By almost any measure, the world is better than it has ever been. People are living longer, healthier lives. Many nations that were aid recipients are now self-sufficient. You might think that such striking progress would be widely celebrated, but in fact, Melinda and I are struck by how many people think the world is getting worse. – Bill Gates, 2014 Gates Foundation Annual Letter

Bill Gates is one awesome dude. In addition to inventing Windows, revolutionizing the PC, and making nerds cool, he has thrown $26 billion of his own money toward solving the supposedly intractable problems plaguing the world today. From absolute poverty to child mortality to education, Bill (through his Gates Foundation) continues to bring positive change to the world.

Bill’s 2014 Gates Foundation Annual Letter caught my attention (PDF version). I think it’s worth a read if you have time. If not, I’ll highlight the most important parts here.

Debunking the 3 myths that block progress for the poor

Bill and Melinda wrote the 2014 Letter to debunk these three myths:

Poor countries are doomed to stay poor Foreign aid is a big waste Saving lives leads to overpopulation

Myth 1: Poor countries are doomed to stay poor.

This simply isn’t true. Bill takes a look at the changes that have occurred during his lifetime. A single lifetime. 50 years ago the world had three types of countries: developed or first world countries, soviet bloc countries behind the Iron Curtain, and developing or third world countries. Countries that were “developing” back then have now developed!

India, Brazil, and China , with a third of the world’s population, illustrate the point well. In the last 50 years, the real income per person increased fourfold in India, quintupled in Brazil, and expanded eightfold in China. Many other less populous countries have experienced similar successes.

As Bill points out,

There is a class of nations in the middle that barely existed 50 years ago, and it includes more than half of the world’s population.

But what about Africa? It will never amount to anything. Except it has made gains over the last 50 years too. Income per person in sub-Saharan Africa has increased over the last five decades. Since 1998, income per person has increased by two thirds from $1,300 to $2,200. This income level is still paltry compared to the incomes in more successful countries like China, India, and Brazil. But an increase in real income per person is still an increase. It leads to better lives, more opportunities, and further potential for growth and development.

To expand on the successes in Africa, Bill highlights the improvements in the health and education of the populace.

Over the last 50 years, life expectancy has increased from 41 years to 57 years in spite of the rise of the HIV epidemic

The number of kids in school has increased from around 40% to 75% since 1970

Fewer people are starving; more people have good nutrition

If getting enough to eat, going to school, and living longer are measures of a good life, then life is definitely getting better there. These improvements are not the end of the story; they’re the foundation for more progress.

As Bill says, the problems in Africa are still being solved, but life is much better today than it was 50 years ago. And a healthier, more educated populace is more likely to lead to long term economic growth.

Here’s a powerful prediction from Bill:

By 2035, there will be almost no poor countries left in the world. (I mean by our current definition of poor.) Almost all countries will be what we now call lower-middle income or richer. Countries will learn from their most productive neighbors and benefit from innovations like new vaccines, better seeds, and the digital revolution. Their labor forces, buoyed by expanded education, will attract new investments.

Given the improving conditions over the last several decades, Bill might be right. Let’s hope so. What a boldly optimistic sentiment!

In his Letter, Bill does call out some nations, like North Korea, that might not enjoy the same growth in prosperity that the rest of the world will enjoy. Without big changes, that is. War, politics, and geography will still impact the prosperity of some nations, but these countries will be the exception, not the rule.

Myth 2: Foreign aid is a big waste.

As a world, we don’t spend that much on foreign aid. The most generous donor nation, Norway, devotes a scant 3% to foreign aid. In the United States, the budget allocation is less than 1%. That 1% amounts to $30 billion of our taxpayers’ hard earned dollars. Hey, that’s a lot of money, even to a billionaire like Bill Gates.

Bill cites the amount of U.S. foreign aid spent on health initiatives like vaccines, bed netting to protect against mosquitoes, family planning, and life-saving pharmaceuticals. It totals $11 billion per year, or about $30 for every American. Of course it’s half of what we spend on farm subsidies each year and one sixtieth the amount budgeted for the military. When dealing with big numbers, it pays to put amounts in context.

What can $30 buy? We can vaccinate 120 kids against measles at $0.25 per shot.

Bill does some fancy math and figures out each $5,000 of foreign aid has saved one kid’s life. That’s a pretty good return on investment! If you’re thinking “hey, that’s just one more grubby mouth to feed”, stick around for the response to myth #3.

Sure there’s waste, fraud, and abuse. That’s an inevitable part of programs run by humans (instead of computers). I saw enough waste while working in state government to last me a lifetime. That’s not necessarily a reason to abolish state government altogether. If the problem is fraud, waste, and abuse and that forms a small part of the overall expenditures, then the target for reform should be the fraud, waste, and abuse, not the valuable programs in their entirety. Keep the baby, toss out the dirty bath water.

Bill gently lampoons Illinois as the poster child of fraud, waste, and corruption (hey, they are an easy target).

I’ve heard people calling on the government to shut down some aid program if one dollar of corruption is found. On the other hand, four of the past seven governors of Illinois have gone to prison for corruption, and to my knowledge no one has demanded that Illinois schools be shut down or its highways closed.

Well, I’m sure someone has demanded a complete cessation of all government in Illinois. But that’s beside the point. The proper remedy is to keep throwing the bad guys in prison and continue exposing the fraud publicly.

Bill makes short work of the “foreign aid breeds dependency” argument.

[The argument] misses all the countries that have graduated from being aid recipients, and focuses only on the most difficult remaining cases. Here is a quick list of former major recipients that have grown so much that they receive hardly any aid today: Botswana, Morocco, Brazil, Mexico, Chile, Costa Rica, Peru, Thailand, Mauritius, Singapore, and Malaysia. South Korea received enormous amounts of aid after the Korean War, and is now a net donor. China is also a net aid donor and funds a lot of science to help developing countries. India receives 0.09 percent of its GDP in aid, down from 1 percent in 1991.

Foreign aid hasn’t made every country prosperous and self sufficient. Yet. But the trend points toward that goal being met one day (perhaps within two decades as Bill suggests).

Getting back to the question of whether foreign aid is a worthwhile investment, Bill shares how health aid spending is a phenomenal investment.

When I look at how many fewer children are dying than 30 years ago, and how many people are living longer and healthier lives, I get quite optimistic about the future. The foundation worked with a group of eminent economists and global health experts to look at what’s possible in the years ahead. As they wrote last month in the medical journal The Lancet, with the right investments and changes in policies, by 2035, every country will have child-mortality rates that are as low as the rate in America or the U.K. in 1980.

To put it in perspective, a baby born in 1960 had an 18% chance of dying before celebrating their fifth birthday. Today, that figure has dropped to 5%. By 2035, only 1.6% of children won’t make it to age five. That’s about the same child mortality rates experienced in the United States in 1980. Pretty amazing progress within one lifetime (if it can be achieved). Of course the 2035 goal can only be reached with the right investments and changes in policies.

Myth 3: Saving lives leads to overpopulation

At first glance, it seems like a waste of money to save all of these lives in poor countries. We’re just creating more dependents with mouths to feed and bodies requiring medicines and vaccines.

In practice, the opposite is actually true. As child mortality rates drop in a given country, families choose to have fewer children. With high child mortality rates, families have to produce many kids to ensure decent odds of some children reaching adolescence and adulthood.

Melinda Gates (Bill’s wife), in writing the rebuttal to myth #3, explains:

Consider Thailand. Around 1960, child mortality started going down. Then, around 1970, after the government invested in a strong family planning program, birth rates started to drop. In the course of just two decades, Thai women went from having an average of six children to an average of two. Today, child mortality in Thailand is almost as low as it is in the United States, and Thai women have an average of 1.6 children.

This same trend has been observed as far back as the 18th century, when France experienced improvements in child mortality and saw 15 consecutive decades of lower birth rates. Over the intervening decades and centuries, Germany, Brazil, and many other countries all over the world have seen the same relationship between child mortality rates and birth rates.

As Hans Rosling, a professor at the Karolinska Institute in Sweden and one of my favorite data geeks, said, “The amount of children in the world today is probably the most there will be! We are entering into the age of the Peak Child!”

Countries see big boosts to productivity due to lower birth rates.

…[T]he virtuous cycle that starts with basic health and empowerment [of women’s reproductive options] ends not only with a better life for women and their families, but with significant economic growth at the country level. In fact, one reason for the so-called Asian economic miracle of the 1980s was the fact that fertility across Southeast Asia declined so rapidly. Experts call this phenomenon the demographic dividend. As fewer children die and fewer are born, the age structure of the population gradually changes…

Eventually, there’s a bulge of people in their prime working years. This means more of the population is in the workforce and generating economic growth. At the same time, since the number of young children is relatively smaller, the government and parents are able to invest more in each child’s education and health care, which can lead to more economic growth over the long term.

Fewer kids per family means parents and the government can spend more per kid to make them more productive and healthier. The focus switches to quality of children, not mere quantity. This intuitively makes sense. If you have seven kids, with the hope that at least four survive to adulthood, you may end up with seven mouths to feed and seven brains to educate. In contrast, if you have two kids and a 95-97% chance both kids will grow to adulthood, you only have two kids to feed and educate. Limited parental and governmental resources can be more sharply focused if there are fewer kids in the household.

Melinda’s comment sums up the answer to myth #3:

Saving lives doesn’t lead to overpopulation. In fact, it’s quite the opposite. Creating societies where people enjoy basic health, relative prosperity, fundamental equality, and access to contraceptives is the only way to secure a sustainable world. We will build a better future for everyone by giving people the freedom and the power to build a better future for themselves and their families.

Parting thoughts

Bill and Melinda make a compelling case for supporting foreign aid. There are real results from decades of foreign aid. More productive economies and real growth in income per person. Lower child mortality rates. Huge leaps forward in eradicating or reducing preventable illnesses and disease.

But hey, sometimes numbers lie. Statistics can be manipulated to prove many different points. One big piece of evidence to support Bill and Melinda’s thesis as presented in their 2014 Letter? The $26 billion they have donated to their Gates Foundation (which in turn funds other foreign aid non-profits). Warren Buffett heard about Bill and Melinda’s little Foundation and he has been donating billions each year as well. He’s a pretty clever guy, and very focused on efficiency and effectiveness when he deploys capital. I imagine the same can be said of his philanthropic activities.

Time is a precious resource and the stakes are high. In Bill and Melinda’s 2014 Letter, they suggest that some pretty lofty goals can be achieved within two decades (bringing virtually all countries to “middle income” status and reducing child mortality to 1.6%, to name two such lofty goals). Only time will tell whether these goals come to fruition. One thing is certain: without continued focus on improving conditions through foreign aid, these goals won’t be achieved.

In terms of political philosophy, I find myself in favor of the concept of “equality of opportunity” and less concerned with “equality of outcome”. There will always be differences in outcome based on luck and individual effort. But without a little extra help to provide a somewhat even starting point, there is no way some countries can ever climb out of destitution and poverty. It would be a shame if the next Bill Gates never had the chance to create something valuable for the world just because he was born in a place that provided zero opportunity.

If you want to read the full 2014 letter, please do so here: 2014 Gates Foundation Annual Letter

Bill and Melinda, thanks for your eloquent rebuttal to these three myths on aid for poor countries.

Bonus!!: Cool interview from The Economist with Bill Gates on this same topic. Choice quote:

The poor are not getting poorer!

Updated 12/2/2014 to correct the text that implied farm subsidies were twice the $30 billion spent on foreign aid. The farm subsidies (around $20 billion per year, not counting nutrition-related spending like free school lunches, SNAP/food stamps, and WIC) are roughly double the $11 billion spent on foreign aid health initiatives. Thanks to commenter “Daniel” for pointing out this inaccuracy in the originally published article.

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