Richard Posner: " I do not favor aid, debt relief or other financial transfers to poor countries"

I originally posted this note on facebook. Please watch this space for more topics on African issues. (Read facebook note here)

“I just bumped into a comment made by respected U.S. Judge, Richard Posner on foreign aid to Sub-Saharan Africa. I respect Posner because his analysis is always lucid, organized and straight to the point, but as an African I found his thoughts to be rather disturbing (albeit from a purely emotional/moral angle.)

From a logical stand-point however, he makes a good argument when he says: “The highest priority for—and it should be a condition for receiving any—foreign aid should be a nation’s agreeing to the establishment under the auspices of the G8 nations an independent, professional, and competent judiciary and police, well paid and well supported with staff and with computer and other necessary equipment, to enforce contracts, property rights, and personal rights.”

But it makes sense in a utopian world where establishing the above structures is easy to implement. However, I might be wrong…perhaps African countries just currently lack the moral will/the proper incentives to fix their domestic institutions…

Posner goes on to make other comments such as: “I do not agree that African nations should receive anti-AIDS drugs on a subsidized basis…” and as usual, in his clear, logical style, he backs this claim up with several rationally sound (yet very “hmmm” inspiring) positions…
Thoughts?

Foreign Aid to Sub-Saharan Africa–Posner Comment

I do not favor foreign aid, debt relief (which is simply another form of such aid), or other financial transfers to poor countries, in Africa or anywhere else. Countries that are not corrupt do not require foreign aid, and foreign aid to corrupt countries entrenches corruption by increasing the gains to corruption. Foreign aid to Zimbabwe, for example, will simply prop up dictator Mugabe.

Foreign aid makes people in wealthy countries feel generous, but retards reform in those countries as well as in the donee countries. Obviously from a world welfare as well as African welfare standpoint Europe and the United States should not impose tariffs on agricultural imports in order to protect their rich farmers. Eliminating tariffs would do more for Africa than giving them an extra $25 billion a year to squander. (It would also increase the wealth of the countries that eliminated their tariffs.) Since there are 650 million people in Sub-Saharan Africa, the extra $25 billion will increase per capita annual income (assuming it isn’t squirreled away by corrupt elites) by only $40. Not that such an increase is wholly trivial in relative terms—Nigeria, for example, has an annual per capita income of only about $300, and it is not the poorest country in Africa. But it is unlikely that the poorest people in these countries will benefit from the extra money; even if most of it isn’t skimmed off by corrupt officials or squandered on dumb projects, it is likely to stave off fundamental political and economic reforms. (The G8 nations at Gleneagles also agreed to forgive some $50 in African debts to them, but that is a one-time event and its annualized value is therefore much less than $25 billion a year.)

Controls over how the money is spent will be difficult to implement. Earmarking donated money is especially difficult to enforce because the donee country can use the money to replace funds that it is already spending on the activity that the donation is earmarked for. So, for example, if money is earmarked for girls’ education, the donee country can reduce the money that it appropriates out of its own funds for such education; such an evasion would be very difficult to prevent without intrusive monitoring of the country’s finances that its leaders would resist vigorously and effectively in the name of anticolonialism.

The highest priority for—and it should be a condition for receiving any—foreign aid should be a nation’s agreeing to the establishment under the auspices of the G8 nations an independent, professional, and competent judiciary and police, well paid and well supported with staff and with computer and other necessary equipment, to enforce contracts, property rights, and personal rights. Without such a framework for the protection of economic activity, the African nations are unlikely to progress. The cost of such a framework would be quite modest—far less than $25 billion a year for the entire region.

Another priority is, as Becker notes, girls’ education, probably the surest route to reducing population growth. But, although heartless, I do not agree that African nations should receive anti-AIDS drugs on a subsidized basis. Drugs that reduce the severity of an infectious disease can actually foster the spread of the disease by making the disease less costly to people who contract it. Pending development of a vaccine (still not in sight), the only effective way of dealing with the African AIDS epidemic is adoption of safe sex. The AIDS drugs will retard that adoption by reducing the benefits. Girls’ education, quite apart from its other benefits, will combat the epidemic because the more secure women are economically, the less they will be inclined to yield to men’s demands for risky sex”

More from Posner on Africa: The Microeconomics of the AIDS epidemic in Africa

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