Teaching someone to fish vs. Giving them a fish — Foreign Aid Style

Mark Perry (another economist is not pathetic, and not only because he bought me a beer)    posted on his blog, Carpe Diem, a Kenyan economist who points to foreign aid as part of the problem in Africa, rather than the solution.

Here’s a snippet of what James Shikwati had to say:

Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa’s problems. If the West were to cancel these payments, normal Africans wouldn’t even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid.

Even pop singer Bono seems to be coming around on this point.

Bono 4 Capitalism

Amazing timing.

I had a conversation about the band, U2′s, lead singer, Bono, with a co-worker. I quipped that I thought it was funny how Bono made so much money from commerce while being so critical of commerce.

Then I read this post at The Pretense of Knowledge, about the reformed Bono, who now recognizes that commerce and capitalism is key for lifting folks from poverty and creating prosperity.

Not only that, it’s as if he heard me poking fun at him. From the article:

The Irish singer and co-founder of ONE, a campaigning group that fights poverty and disease in Africa, said it had been “a humbling thing for me” to realize the importance of capitalism and entrepreneurialism in philanthropy, particularly as someone who “got into this as a righteous anger activist with all the cliches.”

I think this is good news and bad news.

It’s good news that a popular entertainer gets it now. Maybe someone will listen to him. It’s also good news that someone like Bono admitted to changing his mind. We don’t see enough of that.

It’s bad news that it took him so gosh darned long to figure it out. That’s a key reason folks the world over try to restrain capitalism — they don’t understand it, even when it provides them with so much prosperity.

We Should Expect Better for WSJ and Gates

Last weekend the Wall Street Journal ran the type of feature that I enjoy very much.  It was a debate-style format between Bill Gates and Matt Ridley, author of The Rational Optimist.

Gates’ portion of the debate can be found here.   Ridley’s here.

The debate covered several areas and focused on global warming and improvement in Africa.

I’m disappointed that so much of the debate relied on misunderstanding the opponent’s position.  It seems we could have much more productive discussions if we get better at recognizing when our view of the opponent’s position is flawed.

Quite frankly, I don’t believe the following portion of debate should have made it to print.

Gates writes this about Ridley:

In discussing Africa, Mr. Ridley relies on critics who say, essentially, “Aid doesn’t work, hasn’t worked and won’t work.”

Ridley responds:

Far from saying that aid “doesn’t work, hasn’t worked and won’t work,” I actually say this in my book: “Some of the most urgent needs of Africa can surely be met by increased aid from the rich world. Aid can save lives, reduce hunger, deliver a medicine, a mosquito net, a meal or a metalled road.”

I go on to say that “statistics, anecdotes and case histories all demonstrate that the one thing aid cannot reliably do is to start or accelerate economic growth.” Now here I admit that Mr. Gates does have a point. Unintentionally, I have given him and perhaps other readers the impression that, in my view, combating malaria or AIDS does not pay economic dividends. It does.

What I do take issue with is economic aid designed to stimulate economic growth. For example, a 2006 study by Simeon Djankov of the World Bank (now deputy prime minister of Bulgaria) and his colleagues concluded that “foreign aid has a negative impact on the democratic stance of developing countries and on economic growth by reducing investment and increasing government consumption.” Economic aid diverts resources into projects that fail, puts money into the pockets of corrupt government officials and crowds out the efforts of entrepreneurs. In one example, only 13% of educational aid to Uganda reached schools; the rest was siphoned off by rent-seeking officials.