The Heritage Foundation

Backgrounder #947 on Middle East

June 25, 1993

June 25, 1993 | Backgrounder on Middle East

Beyond Dependence and Poverty: Rethinking U.S. Aid to Africa

(Archived document, may contain errors)

947 June25'1993 INTRODUCTION The Clinton Administr ation wants to use American foreign aid to spur economic growth in Africa. Yet the over $1 billion of aid which Africa receives each year has not done much to ad vance the continent's long-term economic development. The average African has received four t i mes as much foreign aid since World War II as the average Asian, yet Africa remains the world's poorest region. It is about time that the United States restructure its African aid program, making it more effective and tuned to encouraging the growth of pr ivate enterprise and free trade in Africa.

The bulk of U.S. aid to Africa is funneled through the Development Fund for Africa DFA). Established in 1988 by an amendment to the U.S. Foreign Assistance Act of 1961 FAA the DFA was intended to supply a steady s ource of development aid to Africa. Essen tially a permanent foreign aid earmark, the DFA received an $800 million congressional ap propriation for 1993 to promote economic development in Africa. Some in Congress would like to appropriate $1 billion for t he DFA in 19

94. Unfortunately, the approach to distributing DFA aid taken by the Agency for International Development (AID) fails adequately to pro mote free markets. Without further market development in Afric a, that long-suffering conti nent will never develop the wealth necessary to end poverty and raise the standard of living of all Africans.

The timing is now right for the U.S. to use its foreign aid as a means to press for a free mar ket agenda in Africa. With the end of the Cold -War, most aid to Africa can now be used to promote economic development, and not merely to support friendly regimes against sum gates of the former Soviet Union. Moreover, many African nations have begun to take steps toward fre e markets, and they need encouragement from the U.S. To help these countries capi talize on what are still very tentative steps away from statist economies and authoritarian polit ical systems, and to make U.S. aid to in Africa more effective, the U.S. sho u ld 1 The U.S. also provides Africa with non-DFA aid. This includes humanitarian aid, debt relief, food aid, a small amount of security assistance, and the Economic Support Fund (ESF The U.S. also aids Africa by funding the World Bank, the IMF, the African Development Bank and other multilateral institutions. While calculating the exact amount of total U.S aid given to Africa is problematic, it has been estimated at slightly less than $1.1 billion dollars for 1992.

Sub-Saharan African Countries Receiving U. S. Foreign Aid: I 992 Note: U.S. aid to South Africa is directed toward disadvantaged South Africans J Establish an Index of Economic Freedom as the primary determinant of devel opment aid to African countries. The Index would be a quantitative gauge of a countrys economic freedom. It would take into account its economic policies, in cluding taxation rates, regulation on business activity, and the size of the state sec tor of the economy. Implementing an Index will ensure that U.S. development aid is given only to those African countries that pursue market-oriented economic poli cies, which are the only proven means of achieving long-term economic growth and development. The Index also would greatly focus U.S. African aid programs.

The U.S. is not obligated to provide foreign aid to any other country, whether it be Angola or Russia. Development aid, when given, should be conditioned on prog ress toward the establishment of free market economies, leading to the eventual ces sation of dependence on foreign ai d . An Index of Economic Freedom would be an ideal instrument for signaling that there is an endpoint for U.S. development aid the establishment of a free market 2 J Concentrate U.S. development aid in fewer African countries. There is no need for an AID pr e sence in every African country. Washington should concentrate its development aid on those African countries that ate committed to developing free markets as indicated by an Index of Economic Freedom. This would be eco nomical than the current polic y of dispersing U.S. aid resources in some 37 Afri can countries. The result should be fewer African countries receiving AID funds ment. African states pursuing free market reforms could benefit greatly from tech nical aid for privatization and private sec t or development. For example, AID could be providing more money for the establishment of banks to lend money to poten tial African entrepreneurs. Yet the Clinton Administration is deemphasizing AIDS private sector programs, developed in the 1980s, in favor of other, less effective programs, such as population control projects.

J Use development aid as leverage to encourage African aid recipients to move toward democracy. The U.S. should use aid as a means for pressuring repressive African governments, such as those in Uganda and Cameroon, to adopt democratic reforms. The U.S. also should continue its democracy-building programs in Africa.

By providing technical aid to political parties, legislative assemblies, and other democratic institutions, Washington d raws on a prime source of American strength in Africa: its democratic tradition J .-Increase U.S. support for African privatization and private sector develop AFRICAS ECONOMIC DECLINE Fifteen of the worlds thirty poorest countries are African. This gloomy predicament con trasts starkly with the optimism that prevailed throughout the continent during its indepen dence era of the late 1950s and early 1960s. Standards of living have actually declined since then. Today the approximate per capita ss national pr oduct (GNP) of Mozambique is $77 Kenyas is $368; and Nigerias is $2

66. Throughout the 1980s, most African countries.rou tinely registered GNP growth rates well below their rate of population growth and a decline in international prices for its primary com modities. The greatest enemy of Africas economic development,however, has been the statist economic policies of African governments. Young and ideologically inspired African leaders, including Julius Nyerere in Tanzania, Kenneth Kaunda of Zambia, and Ghan a s Kwame Nkrumah, proclaimed that Af rica could best be developed under state-planned economic systems, even though comprehens ive planning played no part in successful development elsewhere. As a result, most African states established government monopoli e s, price controls, and high taxes; nationalized foreign investment; and excessively regulated foreign investors and even their own business class 1 The result was a loss of productive economic activity and foreign investment, a deteriorating infrastructur e , declining economic competitiveness with other developing regions, and perva 9l.O Africas economic misery is caused by many factors, including civil wars, coups, droughts 3 sive corruption 2 3 The United Nations Development Programme and the World Bank, Aftican Development Indicators (New York and Washington, 1992), p. 32.

For an in-depth look at how donor-supported statist economic policies destroyed theTanzanian economy see the 3 FREE MARKET REFORM MOVEMENTS By the early 1980 it was obvious to most aid donors and to some African leaders that stat ist economic policies were destroying African economies. Donors, including the U.S conse quently began using their enormous economic leverage to pressure African states into adopt ing structural adjustment prog r ams SAPS SAPs are country-specific reform programs de signed by the World Bank and the International Monetary Fund (IMF) to liberalize the econo mies of aid recipients. These programs typically attempt to impose more fiscal responsibility and better debt m anagement, privatize inefficient state enterprises, devalue currencies to en courage exports, eliminate disincentives for the private sector and streamline bloated govern ment bureaucracies A SAP often is backed by a World Bank or IMF loan, often on conce s sional terms as well as aid from donor countries to specific economic sectors. African states that reject or fail to implement SAPs risk losing foreign aid, as Kenya did in 1991 dergoing structural adjustment appear to be performing better than the non-r e forming African countries! For example, the west African country of Ghana often is cited as a stqctural ad justment success by the World Bank, the IMF, and other donors eager to justify their activi ties. After years of economic decline, including a 6.5 d r op in gross domestic product in 1982 Ghana undertook a SAP in 1983 and has registered an approximately 6 percent GDP growth rate annually over the last several years! The return of an estimated $200 million in flight capital each year is testament to Ghan a 's improved economic climate6 rica in the early 1980s. This represented a dramatic change from AID'S earlier policies which were either indifferent to a recipient country's economic policies or outright hostile to free market economics. Despite earlier en d orsements of AID'S approach in the DFA legisla tion, though, Congress over the past couple of years has expressed a concern that AID'S em phasis on supporting structural adjustment will not alleviate poverty. Congressional critics have attacked AID for de e mphasizing social programs in Africa in favor of what is called non project assistance. This generally takes the form of cash transfers to African governments to support economic reform, as opposed to support for projects designed to aid the poor majority of Africans directly, such as providing training for basic health services.

Economic reforms imposed by SAPs, however, generally have not hurt the poor in Africa.

Rather, it is the elite and the relatively prosperous urban residents in Africa who typical ly bear the burden of structural adjustment. It is they, for example, who suffer most from the re moval of price controls on agricultural products, which is required by SAPs. In fact, African farmers, the majority of whom are poor, have seen their incomes rise as government monopo The evidence suggests that SAPs have helped Africa. The 28 African countries currently un AID began supportin the IMF and World Bank structural adjustment approach toward Af 8 author's "Tanzania's Travail: Lessons in Improving Am erican Aid to theThird World Heritage Foundation Backgrounder No. 866, November 14,1991.

See Witney W. Schneidman Africa's Transition to Pluralism: Economic and Investment Implications CSIS Afica Notes No. 142 (November 1992 p. 3.

African Development Indicators, p. 3 1.

Swiss Review of World Affairs, February 1993, p. 11.

Certain countries with poor economic reform records that were considered important to U.S. strategic interests, including Liberia, Somalia, and Zaire, continued to receive substantial amounts of economic assistance throughout the '1980s. H. Rept. 102-108, Foreign Operations, Export Financing, and Related Programs Appropriations Bill, 1992, p. 74-81 4 5 6 7 8 4 9 lies, price controls, and high rates of taxation have been eliminated by SAPs. On the whole Africas poor certainly are better off under most SAPs t han they would be without structural adjustment In fact, social service spending in many reforming countries is increasing. In Ghana, for example, education and health spending by the government is up considerably.l0 DEVELOPMENT FUND FOR AFRICA Congress i n 1988 established the Development Fund for Africa, essentially a permanent ear mark of economic development funds for sub-Saharan Africa. The Agency for International Development will spend 800 million in DFA funds in 19

93. This money will be used to fund a variety of AID activities, including development projects aimed at increasing agricultural production and direct cash assistance to African governments, to support imports, for example.

The legislation that created the DFA, a 1988 amendment to the For eign Assistance Act FAA of 1961, prevents Congress from earmarking DFA funds for specific sectors, such as health, or for specific countries. l1 This amendment, now Chapter 10 of the FAA, specifies three sectoral spending targets, each of which should be a llocated 10 percent of total DFA funding: 1) renewable natural resources, which are primarily agriculture-related, 2) health and 3) voluntary family planning. Moreover, DFA legislation includes several instructions for AID. Aid, for example, should help t h e poor majority of African men and women, encourage private sector development by reducing the role of central governments, and protect the poor from the side-effects of economic reform. AID also is instructed to concentrate DFA funds on those countries i n greatest need of outside aid and with potential for growth and commitment to economic reform.

AID determines its allocation of DFA funds according to several criteria on a weighted scale. These include a countrys need or poverty level (as determined by i ts infant and child mortality rate its commitment to economic reform and democracy, and its quality of gover nance. AID considers a countrys need the most important factor: it weighs in at approxi mately 50 percent on the allocation formula. Economic poli cies are weighted at only some 25 percent BASIC HUMAN NEEDS PROGRAM STRUCTURAL ADJUSTMENT OR NOT?

Underlying much of AIDS policies is a fundamental premise: that AIDS primary business should be providing for such basic human needs as education, health, and nutrition. This should be done, it is often suggested, regardless of whether or not a recipient country is re forming. For example, Under Secretary of State-designate for Economic and Agricultural Af fairs Joan E. Spero stated that basic human needs aid s uch as public health and primary educa tion should be given even in a dysfunctional policy environment.12 9 Edward V.K. Jaycox, Structural Adjustment Spurs African Development, Africa News, March 8-21,1993, p. 14 10 Afncan Development Indicators, pp. 19 1 , 193 11 Eastern and Central Europe are the only other regions free of congressional earmarks 12 Response to a question from Senator Jesse Helms, Senate Foreign Relations Committee, March 24,1993 5 This notion of providing for basic human needs abroad pred a tes the advent of structural ad justment programs. In fact, it originated in the early 1970s, when the economic policies of most African countries guaranteed that they would be incapable of providing these fundamen tal social services. Today, some in Cong r ess suggest that the commitment made by African governments to alleviating poverty'or promoting basic human needs should be one of the most important criteria used in allocating DFA resources tive, delaying the implementation of needed reforms. It only re l ieves popular pressures on government to improve the economic environment. While Africa's economic condition is dire, its development prospects are not entirely bleak, largely because of the recent free mar ket economic reform movement. The U.S. aid progr a m in Africa needs to be reformed as well to support Africa's free market development 13 This viewpoint is misguided. U.S. aid to non-reforming countries will be counterproduc It is widely acknowledged that the U.S. foreign aid program lacks focus or sense of pur pose. Nowhere is this more obvious than in Africa. U.S. aid policy needs a new purpose: help ing to build strong free market economies. Africa would be an ideal place to highlight this pur pose because, with its diminished strategic significance to the US Africa receives primarily development aid To develop a vigorous free market-oriented development aid policy toward Africa, the Clinton Administration should J Establish an Index of Economic Freedom as the primary determinant of development aid allo c ations to African countries Congress has instructed AID to concentrate Development Fund for Africa resources on those African countries that are making market reforms. However, AID must follow the DFA's other guidelines as well, particularly the one requi r ing that the most needy African countries receive aid. Following these other guidelines means that a recipient country's eco nomic policies are underemphasized in the DFA allocation calculation. In fact, the heavy weight given to a country's need or its p o verty level renders it almost inevitable that African countries with little commitment to economic reform will receive considerable DFA funds This unfortunate outcome, which both wastes aid resources and delays the implementation of sorely needed economic reforms, is all the more likely given that AID is mandated by Con I 1 gress to spend $800 million in DFA money. I To ensure that US: development aid is given only to those African countries pursuing free market economic policies an Index of Economic Freed o m should be established to make an African country's economic policies the primary determinant of whether it receives develop ment aid.14 Last year's President's Commission on the Management of AID Programs: Re- I PROMOTING THE FREE MARKET CENTERPIECE OF U .S. AID TO AFRICA 13 Evidence of congressional support for a basic needs emphasis for U.S. development aid and a general lack of enthusiasm I for structural adjustment is reflected in a congressional study "The Investigation of the Agency for Internationa l Development Administrators' Compliance with Ethical Standards prepared by Michigan Democrat Representative John Conyers during the last Congress. This study sympathetically cited concerns expressed by AID career developmentalists that AID was losing sigh t of its basic human needs approach in favor of an emphasis on private sector development and structural adjustment 6 Largest African Recipients of U.S. Foreign Aid FYI991 FYI992 FYI993 Actual Estimated Requested Source: Congressional Research Service, Afr i ca: U.S. Foreign Assistance Issues, updated February 4, 1992 He~itageDanchul port to the President-An Action Plan recommended that AID concentrate its development ef forts on states promoting private sector economic growth. The Commission also cites in In d ex of Economic Freedom as an effective means of doing ~0 An Index would quantify rates of taxation, the size of the public sector, the extent of private banking, regulation and red tape, the extent wages and prices are regulated, tariff levels, restrictio n s on foreign invest ment, protection of property rights, and other indices in order to assess the extent to which po tential aid recipients have adopted and actually implemented pro-growth economic policies An Index score would be established for each cou ntry each year. African countries proceed ing with free market economic reforms would be eligible to receive U.S. development aid while those rejecting reforms would not be eligible, regardless of their perceived need.

The extent to which a country's media are state-owned or statecontrolled should be weighed heavily in an Index of Economic Freedom. Free media are essential to economic lib erty. Business and commercial activities need sound information on domestic and global eco 16 nomic conditions in order to devise business plans, market products, and attract investment 14 The Heritage Foundation has long advocated an Index of Economic Freedom. See the author's "Tanzania'sTravail 15 Chairman George M. Ferris, Jr. and Commissioner Thomas Kemp urged AID to e s tablish an Index of Economic Freedom, p. 20 16 This is a consistent theme throughout the writings of Heritage Foundation Adjunct Scholar George B.N. Ayittey. For example, see "The End of African Socialism Heritage Lecture No. 250, January 24, 1990 7 Moreo v er, free media are essential for mobilizing public support for the type of economic re forms that are needed in many countries throughout the region. Without them, Africans in all likelihood will fail to overcome the dependency mindset instilled in them b y African leaders who falsely claimed that the state could provide for all their needs AID has the technical capabilities to develop an Index of Economic Freedom. In fact, it al ready does much of this economic policy analysis An Index of Economic Freedom m erely would require the establishment of a formal coun try score to indicate the willingness of each aid recipient to release the development potential of the free market An Index also would provide Congress with a gauge of what is an appropriate develop m ent aid funding level for Africa. As the appropriations process currently stands, it is possible that all appropriated DFA money could be spent in countries moving away from free markets back toward their statist pasts. DFA appropriation decisions should b e based on a quantifiable understanding of which African countries genuinely are undertaking free market economic re form An Index of Economic Freedom could be used to determine a recipient countrys develop ment assistance allocation independent of its re l ations with the IMF and the World Bank. Afri can countries have a notoriously poor compliance record with IMF and World Bank structural adjustment programs, and program violations often are concealed by these financial institu tions. Rather than allowing d eals struck by bureaucrats from the World Bank, the IMF, and African governments to be its guide in Africa, AIDS allocation decisions should be deter mined by its own assessment of the extent of economic freedom enjoyed by citizens in vari ous African nat ions dom would encourage this trend and provide U.S. development aid to Africa with a single focus 17 Free markets are starting to produce positive results in Africa. An Index of Economic Free J Concentrate U.S. development aid in fewer African countries.

A cutback in the number of African countries aided by the US now some 37, would be economically sensible. The Presidents Commission on the Management of AID report recog nized that AID funding is too low in several countries to justify the numbers of staf f based in Africa.18 For example, in the West African country of Burkino Faso AIDS operating ex penses represent some 20 percent of the total costs of its programs. Yet while it has been pressing AID to sharpen its policy focus in Africa, Congress resists A IDS desire to close country missions. The reluctance to withdraw AID missions almost guarantees that DFA money will be squandered in countries with little commitment to free market economic devel opment 17 In its Development and the National Interest: U.S . Economic Assistance into the 21st Century, AID reported that its economists had devised a policy matrix, called an Economic Opportunity Index, that compared the economic policies of 42 developing countries. This matrix shows that a similar Index of Econo m ic Freedom is feasible. It also shows what is widely known: that free markets produce higher rates of economic growth 18 See page 5 of the report 19 U.S. General Accounting Office, Foreign Assistance: A Profile of the Agency for International Development GAO/NSIAD-92-148 (April 1992 p.

32. I 8 U.S Bilateral Aid to Africa: Development Aid Increases as Security Assistance Falls Billions of I992 Dollars 1.8 1.6 I .4 I .2 I .o 0.8 0.6 0.4 0.2 I l~.l Development Aid I982 I 984 I986 I988 I990 I992 Ne: ESF Econo mic Support Funds Source: Congressional Research Service, AMs: U.S. Foreign Assistance Issues updated February 4, 19

92. Heriqp DanChvt AID should concentrate its development programs in no more than twenty African coun ries. These should be determined by the Index of Economic Freedom. Concentrating U.S. de ielopment dollars in this way would increase AIDS efficiency. Moreover, the risk of losing ievelopment aid to other countries with better economic reform records also would give Afri an countries a gre ater incentive to proceed vigorously with free market economic reforms J Increase U.S. Support for African privatization and private sector develop ment.

African countries would benefit greatly from the more rapid privatization of such state en erprises as oil refineries, mining operations, and transportation. Enterprising African workers ould make more productive use of their countrys economic resources,.such as trucks, build ngs, and machinery, if they were owned by private entrepreneurs. Turning over ec onomic en mprises owned and mismanaged by the state to private citizens has proven to increase eco iomic productivity throughout the world. Privatization even has been credited with increasing rood production in formerly famine-plagued Ethiopia.

Privatizat ion should be encouraged not only for economic reasons but also for the potential political benefits for African countries. A strong private sector would contribute to political stability in Africa. Politics have degenerated into civil war so often in Afr ican countries partly 20 20 Peasants onTop, The Economist, March 13,1993, p. 53 9 because the stakes over who controls state-owned enterprises have been exceptionally high.

Once in power, African political leaders have controlled the national wealth for th eir own pur poses and not for the benefit of the African people. Corrupt African leaders such as Mobuto Sese Seko of Zaire have used their control over the national economy to enrich themselves and their supporters. Fundamental economic decisions have bee n made on the basis of politi cal, and often tribal, calculations. African political struggles would prove far less contentious if political power did not automatically bring economic wealth.

Unfortunately, privatization is proceeding slowly in Africa. In Ghana, a large recipient of U.S. aid the number of public enterprises is actually increasing? This sluggish pace of re form is due in part to Africas lack of technical expertise and knowledge on how the free mar ket works AID advisors can help Africans bu i ld a free market economy. They can train them on how to create stock exchanges, banks, and other basic elements of a free market economy. Unless these institutions are strengthened, structural adjustment programs, which heavily emphasize privatization are bound to fail. In South Africa, AIDS Bureau for Private Enterprise (PRE which is charged with promoting the private sector in assisted countries, has helped establish a credit program to enable black entrepreneurs to receive credit from South African bank s This kind of program should be recreated all over Africa.

There are numerous opportunities for AID to advance privatization, but th ey are being missed. For example, PRE could assist countries to set up their own stock exchanges, which play an important role in privatization. Unfortunately, there are only a few in all of sub Saharan Africa, and even they are not very successful. The G h ana Stock Exchange, for exam ple, lacks financial information on traded companies. Moreover, there are only three accred ited stockbrokers in the entire country tries that score high on the Index of Economic Freedom. For example, if the Index were ap plie d to Kenya, that country would not qualify for development aid. Kenya long has resisted meaningful economic reforms. Most international aid to Kenya was cut off in 1991 because of its statist economic policies and its lack of political pluralism. President Daniel arap Moi several months ago severed relations with the World Bank and the IMF, bitterly attacking their demands that his government dismiss thousands of civil servants, move quickly on prom ised privatization, and further liberalize agricultural pr i ces. Moi has since patched up relations with these international financial institutions. Yet AIDS Bureau of Private Enterprise boasts of its private sector development efforts in Kenya, where it has worked with venture capital companies to increase the av a ilability of capital to would-be Kenyan entrepreneurs. This kind of program would not continue if the criteria of the Index were applied. The reason: Mois re sistance to meaningful economic reform and the consequent deterioration of the Kenyan econ omy, a s well as Mois on-again, off-again relationship with international donors. An Index of Economic Freedom would show that current U.S. aid to Kenya is a waste of money To be productive, AID should concentrate its privatization programs on those African coun 2 1 Afican Development Indicators, p. 258 10 J Use development aid as leverage to encourage African aid recipients to move toward democracy Africa has experienced profound political change in recent years. Over half of its 54 coun tries are moving, however t entatively, from autocratic political systems to ademocratic form of government. This movement toward democracy merits U.S. support. This is particularly true today when Washington has little strategic reason to ally with dictatorial African leaders as wa s the case during the Cold War. U.S. foreigqaid is a potent tool with which to press for democracy in Africa Free market economic reforms require a certain measure of sacrifice in the short term.

Some workers lose jobs as government bureaucracies are prune d, for example. Consumers ini- tially suffer as prices rise when subsidies on some goods are removed. It probably would be easier for such changes to be accepted by Africans if they have had some say in selecting the government instituting them 1991 elect ed a new president, Frederick Chiluba, who promised tough reform measures. By electing Chiluba, Zambians were rejecting long-time president Kenneth Kaundas statist eco nomic policies and his history of confrontation with Zambias reform-minded donors.

Chiluba has suffered several setbacks since his election, but he has been successful in institut ing some of the most radical free market economic reforms in Africa.

Moreover, dictatorial African regimes have more reason than democratically elected gov ernment s to avoid free market reforms. Most African regimes wield their control over the economy for patronage and other political purposes. Democratic leaders, however, who would face re-election, would be more likely to experiment with free market reforms to i nvig orate the economy.

If an African nation is eligible for development aid under an Index of Economic Freedom the U.S. should use that aid as leverage to push for continued progress toward democracy. De mocracies are far less likely to sanction human rig hts abuses or to restrict individual liberties including freedom of speech, freedom of assembly, freedom of religion, and the establish ment of due process. While the Index should determine whether or not an African country is eligible for aid, Washington should feel free to withhold development aid from an economi cally reforming country that is footdragging on democratic reforms.

The U.S. also should continue to help consolidate young democratic movements in Africa.

The National Endowment for Democracy, the International Republican Institute, and the Na tional Democratic Institute have been active in Africa, training political and civic leaders and building the independent media. Though relatively modest, these efforts are extremely worth while, playing on the strength of Americas democratic tradition Indeed, politically empowered Africans may even welcome economic reforms. Zambians in J Remember that U.S. foreign aid is not an entitlement program.

Some suggest that the U.S. has a moral obligation to aid African and other developing coun tries. The Washington-based Overseas Development Council, in a recent report calling for more U.S. development aid spending, declared that wide disparities in income and human well-being between rich and poor people and c ountries are immoral 922 The World Bank 22 Challenges and Priorities in the 1990s: An Alternative US. International Affairs Budget, FY 1993, Overseas 11 .shares this view, calling an attack on poverty a moral imperative. Most African leaders natu rally al so advance this position, claiming a right to receive Western and U.S. aid.

Arguments that the U.S. and the developed world are morally obligated to assist the devel oping world wrongly assume that the developed countries became wealthy by causing the de v eloping world to become poor. Yet Africa is not poor because it was exploited, or because the West is rich. Africas poverty is the results of African factors, including some three de cades of statist economic policies. The notion that developed countries a re morally obligated to invest in African countries is all the more dubious given that Africans themselves routinely take their money abroad. It is estimated that wealthy Nigerians, for example, have enough money in foreign banks to eliminate the countrys more than $36 billion foreign debt so as individuals. Indeed, Americans give over $6 billion in voluntary contributions to pro mote development overseas every ~ear.2~ This individual generosity is uniquely American and is more than just a forced transfer of wealth engineered by the US. government.

The developing worlds effort to stake a moral claim on American tax dollars also over looks the fact that there have been virtually no development successes that can be attributed to foreign aid. On the contrary, nations like Chile and Taiwan have experienced impressive economic growth with very little foreign aid. Foreign aid has been unsuccessful partly be cause it retards the development of social qualities essential for economic growth anddevelop ment, such a s thrift, industry, and self-reliance.

The philosophy behind the Index of Economic Freedom challenges the counterproductive presumption that it is a U.S. obligation to give foreign aid to developing countries. By adopt ing an Index, the U.S. would signal d eveloping African countries that it is they who have the obligation to use U.S. aid constructively. For example, an Index of Economic Freedom would repudiate Zimbabwe President Robert Mugabes suggestion that aid for children be delinked from the general d e mand for good governance and democracy, a standard that some donors and activists, including many in the U.S are pushing. An Index would invalidate Mugabes demand by placing much of the responsibility for the suffering of Zimbabwes children where it belon g s-on Mugabes statist economic policies An Index of Economic Freedom would create a greater sense of responsibility on the part of recipient countries in Africa. By making an Index the centerpiece of development aid to Af rica, the U.S. would be sending th e message that it will help African countries overcome their statist past and develop free markets. It will do this because free markets are the best known means of achieving prosperity. Beyond that goal, however, African nations must be prepared to rely u p on their own resources for their long-term development. Any other foreign aid framework is bound to raise expectations by Africans that will be unmet, or worse, lead the US. to take on an open-ended obligation that leads to an endless transfer of tax doll a rs from Americans to African nations Americans who feel a moral obligation to aid people in Africa have every opportunity to do Development Council, 1992, p. 23 23 Development and the National Interest, p. 61 12 CONCLUSION The road to development in Afric a will be long and difficult. Fortunately, many African states have enhanced their prospects for development by accepting the need for free market economic policies. The U.S. should encourage Africa's free market trend by establishing an Index of Economic F reedom for allocating development aid to Africa, and by directly aiding the emergent African private sector An Index also would provide the diffuse and unfocused U.S. foreign aid program with a coherent strategy for disburiing U.S. foreign aid Free market s are valued by nations because they produce wealth and raise the standard of living of all people. In this sense, free markets are not an end in themselves. They should however, be the goal of foreign aid donors. Otherwise, the aid recipient will suffer a debilitat ing dependence and the donor will assume an unending obligation. The U.S. should strive only to help African countries-and indeed countries all over the world-overcome their stat ist past so that they can provide for their own needs. Anything el se is bound to be wasteful and counterproductive to creating what all Americans want for Africa-a rising standard of living for all Africans.

Thomas P. Sheehy Policy Analyst 13

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