Why Third World aid is no solution for poverty

Following John Blundell s Capitalist Manifesto Against UK Poverty last week, he now puts his analysis of the cure for Third World Poverty

I USED to find that if I expressed misgivings about Third World Aid I was regarded as hard hearted. How could I be so insensitive?. Let me be blunt and not so much hard hearted as hard headed and clear eyed. The bulk of overseas aid, official or voluntary, is positively harmful. This is offensive both to common sense and to our charitable instincts. Surely, we think, the word and the thing are the same. Aid sounds kindly and benevolent. How can aid not help? Politicians jostle to show their compassion with our money.

Hilary Benn MP now carries the flame previously carried by Clare Short. He has an entire Department of State. I do not denigrate either him or his colleagues personally. They have simply not understood the subtle nature of the gross problems we lump together as Third World Poverty.

The late Professor Peter Bauer made a lifetime’s study of aid and concluded in all but a tiny proportion of cases it was always pernicious. Yes, it damages those in the recipient nations. He came up with the penetrating formula: “Aid is the process by which the poor in rich countries subsidise the rich in poor countries.” He means most of the aid billions goes to the governments of the Third World or their agencies. Whole societies that once traded become politicised and militarised as those in power will do anything to stay in office and keep the gravy coming.

Aid, then, is mostly a lubricant for the planet’s greater tyrants, bullies and thieves. It may be argued that Robert Mugabe’s Zimbabwe is too easy a target but at least we can all agree by any measure the economy of this well-endowed place has been destroyed by its leaders. It is not a few hundred white farmers who have been degraded. Everyone, save a small cadre around the presidency, is starving or fleeing. What is Mugabe’s main source of income? Tobacco, maize, or lignite? No it is aid, much of it not with the faintly sanctimonious glow of UK official gifting but from Libya and China. Zimbabwe’s Torture State is only sustained by subsidies.

I am not arguing that the methods of appraising projects be beefed up and the more vicious regimes abandoned. Tweaking aid programmes may make some marginal differences but much of it will still end up in the Swiss bank accounts of kleptocrats. We know from our own welfare state that making people dependent on aid is not the best hand-up. Hand-outs are not hand-ups.

The misery territories – most of Latin America, almost all of Africa and too much of Asia – lack the subtle but essential tools to nourish prosperity. They lack what we regard as assumed. They do not have the rule of law. In its absence, markets cannot evolve. We can resolve disputes. Contracts are honoured. If they fail we have recourse. We may all groan at the ability of lawyers to make disputes complex and expensive but basically we trust our law givers.

In the lands we define as needing aid you will observe nobody has recourse against the corrupt or thieving agencies of their governments. Do you suppose the citizens of Equatorial Guinea, Haiti or Myanmar can be assured of simple civil rights we take for granted? Every reader of The Business owns property, either real estate or paper claims to pensions or shares. The tissue of these relationships compose our prosperity. Third Worlders have no such discernible property rights. Many even do not own their own labour. They are effectively serfs – or slaves.

Hernando de Soto, the noted Peruvian economist, has blazed a trail criticising the processes by which the poor remained dispossessed – precisely because they are denied possession. Hundreds of millions farm on land which they do not own. This means they cannot trade it or bequeath it. They cannot borrow against it