Liberal Vision

Gordon Brown: inputs = success

Rousing stuff from Gordon Brown in the Independent, where he announced draft legislation enforcing the UK to hit and maintain the United Nations target of 0.7 per cent of national income to be spent on aid each year:

“In conscience and in our own self-interest, for their sake and ours, we dare not fail. We must act now to give the entire world back its future and its hope.”

What he actually meant was:

“In the interests of DfID’s many conscientious bureaucrats, for their sake and mine, this government dare not fail. I must act now, to spend more tax payers’ money, giving hope to the legion of NGOs, charities, trade unions and self-interested government officials who rely on DfID for their future.”

If the past four decades of Overseas Development Assistance (ODA) have taught us anything, it is that it has been monstrously ineffective. No one is advocating scaling down emergency relief efforts (such as the Haitian response, which has prompted the latest bout of ministerial soul searching), nor are they advocating restricting private aid flows, such as remittance payments or charitable projects. What they are right to question is the efficacy of ODA, distributed by DfID to the tune of £6.3 billion in 2008, in tackling poverty in the developing world.

So far it has been a disaster: despite over $1 trillion in aid since 1960, Africans are poorer now, than they were forty years ago. The money simply does not reach those who need it. Worryingly it is estimated that 40 per cent of Africa’s military spending is inadvertently financed by aid (Collier: 2007). It seems unlikely that increasing aid flows to an arbitrary amount set by the UN in 1970 will change this–not to mention the oddity of linking aid expenditure to national productivity. It rather smacks of medieval church donations: “we don’t care how much you give–as long as it’s more than you can afford.”

The last forty years has demonstrated that pumping aid money into faltering economies simply doesn’t work. Brown and Cameron want to re-test this theory by throwing another £10 billion annually at the problem (0.7% of national). Not only will this not work, but it is a terrible idea to judge projects upon the size of their budgets rather than the outcome of their endeavour. Et tu, Clegg?

Africans: “We need trade not aid”

Africa remains the world’s poorest continent with the world’s worst employment opportunities. The International Labour Organisation estimates that up to 99 per cent of African employment is informal–outside of the fiscal system.

The situation is dire and imposes increasing  costs on taxpayers in donor states. In 2008 Labour spent £6.3 billion on Overseas Development Assistance and the Conservatives have pledged to increase this by almost £4 billion.

In times of economic hardship £10 billion spending pledges need to stand up to scrutiny. But this one does not. Four decades of development “assistance” and trillions of dollars in aid have done little to improve the situation in Africa. In fact, Africans are poorer now than they were forty years ago. Over 60 per cent survive on less than $1.25 a day, and one in four African children under the age of 5 are malnourished. Surely, by now it should be evident that this system of aid is not working? Money continues to be wasted on top down aid projects that, at best, do little to appease the underlying causes of the poverty. At worst they actually aggravate the situation by undermining local businesses and legitimising corrupt regimes.

There are a few dissenting voices. Outnumbered by well heeled NGO lobbyists, some economists are daring to incur the wrath of the Department for International Development’s (extensive) advocacy department and are speaking out. Articles like this recent editorial in the Kenyan Daily Nation reflect what many Africans are thinking; that freedom to trade is the surest route out of poverty. To borrow a phrase from another African tired of witnessing the futility of pumping good money after bad, Dambisa Moyo, “there is no doubt–we do want to help.” But help does not come in the form of DfID handouts; it comes from allowing Africans to do what has enriched the rest of the world–trade.

[For fuller accounts see ‘The White Man’s Burden‘ by William Easterly and ‘Dead Aid‘ by Dambisa Moyo – Ed.]

Aid “for Trade” is pointless amid corruption

While funds continue to be pumped into Africa through Aid for Trade programmes (to the tune of $9.5 billion in 2007), African governments continue to stifle their own businesses by imposing restrictions upon the movement of goods through the region.

A recent article in the Vanguard News (Lagos) details how debilitating delays to traffic are caused by Nigerian government officials extorting money, in the form of taxes and fines, from traders. It’s a common story, has even become a stereotype of much of the continent, yet sadly remains true. This heavy handed government action renders Nigerian businesses uncompetitive–delaying their goods and increasing their costs compared to foreign competitors.

Historically, the response of the government in Nigeria has been to increase import duties to “protect” their domestic industries. This results in higher prices for the average Nigerian as they have to pay more for their goods and services. The sad irony is that the reason many Nigerian businesses aren’t competitive in the first place is because of these detrimental government interventions in their business activities. Thus the vicious cycle continues–businesses crippled by their own governments plead for further protection against competition from abroad.

African governments need to stop looking to aid agencies for hand-outs and start allowing domestic companies to do their good honest business.