Politicians are never more dangerous than when they are thinking, “We’ve got to do something!”
Take the just-adjourned G8 meeting in Scotland. The rulers of the most advanced economic powers (and Russia, go figure) met with the intention of looking as though they were doing something to end poverty in Africa. They pledged to double the amount of money they will send to the continent by 2010 to $50 billion a year.
Most accounts of this meeting, such as the one in the New York Times, spoke in terms of “addressing African poverty” and “commitments by the eight nations to double their aid.”
Let’s get real. No “nation” made any commitment. Eight presumptuous men promised to coerce their taxpayers to surrender the money. The forced transfers will not constitute aid if by that word we signify the means to create prosperity. He who defines the terms wins the debate before it starts. One cannot assume that government handouts are truly aid. One must prove it. History and theory prove otherwise.
Over the last 40 years billions and billions of dollars have been given to governments and nongovernmental organizations in Africa, yet, according to the World Bank, “average per capita income [in sub-Saharan Africa] is lower that at the end of the 1960s…. The region contains a growing share of the world’s absolute poor.” That’s some track record.
On what grounds, then, do we call the money “aid”? As the great development economist P. T. (Lord) Bauer wrote many years ago, the term “aid” prejudges the effects of the money. “Either gifts or doles would be much preferable [terms] on logical grounds as a description of these transfers.”
Semantics aside, is the money needed to lift Africa out of poverty? Bauer wrote in the 1960s, “Foreign aid is clearly not necessary for economic development, as is obvious for instance from the very existence of developed countries. All of these began as underdeveloped and progressed without foreign aid. Moreover, many underdeveloped countries have advanced very rapidly over the last half century or so without foreign aid…. There are many such countries in the far east, south-east Asia, East and West Africa and Latin America. Nor is foreign aid a sufficient condition. It cannot, for instance, promote development if a population at large is not interested in material advance, nor if it is strongly attached to values and customs incompatible with material progress.”
The money is worse than ineffective. It is harmful because it politicizes societies, enriches politicians and parasitic organizations, and discourages productive activity. Political decision-making, which is strengthened by aid, is not good for people. This is why the idea that aid should be given only if African governments root out corruption is nonsense. Even if they could end corruption (have the G8 governments ended it yet?) aid would be inimical to progress.
As Bauer pointed out, economic progress grows out of work, the division of labor, trade, saving, investment, and secure property rights. The precondition is a culture that neither discourages nor impedes the creation of wealth. Don’t people need capital? It will be generated by the people themselves; but if the above-mentioned conditions are fulfilled, foreigners will be eager to invest.
The upshot is that the poorest African countries hold their destinies in their own hands. They do not need the promises of eight politicians who produce nothing.