In his speech to the World Bank today, Bush proposed that half of all funding directed at international development aid be converted to cash grants rather than straight loans that have a dark history of further destroying the nations that the loans aim to help.
The US position on cash grants represents the ideal capitalist society that it could be rather than the kleptocracy that it demonstrates itself as nearly every day.
Before getting into the capitalist nature of cash grants, it should be pointed out that cash grants as a practice are not unusual. The US gives cash grants to developing third world countries every day. These third world, developing countries refer to themselves by such names as “Alabama”, “Georgia”, “Mississippi”, “Louisiana”, etc.
There are nearly 50 of these developing regions that get money for nothing from Washington on a regular basis. They call themselves “states”. There are additional minor third world developing countries that receive Federal assistance. They call themselves “territories”.
Through capitalism, all actions occur from self-interest. Voluntary contracts are entered when self-interests intersect. For larger issues where beneficiaries cannot be directly charged for the benefits received, the “neighborhood effect” is handled through taxation which, in turn, distributes grants.
A capitalist society does not help people out of altruism. Help, like in the form of cash grants to Mozambique and Alabama, are done out of clear self-interest. The cost of allowing people to wallow in shit, starve and live under constant war with no hope of escaping international debt is higher than helping leaders of developing nations help their citizens.
History has shown that government regulation, no matter how well intended, never works as intended. International loans from the World Bank and IMF have harmed everyone they’ve touched. They’ve destroyed functional, if primitive, economies throughout Africa during their existence. These allegedly primitive economies kept everyone fed and employed. They didn’t give shoppers at Sam’s Club the 99 cent drum o’ macadamia nuts that cannot be bought without slave labor. They instead did the first job of any government–keeping the peace through the internal economy.
The World Bank and IMF have turned the first job of government into specialized export. Unfortunately, specialized export puts people out of work, starves babies and tempts people to shoot their neighbor or reach out and hack someone.
By the power of suggestion, Bush has done the most influential act to date in the effort to change the behavior of international lending institutions. If the World Bank begins grants rather than loans, they will give the people they help to have the power to help themselves. Through ethical guidelines rather than rigid demands of market conversion, grant recipients will find the best way to help their country towards a market economy without the historical pain and displacement and sometimes bloodshed caused by development loans.
That, of course, assumes that international development aid is given in the name of altruism or the self-interested goal of reducing social cost to everyone else. The World Bank and IMF are driven to bring profits to investors at any cost as all lending institutions do. That is hardly compatible with socialist altruism or capitalist neighborhood effects.
Historical international lending institutions are a kleptocracy of the worst kind. Unregulated, unelected, unaccountable and makes profit from slavery.
The international development loans are not evil by virtue of being loans, they are evil by virtue of demanding capitalist development through Soviet style coercion. If Smith, Friedman and others are right about capitalism then using cash grants is not just the compassionate thing to do, it is being intellectually honest.
