British Prime Minister Tony Blair is pressuring the rich nations of the world to give more foreign aid to Africa -- to the tune of $25 billion a year by 2010. The U.S. already gave $3.2 billion last year. In the wake of this pressure, we might ask ourselves whether it's foreign aid that Africa needs most for economic development.
A standard myth is there's a "vicious cycle of poverty" that makes economic development virtually impossible for the world's poor nations. This myth holds that poor countries are poor because income is so low that savings cannot be generated to provide the kind of capital accumulation necessary for economic growth. Thus, it is alleged, the only way out of perpetual poverty is foreign aid.
Let's examine the "vicious cycle of poverty" myth and whether foreign aid is a necessary ingredient for economic development. The U.S., Britain, France, Canada and most other countries were once poor. Andrew Bernstein of the Ayn Rand Institute wrote in an article titled "Capitalism Is the Cure for Africa's Problems" that pre-industrial Europe was vastly poorer than contemporary Africa.
A relatively well-off country, like France, experienced several famines between the 15th and 18th centuries as well as plagues and diseases that sometimes killed hundreds of thousands. In France, life expectancy was 20 years, in Ireland it was 19 years, and in early 18th-century London, more than 74 percent of the children died before reaching age 5.
Beginning in the late 18th century, there was a dramatic economic turnabout in Europe. How in the world did these once poor and backward countries break the "vicious cycle of poverty" and become wealthy, without what today's development experts say is absolutely necessary for economic growth -- foreign aid handouts, World Bank and International Monetary Fund loans, and billions of dollars of debt forgiveness?
The answer is simple: Capitalism started taking root in Europe. Capitalism is an economic system where there's peaceable, voluntary exchange. Government protects private property rights held in goods and services. There's rule of law and minimal government regulation and control of the economy.
Check out the Washington, D.C.-based Heritage Foundation's "Index of Economic Freedom." Heading its list of countries with the freest economic systems are: Hong Kong, Singapore, Luxembourg, Estonia, Ireland and New Zealand. Bringing up the rear as the countries with little or no economic liberty are: North Korea, Zimbabwe, Angola, Burundi and the Congo. It's not rocket science to conclude that economic liberty and the wealth of a nation and its peoples go together, not to mention greater human rights guarantees.
Some economic development "experts" attribute Africa's troubles to its history of colonialism. That's nonsense, because some of the world's richest countries are former colonies, such as the U.S., Canada, Hong Kong and Australia. In fact, many of Africa's sub-Saharan countries are poorer now than when they were colonies, and their people suffer greater human rights degradations, such as the mass genocide the continent has witnessed.
One unappreciated tragedy that attests to the wasted talents of its peoples is that Africans tend to do well all around the world except in Africa. This is seen by the large number of prosperous, professional and skilled African families throughout Europe and the United States. Back home, these same people would be hamstrung by their corrupt governments.
The worst thing that can be done is to give more foreign aid to African nations. Foreign aid goes from government to government. Foreign aid allows Africa's corrupt regimes to buy military equipment, pay off cronies and continue to oppress their people. It also provides resources for its leaders to set up "retirement" accounts in Swiss banks.
What Africa needs, foreign aid cannot deliver, and that's elimination of dictators and socialist regimes, establishment of political and economic freedom, rule of law and respect for individual rights. Until that happens, despite billions of dollars of foreign aid, Africa will remain a basket case.