Wednesday, July 06, 2005

Trade Not Aid

Want to help Africa? Reform it, don't enable it.

Alex Massie,
writing in NRO:

This demand for accountability is oddly controversial. But it seems axiomatic that anyone with Africa's interests at heart would want, indeed demand, that aid be spent on those it is designed to help rather than sequestered in Swiss bank accounts or squandered to satisfy the whims of a kleptocratic elite.

An appraisal of the history of aid to Africa is enough to make you weep. In the last 45 years the developed world has handed out more than $450 billion in aid. Yet according to Marian Tupy at the Cato Institute, African GDP declined by 0.59 percent per annum from 1975 to 2000. South Asia, which received just 21 percent of the aid Africa did, has increased GDP by 2.94 percent a year during that same period. Even allowing for different circumstances, that comparison is striking and ought to suggest that more aid is not necessarily the answer to African woes.
Read the whole thing.

Update: Jonah Goldberg has a nice piece on the Live 8 concert as well.
Very smart people have been trying really, really hard to make poverty history for a long time. Heck, they've been working very hard to make Africa just ever-so-slightly less hellish for a very long time. Debt relief is probably part of a potential solution, but without ending Africa's tendency to produce horrible, greedy dictatorships, debt relief is more akin to paying off a drug addict's credit cards.


At 10:11 AM, Blogger Nathan said...

As I see it, the problem is that all money in most African nations is channeled to dictatorial governments. Correct me if I'm wrong.

So, even free trade would invariably produce the same result. These cultures are inherrently power hungry. That won't change with money or trade. The simple fact is that there needs to be an attitude change, or nothing will change. Period.

At 10:26 AM, Blogger Tyler said...

Your initial take is correct, but where you go with it goes astray.

Aid money is given to the governments to use on variuos projects - transportation, health, infrastructure - and are typically handled several times, with each handler taking a piece.

Trade would route around the governments, because it would be companies and individuals dealing with other companies and individuals. There would still be opportunity for graft - excise taxes, fees, customs duties - but the governments would not be handed a big sack of money, as currently happens. Rather, individuals would be buying and selling, more freely than they can now.

I've got to ponder it some more, myself. But the current aid system doesn't work well. And so far, the only changes that have been called for are to throw more money at the problem.

At 10:44 AM, Blogger Nathan said...

Some ideas to help change African attitude.

1) Stop ALL foreign aid immediately.

2) Set up free trade districts (using military effort if necessary).

3) Allow American companies to set up factories to utilize the cheap labor.

4) Local factory workers earn money that will be spent in local economy. They will be protected from local dictators by military, if necessary.

5) Decrease in poverty as Aficans learn that they can improve their circumstances through work.

At 11:36 AM, Blogger Tyler Farrer said...

There are some logical moral arguments for free trade over aid. Daniel Griswold has a seven arguments for free trade on The Insider Online

My favorite quote from the article.

"Producers who seek protection are not only robbing their fellow citizens of income and freedom of choice; they are sapping the economic strength of their own society. Protectionists are prone to wrap their agenda in words of patriotism and compassion, but their aim is self-centered and self-serving."

At 2:10 PM, Blogger Maine Man said...

I agree with numbers 1 and 5. Take military out of 2 and 4 and I'd say "right on." But, 3 would only be good if the factories are supplying products to be sold in the local economies. Otherwise, the cost savings from cheap labor would be more than offset by the increased transportation costs, inventory costs, poor quality, ripped off patents, communication issues, etc. etc. just as it is with nearly every other offshore manufacturer. The last thing American manufacturers need is another rainbow to chase in the illusion of labor savings. This might help Africa, but it would seriously injure the USA.


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