U2 frontman Bono and Treasury Secretary Paul O'Neill are on an African poverty safari that teaches many things, chief among them that publicity stunts still work. Not since John McCain's days on the campaign bus has there been such a media swoon. The Odd Couple comparisons, the starched shirt vs. blue wrap-around sunglasses, are tired. But the most grating aspect is the dominant media frame through which it is being covered: that this is a traveling development aid seminar in which Professor Bono is schooling an ignorant and misguided secretary of the treasury on the virtues of foreign aid. O'Neill, who, after all, grew up in a ditch, may have a thing or two to teach Bono.
There's certainly plenty of learning to be had. To get an accurate picture of the aid world, you don't have to spend taxpayer money on a learning junket to ill-equipped schoolhouses and villages without wells. You could stay in D.C. and review the records of the massive bureaucracies devoted to helping poor people in other countries achieve the status of "low income." Or you could let World Bank insider William Easterly do that for you, and read his masterful book The Elusive Quest for Growth (2001).
Easterly, like Bono and O'Neill, starts in Ghana. In 1957, the country had just gained independence from Britain, a separation that bequeathed it new roads, new health clinics, and new schools. At the time, the country produced two-thirds of the world's cocoa. It also, Easterly notes, had many developmental economists hoping to help it grow, plus a Soviet Union and United States eager to kick in cash and advice. Ghana's new leader used foreign money to construct a giant dam, a project that was supposed to provide power for an aluminum plant even as it created a domestic fishing industry and brought transportation and irrigation to the farmers. In total, aid enthusiasts figured it would power growth of up to seven percent per year.
Only the aluminum plant came through. Writes Easterly, "The saddest part was that the Volta River project was the most successful investment project in Ghanaian history." Today, the country remains as poor as it was in the 1950s.
Such stories are not particular to Ghana. (There is, for example, the Morogoro Shoe Factory, owned by the government of Tanzania, which failed to export a single shoe.) Easterly also knocks the legs out from under the latest developmental fad—education-driven growth—pointing out that economic stagnation and decline has accompanied ever-increasing school attendance and literacy rates.
It's a hilarious read, if you enjoy gallows humor. The thesis of the book is that incentives matter, and where people have an incentive to invest in the future, they do so. Where that investment is likely to be destroyed by corrupt governments, they don't. And where they have an incentive to engage in corruption, they do that as well.
The problem of corruption is compounded by the fact that the development economists working in large international organizations know next to nothing about development. Instead, they apply a Soviet-inspired growth model to pump money into failed projects, such as Ghana's dam. It doesn't bother them that the economist who developed the model declared it useless in 1957, the year of Ghana's independence. The model tells economists how much money to dump into countries, and they like dumping the money—so they keep using it.
This may not mean that aid is always a bad idea. It does say, though, that it's not good for economic development. Consider a current crisis, a famine in southern Africa produced by bad weather and terrible public policy. The Malawi government, whose citizens are currently starving, actually sold 167,000 tons of emergency grain last year but can't account for the money. The agricultural economy of Zimbabwe, which typically kicks off surplus food, was decimated when President Robert Mugabe, facing re-election, decided to play his version of the race card and redistributed white-owned farms to blacks.
Such corruption and mismanagement aside, starving people need food. Lend a hand, then, but don't pretend it's a hand up. Perhaps that's something on which Bono and O'Neill can agree.