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Foreign Aid is Harmful to Donors and Recipients

September 30, 2012

Everyone knows foreign aid doesn’t work, because if it did the recipient countries wouldn’t still be dirt poor after 60 years of multiple billions in tax transfers from the coping classes of the West to the governments of the southern hemisphere. Aid will never be anything but a curse to the citizens of recipient countries. The effects of Aid are the same as the “resource curse” that afflicts many countries which, despite being rich in natural resources, have shown no real material development for 90-95% of the population.

Aid can be likened to a well-head that gushes out hundreds of millions of pounds every year in a country with little or no other sources of wealth. Like mines and oil wells which have a relatively small, well-defined area, the Aid well-head can be expropriated easily by a strong man and a few soldiers. Once he has secured the mine or oil well, the “General” then has the means to consolidate his position since he controls the country’s sole source of wealth. A challenge to his authority can only come from a civil war, funded externally. This was the story of much of Africa during the Cold War, when American and Russian proxies fought a hot war over natural resources. China’s exploitation of African resources is just a continuation of this war via low intensity colonization.

Britain’s net overseas development assistance for the year ended March 2012 was £7.7 billion (source: DfID). According to the analysis of expenditure in DfID’s annual report and accounts, the department spent £3.4 billion in regional programmes, including £1.8 billion in Africa, £0.8 billion in Asia and the Caribbean; £1.8 billion in contributions to the world bank and similar globalizing entities; £1.7 billion in international relations and £0.8 billion in research and development.

Critics have asked, rhetorically, why the low waged of Britain are giving money to, for example, India and Pakistan who have nuclear weapons, and South Africa which has natural resources? The answer is that these countries have large numbers of poor people who need our help. Which is true, but Aid has never rescued the poor from poverty. Europe did not need Aid to develop a technological society out of the Dark Ages. It was done by the free enquiry of smart, motivated men who were able to harness ever-larger amounts of energy in the service of man. But what they needed most of all was the protection of the law, so that their property remained private. If the progenitors of the Industrial Revolution had had their inventions nationalized after they first appeared, we’d still be reliant on the Spinning Jenny and the Department of Spinning would probably have a staff of 500,000 by now.

That’s why a knowledge-type economy is much harder for would-be dictators to control, because they can’t put a platoon of soldiers at the door of everyone with a bit of knowledge of how the economy functions. In that instance one can say that the wealth creating powers of the economy are Distributed.

If Overseas Aid is not for the benefit of the poor in the recipient countries what is it for? I believe Britain supports it for reasons of bureaucratic inertia. We have a bureaucracy that is in receipt of public money, DfID. Bureaucracies don’t voluntarily liquidate themselves when they serve no purpose. Rather, being composed of bureaucrats who seek to improve their own position, they grow without limit and within a short space of time the driving purpose of the bureaucracy is to make bureaucrats wealthy. It’s not that they are necessarily bad, or certainly no worse than the rest of us, but that unlike the private sector there is no exogenous control mechanism telling them to stop growing and start shrinking.

Public sector charity is immoral, because it relies on coercion to raise funds and the funds are disbursed according to the objectives of the government, not the needs of the recipients. Public sector charity always comes with strings attached and often those strings can be inherently evil. For example, the United Nations is obsessed with population reduction, so that Aid is tied to “reproductive  health” provision, i.e. a government must agree to promote contraception and abortion to obtain development funds. See the link on the right for the Population Research Institute for the experts’ view on the methods employed. Charity is voluntary private giving, mediated through private individuals (preferably working under the auspices of the Church) who can discriminate between the deserving and undeserving poor, because they know recipients’ histories.

Below is a short video by Dambisa Moyo, economist and author of the book Dead Aid: Why Aid Isn’t Working (2009). There are several hour-plus interviews with her on YouTube where she goes into more detail. Moyo has impeccable credentials as a member of the pro-globalization lobby, e.g. she has worked at the World Bank and Goldman Sachs and has addressed the Council on Foreign Relations and the Bilderberg Group. In 2009, Moyo was designated a Young Global Leader by the World Economic Forum and she sits on the boards of globally significant companies, e.g. Barclays, SABMiller and Barrick Gold (the world’s largest gold miner). She makes the case for withdrawing Aid from recipient countries and instead putting in place the instruments that helped every rich country get rich, i.e. the rule of law, protection for private property, moderate taxation, acceptance of wealth disparities and fair access to our markets (including the abolition of the Common Agricultural Policy). With these tools developing countries could pull themselves out of their permanent poverty, because the economy could not be dominated by a psychopath who controls the single source of wealth. Distributism, in fact, but Moyo doesn’t use the word.

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From → Chapter 1

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