Foreign aid has long been a part of governmental and civilian policy. It is seen as a moral imperative for rich, developed nations to assist those that live an inescapable system of poverty. To relieve the illness and suffering among the members of those residing in these unfortunate nations. And to fight for human rights and civic prosperity in places where the fundamental freedoms that developed nations take for granted, are constantly under threat. But are there problems between this ideal notion and it’s implementation?
Dambisa Moyo, in “Dead Aid”, has enumerated the multiple problems that can arise in these nations when aid is given in considerable amounts. But first, she offers a solution for alternate sources of funding: to invest in Asian markets which are expanding (Vietnam, China, India), pouring money into strengthening and maintaining infrastructure, lobby for free market agricultural products, and turning surplus dollars into loans. These seem to be goals which could positively impact the poor nations of Africa.
But as she extrapolates, there are obstacles which significantly dull the effectiveness of traditional aid. Among these obstacles are the historical roots of American foreign policy. Specifically, the Marshall Plan which left the impression among the developed nations of the time, that foreign direct investment within a country was an important component of building an economy. While it is true that FDI was crucial, Moyo makes the case that the spread of democracy, resulting from this investment, has established beneficial government systems which become inefficient and corrupt.
The Washington Consensus is a list of ten economic guidelines for developing nations to adopt. These principles are supported by a variety of nations and organizations. They generally prescribe a trend towards low government deficits, open markets, and conservative monetary policy. Criticisms of these guidelines are varied, but I thought that privatization of services can lead to higher efficiency, but show holes in their social objectives.
In “Dead Aid”, Dambisa Moyo paints an unflattering picture of traditional aid. She states that is ineffective because it is impacted by corruption. Her prose points out numerous examples of gross negligence and corruption where large amounts of foreign aid have been filtered away by greedy politicians. As a result, the politicians become dependent on aid to stay in power, further, the country becomes dependent on aid. As they become dependent, these nations no longer spend time building a tax infrastructure which can support the basic goods and services that governments must provide. The aid is placed into those facets. Once this idea has been institutionalized, there is little effort on the part of local democracies to improve the efforts for transparency and accountability. Put another way, they have reached a status where “everybody does it, so nobody is guilty”.
Moyo quotes someone “My voice cannot compete with an electric guitar”. This person was referring to the skewed perception that celebrities give impactful advice and expertise on aid. That they are able to reach a larger portion of the population of developed nations. Similarly, President Paul Kagame of Rwanda expressed frustration at the status quo in the shadow of the finished geopolitical chess match between the United States of America and the Soviet Union.
In terms of outlook, Malawi has experienced growth through tobacco exports, manufacturing, construction, and other base industries. However, despite this beneficial period in the last year, the contributing factors do rely on current
economic conditions to remain the same. In order to continue growth, it is suggested that they adopt a policy of enabling privatization and good governance.
In another vein, Jeffrey Sachs has discussed a term called the “poverty trap”. It can be described as any method which perpetuates cyclical poverty. Sachs lists specific initiatives that can benefit poor nations, but also states that NGOs should behave as investment banks for local companies. He argues that localized investment is more valuable to the individual regions.