Thursday, January 06, 2005

Some Help is on the Way

Help is on the way. But we can always do better. The LA Times and many others focus on government emergency grants. The currently pledged $350 million (about the cost to pay for one mile of the LA subway, Wendell Cox reminds us) by the U.S. places us fourth (after Australia, Germany, Japan). Yet, those who produce and follow these rankings are missing two very big stories.

Today's WSJ features pieces that call attention to two other important sources of help (both short pieces reproduced below). We do very well in the realm of private giving. At the same time, we fail badly in terms of our discriminatory trade policies.

"Tariff Tsunami"
(WSJ, January 6, 2005; Page A16)

"Senate Majority Leader Bill Frist is in Sri Lanka today bearing tsunami relief, one more worthy effort amid thousands. But if he really wants to do some long-term good for that nation's victims, he'll return to educate his fellow solons about the numbers in the chart below.

"A friend of ours scoured Census Bureau data for 2003 and pointed out some eye-popping statistics showing how U.S. tariffs discriminate against the world's poor, including in particular those in Sri Lanka. The duties paid on Sri Lankan garment exports to the U.S. in 2003 were $238.5 million -- which was more than the total duties ($227 million) paid that same year on every product exported to the U.S. from all six countries of Scandinavia.

"That's despite the fact that Scandinavia exports roughly 12 times more to the U.S. than does Sri Lanka -- $23.8 billion versus $1.8 billion in 2003. The average U.S. duty rate on products from those rich nations of Northern Europe is about 1%, while the average rate on Sri Lankan goods is 13.8%, and 16.6% on the bulk of its exports, which happen to be clothing. The combined GDP of those six European lands is about 10 times the size of Sri Lanka's, with far higher per capita incomes. If there was any doubt left that U.S. protectionism discriminates against the world's poor, this ought to end the debate.

"Americans of all faiths and incomes have been donating tens of millions of dollars to assist the Christmas tsunami victims. This is a tribute to our generosity. But there is no amount of aid that would be more meaningful to more people in Sri Lanka than to lift U.S. tariffs on its textile exports. Perhaps when Mr. Frist returns, he'll bring the matter up in the Senate Finance Committee."

"Private Acts of Giving"

By ROBERT A. SIRICO, WSJ January 6, 2005; Page A16

"The outpouring of money to help the victims of the tsunami has been marvelous to behold. At press time, the Red Cross alone had collected an astonishing $69.2 million in cash. The grand total raised by private dollars will be many times that amount. Though aid alone can never restore what was lost, the expression of goodwill that the money represents is an inspiration. It may also point the way to reforming the way foreign aid is undertaken and managed in the future.

"Of the $108.5 billion given by major countries in foreign aid and investment in 2003, the U.S. contributed 35% or $37.8 billion. The next highest giver was the Netherlands. It is neither here nor there to consider the percentage of national income because, when looking at the U.S., all budget items seem small by comparison with overall productivity.

"Also in 2003, donations to foreign countries -- that is, not collected via taxes and spent by the government -- were the largest part of foreign aid, amounting to even more than government gives. Research by Carol Adelman, the leading scholar in this area, found that private aid in the year 2000 was $35 billion compared with government aid of $9.9 billion.

"Private giving was on the rise even before the tsunami. Foundations and individuals are increasing contributions. One reason is that it is more effective and targeted directly at the needs of the people and their communities. I know from experience that the groups involved in private giving are more agile and manage money more efficiently. In fact, Ms. Adelman and others have speculated that the trends are so strong in the direction of private giving that foreign aid is being privatized to some extent.

"Many of the same problems of the old-style welfare state afflict foreign aid today. Countries become dependent. Foreign aid feeds political corruption, and -- what's called the moral hazard -- rewards bad economic policies rather than encourage economic reform. Private aid, however, has nowhere near the same level of problems as government aid. It tends to go to individuals and private institutions rather than governments, so it doesn't feed corruption and the problem of moral hazard is reduced.

"Now we have a spectacular demonstration of the ability of private groups to respond to disaster in ways government never could. Private aid agencies responded to the tsunami victims first, doing the most difficult work, even as governments were still managing PR issues over whether they are "stingy" with others' money.

"President Bush has asked his father and Bill Clinton to lead a new fund-raising effort to help tsunami-stricken regions. Cynics might argue that this effort is akin to the mayor arriving just in time for the ribbon-cutting at the local mall. But the Bush administration understands that the future of foreign aid is very much bound up with private efforts and that the contributions of governments can only go so far.

"Whatever the future of foreign aid, we can see that the path leads toward relying less on government and more on private foundations, churches and NGOs -- all buoyed by the generosity of everyday individuals. We may yet find a way to end foreign aid as we know it."