Don't Fight Poverty with Worn-Out Tools

After years of being out of fashion in Washington, foreign aid is back in vogue. President Bush has announced that he is boosting U.S. spending on development assistance by 50%. Treasury Secretary Paul H. O'Neill has spent weeks in Africa, passionately pleading for more help for the world's poor. Conservative Republicans are joining liberal Democrats in demanding that America do more to stop the spread of disease and hunger. The link between terrorism and poverty, however indirect it may be, has united the entire political spectrum in a new effort to do something for the 1 billion or so of the earth's people who are living on $1 a day or less. This is good.

But good intentions are not enough. For decades, the U.S., Europe, and Japan wasted tens of billions of dollars in foreign aid that did little to alleviate the plight of the poor. Most of the money was spent for political purposes in the Cold War--to bolster regimes that battled communism or to calm hot spots such as the Middle East. The geopolitical objectives were achieved, but the goal of ending poverty was not. Additional billions from the World Bank and other international organizations were wasted on huge, ill-conceived "white elephant" projects, such as steel mills or power projects, that were never globally competitive.

BusinessWeek, in a Special Report on Global Poverty, analyzes a number of new approaches that are being successfully used around the world. Many of these approaches combine market-based strategies with focused deployment of funds and tough standards that ask for measurable results.

In Bangladesh, a microcredit lending organization finances small businesses. In Brazil, families are paid to keep their children in school. In China, peasants are getting title to their land. In Africa, private philanthropy is buying vaccines for measles and hepatitis. In India, Internet access is helping villages get better prices for their crops. All of the programs are successful and capable of being expanded.

But they aren't sufficient. Weak, failed, and authoritarian national governments continue to keep millions impoverished. Oil-rich Nigeria and resource-rich Zaire have the economic means to eradicate poverty and disease, but neither country has the political ability or will to do so. Trillions of dollars have gone to autocratic Middle Eastern governments over the decades to pay for oil, without ending poverty. In these countries, democracy may well be a necessary pre-condition for fighting hunger and disease.

As the U.S. gears up for another round of foreign aid spending, it makes sense to do it a different way this time. There are small new programs that work, which should be expanded. And there are big old political issues that must be tackled if poverty is, truly, to be ended.

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