- The Washington Times - Tuesday, April 2, 2002

Like judges, foreign aid gurus need education in the obvious. The equation for economic prosperity has been as constant as Newton's laws of motion since Genesis and the Golden Calf: stable, democratic and noncorrupt government, light and evenhanded taxation, and free movement of capital and labor, i.e., good governance. Adam Smith taught the trusim in his ageless 1776 treatise, "Wealth of Nations." Yet, like the French Bourbons, self-credentialed foreign aid mavens typically forget nothing and learn nothing. Since World War II, international organizations like the World Bank and the International Monetary Fund and the wealthy G-8 nations have squandered staggering billions in economic backwaters seeking to circumvent the law of good governance. In comparison, Enron was soundly managed.

The task of carrying that message is as unenviable as was altering Cleopatra to Antony's infidelity. The messenger is typically maligned as stone-hearted, Nietzsche-like, and an apostate from Robert Browning's heady creed that "a man's reach should exceed his grasp, Or what's a heaven for?"

But Treasury Secretary Paul O'Neill, like a colossus on the scene, has grasped the nettle. He has unflinchingly preached the good governance law despite legions of contrarian international aid crusaders. Mr. O'Neill converts have appeared in the White House, the World Bank, the International Monetary Fund, and other centers of accoladed financial wizardry. The recent Monterrey Conference in Mexico witnessed a watershed in the grammar of foreign aid.

The new catechism: no good governance, no bail out, a return to the Marshall Plan formula which conditioned European aid on open markets and sound currencies.

The justification is simple. An ordinary craving for wealth drives investors and workers to maximize the return on their funds and toils in a global marketplace. Relative risks and opportunities among nations are the integers of that calculus. Capital and labor flee like thoroughbreds from nations with artificially inflated currencies, arbitrary taxation, whimsical legislation, fragile property rights, government monopolies, heavy-handed licensing, closed employment markets, pliable judges, corrupt civil servants, or omnipresent wage and price manipulations. Each of these bad governance earmarks raises the risk that an investor or employee will be cheated of his earnings or severely handicapped in capitalizing on his skill, foresight and industry that satisfy consumer preferences. They will thus gallop to the greener pastures of the G-8 nations where good governance is ascendant. The United States is the gold standard.

We are the recipient of countless billions in capital flight from bad governance nations, such as Russia, Argentina, Brazil, Mexico or Saudi Arabia. The worldwide "brain drain" to the United States is legendary. The most enterprising workers from bad governance countries risk life and limb to work here. The safest investments in the world are United States Treasury securities. Even OPEC nations stridently condemnatory of United States foreign policy place their oil and gas surpluses in such financial instruments, not in Syrian, Jordanian or Egyptian government bonds. To believe that international economic assistance can turn back this tidal wave of capital and labor without good governance dethroning bad governance abroad is to fantasize that King Canute could have turned back the waves.

But this economic preaching is morally troubling. Withholding assistance may not jolt a nation into swapping bad governance for good governance. Non-democratic and lawless rulers seldom suffer when foreign aid is clipped. Iraq's Saddam Hussein, for instance, lives more like King Louis XIV at Versailles than like Oliver Twist in an orphanage despite a longstanding international sanctions regime. And bad governance is what gives tyrants coveted financial leverage to cow would-be dissidents or rebels into submission. Their personal interests are in its preservation, not dismantling. Moreover, if foreign economic assistance is withheld, the first to suffer will be oppressed men, women and children. Think of the millions who have died of starvation or malnutrition in Iraq, North Korea or Liberia. Did they deserve such grim passages?

The answer is more chiaroscuro than prime colors. Natural law crowns each individual with a right of insurrection against tyranny, as trumpeted in our Declaration of Independence. To forgo that right makes a citizen partially culpable for bad governance. As Cassius importuned in "Julius Caesar," "The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings."

On the other hand, such stirring words are nonsense for infants groaning under despotisms. And human nature is averse to martyrdom. Sir Thomas More is the exception, not the rule. Would you risk clamoring for good governance on the streets of Baghdad, Beijing or Rangoon? Why hold citizens under bad governance to a higher moral standard?

Moral judgments, however, must consider not only the living but those yet to be born. Current unforgiving privations may be indispensable to provoking popular revolts against bad governance and to midwifing good governance for posterity. The theory seems intuitive, but far from certain.

Economic sanctions against the Soviet Union seemed marginal to its disintegration. And the ruination Fidel Castro has visited on Cuba's economy has not disturbed his iron-fisted cruelties.

The best that can be said is that foreign aid where bad governance prevails is economically misguided no matter how benevolent the motivation.

Its morality lies in the twilight zone. Who knows in seeking to upend bad governance what will yield the greatest good for the greatest number? That seems a tragedy of the human condition.

Bruce Fein is general counsel for the Center for Law and Accountability, a public-interest law group headquartered in Virginia.

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