Funding Graft in Russia and Africa

Washington Times, November 22, 1999.>
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Shed no tears for the Clinton administration’s pain over the Russian money‐​laundering scandal. This largely self‐​inflicted pain stems from the administration’s reluctance to learn from its own blunders elsewhere, particularly in Africa. It invested massively in the rhetoric and charisma of “leaders,” thereby setting itself up to be duped by crackpot democrats.

The administration seeks out an “Abraham Lincoln,” and develops a warm, cozy personal relationship — or “partnership” with him to transform his country. Thus, so much faith was invested in Boris Yeltsin and a small cadre of “reformers,” led by Viktor Chernomyrdin. Western aid dollars flowed. Staggering from a hangover, the administration now finds itself swindled by gangster bureaucrats, who, during the party, engaged in a massive heist of Russian assets for transfer overseas.

Similarly, during his historic trip to Africa in March 1998, President Clinton hailed the presidents of Congo, Uganda, Rwanda, Ethiopia and Eritrea as the “new leaders of Africa” and spoke fondly of the “new African renaissance” sweeping the continent. But barely two months after Mr. Clinton’s visit, Ethiopia and Eritrea were at war, the “new African renaissance” in tatters and the rest of the “new leaders” were at each others’ throats in the Congo conflict. Were this not enough, the administration’s other African “partners” turned out to be reform acrobats and crocodile liberators.

Like Russia, huge sums have fled Africa. According to the United Nations, $200 billion or 90 percent of sub‐​Saharan Africa’s GDP was shipped to foreign banks in 1991 alone. Yet, this kamikaze plunder, which occurred under the watchful eyes of Inspector Clousseau and the Keystone Cops (the IMF and the World Bank), elicited no outrage from the Western media and the Clinton administration for reasons of political correctness.

The administration’s policies toward Russia and Africa are fundamentally flawed. The near‐​fatal obsession with an “Abraham Lincoln” encourages all sorts of charlatans and hucksters to project themselves as such to win Western favors and recognition. They parrot “democracy” and “capitalism” by rote, not so much out of conviction nor with the will to implement them, but because such euphonious utterances please Western aid donors.

Second, the starry‐​eyed belief — in the teeth of abundant evidence to the contrary — that a “government” exists in the recipient country, that cares about and responds to the needs of its people, is astonishing. What is now proven to exist in many African countries and Russia is a gangster state — a “government” hijacked by a phalanx of vagabonds who use the machinery of the state to develop their own pockets. The chief bandit is often the head of state himself. As the director of the World Bank’s own Poverty and Social Policy Department, Ishrait Husain, himself observed: ” Market reform is failing in many African countries precisely because their governments misappropriate funds. They spend large sums of money promoting their own interests, building airports in their home towns, increasing military spending, and buying more fashionable cars.

The third flaw is the persistent failure to distinguish between outcomes and the processes or institutions required to achieve those outcomes. A democratic Russia or Africa, based on the free market system, are outcomes of often long and arduous processes. Most critical are the transparency of the processes, the fairness of the electoral rules, mechanisms for peaceful resolution of electoral disputes, among others. By focusing almost exclusively on the outcomes and paying scant attention to bothersome details of the processes, Western leaders often become, by default, complicit in the commission of egregious electoral frauds that produce a pirate democracy.

In Africa, the democratization process has been stalled by political chicanery and strong‐​arm tactics. Incumbent autocrats appoint their own electoral commissioners, empanel a fawning coterie of sycophants to write the constitution, massively pad the voter’s register and hold fraudulent elections to return themselves to power.

The record on market liberalization is even more dismal, despite the rosy portrait the Clinton administration, the World Bank and the IMF paint of Africa. More than $50 billion has been poured into Africa by USAID, the World Bank and the IMF since 1990 to support market reform in Africa. Yet, the prospects remain bleak. Ghana, Lesotho, and Uganda, for example, were all the rage two years ago. Not any more.

A market economy cannot be established without secure property rights, free flow of information, the rule of law and mechanisms for contract enforcement. Since these processes or foundations are missing in Russia and most African countries, the free market economies the Clinton administration hopes to establish in these countries are pies in the sky, regardless of assurances by Mr. Yeltsin and the “new African leaders.”

A new approach that emphasizes institution‐​building or processes is imperative. Leaders come and go but institutions endure. Four are critical:

  • An independent central bank — vital for monetary and economic stability, as well as stanch capital flight.
  • An independent judiciary — -crucial for the enforcement of rule of law, protection of property and to end rapacious plunder.
  • An independent and free media — to facilitate the free flow of information, to expose criminal wrongdoing, and to disseminate ideas.
  • Neutral and professional armed or security forces — to protect life and property and ensure law and order. Witness East Timor.

At the minimum, Western aid should be made contingent upon the establishment of these institutions, which are established by civil society, not leaders. An implicit conflict of interest is involved when leaders are asked to set up the very institutions that would limit their power or the arbitrariness by which it is exercised.

Re‐​channeling existing aid programs to reach the people or civil society would have much greater impact in transforming Russia and Africa than placing unwarranted faith in Lincoln wannabes.

George B. N. Ayittey

George Ayittey, an adjunct scholar at the Cato Institute, is an Associate Professor of Economics at American University and president of The Free Africa Foundation, both in Washington. His new book is Africa In Chaos.