The Aid Bubble has burst–the West wants profits in Africa (a follow up)

To pick up on an earlier theme about the shift in "climate" for Western involvement in Africa, it is clear that there is a huge upswing in Western investor interest. I’ve been collecting some of the interesting stories and anecdotes and will share as time permits. Bloomberg is providing lots of coverage out of Nairobi now, and the Wall Street Journal has an Africa page that is well worthwhile. Clearly Western investors are playing "catch up" to the Chinese in some markets, but there remains a difference in the nature of Western private investment and Chinese operations. Likewise the Libyans, the Gulf States and and Iranians have moved more quickly than Western funds, but have some different objectives and approaches. See Nick Wadhams blog for some interesting observations on Chinese projects.

Newsweek has the other side of the coin in a new feature by Joshua Kurlantzick on "The Death of Generosity". This is the background for my thought that I should go so far as to label the Bono era as a "bubble". A lot of "promises" that will not be met and IOUs that will not be paid, in part because the rich nations are finding themselves less rich than they thought they were, in part because a certain amount of it was a political fad fueled by the finance/housing bubble and the political winds have changed. Some of it is an appropriate sobriety about what actually works and make sense.

One big obstacle to aid is the politics of spending money on other nations’ problems. President Bush enjoyed a Nixon-goes-to-China credibility with conservatives, who tend to be more skeptical of foreign aid. But Obama’s low popularity among conservative voters makes it nearly impossible for him to sell an aid program to them. Reaching out in this way might feed into American stereotypes that Republicans are tougher on national security while Democrats prefer soft power.

What’s more, Americans are not in a generous mood. In a poll released last December by the Pew research organization, nearly half the Americans surveyed said that the U.S. should “mind its own business” in the world. This figure was the highest level of support for isolationism in decades. And it is not just the U.S.; polls show that this isolationism is matched in many wealthy nations in Europe and Asia, including Japan, long one of the biggest donor nations.

It is not surprising that nations such as Italy, one of the weakest industrialized economies, have slashed their aid budgets by more than 30 percent, while France has not met promised commitments, and the Obama administration has presided over reductions in the budget of the Millennium Challenge Corporation from $3 billion requested for 2008 to $1.4 billion this year.

Recipient nations have not exactly helped themselves. In the early 2000s many developing countries eagerly pledged to improve governance in order to make aid more effective. In 2001 African nations agreed to a New Partnership for Africa’s Development, a continentwide compact to improve governance, promote equitable development, fight graft, and fulfill other aims favored by both Western donors and civil-society activists in most developing nations. In 2006 wealthy Sudanese communications entrepreneur Mo Ibrahim established a $5 million prize for the African leader who best focused on development, governance, and education. Yet the performance of these aid-recipient nations often has been woefully poor, a failure that only further alienates donors. Kenya, for one, vowed in 2002 to implement a tougher reform program, appointing prominent graft fighter John Githongo as anti-corruption czar. Within two years, Githongo had been forced out of real power, and he soon fled the country, his investigations having failed to change Kenya’s climate of corruption. Githongo has since returned to Kenya to launch a grassroots advocacy group, but little has changed, though there is some hope that the new Constitution, passed in Kenya this month, might curb some of the worst abuses. Still, Kenyan M.P.s recently voted themselves another salary increase, and now earn roughly $170,000 per year, nearly the same as members of the U.S. House of Representatives, though the average nominal annual income in Kenya is only about $900, compared with roughly $46,000 in the United States.

In rich nations, the growing demand for instant political gratification also undermines the long-term commitment to aid programs. For instance, India, fueled partly by foreign assistance, launched the agricultural-modernization program that would come to be known as the green revolution in the early 1960s, but most of the results were not seen until the 1970s and even later. After the devastating Haiti earthquake last January, governments and private citizens around the world rushed to contribute to the reconstruction effort, often pledging money through new tools such as mobile phones. But as the Haitian government, weak in the best of times, struggled to rebuild and resettle the homeless, many donors grew frustrated. Though it has been only seven months since the quake, only $506 million of the $5.3 billion pledged to the country has been disbursed. “Donors typically set unrealistic time frames for reconstruction, and the level of infrastructural and political damage inflicted in Haiti suggests that they must think in terms of years, if not decades,” notes a report by Oxfam Great Britain on the Haitian disaster.

This will present yet another challenge to Western diplomats and further tension between other diplomatic objectives and democracy support. One of the many hats worn by our Ambassadors, and the Ambassadors of the other nations comprising "the diplomatic community" in places like Rwanda, Uganda and Kenya, is the promotion of the interests of investors from "home". Thus, one more area in which Western diplomats will be seeking cooperation from people like Kagame and Museveni, and Kibaki, while also asking them to behave better on political rights and civil liberties.

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