July 16, 2005
Response on Aid to Africa-BECKER
I enjoyed and benefited from many comments. The discussion helped to resolve a number of issues. Let me add to a few that were not resolved.
Remittances to India and China were not of great importance during their 40 years of slow growth. Nor did farmers in either country do well during this period, except for a few areas in India where the green revolution took hold. In China farmers suffered badly under Mao’s misguided policies. Indian farmers have participated less in the economic gains since 1991 than urban workers. However, many young persons born on Indian farms are now moving to urban areas to take advantage of the better opportunities there.
Neither China nor even India built up its education structure while they were growing very slowly. China almost ruined its education system during the cultural revolution since most universities and many secondary schools were closed. And despite the high quality of India’s IIT’s, the vast majority of Indians get very little education, and what they get is of low quality.
Opening the markets of the rich countries to the mainly agricultural goods from Africa is surely desirable. That is one of the proposals at Gleneagles that can be supported strongly. But opening markets alone will not stimulate rapid growth.
For good economic reasons, I agree with the person who said that low cost Aids drugs if widely available in Africa would tend to both increase infection rates and increase life expectancy. The puzzling aspect of the Aids epidemic in Africa is that the many persons who have not had access to the cheap new drugs have not taken more steps to reduce their likelihood of infection. Studies indicate, however, that more educated Africans adjusted their behavior more than the less educated. By contrast, prior to the development of the Aids drugs, vulnerable Americans did take many steps to reduce HIV infections, including greater use of condoms, less risky types of sex, and still other responses.
Someone gave examples of crises that did not stimulate beneficial economic reforms. I have only argued that serious crises are often necessary to generate such reforms, but I agree that crises are not sufficient.
Foreign investment in Africa will both stimulate economic growth and raise the earnings of many workers. With the right economic and political conditions, international companies will invest in Africa either in low skilled-labor-intensive industries or in mining. Multinationals pay higher wages than local labor, so as a result, they select better and more reliable workers.
Of course, valuable infrastructure can help in speeding up economic development, but just building roads, airports, etc. may do little good, as in the airport example I gave in my posting. India managed rapid growth since 1991 with bad roads and embarrassingly rundown airports. I do not believe, however, that large infrastructure projects is a good way to give aid since it is an invitation to theft and corruption. Instead, if aid is to be given, it should concentrate on small and very specific projects unlikely to be undertaken by African governments. There are not a lot of these that are feasible, but I gave some examples in my posting, and some of you gave other examples.
Posted by Gary Becker at 7:21 PM | Comments (0) | TrackBack (4)
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