October 18, 2010

The Cost of Free

What does charity do for a local economy?

by Darren Fleet

The Dominion - http://www.dominionpaper.ca

VANCOUVER—“Thirty years of development aid and the basic nature of poverty hasn’t changed,” said Pablo Recalde, the head of the United Nations World Food Program for Zambia, as we travelled the country’s sandy roads.

I was part of a press convoy hitching a ride in his decked-out UN land rover to a rural medical outpost called Makunka Health Centre. Only 30 kilometres from Livingstone, the third largest city in the country, the journey took over three hours over non-existent tracks.

My Zambian colleagues and I were covering a standard aid photo-op. Godfrey Mpende and Angela Mutale were two notable Livingstone journalists making the salary of a top reporter: US $150 per month.

Clinics serve as community centres in the bush. Makunk was the size of a small elementary school gymnasium with two wards—one for men and one for women—with a recent paint job. Two nurses worked on staff. At the medical station, toddlers had the fat of their arms measured with tailor’s tape to judge if their gaunt bodies qualified for emergency bags of pounded maize, the staple food in the country.

Sixty-five per cent of the country lives in rural areas like those surrounding Makunka. On this particular day about 30 mothers trickled in from surrounding areas to receive enough maize for two weeks, after which time, if available, they would return again to the clinic. Many of the mothers were farmers themselves and most were in their teens or early twenties. Only 10 years ago life expectancy in Zambia was a paltry 33 years of age and there is a noticeable lack of elders in the country. Grey hair is about as common as a paved road. HIV/AIDS nearly wiped out an entire generation.

Poised for success at independence in 1964, in 2006 Zambia was drowning in debt before the bulk of this crippling foreign debt was erased. Now Zambia is the poorest non-conflict country in the world.

The youthful mothers watched patiently as their children were measured and weighed, their names given a checkmark on a written ledger after which they received their share of nshima (pounded maize). Their share was calculated on the same scale that weighed the child. The absurd display of weights and balances is an unfortunate part of development projects ensuring that “aid” reaches the deserving and not swindlers.

As Dambisa Moyo’s groundbreaking 2009 book Dead Aid: Why Aid is Not Working and How there is a Better Way for Africa shows us, the international development industry has entrenched a destructive class in Sub-Saharan Africa, making close oversight one of the many strings attached to foreign aid.

Pablo Recalde oversaw the feeding of three million people each day and was in charge of yet another UN development scheme, this one called “Production for Progress.” The idea was to give small-scale farmers a guaranteed market for their crops and prevent the surplus production from rotting in isolated silos.

Encouraged to grow grain for profit, a guaranteed market for goods is an entrepreneur’s dream and can break the nightmare of poverty and aid dependency.

But it has achieved neither. Selling food to aid agencies is not a real economy. Where is the demand for local grain when everyone in the country is fed through aid handouts?

In the rural south of Zambia chronic malnutrition was rampant in 2008 when news broke that small land holders were selling all of their maize at the end of harvest season leaving no food for their own families through the arid months. The story made me chuckle since it was one of many constant and absurd experiences of the NGO world. As the hot season bleached their fields the farmers knew the aid agencies would feed them. They had become fluent in the economy of aid—the biggest employer in the country. Welfare fraud by any other name, you would be hard pressed to find a person anywhere in the world who would not do the same given the circumstances.

Other than copper exports for which multinationals pay almost zero tax to mine (companies use instability and unpredictable property rights in the region as a bargaining position), Zambia has no economy to speak of.

Nevertheless, I witnessed the greatest economic ingenuity I have ever seen: street kids pooling their pennies to purchase a single newspaper and rent it to readers; illegal gas stations selling watered-down fuel at a discount (gas was US $3 per litre in 2009); women buying up bread at the grocery store to re-sell it after hours on the same grocery store steps; little girls selling individual cigarettes for seven cents (a two-penny mark up); old men in “phone booths,” which consisted of a cell phone, a cardboard sign, and three minutes’ worth of talk time; farmers selling all of their maize on the presumption that aid agencies would give it all back.

To understand the nature of poverty in Zambia it is worth revisiting Pablo Recalde’s observations: 30 years of development aid had not changed the basic nature of poverty in the country. That aid is the problem in Zambia is the premise of Zambian economist Moyo’s bestseller Dead Aid.

“...Over $US 1 trillion of African aid, and not much good to show for it,” she writes.

How could good intentions go so wrong? Everyday community groups, governments, NGOs, rock stars, churches, school groups and others throughout the West raise dollar after dollar to send in response to the fetishization of aid in support of inflicted and uneducated and starving Africans as seen on TV. Without thinking about the consequences of charity glut few who donate their dollars ever realize that “free” can have disastrous and costly consequence.

Take clothing as an example. In Livingstone I saw a man wearing a Winnipeg Jets jersey. If the consequences were not so dire such clothing might deserve a second smirk. But that hockey jersey under the hot sun bears no irony.

Having a shirt is a luxury in many parts of Zambia. Having a job is an even greater luxury. Unemployment in the formal sector is well above 50 per cent and those with an income have the incredible burden to provide for endless dependants. While a “free” shirt solves a short-term need the shadows cast by the shuttered doors of Livingstone’s former textile factories point to the real problem: a once vibrant, though small, fabric industry has gone bust. It cannot compete with free.

Donated clothing generally comes in massive containers shipped from rich countries. I once helped fill one of these containers. I have since seen several of these “donated” bins unloaded into massive piles in third world market squares thus squeezing out local textile producers. I have even seen Value Village tags still on the sleeves of clothing in Zambian bazaars. Moyo rightly notes that “free” comes at a cost since it disrupts nascent economic channels and keeps even the smallest of indigenous businesses from developing.

Moyo describes the eroding aspects of charitable mosquito nets which have the ultimate impact of putting local net makers out of business. She states:

Enter vociferous Hollywood movie star who rallies the masses and goads Western governments to collect and send 100,000 mosquito nets to the afflicted region, at a cost of a million dollars. The nets arrive, the nets are distributed, and a "good" deed is done. With the markets flooded with foreign nets, however, our mosquito net maker is promptly put out of business.

Moyo calls this the micro/macro paradox: the sacrifice of long-term growth for short-term gain. If local investment were supported instead of the guilt relieving cauldron of “free,” the village would be able to produce its own mosquito nets. That mosquito net maker would then earn enough money to feed his family and send his kids to school, rather than rely upon aid agencies for every aspect of his existence. This phenomenon is one of Moyo’s primary arguments against development aid. This view is compounded by her assertion that aid rarely, if ever, gets to those it is intended for.

More than 85 per cent of direct foreign aid is misallocated, says Moyo. What is worse, the most chronic offenders of misappropriation are never punished. In hopes of retaining past loans, donors re-finance loans to the worst offenders.

Although most African states claim to be democracies the reality is that rulers have very little need for the people other than as leverage to access more foreign aid. Leaders are more accountable to donors and companies because their budgets do not come from taxing the people, notably the middle class, which is scant in Zambia.

“Aid effectiveness should be measured against its contribution to long-term sustainable growth, and whether it moves the greatest number of people out of poverty in a sustainable way. When seen through this lens, aid is found to be wanting,” writes Moyo.

The nail in the coffin of her addicted-to-aid argument is the example of Chinese investment. Much to the chagrin of European states still basking in their colonial fiduciary ties as former empirical masters, Moyo has titled an entire chapter, “The Chinese are our Friends.”

Chinese investment will fill the hole that aid has been poorly filling since the 1950s and offer Africa what it most desperately needs: investment and employment. The reason, she says, is that China offers trade, not aid. Something the West has yet to do on such scale and without charity.

Darren Fleet is a master's candidate at the University of British Columbia. He has reported from Zambia and Thailand.

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