Week 11: Grameen, Moyo vs Sachs: Live Free or Aid Hard

The Grameen Foundation is an NGO which facilitates aid in various developing countries. In particular, they attempt to provide financial services to assist in capital investment within these nations. In Ghana, they have established a mobile network to improve neonatal and maternity care. By opening a mobile line of communication between expectant mothers and physicians, MOTECH, as it is called, is assisting patients get accurate and timely information about their reproductive health. Ensuring infant mortality rates are lowered is not merely a humanitarian goal. Production is directly influenced by the number of able-bodied citizens that can sustain economic activity. Therefore, neonatal care must be treated as a first step. Assuring that medical knowledge is up-to-date accurate is critical, and MOTECH is a practical measure toward that end.

In a similar way, the Grameen Foundation operates the African Health Markets for Equity (AHME) initiative in a number of countries, including Nigeria. It’s purpose is to provide medical care in greater abundance directed directly towards those health issues that affect the poor to a greater degree. Their priorities include “reproductive health, infectious disease, and nutrition.”

Capital investments are a component of economic growth as they provide start-up capital and other loans which facilitate business dealings. One such establishment is MicroKing, which operates in Zimbabwe. Financial infrastructure that is stable can be difficult to find. MicroKing provides micro-financing loans with US dollars. Since 2003, the inflation rate of Zimbabwe has had a remarkable increase in 2009. In order to continue providing loans, they were allowed to use a different currency from their own, hence the dollar.

Bank Teller Windows ideas4development.org

At this point in Dead Aid, Dambisa Moyo feels she has provided the evidence as to why the current system of aid has lost focus, and the concepts that can most effectively solve that problem. It is now her prerogative to indicate the method to adopt in order to implement her system of aid. In practice, it is first dedicated to alternate sources of financing capital: trade, FDI, the capital markets, remittances, micro-financing, and savings. She stipulates that decisions over which source should be customized to each market. (Moyo).

The second is a set of guidelines for how to behave with these funds. Corruption and incompetence have had a detrimental effect on aid recipients. New efforts under this model must succeed by adhering to a policy of fiscal conservatism and targeting investment towards healthcare, education, and infrastructure. The resulting economic ripple effects from these consolidated efforts can result in cheaper goods, higher wages, and a capable work force.

According to Moyo, the final step is the establishment and maintenance of pillar institutions within society. Ensuring that decisions are being made by a clear and uncompromised authority as well as supporting agencies which attend to public health and order. Understanding the environment in which investment takes place can provide crucial context and improving it serves to strengthen trust between the people and government. This can also help provide a legal structure which is key to encouraging FDI, as businesses wish for their money to be protected from crime and governmental abuse.

Her contemporary, Jeffrey Sachs has previously described his own method for repairing the system of aid. His 9 commitments for aid are a general framework. Even though it is broad and multidisciplinary, his points are slightly vague – and while their goals are legitimate, he does not enumerate them here.

Poverty is an international concern. Often in areas of extreme poverty, there is a high prevalence of crime that afflicts this area. In the Middle East, Poverty can be a catalyst to bring about religious fanaticism. Thus, developed nations are spending military dollars on issues that stem from poverty. They can ignore a problem and create one that must be taken care of later.

Week 9: Aid Sourcing, Sachs n’ Moyo

Once again, examining another section of “The End of Poverty”, Sachs discusses the role of the ‘rich’ in international aid. Further, he is describing wealthy nations and not a single billionaire investor or humanitarian. It is clear by GDP that there are countries with vast amounts of wealth. The estimates set by the World Bank say that the poor can be provided with all basic needs for $1.08 per day per person. This amounts to about 124 billion dollars. This amount is well within the goals already set by the world community of 0.7 percent of GDP. However, a stipend of that size will only serve to feed the costs of consumption in areas of extreme poverty. Thus, they accomplished a few calculations which identify how much of the total cost of ending extreme poverty will be passed on the international donors (close to 60%).

The result of this analysis is one facet. The next step is to identify how to account for this percentage of aid. Sachs suggests that the cost be passed on to the wealthiest nations (USA, Japan, Germany, France, and today – China). While it may seem to some that it is passing on the costs of an effort in another country, Sachs has already made his case. The cost to these nations would be relatively minimal compared to the vast amount of capital hat flows through their economies normally. They are also among the nations capable of holding the countries which would be benefiting accountable.

Copyright Pew Research Center - http://www.pewglobal.org/2013/07/18/chapter-4-global-balance-of-power/
Copyright Pew Research Center – http://www.pewglobal.org/2013/07/18/chapter-4-global-balance-of-power/

In my opinion, it is not a perfect solution. Targeting countries which simply have the means to pay for this venture is a selective process. However, I believe that the benefits of establishing nations with healthy populations and growing economies benefits the developed nations as well – obviously to a point where there are too many developed nations – but we are many years from experiencing such a time. The World Bank has stated that extreme poverty has fallen to 17 percent in the world, supporting Sachs’ claims.

Further, Sachs discusses the myths surrounding aid money, specifically in Africa. Conventional wisdom, Sachs states, is that Africa is a drain which will inevitably swallow more money. Curing human disease will lead to population growth, which will lead to further demand for food assistance; and Africa’s lack of transparent government as well as shortcomings in their educational system will hamper any aid effort.

I agree with his characterization of these myths, in that I believe that they exist and are blown out of proportion. The resulting increases from aid are not the current concern. Shrugging our shoulders and dooming these people to their fates is simply not a view worth considering. Investing in countries and raising them up should not be considered a budget line, a series of pluses and minuses. Put simply, the reasons to ignore these myths are fundamentally more imperative than those which state the opposite. Though we should examine our information carefully beforehand.

Finally, Dambisa Moyo talks about China’s role in Africa. While it is clear that they have invested billions of dollars in Africa and established fruitful relationships with any of the nations, Moyo does have criticism to offer. The Chinese appear more business-like than humanitarian in their efforts. They align themselves with countries which can serve their interests a great deal (investing 3 billion dollars to achieve 45% of Nigeria’s oil fields), (Moyo). But it is there nonchalance with regards to human rights violations which commands Moyo’s attention. It has long been the practice of the Chinese government to persecute Christians and other religious groups as well as negotiate with disreputable regimes. However, the public perception of Chinese influence within Africa is generally positive, even more so than that of the United States.

Week 8: Sachs and Moyo

                Noted expert in the field of aid studies, Jeffrey Sachs has stated in his book, “The End of Poverty”, that poverty reduction strategy plans (PRS) have been formulated, studied, and approved by the IMF for years in various countries. But, in a short anecdote, he demonstrates that despite the focused nature of this aid, those funding it cannot pass a large enough hat. These programs are unfortunately underfunded, but that more could be raised if the reasons for providing it were made clear to the developed world. This would be stipulated on a high level of transparency for how the dollars are utilized. He focuses in on several PRS in place.

                Kenya’s PRS, called ERS, is a four part effort which is aimed at reducing poverty and inducing economic growth in a macroeconomic context within 4 years. The first part is to source all government expenditures through tax revenue by holding revenues at 21% of GDP. The second is directed at strengthening good governance, so that there may be the rule of law, national security, and efficiency in public administration. The third is primarily concentrated on improving infrastructure. Finally, the fourth is investment in human capital including health and comfort dollars.

Senegal too participated in a PRS. In general, the document states what the obstacles to development are, including a contextual background in Senegal’s particular culture. The solutions it provides are wide stretching, but are focused on investing in public goods and services, while promoting the growth in the private sector.

Senegal

While aid has long been a part of the effort to develop nations, new thinking among experts, such as Dambisa Moyo, states that it is less effective at expanding economic prosperity, and is in fact detrimental to the process. Moyo has described, in Dead Aid, many of the issues surrounding the procurement and distribution methods for aid. In the next part of her book, she describes a ‘capital solution’ which she considers to be a better method for development.

Her solution is based on the principle that aid is wasteful as the countries which receive it become dependent and less successful as a result. Therefore, she proposes that nations in a developing stage should seek out sources of capital, specifically pursuing the bond market. While aid can be paid back within a number of years, the length of those loans can exceed 50 years. Bonds can be repaid within a much shorter timeline (max of 30 yrs.). Naturally, this requires the efforts of these nations to assist in securing this funding through diplomacy with financial institutions. A bank can be a useful supporter when providing such aid.

Finally, Moyo discusses what developing nations must accomplish before seeking FDI. First, they must find an investor who can supply start up dollars for a project which will grow consistently for a long period of time within economy of that nation. Instability and public perception can be detrimental for a country in need of FDI. Thus, clear and unbiased information is key to garnering FDI, so that investors can feel they are making the best possible choice.

Week 7: Moyo Money

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

Tobacco Fields in Malawi. Wikipedia Commons.
Tobacco Fields in Malawi. Wikipedia Commons.

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.

Week 6: Aid Policy

“The Consolidated Appeals Process (CAP) is a programme cycle for aid organisations to plan, coordinate, fund, implement, and monitor their response to disasters and emergencies, in consultation with governments.”

GNI (Gross National Income) is the total amount of value from producers (in a single nation) plus taxes and income received other nations. It is an important economic indicator because it provides a clearer picture of the state of an economy. The GNI of Malawi has been reduced since 2010 (350 million American dollars.

Official Development Assistance (ODA) is a term defined, in 1969, by the Development Assistance Committee (DAC) of the Organization for Economic Co-Operations and Development (OECD), as the ubiquitous indicator of the way in which international aid is distributed. It is the primary measure involved when discussing aid flows. Countries which have high aid flows tend to receive slightly fewer aid dollars because these flows are reported. Donors are able to see where this amount is and tend to distribute their dollars elsewhere.

U.S. Foreign aid is a difficult subject to tackle. There are educated, yet conflicting opinions which are comprised of one side which wishes to increase aid dollars, and another which wishes to reduce them. While the case against aid is rational and quite well-argued, they simply do not transcend the moral imperative nor the over-arching goals that aid can achieve: a safer, more prosperous world community. U.S. Foreign Aid does not only account for aid dollars, but this is the metric that we use to measure it. Aid dollars is one component. The other component is military.

flickr.com
flickr.com

Military aid can consist of soldiers, armor, and vehicles used around the world. U.S. soldiers distribute supplies, build infrastructure, and defend the recipients of aid, as well as others from danger.

Specifically in Malawi, an aid program called Malawi Health Equity Network has been working to reduce the effects of illness in that country, with a limited US aid budget. The program’s director, Martha Kwataine, lobbied successfully to include 12,200 new scholarships in the Malawi budget. She believes that it is important to improve health service in developing nations.

oxfamamerica.org
oxfamamerica.org

According to the OECD, Policy Coherence for Development was a framework put in place to streamline the aid process. Doing away with the “donor centric” ways of the 8th MDG, it organized aid to cohere with other factors at work in the regions, such as local government and environmental impact.

U.S. Foreign Aid provides a major contribution to the efforts to curb the debilitating effects of poverty and illness in developing nations. But there are blind spots and places that the U.S. refuses to lend. They can be helped by increasing the aid dollars in the Foreign Aid budget. Though many might decry it as half-a-measure or even a foolish one.

Week 5: Will. Kam., Clean Water and Highways, Freedom in Africa

The “Cheetah” generation, those that educate themselves and promote the modernization of African society without governmental corruption, are important figures to the development of the continent. One such cheetah in Malawi, William Kamkwamba was only 14 years old when he began. Despite his youth, William showed intuition and skill as he constructed an electric mill. “He built his family an electricity-generating windmill using blue gum trees, bicycle parts, and materials collected in a local scrap yard, and working from rough plans he found in a library book.” (Emerging Africa, 134) William has continued to build useful structures including two more similar windmills and a “solar-powered water-pump that supplies the first drinking water in his village of Wimbe” (Emerging Africa, 135) His work even inspired a greater effort to continue construction, in particular to rebuild the school in his village.

As I have read and educated myself about the issues facing the African continent, I have been familiarized with major factors impeding development. It is important to note that these are my opinions about these factors, not what those that could be considered ‘experts’ would necessarily put forth themselves.

For me, there are several issues that have not been given the appropriate attention. First is clean water. Much of Africa is comprised of the Sahara desert, where, unsurprisingly, there are few large lakes and rivers. Without fresh water, clean water can be more difficult to find as they have to rely on oases, natural aquifers below the surface, and other groundwater sources. “The WHO (2006) stated that, in 2004, only 16% of people in sub-Saharan Africa had access to drinking water through a household connection (an indoor tap or a tap in the yard).” (Lewis, thewaterproject.org)

But even when water is available, the sources could be contaminated. Effective sanitation is limited due to a lack of funding and oversight. Water tests are performed fewer times than is appropriate. Providing a source of water for a large number of Africans is also impractical because surface water sources are often tainted and actually getting the water to dryer areas would present a significant financial burden.

This lack of sanitation is also a health issue, as many in Sierra Leone have died from dehydration. Even though they could acquire water, it often contains parasites and bacteria from human and animal waste which can cause diarrhea. Unfortunately, due to the fluids that these ill-fated people lose from diarrhea, a number of them simply can’t replace those fluids in time to spare their lives. Such a situation requires a greater effort on the part of those attempting to assist these nations. This can be through education of which water sources to utilize or proliferation of clean water technologies, such as desalination.

A second issue that is hindering African aid is the lack of a truly effective highway system. Highways already exist in Africa, leading, seemingly, to all parts of the continent. However, this is not the whole story. For certain, these 9 roadways exist, but they are hardly ubiquitous. A number of locations throughout Africa are not within a reasonable proximity of any of them. In addition, many of these highways are in poor conditions (leading to a greater number of accidents), lack bridges and tunnels, or have been destroyed by weather conditions or war.

The necessity of these roadways is immense. Aid comes in many forms. Aid can be direct funds, supplies, or even vehicles. After being paid for, how does the aid reach the village in Uganda for which it was intended? By going along the highways. Although progress has been made, there is still more work to be done. According to Infrastructureafrica.org, “Road freight will continue to be costly and inefficient until competition in the trucking industry is increased and barriers to trade are lifted”, “Africa’s rapidly growing cities groan under the mobility problems caused by too few paved roads and inadequate public transportation systems”, and “Road traffic crashes are the third leading cause of death (after malaria and HIV/AIDS) and present a major public health concern”. (infrastructureafrica.org)

As a general overview, “Road conditions have improved in most African countries in recent years, as governments have strived to increase the density of their road networks and carry out institutional reforms. Tremendous progress has been made in establishing institutions to manage and maintain Africa’s roads, for example, but still only one in three rural Africans has access to an all-season road. Unable to reach urban markets, millions are trapped in subsistence agriculture. In cities, road construction has not kept pace with urbanization. In many countries, road maintenance remains inadequate. Even the Trans-African Highway, the symbol of modern Africa, has long gaps.”

Map of Trans-Africa Highway Network
Map of Trans-Africa Highway Network

Democracy is difficult. Particularly in SSA, this can be the case. Although in many of these countries, free elections have been held, they are no longer true democracies. This is due to a significant insufficiency in the protections and institutions that make up a democracy. These are comprised of a secular parliament (or similar ruling body), civil liberties, adequate representation based on informed opinions, and accountability. Many of the elected leaders gave little effort to implementing these notions as they are typically too incompetent to serve as an elected official. Malawi and the Republic of the Congo rank as #126 and #170 respectively. (heritage.org). Each of these nations faces issues when it comes to freedom (including human rights, economic openness, and the rule of law.)

Bibliography:

http://thewaterproject.org/water-in-crisis-rural-urban-africa

http://www.infrastructureafrica.org/sectors/roads

http://www.heritage.org/index/ranking

Week 4: Cheetah Generation

The “Cheetah” generation is a term used by the author of “Emerging Africa: How 17 Countries are Leading the Way”, Steven Radelet, to describe the next intellectual generation throughout Africa. But this new generation is diverging from the traditional ideas and attitudes of established anti-imperialists. They are college graduates with new ideas for social and economic reforms throughout the continent. However, like perhaps a traditional intellectual generation, these luminaries are emerging in many different countries in Africa. Their goals are to establish transparent governments that can respond effectively to modern markets and growing demand for civil and economic reforms. Radelet also describes their autocratic, anti-colonialists predecessors some of whom remain in power, are called the “hippo” generation.

The two differ greatly as the “hippos” have put effort into propping up inefficient government systems. They are unreceptive to new concepts and technologies. While “cheetahs” are centered on good governance, with legal protections and modern civic attitudes.

NGOs have played a part in the development of this “cheetah” generation. They have found and supported several of these cheetahs, while some have hired them. However, they, for the majority, keep a respectable distance away because the cheetahs no longer require the intervention of the NGOs to effect change. This is due to the proliferation of modern mobile phone technology and other modern facets which have allowed this generation’s communication network to grow ad infinitum.

While perhaps being considered hapless victims by some in the Western World, African women have contributed immensely to the development, and many are a part of the cheetahs. One such member, Dr. Agnes Binagwaho was a pediatrician in France before she headed to Africa. She was appalled by some of the conditions in Rwanda. “Luckily for countless Rwandans, Binagwaho did not leave. For the past 14years, she has led Rwanda’s battle against HIV/AIDS, first as the executive secretary of the National Commission for the Fight against HIV/AIDS, and now as he permanent secretary for the Ministry of health. She has helped develop the standard of care for the treatment of HIV/AIDS patients, in Rwanada, improve access to care for communities, and develop the overall national strategy to fight the disease.” (Emerging Africa, 128-129)

  1. According to Jeffrey Sachs in “The End of Poverty”, there are a multitude of issues which reside within these developing nations that hinder growth. Seemingly, one of these issues arises in every facet of aid. Aid can be less effective because of failed implementation. This could be due to a lack of educated individuals who would be capable of utilizing the aid provided most effectively. Another could be a dearth of technology, legal expertise, or financial information which would allow Africans to take advantage of favorable economic conditions in their markets. All of these factors contribute to some of the nations’ lack of growth.
  2. Sachs then proposes a framework for identifying the symptoms of poverty, and how best to collect the information so that it utilized correctly. For instance, in Malawi, primary school enrollment is up to 141% (can exceed 100% due to over and under-aged students and grade repetition), life expectancy is 55 years old, and 83% of the rural population has access to water. While in the Republic of the Congo, primary school enrollment is 109% (only marginally better than all of Sub-Saharan Africa), life expectancy is 58 years old, and only 39% of the rural population has access to water. Malawi’s educational efforts seem to be paying off, while the Republic of the Congo could focus on improving rural access to improved water systems.