Why has so much aid failed to deliver economic transformation in Africa?


The last point is crucial: the plan worked because it was designed at home by countries who wanted to revive economies where the legal and government structures, skills, and the private sector already existed. The recipient governments’ plans were therefore predicated primarily on restoring private sector-led growth in a way that would avoid the instabilities that caused the Depression.

Sadly, the term “Marshall Plan” has become synonymous with just a very large sum of money, whether to tackle development, climate change, or a health emergency. But what matters are the situation in which the money is used and how it is spent. Post-colonial Africa’s situation is significantly different from that of post-war Europe, and Western aid to Africa comes with different assumptions to American aid to Europe.

Fundamentally, Mills argues, the failure of aid to create faster development is a political failure, not an economic one. He draws attention to “the empirical congruence between democracy and development in Africa”, citing Ghana, Senegal, Kenya as examples of democracy delivering accelerated growth. The more democratic a government, the more answerable it is to its citizens, and the greater the accountability for decisions and spending.

Though corruption undoubtedly exists in these countries, it can be more easily exposed and contained. Where leaders or the political elite feel that they can act with impunity, that is where the scale of corruption escapes all bounds, and the difficulties of spending aid productively are compounded. In that aid can, even if indirectly, subsidise authoritarian governments, Mills advises donors to focus support on more democratic governments.

Violent conflict exacerbates the problems, and Mills’ experience of working in countries such as Afghanistan illustrates the problem that donors’ short-term focus can make political problems worse by getting money out of the door so fast it fuels corruption and distorts incentives along the way. His analysis of the donors’ failure in Afghanistan (in chapter 6 but expanded in his book The Ledger) shows the devastating effects of these interventions.

This experience also underpins his critique of the state-directed development model. This can indeed deliver rapid economic growth and poverty reduction, as it has in Ethiopia and Rwanda, though the extent of real poverty-reduction in the latter is contested and progress in the former has been shown to be politically fragile.

As the fighting in Ethiopia has demonstrated, nothing increases poverty faster than conflict. There is also a high risk that when government controls so much of the economic activity, the political elite will be tempted to use it simply for rent extraction.

Not that this risk is limited to authoritarian states. Despite it being an electoral democracy (however imperfect), Mills notes that “things don’t work in Nigeria for a reason” – namely, that the big men are doing very nicely thank you from the dysfunctional system, extracting rents and using them to grow their own businesses and provide political patronage.

There are two important points here that need more exploration than Mills provides.

Continued next page


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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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