Article published on TCS on July 18, 2005.
Africa was supposed to be a central focus at last week’s G8 summit. But take a look at the plan to relieve African poverty. After announcing the cancelation of debt for 18 of the poorest countries –14 of which are African –, we heard it trumpeted that aid to third-world countries would be doubled, the goal being to reach $195 billion by 2015. From Tony Blair to “anti-globalization” organizations, most commentators and policy-makers portray this proposal as a great step forward in the anti-poverty fight. Whatever the intentions of the supporters of this public aid, it is more likely that finding meaningful solutions to the problem of poverty will come about through questioning these plans.
First of all, international aid is by no means a new weapon against poverty. So the benefits of doubling aid can be judged against past experience. International development aid to Africa has existed for more than 50 years. If this instrument is so efficient, how come Africa is still so poor? How come supporters of international aid justify unflinchingly the necessity to increase aid when they themselves state that the standard of living has actually fallen in the last 30 years, at the same time aid was increasing? This correlation does not prove anything but it could at least raise doubts about the efficiency of the process. Actually, there are good reasons to think that this aid is counter-productive, as an instrument of aid for development.
The term “international aid” actually refers to financial transfers between states, be they direct transfers or loans, via the International Monetary Fund, the World Bank or other international public organizations. In other words, the United States, France and other donors do not give money, food or medicine to the poorest African people but to their governments. These states are subsidized because their citizens are poor, and it is up to them to allocate the funds. This starts a completely dysfunctional chain of practice. Unless we naively consider that the politicians and bureaucrats in charge of dealing with this money are only interested in their fellow citizens’ well being, we have to realize that such transfers are a source of income for them. These policy-makers are thus encouraged to avoid reforms that would result in long-lasting relief for the population, as international financing would then have to stop.
It is true that such political choices are not without cost for the recipient governments. Even the most authoritarian states cannot completely and indefinitely ignore public opinion and if the population links its disastrous situation to the decision-making of its leaders the latter risks being overthrown. This is the reason why a part of the aid is distributed even when the interest of the individuals in charge of the distribution is only about accumulating wealth for themselves. Nevertheless, the incentives given by international aid make delaying reform, and even keeping the population in poverty, worthwhile.
Thus, the international aid system has essentially served to reward policies that slow down development, whatever the initial intentions of its advocates. Under such circumstances, the implementation of the rule of law in Africa, necessary to wealth production, has been postponed indefinitely. Aid actually received by the poor is a very small compensation. If the cancelation of debt — which they could have paid off thanks to taxation — gives them a bit of breathing space, it won’t be through increasing subsidies to their governments that their living conditions will be improved.
Xavier Méra is associate researcher at the Molinari Economic Institute.