Making Poverty History?
By Nicholas Newman
18 February 2004
Hi! Don’t you agree that just forgiving third world debt is not the solution to tackling the poverty suffered by the poor in the third world, which the rich and famous like Dawn French and Bono would have us believe?

All it will do is reward the money grabbing elites that misrule those countries. Angola and Nigeria are major oil and gas producers, but they remain large debtors. In Angola, Global Witness reports that a quarter of oil revenue is unaccounted for each year, and one in four children dies in infancy. The poor in those countries remain poor despite the oil wealth. Debt, by itself, is not the principal cause of poverty in many economically failing states, but bad governance, incompetence and corruption. “Ordinary citizens in oil producing states of Angola, Equatorial Guinea or Kazakhstan have no information on what is happening to that money" Gavin Hayman of Global Witness told the BBC's Today programme. "The international community spends $200m each year trying to feed one million people in Angola who are critically dependent on international food aid," said Mr Hayman.

"Now given that $1.5bn is going missing from the treasury, there is a lot more they could be doing for their citizens."

All debt forgiveness or rescheduling does is to delay the day when such countries will need to make the painful process to reform their economic, governmental and political systems. The 1996 World Bank Report argues “Aid may have unintentionally encouraged misrule that led to collapse and civil conflict”. Almost all civil governance and public development in Africa is paid for by foreign aid, enabling African despots to wage wars on their neighbours.

Ethiopia is a good example of a failed state, a country fashionably popular with our rich and famous. In 2004 AFP reports, this much troubled land bought a new fleet of Sukhoi SU-27 fighter planes and military helicopters, costing millions of dollars, while two million citizens remain dependent on humanitarian food aid. Marti Ahtisaari, the UN special envoy for the Humanitarian Crisis in the Horn of Africa, blames current Ethiopian government policies in two key areas environmental and population polices as the cause of the country’s cycle of catastrophes.

Did you know debt forgiveness or rescheduling increases the cost of future borrowing - as such a process worsens the credit rating of such a state. Indonesia has rescheduled three times and the cost of borrowing has gone up each time. That explains why many third world states including Laos and Vietnam are against such proposals reports the World Bank.

Debt forgiveness or rescheduling is unfair on those countries that have made the effort to pay off their debts like India and Russia; in fact Russia will become a net creditor in a few years time, notes the OECD. Incidentally, there is a strong correlation between states that meet their repayments and later long term strong financial performance.

According to the OECD, did you know that almost every African country has witnessed a systematic regression of economic capacity over the last 30 years? The majority had better economic capacity at independence than they now possess. This poor economic performance is due to many reasons including absence of incentives for the private sector, government control of the economy, and discouraging investment laws., and, of course, corruption.

Having a simple regime change is not the solution; all you will do is replace one corrupt, incompetent, money grubbing elite with another. What is needed is a cultural change through economic, political and governmental reform, which will encourage the majority to work hard to transform their country into a modern prosperous state.

The oft sited mantra ‘that the only solution is to let such countries solve their problems themselves’ is now wearing thin according to often exasperated experts in the aid industry.

It looks like countries like Kenya need outside pressure to force significant change. When President Mwai Kibaki was elected three years ago, he promised Western aid donors and end to corruption by appointing the Kenya's National Anti-Corruption Campaign. Instead, his government has continued the two traditions of African governments, continued as before while paying lip service to Aid donors. This body was kept chronically under funded and blocked at every turn and its steering committee has resigned in disgust reports the Kenya’s Standard earlier this month. This together with the allegations of the Kenyan government ministers involved in a series of dodgy procurement deals worth millions of dollars reports the Kenya’s Sunday Standard.

Whilst Kenya’s Standard complains that ‘The government’s credibility in the fight against corruption has been in freefall in recent weeks, following a barbed attack by British High Commissioner Sir Edward Clay. Mr. Clay’s statement was followed shortly thereafter by the withdrawal of funding for the government’s anti-graft effort by the United States government and, on Friday, (18 February, 2005) by the German government’. It looks like the West is learning, letting Africa solve its own problems does not work - a more hands on, project by project, approach is certainly needed.

Prime Minister Tony Blair and President Bush are right to encourage democracy as part of the solution to turning round such basket cases. Simply throwing more aid to prop up corrupt incompetent regimes who neglect their countries duties to develop their countries for the benefit of the majority of its citizens is not the answer.



Since many of these poor states are victims of their corrupt governments, one possible solution would be for the EU adopt Robert Wheelan Institute of Economic Affairs (IEA) proposal. This proposes that the West should privatise the governance of such countries to EU approved multinationals to run such states under a profit sharing deal for a 21 year period, with the aim to rebuild, regenerate and develop these countries economies for the benefit of the majority of these countries citizens.

Somehow I don’t see Dawn French or her Vicar of Dibley persona starting a campaign to support Wheelan’s proposal?