Posted in: World

The Changing Shape of Aid

By | April 9, 2012

Corporate aid is redefining humanitarianism in the state capitalism age.

Back in January the Economist ran a cover feature on the rise of state capitalism in developing economies, detailing the popularity of state-owned nationals in rising economic powers. China has long adopted this model, dating back to the Great Opening of the 1970s, but recent government-brokered deals in Brazil and rumblings in South Africa imply that the emerging world elite economies are increasingly seeing this hybridized capitalist model as a viable system. This development has fascinating implications for international aid, as the merging of government and business sectors offers the potentiality for a newer, more corporatized humanitarian assistance model more akin to that of the colonial era.

Chinese expansion into African aid has been going on for the greater part of the last two decades. Beginning with construction of a highway connecting copper mines in Zambia to the port city Dar es Salaam in Tanzania in the 1970s, the Chinese have pursued relentless infrastructural aid in much of resource-rich Africa. Continually seeking new ways to ensure cheap natural resources, China has constructed over thousands of miles of roads, hospitals, and other infrastructure projects to accommodate its large corporate interests in the region. Chinese settlers have flocked to the region as construction and administrative workers as well as managers of these new holdings. The holdings of Eximbank, ZTE, and the Chinese Railway Construction Corp already stand as three of the largest in East Africa.

This development aid model is in stark contrast to the more charitable method of Western nations, who for the most part just pour money into African states and communities with the hope that it will filter through the layers of corruption down to the people who need it most. The European nations, the United States, and Canada have sent an average $50 billion to Sub-Saharan Africa every year for the last half decade and yet every country in the region remains mired in infrastructural, governmental, and economic malaise. Shining stars have recently hit snags with endemic corruption in South Africa and a coup and secession movement undermining a functional democracy in Mali and more than half of Foreign Policy’s top ten in its Failed States Index are African ones.

Zambian academic Dambisa Moyo wrote a scathing critique of Western blind aid in her 2009 book Dead Aid, going so far as to claim that the massive influx of money into African nations retarded their development by making “failed” a profitable model for state elite. She called for the West to withdraw its patronage and force African nations to confront their multitude of internal problems, a potentially helpful, but far more likely calamitous prospect. Short of going cold turkey on aid, she provides an alternative in the Chinese model described above. Foreign firms come into Africa, set up the powerful economic actors that the African nations are too weak to establish, build roads and hospitals providing positive externalities to everyone, and at least churn some money into the system through taxes and the creation of new jobs. She points out the massive highway project in Ethiopia as an example of foreign business interests providing the poor with a necessary infrastructural good.

Yet there are serious colonial underpinnings to this humanitarianism for profit scheme that is increasingly coming into vogue. England went into India and Spain went into Latin America, built roads, and extracted natural resources under national corporations hundreds of years ago. The East India Trading company is the most famous example of the state capitalistic model. Building roads and hospitals is great, unless they fall down, but foreign multinationals or nationals carving up spheres of interest already happened ironically in China throughout the late 19th and early 20th centuries. It is hard to criticize what the Chinese are doing because they are simply coming late to a party that every other major economy joined one hundred years ago (see Dutch Shell or Rio Tinto). Of the fifty largest African companies only 2 lie outside of North Africa or South Africa (Nigeria’s First Bank of Nigeria and Zimbabwe’s Pretoria Portland Co), and as it stands most of the portions of African economies not tied up in aid are largely dependent on the revenue generated by foreign companies within their borders.

Until African nations reform to the point that viable businesses can emerge uninhibited by the cronyism of state politics, corporate colonization will continue and thus corporate aid models will increase. Governmental colonialism may have ended in 1977 with the end of French rule in Djibouti but corporate colonialism seems here to stay for a while, and savvy businesses willing to take the risk of placing capital in volatile regions with massive upsides are increasingly going to go about getting things done without the meddling and bureaucracy of stumbling states. The next twenty years will likely see a host of airports, highways, power stations, and high-speed cables with Chinese, Brazilian, and Indian company’s names on them bringing much needed benefits to millions.

This is not to say that countries will not continue to dump enormous amounts of money into poor countries. The non-profit sector is a massive economic entity in itself and is largely self-sustaining, thus many rich countries have a vested interest in maintaining aid, despite what conservative voters would like to think. But corporate aid is here to stay, and while it may not be perfect, it is at least doing some good in regions that could use the help.

For more coverage of this issue check out Deborah Brautigam’s great blog China in Africa: The Real Story.

Photocredit: China Talking Points

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