Sowing Seeds of Poverty – US Aid to Ethiopia

by Aanya F Niaz

 

“US Aid to Ethiopia: Sowing Seeds Of Poverty”

 

“Strategic Politics of Aid”

The role of foreign aid has developed into a controversial topic of debate. To what extent has aid promoted economic and political stability in developing countries is far below donor predictions. In fact, global poverty has been perpetuated by the very presence of foreign aid in these countries. With the US providing over $932 million during fiscal year 2010 to Ethiopia, many sources, including USAID claim Ethiopia’s progressiveness to the US aid, despite cutting off all military and development assistance in the years before due to Ethiopian ties with communism during the Derg era, hindering Ethiopia’s journey to economic and political stability. Any US aid is provided only during times of US sympathy and need to revitalize relations with Ethiopia to achieve strategic presence in the African continent, disregarding the African country’s time of need and disaster. With such strategic aims and threats of sanctions, it is increasingly difficult to afford the US with any Ethiopian successes. Therefore, the purpose of this paper is to highlight, using economic and political variables, reasons why aid provided by the US should be decreased and the level of transparency should be increased. To illustrate the detrimental effects of foreign assistance, this paper will cite examples of African countries suffering with the same fate of aid, in context with Richard Joseph’s Smart Aid for African Development and The Congress of the United States report on The Role of Foreign Aid In Development. To further explicate the detrimental effects of US aid, Ethiopia will be the focus of the paper, exemplifying that an increase in aid is not always the solution to troublesome and corruptive variables in a nation. In support of this argument, Finally, this research will lead to politically and economically viable recommendations that can make aid an effective instrument of improvement in poverty-stricken countries.

 

The Federal Republic of Ethiopia is situated in the heart of the volatile Horn of Africa. It reveres its ‘non-colonial’ history, however surrounded by countries that experienced profound colonialism; the remnants of hierarchy and feudalism persist.  With a highly diverse population, 77 ethnic groups flourish with their own languages and traditions[i]. US-Ethiopia relations were established in 1903, and these ties strengthened after World War II on the basis of the 1951 treaty of amity and economic relations. After Ethiopia’s revolution, these relations began a downward journey with Ethiopian links to international communism, and any requests by the Ethiopians made to fight the Eritrean secessionist movement were denied by the US, forcing the African country into further chaos and devastation. These ties were renewed with the downfall of the Mengistu regime and since then over $932 million have been provided by the US as ‘developmental aid’ and famine assistance. Significantly, during the revolutionary times in Ethiopia, food was on the decline and casualties were ample taking over hospitals and hindering the Ethiopian economy. However, the US kept it’s eyes shut because it was not of strategic intelligence to aid a country, even if it needed consistent aid support, if they had ties with international communism. The US was developing into the world’s greatest power and no country’s suffering or devastation was significant enough to make the US re-think its actions and strategies towards Ethiopia. It became clear that the political variable was fundamental in US-Ethiopian relations, which as explained in this paragraph, completely undermines and defeats the purpose of aid-provision. To further exemplify this reality, if the US had not halted its aid provision to Ethiopia during it’s revolution years and post-civil war times, the troubles of famine, poverty and political instability would not have exacerbated to the point that they did in the early 2000’s. The US would not have felt the necessity to provide such unrelenting amounts of aid if it had consistently managed it’s relations with Ethiopia on a separate level from aid provision during times of disaster in the poverty-stricken African nation.

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This section will briefly explore donor policies in practice and the challenges of poverty reduction and aid effectiveness, as described and explained by Richard Joseph in his Smart Aid for African Development[ii]. Following this section will be recommendations made to use the aid being provided in beneficial ways so as to promote genuine economic and social development and growth in African countries serving as recipients of US aid.

Since World War II, the US has spent over $1 trillion for foreign aid, so as to encourage social and economic reconstruction in the post-war era in Europe. With the increase in foreign assistance, the Congress in Washington began to formulate answers to two major questions so as to make evident its credibility:

  1. What role does foreign assistance play in promoting economic growth and improving human welfare in developing countries?
  2. In what manner can this foreign aid be provided to establish the US as the ‘police-man’ of the world and make it’s assistance a requirement in these countries?

The first answer is quite obvious; US began to empower rehabilitation in post-War countries in Europe and seeing that they were capable to get back on their feet, it began to channelize its strategic interests in other parts of the world including the Middle East and Africa. They did not want these regions to digress so as to propel further destabilization in the world, in particular because of their oil and mineral reserves. Therefore, the US began its foreign-aid provision journey. With attaining Egypt as a regionally strategic ally by aiding them during times of war, the focus shifted to Africa so as to maintain US presence in the largest continent of the world. If there was economic and political growth in countries of Africa, and this growth was under the banner of US aid, then acquiring African assets such as oil, precious stones i.e. diamonds and minerals would be an easy ball game. At this time, the US step foot onto African soil with strategic interests in one hand and plans to label these countries in desperate US need in the other. Therefore, the answer to both the questions afore-mentioned became intertwined, one feeding into the other and the US only providing assistance when its own needs and wants were met.

The role of foreign aid emerged as the topic of debate and media. “The average amount of aid transferred to developing countries in small compared with the size of their economies – 2-3 percent of their gross national product.” However, the effects of receiving aid gradually became apparent and aid’s detrimental effects could no longer be concealed, much to the displeasure of Washington. Receiving too much aid has the capability to overwhelm a country’s absorptive capacity and undermine the effectiveness of aid itself. Saying yes became a required answer by these developing countries; otherwise the US imposed sanctions and petrified the political administrations of future demise due to instable economies and lack of social development. Secondly, it is no mystery that receiving aid has advantages if the government and its economic policies are stable and equal, if a country has a highly corrupt political system, as do most African countries, then this money only perpetuates further corruption and destabilization. The way donors give foreign assistance also influences the ways and manners in which the aid is used. It has, needless to say, been effective in alleviating the destruction of natural disasters and emergency situations. Making developing countries dependent on this assistance and overwhelming them with loans, however, makes impossible the reconstruction in the future because the country is highly in debt and cannot even afford its citizens basic necessities since the revenues being generated are channelized towards the US to return its loans, in order to keep receiving this aid. It is clear how this turns into a vicious circle of affairs; no longer is the developing country free of external factors. In fact, its internal institutions must run in accordance with foreign countries, i.e. US if it wants to survive.

Various political, strategic and economic arguments make for the case of criticizing aid programs. These include, first that foreign aid does not, actually, contribute to economic progress in developing countries because the aid that is intended to cater to developmental needs diverts the money to non-profit activities and is pocketed by the corrupt top-leaders, whose hunger for power and authority is the first priority. Secondly, aid is usually transferred to the governments of these countries, which increases the power of the government itself and the needs of society and the community become secondary. With more money coming in, the governments begin to use it to encourage political and administrative stability, to meet the needs of the donor to acquire a politically stable institution; therefore none of the money actually makes its way down to the population. Thirdly, the aid is not for all, in fact it is for a certain identified groups of people that can benefit the donor, in this case, the US. The donor highlights its policies, and these include the persecution of various minority groups, restrictions on private trade and inflow of private capital, redistribution of land, price policies and the increase in privatization of subsistence, decreasing agricultural production and employment opportunities for the average person residing in any developing country. In fact, Africa had been relatively low priority on the US foreign aid program; it has received approximately 10% of US bilateral assistance especially in the 1990’s[iii]. Stepping forward, the US saw an opportunity exploit Africa’s desperate needs and poverty-stricken existence, and began to increase its aid. However, this came in a form of food aid and military assistance, both forms of aid met none of the needs that Africa actually had.

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“Development Without Freedom”

Richard Joseph’s efforts to understand the limited, restrictive, however at times sincere sentiments behind aid, and the risks and unforeseen circumstances that arise provide an optimistic platform. In fact, this research makes possible for politically and socially viable suggestions that can actually make aid an ingredient of development. Joseph argues for various factors that amalgamate to make for a hopeful argument. Firstly, a fundamental aspect of ‘smart aid’ is the development of trust between two parties in the aid relationship; a trust based upon the following elements: a degree of shared purpose, commitment, reliability and familiarity with local conditions, transparency and honest communication. As Joseph highlights, the debate on African development has often been conducted in a generalized fashion. Unfortunately, these sweeping generalizations obscure the fundamental importance of specific country dynamics in determining aid outcomes. Apart from abundant natural resources in some counties, an important of Africa’s wealth resides in deep reservoirs of non-state, unofficial and none-profit organizations. These have made it further difficult to decipher the needs of particular African countries in context with their precise and specific variables. Joseph goes on to outline “external assistance is never the key factor in promoting internal change” (p.105, Joseph).

What can actually make aid efficient and effective is the manner in which aid instruments available to the national governments and administrations are channelized. Their personal ideas, as Joseph correctly observes, along with convictions and traditional histories can inform them to envision better futures for themselves. Policies that are offered by the donors should not be accepted unless they are tailored with specific requirements and tastes of particular countries. This will not harm the countries; in fact promote growth and a standard of institutionalization. Since the US will not offer foreign aid if their requirements aren’t met, the countries do not have to bluntly disapprove of what they are offering, but to only accept if they can be tailored. If the US does not support this, it is not the end of growth for their aid provision under their own restrictive policies would actually disadvantage the country even further. For aid agencies deployed in developing countries, recognizing the dynamics of the country they are in is imperative if they want cooperation and if they want to acquire success. “From this perspective, aid should be considered as an experimental mission furthering economic, political and social change amid uncertainty.” (p.105, Joseph) This is of great significance, since such countries already have uncertain presents and futures, which make any promises of returning loans and returning debt uncertain. Therefore, encouraging aid in forms of grants and institutions that will work with the local communities should be manifested in developmental strategies. For an example, in Senegal, civil society and women’s associations participated in the formulation of PRSP2 (p.109, Joseph) and will continue to be involved, so that these groups can make increasing use of the presence of relief agencies. This participation is not only at outward levels, but also in the decision-making and formal conduction of meetings. Another example of poverty reduction is that of Ghana in 2005, where the head administration recognized that the key conditions of admitting and approving of US aid is fostering key leadership out of self-respect, working for themselves and individually forming ideas and collectively manifesting them (p.111, Joseph). The quality of staff and their employment positions should also be taken into consideration, with the local administration setting a standard of conduct and equality so that when foreign agencies step in, they are offered a specific framework to work within, not dismissing the local traditions and ways of attaining livelihood. Achieving good results depends heavily on the quality of the aid agency staff; therefore providing them a locally crafted agenda will acquire success for the locals in ways unforeseen before. The fundamental concept of development is that of sustainability. After such agendas are set and aid agencies are introduced to the rules and regulations of the localities, then sustainability should become top priority. This can be achieved by including locals in every level of decision-making and development. In institutions such as schools, hospitals and colleges that are working with aid agencies from the US, including students and local citizens in the construction, reconstruction and administrative curriculum revisions would be most beneficial. The agenda should not be of promoting one political institution of democracy or another, but to embrace whatever scattered pieces of that country exist and working with those. The only way to achieve this, and not to sideline aid offerings, is to work with the political and strategic institutions that are deploying aid and collectively coming to terms with the realities that are in place and the realities that will be in place in the near future. With this optimism in mind, we will revert back to the detrimental effects of aid and why such locally administered aid strategies must be put into place.

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“Case of Ethiopia: Economic Therapy Through Free Markets”

Now we will explore the flow of foreign aid and private capital to developing countries in general, so as to emphasize on Ethiopia’s case study as mentioned above. We will analyze the reasons for and against US aid and how it actually meets the strategic interests of Washington incomparably to meeting any needs of developing countries. This section will highlight the types of US aid in relation with its role to encourage development, and outline the challenge of aid for development.

In order to highlight the economic variable at play in wreaking havoc in Ethiopia with US aid trickling in, the ‘famine crisis in the Horn’ will be used to explicate the situation. It will make evident that despite the USAID workers claiming the climate to be the cause of famine in this country, it is actually the US encouragement of free markets and the World Bank and IMF’s strategic emphasis on Structural Adjustment Programs (SAP) that have lead to famine extending to even the affluent agricultural families in Ethiopia. Over 15% of the entire population, reaching 8 million people have been affected and it is no longer a secret that boosting a free market economy is detrimental for Ethiopia, especially during it’s feeble years of acquiring economic stability. It has lead to 8 million people being locked into “famine zones”: “What the media tabloids fails to disclose is that – despite the drought and the border war with Eritrea – several million people in the most prosperous agricultural regions have also been driven into starvation. Their predicament is not the consequence of grain shortages but of “free markets” and “bitter economic medicine” imposed under the IMF-World Bank sponsored Structural Adjustment Program (SAP) [iv].”

Ethiopia produces 90% of its consumption needs. However, the World Food Program (WFP) stated that there was a deficit of 13 kilos of grain per annum in year 2000, even though in Amhara and Oramiya there was over 25% of excess in grain production. The WFP highlighted the ‘need’ of disaster relief so as to prove itself credible for evaluating the famine crises. What the world was not to see was that there was excess of food produce, but since the free markets were in full swing, it left the regular farmers and employers in the agricultural industry in chaos. As the famine crisis was being used to label the poor country as devastated and desperate for Western assistance, the economic structure of Ethiopia was also being dominated, therefore resulting in an agricultural and economic conundrum.

With Ethiopia’s transitional government coming into place in 1991, the usual US foreign policy of prescribing a severe deficit of aid was plugged in on the platform of IMF’s structural programs. Washington tagged Ethiopia as Africa’s post Cold War free market showpiece. The purpose was to prove that free markets, in opposition with Marxist theories of communism were the correct track to achieve economic stability. The US saw this a chance to prove it’s emerging theories of power and control as successful. The Structural Adjustment Programs, which were to support developmental purposes were greatly misrepresented and disregarded by way of reducing the social spending budget. Instead with Ethiopian-Eritrean chaos, the US offered military assistance in the form of weapons and arm sales to Ethiopia, increasing US military budget. In order to pay back the debt, more than half of Ethiopia’s export revenues were offered as debt-relief to the US, further disabling funding for development projects. Under the disguise of ‘help’, Washington actually formulated a precise plan of strategy that was to take place in Ethiopia and this was put into action as soon as the military aid was offered in order for it to be used by the Horn of Africa. Not surprisingly, but equally despicable was the enforcement of austerity measures, which hindered the possibility of any post-war rehabilitation of the country’s shattered infrastructure. In fact, the creditors demanded that Ethiopia’s financial assets be invested in Price Waterhouse Cooper in order to achieve equity in property sales. The control of these investments and most of Ethiopia’s assets was forced into the hands of Washington, who conveniently demanded that all financial and public institutions be privatized leading to unbelievable rates of unemployment. Even the civil servants working in schools and hospitals lost jobs as no monetary funding was being offered at the state level; freezing all labor opportunities for the average Ethiopian and compelling the country into privatization and corruption. Now, only those individuals and institutions that had acquired wealth, not income, over the years had the opportunity accumulate further funds as long as they did so surreptitiously. The country was thrown into further inflation and with famine at hand, the creditors continued to blame climatic reasons and enforced trade with Ethiopia in order for the poor country to acquire basic food produce. The country, which had always met 90% of it’s consumption needs was now unable to do so, with the control of agricultural land in the hands of the top landlords and feudal lords and needless to say, the US. “The enforcement of severe austerity measures virtually foreclosed the possibility of a meaningful post-war reconstruction and the rebuilding of the country’s shattered infrastructure. The creditors demanded trade liberalization and the full-scale privatization of public utilities, financial institutions, State farms and factories. Meanwhile, corruption became rampant. State assets were auctioned off to foreign capital at bargain prices and Price Waterhouse Cooper was entrusted with the task of coordinating the sale of State property.[v]” Therefore, we can see the economic variable being manipulated by the US to afford it an increase in military spending, feeding into the vicious circle of pretend assistance to a country, which had previously met more than majority of its needs.

 

 

 

 

 

 

 


[i] US Dep of State. “Ethiopia.” U.S. Department of State. US, 11 Nov. 2011. Web. 02 Dec. 2011. <http://www.state.gov/r/pa/ei/bgn/2859.htm&gt;.

 

[ii] Joseph, Richard A., and Alexandra Gillies. Smart Aid for African Development. Boulder, CO: Lynne Rienner, 2009. Print.

 

[iii] United States, The Congress. The Role of Foreign Aid in Development. Rep. Washington D.C.: Congressional Budget Office, 1997. Print. May 1997.

 

[iv] Chossudovsky, Michel. “Sowing the Seeds of Famine.” Global Report Report. Global Research, 2000. Web. 2 Dec. 2011. <www.globalresearch.com>.

 

[v] Chossudovsky, Michel. “Sowing the Seeds of Famine.” Global Report Report. Global Research, 2000. Web. 2 Dec. 2011. <www.globalresearch.com>.

 

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