be undone.

More Aid, Better used Aid, Directed Aid.....
Africa has Aid coming out its ears and nothing..... Maybe it is not aid that will help. Maybe it is the economic policies of the west that will help. The west could really assist the people of Africa by doing the following:
1. Removing troops and intelligence agents from the continent.
2. Dropping all tariffs and trade barriers with nations on the continent. This specifically includes that awful concept of Blood Diamonds or War Diamonds that is hurting the exact folks in Africa that the prohibitions are trying to help. I know they make sad movies about it but movies hardly mimick reality, think Al Gore.
3. Stopping any subsidies on products supplied by Africa:
This list includes but is not limited to:
1. Fuel-Yes that theft of money call ethanol is killing Africa. Plus subsidies to consumers make African oil more expensive.
2. Food-All the farm subsidies are making African farmers less competitive.
3. Textiles-There is an open industry.

Basically, let Africa compete and deliver its products to the West and you will see rapid and dramatic improvement in lives of Africans.

This is exactly what made the Asian Tiger economies.

your suggestions
are good, but naive because it only mentions free trade in one direction. Did you know that most African countries have all sorts of trade barriers to stuff coming INTO the continent? Some of them have a 35% import duty on medicines for example, then complain that western companies charge too much. Also, you comments ignore the fact of bad governance. Even if allowed to export, local elites would still charge huge export duties, and other such methods to steal from their own people.

Where is Jefry Sachs?
I'm surprised that JS hasn't written in here with his normal line of; even tho we've spent about a trillion of african aid, what we need is twice as much". In fact, it looks like all the statists on this forum are also hiding under their desks.

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