Glenn Hubbard: Think Again ... A Marshall Plan for Africa
[Glenn Hubbard, chairman of the White House Council of Economic Advisers from 2001 to 2003, is dean of Columbia Business School. With William Duggan, he is co-author of the forthcoming book The Aid Trap: Hard Truths About Ending Poverty.]
Just six months into his term, U.S. President Barack Obama is already modeling himself after the country's most transformational Democratic leader, Franklin D. Roosevelt. As Secretary of State Hillary Clinton visits Africa this month, now would be the perfect time to follow in the steps of Roosevelt and his secretary of state, George Marshall, by announcing a second Marshall Plan. More than half a century after the United States helped rebuild a war-torn Europe, it's time Africa got the same chance.
The Marshall Plan was fundamentally different from the aid that Africa has received over the past four decades. The Marshall Plan made loans to European businesses, which repaid them to their local governments, which in turn used that revenue for commercial infrastructure -- ports, roads, railways -- to serve those same businesses. Aid to Africa has instead funded government and NGO development projects, without any involvement of the local business sector. The Marshall Plan worked. Aid to Africa has not. An African Marshall Plan is long, long overdue.
Aid groups will argue that such a plan, grounded in building up the local African economy, can never work. Here are the objections they'll make to an African Marshall Plan -- and why they're wrong.
"The Market Failed in Africa."
It never had a chance. No lesser masters of the market than Bill Gates and Warren Buffett have declared that the market has failed poor countries. In an era of global trade, most Africans have benefited not at all. Despite a flourishing market in most of the rest of the world, Africa remains a continent of poor villages and sprawling slums. So rather than investing in the continent's businesses and ventures, these billionaires fund NGOs and government projects for health, education, and technology. And they call for U.S. foreign assistance to do the same.
But take a look at the World Bank's annual report, "Doing Business," and you'll realize that many African economies have never had a business market to fail -- thanks to their governments' dense, unnavigable regulations. "Doing Business" ranks countries according to how easy it is for citizens to start and run businesses -- things such as registering a company, hiring and firing workers, getting credit, and so on. Poor countries in general and African ones in particular rank at the bottom of the list. The major reason is that their governments have never had an interest in fostering business because favor and aid for government and NGO projects comes so much easier. In essence, the market never failed because it never really existed.
The Marshall Plan in Europe came with conditions: Each country had to adopt policies that allowed its businesses to operate normally. It made the same offer to all of them, and those that refused got no aid. The offer went out to all Europe, but the Eastern bloc, under Soviet threat, declined. Some African countries will also decline. That means they don't get the aid.
"Strong Businesses in Africa Will Be the New Colonialists."
Yes, but that might be a good thing. A whole contingent of aid advocates admit the faults of African governments, but trace them back to colonialism. Under colonial rule, they say, foreign governments and businesses exploited Africa and left it poor. Pro-business policies, they worry, would lead to a new colonialism, with foreign companies exploiting Africa anew.
This argument flies in the race of reality...
Read entire article at Foreign Policy
Just six months into his term, U.S. President Barack Obama is already modeling himself after the country's most transformational Democratic leader, Franklin D. Roosevelt. As Secretary of State Hillary Clinton visits Africa this month, now would be the perfect time to follow in the steps of Roosevelt and his secretary of state, George Marshall, by announcing a second Marshall Plan. More than half a century after the United States helped rebuild a war-torn Europe, it's time Africa got the same chance.
The Marshall Plan was fundamentally different from the aid that Africa has received over the past four decades. The Marshall Plan made loans to European businesses, which repaid them to their local governments, which in turn used that revenue for commercial infrastructure -- ports, roads, railways -- to serve those same businesses. Aid to Africa has instead funded government and NGO development projects, without any involvement of the local business sector. The Marshall Plan worked. Aid to Africa has not. An African Marshall Plan is long, long overdue.
Aid groups will argue that such a plan, grounded in building up the local African economy, can never work. Here are the objections they'll make to an African Marshall Plan -- and why they're wrong.
"The Market Failed in Africa."
It never had a chance. No lesser masters of the market than Bill Gates and Warren Buffett have declared that the market has failed poor countries. In an era of global trade, most Africans have benefited not at all. Despite a flourishing market in most of the rest of the world, Africa remains a continent of poor villages and sprawling slums. So rather than investing in the continent's businesses and ventures, these billionaires fund NGOs and government projects for health, education, and technology. And they call for U.S. foreign assistance to do the same.
But take a look at the World Bank's annual report, "Doing Business," and you'll realize that many African economies have never had a business market to fail -- thanks to their governments' dense, unnavigable regulations. "Doing Business" ranks countries according to how easy it is for citizens to start and run businesses -- things such as registering a company, hiring and firing workers, getting credit, and so on. Poor countries in general and African ones in particular rank at the bottom of the list. The major reason is that their governments have never had an interest in fostering business because favor and aid for government and NGO projects comes so much easier. In essence, the market never failed because it never really existed.
The Marshall Plan in Europe came with conditions: Each country had to adopt policies that allowed its businesses to operate normally. It made the same offer to all of them, and those that refused got no aid. The offer went out to all Europe, but the Eastern bloc, under Soviet threat, declined. Some African countries will also decline. That means they don't get the aid.
"Strong Businesses in Africa Will Be the New Colonialists."
Yes, but that might be a good thing. A whole contingent of aid advocates admit the faults of African governments, but trace them back to colonialism. Under colonial rule, they say, foreign governments and businesses exploited Africa and left it poor. Pro-business policies, they worry, would lead to a new colonialism, with foreign companies exploiting Africa anew.
This argument flies in the race of reality...