foreign aid: does it hurt more than it helps?

Massive amounts of aid in the form of free food have been going to Ethiopia since famine was first reported in the Western press, and we were in Lalibela the day one of the monthly shipments arrived. People from all over the countryside came into town on their donkeys -- well, not into town, but near it. The poorer you are, the more food you get, and no one wanted to show off his possessions, so everyone parked his donkeys about three kilometers from town and walked the rest of the way. There were hundreds of donkeys around, waiting on the edge of town, and hundreds of people in the center of town, waiting for the food trucks to arrive. With their arrival, fifty-kilogram sacks of wheat stenciled with the name of the contributing country -- some from the United States, some from Germany on this occasion -- were distributed.

While this was going on, glorious, lush fields all around Lalibela lay fallow because nobody farmed them anymore. An entire generation of Ethiopians has grown up without learning how to farm. Instead, to put food on the table, they go to town every month, park the donkey, and collect grain. Some recipients, the day we were in Lalibela, carried their ration of wheat directly over to the town market and started selling it. And so, in addition to that generation that has never learned how to farm, there is a generation of farmers who have simply stopped farming because they can no longer sell the fruits of their labor -- there is no way to compete with free grain.

Jim Rogers, Adventure Capitalist

At the turn of the millennium, retired investor Jim Rogers took a trip around the world with his fiancee. What he saw, particularly in Africa, was distressing:

Throughout the continent there are huge markets where on can find bundle upon bundle of T-shirts spread out for sale, donated by places such as the YMCA of Cleveland and the First Baptist Church of Charlotte. These and clothing of all kinds are given as donations in the United States destined for the poor of Africa, but by the time they reach the continent, they are sold as a commercial product. Not only do they enrich the entrepreneurs involved in the traffic, they also put local tailors out of business. The tailors cannot compete, nor can the people who weave cloth, spin yarn, or grow cotton, the people whose costs the tailor incurs. In Africa you used to see tailors everywhere. You would see them by the side of the road with their sewing machines. Now you see them only rarely. How can any of them compete with a product that the entrepreneur gets virtually free?

Has well-intentioned foreign aid hurt the people it was meant to help? Is Africa worse off today than it was before the West began sending massive amounts of goods in their direction?

But it gets worse. Non-government organizations (NGOs) have raised billions of dollars to send representatives to Africa to make their expertise freely available to the locals. But this form of "aid" may be the worst:

The Bangladesh International Network (BIAN), while we were there, filed suit against UNICEF, WHO, the World Bank, the Islamic Development Bank, NGO Forum, and other groups that were responsible for funding the sinking of wells contaminated by arsenic and other poisons. ... As a local newspaper reported, "The short and long term effect of arsenic poisoning is lethal. Research has proved beyond doubt that the source of arsenic poisoning is the shallow tube wells from which ninety-seven percent of the rural population receives its drinking water. People are drinking poisonous water every day from shallow tube wells while policymakers and their implementing agencies continue to sink these. While World Bank's own figures claim 20 million people are currently at risk and 75 million are potentially at risk of arsenic poisoning from tube wells, donors continue funding to sink tube wells."

Rather than stop digging wells, international agencies were conducting the Third International Symposium on Reducing the Impact of Toxic Chemicals on Bengal Basin's Economies -- the third -- in the midst of what may be the largest mass poisoning in history.

If all this is true, is there anything we can do to fix the problem? Rogers has the outline of a solution:

Forgive all the debt. Right now. African countries, combined, owe some $350 billion plus in foreign debt, according to the International Monetary Fund. While no one really expects these countries to pay back that debt, they are still required to finance it, making annual payments on the loans. If we assume the interest on the loans to be 8 percent, it means that African countries must collectively pay $26 billion a year in interest. That does not include principal payments. If we assume principal payments to be another 2 to 3 percent, annual payments to finance the debt total over $30 billion. Once the debt is forgiven, Africa's leaders will have an additional $30 billion annually that can be put to productive use, plus no debt hanging over them. Call the $350 billion reparation for supposed past sins, if it makes you feel better.

This much has been suggested before, by charitable organizations and even some western governments.

However, part of the deal would be no more foreign aid.

The effects would undoubtedly be profound. Africa would be left to survive on its own. The people of Africa, no longer relying on handouts, would learn to fend for themselves. The Ethiopian teenagers I met who had never learned how to farm would have to take up the plow. The madmen fighting on the Horn of Africa would stop receiving arms from around the world. Nigerian leaders would no longer be able to walk into banks and walk out with sacks of U.S. dollars. Those who run Mozambique would no longer be able to solicit flood relief money with which to line their coffers. The IMF and World Bank would go bankrupt, and local NGOs would be forced out of business.

Would it work? I don't know how this last part could possibly be enforced. But enabling Africans to solve their own problems is the only way to solve them.

More than eight hundred years ago, Moses Maimonides wrote that the best type of charity was to help people become more self-sufficient. When will today's advanced societies learn this lesson?