By Federico Schiavio.
Is there a direct relationship between democracy and growth? No and the proof is in the lost decades that the West has spent providing aid to “allegedly” democratic African nations.
I find myself in total agreement with Meles Zenawi’s statement that “There is no direct relationship between democracy and growth”. The one and only obstacle to successful Western Aid is that the West “over plans” its efforts, resulting into missed targets and opportunities. Please allow me to elaborate.
Over the last 5 decades, the West has spent 2.3 Trillion on foreign aid, what do we have to show for that? Apparently, not that much, poverty is still rampant. So what are we doing wrong?
The West mistakenly believes that poverty is a technical engineering problem whereas the Chinese believe that poverty is a complicated tangle of political, social, historical, institutional, and technological factors that are to be avoided at all costs. Therefore, the Chinese concentrate on the three CSFs (Critical Success Factors) health, education, and infrastructure – with these, people can fix their own problems and eliminate poverty.
The West believes outsiders know enough to impose solutions while the Chinese believe only insiders have enough knowledge to find solutions and that most solutions must be homegrown. This begs the question, “what can foreign aid do for poor people?”
For starters, it could devise a program to give cash subsidies to parents to keep their children in school. Poor people rely on their children to help make ends meet thus denying them the education that is one of the critical success factors to eradicate poverty.
The West keeps on setting goals, which may be good for motivation but is counterproductive for implementation. The Chinese, on the other hand operate off the “free market” playbook favoring general goals like businesspersons making profits and consumers achieving satisfaction.
Nevertheless, the West is not as clueless as it appears, whether by luck or design, it too has some positive accomplishments. The nonprofit organization Population Services International (PSI), headquartered in Washington DC, acted more on par with the Chinese than the West when it found a way to get insecticide treated bed nets to the poor in Malawi.
PSI sells bed nets for fifty cents to mothers through antenatal clinics in the countryside, which means it gets the nets to those who both value them. and need them. (Pregnant women and children under five are the principal risk group for malaria.) The nurse who distributes the nets gets nine cents per net to keep for herself giving her an incentive to ensure the nets are available. PSI also sells nets to richer Malawians through private sector channels for five dollars a net. The profits from the private sector pay for the subsidized nets sold at the clinics, so the program pays for itself. PSI’s bed net program increased the nationwide average of children under five sleeping under nets from 8 percent in 2000 to 55 percent in 2004, with a similar increase for pregnant women.
A follow up survey found nearly universal use of their nets by those who paid for them. By contrast, a study of a program to hand out free nets in Zambia (the favored approach of the West); found that 40 percent of the recipients did not use the nets. The “Malawi model” is now spreading to other African countries.
Once again, the “Chinese Way” leads the way (no pun intended). As I mentioned previously, “the Chinese believe only insiders have enough knowledge to find solutions and that most solutions must be homegrown.” Just like that, neither PSI nor WHO or any other Western entity dictated this particular solution. It was the local PSI office in Malawi, staffed mostly by Malawians, that while looking for a way to make progress on malaria, came up with the plan involving bed nets, antenatal clinics, and the dual channel sales concept.
Now we come to the third critical success factor, infrastructure. Infrastructure is important because it enhances economic activity and thus overall growth. For example, by reducing production and transaction costs, increasing private investment, and raising agricultural and industrial productivity. It removes bottlenecks in the economy, which hurt poor people by impeding asset accumulation, lowering asset values, imposing high transaction costs, and creating market failures. Eliminating these bottlenecks allows the poor to contribute to growth directly through the employment and income opportunities created by the construction, maintenance, and delivery of infrastructure services, and indirectly through better services. Furthermore, it generates positive distributional effects on growth and poverty reduction through poor people’s increased participation in the growth process, by increasing their access to factor and product markets, reducing risk and vulnerability, enhancing asset mobilization and use, and promoting their empowerment.
Infrastructure investment and improvement also affect non-income aspects of poverty, contributing to improvements in health, nutrition, education, and social cohesion. Indeed, infrastructure improvement makes valuable contributions to all the MDGs (Millennium Development Goals). The many benefits of infrastructure have also been confirmed by the UN Millennium Project (2005), which advocates a major increase in basic infrastructure investments to help countries (especially in Africa) escape the poverty trap, and by the Commission for Africa (2005). However, to be effective in reducing poverty, infrastructure development must be coordinated with other important concerns, such as agricultural, environmental and trade policies.
Again, the Chinese are at the forefront of infrastructure projects in Africa. For decades, Africa’s poor infrastructure has been a major obstacle for the continent’s economic development. In less than a decade of activity, Chinese companies have brought the promise of development to the most remote reaches of the continent by constructing a network of roads and railways. In essence, China’s infrastructure contributions are transforming the continent.
Angola’s capital city, Luanda, is bustling with construction activity. Numerous cranes dot the skyline and ships laden with building materials form queues at the harbor. A modern 20-story blue glass building, constructed by a Chinese company for Sonangol, the company responsible for managing the oil and gas reserves in Angola, stands in stark contrast to the company’s previous five-story office block.
Zhou Tianxiang, Deputy General Manager of China Civil Engineering Construction Corporation (CCECC), listed the numerous African projects his company has engaged in during a recent interview. He mentioned, among others, the construction of light rail and ports in Nigeria; expressways and express railways in Algeria and Libya; housing in Tanzania, Botswana, Uganda, Rwanda and Djibouti; and civil construction in Sudan, Ghana and Angola.
The activities of CCECC are only a sample of China’s ongoing infrastructure developments in Africa. Chinese companies have taken the initiative in some of the furthest reaches of the continent, building transportation networks, schools, hospitals, research facilities, telecommunication networks, and power stations. Xinhua News reports that over the past 50 years, China has constructed over 2,000 kilometers of railways, 3,000 kilometers of expressways (with many more on the way), and has provided aid to around 900 projects in 53 African countries.
Where is the West? The West is claiming that there are a number of problems, namely that the Chinese are importing their own workers and excluding Africans from the jobs on the construction projects. Moreover, they claim that the Chinese, thanks to their ingenuity, will quickly come to dominate the economy and run Africans out of businesses and that the Chinese stay out of sight, maintain tight local social communities among themselves, and exclude the locals. Finally, some in the West claim that they do shoddy work on buildings and roads.
That kind of thinking is not going to do us any good. I spent an entire year in Ethiopia and had the opportunity to witness firsthand the evolution of the Chinese advance. First off, the Chinese importing their workers is a myth. Yes, they bring in their own engineers, supervisors, project leaders and the like, but the main workforce is local. Second, in the case of Ethiopia, Chinese are prohibited from opening small businesses. I suspect that would be the case in other African countries as well. Initially, the Chinese stayed out of sight but I assure you now that is no longer the case. True some of their work is shoddy (like the ring road around Addis Ababa) but I drove on a highway in the north that made me question whether I was suddenly transported to Europe.
The West is apparently caught like a deer in the headlights and is not conscious that Africa is slowly but surely slipping from its grasp along with its natural resources. The West needs to take the drastic step of meeting the Chinese challenge head on and throwing its weight into the three critical success factors referred to previously. Anything less and we lose the race to control the largest repository of natural resources remaining.
In closing, I would like to mention that tomes have been written about Human Rights, Democracy, and Aid. There are so many facets to those three elements that they will be debated to death and not resolve one problem. However, should we decide to stop and think that maybe, just maybe, governments will no longer have to repress people if the people are happy, we may just have reached the fork and taken the road to actually ending poverty. When people have roofs over their heads, a job, and food on the table they are happy and happy people can pose less of a threat to political elites determined to retain power. Therefore, repression can become less necessary and diminish, thereby potentially moving the country incrementally toward democracy. My recommendation is to stop attaching human rights restrictions to Western Aid as we have been doing for the past 50 years with debatable results and follow the Chinese way.
