Steve Chapman points out the supremely counterproductive policies behind foreign aid:
Affluent nations often make it impossible for Third World exporters to participate in the world economy. Third World producers trying to export to rich countries face tariffs averaging nearly 13 percent, nearly four times higher than the duties encountered by producers from rich countries.
Poor countries that might sell agricultural commodities in the West also face another hurdle—government subsidies to farmers in rich countries, which amount to $1 billion a day and serve to discourage imports. Textiles and apparel, where poor countries often excel, are still tightly restricted in the United States and other advanced economies. We want developing nations to compete in the world economy—but without inconveniencing our own producers, thank you. All these barriers cost poor countries about $100 billion a year, which is twice as much as they get in assistance.
“The biggest request we are making of Western countries is to open their markets,” Ugandan President Yoweri Museveni said recently. “Debt relief has saved us some money, but the real money will come from trade. Give us the opportunities, and we will compete.”
Of course, Africans aren’t exactly helping themselves either. As Nick Kristof points out, the staggering amount and complexity of red tape only perpetuates economic stagnation and dependence on handouts:
[O]f the 20 countries in the world where it is most difficult to do business, 17 are African, according to the [World Bank] study, “Doing Business in 2006.” Niger ranks 150th, followed by Sudan, Chad, Central African Republic, Burkina Faso and—the very worst place to try to do business—Congo.
Take a simple construction project—building a warehouse for books. In Niger, obtaining the necessary licenses would involve 27 procedures over half a year. And in either Nigeria or Zimbabwe, the licenses would take nearly a year and a half to obtain. . . .
The minimum wage is set at $35 a month in Niger, higher than the local market level. Employees are allowed to work no more than nine hours a day, weekend work is basically prohibited, and women are not allowed to work evenings at all. Layoffs are usually not allowed.
How does any of this relate to the war on terror? Tom Friedman connects the dots:
Wouldn’t it have been wise for the U.S. to take the initiative at Cancún, and offer to reduce our farm subsidies and textile tariffs, so some of the poorest countries, like Pakistan and Egypt, could raise their standards of living and sense of dignity, and also become better customers for U.S. goods? Yes, but that would be bad politics. It would mean asking U.S. farmers to sacrifice the ridiculous subsidies they get from our federal government ($3 billion a year for 25,000 cotton farmers) that make it impossible for foreign farmers to sell here. . . .
The Pakistani farmer we’ve put out of business with our farm subsidies then sends his sons to the Wahhabi school because it is tuition-free and offers a hot lunch. His sons grow up getting only a Koranic education, so they are totally unprepared for modernity, but they are taught one thing: that America is the source of all their troubles. One of the farmer’s sons joins al Qaeda and is killed in Afghanistan by U.S. Special Forces.
A version of this blog post appeared in the Hamilton College Spectator (November 14, 2003), the Syracuse Post-Standard (January 22, 2004), and What We Think: Young Voters Speak Out (College Tree, 2004). The post also was noted on the Hamilton College Web site on September 28, 2004, and January 22, 2004.
On Monday in Beinecke, the Hamilton chapter of Amnesty International asked me for money to buy a water buffalo for a farmer in Nepal. The scene reminded me of a comparable event I wrote about last year. “So, we donated spare change in water buckets at the dining halls, we fasted, we volunteered for Utica’s soup kitchen. But something was missing—an ingredient so implicit in our bounty that we overlooked its necessity. That manna is capitalism. For capitalism, in contrast to the quick fixes of Hunger and Homelessness Week, is a long-term panacea.”
Indeed, world hunger is not a problem of redistribution. As psychotherapist Michael J. Hurd observes, people don’t go hungry “because you throw out half a stick of butter or an unfinished Coke.” In the same way, malnutrition does not develop into abundance when you donate one of those shiny new $20 bills to some charity. As they say, Give a man a fish, and feed him for the week. Teach a man to fish, and feed him for a lifetime.
To wit, though the specifics vary from country to country, the root cause of hunger is always the same: not lack of handouts, but lack of a market economy. Consider sub–Saharan Africa. Echoing Julian Simon in The Ultimate Resource 2, philosopher Andrew Bernstein argues, “Africa has the identical natural resource fundamentally responsible for the West’s rise: the human mind.” Yet the continent lacks the social system that allows the mind to flourish, which liberates it to invent and innovate. What Africans, like other starving people, desperately need, therefore, is to marry the mind to the market.
For to the extent that it has existed, the free market has enabled abundance unmatched in human history. When was the last time a famine occurred in any capitalist nation? It is no coincidence that the hungriest countries—Somalia, Afghanistan and Haiti—are the most averse to economic and political freedom.
Now, I don’t doubt the sincerity of my fellow students. But if your heart bleeds for the tired, the poor, the huddled masses yearning to breathe free to whom Emma Lazarus dedicated our Statue of Liberty, then give them the gift of capitalism and watch their cups runneth over. We can debate the details later, but let’s call a spade a spade. To paraphrase Ayn Rand, the haves have capitalism; the have-nots have not capitalism. To rephrase President Clinton, It’s capitalism, stupid. To rephrase Karl Marx, Workers of the world unite for capitalism; you have nothing to lose but your hunger.
Unpublished Notes
1. Robert Wright, “Poverty and the Middle-class Terrorist,” Slate, September 10, 2002, in Robert Wright, “A Real War on Terrorism,” Slate, September 3-September 13, 2002.
But one thing aid has generally not done, as the economist William Easterly showed in The Elusive Quest for Growth, is make a clear contribution to lasting economic development—to the market-driven modernization that tends to be lacking in terrorism-exporting countries.
Nor has aid dramatically contributed to the freedom and democracy that are also lacking in terrorism-exporting countries. In fact, when aid passes through the hands of dictators, a large chunk has a way of winding up in the hands of their cronies, consolidating autocratic rule. According to calculations reported by Bruce Bueno de Mesquita and Hilton Root in the National Interest, “every dollar of per capita foreign aid improves an incumbent autocrat’s chance of surviving in office another year by about 4%.”
2. Pedro Sanchez, “The Next Green Revolution,” New York Times, October 6, 2004.
3. The traditional kind of foreign aid simply does not work. It does not encourage the recipient nations to reform their legal systems, or their markets; it does not help them to become industrialized.
4. Gary Dempsey and Aaron Lukas, “Promoting Afghanistan,” Center for Trade Policy Studies, January 23, 2002.
The real source of poverty and isolation in much of the world lies in the unwillingness of many states—especially Muslim states—to make themselves competitive in the global economy. Poor countries, in other words, have adopted poor policies. The key to fighting poverty doesn’t lie in foreign aid, which often merely helps recalcitrant governments avoid necessary reforms. Developing countries must reduce trade barriers, establish the rule of law, protect private property, curb inflation, cut wasteful spending and corruption, and stop meddling in domestic markets. A trade deal wouldn’t prompt those changes overnight, but it would introduce external discipline to get the basics right.
Right now the United States imposes its highest trade barriers on exports that are most important to poor countries, such as sugar, footwear, clothing, and textiles. In the World Trade Organization’s Agreement on Textiles and Clothing, for instance, the United States pledged in 1995 to phase out all textile and apparel quotas over a 10-year period. Only a tiny percentage has been scrapped so far. On average, developing countries face tariffs on their manufactured exports that are nearly four times the tariffs facing exports of developed countries. Because of that inequitable pattern of protectionism, Thomas W. Hertel and Will Martin of the World Bank have concluded that developing countries would capture around 75% of the world economic benefits from further trade liberalization in the manufacturing sector.
In other words, Washington could deliver far more important and long-lasting “aid” to poor farmers and workers around the world by allowing them to sell what they produce duty-free in the U.S. market.
Aid’s long-term prospects are much bleaker. When Harry Truman took enormous political risks in 1947 to push the Marshall Plan through Congress, he was dealing with nations very different from Afghanistan. If massive government spending could work anywhere, it was in post-war Europe: Skilled labor was widely available, the rule of law and property rights had a long history, and the customs of a commercial society were recoverable. All Europe needed was physical capital. Afghanistan currently lacks all of those things, so massive foreign aid won’t achieve much. It would likely create an addiction to freebies among Afghanistan’s political elite that they would eventually use to blackmail the West: Give us more money or “the bad guys might come back.”
5. John Blundell, “Africa’s Plight Will Not End with Aid,” Scotsman, June 14, 2004.
Without the rule of law, private property rights, an independent judiciary, limited government and an infrastructure for basic transportation, water, electricity and communication, Americans would also be a diseased, broken and starving people.
6. Marian L. Tupy, “Poverty That Defies Aid,” Washington Times, June 19, 2005.
“poverty that defies aid”
7. Victor Davis Hanson, “Misunderstanding America,” National Review Online, February 25, 2002.
“Everyone from Swedish relief officials to Bono whines that in proportional rather than absolute amounts of foreign aid, we American are tightfisted and do not give generously to the Third World countries. Forget the billions that we do hand out—and whether such blanket donations without the prerequisite conditions of Westernization make countries like Egypt, Palestine, North Korea, and Pakistan worse rather than better. Instead consider that Americans, unlike Europeans, spend billions in defense that in real terms are not directly tied to the security of the United States but rather ensure global trade, tranquility and security.
“Just how much ‘foreign aid’ is a multibillion-dollar carrier battle group, when it patrols the Mediterranean or the Sea of Japan and so has the effect not of stealing foreign resources but rather of ensuring that Turks and Greeks are not at war, that Koreans do not blow each other up, or that China keeps away from Taiwan and Japan? Unlike simple food or money, this type of ‘foreign assistance’ is quite risky to its benefactors—and more likely be resented, caricatured, or misrepresented. Sending in an air wing to Kosovo can save thousands; sending in the Red Cross or the U.N., tragically, cannot. G.P.S. bombs, not Amnesty International, are more likely to keep killers away from Big Ben and the Vatican. Should we not deploy carriers, frigates, and planes the world over, both the Europeans and the Third World would not enjoy a stable global community, but one that would either sink into the chaos of a Mogadishu, Monrovia, or Kabul, or find its stability only in the law and order of a Baghdad, Peking, or Havana.
8. The historical record suggests that foreign aid promotes perpetual dependence.
9. Ugandan President Yoweri Musevani, during a 2003 meeting with President Bush.
“I don’t want aid; I want trade.”
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