0:10 - Introduction and Podcast Update
1:09 - The Failures of Foreign Aid
3:29 - Consequences of Foreign Aid
6:08 - Case Study: Micronesia
9:48 - Government Response to Failures
13:30 - Famine and Government Policies
15:47 - The Profitability of Starvation
18:32 - The Role of the UN
21:17 - The Myth of the Marshall Plan
27:54 - Conclusion and Final Thoughts
In this episode, I delve into the troubling landscape of foreign aid, drawing insights primarily from David Ostrefield's article, "The Failures and Fallacies of Foreign Aid." I kick off the conversation by sharing my unfortunate technical mishap in losing my initial podcast recording, but I quickly pivot to the weighty subject matter at hand. I argue that while foreign aid has been touted as a mechanism for improving conditions in the Third World, the reality is starkly different. I outline a sobering historical perspective that spans a 35-year period from 1950 to 1985 during which over $2 trillion in capital transferred from the West to the Third World yielded little positive impact and often detrimental consequences.
I unpack the mechanics of aid dependency, pointing out that while substantial amounts of money have been funneled into nations like Micronesia and various countries in Africa, the outcomes reveal a systemic decay rather than growth. The statistics are alarming; nations that received extensive aid have witnessed significant deterioration in their agricultural capabilities, essentially shifting from self-sufficiency to reliance on imports. For instance, I mention that Africa was once a food-exporting continent, but aid interventions have dramatically altered this reality, further entrenching poverty and economic stagnation. The paradox is evident: as financial support increases, the economic health of these nations appears to suffer.
The bureaucratic behemoth created in the wake of aid inflows becomes an additional point of critique. With the influx of funds, governments grow disproportionately large, and their effectiveness wanes. I highlight how the emergence of parasitical bureaucracies leads to a disincentivization of local entrepreneurship and productivity. The corruption and mismanagement that often accompany aid exacerbate these issues, solidifying a vicious cycle where dependency begets further decline. For instance, I examine Micronesia's case, where excessive grant assistance led to a decline in local food production and a rise in dependency on free handouts.
In exploring the characteristics of foreign aid, I emphasize its unintended consequences: aiding the very systems it aims to reform. This is especially poignant when discussing food aid, which often disrupts local markets and undermines indigenous agricultural efforts. I illustrate how such practices not only perpetuate hunger but also foster a culture of dependency. The dire situation in countries like Ethiopia serves as a pressing example where government manipulation during famine exacerbated suffering, with aid diverted to political ends rather than humanitarian needs.
As I continue, I discuss the broader implications of these aid strategies, particularly the tendency for governments in recipient nations to engage in capital flight, taking with them the wealth that should foster local growth. I argue that the flow of aid encourages corrupt practices, as local leaders prioritize personal gain over public welfare. Here, I reference the unsettling observation from economist James Henry regarding the outpouring of funds from nations like Mexico and Argentina—instances where the aid was merely a revolving door of currency that failed to translate into sustainable growth or improvement for the citizenry.
Finally, I navigate through historical examples like the Marshall Plan, arguing against the conventional narrative of its success, asserting that it was not aid that revitalized post-war economies but rather an absence of violence and a return to free market principles that spurred genuine recovery. The post-war successes of countries like West Germany and Japan, contrary to popular belief, did not stem predominantly from aid but from keen economic reforms and a commitment to market-driven solutions.
In summary, this episode serves as an invitation to rethink the prevalent paradigms of foreign assistance. I conclude with a compelling argument that real, sustainable change comes not through aid dependency but by fostering environments ripe for self-reliance and economic liberty. The narrative of foreign aid as a boon for developing nations is fundamentally flawed—a call for a reevaluation of our strategies in addressing global poverty, recognizing the complex interplay between government intervention, economic structures, and individual agency. Thank you for engaging with this critical discourse, and I look forward to our next exploration together.
[0:00] Hello, everybody. It's Stef. I hope you're doing well. It is 1.21pm on Friday the 17th of March, and sadly, I lost my morning podcast.
[0:10] I was trying to clean up the hard drive and accidentally deleted the Audacity temp files, which were currently being edited. So, no problem. I'm sure that the second time around it will be even better. And you didn't get to hear my gripping review of the Queen concert I went to last night, which was great, and has left me a little bit horse. Of course, when you're in the audience trying to sing these impossible songs like We Are the Champions and Another One Bites the Dust, you're sort of croaking away going, oh yeah, that's why you're up there getting paid to do this. And I'm down here in the pits screeching along. So if you get a chance to see them on this tour, it's a great show. Not the cheapest thing in the world, but very well done. And of course, the singer Paul Rogers used to be in Free and Bad Company, so there's a lot of his hits that they play as well. Very good. Anyway, so I know this is going to be a shock, but we're actually going to deal with some facts today. I'm in the office and I wanted to get this done over lunch. So I'm going to read a little bit of an article called The Failures and Fallacies of Foreign Aid by David Ostrefield.
[1:10] You can get this from libertyhaven.com.
[1:12] And I think that the information is good. It's jived with some other stuff that I've come up with before. So I'm just going to read a couple of points from his article, just to give you some sense of what it is that I'm talking about when I talk about the complete disasters of foreign aid. So let's look at the years from, it's a 35-year period from 1950 to 1985. It's sort of only gone up since then, as far as I understand it. But the net transfer of capital, private and public from the West of the Third World in this 35-year period was over $2 trillion in 1985 prices. Now, private investment was about 25% of this, but its share fell from about 40% in the 50s to only about 16% in the 80s, and it's even lower now. Now, just to give you a sense of what $2 trillion dollars means in 1985 dollars, two trillion dollars was enough to purchase not only all the companies on the New York Stock Exchange, but in addition, the entire American farm system, right? So just picture that in your mind for a moment. If you had the foreign aid that went from the west of the third world in a 35-year period in your pockets, okay, you'd have big pockets, but you would be able to buy all the companies on the New York Stock Exchange and the entire American farm system. Okay, so let's just say that that's a rather staggering amount of money. Well, okay, what has it been achieved? What has been achieved with this?
[2:37] Well, it's been directly responsible for destroying the economies, large sections of the population in Micronesia and elsewhere. It has driven enormous numbers of local farmers out of business in Micronesia, Bangladesh, India, Egypt, Haiti, Guatemala, Kenya, many other places. There are some experts who believe that food aid to India may have actually been responsible for millions of Indians starving. There's other studies that show that in Bangladesh, that malnutrition actually rose as food aid to that country increased. And there's countries such as Peru and Haiti and Guatemala have either refused to accept U.S. food aid or pleaded with the U.S. Government to restrict such aid because they know how disastrous it is for their own economies.
[3:23] Now, Africa used to be a food exporter. Traditionally, throughout history, it's just such a fertile land that used to be a food exporter.
[3:30] And as Thomas Sowell has written, Africa lost the ability to feed itself exactly like down to the year when donor agencies began to, quote, smother Africa with Project Aid. And this relationship is not accidental. Africa's economic deterioration, which is one of the great disasters of the 20th century, is in particular in agriculture, was caused to a large degree by aid. Now, when you look at what happens to these countries when aid gets put out to them, just about every single case, as soon as you get aid, you get the immediate emergence of a massive parasitical government bureaucracy. And that's sort of very important, exactly what you would expect here. If you give the government $100 billion, it's just going to create all these agencies. So that's fairly important to understand. You give the government money, all it does is grow the government, which causes people to have less capacity to fend for themselves economically. Let's have a look at some other statistics. So in 1983, the World Bank did some studies, and development assistance was 5% of the gross domestic investment of the low-income countries of South Asia, but it was over 40% in the low-income countries in Africa. So that's very important.
[4:41] It's, what is that, eight times higher, eight times more aid is going to Africa than to South Asia. Now, if you look at in the 1970s, per capita income in South Asia's low-income countries grew over five times faster than it did in the low-income countries of Africa. That's fairly important, right? The more aid you give, the less the economy grows. And in Africa, of course, the more it deteriorates. Now, if you want to look at successes, right, that's a very important thing, right? We know all the disasters, but let's look at the successes, not of foreign aid, because there aren't any other violence, it never works.
[5:16] But if you look at Hong Kong and Singapore, two of the most economically vibrant areas over the sort of 1950s to the 1980s, and of course, even more now, they received only negligible aid from the West. And of course, they are the most economically successful. And that's very interesting. Taiwan, Taiwan and South Korea are often also touted as big success stories. But if you look at the statistics, their amazing economic growths began only after the large-scale economic aid from the US was discontinued, right? So once you stop drugging people with this kind of foreign aid, then they actually start to do better. It's not exactly what you would expect. So, you know, despite this incredible sum of money transferred just in a 35-year period, It's gone on since, right, even more. There's no relationship that it succeeded in creating self-sustaining growth or anything like that. In fact, quite the contrary, it does quite the opposite.
[6:08] So, let's have a look at something in a little bit more detail. This is Micronesia, or the Micronesians.
[6:14] Micronesia was acquired as a trust territory in 1945 by the U.S. Following its liberation from the Japanese. Now, of course, the U.S. Navy ran quite a bit of this, and outside private investment was discouraged because, according to the U.S. Navy officials, it would, quote, reduce the people to cheap labor. So, instead, what were they given? Well, they were given free food, free clothes, other supplies, and, of course, what happened was everything being handed out for free bankrupted most of the local stores. It's kind of tough to compete with free, right? So, it just destroyed the local economy. And of course, there was no incentive to work. There was no incentive to get education. There was no incentive to growth. And so, what happened? Well, you give people all this free stuff and they become lazy and there's no point going into business. There's no local economy. Working becomes a sucker's occupation. So, of course, productivity plummets, right? So, you get this vicious circle. And this happened in Micronesia and it's happened enormously and repetitively in just about every foreign aid situation you can look at, well, you get this vicious circle, right? So productivity plummets as a result of foreign aid and the economy gets worse because it becomes unproductive to work and local companies go out of business because they can't compete with the free stuff. And so as the economy deteriorates, you need more aid and the more aid you give it, the more the economy deteriorates and so on. So just between 1947 and 1985, Micronesians received, it's just like the 150,000 people, that's about it. They got $2.4 billion.
[7:40] And the people who inhabited Micronesia, eligible for close to 500 government programs. And that is very interesting. So if you just look at what happened in 1985, two thirds of all the Micronesians were employed by island governments It's financed by American taxpayers, right? This is what happens. And this is what happens in Africa as well. The best thing that you can hope for is a government job funded by U.S. Taxpayers, which, of course, what do you do when you get that government job? Well, you have to push paper around and pass regulations and invent all this stuff to further cripple what is the last vestiges of the free market.
[8:13] Between 1963 and 1973 in Micronesia, the acreage that was devoted to coconuts fell by 50%, vegetables went down 70%, citrus fruit nearly 60%. And during that same period, imports of food that were traditionally produced locally, like not stuff that was not native, it went fivefold up, right? So fivefold imports of food that they used to grow locally, exports declined by half. And that is fantastic. In 1984.
[8:39] Despite the fact that massive amounts of trade and funds and subsidies and all that were infused into Micronesia, the local fishery sector was no more productive than it was in 1945 before it became a trust territory. So that is something that is very, very interesting to think about. Now, hands up everybody in the class who can tell me what happens to a government program which is failing miserably to achieve its stated objectives. In fact, if you can tell me what happens to a government program that achieves the exact opposite of its stated objectives, you get a bonus. You get a bonus-free download of a podcast. Well, of course, when a government program achieves the opposite of what it's supposed to, then you naturally will increase and expand that government program. So what happened to the American response to this incredible deterioration? Well, as of the 1980s, they increased the rate of aid to Micronesia, right? So there was more than double, So the next 15 years, they increased the rate to more than double the average of the first 38 years. So this is exactly sort of what you would expect from this sort of government program. It doesn't work, let's increase it, make it even worse.
[9:48] Now, let's have a look at food subsidies. And this is something that's ridiculous, right? I mean, the government pays the farmers to produce an enormous amount of food. And of course, you don't just want it sitting and rotting around, because that would sort of look stupid and reveal just how ridiculously wasteful and destructive this farm programs were. Or, so what do they do? Well, they ship it overseas and they dump it in the markets of the third world.
[10:08] And the governments of the third world are more than happy to let this stuff into the country because it's good for them, right? They get to sell it. So let's have a look. There was a sort of food for peace program that began in 1940. And this sort of program distributes surplus US food overseas. Of course, the question is, why is there a US food surplus? It's because of the farm programs in the US, which we can deal with another time. But basically what happens is that as soon as you hand over the food to sort of Bangladesh or India, Haiti, Guatemala, and so on, it's that, well, you decrease the demand for locally produced food and you create an entrenched welfare class, which you need a lot of bureaucracy to manage. So consumers don't pay for what they can get for free, right? So all the local producers go out of business. And within a generation or so, what it de-skills, right? De-skills the local population, which is sort of important because once you stop learning how to be a farmer, you can't just go and pick it up again. And if a generation has passed, you've had no need to farm because of all this free US food, and you're not going to go pick it up. I wouldn't know how the hell to do it.
[11:07] So what about emergency famine relief, right? So you see Sally Strother is parading around with these stick insect children in the third world. And what about this sort of stuff, right? So in Ethiopia, there was a famine in 1973 to 1974. And this famine was somewhat artificially created in order to get this kind of aid. But we won't go into that right now. Let's just say it was a perfectly legitimate famine. Well, what happens? Well, they got enormous amounts of food from Europe and America, and the two provinces that were most affected were Eritrea and Tigra, but they were rebels in those, right? Rebels trying to take over the government, so food wasn't sent there, so that they would get starved into submission, right? So you give all of this aid to the government, and the food was simply diverted from the places where people were hungry because those people were anti-government, and so they sort of starved them out. And the government of Haile Selassie sold a huge chunk of the donated food on the world market, and of course the money goes to line the pockets of the regime members.
[12:08] The Ethiopian government even offered to sell the US 4,000 tons of grain, the idea being that the US would then donate the money back to Ethiopia, and therefore it was going to help the US fulfill its pledge of 22,500 tons of donated food. The offer was declined. Now, if you look at the Mangistu government in the 1984-1985 famine in Ethiopia, it's remarkably similar. So, there are thousands and thousands of people starving. But, you know, while these thousands and thousands of people are starving to death, the government somehow manages to dig deep in its pockets and spend over $200 million to celebrate the 10th anniversary of the Marxist revolution. It also earned $15 million in revenue by charging ships loaded with donated food a port entry fee of $50.50 a ton. And if you couldn't pay this, too bad for you, you got turned away, the cargo was never able to be landed. And of course, the Eritrea and Tigra area was sealed off, and anybody who tried to smuggle food into the actual areas where starvation was occurring was attacked by the army. Food shipments are seized, some of it is used to feed the army, and some of the food was sold on the world market, and the money was earned from that was used to buy war equipment for the attack against the rebels. So that's all exactly as you would expect, and terribly, terribly sad.
[13:27] And it's also important to understand that there's absolutely no reason for famines anymore, whatsoever.
[13:31] I mean, there is a surplus of food within the world, and there's, you know, you've got aerological and, sorry, aerial and meteorological surveillances, you've got local price fluctuations, and where famine occurs, you would normally expect that people would simply rush the money in, the food and the excess food in there to feed people. Famines are always the result of government policies, are always the result of violence, or violence results in starvation, just as it did in Europe and the West during the Middle ages up until about the 18th century. The 17th century was called the sad century because about 5 to 15 percent of the European population starved to death every year. And you would actually get villages no more than 15 miles apart starving while one starving while another had an excess of food because it was illegal to transport food and the church and the state were heavy hand in hand and completely controlling everybody's lives. So this is we all starved until we got a free market here, and it's exactly the same everywhere else.
[14:25] So, why? Okay, so the starvation of millions of Russians in 1929 to 1939 was a government program, Stalin's forced collectivization of the farmland. The starvation of at least a million Igbos in Nigeria in the late 1960s, 100,000 Timorese after Timur's annexation by Indonesia in the mid-1970s, 2 million Cambodian starved deaths after the Khmer Rouge seized power in the late 70s, Mass starvation in Afghanistan following the deliberate destruction of the food system after the 79 invasion by the USSR. Massive famines in Eritrea in the 70s and 80s. All, all, all the result of deliberate intentions on the part of the government. You look at the starvation of 20 to 30 million Chinese during this sort of what's called the three lean years from 1959 to 1962. All of the endless famines that occurred in most of the sub-Saharan countries in the 80s, It wasn't the direct intention of the government, perhaps, but it was the natural result of ill-advised government policies, you know, all the stuff you need, price controls, collectivization, marketing boards, and all these other frou-frou interventionist measures. It destroyed local production, while, of course, they banned imports of food. And, of course, the pride of the leaders, they would never say it's not working, so they'd rather that tens of millions of people starve to death rather than say, ooh, I think we need a bit of help.
[15:42] So that's another thing that occurs constantly, right? This sort of stuff occurs.
[15:47] And now, of course, it is profitable to starve your people, right? After the creation of foreign aid, it becomes enormously profitable to starve your people because you basically get all this free food, which you can then go and sell for weapons, and you can sell for money. And this is why all these guys retire to Argentina and buy these incredible houses by the sea because they, you know, through starving their own people, you get economic gains, right? I mean, this is something that would never happen in the free market, right? Starvation is not profitable. But in this sort of violent-based coercive system of the states and so on, you have endless profits that come out of starvation. And this is what results from things like violence always, always, and forevermore.
[16:26] There's other things that occur, of course, with foreign aid. One of the things that happens is that if you've ever been an entrepreneur, you need to have a sense of price over the long run. You need to have a strong sense of how much things are going to cost, both in terms of what you can sell your products for, but also what your overhead is going to be. Now with foreign aid coming in and out and free food being dumped everywhere and free goods being dumped everywhere you really can't tell how much things are going to be cost and as one person said once i think trying to determine whether costs exceed benefits in the absence of accurate cost data is sort of like trying to cut a piece of paper with a single blade of scissors you can't do it and so people generally become non-entrepreneurial in a situation where overhead prices costs and so on and inflation all fluctuate wildly and this is naturally what occurs in a situation where large amounts of government aid are flowing into a country or a culture. So that's another thing to understand that you completely destroy people's ability to calculate in the long run, which of course completely destroys the free market and people's incentives to do so. Now, of course, another thing that's going to occur in a situation like this is that all of the really talented, ambitious, and intelligent people are going to look at the survey of the situation and going to say, okay, well, in the private sector, there's no demand because all these free goods are coming in from outside the country. I can't predict prices. there's no capital investment.
[17:40] And even if I do end up magically getting one of these projects, I'm going to build a dam in the middle of nowhere, which is going to be sort of pointless, and I might make money, but it's not going to be that satisfying. Whereas they're going to look in the public sector and say, wow, here's where the real money is, here's where the real action is, here's where the real growth is, here's where the real opportunities are for my career. And so you're going to sort of draw people in like a whirlpool to this state sector and government positions within the third world become these, you know, absolute meccas, these fantastic stuff that people just want to get a hold of. This draws all the talented people towards this area. And so you don't want talented people in the government, right? You want as many idiots in the government as possible so that they just push paper back and forth. An energetic and efficient bureaucrat is a complete cancer of society. So it's pretty bad. You want the government positions to be the lowest paid and least upwardly mobile positions in society. And that's exactly the.
[18:33] Foreign aid flowing into an economy. And so now we come to the friendly UN and all of the wonderful things that UN did to help these poor countries become better off. Well, what do they do? Well, in the UN passed a sort of new international economic order, and it was directly designed to discourage private investment by encouraging these less developed countries to adopt policies that directly undermine the institution of private property within their cultures. So for instance, in this new economic order of the UN, it specifically refers to nationalization as an inalienable right, right? The nationalization being the forcible transfer of capital and equipment and labor, I guess, too, from the private sector to the public sector, right? So taking over the mines or whatever, I mean, this is an inalienable right, excuse me. So, of course, what else happens is that the International Development Association, which was organized by the World Bank in 1960, encouraged pretty heavy, hefty, large-scale borrowing by making soft or interest-free loans readily available to these less developed governments.
[19:33] That's pretty bad. So, what else happens? Private banks, the governments get export credit insurance provided by the governments. So, in 1984, the US Export Import Bank guaranteed loans to private banks, right? So, it's free money, no risk. You lend them to the third world government, and if that government goes down, you get paid back by the US. So, you get tax credits and so on. And so, naturally, you begin to, instead of getting foreign investment, these third world countries just borrow, right? So instead of getting investment in where you have to prove a business case, and you also have to prove the protection of property rights, and all the things that would actually benefit your domestic people, you end up just borrowing. So you're actually completely unaccountable to your people now. And you don't have to do anything which is going to help them to increase their capacity to run the free market or anything like that. And this is pretty important, right? So over the last three decades, in private investment, and this is the size of, I think, the late 80s, it fell from 40% to less than 16% of transfers, right? So this is pretty significant.
[20:34] And this is, of course, what happens to countries that borrow excessively, that you get this incredible debt, right? You all know this bonus going around whining about all this kind of stuff and wanting to steal our money to solve the problem of third world debt, like we're responsible for all these policies, right? But the new economic order, which was in 1974, immediately followed with this unbelievable debt, right? So between 1975 and 1980, five years, five years only, Argentina's debt rose over 300%, Brazil's 250%, Mexico's 280%.
[21:07] And this is just astounding, right? I mean, this is a complete destruction of the economy. And if you can see, of course, what's happened to Argentina's currency and Mexico had a default and Brazil was a mess.
[21:18] So that's sort of very important as well.
[21:20] And this hostile environment to private investment that occurs is results in what's called this capital flight, right? Capital flight is when whenever money centralizes itself in the third world, the first thing you want to do is get it out of the third world where it's subject to state grabbing or coercion or a change government or a coup or whatever, and you want to nestle it in a nice, safe, secure Swiss bank or something like that, I mean, heck, you put it in a suitcase and handcuff it to your wrist, you're going to be a lot better off than leaving it in the third world. So even in 1988, right, more than $10 billion in capital left Africa every year, right? And that's more than came in in foreign aid, right? It's all booty. It's illegally shipped abroad by the ruling elites. Zaire's President Moboto put more money in his personal Swiss bank account every year than the 45 million year that the U.S. Contributed in aid to Zaire. It's really quite astounding. And the economist James Henry observed, I think in the late 80s, that, quote, more than half the money borrowed by Mexico, Venezuela, and Argentina during the last decade has effectively flowed back out the door, often the same year or even month that it flowed in, right? So it's a flow-through account. Basically, what happens is foreign aid can be summed up like this, right? Poor people in the first world, in the West are subsidizing rich people in the third world. I mean, it's a net income transfer from poor, honest workers in the first world to rich, corrupt, vicious warlords in the third world. I mean, that's sort of the basic summary of the fact.
[22:49] So there would be no third world debt, no capital flight problem or anything like that if we just left these countries alone. And therefore, by subsidizing all of these corrupt and bad and parasitical decisions of the rulers, all we're doing is encouraging people to continue in this kind of way. And so finally, of course, what happens to people who are productive, right? I mean, if you've ever been part of a union and tried to work to exceed your quota, you'll sort of have a pretty strong understanding of how corrupt people view productive people. But it's even worse in the third world, right? I mean, what happens in the third world is if you're a productive group who's creating value in the economy, that's going to directly impact the foreign aid that the ruler is going to receive. So you're going to be pretty much attacked, right? So throughout the third world, your entire occupations are being outlawed and hard-working and industrious people, subject to unbelievable treatment of discrimination, exclusion from choice occupations, and of course, the outright genocide. So Mobotu's expulsion of traitors or middlemen that promptly reduced Zaire's per capita income, and therefore Zaire was qualified for increased aid, right? So in 1983, Mobotu got rid of all these traitors, he just threw them out of the country, which destroyed Zaire's per capita income, thus qualifying him for additional aid. So, of course, naturally, he did that, and everybody starved, and he got wealthy. So, in countries like Algeria, Burma, Burundi, Egypt, Ethiopia, Ghana, Indonesia, Iraq, Kenya, Malaysia, Nigeria.
[24:14] Sri Lanka, Tanzania, Uganda, Zaire, and Zambia, all of these groups are all attacked, right? Economically wealthy, but politically weak groups are always attacked. And that is pretty savage. And what happens is that you end up with a sort of bureaucratic success rather than economic success, which is how large can the bureaucracy grows. And this is all, of course, rather catastrophic, entirely catastrophic for the countries that are subjected to this kind of stuff. And so the last thing that I'll mention is that I dug up a little bit more on the Marshall Plan, right? This is the Marshall Plan was the money that was supposed to go to Western Europe and to Japan following the Second World War, which was supposed to have helped them build up their resources. And this is, of course, a huge myth and sort of like the mission, the myth that FDR saved us all during the Great Depression and all that.
[25:04] And it's used to basically justify the money that is spent in Iraq, right? So Bush sort of put it this way in his announcement. He said, America has done this kind of work before. Following World War II, we lifted up the defeated nations of Japan and Germany and stood with them as they built representative governments. We committed years and resources to this cause, and that effort has been repaid many times over in three generations of friendship and peace. America today accepts the challenge of helping Iraq in the same spirit for their sake and our own. So, well, what did that mean? Well, of course, after the Second World War, West Germany, Hong Kong, Japan, much worse state than Iraq is today. The cities were leveled in discriminant bombing by the US, the Royal Soviet Air Forces just smashed these cities to bits.
[25:50] And of course, West Germany, Hong Kong, Japan, really not so many natural resources. And of course, unlike Iraq, which has enormous oil reserves, I mean, these countries had almost nothing.
[26:01] So what happened? Well, of course, Hong Kong is low taxes, minimal tariffs, and regulations. And there was no welfare state, no large-scale foreign aid. And this sort of all worked itself out. So Hong Kong did beautifully. Now, of course, the Marshall Plan was like a tiny, tiny percentage of the German gross domestic product in 1948, I think it was. And of course, West Germany had to pay reparations. It was much larger than the Marshall Plan aid, right?
[26:25] West Germany received military defense from the US and England, but it paid huge fees for this sort of quote service. And the German economic miracle just began with just the usual stuff that you would expect, right? All the usual suspects of economic growth. You get privatization, deregulation, the end of regulatory controls. They blew away the tax system that had been imposed by Hitler and the National Socialists.
[26:46] And that actually is what occurred. Same thing with Japan. Low taxes, high savings rates, strong economic growth. Foreign aid intervention, all tiny, completely tiny. And it didn't need any massive intervention to recover, even though it's got no, as I mentioned before, it's got no oil fields like Iraq. So this is pretty much what happens is a lack of violence, right, is what grows economies. Foreign aid is cancer upon the throats of the people that it is sort of supposed to be, quote, helping. All the people you see in the ads of foreign aid never receive any benefits from the programs. All that happens is the programs, you know, American lawmakers get bribed. They also get to bribe American companies with lucrative foreign contracts, as I talked about in my last podcast, and the money all gets sort of swept out and they get to increase taxes and controls over the American people. And the idea that there's any kind of interest in helping the poor in the third world is laughable, right? I mean, all you have to do is look at the statistics. $40 billion flushed into the sewer of Africa with the simple result that, you know, a quarter of the population is dying of AIDS. This is all the kind of stuff that you would exactly expect from the use of violence or violence never produces anything good, never has, never will.
[27:55] Foreign aid is just another example of this mess. So thank you so much for listening, as always, and I will talk to you soon.
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