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Thursday, July 8, 2010

Déjà vu All Over Again

Government-to-Government Transfers Do Not Aid Foreign Economic Development

“[A]ll things recur eternally. . . .”
––Nietzsche, Thus Spake Zarathustra

Sometimes I think Nietzsche was right. It happens when I read things like this from the New York Times last January: “An international team sponsored by the United Nations proposed a detailed, ambitious plan on Monday that it says could halve extreme poverty and save the lives of millions of children and hundreds of thousands of mothers each year by 2015. The report says drastically reducing poverty in its many guises—hunger, illiteracy, disease—is ‘utterly affordable.’ To fulfill this goal, industrial nations would need to double aid to poor countries, to one-half of 1 percent of national incomes, from one-quarter of 1 percent.”

This is the recommendation of the UN Millennium Project, headed by Columbia University President Jeffrey Sachs. In the dog-bites-man department, the World Bank and International Monetary Fund eagerly endorsed the program.

The report was greeted more skeptically by others. A member of the project, Nancy Birdsall, president of the Center for Global Development, said poor countries’ governments could do many things to help their populations that require no outside money, such as changing their political systems. She nevertheless favors increased transfers from the developed countries.

New York University economist William Easterly had a more trenchant criticism of the project’s report. “Its approach is a sort of utopian central planning by global bureaucrats, a crash program like a Great Leap Forward for poor countries. This will not work any better than central planning by bureaucrats has worked anywhere else, which is to say not at all.”

In the year 2005, 60 years after the binge of post-World War II foreign “aid” began, you’d think we’d stop seeing such obviously futile proposals. The countries that have climbed out of poverty are precisely the ones that got little or no money from Western taxpayers and that followed market-liberal paths. The biggest recipients of handouts remained dependent and poor—until they began to liberalize their societies and let markets work.

Nothing has occurred to refute the late Peter Bauer’s critique of the foreign-aid lobby. To begin with, the term foreign “aid” begs the question and prejudices the case. What we’re really talking about are government-to-government transfers, with taxpayers as coerced accessories. This can hardly be called “aid” once we realize that governments have no constructive role in economic matters beyond protecting life, liberty, and property. Giving money to a government for economic development is like giving a china shop to a bull. Call it what you will, it’s not aid. Governments are by nature unequipped to spend money intelligently for such a purpose. The planners can’t know what needs to be produced in what quantities and how. They cannot know what tradeoffs people are willing to make to obtain any particular thing. That information can only be determined by the market process, which means through social cooperation in a regime of private property and free exchange.

Second, the champions of foreign transfers should be required (I’m tempted to say compelled) to explain how, if they are correct, any society ever became rich. I suppose the first modern countries to emerge from poverty might have petitioned for foreign aid. But from whom? This creates a tricky situation for the UN Millennium Project. If economic growth required handouts from wealthy societies, there would be none to provide them. And if economic growth didn’t require handouts, then poor countries today don’t need them. Either way, the UN Millennium Project’s plan is futile.

Only it’s worse than that. It’s dangerous. Government leaders may not know how to create prosperity with cash transfers, but they definitely know how to increase their power, help their friends, and suppress their opponents. We’ve seen quite enough of that over the years. When will the UN-types learn?

Compassion carried out with collectivist economics is indistinguishable from brutality. The path to prosperity is well lit.

* * *

Few people would want the government to tell their doctors how to practice medicine. But thanks to the war on drugs, it does just that in the treatment of chronic pain. Frank Fisher, M.D., has the horrifying details about suffering patients and persecuted doctors.

Dr. Fisher was himself victimized by a system that is eager to stigmatize chronic-pain treatment as “pill pushing.” Radley Balko reports.

Reform of Social Security remains the hot topic. Many opponents of change maintain that the system can be made sound with only some minor adjustments. Robert Murphy examines one such claim: that the rich industrial societies can easily support their aging populations.

The Vienna in which Ludwig von Mises emerged as an intellectual was a uniquely fascinating place. But events in Germany eventually changed all that. Richard Ebeling presents the second of his two-part article on the milieu in which Mises developed his liberal worldview.

We do not always rely on government to obtain justice. Instead, we have come to expect it from the marketplace itself. Exhibit A: the mundane credit card. J.H. Huebert explains how self-interested companies look out for us.

The connection between economic development and freedom has become increasingly appreciated by people of many political persuasions. Gerald O’Driscoll focuses on the key element of freedom.

Our columnists have these matters on their minds: Richard Ebeling distinguishes freedom from democracy. Donald Boudreaux defends “price gouging.” Stephen Davies looks at a much-disparaged source of economic growth. Russell Roberts claims the moral high ground in the debate on privatizing Social Security. And George Leef, hearing Bill Moyers sound alarms about a new threat from corporate power, replies, “It Just Ain’t So!”

Books undergoing scrutiny this issue examine institutional economics, government bullying, the death tax, and the economy of the 1990s.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.