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February 07, 2005

Comments

Brian

1. Trade Justice, 2. Drop the Dept and 3. More and better aid

I generally agree with you on trade justice. For over a century, trade between the West and Africa has been a one way street.

I assume #2 means drop the debt. I wholeheartedly support that. Simply put, much of the loans were given to bad regimes as a result of political influence of large donors. For example, by the 80s, no sane banker using normal financial criteria would've lent a dime to Mobutu's Zaire. But he was an anti-communist so western regimes made sure he got to fill up his Swiss bank accounts.

I say: erase all developing debt... BUT require that FUTURE loans be contingent upon democracy, good governance, respect for property rights, etc. Or at the very least that the money be demonstrably used for its stated purpose. If they don't like the conditions, they don't have to accept the money.

As for more and better aid, I wholeheartedly believe we have to figure out the better aid part before we worry about the more aid part. Bad aid only discredits the whole concept of aid.

"The best use of foreign aid is in responding to crises and dealing with health pandemics."

I completely disagree. The best use of foreign aid is in preventing crises and health pandemics in the first place.

And excellent example is how last year about this time, intl organizations warned of a possible locust infestation of West Africa and requested money for insectide and other preventive measures. They got practically nothing. Then when the infestation happened, there was a brief rush to throw money at the problem. Except the damage had already been done. You talk about stability and economic development. Sure it would be better for those things to avoid health and political crises altogether rather than responding to them.

Frank McGahon

Brian, can you explain the difference between "more aid" and "debt writeoff" to me? because I fail to see the distinction. If I owe the bank $50,000 (let's say it wasn't my fault but was due to the financial recklessness of my parents). My situation is precisely the same whether a generous donor gives me $50,000 or the bank writes off the loan. How is it ok to do the latter and not the former?

I generally agree with you on trade justice. For over a century, trade between the West and Africa has been a one way street.

Yes, but you should be careful with your imprecise language here. This is popularly taken to mean that "the West", overall, "benefits" from this "one way trade". This is a mistaken mercantilist assumption. In fact, it is only a tiny minority of rich producers who benefit, millions of consumers don't benefit (their disadvantage is dispersed and thus less noticeable). Comparative advantage tells us that freer trade benefits both parties.

Brian

"Brian, can you explain the difference between "more aid" and "debt writeoff" to me?"

Sure. Debt writeoff is indeed a form of aid... provided the country is meeting its debt obligations. They would be different in the case of a country like Argentina which has defaulted or not made debt payments.

However, a difference is that debt cancellation not only be annuling the amount of principle owed, but it would pre-empt future interest payments as well.

I've actually argued that debt cancellation should be made conditional upon demonstrable proof that freed up monies would actually be used for expressed purposes.

For example, all countries would received a write off of, say, 1/3 of the debt. If a country could demonstrate that there was an increase in spending on, for example, education and health care equivalent to the amount that was written off, then it would get another 1/3 written off. And then if that continued, the final 1/3 would be erased.

I would actually consider that a better alternative than a blanket write off. Because once that extra money was actually spent on helping the people, there would be the expectation that it continue that would outlast donor pressure.

Brian

"This is popularly taken to mean that "the West", overall, "benefits" from this "one way trade". This is a mistaken mercantilist assumption"

So the ordinary Frenchman didn't benefit from the cheaper oil that resulted from Elf's involvement/meddling in Gabon?

Brian

Trust me, I've had this debate more than once with my 'anti-globalization' progressive friends. They claim to be in solidarity with the peoples of the Third World, though it comes across more as a transparent psychological tool to suck up to me because they know I care about Africa. Yet they advocate the maintenance of subsidies to support the American farmer. Subsidies which hurt farmers in Africa.

Frank McGahon

Brian, I don't know enough about Elf in Gabon to comment, but I fail to see anyone's interest in selling oil at a below-market rate. My point is that tarrifs, subsidies and quotas force consumers in the developed world to pay far more to producers in the developed world than they would otherwise pay to producers in the developing world.

eoin

"My point is that tarrifs, subsidies and quotas force consumers in the developed world to pay far more to producers in the developed world than they would otherwise pay to producers in the developing world."

Wrong Frank. In general - with some exceptions like sugar - agricultural subsidies and quotas force consumers in the developed world to pay far more to producers in the developed world than they would otherwise pay to producers in the developed world. It seems everyone makes that mistake and I have to go around crazy libertarian blogs correcting it.

( BTW, even if this fertile and politically stable Island could source all it's foodstuffs from periodically fertile, unstable, climatically irregular sub-Saharan Africa - well even then, we shouldn't: as some crazy African dictator may pull the plug on exports. We would then be reduced to eating software. Comparative advantage that!)

Frank McGahon

Eoin, you reveal that your grasp of logic is as tenuous as your grasp on economics. The statements:

1. "tarrifs, subsidies and quotas force consumers in the developed world to pay far more to producers in the developed world than they would otherwise pay to producers in the developing world"

and

2. "agricultural subsidies and quotas force consumers in the developed world to pay far more to producers in the developed world than they would otherwise pay to producers in the developed world"

are not mutually exclusive. For the sake of argument it doesn't really matter all that much where the best-value-producer of product X will be found under free trade. What matters is that free trade will find it.

I'll also note that you are treading a very fine line with that crass comment about "crazy African dictators" and point out that your "nightmare scenario" is absurd - it is utterly impossible for one country to corner the market in all vital foodstuffs and remind you that few oil-producing nations are paragons of stability, yet, miraculously, the income generated by selling oil has incentivised them to keep producing the stuff.

Charlie

I think that at this time the only effective cultural and political changes that are supported from outside of Africa are privately funded ones. Of course even these require a willingness from African peoples. Change comes from within, and its African peoples that want it, not the Governments. This difference in will is emphasized by the fact that whereas African people benefit from private investment (albeit where Governments permit), it is African Governments that benefit from Debt write offs and Loans.

It is totally ludicrous that Gordon Brown and co. can endorse debt write offs and not even pay reference to the IMF and world bank loans that are being made as we speak. If these international bodies are to have any function it should be to offer aid in return for a coherent agenda of reform, supervised by member states. If they can't agree on reform agendas they are better off done at the national level.

By far the most important measure, as Frank highlights succinctly, is free market based trade reforms. ie, The developed nations on the economic right practicing what they preach. That might stop them, and Capitalism, getting such a bad name.

I have been considering a private approach for positive cultural reform. A philanthropic method if you will. Tackling starvation, AIDS, poverty and even education are the numerous existing charities well established in Africa - Oxfam, Christian Aid etc. There impact is significant and their programs save lives and create livelyhoods but fail to tackle problems at a cultural level. In my opinion, the occasions cultural transformation projects have been attempted have often caused more problems than they have solved: witness the misguided theological offerings of Christians, witness AIDS/Catholicism & contraception debacle.

Now I recognise that there are certain concepts not well founded in a lot of African culture - property rights are a good example. Now rather than trying to push some Western Laissez Faire theory from a Western perspective onto the continent, (theory that even a substantial proportion of the United States or UK do not understand or accept), it strikes me as better to take some of the best elements from the relevant African cultures and develop them into their own unique perspectives on liberty and democracy. Right down to the extent of using their language, investing money in local development in parallel and using remigration strategies so its not whitey saving the day. In a nutshell giving them the self-confidence and pride to develop and sustain long term solutions and ultimately responsible governance. Give a man a fish and he'll eat for a day, teach him how to fish he'll eat for the rest of his life. Give a man some values and he start teaching himself.

I hope these comments aren't too long - I've throughly enjoyed reading the contents of this blog. Good stuff Frank.

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