At the request of our valued reader and  frequent commenter Frank, we have written this article on foreign aid and what would happen if it were stopped. He was prompted to think about it when he watched a news video reporting that in this time of recession and severe unemployment, hundred of millions of US taxpayer dollars are being sent abroad for the refurbishment of mosques in Islamic countries, many of which are known to incite terrorist attacks on US targets.

(Note: Requests are welcome, though we can’t promise always to grant them.)

*

“Foreign aid is the transfer of money from poor people in rich countries to rich people in poor countries.”

There’s disagreement on who first said that, but it doesn’t matter. The question is: is it true?

The first part is not entirely untrue: among the tax–payers whose money goes to foreign aid are many who are poor, or at least not rich, by their own country’s standards.

The second part is almost entirely true. Foreign aid is paid by the donor states to the governments of the recipient states, and very little of it goes any further. The dictators, the kleptocrats, the oligarchs, the once-elected-always-in “democratic” panjandrums, the tribal chiefs who rule weaker tribes by tradition or conquest, pocket the lion’s share of the incoming largesse, distribute some of it to their kinsfolk, chums, influential supporters and selected rivals, and only then, if there’s anything left – which would likely be by oversight for which someone gets fired or shot – it’s flung from the balcony of power, in a little glittering shower, down upon the ravenous masses who scrabble for it in the dust.

Our own sort of government is not like that. Ours is accountable to us, at least in theory. The present government of the US has acted on a different understanding, but even the worst members of the Obama administration cannot – as far as we know – be accused of the venality of, say, African dictators, or even the routine corruption that characterizes the unelected leaders of the European Union.

Now what may be virtuous in an individual can be a fault in government, and vice versa. You, sir/madam, may not kill, but governments must in war. You may not demand money with menaces, but governments must when they tax you. You may not hold someone against their will, but governments must imprison convicts. You may give away your money, but a government is a trustee of others’ money and should spend it only for the benefit of those who earned it. Generosity is a virtue in a person, a vice in a government.

Those who want a government to be a wellspring of cash to pay for all their personal needs, vote for socialism. A socialist government is extortionist, the idea being that those who earn money should be forced to hand it over for the benefit of everybody else. A central agency – which can only be government as it’s the only institution with the legal power of compulsion – must gather it in and deal it out again “fairly”.  Some toil, and all hold their hands out. The system is not just, though it’s devotees call it “social justice”.

Socialists think of an economy as a pie, of which everyone should get an equal slice. They assume there is a fixed amount of wealth in the land, established once and for all long ago by divine grant, so if some are richer than others they must have become so by theft. A few are rich – they imagine – because the many are poor: the many are poor because a few are rich. They cannot grasp, or will not learn, that wealth is created, and where it is created some become rich and many become richer. (A fine example is the “second industrial revolution” that began to the world’s wonder and glory in Silicon Valley about half a century ago. Apple orchards gave way to Apple computers – to sum it up – and where there had been hundreds of poor field workers there are now millions of prosperous industrial workers, and the persons who were free to invest their own money, time, innovative ability as they chose, not only became rich themselves, but have also benefited hundreds of millions of people all over the world. That’s what capitalism and the free market – so dreaded and hated by socialists – can do.)

Foreign aid is a socialist idea. It is redistribution of the “world’s wealth”. That pie idea again, writ very large. Equal slices. A fixed amount that needs to be distributed “fairly”.  (Ideally, to the true believers, by a world government.) Those who advocate it get a warm glowing feeling inside. Puffed up with moral pride, they simply know they are virtuous. They hold compassion to be the highest value, and bestow their compassion, by means of other people’s money, liberally on the wretched of the earth.

But have they actually done any good?

They claim to have “helped” poor countries by bringing plenty where there was  scarcity. The more realistic among them, not entirely persuaded by the pie theory of wealth, see the free grants of cash from the First World as seed money with which  to grow profitable projects that will make many an economic desert bloom.

Has the looked-for transformation ever come about? Has US aid – for instance – ever actually promoted economic success anywhere?

Well, yes. Once. Maybe. European economic recovery after the devastation of World War Two was probably boosted by the aid it received through the Marshall Plan. About $13 billion was distributed in varying amounts to the west European states, including Italy and  Germany  (and even neutral Sweden but not Spain), Britain getting the most. It’s  impossible to know whether Europe would have recovered as well, less well, or better without it. It was given, it was used (much of it to buy goods from the United States), and Europe did recover and prosper, so you could say that the aid wasn’t wasted.

But can as much be said for other hand-outs to foreign lands? If you hunt about you may light upon a successful outcome from a grant being well used here and there on our big round globe. But in general the answer is no. Aid has not proved a successful means to help poor peoples to thrive. And that isn’t all of the bad news. The rest of the story is worse. For the most part aid is squandered.  Worse still, it has often had the effect of making poor countries poorer – a point to which we shall return. And arguably worst of all, it sometimes goes to strengthen the aid-giver’s active enemies. (See our post, Aiding our enemies , March 14, 2011.)

The  redistribution enthusiasts explain, in the patient tones of saints, that the waste of what is given and the hatred directed at the giver are the direct results of the rich countries not giving enough (see for example here, here, and here). They complain that no developed country in the Western world budgets even as much as the .7% of its GDP that they promised once upon a time at some international forum, some field of the cloth of gold. The richest country in the world, the USA, allots barely .2%, and the saints who want to be generous with Americans’ money feel that the US government should hang its head in shame for being so miserly.

But if the money is squandered, what justification is there for giving any at all? If it doesn’t improve living standards, does it at least secure a strategic advantage, a port or an air base? Ensure an ally where one might be needed? Engage a supportive voice in the United Nations? Yes, sometimes, for a while, if nothing comes along to put a strain on the agreement.

Does it matter if the aid money does no good for the recipient and possibly endangers the giver? Conservative governments seem to have answered this question cynically, along such lines as: “Even if a few millions bestowed on this or that Havenotistan is spent on a gold bed for the tyrant’s wife, or a fleet of Mercedes that cannot be moved from the airport where they were landed because no one knew to put oil in them before trying to drive them away (both actual examples), the amounts are too small to fuss about … chump change … and there may be some sort of  dividend coming out of it one sunny day.”

What if consumer goods are sent rather than money? Food, say? Doesn’t that reach the people who need it? Not often. It gets diverted –  to  cartels, army top brass, transport operators, profiteers in influential positions, who will sell what they don’t keep for themselves at inflated prices when famine gets severe enough. For instance, in Somalia, after such slavering packs of wolves have chewed off  their share  –  al-Qaeda linked terrorists among them in that benighted land –  only half the food sent as aid is “distributed to the needy population”. (See our  post,, Out of Africa always something familiar, March 11, 2010.)

But, it might be objected, not all recipients are unpredictable despotisms. The biggest beneficiary of US foreign aid is Israel – $3 billion per annum. Any complaint about that?

Yes. From Israel – because of the strings attached. Israel has to use some of the money to buy American military aircraft and weapons – not the ones it wants, but the sort Israelis say they can make better themselves. Some also say they don’t really need the aid at all, which amounts to under 1% of Israel’s total GDP, but are not allowed to refuse it because tens of thousands of American jobs depend on the Israeli munitions market. If this is true, Israel is not a beneficiary but a victim of aid!

From America’s point of view, however, that’s surely one lump of aid worth giving. Or is it? The economist Peter Bauer, who was Prime Minister Thatcher’s special adviser on foreign aid, pointed out that such an arrangement as that is analogous to your local store owner giving you cash on condition that you spend some of it buying his merchandise.

But let’s return to our assertion that aid often has the effect of making poor countries poorer. Here’s a quotation from an article by Matthew Rees in the Wall Street Journal [first quoted in our post, How to spread poverty, April 4, 2009]:

Dambisa Moyo, a native of Zambia and a former World Bank consultant, believes that it is time to stop proceeding as if foreign aid does the good that it is supposed to do. …  Aid, she writes, is “no longer part of the potential solution, it’s part of the problem – in fact, aid is the problem.” … Ms. Moyo spells out how attempts to help Africa actually hurt it. The aid money pouring into Africa, she says, underwrites brutal and corrupt regimes; it stifles investment; and it leads to higher rates of poverty – all of which, in turn, creates a demand for yet more aid. Africa, Ms. Moyo notes, seems hopelessly trapped in this spiral, and she wants to see it break free. Over the past 30 years, she says, the most aid-dependent countries in Africa have experienced economic contraction averaging 0.2% a year.

In the light of that dismal fact, foreign aid is plainly a bad idea and it should be stopped.

What would happen if it were?

It’s more than likely that the redistribution saints would wax very wrathful indeed. It would soon become plain that their motive was never so much – or at all? – the betterment of life for the hungry masses in poor countries. They, or many of them, have a higher goal in mind: global redistribution of what they call “resources” – meaning the wealth created in and by the capitalist First World.

Matthew Rees explains in his Wall Street Journal article:

The report blends the socialist and Islamic economic perspectives as an alternative to our present capitalistic system.  It has four basic themes.  Western-style free market capitalism is the villain. Redistributive justice is mandatory. New global governance authorities are required. Global taxes are also needed.

The only institution that the UN experts believe has broad enough political legitimacy to serve as the global decision making forum and eliminate the abuses of free market capitalism is, unsurprisingly, the body that gave them the platform to air their views on a global stage in the first place – the United Nations.

Since the United States is usually asked by the UN to put up at least 20% of whatever money it is raising, that would mean U.S. taxpayers would be expected to fork over $200 billion extra over the next two years.

Would we at least be able to impose some reasonable conditions on the massive grants and loans for development and other support (or “conditionalities” as the Commission of Experts calls them)?  The UN experts say absolutely not!

After all, it would be politically incorrect to expect each recipient of our taxpayers’ money to actually have to demonstrate that the money won’t end up in a corrupt dictator’s Swiss bank account because, according to the UN experts’ circular reasoning, such “conditionalities” would “disadvantage developing countries relative to the developed, and undermine incentives for developing countries to seek support funding…

Our sovereignty as a self-governing people to regulate our own economy must give way to global government for the sake of “the broad interest of the international community”.

The bid failed. But the saints never give up. They had another go by claiming that the planet could only be saved from man-made global warming by world government, which would oversee the redistribution of the developed world’s “resources”.

That would be the killing of the goose that lays the golden eggs. There would soon be no more “resources” to redistribute. No one would be rich (except themselves), but there’d be that equality of misery everywhere on earth which, to the socialist conscience, is the non plus ultra of moral good.

We must not let it happen. Our verdict is that if foreign aid were stopped, everyone would benefit, the nations that give and the nations that receive. So what we need now – to save not only ourselves who are thriving on capitalism, but the rest of the world too – are tightfisted governments. America must elect a miser-government, the stingiest ever, refusing so much as a crumb in aid to another country. Then the wretched of the earth can imitate our ways, and prosper.

Jillian Becker   March 21, 2011