Think Again: A Marshall Plan for Africa

America brought Europe back to life a half-century ago. Why not give Africa the same chance?

BY GLENN HUBBARD | AUGUST 13, 2009

Just six months into his term, U.S. President Barack Obama is already modeling himself after the country's most transformational Democratic leader, Franklin D. Roosevelt. As Secretary of State Hillary Clinton visits Africa this month, now would be the perfect time to follow in the steps of Roosevelt -- and the most transformational Democratic secretary of state, George Marshall -- by announcing a second Marshall Plan. More than half a century after the United States helped rebuild a war-torn Europe, it's time Africa got the same chance.

The Marshall Plan was fundamentally different from the aid that Africa has received over the past four decades. The Marshall Plan made loans to European businesses, which repaid them to their local governments, which in turn used that revenue for commercial infrastructure -- ports, roads, railways -- to serve those same businesses. Aid to Africa has instead funded government and NGO development projects, without any involvement of the local business sector. The Marshall Plan worked. Aid to Africa has not. An African Marshall Plan is long, long overdue.

Aid groups will argue that such a plan, grounded in building up the local African economy, can never work. Here are the objections they'll make to an African Marshall Plan -- and why they're wrong.

PIUS UTOMI EKPEI/AFP/Getty Images

 

Glenn Hubbard, chairman of the White House Council of Economic Advisers from 2001 to 2003, is dean of Columbia Business School. With William Duggan, he is co-author of the forthcoming book The Aid Trap: Hard Truths About Ending Poverty.

MASWANA

11:39 PM ET

August 14, 2009

Africa doesn’t need a Marshall Plan, rather George Marshall

I’ve enjoyed reading this article and I agree with the authors’ view that, as far as Africa is concerned, the current aid paradigm is flawed, for the reasons that the aid system is on government or NGO projects, rather than local businesses. Still, I’m not quite sure whether a Marshall Plan type of external intervention can ever work in Africa. Here are my reservations and views.
First, in addition to its political aim, the Marshall Plan was a reconstruction (not a construction) plan, which implies the pre-existence of knowledge and human capital require to re-build the devastated Europe. After the WW2 Europe was devastated, but its entrepreneurs/local business class, which built and maintained its prewar infrastructure/institutions, were still able to re-build their economies. Africa has been poor for decades or centuries and has yet to develop an adequate human capital able to absorb huge inflows of Marshall Plan type. Since entrepreneurship is known to be crucial in stimulating economic growth through the creation and transformation of knowledge, it could make sense to think that certain types of government and NGO projects can still help.
Second, as a catalyst, there is no doubt that the financial resources made available by the Marshall Plan were important. Yet, related conditionalities were also a key element in breaking up structural rigidities and bringing about economic growth and prosperity. We know well how reluctant most African leaders are when it comes to creating a business friendly environment.
Third, simply purring huge financial flows in the end of a government that doesn’t know how to build a road (i.e. absence of the required knowledge or entrepreneurship) will only fuel the most favorite sport of African leaders: corruption and all kinds of wastes. While European leaders didn’t divert US fund into their own pockets, very few African leaders would miss such an opportunities “from heaven”.
Bref, Africa doesn’t need a Marshall Plan, rather the like of George Marshall.
Jean-Claude Maswana

 

EDWIN ARRISON

12:02 AM ET

August 15, 2009

How about supporting the existing Marshall plan for Africa?

This article is good, but it gives the impression that once again someone from the outside (with a pre-drawn up plan) must do something "for" Africa and Africans. There is an existing home-grown Marshall plan on the table called NEPAD. Perhaps the writer should consider urging all parties in the world to support that plan first, and even strengthen it where it is considered weak. You might want to find creative ways of implementing such a plan: eg. In South Africa there is a Broad-based black economic empowerment plan on the table, to ensure Black participation in the economy here. A Marshall plan might want to start in South Africa by supporting black business, but with the express understanding that those who are helped must then help one business in a country other than South Africa. This will do two things: it will strengthen black business in South Africa (thereby also strengthening democracy) and it will re-connect black business in South Africa to the rest of the continent in a real way.

 

DECONSTRUCTOR

3:21 AM ET

August 15, 2009

colonialism was good?

It is strange to hear an argument that colonialism was good for Africa. You misinterpret some short term gains, such as, joining international trade of some African nations under the colonial rule and making pennies in the face of long term damage that colonialism inflicted on the African nations, such as, military rulers, dictatorships destroying any seed for democractic governance and also in economic terms subordnitating the economy of a colony to that of its master. There are innumerable books on these topics and you better bother yourself read some of them before writing an article on the retractive benefits of colonislams.

 

CHRISWALKER

8:35 AM ET

August 16, 2009

Why your title is all wrong:

First, for such an ambitious title, the author does little to actually substantiate his claims about Africa's colonial experience. Other commenters have already touched on the obvious flaws in making this statement.

Second, the author throws around the term poverty too freely. Though money is one thing, the forces of original accumulation took the ability of many to seek their own sources of food, shelter, and other basic needs through traditionally successful methods. Surely, during the colonial period, life expectancy may have spiked, but a skeptic might attribute this to European business forces ensuring their access to free/cheap reliable labor. After 1960, it follows from this that those artificial support systems crumbled - leaving urbanized populations to fend for themselves - hence the retrenchment of life expectancy and increased poverty.

Third, pages 4-7 say little to nothing about colonialism at all. They simply debate the merits of commonly held ideas about development - which in themselves aren't entirely new or controversial.

Last, as it's been said comparing Europe and Africa is certainly not a comparison of apples to apples. Though no one doubts Africa's ability to someday have the state capacity (democracy, corruption aside), population possessing the necessary skill sets, assuming room within the global economic system to make a European style comeback (debut) - the simplicity of the author's proposal is almost naive in it's scantness. His prescription applies the same "If only Western countries did X, Africa would become more Y" formula of every developmentalist that came before him.

In conclusion, as I stated last, Africa's development hinges on question of whether there is adequate room within the global economic system for 52 or so states to become "developed." Asia will not simply relinquish it's mantle as the world's supplier of cheap manufactures - and when they do - there are other regions more readily capable of inheriting this niche. The agricultural sectors are a travesty all their own. Mauritius, the author's glowing example, had been a low-income state based primarily on sugar cane. Now 22% are employed in hotels. Surely, the entirety of Africa cannot sustain itself on tourism. Therefore, insofar as the world's economy is reeling in crisis, I challenge the author to make a concrete proposal about the role Africa could play in an over-expanded world economy.

 

LENTULUS

12:11 PM ET

August 16, 2009

One note

Truman appointed Marshall Secretary of State on 21 January, 1947, so it is inaccurate to call him Roosevelt's.

 

KJAM

1:08 PM ET

August 16, 2009

Re: One note

Thank you for pointing this out. This is not only inaccurate, it is just wrong. Roosevelt's Secretaries of State were Cordell Hull, Edward Stettinius, Jr., and James F. Byrnes.

 

MOHAIR.SAM

12:37 PM ET

August 17, 2009

Just as misguided as aid programs ...

"But take a look at the World Bank's annual report, "Doing Business," and you'll realize that many African economies have never had a business market to fail -- thanks to their governments' dense, unnavigable regulations."

To say nothing of rampant corruption ...

So having a Marshall plan will change the underlying corruption and unreliability of African governments? I think not. There is a reason why business doesn't thrive across the continent, except in select locations. The vestiges of tribal rivalry and the associated favoritism of patronage ensure that corruption endures and thrives.

Sure, they'd sign on for whatever cash we'd pony up for whatever purposes we ordain. Somehow, those promised projects would find a way not to materialize, and you'd still have the same ultra-corrupt kleptocrats running the show as their people continue to suffer for it. Even if they did materialize, whom would they benefit, aside from the already well-connected? Without a history of maintaining what infrastructure is there, future prospects are grim, at best. Business gifts targeted at infrastructure development need some cultural sense of the importance of business and infrastructure to begin with.

Jean-Claude Maswana's comments sum it up perfectly.

 

FLACOJOHNSON

9:28 AM ET

August 18, 2009

Weak examples

The indisputable good news is that Botswana and Mauritius are relatively successful, but they are too easy to use as props for the magical power of the unrestrained free market. Both countries have populations of 1 million people each, and Mauritius is fortunate, in the context of conflicts on the continent, to have the Indian Ocean for borders. Botswana's well-being is due to diamonds and its relative freedom from colonialism (they were a poor, mostly neglected protectorate and discovered diamonds just after independence). Debswana, the partnership between the government and De Beers, contributes 30% of the GDP and diamonds account for half of government revenue. Yes, they manage it well and this is a great engine when diamonds are selling but the country just took a $1.5 billion loan from the African Development Bank (and is reportedly talking to IMF) to cover the recession-driven deficit. So these countries thrive within highly specific circumstances. It would be more worthwhile to examine what's working in Ghana....not that any of this is comparable to post-WWII Europe.

 

JUANITA123

6:59 AM ET

August 19, 2009

It already exists

The President should strengthen the Millennium Challenge Corporation, a US agency independent from USAID that exists exactly for this purpose. It's already operating a $6 billion foreign assistance budget, but it needs more to do the job right. (www.mcc.gov)

 

CARNEY

12:52 PM ET

August 20, 2009

Inapplicable precedent

At the end of WW2 (and in fact after more than a century of wars), Europe finally had borders that with some exceptions basically conformed to the ethnic lay of the land. Of course much of that was achieved by brutal bloodshed and mass deportations, but in the end the result, with some exceptions, was a collection of de facto or de jure ethnically defined nation-states, and thus a minimum of frustrated nationalism and irredentism and the vast majority of Europeans being the overwhelming majority in their own ethno-states. This contributed immensely to stability and amity, both within states and in inter-state relations. And thus made the Marshall Plan viable.

One of Africa's biggest problems is that it is a long way from that situation. Most of its states are not nations, but are better termed "post-colonies": huge, random chunks of territory whose borders were drawn up by colonial powers in the Berlin Conference of 1884-85 with zero consideration for local demographics, slicing through homelands of people who want to live together, and looping together other peoples that would prefer to live apart. While divide and conquer may have been an effective tool to preserve colonial power, upon the advent of decolonization, the Europeans should have convened an exit conference and re-drawn the borders to create real nation-states. Instead, the former Portuguese East Africa, German Southwest Africa, Italian East Africa, French Northwest Africa, the Belgian Congo (named for a river), etc. were simply spun off, given African names, flags, and black leaders. But they were and remain completely unworkable and a constant source of problems.

By splitting up ethnic groups, the arbitrary borders guarantee illegal cross-border migration, hiding from authorities on either side, lucrative smuggling, and an overall culture of lawbreaking (see the Pushtun and the Af-Pak border). Even looping together rival groups undermines civic-mindedness, respect for authority, and mutual identification and respect between the people and the government, because inevitably the state will be in the hands of one ethnic group that benefits itself at everyone else's expense, and each outsider group seeks to be in that position instead. Nearly all African political parties, factions, ideologies, and even armed movements - all the grandly named People's Patriotic Unions, National Salvation Fronts, Democratic Freedom Coalitions, and so on are mere fronts for one ethnicity alone, and thus all elections are mere ethnic nose-counts and like the coups and civil wars are raw inter-ethnic struggles for power and resources. Even in a best-case scenario, the absence of war or civil war, or tense tinderbox of potential war waiting to flare up, one is faced with pervasive cynicism, corruption, crime, disorder, and systemic failure, all of which to a great degree results from this unsatisfactory political situation.

And since each state is led by elites that benefit from ruling it, there's no hope of Africans themselves coming together to re-draw the borders to get a rational setup which would enjoy credibility and trust from the peoples there. Nor does any outside power have the moral self-confidence and long-term attention span necessary to invade the continent and overthrow all those states to do so itself.

Thus, no Marshal Plan will ever work.

There are other crucial reasons that Africa and its people are not analogous to Europe and Europeans, but this situation is a key one.

 

CARNEY

1:55 PM ET

August 20, 2009

A better way to help

One very helpful thing we can do for Africa (by which we mean black Africa; few wring their hands about Arab North Africa) is to break OPEC.

Think of how the price of a barrel of oil went up from $10 in 1999 to $140 in 2008. It caused political turmoil and eventually economic collapse in the US and other First World nations but the consequences for poor economies are horrific. As "Energy Victory" author Dr. Robert Zubrin has said,

"It is one thing to pay over $100 per barrel when you live in a country where the average person makes $48,000 per year. It is quite another if you are an African or Haitian making $1,000 per year. OPEC is starving many of these people by driving up transport, farming, and fishing costs."

Zubrin's simple but brilliantly straightforward and practical plan is to mandate that all new cars sold in America be fully flex-fueled, able to run equally easily on any alcohol fuel as on gasoline. That's about a $130 per car expense for automakers, basically lost in the noise, but it would have a profound impact.

First, note the sold in America, not just made - so as to include imports. Foreign automakers will not abandon the US auto market and will thus switch their production lines to flex-fuel components, and will not bother to continue with gasoline-only for non-US markets given the small total price difference and the expense/hassle of separate lines. Thus, our flex-fuel standard would become a worldwide standard, and cars sold all over the world would be alcohol-compatible; the unnecessary lock-in to petroleum-only would finally end. Since about 10% of cars on the road are new that year, in just 3-4 years the proportion of alcohol-compatible cars on the road would be big enough for gas stations, even those with only 4 pumps, to start setting aside at least one pump for alcohol fuel, to undercut their competition, especially with inherently cheap methanol (other alcohols include ethanol, propanol, butanol, etc.)

Thus, gasoline would at last be forced to compete with a viable alternative fuel all over the world, and effectively have its price capped at $50 a barrel, about the point where alcohol is price-competitive. That removes a huge sword of damocles from the world economy and especially that of poor nations.

Even better, since even with our huge excess slack capacity being used as much as possible , our farmers could not possibly supply enough to replace our gasoline usage, they would have all the business they can handle and then some, enabling us to drop our tariff barriers against Third Word produce. We would likely buy from Latin America and the Caribbean, Europe from Africa, and Japan from South Asia. Thus desperately poor subsistence farmers could start earning hard currency and begin to participate in modernity. Diverting our enormous fuel purchasing funds from already filthy-rich, fanatical Islamists to peaceful farmers would have an enormously positive impact on the world. The piece of the action the poor tropics would get would be about $600 billion per year, ten times greater than the total combined foreign aid and charitable budget of all world powers, charities, the UN, NGOs, the Catholic Church etc etc.

It's trade, not aid, that will be most helpful in alleviating poverty, and offers the most potential as well for bypassing corrupt governments too.