Saturday, December 17, 2005
Guest Post 2: Response to Paul Theroux, Bono, Africa etc
Hari Chandra responds to the previous post linking to the Paul Theroux op-ed in the Times as well. Hari is with the Blackstone Group.
Why I wish Bono would, despite his best intentions, stick to U2 and why Paul Theroux doesn't quite get it either
As much as I love Bono's music, he and his ilk (Geldof et al) have sadly done a great deal of harm to Africa's ongoing process of economic development by sustainning a perception of Africa as a charity case. I would hardly make unsubstantiated claims about magnitude, but every moment that the "Save Africa" culture propogated by Bono and others captures the world's imagination is another moment that hope for widespread prosperity in Africa is deferred.
Certainly, the causes of debt relief and increased aid raised by the "Save Africa" crowd are, in the right context, worthy. Debt relief should never be a goal in itself. Countries must prudently incur debt in order to develop and lenders should expect repayment in order to continue providing necessary capital. However, I submit that there may be cases where debt relief may be required to erase the errors of a kleptocratic former regime, provided that new creditworthiness is established. Foreign aid also clearly can be helpful in certain circumstances, particularly for humanitarian relief, cases of very clear market and government failure (which are rarer than commonly publicized) and public health, particularly, as Sheri mentioned, in the case of HIV/AIDS, but has its own problems when it is a substitute for real investment capital.
However, the centralization of debt relief and aid, even when coupled with a demand for better governance, as a plan to "Save Africa" creates a notion among investors and policymakers of a sub-Saharan Africa that reeks of a bad Oxfam advertisement (e.g. with 12 pounds a month, you can ensure that little (insert African name) can have a good meal every day). The "charity case" notion makes sub-Saharan Africa out to be a pervasive basket case, constantly facing starvation, disease, civil war etc when the reality for much of the continent is very different. Certainly, there are pockets of the continent that fit the charity case notion, but nowhere in this worldview is the Africa of improving governance, return of the rule of law, vast natural resources and a pragmatic, entrepreneurial culture, that exists in many parts of the continent and are arguably the foundation for the next rapidly developing economic region, given access to capital. As long as the negative, charity case, perception of Africa exists globally, it is a critical impediment to real prosperity.
Theroux is wrong as well. Africa absolutely needs "more money". However, the money it needs the most is not foreign aid, is not debt relief, is not even money for public health programs. Except in limited and specific circumstances, Africa does not need charity. Africa needs "more money" in the form of huge amounts of global risk capital, equity and debt, that can build the industrial and manufacturing base that can employ millions and provide even more with the basic tools of prosperity, support the entrepreneurs building a service industry, provide access to global trade markets for many more people, etc. Certainly capital is not the only thing that Africa needs but it can create a virtuous cycle, funding the educational institutions needed for a professional middle class, supporting the civil society that a sizeable middle class engenders, ultimately allowing Africans to take ownership of their resources.
The "Save Africa" message frightens this absolutely necesary capital, creating an image of a civil society and economy that are destined to fail without aid, when the reality could be sucess with capital investment. I am confident that the African market could provide attractive returns for significant investment capital but my experience is that the market tends to view Africa as a charity case and not worthy of consideration of real investment dollars. This is in no small part due to the branding of Africa that Bono and others create. Though the branding issue is very significant, this is not just a branding problem. A culture where debt relief and aid are seen as real solutions is unlikely to engender the discipline and pragmatism necessary to attract the vast amount of capital that Africa needs to develop.
PS: There are other things troubling about the Theroux piece like issues about free movement of people but this post is already too long.
Why I wish Bono would, despite his best intentions, stick to U2 and why Paul Theroux doesn't quite get it either
As much as I love Bono's music, he and his ilk (Geldof et al) have sadly done a great deal of harm to Africa's ongoing process of economic development by sustainning a perception of Africa as a charity case. I would hardly make unsubstantiated claims about magnitude, but every moment that the "Save Africa" culture propogated by Bono and others captures the world's imagination is another moment that hope for widespread prosperity in Africa is deferred.
Certainly, the causes of debt relief and increased aid raised by the "Save Africa" crowd are, in the right context, worthy. Debt relief should never be a goal in itself. Countries must prudently incur debt in order to develop and lenders should expect repayment in order to continue providing necessary capital. However, I submit that there may be cases where debt relief may be required to erase the errors of a kleptocratic former regime, provided that new creditworthiness is established. Foreign aid also clearly can be helpful in certain circumstances, particularly for humanitarian relief, cases of very clear market and government failure (which are rarer than commonly publicized) and public health, particularly, as Sheri mentioned, in the case of HIV/AIDS, but has its own problems when it is a substitute for real investment capital.
However, the centralization of debt relief and aid, even when coupled with a demand for better governance, as a plan to "Save Africa" creates a notion among investors and policymakers of a sub-Saharan Africa that reeks of a bad Oxfam advertisement (e.g. with 12 pounds a month, you can ensure that little (insert African name) can have a good meal every day). The "charity case" notion makes sub-Saharan Africa out to be a pervasive basket case, constantly facing starvation, disease, civil war etc when the reality for much of the continent is very different. Certainly, there are pockets of the continent that fit the charity case notion, but nowhere in this worldview is the Africa of improving governance, return of the rule of law, vast natural resources and a pragmatic, entrepreneurial culture, that exists in many parts of the continent and are arguably the foundation for the next rapidly developing economic region, given access to capital. As long as the negative, charity case, perception of Africa exists globally, it is a critical impediment to real prosperity.
Theroux is wrong as well. Africa absolutely needs "more money". However, the money it needs the most is not foreign aid, is not debt relief, is not even money for public health programs. Except in limited and specific circumstances, Africa does not need charity. Africa needs "more money" in the form of huge amounts of global risk capital, equity and debt, that can build the industrial and manufacturing base that can employ millions and provide even more with the basic tools of prosperity, support the entrepreneurs building a service industry, provide access to global trade markets for many more people, etc. Certainly capital is not the only thing that Africa needs but it can create a virtuous cycle, funding the educational institutions needed for a professional middle class, supporting the civil society that a sizeable middle class engenders, ultimately allowing Africans to take ownership of their resources.
The "Save Africa" message frightens this absolutely necesary capital, creating an image of a civil society and economy that are destined to fail without aid, when the reality could be sucess with capital investment. I am confident that the African market could provide attractive returns for significant investment capital but my experience is that the market tends to view Africa as a charity case and not worthy of consideration of real investment dollars. This is in no small part due to the branding of Africa that Bono and others create. Though the branding issue is very significant, this is not just a branding problem. A culture where debt relief and aid are seen as real solutions is unlikely to engender the discipline and pragmatism necessary to attract the vast amount of capital that Africa needs to develop.
PS: There are other things troubling about the Theroux piece like issues about free movement of people but this post is already too long.
