More Aid? Sounds Great; But Wait...
In the wake of Sept. 11, rich countries are being exhorted to spend more money on foreign aid. If income inequality has spawned terrorist movements, the thinking goes, then rich countries should shell out more to make the world safer. But enormous sums of aid for development have already been wasted over past decades. And different countries have different needs: Afghanistan's request for peacekeeping forces is a far cry from Argentina's entreaty for a financial bailout.</br></br>Easy as it might be to succumb to the cheap grace of writing checks, the Bush administration is proposing a more thoughtful approach to foreign aid. Its goals, to emphasize quality over quantity and to focus on measurable results, will no doubt antagonize the United Nations, the World Bank and the International Monetary Fund, who prefer to help the world by soliciting more funds for their own budgets. Under the Bush plan, recipient nations will be asked to assume greater responsibility for their own economic decisions. Call it the tough love approach to global development.</br></br>One of the first steps is recognizing that economic growth must begin in the soil of basic security and the rule of law. In countries besieged by war and political instability, few have the luxury of focusing on improving their own prospects. "I receive daily delegations from all over Afghanistan," notes Afghanistan's interim leader, Hamid Karzai. "They all ask for security and peace more than education, health and development." Financial assistance that fights crime and promotes a functioning legal system is money well spent. But it can only succeed where a nation is committed to transparency and good governance.</br></br>Helping improve nations' productivity is another area where foreign assistance can help. Access to health care and education allows individuals to become contributors to the global economy rather than be left behind or remain perpetual burdens. Enrolling girls in school can literally double the potential work force. Likewise, money to provide vaccinations against infectious diseases or prevent the spread of AIDS not only relieves human misery, but changes the social and economic dynamics of stricken nations. In South Africa, the "AIDS tax" (the epidemic's cost) on business is as high as 10% per year.</br></br>Still, as nice as it all sounds, humanitarian aid to improve peoples' lives and give them the chance to be productive is an empty victory without opportunities for nations to capture the rewards of upgraded skills and lift themselves out of poverty. And much of that responsibility falls to local governments. No one is indifferent to scenes of desperate people in Argentina being injured or killed in riots caused by money meltdown and financial chaos. But as Treasury Secretary Paul O'Neill points out, Argentine officials received some $60 billion in emergency assistance from the IMF and other sources, yet "they just didn't reform." It is irresponsible to continue giving money to a government that violates the most basic commitment to its citizens.