| Number 215 | July 25, 2003 |
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This Week:
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Greetings, I had no idea when I started this piece on foreign aid that it would extend to four parts. But that’s the way it goes. I think it is worthwhile to look closely at two conflicting sides of our government. The one side is the side that “regrets” having to do what is “necessary,” as is the case when we go to war, for example, or cut budgets for needed services. I certainly write often about those sorts of things, as do many critics of the powerful institutions in our lives. But I think it’s also important to look closely—even more closely, perhaps—at the things our government does that it brags about, such as giving foreign aid, or cutting taxes. It is universally true that a politician (and, really, all of us) will tend to speak of their actions in a positive light. Sometimes it’s because their actions ARE worth bragging about. But often they, just like the rest of us, are deceiving themselves, or have only listened to their supporters and not their critics. Sometimes they are simply lying, or manipulating. And this is where it is important for journalists to THINK, and not simply record. I’ll finish up the series next week, then I have some comments about recent media lunacy, then I’ve got a bunch of stuff on the federal Medicaid program, and I want to re-visit Iraq a few times (journalistically speaking). I’ve thought recently that I’d kind of like to put a new sign in my yard: “Liberate Iraq!” It would have a little different meaning now than it did in April. Wouldn’t it? In solidarity, Nygaard |
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The New York Times (“All The News That’s Fit To Print”) refers to Paul Wolfowitz as “a main intellectual architect of the Bush administration's Iraq policy.” Wolfowitz recently returned from an official tour of Iraq, where he said that “conditions here are much better than I thought they were.” But that’s not the “Quote” of the Week. That honor is reserved for his comments at a news conference he held in Mosul, Iraq, on July 21, which was reported in the Times of July 22. Mr. Wolfowitz, the deputy defense secretary of the United States of America, the current occupying force in Iraq, said this:
Bonus “Quote” of the Week Here’s a quote from a powerful person. Does it illustrate astonishing ignorance? Or bald-faced lying? You be the judge in the case of Jim Nussle, the chairman of the House Budget Committee, who was quoted in the New York Times (“All The News That’s Fit To Print”) of July 16th:
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I’ve been talking for the past couple of weeks about U.S. foreign aid. Two weeks ago I talked about how little aid we give relative to our wealth and our recent history. Last week I started to explain the new Bush administration initiative known as Millennium Challenge Accounts (MCA), under which poor nations will be forced into a sort of competition to run their countries in accordance with U.S. wishes if they hope to get any financial largesse from The World’s Only Superpower (and most wealthy economy). The first two categories in which poor nations must compete are the categories of “Governing Justly” and “Investing in People,” which were the subjects of last week’s Notes. This week I want to focus on the third, and likely most important, category: “Promoting Economic Freedom.” Those who have been paying attention to the workings of the Individualist and Competitive (the Nygaard term for “right-wing”) forces over the past few decades will understand what they usually mean when they use the phrase “economic freedom.” “Freedom” to these people, in theory, means no more and no less than the right to DO whatever one wishes. Coupled with the word “economic,” the criterion of “promoting economic freedom” can be understood to mean “promoting an economic system in which those with market power (i.e., money) are free to do as they please with very little regard for the rights and needs of those with no market power.” This wild-west economic “freedom” is variously known as “laissez-faire” capitalism, neo-liberalism, “free-market capitalism,” or any of a number of other catch-phrases. This is only what it means in theory. In practice, proponents of these policies typically favor strict limitations on the “freedom” of individuals and governments to take actions to protect themselves from the abuses that inevitably flow from the “freedom” of the rich and powerful to extract wealth from any place they find it. With this in mind, let’s look at Mr. Bush’s plan to “reward” countries that “Promote Economic Freedom.” |
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What, specifically, are poor nations going to have to do in order to convince the United States government that they are “Promoting Economic Freedom?” The Bush people say that they will consider six criteria: Country Credit Rating, Inflation, 3-Year Budget Deficit, Trade Policy, Regulatory Quality, and Days to Start a Business. For a country to qualify for U.S. MCA funds, it must “score” above the median on three of the six criteria listed. Let’s look at each one. 1. COUNTRY CREDIT RATING: The fundamental value here is a country’s expected ability to pay back the money that it owes to the wealthy banks that have loaned it to them. The source that the Bush people will use to assess a country’s “credit rating” is the Institutional Investor Magazine; they determine the worthiness of a country annually, by asking “75-100 banks.” It’s worth noting that heavily indebted poor countries pay more every year in debt service than they spend on health care and education. Also telling is the fact that African nations receive $12.7 billion in aid every year, but pay out $14.5 billion repaying debts. As the British group the Jubilee Debt Campaign puts it, “giving aid, whilst simultaneously enforcing debt repayments, is to give with one hand whilst taking with the other.” In short, to consider a nation’s “credit worthiness” as a criterion for giving “aid” to help it move out of poverty is to bias the selection process against the very nations who need it most. 2. INFLATION: Why would the Bush administration consider “inflation” to be important for a poor country to control, and what does it mean that the judgement is made by the International Monetary Fund (IMF), the Bush administration’s source for this rating? Those familiar with the workings of the international financial system, of which the IMF is perhaps the most influential player, understand this priority quite well. While so-called “hyper-inflation,” with its images of wheelbarrows full of nearly worthless currency, is not good for anybody, a decision to tolerate a modest level of inflation may not be a bad thing for many poor countries. The problem with inflation, from the point of view of someone who has loaned out some of their money, is that the lender will be paid back with dollars that are worth less than the dollars they loaned. So, for example, if I loan someone $1,000, and the inflation rate is 50 %, when I get paid that $1,000 at the end of the year, it will really only have the purchasing power of $667. That’s a good deal for the borrower, but lousy for me. Since the people making the rules—the U.S., in this case—are the lenders, then it’s obvious why they want to push nations to keep inflation low. What does this mean, in practical terms? The typical IMF prescription for reining in inflation is to have the country increase interest rates. The theory here is that fewer people will be able to borrow money, so there will be less money in the economy, which in turn means that the money that is around will be “worth” more: Bingo! Lower inflation. Of course, the side effects are economic recession and higher unemployment, but what do moneylenders care about that? So, again, by favoring low-inflation policies in the nations that wish to qualify for U.S. foreign aid, the U.S. is “giving with one hand whilst taking with the other.” 3. 3-YEAR BUDGET DEFICIT: Here, again, the source is the IMF. I’ll just quote a paragraph from a recent paper by the 50 Years is Enough campaign:
4. TRADE POLICY: The criterion here comes directly from the Individualist and Competitive (Nygaard term for “conservative”) think tank, the Heritage Foundation. The Heritage folks published a paper on this very subject, drawing on their own “experts” and those from the libertarian “think tank,” the Cato Institute. There are an enormous number of details here, but suffice it to say that the agenda is unmitigated pursuit of what is known misleadingly, as “free trade.” The ideology here is that “trade” between countries is good for everyone, in every case. This is not true. The Center for Economic and Policy Research sums it up succinctly in a recent study: “When the benefits and costs of continued liberalization along the lines [favored by the U.S. and other wealthy countries] are evaluated according to standard economic research, it is not clear that the developing countries as a group are facing a net gain.” That’s putting it mildly. For example, let’s use the World Bank’s own numbers to see what would happen if all barriers to trade were eliminated, as the Heritage folks say they want, by the year 2015. The net effect on a country in sub-Saharan Africa that currently has per-capita income of $500 per year? It would go up to $503 per year (0.6 percent). Yippee. Those additional three bucks would come at a cost. Says CEPR,
There are other losses associated with “trade liberalization,” such as massive loss of public revenues resulting from the removal of tariffs, and the possibly disastrous disruptions in domestic agriculture systems and the poverty and social unrest that will likely accompany them. 5. REGULATORY QUALITY: These numbers also come from the World Bank Institute, and the meaning of “quality” here is, as usual, defined by those who would be regulated. That is, bank and corporate interests, often based in the wealthy countries of the North. Guess what? They would like to be less “regulated,” and more free to do what they like without “interference” from any group that might wish to serve the public interest. Again, the agenda here is “laissez faire,” meaning, sort of literally, “Let ‘em do what they want,” a policy that invariably favors the powerful at the expense of the powerless. 6. DAYS TO START A BUSINESS: I don’t even understand this one. Who cares? You get the picture. There’s no need to remember all these details. What is important to remember is the overall shift in the “rules of the game” for disbursing non-military foreign aid under the Bush administration. While U.S. aid has always been used in a self-serving way, the soon-to-be-launched MCA initiative (officially starting in September, they say) marks a new era for this country. MCA is intended to more tightly tie the giving of “aid” to the overall goal of imposing the Free Market Capitalism of the United States on the rest of the world. When a state or a leader threatens to be openly rebellious, or is perceived to be of particular strategic importance, we will not hesitate to use military force to bring them back into line, as the Bush Doctrine plainly states. For countries that simply aren’t as compliant as our leaders would like, we will use economic coercion to impose our will on weaker states. This is the New World Order that you may have heard about, and which so many around the world are risking their lives to resist. Next week, in the final installment of this foreign aid series, I will briefly explain the concept of how “aid” can actually be—and usually is—an obstacle to prosperity and development for the world’s poor nations. |