Africa: aid, corruption and growth

Helping Africa is a hot topic these days. Pop stars, politicians and other prominent figures in Europe and across the pond compete in calls for debt relief and more aid to help African economies grow. The same people are usually dismissive about those who would prefer to see certain conditions aimed towards achieving better governance and reducing corruption attached to the entire package.

Even Jeffrey Sachs jumped on the bandwagon and said in an NYT interview that the “….. idea that African failure is due to African poor governance is one of the great myths of our time." It must be true, if Jeffrey Sachs says so. Empirical evidence, as Marian L. Tupy of the Cato Institute points out, seems to suggest otherwise.

“… between 1960 and 2005, foreign aid worth more than $450 billion, inflation adjusted, poured into Africa. Result? Between 1975 and 2000, African gross domestic product (GDP) per capita declined at an average annual 0.59 percent rate. Over the same period, African GDP per capita fell from $1,770 in constant 1995 dollars adjusted for purchasing power parity (PPP) to $1,479.

In contrast, South Asia performed much better. Between 1975 and 2000, South Asian GDP per capita grew at an average annual 2.94 percent. South Asian GDP per capita grew from $1,010 in constant 1995 dollars adjusted for PPP to $2,056. Yet, between 1975 and 2000, the per capita foreign aid South Asians received was 21 percent that received by Africa. The link between foreign aid and economic development seems quite tenuous.“

Professor Sachs also suggested that Africa is improving in combating the endemic corruption. Again, the figures suggest the opposite is true.

“But evidence is not on Professor Sachs' side. African corruption has been getting worse, not better, over the last few years. Each year, Transparency International publishes its Corruption Perception Index (CPI). The CPI defines corruption as "abuse of public office for private gain." It is measured on a scale from 0 to 10. The higher the number, the lower the corruption. In 2000, the average African CPI was 3.24. By 2004, the African CPI fell to 2.87.”

Another issue, the one of agricultural subsidies in US and EU is often mentioned in the context of African poverty. While it is true that the archaic agricultural subsidies in the West should be abolished simply because they distort markets and stand in the way of allocating resources to their more efficient use, the extent they have on keeping Africa poor is arguable. It is true that subsidised food from the West prevent African farmers from exporting more food and making more money. However, it is often forgotten that the subsidised western food is actually benefiting the African urban population (39% of Africans) in the same time. Considering that the agriculture sector employs some 50% of Africans and contributes to far less than 50% of GDP of the continent abolishing agricultural subsidies and food ‘dumping’ no longer seems like a magical cure.

The conclusions are obvious. The issues like ‘agricultural subsidies’ and ‘colonial legacy’ are simply ‘red herrings’ diverting the discussion from the real culprits of African misery: corruption and incompetence. Whether this distraction is deliberate or not is irrelevant.