Agreeing on Africa, up to a point

Jun 14th 2005

From The Economist Global Agenda

George Bush and Tony Blair have agreed that America will funnel more money towards Africa, and the G8 has reached a deal on broad-based debt relief. But if rich countries are really serious about poverty reduction, they should also curb subsidies that keep out products from the poor world

IS 2005 the year when Africa finally starts getting the help it needs to pull its inhabitants out of penury? Tony Blair certainly hopes so. The British prime minister has made reducing African poverty the centrepiece of his presidency of the G8. In preparation for the group of rich nations’ summit at Gleneagles, Scotland, which is coming up in July, he has worked hard to secure support from other heads of government for his plan to forgive vast swathes of Africa’s crippling debt burden and pour $50 billion more a year in aid into the continent by 2015.

Already he has had some success. After a long meeting on Tuesday June 7th, Mr Blair and President George Bush announced agreement that sub-Saharan African debt should be cancelled, and money paid into the World Bank’s coffers by rich donor nations in order to make up the loss of the debt-service payments. And on Saturday, G8 finance ministers announced that they had reached a broad-based deal on debt relief. Under the deal, the World Bank, the IMF and the African Development Fund will immediately write off all of the money owed to them by 18 countries—some $40 billion. According to Gordon Brown, Britain's finance minister, another 20 countries could qualify for debt cancellation if they meet targets for good government and corruption-fighting. In total, the agreement could be worth more than $55 billion. Mr Bush has also agreed to disburse $674m more in aid to Africa.

But Mr Blair has so far failed to secure Mr Bush’s support for doubling aid flows to Africa, as recommended by Britain’s Commission for Africa in March. Aid matters, because debt forgiveness alone, though it may help struggling countries to get their fiscal houses in order, will not heal the millions who die each year from preventable disease, nor lift those living on less than a dollar a day out of their extreme poverty. This week, Paul Wolfowitz, the new head of the World Bank, is travelling around Africa to emphasise his commitment to poverty reduction on the continent, which he has pleged to make the centrepiece of his leadership. But radical change in the continent's dismal trajectory will require radical increases in cash transfers from the rich world—which means getting co-operation from Mr Wolfowitz's former employer. Without the backing of the world's richest donor, it is hard to see how substantial progress can be made on aid.

The American government is notoriously stingy with its foreign aid, giving just 0.2% of GDP to poor countries every year. Even when Americans’ ample private donations are added in, America still falls near the bottom of the rich-nation pack in generosity to those abroad. Yet American voters believe they are absurdly generous. A 2001 poll showed that they think 24% of their federal budget goes on foreign aid, a figure that would amount to more than 4% of America’s GDP. Given that perception, it would be difficult for Mr Bush to agree to substantial spending increases, much less get such an agreement through Congress—especially with a budget deficit expected to top $400 billion this year.

But catering to selfish American voters is not the only reason that Mr Bush—and many analysts—are reluctant to endorse Mr Blair’s bold new vision for Africa. Critics of such grand plans argue that the continent does not need, in the words of Mr Brown, “a new Marshall Plan”. The rich world has already poured the equivalent of six Marshall Plans into Africa, with very little to show for the money. What Africa needs most, they point out, is decent governments—not perfect ones, just ones that are less corrupt, incompetent or violent. Without such governments, aid will do nothing but build roads to nowhere and pad the Swiss bank accounts of the ruling kleptocrats.

These days, most talk about aid acknowledges the fact that good government is a precondition of poverty eradication. Mr Blair certainly recognises this. But his ambitious aid plans are, to many minds, hard to square with the current shortage of decent African governments. In theory, aid can be used to encourage political reform, but critics question whether donor nations will really be sufficiently hard-nosed to crack down on countries that go astray. Could rich countries really bring themselves to suspend aid to dodgy administrations when that might mean less help for sick and hungry children?

Some are afraid that such problems could also plague debt relief, and are thus pushing for relief to be offered to only those countries whose governments are democratic and whose policies encourage economic growth. Debt relief, the argument goes, can only be a one-off event, a way of letting countries shrug off the excesses of the immediate post-colonial era; any hint that such relief might be available again would merely encourage bad governments to get themselves back into trouble. Because of this, debt relief should be limited to governments with sound policies, both as an encouragement to others to reform, and to ensure that the fresh start comes at a time when the country is best able to use it.

The debt deal acknowleges these concerns by making relief available to only a limited number of countries, which will have to meet criteria such as anti-corruption measures. But to many onlookers, withholding relief seems callous when a continent is suffering as much as Africa is.
During his visit to Nigeria this week, Mr Wolfowitz told the president, Olusegun Obasanjo, that he hoped the country would make progress in its push to secure relief from its heavy debt burden. As the world's seventh-largest oil exporter, Nigeria is deemed too wealthy to qualify for Mr Blair's programme; its debt is being considered separately, by the Paris Club of international lenders. Nor is it clear that Nigeria should receive such forgiveness, at least at the moment, for it is among the most corrupt countries in the world. But it is certainly very poor by western standards, with per capita income of just $390 a year, and it owes tens of billions of dollars to the rich world.

On June 8th, the UN Development Programme released a statement showing that progress towards the Millennium Development Goals (MDG), which were supposed to cut extreme poverty in half and improve social indicators such as education and health care, has been pitifully slow. At the current rate of progress, by 2015 the number of deaths of African children under five will have fallen only to 5m a year, rather than the 2m target set by the MDG. Other indicators look just as bleak. AIDS, in particular, is devastating the population. Life expectancy has dropped by more than ten years in many countries. And with the deaths concentrated in the working-age population, each new case adds to a widening circle of economic hardship.

It's farm subsidies, stupid

Yet there is one step that rich countries could take that would help Africans in both well-governed and poorly-governed states: curbing the agricultural subsidies and health-and-safety regulations that keep African products out of rich-country markets. The current structure of agricultural protections not only hurts poor African farmers, but also, by levying disproportionate tariffs on many processed goods such as ground coffee, helps keep poor countries selling low on the value chain. This leaves their already-weak economies extremely vulnerable to swings in raw commodity prices.

But the most obvious step may be the hardest one for the G8 to take. Fear of muscular farm lobbies among rich-world governments has been one of the main obstacles to progress in the Doha round of world trade talks. The suffering of their own consumers has not yet moved either the European Union or America to wean their farmers off government protections. Perhaps the much deeper suffering of Africans will do the trick.

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