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July 01, 2005
Why Bob Geldof is an idiot
--or--
If everyone is going to talk about this, let's talk about it.
Eight of the most powerful men in the world are about to get together for a couple days of missing the point. At the same time, Bob Geldof has set up 9 massive concerts all over the world where people will get together in solidarity to also collectively miss the point.
Look, I appreciate the impulse to say "hey you G8 guys, the eyes of the world are on you, so you'd better do what we want," but if you're going to do that, you need to have a better idea of what you're asking for. The fact is that throwing more aid money at developing African countries is only going to make things worse.
For one thing, economists have known for a long time of an effect known as "Dutch disease" where aid flowing into a country causes wages to rise, which begets inflation, which hurts exports, thus curbing growth and further depressing the local economy.
Further, recent studies (some as recent as this week) by IMF economists suggest that increasing aid does not necessarily increase growth. There's more work that needs to be done in this area in order to disentangle the effects of humanitarian aid (such as disaster relief, which isn't supposed to help economic growth) and development aid (which is supposed to foster growth), so we can be clear on what exactly the studies are saying. Nonetheless, the discussion around the recent work raises two important points.
First of all, it doesn't matter how much money you throw into a economic/political vacuum. Most of the countries at the forefront of the development agenda simply don't have the economic infrastracture to make effective use of the money that's pouring in now, so why should anybody think that more money is the answer? At the same time, since many of these countries lack stable governments, we shouldn't be thinking that such infrastructure is forthcoming. This is what the G8 leaders need to address. Their development aid is going to be useless without economic infrastructure that can effectively mobilize cash and captial, and there's no way to get those mechanisms in place unless there is some assurance of political stability. Stable governments also have the benefit of being able to attract direct foreign investment which takes the development burden off of governments to deliver aid (but we're a long way off from that).
If the Gleneagles gang wants to get serious about development, the answer simply isn't more aid. The best thing that large economies can do to help smaller ones is to stop the shameless subsidizing of their own local producers. It'll be impossible for anybody who we're ostensibly trying to help with aid money to actually develop their own economies if our markets are de facto closed to them due to subsidies that keep prices on domestically produced goods artificially low. We thereby price out foreign competitors, including some of the resource-rich but economically devastated nations we're supposed to be helping with our aid money.
Of course, doing anything remotely like that is political suicide, since Angolans don't vote in US or UK general elections, but these are the kinds of changes that must be made in order to stop throwing good money after bad (well-intentioned) in Africa and elsewhere.
If you want to put political pressure on these guys to do the right thing, you'd better know what the right thing is before you ask for Beyonce to help. Push hard, but push in the right place.
Slight clarification: In addition to the things that Geldof has campaigned for that are stupid and pointless, he has also pushed for debt forgiveness for African countries. That's not stupid or pointless.
Posted by matt at July 1, 2005 10:25 AM
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Comments
just a note to myself, in the spirit of public self-flagellation, if you're going to call someone an idiot on your website, you should check for typos anywhere you write their name in bold (like, say, in the title of a weblog post).
Posted by: matt at July 1, 2005 11:16 AM
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