Michael Fry: Time to draw a line under this economic folly

History proves the countries which prosper are not the ones receiving endless bounty in the shape of foreign aid

IN THE decades since the West started programmes of aid to the Third World, the money has made little difference. Sub-Saharan Africa, on which we have concentrated most of our efforts, remains miserable, starving, barbarous: a Heart of Darkness, much as Joseph Conrad described it a century ago.

Meanwhile, however, there are parts of the Third World which have overcome their worst problems and embarked on a path of steady, self-sustaining growth. It may, within the lifetimes of people already born, conceivably bring them up to western standards of prosperity and wellbeing. China and India are the best examples, but we might point to a good many others.

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What is the key difference between these two models of development?

In the one, development is supposed to be borne along on the back of transfers of money from rich countries to poor countries. Yet that is somehow not what happens. The cash flows, yet the expected results do not follow. The resources are spent by the western agencies involved or by the recipient governments but the toiling peasants and their hungry wives and children, let alone their parched plots of land and skinny livestock, are not the ones that see the benefits. Those benefits may instead be traced in the Swiss bank accounts of the African political class or indeed among the administrators of the aid, living high on the hog in some tropical capital.

In the alternative model of development there may be no net transfers from rich countries to poor countries. On the contrary, India and China and others now transfer their capital to us in the West, investing in financial markets and buying up industries which they run better than we can. At the same time their domestic economies continue to boom. The impetus for that came not from western aid but from themselves. They conducted long socialist experiments which in the end failed, as all socialist experiments fail. Instead they opted for capitalism, for pulling themselves up by their own bootstraps. Now, not through aid but through their own efforts, they have left the other developing countries far behind and aspire to match the West.

The difference between these two models of development is what lies beneath the spat over aid inside the British government, between the Prime Minister, David Cameron, and his Secretary for Defence, Liam Fox. Cameron, perhaps from personal conviction but certainly to help in keeping restless Lib Dems onside, supports aid at its present levels, and to make it 0.7 per cent of gross national income. Fox, incensed at a waste of the money he is being forced to chop from his own budget, sees no good reason why aid should be exempted from the cuts being inflicted on all other heads of public spending.

If there were any justice in politics, it is a spat Fox ought to win. Overseas aid does, of course, include some humanitarian projects which may commend them to the normal charitable instincts of British voters. But detailed scrutiny of the total transfers to the Third World is unlikely to convince anybody that the money we send is going to the most deserving places or to the most worthy purposes.

The biggest beneficiary of British aid is Pakistan, which has descended perilously close to being a failed state, its economy struggling, its politics in confusion, its government feeble. There being no prospect of things improving soon, we presumably give it so much money because we fear it might be taken over by terrorists.

But the giving of the money never stopped Osama bin Laden finding refuge on Pakistani territory, under circumstances in which it is impossible to believe powerful local people did not collude: that is why the Americans omitted to consult their supposed allies when they went in to kill him.

So far as British policy is concerned, it seems lost in the same confusion here as in the rest of the Islamic world. Basically we have no idea what to do about the Islamic world, so we throw money at it in the hope that might do something to solve the problems. It will do nothing except make a few corrupt Pakistanis a great deal richer.

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The second biggest beneficiary of British aid is Ethiopia. Here it is possible to accept a genuine humanitarian case. Ethiopia was one of the countries unlucky enough to fall under Communist dictatorship in the last quarter of the 20th century, and a very brutal, incompetent dictatorship it was too.

While the president ordered massacres of street kids in the capital Addis Ababa, in the outlying parts of the country millions of people died in famines. That did not stop the resources being found for a war against Eritrea. After such a woeful history, it seems impossible to refuse aid.

A further point in its favour is that for Ethiopia we have no ulterior political motives: we just wish its government to hold together enough to prevent its people starving.

No such justification can be offered in the case of the third highest beneficiary of British aid, India. Why do we need to send money to fuel one of the world's great economic miracles? While our own economy falters or even goes into decline, the Indian one is forecast to grow by 8 per cent this year (a rate we last saw here in the eighteenth century). Perhaps the Indians should start sending aid to us. In fact they do, for example in the investments of the Mittal family or in the many more modest Indians who come over to do jobs that British workers cannot or will not do (nowadays quite a long list). All are testimony to the fact that India requires no more aid from us or any western country.It might be interesting if the dispute between Cameron and Fox called forth from the Prime Minister some general statement of his philosophy of aid, seeing how incoherent it appears under any closer examination: it would challenge even his genius for obfuscation. But I suppose Fox will just lose out, and the folly will continue.