With Southeast Asia battling one of the worst natural disasters in modern history, Western politicians took the opportunity to create a perfect storm of petty recriminations. As the world scrambled...
With Southeast Asia battling one of the worst natural disasters in modern history, Western politicians took the opportunity to create a perfect storm of petty recriminations.
As the world scrambled to send money to help, U.N. emergency-relief coordinator Jan Egeland huffed that rich nations are “stingy” with foreign aid. Trying to talk his way out of the ensuing flap, he explained Tuesday that he didn’t mean stingy so much now in the current relief effort but more, well, stingy all the time: Our governments don’t give enough cash to the Third World. What he doesn’t get (natch, he’s a U.N. bureaucrat) is this:
The countries that prosper are those that want investment, not giveaways. When this crisis passes, that will be more obvious than ever. In the wake of the tsunamis, the United States will inevitably end up shelling out more for relief than the rest of the world combined. But America’s status as the largest donor overall (foreign-aid budget: $20 billion a year) doesn’t matter to Europe and the United Nations because America doesn’t give as much as a percentage of national income as say … Egeland’s own Norway.
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As ever, this obsession with redistributing wealth misses the importance of creating it. Which — even though we’re the world’s biggest giver of handouts — is where the United States makes its most vital contribution to fighting poverty worldwide.
To start with, America for half a century has stood as preacher, defender and guarantor of a relatively open international trading system — the most powerful force for poverty relief the world has seen. Just ask China. When the communists there finally had enough with communism, they opened up to trade and investment, lifting more people out of misery faster than anyone else in history.
It was a mutually beneficial relationship with the U.S. market that let them do it — one driven not just by consumer interest but by a long-term philosophy that trade makes the world a better, more peaceful place. Our openness lets the world’s poor earn money here and then send it home. In many poor countries (e.g., Mexico, India and the Philippines), foreign aid is dwarfed by remittances sent from family members working in America. That’s money — roughly $18 billion a year from the United States — that goes directly to households that need it, from somebody who directly understands their needs. It doesn’t flow through government hands, subject to rake-offs and politically inspired diversions to worthless projects.
Privately, Americans gave $241 billion to charity, with roughly one-tenth of it going overseas.
Microsoft’s Bill Gates has given billions for disease relief in the developing world. Pierre Omidyar, founder of eBay, set up a Web site to invite worldwide input on how to give away his $10 billion fortune. Europeans can’t match this — not least because their sclerotic economies don’t produce wealth in the first place.
In Afghanistan, Finance Minister Ashraf Ghani recently said the best things that could happen in his country would be for Western multinationals to begin investing in the region. “Trade, not aid,” is a slogan adopted universally in the last few years by emerging democratic governments in the developing world — because trade tends to start the “virtuous cycle” of job opportunities, education and upward mobility in ways the pork-barrel aid has largely failed to achieve.
Yes, in a crisis, aid is necessary. Even if nine out of every 10 dollars get wasted or stolen, the remaining buck does an immeasurable world of good by putting clean drinking water, medicine or food in the hands of a family in urgent need.
But once this crisis is done, if rich countries want a cause to flagellate each other with, they should direct their attention to their own trade protectionism practiced at the expense of developing countries.
Consider Bangladesh, one of the poorest countries on Earth and hard hit in the latest disaster. Last year, it had to fork over roughly $300 million in tariffs for the privilege of making clothes for Americans and selling them here. Agriculture and textiles are traditionally the first rungs on the trade ladder. Yet to protect labor unions and farmers in America and Europe, we destroy these opportunities with various domestic subsidies and import quotas.
This is an abomination, helping to keep countries poor and therefore more vulnerable to disasters like last weekend’s tsunamis than they would otherwise be.
Collin Levey writes Fridays for editorial pages of The Times. E-mail her at email@example.com