Money Talk

It is difficult to say whether the Eighties will come to be seen as a decade in which the world was unusually obsessed with money, or merely guilt-ridden about the idea of such an obsession. Certainly television has transported the very hungry and the exceptionally greedy into our living-rooms. Both extremes have turned out to be subjects of morbid fascination: on the one hand the nameless, starving children of Ethiopia, on the other the wheeler-dealers of the international markets, the Michael Milkens and their hundred million dollar salaries.

Michael Lewis deals wittily with the bizarre and shameless world of the wealthy bond-dealers in Liar’s Poker. In Lords of Poverty Graham Hancock looks at the other side of the equation, the international aid industry which has grown up to assuage our guilt about the poor. It is a disturbing if imperfect indictment of the 60 billion dollar a year development aid business, a breathless polemic which every prospective aid-worker should read. Targeting the bloated official aid organisations, Hancock challenges our most basic assumption about the Third World: that it needs more money and expert assistance to make it succeed. He goes further than saying that aid is patronising and useless. He insists that it is harmful, both to Third World self-sufficiency and to the environment.

I have little doubt that many of those who have worked in Africa, inside and outside the aid business, will find themselves nodding sadly but vigorously in agreement. It is not just the old story of a benevolent concept badly executed in the field, although Hancock provides plenty of examples – from the refrigerators sent to Somalia with the wrong voltage to the emergency food which arrives too late to stave off disaster but just in time to undercut indigenous farmers at the next harvest. Then there is the repeated failure to consult aid recipients about local conditions, wasteful duplication of effort by competing donors, and the lasting damage of aid-driven resettlement programmes in Brazil and Indonesia. One of the more colourful examples of incompetence is the fish farm in Mali, funded by US aid, which produced its fish at a cost of 4000 dollars per kilo. Lords of Poverty, however, is much more than a list of mistakes. It questions the whole philosophy of aid.

One of the least endearing characteristics of aid officials is a public insistence that they have learned from past mistakes combined with a private determination to repeat those very mistakes for as long as possible. Grain donors – among them the US, Canada and Australia – have a habit of dumping their surpluses in developing countries, claiming credit for a gift of high nominal value, and promising quietly to stop soon. They know that it undermines the local market and often gives recipients a taste for imported wheat at the expense of domestic produce. If anyone doubts the debilitating impact of the aid circus on peaceful countries with agricultural and industrial potential, they need only look at Tanzania and Zambia. Each year in Zambia the regular and quite adequate staple corn harvest comes as a surprise to the Government, although not, of course, to the wretched farmers. Crops, already underpriced, lie rotting and uncollected with the inevitable arrival of the rainy season, for want of efficient management and a few trucks.

The Government does not really mind, and has no need to do more than make a telephone call to the World Food Programme. In fact, the authorities have reason to be rather pleased. Instead of paying to gather and process their own harvest, they can receive free grain from donors and sell it to the townsfolk for local currency, thus allowing them to run an even larger budget deficit than would otherwise be the case. Meanwhile rural clinics are crying out for special rations of donated food for malnourished children, to be transported in donated vehicles. Unfortunately the vehicles are being used by aid-workers and government officials in the capital, while the rations rot in a state warehouse. I have seen such food myself, crawling with weevils and unfit for human or animal consumption after months and years in storage.

Hancock’s thesis is that aid helps to promote inefficiency, for all the talk in the Eighties of structural adjustment and aid ‘conditionality’. The inflow of money supports kleptocratic regimes which are both brutal and incompetent, and as often as not the cash finds its way into the pockets of rulers such as Mobutu Sese Seko of Zaire. Capital flight – back to the West – is a typical symptom of the disease of foreign aid. Even if aid money is targeted at peaceful development, the income simply allows governments to spend the money they save on weapons or graft. Various elements of Hancock’s argument are familiar to critics of the aid industry, but in gathering the damning evidence into one short book he makes it difficult to disagree with his assessment of development as a transaction between bureaucrats and autocrats.

Hancock is careful to spare the principle of emergency famine relief and the efforts of hard-working charities from his vitriol, reserving his most bitter condemnation for the unwieldy bureaucracies of the United Nations and the World Bank. It is opinionated stuff, and – if you accept that underdevelopment is a problem needing a solution – he may be fairly criticised for failing to provide his own answers, despite a half-hearted suggestion that aid be linked to human rights and curbs on military spending. Indeed, he is torn between his desire to see aid abolished and his desire to see it improved.

Lords of Poverty rightly insists that multilateral and bilateral aid organisations, funded by taxpayers, should be accountable for their mistakes. Again it is difficult to dispute Hancock’s accusation that they are far too secretive, but it takes a particularly bold politician in the West – and a particularly honest one in the Third World – to stand up and confront the holier-than-thou edifice of international aid. As the subtitle suggests, Lords of Poverty has it in for the cynicism and sumptuous lifestyles of the aid barons, and I am sure that the recent resignation of Jean-Pierre Hocke as UN High Commissioner for Refugees – over a scandal involving a fund for first-class airfares – came as no surprise to the campaigning Hancock. There is undoubtedly a gravy train mentality among expatriate aid officials and consultants in the Third World. It is also depressing that the ultimate success for an African has come to be seen as a job with the UN, which means a dollar salary, per diem allowances, and escape from the home country.

At its best, this book questions our preconceptions about aid and backs up the challenge with a wealth of incriminating detail. At its worst, it is shrill, repetitive and replete with spurious comparisons. ‘Since 1962, the USA has spent almost 300 million dollars on training dolphins for military purposes – more than the aid budgets of Austria and New Zealand combined,’ it says. ‘British women, meanwhile, spend roughly four hundred and eighty million dollars a year on fragrance and skin care products – more than Switzerland spends on aid.’ In the same vein, Hancock seems to criticise aid-workers in Somalia for having cars and eating hamburgers in a ‘well-appointed restaurant’. They have got to eat something.

For genuinely excessive consumption you have to go to New York, where Friday was ‘Food Frenzy’ time in the heyday of the mortgage department of Salomon Brothers, the investment bank. Gluttony on the trading-floor – the gulping down of malted milk, candy, pizza and mountains of Mexican food – became a metaphor for personal and corporate financial greed. In Liar’s Poker (the title refers to a trader’s poker game in which the cards are dollar bills and the players try to fool each other about the serial numbers on the notes) the bumptious Michael Lewis tells the inside story of that late 20th-century phenomenon, the early-rising, high-earning, foul-mouthed international bond-dealers. Lewis became the highest-paid employee of his age at Salomon, but preserved a measure of detachment – and amazement – about what was going on around him. This is the real-life version of the investment banking background to Tom Wolfe’s Bonfire of the Vanities, and the characters are just as interesting. Lewis has a gift for the rapid portrait. Unless you find his flippant one-liners irritating, it is a pleasure to be guided around the jungle of bond markets by his reminiscences and trenchant asides.

It is a world of geeks (apprentices) and their jungle guides, and big swinging dicks (proven traders). It is the territory of the Human Piranha and Michael ‘Fat Ankles’ Mortara. It is an exchange where the smart buy potato futures after Chernobyl, and where practical jokes and sick ones are traded along with the bonds; when the space shuttle Challenger exploded, six people telephoned Lewis from six points of the globe to tell him that NASA stood for Need Another Seven Astronauts. For the Americans, the British are lazy Eurofaggots. ‘He was a portly, middle-aged figure in an ill-fitted suit, scuffed black shoes, and the sort of sagging thin black socks I came to recognise as a symbol of Britain’s economic decline,’ Lewis says of the head of an English brokerage firm, with whom he had a long and liquid lunch in his early days in London. The man places laughably small five-pound bets on horses. ‘His clothes were as rumpled as if he had slept in them. He was the boss of an operation of several hundred people, and he looked like a bum.’

The present-day Lewis, however, is no slave to the American business ethic. Apart from the belly-laughs, one of the triumphs of Liar’s Poker is that it makes the financial complexities of investment banking and the markets accessible to the layman. Lewis explains how investment bankers managed to dupe their customers, manipulate the Federal Government and sink America deeper into debt, and how they failed to control their excesses to the detriment of their own business. Everything from yields to selling short is painlessly clarified in the course of the narrative. Market psychology is an intriguing field of study; even if you do not believe in the chartists, you have to look at the chart patterns anyway because other people do believe in them, and they will thereby influence the market. In behaving like this, so of course will you.

‘Most of the time when markets move, no one has any idea why,’ writes Lewis.

It was the job of people like me to make up reasons, to spin a plausible yarn ... Heavy selling out of the Middle East was an old standby. Since no one ever had any clue what the Arabs were doing with their money or why, no story involving Arabs could ever be refuted. So if you didn’t know why the dollar was falling you shouted out something about Arabs.

For an understanding of what motivates the individuals who work so hard and make so much money by watching their computer screens, it is best to turn back to Tom Wolfe. Perhaps because he felt guilty about earning more than he deserved and did not fit in to what he calls the most absurd money game ever, Lewis is regrettably reticent on the subject. Perhaps the private lives of the wealthy are not that exciting in any case. Taki’s High Life, a collection of his old columns for the Spectator, is an orgy of past scandals and out-of-date gossip, of parties and name-droppings. Going to Pentonville prison in 1984 for possession of drugs seems to be the most interesting thing that has happened to him.

The fact that there is big money and quick money to be made in trading – rather than manufacturing – is a topical issue in Britain, and a problem which preoccupies Anthony Sampson. The Midas Touch, flitting from east to west and north to south, touches on this and other important issues, noting the manufacturing prowess of Japan, the new cult of activity rather than leisure for the rich, the consumer obsession with brand names, the loss of the stigma once attached to debt, and the homogenisation of the world. But the book as a whole is profoundly disappointing – a series of brief and fragmented financial histories of various parts of the planet.