The Solution to Poverty in Africa

[ku]

It is widely believed that foreign aid to poor countries does little to help the actual citizens and instead end up in the hands of corrupt leaders. Is this a justification for removing this corrupt government by force?

 

It is suggested that the reason why those in power do not put effort into promoting economic growth is because there is little incentive to do so. Low economic growth may attract more foreign aid. Furthermore, too much economic growth may enpower other groups within the country that may challenge the government in power. A politician cares only about his own welfare and not that of "his people." The solution, therefore, is to make the politician's incentives in line with those of the citizens.

 

I believe that instead of dumping foreign aid into a poor country, that an efficiency wage is paid to the politician, that the amount the politician earns is directly related to the GDP growth rate of the country and the foreign aids goes directly into the hands of the politician in power. (Of course the GDP Growth rate is measured by independent auditors.) CEOs are paid huge amounts and their bonuses are linked to performance. The same should apply to those in charge of countries because operating a firm is exactly the same as operating a country.

[john5746]

CEOs are paid huge amounts and their bonuses are linked to performance. The same should apply to those in charge of countries because operating a firm is exactly the same as operating a country.

 

I hope not. CEOs primary goal is to increase the stock price for the shareholders. Many times, their pay is in the form company stock. Over and over again, we see layoffs and stupid merges that temporarily improve the bottom line and increase stock price, but do nothing for the long-term company health and hurting the employees. The CEO gets payed handsomely, then can parachute to another company and let someone figure out what to do with the company.

 

Not saying that layoffs aren't necessary, just that Presidents can't layoff citizens. Seeing the population improve should be its own reward, if they can't get leaders that think that way, I'm not sure they will ever get their head out of the dirt.

 

I think their "pay" should be tied to how much money goes to the population similar to charities. It gets difficult though, since not paying the leader also means the population doesn't get money also.

[In My Memory]

Ku,

 

It is suggested that the reason why those in power do not put effort into promoting economic growth is because there is little incentive to do so. Low economic growth may attract more foreign aid.

Absolutely wrong. Very wrong. Very very wrong. There is no excuse for blaming poverty on laziness.

 

Poverty is widespread because years ago (1800s through 1900s), industrialized nations used up the natural resources of these countries through predatory colonization - meaning they set up private investments and infrastructures that were so one-sided that the host countries never benefited. When there was no profit left to take, the private investors left, leaving behind a third-world nation

 

The reason many of these countries have never recovered is because they have been unable to participate in competitive market or international trade. You cannot have economic growth without anyone to trade with, so the obvious solution to poverty is to introduce third-world nations into the competitive world market.

 

There is plenty of incentive to promote economic growth: the threat of starvation. Hunger is torture, it is a terrible way to live and a very awful way to die. Being lazy with promise of a small amount of foreign aid is not an idea to entertain seriously in light of starvation. If these people were capable of promoting growth to end starvation, they would do so - but they cannot do that because they are unable to enter into the competitive market.

 

Your plan will not work because neither increasing nor decreasing foreign aid has anything to do with international trade or market competition, and no amount of foreign aid is enough to enrich a countries economy to make a country self-sustainable - specifically, foreign aid is not used by countries for economic consumption, but rather to help fight the spread of disease and increase education, so it isnt worth talking about third-world poverty and economy in terms of foreign aid in the first place. Adding to that, no amount of foreign aid will put third-world nations into the world marketplace.

 

 

Here is a better solution:

 

The first way to get third-world nations into the competitive market is to stop governments from granting agricultural subsidies to industrialized nations. There is no earthly way that African or Latin farmers can compete against the multinational corportations, and as long as governments keep giving subsidies to these corporations there will be widespread hunger and povery.

 

I'd also suggest doing many other things, like forgiving the past debt that these countries have owed (it would have a barely noticeable impact in the economy of any developed nations), and eliminate all protectionist policies in terms of trade with third-world nations.

 

There are a few risks involved, for instance we wouldnt want to see an African nation sustain itself through deforestation ( as no economy can be sustained by those means), and we also have to be very careful countries that manufacture things through sweatshops. (There are ways to prevent and counteract these problems, such as setting up tariffs against countries or corporations, but they often lead to terrible diplomacy problems.)

 

But, the benefits gained by introducing African nations to the competitve market are usually immediate, and increase exponentially with time:

- Povery decreases and hunger will decrease substantially

- As economic sustainability goes up, so does the incentive to educate citizens. It is a well-known fact that education and overpopulation are inversely proportional to one another. More education and less overpopulation are two good things for the price of none.

- More capital being traded means an overall increase in net worth of all the worlds economies.

[Thomas Kirby]

White man's definition of laziness: Failing to find work when there are a thousand applicants for every available job. I am a white man, too, more or less.

[Pangloss]

Good post IMM.

 

It's worth noting that both Bob Geldoff and Bono agree with IMM's post above. The primary intention of their recent efforts is to build a self-sustaining economic infrastruture in Africa. Put another way, "capitalism."

 

It's very revealing to watch what ideologues do when they set aside their ideologies to get something done. You can learn a lot about where the spin stops and the truth begins.

[Edisonian]

Many of the politicians there are too corrupt to trust them with that sort of proposal. Most importantly, it assumes that there are no real-world structural barriers to productivity.

 

IMM -- Very well said.

[Skye]

The first way to get third-world nations into the competitive market is to stop governments from granting agricultural subsidies to industrialized nations[/i']. There is no earthly way that African or Latin farmers can compete against the multinational corportations, and as long as governments keep giving subsidies to these corporations there will be widespread hunger and povery.

Actually I agree that the Africans can't compete with these large corporations, but I don't think they can regardless of the subsidies. What needs to happen is that African nations recognise the opportunity to make significant money from broadacre farming, especially when it comes to supplying out of season crops, and crops to some countries Asia which are rapidly becoming a net importer of grains, dairy and other. Large farms and co-operatives often fund the infrastructure needed to get their produce to distant markets, they can't operate by only supplying the local market so they are forced to. This is more important than people realise. Alot of people moan that the US could just feed Africa. Well I think Africa could feed Africa if the infrastructure to distribute the food was in place. If it's not, then we'll continue to have the local famines regardless of the amount of food produced in Africa, America or Antarctica.

I'd also suggest doing many other things, like forgiving the past debt that these countries have owed (it would have a barely noticeable impact in the economy of any developed nations)

I'd avoid this where possible. It creates a bad credit record, which will hang like a dark cloud over the country discouraging investment. Remember that after the recent tsunami India turned down offers to forgive its debts, largely because it didn't wish to affect its image as a growing economic power. It's pretty much equivalent to declaring bankruptcy, you only do it if you really need to.

and eliminate all protectionist policies in terms of trade with third-world nations.

That's a better idea than stopping subsidies. Subsidies will only reach a certain point because it costs the government money to pay them. At some point they are going to say no more. Tarriffs make money for the government, and so they can be set at any rate.

[Pangloss]

Actually I agree that the Africans can't compete with these large corporations, but I don't think they can regardless of the subsidies.

 

Isn't that what they said about China? What's the difference?

[Skye]

The difference that is evident now is probably due to the strong and stable government of China, that has consciously decided to pursue a rational economic policy with long term growth in mind, and had the power to do so, since Mao's death.

[ecoli]

The difference that is evident now is probably due to the strong and stable government of China, that has consciously decided to pursue a rational economic policy with long term growth in mind, and had the power to do so, since Mao's death.

 

Yeah, I was going to say that too. Where is the strong leadership in Africa, the last strong leader I remember hearing about was Nelson Mandella, and South Africa is one of the most developed African nations.

[Pangloss]

A number of governments in Africa are strong and stable, and have human rights records no worse than China's (not that that has anything to do with economic success, or so China keeps showing us).

 

I don't think there's any particular reason why Africa, even aside from South Africa, can't compete with China and, say, India, or SE Asia. It's just a matter of taking the appropriate measures to make that happen, something they have so far been unable to do, mainly due to corruption, so far as I can tell (in my limited experience with the subject).

 

I read somewhere that when Bush came into office the leadership of a number of African nations got together and declared that they hoped they would be getting some kind of Marshall Plan for Africa. In fact they've gotten something like the equivalent of four Marshal Plans from the US, and they've pissed away all of 'em, mainly into the pockets of corrupt leaders. This is why we were somewhat hesitent to pack in another wad when Geldof and Bono came around earlier in the year. But they're taking a new approach over there, so I guess we'll give it another shot. Sooner or later you'd think something would stick.