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Why Africa does not need aid from the Western and Asian governments

UREPORT
By Ndirangu Ngunjiri | June 22nd 2016

The Western and Asian governments are strikingly generous in foreign aid donations to Africa.

Infrastructure development in Kenya and other parts of Africa is donor-funded, but if money alone were the solution, we would be on the road to prosperity.

The idea that large donations can remedy poverty has dominated the theory of economic development – and the thinking in many international aid agencies and governments – since the 1950s. And how have the results been? Not so good, actually.

Millions have moved out of abject poverty around the world over the past six decades, but that has had little to do with foreign aid. Rather, it is due to the economic growth in countries in Asia which received little aid.

The World Bank has calculated that between 1981 and 2010, the number of poor people in the world fell by about 700 million. And in China, over the same period, the number of poor people fell by 627 million.

In the meantime, more than a quarter of the countries in Sub-Saharan Africa are poorer now than in 1960 – with no sign that foreign aid, however substantive, will end their poverty. One could imagine that many factors have kept sub-Saharan Africa poor – famines, civil wars.

But huge aid flows appear to have done little to change the development trajectories of poor countries, particularly in Africa. Why? this is not to do with a vicious circle of poverty, waiting to be broken by foreign money.

Poverty is instead created by economic institutions that systematically block the incentives and opportunities of poor people to make things better for themselves, their neighbours and their country.

The people in poor countries have the same aspirations as those in rich countries. The problem is that their aspirations are blocked. The poor don’t pull themselves out of poverty, because the basic ability to do so is denied.

The key to understanding and solving the problem of world poverty is to recognise not just that poverty is created and sustained by extractive institutions, but to appreciate why the situation arises in the first place.

Recognising that poor countries are poor because they have extractive institutions helps us understand how best to help them. It also casts a different light on the idea of foreign aid. Even if a huge amount of aid is siphoned off by the powerful, the cash can still do a lot of good. It can put roofs on schools, lay roads or build wells. Giving money can feed the hungry, and help the sick – but it does not free people from the institutions that make them hungry and sick in the first place.

When aid is given to governments that preside over extractive institutions, it can be at best irrelevant, at worst downright counter-productive. Aid to Angola, for example, is likely to help the president’s daughter rather than the average citizen.

Making institutions more inclusive is about changing the politics of a society to empower the poor. It means using financial and diplomatic ways to help create room for inclusive institutions to grow.

This may be a hard task – far harder than writing a cheque – but it is the surest way to make poverty history.

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