TOPICS: An economist’s way of inspiring aid

We’ve seen enough pictures to become desensitised — vast slums crawling with rats, emaciated dogs, and starving children, creeks of sewage trickling through the streets. We’ve heard the pleas — emotional appeals about helping our less fortunate brothers and sisters; about making a difference. But still the problem of wrenching poverty across the globe persists.

Maybe a different approach is needed. Instead of tugging at heartstrings, let’s look at the issue in a cold, detached, and heartless way. Let’s look at it from the standpoint of someone who gets paid to focus on collective utility, not individual suffering. In other words, let’s look at it like an economist.

In economics, competition is the key ingredient in an alchemy that converts self-interest into social good. Economic competition identifies the best of what each person has to offer and rewards it with wealth. This is why, as you read this, scientists are working to create new medicines, entrepreneurs are trying to come up with better products, and singers are trying to put together better-sounding performances. Their goal is their own economic benefit. The end result is that all of society benefits. Society will benefit even more if we end extreme poverty, a menace that holds the potential economic contributions of one-sixth of the planet in check.

Some economists dismiss the value of aid, alleging that past contributions have not alleviated poverty due to factors such as corrupt governments and lack of free markets within the poor countries themselves. Future aid will do no better, they say, unless it is preceded by internal transformation. What does a self-interested, rational point of view tell us about this debate? That dismissing the effectiveness of aid is a mistake. While not a panacea for poverty, it clearly must play a role.

There is no free lunch. Increasing international aid imposes a cost on those of us in more developed countries. But from a self-interested point of view, what we stand to gain, a world with less want and more wealth, which breeds more trade and fewer terrorists, will outweigh what we give up. In the US, economist Jeffrey Sachs’s plan would require roughly tripling the current aid budget. While this sounds substantial, it is actually only an increase from 0.2% to 0.7% of gross national product. The relevant question may not be how much return we get for what we give up, but whether we will even notice what we give up at all.

Success cannot be guaranteed, but for those who harbour doubts, remember that our argument comes from a standpoint of self-interest. Unlike most other appeals related to extreme poverty, it makes no high-minded, poetic pleas. It invokes no images of a family living among sewage, or hundreds of thousands of children dying each year because their families cannot afford mosquito nets. Our argument has no heart, so to speak, and holds no concern for these dreadful things. Yet still, it says we must end them. What then do we say? — The Christian Science Monitor