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June 10, 2005



PAUL GIGOT: Welcome to THE JOURNAL EDITORIAL REPORT. British Prime Minister Tony Blair came to Washington this week, hoping his strong support for President Bush on Iraq would pay off. Blair wanted help on his pet project: a massive increase in aid from rich nations to poor nations, particularly in Africa. He did not get what he wanted. The disagreement between the two men is about how to help. There is no dispute about the need.

The crisis can be summed up in two words: poverty and AIDS. Two hundred million Africans go hungry every day. Five hundred million live without access to clean water. Poverty also disables education, breeds crime, and denies health care. Twenty-eight million Africans are infected with HIV, including a million and a half children. Most of those infected can neither afford nor find medication or treatment. As a result, two million Africans will die of AIDS this year alone. Another million will die of Malaria.

Celebrities such as U2's lead singer Bono and actor Brad Pitt have tried to help focus world attention on the human misery by backing worldwide campaigns to encourage richer nations to boost aid. Bono, along with other rock stars, will launch a concert tour next month on behalf of more African aid. But whether because of corruption and inefficiency or too little money, the infusion of hundreds of billions of dollars in international aid so far have done little good.

Blair and Bush agreed this week on a plan that would cancel about 17 billion dollars in debt owed by 18 of the world's poorest countries. But Bush rejected Blair's proposal that the United States double the amount of money it sends to Africa -- an increase of at least five billion dollars. With me to discuss all this are: Dan Henninger, columnist and deputy editor of THE WALL STREET JOURNAL editorial board; Kim Strassel, a senior writer for the editorial page; and Bret Stephens, a member of the editorial board.

Bret, the world's attention really does seem to be focusing for a welcome change on Africa. And late this week, the U.S. and Britain did come to an agreement on a debt relief plan for Africa. Is this a step forward?

BRET STEPHENS: I think it is a step forward in the sense that the countries whose debt was forgiven this week were probably never going to repay the money anyway, so forgiving the debt does alleviate some of the burden that's on them. The real question is what we do going forward. We can repeat a cycle of handing out loans to these governments, loans to these countries, and see them in 10 or 15 years time becoming, again, highly-indebted, poor countries, more destitute than they were before, and going through the same thing at some point in the future. Or, we can change our approach to development and start focusing on the things that President Bush has been talking about -- good governance, rule of law, democracy, trade, free market, and above all property rights.

PAUL GIGOT: Well let's talk about that change of strategy, because one of the debates here is about loans versus performance grants. Grants are the thing that President Bush has wanted foreign aid to move to. What is he talking about when he says performance grants? And does this make sense?

KIM STRASSEL: Well I think there has always been a tendency toward loans in part because I think there's a sense of fairness. People say, well, you're getting this money, you should pay it back. But what we know, as Bret was just talking about, is that it tends to go down a rat hole. There's no accountability. The thing about performance grants is that they specifically ask for economic reforms, and also for government changes. And it gets to what Bret said, too: property rights, questions of taxation, civil society. And what they do is, they measure the progress. And the money is based on how well you comply with these specific criteria. And it's the best thing that we can do if we want to start setting the groundwork for how these countries are going to improve, going forward.

PAUL GIGOT: Now there are some examples, Dan, are there not, in Africa, of success stories? We describe the continent itself as just all a mess. But that's not true. There are real success stories, or countries that have made progress, countries like Botswana.

DAN HENNINGER: I think Botswana and Uganda are actually the only two countries that have had growth rates above three percent since 1980. So it's a fairly poor record, but you can slip this issue around a little bit and say, okay, perhaps these countries do start doing the right thing. Then, in what way do their economies function? What do they produce? And one of their most -- the thing which they have a comparative advantage in, is cotton. Well it's very difficult for them to sell cotton on the world market, because both the United States and Europe provide significant subsidies to their cotton growers and to their agricultural sectors. And so if they are not going to be allowed to compete on the things which they can do well, then they're not going to succeed no matter what they do to their economy.

PAUL GIGOT: Yeah, I think the line is, one thing statistically I've heard is that a European cow is subsidized to the tune of about two dollars a day, which is more than double the average African daily income. So these subsidies do make a big, big difference.

DAN HENNINGER: I think it's a moral issue, really. You can't complain about Africa the way the West does and whine about it, and then deprive them of the means to make a living that way.

KIM STRASSEL: President Museveni of Uganda wrote a piece for us several years ago, and he actually said it very plainly. He said, you rich countries have to make a choice. You either give us access to your markets or you acknowledge that you would prefer to keep us dependent on hand-outs.

BRET STEPHENS: Yeah, and I think it's important to stress how destructive aid often is in many of these countries. I mean, in a place like Tanzania, for example, shipments of American or European, Western food aid over the decades, had the effect of essentially destroying Tanzanian agriculture for a very simple, economic reason. Tanzanian farmers were trying to sell their product for a profit. We were shipping grain and rice and food for nothing. So obviously, the effect of it was to destroy Tanzanian agriculture. The same thing happened in the 1980s in Somalia, when the Italians started shipping pharmaceuticals for free to Somalia. It destroyed the indigenous Somali pharmaceutical industry. And you go through Africa, and really what you see is the trail of destruction left by Western largesse, which has denied Africans the ability to form their own economic bases.

PAUL GIGOT: But wait a minute, Bret. I take your point. Those examples are good ones. But there are cases, it seems to me, where aid can make a difference -- and I'm talking about infrastructure, for example. I hate that word, but what it means is, road and bridges in a place like Africa. Because you don't have, like you have in the United States, a lot of navigable rivers for helping in transportation and getting agricultural products from farm to market for example. You don't have that in Africa. You need to build roads. And the World Bank just criticized itself in a report for saying that it hadn't focused enough attention, enough money, on roads over the recent years on that kind of infrastructure, instead putting money into social services like education and health care. Obviously you have to do something on AIDS. But it's that development. Because you've got to have growth. If you don't have economic growth, these countries are never really going to get profitable.

KIM STRASSEL: But the precursor to all of that, though, is you have to have a country that is accountable enough to spend the money that you're giving them on the infrastructure that they're supposed to spend it on. I mean, the problem is that a lot of this aid goes to some dictator who shuffles it aside and gives it to his brother-in-law who runs a construction company, but nothing ever gets done. And the corruption aspect of this -- the countries that Dan pointed out who are success stories, one of the things they have in common is that they're democratic.

BRET STEPHENS: I think it is right. There are areas where we can target AIDS smartly and create infrastructure projects that really work for the country. Now those don't always work. You can build dams in places and you can electrify a countryside, but you're still electrifying shacks and people who live in poverty. I think you really have to go to the fundamentals. And the real fundamental here is private property.

From the 1960s onward, African countries were sold on policies of import substitution, they were sold on policies of central planning, they were sold on policies of socialism. And that's what destroyed the country.

PAUL GIGOT: What does import substitution mean, just for our viewers?

BRET STEPHENS: Well, important substitution means try to make it yourself. And sometimes that makes no sense, because you can import it much more cheaply. And it's this idea of creating a self-sustaining economy, and that's not connected to ...

DAN HENNINGER: Can incentives work? We have two good examples, Taiwan and South Korea, two countries which after World War II were flat on their back broke. They're great success stories today because they got the market incentives right. It can work.

PAUL GIGOT: In 1960, Asia as a continent had one-half of the per capita income of Africa. Now, of course, Asia as a whole has many times the per capita income of Africa, and a lot of that progress has been in two countries which 20, 30 years ago had the most of the world's poor: China and India. And they've made progress, not with AIDS, but with their own policies.

All right, that's the last word. Next subject.