FOREIGN AID TO AFRICA MUST GO TO PRIVATE ENTERPRISE – PART I By the end of the Second World War, the European economy was destroyed and they were too broke to fix it. Europe needed a bailout from America. America figured it needed partners in industrialization and development. If development was to occur within free markets and democracy, it was not in America’s interest to leave Europe in tatters. Besides America couldn’t sell its technology to Europe if it’s destroyed manufacturing base remained in ruins. America therefore formulated foreign aid through the Marshall Plan to resuscitate Europe. It is important to note that the bulk of that foreign aid was not to be given directly to European governments. No, it was to go to private enterprise in Europe first. The formula for the Marshall plan followed these principles: 1. The foreign aid was to be disbursed to private enterprise as loans, not as free money. Private enterprise was to pay these funds back. 2. A credible organization in Europe was to be formed as a partner to America in the disbursement of the funds to private enterprise. 3. As part of the qualification for private enterprise to receive the funds, its government must demonstrate clearly that it has enacted the enabling environment for the success of free markets and enterprise. 4. The loans from private enterprise were to be paid to the government of that country. Government was to use the funds for infrastructural development, transportation, financial systems and communication, to facilitate further development. Glenn Hubbard, Dean of Columbia Business School writes, “The Marshall Plan was fundamentally different from the aid that Africa has received over the past four decades. The Marshall Plan made loans to European businesses, which repaid them to their local governments, which in turn used that revenue for commercial infrastructure -- ports, roads, railways -- to serve those same businesses. Aid to Africa has instead funded government and NGO development projects, without any involvement of the local business sector. The Marshall Plan worked. Aid to Africa has not. An African Marshall Plan is long, long overdue.” Within four years of implementing the Marshall Plan, Europe had not only developed, they were stronger than their pre-war years. So if we know of a successful formula for the disbursement of foreign aid, why it is not used in Africa? Since the 1960s, foreign aid to Africa as only ended in the personal pockets of corrupt politicians. How is it possible that Ghana’s debt will be written off in the mid-2000s and about six years later we will be turning to the IMF for a bailout? Why must the bailout go to the government which has demonstrated such gross incompetence in the management of such aid? If the foreign aid were given as loans to private enterprise, jobs will be created faster and more in tandem with the rate at which the population is growing. A strong middle class will be created. Out of the middle class, more pressure groups will be formed to ensure that the democracy is working as it should. They will continue to exert the necessary pressure on the government to do what is right by the people. Private enterprise will also pressure government to continue to enact policies which encourage business development. A new cycle will be created, similar to the cycle which helped resuscitate Europe after the Second World War. What excites me is that ordinary citizens can come together to change this trend of giving foreign aid to African governments. We can form the organizations that vet and give accreditation to businesses in Africa which can qualify for such aid/loans. We can work as one voice, in this new age of Internet communication to raise funds for credible businesses through crowd sourcing and many other avenues. To be continued: Part Two will focus on what we can do to direct funds to private enterprise. By Kobina Nyanteh
Posted on: Sun, 07 Sep 2014 17:24:08 +0000
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