Where does most of that money go?

By Tim Swanson,

While the report cited is several months old, Declan McCullagh recently wrote about how nearly all government-to-government foreign aid to Africa ends up in Swiss bank accounts.

For instance, in 2004 $94 billion was desposited into the accounts, most originating from African politicos. The following year the amount increased to $150 billion. In all, about 80% of all aid given to Africa was "stolen by corrupt leaders and transferred back into Western bank accounts."

Bureaucratic governmental projects also have a dismal track record of working as "World Bank's aid projects failed 55 to 60 percent of the time." Furthermore, "transfer payments have failed to stimulate economic growth in Africa where the average income per person is 11 percent lower today than it was in 1960."

In addition, despite receiving fistfulls of "free" capital, productivity levels did not increase:

The productivity increase that resulted from $187 billion's worth of aid going on "public investment" in 22 African countries between 1970 and 1994 is a very precise figure: zero. The Ajaojuta steel mill in Nigeria helps to explain why so much produced so little. The Ajaojuta project began in 1979. Nearly 30 years and more than $5 billion later, it has yet to produce a single bar of steel.

McCullagh was writing in response to WEF speakers in Davos, Bill Gates in particular, who call for more foreign aid to African countries.

A couple years ago Walter Williams pointed out why this free-aid policy is foolhardy,

Nearly every sub-Saharan African nation is poorer now than when they became independent during the '60s and '70s. Since that time, food production has fallen by roughly 20 percent. Since 1975, per capita GDP has fallen at a rate of half of one percent annually. Nigerian President Olusegun Obasanjo estimated, "Corrupt African leaders have stolen at least $140 billion from their people in the [four] decades since independence."

Be sure to also read Will More Foreign Aid End Global Poverty? and the Spiegel interview with economist James Shikwati -- in a nutshell, free trade not free aid.

Ludwig von Mises Institute