Foreign Aid

People tend to have two common views on foreign aid.  One is that we shouldn’t be sending money to help these other countries when we have people here at home who need help.  The other is that it’s selfish and heartless not to help those countries that are so much worse off than we are.

Both of them miss the mark in that they both assume that the foreign aid actually helps.  Mostly it doesn’t.

Before you can decide whether foreign aid is likely to help a poor nation you first have to look at why the nation is poor in the first place.  When it comes to the so called “third world” a common reason given for their poverty is “legacy of colonialism” yet is that actually true?  How does that jibe with Argentine–in the early 20th century, a century after it gained independence, it was one of the 10 most prosperous nations in the world.  Now it rates 55th out of 188 (as of this writing).  Clearly “colonialism” explains neither its former prosperity nor its later poverty.

Going beyond Argentina, consider ten countries that were never colonized by Europeans. Ranging from Japan at 23rd out of those 188 nations to Afghanistan (177 out of 188) with most in the “lower half” of per capita GDP.  Note that the list of nations not colonized by European’s simply lists “Korea” and while South Korea is on the list of per capita GDP, North Korea is not. Clearly, blithe assertions like “legacy of colonialism” (generally meaning European Colonialism) does not explain these nations poverty.

Most simple explanations for why some nations are poor and others prosperous fail.  Natural Resources?  Then how to explain Japan, Hong Kong, or Singapore?  No, the answer is a combination of factors.  But several cultural factors loom large.  Respect for rule of law, respect for and enforcement of property rights (without which people are very unwilling to invest), corruption kept to at worst a modest level, all help to create a climate where businesses from the small entrepreneur to the large multinationals can prosper, and in so doing create wealth.

Take, for instance, one of the great successes of foreign aid:  the post World War II Marshall Plan.  It worked to help bring prosperity back to war torn Europe because Europe already had a “recipe” for prosperity and merely needed rebuilding of infrastructure destroyed by that war to get back on a solid economic footing.

In other places, where such a “recipe” is lacking, “foreign aid” is much less beneficial.  Much of it simply ends up in the hands of rulers and their favored, giving them a lavish lifestyle while doing nothing to improve the lives of the population at large.  There might be a few “Potemkin” show villages with guided tours for foreign politicians and media but nothing that helps the average citizen.

Bluntly, however much one might care about the poor and unfortunate of the world, “foreign aid” is simply ineffective at achieving the stated goal.

There is another aspect to foreign aid, however, as mentioned in “The Conscience of a Conservative” by the late Barry Goldwater, that of international diplomacy.  In Goldwater’s day the Cold War was in full swing.  Carl von Clausewitz described war as the continuation of politics by other means.  The reverse also holds:  diplomacy and international politics is war by other means.  Goldwater described foreign aid as a tool in the fighting of that war–not so much buying favor as aiding those who support us and countering the similar aid the USSR was giving to those who supported them.  Goldwater, in the book, did not endorse foreign aid for its own sake–preferring to allow individuals and organizations on their own initiative attempt humanitarian aid; after all, they had a better track record of success than did government programs that invariably deal with other governments–but rather as a weapon to use against an enemy that sought not just our overthrow but total global dominion.

Even today, although the enemy is different, that might actually be a valid use of foreign aid.  Yet even in Goldwater’s day, how often was it actually used to that end?  And even today, is it used to that end at all?  How many American foreign aid dollars are going to our opponents, even avowed enemies, compared to those going to our supporters?  If the proponents think that this will somehow buy favor and make those enemies turn around and love us, they are deluding themselves.  Far from buying favor, our enemies are more than willing to take our money while sniggering behind their hands at what great fools we are to finance our own destruction (or so they intend).

Maybe we should stop paying people to hate us?