Biggest component of foreign aid = knowledge

Seeing the legions of UN and NGO workers driving around Africa in their brand-new Toyota Land Cruisers got me wondering what the most effective form of foreign aid is. Jeffrey Sachs claims that we should put more money into providing food, education, health care, and housing. The caveperson thought on foreign aid of this kind, however, is that foreigners paying for this stuff will simply enable the rulers to move more of the tax and resource revenue into their Swiss bank accounts.

My Weblog posting on The End of Poverty notes that “Sachs cannot come up with a single example of a country that has been lifted out of poverty by foreign aid”. Upon further reflection, this is not true and I think that I’ve overlooked the biggest component of foreign aid: knowledge.

Imagine a group of humans in the middle of a rainforest that has been living in isolation for 2000 years. What practical non-cash items do they get when they meet the modern world? They get physics, chemistry, biology, engineering, medicine, public health, and business methods. This information is published, more or less for free, in Wikipedia, textbooks, and journals. The information is also available in patents, which either don’t apply in the rainforest territory or expire 17 years after issuance. This information has been developed at a cost of $trillions and centuries of hard work.

Has any country pulled itself out of poverty or been able to accommodate a population explosion in virtue of getting this kind of information? A lot of Asian countries, starting with Japan (1868 onward), Korea, Taiwan, and Singapore would seem to be candidates.

One way to look at foreign aid in Africa then is that we are already delivering a huge quantity in the form of knowledge. Any additional aid is likely to be most effective if it builds on this existing supply. What kinds of things would enable an African country to take better advantage of the scientific, engineering, and business knowledge that is currently being delivered to interested people worldwide?

  • Better/cheaper Internet access (will enable video conferencing)
  • More/cheaper airline connections for face-to-face interactions (would require deregulation)
  • University/grad school fellowships for Africans (serious problem of brain drain, however, with the best students tending to stay in the host country)
  • Support for improved university education in Africa

7 thoughts on “Biggest component of foreign aid = knowledge

  1. What seems to be forgotten (and taken for granted in developed countries) would be basic “rule of law” type things. Even the ancient Greeks realized that people won’t work for things that are likely to be taken away.

    In graduate school, I moved and stored some belongings of an African friend, also a student (odd that one of the few things he bought instantly was a television). He was amazed that I left my (meager) belongings in a locked minivan during the middle of the day. He said something like “Shouldn’t one of us stay with the van? Back home, that would be stolen immediately.”

    It would seem that the same dictators who siphon UN aid would also demand bribes and/or confiscate a successful business.

    Another thought on your “knowledge capital” thing: it seems that successful developing countries specialize in one thing. Japan did it with electronics and moved to automobiles. China seems to be focusing on commodity manufacturing (not a very narrow niche, but they’re a huge country). Brazil seems to specialize in airplanes (and built a city shaped like one!). India started with PC software and is branching out into anything white-collar.

    It seems prudent that maybe an African country should put its people’s collective intelligence toward trying to achieve competence in only one industry, rather than trying to learn everything at once. We see that different regions even of the US specialize in stuff (Wall Street: finance, Silicon Valley: semiconductors & computers, Midwest: automotive). Given that we’re talking about small countries with small populations (and a small fraction of that population has the intelligence necessary to contribute to advanced economic activity), it makes sense to concentrate on one thing. There is even informal education that goes on, i.e., the local newspapers would report on relatively minor developments in the Chosen Industry and aspects of the Chosen Industry become part of the national conversation. Sort of like how a physician who never did farm work probably can’t help but learn a little about farming if he grows up in a farming community where the local radio announces commodity prices every hour.

  2. do I get the sense that the hedgia is as inflammatory as the flamebaitia?

    correlating asian acceptance of modern industrialism with countries’ pulling themselves out of poverty or population explosions is more than a bit simplistic…

    E.g. japan had population densities far exceeding western countries long before the black ships arrived…


  3. “Sachs cannot come up with a single example of a country that has been lifted out of poverty by foreign aid”. Upon further reflection, this is not true and I think that I’ve overlooked the biggest component of foreign aid: knowledge.
    Ireland 1977 to 2007 is an example of a country that has been lifted out of poverty by foreign aid (European Union grants for infrastructure) and knowledge (Most USA multinationals European headquarters are in Ireland).
    However it should be noted that Ireland (government and people) was receptive to this aid and encouraged it by creating an environment that was conducive to its receipt, in the form of low tax rates and transparent usage of funds received.

  4. You seem to want to take the point that foreign aid is not a very effective means of reducing poverty in the long term.

    And it is better for these nations to draw on the knowledge created by developed countries to power their way out of poverty.

    But I see examples of developed countries artificially manipulating world markets by subsidizing their own industries thereby suppressing prices and making it very difficult for developing countries to actually sell their products.

    It makes me wonder if foreign aid is a genuine attempt to help the less fortunate or a simple ‘bribe’ to maintain the status quo and our high standard of living.

  5. The first comment was on the right track.
    Long-term, the best gift by far we can give poor countries is the example of a good political philosophy, e.g., private property, free markets, the rule of law resting on a respect and defense of individual rights (not the twisted non sequiturs the UN lists as “human rights”). We are doing a terrible job – and getting worse.

    Giving math/science/engineering without the underlying philosophy of reason is basically teaching thugs and witchdoctors how to make nuclear weapons or how to use firewalls to censor research and track down political dissidents. Iranian nuclear scientists went to MIT. Knowledge of science and engineering is indeed a boon to a poor country. But we have to recognize how important the more fundamental ideas about man are.

    Consider that popular elections are a mechanism to select individuals to administer our constitution, a constitution that is supposed to defend individual rights as an absolute principle of man’s nature. Democracy means the majority get to do whatever they vote on. If we promote Democracy as an ideal, we end up signing on to and morally sanctioning the creation of an Islamic republic, as in Iraq. Americans and their leaders are completely flummoxed by the simple premise that individual rights are the primary and that the mechanism for administration (direct/indirect, unicameral/bicameral, panels of judges/juries, etc., etc.) is an implementation detail.

    When we engage in a “war on terror” rather than a principled defense against Communism or Islamic theocracy, we again substitute the primary – the antagonism of an ideology to freedom – with the mechanism that is being employed.

    The example we offer the world in domestic politics and business regulation is such a mess of contradictions, it is almost impossible for us to point at what we are doing and say, “This is how you gain prosperity; this is how you create the conditions for freedom.”

    The erosion of the respect for individual rights in America is so sweeping it is hard to find a niche where it hasn’t happened. Fortunately, we are still doing quite well on free speech. And thus there is reason to be hopeful that past mistakes can be understood and eventually corrected.

  6. Take a look at Hernando Desoto’s “Mystery of Capital” for some ideas on helping poor people help themselves.

  7. Maybe buy them a 747-load of Nicholas Negroponte’s laptops at $188 a pop? 🙂

    Speaking as someone who has visited Zambia twice for a month each time, one thought is to help Africa develop good, competent political leadership.

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