Thursday, August 04, 2005

A Talk with a Libertarian about Aid

Recently I got in touch with four high school friends whom I haven’t seen since 1947. That’s a 58-year hiatus in friendship. Naturally, we have all changed — none more remarkably than Ted, who somehow became a along the way. Never having met a Libertarian before, I began a discussion. Fortunately, it has forced me to respond to comments that would never have been offered by anyone I meet here in Canada. (I live among left-liberals and a handful of wistful retired .) Ted and I are sparring by e-mail, and I enjoy confronting his startling arguments.

For example, last week I forwarded a piece from Harper’s to him about how Americans are more likely than any other society to claim they are Christian, yet of all the rich countries, they are the least peaceable and least generous to the poor. Like other countries, the United States has pledged to give 0.7% of GDP in aid, but actually gives only 0.15%. That’s fifteen cents a day, per capita. To be sure, lots of other countries have also failed to fulfill their pledges, but the Americans’ shortfall is the most extreme. (This is not just my showing, since I was born in the United States and retain dual citizenship.)

Ted tried to argue that Americans prefer to make their donations privately. Sorry; that doesn’t explain the gap. If you add in private , the American donations come to twenty-one cents per capita — far less than the 70 cents per day that was promised. I remember Ted as a devout Catholic, and I figured this little datum would be a painful thing for him to acknowledge.

Not so. He replied by arguing that development aid doesn’t work, and he closed with this aphorism (which I recall hearing Reagan utter as well): “Don’t just hand out fish. Teach people to fish for themselves.“

Fair enough. That’s an argument I haven’t heard for a long time and I must deal with it honestly. There’s actually such a thing as becoming dependent on others. Last summer at the Pearson Centre in Nova Scotia, I talked with an African woman who was extremely troubled by seeing it happen in her village. She said the villagers used to be hard-working farmers but now the young men sit around waiting for the UN truck to arrive with food.

Such problems can actually arise. It happens especially in situations of near-famine, such as the one in Niger right now. Many people are going hungry, and only recently has the rest of the world begun to send them food. The delay came from legitimate concern that free food can disrupt the market and destroy the incentive for local farmers to produce. (That’s also why it’s harmful to Third World countries to sell them cheap food from highly productive European and North American farms. “,” it’s rightly called.) Sometimes in an emergency, it is necessary to provide free food, but that is not an ideal solution to hunger. Instead, money should be spent whenever possible — to use Ted’s metaphor — on “fishing rods and nets” and other elements of infrastructure.

The economist Jeffrey Sachs, who leads the UN’s project on the Development Goals, points out that in many situations, people cannot get out of poverty by their own efforts. Nor is it fair to blame the African governments for the poverty. Yes, there is always room for improved governance. However, as Sachs notes, some “slow-growing African countries such as Ghana, Senegal, Mali, Benin, and Malawi have less corruption than the fast-growing Asian countries like Vietnam, Bangladesh, and Indonesia.”

The Millennium Development Goals can be met, says Sachs, by increasing “investment in people (health, education, nutrition, and family planning), the environment (water and sanitation, soils, forests, and biodiversity), and infrastructure (roads, power, and ports). Poor countries cannot afford these investments on their own, so rich countries must help.“

Amen! Yet I wonder whether my political debate makes any difference. I really want Ted to join in eagerly in the work of saving . My personal goal is to discover how to touch people’s hearts in ways that make that happen. There has to be a way. But debate may be less convincing than sensitive stories depicting generous, wise people. I’m not sure.



Blogger tednichols said...

I'm here. Great blog. Of course humanitarian aid must be given, Still question your figures on U.S. aid since aid by military is not added in, i.e. hospital ships off Indonesia and helicopter drops plus food contributions including MRI.s. Also huge (in the millions) donations by corporations must be factored in. Unfortunately figures don't lie, but liars figure i.e. U. S. bashers in UN.

Interested in your comments about water. I think government ownership of water was implied. The Los Angeles DWP is notorious as a government owned water source. It was ruthless with its use of eminent domain and terror tactics in the 30's and its directors are still guilty of living high on the hog at taxpayers expense ala the commissars in the USSR.


6:24 PM  
Blogger tednichols said...

Marian L. Tupy assistant director of the Project on Global Economic Liberty at the Cato Institute put it best with these recommendations for aid for Africa:

One, the United States should withdraw from the International Monetary Fund. The IMF often serves as a benefactor to corrupt and inept regimes, which engage in gross macroeconomic mismanagement. Were it not for the IMF and other official lenders, economically incompetent governments would be forced to seek loans under normal free market conditions. Lenders would lend to governments at rates reflecting the risk involved. In other words, the more incompetent governments would be forced to borrow at higher interest and vice-versa. Higher interest rates would thus stimulate governmental circumspection in borrowing and expenditure.

Two, the United States should withdraw from the World Bank. The World Bank's "aid" to Africa has had disastrous consequences for the continent. Far from being used for infrastructure and health care, the World Bank's money enriched Africa's dictators and provided them with the means to oppress their people. The money that was not embezzled was misspent. According to the Meltzer Commission, the failure rate of the Bank's African programs in 2000 was 73 percent.

Three, the United States should make the sovereign credit system more efficient by expressing its support for the concept of "odious debt." Cancellation of debt acquired by corrupt dictatorships will both decrease the overall level of African debt and rationalize future lending. More circumspection on the part of the creditors in the future will help keep funds from African dictators.

Four, the United States should emphasize the benefits of free trade. According to the Cato Institute's recently released 2003 Economic Freedom of the World report, Africa possesses some of the world's most economically unfree nations. Not surprisingly, the per capita GDP of sub-Saharan Africa is only $564. On the other hand, Botswana, which has for a long time had a significantly higher level of economic freedom than other nations in Africa, today enjoys a per capita GDP of US$3,950.

Five, the United States should live up to its words and embrace free trade by enabling African farmers to enjoy unrestricted access to American markets. The United States should end its farm subsidies and leave the European Union as the only major agricultural protectionist in the world. Considering that even the long-term opponents of free markets in Europe, such as the British Oxfam, now favor "trade" as an effective way for Africa to escape poverty, it should be possible to shame the EU into ending the disastrous Common Agricultural Policy.

No doubt, the above actions will require a dramatic change of thinking on the part of the American foreign policy establishment. Our policy makers are wedded to the status quo exemplified by the Bretton Woods institutions. To wake them from their slumber, President Bush will need to exercise considerable vision and leadership. Ironically, by interfering less in African economic affairs, the United States could do more to stimulate African growth.

This is Ted again, hope prevails in Africa as Georgie Geyer stated in the Washington Times. Elitism in the UN, and Africa has gotten in the way in the past lets hope for the sake of people in Africa it does not get in the way of the future.

Ted Nichols

7:09 PM  
Blogger Metta Spencer said...

Do you figure that military supplies should count as humanitarian aid? I certainly don't. And I believe corporate donations are actually included, Ted. Check your facts.

I can't comment about the Los Angeles water situation. Don't know anything about it.

12:26 PM  
Blogger Metta Spencer said...

Re your piece on aid: I can agree with some, but not all, of the proposals. I think it would be a shame to withdraw from IMF and World Bank -- but certainly their policies should be changed and they should be made more accountable. There should be board members representing various concerns such as environmentalists, consumers, workers, and conflict resolving organizations. (See David Held’s suggestions for democratic reforms.) All transactions and plans should be publicly transparent -- not only for the IMF and World Bank but also for all corporations.

I favor proposal three and -- surprise, surprise! -- am not flatly opposed to proposal four. Globalization can be good or bad, depending. That should be the topic for many additional blogs. And proposal five is bang-on correct. I certainly favor that. (There could be some qualifications when I look at the fine print, but I do believe in eliminating tariffs and other factors that give trade advantags to the rich countries.

12:38 PM  
Blogger tednichols said...

You don't want to count the military helicopters delivering food in unaccessible places, You don't want to consider military hospital ships as humanitarian aid, especially after a catastrophe, Then figure out the expense, if you can find anyone else to do it. I am disappointed when I see the military taken for granted.

6:37 PM  
Blogger tednichols said...

You don't want to count the military helicopters delivering food in unaccessible places, You don't want to consider military hospital ships as humanitarian aid, especially after a catastrophe, Then figure out the expense, if you can find anyone else to do it. I am disappointed when I see the military taken for granted.

6:41 PM  
Blogger tednichols said...

Metta muses about political debate making a defference. Metta it does. There is a place for emotion and appeals for aid. However, too often it is misguided and does not get the results intended. Richard W. Rahn a Cato scholar cites Peter Bauer in this matter of foreign aid:

The late great British economist, Peter Bauer, was the single most important individual in discrediting the socialist orthodoxy that Third World countries were trapped in a vicious cycle of poverty that could only be broken by massive foreign aid. Bauer explained in his many articles and books, most notably, in his "Dissent on Development" (1972), that all countries were once poor, and that the rich countries did not become rich through foreign aid, but by having the rule of law and the proper incentives.

Bauer noted that all too often foreign aid simply turned out to be "transferring money from poor people in rich countries to rich people in poor countries."

A country that establishes the rule of law and largely eliminates corruption, allows free markets to operate, establishes free trade, maintains low taxation and government spending, does not excessively regulate, and establishes a stable currency will attract sufficient domestic and foreign investment to grow rapidly, without foreign aid. Countries that do not provide the rule of law and sound economic policies will not grow no matter how much "foreign aid" and development assistance they receive.

Rahn goes on to state: The World Bank and many foreign governments continue to provide large government-to-government loans, which are rarely used in cost-effective ways but often are stolen by the recipient countries' corrupt rulers, which saddle the citizens of those poor countries with massive debts they repay to the lenders.

The U.S. government provided $12.9 billion in official development assistance last year, most of it through the U.S. Agency for International Development (USAID), and has spent hundreds of billions in aid since World War II. Sadly, many of the recipients of U.S. development aid are poorer now than they were before receiving assistance.

Rahn makes the point that: A major part of America's economic and political success was the formation of voluntary associations to take care of humanitarian, social, educational, infrastructure and public policy problems that are only done by governments in many other countries. Our tax code correctly encourages private support for such organizations by making them tax deductible. In most European and many other countries, support for such organizations is not only not tax-deductible, but donations are taxed.

At the minimum, the Bush administration should demand that no country can receive U.S. aid unless it allows tax deductibility for contributions to private aid, educational and public policy organizations, because such groups will be needed to fill the vacuum when the U.S. and other donors eventually leave (as they should).

The administration should also immediately reduce U.S. support for international organizations, such as the Organization for Economic Cooperation and Development, the United Nations and the World Bank, which have programs that discourage economic growth.

Debate, then, is essentialy for meaningful and effective aid. UN per capita figures on aid become meaningless when we look under the surface at ways to really help people.

7:17 PM  
Blogger Metta Spencer said...

There are times when military equipment must be used to deliver humanitarian supplires, etc. However, that's far from the prevailing use of helicopters! Moreover, genuinely humanitarian NGOs such as Doctors Without Borders insist that the military should be kept absolutely distinct from their own human itarian roles. What happens is that the army, wanting to be seen as good guys, delivers groceries to poor families or accompanies doctors on their missions — against their wishes — and confuses the local inhabitants, who see these groups as related. The next day an MSF team arrives in the neighborhood and gets shot. Fifteen years ago humanitarian organizations were recognized as impartial and fair and therefore were never targeted by militants. Now they are seriously at risk and often have to leave. It's bad policy to try to give the military a fuzzy role and let them appropriate the halo of a genuine benefactor. Ask humanitarian groups themselves.

I see that there will have to be a lot more entries here on developmental aid. Not all of your proposals -- or those of Tupy -- are bad ideas. I think, for example, that democracy and accountable governance are indeed important criteria to impose on any recipient country. But it is a mistake to assume that aid is never necessary -- that everyone can pull himself up by his own bootstraps. We'll have to pursue this further in the future, but I won't try to do so here.

7:53 PM  
Anonymous chrissy said...

I think Ted has some very sound ideas. I agree that foreign or domestic aid is of little use, and often does more harm than actual good by way of promoting dependence and corruption.

Most people in the world would function a lot better on their own, without interference or "help" from government, whether their own or one from a different nation. On a local level, people are more aware of and rational about their problems and needs.

The first world has created many of the problems the third world now faces with debt and environmental degradation, among other things. However, we cannot turn back the clock, so that leaves three options: continue to foster an atmosphere that allows for more struggle and crisis, change the way we provide help to minimize crisis over the long term (which would involve actual studies to understand the problems that face these nations, looking hard at how our support helps or hurts, and eliminating the idea that our aid should somehow benefit us, our corporations, etc), or pull out completely. Since the 1st option is the definition of insanity, and the 2nd option is unrealistic in our world, that only leaves #3: pull out and don't look back.

This is not a miserly, selfish view of the world. This is a realistic, possibly workable solution to a problem that our government and society continues to make worse.

4:06 PM  

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