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The Case against Foreign Aid

By Eamonn Morris in Opinion & Politics

Foreign Aid has played a major role in the world economy since the end of the second World War, when Development Economics began to emerge. On the surface, it makes perfect sense to give money to the developing world- we have a duty to help those who are less fortunate than we are. Unfortunately, it’s not that simple. Foreign Aid has failed again and again in the past. the extended food crisis in India was greatly exacerbated by foreign aid; the emergency relief “may have been responsible for millions of Indians starving” (James Bovard.) Guatemala, a country struggling with economic and health-related crises, has continuously refused American aid. It is becoming increasingly clear that foreign aid is not working. The two biggest reasons: Lack of Incentives and Government Corruption in the aided nation. Incentives are an important concept in economics. In a free-market economy, the standard model for most of the world, consumers and producers are motivated to work by the promise of increased wealth. This is why people go to work every day- they get to take home a nice hefty paycheck at the end of the month. These incentives disappear once foreign aid is introduced into a nation’s economy. In 1945 free food, clothes and supplies were distributed in Micronesia, and as a result most of the locally-owned stores selling these items went bankrupt. Why? Because the people were getting the items they needed for free! The distribution of essential items for no charge by the American government provided the Micronesian populace with an incentive not to work, because the money they would have earned and the work they would have put in was worthless against the “aid” they received. The implications of this are far-reaching. If a country subsists on foreign aid for long enough, it will lose its independence, its capital will deteriorate from neglect, and the country’s economy will be unable to recover. Then the country will be reliant upon foreign aid forever. We have already seen this as the case in several African countries. Another problem we see with foreign aid, particularly in nations like Uganda where there is extensive government corruption, is that a government bureaucracy springs up to “manage” the aid that the country receives. Once an agency like this steps in to distribute foreign assistance, it’s all over; the aid usually goes to the ruling elite of the country while the general public gets nothing. Meanwhile, there are almost no restrictions from the UN, the US or other organizations sending aid regarding how it be used. The New International Economic Order from the UN states that “every country has the right to adopt the economic and social system that it deems to be the most appropriate for its own development and not to be subjected to discrimination of any kind.” This essentially enables the governments of assisted countries to completely botch the relief efforts either out of incompetence or as a way to fill their own coffers with the money and capital received from the donor. It’s clear that foreign aid is in need of serious reconsideration. We’re not at much of a financial risk as a result of sending aid abroad, but we put developing countries at the risk of becoming dependent upon us, UNICEF, and other organizations forever. Reforming assistance abroad would be incredibly time-consuming and would likely be watered down in the United Nations. So since we were trying to help these countries out in the first place, we have to do whatever we can to help them achieve independence and get them on their feet. The only choice remaining is to cut them loose.

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