Why is Africa poor?
Alex McCaffrey
The World Bank defines poverty as living on less than $1.25 a day. Ten years ago 58% of people in sub-Saharan Africa qualified as poor. Today that figure has dropped to 48%, things are improving 1 . But Africa still has too many people living in poverty and even those above the threshold are living on a hand to mouth basis. Whilst Africa is a diverse set of nations, with different histories and cultures there are several recurring themes that I wish to consider – namely the role of aid, the legacy of colonization and the resource curse. These themes underlie the corruption and conflict that hinder Africa so badly. I focus on the Sub-Saharan countries excluding South Africa. That country’s unique history – early colonization, the Boer Wars, Apartheid, democracy – follows a path that puts it beyond the scope of this essay. African countries have been massive recipients of Aid in the last 50 years. Over $300 billion has been pumped in with the intent of transforming the continent. Unfortunately however the effect has been underwhelming, at best this money has been the difference between stagnation and severe cumulative decline. In some cases however, aid can have decidedly negative effects. In order to explain where the money has gone and why it hasn’t achieved what we hoped we need to look at how it’s delivered. The World Bank and the IMF (the two Bretton Woods agencies) are two institutions adopting similar approaches to aid and Africa. Both invest heavily in aid programmes without any obvious success. An IMF paper from 2007 said: ‘IMF-supported programs have done little to address poverty reduction and income distributional issues despite institutional rhetoric to the contrary.’ 2 The dominance of Keynesian ideas at the birth of the IMF and the World Bank was soon overturned after the apparent success of the ‘Chicago boys’ and their policies in Chile. This culminated in the IMF and World Bank insider John Williamson declaring the Washington consensus as ‘the common core of wisdom embraced by all serious economists’. 3 The aid industry fell into the pitfall of simple ideology, all questions answered by the beautiful free market. Naomi Klein claims the consensus was ‘nothing less than Friedman’s neoliberal triumvirate of privatization, deregulation/free trade and drastic cuts to government spending’ 4 The rise of western free markets would not have been possible without state intervention. Infant industry protection was necessary to nurture industries in western economies to produce the dynamic, innovative free markets we see today. This kind of protection is not allowed in many African countries, who accept aid agreements banning the effective use of tariffs. This chokes off opportunities in low– end manufacturing which have proved so successful in Asian developing economies. Another distinct type of aid is direct transfers from government to government. This type of aid took off during the Cold War era. African countries were effectively proxies for the west and the eastern bloc. There was little interest in encouraging good governance and growth; donors were focused on 1 http://data.worldbank.org/topic/poverty 2 ‘The IMF and Aid to Sub ‑ Saharan Africa’ by Joanne Salop et al (2007) 3 ‘Democracy and the ‘Washington Consensus’’ by John Williamson (1989) 4 ‘The Shock Doctrine’ by Naomi Klein (2007) p163 Aid
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