No relief for Africa

Debt cancellation comes with strings attached.

Alex Gourevitch

Topics Politics

On 11 June, finance ministers from the G8 countries agreed to cancel the debt of 18 of the world’s poorest countries. Coming at the same time as Bob Geldof’s plan for a Live 8 benefit concert for Africa, the proposal appears to be a gesture aimed more at immediate appearances than lasting results. No doubt UK prime minister Tony Blair has an eye to winning the favour of those disenchanted with the Iraq war, and seeks to create an issue around which he can appear to exercise leadership internationally. It is likely that similarly opportunistic motivations drive the other G8 leaders. But this is the least of the problems with the debt issue.

Debt relief activists complain that their cause has been corrupted, or at least that it shouldn’t be confused with the G8 plan. ActionAid gave a ‘cautious welcome’ to the announcement, but argued that the G8 ‘needs to do more’ (1). UK Jubilee Debt Campaign said that around 60 countries, not 18, need debt cancellation (2). Yet the activists’ attempt to separate the purity of their intentions from the opportunism of G8 politicians falls flat. No amount of moral posturing can cover for an uninspiring political project.

On the surface, debt cancellation appears inarguable. Sub-Saharan Africa spends $30million a day servicing debts acquired under past authoritarian regimes that were often clients of some of the same Western governments to which the debts are now owed (3). For every pound it receives in investment, Africa pays back £1.51 in debt services (4). Debt-service directs money away from anti-poverty programmes and basic investment. Cancelling debts would hardly cost the West anything, while it could be of great benefit to Africa.

Yet the issue is more complicated than it seems. Activists began to embrace the programme of debt relief when they adopted the anti-industrial ‘sustainable development’ ideology. Now that activists have abandoned real development as a serious goal, they call for debt relief instead. Tellingly, most activist groups have recommended that the money from debt cancellation be used for health and education, rather than investment and infrastructure. They apparently wish to address underdevelopment and poverty without economic growth, or improving the productivity of African societies.

The idea of sustainable development helps to legitimise slow growth. Between 1960 to 1980, the heyday of developmentalism in Africa, growth averaged 1.4 per cent per year and average output per worker increased at 1.9 per cent per year. Between 1980 and 2000, the period during which sustainable development dominated development debates, average growth in Africa fell to -0.3 per cent per year and output per worker fell by -0.65 per cent per year (5). In this context, sustainable development seems to be little more than an ideological accommodation to economic stagnation in Africa. The same applies globally. Over the same period, world growth fell from 4.5 per cent to 3.4 per cent, and the growth of output per worker fell from 2.7 per cent to 1.85 per cent (6).

Debt relief activists argue for a fairer redistribution of the existing pie. This makes economic growth and poverty a question of Western obligations rather than African potential. The result is that Africans are instructed to abandon the idea of self-determination. Forget industrialisation, they are told – just depend upon the good will of others.

Then there is the fact that charity always comes on terms dictated by the giver. Debt relief comes with a body of regulations to be imposed on African countries already crawling with international technocrats from a bewildering array of agencies. In the 1980s, the main ideology of foreign donors and lenders – such as the World Bank, International Monetary Fund, Foreign Aid offices – was ‘neoliberalism’. Money came attached with ‘economic conditionalities’, or demands that poor countries adopt a number of reforms lessening state involvement in the economy.

In the 1990s, there was a shift from ‘neoliberalism’ to ‘good governance’, reflected in the increasing use of ‘political’ as opposed to ‘economic’ conditionalities. Market reforms were no longer enough. Poor countries received funds on the condition that they adopt detailed lists of political reforms, including multiparty elections, judicial independence, and new constitutions embracing human rights. In 2000, a World Bank report called Can Africa Claim the 21st Century? stated: ‘improving governance and resolving conflict is perhaps the most basic requirement for faster development.’ (7) This shift went hand in hand with a redefinition of development from GDP growth, to a broader set of social and environmental standards collected under the heading of sustainable development.

These ideas have shaped the design of international aid and debt relief. An influential paper by two World Bank economists, Craig Burnside and David Dollar, published in 2000 in the American Economic Review, found that ‘aid has had a more positive impact on growth in good policy environments’ (8). The implication is clear – unalloyed aid is a waste of good money. Aid should come with strings attached. As one commentator on the paper noted, ‘international aid agencies, public policy makers, and the press quickly recognised the importance of [Burnside and Dollar’s] findings’ (9). Not only did these ideas shape the World Bank’s strategy, they influenced the design of the USA’s Millennium Challenge aid program, as well as the UK Department for International Development’s (DFID) strategy (10).

Most recently, these ideas have influenced the design of the G8 debt cancellation programme. The details of the programme remain fuzzy, but as the New York Times recently reported, ‘All of the countries eligible for debt relief have had to show that they have acted to improve governing, reduce corruption and pursue what the international lenders consider sound economic policies’ (11). The World Bank has endorsed these conditionalities on debt relief (12).

Leading debt relief non-governmental organisations (NGOs) have also been willing to advise poor countries on how to spend their money (13). The DATA group, headed by U2’s Bono, and responsible for raising the profile of the anti-debt campaign, reiterates the ‘Democracy, Accountability, and Transparency’ dogma now dominating development-speak (14). In response to the G8’s announcement, Archbishop Desmond Tutu, the South African anti-apartheid-cum-human-rights-activist, ‘urged officials to monitor the deal closely to ensure funds were not diverted by corrupt leaders’ (15). While activists parade against neoliberalism, they are at the forefront of the good governance agenda, welcoming the dictation of new terms by various international agencies.

If Africa is lucky, the G8 countries will not attach too many conditions to a debt cancellation agreement. This is highly unlikely. But even if it occurs, the debt issue remains problematic.

Debt cancellation is presented as non-political. It appears as simply a matter of right and wrong on which everyone can agree. In reality, it comes with the demand to accept the limited terms of the current development debate. Moral arguments conceal what are highly debatable, eminently political questions. There is no reason for Africa to accommodate to an ideology that displaces a political debate about development and independence, and replaces it with moral platitudes.

African leaders no doubt will and should take the money. But let’s not kid ourselves about what is being offered. No relief is free of terms.

Alex Gourevitch is a PhD candidate in political science at Columbia University, New York.

(1) Cautious welcome for debt relief package, ActionAid International

(2) Debt cancellation activists welcome relief but call for more, Reuters, 13 June 2005

(3) The debt crisis, DATA

(4) Status of debt in Africa: 2004 (.pdf 194 KB ), Jubilee USA Network

(5) The Empirics of Growth: An Update (.pdf 322 KB), Barry Bosworth and Susan M Collins, Brookings Institution, 22 September 2003, p45

(6) The Empirics of Growth: An Update (.pdf 322 KB), Barry Bosworth and Susan M Collins, Brookings Institution, 22 September 2003, p45

(7) Can Africa Claim the Twenty-First Century?, World Bank, p2

(8) ‘Aid, Policies and Growth’, Craig Burnside and David Dollar, American Economic Review 90, 4, p864 (emphasis added)

(9) ‘Aid, Policies and Growth: Comment’, William Easterly, American Economic Review, 94, 3, p774

(10) ‘Aid, Policies and Growth: Comment’, William Easterly, American Economic Review, 94, 3, p774

(11) US and Britain agree on relief for poor nations, Elizabeth Becker and Richard W Stevenson, New York Times, 9 June 2004

(12) The Heavily Indebted Poor Countries Initiative: Progress and Prospects (.pdf 108 KB), World Bank, Winter 2003

(13) The Heavily Indebted Poor Countries Initiative: Progress and Prospects (.pdf 108 KB), World Bank, Winter 2003, p3;
G8 Urged to Ensure Debt Write-Off Reaches Poor, Reuters, 12 June 2005

(14) What works, DATA

(15) G8 Urged to Ensure Debt Write-Off Reaches Poor, Reuters, 12 June 2005

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Topics Politics


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