Thursday, July 14, 2005


Great post and comments over at The Becker-Posner Blog:

Aid to Africa: Will it Help?
Accompanied by rock concerts in different countries and a push from activist rock stars like Bono and Bob Geldof, the world's richest democracies, called the G8 nations, met this past week in Gleneagles Scotland to decide how to help African nations. The publicity surrounding their meeting was reduced by the terrorist attacks in London, but they still managed to get considerable newspaper coverage. They committed to $25 billion in extra annual aid to Africa by the year 2010, sizeable debt relief for Africa, trade talks to eliminate agricultural support in the rich nations, and a promise to make low cost AIDS treatment widely available in Africa.

The G8 nations are rich enough to easily afford the increased aid committed to Africa. Perhaps for this reason, some of the activists denounced the aid as too small and miserly. But that these countries can certainly "afford" to spend more does not mean that much greater aid will help the millions of poor Africans. Indeed, it is doubtful whether more aid will speed up economic growth, given both Africa's experience with aid during the past half century, and the evidence from other poor nations that internal reforms that produce sizeable and persistent growth are the only really effective way to reduce a nation's poverty.
(Becker's full post)

Foreign Aid to Sub-Saharan Africa
I do not favor foreign aid, debt relief (which is simply another form of such aid), or other financial transfers to poor countries, in Africa or anywhere else. Countries that are not corrupt do not require foreign aid, and foreign aid to corrupt countries entrenches corruption by increasing the gains to corruption. Foreign aid to Zimbabwe, for example, will simply prop up dictator Mugabe.

Foreign aid makes people in wealthy countries feel generous, but retards reform in those countries as well as in the donee countries. Obviously from a world welfare as well as African welfare standpoint Europe and the United States should not impose tariffs on agricultural imports in order to protect their rich farmers. Eliminating tariffs would do more for Africa than giving them an extra $25 billion a year to squander. (It would also increase the wealth of the countries that eliminated their tariffs.) Since there are 650 million people in Sub-Saharan Africa, the extra $25 billion will increase per capita annual income (assuming it isn't squirreled away by corrupt elites) by only $40. Not that such an increase is wholly trivial in relative terms—Nigeria, for example, has an annual per capita income of only about $300, and it is not the poorest country in Africa. But it is unlikely that the poorest people in these countries will benefit from the extra money; even if most of it isn't skimmed off by corrupt officials or squandered on dumb projects, it is likely to stave off fundamental political and economic reforms. (The G8 nations at Gleneagles also agreed to forgive some $50 in African debts to them, but that is a one-time event and its annualized value is therefore much less than $25 billion a year.)
(Posner's full post)

No comments: