In the midst of the protests and promises surrounding the G8 last week, one plea went almost unnoticed. An African economist continued his campaign to plead with the West for a serious change to financial and food aid to Africa. Specifically, for it to be totally discontinued. In an interview with Der Spiegel, in which it was clear that the interviewer could sometimes not believe his ears, Kenyan economist James Shikwati argued passionately for an immediate stop to nearly all economic—and even nearly all humanitarian—aid to Africa.

Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa’s problems.

This message is nothing new for Mr. Shikwati, who has been making this seem argument for many years. And he’s not alone. Even Der Spiegel itself, hardly a reactionary bastion of globalism, has written about the terrible paradox: too much aid creates more need.

And anyone at all familiar with basic economics, or even basic history, should know that this is true. The great economic powerhouses of the West did not arise as a result of altruistic development assistance. The United States, Britain, France, Germany, Japan, and the rest do not owe their prosperity to well-intentioned aid packages. Of course, some wits will point to the Marshall Plan and the Korean War era assistance to Japan. But as Mr. Shikwaki points out correctly:

In Germany’s case, only the destroyed infrastructure had to be repaired. Despite the economic crisis of the Weimar Republic, Germany was a highly- industrialized country before the war. The damages created by the tsunami in Thailand can also be fixed with a little money and some reconstruction aid. Africa, however, must take the first steps into modernity on its own.

Shikwati’s claim isn’t that aid can’t be helpful, let alone that it’s always harmful. His claim is that aid cannot assist in development. It can, and does, help in recovery, but that’s a very different circumstance. If a community, or a nation, already has a functioning economy and citizens capable and willing to rebuild, humanitarian and financial aid can be a great boon. But the aid can’t create that economy or those citizens. For all their faults, Germany and Japan were industrial powers before World War II. The aid helped rebuild ruined economies, not create new ones.

In fact, aid too early in the development process can retard or destroy development. In the case of Africa, massive food aid has destroyed numerous local agricultural economies. And well-intentioned clothing aid has clad numerous Africans in cast-off T-shirts instead of locally produced clothing. Whatever the benefits for the hungry or the naked, these things are death to local farmers and tailors. Send money to buy food or clothes from African sources would be better, but even that can create terrible dependencies—as recipients begin to plan their lives around recurring aid.

So does this mean that the altruistic Westerner can do nothing but stand by and watch poor Africa wallow in misery? No, though it does mean that that would be better, though harder, than sending billions in aid money which only destroys African economies and props up butchers and criminals. Without such aid, nature would take its course and there’d be at least some consequence to tyranny and brutal stupidity.

Fortunately, however, you don’t have to just stand by. You can help, though you have to think just a little outside the box. Instead of aid, why not support African industry and economic growth directly through microinvestment. Through various services, you can invest in a variety of organizations that issue microloans to African entrepreneurs and small businessmen. These work just like standard loans here, but they’re for what would be trivial amounts in the West—but can be the difference between a dying and thriving business in the Third World.

You can find more information about this growing area at the web site of Nobel Peace Prize winner Grameen Bank. And here’s a list of microloan provider sites, through which you can invest if you choose. Kiva.org is a new site, one that allows you to examine and choose to fund individual business plans.

And check out a relatively new twist on this, microequity: effectively venture capital for the Third World—buying equity in entrepreneurial ventures. One fund you can check out in this new area is the Village Enterprise Fund.

Will this all work? It’s not clear. But one could note that this is much closer to the pattern by which the West actually rose (though in that case the investment came from within—for the most part). While microinvestment may not be a panacea, at least its track record isn’t the unmitigated disaster of traditional “development aid.” And at least the funds it provides aren’t sent directly to the bank accounts of Africa’s despots and their corrupt flunkies.

Advertisements