Freedom, Global Poverty, and the Failure of Foreign Aid

The standard narrative floating about the mainstream press is that the developing world is held back by a quagmire of free market fundamentalism. Sure, there are a few exceptions to this narrative, such as Peter Bauer and William Easterly. But pretty much all we hear is a chorus from the likes of Jeffrey Sachs; that in order for these poor countries to become wealthy, they must receive aid from wealthy countries and rein in the free market.
Salon even had the audacity to refer to Honduras as a ‘modern day libertarian dystopia.’ As the author states, ‘Eliminate all taxes, privatize everything, load a country up with guns and oppose all public expenditures, you end up with Honduras.’ A country where ‘the police ride around in pickup trucks with machine guns, but they aren’t there to protect most people. … For individual protection there’s an army of private, armed security guards.’
And then there’s Naomi Klein, whose popular book The Shock Doctrine claimed those who support free markets actually use crises to enact their free-market reforms on poor countries and ensure such poverty continues.
There is so much wrong with all of this that it’s hard to know where to start. First of all, Klein gets things backward. While corporations have certainly done their share of wrong (usually with the help of the government), Robert Higgs showed quite clearly in Crisis and Leviathan that it is the state that uses crises to grow. In the United States, the government grew vastly during World War I, the Great Depression, World War II, and even the Cold War. It is now using the War on Terror to grow once again.

This post was published at Ludwig von Mises Institute on MAY 29, 2015.