Why was the Marshall Plan so successful in developing Germany after WW2, and why was a bigger sum of aid so unsuccessful in developing Africa? (The official name for the US Marshall Plan was the European Recovery Plan.)
Foreign aid for Africa, especially South Africa, is a hot topic now, with Trump’s shutting down of the US Agency for International Development (USAID) and the ending of the US President’s Emergency Plan for AIDS Relief (PEPFAR). Why does foreign aid sometimes promote economic growth, and sometimes retard it? In Africa, it is very difficult to find examples of countries where foreign aid has boosted economic development.
The question above is a bit cloudy. West Germany certainly did stage a spectacular economic and industrial recovery after the Second World War, and did receive a lot of Marshall Plan aid from the US after 1948, but was already recovering before 1948 and it is difficult to say how much the aid helped.
The same applies to other West European countries (Marshall aid was offered to East European countries, but the Soviet Union refused it). In Africa, the effects of foreign aid are mixed. Some types of aid, such as specific programmes against diseases, do seem to help a lot (although one programme, against malaria, was a catastrophic failure), but programmes for economic development usually do not help, and often make things worse.
In the Second World War, massive bombing raids by Britain and the US had laid waste to many German cities, such as Hamburg and Dresden. My mother, an English WREN officer, was stationed in West Germany shortly after the war. She saw rubble and ruin. Some years later she returned and saw a miraculous recovery. The German economy went on to outperform the British one. Was this because of aid? After all, East Germany did not get Marshall aid (Russia wouldn’t allow it), and East Germany made no such recovery. Or was it for other reasons? Germany had a highly advanced economy before the war, and legendary skilled workers. But this applied to both West and East Germany. The main explanation for their different fates is simply that West Germany chose capitalism and East Germany had communism thrust upon her. In 1949, the great Konrad Adenauer become Chancellor of Germany. He turned Germany into a mighty industrial power. He chose Christian family values and capitalism. If Marshall aid did work in Germany, it was because Germany already had the right policies, thanks in considerable part to Adenauer.
Pitifully low
Life expectancy in Africa has grown (from 40 years in 1960 to 65 years in 2025) and food production has increased. But economic development and growth have been pitifully low – especially when compared with Singapore, South Korea, Taiwan and other emerging economies. On balance, most aid for development has not helped at all. The Economist of 8-14 March has a cover story on “The Future of Aid”. It quotes the US Centre for Global Development as saying, “There is no country that has really grown from aid”, and it writes that “from 1970 to 1997, aid was found just as likely to shrink the world’s poorest economies as to help them grow”. The Economist says that the biggest successes of foreign aid are from global health programmes and humanitarian aid after floods and famines.
PEPFAR has been a huge help to South Africa. I had not realised how big it was until I heard local health experts saying how hard it will be to fill the hole in funding for the drugs, treatment and education on HIV/AIDS when it leaves. There is grim irony here. South Africa has the world’s largest number of people infected by HIV (which almost always causes AIDS, which untreated has a fatality rate of 100%). The culprit for this calamity is the South African government under the ANC in the early 2000s. Official ANC policy, coming from the President himself, was that HIV cannot cause AIDS and that anti-retroviral (ARV) drugs for AIDS were not allowed. It is estimated that over a quarter of a million South Africans have died so far because of this ANC policy. PEPFAR has helped enormously in preventing HIV infection and treating AIDS. So the hated Americans have helped to save South Africa from a deadly disease that the ANC government denied was caused by HIV. I very much regret the ending of PEPFAR and wish I could ask the US Government to reverse its decision here. Just because the ANC has shown how much it hates and despises the US, and sides with her enemies, including terrorist enemies, is no reason to punish – or indeed condemn to death – poor South Africans who have had no part in the ANC’s abuse of human rights.
One terrible example
There is one terrible example of the harm Western environmentalists did to the poor, dark-skinned people of the world, and this is over DDT. Malaria has been a deadly scourge of humanity all over the world for centuries, probably thousands of years. In the awful cold weather of the 17th Century, malaria decimated Europe’s population. It probably killed Oliver Cromwell and many other famous men. Then in the 20th Century, the chemical DDT was synthesised for some other reason, and it turned out to be miraculously effective in deterring the malaria mosquitos and certain other vermin. It was sprayed over soldiers in WW2, causing them no harm whatsoever but rescuing them from body lice. It was used against malaria in Europe and America with stupendous success. It completely eliminated malaria from these regions. It was abused by being sprayed on crops, but without any serious ill effects. It was never shown to cause any harm to humans, even when abused. It did not harm bird populations, including bald eagles and peregrine falcons. It did not cause eggshell thinning. But the greens latched on to it as a deadly menace coming from naughty industrial society, and condemned it without giving any good evidence against it. In 1972, the US Environmental Protection Agency (EPA) banned DDT, refusing point blank to give any reasons for the ban. In true imperial fashion, the US greens persuaded African countries to introduce the ban too. They did. Malaria, which was being rolled back by DDT, came storming forward again. Tens of millions of people with dark skins died. The greens were very pleased. One of them, Charles Wurster of the Environmental Defence Fund, was asked if the banning of DDT would cause more human deaths. He was widely reported as answering, ““People are the cause of all the problems. We have too many of them. We need to get rid of some of them, and this (malaria) is as good a way as any.”
But maybe the anti-DDT catastrophe could not rightly be grouped under “global health programmes”, most of which do good.
Three reasons
One of the best commentators on African development, or lack of it, is Greg Mills. His latest book, Expensive Poverty: Why aid fails and how it can work, gives three reasons why aid has failed: “state weakness”, “corruption” and “wrong-headed donors”. The biggest problem of all is that most African governments love state control and hate the free market. They want to channel all aid for development through themselves, to benefit their families and comrades and further the cause of socialism. (I haven’t read Mills’s book, only a blurb about it, but have no doubt he deals with this rigorously.) Of course, a lot of the Western bureaucrats who controlled the aid money were themselves socialists, also believing strongly in state control and collectivism, and disliking private enterprise and individualism. Western donors just loved Julius Nyerere, the prattling socialist dictator, who was President of Tanzania from 1964 to 1985. Following Lenin, he collectivised Tanzanian agriculture in a system of state-controlled unjamaa villages. Naturally this destroyed agriculture in Tanzania and, equally naturally, Western aid donors just loved it and gave him more and more to bring the country to ruin. (Where did Nyerere, a socialist son of the African soil, die? Why, in a private clinic in London, of course.)
The Economist surprised me by citing Malawi as one of the biggest receivers of foreign aid. I find this telling, because Malawian people outside of Malawi have a high reputation for being enterprising, hard-working, honest and reliable. In my letter-box in Fish Hoek, I often got little notes saying, “Malawian gardener / domestic worker looking for work”. They know that white people would rather have Malawians working for them than South Africans. (This leads to xenophobic resentment.) Yet The Economist writes of the Malawian capital: “Built in the 1970s by the World Bank, Lilongwe’s straight streets are filled with charities, development agencies and government offices. Informal villages are home to cooks and cleaners for foreign officials; the entrance to each is marked with the flag of its national sponsor.” It also writes: “The Malawian state, for example, employs many more people to manage aid than to oversee trade.” I see that Malawi is the fourth poorest country in the world (ahead of Afghanistan, South Sudan and Burundi) with an annual GDP per capita of only $400. I find it hard to believe that aid has not stunted Malawi, has not corrupted it into reliance on others, and has not deliberately stifled its enterprising wealth-making people under the dead hand of its statist, wealth-taking politicians.
Socialist East Germany
I mentioned that capitalist West Germany far outperformed socialist East Germany, despite both having the same high-skilled, potentially very productive people. I also mentioned that some East Asian countries, such as South Korea, which were as poor as Kenya in 1960, are now much richer. But North Korea is now much poorer than Kenya. North and South Korea have the same people, the same geography and the same climate. Yet South Korea is rich, well-fed, healthy and economically advanced, while North Korea is poor, hungry, sickly and economically backward. The complete answer is that one is capitalist and the other socialist. Africa is poor because most of her governments are socialist. If you give aid to a capitalist country with a just leader, such as West Germany under Adenauer, it will likely do good. If you give it to a socialist country with a corrupt leader, such as many African countries, it will likely do harm.
There is a simple recipe for how to make any country prosperous, whatever its races, whatever its natural advantages or disadvantages. You just need free enterprise (capitalism), free trade, private property, just laws and just justice. To achieve these, you need a small, clean, competent, impartial government that keeps the peace, defends against criminals from within and the enemy from without, and leaves its enterprising citizens, the wealth-makers, to do business as they wish, without state interference. This recipe has never failed. Aid to any country following this recipe will be helpful. Aid to any country not following it will likely be unhelpful.
PEPFAR has been helpful for South Africa. It has saved lives. Development aid to South Africa, aimed at promoting economic growth, would likely be harmful unless it was limited to specific projects with good business cases, and given directly to the businesses managing the projects, and not via some government agency. Otherwise, the aid would just disappear into the pockets of the rich, connected elite of BEE, affirmative action and cadre deployment. If the government chose the project to use the aid money, then it might as well be poured down the drain. The ANC, which is strongly socialist, consists of wealth-takers not wealth-makers, and the whole secret of helpful development aid is to give it directly to the wealth-makers.
Double stigma
I was in Kenya about 25 years ago. A friend working in Nairobi told me that a shopping centre in the city had horrid dirt roads, which turned to mud when the rains came. The shop owners, who carried the double stigma of being capitalists and Asians, asked the government if they themselves could pay for all the roads around them to be tarred, to improve access for their customers (so they could make more money by providing a better service). The government refused point blank. It wanted some foreign company or foreign aid sponsor to tar the roads so that they could take a fat bribe from them. The ANC’s BEE laws are a variation of this.
The standard platitude is that “Foreign aid is money taken from poor people in rich countries to give to rich people in poor countries”. Like many platitudes there is some truth in it. Money is taken from British workers to give to African dictators so that they can buy the latest Mercedes or Ranger Rover, or private health care in Europe. But this is also to over-simplify things. In the specific instances of medicine and natural disasters, foreign aid has been a huge benefit. In the case of economic development, foreign aid can help if the country already has good policies, and the money goes to the wealth-makers. Otherwise, it is probably worse than useless.
All African countries can develop quickly – will develop quickly – if their governments just adopt good policies and implement them.
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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