TAKING STOCK : Say no to aid The philosophy behind foreign aid is that developing countries, like India and Nepal, caught in the vicious circle of poverty (VCP), cannot escape from it without foreign money. Donors sending billions of dollars to developing countries maintain that the poor are trapped in their poverty and will never have enough to save to come out of their misery. Poverty thus is self-perpetuating and unless outside help is available poor will always be poor. Sounds plausible, however, it’s not true. Every country was once poorer than Nepal is today. The US, UK, Australia, and Japan were underdeveloped at one point of time. To say that what they achieved cannot be done by Nepal is an insult to its people. Human beings, be they in Nepal or elsewhere, have the means within themselves to progress. It is only animals who remain as they were back in the Stone Age. A bird’s nest, a tiger’s lair, and a bee-hive look the same as they did thousands of years ago. To imply that today’s poor will not progress without outside aid is to relegate them to the status of animals. It also flies in face of the existing evidence; Western countries and many in the third world have moved to prosperity without outside help. The late Lord Peter Bauer, arguably the world’s greatest development economist, who strongly influenced the former British prime minister, Margaret Thatcher, was totally opposed to foreign aid. Many called him an enemy of the world’s poor, but, in reality, he was their true friend. He maintained that the theory of VCP was simply untenable. Lord Bauer called aid as government to government money transfers which went from the poor of the developed world to the rich of the underdeveloped. Bauer emphasised that every country, which is rich today started off poor. He rejected the theory of VCP as utter nonsense and said “if the hypothesis were true, the world would still be in the Stone Age. Capital is the result of economic achievement not its precondition.” A country’s wealth is generated by a right mix of policies. Aid is not going to help, if you follow wealth-depleting policies. Let us not look at a single country but an entire continent. Africa has been, for decades, the principal recipient of foreign aid. Far from benefiting from this largesse, there is ample evidence to show that this flow of funds has been an unmitigated disaster for its people. This is what James S Shikwati of ‘Inter Region Economic Network’ in Kenya has to say: “Aid agencies with good intentions have sought to assist poor countries emerge from their sorry state. Sub-Sahara Africa alone received total aid of some $83 billion between 1980 and 1988. Yet all those funds failed to spur economic growth and arrest Africa’s economic atrophy.” The standard of living fell by 1.2 per cent a year during this period. During the 1965 — 1984 period, 18 black African countries had growth rates of less than one per cent per annum. The worst performers were Benin, Burkina Faso, Chad, Ghana, Liberia, Somalia, Sudan, Uganda and Zaire.” Aid is bad because it gives resources to government to pursue the populist policies, which impoverished the country in the first place. Aid allows third world governments to keep delaying urgently needed economic reforms so essential for wealth creation. Aid is bad because it promotes corruption. Money, more often than not, ends up in Swiss banks of rulers and the country is left to foot the bill. By, 1982, Zaire had a foreign debt of five billion dollars while, Mobutu Seko, its president, had acquired a personal fortune of four billion dollars. Aid is bad because it is frequently used to expand a country’s bureaucracy and officialdom, which represses the people even more. Bigger government invariably means more red tape, more rules and regulations, and higher taxes when it comes time to repay the aid. Aid is bad because it puts an end to the initiative, enterprise and creativity of people who now begin to depend on government handouts. Aid ends wealth creation like nothing else. Let us take the proud step of treating offers of foreign help with the disdain they deserve. Create the right environment with economic freedom and within a few years other nations might come seeking aid from Nepal. (The writer can be contacted at: everest@mos.com.np)