Obama's global poverty act

Senator Barack Obama, the eminently likable possible Democratic nominee for president, has sponsored a “Global Poverty Act” that would require the United States to increase foreign aid by approximately $65 billion per year.

If the Senate passes this bill, it will be Mr. Obama’s first significant legislative accomplishment in Washington (he has only been a senator since January 2005). As such, it merits our scrutiny for clues about his worldview.

Conservatives should be careful how they critique the Global Poverty Act. If we say, “we can’t afford another $65 billion per year,” Obama will score a lot of points with the rebuttal, “You mean, we can afford hundreds of billions to wage war in poor countries and tens of billions for pork-barrel spending like the bridge to nowhere, but we can’t afford to rescue the wretchedly poor from misery?”

Granted, Obama’s proposal has important fiscal, constitutional, and even sovereignty issues (sovereignty because his legislation would commit us to the UN’s global “master plan” for dispensing aid) but those points – however valid – will strike many Americans as cheap and small-minded technicalities when weighed against humanitarian considerations.

Having seen heart-rending poverty in developing countries, I heartily endorse Senator Obama’s desire to greatly reduce, if not eradicate, Third World poverty.

At the same time, I oppose the Global Poverty Act. If passed, it would be a hugely expensive mistake. The act fails on pragmatic grounds – it simply would not accomplish its stated goal of greatly reducing poverty.

For the zillionth time, we see that liberal politicians are so obsessed with redistributing wealth that they never bother to learn the prior and most fundamentally important economic lesson – namely: how to create wealth. How, in fact, do countries develop economically? What works?

Very simply, countries have progressed from developing to prosperous by liberating the productive energies of their citizens. How? By protecting private property, respecting and permitting profits, allowing markets to determine prices, reducing tax rates, cutting back on stifling bureaucratic red tape, stabilizing the currency, etc.

In short, the primary need is for good governance and vibrant markets. This is of crucial importance. It means that countries hold the key to their own fate.

Is there nothing, then, that foreigners can do to assist this process? Indeed there is. It is called “foreign investment,” not “foreign aid.” The distinction is crucial.

Nowhere in the world can we point to a country that has escaped poverty through foreign aid – in spite of more than $2 trillion of foreign aid spending so far. Tragically, in some African countries that have received billions of dollars in aid, standards of living have deteriorated rather than improved in recent decades.

As celebrity economist Jeffrey Sachs has written, the majority of foreign aid gets siphoned off to service old debts, pay for expensive consultants, fund emergency humanitarian relief, or to Swiss bank accounts. Of the remaining “aid,” much often goes to US multinational corporations (corporate welfare?) who are contracted to construct dams, airports, highways, buildings, etc. Many of those projects are no more than “white elephants” – extravagant monuments to vain leaders that do little to foster economic development.

By contrast, many of the world’s developed economies were boosted by foreign investment. Foreign capital has always contributed greatly to economic progress in the United States, and foreign capital is instrumental in the rapid development of China today.

I am convinced that Sen. Obama’s heart is in the right place, but his Global Poverty Act proposal shows his economic knowledge to be 50 years behind the times. He has good intentions. What he needs now is a crash course in economics.

Dr. Mark W. Hendrickson is a faculty member, economist, and contributing scholar with the Center for Vision & Values at Grove City College.