Development and ‘At-Risk’ Democracies

The correlation between the level of democratization in poor countries and the success of development aid in promoting economic growth should not be surprising to anyone with even a cursory knowledge of post-colonial Africa. As Robert Mugabe of Zimbabwe and other African autocrats have clearly demonstrated, dictators are not good at sharing.

The decolonization of Africa following World War II sparked violent and ethnically driven contests for power in many of the newly independent states, particularly in those states whose borders were most arbitrarily drawn by their colonizers. The Cold War powers keenly exploited these ethnic divisions in their quests to control the ‘Third World’ in Africa, arming amenable regimes or like-minded insurgents and igniting brutal civil wars. From Zim-babwe to Zaire, the result was much the same: dictatorship, corruption, and authoritarian control of the country’s political and economic systems. As economists like Joseph Stiglitz¹ and William Easterly² have argued, development aid from international economic organizations is not only ineffective in such autocracies, but may also be counterproductive, as the money often serves only to line the coffers of the elite and corrupt.

The futility of development aid from the World Bank and the IMF to undemocratic regimes like Mugabe’s is well documented. But what about Africa’s struggling, nascent or, as Larry Diamond calls them, “at-risk” democracies?³ In nations like Kenya, Liberia, Tanzania, and Ethiopia, where democratic reformers and hopeful entrepreneurs are fighting against the entrenched legacies of autocracy and economic disenfranchisement, can development aid play a useful role in promoting not only economic growth but also democracy? The answer is ‘yes,’ but only if international economic organizations adhere to Mr. Easterly’s maxim: “Development everywhere is homegrown.”⁴

Development aid must serve to empower Africa’s private-sector and social entrepreneurs—the true drivers of both economic growth and social and political change.⁵ Providing start-up capital and investment advice for small businesses and grass-roots organizations is a much more effective way of empowering Africa’s forces for change than simply handing money to the country’s finance ministry.

Aid must also be focused on investments in Africa’s human capital. As Mr. Stiglitz asserts, “what separates developed from less developed countries is not just a gap in resources but a gap in knowledge.” Here, Africa’s governments can and must play the critical role by investing in education and making communication technology available to African entrepreneurs to help close the knowledge gap.⁶ If governments insist on managing the largest portion of the development budget, they can utilize their geographic scope and structural resources by investing the aid in nationwide infrastructure, technology, and transportation projects. Marketable products and creative ideas go nowhere without good roads and fast Internet connections.

Of course, coordination between bureaucrats in Washington and entrepreneurs in rural Kenya is not so simple, but distance is hardly the greatest impediment to transatlantic collaboration. The greatest obstacle is that the agents of development and social change in Africa have no meaningful seat at the tables of the World Bank and IMF, where decisions on aid allocations are made. The structures of these organizations are fundamentally designed to place decision-making power in the hands of the most elite representatives of the world’s strongest economic powers, thus keeping power out of the hands of those who are to actually benefit from the aid.⁷ Of all of the criticisms levied at the World Bank and IMF by detractors like Mr. Easterly and Mr. Stiglitz, the most consistent and trenchant is the inherent ‘democratic deficit’ of these leading international economic organizations.

But this deficit of democracy is eminently reducible. Rather than continuing to criticize the World Bank and IMF and question their raisons d’etre, proponents of reforming development aid should focus their energies on reforming these organizations, given that they actually have the scope and resources to finance real, long-term development in Africa. As Amartya Sen points out, these democratic deficits at the World Bank and IMF “call for better economic and political reasoning and bigger voice for the poor in the governance of...