3.28.2011

The Problem With Economic Aid

I recently did a piece on the Center for African Affairs and Global Peace blog on the problem with economic aid. Economic aid given by the IMF, Word Bank, and governments has severely damaged Africa by creating dramatic poverty and a culture of frivolous spending.

The typical image portrayed of Africa is of a poor, impoverished continent with millions of people huddled in refugee camps, starving and with flies in their eyes. Although this severe image does exist in some parts of Africa, it is not the case for the entire continent; yet somehow this image is always synonymous with Africa as a whole, not just in conflict zones. How did Africa get this reputation of being poor and in desperate need?
In Africa alone there are 700 million people that survive on less than a dollar a day which makes Sub-Saharan Africa the region with the highest proportion of poor people in the world.1 As if the poverty weren’t enough, 50% of Africa is under non-democratic rule. These two factors more than likely are linked. When there is non-democratic rule (especially authoritarian regimes or dictatorships), poverty and economic problems are likely to follow. But what made Africa so poor in the first place? How did it get this bad?...
Economic aid, although seemingly beneficial to those in Africa at first, has in fact been damaging to the continent as a whole. Aid (remember we are not talking about humanitarian or relief aid. A critical analysis of those will come at a later time) has caused Africa to become dependent on the constant incoming flow of money from Western nations and increasingly from China. Aid often times goes to countries with the most undemocratic leaders because they have the most conflicts and the most need for economic support; however, this aid ends up being siezed by the regime and ruling elite and used for personal expenses instead of being invested into the country and its people. This aid; therefore, ends up supporting undemocratic regimes in Africa. Furthermore, the countries become dependent upon the aid. They become accustomed to having a consistent flow of money into the country and end up spending the money frivolously. The government then does not learn about income generating activities and how to mange money properly. This creates a vicious circle of aid dependency. 
Micr0-finance (sometimes referred to as micro-lending or micro-credit) is when individuals in countries like the UK or US (or in any country for that matter) can loan any amount of money to an aspiring business owner in a developing nation. These loans are given at amounts that are decided by the donor and are re-payed by the  receiver at a set amount of time with a little interest. This gives them the opportunity to begin their business and start generating an income and be able to pay back the money they received. The hope is that once the donor gets their money back from the entrepreneur, they will then lend again to another aspiring business owner. The cycle continues with more business being started while also promoting economic independence and proper money management without going through the governments...(continue reading)
In order to encourage people to get involved in grassroots micro-finance projects, I have created a  Kiva Lending Team for CAAGLOP so that we can track the difference that our readers make in the economic independence of Africa. Please consider signing up and lending with us to help promote economic stability and independence throughout Africa and the developing world.

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