Obama, Bush Offer a U.S. Kiss of Death to Africa

Feb. 27 (Bloomberg) — Africa is easier than the Middle East. It's not all about the oil. You don't have to send the 1st Cavalry Division there. All Africa needs is money to become healthier, more democratic, friendlier — you name it.

That seems to be the conclusion of Barack Obama. In the Senate, the Democratic presidential candidate is pushing for passage of legislation that requires the U.S. government to cut global poverty in half by 2015. The bill's mandate seems likely to force presidents to back expanded aid. Meanwhile, when he can at least, Obama avoids those dangerous Middle East topics.

Nor is Obama alone in his Africa interest. This month, President George W. Bush traveled to Tanzania, Benin, Rwanda, Ghana and Liberia to celebrate past U.S. assistance and reinforce his administration's promise that America will double aid to Africa. The President Bush handing out mosquito netting in the photos looked more relaxed than the President Bush who takes questions on Iranian uranium at press conferences back home.

You get the sense that politicians these days are racing to match Bill and Melinda Gates, Warren Buffett and the rest of the private sector in charity spending. Historians talk about the old scramble for Africa. That was a scramble to get — European monarchs took land for colonies. Now we are witnessing a scramble to give.

The new scramble is as much a shame as the old one. Foreign aid can be the kiss of death for poor regions, as a former World Bank official, William Easterly, demonstrated in his recent book, "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good."

Growth Distraction

Easterly's research found that $2.3 trillion in aid the U.S. and allies have spent over the past half-century has been a counterproductive distraction from achieving stable growth. And people die from the absence of growth — the poverty-related malaria kills thousands a day.

This idea seems tailored to drive Gates crazy, and it has. A year ago at Davos, the usually affable Gates sputtered back at Easterly: "When we put people on AIDS drugs, we don't say to them, 'Hey, unless you raise the GDP we have wasted our money."'

Plenty of others, though, agree with the Easterly thesis. In a recent paper, scholars Simeon Djankov, Jose G. Montalvo and Marta Reynal-Querol surveyed data from more than 100 countries over four decades. They also found that aid tends to supplant growth and makes countries quantifiably less democratic. They compared aid with petroleum wealth. Based on their research, they determined, "aid is a bigger curse than oil."

Losing Ground

The scholars monitored the quality of courts and other government institutions and assigned countries a democracy rank from zero to 10 for a given year. They measured foreign aid's influence on a country by quantifying its share of gross domestic product.

Over time, the countries that were most saturated with aid drop almost a full point, or 10 percent, on the democracy meter. Countries less dependent on aid also experienced weaker democracy, but less so. From the 1960s until 1980, more aid meant less democracy in Africa. From the late 1980s to the current period, the average level of aid dropped, while democracy increased. The same trends were visible in the rest of the world.

This makes sense when you consider that both oil and aid obviate the need to tax. Governments that don't need to collect taxes don't need voter support either. They also don't need to produce an environment friendly to business. Those who benefit from a windfall turn to autocrats.

Kids Fighting

When there's a resource, people will fight over it like kindergartners, instead of creating new assets. Our aid propped up the brutal Mobutu Sese Seko in Zaire. Somalia's "Black Hawk Down" battles of the 1990s were, to some extent, battles over control of food aid.

Obama or Bush might counter that their plans are carefully structured to limit corruption and encourage growth. There's talk in Obama's legislation about "leveraging U.S. trade policy" to enhance growth in Africa. And establishing incentives for good governance in countries that get aid is the whole point of Bush's Millennium Challenge Corp., which rewards nations for meeting governance targets with aid. It's true that medicine for HIV is harder to profiteer from than cash.

"Since the medicine is not fungible, it cannot be used for other purposes by politicians," Djankov said in an e-mailed statement.

But a recent Middle Eastern experiment in aid — Iraq's Oil for Food program — reminded us that people are ingenious when it comes to converting non-tradeables to tradeables. Easterly makes a more basic point. When governments focus on one malady, say HIV, they tend to neglect other preventable sicknesses, such as malaria and the infections that make childbirth so risky.

More importantly, aid tends to make politicians forget about growth. Easterly describes an encounter with an HIV-positive woman in Soweto, where AIDS flourishes. When asked what the area's worst problem was, the woman replied "no jobs."

So you can talk all you want about trade and aid. The reality is often trade or aid. This new research suggests that you should expand aid if you want to make Africa look more like the Middle East — a bit healthier, but fundamentalist, non-entrepreneurial and bellicose. That's one flawed gift.

(Amity Shlaes, a senior fellow in economic history at the Council on Foreign Relations, is a Bloomberg News columnist. The opinions expressed are her own.)

© Copyright 2008 Bloomberg

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