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Julian Sanchez | March 10, 2006

Jens Laurson and George Pieler argue that the track record of western development assistance to Africa shows some kind of help is the kind of help we all can do without.

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|3.10.06 @ 3:14PM|#

There is also the question of whether a leader not in that position via the requirements of the country's laws can bind the country (the people) to repay loans from multilateral or commercial lenders. Because several African leaders have simply taken power. I don't know much about intl law tho :(

|3.10.06 @ 4:11PM|#

Just got done reading: "Dark Star Safari : Overland from Cairo to Cape Town" by Paul Theroux -- its an excellent travelogue in its own right but along the way on his adventures he hammers western aid with observed several examples and observations.

|3.10.06 @ 4:13PM|#

For countries that feel the need to give aid directly to countries:

1) Only give to democracies. They must be functional democracies as well, not just one person, one vote, one time. If they won't allow election observers, they don't have to have them, but they don't get our aid either.

2) Don't give to countries where the leadership is clearly corrupt. If it is ambiguous, well, use your judgement, but right now we (the west) are giving money directly to people who put it straight into their bank accounts. How does that help the poor?

3) Only give to countries that have a pro-growth strategy. There are several formerly poor countries that have had different pro-growth strategies, such as Hong Kong (preferred of course), Taiwan, South Korea, Singapore, Malaysia, Japan.

4) Give only to countries with a free (international) trade regime.

Botswana has a huge number (%) of poor still, but they have had huge growth over the past 40 years since they achieved independence. They have had true democracy each year since indepence about 40 years ago, and chose a clear growth path, even if it is much more statist than I'm happy with, and went from being one of the very poorest, and I mean dirt poor, to having a per capita GDP of $10,100. This despite being ground zero for AIDS. True, they were blessed with great diamond deposits, but plenty of other poor countries are blessed with great mineral resource deposits, and they turned those blessings into a curse.

Finally, and this is easily the most controversial of all, especially considering how Iraq is turning out, we should give serious consideration to simply assassinating the corrupt and malign dictators out there if they refuse to at least try to help the people of their nation they have chosen to enslave. No invasion, just let them figure out what comes next by themselves. We may only need to kill one of them by the way, the rest may well get the message.

|3.10.06 @ 4:17PM|#

Oh yeah, please please please, no more government to government loans. If the private sector thinks they are a bad risk, then they are.

And if a government simply feels it must loan to a government, such as a cureency crisis that spawns a bank run against an otherwise healthy system, then charge usurious interest rates. End the moral hazard of bailouts once and for all. Bailouts simply encourage more stupidity like fixed exchange rates, government borrowing in a non-home currency etc.

|3.10.06 @ 4:22PM|#

In my view all foreign loans are fundamentally unenforceable...and should be, for that matter. You cannot reposess a country and any economic sanctions will hurt you as much as them. Don't forget, Britain defaulted on their WW1 loans to the US.

This came up recently regarding Iraq loans. During the 80's Iraq was suspending loan repayments to countries that stopped lending to them, essentially forcing more money out of them. Italy and the US were especially hard-hit by the practice and agreed to cut loose more credits, prolonging the Iran-Iraq War unnecessarily and propping up Hussein. Now nations are reluctant to forgive the debts and the new government is reluctant to default because they dare not offend the IMF.

I say offend, and offend again. Plenty of countries, even poor ones, manage to run their governments out of current accounts. Those debts essentially give the government unearned authority, power to wield over their citizens that they receive from foreigners who don't have to live under their misrule. In the end, they find themselves struggling to please their donors rather than their citizens. There is a conflict of interest built in.

Argentina should have defaulted on its debts, as well, and if that meant no one would give them any further loans, so much the better for everyone. This is a hard Libertarian position, by the way. It states essentially that taxing people is bad enough, but taxing people who have no influence on the government, citizens without voting rights or unborn children, is far worse.

I know Republicans are pretty self-satisfied right now that they have pushed the government towards debt rather than taxation, but the debt isn't going to pay itself. It will be paid out of taxes on people who haven't been born yet. It's nothing more than common theft, and the people who propose tax cuts funded by debt are criminals stealing from people who cannot speak for nor defend themselves. They get the gravy and the unborn get the shaft. They get nothing but contempt from me. Government may be too big and too expensive, but raising taxes to cover all the goodies you want would at least force the debate. Debt is the coward's way out and it suits this administration well.

|3.10.06 @ 4:23PM|#

Aid to Africa remains a favorite cause for politicians and entertainers.

There was an apparent need for that aid before the aid actually started: IOW, Africa wasn't do well without outside help. And it's not doing well with help, either.

Nations and multinational institutions that want to help Africa should beg, cajole, and browbeat its nations to remove trade barriers continent-wide, the fastest and least risky way to enhance wealth and bring support directly to the small farmers, tradespeople, and entrepreneurs who are Africa's future.

The trade barriers are bad for nearly everyone, but somehow only Africa achieves starvation status because of them. It's only complicated and mysterious when viewed through politically correct filters.

|3.11.06 @ 8:04PM|#

Dilbert will never run out of material.
The typical humanoid, when it notices a rock in its shoe, will think first of going to buy a Dr. Scholl's gelpad.
The only way to be "gellin'" is to spend more money.

|3.12.06 @ 2:09AM|#

It's only complicated and mysterious when viewed through politically correct filters.

Here I was, thinking extreme poverty in developing nations was a complicated issue, and twice today I've been told it's simple.

First, as I watched the DVDs of the Live 8 concerts from last summer (some fine performances there, btw, especially from the reunited Pink Floyd). They said extreme poverty would go away if only people would send money.

Now, Mr. Le Mur explains it's simply because I've been looking at the problem in a "politically correct way." I can't ask Bob Geldof or Bono questions about how they think it works, so I'd appreciate hearing your analysis, Mr. Le Mur. I'll admit my skepticism up front, just as I'm skeptical of the long term benefit of the Live 8 concerts (though I do think the hearts of most everyone involved were in the right place). Still, I'd love for you to change my mind (simple problems are, after all, preferable to complicated ones).

|3.12.06 @ 12:05PM|#

Les,

Here's my simple solution, I'll let Le Mur give his own.

Giving cash to a beggar only ensures that the beggar learns the way to get money is to beg. Once the aid stops the lack of cash becomes an extreme problem again. How many concerts do these guys think will be necessary to continue the cycle of dependency?

The only way out of poverty for poor countries is for them to choose an economic growth strategy. The false notion that aid is the way out only makes it harder for them to see the way to doing what they need to do.

We can't force them to implement intelligent economic policies, although we can assassinate the occasional ruthless dictator I suppose, But even then the aftermath is far from clear to being a good thing, witness Iraq.

We can conceivably bribe them into making a pro-growth stategy though, a la The Marshall Plan, which only worked when they implemented a pro-growth strategy, and was a failure before that when they were merely getting aid money.

But such aid needs to be tied to such pro-growth policies or it will simply prolong the misery. Viewed in this light, the Live 8 concerts and similar initiatives almost certainly cause more harm than good, despite their golden intentions.

These countries don't need to wait to be bribed to pick a pro-growth path though. There are plenty of east Asian countries that did so without such aid, such as Hong Kong, Singapore, South Korea, Taiwan, and more recently, Malaysia, Thailand, China, and much more recently, India.

Botswana, an African country by the way, has had a pro-growth strategy (too statist to be as effective as possible, but it is still pro-growth) for about 40 years now, and while it still has a large percentage under poverty, it also has managed to go from essentially 0% non-poor to about 60% non-poor, again despite being Aids central.

Perhaps it is precisely because these countries knew they weren't going to get aid that they found the way to a pro-growth path which lifts people out of poverty. They knew they were on their own.

|3.12.06 @ 12:15PM|#

An aid/growth analogy would be Ireland and Protugal. Both recieved substantial aid from the EU and its predecessors. In neithe rcountry did the aid do basically anything to add to growth. Then Ireland chose a pro-growth strategy, much to the bizarre dismay of countries like Germany and France. Ireland had leapfrogged most of Europe and has one of the highest per capita GDP's in the world now, while Protugal is still struggling along.

Granted, both of these countries were much richer than the poor countries of Africa, but the same principle applies.

|3.12.06 @ 12:18PM|#

Uh, Portugal. :o

|3.12.06 @ 12:47PM|#

I've read that Iceland had a pretty basic subsistence-farmer/fisherman economy forty or fifty years ago and pulled themselves up by their bootstraps. Botswana is probably along a similar trajectory. Africans speak of it as if it were practically a European country already. A South African tour driver I met in East Africa told me that whether a cop was corrupt or not, it was generally safe to offer a bribe throughout Africa. He might not take it, but he wouldn't bust you. "Except," he said, "in South Africa and Botswana. In Botswana, you NEVER try to bribe a cop."

He was shocked when he was stopped in Uganda for speeding and cop insisted on writing out a ticket. "I just met the only honest cop in Uganda," he exclaimed. When I suggested a few thousand more like him might really straighten out the country he replied, "Too true, Mate. But I'm still not going to pay the ticket."

Third World countries don't have the computers or resources to track down skips...if another cop stopped him he would have no idea he was a scofflaw. The major deterrent to speeding was not the threat of a fine, but the fifteen minutes he was stopped while the cop hassled him and wrote out the ticket. I now leave the floor open to discuss whether, under the circumstances, a corrupt cop who demanded a bribe would deter speeding more than a cop who writes out a ticket the state does not have the resources to enforce.

|3.12.06 @ 3:53PM|#

happyjuggler,

That all sounds really reasonable. I tend to agree with you that the solution(s) are rather simple, but that the problems and their sources are extremely complex. Do you think it's necessary for them to somehow develop political systems which aren't so cripplingly corrupt (like Ireland and Portugal) before the economic policies like the ones you describe can prove beneficial?