Mon, Apr 01, 2002 page9

• Giving aid to governments of poor nations usually backfires

  • By Doug Bandow
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  One of Lahore's small Christian communities sits on army land, and thus constitutes an illegal occupation in the government's view. Most homes have one room, the latrines are makeshift, and families are lucky to survive on US$20 a month.

  These are "very difficult times," one resident told me. But these people have never seen a penny of the billions in foreign aid received by Pakistan over the years.

  When government officials talk about foreign assistance, they rarely use numbers less than a billion. As when a gaggle of world leaders, led by US President George W. Bush, recently met in Monterrey, Mexico. Like at most such gatherings, they spent their time spouting platitudes while planning new ways to waste taxpayer's money. Or old ways, in this case. Western leaders proposed to hike foreign aid outlays -- the US alone pledged an increase of 50 percent. In fact, the case for foreign assistance died with the Cold War.

  While engaged in a global struggle with hegemonic communism, there was a plausible argument for buying friends throughout the Third World. But no longer.

  Some urge a new infusion of aid as part of the War on Terrorism. But global poverty has nothing to do with terrorism, or else the US would have been under siege for years by terrorists from Sub-Saharan Africa.

  Money might help prop up moderate Arab regimes in the face of Islamic fundamentalism, but it won't take US$5 billion to buy their help. Anyway, far more effective would be relaxing trade barriers to exports from those nations.

  And without economic and political reform, no amount of outside funds will yield stability. Yet foreign aid reduces the incentive to make despotic regimes more responsive to their people.

  The Monterrey summit focused on the plight of the poor. Yet while President Bush emphasized the importance of making assistance effective, for 50 years government-to-government transfers have benefited political elites, not common people.

  Aid agencies subsidized the worst collectivist autocracies, underwriting the very policies responsible for Third World poverty. This should come as no surprise, since government aid agencies exhibit neither accountability nor creativity. Writes William Easterly, an economist with the Center for Global Development, "The resulting edifice of national and international bureaucracies has not provided services effectively to the world's poor." Consider aid to Pakistan, a prototypical overpoliticized state. The economic and political systems are unfree; interest groups must be bought off to maintain regime support; most people possess no influence. The latter is particularly evident for Pakistan's minority Christians.

  Government work is highly sought after in an economy largely bereft of good private employment. Yet "we apply for the jobs," even menial ones, and "we can't get them," one poor resident told me. The Pakistani state denies public services to Christians.

  "The government is not doing anything for us," complained Shagufta Irene Samuel, general manager of the Technical Services Association (TSA), a private aid group. Desperate Christian residents of a tent city in the heart of the capital of Islamabad say the same thing: "we get nothing from the government." In Lahore a Christian neighborhood sits astride electrical transmission lines, but the 70 or so families have been told they must pay US$7000 to connect -- an impossible sum.

  Foreign aid is maldistributed by the regime in the same way. "International agencies give money to the government," the resident of one poor neighborhood complained. "But the government doesn't give the money to us."

  Even when money is distributed to private groups, Christian agencies find themselves on the outside. Samuel says that "foreign aid doesn't help us."

  Instead of government-to-government aid, "We need direct assistance," one poor Pakistani told me. Great good can be done with very small amounts of money. For instance, two members of the group Christian Freedom International (www.christianfreedom.org) recently visited several poor neighborhoods in Pakistan. They distributed small amounts of cash to residents, paid the tuition for two children whose father, a house painter, had been disabled, developed plans to begin schooling needy children, and hired a local pastor to manage the programs. They are also working to develop local craft manufacturing to help poor families become self-sufficient. Direct aid "is great and all that," explained Jim Jacobson, head of CFI.

  Alas, government-to-government aid has failed for 50 years. In contrast, private efforts offer a small start to deal with desperate poverty. In this way people in wealthier countries can save individuals, families, and communities in poorer nations.

  Doug Bandow is a Senior Fellow at the Cato Institute and a former Special Assistant to President Reagan.
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