The German magazine Der Spiegel published an interview with James Shikwati, a Kenyan economist, who argues that Africa would be **much** better off if foreign governments immediately stopped providing "development assistance." Shikwati correctly notes that this aid depresses local entrepreneurship by making African goods, including agricultural products, artificially uncompetitive. Only a small clique of bureaucrats and politicians benefit from "aid" and most Africans would not notice if it immediately ceased.
A similar dynamic is at play with the US when mercantilist economies such as Denmark, Israel or South Korea, "lend" the US money at ultra-low interest rates by buying up US treasury debt. The result is US goods are artificially made uncompetitive and the US economy suffers. Americans enjoy the "benefit" of purchasing artificially cheap Samsung flat screen televisions, but in the absence of South Korean loans the US would produce its own televisions, unemployment would fall, and some of the moribund post-industrial regions would come back to life. As with Sub Saharan Africa, a small number of elites benefit from these capital inflows, but to quote Nancy Reagan, the country would be much better off if American policymakers just said no.
Here's the interview with Dr. Shikwati.
Reference:
Der Spiegel. July 4, 2005. "For God's sakes, Please stop the aid!" Interview with James Shikwati.
http://www.spiegel.de/international/spiegel/spiegel-interview-with-african-economics-expert-for-god-s-sake-please-stop-the-aid-a-363663.html
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