Foreign aid, argues President Clinton, is "designed to keep our
soldiers out of war." He has threatened to veto the $12.7 billion
foreign assistance appropriation bill passed by Congress, which
reduces his request by $2 billion. But evidence is overwhelming that
increasing foreign aid would only throw good money after bad.
The United States alone has contributed more than $1 trillion (in
current dollars) in foreign assistance since World War II. Yet in
1996 the United Nations reported that 70 countries, US aid
recipients all, were poorer than they were in 1980; 43 were worse
off than they were in 1970.
In its report, Development and the National Interest, the US
Agency for International Development (USAID) admitted that "much of
the investment financed by [the US] and other donors between 1960
and 1980 has disappeared without a trace." This is supported by the
recent New York Times expos detailing an investigation by the Office
of the High Representative in Bosnia, which concluded that as much
as $1 billion in public money has been stolen since 1995 even as the
West was providing $5.1 billion in aid.
The State Department argues that the bulk of the loss was the
Bosnians' own funds, but money is fungible. Western taxpayers are
subsidizing local corruption. The misuse and abuse of aid is a
"major impediment [to development] all over the entire region," Carl
Bildt, former chief UN envoy to the Balkans, has warned.
Russia has collected more than $20 billion from the International
Monetary Fund (IMF) alone since 1992; the money has disappeared to
no effect. John Odling-Smee, director of the IMF's European II
Department, has acknowledged Moscow's "lies and the failure to meet
commitments." A $640 million July IMF loan was simply shifted among
Fund accounts to pay down Russia's outstanding debt.
Looted IMF funds may have been laundered through the Bank of New
York, which appears to have become a transit station for the Russian
mob. But the IMF says it can't track the disbursements.
The aid experience in Indonesia is little better. The World Bank
held up planned lending before the parliamentary election earlier
this year to prevent government manipulation of aid for political
purposes and has threatened to halt its entire program because of a
recent banking scandal.
In a new study for the National Bureau of Economic Research,
economists Alberto Alesina and Beatrice Weder conclude "that
according to most measures, corrupt governments actually receive
more foreign aid rather than less. …