I. Africa teaches that aid doesn’t work; it just disappears into dictators’ pockets.
Over the last fifty years, hundreds of billions of dollars have been funnelled into Africa, with $US20 billion given annually throughout much of the 1990s. Yet throughout this period of aid, civil war continued to ravage the continent, in Sierra Leone, Angola, the Democratic Republic of Congo, Somalia, and in many other countries. Often, funds and aid were given towards leaders who divert funds towards their supporters in order to continue to oppress their opponents. Aid rarely gets to the people it is meant to help. The stark evidence of the failure of aid is the devastating economic and political turmoil in Africa today.
II. Teach a man to fish and he’ll never go hungry.
For the poor of the world, other policies should be implemented. For long term, sustained growth, the focus must be moved away from aid and placed on individual responsibility. The north should take its aid money and invest it in programs such as the American Peacecorps, in which northern countries send training teams to the south to build sound institutions.
These training corps should have a simple mission: to enhance basic public goods and make sure that all sectors of the population, especially the poor, have access to these goods. What are the public goods? Justice, education, and the police. What are the institutions that training corps will reform? Courts, banks, schools, and police forces. These institutions should train the legal community, judges and lawyers, to consistently apply rule of law. Police forces should be trained to enforce justice upon perpetrators. Banking institutions should become developed and credit should become available to all sectors of the population. In addition, private property and intellectual property, the keys to the capitalist system, should be protected. If a ruler seizes private property, he should be impeached for blocking economic liberty. Finally, education should be reformed, requiring all children to attend twelve years of primary school, and learn how to read. If a country cannot afford in its budget twelve full years of free public education, then it should focus on the first seven years, or the first four years of primary education – that is where you get more bang for your buck. Everyone should learn how to read, and develop the basic faculties to learn how to use new technologies, another factor of productivity and growth. Children should be given a simple choice: go to school or go to prison.
At this point, the poor will be at the center of training programs that teach them how to read, use credit, access legal institutions, and protect property rights. They will now be empowered to invest in personal enterprise. This system of “inclusive, compassionate capitalism” will enable the poor to take personal responsibility to create the goods to trade their way out of poverty.
There remains, however, one large obstacle.
III. Fire northern farmers. Then dismantle southern tariffs.
The poor will specialize in textiles and agriculture, and will compete with subsidized northern economies which protect these goods. The south will remain greatly disadvantaged in free trade, even with the above reforms in place.
The north should end its double discourse on free trade and end subsidies. It should allow its farmers to compete with cheap southern labour and see how they fare. The costs will be heavy, causing job loss in agriculture throughout America and Europe. Yet the transition can be gradual and the actions will benefit all parties. Americans and Europeans will at last be freed from heavy tax burdens which support inefficient industries, and southerners will be able to develop wealth through exporting products which they can naturally produce more efficiently and at lower costs. Southern countries will be able to access northern economies and build revenue through exportation, thus increasing wealth, and fighting extreme poverty.
We should never forget that free trade is a two way street. The south should also dismantle its own tariffs, which according to World Bank estimates, are four times higher than those of the north. Charity starts at home. Through concrete reforms taken from both the North and South together, the world as a whole can realize the wealth creating effects of free trade and globalization.
IV. Imitate the East Asian miracle (but be democratic).
Even if Mexico gets a monopoly on say, tomato production, it will never become as rich as Japan, which has a monopoly on computer chips. Southern countries will remain unable to realize the wealth of their industrialized, northern counterparts. They will first need to fix certain sectors of their economy on the path towards industrialization in order to achieve this growth.
How did East Asia do this? Herein lies one of the rare times this author will support government intervention in the market: Asia used smart protections. The government protected infant industries for just enough time until they matured and were able to compete on the world stage. Then the government pulled back aid and forced industry to export. The result? High savings and great capital accumulation. Today, poverty has been nearly eradicated in these newly industrialized economies.
Southern countries should make similar reforms in creating time sensitive, limited protections, rather than imitate the European or American examples which allow for indefinite subsidies towards inefficient agricultural industries. Southern countries should create incentives for their industries to export. They should say, “In two years, your protections will expire. If you are not competitive by then in Northern markets, you will lose your job when subsidies end.” Only then will southern countries continue to gain access to northern markets.
V. Fighting poverty is a moral duty.
There is a moral imperative for northern countries to aid southern countries fight poverty, not in just empty words or promises to halve poverty by 2015, but through concrete action. The north should be willing to make serious sacrifices, and by this we do not mean meagre aid which disappears into southern countries with no accountability. Instead, the north should invest in institution building, training programs, and consultancy that help southern countries to take the actions on their own that are necessary for growth. First, southern countries should shift towards market economies and realize the wealth-creating benefits of free trade. Second, the north should be prepared to end its double discourse on free trade and end subsidies. Finally, the south must move towards transition to more dynamic, industrialized sectors.
The fight against poverty is worth fighting, not only because people should have food in their stomachs. The fight against poverty should be fought because poverty, the seed of hunger, conflict, crime, and terror, should be eliminated.
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