Funny You Should Bring That Up

Madeline Albright has been reported in the FT pointing out the following:

Put in perspective, the $31bn (€25bn, £17bn) donation announced this week by
Warren Buffett, the investment guru, to the Bill and Melinda Gates Foundation
exceeds annual US government spending on foreign development and humanitarian
assistance.

There are two points I must make. First, the comparison of one individual to one bloated US government is interesting. However, the donation is spread out over many years as opposed to annual foreign aid expenditure which happens to be spread over (believe it or not) one year. Second, while Ms. Albright was making the above point to push America to spend more on foreign aid, the above point actually highlights why foreign aid is a failure.

Foreign aid finances consumption (if it reaches people) and corruption (if it does not). On the other hand, charity (in Buffet's case, $31 billion) is carefully monitored by the donor to make sure his hard-earned money is spent wisely. Furthermore, as evidenced by Buffet, rich people almost always give away millions and in this case billions to charity. These people would probably give even more to charity if they were not taxed as much. While Ms. Albright would like to see more aid money wasted on BMWs for Robert Mugabe, America should instead end its aid programs and start doing the only thing a government can do to alleviate poverty in the third world, move forward with trade liberalization.

Aid CAN work, but it must be voluntary. If it is mandatory and handed out through a bureaucracy, the money will be useless and in come cases harmful.