Update on Africa

Further evidence that expanding aid to Africa won't cure poverty. As background, remember that post-war economists -- especially JFK/LBJ cold warrior the late Walt Rostow, in The Stages of Economic Growth, first published in 1960 -- argued that sub-Sahara Africa was locked in a "poverty trap," but that countries could emerge from stagnation into self-sustained growth via an aid-financed increase in investment. Despite the example of Africa, some economists, notably Jeffrey Sachs, director of Columbia University’s Earth Institute and advisor to UN Secretary-General Kofi Annan, still cling to this so-called "take-off" theory.

Only one problem: according to MIT PhD and former World Bank economist William Easterly, now Professor of Economics at NYU, the "evidence to support the narrative is scarce." (I've previously relied upon and cited his earlier paper.) In a new paper for the Center for Global Development, Easterly tests this storyline using growth regressions, concluding:

Over 1970-94, there is good data on public investment for 22 African countries. These countries’ governments spent $342 billion on public investment. The donors gave these same countries’ governments $187 billion in aid over this period. Unfortunately, the corresponding “step” increase in productivity, measured as per capita growth over this period, was zero.

Rather, Easterly finds an inverse correlation (though not necessarily causation):

Decades of research on aid and growth has failed to generate evidence for this prediction. The big stylized facts certainly do not support the prediction that aid has big growth effects, helping countries to escape from poverty traps: (1) growth is lower in aid-intensive countries than in developing countries that get little aid, (2) aid has risen over time as a percent of income in Africa, but Africa’s growth rate has fallen over time.

Other economists agree there is little evidence foreign aid works.

Try telling that to internationalist bureaucrats or NGO lobbyists. Intent on perpetuating failure, the UN just concluded its 2005 World Summit, attended by gaggles of "poverty trap" partisans, who "forged an action plan" to achieve the various poverty-reduction targets codified as UN Millennium Development Goals.

The idea is laudatory. But the program is doomed, says University of Ottawa Law Professor Amir Attaran:

[M]any of the most important MDGs, including those to reduce malaria, maternal mortality, or tuberculosis (TB), suffer from a worrying lack of scientifically valid data. While progress on each of these goals is portrayed in time-limited and measurable terms, often the subject matter is so immeasurable, or the measurements are so inadequate, that one cannot know the baseline condition before the MDGs, or know if the desired trend of improvement is actually occurring.

According to Richard Tren, a director of the South Africa-based advocacy group Africa Fighting Malaria, this amounts to declaring victory and then pulling out:

It is morally reprehensible for political leaders to sign onto goals they know they have no means of attaining. Endorsing the fight against disease and poverty may build political capital for a politician, but it means little to ordinary people in poor countries. The fact that no one can measure progress allows that politician to declare success at any point or blame others for failure, as he or she likes.

Lacking data, even the most well-intentioned aid programs fail. For example, the World Health Organization (WHO) held its 6th Global Conference on Health Promotion in August, focusing on:

[T]he changing context of global health and the challenges faced in achieving its aims, including the growing double burden of communicable and chronic diseases which include heart disease, stroke, cancer and diabetes. There is also the need to address and harness the health effects of globalization such as widening inequities, rapid urbanization and the degradation of environments.

John Luik tries to translate:

The first response to all of this is to dismiss it as some inelegant, international, bureaucratic nonsense that must have been conceived in German, written in French and poorly translated into English. But this would be a mistake. For beneath the surface of what looks like simply bad bureauspeak is something that is actually quite menacing. . .

WHO's relentlessly anti-free enterprise and sophomorically leftist bias that conspires against the very people WHO allegedly cares about. For example, how can one explain a session devoted to "diet change and international trade" as relevant to a developing world in which malnutrition plays a role in 50% of all childhood deaths, except in terms of an ideological opposition to both the food industry and liberal trade policy? Nor is it any easier to explain the connection between "globalization, poverty and health" and, for instance, eliminating the sources of disease in unsafe water. While WHO speaks of the importance of such determinants of health as poverty, it at the same time is critical if not explicitly hostile and obstructive to both the very system and its corporations that serves as the major engine of poverty reduction.

The socialist and statist NGOs are worse, argues Kenyan economist James Shikwati:

The contrast is stark between many developed country NGOs and the people they claim to represent: wealthy countries want the Earth to be green, the underdeveloped want the Earth fed.

The delegates [to a 2002 conference on sustainable growth] have been busy discussing complicated alternatives as a solution to the world poverty problem: alternative energy (renewable energy); alternative water (not piped or canal); alternative dams (without concrete); alternative governance (not private sector or market-driven), implying that the government and global governance has a much bigger role to play in sustainable development.

But what poor farmers, street hawkers, and others, want is far simpler: the freedom to create wealth in the way that they best see fit, without First World demands and over-intrusive government.

Richard Tren agrees the UN/World Bank/Sachs/NGO approach already has failed:

Instead of signing onto targets and uttering yet more platitudes, the leaders of poor countries should be doing everything that they can to reduce poverty and that can only be done by increasing economic growth. Economic growth in turn can only come from the enterprise and energy of the private sector and they can only be successful when economic freedom increases. If African leaders really care about the MDGs they would implement economic reforms, such as securing property rights, ensuring the rule of law, removing bureaucratic barriers to business and trade and reducing tax rates. Without that, economic growth will be sluggish, if positive at all, and individuals will continue to be hungry and poor.

Agreed. As TCS's Nick Schulz notes:

If half a trillion dollars of investment and aid can't raise economic output, then what can? "[Easterly's] paper instead finds support for democratic institutions and economic freedom as determinants of growth that explain the occasions under which poor countries grow more slowly than rich countries." In other words, poverty -- and its alleviation -- are directly linked to governance.

But you knew that already.

It is altogether fitting and proper that prosperous nations such as the United States assist the developing world. A suggested first step: lose the blindfold.