The Rational Optimist_ How Prosperity Evolves - Matt Ridley [147]
There are hopeful exceptions, like Mali, Ghana, Mauritius and South Africa – countries that have achieved a measure of freedom, economic progress and peace. All across the continent, economic growth has picked up in recent years, and in Kenya, Uganda, Tanzania, Malawi, Zambia and Botswana even life expectancy is rising rapidly after falling while AIDS took its toll (South Africa and Mozambique have yet to follow suit). It is a false Western cliché that all African lives are spent dodging poverty, corruption, violence and disease. But far too many are, and the contrast with much of Asia grows more acute by the year. Whereas income per head stood still in Africa in the past twenty-five years, in Asia it trebled. Then tragically, Africa’s promising economic boom in the 2000s was cut short by the credit crunch.
Some Westerners have been heard to say that growth is not what matters, that what Africa needs is an improvement in the human development index, towards the Millennium Development goals and to erase suffering without raising income, or that it needs a new kind of sustainable growth. Paul Collier and his colleagues at the World Bank encountered a storm of protest from non-governmental organisations when they published a study entitled Growth Is Good for the Poor. This suspicion of growth is a luxury that only wealthy Westerners can indulge. What Africans need is better living standards and these come chiefly from economic growth.
Aid’s test
Some of the most urgent needs of Africa can surely be met by increased aid from the rich world. Aid can save lives, reduce hunger, deliver a medicine, a mosquito net, a meal or a metalled road. But statistics, anecdotes and case histories all demonstrate that the one thing aid cannot reliably do is to start or accelerate economic growth. Aid to Africa doubled in the 1980s as a percentage of the continent’s GDP; growth simultaneously collapsed from 2 per cent to zero. The aid that Zambia has received since 1960, if invested instead in assets giving a reasonable rate of return, would by now have given Zambians the income per head of the Portuguese – $20,000 instead of $500. Although in the early 2000s some studies managed to find evidence that certain kinds of aid sometimes trigger growth in countries with specific economic policies, even these conclusions were later dashed by Raghuram Rajan and Arvind Subramanian of the International Monetary Fund in 2005. They could find no evidence that aid resulted in growth in any countries. Ever.
It is worse than that. Most aid is delivered by governments to governments. It can therefore be a source of both corruption and discouragement to entrepreneurship. Some ends up in dictators’ Swiss bank accounts; some goes to make billion-dollar steel mills that never work; some is given on condition of importing certain goods from a Western country; some is not independently evaluated for efficacy either by the donor or the recipient. Some African leaders are so disenchanted with government aid that they even embraced the recommendations of the Zambian economist Dambisa Moyo who concludes, bleakly, ‘aid doesn’t work, hasn’t worked, and won’t work ... no longer part of the potential solution, it’s part of the problem – in fact, aid is the problem.’
Moreover, in recent years much aid has been granted on condition of free-market economic reform, which far from kick-starting economic growth, frequently proves damaging to local traditions, undermining the very mechanisms that get enrichment started. As William Easterly puts it while criticising the shock therapy that did such harm in both the Soviet bloc and Africa, ‘you can’t plan a market’. The top-down imposition of a bottom-up system is bound to fail.
Easterly cites the example of insecticide-treated mosquito bed nets, which are a cheap and proven way of preventing malaria. A bed net costs about $4. Encouraged by a flurry