Aid, Economic Decline and Poverty in Africa

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In the past decade, a number of developing countries – including Brazil, India, Russia and China – have achieved extraordinary levels of economic growth.

According to the World Bank, China alone contributed 14% to the world’s economy (purchasing power parity basis) in 2005, and for the past two years India’s GDP per capita has been increasing by an incredible 7.7 per cent per annum.

However, not one African nation has succeeded in matching that growth. Indeed, many – Zimbabwe, Chad, Somalia, and the D.R. Congo, among others – have slipped backwards into devastating economic quagmire.

Journalist Martin Meredith summarises Africa’s declining economic position with a pair of startling statistics. The majority of African nations now have lower per capita incomes than they did in 1980. The continent’s share of world trade has slipped to less than 50% of what it was in the late 1980s.

Development Aid in Africa Causes Poverty and Economic Decline

Dambisa Moyo, in her book Dead Aid: Why aid is not working and how there is another way for Africa, has controversially suggested that development aid is the direct cause of this lack of economic growth and resulting poverty in Africa.

The US$1 trillion in development aid pumped into Africa over the past fifty years has, according to Moyo, “perpetuat[ed] the cycle of poverty and derail[ed] sustainable economic growth” (2009, p. 28).

The solution? According to Moyo, they key lies in breaking Africa’s aid dependency by assisting African nations to move into the international markets and grow their economies through trade.

Trade as an Alternative to Aid

Increasing access to free trade is clearly a neoliberal approach, based on the belief that poor countries need access to the profitable world markets in order to develop successfully. This is achieved through a process of globalisation.

Such an approach has worked in the past for Africa. With fresh exposure to global markets hungry for African products, Martin Meredith notes that African economies achieved an expansion of between 4 and 6 per cent per annum on average over a 15 year period.

Third-world economist Giles Bolton notes that, cross Africa, with the onset of post-colonial globalisation from approximately 1950 onwards, income per person grew by an average of 1.2% annually.

Criticisms to Free Trade in Africa

However, unrestricted global trade has been condemned for favouring competitively strong economies over the weak. In a free-trade system, there is nothing that guarantees that developing economies would be able to develop technology at a sufficiently rapid pace in order to become and remain competitive.

Evidence has shown that globalisation and the free market approach in this way has been detrimental to many developing African nations, Ghana among them.

Ghana strode to independence in 1957 as the most economically-powerful nation on the African continent. However, its economy was technologically insufficient post-independence Ghana found itself unable to compete globally.

Martin Meredith notes that Ghana’s per capita gross domestic produce fell by more than 3 per cent a year throughout the 1970s. By 1980, Ghana was bankrupt and in chronic economic decline. The 2007 Ghana Human Development Report states that one-third of Ghanains now live in sustained poverty.

Unfair Trade Rules and Africa

This spectacular economic failure, as with many on the African continent, has a lot to do with unfair trade rules and agricultural policies of the West. Such subsidiaries and tariffs have a devastating effect on small-scale agricultural producers across the African continent.

It has been suggested that, until the Western nations change their economic values, weak African economies will be inevitable victims of globalization.