"HE IS THE MAN IN CHARGE of America's wallet, and I am looking to open it." So pronounced rock star Bono as he and Treasury Secretary Paul O'Neill embarked on a four-nation African "poverty tour."
Bono, a longtime activist for improved living conditions in Third World countries, presses First World countries -- especially the United States -- for debt relief in addition to further aid to Third World countries. O'Neill, a free-marketer, believes that corrupt Third World regimes steal the money or otherwise spend it improperly. O'Neill argues that prosperity depends upon capitalism, free markets and individual rights.
Decent roads, electricity and basic services -- supplied by the West -- says Bono, provide the base upon which a fair, just society stands. About their tour of South Africa, Ethiopia, Ghana and Uganda, Bono said, "We are driving down the streets and people are waving, people are jumping up and down, they are glad to see the United States. If this country doesn't get help . . . you come back in five years and they'll be throwing rocks at the bus."
Bono, like many spread-the-wealth-they-have-so-little-because-America-has-so-much types, leads with his heart, not his head. Throwing money at countries with failed leadership not only fails to change the underlying reasons for poverty, but also simply allows failed governments to remain in power. In 1993, the U.S. Agency for International Development said, "Much of the investment financed by USAID and other donors between 1960 and 1980 has disappeared without a trace." Five years ago, the Cato Institute's Doug Bandow wrote, "Since World War II, the United States alone has contributed more than $1 trillion (in 1997 dollars) in bilateral and multilateral assistance. . .
Many aid recipients have been losing ground economically. An amazing 70 (countries) are poorer than they were in 1980; 43 are worse off than they were in 1970."
In an article from The Wall Street Journal, George Melloan, deputy editor, international, wrote, "A study prepared by economist Peter Boone for the Centre for Economic Performance at the London School of Economics last year concluded that little correlation exists between the level of development aid to poor countries and changes in living standards. He discovered no sign that aid flows reduced infant mortality rates, which are perhaps the most basic measure of the welfare of impoverished populations. Indeed, he concluded that the principle effect of foreign aid seems to have been to raise the consumption levels of the richest members of poor countries' populations."
Bono urges a kind of Marshall Plan for Third World countries. But Cato's Bandow writes, "(The Marshall Plan) did not track with economic recovery. France, Germany and Italy began to grow before the onset of the Marshall Plan." Paul Hoffman, the architect of the Marshall Plan, later admitted that "the primary benefit was 'psychological.'"
What helps? Micro-loan programs. A micro-lender lends small amounts of money -- often under a hundred dollars -- to a well-chosen small businessperson. The recipient promises to repay the loan through proceeds with sales. The London Independent described how it works: "A typical borrower from his (micro-loan) bank would be a Bangladeshi woman who has never touched money before; all her life, her father and husband will have told her she is useless and a burden to the family; finally, widowed or divorced, she will have been forced to beg to feed her children. . . . She uses the loan to buy an asset which can immediately start paying income -- such as cotton to weave, or raw materials for bangles or a cow she can milk. She repays the loan in tiny weekly installments until she becomes self-sufficient. Then, if she wants, she can take out a new, larger loan. Either way, she is no longer poor." With a low default rate, the micro-loans create businesses and jobs, the kind of bottom-up development that makes sense.
What hurts? The recently passed protectionist American farm bill. Mark Ritchie, president of the Institute for Agriculture and Trade Policy said, "This farm bill, I think it's fair to say, will put millions of small farmers out of business in Africa. They will have to move to cities and become part of unemployed labor pools." The Los Angeles Times' Warren Veith wrote, "According to World Bank economists, cotton exporters in West and Central Africa would take in an additional $250 million a year if the U.S. stopped subsidizing domestic production."
While O'Neill talks the talk to Africans on the importance of free markets, President Bush, through the farm bill and tariffs on lumber and steel, walks the walk of protectionism. O'Neill once said, "Able-bodied adults should save enough on a regular basis so that they can provide for their own retirement and, for that matter, health and medical needs." Poor Mr. Secretary. He properly spoke to Africans about free trade. Will he offer the same lecture to the president?