Commentary

Foreign Waste Disguised as Aid

This piece appeared in the Washington Times on August 20, 1999.
The closer his term comes to an end, the more leftward President Clinton seems to move. In a speech before the Veterans of Foreign Wars, he urged Congress to approve his bloated foreign aid budget. Yet no one would benefit from throwing more money at programs which have consistently failed.

Foreign assistance has always had strong defenders. They believed fistfuls of cash could buy political stability, spur social progress and eliminate poverty in the Third World.

Alas, this strategy, backed by more than $1 trillion (adjusted for inflation) from the United States alone, has crashed and burned. In 1996, the UN declared that 70 countries, aid recipients all, were poorer than in 1980. An incredible 43 were worse off than in 1970. Chaos, slaughter, poverty and ruin stalked Third World states, irrespective of how much foreign assistance they received.

But aid advocates haven’t given up. Mr. Clinton told the VFW that current programs are “designed to keep our soldiers out of war in the first place.” Without money for the Balkans, he warned: “Make no mistake - there will be another bloody war.” It’s a superficially appealing argument. Alas, it simply isn’t true.

Between 1971 and 1994, Haiti received $3.1 billion and Somalia collected $6.2 billion. Both nations ended up in chaos and under U.S. military occupation. In fact, most every country in crisis in recent years banked abundant “aid” over the same period. Sierra Leone received $1.8 billion, Liberia $1.8 billion, Angola $2.9 billion, Chad $3.3 billion, Burundi $3.4 billion, Rwanda $4.7 billion, Uganda $5.8 billion, Zaire $8.4 billion, Mozambique $10.5 billion, Ethiopia $11.5 billion, and Sudan $13.4 billion.

In no case did peace result. To the contrary, aid often fostered conflict, underwriting autocratic, venal dictators who impoverished their nations.

Then there’s Bosnia. President Clinton’s speech was reported on the same day that the New York Times reported the results of an exhaustive international investigation of the $5.1 billion in aid provided to that nation since 1995.

This money, too, was intended to prevent the resumption of conflict. Alas, reports Chris Hedges: “As much as a billion dollars has disappeared from public funds or been stolen from international aid projects through fraud.”

Western officials fear even discussing the problem lest it frighten away “international donors.” As well it should. For instance, in 1999 $200 million has simply disappeared from the city of Tuzla’s budget, on top of $300 million missing over the past two years. Aid agencies and foreign embassies lost $20 million deposited in one Bosnian bank.

The U.S. Agency for International Development established a $278 million revolving fund to jump-start local businesses. Hidrogradnja, one of Bosnia’s largest firms, failed to repay $1 million in loans. The agency has sued 19 companies that failed to repay more than $10 million worth of loans.

The investigation was conducted by the anti-fraud unit of the Office of the High Representative - essentially the West’s dictator in Bosnia. Officials have reportedly compiled a 4,000-page report and are investigating 220 cases of alleged corruption and fraud.

Not surprisingly, the recipients of aid seem uninterested in prosecuting wrongdoers. The High Representative has formally barred 15 miscreants from office, but most, reports the Times, retain their influence. Bosnian President Alija Izetbegovic dismisses the High Representative’s allegations.

Of course, President Izetbegovic’s son, Bakir, is reputed to be one of the richest men in Bosnia. Bakir Izetbegovic controls Sarajevo’s City Development Institute, which determines who gets to occupy 80,000 public apartments. Members of the ruling party get preferential access, while average Bosnians complain they have to pay a $2,000 kickback.

Western officials report that the younger Mr. Izetbegovic shares the extortion money extracted by Sarajevo gangsters from local businessmen. He also owns 15 percent of state-controlled Bosnia Air.

The problem is not just those who are stealing, but those who are paying. James Lyon, director of the Crisis Group, complains: “The international administrators beg, plead, cajole and in some cases engage in what looks like bribery, promising cities infrastructure projects if they allow some refugees to return.” It should surprise no one if what looks like bribery ends up being treated like bribery.

Alas, the experience of Bosnia is all too common. The venality of aid recipients such as the Philippines and Zaire was legendary. A new study from the National Bureau of Economic Research reports that more corrupt governments tend to receive more aid. Even more money will only worsen the problem.

President Clinton evinces the best of intentions in lobbying for his foreign aid bill. But 50 years of experience shows foreign assistance to be a bust. It should be called foreign waste, not foreign aid.

Doug Bandow is a senior fellow at the Cato Institute.