NCPA - National Center for Policy Analysis


June 20, 2007

Bill Gates's plan to use his foundation to reduce world poverty is a noble goal; but it will likely just supplement the much larger -- and at best, checkered -- programs of aid and debt relief that have been carried out for many years by international organizations and governments, says Robert Barro, economics professor at Harvard University and a senior fellow at the Hoover Institution at Stanford University.

To find policies that are likely to alleviate poverty, it is best to look at actual successes and failures, says Barro:

  • In recent decades, the biggest single accomplishment is the post-1979 (post-Mao) economic growth in China.
  • A massive poverty reduction occurred despite an increase in the Chinese population of more than 400 million and rising income inequality within China.
  • Another good story is India, where the poverty count fell by around 140 million people from 1970 to 2000.
  • Also illuminating is the greatest tragedy for world poverty -- the low economic growth in sub-Saharan Africa; in this case, the number of people in poverty rose by around 200 million from 1970 to 2000.

An important clue is that the triumphs in China and India derive mainly from improvements in governance, notably in the opening up to markets and capitalism. Similarly, the African tragedy derives primarily from government failure. Another clue is that foreign aid had nothing to do with the successes and did not prevent the African tragedy.

One reason for this is that foreign aid is typically run through governments and, thereby, tends to promote public sectors that are large, corrupt and unresponsive to market forces. Perhaps the Gates Foundation will run more efficient aid programs than we've seen in the past, but he is kidding himself if he believes the Gates Foundation will provide anything like the past and future accomplishments of Microsoft. 

Source: Robert Barro, "Bill Gates's Charitable Vistas," Wall Street Journal, June 19, 2007.

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