In this country, the notion of private companies risking their capital on infrastructure projects is a no-no. While it complains about “market failure” and high prices, Duncan McLeod reports that the government has just decided to spend $2 billion (!) on its own undersea cable project. It’s no surprise that foreign investors are being chased away. It’s no surprise the World Bank is perplexed.

Clearly, our government’s idea of a New Partnership for Africa’s Development is central control over all major projects. It is to crush private competition, and stubbornly forge ahead with state-led development. We don’t need neo-colonialist exploiters, we’ll lay our own damn cables, is what Poison Ivy, the communications minister, appears to be saying.

There’s a wealth of evidence that Keynesian or socialist state-led development has failed for decades to lift poor countries out of poverty. Those countries in which significant economic development occurred achieved this by encouraging private investment and free markets.

In addition to the statistical evidence, the theoretical problem is that state competition scares off private investors, without which there will be no competition, whether on service quality or price. The state can only solve problems in series, trying one possible solution after another. When it does appear to solve it, there is no way of knowing if it did stumble on the best solution, whether supply actually meets demand, or whether the price is right. Besides, to date the government’s record at telecoms development has been atrocious.

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Foreign aid is a bad solution to the world’s development problems. It has failed to make any significant impact in the last half-century, and in fact undermines development by driving emerging entrepreneurs out of the market with free or subsidised goods and services. It does not answer to real needs on the ground, does not respond to price signals, suffers from bureaucratic inefficiency and red tape, and in many cases fuels the very corruption that keeps oppressive or socialist regimes in power and prevents the citizens of poor countries from providing for themselves and their families.

Yet the United Nations and aid communities are proposing to throw good money after bad, by doubling foreign aid to poor countries as a means to reduce poverty. It won’t work.

Some of the reasons why are examined in essays written by the winners of the 2006-2007 Olive W. Garvey Fellowship, which is awarded each year by The Independent Institute, a public policy research outfit.

The winners follow, with links to their essays on the topic, “Is foreign aid the solution to global poverty?”

Junior Faculty Member Winners

1. Peter Leeson, George Mason University: Escaping Poverty: Foreign Aid, Private Property, and Economic Development
2. Jason Sorens, University at Buffalo, SUNY: Development and the Political Economy of Foreign Aid
3. Art Carden, Rhodes College: Can’t Buy Me Growth: On Foreign Aid and Economic Change

Student Winners

1. John Parker, University of Alabama: The Politics of Development Economics
2. James Estes, Pittsburgh Theological Seminary: Easter Economics: The Resurrection of Dead Capital
3. Juan Ramón Rallo, Universidad de Valencia: The Curse of Foreign Aid

Congratulations to the winners. I hope your efforts are widely read and well understood.