TCS Daily

The Road to Hell

By Max Borders - July 5, 2005 12:00 AM

"Double foreign aid," says Finance Minister Gordon Brown in the run-up to July's G8 summit . Development economist Bill Easterly likens this refrain to Moore's Law, which predicts computing power will double every 18 months. Likewise, says Easterly, rock stars and globocrats have called for the doubling of foreign aid about every 10 years since Bretton Woods.

Personalities like Bono parade around with the latest World Bank Wolfie (Wolfensohn, Wolfowitz, etc.), hoping that these world tours for aid will put them in contention for the Nobel Peace Prize -- having, of course, bagged their Grammys long ago. Single-minded bureaucrats with grotesque salaries funneled from us -- the engines of wealth creation -- go to their offices every day earnestly believing that, one day, they will figure out how to pull the Third World out of the Ninth Circle of Hell if they only had more resources.

"Double foreign aid," says Prime Minister Tony Blair. Back to the refrain.

Jeffrey Sachs, once the Doogie Howser MD of global economics, sits in the air conditioning penning book after book, each amounting to little more than a guide to squandering the world's resources. Like Bono's, we know Sachs's heart is in the right place. But as they say, "the road to hell..." And if we are blind to consequences, no amount of good intentions will make Africa wealthy.

Most people see the daily images of Africans in squalor and feel that something must be done. We might not be so concerned about siphoning the creme off the pie of the West's great wealth, as long as there is a boy somewhere drawing his last breath due to malnutrition, dysentery, or AIDS. And yet there is something profoundly wrong-headed in all this. We think that if there were only enough money thrown at their problems, places like Africa might be saved. If we could just increase $50 billion per annum to $100 billion per annum, Africa would somehow develop by the brute force of capital infusion.

But this is a self-deception. And it's time we started calling it an evil. Rich, visible people who seek publically to atone for their own riches and excess by sticking their mitts into our family pots should take a step back from the pulpit of rectitude and listen to what others are saying.

We have had 50 years of Bretton Woods Keynesianism, i.e. the policy founded on the false notion that macro-economic wizards and central planners could grow Africa "like a garden." Nothing has grown since . And the garden metaphor is wrong.

Indeed, economies are not like gardens at all, but ecosystems. And ecosystems can't be grown. But if the IMF and World Bank are in the business of growing gardens, their methods are more akin to dropping fertilizer from 50,000 feet onto the desert. Doubling the amount of fertilizer, far from yielding potatoes and corn, will yield a desert full of shit.

We should also be angry about the politicization of foreign aid. That even so-called conservatives like President Bush end up ingratiating themselves to those who know he needs to save face for Iraq. The issue has become so politically entrenched that the debates involve only "how much?" rather than "is it working?"

And yet the answer is staring everyone in the face. One need only look at the data. But you can use common sense to understand why foreign aid doesn't work. (Most of us couldn't even tell what precisely it does not work at  only that places like Africa only languish, grow increasingly dependent, less likely to change, and more corrupt. These problems get worse as more of our money is poured in.)  Fifty years of the domestic welfare-state status quo in the US should have taught us that a global welfare state would be even more expensive and even less efficacious. Only since the Welfare Reform Act of 1996 has the US seen an overall decrease in the number of people at the teat of FDR's dole. And only with some similarly half-baked reform will we start to see real GDP growth in the developing world. Why? Because it's almost an iron law of human beings: if you reward any behavior, you're more likely to get more of it.

In Africa, all the wrong behaviors are being rewarded:

Does your country have a) a dictator surrounded by ruthless cronies? Or b) the rule of law?

"Answer A!"

Give them $50 million!

Does your country have a) nationalized agriculture? Or b) privately owned farms?

"Answer A!"

Give them another $50 million!

Ah, but the well-intentioned bureaucrat thinks that things would get better if those resources were directed to the people. Maybe, but the improvements would be marginal and short-term, at best. Poor people, like dictators, learn to pull the lever if the cheese keeps coming. For them it makes little sense to think, act, or to take risks if extending your palms is rewarded with a morsel that you can get again tomorrow.  And don't be fooled by those who accuse the West of being chauvanistic about our economic systems.  They are under the spell of cultural relativism and zero-sum thinking, and they will happily take your money and mine so long as it means their guilty feelings can be assuaged.

Global bureaucrats are starting to pay lip-service to the idea of "good governance" and "institutions," but they will not likely have the political will to turn away the begging bowl when reform efforts fail. Short of doling out no aid at all, thoroughgoing institutional change is precisely what will be required for Africa and the rest of the Third World to improve. But if past efforts are any indication, Africa's road to hell will continue to be blanketed in foreign aid.


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