The Munk Debates Read online

  This involves an exercise of collective will to put in place the preventative strategies, to put in place the reactive strategies, to put in place the helicopters that are needed in Darfur. These things do make a difference. In the end, it’s about more than national interest, though of course national interest matters, and we’ve tried to explain on our side how national interest factors in.

  But it can’t just be a debate about that. It has to be, as Mia has said so well, about our common humanity, and about our obligation simply as human beings not to stand by and watch our fellow human beings suffer unutterable, unbearable horrors. That is our obligation as international citizens. That is why we have to do everything within our capacity to get these situations right, to prevent them, and to react to them when they occur. That’s why it’s so important for countries like Canada to maintain the finest traditions of peacekeeping that have made Canada such stars in the international community.

  rule

  SUMMARY: Bolton and Hillier must have been convincing, as the pre-debate vote was 77 percent in favour of the resolution, 23 percent against with the post-debate vote shifting to 68 percent in favour and 32 percent against.

  FOREIGN AID

  Be it resolved foreign aid does more harm than good.

  * * *

  Pro: Dambisa Moyo and Hernando de Soto

  Con: Paul Collier and Stephen Lewis

  June 1, 2009

  FOREIGN AID

  INTRODUCTION: The June 2009 Munk Debate asked whether, in trying to do good, well-intentioned people in the developed world are actually making matters worse for people who live in developing economies. The debate resolution was as follows: Be it resolved foreign aid does more harm than good. The panel of experts assembled included the Zambian author of the controversial book Dead Aid, Dambisa Moyo; Peruvian economist, author, and President of the Institute for Liberty and Democracy [ILD], Hernando de Soto; Canadian politician, activist, and co-founder of AIDS-Free World, Stephen Lewis; and British author and Professor of Economics at Oxford University, Paul Collier.

  Moyo and de Soto argued the pro side while Collier and Lewis took on the con arguments. Both Moyo and de Soto wasted no time in pointing out that the two anti-aid debaters were from the developing world, whereas those convinced the trodden path — which has obviously not worked on all fronts — was the one to continue along were from the West. De Soto focused on the importance of property rights in helping individuals — and nations — gain financial ground and stability. Moyo said that treating Africans and others in developing countries like children was what kept them living in poverty in the first place and only served to perpetuate an already vicious cycle.

  Much of the evening’s debate pivoted around the arguments in Moyo’s book — released just before the event and the subject of many headlines and editorials. And while everyone agreed that the risk of aid money being stolen by dictators and rogue leaders or otherwise going astray was always present, Lewis and Collier felt that eradicating malaria, AIDS, and other diseases was too great a necessity to ignore and that therefore aid had to continue, regardless of potential corruption. De Soto stressed that all four of the debaters believed in helping the developing world, but that it was a question of doing so effectively. He also reminded the audience that immediate aid in a crisis (such as an earthquake or tsunami) was a very different thing from continually flooding money into various global hot spots.

  * * *

  RUDYARD GRIFFITHS: I’m going to ask Stephen Lewis to begin.

  STEPHEN LEWIS: Thank you, Rudyard, and fellow colleagues on this debating panel. This morning, Dambisa Moyo and I did a dry run for this debate on The Current, on CBC Radio. It was pointed in places, but effortlessly congenial. The simple truth is that Dambisa Moyo has written a book called Dead Aid that frames this debate. The book raises a number of interesting issues. I disagree with much of it. I find many of the statistics suspect and at times misleading. But I have none of the jugular instincts that some of her more frenzied detractors have displayed.

  Aid to Africa has been wantonly abused over the decades. It has sustained countless despots of the most hideous variety. It has been an engine for corruption, although no more an engine than private capital. It has also been used by international financial institutions — under the guise of structural adjustment programs — to do great damage to Africa’s social sectors. But there’s an important distinction to be made. All of this says nothing about the intrinsic nature of aid itself. It says everything about donor governments, multinational corporations, and the World Bank and the International Monetary Fund [IMF], who were perfectly content to use aid in the most manipulative and destructive ways imaginable. It takes two to orchestrate dictators, corruption, and Reaganomics. In those particulars, there is some agreement.

  What Dambisa Moyo’s book fails to acknowledge, I say respectfully, is the huge impact aid has had on the humanitarian imperative. Millions of people living with HIV/AIDS wouldn’t be alive today without aid money for anti-retroviral drugs; millions of children have been immunized against fatal diseases; over 30 million additional African children are in schools since the year 2000; there has been a modest reduction in extreme poverty, from 58 percent to 51 percent, between 1999 and 2007; 12 million orphans have been given food; and malaria death rates have been cut in half in countries like Rwanda and Ethiopia over the course of two years because of insecticide-treated bed nets. I could go on ad infinitum. These are examples of aid, aid that gets to the grassroots, aid that transforms open communities. It is no small matter, it is no Band-Aid. And, of course, aid does much more.

  Dambisa Moyo makes the point that Botswana is the best example of an African government that is democratic in character. The Botswanan government uses a modern approach that is a mix of investment and free markets to build a strong economy. But what she doesn’t mention is that Botswana has diamonds. And what is also not said is that, a few years ago, Botswana had the highest prevalence rate of HIV/AIDS in the world — almost 40 percent of the population between the ages of 15 and 49 are infected. The former President of Botswana, Festus Gontebanye Mogae, actually used the word “extinction” when talking about the future of Botswana. What saved Botswana? Aid. What made it possible for Botswana to transition to a vibrant mixed economy? Aid. In the last decade, aid to Africa and elsewhere has become much more focused, monitored, and intelligently applied.

  Oddly enough, Dambisa Moyo’s book feels curiously out of date. She remains unhappy and unrepentantly suspicious of aid playing any useful role, urgently looking forward to the day when it is removed from the agenda. So her book contains a number of alternative prescriptions that we’ll discuss during this debate. Dambisa Moyo suggests that African governments should raise money by issuing bonds on the capital market. I ask: What markets? A year ago, perhaps this would have been a good prescription. Now, hardly a chance. Capitalism has proved itself a touch quixotic — not to say mean, brutish, and ugly. Dambisa Moyo suggests Africa secure foreign direct investment [FDI]. But it’s not available. Try as Africa might, secure foreign direct investment has never been available. Africa’s share of world FDI is now one percent. And it is not for lack of trying. The countries are too small, the regional groupings ineffectual, the sense of risk overwhelming.

  Dambisa Moyo says trade is the answer. Who can disagree? But the current trade negotiation round of the World Trade Organization [WTO] — the Doha Development Agenda [DDA] — is in collapse, and there is not the slightest sign that the United States or Europe is prepared to relinquish agricultural subsidies in order to give African agriculture a chance to export. These are grand designs, but they don’t work in practice. I’m a socialist. I’m an expert in grand designs that don’t work in practice. Dambisa Moyo believes that China is Africa’s salvation. I don’t share the same enthusiasm for China as Africa’s new neo-colonial master. To do Dambisa Moyo justice, there are more options, ranging from microcredit, to remittances, to savings. But I have to say that, given
the state of the world’s economy, we’re going to need aid for a very long time. The effort should be to make aid more effective, not to expunge it from the balance sheet.

  I share the same sense of anxiety, frustration, and rage about the future of Africa, and I’m especially concerned about the future of the next generation of whom Dambisa Moyo speaks. I worry greatly about the quality of political leadership in Africa. I worry even more about the world losing interest in Africa, and I don’t think that celebrities are the answer. Believe it or not, I have been going back and forth from the African continent for close to fifty years, and I have nothing but admiration for the intelligence, sophistication, and resilience of the grassroots, especially among the women of Africa. There has to be a way of getting aid into the hands of the grassroots and into the hands of civil society. We have to concentrate on opening doors to other economic designs and transforming the continent. That’s where aid continues to do far more good than harm.

  RUDYARD GRIFFITHS: Thank you, Stephen. Hernando, please begin with your opening statement.

  HERNANDO DE SOTO: Who can disagree with Stephen Lewis? We all believe in aid. It’s even a religious precept. It’s in the Koran and it’s in the Bible. What we are really talking about is whether aid, as it is structured today, causes more harm than it does good. Obviously, it does good. We heard a case for it. But what is the objective of aid?

  The objective of aid is essentially to act as a seed, a first seed, a stimulus to begin development so that the Third World can operate like the First World. How does that work? Well, it’s about capital. You need capital, obviously. There’s nothing in this city [Toronto] that indicates that you don’t need capital. You need credit and capital. At the same time, you need a government that ensures that things don’t get guided one way or tied up in monopolies. There are three problems that exist in regard to these matters: first of all, how do you raise capital if you are a developing country? Second, how do you help your poor? Is the sub-prime market a solution? And third, how do you untie aid and how do you get rid of monopolies? Let’s begin with the first problem, capital.

  How do you raise capital? Take, for example, a Canadian company or a U.S. company. Imagine you are running a U.S. company and you find petroleum in Peru. You get a concession. You ask the government to give you a property right on the land. You get your property right, but you don’t trust the Peruvian government, so you have to appeal to your own government — and that’s where it begins, because the property right is government-supported — to sign a bilateral investment treaty between the United States and Peru, where the rules of the game are set. In that bilateral investment treaty, you bind the developing country to the facts, aid, and property rights involved. Labour and legislation can no longer change the basis of that treaty. You then present this to an overseas private investment corporation and you tell them to confirm the property right and let the investment corporation know that the U.S. government is behind your company if the Peruvians do something questionable. Then you go to the Multilateral Investment Guarantee Agency [MIGA] for a guarantee and put Peru on notice that they have to honour their agreements. Then, with that property right, which you couldn’t have acquired in Canada or the United States, basic taxes and labour are tied up, and there are no exceptions under any circumstances; you go to the capital markets and say, “Have I got a title for you.” And that’s where the money comes from.

  There is no such thing as money or capital without a property right. Money is received when something is given in exchange, such as a guarantee. Then, the company starts operating in Peru, with the backing of the United States or a European country. And at that time, out comes the second head of Janus — in Roman mythology, he is the god with two heads. The second head of Janus is no longer the export credit guarantee department and no longer the diplomats, it is the aid system of the United States or of Western Europe which then says, “We’re also giving money, by the way, to a lot of people who have indigenous rights. What are you doing here sitting on indigenous people’s space?” Then all of a sudden developing countries see two heads. And that second head says, “These are indigenous people. They have the right to roam. You’re trespassing.” And all of a sudden in countries like Peru, all hell breaks loose. And all hell breaks loose because both sides are being supported.

  Now, why doesn’t this happen in the U.S. or in Europe? Because the left and the right form one government, and as a result the government is actually able to work things out. Here’s where it gets confusing. At home, in Western capitalist countries, you give Treasury positions to politicians on the right and you give aid and ambassadorship positions to politicians on the left. In the U.S. you have Timothy Geithner as the current U.S. Secretary of the Treasury, and you’ve got Dr. Susan Rice as U.S. Ambassador to the United Nations. You’ve got Christine Lagarde as the current Minister of Economic Affairs, Industry and Employment of France, and you’ve got Bernard Kouchner as the current French Minister of Foreign and European Affairs.

  Now, this is all great, because the U.S. and European countries have got their act together. But what happens to other nations? This produces what Marx referred to as a social contradiction. And therefore people in the U.S. and European countries are very happy. They have the investments. But poor people are working against the property system, which creates a left versus right discourse, one which is applicable to developed countries, not to developing countries. Just like there are Hutus and Tutsis warring in Somalia, in developed countries the aid system pits left and right against each other. Sub-prime is the same thing. We’re all aware of the recession, I don’t have to tell you about it. The only thing that’s interesting about sub-prime is that while developed countries have given something in the order of about 300 billion dollars to developing countries, as was pointed out by Stephen, developing countries have given developed countries 2 trillion dollars, because our money went to the United States, and to Europe. That’s what basically financed the sub-prime. Why did it go there? Developing countries have a higher return on capital and higher interest rates. Our money went to developed countries because you’ve got property rights. It is much easier to arrange financing in the United States or in the Western world because you’ve got something to hold on to. In other words, property rights.

  The question then becomes, why don’t developing countries have property rights? It is due to a world system or bias that is against indigenous people having property rights. Why? Because Canada, the U.S., and Europe feel guilty about their colonial past, and therefore you aren’t willing to do for developing countries what you do for your own citizens.

  And last but not least, let me finish with a few words about the matter of tied and untied aid. Canadians are a generous people dedicated to helping developing countries, for which we are very grateful. But you haven’t seen what you’ve done. Aid is untied, for example, through your Canadian International Development Agency [CIDA]. But on the other hand, you’ve got export credit programs that tie that aid to specific regulations. You may support grants for a hydroelectric plant, but you require that we source materials and professional expertise from you. In one case, we receive a small amount of aid that is untied, and in another case we receive a large amount of foreign aid that restricts us to get the best prices possible. That’s a contradiction.

  RUDYARD GRIFFITHS: A great start to the debate. Paul, you’re next.

  PAUL COLLIER: I wrote The Bottom Billion because the term “bottom billion” was meant to describe sixty low-income countries that have missed out on global prosperity. They have stagnated while other countries prospered, and as a result they’ve diverged. They’ve diverged for forty years, and it is a vital matter both for the people living in these societies and for the rest of mankind that instead of diverging they start to catch up. That is the challenge. However it’s done, it seems to me fundamental that the bottom billion converge with the rest of mankind. If the next forty years are like the last forty years, we’re heading for tra
gedy.

  So what can we in the rich world do? I think there are four policy areas that are important in achieving convergence. One is security, which we are actually doing, for example, in Afghanistan. Two is trade policy, which Dambisa emphasizes. Three is governance, and the fourth is aid. Aid is part of that spectrum of effective policies. Why aid? Because the fundamental reality of the bottom billion is that these countries are desperately short of capital. That is their defining feature. It’s not their only feature, but it’s their defining feature. They’ve got to accumulate capital, and if they have to do that from internal resources only they’ll have to cut consumption deeply, and they’re already living at the margin of subsistence. So they need international capital, not just aid but public and private capital. Potentially, they’re complements. Public capital provides things like the roads and private capital pays for things like trucks.

  Now, in Africa, to date, there has been a lot of criticism of public capital. But the reality is that private international capital has also failed. Let’s take a couple of examples. The stellar example of private lending to African governments is Nigeria. In the late 1970s and early 1980s, Nigeria was able to borrow quite heavily on international capital markets. International banks provided money, and they didn’t care to ask who was borrowing it or how it was going to be used. The money went down the drain. It left Nigeria with a load of international private indebtedness. The big example of foreign direct investment to Africa over the last decade has been to Angola. Is the government of Angola aligned with its citizens? No, it is not. In fact, even in the boom years, the last crazy five years when private capital would go almost anywhere, it went almost anywhere except to the bottom billion. They were just starting at the margins when the whole thing collapsed. Looking forward, don’t hold your breath.