President Obama said a number of good things in his address yesterday at the United Nation’s Millennium Development Goals (MDGs) Summit in New York. Unfortunately, he has not been following his own good advice.
Saying his administration will no longer rely exclusively on metrics of money, food or medicine distributed to the world’s poor but judge the effectiveness of development programs by how successful they are in helping countries move “from poverty to prosperity,” the president advised other world leaders to direct taxpayer-funded foreign aid to countries pursuing economic growth by promoting “good governance and democracy; the rule of law and equal administration of justice; transparent institutions with strong civil societies; and respect for human rights. Because over the long run, democracy and economic growth go hand in hand.” He also urged others to adopt policies that “unleash the next generation of entrepreneurs.”
“Our focus on assistance has saved lives in the short term, but it hasn’t always improved those societies over the long term,” the president continued. “Consider the millions of people who have relied on food assistance for decades. That’s not development, that’s dependence, and it’s a cycle we need to break.”
How ironic, then, that President Obama’s entire term in office to date has been marked by the passage of one gigantic federal program after another—the goals of which are to make Americans more and more dependent on government largesse and favoritism while punishing entrepreneurs and small businesses with higher and higher taxes and deficits. Those are the policies that have led to the massive corruption in Africa and elsewhere that have trapped millions in poverty. It’s a cycle we need to break!
While President Obama should be lauded for saying he wants to reform foreign aid policy to focus it on economic growth, his speech was also contradictory. In trying to please his statist friends in the development assistance community he also reiterated his commitment to the traditional ODA programs in support of the MDGs and did not withdraw his earlier call for a “doubling” of the U.S. foreign aid budget.
We are left wondering, then, what the Obama Administration’s foreign aid program contains. The annual Heritage Foundation/Wall Street Journal Index of Economic Freedom measures a country’s openness to competition; the degree of state intervention in the economy (whether through taxation, spending, or overregulation); and the strength and independence of a country’s judiciary in enforcing rules and protecting private property.
The Index consistently finds that free markets and entrepreneurship are the keys to prosperity. The results of the 2010 Index demonstrate a significant positive correlation both between higher economic freedom scores and reduced poverty as measured by the UNDP Human Development Index as well as improved democratic governance and political stability as tracked by the Economist Intelligence Unit’s Index of Democracy. It was economic growth, not foreign aid, that lifted one billion people out of poverty in China and India in the last 20 years.
So, why does the U.S. need to “double” its foreign aid budget if the primary responsibility for economic growth to help people achieve the MDGs lies with developing countries themselves?
President Obama should exhort developing world leaders to end corruption, strengthen of the rule of law, and return to the principles of economic freedom. He should announce a complete overhaul of his administration’s development assistance policy away from the statist programs of traditional ODA and towards incentives for free market-led economic growth.