Wednesday, July 13, 2005

Becker and Posner on African Aid

Nobel Prize winning economist Gary Becker on aid to Africa:

The G8 nations are rich enough to easily afford the increased aid committed to Africa. Perhaps for this reason, some of the activists denounced the aid as too small and miserly. But that these countries can certainly "afford" to spend more does not mean that much greater aid will help the millions of poor Africans. Indeed, it is doubtful whether more aid will speed up economic growth, given both Africa's experience with aid during the past half century, and the evidence from other poor nations that internal reforms that produce sizeable and persistent growth are the only really effective way to reduce a nation's poverty.

Despite receiving cumulative aid of more than $500 billion during the past several decades from rich countries and international organizations like the World Bank, Africa has had the slowest growth in per capita income of any continent. Slow growth is not the inevitable result of being poor since the per capita incomes of poor nations grew since 1960 about as fast, and perhaps a little faster, that the per capita incomes of rich countries. Obviously, the abundant aid to Africa in the past did not guarantee rapid growth, This aid may even have made growth harder by encouraging greater corruption, by reducing the need to consider drastic economic reforms toward freer economies, and by making it easier to waste resources on grandiose and unproductive projects, such as the Eldoret International Airport in Kenya that almost nobody uses.

And Richard Posner on the same blog:

I do not favor foreign aid, debt relief (which is simply another form of such aid), or other financial transfers to poor countries, in Africa or anywhere else. Countries that are not corrupt do not require foreign aid, and foreign aid to corrupt countries entrenches corruption by increasing the gains to corruption. Foreign aid to Zimbabwe, for example, will simply prop up dictator Mugabe.

Foreign aid makes people in wealthy countries feel generous, but retards reform in those countries as well as in the donee countries. Obviously from a world welfare as well as African welfare standpoint Europe and the United States should not impose tariffs on agricultural imports in order to protect their rich farmers. Eliminating tariffs would do more for Africa than giving them an extra $25 billion a year to squander. (It would also increase the wealth of the countries that eliminated their tariffs.)
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