It’s a Puzzle to a Simple Man Like Me

Blog goddess Natalie Solent has written two posts that Iíd like to bring to your attention, but Iím only going to discuss them in one. (What a bargain! And we pass the savings on to you!)

The first post is a fisking of a British textbook used in a Religious Studies course. Natalie tears into the material with gusto, since the author of the textbook blames the inequality of living standards between developing nations and industrialized countries on world trade and a lack of foreign aid. NATO also adds to the problem by acting as the worldís police force.

Got that? World trade creates poverty. Mean nations who happen to be rich wonít give their wealth away to those who deserve it. And NATO screws everyone over by trying to keep genocide and regional conflicts from flaring up.

If this is what theyíre teaching the youth in the UK then I weep for the Commonwealth. I’m also wondering why some Socialists are writing a textbook on religion, since I thought they hated that sort of thing.

Click on the link and read the post. Itís very good, and Natalie does a very good job of pointing out the absurdity of it all. But thatís not whatís really puzzling me.

Natalie follows up her fisking with a post about interest rates charged on loans to developing countries. Two of her readers, both admitting that high interest rates hinder needed growth in the Third World, take mutually supporting positions as to the cause and utility of those rates.

One claims that itís pretty much a natural law for high rates to be charged where the risk is high, and so itís natural that money for needed growth will be scarce. If developing nations want to actually, you know, develop, then they have to clean up their own back yard first. Reduce corruption, develop and stick to sound economic policy, support the rule of law.

The other reader seems to think that every problem is the fault of poor government and rich people. People get rich in developing nations by loaning money to the guys in power, and so the only thing theyíre interested in is propping up the government in order to guard their cash flow. The poor are helpless, marginalized, and just donít matter.

I donít make any bones about how my areas of interest are law enforcement, self defense and military history. Iíve never even read Adam Smith, which is as close to an admission of blasphemy as youíll find here at The Chicago Boyz. Thatís why Iím not going to even try to take a position when it comes to economic theory.

Thatís what my readers are for.

The question to springs to mind is what would happen if interest rates were reduced for selected developing countries? Would it make a difference, or would it just be more money down a rat hole? And, if itís almost certainly going to be a waste of resources and time, why in the world does anyone support organizations like the World Bank?

It could just be that Iím missing something here. There might be an alternative to loans that I just donít see. If so, Iím sure that someone will point it out.

3 thoughts on “It’s a Puzzle to a Simple Man Like Me”

  1. The World Bank and associated developement banks, ADB etc… do offer low interest loans for useful projects.

    But just because you build up one part of the economy doesn’t mean the rest will take off. BUT.

    I think if you look and see the term “success begets success” is true, once a country starts getting it’s act together, with marginally less corruption, or an functioning & efficient energy sector, or an army that stays in it’s barracks and stop abusing the locals all the time, then not only do the local people start creating wealth ex-nihilo in all the small and myriad ways, but you start getting the more adventurous foreign investors, or expatriated natives, or local power brokers investing in this or that.

    As soon as a government stops debauching the currency, stops stealing everything, and cracks down on the more egregious crimes (financial and other) of the other economic actors, i.e. sets a level playing field, all you have to do is get out of the way.

    Money will “allocate itself” and as the country acts like responsible citizen the rates will fall and more projects become feasible.

    I’d be will to bet my life that if you took ANY crappy (african) country of your choice, and we installed basic minimalist “good government”: say we “colonized” it a small but effective army and some adminstrators, that in a short lifetime if would be one of the most prosperous nations south of the Sahara.

    No special loans necessary.

  2. On a cruise in the Caribbean, we could not help experiencing the difference between the larger island of Jamaica which had far more resources than tiny Grand Caymans.

  3. Some 20 years ago I did a stint as a Peace Corps Volunteer in Guatemala. At that time due to the nasty military government Guatemala was at the bottom of the list for international aid. Even so, in the tiny mountain community I lived in, they received food aid from at least, Holland, Denmark, and the US. This in a town that produced nothing but farm products. Their school was built by the Swedes, the local radio station by the US. And of course I and several other PC Vols were there or in nearby communities. Their reforestation projects were paid for with US money, their cattle vaccination programs too.

    International aid floods into poor countries, to the point where it causes more disruption and poverty than it cures. The third world is crawling with well-intentioned foreigners out to do good. I can’t see where more money would help when the basic problem is not a lack of money, but a lack of basic human rights, freedom and good government.

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