When analysing each specific issue I shall try and use case studies alongside statistical evidence to prove that the impacts of debt and certain areas of trade/aid are negative although the latter two can have a positive impact when coupled with strong institutions and good governance. On the issue of debt, my main area of analyses will be the impact of the International Monetary Fund (IMF) and their structural adjustment programmes trying to perceive whether the loans granted to each state generated positive or negative outcomes. When looking at aid, I will see the difference that the United Nations (UN) and Non-governmental Organisations (NGO's) have made through multilateral aid contributions and the individual bilateral aid agreements (Powell & Bird, 2010). While considering if the large amounts of aid have created a culture of dependency within which local communities have become unable to support themselves (Maathai, 2010, pg.70-82). Finally I will consider the importance of trade, primarily with neighbours (also the impact them being politically stable) then the importance the informal economy within states, which in less developed countries is extremely important.
When considering the impact of debt upon development, analysis must begin with the effects of colonial rule and the decisions taken in this period. Upon independence the countries had debt transferred to them by the colonisers and an interest rate set at 14% so these new states already had substantial debts before being able to organise (Shah, 2007) meaning that instead of focusing the country towards building infrastructure and improving upon the social circumstances of its citizens, money had to be instead diverted towards debt servicing. The impact of 'odious debt' as well is severe, this is money leant to repressive dictators who use the public finances to increase personal wealth as Jayachandran and Kremer (2006) stated in their research, the result of this is that citizens suffer multiple times. The most striking example being South Africa (SA), after the end of apartheid in 1994 and the beginning of true democracy with multi-racial elections the new Government still had to pay back the eleven billion dollars borrowed to finance apartheid. The effects of this are directly observable, with the SA government selling 14 state owned businesses between 1992 and 2004 which raised four billion dollars. Instead of this money being diverted into achieving Freedom Charter goals such as social housing, free education and increased employment it was lost to large transnational economic institutions (2007, Bolton & Skeel). These loans and the consequential debt means that countries development suffers more than once, first; state wide oppression is continued up through the financial supports these loans give, second; the servicing of these loans draws away valuable resources and thirdly; damage that will come if the country if forced to undergo a Structural Adjustment Programme (SAP) by the IMF. In this case the country would benefitted hugely by a system of debt relief which then would have allowed to focus on development.
Although considered by some as a type of aid, the notion of debt relief is distinctly different in implementation and effect. Since the abandonment of welfare programmes in the seventies by many African states, due to the emergence of the Washington consensus and equally later with the fall of the Soviet Union many countries have moved towards a neo-liberal free market approach (2001, Easterly) (2010, Thompson). The side effect of this is that due to large borrowing, some countries are now classed as Highly Indebted Poor Countries (HIPC) which is where debt is over 200% of exports. The HIPC initiative was founded in 1996 by the IMF and World Bank (WB) its aim was to provide relief to countries so that resources could be freed up from debt repayment and allocated to poverty relief programmes. When applying for admittance to the HIPC initiative, the prospector must undergo certain tests, one of these being the acceptance of an IMF programme and meeting the targets of this programme for a minimum term of one year. These structural reforms are well document by Barro & Lee (2005), Riddell (1992), Hartzell, Hoddie and Bauer (2010) and Hope (1997) to name only a few as having a negative impact on the economies of states and causing the living standards of citizens to fall. Freytag & Pehnelt (2009) make the important connection between good governance and the HIPC effectiveness in poverty reduction, for the debt reduction schemes to have a positive impact countries must have well established economic institutions with low levels of internal corruption, otherwise when the HIPC programmes are run and debt lowered it may mean that the country will only use the extra capital available to future advance the goals of an elite. The political dimension should also be factored in, this is the view that organisations such as the Paris Club (a group which consists of nineteen states which are the highest holders of African debt) may use debt relief to make sure creditor countries do not default on loans or so that previous odious and irresponsible lending is not unveiled instead of using effective debt reduction strategies to help improve development (Ngassam, 1992) (Nunnenkamp, 1989). High levels of debt and conditions attached to debt relief schemes are an obvious factor that hinders the sub-Saharan states from reaching full development potential although debt relief on its own would be highly effective if coupled with good governance.
The role of aid is crucial to understanding development at a national level and on the development of individual citizens' behaviour. Aid to react to unforeseen crisis such as freak weather incidences or the aftermath of civil war will not be discussed here as I consider it to be undoubtedly helpful, but instead the role of aid that looks to fill the gap left by low domestic savings or insufficient national investment in healthcare and education. I put forward the notion that by donor states giving capital to short term projects that are implemented without consultation with local groups leads to a culture of dependency and installs a mind-set among individuals that discourages domestic entrepreneurial initiative (Ilorah, 2008). Africa should re-evaluate its position towards accepting foreign aid, instead looking for forms of foreign direct investments to boost technological advances and increase human capital, with larger proportions aimed at infrastructure development and to encourage good governance which then would in turn erode its reputation as a high-risk zone for infrastructural ventures.
The reliance on aid from Western countries means that African governments don't help their fellow states as much as possible. The prevailing image of the continent is one of a starving child or an ongoing civil war and to change this firstly attitudes of Africans must be changed so that they believe in themselves instead of a neo-colonialist idea that the donor states will come to the rescue (Maathai, 2010). Combatting malaria may seem like a simple task; providing retroviral drugs and nets does help to save lives but only combats the problem not the underlying cause, which is the societal lack of education into the spread of disease and even how to effectively use the help provided. Aid programmes are too brief and want to see fast results instead of focussing on sustainability, and would do more good by instead helping to create an effective network of government mobile health workers who can constantly monitor the problem, so the governments need to wage a war on poverty instead of the intermittent commitments that many make only when faced with conditionalities of loans or the arrival of an expert international development squad.
Trade in Sub-Saharan Africa is often dominated by primary commodities; fighting over these represents the foundations of many ongoing internal conflicts. Nevertheless international trade has had both positive and negative effects, I believe that it is not the trade that creates development but whether you have a stable government in power who can reallocate capital into social programmes. An example of where commodity trading has been hugely successful is the diamond industry in Botswana. Since mining began in the mid-seventies, the sector has account for between one-third and half of GDP (Bank of Botswana, 2005). During the eighties under recommendations from the IMF and WB the country moved away from extreme reliance on this industry and enhanced its diversification alongside moderated structural reform (Maruatona, 2011). Then a process of building up foreign currency to offset the potential impact of diamond price fluctuations, meant the government could increase expenditure into social programmes, and by 2000 the country had 30 fully functional hospitals alongside 1200 other health facilities, which meant lower infant mortality rates although life expectancy was still low due to the increasing HIV/AIDS epidemic. Other infrastructure improved were the road system which went from 12km of paved road in 1966 to over 9000km in 2006 (Poteete, 2009). This development has led to Botswana becoming a middle income country in 2006 with a GDP per capita of $16400, although the country still has high unemployment of 17%, it is hailed as one of the best developed sub-Saharan African states (Maruatona, 2011) mainly due to its consistent multi-party elections and smooth democratic government transitions.
The positive effects of trade for Africa would be much higher if it wasn't for the impact of agricultural protectionism used by developed states. Subsidies for the developed farmers (mainly EU and US) means they have distortedly low costs of production compared to African states who don't have the ability to invest in new technology and infrastructure, work has to be done in an inefficient manual form (Ilorah, 2008). An example of the damage done by this is Senegal, it has around three million cows that could produce milk, part of the reason of this not being undertaken is a lack of the right equipment for refrigerating and pasteurising the milk (this would be an effective area of for aid to be use, therefore creating self-sufficiency not dependence). The more developed nations can afford to subsidise the farmers in their own country who have access to more recent technology, so what happens is that they would produce milk powder which could be bought more cheaply in the local economy, this is a direct result of the openness of market and one of the major downfalls of trade (Williams, 1994, pg.84-90). Normally a country may place a limit on the amount of a certain good that can be imported, to protect local production but not countries which are receiving IMF loans, such as Senegal, they have adhere to strict neoliberal free market principal. This has led to the Senegalese poor becoming dependent on the import of powdered milk instead become self-sufficient; this means that less money is being kept in the local and national economies, creating a smaller pool of resources for development. A potential side effect of this situation that can be seen in the grain trade is that when harvests are bad in the developed countries, they will stop exporting to less developed countries causing an increase in price and potential food shortages.
Africa's chronic underdevelopment has more causes than can be addressed in 2000 words. From the purposeful lack of colonial investment, ongoing civil wars, the debt burden caused by dictators to the terrible effects of preventable diseases such as HIV/AIDS and malaria. I find that debt is counterproductive to development as it draws away resources from social programmes; the emergence of globalised trading markets has been mixed in some states helping to create wealth but in many destroying local production. Then aid, this is the most contentious point of all, I find that all though it has brought some improvements it on the whole has create a false culture of reliance. To me for any of these three aspects to make a significant difference to most people, they must move away from dependency to self-reliance coupled with good governance and better targeted aid.
