PanAmPost: Studying economics at the university level usually means taking at least one course in development economics and three in macroeconomics.
However, in my case, as in many other students across the world, none of these ever covered the importance of free enterprise and property rights.
How to get countries out of poverty is a standard theme of Macro 301 and development economics. But these courses’ answer to such a complex dilemma is, almost without exception, state intervention— all very much in line with the notion that the poor are trapped in a vicious circle and only a third party can help them.
This idea, which the great late economist Lord Bauer dubbed the “spurious consensus” and combated throughout his life, states that poor countries cannot progress because they have such low incomes that they have no money left to save and are therefore condemned to misery.
Where that kind of reasoning leads to should be obvious: rich countries should step in to the provide the poor ones with alms. This has been the predominant development theory in academia, and the policy for combating poverty of any kind.
But how can the theorists of development economics, faithful believers in aid, then explain that countries that are now rich escaped poverty without subsidies from third parties? MORE
Srta. Vallejo is clearly on the economically and morally correct side on this issue, but she doesn’t do a very good job of explaining just why it is that “foreign aid backfires and condemns countries to poverty” as the title implies.
For post-grad material, of course, read John Perkins Confessions of an Economic Hit Man and his follow on books.
One crystal clear example is the effect of the commonplace practice of sending free food to populations perceived to be or actually starving. Any local food producers are immediately ruined. How do you compete as a food seller if your competition is giving food away for free? If we simply cannot avoid foreign aid in such tragic situations, it should be to assist the local food producers, farmers, and distributors.
More nefarious is the practice, especially by the U.S., of “helping” underdeveloped countries by financing development projects such as electric power generation and distribution. It sounds good until you read the fine print: the proposal is based on unrealistically high estimates of return on investment, so the project is doomed to default. What’s more, some large proportion of the money must be used to hire U.S. crony capitalist companies to do the work. So, the “aid” money mostly just flows temporarily through the economy purported to be the beneficiaries and then into the bank accounts of well-connected U.S. bureaucrats and businesses.
This is an over-simplified description, but I hope it illustrates the point. Perkins’ books are mediocre writing but very eye-opening and worth a little time.
Foreign aid is exported welfare. Same effect over the long term.
I second that Uncle Al,definitely a good Read.
annie Go Trump
wealth creation starts with personal freedom
The obvious solution to poverty is to elect every person to one term of congress during their lifetime and they will emerge healthy, wealthy and wise (and with a huge lifetime pension)!
(the voice of any govt official) “But,if we did that I wouldn’t have a job!,HEll,,I would’ve to get a real job!”. “One where the Boss would expect me to DO that job!”.