Rethinking Aid in Africa - A Guest Post

Few will deny that there is a clear moral imperative for humanitarian and charity-based aid to step in when a country or continent encounters a crisis, such as the recent earthquake in Haiti. Nevertheless, it's worth reminding ourselves what emergency and charity-based aid has its limits. Aid-supported scholarships have certainly helped send African students to school, and food aid has helped feed millions of people affected by persistent drought. This kind of aid can provide band-aid solutions to alleviate immediate suffering, but by its very nature cannot be the platform for long-term sustainable growth.

Over the past 60 years at least $1 trillion of development-related aid has been transferred from rich countries to Africa. Yet real per-capita income today is lower than it was in the 1970s, and more than 50% of the population -- over 350 million people -- live on less than a dollar a day, a figure that has nearly doubled in two decades.

Development related aid has also created aid dependency in many African governments in Burkina Faso, Rwanda, Somalia, Mali, Chad, Mauritania and Sierra Leone from 1970 to 2002, over 70% of total government spending came from foreign aid, according to figures from the World Bank this dependency makes this governments complacent in initiating any projects that may increase tax revenue since they are guaranteed “free money” every year.

On the surface development aid appears to be benign intervention, however unintended consequences can leave the recipients’ worse off say there is a tailor in small-town Africa who employs ten people and his company manufactures 500 clothes a week. Typically, these 10 employees support upward of 5 relatives each. An aid program generously supplies the affected region with tons of free clothes. This promptly puts the clothing manufacturer out of business, and now his 10 employees can no longer support their 50 dependents. In a couple of years, most of the donated clothes will be torn and useless, but now there is no tailor to go to. They'll have to get more aid. So long as there is a constant supply of free clothes local manufacturers cannot operate profitably.

If aid is not the solution, what is? The answer to this question is trade. Take the case of Botswana as an example, At the time Botswana became fully independent in 1966 it was a desperately poor country. Like most of the other countries in Africa, it had a per capita annual income of $100 by 2008 Botswana has a per capita annual income of $14,906, granted Botswana is blessed with huge diamond deposits but so is Congo, what has made Botswana a success is a policy of not depending on aid, investing in local industries and learning to live within its means.

Africa is a continent blessed with a large variety of natural resources, key among the resources is land. A recent study by the Food and Agriculture Organization of the United Nations (FAO) indicated that less than half of Africa’s agricultural potential is in use. Given the projected rise in global food demand over the next 50 years Africa has the opportunity of using trade to build sustainable economies which depend on trade in agricultural resources, natural resources and other services and not on development aid.

- John Mwangi

John Mwangi is a fellow Section V'er and comes to Darden from the country of Kenya. He graciously sent his Management Communication (MC) paper from last quarter to me so I could share his thoughts with the blogosphere.

Creative Capitalism Live Blog

"There isn't a person in this room who couldn't do what Mohammad Yunus did." - Ed Freeman, Darden Professor, March 23, 2010

Mohammad Yunus, in case you are not familiar with him, won the Nobel Peace Prize for pioneering Grameen Bank and the concept of micro-credit. Micro-credit is the concept of giving itty, bitty loans (like $25) to people who need them to get capital to start their businesses. If you are at all interested, I highly recommend Banker to the Poor.

Can I really change the world? According to my Creative Capitalism prof, yes.

The question is not if, but how.

U2

If you read my blog at the actual blog site and not on Facebook, you will notice that on the right side of my blog, there is a bucket list. On the top of that list, there is a newly checked item - seeing U2 in concert.

It was everything I dreamed it would be.

Okay, perhaps that is slightly overdramatic, but seriously, the concert was amazing. I continue to have a deep-found respect for Bono as a musician, celebrity, activist and man of faith. One of my favourite moments in the concert was the acoustic version of "Amazing Grace."

The social activism remained high as well. They performed "Walk On" in honour of Aung Sang Suu Kyi, a political prisoner in Burma. There was a tribute to everything the One campaign has accomplished. And at the end, Bono gave a special thank you to the people sitting in the (RED) section.

As I walked back to my apartment, one of my classmates and I discussed the implications of everything. Here we are, being trained as "leaders in the world of practical affairs," and as such, we have a responsibility. I've always felt it is my responsibility as someone who has much to give back and truly make an impact that lasts beyond my time on this earth and does something more than expand my shoe collection. It's so easy to forget this when I am caught up in cases and the job search, but ultimately, I need to figure out how best to contribute to this global community I find myself in.

Anyway, I could probably develop a whole blog on this subject, but for now I am tired. The concert was great.

Blog With an Identity Crisis

Though I haven't started writing, I have a feeling this might get long. You may want to grab a cup of tea before you start reading... I know I just did.

As I mentioned in my previous blog posting, this recent surge of blogging activity has been due to inspiration from the Darden Student Bloggers. After spending time over the last few days reading over their blogs, I decided that I would read another blog: my own. I went back in time to 2005 and reminisced over the trials, lessons, joys and pains of the last four years.

It was quite interesting to get reacquainted with myself. It was interesting to look back on my dreams and ambitions of years past and see how far I've come. I'm actually amazed, not only at how my goals and career ambitions have remained solid, but at how much progress has been made against those goals.

But I digress...

When I first started blogging, it was an outlet of exploring my life and my faith and their interactions. As I've developed more and more of a passion for things like business, social justice and corporate social responsibility (CSR), I've blogged about those things as well. And, more recently, I've put forth a practical, more newsy voice as I talk about the specifics of moving to the US to attend a top business school. (Yes, I have to keep writing that, since Darden isn't as well known here in Western Canada!)

So I'm at a point where I don't really know whether I should be blogging about deep thoughts on life, my faith, business, social justice and responsibility or my upcoming life at Darden. And, my strategic mind things that all of these belong on separate blogs, maintained by separate identities.

But I think the big challenge and joy in life is learning to merge all that we are. I should never be shy about my faith. Even though there are Christians out there who have made it embarassing at times to claim ties to this faith (and, to be fair, I am FAR from perfect or even loving or graceful), it is still something that is absolutely foundational to who I am. My faith and business cannot be separate.

At the same time, I can't separate out my passions for business, social justice and CSR. And while those things may not seem as though they fit together, they are the main motivation for pursuing an MBA. And the social justice is rooted in my faith...

And I don't want to separate out my journeys to Darden. There has been something encouraging and inspiring about reading about the student blogs, and I want a record of my own journeys. I love looking back on my own journey and seeing how things really did end up. It ties back to my faith and seeing God's hand in the ordinary, sometimes mundane, yet entirely beautiful journey of my life.

So, here it is, unapologetically: my blog with an identity crisis. If I were attempting to make revenue from this blog, I would separate it into three or four blogs to attract different audiences.

But I'm not. And the truth is that while others may eavesdrop, (and I do try to pan my perspectives out to be broader than my own circumstances) this blog is ultimately for me. Reading over the last four years of my life, I've gotten back in touch with a girl who loves to think, ponder and write, and I'd like to keep her around a little more.

Western Affluence: At the Expense of the Impoverished?

This is less of an argument and more of a discussion... For a long time, I always assumed that our affluence in the "West" came at the expense of those in less fortunate circumstances: cheap labour for cheap goods, etc.

Right now I am reading two books:
- A Farewell to Alms by Gregory Clark, which examines the state of the world prior to 1800. Basically, up until the Industrial Revolution, the world was stuck in the "Malthusian Trap," meaning there was no gain to real incomes, since any increase in production was offset by an increase in population. He then examines the causes of the Industrial Revolution, and goes on to describe why some nations are affluent and others are impoverished.
- The End of Poverty by Jeffrey Sachs, which discusses the factors causing extreme poverty, and what we can do about it.

These books may seem different, but they actually cover very similar material. Ironically enough, I had put down A Farewell to Alms last night (since it has many graphs and formulas and I wasn't in that head space) and picked up The End of Poverty, and it was discussing the factors and implications of the Industrial Revolution.

Anyway... all of this is helping me to start seeing poverty in a new way. Sachs, who I would originally assumed would have thought opposite, said explicitly that poverty in underdeveloped nations is not a result of the exploitation by affluent nations.

And, you'll have to bear with my reasoning here... Clark attributes "modern growth" to an increase in innovation... now, theoretically, if there are more countries contributing to innovative ideas and processes, that will simply increase production for everyone!

This is all just food for thought... Any other thoughts out there?

The End of Poverty

"The destinies of the 'haves' are intrinsically linked to the fates of the 'have-nothing-at-alls'." - Bono, from the foreword to The End of Poverty by Jeffrey Sachs

Although I am certain I've posted quotes from Bono regarding the end to extreme poverty before, since I have started reading The End of Poverty, I am coming across them again. And they are still as poignant and powerful and they were when I first heard them. It is pretty intense to think of the immense privileges that we enjoy, as the richest sixth of the world. And I say 'we,' because if you are reading this, you probably have access to a computer, Internet and leisure time.

There are many people in the world who lack the tools required to pull themselves from extreme poverty, with extreme poverty defined as the state in which one fights daily for survival, facing struggles that many of us never worry about: malaria, TB, AIDS and malnutrition.

There is hope, though, and as I am reading this book, I hope to take more time to blog about the weighty issues involved. This is an issue that I have been processing and slugging through as much as I can, accessing as many resources as available so that I can do SOMETHING. Something big.

Here are some more quotes from the intro by Bono:

"..we could be the first generation to outlaw the kind of extreme, stupid poverty that sees a child die of hunger in a world of plenty, or of a disease preventable by a twenty-cent inoculation. We are the first generation that can afford it. The first generation that can unknot the whole tangle of bad trade, bad debt, and bad luck. The first generation that can end a corrupt relationship between the powerful and the weaker parts of the world which has been so wrong for so long."

"We can be the generation that no longer accepts that an accident of latitude determines whether a child lives or dies - but will we be that generation? Will we in the West realize our potential or will we sleep in the comfort of our affluence with apathy and indifference murmuring softly in our ears?"

"Future generations flipping through these pages [of history] will know whether we answered the key question. The evidence will be the world around them. History will be our judge, but what's written is up to us. Who we are, who we've been, what we want to be remembered for. We can't say our generation didn't know how to do it. We can't say our generation couldn't afford to do it. And we can't say our generation didn't have reason to do it. It's up to us. We can choose to shift the responsibility, or, as the professor [Sachs] proposes here, we can choose to shift the paradigm."