The scale of the global economic crisis is unprecedented in our times – the G-20 today issued a statement committing member states to spending yet another trillion dollars to stem the problem. To date, the United States alone has commitments of over $13 trillion – the equivalent of one year’s GDP or enough money to have paid off every single outstanding mortgage in America. It seems every time one turns around the US Congress has another spending bill measuring in the hundreds of billions of dollars. China’s relatively modest $500 billion of economic spending seems almost modest by comparison.
Amongst all this the IMF, the World Bank and the NGO industry are crying out for help for the developing world. The World Bank claims it needs billions of dollars more in order to alleviate suffering and foster economic growth. Yet no one asks the question – why? In its 60 plus year experience the World Bank's policies, work and programs have yet to launch a single country into self-sustaining economic growth.
Could the global economic mayhem actually be beneficial to Africa and the rest of the aid dependent nations? The answer is it depends.
In a country that is creative and resourceful and committed to good governance and sound economic policy the sudden disappearance of aid money gives them a chance to develop the way the rest of the world has developed – on their own. Nations develop by competing in the global marketplace and creating environments that are business friendly, have sound judicial institutions and respect for the rule of law.
This process is not a complicated formula – it has been done time and time again, and yet it has been an elusive elixir lost on the well-meaning staff at the World Bank, the countless legions of NGO personnel who trek to Africa in order to help, and the suburban families who collect used clothing to send to Africa.
In order to understand the process of obtaining economic growth one has to envision Europe and the America two hundred years ago. In the early 19th century Europe and America looked politically and economically similar to present day Africa. Business and politics were intermingled, politicians were utterly and hopelessly corrupt and things didn’t get done at the front office but rather in back rooms with greased palms.
Only once the populace became fed up with the situation did things begin to change. Politicians were held accountable, corruption was curtailed (albeit never eliminated,) the institutions of the judiciary were strengthened and stifling bureaucracy and government interventionism, most often manifested in the form of government seizure of business, was eliminated. An entrepreneur in America can register a company in hours, in Africa it can take months.
If a more recent example is required look to the following places; China, Chile, Singapore, Thailand, Malaysia, or Slovenia. Neither China nor Chile received any significant amounts of aid – and Chile reformed an economy suffering from hyperinflation and an incredibly onerous business environment to achieve the highest economic growth rate in Latin America.
The opportunity is there for Africa to take – whether or not it does so is up to the leaders in question. If history is a guide they won’t because people, both inside and outside Africa, don’t demand it of them. Instead they will continue to beg, and bleeding hearts in the Western world will continue to fund their regimes, their cronyism, and their poor economic policies. Think about that the next time you donate to an NGO.