Reply To: Foreign Aid


Amazingly, even the consensus of mainstream academics who study foreign aid has turned against it (mainstream academic game-theoreticians are still sometimes/often for it as a means of, in effect, buying off other governments/conflict avoidance, and they remain ideologically sympathetic with the concept of foreign aid and can’t wean themselves of that, but the growing consensus is that developmental aid is at best useless in fulfilling it’s task and at worst actively harmful).

Even the OECD has grudgingly conceded this; OECD, 2008, “Growing Unequal? Income Distribution and Poverty in OECD Countries,” but the best work on this subject has probably been done by Peter Bauer, who was “prematurely right” in reaching this conclusion (and thus hated for a long time). He’s more known for his academic articles on the subject, a couple of which I’ve read (but can’t recall off the top of my head now), but if you want a book-length treatment “From Subsistence to Exchange” by him might be good, which is recent, or “Dissent on Development,” which unfortunately is over 40 years old.

Tom Woods has a chapter on this in his book “The Church and the Market” which is where I found out about Peter Bauer and is a gold-mine for other sources, too, such as Alan Waters, former chief economist for USAID, who wrote Foreign aid is inherently bad. It retards the process of economic growth and the accumulation of wealth (the only means of escape from poverty and degradation it weakens the coordinating effect of the market process; it pulls entrepreneurship and intellectual capital into non-productive and administrative activities; it creates a moral ethical tone which denies the hard task of wealth creation. Foreign aid makes it possible for African societies to transfer wealth from the poor to the rich. . .They have encouraged the establishment in Africa of such institutions as state monopolies and economic development planning boards which would not have been permitted at home Food aid permits price controls which Perhaps the greatest condemnation of foreign aid is that it has engendered and now justifies the bloated bureaucracies of Africa.

And Woods cites Melvyn Kraus’s “Development Without Aid,” where Kraus writes “It comes as a surprise to a layman, but not at all to the experts that food aid arriving in Bangladesh and many other places isn’t used to feed the poor. Governments typically sell the food on local markets and use the proceeds however they choose. Here, the government chooses to sell the food in cut-rate ration shops to members of the middle class.”

(Woods – and others – note that this kind of thing distorts the domestic markets at the expense of local farmers, who are thus discouraged from producing what is needed because the influx of foreign aid is swamping the natural response that would result on a free market).

Even leftists like Amartya Sen have conceded that what is most important in development isn’t a function of aid, but internal liberty such as a free press (his nobel prize was based on his findings in this area, the most noteworthy aspect of which is that there has not been a famine in a country with a free press – a feature that has nothing to do with what foreigners give or do not give). (I wouldn’t recommend Sen as a general source of wisdom on this, though; he’s a social justice guy and he thinks incentives have no moral basis, and he remains in favor of wealth transfers on social justice grounds; probably the furthest he would go is wanting them to be “more effective” and “reformed” to “find out what works,” which is also what my guess the response will be from this “idealistic group” that is “preparing to lobby the government” that you speak of).

Microloans, which were to be the “big new thing” now, and which aim at redirecting aid from government-to-government to the micro level, are even being called into question by some of their advocates now that it has become “the next big thing.” (Lesson: beware of Progressive “Next Big Things,” though I can’t point you to a specific book or article.

Anyhow if you can find a copy of “The Church and the Market” its chapter on economic development & foreign aid is good-in-itself and a goldmine of footnotes citing “mainstream” development/aid specialists on how ineffective and perverse foreign aid, especially government foreign aid, is.

You might recommend to this group that instead of spending their time lobbying government to spend other people’s money on this project, making themselves feel better at other people’s expense, they themselves devote their own money (and spend the time they would otherwise spend lobbying) on some useful project. I say that not because it would be effective, but personal (as opposed to government) aid is generally least damaging, *can* be positive (on the margins), but also mainly because it would puncture their balloons. Likewise point out that most government “foreign aid” ends up being recycled back to big domestic businesses (foreign governments are usually mandated to spend the money, or at least the lion’s share of it, buying goods from the donor’s domestic enterprises), and “they don’t want to help put money in the pockets of big business in America, do they?”

But I admit these recommendations would mainly be trolling. Still, you could do it for the lulz! Especially since they’re almost certainly, 99.9% probability, going to go ahead with their lobbying effort regardless of what proofs you present them as to how bad foreign development aid is (but progressivism is nothing if not REASON and SCIENCE! Praise their respect for empiricism). So you may as well get some lulz trolling them.