U.S. Treasury Secretary Paul O’Neill and Irish rock singer Bono have just concluded a four-nation tour of Africa. During their visit to Ghana, South Africa, Uganda and Ethiopia, the two men studied ways to help the world’s poorest continent. They bring two very different approaches to this pressing problem. Neither is likely to convince the other of the correctness of his own solution — which is as it should be. Neither is going to work alone. Together, however, they can give Africa a future.
They are a very odd couple. Mr. O’ Neill is the picture of starched-collar conservatism: As befits the Treasury Secretary in a Republican administration, he is a former business executive with a fervent belief in market forces. Bono is the lead singer of U2, one of the most famous rock ‘n’ roll bands in the world. Both are concerned about the future of Africa, home to the 28 poorest countries in the world, according to the United Nations statistics.
As expected, the two men have different ideas about the best way to help Africa’s poor. Bono is a tireless campaigner for debt relief and public aid. Mr. O’Neill wants the private sector to do the job, arguing that assistance will be wasted without the institutions — markets — that will put resources to the most efficient use.
Both men are right. Debt is a crushing burden on many African governments. Some form of relief is essential. But that burden is the result of lending that was unconcerned with obtaining results. Forgiving debt without economic reforms will only provide temporary relief. In fact, it may even compound problems since banks will be even less willing to lend in the future, knowing that the risk of repudiation is real. That is the message behind U.S. President George W. Bush’s Millennium Challenge Accounts, a program that aims to increase U.S. foreign aid by $10 billion from 2004 to 2006. Those funds will only go to countries that make serious efforts to eliminate corruption and to reform their economic systems. It is a philosophy that Japan should appreciate, given this nation’s preference for assistance that is disciplined by the market.
But Bono is right to argue that markets alone will not suffice. There must be government intervention to build infrastructure. One-half of the world’s population subsists on less than $2 a day, lacking such basic needs as education, drinking water and health care. The micro-credit programs that Mr. O’ Neill touts sound appealing, but they are a cruel trick to people who are too sick to work or cannot do rudimentary mathematics. After they have acquired those basic necessities, roads, ports, and power grids have to be built. That, too, requires public assistance, although at that point economic reform begins to matter. Sadly, development assistance from the developed world fell $51 billion in 2001 and was just two-thirds of the amount given a decade ago.
There is a critical third pillar: trade reform. The world’s poorest countries must be integrated into the international economy if they are to prosper. Their domestic markets are simply not large enough to generate the wealth that these countries need to grow. They must have access to foreign markets, and here the failings of the developed world are plain.
Successive trade rounds have been effective in lowering the barriers that developed countries encounter when they try to export their goods. Unfortunately, those same governments have been considerably slower to open their own markets to goods produced in the developing world. In fact, the West has been slowest to eliminate trade barriers for agricultural products and textiles, the two industries in which developing nations often claim a comparative advantage. Worse, the gap between the rhetoric of the West and its actions is growing.
Earlier this month, Mr. Bush signed a farm law that increased crop and diary subsidies by 67 percent. Japan and the European Union have their own programs that make a mockery of calls to let market forces reign. The World Bank estimates that the developed nations spent nearly six times as much on agricultural subsidies than they did on development assistance. This hypocrisy is becoming harder to ignore, especially at a time of rising concern about the long-term effects of persistent poverty and deprivation.
There is a deal to be made. Western governments can demand economic reform in exchange for increased access to their own markets. Aid and debt relief will also have to be part of the package. This comprehensive approach is one that Mr. O’Neill and Bono can both support — and is the only one that is going to succeed in the long term.
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