Wednesday, May 28, 2008

Feeding The Tiger

Aid buys some great grandstanding opportunities

We all know about India. Following its eventual move away from socialist economics in the 90s, the Indian economy has been on fire. India's GDP is growing at 8-9% pa, its industries are booming, its giant companies are gobbling up our companies, and it's threatening us with the dole queue*. Politicos like Gordo routinely warn us that unless we jolly well pull our socks up, we'll be crushed.

And when you look at the long-term GDP projections produced by brainboxes such as Goldman Sachs, our future looks about as bright as a winded gnat trapped under the foot of a bull elephant:

There's only one thing for it - we'd better ask India for economic aid pronto.

But... but... what's this? Far from asking them for aid, we're actually giving it to them. According to the Department for International Development (DfID), India is the top recipent of UK aid: over the last five years we've given them £1o45m, and there'll be a further £825m by 2011.

To which the only response is why?

Why are we supporting a burgeoning economic superpower that will be an increasingly fierce competitor in future?

According to DfID:

"DFID believes that the eradication of poverty in India is central to achieving success in global war against poverty. The purpose of our programme is to support the Government of India achieve its poverty reduction targets and to help India meet the Millennium Development Goals."

Sorry... "the global war against poverty"? What possible link is there between the rural poor in fast-growing futurescope India, and the hopelessness of the Dark Continent? Why are we being taxed to pay for the Indian poor? Why doesn't the Indian government tax its own booming economy? Or why doesn't it, say, use some of the money it currently spends on defence?

Liam H, a BOM correspondent, points out that India is a nuclear power, and its armed forces seem to be better equipped than ours. He notes that while our servicemen are forced to fly those decrepit unsafe Nimrods:

"In 2004, the Indian Air Force ordered the Phalcon Airborne Early Warning radar system from Israel Aerospace Industries, which is considered to be the most advanced AEW&C system in the world. The air force will use newly-acquired Ilyushin Il-76 Phalcon as a platform for these radar.

Also India operates the SU-30 which is probably one of the world's most advanced jet fighters. All in all, India's airforce makes ours look a little puny (check out IAF's Top-Gun style website here)."

Here's how India's defence spending has ramped up:

So why am I paying taxes for health and education services in India, when the Indian government is spending all that dosh on arms? Why aren't we spending the money ensuring our own servicemen are properly equipped?

We've blogged moneypit DfID before (eg see here). This year we British taxpayers will shell out £4.9bn on the government's international aid programme; that's £200 for every British household. And even setting aside the highly contentious issue of whether taxpayers should be forced to contribute to overseas charity in the first place, we get atrocious value for money.

For example, as regular BOM readers will recall, DfID currently spends an extraordinary 12% of its budget on our old friends the consultants. And according to ActionAid, around one third of that £5bn pa goes on "phantom aid", which does not benefit the world's poor at all.

Large amounts of cash spent far from home, well away from taxpayer scrutiny, has always been a surefire recipe for waste. And in the case of India, we're spending it on something that is quite possibly damaging Britain's vital economic interests.

(HTP Liam H)

*Footnote Actually I don't believe that an economically strong India threatens us with the dole queue at all. We should welcome Indian growth, as we should welcome Chinese growth. Yes, India might corner the market in software development, and China might end up producing all the world's electronic goods (although I doubt both). But so what? We'll find other things to earn a crust, things we will be able to sell to them with their new higher incomes. That's been the magic of global trade for half a millenium. Although that doesn't explain why we should be paying tax to fund their health and education services.


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