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With Warren Buffett’s largesse added to his own, Bill Gates has about $60 billion to spend on health and development. How should he spend it?
Resident Fellow Roger Bate
The Copenhagen Consensus, a group and process put together by Danish academic and world renowned sceptical environmentalist Bjorn Lomborg, answered this question last year. Experts on the best life-saving interventions in various fields reached a consensus on what provided the best bang for the buck if they were spending $50 billion. Their conclusions could be of use to Gates.
Top of the list of value for money aid investments was combating HIV-AIDS. Improving nutrition, opening up trade, preventing malaria and improving clean water delivery were some of the next best interventions.
The Bill and Melinda Gates Foundation should be commended for supporting HIV and malaria clinical research. However, it has avoided dirtying its hands by staying away from interventions on the ground–such as drug delivery, spraying insecticides to kill mosquitoes or running bed-net distribution and support programs–that would save lives today.
Furthermore, although vaccine research is important, vaccines for HIV and malaria are still a mirage and it should be remembered that there are millions who do not receive much-needed and widely available vaccinations for other ailments.
Indeed, the Gates Foundation, as with most aid agencies, has done little in any of the areas of prioritization identified by the Copenhagen Consensus. Aid agency chiefs, subject to the whims of politicians, who are under pressure from increasingly powerful interest groups (such as specific disease/country proponents), will never say that disease/country/approach A should take priority over the equivalent B, even if the case is obvious. In short, aid agencies often behave as though ignorant of basic economics, not optimizing scarce resources to save the most lives.
Lomborg’s exercise has contributed greatly towards forcing the aid community into prioritizing programs.
Importantly, many programs considered successful have been driven endogenously by poor country governments or the private sector, whereas many aid programs are not (or no more than rhetorically) endorsed by recipient governments. New aid announced at the G8 summit last year, as well as new money from Gates, must be properly targeted. Without full endorsement, provision of aid usually fails, as has been repeatedly demonstrated, most recently in The White Man’s Burden, William Easterly’s masterful book on the limits of aid.
Gates must also realize that aid flows reflect the cost of providing services for the poor, not the value of those services. As Easterly says: “Would Microsoft Corp promote an executive who bragged about setting a record for costs? Would Berkshire Hathaway invest in a business that headlined its remarkably high spending on office supplies? Unfortunately, the foreign aid business has a sad history of bureaucrats under heavy pressure to spend money on foreign consultants and four-wheel-drive vehicles but with zero pressure to find out whether that spending translates into the forever elusive ‘technical assistance’, ‘capacity building’ and ‘civil service restructuring’ that are supposed to help the poor.” Gates’s challenge–much harder in foreign aid than in business–is to make sure his final customers are satisfied.
The customers are the poor population, not government officials. Gates, similar to so many Western governments, has given money to poor country governments and inadvertently made them less accountable to their populations. Take Uganda, where about half of government revenue comes from aid.
As Ugandan political commentator Andrew Mwenda has explained, with more and more aid the Ugandan Government has less need to look after the electorate since it needs it less and less for revenue.
Aid can encourage the nepotistic patronage system in Uganda and weaken any parts of the private sector by pushing the corrupting influences of patronage into it. So whether it’s the hypothetical aid of Lomborg’s exercise or the real money of Gates and Buffett, it may do more harm than good.
Perhaps, after all, Gates is well-advised to just back disease research in Western countries; at least the money is not stolen or misused. Thankfully, Gates (let’s call him the G1) can be relied on to keep his eye on the ball and not be distracted when more immediate concerns arise; last year’s G8-Live 8 celebrity extravaganza for saving Africa is now mostly forgotten since Africa didn’t rate much of a mention at the recent G8 meeting in St Petersburg.
The G1 will likely perform better than the G8, but he still has his work cut out in finding the right interventions, funding the right groups to undertake them and not undermining fledgling democracies as he does it. It’s a much tougher job than becoming a multi-billionaire and only time will tell if he’s up to the task.
Roger Bate is a resident fellow at AEI.
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