Insanity is doing the same thing over and over, expecting a different result

Now that the Live 8 stage/soapbox has been taken down, we don’t need to pay any mind to the band of economists known as Green Day. The putative purpose of Live 8 was to – somehow – bring political pressure on the G8 group meeting in Scotland this week to forgive debt in Africa. Since the end of colonization, Africa has been on a yo-yo of foreign aid and debt that has stifled economic and political development. Finally, the conventional wisdom is forming that the cycle of dependency must be broken. Here’s John O’Sullivan with a powerful article titled “Anti-poverty campaign gets it almost all wrong”:

In short, [Make Poverty History] ignores almost all the valuable work done in development economics since the 1960s, which established that when private property is legally protected, pettifogging regulations reduced to a minimum, and producers allowed free access to domestic and foreign markets, the poor lift themselves up by their own bootstraps.

That anti-poverty campaigners should pass over these well-known findings is sinister rather than merely foolish because aid agencies benefit from having the poor not as active agents in their own success, but as grateful recipients of their largess. So they have an interest in keeping aid flowing and the poor dependent. Aid should be made conditional not merely on ending corruption in government, as Bush as rightly seen, but also on protecting the property rights of the poor, cutting the red tape that holds their "informal sector" businesses back, and going to local organizations rather than central government.

“Sinister” may be a bit strong, but the Economist echoes much of O’Sullivan’s argument and forcefully proposes that enhancing trade with Africa would work best to lift the continent out of poverty:

Givers of aid have (so far fruitlessly) sought ways to keep recipient governments on the straight and narrow. But even well-meaning governments need a helping hand in figuring out ways to maximise the poverty-fighting potential of economic growth. The World Bank report suggests that while growth alone is good, policies like trade liberalisation, as well as things like improving infrastructure and access to capital, can greatly boost the speed at which the lives of the poor improve.

We can’t keep throwing money at institutionalized poverty in Africa. Change must start with open trade policies to give African economies a chance for self-reliance.