Obama's spare "change": more (ineffective) foreign aid

In terms of its effectiveness, welfare is a mixed bag. Foreign aid is welfare between foreign governments-- and is prone to even more difficulties.

True change-- and hope-- in this arena would stem, ironically, from cutting off foreign aid. Alas, it's just more of the same ol', same ol'. Thanks Barack!

Here's an update on an old theme with a new coating of paint-- from Mary Anastasia O'Grady in the WSJ...

U.S. Treasury Secretary Tim Geithner [was at] the Inter-American Development Bank's (IDB) general assembly. His big contribution was to get behind a proposal to nearly triple the development bank's capital.

By supporting the bureaucratic status quo in Latin America, Mr. Geithner strengthens himself politically. All hail the Obama administration's first-string hurler, a man who never meets a problem that can't be solved by throwing more money around. But back in the real world.

...this is a good time to repeat what is already manifest: Latin America remains poor and backward not despite multilateral "assistance" but, in a large part, because of it. The IDB has been going at the problem of poverty in Latin America since 1959, but it hasn't acted alone. In the postwar period the World Bank, the International Monetary Fund and untold bilateral agencies have blanketed the region with aid. World-wide foreign aid has boomed....in 2008...rose by 10.2% in real terms to $119.8 billion...the highest dollar figure ever recorded.

Does it follow that poverty persists because the amounts have been just too measly to do the job? It does for Mr. Geithner and the foreign-aid brigades. But rather than rely on those with vested interests, it's more useful to look at the empirical evidence. A 2006 paper titled "Foreign Aid, Income Inequality and Poverty," from the research department of the IDB itself, looked at the period 1971-2002 and found "When the quality of institutions is taken into account, however, this result is not robust. This finding is consistent with recent empirical research on aid ineffectiveness in achieving economic growth or promoting democratic institutions."

So now that we know it doesn't work, Mr. Geithner wants more of it. This is what the late, great development economist Peter Lord Bauer called "the disregard of reality." In a 1987 essay in the Cato Journal, he called the claim that poverty is a trap that cannot be escaped without external aid an "obvious conflict with simple reality." "All developed countries began as underdeveloped," Bauer wrote. "If the notion of the vicious circle were valid, mankind would still be in the Stone Age at best."

Bauer spent a lifetime studying development....For Bauer, foreign aid was not just a waste of money; it worked against getting things right in those areas that really matter to progress. Those "determinants" are now widely acknowledged, even by researchers at the World Bank. They produce an annual "Doing Business" survey that looks at the regulatory burden in 181 countries and points out the critical link between economically free people and prosperity....