U.S., Europe Spar on African Aid

By Marc Perelman

Published April 22, 2005, issue of April 22, 2005.

The Bush administration is facing a tense debate with its main allies this spring over its opposition to international plans for reducing African poverty by radically increasing foreign aid.

Spurred by an ambitious United Nations declaration in 2000, a series of plans has been floated in recent months by European nations, Japan, the World Bank and the International Monetary Fund. Most of them involve doubling the amount of aid from rich nations in order to fund economic development, health initiatives and basic human needs in Africa.

Washington has opposed the plans advanced so far, arguing that arbitrary targets for increased aid are a mistake, that poor nations should meet performance benchmarks before receiving extra aid and that drastic American aid increases are politically unrealistic.

“There is a near international consensus to double aid, with the notable exception of the United States government,” said Columbia University economist Jeffrey Sachs, who heads the U.N. poverty initiative. “And the American people ought to know about this.”

Washington is also wary about plans advanced by Great Britain and the IMF to fund debt relief from international sources. The Group of Seven major economic powers debated two debt-reduction schemes proposed by Britain, the G-7 chair, at a closed-door finance ministers’ meeting last weekend, but failed to reach agreement after Washington declined to endorse them.

Aid advocates say they expect Washington will offer at least symbolic concessions in advance of a looming showdown at the G-8 summit in Scotland in July.

British Prime Minister Tony Blair, a close Bush ally, has declared 2005 a “make-or-break” year for fighting poverty in Africa and has vowed to win passage of a debt relief plan at the Scotland summit. Blair faces a general election next month. Critics say he is pressing the African poverty issue in order to burnish his progressive credentials, battered by his alliance with Bush. British officials expressed optimism.

“The Bush administration has been quite responsive, and this has created a positive environment,” said Myles Wickstead, the head of the secretariat of the Commission for Africa, a high-level panel appointed by Blair. “A positive outcome is in our grasp.”

President Bush is believed to be seeking ways to repair America’s damaged image in the world in the wake of the Iraq war, and recently named his longtime aide Karen Hughes to head up a public diplomacy effort.

Around 1.1 billion people in the world live in what economists call extreme poverty, with incomes of less than $1 a day, according to the World Bank. While the number of extreme poor has declined from a 1981 high of 1.5 billion, the decrease is mostly due to economic progress in Asia. The situation has actually worsened in Africa, where extreme poverty plagues half the continent, or some 750 million people.

The so-called United Nations Millennium Declaration, issued at a global summit in September 2000, called for rich nations to double their official foreign aid levels in order to cut extreme poverty in half and reduce child mortality by two-thirds by 2015.

A follow-up U.N. summit in Mexico in March 2002, adopted a set of standards for fighting poverty. The standards, known as the Monterrey Consensus, call for fighting government corruption and promoting private initiative in addition to increasing foreign aid by rich nations. The consensus calls for rich nations to devote 0.7% of their gross national product to foreign aid by 2015.

Britain, France, Germany and Japan have all announced in recent months that they will meet the 0.7% target by 2015.

Last week, the International Monetary Fund, a traditional bastion of austerity policies, issued a joint report with the World Bank advocating the doubling of aid even sooner, within five years. A similar recommendation was made last month by a high-level commission for Africa appointed by Blair.

The Bush administration is opposed to setting any arbitrary targets and has refused to set a timeline to reach the 0.7% target. Instead, it has put forth its own aid mechanism, emphasizing strict accountability benchmarks for beneficiary nations, as well as a much-heralded HIV/AIDS initiative.

Sachs, a former Harvard professor who now heads Columbia University’s Earth Institute, claims that five years after the U.N. Millennium statement, little has been achieved to meet its goals.

Only five countries — Denmark, Luxembourg, Netherlands, Norway and Sweden — have met the 0.7% target. On average, the world’s richest countries allocate 0.25% of their GNP to aid. America’s total is some 0.15%, or $16 billion.

Sachs argues that even a more modest aid increase by the rich nations to 0.54% of GNP, or $195 billion a year, would be enough to get the world on track toward ending the most deadly forms of extreme poverty in 20 years.

What is needed in order to meet international goals, he said, is an American timetable. If America reached the 0.7% mark by 2015, he said, that alone would total some $80 billion a year, nearly half of which would go to sub-Saharan Africa.

“If you do this over a decade or so, then you can get the job done,” he said. “And we are talking about very modest amounts used for very practical things.”

Sachs was an architect of the so-called shock-therapy free-market reforms in post-communist Russia and other nations in the 1990s. Since shifting his focus to Africa after the millennium he has become a passionate advocate of government assistance.

“If you are a trained economist and you are allowed to look at things with no outside pressure, you reach the conclusion that very hungry and poor people need help to climb out of the poverty trap,” he told the Forward.

Sachs has shaken up the international development world in recent weeks with a new book, “The End of Poverty,” in which he argues that a substantial increase in foreign aid could actually eradicate extreme poverty by 2025.

He noted that the $3 billion provided by Washington to Israel and Egypt every year is equivalent to the aid directed at sub-Saharan Africa’s 750 million poor.

Bush administration officials counter that they have not formally committed to the 0.7% target, adding that American aid to Africa has tripled in the past five years to around $3.5 billion. Still, they add, they prefer assistance to be channeled through the Millennium Challenge Account, which was set up in 2002 and makes aid conditional on certain good-governance criteria. Its first contract, a $110 million grant to Madagascar, was signed this month.

In addition to the Millennium Account, Bush has also announced a $15 billion, multi-year program to help fight AIDS in Africa.

The administration contends that setting numerical goals without establishing mechanisms for accountability would defeat the goals of the aid. Moreover, the administration’s defenders say, focusing anti-poverty plans on foreign aid shifts the focus away from trade and the private sector, which it sees at the main growth engines.

“The idea that you can transform failed states into economic dynamos merely by raising the level of aid is a fallacy,” said Brett Schaefer, a fellow with the conservative Heritage Foundation. “What is important is the economic policies that are put in place, and focusing on the input rather than the results is simply wrong.”

Moreover, defenders of the administration note that Congress makes the decisions on foreign aid. Faced with a growing deficit, legislators have already curtailed funding for both the Millennium account and the AIDS program.

Schaefer commended the administration’s willingness to reward efficiency rather than the “obsessive focus” on the 0.7% target, which he said is not a binding commitment but rather a declaration of intent.

Sachs said such views are merely excuses based on myths and clichés, according to which vast amounts of aid are sent to Africa only to end up in the Swiss bank accounts of corrupt rulers. The fact is, he said, that most aid goes to debt servicing, administrative costs or various non-poverty programs and never actually reaches the needy, creating a myth that it has been siphoned off by dictators. Corruption is no greater an issue in poverty-stricken Africa than it is in the booming economies of Asia, he said. To increase the amount of aid reaching the needy, more aid must be allocated to the needy.

“It is especially important for the United States to act” on African poverty, he said. “This is the most forgotten of the forgotten issues.”

As for America’s insistence that aid be carefully monitored, he noted archly that such careful scrutiny is “certainly” not applied to America’s multibillion-dollar reconstruction efforts in Iraq.

Most observers say the United States and Europe will have to reach at least a minimal consensus on implementing debt forgiveness by July 6, the date of the G-7 summit in Gleneagles, Scotland.

While all rich countries have agreed in principle to forgive all the debt of the poorest nations, the Bush administration wants the cancellation to result in fewer loans by the World Bank, while the Europeans favor replenishing the bank’s reserves to maintain the level of loan activity.

Britain has proposed covering short-term poverty relief either by issuing bonds or by selling some 12% of IMF gold reserves. France has proposed an international tax on air travel. Washington has rejected both approaches.



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