The eight MDGs were agreed in 2000. They are:
1. Eradicating extreme poverty and hunger,
2. Achieving universal primary education,
3. Promoting gender equality and empowering women,
4. Reducing child mortality rates,
5. Improving maternal health,
6. Combating HIV/AIDS, malaria, and other diseases,
7. Ensuring environmental sustainability, and
8. Developing a global partnership for development.
The policies which the western world are presently pursuing – with large increases in foreign aid – are working against these objectives. Unless the MDGs were intended to be achieved no earlier than the year 3000 AD, in which case the policies are probably working a treat.
Now climate change policy is seen as a further way to increase foreign aid, with some suggesting that the west should compensate developing countries for the harm caused by previous economic development. That’s an interesting take on history – western democracies are rich and developing countries are poor because the former stole from the latter. If that were true, western countries would be only marginally richer than developing countries since resources purchased / taken from developing countries have accounted for only a tiny fraction of economic growth since the industrial revolution.
Afghanistan is an example of the vast sums of aid that have been plundered by various elites for no gain by the ordinary Afghan. This pattern has been repeated throughout the world – aid is simply a means to enrich the few at the expense of the many. Aid entrenches poverty – it discourages innovation and the creation of wealth and creates welfare dependency.
But it is worse – foreign aid acts in the following ways:
- it ruins the budgetary position of many advanced economies who are spending ever more money on foreign aid
- it entrenches elites in power in developing countries
- it finances terrorism
- it promotes corruption
- it encourages money laundering
- it increases the size of government in advanced economies, acting as a brake on economic growth
- it creates a rent-seeking class (via NGOs, consultants and corporations) in advanced economies who become ever more reliant on foreign aid and hence ever more dependent on government and demanding of ever more foreign aid in the gravy train
- it crowds out more effective private sector charitable activities
- it creates a sense of resentment among the recipients of foreign aid – those parcels branded “US AID” do not lead to the recipients being grateful, it fuels a sense of injustice and resentment
- it enriches despots who keep private bank accounts in Switzerland, Luxembourg etc.
In effect, foreign aid is the principal-agent problem writ large. It is a massive swindle to take money from the taxpayer (the principal) to enrich the agents.
If we were really interested in human wellbeing and poverty reduction, we would phase out relatively quickly all foreign aid and leave the private sector to act as charities. Foreign aid does no good, only bad.
Foreign aid is a negative sum game. Trade is wealth creating.
So, in addition to phasing out foreign aid, it will be important to eliminate all trade barriers. We want to buy from poor countries, not provide gifts.