Anyone who has visited a shantytown in Africa can applaud the impulse behind Live 8 and the Make Poverty History campaign. It would be swell if, as we are repeatedly told, “for the price of a Big Mac” we could save 20,000 people a day who die from extreme poverty. But there is little reason to think that aging pop stars have figured out how to achieve a goal that has eluded generations of policymakers.
The solution being promoted by Live 8 is simple: Send beaucoup bucks. The anti-poverty campaigners are grouchy because the wealthy world spends only 0.25% of its gross national income on aid -- a mere $76.8 billion last year. They want to nearly triple that, to 0.7% of GNI.
The United States, in particular, is castigated for its stingy development budget -- only 0.16% of GNI. This obscures the fact that, in absolute terms, the U.S. government spends far more on foreign aid ($19 billion last year) than any other nation. And that’s only a small part of our total contribution. Thanks in part to our lower tax rates, Americans give far more to charity than do Europeans. If you include private-sector donations, the Hudson Institute finds, U.S. foreign aid totals $81 billion, or 0.68% of GNI -- close to the U.N. Millennium Development Goals. And that’s not counting the billions the U.S. spends to subsidize global security or the billions more it sends abroad as investment capital.
By any measure, the U.S. is extraordinarily generous, and President Bush is making us more generous still. He has already tripled development aid to Africa and plans to double it again. But for the anti-poverty campaigners it’s not enough. It never is. Their animating idea is the same one that was behind Lyndon Johnson’s Great Society: Massive transfers of wealth can eradicate poverty. It didn’t work in the U.S., and it has even less chance of working abroad.
In the last 50 years, $2.3 trillion has been spent to help poor countries. Yet Africans’ income and life expectancy have gone down, not up, during that period, while South Korea, Singapore and other Asian nations that received little if any assistance have moved from African-level poverty to European-level prosperity thanks to their superior economic policies.
Economists who have studied aid projects have found numerous reasons for the failures. In many instances, money was siphoned off by corrupt officials. Even when funds did reach the intended beneficiaries, the money often distorted local markets for goods and labor, creating inflation that drove local businesses out of business.
Only one major research paper in recent years has found any positive correlation between foreign aid and economic growth, and that only in countries “with good fiscal, monetary and trade policies,” which excludes much of Africa. Most experts think even that conclusion is too optimistic.
The International Monetary Fund recently issued two reports that find “little evidence of a robust positive impact of aid on growth.” Jeffrey Sachs, economist-in-residence at Rock ‘n’ Roll U., airily waves away such objections. Yes, aid hasn’t worked in the past, he concedes, but he’s come up with some boffo (or is that Bono?) ideas that really, truly will break a half-century of futility. Maybe he’s identified the key barriers to growth; maybe Africa really does need more leguminous trees. Or maybe not. But his impassioned assurances offer scant cause to throw good money after bad.
Oddly enough, Sachs ignores the most obvious obstacle to Africa’s escape from the “poverty trap,” what his pal Bob Geldof has accurately described as “corruption and thuggery.” (This was also Sachs’ blind spot when he tried to reform the Russian economy in the 1990s.) Yet not even Sir Bob has offered any plausible ideas for addressing these deep-rooted woes.
Africans continue to be tormented not by the G-8, as anti-poverty campaigners imply, but by their own politicos, including Sudanese President Omar Hassan Ahmed Bashir, who is abetting genocide in Darfur, and Zimbabwean President Robert Mugabe, who is turning his once-prosperous country into a famine-plagued basket case. Unless it’s linked to specific “good governance” benchmarks (as with the new U.S. Millennium Challenge Account), more aid risks subsidizing dysfunctional regimes.
Any real solution to Africa’s problems must focus on the root causes of poverty -- mainly misgovernment. Instead of pouring billions more down the same old rat holes, maybe the Live 8 crew should promote a more innovative approach: Use the G-8’s jillions 2 hire mercenaries 4 the overthrow of the 6 most thuggish regimes in Africa. That would do more to help ordinary Africans than any number of musical extravaganzas.