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 / Summer 2008 / Issue 51(originally published by Booz & Company)


The Forgotten Lessons of the Marshall Plan

But the original plan’s focus on the private sector is missing from today’s African aid visions. Brown’s plan, for example, fosters government-led development with an emphasis on grants to social ser­vice agencies and NGOs: the same old aid-to-Africa idea in a bigger package. The MCA, as designed by the Bush administration, offers ma­jor aid packages to governments of poor countries that put in place economic reforms and that improve human rights and democratic institutions. This, too, fails to completely capture the spirit of the original Marshall Plan. The only element the MCA’s mission has completely in common with the original Marshall Plan is economic reform. But the MCA provides its primary aid to government-led development, not  to business-sector support.

A real Marshall Plan for Africa would represent something that this continent has never seen on a major scale — a private-sector support project. This historical lack of business support in the region is poorly understood. For example, in a June 26, 2006, appearance on the Charlie Rose show with Bill and Melinda Gates (announcing his multibillion-dollar gift to the Gates Foundation), Warren Buffett said that “a market system has not worked in terms of poor people.” In reality, it was never given a chance.

Of course, the new Marshall Plan would not look exactly like the original. Africa today is not the same as Europe in 1947. Despite the ravages of World War II, Europe then was in better shape than Africa is now. The Marshall Plan aimed to restore the European economy to its prewar prosperity. But most of Africa has never had such prosperity to restore. It has always been poor. Yet the essential elements of the original Marshall Plan offer a way forward that any program of development aid must follow.

An effective Marshall Plan for Africa should concentrate ex­clusively on business development. It should have its own institutions designed to match those of the original plan. Last time, the U.S. Congress created a commission to oversee the plan. The new plan should require an international commission to provide oversight. And a structure should be put in place, equivalent to the original plan’s ECA, to collect and manage the funds on the donor side. Under such a plan, an African country would become eligible by putting policies in place to foster business development; each member government would then have its own revolving fund in a special account. In the original Marshall Plan, governments spent the repaid loans on economic infrastructure projects approved by the ECA. A Marshall Plan for Africa should establish a similar structure. Given Africa’s size and diversity, there might be re­gional ECAs rather than a single one for the whole continent.

A plan like this would not be redundant; it would complement the existing private-sector efforts in Africa — such as those sponsored by the Africa Development Bank (ADB), the International Finance Corporation (IFC, the private-investment arm of the World Bank), the Grameen Bank and other microlending institutions, and the emerging networks of Chinese investors. These private-sector ef­forts are all beneficial, but they are tiny compared to the public-sector aid going into Africa today. And the existing business-related efforts are limited in their effectiveness. The ADB, for example, makes more loans to government agencies and NGOs than it does to private companies, and neither it nor the World Bank insists on pro-business policies, as the Marshall Plan did. A country like Mozambique, which ranks 140th out of 175 countries analyzed by the World Bank in its “Doing Business” reports for pro-business policy, still qualifies for multilateral loans. The IFC does good work, but it cannot meet every business development need on the continent. The Grameen Bank — the microlending institution founded by Nobel Peace Prize winner Muhammad Yunus — is also excellent. But it fosters unregistered, tiny businesses, not the midsized, more formal businesses that can move an economy forward more quickly, and that often need more help, because government agencies sometimes see them as competition. China still invests primarily in those companies that work closely with Chinese companies, or in African branches of Chinese enterprise; this is better than a system that funds only governments without private enterprise involvement, but it hardly represents an open business environment.

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