Have you ever come across an aid campaign on TV picturing a child sitting on a dusty ground, wearing ripped clothes, with a fly wandering around his face. The child in question is told to be suffering from cholera, diarrhoea, malaria, pneumonia…you name it. He becomes the ambassador of despair of a whole continent, where all 660 million children are waiting for the donated dollar that will improve their lives. Not to mention that these type aid ads stay around for 5 to 10 years with the same child and same purchasing power of $1, as if the continent is Peter Pan’s Island.
Have you ever come across the legendary story about the relationship between the west and the rest, the story holds that the rich nations of the OECD give generously of their wealth to the poorer nations, to help them eradicate poverty and push them up in the development ladder?
Yes, during colonialism the west may have enriched itself by extracting resources and slave labour from their colonies – but that’s all in the past right? These days, the selflessly given $162bn in foreign aid is the solid evidence of their goodwill.
Those kind of stories are so widely propagated by the aid industry and governments. The current economic power dynamics make even governments of poor countries believe in this logic by expressing their gratitude toward the west – solely relying on its aid, taking an active part in the powerful narrative that the African continent is poor and that it needs western help.
Shall we do some reality checks
It is true that African countries received $162bn in 2015, mainly in aid, loans, and personal remittances. But in the same year, $203bn was taken out of the continent, either directly through multinationals repatriating profits and illegally moving money into tax havens, or by costs imposed by the rest of the world through climate change adaptation and mitigation.
This led to an annual fiscal deficit of $41.3bn from the 47 African countries where many people remain trapped in poverty.
The Global Justice campaigners said illicit financial flows, defined as the illegal movement of cash between countries, account for $68bn a year, three times as much as the $19bn Africa receives in aid.
Governments from several African countries received $32bn in loans in 2015 but paid more than half of that – $18bn – in debt interest (rising rapidly each year). Developing countries have forked out over $4.2tn in interest payments alone since 1980.
But by far the biggest chunk of outflows has to do with unrecorded – and illicit – capital flight. GFI calculates that developing countries have lost a total of $13.4tn through an unrecorded capital flight, mostly through trade misvoicing, since 1980.
This might sound simplistic considering that the overall GDP of Africa is $7.7tn, and that economies do not grow by stockpiling inflows and preventing outflows but by enabling people to invest and learn, adapt technologies and access markets. But is there a real market access opportunity for those economies, or are they considered as an inert bucket into which money is poured?
The key message to get across is that more money flows out of Africa than goes in, and if we all are to address poverty and income inequality we have to work on getting it back. He added that one of the key factors contributing to this inequality includes unjust debt payments and multinational companies hiding proceeds through tax avoidance and corruption.
The aid narrative begins to seem a bit naïve when we take these reverse flows into account. It becomes clear that aid does little but mask the maldistribution of resources around the world. It makes the takers seem like givers, granting them a kind of moral high ground making the whole world believing that the African continent is only about death, destruction, and diseases.