THE PROGRESSIVE CONSERVATIVE, USA
An Online Journal of Political Commentary & Analysis
Volume VII, Issue # 75, April 7, 2005
Dr. Almon Leroy Way, Jr., Editor
Government Committed to & Acting in Accord with Conservative Principles
Ensures a Nation's Strength, Progress, & Prosperity
U.S. FOREIGN AID & THE IMF SWINDLE
By Dr. Ron Paul
UNITED STATES FOREIGN AID POLICY & THE INTERNATIONAL MONETARY FUND: WHY SHOULD AMERICAN TAXPAYERS
BE FORCED TO SEND MONEY ABROAD, CONSIDERING THE FACT THAT RESISTRIBUTION OF WEALTH FROM RICH TO POOR
NATIONS HAS DONE LITTLE OR NOTHING TO ALLEVIATE SUFFERING ABROAD? -- WHAT WILL CREATE THE CONDITIONS
NECESSARY TO LIFT THE THE POOR NATIONS OUT OF POVERTY: THE RULE OF LAW, PROTECTION OF PRIVATE PROPERTY
RIGHTS, & THE FREE MARKET ECONOMY
FULL STORY:
During the 2004 election season, we did not hear either presidential candidate say much about the issue of foreign aid during, despite
the record levels of federal spending and debt that have plagued our economy in recent years. Very few Americans realize the extent
to which the U.S. Congress sends billions of their tax dollars overseas to fund the most counterproductive foreign welfare schemes
imaginable, always in the guise of helping the poor. A recent report by the congressional Joint Economic Committee highlights the
reckless manner in which one organization, the International Monetary Fund, wastes our money around the world.
The IMF provides a perfect illustration of both the folly of foreign aid and the real motivations behind it. The IMF touts itself as a bank
of sorts, although it makes “loans” that no rational bank would consider, mostly to shaky governments with weak economies and
unstable currencies. The International Monetary Fund has little incentive to operate profitably like a private bank, since IMF funding
comes mostly from a credulous U.S. Congress that demands little accountability. As a result, the IMF is free to make high-risk loans at
below-market interest rates.
The real purpose of the IMF is to channel tax dollars to politically-connected companies. The huge multinational banks and
corporations in particular love the IMF, as both used IMF funds – taxpayer funds – to bail themselves out from billions in losses after
the Asian financial crisis. Big corporations obtain lucrative contracts for a wide variety of construction projects funded with IMF loans.
It's a familiar game in Washington, where corporate welfare is disguised as compassion for the poor.
In fact, IMF loans often do far more harm than good. At best, IMF borrowers are governments of countries with little economic
productivity; at worst, the money ends up in the hands of corrupt dictators. Either way, most recipient nations face huge debts they
cannot service, which only adds to their poverty and instability. IMF money ultimately corrupts those countries it purports to help, by
keeping afloat reckless political institutions that destroy their own economies.
Government-to-government transfers through a middleman like the IMF cannot produce real economic growth. When capital remains
in private hands, it is allocated to its most productive uses, as determined by the choices of consumers in the market. Placing capital in
the hands of politicians and government bureaucrats inevitably results in inefficiencies, shortages and economic crises, as even the
best-intentioned politicians and government bureaucrats cannot know the most efficient use of resources.
American taxpayers already lend various governments more than $5 billion annually through the IMF, at a yearly cost of over $300
million because of loan defaults and subsidized interest rates. Now the IMF wants to double its pool of funding, which will put
taxpayers on the hook for $12 billion in loans, at a cost of about $750 million each year. Furthermore, since the IMF creates “drawing
rights” accounts that are redeemable in U.S. dollars, it, in essence, prints U.S. dollars when it increases those drawing rights. This is
a clear violation of American national sovereignty, and a vivid example of why we should stop participating in international schemes
like the IMF altogether.
The IMF and other complex schemes only serve to obscure the real issue: Why should U.S. taxpayers be forced to send money
abroad? In legal terms, the United States Constitution provides no authority for this kind of foreign aid. In historical and practical
terms, redistribution of wealth from rich to poor nations has done little or nothing to alleviate suffering abroad. Only free markets,
property rights, and the rule of law can create the conditions necessary to lift poor nations out of poverty.
LINKS TO RELATED TOPICS:
Government & the Economy
Dr. Ron Paul is a Republican member of the United States House of Representatives, elected from and representing the Fourteenth
Congressional District of Texas. Congressman Paul is considered to be one of America's leading spokesmen for constitutional
government, the rule of law, liberty under law, the private enterprise system,, free market economics, sound monetary policy, and
fiscal restraint on the part of the U.S. national government.
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THE PROGRESSIVE CONSERVATIVE, USA
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Dr. Almon Leroy Way, Jr., Editor
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