If nothing else, yesterday's Live8 event offers the occasion to reflect yet more on the role of trade policy in advancing, or inhibiting, the cause of human welfare. In case you haven't been paying attention, the goal of the global -- read North American and European -- music event is to get you to visit the Live8 website and photographically sign a petition to the G8, calling on them to reform their ways with respect to economy policy toward Africa:
8 world leaders, gathered in Scotland for the G8 summit, will be presented with a workable plan to double aid, drop the debt and make the trade laws fair. If these 8 men agree, then we will become the generation that made poverty history.
Would you believe that not everyone is so sure about that? Don Boudreaux suggests that Spain's history (as in the 16th and 17th centuries) may contain lessons for those who see more foreign aid and debt relief to Africa as key to Africa`s escape from poverty:
Debt relief certainly didn't`t work for Spain.
... transforming resources into desirable goods and services requires productive creativity and productive effort. These, in turn, are unleashed (and properly channeled) only by a system of secure and exchangeable private property rights defined and enforced under a strong rule of law.
Meanwhile, The Liberal Order reminds us that the track record of economic aid is not, shall we say, spotless:
In one of the most extensive studies on the effect of providing foreign aid on economic growth in developing countries, [William] Easterly finds no overall positive effect, including instances where aid is provided to developing countries with favorable institutions.
Here's a particularly interesting picture from the Easterly paper:
To be fair, the Live8 organizers don't want just more aid to Africa, but better aid...
However, without far-reaching changes in how aid is delivered, it won't achieve maximum benefits. Aid needs to focus better on poor people's needs. This means more aid being spent on areas such as basic health care and education.
... and there is evidence, not surprisingly, that not all assistance is futile. Again from Easterly:
Indeed, in some cases foreign aid has been strikingly successful. For example, the World Bank’s $70 million loan to the Ceara state government in the Brazilian northeast concluded in June 2001. The loan facilitated innovative government-led initiatives in land reform, rural electrification and water supply and a fall in infant mortality. There are countrywide success stories like Uganda, with heavy involvement by the World Bank and other aid agencies. Earlier success stories associated with aid included South Korea and Taiwan. There are also sectoral success stories, like the elimination of smallpox, the near elimination of river blindness, family planning and the general rise in life expectancy and fall in infant mortality, in which foreign assistance played some role.
But the Live8 crowd wants to bundle things up with this...
[Aid] should no longer be conditional on recipients promising economic change like privatising or deregulating their services...
... and the seemingly inevitable call for "trade justice":
Three main bodies combine to write the rules of trade:
World Trade Organisation (WTO)
World Bank
International Monetary Fund (IMF)
All three are dominated by the world's richest nations.
Between them, they're forcing poor countries to open up their markets to foreign imports and businesses, and sell off public services like electricity - even when this isn't in their interest. They're also banning poor countries from supporting vulnerable farmers and industries, while wealthy nations continue to support their own.
Oh-oh. The Live8 group appears to be all for developed countries importing from developing countries, but adamantly opposed to trade flowing in the opposite direction. Mercantilism as the path to economic well-being? And the presumption that government direction of resources is the key to economic development? Let's call that one questionable.
Besides, there is scant evidence that conditionality is even consistently enforced, let alone the problem. Back to Easterly:
... the fundamental problem remains that both the success of past aid to follow conditions and the failure of past aid to follow conditions are both taken as justifications for future aid. For example, in 2002, a World Bank task force made recommendations on how to direct aid to states convulsed by predatory autocrats and corruption (the World Bank euphemism was “low income countries under stress”). In other words, a nation will selectively receive aid if it is a “good performer”— unless it is a bad performer, in which case it will receive aid from the “bad performer” fund. In these circumstances, the imposition of conditions is no more than a wistful hope, rather than a policy with consequences.
In the end, perhaps the Africans themselves have the better handle on what Africa really needs. Here is a thoroughly unscientific snapshot from the Christian Science Monitor (hat tip, Mark Thoma):
Should strings be attached to Western aid:
Africans: 8 of 8 said yes.
Concertgoers: 3 of 8 said yes.
What can the west do to help Africa most?
Africans:
• Educate us and "stop selling weapons to African countries."
• Help end Africa's wars
• Give aid that is "better organized and more carefully watched."
• Create "programs that can help with things like AIDS."
• Open up trade.
It was a fine hootenanny, though.
Personal note: This post is for Tianna.
UPDATE: More from Easterly, via Liberal Order. And if you feel like you might want to spend a good part of your day absorbing blogger-chatter on the Live8 soiree, Pajama Hadin has the links for you.