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© 2002 Copley News Service, 3/27/2002
Foreign aid is never enough for the left and always too much for the right. However, President George W. Bush did the wise thing two weeks ago when he announced that the United States will contribute $5 billion over the next three years into a new Millennium Challenge Account to fund initiatives to help developing nations improve their economies and raise their standards of living.
Looking ahead to last week's International Conference on Financing Development in Monterrey, Mexico, the president said: "In Monterrey, we have a tremendous opportunity to begin acting on a new vision of development [that] unleashes the potential of those who are poor, instead of locking them into a cycle of dependence. This new vision looks beyond arbitrary inputs from the rich and demands tangible outcomes for the poor."
What a surprise this must have been to the U.N. bureaucracy and its attendant aid and finance agencies, the World Bank and the International Monetary Fund, which are facing withering criticism for their stupendous failures and had hoped to use Monterrey to blame their failures on a lack of funding.
In 1999, the Meltzer Commission, appointed by Congress to review international development and finance institutions, delivered a devastating assessment of their failures, finding them to be "overstaffed, ineffective, bureaucratic institutions." A 1998 unpublicized internal World Bank report chronicled its history of failures, and a new book by World Bank economist William Easterly, "The Elusive Quest for Growth," pronounces the World Bank a spectacular failure over its 50-year history.
The United Nations and its international financial bureaucracies were poised to use Monterrey as a fulcrum on which to leverage past failures into more funding, enhanced power and expanded reach to inflict more ill-conceived policies — high tax rates, fiscal austerity, floating currencies and currency devaluation — on poor countries. Mr. Bush headed them off at the pass by offering an alternative vision of economic assistance in which grants are tied to rules of accountability and made conditional on recipients' making demonstrable progress in reforms that build democracy, strengthen and enforce the rule of law, and unleash free markets.
By contrast, how disheartening it was last week in Monterrey to hear Mexican President Vicente Fox call on the United Nations to levy global taxes "as a steppingstone on the path toward development for all." This is simply a thinly veiled call for elevating the United Nations to the status of world government and empowering it with taxing authority to effect a global redistribution of income. It was, therefore, frightening to hear Patrick Cronin, assistant administrator for the U.S. Agency for International Development say, "In the right time, there could be a serious discussion about global taxes."
Beneath the clamor for more World Bank handouts, global taxes and global income redistribution, there is a mistaken notion that developed nations prosper at the expense of poor nations. In the 1960s, it was unabashed Marxism going by the title of dependencia economic theory that claimed developing countries were "lost in the labyrinth" and that the international trading system was condemning the "periphery" — Latin America and other developing countries — to enduring poverty, exploitation and dependency. Today, most political leaders accept the reality that it's bad policies that retard economic growth and that open trade, free markets, foreign as well as domestic investment, private property and the rule of law allow countries to grow and prosper.
Yet the foundational premise of "dependencia" theory — the belief that successful economies prosper by exploiting poor countries and despoiling the environment — continues to infect the thinking of political leaders. Call it nuevo dependencia or "Third Way dependencia"; either way it's a form of "soft socialism," a self-fulfilling prophecy that stifles economic growth and consigns poor countries to permanent dependency on global government.
It represents a misguided ideology premised on the belief that global markets inevitably produce a widening gap between rich and poor nations unless a world government equipped with taxing, spending and redistributing authority is empowered to "harness" and "channel" them. Nuevo dependencia is a self-fulfilling prophecy destined to stifle economic growth and create permanent Third World dependency on global government.
Bravo to Mr. Bush for daring to refute this neo-leftist nonsense. The Mexican president's flirtation with this trendy theory, on the other hand, is ironic and tragic because it is at such odds with his otherwise clearheaded vision of what it takes for developing countries to prosper and grow, including a clear understanding of the two great political impediments to growth and development — protectionist taxes and subsidies.
Every country, rich and poor, holds its economic destiny in its own hands and has the wherewithal to generate economic growth. It is a nation's people, its human capital, that form the engine for economic growth if they are taxed gently and left free of burdensome regulations and restrictions to take risks and work hard to achieve their full potential.