Do Global Strategies for Poverty Eradication in Sub-Saharan Africa Work? an Assessment of Several International Macroeconomic Policies

Abstract

INTRODUCTION The July 2005 rock concert Live 8, and the subsequent Group of 8 Summit meeting in Scotland, put African poverty and underdevelopment in the forefront of world affairs. As with past attempts at poverty eradication and sustainable development, promises were made. Despite decades of foreign aid and borrowing, Africa has remained poor, and many of the recently made promises have been met with much skepticism. In Sub-Saharan countries, poverty affects the daily lives of the majority of the population. The United Nations Statistical Office estimated that, in 2002, 44% of the people in SubSaharan Africa lived in extreme poverty, defined as less than $1 a day. (1) But the deep and severe poverty of Sub-Saharan Africa is not only a political, economic or social problem. With famine, starvation, and deprivation of basic necessities threatening the lives of millions of men, women and children, abject poverty in Africa is also a humanitarian issue. Africa stands as the most marginalized continent in the global economy. Even in the millennium, Africa's economic integration with the rest of the world is still the product of sustained economic ties with former colonial powers and of an over-dependence on foreign aid. (2) However, there is one economic sector that is an exception. Africa's oil and gas resources have instigated a new scramble for neo-colonial control of Africa' strategic resources. Governments reliant on resource extraction, including oil and gas, have poor records of democratic promotion, human rights standards and poverty alleviation. (3) As the 2005 G8 World Summit stated, the eradication of poverty in Sub-Saharan Africa will depend on effectively attracting large amounts of trade and aid. African economies will not become competitive and will remain marginalized in the global economic and political order without the help of external capital inflows. But so far, the flow of capital into the region has been meager--outside of the enormous increase in the foreign direct investment in Africa's oil and gas production--because financiers choose to invest in economic and politically stable countries. Many states in Africa have experienced and continue to experience social and political unrest. And, today, this continued unrest is in great part due to Sub-Saharan African states' increased geopolitical importance in the extraction of oil and erosion of government legitimacy resulting from the lack of human development in the mist of plenty (oil). At the same time, however, the international strategies to reduce poverty in Africa proclaimed by world leaders and Western economists are not without their critics and detractors. This study examines the effect of several global strategies for poverty reduction--debt relief, greater foreign aid, improved access to Western markets, and increased Foreign Direct Investment (FDI)--on poverty rates in Sub-Saharan Africa. The next section of the article will present a brief summary of the arguments for and against each proposed strategy. DEBT RELIEF FOR SUB-SAHARAN AFRICA In 1996, the World Bank and the IMF initiated the largest multilateral program, the Highly Indebted Poor Countries Initiative (HIPC), aimed at relieving the burden of the poorest and most heavily indebted countries. The belief was that the debt overhang was preventing economic growth and poverty reduction in poor countries. (4) The initiative was to grant relief to those countries willing to carry out economic reforms thought necessary to prevent future problems with the savings redirected towards social expenditures. Eligible countries had to meet three criteria: they had to be eligible for World Bank and IMF concessional lending; external had to exceed 200-250 percent of the country's exports or 280 percent of government revenue; and countries had to establish and maintain reforms for economic stability. In 1999, the HIPC Initiative was enhanced in order to provide faster, broader, and deeper relief' and to allow more countries to qualify for this relief program. …

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