African Fiasco

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Perennial skeptic of international good intentions William Easterly romps through the quagmire of African aid.

After 43 years and $568 billion (in 2003 dollars) in foreign aid to the continent, Africa remains trapped in economic stagnation. Moreover, after $568 billion, donor officials apparently still have not gotten around to furnishing those 12-cent medicines to children to prevent half of all malaria deaths.

With all the political and popular support for such ambitious programs, why then do comprehensive packages almost always fail to accomplish much good, much less attain Utopia? They get the political and economic incentives all wrong. The biggest problem is that the rich people paying the bills do not share the same goals as the poor people they are trying to help. The wealthy have weak incentives to get the right amount of the right thing to those who need it; the poor are in no position to complain if they don’t. A more subtle problem is that if all of us are collectively responsible for a big world goal, then no single agency or politician is held accountable if the goal is not met. Collective responsibility for world goals works about as well as collective farms in agriculture, and for the same reason.

Yes, Bono makes an appearance. But Easterly is more concerned with the U.N. Millennium Project and aid packages from Blair and Bush. He compares the disjunction of governments touting their dollar-figure aid increases as a measure of success to the studio that made “Catwoman” touting it as a success because they spent $100 million on it.

The various needs of the rich are met easily enough by a system of decentralized markets and democracy, which utilize feedback from the customers and accountability of the suppliers. Rich, middle-aged men can buy Rogaine to grow hair on their heads, while women can buy Nair to get rid of hair on their legs. No Millennium Development Goal on Body Hair was necessary. The Rogaine and Nair corporations are accountable to their customers for satisfaction. If the customers don’t care for the product, the corporations go out of business; if the customers do like the product, corporations have a profit incentive to supply it. Similarly, men and women in wealthy countries can complain to democratically accountable bureaucrats and politicians if garbage collectors do not pick up their discarded Rogaine and Nair bottles. Private markets also specialize; there is no payoff for them to produce a comprehensive product that both removes hair from women’s legs and transfers it to men’s heads. The irony of the situation is tragically obvious: The cosmetic needs of the rich are met easily, while the much more desperate needs of the poor get lost in centralized, utopian, comprehensive planning.

Any hope in there? Yes, but in the long, hard slog, not the quick fix.

Fortunately, poor countries are making progress on their own, without waiting for the West to save them. The steady improvement in health and education in poor countries (except for the AIDS crisis), the market-driven growth of China and India, the movement toward democracy in Latin America and Africa (even amid continued disappointing economic growth), not to mention earlier successes such as Botswana and the East Asian Tiger economies, offer hope for homegrown and gradual development.

Hmm, there are enough “yes, buts” in that paragraph, stated and unstated, to make the prospect dim indeed. The wonderful thing about Singapores is Singapores are wonderful things. But they’re rare, rare, rare.