This is going to be more of an editorial post than a post analyzing media. I have tried to reserve my editorials for The Benin Epilogue Part I site; but today just feel compelled to mention air my thoughts on this subject here. For several days I have been re-considering my ideas and position on trade vs aid. So much so that my “writing energy” was beginning to feel cramped unless I gave in and wrote this.
But whereas in the past I may have said or implied that trade is more important to for the further development of Africa’s growing economies; now I am coming to the conclusion that without sound economic policy and strong governance neither aid nor trade will be able to fully address the needs of the broader socio-economic groupings within some of Africa’s nations.
The argument has typically been that aid in Africa only helps a handful of people -due to high probabilties for misuse. But I think that the benefits of trade may also affect a small section of the economies that we are discussing if the proper policy is not in place. This doesn’t change the fact that trade does empower those who partake in it, but it does say that barriers to entry for the small “moms and pops” business in a country with sound policy is much different than what one might expect in nations with weak policy and governance. So in the end, in an area or nation lacking strong checks and balances both aid and trade might still have a difficult time building prosperity across all income levels.
Now that being said there are several nations which readily come to my mind when we talk about balanced policy and governance, plus strong economic trends. Topping the list in 2007 would be Tunisia. Tunisia economy comes in at or near the top of the list not just in Africa but even in comparison with some of Europes economies in statistics measuring employment and participation in the economy. After Tunisia would probably come Botswana ,Mauritius, Ghana, and Senegal, . There are nations like even Kenya-who as Odegle mentions-just four years ago was having a tough time-but has since been working to turn the situation around. Then there are other countries like South Africa and Nigeria, the largest economy and second largest economies in Sub Saharan Africa, respectively but yet sharing the the unfortunate distinction of having two of the largest income disparities in the world. This would be due to the legacy of very serious social and policy issues in each country.
So I guess at the end of the day what it boils down to is that their are some African nations where we could invest in or channel aid into and many would benefit and then there are others nations on the continent where this would not hold true. This is why I think that there is more than meets the eye on this aid vs aid debate. This is also what makes the arguments of economists like Prof. George Ayittey so valid. Unfortunately, it is so much easier for us to only hone in on the “shock value” aspect of arguments from the likes of those like Ayittey, Mwenda, and Shikwate-so we tend to sensatinalize the “aid is bad” component of their arguments and then end up taking that one part of what they say out of context. Which is to say that that aid does not necessarily have to be always bad and that trade is not necessarily all good at all times-but that good governance must precede both. The scenario playing out right now in places like Equitorial Guineua, Nigeria, and Sudan seems to crystalize this notion. There is a substantial amount of trade taking place in each of these three nations but the policy gaps have in each country have led to huge income gaps between the poor and wealthy of these three countries; in short the good deals only go to the well-connected.
But again, the idea is that with stronger governance in countries currently lacking the policy infrastructure trade will alas make a difference-not just for the few, but for the many! Likewise if aid is dispersed it will make it to the intended recipients until they are able to agin participate in the formal market economy. So, if I were a policy advisor to any of the Africa’s stable economic and political countries ( which would be 47 out of Africa’s 53 nations, since I am excluding the 5 nations which have active emergency situations right now) state of economy my advice regarding aid would be to categorize aid into two main categories:
Potentially Beneficial Aid(these types may not have quick benefits, but in they long term they could rastically dchange the scope of the economy for the better)
- training to enhance the skills of the labor pool (special priority might go to agribusiness, ICT, women in business, and youth development)
- business and entrepreneurship training
- research related
Potentially Harmful Forms of Aid
- aid with trigger clauses allowing for loss of natural resources or forcing the nation to grant contracts to companies of the donor or creditor nation
- inflows that would cause the country to behave like a debtor to a creditor
- projects that benefit only a small portion, region, or ethnic group within the nation
My advice on policy changes or updates might look something like this:
Policy Do’s
- Emphasize and utilize aggressive tax collections, plugging the collection leaks with systematic and results based processes
- Reduction of intra-continental trade tariffs.
- Put together a team or think tank consisting of the nation’s top economists and business persons to assess the countries economic strengths and weaknesses and use the findings to build on strengths and partner up with neighbors to cover weaknesses.
- Further development and establishment of luxury industries like luxury tourism, high end organic food or hand finished clothing, and furniture products for export earnings.
- Use the tax windfalls from increased collections to spur further development of natural resource processing and finishing industries and infrastructure.
- Allow for aid programs but work to minimize state involvement by empowering the more localized, private, and/or community based groups to accept aid and or grants with the condition that they be responsible for the results and obligations.
Policy Don’ts
- Zero tolerance for corruption, with heavy emphasis on removing the opportunities for corruption.
- Refuse to support departments, initiatives, businesses, or industries that are not able than to bring in more revenue than the expense necessary to carry them-eliminate redundancies, within a term or office.
- Moving away from the top to bottom or no questions approach to a more customer service oriented approach. Likewise, move away from processes or communications that build upon an “us versus them” strategy and move towards an an approach that sees business, civilian, and government as one team.
- Doing away with secrecy in bidding processes-especially involving state parastatals and establishing system to exclude government officials above a certain level from being able to bid on such properties.
- Discourage the taking on of loan commitments that would extend past one administrative term of office.
OK, in reality it is always much more complex than this, but that’s sort of the general idea of it.
Before ending let me also say this re-evaluation has been inspired by various conversations and readings on this topic and this post itself is inspired by a conversation from Africa Enterprising. In fact, my hope is that we can continue this discussion and see whether this aid vs trade debate is complete or find out what needs to be added to it to make it even more relevant. Perhaps we can do this discussion in the form of a blog chain where other bloggers can respond to this post and then more bloggers can in turn respond to those bloggers and it continues until it can’t be discussed anymore. Following the blog chain, on July 6, 2007 we will be publishing a blog carnival on Africanloft so you may also feel free to submit your trade and aid posts to this edition. But most importantly that will mean that this discussion will have opened more minds, provoked more thoughts, and even stirred some form of economic action. But I guess we’ll have to wait and see…
