Is Foreign AID the Solution to Malawi’s Malaise or the Problem?

Updated: Feb 14


Published in the author's personal capacity.

So let me at the outset declare that I have worked for one international agency or another for the most part of my professional life. I do acknowledge that often times the contributions of individual agency efforts do make a difference in the specific topic, territory and time that they choose to intervene, however small. Nonetheless this opinion piece posits that the sum of these efforts is lesser than its parts in that it has not led to the structural socio-economic transformation required to put Malawi on a path to economic self-determination let alone self-sufficiency.

Malawi continues to be poor despite billions of Kwacha worth of bilateral and multilateral aid from developed countries and development agencies. The unresponsiveness of growth, poverty and development to foreign aid is a subject few wish to broach. Perhaps because the status quo is not uncomfortable for the political and intellectual elite and whoever can claim to be middle class (present company included). Perhaps also because aid is an industry too big to fail: both for our government as well as donors.

I turn to dependency theory (DT) as one possible frame with which to explain our aid-development contradiction in Malawi. DT postulates that foreign capital flows, in our case mostly aid, are directly responsible for poor development progress in less developed countries. DT characterizes the international system as comprising two sets of states – the dominant and the dependent. The situation of dependency retards economic growth since reliance on foreign capital leads to inadequate capital accumulation for domestic investment exacerbated by unfavourable and deteriorating terms of trade. Dependency is contrasted from interdependence - on which much of international relations are predicated on, incorporating mutual responsiveness and benefit and cooperation. Dependency is necessarily an asymmetrical relational phenomenon with key relational differences being unequal exchanges (as in terms of trade) and power inequalities. Therefore it is not necessarily the character of poor countries; rather, the structure of the international economic system that is significant.

Aid may be defined as goods and services and financial flows provided at concessional financial terms by official agencies, with the objective to promote economic development and welfare. Aid, as a developmental instrument, draws much of its legitimacy and validity from the success of the post-World War II Marshall Plan. However, aid motives are heterogeneous and complex. Aside from the expressed philanthropic motivations and development considerations, post-colonial relations including commercial, political, national security and other strategic interests also drive it. Aid, as pertains to international efforts at promoting progress, is a technology of government - a way of ordering the relationship between people and things to produce a desired outcome, different from colonialism, but a technology of ‘governing at a distance’ nonetheless, thus a form of neo-colonialism (c.f. Duffield, 2001). The neo-colonial pattern of development continues to produce for LDCs, an economic structure and development trajectory that depends critically on external capital and external decision makers.

Two salient features of aid - tied aid and conditional aid, support this view. Tied aid puts restrictions on how and where aid resources, may they be grants or concessional loans, can be redeemed. Thus aid is usually tied to goods and services from the donor country. However, tying aid leads to additional costs, administrative burdens and the risk of biasing aid in favour of technology inappropriate for our local context. Tied aid tends to benefit the donor more than the recipient countries and it is conceivable that some states may see aid as a growth strategy, using aid to secure markets for their goods and services. Conditional aid involves allocation of aid provided that the recipient adopts certain policy reforms, undertakes specific actions, obtains some performance target, or satisfies some other criteria. Typically, some donors only provide assistance if recipient countries subscribe to their world-view about how the development enterprise should be organised and implemented, thus conditionality binds recipient countries around donor priorities. However, policies may be imposed with imperfect knowledge of the local context and imperfect control of implementation of these policies.

Even in instances where the motives for providing aid are not influenced by strategic considerations, there is often lack of coherence between aid policy and other policies relating to trade and donor country growth aspirations. When conflicts of interest occur, it would be naïve for us to expect donor governments to implement policies to strengthen aid-recipient economies where these are expected to harm their own interests. Consequently, aid is fragmented across donors, volatile and unpredictable and is beset by proliferation of projects, duplication of effort and conflicting donor agendas. Is it any wonder, the causal chain linking aid to development outcomes is fragile and often ambiguous?

That is not to say that we, aid recipients, are in any way blameless in the travesty of development aid. The local elites are complicit as they structure their rule on a coalition of internal interests that coincide with interests favourable to the international connection. Aid presents a moral hazard to local elites in that it undermines incentives for the governing elite to uphold the social contract with the local population as they become more responsive to donors instead of citizens, leading to externalization of accountability and decision making. Donors provide a much stronger political constituency than the voter, at least in the 4 years between elections. Aid provides significant resources for government services and programmes that allow political elites to divert local resources for patronage and many fringe benefits.

Cashgate is a classic example. There is little incentive to change the status quo. In Malawi, we are particularly attached to our poverty - this being our most prominent claim to fame. Aid results in excessive and unsustainable levels of government consumption, affects the real exchange rate thus undermining the competiveness of the export sector and leading to increases in imports which are largely consumed by the elite. Aid also skews allocation of human resources. Our best talent is not applied to the generation of wealth through business enterprise and trade, which historically has been the means through which nations lift themselves out of poverty, rather they are found in government, NGOs and international development agencies pursuing agenda that are not entirely congruous to the project of economic development and self-sufficiency. Thus aid also leads to greater income inequality within nations as the local elite benefit from their association with the dominant whereas as the rest of the population gets left behind. Consequently aid may have distorting effects on policy ownership, fiscal sustainability, institutional development, income equality and ultimately autonomous long-term economic growth (c.f. Moss et al., 2006), leading to the hollowing out of government where the role of the nation-state to drive development is greatly diminished.

The question remains though, if not aid then what? To be honest, I do not know the answer. I do know however that the moral imperative to restore our national pride as a country that can feed, house, heal and school its people – as well as create jobs for all its young people – does not rest in the hands of bureaucrats in Washington, Geneva or Beijing. It demands that our talk of independence from aid move from rhetoric to action, particularly if it may mean the loss of comfort and privilege for the elite few as a sacrifice for the benefit of the masses in severe poverty and deprivation. Otherwise posterity will judge us harshly – gutless, foolish, treacherous. What do you think?

#ECONOMICSANDDEVELOPMENT #POLITICS

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