Opinions Differ Over Action Needed
GLENEAGLES, Scotland, 9 JULY 2005 (ZENIT)In the lead-up to this
week's Group of Eight meeting in Scotland much ink was spilled over what
is the best way to help developing nations, particularly in Africa,
overcome poverty. Writing in the British newspaper the Guardian on June
8 African businessman Andrew Rugasira said he seeks what all
entrepreneurs desire: "markets and equal opportunities to exploit them."
What Africa needs, he explained, is wealth creation, and this is best
done by the private sector. But trade barriers in the richer countries
prevent African countries from exporting their goods.
Rugasira argued that if the continent's exports could grow by just 1%
this would generate revenue of more than 40 billion pounds ($70 billion)
a year, a greater stimulus than could be hoped from the often-broken
promises of additional aid.
In a similar vein on June 24 the Guardian published a commentary by
Matthew Lockwood, former aid worker and author of a new book on Africa.
He argued that Africa needs to imitate the example of the Asian Tiger
economies.
He observed that in 1981 there was a call for a doubling aid, and that
over the following years it rose by 130%. In those years, however,
incomes fell. In some cases, aid did bring economic growth, Lockwood
said. But aid alone is not sufficient. Lockwood doubts that relying on
agricultural exports will generate sufficient income, even if trade
barriers are reduced.
What Africa needs to do, he argued, is to diversify its economies and
develop new industries. As well, it is essential to reduce corruption
and to improve the functioning of government bureaucracy, making
additional aid conditional on these reforms.
Security and health
Nancy Soderberg, the Africa program director of the International Crisis
Group, stressed the importance of improving security. Writing in the
Financial Times on June 24 she explained that aid or emergency relief
cannot be delivered if a country is in chaos, or if the civilian
population lives in constant fear.
Congo, for example, has received just $10 million to $20 million to
establish and train a national army. But, with the country still riven
by conflicts, it is impossible to deliver aid to the population.
In an article published by the Spanish daily El País on July 2, Michel
Camdessus and Gro Harlem Brundtland put the emphasis on health issues.
The two, respectively former executive directors of the International
Monetary Fund and the World Health Organization, pointed out that each
year millions of Africans die from diseases that don't kill hardly
anybody in rich countries.
These deaths, and the loss of productivity due to people affected by
recurrent problems such as malaria, seriously diminish economic
production. Some progress has been made, they noted, with vaccination
programs, but much remains to be done.
Reforms
Moeletsi Mbeki, the brother of South African President Thabo Mbeki, was
skeptical about what can be achieved through additional aid without
accompanying political reforms. In an article published July 3 by the
newspaper Scotland on Sunday he observed that after some $400 billion of
aid during the past 30 years many Africans are poorer than before. "Will
doubling aid and channeling it through those selfsame governments change
anything?" he asked.
The post-World War II Marshall Plan for rebuilding Europe was driven by
the principle of strengthening democratic institutions and free markets,
he noted. But in Africa, "Since independence, political elites have
suppressed or prevented the development of the civic institutions that
strengthen society and provide a balance to the power of the rulers."
In these circumstances, Mbeki said, "The more the African political
elites consolidate their power, and the more aid they get, the poorer
Africans will become and the more African economies will regress or, at
best, stagnate."
And, regarding the economy, Mbeki listed a number of factors
hamstringing growth in African countries: Bureaucratic obstacles make it
impossible to get a license to establish a business without bribery; few
countries have any form of private land rights; most Africans have no
access to open and stable financial institutions that could provide
loans; and there are too many internal barriers to trade.
"The emphasis in Africa should be placed on strengthening national
economies and democratic practice by freeing the private sector," he
concluded. And for its part the West needs to remove barriers to African
exports.
In a commentary published Tuesday in the Financial Times, Jagdish
Bhagwati, professor of economics and law at Columbia University, and
Ibrahim Gambari, undersecretary-general at the United Nations and
special adviser for Africa, outlined five key policy measures that
Africa needs. They are:
—
Debt relief must be extended to very poor nations.
—
New aid must be used productively. Additional aid should go to countries
with good governments and given only to carefully devised projects and
programs.
—
Aid to Africa must be spent on programs that are really beneficial, such
as resolving the shortage of skilled labor and improving health.
—
African nations need to reduce their own trade barriers while seeking
the removal of the subsidies and tariffs of rich countries.
—
Programs to make the private sector the backbone of development are
necessary. This includes establishing micro-credit institutions which
enable the poor to borrow without collateral, and establishing clear
property rights.
Promoting growth
Keith Marsden, formerly an economist with the World Bank and the United
Nations, argued for favoring private-sector loans, in an article June 30
in the Wall Street Journal. In a study he did while at the World Bank he
found that growth of income per head was strongly correlated with the
growth of domestic credit to the private sector. But lending money to
governments failed to raise living standards significantly.
Public-sector projects, he commented, are often approved by people
without a personal stake in their long-term success. His case studies of
African countries show that economies where the private sector has
greater credit access grow faster, leading to higher wages.
Prior to the G-8 meeting the International Monetary Fund warned of the
need for moderation in claims about the benefits from increased aid.
According to a report June 30 in the Financial Times, the IMF released
two research papers that suggest aid flows to poor countries have not
led to higher growth rates. This conclusion, however, is in conflict
with a World Bank study, published five years ago, which found aid
boosted growth in countries with good policy environments.
"The basic message is that it is good that people are talking about
increasing aid flows but that we have to find ways to make them more
effective," said Raghuram Rajan, the IMF's chief economist and co-author
of the reports.
A commentary published Wednesday in the Financial Times also highlighted
the importance of not expecting miracles from increased aid. Drawing on
his 10-year experience at the World Bank, Martin Wolf noted that it is
important not to oversimplify. There is no one magic formula, he said,
and we should not think that any one single measure, such as debt
relief, aid, or a reliance on the market will solve everything.
Rather, he concluded, what is needed is a package of measures that
involves reforms on how the countries are governed and their economies
are managed; increased aid; improvements to agriculture and health; and
stimulation of the private sector. One positive sign of the intense
debate over development issues is that, at least for the moment, the
fate of poorer countries is attracting the interest of both world
leaders and public opinion.
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