IS AID A VIABLE LONG TERM SOLUTION?

In today's party leader debate in the Swedish parliament Lars Leijonborg (Liberal Party) and Peter Eriksson (Green Party) threw punches at each other over who were the most generous with foreign aid - an important fight to win perhaps, with the tsunami disaster fresh in the voters's minds. And indeed - emergency aid for catastrophes such as the one in South East Asia are of great importance. And there's no doubt that those of us who are fortunate enough to live in the richer parts of the world should help fighting poverty. The question is if substantially increased foreign aid is an effective way of doing that.

I think not, and for a couple of reasons - some mentioned in this article by Martin Wolf published in the Financial Times yesterday. In it he points out four problems with the increased aid policy advocated by Jeffrey Sachs in his UN report on the subject.

Firstly Mr Wolf points out that the countries furthest behind would need to change their domestic policies so greatly that forcing such changes with requirements for providing the aid is virtually undoable. Secondly he wonders where all the teachers, doctors, engineers and so forth that these aid programmes rely on will come from. They don't exist now, and surely it would take quite a while to educate them all. Third, how should we decide how much to spend on each individual country. Should we prioritize those countries with the highest potential (to get quick results) or those with the biggest issues? Fourth, he asks where the incentives for achieving these economical and social goals are?

All of these are valid points, and though the specifically target the UN programme outlined in the Sachs report, I think they can be applied generally.

So what should we do? As PJ Anders Linder points out free markets and technological developement are the strongest forces for leaving poverty behind. The truth is that the things needed most for these countries are things they have to do themselves (and that's easier said than done, considering the lack of democratic government that ails the region). They need to strengthen property rights, implement the rule of law, liberalize labour and capital markets and so forth.

There are important things for the rich world to do too, though. More important than directly funneling money to the developing countries is giving their citizens access to our big markets. Simply put, removing tariffs and stop subsidizing our own industries. That would bring way more capital to the poor than aid ever will.

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