Accompanied by rock concerts in different countries and a push from activist rock stars like Bono and Bob Geldof, the world's richest democracies, called the G8 nations, met this past week in Gleneagles Scotland to decide how to help African nations. The publicity surrounding their meeting was reduced by the terrorist attacks in London, but they still managed to get considerable newspaper coverage. They committed to $25 billion in extra annual aid to Africa by the year 2010, sizeable debt relief for Africa, trade talks to eliminate agricultural support in the rich nations, and a promise to make low cost AIDS treatment widely available in Africa.
The G8 nations are rich enough to easily afford the increased aid committed to Africa. Perhaps for this reason, some of the activists denounced the aid as too small and miserly. But that these countries can certainly "afford" to spend more does not mean that much greater aid will help the millions of poor Africans. Indeed, it is doubtful whether more aid will speed up economic growth, given both Africa's experience with aid during the past half century, and the evidence from other poor nations that internal reforms that produce sizeable and persistent growth are the only really effective way to reduce a nation's poverty.
Despite receiving cumulative aid of more than $500 billion during the past several decades from rich countries and international organizations like the World Bank, Africa has had the slowest growth in per capita income of any continent. Slow growth is not the inevitable result of being poor since the per capita incomes of poor nations grew since 1960 about as fast, and perhaps a little faster, that the per capita incomes of rich countries. Obviously, the abundant aid to Africa in the past did not guarantee rapid growth, This aid may even have made growth harder by encouraging greater corruption, by reducing the need to consider drastic economic reforms toward freer economies, and by making it easier to waste resources on grandiose and unproductive projects, such as the Eldoret International Airport in Kenya that almost nobody uses.
India is a good example to consider in evaluating the respective roles of aid and self-generated reforms. India probably received more economic aid from international organizations than any other nation during the 40 years from its independence to the mid-1980's. Yet this large and complicated democracy experienced only a slow growth in per capita income during this period-sometimes referred to as the "Hindu" rate of growth, as if Hinduism was an inevitable drag on economic progress. However, a serious macro-economic crisis around 1990 forced India to change its ways, and brought in a reform-minded economist as finance minister, Dr. Manoman Singh. He introduced a series of simple but basic economic reforms during the early 1990's that included sharp lowering of very high tariffs and quotas, substantially reduced regulation of private domestic investments, a little encouragement to foreign direct investment, and the opening of more sectors to private enterprise. With no increase in foreign aid, and very likely a decrease, India's rate of economic growth sky-rocketed after these reforms to above 6 per cent per year, second highest only to China, and a pace of growth that would be the envy of African nations.
India and other examples of poor countries that managed to grow rapidly indicate that large scale and general foreign economic aid is not the solution to slow growth. Indeed, general aid might delay the reforms necessary for growth because it can take away the crisis mentality that appears crucial to galvanizing the political will necessary to implement radical economic reforms.
I am not denying that Africa has some special and serious problems that may make growth more difficult there, and perhaps provide room for aid for specific projects. Many African countries are located around the equator, and have climates that breed diseases that are highly debilitating and have not yet been conquered. Deadly tribal and ethnic civil wars have ravished many countries and certainly discouraged long-term investments. The AIDS epidemic has been particularly deadly there, with many millions infected, although it is puzzling why more precautions are not being taken by the African men and women at risk.
So it is easy to sympathize with the desire to provide aid to reduce some of this misery. As the Indian example (and Chinese example as well) indicates, sustained growth requires economic reforms toward freer markets in a political environment that is not clouded by civil wars and uncertain property and legal rights. However, aid might be helpful if directed toward better health and education-improving projects that would be neglected by African governments. Some examples include vaccination programs of the type favored by the Gates Foundation, the support of elementary schools in rural areas primarily devoted to the education of girls, and subsidizing research in G8 nations on diseases most common in Africa, such as malaria, sleeping sickness, and of course AIDS.
If these kinds of projects are politically feasible, they might more than repay the additional investment called for by the Gleneagles Meeting. But these and other projects promoted by aid from rich countries will not stimulate rapid economic growth and widespread reduction of poverty. Rapid growth can only come from major additional internal changes within Africa.