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Foreign Aid Debacle

The Free Market

Tags War and Foreign PolicyInterventionism

12/01/2000Laurence M. Vance

The Free Market 18, no. 12 (December 2000)


One of the pillars of an interventionist US foreign policy is foreign aid. Since World War II, the United States has dispensed billions of dollars in foreign aid to virtually every country on the planet. Foreign aid was lavished on our friends and our foes during the cold war and a decade after. It is extended to both sides of military conflicts. It is even accorded to countries that regularly vote against the US in the UN. The recipient countries are less likely to reform their economies once they get on the US dole.

Although foreign aid comes in many forms besides cold, hard cash, it all comes from the same source. Construction projects, food, medicine, weapons, peacekeeping forces, subsidized loans, humanitarian relief—they are all bought and paid for by the US taxpayer. But what is often disguised as economic development, disaster relief, or containing communism is nothing more than an elaborate system of bribes and rewards. Foreign aid is further camouflaged as US support for the UN, IMF, World Bank, and other sinkholes for American taxpayer dollars.

One of the great myths of foreign aid is that it goes to poor, starving, economically disadvantaged people. But foreign aid is really foreign government aid. And these foreign governments are habitually corrupt, heavily bureaucratic, and statist to the core. Yet the beneficiaries of US foreign aid are not just the miscreant regimes that pocket our aid. Foreign aid further entrenches the US government bureaucracy, increases the power of the State, and lines the pockets of US corporations whose products are bought with foreign aid money.

The Republicans in Congress—even the most avowed conservatives—incessantly vote for foreign aid. House bills for billions of dollars of foreign aid appropriations are regularly passed by the "conservative" Republican majority. In 1994, the bogus "Contract With America" made no mention of cutting foreign aid, and the subject has remained off the table ever since.

The Reagan administration expanded foreign aid to greater heights than the three previous administrations combined. Even callers to Rush Limbaugh s radio show are told not to worry—foreign aid is only a small part of the US budget. If foreign aid worked to advance American interests, like every administration claims, then the most prosperous countries would be basket cases like Haiti, Ethiopia, and Bangladesh.

But the question is not whether foreign aid "works," because the economic and military interventionist interests of the US government are not the interests of the American people. And even if they were, foreign aid would still be immoral, because it is the forced looting of the American taxpayer to fund the governments of countries most Americans could not locate on a map and in many cases have never even heard of.

Yet ironically, the solution to the foreign aid question is not an end to foreign aid. It is an end to the methods used to fund it. If the countries of the world want foreign aid then let them have it—free-market foreign aid. The solution is the same as the solution for any other government transfer program. If Big Bird can t make it in the free market, let him go back to the chicken coop. If an art exhibit can t garner an audience, let it stay in the basement. If a foreign country can t elicit enough funds from US citizens, let it solve its own problems.

The process of soliciting foreign aid is a simple one. A direct_mailing campaign using mailing lists or the city directory should be undertaken by each country. This could be done after a disaster or any time money is needed. If someone wants to donate money for disaster relief in Iran or Pakistan all they have to do is write out a check to the respective country. If an Irishman wants to send money to Ireland there is nothing stopping him. Likewise with other groups. If foreign aid can survive on the free market then let it continue.

This is made all the more easy, thanks to the Internet. Governments need only set up a site that makes online contributions possible. If someone wants to give money to Haiti, he can go to and give all his heart desires. Or if he wants to give money to a US corporation to invest in Haiti, he can do that at innumerable corporate sites. What taxpayers object to is neither the aid nor the fact that it is foreign but rather that their money is being taken without their consent.


Contact Laurence M. Vance

Laurence M. Vance is an Associated Scholar of the Mises Institute, columnist and policy adviser for the Future of Freedom Foundation, and a columnist, blogger, and book reviewer at He is also the author of Gun Control and the Second AmendmentThe War on Drugs Is a War on Freedom, and War, Empire and the Military: Essays on the Follies of War and U.S. Foreign Policy. His newest books are Free Trade or Protectionism? and The Free Society. Visit his website:

Cite This Article

Vance, Laurence M. "The Foreign Aid Debacle." The Free Market 18, no. 12 (December 2000).