Can monetary aid alter African economies?
Boston — ''Money talks,'' it has often been said. Can it also reform? The World Bank and the Reagan administration are hoping it can. This week the administration hopes to get the first $75 million of a $500 million ''economic policy initiative'' for Africa. The money is intended to tempt four or five African governments into carrying out economic policy changes that will step up economic development.
The World Bank is also debating just how far it should go in using its money as a lever for altering domestic policy. To developing countries, using foreign aid as bait for change smacks of interference in internal politics, perhaps even violation of national sovereignty.
''There is an element of blackmail in the whole thing,'' admits C. H. Mangua, deputy director for programs of the African Development Bank.
In a communique issued before last month's annual meeting of the World Bank, the Group of 24, which represents developing countries, expressed concern about ''undue emphasis'' on what the bank terms ''policy-based lending'' and ''the move to link the quantum of (World) Bank assistance to increasing conditionality.''
For many years, any nation seeking sizable loans from the bank's sister organization, the International Monetary Fund (IMF), to finance international payments deficits has faced ''conditionality'' - a requirement for changes in domestic monetary and fiscal policies the IMF considers necessary to reduce that deficit.
Argentina, the Philippines, Mexico, Brazil, and many other developing countries have had to bow to IMF demands to get its money. IMF policy demands were one factor in riots on the streets of Sao Paulo, Brazil, Cairo, and other cities. Industrial countries, too, have heard the same music when they sought major IMF loans.
Nonetheless, the idea of using foreign aid as a policy lever has become more popular - at least among leaders of the industrial countries - in the last few years.
One reason for this popularity is the view of some conservatives that much foreign aid is money poured down a drain. More suitable economic policies, particularly the use of free markets, would provide much more development than foreign aid, they maintain. So, using the same sort of logic used by a parent when a child is reluctant to take advice, they hold that donors should force their wiser development strategy on a less developed country.
Liberals, seeing a stagnation in the growth of foreign aid, look at ''policy-based lending'' as a way to get more development bang for each foreign aid buck available.
Joseph Wood, who is in charge of a major staff study at the World Bank on its ''future role,'' argues that bank loans have always had some elements of conditionality attached to them. If the bank made a loan for an electric power project, it probably sought prior agreement on suitable rates for the power it would produce.
He admits, however, that in recent years attention increasingly has gone beyond the particular investment being financed to the industrial sector in which the project is situated. In some cases, the policies affect all of the economy. Thus, he says, any change would be a matter of emphasis.
''An emphasis on policy has got to be seen as something that is supporting changes which the governments themselves wish to undertake and not as forcing policy changes on reluctant governments under the threat of withholding finance, '' he states.
That, of course, is the language of an international civil servant, a type of diplomat. Under pressure from the industrial nations lending money to the World Bank, the bank itself may be forced to be tougher in its policy requirements for loans.
On the other side, the only justification for the existence of a development bank is making development loans. It cannot demand perfection in economic policy in developing country, as it would then be unable to make any loans. Besides, as Mr. Wood notes, there are reasonable differences of opinion on the best routes to development.
In any case, the old view of the IMF as tough and the World Bank as soft is likely to be become more blurred in the future.
The United States is open in its intention to use development loans as a lure for policy reforms, especially in the case of its ''economic policy initiative'' for Africa.
Sen. Robert W. Kasten (R) of Wisconsin held that the US should be using the same policy technique in all its bilateral foreign aid, including the $1 billion already destined for Africa. So he opposed the extra money.
The Reagan administration saw his logic, but it held that the extra $75 million would make especially good bait. At this writing, as a continuing resolution moves through Congress, it looks as if the administration will get its money, although as military support funds rather than foreign aid. As long as it is the intent of Congress that the money be used for foreign aid, the State Department sees little difficulty in this.
So the US will have the bait to go fishing for policy reforms in the region where they are seen as most desperately needed, Africa.