Is Foreign Aid part of the problem?

Foreign deadly aid is seen to do more harm than good to developing countries especially Africa and its population, leaving the continent in a situation where Africans became unable to set their own development path due to the fact that they have been dependent on the West for such a long period. The growing dependence on foreign aid in many African countries and the inability of African governments to adopt real economic policies is a result that developed countries have created. In fact, foreign aid has been largely blamed for deteriorating the situation in Africa since Africans themselves believe that the more Europe tries to help them, the more the continent becomes poorer. According to them, foreign aid is not the solution because it does not reach the needs of populations, believing that this is a short term aid and thus they have to build their own social and political infrastructures to cover the basic needs of life. Nonetheless, it has been argued that foreign aid has worked in countries such as: South Korea, which has been as poor as African countries during the 1960s, becoming thirty years later rich enough to provide aid for Africa itself. Africans question why the same combination has worked well for other countries such as: South Korea, who graduated from the same aid school. Consequently, it is inevitable to address why foreign aid has worked elsewhere, but not in Africa which has been funded by over trillions of dollars in order to combat poverty, famine, civil wars, genocide, disease and corruption, yet the situation is subsequently inferior. In this concept, there have been various explanations to clarify the massive failure of foreign aid precisely in Africa. Foreign aid’s failure may, in large, be linked to corruption and egoism in the recipient regimes. In most cases, over half of the delivered aid gets lost, stolen or simply never used. A Hydroelectric power station in Zaire and Glass factory in Tanzania were completed by the Belgian government under foreign aid programme, yet have never been used.

In such, it has been claimed that the aids provided by the west do not reach the general public since politicians, powerful elites, government officials and their allies use these grants for their personal interests as Lancaster supplemented: “The World Bank and many foreign governments continue to provide large loans, which are rarely used in cost effective ways, but often are stolen by corrupt rulers”. Obviously, development will never be achieved if wealth is not equally distributed and invested in infrastructures and businesses that add to the economic prosperity. “Between 1981 and 1991, the World Bank provided 20 billion dollars for Africa towards the infrastructure of education institutions, government agencies and transportations. Yet, none of this has been accomplished because the funds have been robed by corrupted and self-seeking leaders. The fact is Africa stills in poverty although its export earnings from oil, gas, and diamonds are supposed to be sufficient for its inhabitants. It has been frequently argued that the West is already in knowledge of the robbing strategy, used by African leaders, yet keeps a closed eye to promote its strategic, economic and diplomatic goals in the area. Western regimes act in their general interest; they help African leaders resist political competition by providing them with aid. From this notion, foreign aid is used to support local bureaucracies and policies of poverty. This, actually, was in accordance with the written article in the French paper “Le Monde/1990” which stated that: “Every Franc we give to impoverished Africa comes back to France or is smuggled into Switzerland or even Japan”.

Hence, foreign aid may be hiding a political agenda; it stabilises friendly regimes to the donor country either by a collective organisation such as: the Organisation for Economic Co-operation and Development or an individual one as the United States. They are effective political programmes for the donors, who are not necessarily interested in effective development programmes in recipient lands. Arguably, foreign aid has been used as a tool by some institutions and countries to encourage the spread of capitalism; the ultimate purpose of aid is to help spread capitalism to the benefit of the global economic organisations in which first world dominate the third world for economic ends, summed up by economic imperialism and neo-colonialism. In the 20th century, private capital flows and remittances from migrant workers became the two largest sources of aid from wealthy countries to poor ones. However, this form of aid was direct foreign investment which has gone to developing countries pursuing policies of trade and economic liberalisation and those with large markets such as: Brazil and India . It is also relevant that business corporations control the budget of foreign aid in accordance with their trades as the World Bank confirmed that food aid has not been very successful because the budget was controlled by exports of surplus from western countries, rather than being determined with the needs of recipient countries to reduce their dependence on imported foods.

Foreign aid has also failed to deliver economic development mainly because the aid was not consumed wisely. It was directed on the short term consumption rather than promoting investment, which ignores public needs in the long term. Consequently, investment became the high class luxury, putting the general public in an enduring need because the recipient country does not have any economic strategy or expertise to utilise the “big push”, provided by the west. Foreign aid is a weak instrument in developing countries and poor investment is largely driven by government`s lack of credibility and poor economic policies. This argument is based on the reality that strict and fair economic policies in Asian countries saved them from their extreme poverty and at least provided them with the strict minimum of survival. Unlike African states, Asian ones welcomed foreign investment and trade, creating the “Asian Tigers” and the “Asian Miracles”. Meanwhile, various African regimes closed their doors on foreign trade and investment and depended on their simple domestic economy. Direct foreign investment has been an important element in outward looking development strategies in Asia, providing more productive capital, technology, management, training of labour and linkages elsewhere in the host economy.

Another issue has been raised by Dambisa Moyo, was the underestimation of developing countries, especially Africa. Along with her thoughts, Western societies look at developing countries with a sympathy and sorrow and Africans are seen as unintellectual, undeveloped and uncivilised human beings who will never reach development; African people have been prejudiced as primitive, barbaric and undeveloped and the continent has been misrepresented throughout history. These thoughts, made Africans believe that they cannot change their situation without a big push from the west civilised nations. In addition, Moyo criticised celebrities, arguing that many of them claim to speak for the rights and needs of Africa, while in fact, they are only traders with the problem of Africa to gain more popularity such as: Bono and Brad Pitt at the “Make Poverty History Campaign” in 2005. Foreign aid creates additional problems for the recipient country. In cases where the aid is under the form of loans, developing countries may no longer become able to take foreign aid when the terms of aid has been increased by raising the rate of interest and reducing the period of repayment. It became apparent that loans had many potential problems, including feeding inflations and balance of payments deficits in borrowing countries. In addition, export and import payment gap and saving investment gap widen when the country is unable to maintain stability of its domestic savings and balance of payment. In some cases the aid provided may destroy the simple local production and discourages agriculture such as: mosquito nests and wheat. In other cases where the west controls the domestic politics of developing countries, aid is restricted and controlled depending on the recipient government if it agrees with the donor`s agenda; donors award or withdraw aid on the basis of governance issue and some countries of former strategic importance have seen their aid fall accordingly. This whole misery creates enduring debts for developing countries and always put them in a situation of relativity to the west; once the dependence relationship begins, it tends to be mutually problematic unless replaced by transition to interdependence.

More or Less Aid for Africa?

In order to save developing countries from their current situation, some commentators believe that western societies should only keepforeign aid for countries who have adopted fair economic policies, who have faithful leaders and who are willing to provide the best for their population in a transparent democratic system. Fair economic policies of individual developing countries have great relevance to reactivate, accelerate and sustain development. Consequently, the west has to open foreign trade doors to developing countries and help their export system. From this concept, foreign private investment has been suggested as solution to developing countries` problems. This may be advantageous as it limits profits, benefits both partners and foreign investors are being controlled in case of bribery. Overall, without private foreign investment developing countries could have been worse off and the simple presence of multinational corporations is a complete success.

However, others dismiss this step and believe that foreign private investment holds many disadvantages. In such, private industries destroy the local economies, create an economic gap between rural and urban provinces, charge heavy prices on local consumers, increase foreign exchange obligations on the importedraw materials, advertise unfortunate products such as: Coca-Cola, and foreign investors tend to build relations with political leaders and thus add to the corruption of developing regimes. Foreign direct investment raises the risk of becoming monopolised by exterior corporations and ultimately decreases social welfare. In contrast, Moyo believes that Africa could only be saved when Africans stand for their rights and reject the existing corrupted regimes, adopt fair economic, social and political policies and then open their trade doors to countries such as: Japan and China who consider Africa as a business partner, not an uncivilised continent. She also believes that the west is responsible for the situation in Africa, arguing that Asian states respect trade and benefit both partners.