A Marshall Plan for Africa (And Not Just a Good Speech Line This Time)

Everytime someone wants to propose a new major aid initiative, it seems throwing around the term “Marshall Plan” is necessary.  Gordon Brown applied the term quite a bit several years ago in arguing for a big aid push to Africa from the G8.  Thabo Mbeki somewhat nonsensically used the term when he called for Africa to develop independenty.

Most of the time, references to the post-WWII reconstruction of Western Europe simply mean somebody wants the rich world to take out its checkbook. 

But I was intrigued reading a recent proposal by Glenn Hubbard in Foreign Policy.  He focused on the actual mechanics of the Marshall Plan: it provided loans to businesses which then repaid the loans to their home governments which then spent the funds on infrastructure improvements. 

He makes a number of good points.  Microfinance is enough to bring about dramatic transformations in individual lives, but it is not sufficient to jumpstart an economy.  His infrastructure-following-business proposal is also astute: one of the reasons aid-financed infrastructure improvements have been neglected and ineffective is the lack of communication with the people who they are intended to aid. 

And I have to admit, his overall idea, which he provided a little more detail on when he argued for this plan a year ago, is worth a good think. Set up a committee to dispurse aid; make potential recipients adopt business-friendly policies; disperse aid to businesses, upstarts, or “business infrastructure” like training centers; have the direct recipients repay their governments, which will in turn spend it on vital infrastructure, planning projects closely with business leaders.

But there are a couple problems.  The first is that his blistering critique of aid comes a little late.  Yes, for decades aid from the West to the Rest has been ineffective.   Now, though, things have begun to change.  Aid dispersal has undergone reform in many major donor countries, including, to some extent, the U.S.  The MCC already forces recipients to demonstrate progress on five or so indicators directly related to a pro-business environment (trade reform, ease of starting a business, land rights, trade policy, others here.)   Basically, Hubbard makes the same mistake lots of conservative-minded aid critics make (and which I’ve written on this blog about before): he lumps all aid together and fails to admit the possibility of reform. 

The other major problem is the optimistic and naive assumption that governments will change policies when offered funds that will completely bypass their control.  The European recipient governments of Marshall Plan funds –as Hubbard admits– understood the importance of ground-up, business-led growth.  But the poorest countries in Africa don’t necessarily have that valuable experience.  Plus, they have become used to directing massive aid funds.  It’s hard enough, as an outsider with a legacy of poor conditionality associated with aid, to inspire reform in recipient governments.  Forcing them to make politically difficult changes while betting on an untested business community to pay them back is quite a big risk.

But like I said, his argument is not one to be tossed out.  My initial take is that something like the MCC, which offers big aid packages to governments, should be combined with a business-investment program.  That way, a country will still have a strong carrot: immediate, direct budget support aid.  But the potential for wholescale economic change that Hubbard forsees has a fighting chance.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: