- The Washington Times - Wednesday, August 1, 2001

In a recent article in the Economist magazine, Harvard Professor Jeffrey Sachs took the United States to task for the miserliness of its foreign aid budget. He noted that U.S. foreign aid has fallen steadily from the early 1960s, from 0.8 percent of gross domestic product to a current level of about 0.1 percent. Mr. Sachs urged Congress and the Bush administration to triple U.S. foreign aid spending, to bring it in line with that of other industrialized countries.

The Sachs argument is heard almost yearly around the time Congress takes up the foreign operations appropriations bill. It is supposed to make Americans feel guilty that countries like Denmark give 10 times as much foreign aid, as a share of the economy, as America does. Of course, Denmark can afford it, because it spends virtually nothing on national defense, since the U.S. essentially provides it to the Danes for nothing.

A more serious argument is that foreign aid not only does nothing to actually help those who receive it, it often harms them. While this fact may not be apparent to the donor community, it is becoming increasingly clear to aid recipients, some of whom now actually refuse aid.

There are many problems with the whole concept of foreign aid. The economists who put together the World Bank and the Marshall Plan after World War II, saw aid as a simple transfer of capital. Capital, they believed, was the key to growth, especially in war-ravaged countries. In those places, such as West Germany (East Germany refused American aid on Josef Stalin's orders), aid worked. Because they already had an educated labor force and a commercial and legal environment conducive to investment, aid was mostly productive.

But when the aid concept was extended to poor, undeveloped countries in Africa, Asia and Latin America, the experience was quite different. Because those nations did not have the underlying institutions necessary for growth, such as secure property rights, aid simply strengthened the government at the expense of the private sector. It also contributed to corruption by making government, rather than business, the best path to the good life. This continues to be the case. Consider these examples from a recent report in the London Daily Telegraph:

• When the impoverished country of Malawi got its annual aid grant of 52 million pounds from Britain recently, the government's first act was to spend 1.7 million pounds of it to buy 39 brand new S-class Mercedes automobiles for its Cabinet ministers.

• Canadian aid recently paid to build a new international airport in the remote town of El Dorat in Kenya. Apparently, the only plane that uses it is that of Kenya President Arap Moi, whose home town is nearby.

• British aid to the Palestinians was supposed to build housing for the poor. Instead, it built luxury apartments for friends of Yasser Arafat.

Even in cases where the aid is not stolen, if often does more harm than good. The Washington Post and Wall Street Journal reported last year that World Bank aid destroyed the Mozambique cashew and sugar industries. Mostly, though, aid is simply wasted, producing nothing of value for anyone. The developing world is littered with the wreckage of ill-conceived aid projects, such as the salt mine in Uganda financed by the European Union. The site was so isolated, no one would live there and no salt was ever mined.

Now, even some aid recipients are asking for an end to aid. In February, the New York Times Magazine published a fascinating interview with Yousif Kowa, leader of a poor tribe living in the Nuba Mountains of Sudan, possibly the poorest nation on Earth.

Mr. Kowa rejected foreign aid for his people because he said it would destroy their self-reliance. He said he had seen many cases where previously productive farms were destroyed by food aid and did not want to see it happen to his people.

In other cases, the withdrawal of aid has been a blessing.

In May, the Atlantic Monthly reported that Mogadishu, Somalia, has boomed since aid was cut off in 1995, due to the breakdown of civil government. Without governments, both foreign and domestic, mucking things up, local entrepreneurs were able to make things happen without interference. The reporter was forced to conclude that "the lack of large-scale foreign aid might have benefits as well as drawbacks."

I believe that the question of foreign aid is exactly the same as in the welfare reform debate of a few years ago. It was said then that cutting people off welfare would bring great hardship and misery. Instead, it forced people to get training and jobs and fend for themselves. Call it "tough love" if you want, but ending foreign aid not raising it may be the most humanitarian thing we can do to help the world's poor.

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