What Does Foreign Aid Acheive?

2 03 2010

This is the third of three articles I published earlier. I think the three raise the serious issues associated with poverty and corruption, and give evidence of the reasons why they must tackled together as one policy not as two separate issues.  I first published this article on the 9th August 2008.

According to Andrew Mwanda, a leading Ugandan commentator the answer is very little in terms of economic growth. The evidence supports his arguments.

“Over the last 40 years, Africa has received over $600 billion in foreign aid and debt relief. For most of this period, the continent sustained zero to negative growth; positive growth was only occasional and sporadic, depending on international commodity price fluctuations.” reports the Guardian newspaper.

The article continues, “Why has aid been antithetical to growth? There are many reasons, including mismanagement and miss-allocation of aid resources, slow disbursement of aid monies and corruption. But the fundamental reason is that aid creates the wrong incentives for growth.”

Despite the evidence The recent G8 Summit in Japan upheld earlier calls for doubling foreign financial aid to Africa as a solution to poverty on the continent.

Mwanda suggests that If the source of this revenue is the national economy, government would be driven by self-interest to listen to its citizens about policies and it would be necessary to increase the productivity of private enterprises. But, foreign id distorts the situation. Rather than forge a productive relationship with their own citizens, governments find it more profitable to negotiate for revenues from abroad.

Foreign aid that has saved incompetent governments from collapse. By providing them an external subsidy, governments in Africa have been able to retain power even when pursuing policies that impoverish their citizens. Cut the aid, and many of them will be forced to pursue economic growth or pay the political price of their economic folly.

Our View: Almost certainly Mwanda´argument is correct, but this should not lead to an ending of aid. Instead it is the responsibility of o private and public, to adopt policies that recognise and address these issues. That means supporting initiatives, such as those by Transparency International, to encourage the expansion of open and accountable governments, and continuing to expose those that under-perform on the Corruption Perceptions Index which ranks 180 countries by their perceived levels of corruption, as determined by expert assessments and opinion surveys. This index allows decision makers to adopt policies and make investment decisions accordingly.

Capitalism in Crisis: The Cost of U.S. Corruption

26 09 2008

The ongoing bank driven economic crisis in the U.S., and the proposed $700bn rescue plan clearly demonstrate the cost of corruption. Again I am adopting the definition of corruption used by Transparency International (TI) to suggest that this crisis has corruption at its roots.

Transparency International, one of the largest Anti-Corruption agency in the world, define corruption as, “the abuse of entrusted power for private gain”. and say, ” It hurts everyone whose life, livelihood or happiness depends on the integrity of people in a position of authority.”

As to the cost, the $700bn deal being proposed would cost every man, woman and child in the United States about $2,300. And, the total cost exceeds total lending by the International Monetary Fund since its inception after World War Two. The IMF has loaned $506.7 billion since 1947.

In other words, the U.S. government is proposing a deal that would rob every citizen of the U.S. to reward the corrupt institutions and the corrupt directors of them.

The deal is in trouble today. Let’s hope and pray it does not pass. If it does it will be a clear demonstration that corruption pays and would undermine the credibility of America and the capitalist system as a whole.

These are my opinions, and the figures used come from reporting by Reuters.

Mexico: Police No Better Than Criminals

14 09 2008

As I reported here recently, Mexicans are saying “Enough is Enough” but as The Times (UK) recently reported, they cannot reply on the police to help solve the recent crime wave. In many cases the corrupt police force are the perpetrators of the crimes and are also protecting drug related criminal gangs.

In Mexico it is said that 99% of crimes go unsolved and the kidnapping rate is worse than in Iraq. One detective interviewed in the article indicates why, “We work with limitations,” he said. “You don’t do your job, you just chill out, you take your salary, and you avoid trouble as best you can. Sometimes I get depressed when I think about the situation in Mexico.”

Trouble often comes in the form of officers from rival police departments — there are said to be at least 1,600 of them in Mexico — many of which provide protection to drug cartels or run their own criminal operations. If Mr Gomez raided a “narco store” in the wrong part of town, he would risk being shot or thrown in jail by one of his fellow detectives. Jail can be worse than death so instead Mr Gomez does nothing.

The upshot of police corruption in Mexico has been in an almost total collapse of law and order in recent months, a terrifying state of affairs that seems to have gone largely unnoticed north of the border in the US, even though many Mexicans blame Americans for the troubles. Americans bought the drugs that funded the drugs cartels, which paid off the police, they said. Americans also supplied the weapons.

The detective interviewed described the police being arrogant”and said, “they never follow the rules, they torture people, they act with impunity. The corruption is huge. We have to change everything, from the highest level down. It’s going to be difficult.”


Thai Party Drops SAMAK

12 09 2008

Thailand’s ruling party has dropped ousted PM Samak Sundaravej as its nominee for the job, say party sources.

The decision marks an apparent U-turn by the People Power Party (PPP), which earlier seemed determined to re-nominate him to the post.

Protesters have been demanding for weeks that Mr Samak should resign.

The apparent confirmation that he is no longer in contention for the post may pave the way for a settlement of the political crisis, analysts say.

Mr Samak had vowed not to bow to the protesters’ demands, but was eventually forced out earlier this week, over an apparently unrelated appearance in a TV cookery show.

The protesters call him a puppet for former Prime Minister Thaksin Shinawatra, who was ousted in an army coup in 2006 amid accusations of corruption and abuse of power.

Full Story

Zuma Corruption Case Dropped in SA

12 09 2008

A South African court has ruled that the corruption case against ruling party leader Jacob Zuma cannot go ahead. He was facing charges of corruption, fraud and money laundering relating to a multi-billion dollar 1999 arms deal.

The dropping of the case was based on a procedural point of law and had “nothing to do with the guilt or otherwise of the applicant” said Judge Chris Nicholson. Mr Zuma, 66, is now free to stand in forthcoming presidential elections.

The charges against the African National Congress (ANC) leader related to South Africa’s largest post-apartheid arms deal, involving contracts totaling 30bn rand ($3.7bn; £2bn) to modernize its national defense force.

The deal involved companies from Germany, Italy, Sweden, Britain, France and South Africa.

Mr Zuma was sacked as South Africa’s deputy president in 2005, when his financial adviser was found guilty of soliciting a bribe on behalf of Mr Zuma and jailed for 15 years in connection with the deal.

He then went on trial, but the case collapsed in 2006 when the prosecution said it was not ready to proceed.

He was charged again last December shortly after winning a bitter campaign against President Thabo Mbeki to become ANC leader in what his allies say was a political conspiracy to prevent him becoming president.

Full Story

Mexico: "Enough is Enough"

31 08 2008

More than 150,000 Mexicans dressed in white marched on Saturday to protest a wave of kidnappings and gruesome murders, putting pressure on President Felipe Calderon to meet his promises to crack down on crime.

Demonstrators filled the capital’s historic Zocalo Square, holding candles and pictures of kidnap victims and bearing signs that read, “Enough Is Enough”.

Mexico is one of the worst countries in the world for abductions, along with conflict zones like Iraq and Colombia. Much of the crime relates to battles for the control of drugs routes.

Most crimes in Mexico go unsolved, with corrupt police and justice officials often complicating investigations.

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Paraguay´s New President to Fight Corruption

29 08 2008

Ex-Bishop, now president of Paraguay, Fernando Lugo took office promising to fight corruption and tackle land reform, reports the BBC.

On taking office he said,

The 57-year-old said: “Today Paraguay breaks with its reputation for corruption, breaks with the few feudal lords of the past.” There would be, he said, “a frontal assault on corruption which is a cancer that corrodes the entire society.”

Full Story