R. Glenn Hubbard on A Marshall Plan for Africa

In an essay on the Foreign Policy Web site, R. Glenn Hubbard author of the just-published The Aid Trap: Hard Truths About Ending Poverty, makes the case for a new policy toward helping Africa

More than half a century after the United States helped rebuild a war-torn Europe, it’s time Africa got the same chance.

The Marshall Plan was fundamentally different from the aid that Africa has received over the past four decades. The Marshall Plan made loans to European businesses, which repaid them to their local governments, which in turn used that revenue for commercial infrastructure—ports, roads, railways—to serve those same businesses. Aid to Africa has instead funded government and NGO development projects, without any involvement of the local business sector. The Marshall Plan worked. Aid to Africa has not. An African Marshall Plan is long, long overdue.

In the essay, Hubbard argues that the emphasis on local business is crucial for helping the African economy and takes on critics of this strategy. In particular, he critiques the following objections often made by aid groups and NGO’s: 1.) The market failed in Africa; 2.) Strong businesses in Africa will become the new colonists; 3.) Infrastructure must come before business; 4.) Democracy must come first; 5.) Microfinance is enough; and 6.) Anti-corruption measures will make aid programs work better.

Hubbard shows why all these objections are misguided and argues that building a strong local business sector in Africa increases the likelihood of a lasting, meaningful democracy taking hold or the growth of a functional business market.

The Foreign Policy site highlights Hubbard’s essay with the headline: “Colonialism Was Good for Africa: And Other Inconvenient Truths.” Hubbard does suggest that in some ways Africa benefitted from colonial rule:

A whole contingent of aid advocates admit the faults of African governments, but trace them back to colonialism. Under colonial rule, they say, foreign governments and businesses exploited Africa and left it poor. Pro-business policies, they worry, would lead to a new colonialism, with foreign companies exploiting Africa anew.

This argument flies in the race of reality. First, Africa was poor before colonialism, and for many countries, colonialism may well have made Africa richer. There were some exceptions, such as the Belgian Congo in the early 20th century, where forced labor for rubber extraction made the people poorer. But overall, Africans in 1960 were healthier, lived longer, and had higher incomes than Africans in 1900. Ghanaian economist George Ayittey calls the colonial era the “golden age of peasant prosperity” in Africa, when the vast mass of rural Africans joined the world economy for the first time. By 1960, this was even true in the Belgian Congo. The hospitals, ports, schools, railways, and roads of Africa date from the colonial era. Certainly Europeans benefited unfairly from colonialism, but for Africans the result was still an improvement over their former poverty.

What has not made Africans richer, however, are their countries’ own governments, which have cut off that prosperity in favor of government and NGO assistance and foreign investment that benefits only the elite. Enabling the majority of Africa’s population to access and participate in strong local businesses, through a Marshall Plan, would be a welcome breath of fresh air — not to mention a good revenue stream for the common man and woman. The “Doing Business” rankings show clearly that countries that let their businesses thrive — like Mauritius (No. 24), Botswana (38), and Ghana (87) — do better for their citizens than those that don’t — like Mozambique (No. 141), Zimbabwe (158), and the Democratic Republic of the Congo (181).