Aid to Dependent Dictators

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Capitalism
is the most powerful economic force ever developed. The exponential
economic growth made possible by private property rights and free
trade is the basis for the existence of the modern world. This is
no secret; even the Communist Party of China includes "businessmen,"
i.e. capitalists, as one of the four pillars of the Party.

So
why are so few nations even nominally capitalist? Largely because
of America’s biggest welfare program: Aid to Dependent Dictators.
Since World War II, US foreign aid has systematically subsidized
parasitic governing “elites," from the nomenclatura of the Warsaw
Pact to the kleptocrats of Africa; even the rulers of the “Axis
of Evil."

The
Roman Empire extracted tribute from its subject provinces, leaving
Roman citizens with a lighter tax burden (at first, anyway). The
US Empire instead taxes its own citizens to pay tribute to foreign
ruling classes. This may be counterintuitive, but it is a highly
effective Imperial stratagem. By subsidizing socialist regimes,
Rome-On-The-Potomac prevents the development of competing capitalist
centers elsewhere. A tiny expenditure each year to prop up a dictator
can prevent the emergence of a multitrillion-dollar economy. What
if every poor nation in the world had taken the route of 20th century
Singapore, Hong Kong, Taiwan… or for that matter, the 19th century
United States? How much power would State Department proconsuls
have if every nation on Earth were rich?

Of
course, “tiny” expenditures on foreign dictators add up. Unfortunately,
no one can tell you exactly what they add up to, because foreign
aid is dispersed and cloaked better than the CIA budget. Official
foreign aid is the smallest part of the cost; the majority of foreign
Aid today is arranged in back-room deals between money-center banks,
dictators, and the Federal Reserve. The “official” foreign aid figures
are a lower limit. Even this lower limit is an incredible figure.
At an absolute minimum, since WWII more than a trillion dollars
has been transferred from US taxpayers to unfree regimes. What would
this trillion dollars have become, if left in the private sector?
How many trillions of private wealth? And how much of this private
wealth would have been invested in the more-free parts of the Third
World, providing real jobs and real pride to people who now live
in hopeless dependence? Of course, we will never know. Perhaps we
would have seen a cancer cure by now, perhaps Mars would have been
terraformed, perhaps Washington DC would have had a legitimate baseball
stadium instead of a tax-financed atrocity. A multi-trillion-dollar
hole in the world economy is too big to visualize.

The
real dollar cost of foreign aid is the sum of all official aid,
plus all US military commitments not related to US security, plus
all bank “loans” to Third World and communist governments. The majority
of these anti-capitalist regimes will never be able to, or be interested
in, repaying any of this money. The Warsaw Pact alone was estimated
to have owed about two hundred billion dollars to Western banks
at the time the Berlin Wall fell. Since then, of course, the pace
of “loans” to parasite governments has increased dramatically. Counting
our continuing defense subsidy to the wealthy nations of Europe
and the Pacific Rim, and counterproductive military commitments
to puppet regimes in Iraq and elsewhere, US foreign aid must be
well over two hundred billion dollars per year.

The
World Bank

Even
the official foreign aid agencies use accounting methods that make
Enron look like a model of honesty and transparency. The World
Bank
handed out more than 17 billion dollars in 2001. But you
won’t find $17 billion worth of expenditures in the official budgets
of the funding nations. The 1994 Cato Institute book, Perpetuating
Poverty, found that in 1992 the US Congress placed only 3 percent
of its World Bank contribution on the budget. The other 97 percent
was in “callable capital pledges," i.e. illegal, unconstitutional,
off-the-books debt. Most of the World Bank’s money comes from the
sale of bonds, backed by these off-the-books “callable pledges."

This
relatively minor source of foreign aid still gave away $17 billion
in one year. While $17 billion might be only a moderate expenditure
for Bill Gates, this much money can buy a lot of AK-47s and barbed
wire in countries that have per capita incomes less than 400 dollars
per year.

The
good news about the World Bank is that it wastes a high proportion
of its money on administrative costs, more than $1.3 billion in
2002. After all, every dollar spent on overpaid bureaucrats is a
dollar less for forced relocation programs, rainforest destruction,
and dam projects. And to be fair, while the Bank’s financing may
be shady, it issues lots of good reports on the failures of its
own programs. In the Bank reports you can read of the bulging Swiss
bank accounts of government officials, and the environmental damage
Bank projects have caused to the rain forests in Indonesia and Brazil.
The bad news is that the only solution the Bank proposes is that
we give it more money.

The
IMF

Another
of the official sources of foreign aid, the IMF,
explains some of its financing methods as follows on its web site:

“Off-market
transactions in gold. In December 1999, the Executive Board
authorized off-market transactions in gold of up to 14 million
ounces to help finance IMF participation in the HIPC Initiative.
Between December 1999 and April 2000, separate but closely linked
transactions involving a total of 12.9 million ounces of gold
were carried out between the IMF and two members (Brazil and
Mexico) that had financial obligations falling due to the IMF.
In the first step, the IMF sold gold to the member at the prevailing
market price and the profits were placed in a special account
and then invested for the benefit of the HIPC Initiative. In
the second step, the IMF immediately accepted back, at the same
market price, the same amount of gold from the member in settlement
of that member’s financial obligations falling due to the Fund.
The net effect of these transactions was to leave the balance
of the IMF’s holdings of physical gold unchanged.”

As
you can see, Enron accountants have a lot to learn from foreign
aid bureaucrats. Speaking of gold, the IMF claims that gold is not
important in today’s monetary markets, which is no doubt why the
IMF hoards only a bit more than $32 billion dollars worth of the
valueless metal. The IMF claims total currency assets of 290 billion
dollars. The IMF also maintains a credit line of $40 billion. How
much of this leaks away per year? I don’t know how to answer that
question, except to say “all of it." None of this money is going
to get back into the private sector except for the part that is
stolen and invested through numbered Cayman Islands bank accounts.
Let’s hope that’s a large proportion.

The
UN

Yet
another source of off-the-books income for the world’s monarchs
and oligarchs is the United Nations. In addition to dollars, the
UN provides free pro-government mercenaries. Upon a “democratic”
vote of UN representatives (the majority of whom are representing
either dictators or regimes which are “democratic” in theory at
best… most of the world’s elections are just as phony as those run
by Diebold), armies of “peacekeepers” can be raised and used to
support leaders so unpopular in their own countries that they can’t
even hire their own thugs. The US provides a disproportionate share
of the UN’s income, not least of which is the UN dues from minor
dictators… paid out of their US aid money.

USAID

Working
our way down to the small fry of the aid world, we come to USAID.
Unlike the bigger players, USAID
actually has an annual budget request figure you can look up, along
with some wild guesses as to other US agency aid expenditures

(their guess for FY 2004 is 38 billion).

For
FY 2005, the "official" figure is only $8,880,800,00 (but
notice that "supplemental" expenditures were almost four
billion in FY 2004, and there is no reason to believe that any less
will be spent this year).

So
USAID is only hitting up the taxpayer for less than thirteen billion
every year. It doesn’t sound that bad, surely not as bad as the
Department of Agriculture’s mammoth domestic economic drain. But
the real problem is the effect on the aid recipients. What does
massive aid to a government mean to that nation’s citizens? Let’s
look at a few of the most famous cases:

There
is a persistent myth that foreign aid rebuilt Germany and Japan
after World War II. I don’t know how this myth persists when it
is so easy to look up the figures on the 1948 Marshall Plan. There
is a perfect reverse correlation between Marshall Plan expenditures
and development. The lion’s share of Marshall plan money went to
England, which recovered very poorly after WWII. Then France was
pummeled with Marshall help, keeping it down as well. Austria and
Greece were also proportionally large recipients, and proportionally
slow in recovery. (One of the many features of Marshall “help” was
that any Marshall expenditure had to be matched with taxes from
the donor country, causing a maximization of public sector vs. private
sector growth.)

So
far from helping Germany, the allies actually stole twice as much
in reparations and occupation charges as the Marshall Plan contributed.
Germany and Japan both recovered more quickly than England or France
in spite of, not because of, the Marshall Plan. In both cases the
economic “miracle” was achieved by repudiating price controls and
allowing private foreign investment.

Now
let’s look at where massive aid didn’t go after WWII: Singapore,
Hong Kong, and Taiwan. In each case, the economy grew at over 5%
per year. Again, “economic miracle” occurred when price controls
were removed, free trade and foreign investment permitted. Equally
important was the absence of aid. Local politicians had no choice
but to allow some economic freedom, or they would have had nothing
to steal from their productive classes.

Unfortunately
the majority of the world’s politicians face exactly the opposite
incentives. As long as the dictator of a post-colonial African or
post-Soviet “republic” prevents the development of a private sector,
his regime cannot be overthrown. Year after year, the assured flow
of US aid dollars will provide him with a cornucopia of weaponry
and wealth. This is exactly what has happened all across the world,
from Azerbaijan to Zaire. “Aid” has brought permanent stagnation.
In many aid-dominated African nations, incomes are actually lower
than they were twenty years ago.

But
Could US Foreign Policy Get Along Without Foreign Aid?

Many
of my "conservative" friends tell me that US aid programs
are a necessity; that without the skillful diplomacy of our aid
bureaucrats, the world would be overrun with dictators. That would
be terrible, of course. So let's take a quick look at the effect
of US aid programs on the longevity of the most famous dictators:

Stalin:
given vast US aid during WWII and after, including the use of US
troops and flamethrower tanks to round up and send to the Gulag
2.5 million Russians who had “seen the West." Died of old age.

Tito:
given vast US aid, including nuclear reactors, in the 1950s. Died
of old age.

Mao:
captured much of his US aid honestly from former warlord Chiang
Kai-Shek, though some was transferred from Soviet lend-lease stockpiles
ostensibly intended for fighting the Japanese. However, he was aided
by US Drug Prohibition, which made south China opium more valuable.
A hard-working dictator, who still holds the all-time record for
“peasants starved” and “free-style executions," Mao finally died
of old age in the 1970s.

Castro:
aided by the US until the Soviets took over the franchise. Then
back on US aid again after the Bay of Pigs (ostensibly as a ransom
to free Bay of Pigs POWs). Currently protected from the much more
powerful and heavily armed Florida Cubans by the US Navy. May die
of old age, but cryonic suspension still a possibility.

Ho
Chi Minh:
To "oppose" his communist ideology, the US took land
titles away from peasants, forced South Vietnamese into collectivized
hamlets, and dropped seven million tons of bombs on South Viet Nam’s
farms and villages. Oddly, these policies failed to stop communism
from spreading. He died of old age before the US could give him
Thailand, but his political heirs did conquer all of Viet Nam. They
received large amounts of US aid after the Viet Nam war.

Pol
Pot:
killed one third of Cambodian population, so holds the
world record for percentage genocide of one’s entire subject population
(standing contested by Jim Jones, but Jones ruled not eligible in
the “government” category by the Genocide Commissioner). Aided by
the US in war against North Vietnamese puppet government until 1986.
Died of old age.

His
Excellency, Field Marshall, Al-Haji, Dr. Idi Amin Dada, Life President
of Uganda, conqueror of the British Empire, distinguished service
order of the Military Cross, Victoria Cross and Professor of Geography:

aided by the US (and, to be fair, by Israel as well). Later removed
by dictator Julius Nyerere. Amin lived long in retirement in Saudi
Arabia, due to his adherence to a healthy diet (reportedly, of vegetarians).

Julius
Nyerere:
Nyerere absorbed vast amounts of US aid while collectivizing
Tanzanian agriculture. Died of old age.

Kim
Il Sung:
Attacked South Korea in 1950. Rewarded later by Jimmy
Carter with vast amounts of free fuel oil and two nuclear reactors.
Died of old age.

Kim
Jong Il:
Playboy heir of Kim Il Sung. Has a great video collection,
so he must be OK, according to various journalists. In process of
producing nuclear stockpile with US-donated nuclear reactors. Won’t
die of old age for a long time.

The
evidence shows that giving dictators billions of dollars fails to
produce any ill effects on their health.

The
Aidistanian Peace Corps

For
those who look down on Africans and Slavs, and think that we good
Amurricans would never go the same way, try a little thought experiment:
pretend that America was the “beneficiary” of foreign aid from some
hypothetical supersuperpower. Let’s say that whoever controlled
Washington D.C. automatically received six trillion dollars per
year from “Aidistan," as long as they accepted a few minor political
strings. Imagine George W. in a coalition “reconciliation” government
with Senator Clinton, with unlimited funds to create new government
departments. Imagine Aidistanian Peace Corps volunteers crisscrossing
our country, teaching the uncultured poverty-stricken Amurricans
basic hygiene and condom use. Imagine Aidistanian engineers damming
the Grand Canyon and building massive soccer stadiums everywhere.
Imagine highly paid elite troops, equipped with ultra-high-tech
foreign weapons, rounding up the troublesome, primitive, animist
ethnic groups (such as Californians) and forcibly relocating them
to collective rice farms in Alaska. Imagine all government agencies
able to triple in size, and do it without caring about domestic
tax receipts. Imagine no-fly zones over the East and West Coasts;
imagine high tariffs against US products in foreign markets. Price
controls, public housing, socialized medicine, gun control, Drug
War, all paid for by super-taxpayers from an outside power. How
long would the US economy last under a foreign aid regime?


Welfare-To-Work For Dictators

If
Americans truly want to eliminate welfare for dictators, they can
do it in two easy steps, both costing less than nothing. The first
step is to eliminate all US government-to-government foreign aid,
including the no-Congressional-oversight “unofficial” aid that is
sent out through bank “loans” and ends up being quietly “monetized”
by the Fed years later. This will cost somewhere between negative
20 billion to negative 80 billion every year.

The
second step would be to remove all US trade barriers, thus allowing
US videos, books, etc. easier access to repressive regimes. This
would cost negative 100 billion to negative one kazillion, depending
on how much trade increased. The absolute minimum benefit to the
global economy is the amount that is now wasted on tariff enforcement
and bribes to Congresspersons for trade favors.

Foreign
Aid to dictatorships and oligarchies is the least-liked US government
activity. Few Americans believe in the Divine Right of Dictators,
and fewer still want to pay for it. If libertarian and conservative
think tanks want to "cut back government," "end wasteful
spending," etc., they need to concentrate their educational
efforts on ending Aid to Dependent Dictators. At a minimum, there
should be web sites where press and public can easily look up:

  1. How much
    foreign aid there is
  2. Which
    governments are getting the money
  3. Whom they
    are killing with it

If
we can't get rid of Aid to Dependent Dictators, how can we expect
to get rid of Grandma's prescription-drug subsidy?

November
22, 2004

Bill
Walker [send him mail]
works as a Research Associate in telomere biology at an undisclosed
(thanks to legal threats from his tax-financed employer) location.

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