Foreign aid & foreign influence

Posted on | augustus 4, 2011 | No Comments

Foreign aid

Upon discovering that Hosni Mubarak is worth $70 billion, or one-third of his country’s GDP, some American citizens may be wondering if their tax dollars in the form of foreign aid wound up in the Egyptian dictator’s personal Swiss bank accounts. I realize this may be upsetting to many hardworking Americans who pay their taxes and count on their government to use foreign aid to advance US ‘national interests’ and not to enrich foreign dictators. But what if politicians do not equate ‘national interest’ with the public interest, instead defining it as the interest of the military-industrial-complex.

Foreign aid is at the very least a form of influence, and at most a form of intervention by the donor in shaping the policies of the aid recipient. It is also a way to maintain the aid donor’s defense industry thriving. If the price to pay for maintaining a strong national defense industry and influencing the policies of the aid recipient and/or intervention is that the aid recipient is ruled by a corrupt dictator who becomes very wealthy, well, that is just part of the process and it is to be expected when the donor is buying influence/intervention.

Foreign aid (guaranteed loans and/or grants) and trade have always been used as a form of exerting influence by the aid donor on the aid recipient’s financial, economic, trade, investment, labor, military and foreign policies; in short in order to maintain a patron-client relationship between aid donor and aid recipient, aid, trade and loans must be the catalyst. After the end of WWII, the US and UN used foreign aid to win political-military-economic allies to the nascent Western bloc, while the USSR did exactly the same with the Eastern bloc that Stalin was determined to keep under Moscow’s control.

After Indonesia’s Bandung Conference (1955), the US became concerned that Moscow and Beijing were vying for influence in Asia and Africa thereby posing a threat to the US patron-client integration model. To offset Chinese-Russian influence, the US devised consortium aid in addition to bilateral aid used until that point. India became the first consortium (World Bank, US, western Europe, Japan and Australia as donors) aid recipient. In return, however, India had to open its markets for foreign investment, contracts, and trade for products and services by the aid donors. The result was a skyrocketing balance of payments and a dependency relationship with the aid donors.

Despite India’s experience, Pakistan, Turkey and many other countries followed suit. The question is who benefited from such aid, the average Indian and Pakistani, or a handful of politicians, businessmen and mostly foreign creditors and corporations? Robert McNamara admitted when he became World Bank president that he was embarrassed to discover that most world leaders viewed the Bank as a vehicle to secure contracts for private corporations. McNamara was also aware of the bribing process that was an integral part of securing such contracts that linked the World Bank indirectly. After he introduced reforms to stop corporations using World Bank loans as leverage to win contracts, the burden fell on the departments (ministries) of commerce of western governments serving the role as agents on behalf of corporations abroad.

In the last 40 years since McNamara candidly admitted the problem with foreign aid, things have actually deteriorated, obviously as we witness the wealth of many leaders of very poor nations having amassed many millions if not billions in personal wealth ‘appropriated’ from public asset, which of course include foreign aid. When the tsunami hit Indonesia in December 2004, more than $14 billion in foreign aid poured into the devastated country. However, Indonesia had a long history of receiving aid both from the Soviet and US camps as a tool of foreign influence. US, Australia, Japan, China, US and Western Europe used the tsunami aid as a pretext to gain economic, political and military influence in Indonesia. In short, the humanitarian missions were actually vehicles for non-humanitarian goals, but to no one’s surprise. Equally appalling, did the distribution of the humanitarian aid reach its intended victims and destination or was it used as a political tool and a device for personal profit? Reports indicate that as little as 13.5% of the total aid went for the victims.

The situation with foreign aid is not much different in most countries. The specific case of Egypt whose dictator has a personal wealth of $70 million is upsetting to many Americans who after doing the simple math figure that the US has provided massive aid in the last 30 years Does this prove that the US government was using taxpayer money to make Mubarak one of the world’s richest man? US aid has been in the form of military supplies and training. While economic aid was a mere $250 million in 2010, $1.9 billion went for ‘US-Egyptian military cooperation’ (buying Egyptian military loyalty to combat ‘Islamic terrorism’ and support Israel), $1.3 billion for the armed forces, and an undetermined amount in surplus military hardware.

Most of the money never left the US, but went for contracts to General Dynamics, Lockheed Martin, Northrop Grumman, Raytheon, and other defense contractors. In short, foreign military aid is another way that the US government uses taxpayer money to keep defense contractors profitable. The argument in favor of foreign aid that keeps US defense industries healthy is “jobs, jobs, jobs”. Ironically, a small part of the US economic aid to Egypt is designated for ‘democracy promotion programs’, and this is ironic only because Obama has been using this as a public relations gimmick to justify continuing foreign aid to Egypt during the popular uprising.

This of course while he has been saying on TV that he supports ‘the people’ in their democratic quest! In reality, the Obama administration has been using aid as a bargaining chip to make sure that the Egyptian military remains loyal to the US and its Middle East policies. The way the administration is justifying not cutting off military aid to Egypt is that the Egyptian army has not behaved like the Iranian during the revolution of 1979!

In humanitarian cases – tsunami of Indonesia, earthquake of Haiti, etc. – aid is essential, but invariably it is used both by the donor nations and by recipient public officials for purposes unrelated to the intended goal. Consortium and bilateral economic aid as well as bilateral military aid has a proven history that it is in fact a retarding factor in the development of a nation, not only because of its corrupting nature (Mubarak amassing billions), but also because it perpetuates the dependency (patron-client) relationship that prevents the aid recipient from making the necessary structural changes to improve the socioeconomic status of its people. The American people are absolutely justified in their anger at their tax dollars wasted in foreign aid. However, they should blame Washington for using taxpayer dollars around the world to buy policy influence at various levels from authoritarian rulers that it helps enrich, as well as US defense contractors that lobby for foreign military aid.

AUTHOR: Jon Kofas
E-MAIL: jonkofas [at]


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