Friday, November 15, 2002

If it’s this easy, why don’t the ratbags get it?

James Shikwati, director of the Inter-Region economic Network in Nairobi, Kenya, can explains in 700 words why his country wants trade, not aid.
aid gives untrustworthy leaders the resources with which to engage in violent and repressive acts. Mengistu (Ethiopia), Pol Pot (Cambodia) and Idi Amin (Uganda) are among the more infamous recipients of foreign aid.

and this:
In places where poverty is rife, aid becomes the route to riches for the elite. Money is disbursed through contracts, with rulers receiving huge kickbacks for their favours.

More:
Aid also undermines the democratic accountability of government. By offering governments a non-tax source of revenue, it enables them to ignore the wishes of citizens and reduces their incentive to deliver public services efficiently and effectively. It also exacerbates cronyism.

And more and more and more:
As the Peruvian economist Hernando de Soto has shown, economic progress depends mainly on society's institutions. That means formal property rights, free markets and the rule of law. These institutions enable people to own and exchange goods without fear of arbitrary expropriation, either by bandits or by the state. They thereby encourage economic activity, which enables people to escape from poverty. Some even become rich.

Probably exposing themselves to protests as “evil rich dudes”.

Conclusion?
Guilt and goodwill have blinded many to the damage that aid can do. Trade, not aid, is the solution for the poor. At this week's informal WTO ministerial meeting in Sydney, trade ministers should make good on their promise at Doha to create a world trading system that benefits all participants. That means reducing tariff and non-tariff barriers on all goods, as well as reducing agricultural subsidies.

In other word, aid is not helping. Free trade will increase wealth, reduce poverty, increase freedom, and is better for the environment.

UPDATE: Scott Wickstein has his impressions on Shikwati’s piece.

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