More Bad News from “Doing Bad by Doing Good”

Christopher Coyne writes;

[A] study by the economist Jakob Svensson found that foreign aid, on average, is associated with an increase in corruption in the recipient country as various groups seek to maximize their shares of the windfall profits associated with assistance. Similarly, a cross-country study by Stephen Knack of The World Bank found that foreign assistance undermines the quality of political institutions in the recipient country.

Of importance, [this] does not hold just in cases of the transfer of humanitarian assistance from developed to underdeveloped countries, but also in cases of transfers within developed countries as well. In a study of state-provided disaster relief within the United States, economists Peter Leeson and Russell Sobel note that, like international humanitarian crises, domestic natural disasters result in humanitarian assistance transfers from the federal government, in this case to state governments. They find that just as in the international cases, these windfall profits create domestic rent-seeking opportunities that increase corruption. Specifically, [they] estimate that each additional $100 per capita of FEMA relief raises the average state’s public corruption (defined by crimes that the U.S. Department of Justice classifies as “public corruption offenses” by nearly 102 percent

The problem, in other words, isn’t just the political structures/systems of LDCs, but also of the interaction of human nature and windfall profits, even where corruption is not the norm. As much as we might want to help people suffering through no fault of their own, the calls for more aid may be–inadvertently–calls for the promotion of corruption.

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About J@m3z Aitch

J@m3z Aitch is a two-bit college professor who'd rather be canoeing.
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12 Responses to More Bad News from “Doing Bad by Doing Good”

  1. As much as we might want to help people suffering through no fault of their own, the calls for more aid may be–inadvertently–calls for the promotion of corruption.

    Far, far better to let them work it out for themselves. I’m sure that the people of Colorado will be much better off for a winter in the Rockies living like the early settlers did.

  2. J@m3z Aitch says:

    Well, I’m not at the end of the book yet. Perhaps he’ll provide solutions. Until then, not a penny in aid for Colorado! Besides, Colorado Springs seems to have voluntarily returning itself to the pre-electrical era, so who are we to interfere with that path?

  3. My more general criticism is that “X leads to an increase in Y, and Y is bad” is not a sufficient argument to conclude “therefore X is not justified.”
    Medical example: splenectomy leads to an increased risk of infection. Does it therefore follow that splenectomy is never worthwhile?

  4. Matty says:

    Exactly D.C, there are always going to be trade offs in any area of life. The question is not does it cause problems but are the problems it causes worth the ones it solves.

  5. J@m3z Aitch says:

    I don’t remember arguing that X is not justified. Maybe you can point me to where I said that?

  6. I don’t remember arguing that X is not justified.

    You didn’t — but that’s the common inference from the statement (and its most common use in public debate) none the less.

  7. J@m3z Aitch says:

    Let’s be uncommon together.

  8. lancifer666 says:

    One unintended side effect of food aid to Ethiopia is that the large burlap sacks, that the flour, grain etc. comes in, is re-purposed to sell charcoal. Thus people that live in areas with trees, who once only felled and charred enough trees to feed themselves, now sell charcoal on the road side in these handy and free large sacks.

    I know because we bought some on our last trip from Harar, in eastern Ethiopia, back to the capital Addis Ababa.

    I’m sure environmental types would recoil in horror that giving food to people in rural Africa was accelerating the stripping of local forests for fuel. But people are resourceful critters and who can blame these individual people trying to scrape out a life for themselves and their families.

    I was surprised at the thriving road side vendors that have popped up on this otherwise deserted roadway. They sell everything from fruit to locally made clothing.

    Capitalism at its most elemental.

  9. J@m3z Aitch says:

    Give a man a fish, and he eats for a day. Give a man a male fish and a female fish and he becomes a capitalist.

  10. Matty says:

    On the flip side, I have read that when the government of Vietnam started allowing private land ownership many farmers started buying wooded hills above their fields in order to prevent felling and reduce erosion. Environmental protection by sheer self interest and privatisation.

  11. Mr. Blue says:

    Give a man a fish, and he eats for a day. Give a man a male fish and a female fish and he becomes a capitalist.

    Not if he’s hungry and lacks future time orientation.

  12. Troublesome Frog says:

    But people are resourceful critters and who can blame these individual people trying to scrape out a life for themselves and their families.

    VICE had a really interesting profile on “oil pirates” in Nigeria a while back. These are people who take their boats out and crack open the crude pipelines, swamp their boats with crude, and then take it back to “bush refineries” where they refine it into kerosene using open flame. Both the danger and the ingenuity were amazing.

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