What do they have in common?
When looking at the current situation taking place in Greece it is not hard to imagine the parallelism it follows with developmental aid in Africa. However the ironic spin with this story is the developed stage of Greece. If you had to think of one word to describe the current state, many would think austerity; other would think debt or bailout, or even predictions such as a crumbling of the EU structure or the euro. But who would think of the word aid? This is a far reaching analysis or more of a comparison. What can aid learn from the Greek Crisis?
Many think of aid as money flowing to those developing countries in Africa, Latin America, Eastern Europe, Asia, and the list goes on- but debt? What does aid have to do to relate with debt? Well, what many fail to realize is that aid is a debt instrument, loaned in vast amounts to these nations at often below market interest rates and for much longer maturities (World Bank lends at a 50 year rate). Now this is only one type of aid, but it is the majority. So let’s look at this Greek crisis as an experiment where funds (lets call it “aid”) get pumped into a developed nation to bring back its sustainability.
First, let’s look at the “Greek condition” and how they differ from those other developing African countries. Greece, in crisis or not, is still highly developed. It has a firm infrastructure providing access to public needs such as water, electricity, sewage, and other utilities. It also has a much more educated population with many attending university and a higher literacy rate compared to those in developing in Africa. The government is established, even if slightly corrupt. And the economy, other than its extreme dip and use of bailout funds is still highly integrated with the global economy with advanced establishments and systems. It is still a market for private investments. So I have outlined the differences to basically what a non-developed country is. Now let’s look at it this “Greece bailout.”
The bailout is basically debt instruments (aka “borrowed money”) such as large funds and bond issuances in which Greece gains cash flow to keep its economy afloat and charged at a market rate (even though its cost for debt is extremely high compared to its other European counterparts). Yet with such a flux in coming money, why is it not getting any better? Now lets relate that back to this Greek experiment and reword it a little- Why is the aid not helping the developed Greece? Why does billions of Euros invested into to a fairly structure country lack effectiveness?
This is where the lines of aid in Africa and Greece intersect. Aid like the Greece bailout is based on similar debt instruments. When looking at the flows of aid that get piled onto these countries, often consumed by waiting, corrupt politicians and governments and given loan conditionality for predetermined programs chosen by the majority of international bodies-it is not being used effectively. Sound familiar? An “aid condition” occurs where these countries become dependent on it as a vital life source for its government and low influence of good on its economy. With such a large flow of aid going to these developing countries, creating a sense of over-indebtedness, where the aid- the proposed medicine to development is actually supporting the disease of poverty, corruption, social unrest, and a bleak potential for the future. The funds come in, money is dispersed and stolen, and the same funds are also used repay the other aid debt obligations pushed upon them earlier. Just like the Greek crisis this revolving swap of incoming funds going to the repayment of private debt holder, governments, and other agencies such as the IMF. So it creates a sort or fluid, low impact, empty source of creating value and development. I am not promoting that grants should take place of aid and debt be forgiven but, I want to acknowledge the sort of ineffectiveness it is has on a developing country and how aid programs are blind to the microcosm that is happening even on a developed country with all the criteria, such as Greece. If it is not working in a developed country with all the advantages over the developing country in Africa- why would aid programs not realize this? There have been countries that have many of the same “developed” criteria, used aid, and did succeed in developing a sustainable nation such as Botswana because it was managed correctly with the nation in command. Imagine if these developing countries had access to private investments, where they became integrated with the world economy and had the power to help them with having the overhanging hindrance of a well intentioned, yet ineffective program. Aid should pave the way the way for private investments- but not crowd them out. Now this was general but it still draws some close comparisons to comparing the Greece bailout as a model of aid to a developed country, how it is not working, and how this alludes to ineffectiveness of aid programs in Africa. This shouldn’t be “Greek” to us.