Foreign Waste Disguised as Aid

This piece appeared in the Washington Times on August 20, 1999.
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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 fistfulsof cash could buy political stability, spur social progress and eliminatepoverty in the Third World.

Alas, this strategy, backed by more than $1 trillion (adjusted forinflation) from the United States alone, has crashed and burned. In 1996,the UN declared that 70 countries, aid recipients all, were poorer than in1980. An incredible 43 were worse off than in 1970. Chaos, slaughter,poverty and ruin stalked Third World states, irrespective of how muchforeign assistance they received.

But aid advocates haven't given up. Mr. Clinton told the VFW that currentprograms 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 beanother bloody war." It's a superficially appealing argument. Alas, itsimply 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. militaryoccupation. In fact, most every country in crisis in recent years bankedabundant "aid" over the same period. Sierra Leone received $1.8 billion,Liberia $1.8 billion, Angola $2.9 billion, Chad $3.3 billion, Burundi $3.4billion, 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 frompublic 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 $200million has simply disappeared from the city of Tuzla's budget, on top of$300 million missing over the past two years. Aid agencies and foreignembassies lost $20 million deposited in one Bosnian bank.

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

The investigation was conducted by the anti-fraud unit of the Office of theHigh Representative - essentially the West's dictator in Bosnia. Officialshave reportedly compiled a 4,000-page report and are investigating 220casesof alleged corruption and fraud.

Not surprisingly, the recipients of aid seem uninterested in prosecutingwrongdoers. The High Representative has formally barred 15 miscreants fromoffice, but most, reports the Times, retain their influence. BosnianPresident Alija Izetbegovic dismisses the High Representative'sallegations.

Of course, President Izetbegovic's son, Bakir, is reputed to be one of therichest men in Bosnia. Bakir Izetbegovic controls Sarajevo's CityDevelopment Institute, which determines who gets to occupy 80,000 publicapartments. Members of the ruling party get preferential access, whileaverage Bosnians complain they have to pay a $2,000 kickback.

Western officials report that the younger Mr. Izetbegovic shares theextortion money extracted by Sarajevo gangsters from local businessmen. Healso 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 internationaladministrators beg, plead, cajole and in some cases engage in what lookslike bribery, promising cities infrastructure projects if they allow somerefugees to return." It should surprise no one if what looks like briberyends up being treated like bribery.

Alas, the experience of Bosnia is all too common. The venality of aidrecipients such as the Philippines and Zaire was legendary. A new studyfromthe National Bureau of Economic Research reports that more corruptgovernments tend to receive more aid. Even more money will only worsen theproblem.

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