Commentary

Foreign Aid: End It, Don’t Mend It

By Stephen Moore
This article originally appeared in Investor’s Business Daily.

The Republican Congress is giving in to the foreign-aid establishment despite its record of failure and the opposition of the American people.

You’d think a GOP Congress would want to probe the waste and fraud rampant in the foreign aid budget. But last week, Rep. Ben Gilman. R-N.Y., convened a House International Relations Committee hearing on the future of foreign aid, and all but one of the eight witnesses argued for foreign aid spending.

In fact, most of their groups receive foreign aid: the American Israel Public Affairs Committee, the Irish National Caucus, the American League for Exports and Security Assistance, Africare, World Vision and Bechtel Corp.

That’s right: The GOP has brought in Bechtel, one of America’s most notorious recipients of corporate welfare, to call for more corporate welfare. It seems as if the only foreign-aid junkie the Republicans failed to invite is the Democratic National Committee.

In fact, free-enterprise views on foreign aid got a better hearing when the Democrats ran Congress.

Last month, Congress approved more than $100 million of funding for population control programs—thus funneling cash into the coffers of International Planned Parenthood and a host of liberal activist groups.

This is just a sign of the times in Washington: Republicans ignoring their friends and making nice with their adversaries. But the re-funding of failed foreign aid programs is particularly puzzling, because no area of the budget is more unpopular with voters.

Poll after poll reveals that, by two-to-one margins, Americans want foreign aid cut. The public has an intuitive understanding that the people who truly prosper from these programs tend to live in Washington, Geneva, and Brussels—not the Third World.

Supporters of foreign aid insist the public is off base: Aid, they say, runs just $15 billion a year, less than 1% of the total budget. and is thus fiscally inconsequential. But $15 billion is more than was paid in federal income taxes last year by every family in states such as Delaware, Kansas, Maine or New Hampshire.

And the real foreign aid budget is probably closer to $50 billion—when you add in Pentagon “peacekeeping” work that does nothing to protect our nation’s security.

Lord Peter Bauer, the great economist, once described foreign aid as “taxing poor people in rich countries and passing it on to rich people in poor countries. “

The most economically destructive form of foreign aid is funneled through the multilateral groups, such as the United Nations economic funds, the World Bank, and the International Monetary Fund.

Perpetuating Poverty,” the recent book by Doug Bandow and Ian Vasquez of the Cato Institute, documents hundreds of cases where our aid programs have harmed developing countries by rewarding economic failure and delaying market-based reforms. Nations that received less foreign aid have actually seen more economic development than those that got more “help.”

The foreign aid community clings to outdated theories. For example, it still holds to a ’70s mind-set that the solution to every economic problem around the globe starts with birth control. The U.S. alone spends nearly $1 billion a year for “family planning” through the U.S. Agency for International Development, the State Department and the United Nations.

This theology runs so deep that condom distribution is now part of U.S. humanitarian aid to victims of floods, famines and wars. Should we really be surprised that this community has a miserable record in producing growth?

True economic development in the Third World will never come from the advice and dollars of international bureaucrats. Nations with free markets, low tax rates, protection of property rights and minimally intrusive governments will prosper. Those without, won’t.

Private capital flows amounted to $500 billion in 1996, or five to 10 times more than all international economic aid combined. This private investment migrates naturally — without the advice and consent of the IMF or World Bank—to nations that reward freedom and free enterprise.

Rather than increasing funds, Congress should pull the plug on barnacle-encrusted, elitist, self-serving institutions like the United Nations, the World Bank, AID, the Export Import Bank and the IMF.

The best way—the only way—for the U.S. to spread freedom and free enterprise to every corner of the globe is to lead by example.

Stephen Moore is director of fiscal policy studies at the Cato Institute.