Speech to Canada Club, Manchester

10th December, 1965

I am not telling this audience anything they have not heard many times before when I mention that today at least half of the human race command an income per head lower than what the peoples of Europe and North America regard as the minimum necessary for bare subsistence; or that the numbers of the human race are increasing at a rate which would double them again in a quarter of a century.

These facts are so portentous that almost any action or policy which appeals to them for justification can be reasonably sure to enjoy immunity from critical examination. When hundreds of millions are starving, anyone who ventures to question the wisdom and utility of gifts to the hungry risks being denounced as callous. When whole sub-continents are destitute of capital, anyone who argues against providing them with it cheap or gratis is liable to be pilloried for inhumanity.

Yet it can be no good thing for anybody that policies and actions should be sacrosanct from criticism. Policies and actions are not humane simply because the motives of their authors and supporters are, or profess to be, humane: they may, notwithstanding, be foolish, futile, or positively harmful to those whom they purport to benefit. If so, then to expose them to examination is truer humanity than to shy away from the whole subject for fear of the attendant abuse. That is why, being convinced that the current group of policies known collectively as aid to ‘underdeveloped’ or ‘developing’ countries is in fact both futile and harmful to those countries themselves, I wish to add my voice here today to those of others which have already been raised to that effect.

Let me say at the outset that I am concerned only with the policies and actions of states – not of individuals, or of any organizations which have not the power to tax or to borrow on the security of taxation. Every man has a right to be charitable with his own, and if anyone wishes, in St. Paul’s words, to ‘bestow all his goods to feed the poor’, one might indeed, with Octavia Hill, seek to dissuade him if he was going the wrong way about to achieve his end, but as a politician I would hardly feel impelled, or perhaps even authorized, to try to interpose. There are numberless channels, religious and secular, along which charity – or ‘aid’, if you prefer – flows from richer to poorer, from people in one country to those in another, with consequences spiritually beneficial and perhaps sometimes materially so too.

Nor am I referring to acts of international comity, whereby one nation makes a gift to another nation in emergency or as a token of sympathy after some unforeseen disaster. This is as much a matter of international decency as the expression of national regret upon the death of a monarch or the assassination of a president.

Totally distinct from these types of action are the policies by which nations set out to accelerate the development, or to raise the standards, of other nations by making them loans or gifts of money or services, either direct from government to government or through some international agency. It is these policies which more and more people are coming to realize are fundamentally misconceived.

These gifts or loans are an enforced diversion of part of the income of the citizens of the donor countries, which is then placed, directly or indirectly, at the disposal of the recipient governments. Some, though not all, of that income would otherwise have been saved; that is, would have taken the form of capital goods rather than of current consumption goods. Some, indeed probably most of it, is saved by the recipient governments; that is, it is spent on capital goods rather than current consumption goods.

Now, there can be no doubt about the benefits of investment in less developed countries by savers in more developed countries, wherever the anticipated return on that investment – all things, including political risks, considered – is as high as, or higher than, that foreseeable in any alternative direction. That is what results automatically when capital is invested on private account. Those resources of the developing countries which are most valuable, and which will therefore earn most return for them, are selected by this process, and the conditions – political and economic – which will endow those resources with most utility are indicated. Private investment is the true form of ‘charity’ between nations, which, like Shakespeare’s mercy, ‘blesseth him that gives and him that takes’.

May I add that this includes not only private investment but trade? When we refuse to import articles which can be produced or manufactured and conveyed to our shores from the developing countries at less cost than we can produce or manufacture them at home, and thus prevent those countries from in turn importing the goods and services which we can produce efficiently and they cannot, we harm both ourselves and them. By so doing we are in effect denying them part of the value of the resources which they do possess. A Mancunian, for instance, who talked about aid to developing countries but agitated against cheap cotton imports from the Commonwealth would be guilty, whether he knew it or not, of humbug.

On the other hand, what the aid programmes set out to do is to bring about the investment in the developing countries of resources which would produce greater value if invested elsewhere, or if invested in the same countries but in different directions. This is contrary to the interest of both parties to the transaction. How, one can see, if one imagines that such a policy had been put into force earlier. Suppose the advanced countries, instead of investing their savings to best advantage at home or overseas during the past one hundred years, had deliberately invested them less advantageously in other directions. Will anyone assert that the now underdeveloped countries would have been better off because America and Britain and Germany were worse off? On the contrary, it is the advance of the developed countries which has endowed the resources of the developing ones with the value which they possess.

‘But’, people say, ‘in order to exploit those resources, these countries first need the infrastructure of docks, roads, railways etc., and as that cannot be profitable, we ought to give them the necessary capital or lend it at a lower rate than obtainable elsewhere.’ Not so. It is not economic to exploit a mineral deposit, unless it is also economic to provide the transport facilities to take the mineral to where it is demanded. To pretend otherwise is fudging the calculation, and any business and any country which acted on this principle would speedily be ruined. Either the whole process is economic or no part of it is.

What is more, there is no reason to anticipate that resources channelled to the developing countries through intergovernmental aid will be applied, even within those economies, to the purposes most advantageous to them economically. Quite the reverse, the fact that they are supplied to and through governments eliminates at the outset the market forces which might at least have selected the most profitable applications, and gives the maximum play to political factors, with their built-in bias towards prestige projects and works of national, partisan or even personal glorification and self-advertisement.

‘But from whence, then’, persists the apologist of aid programmes, ‘do you suppose the investment and initiative is to be derived which you yourself must surely admit is indispensable to raising the standard of life in these unhappy subcontinents?’ The question deserves a serious, a solemn, above all a truthful answer. First, then, there is not a happy ending to every story in real life, nor a solution at all, let alone a satisfactory one, to every problem. History at least shows us that, and we have not yet walked out of history. Because millions of human beings are hungry and appear to us wretched, it does not follow that therefore it is within our power to make them full and, in our own rather peculiar application of the term, happy. If the Western nations were to confer on the rest of mankind not, as at present, just a tiny fraction of their goods and capital, but were, literally, in the words of the epistle, to ‘bestow all their goods to feed the poor’ their wealth would only disappear, like a snowflake on boiling water, into the maw of these vast and astronomically increasing populations, and the outcome would be a common level of poverty and incompetence.

Whence, then, if from anywhere, are the means of improvement to come? There is only one possible answer: essentially from within. The investment and the initiative which made possible the development of the Western economies was not subscribed or donated from outside; it came from within. The rise of Japan, in far less than a century from Admiral Perry’s arrival, to challenge the Western countries in technology and production, was not because she was spoon-fed with grants and uneconomic loans from a benevolent Europe or America: it was due to the spirit and character of her people and their aptitude and appetite to learn. The great, the only truly beneficent gift we have to offer is the example of that which has made the West productive – capitalism and enterprise. But it is a gift which implies the power and will to receive it: and that, although we can teach and demonstrate by precept and by example, it is not in our power simply to confer. In short, the secret of aid to the developing countries is not capital itself: it is capitalism.

So far I have assumed that the motive of all aid programmes is altruistic, and have criticized only the method as misconceived. One sometimes finds, however, that, at a certain point in the dialogue, a sly look comes over the interlocutor’s face. ‘Well, of course’, says he, ‘I dare say there is a lot in what you are saying; but surely we have to try to keep these countries from going Communist; and if the money does that, you must agree it’s well spent!’ Leaving aside the fact that there is no visible correlation between standard of living and liability to Communism, I question both the policy and the wisdom of this approach. If inter-government aid is inefficacious to produce the results held out for it, the outcome is more likely to be disenchantment and recrimination than gratitude and a common front against the alternative philosophy of Communism. But even if the benefits were real, the gratuitous conferment of benefits by one nation on another in the hope of procuring its friendship or cementing its alliance is a method notoriously doomed to disappointment, as the Americans have proved again in the years since the war. Certainly the demands made by the governments of some of the developing countries for grants or favourable loans are often backed by more than a hint that if not satisfied, they have an alternative on the other side of the Iron Curtain; but to pay up has never been the right method of dealing with blackmail.

These conclusions are not, it seems to me, such as should be unpalatable – much the reverse – to a nation which by its trade and investment, not to mention its own internal progress, has done more than any other to promote economic development in all the continents. They ought rather to strengthen in us the hope that the more efficiently we learn to use our own resources, the more chance there is that, both materially and by example, we may be of help to others.