Too hard on the UN?

I was looking back at the post I made yesterday on the UN's 'business' initiative and thought perhaps I might be seen as being unreasonably harsh. Well, I was in a crummy mood, so I might not have softened the words quite as much as I would have if I hadn't been listening to Max shriek for the previous half-hour. But I'll still defend what I wrote.

What really got me going was Paul Martin's claim that, "private investment too rarely benefits the poorest of the poor, who need it most." That may be true, in the short term, but it is also true of the types of development programs the UN and other concerned outsiders have been inflicting on Africa for the past 40 years. They don't work. Don't believe me? Listen to Kofi Annan:

Malloch Brown and Annan agreed that handouts of money to poor countries have often failed to lower poverty statistics, and have sometimes done more to entrench corrupt and repressive leaders in power.

If even the head of the UN can admit that aid "often" fails, and "sometimes" encourages corruption, the truth is probably a lot worse.

Africa, for example, has been the largest recipient of foreign aid. But according to the National Bureau of Economic Research [NBER] analysts Elsa Artadi and Xavier Sala-i-Martin, Africa has experienced decades of economic decline. In sub-Saharan Africa, per capita GDP is now 11 percent lower than what it was in 1974. Ghana, for example, had inflation adjusted per capita income of $800 in 1967. By 1997, that figure had fallen to $370. Regions that received less foreign aid per capita fared better. As a result, Africa today accounts for a greater percentage of the world's poor than ever before. In 1970, only one in 10 poor people lived in Africa. Today that number is one in two.

Foreign aid also fuels corruption among African officials. Because of faulty domestic institutions and poor oversight, African leaders were able to steal billions of foreign aid dollars over the past forty years. A study commissioned by the African Union in 2001 estimates that corruption continues to cost Africa $150 billion per year.

But back to Paul Martin's hang-up with private investment. I think this attitude is the root of all problems in Africa. The deep, unquestioned suspicion of foreign investment or private initiative is firmly installed in the mind of anyone with any power on that continent. Aid workers, government officials, policemen, military leaders -- they all hold the belief that free enterprise can only take, not give.

The roots of this belief are not too hard to trace. The elites have been educated in Western universities and have learned about the exploitation and colonialism of the Western world, and the destructive results of capitalism. The laws of African countries reflect this attitude, and allow property to be arbitrarly seized by the state. For the less well-connected people, resentment of other's success has provided a fertile ground for Marxism -- and has given justification to anyone with a gun to do a bit of freelance wealth distribution. For Paul Martin to pay lip service to these phoney beliefs -- well, it's just appalling.

And it's not true. Private investment is the only thing that will move Africa forward:

In a recent paper, Fredrik Segerfeldt of the Confederation of Swedish Enterprise, explains that it is not aid that will help the poor but direct investment from business. The paper, "Companies are the Solution, not the Problem" analyses how "economic growth is more important than development assistance in eradicating poverty." And as the United Nations Development Programme admits, poverty is the real enemy. "Therefore, the discussion about world poverty should, to a much greater extent, focus on how economic growth can be achieved, and less on how global resources can be redistributed. Redistribution will never eradicate poverty," Segerfeldt concludes.

Mr. Segerfeldt demonstrates that states that receive a lot of aid but grow slowly have much lower GDP per capita than states that receive little aid but grow faster. The latter grow fast usually due to western corporate direct investment. More importantly he finds that aid does not lead to growth. 12 of the 20 countries that received most aid per capita in the world in 1980 were still on the top-20 list in 1990 and 8 of them were still there in 2000. One would expect far more movement that this if aid actually generated growth, as its proponents at the UNDP claim.

I don't think Paul Martin is stupid. He knows these grand schemes will not work. The only purpose of them is to dampen the guilt we in the developed world (rightly) feel about Africa. But he is willing to play the game because it plays well on the world stage. And it sickens me, it really does.

Posted by Bruce Gottfred at March 4, 2004 01:19 PM | TrackBack