As the G-8 summit approaches and the leaders of the developed world contemplate huge increases in aid to Africa, we must ask ourselves what has become of the billions of dollars already poured into the continent. Africa remains wracked by poverty and disease while other former colonial outposts like East Asia are booming. At the root of Africa's problems are ruling political elites that have squandered the continent's wealth and choked its productivity over the last 40 years.
The list of abuses is long and impressive. African political elites have systematically exploited their positions in order to line their own pockets. They have given favors and won influence through the funding of huge loss-making industrialization projects. They have exploited the natural resources of their countries and then transferred profits, taxes, and aid funds into their own foreign bank accounts at the same time that they ran up enormous debts to finance their governments' operations.
What were the results of those predatory policies? According to the World Bank and the International Monetary Fund, which have become Africa's fairy godparents, Africans are poor and getting poorer. The World Bank noted, "Despite gains in the second half of the 1990s, Sub-Saharan Africa . . . enters the 21st century with many of the world's poorest countries. Average per capita income is lower than at the end of the 1960s. Incomes, assets, and access to essential services are unequally distributed. And the region contains a growing share of the world's absolute poor, who have little power to influence the allocation of resources."
This division is made easier by the modern African state, which in most countries was created by European imperial powers that had little regard for ethnic and religious differences among Africans. From the early days of independence, competing and antagonistic groups were forced together in the political process. The political elites that took over African countries in the 1960s thus saw government as a source of power and personal enrichment. "Seek ye first the political kingdom and all else shall be given," urged Ghana's Kwame Nkrumah. The region's political leaders have been doing so ever since.
Successful development in Africa will not be achieved by throwing more fuel on the flames. Merely handing more aid money to African governments only reinforces the pattern of abuse. The key to development lies in a dynamic private sector. For a country to produce more, private individuals must generate savings and plow those savings back into the production process in the form of new and improved techniques, processes and products.
Africa's private sector is predominantly made up of peasants and, to a lesser extent, subsidiaries of foreign-owned multinational corporations. But those groups are exploited and bullied by the unproductive political elites who control the state. Africa's private sector is powerless because it is not free to decide what happens to its savings.
Case in point: African political elites use their control of the state to extract the region's agricultural surplus. Were the peasants free to retain that surplus capital, they could invest it in improving their production techniques or diversifying their economic activities. Instead, the political elites use marketing boards and taxation to divert those savings to finance their own consumption and strengthen the repressive instruments of the state.
The more the African political elites consolidate power, and the more they tighten their grip on the reins of the state, the more the peasants are likely to become poorer, and the more the African economies are likely to regress or stagnate. A most striking case of that phenomenon is Nigeria. According to a study of Nigeria by the Centre for the Study of African Economies at Oxford, between 1980 and 2000 per capita GDP in 1996 dollars adjusted for purchasing power parity fell from $1,215 to $706 -- a 40% drop. The number of Nigerians living below the poverty line increased from 19 million in 1970 to 90 million in 2000. That was accompanied by a massive rise in inequality. In 1970 the top 2% of the population earned the same income as the bottom 17%. By 2000, the income of the top 2% equaled that of the bottom 55%.
Future development in Africa requires a new type of democracy -- one that empowers not just the political elite but private-sector producers as well. It is necessary that peasants, who constitute the core of the private sector, become the real owners of their primary asset: land.
Private ownership of land would not only generate wealth but help to check rampant deforestation and accelerating desertification. The so-called communal land tenure system, which is really state ownership of land, ought to be abolished. Moreover, peasants need direct access to world markets. The producers must be able to auction their own cash crops rather than be forced to sell them to state-controlled marketing boards.
Africa needs new financial institutions that are independent of the political elite and can address the financial needs not only of peasants, but of other small- to medium-scale producers as well. In addition to providing financial services, those institutions could undertake all the other technical services that are not being provided at present by African governments, such as crop research, extension services, livestock improvement, storage, transportation and distribution to make agriculture more productive. Such changes could for the first time bring into being a genuine market economy that answers to the needs of African producers and consumers.
African governments currently acknowledge the role of good governance in stimulating economic growth. However, they are still doing little to address the fundamental problem of the enormous power imbalance between the political elite and private-sector producers. African governments must spend more time addressing that problem rather than impressing foreign governments, including those of the G-8, with inflated accounts of democratization on the continent.