1 juli 2005

Trade, not aid (The Flemish Beerdrinker)

Abiola Lapite points to a very good article of Jacob Weisberg on the follies of the new movement against poverty. Trade will take Africans out of povery, not aid. And aid will helpfull only if you privatize it. Let’s first see what disaster has come out of Live Aid:

It’s an open question whether Live Aid did more harm or good. As David Rieff explains in the British magazine Prospect, organizations involved in delivering relief became complicit in the Ethiopian government’s Stalinist program of forced agricultural collectivization and relocation, which helped create the disaster. Today, Ethiopia is significantly poorer than it was 20 years ago, and, as David Plotz explained in this 2003 dispatch, perpetually dependent on charity. This is, sadly, the story of aid to sub-Saharan Africa as a whole. While the developed world has contributed more than $500 billion over the last 40 years, Africans have continued to fall farther behind.

Then trade is more promising, at least the genuine article, free, not fair trade, or other muddle-headed idea’s:

Expanded trade, by contrast, offers significant hope for African economic progress. Growth prospects in most sub-Saharan African countries depend on greater access to heavily protected textile and agricultural markets in the developed world. Unfortunately, Africa advocates wearing white wristbands (including Tony Blair) aren’t arguing for free trade. They’re calling for something called "trade justice." Make Poverty History, the group behind the armbands, contends that developed countries should drop agricultural subsidies and remove barriers to African imports without insisting that African countries open their markets. One-way protectionism may be an improvement on the two-way kind, but it won’t jump-start stagnant economies. To secure foreign investment and grow, African nations need trade in two directions. And for that, they need to be pushed to reduce both the bureaucratic obstacles and endemic corruption that deter businesses, both domestic and foreign.

The way forward for aid seems to be to take it out of the hand of governments. Even Bush’s Millennium Challenge Account, which seemed to be a very good idea, is turning into a quackmire:

At the moment, the most promising model appears not to be government-to-government grant-making, but a new style of targeted, goal-driven, private philanthropy. To take the most significant example, the Gates Foundation has spent more than $4 billion, with tremendously encouraging results, to combat HIV/AIDS, malaria, and other infectious diseases, primarily in Africa. It ruthlessly scrutinizes and evaluates its own programs in a way governments seldom do, with the aim of directing additional money where it has the best chance of success.

That’s because governments lack the hard budget constraint. If thinks don’t work out, they just raise taxes. In this regard markets are far superior to governments. So trade, and break the global state cartel of aid, and we will get a lot closer towards the goal of making poverty history.

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