Foreign aid is the first thing most people think of when they see the condition of many African economies. It’s falling out of favor in many circles, however. The reasons vary, of course, but the biggest single factor is that much of it just doesn’t work very well. A strong case is made by William Easterly in The White Man’s Burden; Why the West’s Efforts to Aid the Rest have Done So Much Ill and so Little Good, (Penguin Press, 2006).
Economic aid is often a sinkhole designed as often to advance the economic interests of the donor country as it is to help the recipient. Short story: I once ran a company who was subcontractor to another US firm that was building a communications network in the Cote d’Ivoire. Most of the work in our portion of the contract could have been done by local laborers (we were refurbishing radio towers—cleaning and painting, mostly) at less than a tenth of the cost we charged. The reason? The U.S. aid contract specified nearly 100% of the contract value go to American firms. We weren’t gouging, by the way, but it’s darned expensive to send American workers and all their equipment across the Atlantic.
Then there is humanitarian aid. I cut some slack here, because long-term corrosive problems like malaria and HIV/AIDS aren’t going to go away because the free market says so. There are also crises where hundreds of thousands of innocent people are forced to flee their farms and jobs by genocidal violence or natural disasters like drought and flood. Public-sector efforts like the Bush-backed malaria net program and private undertakings like many of those from the Gates Foundation are well-thought out. Plus, it’s hard to argue with results.
Again, though, there is a huge amount of waste built into many humanitarian aid programs. I talked to several farmers in Zambia while researching Heart of Diamonds, and they pointed out that the jobs they provide are the only sources of cash income for the people in the region. When food aid must—by law—come from U.S. stockpiles, it costs the U.S. taxpayer more and undermines the local economies at the same time. A bad bargain.