Academic journal article Law and Policy in International Business

How the Multilateral Institutions Compounded Africa's Economic Crisis

Academic journal article Law and Policy in International Business

How the Multilateral Institutions Compounded Africa's Economic Crisis

Article excerpt

Africa has a sad and tragic story. It is a continent wracked by never-ending cycles of civil wars, instability, chaos, and gratuitous mayhem. Since 1985, we have seen one African country after another implode, including Angola, Burundi, Ethiopia, Liberia, Rwanda, Sierra Leone, Somalia, Sudan, and Zaire (now the Democratic Republic of Congo), among others.

Political tyranny and brutal repression reign supreme in Africa. Out of the fifty-four African countries, only thirteen are democratic: Benin, Botswana, Cape Verde Islands, Madagascar, Malawi, Mali, Mauritius, Namibia, Sao Tome & Principe, Senegal, Seychelles, South Africa, and Zambia. In the other countries, political oppression remains the order of the day.

Economically, the continent's performance remains dismal. All other regions of the Third World have made some progress and sub-Saharan Africa has retrogressed. Indeed, the statistics on Africa's postcolonial development are horrifying. In 1985, more than 100 million of Africa's 700 million people lived in abject poverty. This number rose to 216 million in 1990 and is projected to reach 304 million by the year 2000. Recently, there has been a slight improvement in Africa's economic performance over the two percent growth rate of the early 1990s. In 1996, for example, Africa's gross domestic product (GDP) registered a five percent growth rate. However, if you subtract an average population growth rate of three percent, that leaves a miserly rate of growth of less than two percent in GDP per capita. This rate is woefully insufficient to reduce Africa's poverty rates, which are among the highest in the world. In fact, a recent report from the International Labour Organization estimates that in sub-Saharan Africa, the proportion of the population living in poverty will increase to over fifty percent by the year 2000.


There is no question that multilateral institutions--the World Bank, International Monetary Fund (IMF), United States Agency for International Development (USAID), United Nations Development Programme (UNDP), and others--can help reverse Africa's economic decline and atrophy. However, after the provision of more than $600 billion in foreign assistance, loans, and credits, a consensus has emerged that aid to Africa has not been effective. USAID admitted in 1993 that "much of the [Third World] investment financed by USAID and other donors between 1960 and 1980 has disappeared without a trace."(2) Furthermore, "[t]he countries that received the most aid--Somalia, Liberia and Zaire--have slid into virtual anarchy. Another large recipient, Kenya, inflicts unspeakable abuses of human rights on their own citizens while aid pays the bills."(3)

Republican Benjamin Gilman (the U.S. House of Representative's International Relations Committee Chairman) and Lee H. Hamilton (a ranking Democratic member) wrote in a letter to Secretary of State Warren Christopher, "Zaire under Mobutu represents perhaps the most egregious example of the misuse of U.S. assistance resources. The U.S. has given Mobutu nearly $1.5 billion in various forms of aid since Mobutu came to power thirty years ago."(4) Representative Hamilton also wrote,

   Mr. Mobutu claims in his column that during the Cold War he and his fellow
   African autocrats were concerned with fighting Soviet influence and were
   unable to concentrate on creating viable economic and political systems.
   The reality is that during this time Mr. Mobutu was becoming one of the
   world's wealthiest individuals while the people of Zaire, a once-wealthy
   country, were pauperized.(5)

Similarly, the United States gave Liberia's late President Samuel Doe more than $375 million in aid between 1980 and 1985. Much of it was squandered and looted, forcing that country into a receivership on May 2, 1986.

In my view, foreign aid actually compounded Africa's crises. …

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