Bill and Melinda Gates have released their annual letter on what's going on with their Foundation, global poverty and aid. And they quite rightly point out that things are indeed getting better.

However, this is not the same thing as stating that it is aid that is making things better. As Bill Easterly points out:

The obsession with international aid is a rich-world vanity that exaggerates the importance of western elites. It is comforting to imagine that benevolent leaders advised by wise experts could make the poor world rich. But this is a condescending fantasy. The progress that Mr Gates celebrates is the work of entrepreneurs, inventors, traders, investors, activists – not to mention ordinary people of commitment and ingenuity striving for a better life. Davos Man may not be ready to acknowledge that he does not hold the fate of humanity in his gilded hands. But that need not stop the rest of us.

There are undoubted successes stemming from aid budgets: vaccination programs or the spread of oral rehydration therapy for example. These have certainly been funded by aid: but we should also note that our own societies managed very much the same things without aid from abroad to pay for them. So while aid may indeed have paid for them that's not the same as stating that aid is necessary for them to have happened.

But Easterly's larger point is that aid flows are of such tiny amounts in comparison with the global economy that they cannot in fact explain that marvellous reduction in poverty. Over the decades there's been very little aid to places such as China, Taiwan, S. Korea, the places where the battle against poverty is being so conclusively won for example. What has actually worked is that these places have become part of the global economy rather than languishing in purist localism.

Or, as we like to say here at the ASI, I contribute to making poor people richer by buying things made by poor people in poor countries.

Aid's all very well but trade is the name of the game.