'Reviving the Foreign-Aid Racket' Jude Wanniski June 15, 2005

Memo To: Fans, Browsers, Limousine Liberals
From: Jude Wanniski
Re: Help for the African Poor?

The headline on Pat Buchanan's syndicated column today says it all, "Reviving the Foreign-Aid Racket." I've been watching in quiet disgust all the stories about how Tony Blair has taken the lead in helping the poorest countries of Africa and elsewhere improve their conditions. He has succeeded in getting the wealthiest nations to cancel more than $40 billion debts that some of the poorest nations owe to international lenders.

Not money owed to international banks, mind you. If commercial banks would write off the debts, that would mean something. Even if they only wrote off accumulated interest and at least asked the poor countries to make payments on the principle. What's going on is yet another ripoff of taxpayers in a way that will do zip for the poor countries the way it is being arranged. They will not have to pay their debts to the International Monetary Fund, the World Bank or the African Development Bank, which is truly an "Axis of Evil."

Here is Buchanan's commentary...

[According to the NYTimes]"The deal [is] expected to ease the 18 poorest countries' annual debt burdens by $1.5 billion. They are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia. All must take anticorruption measures."

It is hard not to break out laughing at that last line.

This $40 billion debt write-off is being hailed as the most magnanimous act since the Marshall Plan. But there is another way to see it: George Bush signed onto one of the biggest bailouts in history. For, here, children, is what has just gone down:

First, that $40 billion was squandered or stolen by the most corrupt regimes and biggest thieves in the Third World. The money is gone. We shall never see it again. And all the wastrels and crooks who got away with it will not be pursued.

Second, the idiot-bankers at the IMF, World Bank and African Development Bank who failed to do due diligence when they made the $40 billion in loans, and lied about how good the loans were, will not be exposed and prosecuted, or tarred and feathered as they should.

Third, the IMF, World Bank and African Development Bank will see all their lost funds replenished, so they can start flying around to those same exotic countries and capitals, shelling out new loans to the same crowd of crooks and incompetents, or their successors.

Fourth, American taxpayers will have to pony up the cash for this historic bailout of the international banks.

Why is this happening? Because George Bush owes Tony Blair, and because Blair, bless his socialist soul, believes in the salvific power of foreign aid and has to bring home some bacon to show his skeptical countrymen the "special relationship" between the two is not that of master and poodle.

Make no mistake. This not a bailout of Africa's poor or Latin American peasants. This is a bailout of the IMF, the World Bank and the African Development Bank. They will get the money to replace their lost loans. As in a Monopoly game where the rules are thrown out, they will be handed new money to play with. Bush and Blair are bailing out failed global institutions run by the highest-paid bureaucrats on earth.

What should have been done?

The IMF, World Bank and ADB should have been held to the same standards as any U.S. government bank that squandered capital entrusted to its care. Congressional auditors should have gone over their books, looked at the bad loans, looked at the backup provided and statements made at the time by lending officers, then let the American people know whether they had been faithful custodians of our tax dollars or clowns who ought not to be trusted with kids' lunch money. If the banks failed, they should be forced to undergo the same discipline and downsizing as any public bank that made similar unsecured loans and lost $40 billion.

At the least, we should shut down the World Bank-IMF country club in Montgomery County, Md. – and make them all travel coach.

But none of this is going to happen. All three of these institutions will soon be back at the same game, and their critics will be denounced as hard-hearted conservatives who lack compassion for the world's poor.

That's not all of it. The second part of the racket is that in exchange for getting debt relief, the poor countries will have to spend the money they save on debt service on "infrastructure projects," to directly help their poor people with water and sewer line, etc., which will be constructed by contractors from the wealthiest nations.

If the "Axis of Evil" banks would instead require the recipients of this largesse to reform their tax and monetary regimes on supply-side economic principles, they would be doing something good. But there is no money in it for these international racketeers.

What comes next? One of the worst economists in the world, Jeffrey Sachs, is in charge of the United Nations scheme to raise mega-billions from western taxpayers for the second leg of this scheme. He wants $25 billion A YEAR for the indefinite future, as I recall, and he has the fervent backing of The New York Times, which always weeps crocodile tears for the racketeers. It was Jeffrey Sachs, in case you forgot, who, with the backing of the NYTimes persuaded Moscow under Mikhail Gorbachev to engage in "shock therapy" to convert from communism to capitalism. It produced the worst inflation in the history of Russia, caused the collapse of the Soviet federation, and sank the Russian people into a poverty they had never experienced under communism. Jeffrey Sachs is a trusted agent of the "Axis of Evil," which forced him on Kofi Annan at the U.N. The money he raises from taxpayers here and in the rest of the developed world will go to the big moneycenter banks that are behind the racket. To follow the money, follow Tony Blair and Jeffrey Sachs.