Tim Worstall

Aid to Africa.

Interesting little fact from Marginal Revolution.

Estimated wealth of African wealth held in foreign accounts, expressed as a percentage of African GDP: 172

Another interesting fact. GDP of Africa ~ $800/900 billion.

Thus $1.45 or so trillion US dollars owned by Africans not invested in Africa.

Reasonable return on invested funds? 5-10% ? Call it 7% (including inflation)?

Roughly $100 billion a year.

How much are we being asked to send in aid? $175 billion or so? More than half of which to go to Africa?

Aid asked for, ~$100 billion.

Earnings from African wealth abroad not invested in Africa? ~$100 billion.

No, no comment, just sayin’.

In

6 responses

  1. Jim Avatar
    Jim

    You seem to think there’s a contradiction here: there isn’t. One of the reasons aid is given is that it promotes investment by funding public goods and boosting growth. So more aid to Africa will generally tend to increase investment by Africans in Africa.

    Reply
  2. auntymarianne Avatar
    auntymarianne

    Hey, if you were African and had garnered in some way some wealth and had a choice between putting it in a safe investment situation where it wasn’t going to be looted or suddenly appropriated by the government, and not putting it somewhere like that, which would you choose? Investors aren’t any less canny for being African and they follow the better side of the investments market like everyone else.
    I don’t agree with Jim. Budgetary and development aid won’t increase investment in Africa because its equivalent will end up being whisked out again (e.g. you provide medical help – the government relies on you to provide for medical spending – money that should be going to medical spending goes awry – arms, corruption, Swazi royalty’s motorcars). Trade will encourage Africans to invest in Africa, because buying goods from Africans encourages investment at the site of production and on infrastructure to transport those goods, and puts (hopefully) wages in workers’ pockets.
    (Humanitarian aid is a different matter. It doesn’t help at all in the long run (for example, we maintain populations in the Sudan living on land long overgrazed past redemption, and rescue countless Bangladeshis from flooding every year, and nothing ever improves) but we do it because although it makes no economical sense it’s just the right thing to do.)

    Reply
  3. Little Man in a Toque Avatar
    Little Man in a Toque

    England Word Association

    Write down the alaphabet on a piece of paper and then do an England word association for each letter of the alphabet. Pick the first thing that comes into your head. This is what I came up with. A. Agincourt…

    Reply
  4. Little Man in a Toque Avatar
    Little Man in a Toque

    England Word Association

    Write down the alaphabet on a piece of paper and then do an England word association for each letter of the alphabet. Pick the first thing that comes into your head. This is what I came up with. A. Agincourt…

    Reply
  5. Albeytar Avatar
    Albeytar

    auntymarianne is right. I have seen aid being ‘reinvested’at first hand. Anybody with any wealth did not invest in the country but exported it to USA dollar or Swiss franc accounts and if you wanted to borrow from the national banks the rate was 36% pa! Meanwhile, the aid donors were expected to have more faith in the system than the recipients.

    Reply
  6. Jim Avatar
    Jim

    Speculation aside (which is what you two are engaged in), the evidence is that aid to Africa is actually mostly spent on what it was earmarked for, and it does promote investment.

    Reply

Leave a Reply

Discover more from Tim Worstall

Subscribe now to keep reading and get access to the full archive.

Continue reading