Foreign Aid Prescriptions

...Egyptian farmers are said to buy bread to feed their chickens because it is cheaper than unprocessed wheat...

...Extra crop shipments would allow countries to maintain modified subsidies of food prices, for example, while paying domestic farmers at market levels...

...These stockpiles are of no use to Americans, since the food cannot be released onthe U.S...

...The willingness of struggling Third World nations to acknowledge the failure of their statist development strategies is a welcome step forward...

...As of last fall the Commodity Credit Corporation possessed nearly $5.6 billion in crops purchased from farmers to help prop up domestic prices...

...The actual record of the California Supreme Court is very revealing, in civil as well as criminal cases...

...By centering their attacks on Rose Bird for her death penalty decisions, critics have allowed her colleagues to escape scrutiny for the very same practices...

...The practical question, then, is not how to cut assistance programs, but how to transform them into something that will promote economic progress abroad, in however attenuated a form...

...AID and State need legislative authority to use the crops to encourage cooperation by recipient nations...

...can-not press the World Bank and other international financial institutions to direct more of their lending to private firms...

...Unfortunately, the portion of the budget devoted to the Private Enterprise Bureau is minuscule, and some of the agency's efforts have done more to subsidize U.S...

...These sup-plies could easily be used as another tool to reward Third World governments that initiated genuine policy reform, particularly in the area of agriculture...

...For continuing to subsidize governments that knowingly wreck their economies, whether for political or ideological reasons, would be far crueler...

...The Food for Peace program generates significant amounts of funds which could easily be shifted to support a market-oriented strategy...

...The agency helped convince Bangladesh to reduce its role in the retailing of fertilizer, for instance...

...A modest "Food for Progress" program, utilizing two to three percent of the corn, wheat, and sorghum reserves, and 25 percent of the rice stockpile, was developed within the Administration last year, but opposition from AID—which administers existing P.L...

...One possible, fourfold approach would involve: •Conditioning Aid on Policy Reform...

...Since the U.S...

...Most Third World nations now control food prices to pacify consumers...

...to sell food, on credit, to developing nations...

...The basic problem in Ethiopia, as elsewhere, is a totalitarian political and economic system that cannot meet its people's needs under any circumstances...

...The U.S...

...Nevertheless, Helms and other Agri-culture Committee members, like Rudy Boschwitz, included a modest version of this initiative in the Senate Farm Bill...

...economic assistance is not going to disappear any time soon...

...In particular, assistance could be loaned directly to private individuals and businesses, either through AID directly, or through intermediaries, such as American Private Voluntary Organizations like CARE and Catholic Relief Services and indigenous private banks and credit unions...

...AID under Reagan, for instance, has rhetorically committed itself to a market-oriented foreign-assistance strategy, making "economic policy reform" and "private sector participation" two of its major objectives...

...The program would not be tied to yearly appropriations and would focus on promoting market-oriented agricultural policy reforms...

...Military aid during the same period topped $100 billion, and humanitarian assistance ran some $34 billion...

...American bilateral aid has been supplemented by nearly $173 billion from a dozen multilateral organizations over the same period...

...But U.S...

...Within a month of the measure's passage, cooperatives and Private Voluntary Organizations had already met to discuss methods of distributing the funds...

...In fact, its effect has beenquite the opposite...

...Yes, though only if the pro-gram changes are fundamental and are pursued vigorously...

...With greater flexibility in the use of funds, however, there are ways to keep foreign aid out of the hands of local governments...

...should thus cut off economic aid entirely...

...Nevertheless, Ethiopia is today the poorest nation on earth...

...There is no clearer example of the failure of foreign aid than the tragedy in Ethiopia...

...In more than fifty consecutive death penalty cases, Bird has voted to reverse the trial court's sentence...

...Activist judges who go beyond the written law—or counter to the written law—in order to reach decisions they consider morally or socially preferable, are revered by some and reviled by others...

...Therefore, if foreign aid is to haveany beneficial impact, existing pro-grams must be fundamentally restructured...

...Rose Bird, Chief Justice of the California Supreme Court, has become the symbolic focus of this controversy...

...They might easily win the battle and lose the war...

...Distribution of the aid would have to be carefully controlled so as not to undercut demand for domestic food-stuffs...

...For example, they should recognize budgetary reality: the new initiative should be implemented with existing funds and food stocks...

...is a member of most of these bodies, $40 billion or so of that assistance came from the U.S...

...The success of this approach, how-ever, will be limited by two factors...

...Most important, this approach, if expanded, will help recipients buffer the impact of policy reforms—including those adopted in response to the conditioning of other U.S...

...Creating private financial conduits for locally owned enterprises also is important because the majority of firms in Third World nations are small and rural-based, while the economic policies of their governments tend to favor larger industries located in urban areas...

...Experience yields a similar conclusion: countries that maintain market-oriented policies, whether Hong Kong, Taiwan, Singapore, South Korea, the Ivory Coast, or Sri Lanka, have achieved relatively high levels of economic development, often in dramatic contrast to their neighbors, which rely on state direction of the economy...

...the Export-Import Bank and other federal agencies added another $55 billion in loans to that total...

...But action, not just talk, is necessary before Africa can reverse its slide into economic oblivion...

...And billions more in aid from abroad will do little other than reduce the pressure on recipient governments to introduce reforms...

...Moreover, they have allowed Bird and her defenders to seize the moral high ground and depict this election as a battle between those who attack judges for "unpopular decisions" and those who want the law upheld by an "independent judiciary...

...Rose Bird alone could not overturn a single death penalty verdict, since she has only one vote, like every other justice...

...By providing governments with bundles of extra cash, says British economist P. T. Bauer, international aid "accelerates and aggravates the disastrous politicization of life in the Third World...

...But no matter how powerful the evidence that international assistance programs are mostly useless, and often harmful, foreign aid remains one of the constants of the federal budget...

...Ethiopia collected more than $900 million in bilateral and multilateral assistance between 1979 and 1982...

...A number of Third World countries, such as Bangladesh, Morocco, and Ecuador, are already moving, albeit haltingly and usually only after exhausting all alternatives, in the direction of a freer market...

...There are also perverse monetary, fiscal, and credit policies, contributing to widespread economic instability and stagnation...

...It is said that State Department and AID officials always oppose reductions in foreign assistance to a nation for one of two reasons: our bilateral relations with the aid recipient are getting bet-ter, or they are growing worse...

...If the Administration possessed—and was willing to use—authority to reward and punish countries based on their domestic policies, more significant reforms should be possible...

...but the political situation in most of them ensures that such state intervention will not disapThe practical question is not how to cut assistance programs, but how to transform them into something that will promote economic progress abroad...

...The process would be similar to that proposed for general U.S...

...Funneling Assistance Through the Indigenous Private Sector...

...Even though this is a congressional election year, one of the most important elections in the nation is not for Congress, or for the governorships, or for the state legislatures, but for the California Supreme Court...

...Getting rid of Bird will be a hollow victory for the court's critics, if the other justices are re-elected to continue overruling death penalty convictions...

...The other is that the amount of money available for distribution to private operators will be con-strained by the size of the bribenecessary to convince local authorities to change their policies...

...There's no reason why the U.S...

...The U.S...

...480 recipients just "use the funds to hire more people for the central government...

...22 THE AMERICAN SPECTATOR SEPTEMBER 1986 pear overnight...

...And foreign investment is actively discouraged by many developing countries...

...One-third of that, naturally, is expected to be foreign aid from the West: African leaders promised to raise the rest, as well as to reform their own domestic policies to promote economic growth...

...To correct these disastrous policies, the United States must be willing to condition its aid on genuine policy reform, which also means that we must be willing to cut off recalcitrant regimes if such reform is not forthcoming...

...Not surprisingly, the World Bank's 1983 World Development Report found that the degree of state interference was dramatically and inversely related to economic growth rates, as well as production and savings levels...

...government will continue to spew forth a cornucopia of dollars to other lands...

...indeed, the federal government spends hundreds of millions of dollars every year to process and store the surplus...

...the equivalent amount in local currency...

...Congress also needs to give the Ad-ministration wider latitude in reprogramming existing funds—the bulk of development funding is currently set both by program area and country—and in using existing "sunk cost" resources, such as stockpiled crops and local currencies generated by the Food for Peace program, in innovative ways...

...grains could help ease the transition...

...American corporations, too, have indicated an interest in working with partner firms in developing countries to loan out P.L...

...This added up to more than a quarter of a million dollars raised in just one evening to pay for her fight to stay in office...

...government beginning in ten years...

...Lending Food for Peace Monies to Local Enterprises...

...cutting them off, even if they are the poorest of the poor, would be painful but necessary...

...On the other side, well over a thousand of her sup-porters recently attended a $200-a-plate dinner in her honor at the posh Fairmont Hotel, in San Francisco...

...While hile civil cases do not have the same emotional drama as death penalty cases, their impact on the public may be greater, even if not as widely under-stood...

...taxpayers already con-tribute nearly $10 billion annually in economic assistance, surely enough to pursue an effective foreign-aid policy...

...Ironically, however, the focus on Bird and on death penalty cases may boomerangagainst critics of the California Supreme Court...

...could better use these funds by lending to local businesses through financial intermediaries...

...Countries would develop most quickly without any subsidies or economic distortions...

...Further, despite minimal authority to reshuffle assistance monies, AID has made "policy dialogue" one of its major goals and has had some success in convincing recipients of U.S...

...Some countries may not be willing to cooperate with the U.S...

...Otherwise, congressional micromanagement will kill any prospect for genuine change...

...Those funds are usually left with the borrower as long as he pledges to undertake "self-help projects...

...funds to reform their economic policies...

...aid, except that to preclude any budget increase these funds would have to be repaid to the U.S...

...Four different organizations have been formed for the express purpose of defeating Bird in the California judicial election this November...

...The California Supreme Court as a whole has gone along with the Chief Justice in the overwhelming majority of death penalty reversals, often by a lopsided vote, or even unanimously...

...Currently Title I of Public Law 480—which ' provided for about $985 million in aid last year—also allows the U.S...

...The overall effect has been small, but again the trend is positive...

...Many of these cases are horrifying in their details—the sadistic torture-murder of a two-year-old girl, for example—so it is not surprising that much public out-rage has been directed at Rose Bird for her rulings in such cases...

...In June the United Nations General Assembly adopted a resolution calling for a five-year infusion of $128 billion into Africa...

...traditional Food for Peace shipments have damaged indigenous farmers in countries like Guatemala, Haiti, and India by driving down crop prices...

...But large-scale U.S...

...And that, at least, would make the annual foreign-aid bite a little less painful...

...AID has made development of local enterprises another of its basic goals...

...480 programs and therefore favored the status quo for bureaucratic reasons—killed it...

...Moreover, Food for Progress will actually save money: the Department of Agriculture estimates that the cost of processing and bagging food under the original Ad-ministration proposal would have run $43.3 million, less than half the $89.1 million cost of continuing to store the same supplies...

...This election is in fact building up to a referendum on the practice of judicial activism, which has provoked increasingly bitter controversy across the nation over the past thirty years...

...Thomas Sowell ROSE BIRD ON TRIAL Will the rest of her gang get away...

...Doug Bandow is a senior fellow at the Cato Institute and the editor of U.S...

...One is that unless fundamental economic reforms are adopted, local businesses, even with new sources of capital, will not flourish...

...in the meantime, the recipient government must give the U.S...

...Providing financing—at roughly market interest rates—to local enter-prises would be particularly important in countries where the government monopolizes financial institutions and uses credit for domestic political ends...

...Aid to the Developing World: A Free Market Agenda (Heritage Foundation, 1985...

...It is Joan of Arc versus a lynch mob, if you believe the image-makers who manage Rose Bird's election campaign...

...Knowing that continued aid depended on additional economic re-form would encourage regimes to continue and expand those changes...

...The real question—crucial both for California and for the nation—is whether judicial activists on the bench are in fact upholding the law or contributing to its destruction...

...Surplus U.S...

...480 money...

...The Asian Development Bank has begun a loan program for local firms without requiring local government participation, as it has in the past...

...However, internal bureaucratic opposition, limited authority to cut off aid monies, and inadequate vision have greatly undercut the impact of the Administration's reforms...

...Almost two-thirds of this assistance is intended to promote economic development...

...No one does this more than the California Supreme Court, or provokes more controversy in the process...

...Many foreign-aid recipients have a host of "parastatals"--government-owned enterprises—that lose money, draining away valuable capital and personnel from more productive economic sec-tors...

...The steady multi-billion dollar flow, moreover, is supplemented by nearly $1 trillion in lending by Western commercial banks and other institutions...

...Repayment, at interest rates of two to three percent, begins ten years after the loan is made...

...For many, the crucial person is Rose Bird and the crucial issue is the death penalty...

...at any price...

...the other regional development banks could do likewise...

...For any reforms to be successful, however, there has to be a fundamental change in the way policy-makers think about the foreign-aid issue...

...Other regimes, however, may be pragmatic or desperate enough to respond to the new American approach, making everyone better off, particularly the Third World peoples most in need...

...Where regimes are fearful of any economic growth outside of their control, they may block private sector assistance even if government-to-government aid is contingent on accepting such a program...

...foreign assistance—on politically sensitive groups, particularly urban populations...

...The California Supreme Court has been in the vanguard of judicial activism, virtually rewriting the law under the guise of interpretation, on a sweeping range of civil as well as criminalcases...

...Unfortunately, in the words of one Senate staffer, P.L...

...must not let pressure for increased appropriations obscure the real cause of global under-development: Third World regimes that stifle economic incentives, confiscate personal earnings, discourage private investment, and terrorize their people...

...More fundamental than any particular result in any particular case is the question whether the very meaning of law is being destroyed in California by judicial edicts which ignore or defy the written law and the written constitution, in favor of the court's own social and political vision...

...market except in limited distributions to the poor...

...Using Crop Surpluses as Inducements...

...As a result, the brightest and most ambitious people in society are further channeled into the state sector, dampening any entrepreneurial possibilities...

...Restrictions on prices and production skew the incentives of suppliers and the demand of consumers, distorting the whole economy...

...In a perfect world there would be no government-to-government foreign aid, at least not for development purposes...

...Altogether, Rose Bird and her critics are expected to spend unprecedented millions of dollars during Thomas Sowell is a senior fellow at the Hoover Institution in Stanford, California...

...Such a program shift would be quite practical: Senator Jesse Helms pushed through an amendment to the Farm Bill which designated ten percent of Title I funds a year for this purpose...

...First, aid levels should come down, not go up...

...The controversies swirling around Chief Justice Bird threaten to overshadow both the elections of her judicial colleagues, who will also be on the ballot, and the many serious and disturbing questions raised by the conduct of the California Supreme Court for more than a decade...

...But in cases where countries, though authoritarian, are inclined to be pragmatic, a new, market-oriented foreign-assistance strategy may yield significant results...

...Thus, a more far-reaching market initiative is needed, one that encourages both substantive change and a greater likelihood of practical success...

...The foreign policy leadership, above all the President, must be committed to overTHE AMERICAN SPECTATOR SEPTEMBER 1986 21 riding pervasive bureaucratic resistance if a new program is not to be stillborn...

...Equally important, Administration appointees must support the new free-market assistance strategy...

...In all, Americans have loaned or given away more than $320 billion since World War II...

...Moreover, death penalty cases are only the tip of the iceberg...

...Carl Liedholm, a professor of economics at Michigan State University, reports that these sorts of credit programs have the greatest chance of success if they rely on working rather than fixed capital, use local institutions to screen borrowers, and make initial loans for small amounts and short periods to encourage repayment...

...the election campaign...

...The issues involved reach well beyond California...

...contributed more than $131 billion in grants and loans for economic assistance alone...

...The amount spent may decrease in the era of Gramm-Rudman, but the U.S...

...But the availability of large stocks of wheat, corn, rice, and other products would be a powerful inducement for regimes to modify or abandon their most damaging economic controls...

...The judicial activism of the California Supreme Court was illustrated in a 1984 case in which an employee reported early to work, found his employers not yet there to open the THE AMERICAN SPECTATOR SEPTEMBER 1986 23...

...In some cases, unfortunately, no reform can be expected—Ethiopia, for example—and the U.S...

...Second, assistance should be careful-ly targeted, to reward countries that adopt growth-producing policies and to punish recipients that do not...

...There is always a surplus of ideas on how to spend more money—the Administration has pushed a special $500 million African Economic Policy Initiative, for in-stance...

...That country's problem is not one of insufficient funds...

...In societies where politics already dominates everything else, and where few alternative social and economic power structures exist, official foreign aid makes the government sector almost omnipotent...

...firms and local governments than pro-mote efficient local businesses...

...If these conditions are met, can a market-oriented aid policy make a difference...

...Between 1946 and 1983 the U.S...

...That includes 2.1 billion pounds of dairy products, 407 million bushels of wheat, 225 million bushels of corn, 410 million pounds of rice, 112 million bushels of grain sorghum, and four million bushels of soybeans...