will debt relief really help?

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Will debt relief really help?Denise Froning aa Policy analyst with the Center for International Tradeand Economics , The Heritage FoundationPublished online: 07 Jan 2010.

To cite this article: Denise Froning (2001) Will debt relief really help?, The WashingtonQuarterly, 24:3, 199-211

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Denise Froning

Will Debt Relief Really Help?

I,̂n 2000, debt relief for what the International Monetary Fund(IMF) and World Bank term Heavily Indebted Poor Countries (HIPCs) wasthe cause of the moment in development theory, attracting international at-tention and broad agreement that it was the single most important piece ofthe poor-country development puzzle. Widespread consensus emerged thatinternational lenders must forgive the HIPCs' debt burden. In the ebb andflow of development trends, debt relief thus had its moment in the sun, andrich countries rightly agreed to forgive some of the debt—although theWorld Bank and the IMF did not.

This relief, although limited to bilateral debt, will help. But when the G-7and other advocates of development move on to the latest fad in the quest forsolutions to the problems of the world's poorest countries—whether disease,education, or some yet unmentioned ill—all the attendant causes of debt re-lief will still need to be addressed.

All of these problems are long-term concerns. None of these countrieswill be wealthy tomorrow, nor will they solve all their troubles immediately.For G-7 nations, perhaps especially the United States, accustomed to focus-ing on the next quarter's profits rather than long'term returns, the tempta-tion will likely be to give up too soon. That decision would be a mistake.

The fact is that these poor countries face far too many problems in addi-tion to overwhelming debt, many of which are precisely what caused thedebt accumulation in the first place. Many factors—disease, poverty, lack ofeducation, lack of institutions, lack of transportation infrastructure, lack offood, lack of business, lack of security, lack of foreign investment, and lack ofprospects—continue to stifle the economic growth of these countries, and

Denise Froning is a policy analyst with the Center for International Trade and Econom-ics at The Heritage Foundation

Copyright © 2001 by The Center for Strategic and International Studies and theMassachusetts Institute of TechnologyThe Washington Quarterly • 24:3 pp. 199-211.

THE WASHINGTON QUARTERLY • SUMMER 2001 199

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they will continue to do so after debt relief. Without a change in these cir-cumstances, debt relief will be only a short-term palliative, and these coun-tries will find themselves back in the same predicament that they now face.

What Is the Problem?

Bad policies and their attendant outcomes, both within and outside thesecountries, contribute to the "problem of poverty." Poor countries must im-prove domestically in a number of areas; their poverty cannot be attributed

entirely to external factors. Although thesecountries face some valid domestic woes,many of the excuses for poverty are invalid. Alack of natural resources, for instance, doesnot fully account for the poverty the HIPCsface. Africa, where most of the world's 41HIPCs are located, is awash in natural wealth,from diamonds, gold, and oil to arable agricul-tural land.1 As George Ayittey observes, thecontinent has abundant natural potential.This potential, however, remains largely unre-alized. Citing examples such as Russia, some

Debt relief, althoughimportant, was thecause of the momentin developmenttheory...

have argued that such resources are more a curse than a blessing, but that ar-gument does not explain the lack of development. Country after country hasbecome rich based on these very resources.

Some maintain that lack of progress among HIPCs is due in part to geo-graphical location and the affliction of disease that accompanies that loca-tion. The impact of disease, from malaria to cholera to AIDS, is indeeddebilitating; but even if disease were entirely eliminated, the lack of institu-tions (or the persistence of corrupt ones) would keep the people of thesecountries poor.

I do not belittle the effects of disease or suggest that people should aban-don attempts to mitigate the health crisis in the HIPC countries. Ratherthan quibble about which cause of poverty should be considered paramount,however, we must first acknowledge that the troubles of these countries arelegion and that each must be addressed for lasting development to takeplace. For example, a couple of years ago, before the debt-relief craze, cor-ruption was the cause du jour. The World Bank and other august institu-tions held conferences, everyone nodded their heads sagely, and learnedpeople everywhere agreed that corruption was corrosive and that somethingmust be done. Although work to address this particular problem undoubt-edly continues, the international focus on corruption has shifted to other

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Will Debt Relief Really Help? |

contributing factors of poverty; yet corruption's effects remain as debilitat-ing as ever.

The construction of sound institutions, as one example, ought not to beabandoned because other problems exist. In fact, admitting that the impedi-ments are many and related reduces the risk of "fad" development, in whichwhatever currently fashionable panacea that captures popular attentionreigns while other crucial issues are forgotten.

BAD LEADERS

Ayittey makes the important distinction between the African people andthe leaders of African nations. It is not the African people who squander de-velopment opportunities. Too often, it is African leaders, as Ayittey has ob-served, who seize both native wealth and foreign aid while plunging theircountries into war and plundering their money, both through the exploita-tion of resources like diamonds and by stealing massive amounts of foreignaid.2 As the Freedom House annual survey of political freedom points out,"Only 21 African countries (40 percent) areelectoral democracies."3 The African peopledo not choose these leaders, but they mustsuffer the consequences of these leaders' poordecisions.

CORRUPTION

...the attendantcauses of debt reliefstill need to beaddressed.

Despite its trendiness as an issue, corruption isa truly debilitating factor in the poorest coun-tries. Indeed, much of Africa reflects the results of corruption undermining ef-forts to foster emerging market economies. Corruption is a cancer on the mostlegitimate efforts at development in many African countries, affecting regula-tion as well as property rights and discouraging economic progress. Althoughhardly unique to Africa or to developing nations, corruption is all the moredamaging to them; it creates obstacles to development that an already estab-lished, large-scale economy might survive but that can prove fatal to fledglingefforts at market development in small economies.

Part of Africa's development problem, as economist John Mukum Mbakuwrites, is bureaucrats who are often

members of the politically dominant group and have significant influenceover the allocation of resources. Under these conditions, civil servants be-have like interest groups whose primary objective is to put pressure on thepolitical system in an effort to redistribute wealth to themselves. "In coun-tries with poorly constructed, inefficient, and non-self-enforcing constitu-


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[ Denise Froning

tional rules, opportunistic behavior (including rent seeking) [is] usuallyquite pervasive.... Excessive regulation of economic activities creates manyopportunities for rent seeking, including bureaucratic corruption.4

Mukum Mbaku's solution: reform the laws to remove the state from directcontrol over the economy—a system which leads to profit skimming, if notoutright profit seizure.

Corruption compounds itself. Sometimes because of profit seizure, lower-level bureaucrats themselves are underpaid and regard taking bribes as nec-essary for their survival. The whole system becomes rotten in layers, withthe entire structure threatening to tumble down if one attempts to reformone part of it.

BAD INSTITUTIONS

Ayittey delineates four institutional pillars5 that are essential for lasting devel-opment in Africa: an independent judiciary, an independent central bank,free media, and neutral armed forces. In HIPCs and other poor countries,these pillars are often missing, which is why foreign assistance—even by thoseagencies whose sole purpose is giving aid—has proved ineffective overall.World Bank analysis of past loans and credits concludes that assistance "has apositive impact on growth [only] in countries with good fiscal, monetary, andtrade policies."6 In countries with poor policies, aid has had a negative im-pact. Robert Barro's analysis reveals that countries with "good fiscal, mon-etary, and trade policies" are more likely to experience positive economicgrowth whether they receive assistance or not.7 Meanwhile, regardless of howmuch assistance they have received, countries with poor economic policieshave not experienced sustained economic growth.8 Clearly, sound economicpolicies, not foreign assistance, are the key to development.

How Rich Nations Exacerbate the Problem

For poor countries to succeed in the international economy, they must haveaccess to the markets of developed countries. Yet the United States leviesthe most onerous of its tariffs—as high as 45 percent—against some of theseimpoverished nations.

The U.S. weighted-average tariff rate of only 2 percent on worldwide im-ports is low by global standards,9 but rather than apply this rate evenlyamong nations, the United States applies tariffs according to the type ofproduct imported. The goods that face the highest U.S. tariffs are preciselythose that the poorest countries produce: agricultural goods, textiles, andapparel. Combined with the impact of quotas, the U.S. tariff structure pre-


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jound economic

policies, not foreign

assistance, are the

key to development.

sents a significant obstacle to any country struggling to create even an ini-tial presence in the world economy.

U.S. weighted-average tariff rates vary widely when plotted along lines ofthe exporting countries' economic wealth. Countries whose inhabitants earnan annual per capita gross domestic product (GDP) of more than $25,000face an average U.S. tariff rate of 2 percent. Twenty-five countries with an-nual per capita GDPs of less than $1,000—approximately the amount that aminimum-wage worker in the United States earns in one month—face tariffrates greater than the U.S. average.

This disparity in U.S. tariff rates exists be-cause poor countries tend to export many ofthe commodities that are subject to high tar-iffs in the United States and other wealthymarkets. Low-income nations develop indus-tries in which they have a comparative advan-tage and which provide goods and servicesthat meet the basic needs of their people. Theagricultural, textile, and apparel industries arelabor-intensive and do not require sophisticated machinery or large amountsof capital to make a profit. The resource they do require, and the resource—sometimes the only resource—that developing countries have, is people.

The United States imposes absurdly high duties on the very goods forwhich poor countries most need a market, effectively pricing HIPCs out ofthe market. For example, Gambia, which has a GDP per capita of about$325 per year, faces duty rates on exports to the United States ranging from8.8 percent on woven cotton fabrics to 11.8 percent on textile outerwear to15.4 percent on women's clothing; the tariff on women's clothing is almosteight times the U.S. average tariff rate of 2 percent. The notion thatwomen's skirts from Gambia are going to flood the U.S. market, overwhelmAmerican textile factories, and send Ann Taylor out of business is clearlypreposterous. In fact, if Gambia exported its entire economy to the UnitedStates, it would amount to less than 0.005 of 1 percent of total U.S. GDP.

Other examples of U.S. protectionism against HIPCs are just as absurdand needlessly damaging. Burkina Faso, a landlocked nation subject todroughts and desertification (both of which make agriculture a difficult en-deavor, to say the least), has an annual GDP per capita of about $215. Itsmain exports are cotton and gold, and the United States is not one of itsprincipal markets. Nonetheless, Burkina Faso faces a 33.3 percent tariff onwhatever outerwear it might attempt to send to the United States. IfBurkina Faso—which faces high costs in exporting everything because of itspoverty and landlocked nature-—somehow manages to get a coat to theUnited States, that coat is instantly taxed at a third again its cost.


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Likewise, Malawi produces a total GDP of only $1.8 billion—just 0.02percent the size of the U.S. economy—but faces a U.S. tariff rate of 32.8 per-cent on exports of suits and coats (raincoats excluded). Presumably, rain-coats fall under "outerwear," which faces a 15.3 percent tariff when enteringthe U.S. market.

Ironically, the United States has said it wants to help these very countries!The entire economies of these HIPCs, much less their total exports, are araindrop in the ocean of the U.S. economy. The same situation is true forother wealthy nations like those of the European Union (EU). It would costnothing for developed nations such as the G-7 countries to eliminate all du-ties and quotas on HIPCs, but that act could mean a lot to the Malawian whocan expect to earn $160 this year—the proverbial "less than a dollar a day."

An opportunity to use the resources they do possess—people—to buildthe sort of labor-intensive industries that are the only comparative advan-tage of poor countries could lead to long-term development. These high tar-iffs and continuing quotas, however, discourage development of suchindustries. Who in these poorest countries can afford to risk precious moneyto build a factory producing goods for which no market exists?

On the other hand, by gaining access to the world market, where the de-mand and remuneration are much higher than in domestic markets, poorcountries can acquire more capital. This capital in turn fuels further produc-tion, increases savings, and fosters the development of new industries thatcan create further economic growth.

What Is the Solution?

Breaking the cycle of indebtedness will require several actions.

FORGIVE DEBT

Among those actors who must act on debt forgiveness are the World Bankand IMF, which refuse to forgive the debt HIPCs owe to them even thoughmultilateral debt accounts for as much as 80 percent of overall debt in someof these countries. The policies of these lenders perpetuate the debt cycle,forcing indebted countries to continue to depend on new aid in order to payoff old debts. This situation will never lead to sustainability.

The debt crisis in poor countries is real. A long-term solution requires to-tal forgiveness of existing bilateral and multilateral debt, which is unlikely tobe repaid in any event, and ending the debt cycle by eliminating bilateraland multilateral assistance. Countries must foster their own economic poli-cies that attract private-sector credit and investment and that have provento be the best means of achieving long-term, sustainable economic growth.


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I he United States

levies the most

onerous of its tariffs

against impoverished

nations.

REMOVE BARRIERS TO GLOBALIZATION

Dani Rodrik cites "a long list of admission requirements" imposed on coun-tries that try to join the world economy today.10 He's right: a thicket of pro-tectionist policies has sprung up around the global market, impedingdeveloping countries' progress toward wealth. Of course, regardless of theprotectionist behavior of other nations, rich or poor, it is crucial to HIPCdevelopment that the HIPCs themselves unilaterally lower their own barri-ers to trade and foster sound institutions in-ternally. These measures will benefit theHIPCs regardless of what other countries do.

Nonetheless, the impediments to whichRodrik refers do exist. Therefore, rich coun-tries should give the HIPCs time to imple-ment the Uruguay Round obligations towhich they have committed themselves inthe World Trade Organization (WTO), rec-ognizing that poor countries face very highcosts in their efforts to liberalize. Among theWTO's 140 members are 109 developing ortransition economies. The cost of implementing just three WTO agree-ments—the sanitary and phytosanitary measures, the customs valuation,and the TRIPS (Trade-Related Aspects of Intellectual Property Rights)agreements—is $150 million for each developing country."

For such countries where, as Rodrik remarks, $150 million may amountto a full year's development budget, implementation is a huge task. Clearly,for these countries to comply with the TRIPS or other agreements in anyreasonable amount of time (reasonable from any perspective, rich or poor),they need some assistance. Thus, wealthy countries should increase theircommitment to providing educational advice on how to implement suchagreements and should be receptive to creative alternatives with respect toimplementation by those countries that may lack the infrastructure devel-oped countries take for granted. Also, rich countries must be patient andrecognize that obstacles will have to be resolved along the way.

ENCOURAGE TRADE THROUGH REGIONAL CUSTOMS ARRANGEMENTS

Encouragement can include strengthening the free-trade role of such exist-ing customs unions as the Southern African Development Community(SADC). For many of the HIPCs, multilateral agreements on the W T Oscale may simply be too big an aspect of modern globalization to undertakeat present. Without giving up on the multilateral endeavors to which they


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P

have already committed, they may need to focus on more manageable liber-alization, through bilateral or regional negotiations.12 Multilateral advance-ment of free trade is ideal, but in an imperfect world, the perfect often mustgive way to the achievable.

Establishing a common trading system such as a regional trade union willallow these poor countries to pool their limited resources to establish a cus-

toms framework. At the same time, each countrycan gain expertise in building the institutional el-

overty is notdue to a lack ofresources.

ements of a modern economy without bearing thecost of modernizing on its own. Regional customsarrangements also alleviate the trade burden forlandlocked countries, including some HIPCs,which face dramatically higher trading costs be-cause they must transport goods through a neigh-boring country to reach a port.

Notably, however, these regional customs unions often have not met theirown trade liberalization commitments for various reasons. Sometimes, mem-bers delay pledged liberalization due to war or the fear that trade constitutesa threat to their own industries—as Tanzania did when withdrawing fromCOMESA (the Common Market for Eastern and Southern Africa). In suchcircumstances, the HIPCs and other poor countries must take responsibilityfor their own actions and honor the free-trade commitments they have al-ready made, which will foster economic growth in the long run even if tradeflows do not rise significantly in the short term.

ELIMINATE ALL TARIFFS AND QUOTAS ON H I P C S

Rich countries should lower the entry fees HIPCs pay to join the globaleconomy by removing trade barriers imposed on these countries. Both theUnited States and the EU have passed legislation intended to increase mar-ket access for developing countries. The EU recently proposed duty-free ac-cess to its market for 48 poor countries in its "Everything But Arms" plan;the United States enacted the Trade and Development Act of 2000 to in-crease access to the U.S. market for poor African and Caribbean countries.

Both of these initiatives, however, offer only limited market access im-provements in sectors that would most benefit these developing countries:textiles and some agricultural goods in the U.S. market; sugar, rice, and ba-nanas in the EU. Moreover, both efforts serve domestic protectionist inter-ests far more than they promote economic development in poor countries.For example, under the EU's proposal, tariff reductions on rice and sugarwould not even begin until 2006. Because 2006 is also the year in which theEU's agricultural subsidy program, or Common Agricultural Policy (CAP), is


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due for its next review, the likelihood that those tariffs will be eliminated oreven reduced is questionable.

Aside from denying market access to developing countries, the CAP is verycostly to the world economy, around $75 billion annually.13 Two-thirds of thecost ($49 billion) is borne by Europeans in the form of higher prices, inefficientproduction, and economic distortions. The remaining $25 billion—roughlyequal to the total output of Burkina Faso, Gambia, Malawi, Cameroon,Guinea-Bissau, Madagascar, Mali, and Mozambique—falls on countries outsidethe EU in the form of lost agricultural export opportunities in Europe.

The United States also maintains barriers in the textile and apparel sec-tor that impose enormous costs on U.S. citizens as well as on developingcountries. The annual cost imposed on foreign countries by U.S. textile andapparel barriers ranges from $4 billion to $15.5 billion.14

The European CAP and U.S. textile and apparel barriers impose a signifi-cant burden on the world economy and are clearly an impediment to tradeliberalization. As illustrated above, the cost to rich nations of eliminatingthese barriers for HIPCs is minimal; but for many low-income countries, ag-ricultural and textile exports are a vital source of income and an importantpath to development.

INSTITUTE ECONOMIC FREEDOM

Ultimately, establishing sound institutions is crucial to development. For de-velopment to take place, a country must first establish a rule of law onwhich its people can rely. Laws must ensure protection of personal propertyrights, as Barro established in his studies.

Other actions to maximize economic freedom are also essential, includingminimizing the level of corruption and reducing the regulation that stifleseconomic development and hinders individual liberty. Hernando de Soto de-tails the very real way in which red tape can prevent the legal purchase ofproperty in some developing countries, requiring a number of steps that canreach into the hundreds through a number of agencies and last for years.15

Free-trade flows are also a key component of development.

The benefits of economic freedom are not just ivory-tower musings. Theyappear as tangible evidence in the real world. Regardless of geography orculture or the unique conditions of different nations and regions, economicfreedom, and through it the seeds of prosperity, can develop globally. Ex-amples include Chile in Latin America, Hong Kong and Singapore in theAsian tropics, and Estonia among the former Communist republics of East-ern Europe, not just the already vibrant Western economies.

Critics often dismiss such examples of success as isolated incidents thatare exceptions to the rule. They say, for example, that Hong Kong and


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Singapore are too small to be representative, or that Taiwan and South Ko-rea succeeded economically in a different era, and so on. These criticismsare excuses, not reasoned arguments. The fact that so few countries in thetropics have developed is indeed a sign of more things wrong than right inthe region, but to dismiss Hong Kong and Singapore is counterproductivewhen examples of success are needed instead. In addition, the notion of an"exception proving a rule" is scientifically backward: theories are provenwrong when an exception is found, not vice versa. The development ofHong Kong and Singapore, two tropical countries, disproves the theory thatdevelopment of the Western kind cannot occur in the tropics.

The next argument that inevitably arises about Hong Kong andSingapore—that they are not viable tropical success stories because of theirterritorial size—is equally invalid. As Jagdish Bhagwati observes,

The exceptionalism cited to explain away the East Asian performance hastaken some strange forms. For instance, it used to be asserted that HongKong and Singapore were small "city states" and therefore somehow notsubject to the economic laws applying to other "normal" nations. Ofcourse, many nations around the world are even smaller on dimensionssuch as population.16

Such exceptionalism was likewise applied to "exceptionally large" countrieslike India to justify development failures without regard to the success of theUnited States, a large country in every sense of the word.17 Is the economicgrowth of the United States then to be regarded as an exception? Wheredoes one draw the line? Is Switzerland too small to be anything other thanan exception to development success? Is Chile? Or Estonia?

In truth, countries will succeed or fail regardless of their size. Their per-formance depends far more on implementing successful institutions and ad-dressing their unique problems, as well as taking advantage of the uniqueattributes that each finds in its own situation. In a variation on the AnnaKarenina principle,18 each troubled country is troubled in its own way.

The standard excuses for lack of HIPC development, then, fall short.Tropics are not the reason: there are examples of tropical success stories.Lack of resources is not the reason: the tropics possess abundant natural re-sources, far more in fact than many other regions. Countries in the tropicsdo have the problem of disease. Along with the admitted problems of theirtropical location, however, their natural wealth offers a potential solution. Acountry like Nigeria that has an abundance of oil could spend all its petro-leum proceeds on vaccines if its government so chose. But it does not. In-stead, the money vanishes into private bank accounts. Why? Corruptionand lack of sound institutions, as well as the lack of a viable rule of law thatcould, if present, minimize the siphoning of profits into private hands.


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Reason to Hope

Success stories exist, often in places few would predict. Upon its establish'ment in 1949, the Republic of China on Taiwan had a poor, agriculturaleconomy that was inefficient and overregulated, and its people were not po-litically free. In the 1960s, however, the government began to institute eco-nomic reforms. It guaranteed private property and set up a legal system toprotect it, reformed the banking and financialsectors, stabilized taxes, gave public lands toprivate citizens, and allowed the free market toexpand. Taiwan has become one of the world'sfastest growing economies in recent years; inthe 1990s, its growth rate was 11 percent.

Taiwan also has developed a functional de-

tconomic freedom

is vital and, in the

end, the only truly

humane solution.mocracy and has conducted successful multi-party elections in both the legislative andexecutive branches of government after years ofrule by a repressive, one-party system. It is

proof that a nation that was under an authoritarian regime little more thana quarter-century ago can evolve into an economically thriving democracy.

For those who are convinced by the argument that Taiwan's developmenttook place at a time in which the costs of globalization were lower, Chile,whose GDP per capita has grown steadily since the government imposedeconomic reforms (except during a recession in the mid-1980s), offers amore recent example. Although the costs of this economic liberalizationwere often high, Chile demonstrates that institutions of economic freedomcan impel political liberalization as well, for it was Augusto Pinochet's mili-tary regime that first began to institute the reforms that continued and in-tensified under subsequent democratic governments. Today, Chile has amarket-oriented economy characterized by a high level of foreign trade.

An even more recent example of poor-country growth took place in the1990s, when the costs of joining the world economy were about as high asthey are now: Estonia, which emerged from half a century of Soviet domina-tion in 1991 only to find that its standard of living, which in 1939 had beenon par with Scandinavian cousin Finland, now lagged far behind. (Even to-day, Estonia's GDP per capita is one-seventh the level of Finland's.) Lackingan education in Western-style economic or political theory and having beentaught in the Soviet system, Estonians began building sound economic insti-tutions, privatizing state-owned industries, establishing a sound legal frame-work to attract foreign investment, liberalizing trade barriers, balancing thebudget, and stabilizing the currency (by tying it to the German mark). In 10


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short years, Estonia has become a model of economic development.Of course, some could argue that Estonia's location—near its Scandina-

vian neighbors, which were already developed countries—has eased itsprogress; certainly, having a high volume of trade with Finland has provenbeneficial. Yet some could also argue that Estonia's location—next to an un-predictable giant that just 50 years earlier overran it and destroyed its eco-nomic prosperity along with its sovereignty—is a distinct liability.Fundamentally, Estonia, like Chile, Singapore, Taiwan, and the rest of theworld's economic success stones, has maximized its assets and sought tominimize its liabilities. All countries must do the same, no matter how insur-mountable the liabilities may seem, in order to develop.

Three countries in three distinct regions, with three different culturalbackgrounds, and in three different time frames: all examples of the possi-bilities of growth through sound institutional reform. Addressing the plightof the HIPCs may seem an overwhelming endeavor, but that does not meanit cannot be done. Far from it; anyone who sees a solution to a particularHIPC problem should be encouraged to tackle it, for these countries needassistance in many areas.

I myself advocate the fundamental necessity of institution building. Eco-nomic freedom is vital and, in the end, the only truly humane solution, forhistory demonstrates that only under such a system do people have thechance to use free will to achieve maximum prosperity. But creating eco-nomic freedom also means building sound, corruption-resistant, indepen-dent institutions that minimize the ability of anyone, native or foreign, richor poor, to meddle in individual lives. Only then will debt relief really help.

Notes

1. George Ayittey, Africa in Chaos (New York: St. Martin's Press, 1998).

2. Ayittey, "How the West Compounds Africa's Crisis," Intellectual Capital, June 29,2000, located at <http://207.87.15.232/issues/Issue387/item9858.asp>.

3. Adrian Karatnycky, Freedom in the World: 2000-2001, located at <http: / /www.freedomhouse.org/research/freeworld/2001/essayl.htm>.

4. John Mukum Mbaku, "Bureaucratic Corruption in Africa: The Futility of Clean-ups," Cato Journal 16, no. 1, located at <http://www.cato.Org//pubs/journal/cj16n1-6.html >.

5. Ayittey, "How the West Compounds Africa's Crisis."

6. Craig Burnside and David Dollar, "Aid, Policies, and Growth," World Bank, PolicyResearch Department, Macroeconomic and Growth Division, June 1977.

7. See Robert J. Barro, "Rule of Law, Democracy, and Economic Performance," inGerald P. O'Driscoll, Kim R. Holmes, and Melanie Kirkpatrick, eds., 2000 Index ofEconomic Freedom (Washington, D.C.: Heritage Foundation and Dow Jones & Co.,2000), 31-51.

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8. David Dollar and Lant Pritchett, "Assessing Aid: What Works, What Doesn't andWhy," World Bank Policy Research Report, 1998, 2.

9. U.S. International Trade Commission, information available at <http: / /www.usitc.gov>.

10. Dani Rodrik, "Trading in Illusions," Foreign Policy (March/April 2001), located at<http://www.foreignpolicy.com/issue_marapr_2001/rodrick.html>.

11. J. Michael Finger, remarks at workshop on "Developing Countries and the NewRound of Multilateral Trade Negotiations," Harvard University, November 5-6,1999.

12. Traci Phillips, "Copyrights and Wrongs," Marquette Intellectual Property Law Re-view 4 (2000), in Foreign Policy (January-February 2001), located at <http:/ /www. foreignpolicy. com/issue_janfeb_2001/gnsjanfeb2001.html>.

13. Brent Borell and Lionel Hubbard, "Global Economic Effects of the EU CommonAgricultural Policy" in Reforming the CAP (Institute of Economic Affairs, 2000), 21.

14. Robert Feenstra, "How Costly Is Protectionism?" Journal of Economic Perspectives 6,no. 3 (Summer 1992): 163. See also Laura Baughman et al., "Of Tyre Cords, Tiesand Tents: Window-Dressing in the ATC?" World Economy 20, no. 4, 409.

15. Hernando de Soto, The Mystery of Capital (New York: Basic Books, 2000).

16. Jagdish Bhagwati, The Wind of the Hundred Days (MIT Press, 2000), 31.

17. See generally Bhagwati, Wind of the Hundred Days.

18. The opening line of Leo Tolstoy's Anna Karenina: "Happy families are all alike; ev-ery unhappy family is unhappy in its own way."


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