Special Report

The Poor’s Mosquito Net

Wealthy governments have poured hundreds of billions of dollars into the developing world. The results are pathetic.

By 6.16.05

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NIAS ISLAND, INDONESIA --The flotsam of disaster was everywhere: trash, bricks, splintered wood, household effects, clothes, debris. Buildings by the ocean were mostly leveled. Across the road several structures survived, barely: only their side walls, perpendicular to the water, still stood. Plastic sheets replaced missing walls.

Known for its idyllic surfing, Indonesia's Nias Island suffered from the December 26 tsunami even before the more recent, devastating earthquake. The island's losses -- hundreds of dead, thousands of homeless -- were small compared to the casualties on much larger Sumatra Island next door. But the human suffering was the same.

International assistance largely passed by Nias. The hotels in Sumatra's Medan, a short hop away from devastated Banda Aceh, were full of aid workers from a dozen nations and scores of agencies, public and private. Traffic into Gunung Sitoli on Nias was much less.

But small private organizations stepped in to meet what were still very real, public needs. Shortly after the tsunami Jim Jacobson, president of Christian Freedom International, a lean humanitarian group based in Front Royal, Virginia, made the lengthy trip to Nias, an overwhelmingly Christian island in an equally overwhelmingly Muslim country.

CFI had to surmount the administrative challenge of transporting donated goods to a distant, rugged island, and then on to a disaster area on the west coast separated from east coast air and port facilities by a crude road. Nearly impassable to anything other than a four-wheel drive vehicle, the 80 kilometer drive took four hours.

The recent earthquake, damaging Binaka airport and destroying homes, businesses, and other buildings all over the island, attracted more international attention, but has simultaneously made the challenge even greater. In response, CFI is drawing on surplus goods collected earlier while stepping up collection of medicine, tools, blankets, clothing, and other items -- even children's toys.

Multiple disasters afflicting Southeast Asia have brought the problem of international poverty to the fore. Indeed, the tsunami triggered a competition among governments over aid promises. Here, as elsewhere, politicians used public funds to bid for international favor.

Assuming the money is used well, there seems little harm in a charitable competition to help people in need. But too often government-to-government aid is not used well. Indeed, the last half century has seen wealthy nations pour hundreds of billions of dollars into the developing world with little positive result. Much of the money has been stolen. Even more has been wasted.

Little has been used to promote long-term productive economic growth. More often than not politicians have established prestige projects, such as capital cities, national airlines, and heavy industries. State companies have been used to promote full employment; borrowers and lenders alike have favored creating new roads and buildings rather than repairing old ones.

Even more important, absent market reforms, economies won't develop. Prosperity and growth correlate with economic liberty, nothing else. Not aid levels, not resource endowments, not population densities. Giving money to incompetent socialist politicians benefits no one.

Worse, transfers often have hindered reform by relieving the price of economic failure. Ruling regimes routinely use foreign aid to remain in power even as they impoverish their peoples. A similar problem is evident today in Iran, as abundant oil revenues have discouraged the government from bargaining away its apparent nuclear weapons program for economic aid from the West.

Over the years the awful record of official assistance has become undeniable. Multilateral development banks, such as the International Monetary Fund, now attempt to justify their activities as market reforms.

Yet the illusion that government-to-government aid can create prosperity persists. Jeffrey Sachs, who is leading the U.N. Millennium Project, proposes spending about $200 billion annually on a grand new initiative.

World central economic planning is to succeed where national central economic planning has failed. Sachs believes that if he can cover the developing world with mosquito nets, malaria will be conquered. Give him enough fertilizer and the fields will bloom; enough drugs and disease will disappear. "We are in a position to end extreme poverty within our generation," he confidently proclaims.

Alas, though Sachs is bright and dedicated, his rhetoric harkens back to the 1970s, when Robert McNamara ruined the World Bank by vastly increasing loans with no concern as to whether or not the money was used well. As a result, scores of poor states ran up huge debts while ending up poorer than they had been at the start. Indeed, real per capita GDP in Sub-Saharan Africa was lower in 2000 than in 1970.

Calculating the theoretical number of mosquito nets necessary to protect every poor person is easy. The real challenge is getting the nets into people's hands and getting people to use them properly.

The illusion that increased foreign transfers can buy development is reemerging. Foreign ministers of the Group of Seven wealthiest states have proposed writing off Third World debts -- while extending new loans. The Blair government in Great Britain is pushing to double official aid.

Although the Bush Administration has refused to back Tony Blair's proposal for a $50 billion bond issue to provide a new source of international assistance, the President, too, has bought into the misbegotten notion that more aid is better. The administration wants to reward its allies in Iraq, such as Poland and Ukraine, with tens of millions in aid. The administration would provide $200 million to the new Palestinian Authority, even though past monies have been looted by the leadership and paid to the families of suicide bombers.

President Bush also has proposed to up contributions to the World Bank's International Development Association and double funds for the U.S. Millennium Challenge Account. Even the conservative Heritage Foundation, once a scourge of foreign aid waste, now is pushing Congress to dump more taxpayer resources into assistance programs, on the theory that aid officials will do better this time. Never mind that Third World governments haven't used all the aid that was approved last year; Congress should give the MCA another $3 billion. (The President initially wanted to spend $5 billion next year.)

Still, a world in need remains. There is no easy answer, though globalization probably offers the greatest hope. Western investment and trade have helped lift hundreds of millions of people out of poverty in China and India. Even the poorest states, such as Bangladesh, have found a glimmer of hope through export trades, such as textiles. The toughest jobs in that industry offer better opportunities than those available elsewhere.

The nations hardest-hit by the tsunami pay more annually in Western import duties -- roughly $2 billion by Indonesia, India, Sri Lanka, and Thailand last year, for instance -- than they recently received in aid. Thus, eliminating Western protectionist barriers is the surest method of aiding growth abroad.

Foreign assistance can help, but it needs to operate as aid rather than as hindrance. That is most likely to occur with private programs. Although totals are hard to come by, the U.S. Agency for International Development estimated $33.6 billion in private outlays in 2000.

When the UN's relief coordinator Jan Egeland accused the U.S. of being "stingy" after the tsunami, he was thinking only of official transfers. Yet Americans had privately contributed even more than their government.

Private aid shows up in many forms. Some monies run through large charitable groups. The Red Cross, Catholic Relief Services, Doctors Without Borders, Oxfam America, Save the Children, World Relief, and CARE all raised tens of millions of dollars in the aftermath of the tsunami. Many such organizations support ongoing development projects around the world.

Big foundations and companies also contribute. The Gates Foundation supports extensive AIDS treatment programs throughout Africa and recently announced a $750 million grant to increase access of poor children to vaccines.

The pharmaceutical giant Merck works with the Gates Foundation, providing pharmaceuticals for AIDS treatment in Botswana. Pfizer, an even bigger drugmaker, donated $25 million worth of medicine and $10 million in cash to aid tsunami victims in Southeast Asia.

Proctor & Gamble has developed the PuR Water Purifier which makes contaminated water drinkable. (Each powder-filled packet cleans 2.5 gallons of water.) The purifier is useful most anywhere in the developing world, but especially in disaster areas. P&G has worked with non-governmental organizations and faith-based groups, such as Franklin Graham's Samaritan's Purse, to distribute its product at cost. In the aftermath of the tsunami the company donated millions of packets and made millions more inexpensively available, providing enough purifiers to clean more than 150 million liters of drinking water.

But size is not everything. Most nimble and creative are small organizations like CFI. Devoted to saving individual lives rather than entire societies, CFI collected materials for Nias before large organizations were even thinking about the island.

CFI runs orphanages and schools for ethnic Karen refugees from Burma (or Myanmar) now living in Thai refugee camps. The group also builds simple clinics, termed "freedom hospitals," and trains medics to work inside Burma, where the Burmese military routinely destroys villages and terrorizes residents.

In the aftermath of extensive Muslim-Christian violence in Indonesia's Moluccan islands, CFI provided aid to refugees in camps on nearby islands. And the organization is currently raising funds to create a training center for handicapped (often blind) Christian converts in the largely Islamic nation of Bangladesh. They suffer what amounts to a dual disability, ensuring that they endure both public and private hostility.

The world is simultaneously awash in opportunity and tragedy. Those of us who possess much have moral responsibilities to those who possess little. But massive new international schemes incorporating vast new resource transfers are a discredited throwback to the past rather than a sophisticated vision for the future.

The best, most creative and efficacious aid is privately conceived, raised, and provided. The poor will always be with us. But people willing to give both generously and thoughtfully can reduce the number of the poor in the future.

Doug Bandow is a Senior Fellow at the Cato Institute. Co-editor of Perpetuating Poverty: The World Bank, the IMF, and the Developing World, he is a member of the Coalition for a Realistic Foreign Policy.

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About the Author
Doug Bandow is a senior fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is the author and editor of several books, including The Politics of Plunder: Misgovernment in Washington (Transaction).