- The Washington Times - Tuesday, October 31, 2000

If left-leaning critics of "globalization" really want to eradicate poverty and raise living standards, their task is clear: Stop cheerleading for more U.S. foreign aid.

Many anti-globalization advocates don't seem to realize that aid-based attempts to end worldwide poverty have not worked. The United States has spent $2 trillion in foreign aid during the past 50 years. The result: Of the 67 countries that received U.S. aid for the past 35 years, more than half experienced a measly 1 percent annual increase in their gross domestic product. And 19 of them are actually poorer today.

The track record of World Bank-spawned aid is equally dismal. Most Third World countries receiving World Bank loans are no better off today than they were in the 1970s when its massive lending programs began.

Philip Parker, an economics professor at University of California-San Diego, offers a novel theory to explain why foreign aid isn't working. In his new book, "Physioeconomics: The Basis for Long-Run Economic Growth," Mr. Parker finds Westerners mistakenly rely on universal standards for income and material consumption for a country. This "one-size-fits-all" attitude leaves underdeveloped countries with badly tailored economies and foreign aid that doesn't help them much.

The standards used by Western development agencies are derived from day-to-day experiences of Europeans, Japanese and North Americans. They are not based on conditions experienced by aid recipients in Asia, Africa and other parts of the world. In other words, foreign aid advocates assume people are poor if they don't consume the same amount of calories, use as much energy or wear the same clothing as Westerners.

Mr. Parker's theory is that "physioeconomics" a combination of climate, terrain and economics creates conditions worldwide that affect people and their economics in different ways. That means, for example, that the people of Finland buy more goods than the people of Equador do because the cold climate requires more housing materials and greater caloric consumption. Mr. Parker's data show that many Third World countries don't deserve to be dubbed "poor" by Westerners.

The World Bank and America's foreign-aid establishment ignore the fact that local conditions shape consumption patterns. Instead, they attempt to equalize country-by-country variances in per-capita income, even though these differences may in part be caused by such factors as human response to climate. Look at Costa Rica, whose economy actually outperforms many high-income countries. Yet, relying on universal standards, citizens of this tropical Central American republic are considered "poor" because they have lower income levels and consume far fewer goods.

Even within two regions of the same country one finds physioeconomics at work. In affluent Australia, Mr. Parker notes, Sydney and Darwin have equal living standards. But because Darwin is on the equator, the two cities' consumption patterns differ sharply.

Mr. Parker's thesis fits in well with that advanced by Peter Boone of the London School of Economics: that most foreign aid is geared to boost consumption, not the investment that spawns needed economic development. Others note that the lure of perpetual aid causes many Third World recipients to become dependent on outside assistance instead of on themselves. It also causes them to forestall implementing market-oriented reforms. Worse, buckets of American greenbacks typically create a free-market hazard by supporting inept state monopolies.

The old foreign-aid assumption that people living on the equator work less than their non-equatorial counterparts has turned into a waste of hard-earned taxpayer dollars (more than $12 billion every year). Across the Third World, it has seduced countries into growing dependent on "assistance" too often geared toward unrealistic objectives. It is time to stop using the current gauges for economic development and adopt Mr. Parker's theories. The world might be richer for it.

Julian Weiss is an international communications fellow at the Heritage Foundation.

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