Is Aid a Matter of Justice?
ONE, a non-governmental organization co-founded by singers Bono and Bob Geldof, recently released a video that contrasts prosperous life in the developed world with African misery. The message is that reducing African poverty, which ONE aims to accomplish primarily through financial transfers from the West, is "not about charity. It's about justice." Appealing to a sense of justice may be a good ploy to silence the critics of foreign aid. But it obfuscates the most important problems Africa faces: bad governments and misguided policies.
To most people, "justice" is about determination of harm, identification of the guilty and compensation of the injured. Watching ONE's video we are left in no doubt as to the identity of the guilty: It is us, the people in the West, who enjoy the good life while Africa starves. But why does ONE conflate Western prosperity and African poverty?
Western consumption reflects Western production. Every dollar that people in the West spend, they first have to produce or borrow, mainly from other Westerners. When governments spend more than they raise in taxes, they too have to borrow. In extreme cases, a succession of spendthrift governments can bring a nation to bankruptcy, as in Argentina in 2002, or close to bankruptcy, like Greece today. Few people in Europe think that the rumored Greek bailout is a question of justice and most are opposed to it.
The government of a country that follows good economic policies, like prosperous Switzerland, may opt to aid a country whose government has followed ruinous economic policies, like distressed Haiti. But such aid is a matter of charity and not of justice.
Over the last 50 years, many countries, including the Asian Tigers and Chile, have liberalized their economies and embraced free trade. They have prospered as a result. More recently China and India have followed their example. Unfortunately, beginning in the 1960s, many African governments opted instead for some variety of socialism. While Central European countries rapidly dismantled their socialist economies following the end of the Cold War and also prospered as a result, economic reforms in Africa remain painfully slow.
Africa is poor not because of Western consumption and stinginess, but because it produces too little. Most economists agree that Africa's low productivity is, in large part, a result of bad policies, such as restrictions on private enterprise, bad institutions, and inadequate rule of law. Unfortunately, far from stimulating growth and reducing poverty over the last 60 years, aid has served as a disincentive to economic and institutional reforms.
Governments that depend on income taxes are generally more accountable to their citizens and more responsive to their citizens' desire to advance economically than governments that do not. In Africa, the constant flow of aid has stunted democratic and private sector development.
Moreover, foreign aid that was not wasted on white elephant projects was often stolen by African politicians and bureaucrats. Corruption insulated the elite from the negative consequences of its own actions. When the ordinary people rebelled, as the Ethiopians did after the rigged 2005 election, they were suppressed by their own troops, who were partly financed by foreign aid. According to Paul Collier of Oxford University, between 1960 and 1999, aid financed up to 40% of Africa's military spending.
Considering how foreign aid has hampered African economic development over the last 60 years, it is perhaps unsurprising that Messrs. Bono and Geldof prefer to defend the continuation of Western financial transfers to Africa in terms of justice rather than effectiveness. Yet, watching their self-righteousness, one cannot but wonder who is the real beneficiary of foreign aid. Are Africans really the hapless victims of Western injustice? Or do we simply prefer to see them in that way, because it allows us to play the role of their noble saviors?
The truth is that only Africans can improve their lot. Our responsibility is not to make matters worse for them. Foreign aid does that and so do some other Western policies — primarily agricultural tariffs and subsidies for domestic farmers. The "just" thing to do is to remove them, not to give Africa more harmful aid.