Will Money Solve Africa's Development Problems

Will money solve Africa’s development problems? Yes. Ashraf Ghani 2 No. Dr. Donald Kaberuka 4 No. Edward Green 5 Only If... Iqbal Z. Quadir 6 No Way. James Shikwati 8 Yes. Professor James Tooley 9 I Thought So... Michael Fairbanks 11 No. William Easterly 13 No. By now we should have learned. Donor nations have spent billions of dollars for development schemes in post-colonial Africa, yet there is little to show for this beyond dependency and corruption. Yet current policy and sentiment seem to advocate more of the same. Pop music and movie stars join celebrity academics in trying to shame wealthy nations into committing ever-expanding funds to address African poverty and ill health. This grand scheme mentality has remained immune from the feedback that failed programs ought to have provided. As for the intended beneficiaries, we find a psychological colonialism that has brainwashed the poor into believing the solutions to their problems are to be found in the technical know-how and largesse of wealthy countries. A recent book, The White Man’s Burden, by William Easterly, challenges “utopian social engineering” by international de-velopment experts he calls planners, for whom poverty is an engineering problem with technical solutions only they can concoct. Needed instead are searchers, who go to Africa with humility, open minds, and ability, to learn and discern what works and what doesn’t in different cultural settings. Public health is one of the few areas of development that has achieved some genuine, sustained results. Yet we need only examine the Western response to AIDS, one of Africa’s worst problems, to see replication of every mistake made by planners over the past half-century. Evidence is mounting that the Western biomedical model of AIDS prevention —condoms, antibiotics for sexually transmitted infections, and testing people for HIV infection — has been largely ineffective in Africa. More recently, billions of dollars has gone into treating AIDS with expensive antiretroviral drugs, an unprecedented public health intervention with as-yet unknown effects on the future of the pandemic. Availability of these drugs has not reduced the rate of new HIV infections in the U.S. African AIDS is driven primarily by those men and women who have multiple, concurrent sexual partners. The global prevention model focuses on medical devices and does not actively promote partner reduction, or even address multipartner sex — dismissing this inaccurately as an abstinence-only scheme. Yet, largely before Western technical advisors showed up, Uganda developed its own response to AIDS based on common sense, sound public health principles, and cultural/religious compatibility. Its emphasis on partner reduction (zero grazing) was appropriate to the type of generalized epidemic Uganda faced. HIV prevalence fell by an unprecedented two-thirds between �99�–�004. The cost? During the early years of major behavior change, $0.�� per person, per year. Meanwhile, the AIDS prevention investment per capita in South Africa and Botswana, where Western-favored approaches are funded, is hundreds of times higher. Yet these countries have among the highest HIV prevalence anywhere and it has been difficult to demonstrate the impact of these expensive programs on HIV infection rates, where it counts. Alas, most Western donors seem to have learned nothing from all this. Until the reasons for this are examined openly and objectively, the wealthy nations are likely to continue repeating the mistakes of the past. Edward Green Director of t he AIDS Prevention Research Project at Harvard’s Center for Population & Development Studies. EDWAR D GR EEN A T EM PL E TON CON V ER SAT ION 5 Only If.. It empowers citizens. African entrepreneurs are the key to solving Africa’s development problems. It is they who can drive their continent’s economic growth and it is they who can make their governments better. If money is invested engaging the organic and transformative potential of local entrepreneurs, Africa will flourish. If money is poured into government bureaucracies — which hold back these entrepreneurs — Africa will continue to languish. Big money to governments in Africa, as it does elsewhere, empowers bureaucracies, promotes statism, and weakens government incentives to increase tax revenues through economic growth. Furthermore, economic assets are often kept in the hands of the state, leading to monopolies, stagnation, and the opportunity for extortion. As a bitter cherry on top, the more the red tape increases, the more discouraged entrepreneurs get and a vicious cycle ensues. There are many instances where money — funding entrepreneurs and non-governmental bodies — does wonders in Africa. These examples are often cited by development gurus who then claim that aid in general is helping Africa, justifying any aid — including that to governments. But there is a clear pattern: money to entrepreneurs and non-governmental bodies helps; money to governments hurts. A look at the history of England explains why outside money to governments is damaging. In the ��th century, after the advent of property rights, the monarch was forced to convene a group of citizens as a tax-legitimizing device. That group’s name? Parliament. Over several centuries, parliament capitalized on the monarch’s chronic need for money and, indeed, made sure the crown did not gain financial independence. Every time a monarch came to parliament to pass a new tax bill, parlia-ment obliged, but only after exacting more liberty from the Crown. Over time, parliament emerged as the more powerful branch of government. In hindsight, the two keys to the successful economic and democratic growth of England were: (a) the monarch’s shortage of money, not its adequacy; and (b) the lack of aid from outside. Likewise, in today’s sub-Saharan Africa, the opportunity exists to put into motion true economic development. It will not happen by deluging African leaders with aid dollars, but ratherby adopting practical ways to help Africa’s citizens thrive. Their increased strength is the best way to remove blockages to progress in the long run. Iqbal Z. Quadir Founder of GrameenPhone in Bangladesh. Founder and executive director of the Legatum Center for Development and Entrepre- neurship at the Massachusetts Institute of Technology. I QBA L Z . QUA D I R A T EM PL E TON CON V ER SAT ION � ( C O N T I N U E D ) A T EM PL E TON CON V ER SAT ION � IQBA L Z . QUA D I R First, rich countries must be challenged to remove trade barriers for African countries now, irrespective of African trade policies. With global market access, Africans would automatically attract private investment to their countries, despite their institutional weaknesses. These institutions would become stronger over time as businesses began to flourish. Private investments capitalizing on access to global markets would necessarily employ Africa’s low-cost labor, thus creating jobs. This is in stark contrast with companies extracting mineral resources in Africa, employing very few people relative to size of the business. Next, small entrepreneurs must be helped with seed money in increments of $�0,000 to $�0,000 (in contrast to the approach of mega-institutions who tend to direct billions into state bureaucracies). Even these relatively small cash amounts can be broken up into several installments, each of which is provided under certain pre-determined performance crite-ria. Just like they do everywhere else in the world, these entrepreneurs would create jobs, products, services, and — let us not forget — choices. It is precisely such jobs, entrepreneurs, and choices that form the bedrock of flourishing democracies. What goes naturally with supporting small entrepreneurs is introducing technologies that cost-effectively empower individuals, an area where Western knowledge can obviously add value. Such technologies multiply people’s abilities and deliver genuine aid to citizens directly. A pair of wheels, for example, provides invaluable assistance in moving a heavy load of bricks. Heightened productivity gives rise to four exciting benefits. First, as individuals control what they produce and consume, their lives improve. Second, when citizens accrue increased economic clout, institutions are forced to become more responsive to their needs. Third, by becoming more productive, users are able to pay for productivity tools, creating opportunities for entrepreneurs to launch profit-seeking enterprises to provide such tools. This is why businesses selling computers and cell phones sprang up naturally in Africa. Finally, profitable businesses attract imitators, unleashing competition. Competition gives rise to innovation, specialization, scalability, lower prices, higher wages, and a host of other good things including curtailing potential abuses by businesses. It’s a virtuous cycle of organic economic growth that, like a mighty wheel, can move the entire continent. We must also take practical action toward building healthcare infrastructure by working with local groups. Imagine if President Bush promised, on behalf of the United States, to give $� million to match any grassroots group (meeting certain organizational and self-sustainability criteria) that can come up with $� million of its own. With only $� billion, one thousand such clinics would spring up with real roots in the ground, possibly attracting African doctors back into their homeland from Western countries. This is only one of many kinds of grassroots enterprises that can be effectively encouraged. Finally, those of us in developed countries can also give direct aid to Africa by purchasing African products. And if rich countries want to further help Africa, they can issue vouchers to their own citizens to encourage the purchase of African goods in Western stores. The time has come for us to stop pouring billions of dollars into bureaucracies. Instead, we must activate the billion brains in Africa, each of whom will tame those bureaucracies and make the continent a global economic powerhouse. No Way. The problem in Africa has never been lack of money, but rather the inability to exploit the African mind. Picture a banana farmer in a rural African village with a leaking roof that would cost $�00 to fix. If one purchased $�00 worth of his bananas, the farmer would have the power and choice to determine whether the leaking roof is his top spending priority. On the other hand, if he is given $�00 as a grant or loan to fix the roof, his choice would be limited to what the owner of the big money views as a priority. Out of 9�0 million Africans in 5� states, there are innovators and entrepreneurs who, if rewarded by the market, will address the challenges facing the continent. If money was the key to solving problems, banks would send agents on the streets to supply money to afflicted individuals. But banks only offer money to individuals who successfully translate their problems into opportunities. A $� million British compensation to ��8 Samburu herders in Kenya in �00� did not stop them from turning into paupers by �00�. Money in itself is neutral. Big money viewed as capital has led strategists (who depict Africa as trapped in a cycle of poverty) to argue for massive inflows of money as the only means of escape from poverty. Viewing money as a receipt for value, a creation, and a resultant effect of exchange between different parties offers a chance to translate African problems into opportunities. As Lord Peter Bauer aptly pointed out, “Money is the result of economic achievement and not a precondition.” How can Africans engage in activities that will lead to economic achievement? The key is to transform the mindset of the 50% of the African population below age �0 to focus on turning African problems into opportunities. In Africa today, there are entrepreneurial opportunities to feed an estimated �00 million hungry people, kill billions of malaria causing mosquitoes that threaten the lives of an estimated 500 million, and develop infrastructure. Africa has enormous capital in the form of natural resources that include oil, hydroelectric power, diamonds, uranium, gold, cobalt, �0% of the world’s Coltan and �4% of its cassiterite. Coltan and cassiterite are strategic in the production of cell phones, laptops, and other portable electronic products. If Africans employed the power of reason, the global cell phone industry that churns out �5 cell phones per second would provide a huge source of revenue for respective countries; thereby widening their menu of choices. Focusing on the African human mind as capital will help translate resources into wealth, thereby helping to solve Africa’s problems. Money’s usefulness and value will only spring from rational responses to the challenges that face the continent through exchange of products and services at the village, national, continental, and international levels. James Shikwati Founder and director of the Inter Region Economic Network. CEO of The African Executive business magazine. J A ME S SH I KWAT I A T EM PL E TON CON V ER SAT ION 8 Yes. But only if the money comes as investment. Africa doesn’t need aid from governments and international agencies. Over the last 40 years, aid to developing countries has reached $�.� trillion, �5% of which has gone to sub-Saharan Africa. It has notably failed to eliminate poverty. Philanthropy should have only a limited role — for disaster relief — and helping policy makers promote good governance, the rule of law, and property rights. What Africa needs in order to overcome its problems is the same as that of any other region or country: flourishing enterprises that provide employment and create wealth. This is true even in my field — education. Less than �0% of the adult population of sub-Saharan Africa can read and write with understanding. And for every �00 men, only �� women are literate. Like a raging bonfire, adult illiteracy is fuelled by lack of schooling, or poor quality schooling. An estimated 40 million primary-school-age children in sub-Saharan Africa are not in school and in half of the countries less than �0% finish the full course of schooling. But staying the course isn’t such a great idea either. The United Nations recently reported that, “Most poor children who attend primary school in the developing world learn shockingly little.” A common response to these problems is to call for billions more in aid for public education. The poor must “be patient,” the development experts opine, because public education needs first to be reformed to rid it of corruption and inefficiencies. But there is another way of solving this problem and it is being illuminated by, of all people, some of the poorest parents on earth. These parents are abandoning public schools en masse to send their children to budget private schools that charge low fees of a few dollars per month, affordable even to families living on poverty-line wages. In the shantytowns of Lagos, Nigeria, for instance, or the poor rural areas surrounding Accra, Ghana, or in Africa’s largest slum, Kibera, Kenya, the majority of schoolchildren — up to �5% — are enrolled in private schools. Recent research has shown these budget private schools are superior to government schools because teachers were much more likely to be teaching when researchers checked in on classrooms unannounced, facilities were often better equipped with drinking water and toilets, and academic achievement was much higher, even after controlling for background variables. All of this was accomplished for a fraction of the per-pupil teacher cost. The existence of this burgeoning private sector reveals ways in which big money — actually, even small money — could help solve Africa’s problems if channelled as investment rather than aid. The key is to follow the lead of the poor parents. They do not want public schools, where teachers do not turn up or, if they do, do not teach. They want private schools, where teachers are accountable to them through the school principal. This entrepreneurial breakthrough in private education has opened up a creative new frontier for investors interested in helping improve the quality of African education. Orient Global has created its $�00 million Professor James Tooley President of The Education Fund, Orient Global. PROF E S SOR J A ME S TOOLE Y A T EM PL E TON CON V ER SAT ION 9 ( C O N T I N U E D ) Education Fund which is investing in private education opportunities in developing countries, including the research and development for a low cost chain of schools; Opportunity International has just announced its Microschools of Opportunity program to disburse loans of a few thousand dollars or less, at commercial interest rates, to help school entrepreneurs build latrines, refurbish classrooms, or buy land. In the past, aid agencies have literally thrown billions trying to get schools to improve their curriculum or teaching. These interventions are not sustainable and fade away as soon as the donor-funded experts move on. You will often find the supplied computers and videos in the government head teachers’ homes, not the school. However, private schools are operating in intensively competitive markets. They are hungry for innovation if it can be shown to improve standards and increase market share. Investors can back research and development to find out what works to improve educational outcomes, then partner with entrepreneurs to ensure successful methods are brought to market. The problems of sustainability and scalability that so bedevil aid intervention are solved. Investors can go even further. Buying into trusted brands enables the poor to overcome information asymmetries that exist in any market. Why not in education, too? Already small embryonic brands are emerging. Some educational entrepreneurs have four or five schools, and are eager to extend further. Investors could assist expansion-minded proprietors in accessing loan capital, or create a specialized education investment fund to provide equity to limited liability companies to run chains of budget private schools. Or investors could engage in a joint venture with local educational entrepreneurs to set up a chain themselves. Many of the private schools already offer free scholarships to some of the neediest children, helping solve the problem of educating the poorest of the poor. Recent research has found 5–�0% of places provided free of charge in private schools, so other schools could channel some of their surplus in the same way. Education is often held up as a key area where Africa needs big money from governments and international agencies to solve its problems. That’s not what the experience of the poor in Africa seems to be telling us. It’s time we listened to them. A T EM PL E TON CON V ER SAT ION � 0 PROF E S SOR J A ME S TOOLE Y