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July 12, 2005

Timmy Elsewhere

A piece up at Techcentralstation. On that report from the Hudson people on how much private aid US citizens give over and above what the Government spends. Jim and Owen will no doubt be happy to know that I do say that remittances are arguable (the piece was written before their comments here.) It was also written before Jim drew my attention to this piece, which puts private donations by US citizens as second highest in the world proportionately (after Ireland. All those missionaries perhaps?).

Owen should also like the argument about subsidy of medical research. It is taken, in its argument at least, from his own thoughts.

Also, from Jim’s paper:

“If Rich Countries Just Doubled their Aid, Poor Countries Could Develop Quickly.”
No. Initiating and sustaining growth and development depends primarily on the actions of citizens and leaders of developing counties themselves. The key ingredients for sustained growth and poverty reduction are economic and political stability, investments in health and education, strong institutions for good governance, and establishing an environment for a robust and competitive private sector.

If you actually want to know what is at the heart of the disagreements that various of us seem to be having over aid it is there, in that quotation. I am insisting that when doling out the aid (and we are talking about development aid, not emergency or food) we must insist on the local government persuing those policies which establish an environment for a robust and competetive private sector. Liberalization, privatization, competition in telecoms, no tariffs on, at the very least, telecoms, computers, communications, capital goods etc. Even more basic things, like a decent land registry, simple commercial law, an absence of intrusive licencing requirements. In my opinion, without these there will never be that strong private sector necessary.

And yes, we must use the leverage of our money to force the current rent seekers to give way.

Others call this neo-colonialism. OK, I don’t care what you call it, just want it to happen.

July 12, 2005 in Techcentralstation | Permalink


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"If you actually want to know what is at the heart of the disagreements that various of us seem to be having over aid it is there, in that quotation"

But that quote doesn't actually support your "Liberalization, privatization" agenda. It doesn't contradict it either, but you're just reading into it what you want it to say. They're talking about reasonable governance and strong private and public sectors being important to government, and you're interpreting this as "we must insist on privatisation and trade liberalisation as a condition for aid!", which completely misses the point.

I see your TCS piece repeats the same dodgy mistakes as your ASI post, including the bit about private investment being aid - you might want to read the section of that Radelet article you're so fond of headed "Private Investment and Other Financial Flows to Developing Countries in the 1990s Offset the Decline in Aid? Think again.”

There's another flaw I forgot to mention earlier. How do you know there's no double-counting there? Seems to me there's bound to be, as, for example many corporations would channel their donations through the work of foundations and not-for-profits. But of course that doesn't matter if the point is to inflate private charity in order to undermine the case for state aid ...

Posted by: Jim | Jul 12, 2005 10:30:29 PM

There is so much wrong in your TechCentral piece that it is hard to know where to begin.

  • You have uncritically used the figures made up by the Hudson Institute, which are wrong for the reasons given in the comments section on your earlier post.
  • As my figures show, even including US private giving, and excluding the private giving by all other countries, the US total of private and public giving still puts it about half way down the list of industrialised countries. Generous it is not.
  • On R&D, I'm afraid you've missed my point (or perhaps I did not make it clearly enough). When drugs are sold in developing countries at lower prices than in the US, that isn't US consumers subsidising poor consumers. If anything, it is arguably the opposite: poor consumers paying something - even if only a little - towards the cost of drugs mainly used by Americans.
  • It is not at all clear that aid given privately is as effective than government aid, whatever your prejudices about the general effectiveness of government. Government aid has lower overhead costs and benefits from significant returns to scale; and, frankly, is less suceptible to capture. Which is not to say that private giving is bad: but it is unlikely to better than official assistance.
  • We should focus as much on the quality of aid and not just the volume. The US scores pretty badly if you adjust its aid for quality.
    • Posted by: Owen Barder | Jul 13, 2005 12:31:02 AM

      I've nothing against competition. But I don't understand this dogmatic insistence on privatisation. Change of ownership does not imply competition. One can easily imagine a situation where a developing country government is "persuaded" to sell off public utilities and infrastructure to "efficient" western companies that then simply exploit the natural monopoly. Introducing effective competition to utilities has proved a tricky task even in the context of developed economies, and has required the establishment of high powered regulators. Something hardly likely to be done easily in poor countries. An alternative route is to improve the quality of the public sector and its management, possibly using aid as leverage for reforms to improve governance systems. This does not preclude introducing competition and scope for "exit" where possible. A blanket insistence on privatisation is not only bad politics, but its not even good economics.

      Posted by: rjw | Jul 13, 2005 12:23:06 PM