Congrats to Daniel Yohannes '76 for being named the CEO of the Millennium Development Corporation by the Obama Administration yesterday. The Millennium Development is a corporation run by the United States government that seeks to implement the Millennium Development Goals by 2015. The hope is to make the world free from poverty, misery, and illiberalism by 2015. (Yeah, I'm also curious as to why the U.S. government owns a corporation, but hey, didn't you get the memo? We're all socialists now...)
Reportedly, Mr. Yohannes came to America from Ethiopia with $150 in his pocket, so presumably he knows a thing or two about eradicating poverty, having done it so successfully with himself. According to public records, he gave over $27,000 this past election cycle to Democrats. Anyone with that kind of cash to spend on a political race certainly can lay claim to having made it in America.
But if you've actually studied the Millennium Development Goals, you'll be a little more suspicious that a worldwide intergovernmental can actually end poverty, notwithstanding the promises of charlatans like Bono and Jeffrey Sachs.
Unsurprisingly, the aid agencies are failing to succeed in addressing any of the Millennium Development Goals. We're usually told that the reason development is slow is lack of knowledge, but actually, we've known since at least 1938 of the problems facing Africa and the development world. Just compare the language of a report from the 30's to one of the Millennium Development Project reports. The reason Africa's been slow to execute isn't a lack of knowledge; it's a lack of useful knowledge, brought to bear through markets.
Worse yet, much of the reason the Development Goals have failed is that they fail to specialize. Here's how economist Bill Easterly describes that problem.
Economists are often congratulated for their impressive grasp of the obvious. Yet if this principle [of gains from specialization] is so obvious, why is it routinely violated in the aid world? It’s gotten worse with the Millennium Development Goals. Each aid organization tries to meet all MDGs and each fails to specialize. Therefore some aid agencies are forced to supply things they are bad at – the equivalent of Gates’ [producing] music videos – for which there is no demand.
UNICEF is working on swine flu, the traditional province of WHO, who is distracted by trying to do development research, which is the traditional specialty of the World Bank, who is in turn distracted by a new emphasis on children, which is the strength of – just to complete the circle – UNICEF.
Even very small aid agencies fail to specialize – Luxembourg’s $141 million aid budget was divided among 30 different sectors (out of a possible 37). The tiny Luxembourg budget also went to 87 different countries.
With high overhead costs for each separate activity for each country, the ratio of overhead costs to funds for the activity gets extremely high, sometimes over 100 percent. UNDP has one of the very LEAST specialized aid budgets by country and by sector, and it actually does have a ratio of overhead costs to aid disbursed of 129%.
Yohannes came to America, fleeing one of most socialistic and repressive regimes. His life story and success in the banking industry are testaments to all that liberalized markets offer. So why then does he want to run an organization that believes it can ignore Hayek's "fatal conceit" and centrally plan for people far, far away when he saw the failure of a government that tried to do that for people nearby?
If Yohannes were serious about truly saving Africa or the rest of the developing world, he'd encourage the rest of the world to scale back-- or even eliminate-- its aid projects and start trading with a newly liberalizing continent. It worked for Asia. Why not Africa?
