Our Problem with Prejudice
A book review in the New York Times outlines a "surprising" case against foreign aid. It is surprising only if you are a writer for the New York Times.
Fred Andrews reviews The Great Escape by Angus Deaton, "an expert's expert on global poverty and foreign aid." The "great escape" of the title is, in Deaton's words, "the story of mankind’s escaping from deprivation and early death." It is an important story, the most important story of the past two centuries, and I have hope that Deaton might get some of it right, judging from Andrews's summary of his case against foreign aid.
In [Deaton's] considered judgment, global poverty today is no longer a result of lack of resources or opportunity, but of poor institutions, poor government and toxic politics. Though about $134 billion in official aid still flows from donor governments to recipient governments, there is no mystery, he says, as to why foreign aid fails to erase poverty. That is not its mission, he asserts: typically it serves commercial interests at home or buys political allies abroad, too often unsavory ones.
All aid is distorted by politics at both ends, he says, citing the example of Mauritania several years back, when aid was in danger of being cut off. The country's president hatched the brilliant idea of becoming one of the few Arab countries to recognize Israel. The aid taps were reopened and the reforms rescinded.
The author has found no credible evidence that foreign aid promotes economic growth; indeed, he says, signs show that the relationship is negative. Regretfully, he identifies a "central dilemma": When the conditions for development are present, aid is not required. When they do not exist, aid is not useful and probably damaging.
This is a big truth that applies to the domestic welfare state as much as to foreign aid. Dependence on welfare or foreign aid leads to more dependence on welfare or foreign aid, whereas real economic achievement comes from the actions of self-reliant people left free to make their own plans and guide their own lives. Economic independence leads to more economic independence.
The case against foreign aid has slowly been gaining traction, not just among pro-free-market firebrands, but among mainstream economists, and this book is another example. As Andrews puts it, Deaton "puts his considerable reputation on the line and declares that foreign aid does more harm than good."
But this review also indicates what stands in the way of progress on this issue. Here is Andrews's conclusion.
[This] is a powerful argument from a scholar who has done his homework, but it is more provocative than ultimately convincing. Defenders of foreign aid would reply that past efforts have contributed greatly to the enormous gains in life expectancy that the professor celebrates. The professor's maverick views fly in the face of an enormous global effort, and he paints with a very broad brush. The World Bank counts nearly 12,000 projects under way in 172 countries. It's hard to believe that all are nearly as flawed or misguided as Professor Deaton suggests. Aid is not a door that should slam shut.
This basically amounts to: who is Deaton to stand against all these people and this giant international establishment? It's an interesting, inadvertent confession of the extent to which foreign aid—like the domestic welfare state—is sustained by a social conformity that makes people unwilling to even question the mainstream consensus, no matter how much evidence you offer for its destructive effects.
This is our problem with prejudice: a moral prejudice in favor of altruism which takes precedence over reality.