Development Aid and Sustainable Economic Growth in Africa

The Limits of Western and Chinese Engagements

Simone Raudino

• Publisher: Palgrave Macmillan
• Year: 2016
• ISBN:
  9783319389363
• Topic: Politics & International Relations
• Subtopic: Trade & Tariffs
• Index: Politics & International Relations

This book offers an original analysis of the long-term impact of western and Chinese economic and development cooperation policies in Africa. It argues that western Official Development Assistance (ODA) has failed to create viable and autonomous economies in beneficiary countries not (only) because of corruption, inefficiencies and cultural differences, but because it was never meant to do so. Raudino demonstrates, rather, that it was always designed to provide relief measures and nurture political relations rather than create genuinely industrialized and self-reliant economies. Similarly, by analyzing the nature of Chinese economic investments in Africa the author shows that China's governmental policies hardly represent a revolutionary departure from the cooperation standards set by the West. In making these observations he also taps into the broader question of why wealth continues to be generated unequally across the world. Based on extensive fieldwork, quantitative economic analysis and historical qualitative research, this thought-provoking work will appeal to students and scholars of politics, economics and development studies, as well as to those involved more directly in the aid process.

© The Author(s) 2016

Simone RaudinoDevelopment Aid and Sustainable Economic Growth in AfricaInternational Political Economy Series10.1007/978-3-319-38936-3_1

Begin Abstract

1. A Practitioner’s Perspective on Development Aid

Simone Raudino¹

(1)

GAP Consultants, Hong Kong, Hong Kong

End Abstract

1 Official Development Assistance to Africa

“We made it”. ¹ A colleague from the “finance and contract section” of the European Union (EU) Delegation to South Africa was riding joyfully through the corridors of our political unit, sharing with us his professional contentment at having met yet another budgetary deadline: few extra-million euros had been successfully disbursed that morning. The payment in case did not relate to any of the Delegation’s internal expenses or external activities; it related, instead, to a transfer of funds from the EU Development Cooperation Instrument (DCI) to the South African government. Such operations are technically called “direct budget support” and have become common currency in the world of development aid; they consist in net transfers of cash from a governmental body (the European Union in this case) towards another governmental body (South African government in this case), usually against a more or less tight promise on how they will be used. They are not exactly peanuts—at least according to the laymen’s understanding of money: in the EU–South Africa case, they represented the large bulk of a 980 million euros financial commitment made by Brussels over the 2008–2013 period for that country only.

The heavy red tape that entangles every tranche of these payments and the close sequence of disbursement deadlines certainly justified my colleague’s euphoria. And yet, something pointed at an anthropological quiz I was not fully able to grasp. In which other real-life situation had I witnessed someone cheering at having managed to siphon off a few million euros on behalf of his employer, knowing little of where this money was going to? What type of organization could ask some of its employees to exclusively concern themselves with liquidating bulk payments devoid of any production or profitable logic, and under such a stringent time schedule? Of course, the financial departments of any private or public organization deal with payments and transfers, but these normally fit within a “production cycle ” logic: payments go in salaries, commissions, trainings, raw materials, equipment purchases and whatever else is needed to produce what they produce, be it goods or services. But what was “direct budget support” producing?

The question is trickier than it might look. Development funds channelled towards direct budget support—as all other aid modalities discussed in this book—were not meant to be employed in life-threatening situations. Humanitarian aid and assistance in crisis prevention are among the budget lines that development agencies dedicate to natural or man-made disasters, financing the kind of activities that Western public opinions usually conjure up when thinking about foreign aid: disaster relief, food and water distribution, refugee assistance, response to epidemic outbreaks and the alike. Development aid deals with situations that still have a potential for threatening lives—including dire poverty and poor sanitary conditions—, but cannot be solved through short-term measures. These situations are little different from those that many parts of the developed world experienced until fairly recently and that are still to be seen in Roma camps and rundown areas of Western metropolis, where illiteracy, unemployment, family degradation, weak institutional presence and lack of service delivery are the rule rather than the exception. So, if direct budget support did not have the compelling goal of saving people from death, what was the logic of throwing money at problems in far away and little-known countries? What motivated Western people and governments to intervene and what were the expectations of these engagements?

By the time I joined the EU, I had ready-made answers for such questions. It was not, in fact, very difficult to provide answers, as a “Directorate General communication” was tasked with informing the public on the aims and modalities of development aid—and any other EU activity for that matter. The standard line of answer characterized aid as a moral obligation finalized at eradicating poverty and supporting rights and services that would not otherwise be available in low-income and mid-income countries, in the interest of a better world. ² Other ready-made answers were based on more thought-provoking lines of argument: by helping low and mid-income countries standing on their own feet, the West is fostering its self-interest of having stable, prosperous and commercially thriving neighbours. The argument was sometimes also framed in terms of Europe’s own interest in jump-starting the development of neighbouring Africa, similarly to the USA’s own interest in assisting Latin American neighbours in becoming mature trade partners. In fact, the whole lot of countries pertaining to the Organization of Economic Cooperation and Development (OECD , the “rich”) has an interest in assisting the Group of 90 countries (G90, the “poor”) because peaceful and stable international environments are conducive to trade expansion and general economic growth.

They all seemed logical lines of argument and I also maintained for several years that development aid produces better lives for poor people in poor countries, while benefiting the international system at large. That line was not simply a matter of faith towards my employer, it was also consistent with academic knowledge and hands-on experience. Western Universities provide students of international relations and development economics with multiple readings on development aid. By no means are these readings uncritical or supine to institutional propaganda, but they still assume that aid agencies such as the United Nations or the European Union bring positive changes to people in developing countries. And rightfully so; was not I a witness to the building of schools, hospitals and roads; resettlement of internally displaced people and international refugees; distribution of basic commodities? Were not children vaccinated and elderly hospitalized in clinical facilities sponsored by Western donors? Were not youngsters given vocational training by those faith-based organizations that received funds from Western governments? Were not—in one sentence—the lives of those people better off after the intervention of aid organizations?

2 Given Directions

Of course they were! It seemed evident that development money was used to improve poor people’s lives: activities were financed and some positive results were clearly under sight. But how exactly was development to happen? How were recipient countries to pass from a situation of inorganic, unbalanced and externally subsidized survival to one of self-sustaining growth? How would development aid help a least developed country (say 2005 Angola) transform into a lower-middle income country (say 2005 Egypt), into an upper-middle income country (say 2005 Thailand), and finally into a fully developed country (say 2005 Netherland)? Indeed, as the development economist Arthur Lewis put it, “[…] the economists’ dream would be to have a single theory of growth that took an economy from the lowest level […] past the dividing line […] up to the level of Western Europe and beyond” (W.A. Lewis 1984, p. 4).

If that was the finality of development aid, it looked as an abysmal task. It would have entailed, inter alia, questions relating to the paths that had been followed by developed countries during their own development; national elites’ capacities in leading their countries; inquiries into global economic, financial and trade flows. I could picture eyebrows raising everywhere in the academic and diplomatic communities as to the viability of these questions. Perhaps a more manageable starting point would have been to understand whether activities sponsored by development aid fitted into the developing process at all: was development aid helping beneficiary countries going through progressive stages of socio-economic development?

I did not have a ready-made answer for this question, but my organization did. It was a mild “yes”, albeit formulated in somehow indirect terms. Several EU directorate generals (DGs), including DG Aid and DG Development, worked at a “range of modalities for implementing development aid […] [and for the] eradication of poverty in the context of sustainable development” (European Parliament 2005, p. 4). “Sustainability” stood here for a host of meanings, which also included the importance of “[…] investing in wealth creation—with emphasis on issues such as entrepreneurship, job creation, access to credit, property rights and infrastructures” (European Parliament 2005, p. 6). ³ Thus, among other things, Europe wanted its developing partners to engage in “sustainable wealth creation”: getting rich, on their own. Aid policies were meant not only to improve poor people’s lives in poor countries, if not to support these countries in acquiring self-sustainable means to improve their own peoples’ living standards. ⁴ This is a concept on which developed countries have spared no ink: the European Consensus on Development openly acknowledges this finality—as also do, in more or less direct terms, the Paris Declaration on Aid Effectiveness, the United Nations Millennium Declaration, the United Nations Agenda 21, the OECD’s Development Aid Committee (DAC) guidelines, the scores of World Bank’s Poverty Reduction Strategy Papers (PRSPs) and roughly any other commitment, plan, strategy or declaration subscribed by major donors of development aid. ⁵

If the statutory aim of Western development organizations includes the promotion of conditions for self-sustainable growth in beneficiary countries, it remained unclear how these aims could translate in pragmatic activities. Locating the link between development aid and the mechanisms promoting self-sustainable growth is not a straightforward exercise. Macro donor organizations such as the EU or the World Bank (WB) establish framework conditions to finance activities but seldom go in the nitty-gritty of the mechanisms that are supposed to contribute towards sustainable economic growth.

Framework conditions on development cooperation provide terms of reference on how funds are used—typically clustered around (1) principles; (2) modalities and (3) policy fields—but say little about their impact upon a country’s capacity to produce wealth. The OECD Development Aid Committee has shaped a number of Official Development Assistance (ODA) principles, which have subsequently become the gold standard among major aid agencies. ⁶ Similarly, donor agencies’ framework conditions set out policy areas ⁷ and modalities of intervention, ⁸ but say little on the master plan, the donor strategy that should identify priorities and pace the actions deemed necessary to create sustainable economic growth. ⁹

The content and meaning of these framework conditions are clear to most observers: development agencies sponsor programmes and policies in line with the national priorities of developing countries, coordinated among them, coherent with other donors’ policies, implemented through different modalities and involving different economic and institutional sectors. OECD donor agencies ensure their taxpayers as to the fact that development funds are spent conscientiously and in activities agreed with beneficiary countries. Yet, how did these activities contribute in promoting sustainable development—the process of autonomously and endogenously generating durable wealth—remained to me an unanswered question.

In particular, when looking at these assumptions and strategies, I spotted four interesting odd points: (1) development models were extremely general, often referring to “hub” concepts which eschewed key qualifications and avoided establishing logical or chronological priorities in their interventions. ¹⁰ These models either failed to specify the causal nexuses that linked ODA actions to economic growth mechanisms or assumed such nexuses to be in line with a set of neoclassic economic assumptions that were far from being uncontested in the economic discipline; (2) in an industry saturated with analyses and obsessed with the quantitative representation of its activities, development agencies could never produce conclusive and authoritative studies correlating aid activities to solid economic results in beneficiary countries; (3) development strategies seemed to be isolated from solid historical analyses: today, there are 74 sovereign countries classified as “high income” by the World Bank, but seldom if ever was the history of their economic, industrial and trade policies taken into account by ODA development strategies; (4) several ODA policies caused vehement protests in developing countries, an element that suggested a conflict of interests that did not show from the ODA institutional discourse.

First, donor organizations were always ready to go into technical details concerning the activities they financed—be they schools, hospitals, training hours delivered, kilometres of roads built, lunch packages distributed, medical and construction kits delivered, refugees airlifted and the like—but seemed to avoid explaining how these activities were contributing towards self-sustainable economic growth. Did roads, bridges, ports and airports built by foreign companies at no cost or at lower-than-market costs for beneficiary countries improve these countries’ chances to kick-start self-sustainable growth? If that was the case, donors were failing to provide a thorough review of the mechanisms through which such economic growth was meant to happen.

Western ODA refrain was that infrastructures were necessary to attract foreign direct investments (FDI); but, were infrastructures necessary independently from, say, the nature, or even the existence, of the beneficiary country’s nat...