The calamitious impact of foreign aid

The London Free Press
By Rory Leishman

In a candid address to the Parliament of Ghana last Saturday, United States President Barack Obama pointed out to the oppressed people of Africa: “Development depends on good government. This is the ingredient which has been missing in far too many places for far too long.”
With reference to the corrupt rule of Robert Mugabe, the longstanding Marxist dictator of Zimbabwe, Obama observed: “The West is not responsible for the destruction of the Zimbabwean economy over the last decade.”
Dambisa Moyo disagrees. She is a former consultant to the World Bank who was born and raised in Lusaka, Zambia, and holds an earned doctorate in economics from Oxford University. In her book, Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa, she persuasively argues that African dictators like Mugabe would not have been able to maintain their prolonged grip on power, if their grossly incompetent governments had not been propped up with hundreds of millions of dollars in foreign aid.
Altogether, the United States, Canada and other donor countries have handed out close to $1 trillion in foreign aid to Africa. Most of this well-meant assistance has been wasted. Moyo points out: “Africa’s real per capita income today is lower than in the 1970s, leaving many African countries at least as poor as they were 40 years ago.”
Half of the 700 million people living in Sub-Saharan Africa get by on less than a dollar a day. Life expectancy in the region averages only around 50 years.
Meanwhile, many less-developed countries on other continents have achieved rapid and sustained economic growth. China is a case in point. Despite having had a lower standard of living than most African countries just 30 years ago, China now has an annual income per person of close to $6,000: That’s more than three times greater than Ghana, Kenya and almost all other African countries.
Moyo asks: “Why is it that Africa, alone among the continents of the world seems to be locked into a cycle of dysfunction? Why is it that out of all the continents in the world Africa seems unable to convincingly get its foot on the economic ladder? … What is it about Africa that holds it back, that seems to render it incapable of joining the rest of the globe in the 21st century?”
She explains: “The answer has its roots in aid.”
Granted, not all foreign aid is bad. Moyo acknowledges that the equivalent of $100 billion in today’s funds which the United States dispensed under the Marshall Plan to the war-ravaged countries of Western Europe was hugely successful. Why, though, has almost $1 trillion in aid to Africa so failed to benefit the people of Africa?
Moyo argues that among many social, cultural and economic factors, one key element was that recipients of assistance under the Marshall Plan realized the program was only temporary. They knew they had better make good use of the aid, because they would soon have to get along without it.
In contrast, leaders in Africa have learned to look upon foreign aid as a permanent handout. Instead of using the assistance to promote self-sustaining economic growth, most African rulers have diverted the proceeds to enrich themselves and prop up their corrupt governments.
Obama told the Ghanaian parliamentarians that his administration will increase assistance to African countries that have established democracies, uphold the rule of law and are determined to curtail corruption.
Moyo thinks this approach is inadequate. She calls upon the United States, Canada and other donor countries to liberate Africa from a stifling dependence on foreign aid, by announcing their intention to phase out virtually all aid to Africa over the next five to 10 years.
Will leaders of the donor countries pay heed to this advice? Let us hope so. Moyo pointedly notes: “one would expect Western moralizers to adopt policies which help those in need rather than hinder them in the long run and keep them in a perilous state of economic despair.”

The sobering reality of immigration

The London Free Press
By Rory Leishman

As the baby-boom generation begins to retire, the ratio of Canadians over age 65 to those of working age (the old-age dependency ratio) is set to increase so rapidly that the costs of sustaining Canada’s retirees threaten to reduce the rate of growth in Canada’s national standard of living.
What can be done? Robin Banerjee and William Robson of the C. D. Howe Institute have addressed this issue in an illuminating report released on Thursday: “Faster, Younger, Richer? The Fond Hope and Sobering Reality of Immigration’s Impact on Canada’s Demographic and Economic Future.”
It might be supposed that immigration will offset the growing burden of Canada’s aging population. This year alone, Canada is expected to take in an additional 245,000 immigrants. With the exception of Australia, Canada maintains much the highest ratio of immigrants to population in the industrialized world.
Nonetheless, Banerjee and Robson estimate that even if the extraordinarily high current rate of net immigration into Canada is retained, the old-age dependency ratio will more than double to 46.3 per cent in 2057. That’s up from 21.5 per cent this year and less than 15 per cent in 1977.
Is even more immigration the answer? Definitely not. Banerjee and Robson project that if Parliament were to rely on an increase in the current pattern of immigration to stop population aging, Canada would have to take in such a colossal number of additional immigrants that the total national population would reach 210 million in 2058.
That’s out of the question. No conceivable amount of immigration can prevent a rapid and burdensome growth in the aging of Canada’s population.
An increase in the age of retirement would help. Most Canadians at age 70 are no less fit today than were most Canadian workers at age 65 a few decades ago.
Banerjee and Robson conclude that a gradual increase in the normal retirement to age 70 would significantly reduce the rise in the old-age dependency ratio; but only temporarily. It’s likely that within 15 years, the proportion of elderly dependants would resume a steadily upward trend.
There can be no lasting solution to the multiplying difficulties posed by Canada’s aging population short of dealing with the fundamental underlying problem – namely, the devastating collapse in the national fertility rate over the past 40 years. In 2005, the average number of children per woman in Canada was just 1.54 -- far below the ratio of 2.1 that is necessary to sustain the population.
Banerjee and Robson have considered the combined effects of a gradual increase in both the age of retirement to age 70 and the national fertility rate to 2.1. The results are encouraging: Other factors remaining the same, the old-age dependency ratio would remain well below 30 per cent.
Banerjee and Robson do not suggest how Parliament and the provincial legislatures might encourage a rise in the national fertility rate. However, at least one part of the solution is obvious: A major reduction in the catastrophic increase in abortions over the past 40 years.
According to Statistics Canada, there were 28.3 induced abortions for every 100 live births in Canada in 2005, down from a peak of 32.2 in 1998. While that slight downward trend is encouraging, it’s hardly sufficient.
Sooner or later, our politicians will have to take decisive action to curb abortion. Few reforms could do more to eliminate a huge amount of suffering and death.
Moreover, as Banerjee and Robson point out, boosting fertility rates could also play a key role in holding down the rate of increase in old-age dependency that threatens the economic prosperity of Canadians.

Correction: In “Ontario should continue to fight menace of marijuana” (Free Press, June 27), I attempted to summarize my findings from a review of the literature on the harm produced by the recreational use of cannabis with the assertion: “there is overwhelming scientific evidence that cannabis is no less dangerous to life and health than alcohol and tobacco.”
That statement is incorrect. I very much regret the error.