Saturday, February 05, 2005

The Wealth of Nations

Given the fuss and show-boating at the G7 summit, Niall Ferguson has an apt piece in the Telegraph, Africa doesn't need handouts: it needs honest governments:

The trouble is that what both Blair and Brown are proposing are mere variations on an old, familiar theme known as "aid". (As Mr Brown's advisers well know, there is no real difference between "debt forgiveness" and handing poor countries a large, gift-wrapped cheque.) But we have been here before. Between 1950 and 1995, Western countries gave away around $1 trillion (in 1985 prices) in aid to poorer countries. But these efforts yielded pitiful results, as New York University economist Bill Easterly has shown, because the recipient countries lacked the political, legal and financial institutions necessary for the money to be used productively

It is probably cliched, but definitely accurate to say that if we don't learn the lessons of history, we are bound to repeat them. The interesting thing is that the timescale of democratic elections promotes a short-termism that inhibits this learning process.
History has shown that political stability and institutions with certain characteristics are necessary for economic growth and health. Placating ill-informed leftist lobbyists, unfortunately, does very little to help the people in question.
Good intentions are not enough - we need better institutions to channel the self-interest of those in power toward more useful ends. Or, and my preference given that such institutional arrangements are extremely rare, we need to decrease the amount of power available, and compartmentalise it.

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