NCPA - National Center for Policy Analysis

Africa Needs Free Trade, Not Foreign Aid

February 7, 2001

European governments have given hundreds of billions of dollars in financial, technical and humanitarian aid to African countries over four decades, yet the continent's problems only worsen.

Rather than alleviate Africa's suffering, aid has exacerbated it, says Jim Peron of the Institute for Liberal Values in Johannesburg, South Africa. Much of the aid is siphoned off by corruption and militarism -- such as the $1 billion given by the Italian government to Somalia before the country collapsed.

And the incompetence of the givers results in ineffective aid -- such as the fish-freezing plant in Northern Kenya built by Norwegian aid agencies that required more power to operate than was available in the entire region.

But two other aspects are usually overlooked: aid can destroy local producers and markets, and government-to-government aid encourages inefficient centralized economic planning. For instance,

  • Farmers in Tanzania simply stopped producing food because of the availability of donated food.
  • Pharmacists in Somalia went out of business due to donated drugs -- which were handed out by medically untrained people.
  • Some $10 billion in financial aid was given to Tanzania, propping up Julius Nyerere's Marxist program for years, during which Tanzania's economy shrank 0.5 percent every year from 1965 to 1988, according to the World Bank.

Yet European restrictions on food imports keep an estimated $700 million in African agricultural goods from entering Europe each year.

Source: Jim Peron (Institute for Liberal Values), "Europe and Africa: Co-Dependent No More?" Wall Street Journal Europe, February 1, 2001.


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