Montreal, July 15, 2005 No 156




Bradley Doucet is a writer living in Montreal. He has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness.




by Bradley Doucet


          A lot has been written about African poverty in the last few weeks. Insofar as the goal of the strategically timed Live 8 shows was to get people talking (and writing) about this important topic, the concerts have been a resounding success. It is an open question, however, whether the measures advocated by Live 8 organizers, and largely adopted at the G8 meeting in Scotland, will accomplish meaningful change. Will increased aid, debt relief, and trade justice actually help Africa's poorest? Are there other measures that might be more effective? In the spirit of renewed interest in the forgotten continent, here are eight suggestions about how to help Africa (and the world) become wealthier.


The G8 Agenda

1) Phase out government aid. The G8 leaders have resolved to double government aid to Africa by 2010. It would have been better for Africans if they had resolved to start phasing it out, and gradually eliminate it altogether.

          First of all, government aid is expropriated from the citizens of donor countries in the form of involuntary taxation. As noble as it is to want to help the poor, the use of force is an unacceptable means of achieving that end. Secondly, it is also an inefficient means, because governments spending other people's money do not spend it as wisely as those people would themselves. This is no less true of money spent on foreign aid than it is of money spent on a gun registry. Thirdly, recipient governments are just as inefficient as donor governments, and they are often hopelessly corrupt to boot, using the money to buttress their own power instead of feeding their people. Because of this widespread corruption, government aid often actually increases the suffering of those it is meant to help.

          This is not to say that all aid should come to an end. Voluntary aid from individuals to other individuals, passing through voluntary charities, is surely a necessary interim measure in the fight against extreme poverty. However, aid from governments to governments is deeply flawed.

          While phasing out government aid is definitely a controversial suggestion, there is growing acknowledgement that this aid has not been very successful. In the July 4th English language edition of Der Spiegel (see "Too Much of a Good Thing Choking on Aid Money in Africa"), Erich Wiedemann and Thilo Thielke write, "Never before have so many African intellectuals called for an end to the classic type of development aid." They proceed to offer supporting quotations from Kenyan and Ugandan newspapers complaining that aid goes to bureaucratic institutions instead of to the people. Given the G8's resolution, however, it is obviously still too soon for Africans to be relieved of the burden of government aid.

2) Be cautious about debt relief. Since debt relief is a form of government aid, it suffers from all of the drawbacks mentioned above. It may be, however, that there is simply no hope of ever recovering some of the loans that were made. Maybe we should cut our losses and start fresh. The danger is that by forgiving debt, we teach the wrong lessons about fiscal responsibility. The honouring of commitments is an integral part of wealth creation, and it should not be abandoned lightly. The G8 does seem to be treading carefully, though, in this area. They claim to have selected the 18 best-governed poor countries (14 of them in Africa) to be the recipients of debt relief, and to have tied this relief to further reforms. This at least sets up the precedent that something must be exchanged for the debt relief.

3) Establish free trade. The third measure called for by the Live 8 organizers, trade justice, is one which lovers of liberty can enthusiastically support as long as trade justice simply means free trade. Wealthy nations have been distorting world markets with their agricultural subsidies, tariffs, and supply management schemes for far too long, to the detriment of poor farmers in Africa and elsewhere (and to the detriment of consumers everywhere). Justice, liberty, and the greater long-term wealth of the whole world depend on the abolishment of these discredited protectionist measures. Let's hope the G8 leaders keep their promises and move ahead with this file when the World Trade Organization meets later this year.

"I believe most human beings do want to help those in need, but not always the same people, in perpetuity, under any circumstances. We want to help people to become self-sufficient, so that they can then pass it on."

          This battle is far from over, however. While Bob Geldof himself was in fact calling for an end to agricultural subsidies, many others imagine that trade justice means paying workers Western-style wages, and suppliers Western-style prices, instead of allowing a truly free market to dictate wages and prices. It is good that we are seriously discussing free trade in agriculture at long last, as long as that really is what we are discussing.

What They Didn't Talk About

4) Expand microfinance. Besides the three factors of aid, debt relief, and trade justice that dominated both Live 8 and G8 sound bites, there are other important measures that can make a big difference. One of the most promising of these is microfinance. Instead of lending huge sums to corrupt (or merely inefficient) governments, microfinanciers lend small sums to individuals so they can start their own small businesses and become self-sufficient. Some will cry for the exploited poor who are (gasp!) being charged interest, but the interest allows the financiers to increase their wealth while increasing the wealth of others at the same time. Instead of exhausting the generosity of the rich, the process is self-perpetuating.

          According to an article by Sinclair Stewart in the May 7th edition of The Globe and Mail, the success already achieved by microfinance is exploding several myths about African poverty. "It has demonstrated that there is capital available, that there is a work ethic and, perhaps surprisingly, that the vast majority of poor people pay back their loans." Unlike their governments, one might add.

5) Denounce corruption. This sounds like a no-brainer. We're not talking about economic sanctions or military invasion, just a simple and clear denunciation of corruption in places like Zimbabwe and Sudan. Still, it seems too much to ask of the African Union, whose observers have been "mealy-mouthed about the flawed election" and the recent "urban clearances" in Zimbabwe (see "Africa acknowledges it must help itself" in the July 7th issue of The Economist). South Africa's leader, Thabo Mbeki, has been entirely uncritical of Robert Mugabe's regime in Zimbabwe. Kofi Annan himself, the head of the United Nations, has been reluctant to lay the blame where it belongs. Even Nelson Mandela did not mention, when he spoke during the Live 8 concerts, the role played by dictators in the suffering of his fellow Africans. Mandela instead argued that without an end to extreme poverty, there can be no real freedom. This is exactly backwards. Without a tolerable degree of freedom, there will be no end to extreme poverty.

6) Support market institutions. Not all African nations are hopelessly corrupt, as pointed out by Jeffrey Sachs, director of the UN Millenium Project and author of The End of Poverty. In an interview in the June 30th edition of the National Post, Sachs argues that just because Zimbabwe is corrupt doesn't mean we cannot help Ghana, for instance, which is one of the more democratic African states. Why, then, is Ghana not already wealthier?

          Simply put, democracy is not enough. Democracy is a method of ensuring the peaceful hand-over of power. This is a significant benefit, as warfare carries with it a terrible cost in terms of lives and money. However, wealth creation and freedom itself, for that matter requires more than mere democracy. It requires the kinds of market institutions we in the West take for granted, things like private property protection, financial transparency, and the rule of law. This is not a new insight, so why have these institutions proven so difficult to transplant?

7) Acknowledge historical and cultural context. African history provides some clues. Africans suffered tremendously under colonialism and slavery. Post-WWII, they achieved independence, but squandered their newfound freedom on socialist nightmares that had been tried and had failed decades earlier in Russia and China. What happened next? Doug Saunders, in the July 2nd edition of The Globe and Mail, claims that an "aggressively laissez-faire approach" was advocated and tried in the 1980s, and that it too failed. It does not require a scholar of African history to know that nothing approaching aggressive laissez-faire capitalism has been tried anywhere on the planet since the closing days of 19th-century America. A more likely explanation is that whatever modest market reforms were in fact introduced in Africa in recent decades have surely foundered under the weight of corruption, protectionism, and other problems.

          Saunders is on more solid ground when he talks of the Soviets and the Americans supporting dictators of the left and the right, respectively, throughout the cold war period. He is also at least asking the right question when he wonders why China and India have been able to grow so impressively while Africa continues to falter. Could there be deeper cultural reasons at play that go beyond politics and economics? Perhaps Africans are encumbered by a more profoundly superstitious worldview which hampers public health initiatives, for example. The answers are doubtlessly complex, and the participation of Africans themselves in uncovering those answers is essential if we want to design programs that work.

Taking Aim

8) Target help efficiently. There are some positive signs in the way governments are targeting their debt relief to countries with good (or at least less bad) governance that are committed to further improvements. This at least puts the incentives in the right place for the many remaining despots who plague the African continent. It will also serve as a good example if those countries whose governance is improving really do make the climb out of poverty.

          We should also target those measures that are most effective. Successes in eradicating smallpox, for instance, can show the way in the fight against diseases like AIDS and malaria. The history of the battle against malaria, however, provides a chilling cautionary tale. Because aid was largely co-opted by governments, and because Western governments were duped by chimerical claims about the dangers of DDT to human health, poor countries that used DDT to fight malaria were denied aid unless they stopped using it. As a result, according to some estimates, tens of millions of people have died unnecessarily since the effective ban of the pesticide in the early 1970s. This is what can happen when we allow governments to make our choices for us. This is one more reason why freedom is so important.

          Some will say there is a moral imperative to help the African poor, perhaps more so because of the harms of colonialism and slavery. While this argument may have some strength to it, a good deal of the socialist impulse to force people to help each other is based on the pessimistic view that we will not want to do so otherwise. I believe most human beings do want to help those in need, but not always the same people, in perpetuity, under any circumstances. We want to help people to become self-sufficient, so that they can then pass it on.

          The simple truth is that the main objective of government officials, both donors and recipients, is to hold onto power. If we really want our good intentions to bear fruit, we should leave the money in the hands of individuals, who can then pick and choose which countries, which charities, or which small businesses to support. With countries, charities, and businesses all competing for private funds, no one can tell what new and innovative ideas will surface to help our fellow human beings lift themselves out of poverty and reclaim their dignity. Unified government control is stultifying and inefficient at best, corrupt and murderous at worst. Only freedom has the power to transform Africa into the wealthy, prosperous continent that it could be.