Trade More than Aid

The recent G-8 meeting in Scotland, as well as concerts and celebrity activism, has put a spotlight on the amount of international assistance reaching the countries and peoples of Africa. This is understandable in light of the continent’s persistent poverty, seemingly endless conflicts, and the prevalence of HIV-AIDS and other infectious diseases. If properly targeted and conditioned on reforms, international aid can make a positive difference.

But aid is no panacea. The fact that so many problems persist despite tens of billions of dollars of assistance and years of effort is a sad reminder that aid can allow governments to undertake foolish investments that accomplish little, or can easily be siphoned off by corrupt officials. Moreover, aid is inherently uncertain, leaving Africans at the mercy of outside forces beyond their control.

Another problem with the emphasis on aid (in addition to the near impossibility of accurately measuring the scale of the flows from all sources) is that the political effort to increase it absorbs attention that would be better spent on a more powerful instrument of economic development: trade.

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