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Advancing African Development: The Necessity for Aid and Trade

7th April 2009

By: Adam Habib


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Is aid as bad as Greg Mills and Terence McNamee suggest? Is the facilitation of trade the simple answer to all of Africa's woes? One would think so if one read the opinion editorial entitled "More Aid is not What Africa Needs from Obama" that appeared in the pages of South Africa's Business Day on 26 January 2009. The article echoes a common view not only emanating from the Brenthurst Foundation but also among certain sectors of the business community. In this world, NGO's are bad, entrepreneurs are good. Aid creates dependency and corrupt governments; trade facilitates entrepreneurial activity and development.

These commentators seem oblivious to the causes of the global economic meltdown. They have forgotten that in the real world entrepreneurs can be as greedy as public officials. NGO activists do significant good even if at times their engagement has unintended consequences. The world is not defined simply by good and bad guys. In the complex world of development a balance between the priorities of business and the citizens is what can generate progress.


Let me use some examples. The great success stories of development in the post world war II period are seen as Europe, Japan, Korea and Taiwan. In all these cases a mix of trade and aid created the enabling conditions that facilitated this end. Aid was absolutely necessary. The development of Western Europe would have been unimaginable without the role of the Marshall Aid plan. Similarly the Asian countries were a major beneficiary of US aid. UNCTAD's Economic Development in Africa estimates that $500 million per year was given to Japan by the US between 1950 and 1970. Korea received economic and military investment that amounted to $13 billion between 1946 and 1978, whilst Taiwan received $5.6 billion.

But trade was as crucial as aid. The US provided preferential access to its markets for both Western Europe and its Asian allies. Moreover, it did not demand reciprocal access enabling these societies to develop their competitive capacities before they integrated into the global economy. This restructuring of international trade by the US in favour of its allies was crucial for the development of Western Europe and South East Asia in the post-world war II period.


But why did both the US and national elites act in ways that were systemically beneficial.
Chalmers Johnson explicitly accounts for the rise of the Japanese economic model by arguing that it was essentially a product of the cold war and the competitive relations between the US and Soviet political elites. Other more recent accounts speak of systemic vulnerability generated by specific political, security, and financial conditions, and yet others highlight the role of social mobilization and extra-institutional popular action in prompting these elite coalitions in the direction of broader developmental outcomes.

These accounts demonstrate that appropriate development policies are not simply the product of good political leaders or clever technocrats. Rather they emerge within particular political circumstances that are distinguished by a dispersal of power. At the international level, competition between equally powerful states is good for development because it conditions international political elites to act in ways that favour developing nations. At the national level, the experience of West European nations, including Norway, and Asian countries like Malaysia, suggest that a robust civil society, including powerful trade unions, is important for conditioning local political elites to adopt policies and behave in ways that are facilitative of poverty alleviation and national development.

But the competitive international environment during the cold war did not benefit Africa. How then can its elites avoid a repeat of this experience? How can they ensure that they are able, like the Asians and Europeans, to use the competitive international environment to facilitate their own development? Two preconditions would be required for this outcome in this era. First, African political elites must develop the political will to pursue a comprehensive development agenda that benefit their citizens. And, as the European and Malaysian experience indicates, such a political will can emerge when the political elite are kept in check by a plural political system and/or an independent robust national civil society. Where this does not exist as in Gabon, Ethiopia and Sudan, these political elites easily become proxies for foreign powers and interests. Substantive democratization, then, facilitates the accountability of their elites to their citizens thereby enabling them to develop the political will to pursue a comprehensive developmental agenda.

Second, African political elites would have to be much more cohesive at the continental level if they are to be able to use the competitive international environment to their collective advantage. Such cohesion could emerge from initiatives towards a continental unity. What form would this take? Some would argue for a pan-African solution in the form of a United States of Africa. While such a development would be positive, it is for all practical purposes unfeasible in the short to medium term. But a Continental Charter of Rights governing investments and engagements on the continent need not be? Such a charter, which would have to be negotiated in the African Union, could supersede bilateral agreements and force all external, and maybe even continental, powers to accord to a specific set of business and diplomatic practices. Of course the administrative weaknesses and the capacity constraints of the AU may hinder compliance. But if such a charter were to be agreed to by the AU, it could be subsequently ratified in the UN, thereby extending and strengthening its institutionalization, and enhancing the reach of its compliance.

What are the lessons for Mills and McNamee? Simplistic solutions will not facilitate development. Neither will sloganeering. Lesson one: both Aid and Trade is necessary. The question is how is the Aid deployed and how is the Trade organized. Lesson two: an enabling political environment both at the national and international level is essential. How to organize the political system to enshrine accountability of political and economic elites to the citizens, and how to play off foreign powers in the competitive international environment so as to facilitate national development needs is what is at issue. Is it not time for us to get to the crux of the debate and reject fundamentalism in all its forms?

Adam Habib is Deputy Vice-Chancellor: Research, Innovation and Advancement at the University of Johannesburg



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