In The Tanks - Alvaro Vargas Llosa on MDGs

Alvaro Vargas Llosa has a few choice words for the MDGs and he makes a number of valid points:

Foreign aid was invented in 1948 with President Truman’s Four Point Program. In almost six decades, some 2.3 trillion dollars have been dished out worldwide to poor countries by rich ones—about half the cost of World War II! In that time, not a single country has significantly reduced poverty as a result of foreign aid.

If we examine U.S. foreign aid in the last decade, we find that there is no relation between these transfers and the reduction of poverty. In Egypt, extreme poverty as a percentage of the population has remained the same despite the money given to that country, the second biggest beneficiary of U.S. largesse. China, while receiving two thousand times less aid than Egypt, reduced extreme poverty by half. Bolivia, one of the eleven biggest recipients of U.S. assistance, has managed to double the percentage of people living in extreme poverty.

As much as I love to knock the effectiveness of foreign aid I am curious if he is including the Marshall Plan in that 2.3 trillion dollars and if he thinks that it did not work. Let's forget this and move on to the trade not aid part of his argument which is much more persuasive:

One wonders why a learned man like Jeffrey Sachs, who until a few years ago advised poor countries to open their economies, is today the intellectual force behind the Millennium Development Goals approach. He is pushing rich countries to devote 0.7 percent of their GDP to foreign aid. He argues the figure is not arbitrary because it would take 0.6 percent of their GDP to give one dollar every day to the more than one billion destitute people worldwide. But, as economist Surjit Bhalla has responded, if you take into account the fact that one dollar will buy you different amounts of goods and services in different countries, in terms of purchasing power, foreign aid already adds up to twice the amount needed to give one dollar a day to every destitute person!

In fact, aid to the least developed countries has consistently gone up in absolute terms. In the last fifteen years, the U.S. has doubled the aid given to those nations. The United Kingdom has almost tripled it. Australia, Germany, the Netherlands, and Spain have expanded theirs by between 50 and 60 percent.

Foreign aid has become a propaganda tool. It does not have as much to do with alleviating poverty as with blaming rich countries for being rich. It is interesting to note that the U.N. report includes detailed lists of how much aid each donor country is giving but not of how much aid each recipient country is getting. In other words, the donors, rather than the beneficiaries, are accountable for the money!

It is no surprise extreme poverty will not be halved by 2015. It is only because of China and India, two countries that have been opening up their economies, that extreme poverty has been somewhat reduced in total numbers since 1990. In Sub-Saharan Africa, where a large portion of foreign aid is destined, extreme poverty has actually risen by two percentage points; in Latin America it has declined by just over one percent!

Very few countries in Sub-Saharan Africa have engaged in major reform; and in Latin America, reform has been half-hearted or misguided compared to reform in Central Europe or Eastern Asia.