The Problems with Current “Foreign Aid,” and What True Foreign Aid Should Look Like

Foreign aid as currently administered fosters corruption, is unconstitutional from an American legal perspective, and entrenches poverty in the third world countries it purports to assist.  Do countries need foreign aid?  Absolutely.  Then let the market (individuals acting freely, i.e. voluntarily donating to a charity of choice) do the heavy lifting.

The market works more efficiently.  A bad charity gets less money.  A bad government gets more money.  In the real world, the answer to such problems is to cut the revenue stream.  In the political world, the answer is almost always more money to remedy the problem, which of course perpetuates further problems, thus requiring more money, ad infinitum.  But perhaps I digress.

I’m always impressed when I hear about the Church’s response to humanitarian issues.  Rarely have I heard a word of complaint about their services (perhaps I do not patronize the right blogs to come across such criticism).  But the work of private agencies like the Church and the Red Cross and Habitat for Humanity stand out to me as good examples of what charity should look like: voluntary, non-discriminating, quick, effective, efficient, and frequently gets rave reviews from those they strive to help.  Contrast this with government aid.

You may wonder, would individuals give sufficiently to meet foreign aid needs without being forced to do so?  Considering Americans already give nearly three times what the government gives (and that’s with the tax burden we share), I would strongly suggest that is the case.

Some recommended thoughts on foreign aid from thinkers much smarter than this feeble intellect:

From Thomas Woods in a review of his book The Politically Incorrect Guide to American History:

The Marshall Plan, which continues to be defended even by some conservatives, is revealed as the failed giveaway program it was. Worse, the perceived success of the Marshall Plan influenced the ideology surrounding development aid to the Third World. U.S. foreign aid, beginning with Truman’s “Point Four” program, has been based on the idea that the Marshall Plan, which consisted of infusions of money into poor economies, had been a success, and that the appropriate response to Third World poverty was therefore some kind of similar program. In fact, as economist Peter Bauer pointed out over the course of a distinguished career spanning several decades, Western aid programs proved disastrous for the Third World. Among other things, since they took the form of government-to-government grants they entrenched in power some of the most brutal and economically repressive regimes in the world. Thanks to infusions of U.S. and other Western aid, these regimes could prosper without having to institute market reforms.

This article by Ron Paul, originally a speech delivered at the House of Representatives, wherein he courageously opposes the Millennium Challenge Act, clearly explains his reasons for opposing foreign aid.

Another article also by Rep. Paul discusses what true foreign aid (hint: it’s voluntary) would look like.

Finally, recently reading this article finally compelled me to get off of my duff and start sharing some thoughts on foreign aid, a task I have long considered.

In short, our current way of administering foreign aid engenders corruption and hostility, neither making America safer nor the rest of the world more prosperous.  Like many government programs, it does the near opposite of what it purports to do.

Ludwig von Mises on the Economic Causes of War and the Path to Lasting Peace

Another excerpt (from this article) from the great economist Ludwig von Mises:

I do not say that all wars of all nations and in all ages were motivated by economic considerations, that is, by the desire to make the aggressors rich at the expense of the defeated. There is no need for us to investigate the root causes of the crusades or the religious wars of the 16th and 17th centuries. What I want to say is that, in our age, the great wars have been the outcome of a specific economic mentality.

The Second World War is certainly not a war between the white and the colored races. No racial differences separate the British, Dutch, and the Norwegians from the Germans, or the French from the Italians, or the Chinese from the Japanese. It is not a war between Catholics and Protestants. After all, there are Catholics and Protestants in both belligerent camps. It is not a war between democracy and dictatorship. The claim of several of the United Nations (Soviet Russia in particular) to the appellation “democratic” is rather questionable. On the other hand, Finland (which is allied with Nazi Germany) is a country with a democratically elected government.

My argument that recent wars have been motivated by economic considerations is not meant to be a justification of the aggressor’s policies. Viewed as an economic means for the attainment of certain economic benefits, the policy of aggression and conquest is self-defeating. Even if technically successful in the short run, it would never attain in the long run the ends at which the aggressors are aiming. Under the conditions of modern industrialism, there cannot be any question of a social system such as the Nazis plan under the name of a “New Order.” Slavery is not a method for industrial societies. If the Nazis had conquered their adversaries, they would have destroyed civilization and brought back barbarism. They would certainly not have erected a thousand-year New Order, as Hitler promised.

Thus, the main problem is how to avoid new wars. The answer is not to be found in setting up a better League of Nations; neither is it a question of the establishment of a better World Court, nor even in the implementation of a World Police Force. The real issue is to make all nations — or at least the most populous nations of the world — peace loving. This can be achieved only by going back to free enterprise.

If we want to abolish war, we must remove the causes of war.

The great idol of our time is the State. The State is a necessary social institution, but it should not be deified. It is not a god; it is a device of mortal men. If we make it an idol, we must sacrifice to it the flower of our youth in coming wars.

What is needed to make a lasting peace is much more than new offices and a new court for the League of Nations in Geneva, or even a new international police force. What is needed is a change in political ideologies and a return to a sound free-market economic system.

Ludwig von Mises on Philosophic Conclusions on Compatibility Between Capitalism and Peace

I read this from this article yesterday.  I highly recommend it.  I found this statement on the conclusion of many classical liberal thinkers regarding peace and capitalism quite intriguing:

Under a system of private ownership of the means of production and free enterprise, with the only function of government being to protect individuals against violent or fraudulent attacks on their lives, health, or property, it is immaterial for the citizens of any nation where the frontiers of their country are drawn. It is of no concern for anyone whether his country is big or small, and whether it conquers a province or not. The individual citizens do not derive any profit from the conquest of a territory.

It is different with the princes or ruling aristocracies. They can increase their power and their tax revenues by expanding the size of their realms. They can profit from conquest. They are bellicose, while the citizenry is peace loving.

Hence, the old liberals concluded, there would be no more wars under a system of economic laissez faire and popular government. Wars would become obsolete because the causes for war would disappear. Since these 18th- and 19th-century classical liberals were fully convinced that nothing could stop the movement toward economic freedom and political democracy, they were certain that mankind was on the eve of an age of undisturbed peace.

What was needed to make the world safe for peace, they argued, was to implement economic freedom, free trade and goodwill among the nations, and popular government. I want to stress the importance of both of these requirements: free trade at home and in international relations, and democracy. The fateful error of our age has consisted in the fact that it dropped the first of these requirements, namely free trade, and emphasized only the second one, political democracy. In doing so, people ignored the fact that democracy cannot be permanently maintained when free enterprise, free trade, and economic freedom do not exist.

Oil Shale In Utah: The Government Stifles Oil Production

I saw this article this morning in the Deseret Morning News.  Three key government officials from Utah oppose federal restrictions on oil shale production which specifically affects the state of Utah.

It turns out that Colorado and Wyoming also have a lot of reserves.  Together, it is estimated that these three states (in the Green River Valley) have enough oil shale to produce petroleum to power America for 100 years.  And what does our government do?  It literally impedes economic progress, stifles growth and development, and refuses to help out Americans at the pump.

As Senator Hatch says, we need oil now.  We need cheaper gas now.  Some distant alternative does not help me today or tomorrow or next year.  Thirty or forty years down the road and trillions of taxpayer dollars later, maybe there will be some infrastructural change.  But for right now, what’s to stop us from getting the oil shale?

Think of the jobs that would result from domestic oil shale production, not to mention the relief at the pump, and in many other areas of petroleum production (oils, soaps, plastics, clothing, etc.).

This is just like the government restrictions on drilling in ANWR or on putting up more oil platforms in the Gulf Coast.  It doesn’t make sense from an economic standpoint, and as this article indicates, it doesn’t make sense from an environmental standpoint, either.

Ah, the joys of central economic planning.

An Economic Stimulus? Jumpstarting the Economy?

I was watching the news the other night about a big investment from Christopher Kennedy to build some sort of wholesale medical showroom called the Medical Mart.  The investment would be quite substantial.  The word is that the investment is so substantial it may be necessary to jumpstart or rejuvenate Cleveland’s economy.

I have no problem with a private investment.  I think private investments are a great idea.  Nor do I have any capability to say why it would or would not be a good investment.  I’m not in the business of evaluating investments.

But I wonder about the idea of an “injection” or “infusion” of cash necessary to jumpstart or rejuvenate an economy.  This is essentially the mindset associated with the World Bank.  As nearly anyone who recently visited a third world country will tell you, World Bank financing hasn’t exactly eliminated poverty.  Confiscated property?  Yes.  But eliminated poverty?  Not yet, and probably never.  It simply goes against economic history.

Wealth is not generated from some big infusion of cash.  This is a Keynesian idea that a big glob of liquidity (cash) somehow gets the economy going.  And so some people justify NASA as a big boon to the economy, rather than money diverted from where individuals would otherwise spend it.

The same goes for nearly any big government program these days.  Farm subsidies, for instance, or putting hundreds of billions of taxpayer dollars into alternative energy research (as Mitt Romney and Rudy Guiliani would discuss with great enthusiasm when they were running).  Whether you believe in the morality and importance of these government programs or not, it is simply bad economics to suppose that money diverted from where it would be voluntarily invested to another location arbitrarily selected is more effective for overall economic growth.

This idea is, unfortunately, everywhere.  Many analysts believe Mitt Romney won Michigan when he promised $20 billion in federal money to help the struggling auto industry.

When either political party talks about “creating jobs,” or equivalent terminology, they usually mean taking money from taxpayers and putting it towards something else, essentially subisidizing an industry.  This is, essentially, the economic policy of either political party.  The Democrats seem to think the Republicans need to be spending more taxpayer dollars to this end, but the principles are nearly identical.

We see this same philosophy in the recent “economic stimulus” package.  A one-time infusion of cash will somehow help offset the looming recession, or so the reasoning goes.  Don’t get me wrong: I’m all for a tax rebate.  But the reasoning is flawed.

The best way for governments to “stimulate the economy” or “create jobs” is to permanently lower taxes, stop deficit spending, increase liberty, and get out of the way of individuals involved in creative, constructive efforts related to economizing and exchanging.  No further taxpayer dollars need be confiscated to strengthen and bolster the economy.  Economic history is more than adequte to show that individuals voluntarily investing their money as they see fit leads to economic prosperity for nearly everyone (the free market) whereas the confiscation of wealth and subsequent redistribution (central economic planning) has the opposite effect.