Stale Focus

Submitted by _James Mahon on July 6, 2005 - 17:32.
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The Economist: Helping Africa Help Itself, The $25 Billion Question, Doing Business in Africa

In light of the G8 summit, The Economist published several articles related to foreign aid to Africa in this week's edition. One, Helping Africa Help Itself, advocates foreign aid on the basis that it constitutes a relatively small amount of rich countries's GDP, and that a few foreign aid projects, particularly in disease eradication, have had large impacts on the lives of the poor. Another,The $25 Billion Question, includes shocking statistics of the misuse of foreign aid, due to the inability of donors to properly align the incentives of government bureaucrats to ensure that they use the aid as intended by the donors. A third, Doing Business in Africa, describes the healthiness of the business climate in Africa, and the success of large, African firms.

Despite the misleading byline on the cover page (Helping Africa Help Itself), this edition of The Economist does not include one article on the potential of private, African firms to reduce poverty in Africa. The articles focus on the standard issues: the barriers that corrupt governments and their bureaucracies pose to foreign aid, the temporality of donor assistance, and the effectiveness for foreign aid at spurring economic growth.

Economic indicators suggest that other approaches to development have more potential than foreign aid. As Bill Kramer quoted the EU Trade Minister in his last post, a 1% increase in trade would equal a seven-fold increase in foreign aid. Remittances, money transfers via wire that many immigrants use to send money to their relatives and friends in their home countries, reached $116.6 billion in 2003, whereas foreign aid from OECD countries only equaled $69 billion in that same year, according to the World Bank. Although the authors of Helping Africa Help Itself rightly point out that foreign aid projects should not be trivialized, the relative small size of foreign aid suggests that stronger and more effective tools exist to reduce poverty in poor countries.


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Dollars and Sense
Submitted by Anonymous on July 7, 2005 - 11:26.
It may be worth noting the irony that for many years, national governments limited their assessment of foreign aid programs to the amount _spent_. When asked what the U.S. was doing to help Africa, the USG would explain how much money was being spent, and that the amount was increasing, rather than citing trends or success stories of lives changed. Interesting that the above seems to essentially assume that money pumped into developing nations - regardless of the sender, recipient, intended use or actual use - is a good thing, and that if the private sector sends more than the aid sector, that the private sector must therefore be doing more good.
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Size Demonstrates Potential (although not effectiveness)
Submitted by _James Mahon on July 7, 2005 - 16:53.

Excellent comment. The speeches that I heard and the protestors that I met in Edinburgh last Saturday embodied that same emphasis. Protestors spoke about how much money wealthy governments spent on development, not what effect that spent money had. Many did not even have a clue how to spend the increase in aid that they demanded.

Although the amount of money spent cannot demonstrate effectiveness, it can demonstrate potential. Larger sums of money can muster more resources. In the above post, I compared aid to remittances and to trade in order to focus on the potential of other aspects of the global economy to be more cost-effectively captured and channeled by policy makers to meet development goals.

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Research needed?
Submitted by _manicplanet on July 8, 2005 - 16:03.
Does anyone know of research already done (or even planned) that examines the role of different amounts of aid money; or direct foreign investment; or loans; to changes in poverty levels? To changes in "consumer confidence" (to borrow an American term) levels? To happiness levels as described in Colombia in _Gaviotas_? Surely someone must have ideas on the true relative value of money spent in different ways towards the goal(s) of development?
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