Foreign Aid

Bill Gates is Not Impressed By Centuries of Bottom-Up Development

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Bill Gates, ladies man

Bill Gates outlines his "plan to assist the world's poor" in a recent op-ed in The Washington Post, arguing that "the private sector hasn't always invested as much in development as it should because the market incentives haven't always been clear…"

Apparently Gates can see through the market haze. On November 3, he will go before the heads of the G-20 to recommend ways to "continue investing in development" despite the crunched global economy.

Gates writes that "aid is targeted to fill specific gaps in development," the most important of which is innovation. He then conflates aid and innovation, citing the U.S. aid-backed green revolution, which was supported by groups like the Ford and Rockefeller Foundations, that "fed a billion people in the 1950s and '60s" and aid-funded immunizations that have saved millions of children from disease. Neither example constituted innovation–both involved transferring existing technologies from rich countries to poor ones.

In Reason's July 2010 issue, Matt Ridley correctly identified "where the perpetual innovation machine and its increasing returns came from."

They were not planned, directed, or ordered. They emerged, evolved, bottom up, from specialization and exchange. The accelerated exchange of ideas and people made possible by technology fueled the accelerating growth of wealth that has characterized the last century.

Both the green revolution and aid-funded immunizations mercifully improved the lives of countless people. But innovations that lead to development and poverty reduction have not historically been spurred by top-down aid like that of the Gates Foundation; they have been driven by the freedom to exchange and experiment.

Gates, like many aid evangelists, conflates aid with development, innovation, and economic growth. Throwing lots of money and energy at producing more crops or increasing vaccinations will accomplish either end, but these sort of aid outcomes–while capable of doing good–are not development.

In response to parts of Ridley's 2010 book, The Rational Optimist, Gates noted in the Wall Street Journal last November:

Science will come up with vaccines for AIDS and malaria, and the "top-down" approach to aid criticized by Mr. Ridley (and by the economist William Easterly) will fund the delivery of these life-saving drugs.

It's not surprising that the man who co-founded a company notorious for top-down software design takes a similar approach to international development. 

Ridley responded to Gates' criticisms in the Journal:

Far from saying that aid "doesn't work, hasn't worked and won't work," I actually say this in my book: "Some of the most urgent needs of Africa can surely be met by increased aid from the rich world. Aid can save lives, reduce hunger, deliver a medicine, a mosquito net, a meal or a metalled road."

I go on to say that "statistics, anecdotes and case histories all demonstrate that the one thing aid cannot reliably do is to start or accelerate economic growth."

In a recent interview, NYU economist Easterly noted the importance of distinguishing aid from development:

The historical record is pretty clear that success in development comes from people doing development themselves… . there's no evidence aid can become the main engine of development to transform the Third World into the First World, poverty to prosperity.

Easterly also hit the crux of the aid debate, noting that people who begin their assessment of the world's poor by asking what they can do to help are missing the point.

What I'm saying is you're asking the wrong question. It's the wrong mindset, asking 'What can we do?' because you've already taken a top-down, paternalistic stance.

Which apparently suits Gates just fine. 

Read Reason on foreign aid here. Below, watch Matt Ridley discuss The Rational Optimist and why "ideas having sex" is a very good thing: