No amount of foreign aid can offset corruption

The London Free Press
By Rory Leishman

Over the past 30 years, Angola has developed into one of the world’s major oil producers, yet it still ranks among the world’s most impoverished countries. What has gone wrong?
Paul Collier has addressed this issue in Plundered Planet: Why We Must – And How We Can – Manage Nature for Global Prosperity. As Professor of Economics and Director of the Centre for the Study of African Economies at Oxford University, he is widely regarded as one of the leading authorities on the intractable economic problems besetting the world’s least developed countries.
In Angola, most oil production is managed by four major players – ExxonMobil, Shell, BP and Total. Some critics might suppose that these conglomerates have somehow contrived to siphon off most of the country’s oil-export revenues, while leaving little for the government and the people of Angola, but that is simply not the case.
Foreign multinationals could easily plunder the natural resources of less developed countries during the colonial era. Today, these same companies and their successors are usually confronted by independent governments with ready access to an array of international banks and law firms that are eager to help auction off natural resources on the most favourable terms.
In this respect, Angola is typical. In the 1970s, the Angolan government established a national oil-company monopoly, Sonangol, with a mandate to manage the country’s oil resources and acquire a 51 per cent interest in the subsidiaries of every foreign oil company operating in Angola. Since then, Sonangol has garnered huge revenues. Collier notes that in 2008, Angola took in more than twice as much in oil revenues than all the foreign aid dispersed to the world’s least developed countries.
Nonetheless, the United Nations Human Development Report for 2009 lists Angola at 143rd in the world, just three levels higher than Bangladesh. Correspondingly, the Institute for Democracy in Africa reports that while Angola has a GDP per capita of about $4,400(US), “some 70 per cent of the population lives on less than a dollar a day.”
Clearly, some people in Angola are getting hugely rich from oil revenues while the majority of the population subsists in dire poverty. And the main reason for this tragedy is also evident: crooked government.
Most of the billions of dollars paid to Sonangol by ExxonMobil, BP and other foreign companies for the right to produce and export oil from Angola has ended up in the bank accounts of the country’s dictatorial President Jose Eduardo dos Santos and his military and government cronies.
The oppressed people of Angola have no choice but to put up with this transparent plundering of the nation’s oil wealth by the country’s own corrupt politicians and bureaucrats? Dos Santos will not brook any effective opposition. He assures that elections are fixed, the media are censored and public protests are severely curtailed.
A few years ago, some intrepid members of Angola’s generally tame Parliament used to denounce government corruption. But even most of this parliamentary opposition to the regime fell silent after dos Santos started paying members $10(US) for every favourable vote,.
Angola is not uniquely bad. Most other least developed countries are also are ridden with corruption. To combat this evil, former British prime minister Tony Blair began the Extractive Industries Transparency Initiative, an international organization that promotes the voluntary disclosure of the payment, receipt and management of revenues from the oil, gas and mining industries.
While most of the major multinationals in the West have agreed to go along with this initiative, Chinese companies have not. And neither has the government of Angola. In 2004, China’s Eximbank extended a $2 billion loan to Angola for the ostensible purpose of rebuilding the country’s infrastructure, but so far, most of this money has disappeared without a trace.
The sad conclusion is inescapable: Judging from experience in Angola and elsewhere, no amount of foreign aid or natural-resource revenues can eradicate poverty among the hundreds of millions of people trapped in countries, where corrupt rulers enrich themselves at the expense of their deeply impoverished fellow citizens.

Progress in reducing poverty in Canada

The London Free Press
By Rory Leishman

The Conference Board of Canada ranks Canada’s record on poverty as “among the worst of developed countries – and slipping.” That’s appalling, if true. But is it true?
Citing the low-income measure (LIM) of poverty used by the Organization for Economic Co-operation and Development (OECD), the Conference Board observes: “With more than 12 per cent of the working-age population living in poverty, Canada is in 15th place out of 17 countries, ahead of only Japan and the United States.”
Perhaps so, but these figures are misleading, inasmuch as they apply only to Canadians of working age. The OECD reports that for all age groups, Canada actually has a lower rate of overall poverty than Greece, Portugal, Spain, Poland, Korea, Ireland, Japan and the United States.
Besides, LIM is only a relative measure of poverty based on the supposition that a person is poor if he or she is living in a household with an income that is less than half of the average income for all households of similar size in the country. By the LIM measure of relative poverty, almost all impoverished people in Canada would rank among the wealthiest in most low-income countries.
Note also that by the LIM standard, many, if not most, medical students in Canada are impoverished, because they are living in households with below average incomes. Is it reasonable for the Conference Board to include these medical students and others like them with temporarily low incomes in an indictment of Canada’s poverty record?
Given the limitations of relative measures of poverty like the LIM or Low-Income Cutoffs (LICO) devised by Statistics Canada, Chris Sarlo, an economist at Nipissing University, has developed a poverty standard based on the number of people living in households with insufficient income to cover all basic needs including a nutritious diet, satisfactory housing, clothing, health care, public transportation, household insurance and telephone service.
Sarlo reports that by this basic-needs measure, 4.9 per cent of Canadians were living in poverty in the mid-2000s, down from 6.8 per cent 10 years earlier. Also, during this same period, Canada’s child poverty rate declined to 5.8 per cent, down from 9.1 per cent.
Clearly, Canada does not have an exceptionally bad and ever worsening poverty problem as contended by the Conference Board of Canada. Yet it is also evident that there are millions of impoverished people in Canada who struggle with not enough income to cover all basic needs.
What can be done to help these genuinely impoverished Canadians?
John Richards has addressed this issue in a report published last month by C. D. Howe Institute, “Reducing Lone-Parent Poverty: A Canadian Success Story.” He points out that provincial work incentives for employable welfare recipients initiated by the conservative governments of Alberta and Ontario in the 1990s have proven enormously successful in persuading and empowering millions of impoverished Canadians to move from chronic welfare dependency to productive employment.
As a result, even by Statistics Canada’s LICO measure of relative poverty, the proportion of impoverished Canadians living in lone-parent families was reduced to 20 per cent in 2007, down from 50 per cent in 1996.
Nonetheless, the poverty rate remains four time greater for lone-parent families than for two-parent families with children. This is one among many good reasons for the federal and provincial governments to encourage Canadian couples to get married and to stay married.
In the 1990s, the overwhelming majority of welfare dependants in Canada were employable adults. In Ontario and some other provinces, most are now classified as unemployable “persons with disabilities.”
Richard explains: “A high-profile category is the urban homeless, most of whom combine mental illness with abuse of drugs or alcohol.” Many of these poor are victims of the cruel policy adopted by the provinces in the 1970s of deinstitutionalizing psychiatric patients without providing them with adequate support in the community.
Alleviating the misery of these neediest of impoverished Canadians will not be easy or inexpensive, but should get top priority in Canada’s ongoing struggle against the evils of real poverty.