Common Error No. 97


97. "We must increase the foreign aid we give if less developed countries are to escape from poverty."

Foreign aid does not lift countries out of poverty; trade does. No poor country has ever become rich from foreign aid, and no poor country which has become rich achieved it without trade. The notion that poor countries will become richer by a more equal sharing of the world's wealth is wrong; they will become richer by creating additional wealth for themselves, just as the rich ones did.

It's all very well for people in rich countries to feel good by increasing foreign aid perhaps from 1 percent to 2 percent, but it will make negligible difference. If they at the same time ban the import of goods from poorer countries or impose punitive tariffs on them, they are preventing people in those countries from pursuing the surest path out of poverty.

The EU waxes pious about the few crumbs of foreign aid it hands out, and then sets tariffs against the goods the poorer countries produce in order to protect its own producers. Its Common Agricultural Policy is little short of criminal, subsidizing its domestic agriculture so foreigners can't compete, them dumping surplus goods onto world markets so they can't sell there either.

Humanitarian aid to combat disease and starvation and to bring relief after natural disasters is a good thing which we perhaps could and should do more of. But development aid is not. Instead we should open our markets to their produce and buy as much as we can. With the money that trade brings they will be able to invest more in developing and upgrading their industries.

Many once poor nations are now set on the upward path that trade makes possible. On our part we can buy their stuff and switch our own economies to produce different things. This, not aid, will help them out of poverty.