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MYTH: More Foreign Aid Will End Global Poverty January 6, 2007

Posted by tkcollier in Business, Geopolitics, News.
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ABC News: MYTH: More Foreign Aid Will End Global Poverty
In the past 40 years, Western governments have given Africa more than half a trillion dollars. Yet Africa is even poorer than it was before the foreign aid began.

Two studies by World Bank economists say foreign aid is one of the problems because “higher aid levels erode the quality of governance.”

Former World Bank economist William Easterly agrees. His new book, “The White Man’s Burden,” argues that Western efforts to cure poverty in the rest of the world have done more harm than good.

“Aid has the perverse effect that it makes [African] politicians much more oriented toward what will get them more money from the West than it does to making them meet the needs of their own people, which is really a scandal,” he said.

Fifty years ago, countries in East Asia were as poor as Africa. Now many are rich, despite much lower levels of aid because their governments created understandable laws so people could trade, borrow and start their own businesses.

In 1999, I went to Hong Kong and in one day, with one form, I got legal permission to open a shop.

The next day “Stossel Enterprises” was open for business, selling ABC trinkets. By contrast, to open a legal business in Kenya you might have to get licenses from 20 ministries and you may have to bribe people. It can take years, and the government can still shut you down.

Foreign aid won’t solve that — especially if it’s stolen.

But Jeffrey Sachs argues that this emphasis on bad governance is misleading. “This idea that the poorest of the poor are our enemies, the big lie that we tell all the time,” he said. “That all they want to do is shake you down.”

“Poor people don’t want to shake me down,” I replied. “The rich leaders of these countries want to shake me down.”

“Our government can find practical ways to ensure that the money that we’re actually giving for real things there reaches the real people,” Sachs said.

“We can do that in Africa? We can barely do it in America.”

“Audit what’s happening,” he said. “Those systems have been shown repeatedly to work.”

Sachs argues that foreign aid would have worked in the past if we had only spent enough. U2’s Bono agrees. At his concerts, he asks his fans to use their cell phones to send a message demanding our politicians increase foreign aid … but why petition politicians? Why doesn’t he ask his fans to spend their own money?

It’s good to help. I’ll contribute to a charity like “The Free Africa Foundation,” which builds malaria-free villages from individual contributions. Charities are much more likely to keep a close eye on the money. If they don’t, donors stop giving.

By contrast, foreign aid often just makes politicians rich — but leaves their people poor.

Copyright © 2007 ABC News Internet Ventur

From Nicholas Kristof’s review in NY Review of Books

Likewise, one perennial problem has to do with getting poor people to use mosquito nets in order to prevent malaria. I’ve often been to villages where nets had been handed out for free but were put aside and not used. Aid workers often find that it is better to sell things than give them away, because people don’t assign value to what they get for nothing. Easterly praises a program devised in Malawi by Population Services International, based in Washington. PSI sells the nets for a token charge of fifty cents each to pregnant women at prenatal clinics because pregnant women and babies are most at risk from malaria; the nurse making the sale keeps nine cents for herself as an incentive. That means that the nets stay in stock and are actually sold. Meanwhile, PSI sells the nets in the cities for $5 each and uses the profits to pay for the subsidized nets in the clinics. “PSI’s bed net program increased the nationwide average of children under five sleeping under nets from 8 percent in 2000 to 55 percent in 2004, with a similar increase for pregnant women,” Easterly writes. “A follow-up survey found nearly universal use of the nets by those who paid for them.”

So one of the most crucial kinds of foreign aid is simply security. And when we have provided that kind of aid, it has made a huge difference. The most successful single thing the US ever did in Asia, for example, was probably Truman’s decision in 1950, after the Korean War began, to send the Seventh Fleet to protect Taiwan. Otherwise China would very likely have invaded Taiwan sometime in the 1950s, hundreds of thousands would have died, and Taiwan wouldn’t have existed as a free economy in the 1980s and 1990s to provide both an economic model and investment for the Chinese mainland. The cost to the US of that deployment was negligible, and the benefit to the world was enormous.

Likewise, the modest UN peacekeeping force sent to Mozambique in 1992 set the stage for Mozambique’s recovery from a brutal civil war and for the remarkable economic boom that followed. In fact, soldiers with guns are sometimes the most effective form of foreign aid. In Chad, right now, it doesn’t make sense to build clinics or train midwives since the Sudanese-financed janjaweed militia is storming through Darfur and Chad, slaughtering people because of their tribe or skin color. What Chadians need most is a small protection force to stop the genocidal marauders so that they can’t butcher children in schools or burn down clinics.

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