Wealth of Nations July 2005

The G-8: How to Make a Success Out of a Stunt

The G-8 summit in Scotland will qualify as more than a political stunt if the gathering spurs an increase in well-designed aid to Africa.
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Sometimes, good things happen for bad reasons. Leaders meeting at the G-8 summit in Scotland next week might announce an increase in well-designed aid for Africa, and (less likely) a new and more intelligent approach to the problem of global warming. British Prime Minister Tony Blair, the meeting's chairman, has put these two issues at the top of the agenda. If those good things happen, it will not matter that the summit participants see this annual gathering mainly as a political stunt—a chance to gain praise for themselves and, where possible, deflect voters' discontent on to others (in this case, for seven of the eight, George Bush).

Nor will it matter much that so many of the arguments for new aid and climate-change initiatives are poorly thought through—or wrong. That, too, is unimportant. If good policies emerge, the anti-poverty and environmental campaigners, to whom a politically enfeebled Blair is pandering, will still deserve the credit.

In a way, of course, this is a pity: In a well-ordered world, it would be easier to derive good policies from good supporting analysis than from bad, and to achieve them through meetings where the aim is actually to design good policy rather than gull the public. But things do not always work that way. Sometimes in global politics, being wrong can be for the best.

The anti-poverty groups and their agonized champions in the media are right about one thing: The toll of suffering and deprivation in the world's poor countries—above all, in Africa—is the great moral scandal of our age. They also have a point when they say, as former Secretary of State Colin Powell put it, that poverty in the developing world is "a core national security issue," and that "the United States cannot win the war on terrorism unless we confront the social and political roots of poverty." The anti-poverty campaigners have pushed the correct issue to the fore. But they are mostly wrong about what to do next.

Partly for rhetorical purposes, and in some cases because they really believe it, the anti-poverty campaigners talk as though Africa's plight is all the West's fault. Millions are dying needlessly, they argue, because the rich countries give too little aid, or because of "unjust trade," or because capitalism by nature depends and thrives on exploiting the weak. According to their worldview, merely by righting such wrongs and by being less greedy—so little to ask—the West can "make poverty history."

No, it cannot. Look at China, the development miracle of this era. Was foreign aid the key? Or suspicion of international trade? Has China thrived because the West finally decided to stop holding it back? Not exactly.

In Africa's case, the policies of the United States and Europe can make a difference, but the truth is that Africa's future (unfortunately for most Africans) depends mainly on the competence and integrity of its own governments. Over the years, billions of dollars in aid have been squandered or stolen in the region. Many African countries are rich in natural resources and other economic opportunities: Tyrants have pillaged or wrecked those, too.

The anti-poverty campaigners are not, one suspects, much in favor of America's attempt to install democracy and good government by force in Iraq—that is "neo-imperialism," in their view, and must be roundly deplored. Fine, but if the West is not going to rule Africa, its ambitions for the place must be correspondingly modest. "Making poverty history" (something that rich-country governments have failed to do even at home) does not qualify.

The doubling of aid that Blair is calling for, by itself, might achieve nothing. And it could achieve less than nothing if a new commitment to substantially increase aid were followed, as it might well be, by a failure so comprehensive that it discredited the idea that aid can ever work. Yet aid can work: The evidence is clear on this. The trouble is that the preconditions for the success of many kinds of aid are demanding—including, as they do, certain minimal standards of good government.

To put it another way, the quality of aid matters more than the quantity. If the quality could be increased, a doubling of aid would be affordable and self-justifying: The results would silence the skeptics. But if the quality cannot be increased, the West will be pouring out billions more with little effect except to keep bad governments in power, and the skeptics will be proved right again.

Governments say they understand this better than they used to. They talk a lot about the design of aid and about the need to direct it to places where it will be used well. But this is where politics gets in the way. Confining aid to countries and purposes for which it will be effective is difficult. One obvious problem is that the poorest countries in the world—the ones with the most pressing moral claim on help from outside, and which most energize popular opinion in the West—tend to have the worst and most corrupt governments. Needless to say, that is not a coincidence.

If the principle, "Spend aid only on countries that are fairly well governed, and then in proportion to the numbers in poverty," were adopted, India would grab almost everything, and many of Africa's poorest countries would see their aid cut back. That is not what the anti-poverty campaigners have in mind—and there is no political advantage for Western governments in that kind of thinking.

Even so, the West could and should try harder to aim its aid more effectively, both by choosing recipients with more care and by delivering the aid, as far as possible, in corruption-proof parcels. So far as the first goes, America's new Millennium Challenge Account—which is intended to reward countries that meet the qualifying criteria with more-generous support—looks promising. To make a success of it, though, the administration and Congress will have to move faster, and give the venture more financial muscle.

Directing aid to medical and scientific research with big expected payoffs for the poorest countries is another especially good idea, also now getting off the ground. One specific proposal of that sort, worked out in detail by Washington's Center for Global Development, is for Western governments to commit themselves in advance to buying yet-to-be-developed vaccines for diseases, such as malaria, that are prevalent in poor countries (see blogs.cgdev. org/vaccine).

Too little research on diseases of this kind is going on at the moment, because poor countries cannot afford to do it themselves and lack the purchasing power to pull rich-country resources in the right direction. Such proposals deserve generous backing because they have two decisive advantages: They would directly help the most vulnerable people in the world, and the opportunities for malfeasance would be much smaller than with conventional aid. Also, smart initiatives like this could yield big visible successes, with the further advantage of winning support for more—and better—aid.

Just as the anti-poverty campaigners are wrong to care more in the first instance about the quantity of aid than the quality, they are mistaken also to elevate fair trade over free trade. According to one recent estimate, eliminating rich-country trade barriers to imports from poor countries could add $100 billion a year to developing-country incomes—far more than the rich countries are sending to the developing world in aid. And that policy, of course, would make rich countries better off as well.

The CGD's Steven Radelet points out that the huge sums America pledged for tsunami relief were exceeded fivefold last year by the tariffs that the United States collected on imports from India, Indonesia, Sri Lanka, and Thailand.

That is "trade injustice," all right—a market-usurping policy, carried out in the name of "fair trade" (protecting incomes in threatened Western industries) that reduces the living standards of rich and poor countries alike. But if those tariffs and other import restrictions were abolished, there would be no need to worry about trade injustice. Free trade is fair trade. What is unfair is protection that discriminates against the poor.

More broadly, international capitalism is not inherently exploitative. To believe otherwise is a gross misunderstanding. Wages are low in poor countries not because of some evil capitalist conspiracy but because those countries lack capital, and their labor is correspondingly unproductive. If allowed to, capitalism ruthlessly sees that as an investment opportunity: Money and knowledge flow in, productivity goes up, and wages and living standards do likewise. It is happening right now in China, India, and many other poor countries.

Better aid (rather than more) and free trade (rather than fair): not exactly what the campaigners are demanding from the summit. Yet if the world is lucky, and the G-8 moves policy in this direction, it will be partly because of the campaigners' pressure. Governments should listen to them—but, please, not too closely.

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Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

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