Western vanities that do little to help the world’s poor; Bill Gates overstates foreign aid’s contribution to the poorest regions, says William Easterly

January 24, 2014 7:10 pm

Western vanities that do little to help the world’s poor

By William Easterly

Bill Gates overstates foreign aid’s contribution to the poorest regions, says William Easterly

Bill Gates said last week that the world is better than it has ever been. Contentment may come easily to the richest man on earth. Yet the object of his satisfaction was not his own billionaire’s lot, but the improving prospects of the planet’s poorest people.

Mr Gates has spent the past 13 years giving away a large part of the fortune he amassed as co-founder of Microsoft. In that time, the foundation whose chairmanship he shares with his wife Melinda has made grants amounting to almost $30bn. In a letter published last week, Mr and Mrs Gates attacked the defeatist attitude that sometimes surrounds discussions concerning global development.

As they rightly insist, incredible progress has been made in the past 35 years towards the eradication of hunger and premature death. This refutes the dogma that poor countries are doomed to stay poor, that foreign aid is all wasted, and that saving lives inevitably leads to the misery of overpopulation. These myths, they say, threaten to hold back the poor by persuading humanity that deprivation is an evil with which people must learn to live, when in fact it is a blight that can be eradicated.

But Mr and Mrs Gates promulgate myths of their own. They overstate the contribution that foreign aid makes to economic progress in the world’s poorest regions. And they exaggerate the role played by philanthropists and politicians. These misconceptions, too, are pernicious, for they focus attention on development programmes that spread a costly misunderstanding on how poverty really ends.

Begin with the role of leaders. Mr Gates says there has been much progress, but that “we’ll need to apply human ingenuity and act on our compassion” to keep it going. Conversely, he equates the idea that “the world is getting worse” to the idea that “we can’t solve extreme poverty and disease”. For Mr Gates, apparently, much depends on what “we” do. But who are “we”, and who put us in charge? Mr Gates seems to have in mind the global elite whose most prominent representatives were this week assembled in Davos: political leaders, business executives, philanthropists, academics and functionaries from international institutions such as the World Bank.

Yet the progress that Mr Gates celebrates began long before this club appointed itself troubleshooter of the world’s problems, and before the advent of organised foreign aid. Consider the case of public health. In the rich countries of today, life expectancy has been rising and infant mortality falling at least since 1900. Poor countries began seeing similar advances shortly after the second world war. While there is still great global inequality on health outcomes, sickness is declining in almost all countries, regardless of how they are governed and how much foreign aid they receive.

This revolution is a story of many actors rather than conspicuous heroes, as Angus Deaton explains in his superb book The Great Escape. The germ theory of disease led to more effective efforts to clear up the water supply, and spurred the invention of drugs such as penicillin. Improvements in transport spread knowledge, medicine and equipment more quickly. Educated parents practised better hygiene and knew how to get medicines for their sick children. Money was only a small part of the story. Ghana at the turn of the millennium was a far poorer country than the US at the beginning of the second world war. Yet it had reduced its infant mortality rate to a similar level.

The contribution made by philanthropists and politicians should not be overplayed. Yet, if aid is a feeble instrument of economic progress, it is nonetheless a powerful tool of self-aggrandisement for the western elite. “We” are important because we are the rich people giving aid, the political leaders of the poor countries that receive it and the experts who broker the exchange.

True, some aid programmes have targeted sickness with triumphant success. Mass vaccination campaigns kept millions of children from dying of measles and smallpox. Unicef promoted oral rehydration therapy to fight diarrhoeal diseases that used to cause far more deaths. But even if health aid has been a success, it does not follow that most progress on health is due to aid.

In other important areas, international assistance programmes have a patchy record. As Mr Gates himself acknowledges, there is no definitive proof that aid stimulates the economic growth necessary to lift people out of poverty.

Mr Gates is right that the world’s rich should do more to support public health programmes that work. He is right, too, to decry the time wasted arguing over whether aid works. But the reason he gives – that the argument should concentrate on how to make aid work better – is the wrong one. Aid spending is a drop in the ocean of the budgets of the governments that give it and the economies of the countries that receive it. Whether it works scarcely matters for development.

The obsession with international aid is a rich-world vanity that exaggerates the importance of western elites. It is comforting to imagine that benevolent leaders advised by wise experts could make the poor world rich. But this is a condescending fantasy.

The progress that Mr Gates celebrates is the work of entrepreneurs, inventors, traders, investors, activists – not to mention ordinary people of commitment and ingenuity striving for a better life. Davos Man may not be ready to acknowledge that he does not hold the fate of humanity in his gilded hands. But that need not stop the rest of us.

The writer is author of the forthcoming book ‘The Tyranny of Experts’


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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