Africa

Africa Needs Fewer Humanitarians, More Profit-Seeking Chinese Investors

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Dambisa Moyo headshot
Credit: Helen Jones Photography via Wikimedia Commons

According to Zambian economist Dambisa Moyo, the key to lifting millions of Africans out of poverty lies not in foreign aid but in profit-seeking investments from China. The U.S. doled out almost $50 billion in foreign aid in 2011, and research shows that a lot of it went to preserving corrupt systems that keep the majority poor and without rights.

Wolfgang Kaspar, author of a 2006 study that examined the corruption inadvertently caused by foreign aid writes:

A major cause for the rising tide of graft is foreign aid. Aid rarely reaches the poor and is rarely cost-effective. Despite assertions by well-paid foreign-aid lobbyists, unconditional foreign aid has failed. Thus, huge aid flows to Africa have only rewarded incompetent despots and kleptocratic elites, whereas absolute poverty has plummeted in India and China, countries which have received comparatively little foreign aid. In countries which derive over half their national budget from foreign aid transfers—as is now the case in many African and South Pacific countries—genuine democracy has no chance.

Moyo provides a succint explanation of the phenomenon in a 2009 article for The Wall Street Journal:

A constant stream of "free" money is a perfect way to keep an inefficient or simply bad government in power. As aid flows in, there is nothing more for the government to do—it doesn't need to raise taxes, and as long as it pays the army, it doesn't have to take account of its disgruntled citizens. No matter that its citizens are disenfranchised (as with no taxation there can be no representation). All the government really needs to do is to court and cater to its foreign donors to stay in power.

The continued existence of these corrupt governments keeps foreign investment away, in spite of the fact that—as Moyo highlights—"the structural and fundamental structures of Africa right now are poised for a very good few decades" due to the availability of labor and a favorable debt-to-GDP ratio.

But just as outside investors offer a promise of change as the U.S. faces the very real possibility of diminished foreign aid budgets, the Chinese government might hamstring it. Last summer, China announced $20 billion in aid to Africa.

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  1. It’s almost as if capitalism and free markets brings prosperity and wealth while decades of state-run economies in Africa have brought nothing but devastation and misery. Clearly they need, as Robert Reich would say, more social justice.

    1. The problem is that while everyone does get richer, the wealth is not distributed equally. And that just isn’t fair.
      It’s better to have universal poverty than wealth inequality.

    2. They do need social justice — some sort of distibuted system by which society rewards people who engage in productive, pro-social behavior while punishing laziness, foolishness, and other anti-social behavior that falls short of criminal. If only such a system existed.

  2. Imagine that; reason says the market is the solution to a problem.

    And conditional foreign aid would be like placing a work requirement on welfare. And we all know what that’s tantamount to.

    1. Foreign aid is a lot like welfare that way. Not a terrible thing to use to keep people from starving to death, but otherwise rather counterproductive.

      1. Foreign aid is a huge scam. I have first hand experience dealing with the $500/hr Beltway foreign aid lobbyists. My little firm has technical expertise that would be effective in several underdeveloped countries. We learned that it could be incorporated as part of certain AID programs, so our CEO thought this would be worth exploring as a means of reducing cost to 3rd world clients. After meeting with the Beltway bandits, I left DC utterly disgusted, and advised that we avoid this marketing route like the plague.

        My impression of foreign aid is that it is skimmed at least five times before it gets to local dictator who probably takes half for his own purposes. Half of 0.9^5 is just 30% of what was extracted from US taxpayers, and most of it is squandered in the 4th Friedman quadrant. http://www.youtube.com/watch?v=leYMlFWWrmw

        1. If you visit DC for any reason and don’t leave disgusted, there’s a problem.

          I’ve got a lot of family there, and even lived in the ‘burbs for a couple of years, and I can’t visit anymore without getting pissed every time I see a new high rise going up.

    2. I am skeptical, at best, that foreign aid is anything more than a way of paying off agribusiness and defense contractors.

  3. How dare you question the white man’s burden industrial complex.

    1. How dare you compare the current crop of international kleptocrats to the British and American colonial administrators to whom Kipling was referring?

      1. Touche. Colonialism as they ran it was better than what we have today. But we can’t bring back colonialism. You thought it was bad before, let these half wits give it a go.

        1. Colonialism as they ran it was better than what we have today

          Tell that to the Filipinos.

          1. Or the Koreans for that matter. But one or two exceptions doesn’t mean overall it wasn’t better than what things are today.

            1. For serious? The exceptions are positive outcomes. European colonialism usually involved killing an awful lot of people, dismantling existing supply chains and funneling raw materials back to the home country making the colonial country dependent. This pattern was repeated in Africa, the Americas, Asia and the Middle East.

              1. No kidding. Colonialism contributed a great deal to Africa’s instability.

                1. Eh, it’s important to distinguish between colonial powers. The Belgian Congo and the Cape Colony have almost nothing in common, other than they are both colonies.

                  In particular, it must be noted that those nations colonized by Britain have noticeable better metrics to this day.

                  1. That’s fair.

                    When talking about Britain’s colonies are we differentiating between where native populations were decimated and placed on reservations (US, Canada, Australia, etc) and those where the British just seized control of the power scheme (India, China, parts of the middle east, parts of Africa) or are we lumping those together?

                    1. Well, one of the things I always got in trouble for bringing up during my history classes is that you’ll notice that various native nations were treated like European nations: treaties were regularly broken, wars of aggression fought, territory seized. The British interacted with Zulus the same way they did with Boers: they did their best to defeat them in battle and take control of their territory, and then gradually suppress their culture. The difference was the Boers had rifles, which are much more effective then assegais.

                      The things that American colonists were doing to the Indians in, say, 1640 were the exact same things that were being done in central Europe at the exact same time to fellow Europeans. It’s not like Europeans were treating the natives in a totally different fashion. That’s just how things were done back then.

                    2. I don’t think it was totally different, but Western Europeans saw themselves as being at the top of the great chain of being and sorted themselves accordingly. Enslaving Slavs fell out of fashion well before enslaving Africans did.

                    3. Except that attitude is incredibly common, nigh ubiquitous in fact throughout human history. The only difference between Western European beliefs of cultural superiority and the identical beliefs held by every other culture on the planet is that the Europeans had the economic power and military technology to act on that notion.

                      Slavery is another ubiquitous human institution. It predates written language. At the time of the transatlantic slave trade, there were huge numbers of Europeans being enslaved by the same Arab traders.

                    4. I totally agree with you, but that doesn’t mean we should look back on piles of dead Filipinos, the deindustrialization of Indian textiles, the intentional production of opium in Afghanistan and its sale in China to hobble the elite “better than what we have today.”

                      People are and always have been imperfect, but we improve by taking a critical eye to our past. Just because it was done (less successfully) when the violence was Europe on Europe, doesn’t make it ok that it was done successfully the Cherokee.

                  2. In particular, it must be noted that those nations colonized by Britain have noticeable better metrics to this day.

                    Comparatively Spain does pretty good as well.

                    Latin America is doing much better then Africa.

          2. Well, administered by people who weren’t the Spanish.

  4. PJ O’Rourke’s chapter on Tanzania in “Eat the Rich” is a funnier, but no less insightful, prelude to this.

  5. The U.S. doled out almost $50 billion in foreign aid in 2011, and research shows that a lot of it went to preserving corrupt systems that keep the majority poor and without rights.

    That’s a feature, not a bug. Used to be all you had to do to get foreign aid from the US was make some noises about being an anti-communist. Now all you have to do is claim you’re fighting terrorists.

    1. Exactly. It’s all about “stability.”

    2. “The U.S. doled out almost $50 billion in foreign aid in 2011, and research shows that a lot of it went to preserving corrupt systems that keep the majority poor and without rights.”

      The sad part is that research was required to find that out.

  6. Foreign Aid: Taking money from poor people in rich countries and giving it to rich people in poor countries.

  7. research shows that a lot of it went to preserving corrupt systems that keep the majority poor and without rights.

    How can there possibly be anybody left who doesn’t know this?

    1. Yes the left knows this, but they also believe that the government creates wealth. So the way to lift the poor is with more government. Not corporations. Corporations steal from the people. Government gives.

      1. Corporations steal from the people. Government gives.

        leftists fail to get the ass backwardness of this, which just makes them evil.

        1. There is an inverse relationship between one’s understanding of economics and the likelihood of being a leftist.
          I can forgive ignorance to a point. But not when it becomes willful.
          The truly evil ones are the ones who understand economics, but still support power for power’s sake. People like Lord Keynes or Krugnuts the Great.

  8. foreign aid winds up in the hands of corrupt dictators? Who knew. Seem, too, that Moyo has a good understanding of current-day Aemrican politics, too:
    “A constant stream of “free” money is a perfect way to keep an inefficient or simply bad government in power.”

  9. Africa needs more economists like Dambisa Moyo. Both idea-wise and appearance-wise.

    1. She is pretty

  10. I’m having trouble with a significant part of this story. Are you trying to tell me that there exists a black female economist?

    1. She’s not authentically black.

      /derpgressive

      1. She sold out to the corporations, man.

  11. The U.S. doled out almost $50 billion in foreign aid in 2011, and research shows that a lot of it went to preserving corrupt systems that keep the majority poor and without rights.

    We all know that every good charity has administrative costs. Corrupt officials skimming 99% off the top if just the cost of getting half a billion dollars to those who truly need it.

  12. I was thinking of a way to allocate African resources in an efficient manner that would allow better allocation of resources. Take a piece of paper and define it as worth a specific amount of some tradable commodity, say some mineral or something. Use some of the huge amount of foreign aide to guarantee those pieces of paper can be traded for the resource and make them relatively hard to copy.

    Next, allow people to trade those pieces of paper in a manner they see fit to their personal scarcity of resources. This one’s a biggie, because it assumes that these people are at least as good at judging the relative scarcity of resources as an NGO employee who spent $75,000 getting a PhD in puppetry.

    Don’t simply hand out those pieces of paper to people in governments who tend to exchange those pieces of paper for their own benefit.

    Lastly, allow anyone who wants to exchange these pieces of paper for resources a chance to do so. Even if they are chinks or crackers.

    You may say that I’m a dreamer, but I’m not the only one…

  13. Dude sees the light, I can just feel it lol

    http://www.AnonProx.da.bz

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