In light of the recent publicity of Live-8 and the G8 Summit in Scotland, I decided to post about the concept of foreign aid. One article I came across that really hit home is “Helping Africa Help Itself” (The Economist July 2005). They explain that for every dollar spent in an African country, the governments raise 28 cents less in tax, and that aid rarely is able to ‘buy growth’. Some examples of governments creating homegrown policy reforms without receiving aid are China (1978), India (1982), and Vietnam (1986); allowing these countries to get wealthier faster than any other time in their whole history. Some question the ability to donate aid without creating a country of dependency, much like the homeless man on the street; if you give him money are you helping him? Or inviting him to come back the next day for the next free handout? These are questions worth considering when donating large amounts of money which does affect our own standard of living and domestic social spending. The Economist noted a few ways to donate to poorer regions without handicapping our own economies. One way of doing this is subsidizing domestic drug producers to produce much needed AIDS/HIV treatment (90% of the $75 billion is devoted to serve 10% of the world’s population). Keeping aid domestic will benefit the poorer regions of the world without having a large negative to our own society and our poverty that too need aid. The key for Africa is to create a peaceful environment for business, with much of the country in civil war, and being one of the largest continents in the world; military missions (while expensive) may be the key to Africa’s prosperity.
In terms of foreign aid spending, Scandinavian countries lead by far in terms of percentage of GDP where the US, Canada and the western European countries bring up the rear of the developed nations. The US while lowest in terms of percent of GDP, is the largest donor of aid in the world, and when you consider private donations, the US spends $170 per person; Canada’s government spends $61 per person. We’ve spent more on the gun registry than we do on aid in a given year, how’s that for priorities?
Aid is needed to areas with rampant disease and war, as for addressing the issue of poverty, I will be posting on the idea of outsourcing soon.
