Thursday, April 03, 2008

The Curse of Foreign Aid

Several studies have found that countries with plentiful and profitable natural resources have not helped them to become wealthy, but in fact, have big a major influence in the poverty of millions of people. This "natural resource curse" is a paradox that refers the negative correlation between abundant natural resources and low economic growth. The primary reason cited for this counter intuitive parallel is the ease from which political corruption can occur when these industries are nationalized (taken over by the government). Oppressive regimes must have control over a lot of money to pay off their followers, i.e. their cronies, and the resulting inflow of money from resources like diamonds and oil are perfect for this. These tyrannical governments, it is safe to say, are not good for economic growth. Nations like Angola, rich in diamonds, and Venezuela, abounding in oil, are perfect victims for this problem.

As scary as this idea is, even scarier is the similar outcome of foreign aid. Foreign aid, from one government to another, does not help the people of needy country, but instead acts a natural resource of easy money for controlling governments. The United States must attempt to be a beneficial government because voters pay the bills. Take away that incentive and governments only have to keep people happy enough not to revolt. No representation without taxation. Here are some articles I found on the subject: Aid and the Resource Curse and The Curse of Aid.

The solution I have come to is this: if we want to help the impoverished people of the world, we'd be better off (and so would they) to lower legal barriers and open trade between these nations.

6 comments:

  1. So, what have you got against Asian people?

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  2. I'm going to assume you are referring to the picture. If so, I just thought it was funny.

    If not... then... yes, I don't like Asian people (especially Thai people).

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  3. We can also give money to smaller organizations which sponsor workers who go to these countries, asses the situation, and provide what's needed (medical care, education, etc.) The Peace Corps and faith-based initiatives would be examples. Though it is still an indirect aid method, it bypasses tyrannical governments.

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  4. interesting article on the topic:

    http://blog.acton.org/archives/2346-European-foreign-aid-caught-between-dishonesty-and-incompetence.html

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You are the reason why I do not write privately. I would love to hear your thoughts, whether you agree or not.