We, the people of the United States, overburdened with taxes, fighting for survival and a way of life, struggling with out-of-touch and out-of-control politicians from all political bents are, in spite of the odds, generous to a fault. Last night the boys and I watched twelve Israeli Scouts perform in the Caravan Gilad; a celebration of Israel through the eyes of its young people. It was energetic, fun and inspiring to watch these youngsters hail life with such enthusiasm. Following the performance, the boys gathered around to listen to Israeli scout tales and, as I was a stranger at the Jewish Community Center, I sat by myself quietly waiting. One of the young women performers joined me
The Caravan Gilad
for a spot of conversation. It did not take long for her to share all of the wonderful welcomes and generosity she had discovered in Los Angeles, Las Vegas, and Tucson. Her story is repeated as complete strangers in the United States donate everything from kidneys to money to other complete strangers just because they want to help. The United States is, indeed, a marvelously giving country. These very same benefactors, the everyday taxpayers, almost to a person, loathe foreign aid. Why?
A cursory evaluation of foreign aid could lead one to believe that it helps people outside of the United States by supplying food or money when they need it. If that were so, I think we’d all be pleased, or at least feel slightly less ill-at-ease. The historical foundation and current application of foreign aid, however, are a case study in unintended consequences. The historical roots of today’s foreign aid can be traced to three distinct acts in the foreign aid play.
Act I occurred at a meeting of representatives of forty five countries in Bretton Woods, New Hampshire in 1944. The Bretton Woods conference, also known as the United Nations Monetary and Financial Conference, turned the world on its fiscal ear including the effective elimination of the bothersome gold standard, which required nations to take the nasty deflation medicine when their economies got out of balance. At the same conference, this group laid the cornerstone of the International Monetary Fund, IMF, an organization which pegs the exchange rates to the U.S. dollar. This is also called the par value system. Nineteen countries eventually signed the original Articles of Agreement and the IMF went into business in 1947. Additionally, this august body also established the foundation for the World Bank, to assist in the reconstruction of Europe following WWII. France became its first customer when the country borrowed $250 million for reconstruction, in 1947. The IMF and World Bank evolved and changed as they defined and re-defined and expanded their missions. Their tentacles reach around the world, seducing countries and influencing the geopolitical play. For the most part, their losses, which are significant, are underwritten by the taxpayer in the United States.
At the time, Henry Hazlitt, a leading editorialist for the New York Times argued against the Bretton Woods model stating that it would break down over time. In a stroke of genius or prophesy, Hazlitt maintained that “…the result of trusting governments and tying their fates together would be inflation and the collapse of what remained of sound money.” He opined that, to achieve stability, each country should maintain its own monetary system. Hazlitt’s position on the Bretton Woods model eventually cost him his job. He later published From Bretton Woods to World Inflation: A Study of Causes and Consequences; a collection of the articles.
Act II, The Marshall Plan or the European Recovery Program resulted in $13 billion in aid over a four year period from 1947 through 1951. Sixteen of Europe’s war torn nations were the beneficiaries of the original package including technical assistance as well as food, fuel and machinery from the United States. Later there were direct investments in Europe’s industrial sector. President Truman appointed General Marshall as Secretary of State in 1947. The new secretary’s challenge was to address the reconstruction of Europe. Marshall probably already had the roadmap in his head because The Marshall Plan came together quickly and solidly. During a speech rolling out the plan at Harvard, Marshall gave a preview of how the aid would politically benefit the U.S. as it entered the Cold War (1947-1991). Marshall posited that political stability in Western Europe was vital to countering communist expansion in that region, and he believed that political stability was integral to the recovery of Europe’s national economies.
Act III, the Truman Doctrine, was simple and succinct. In February 1947, Undersecretary of State Dean Acheson introduced the domino theory when he explained that more was at stake in the Greek crisis than Greece and Turkey during a meeting with members of both houses of congress. If those two key states fell, he clarified, then communism would likely spread south to Iran and as far east as India. Using the set point of Rome and Carthage, Acheson explained the extent of the polarization of power. The legislators believed, and quickly cut a ‘deal’. They agreed to endorse the program if President Truman would emphasize the severity of the crisis publicly in an address to Congress and in a radio broadcast to the American people. Truman complied. He set the doctrine in few words as he asserted, “It must be the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures.” The Republican Congress sanctioned the aid to Greece and Turkey, which marked the beginning of a long and enduring bipartisan cold war foreign policy.
Currently U.S. foreign aid is divided into two broad categories: military and economic assistance. The State Department is no longer directly responsible for handing out the civilian half of the direct U.S. foreign aid. That task was handed to the United States Agency for International Development, USAID, in 1961 and it is the only place where a firm number can be obtained. In 2013, USAID, under the State Department’s budget requested $51.6 billion. According to the USAID web site this money is invested in agricultural productivity, combating maternal and child mortality and deadly diseases, providing life-saving assistance in the wake of disaster, promoting democracy, human rights and good governance around the world, fostering private sector development and sustainable economic growth, helping communities adapt to a changing environment, and elevating the role of women and girls.
The total cost of foreign aid is tough to grasp since the only firm number is the USAID budget request of $51.6 billion. The U.S. military currently has a presence in 78 per of the world’s countries. Some of the cost of occupation is in the DoD budget but much of it is funded directly through other congressional appropriations. The cost of the IMF and World Bank is mired in mirrors and misdirection. The only thing certain is that the U.S. taxpayer funds most of it and most of their extensive losses. At least the military still does what the military does. The World Bank is currently directing most of its effort to ‘alleviating poverty’ (See Footnote 3) and USAID is engineering societies.
Both missions are a far cry from reconstruction following a world war. But, while the fruits of reconstruction are still visible, the aid of today rarely reaches the people it claims to help. As a person who has lived and worked in many of the places foreign aid claims as victories, I will bear witness that foreign aid does more harm than good. It creates incentives for dishonesty and lines the pockets of corrupt politicians and crony capitalists. It does little for the people. I stood on the docks in Antofagasta, Chile, while wheat from the U.S. was being unloaded to help the Chilean people following the huge earthquakes there in the early 1960s. The wheat was loaded into government trucks and transshipped to the highest bidder. I survived a 1966 coup d’état in Ghana and the foreign aid for education and democratic systems along with food poured directly into the hands of General Ankrah and his coup cronies; nothing much reached the thousands in need. I lived on Guam in the 1990s while the State Department turned a knowing blind eye to slavery, while sending foreign aid money to the government to stop it. In the Congo, the U.S. backed Mobutu had bank accounts approximating the sum of the World Bank and IMF loans and grant while his people died of starvation during the many famines. To add insult to injury, we underwrite our enemies with foreign aid. On June 8, 2013, Secretary of State John Kerry released of $1.8 billion in military foreign aid to Egypt even after the release of a video in which they denounced the U.S. as an enemy. Foreign aid is a travesty, another secret pipeline for politicians to use for whatever agenda is on their minds.
Perhaps the American taxpayer is uncomfortable with foreign aid because, while each taxpayer makes a choice to be generous, foreign aid takes taxpayer money by force and spends it to promote political agendas.