Arnold Kling  

fighting African poverty

Imperfect Information and the ... Hong Kong: Statist at Heart?...

In this essay, I offer some advice for people who care about African poverty.

1. The world is a complex place. The farther you are removed from a situation, the less likely that your intervention there will do good and the greater risk that it will cause harm. No matter how thoughtfully it is administered, long-distance aid will tend to be ineffective.

2. The easiest poverty to prevent is poverty that is close by. By developing useful skills and remaining employed, you can help keep yourself and your family out of poverty.

...5. Remember that unlike the Folk Song Army of Tom Lehrer's song, you have no monopoly on good intentions. A morality play in which those who care crusade against those who are square makes for great theater. However, it is not a realistic basis for economic policy.

On the same general topic, Ian Vasquez writes,

Even when aid is supposed to promote policy change, it fails. Countries promise reform, receive donor largess, then introduce half-hearted reforms or fail to do so altogether. A recent World Bank study looked at the record of aid from 1980 to 2000 and found "aid on balance significantly retards rather than encourages market-oriented policy reform." That finding is consistent with a previous Bank study that "reform is more likely to be preceded by a decline in aid than an increase in aid."

Read the entire Vasquez piece. Thanks to Don Boudreaux for the pointer.

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The author at CornerSolution in a related article titled Should We Abandon Foreign Aid? writes:
    William Butterfield Don Boudreaux and Arnold Kling, citing a Cato study, take their easy shots at the embarrassingly poor aid/growth record. The problem is, they offer no alternative solutions to the persistent humanitarian disaster known as most of Af... [Tracked on July 11, 2005 10:38 PM]
The author at Owen's musings in a related article titled Aid, evidence and anecdotes writes:
    The debate about aid effectiveness should be based on proper statistical analysis, not on anecdotes from either side. The evidence is overwhelming that aid is strongly postively correlated with economic growth. ... [Tracked on July 20, 2005 6:00 PM]
The author at Owen's musings in a related article titled The effectiveness of aid agencies writes:
    An academic study comparing the impact of aid with the impact of oil revenues shows that aid agencies are adding considerable value to the transfers that they administer. ... [Tracked on July 20, 2005 10:15 PM]
COMMENTS (3 to date)
Robert Schwartz writes:

I thought this was incredibly eloquent:
Der Spiegel -- Interview with Kenyan economics expert James Shikwati, 35, July 4, 2005, "For God's Sake, Please Stop the Aid!"

SPIEGEL: Mr. Shikwati, the G8 summit at Gleneagles is about to beef up the development aid for Africa...

Shikwati: ... for God's sake, please just stop.

SPIEGEL: Stop? The industrialized nations of the West want to eliminate hunger and poverty.

Shikwati: Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor.

SPIEGEL: Do you have an explanation for this paradox?

Shikwati: Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa's problems. If the West were to cancel these payments, normal Africans wouldn't even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid.

SPIEGEL: Even in a country like Kenya, people are starving to death each year. Someone has got to help them.

Shikwati: But it has to be the Kenyans themselves who help these people. When there's a drought in a region of Kenya, our corrupt politicians reflexively cry out for more help. This call then reaches the United Nations World Food Program -- which is a massive agency of apparatchiks who are in the absurd situation of, on the one hand, being dedicated to the fight against hunger while, on the other hand, being faced with unemployment were hunger actually eliminated. It's only natural that they willingly accept the plea for more help. And it's not uncommon that they demand a little more money than the respective African government originally requested. They then forward that request to their headquarters, and before long, several thousands tons of corn are shipped to Africa ...

SPIEGEL: ... corn that predominantly comes from highly-subsidized European and American farmers ...

Shikwati: ... and at some point, this corn ends up in the harbor of Mombasa. A portion of the corn often goes directly into the hands of unsrupulous politicians who then pass it on to their own tribe to boost their next election campaign. Another portion of the shipment ends up on the black market where the corn is dumped at extremely low prices. Local farmers may as well put down their hoes right away; no one can compete with the UN's World Food Program. And because the farmers go under in the face of this pressure, Kenya would have no reserves to draw on if there actually were a famine next year. It's a simple but fatal cycle.

SPIEGEL: If the World Food Program didn't do anything, the people would starve.

Shikwati: I don't think so. In such a case, the Kenyans, for a change, would be forced to initiate trade relations with Uganda or Tanzania, and buy their food there. This type of trade is vital for Africa. It would force us to improve our own infrastructure, while making national borders -- drawn by the Europeans by the way -- more permeable. It would also force us to establish laws favoring market economy.

SPIEGEL: Would Africa actually be able to solve these problems on its own?

Shikwati: Of course. Hunger should not be a problem in most of the countries south of the Sahara. In addition, there are vast natural resources: oil, gold, diamonds. Africa is always only portrayed as a continent of suffering, but most figures are vastly exaggerated. In the industrial nations, there's a sense that Africa would go under without development aid. But believe me, Africa existed before you Europeans came along. And we didn't do all that poorly either.


SPIEGEL: In the West, there are many compassionate citizens wanting to help Africa. Each year, they donate money and pack their old clothes into collection bags ...

Shikwati: ... and they flood our markets with that stuff. We can buy these donated clothes cheaply at our so-called Mitumba markets. There are Germans who spend a few dollars to get used Bayern Munich or Werder Bremen jerseys, in other words, clothes that that some German kids sent to Africa for a good cause. After buying these jerseys, they auction them off at Ebay and send them back to Germany -- for three times the price. That's insanity ...

SPIEGEL: ... and hopefully an exception.

Shikwati: Why do we get these mountains of clothes? No one is freezing here. Instead, our tailors lose their livlihoods. They're in the same position as our farmers. No one in the low-wage world of Africa can be cost-efficient enough to keep pace with donated products. In 1997, 137,000 workers were employed in Nigeria's textile industry. By 2003, the figure had dropped to 57,000. The results are the same in all other areas where overwhelming helpfulness and fragile African markets collide.


SPIEGEL: What are the Germans supposed to do?

Shikwati: If they really want to fight poverty, they should completely halt development aid and give Africa the opportunity to ensure its own survival. Currently, Africa is like a child that immediately cries for its babysitter when something goes wrong. Africa should stand on its own two feet.

Daniel Slate writes:

Agreed. Very well said. Glad to see Boudreaux's picked it up, too.

Jon writes:

A friend who works for one NGO once explained that his NGO does evaluate the potential problems aid could induce to insure that the aid does not put local workers out of jobs.

Furthermore, in the clothing example cited above--don't the pure free-market people maintain that if a third country were subsidizing production of a product and putting domestic workers out of business, we should welcome the subsidy instead of putting up barriers to "free trade"?

The arguments cited by Vasquez are highly flawed. Much aid is not given for the purpose of generating economic growth; it has been given either to help keep people alive during various manmade and natural disasters or has been given to corrupt governments (or rebels) for the purpose of getting the recipients support. In the 80's it was for the war in Iraq and more recently it has been for the war on terror. Finally the study cited is one of those multifactor regression models. Aid not motivated by politics flows to countries when they have trouble feeding their people--a condition often caused by political disfunction. When the country does not need aid, we probably aren't giving it.

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