Taking From Peter to Pay Paul: International Redistribution

The long road to serfdom seems to be getting shorter with each passing day. At the recent G-20 meeting there was virtually unanimous support for the United Nations Millennium Development Goals (point number 14) and a reaffirmation of the development principles agreed to at the 2002 U.N. Conference on Financing for Development held in Monterrey, Mexico.

Acceptance of this proposition commits the United States to an official foreign aid formula of 0.7 percent of Gross National Product, a goal envisioned in President-elect Barack Obama’s Global Poverty Act. In the aggregate this will cost $845 billion of taxpayer assets. Additionally, it is anticipated that President Obama will lobby for the Jubilee Act designed to cancel as much as $75 billion of foreign debt.

Not only are we discussing bailouts of the mortgage industry, financial services, the insurance business, car manufactures, but we are soon to be the bailout artist for the globe. Some have hailed this as the dawn of a new era in which contributions to the International Monetary Fund and the U.N. Development Fund will increase exponentially.

For many adversaries, the United States is being cut down to size. But this is actually a voluntary diminution. As the economy falters, it is only a matter of time before America’s military dominance declines as well.

Alas, change is just over the horizon. But this is revolutionary change that not only involves the redistribution of wealth at home, but the distribution of American wealth abroad. Where does it end? In fact, the more pertinent question is how does the United States sustain a sound economy when capital is being dispensed in an almost feverish fashion?

Presumably this capital flush will stimulate liquidity and put the global economy back on track. This, of course, is hoping for the best. But as P.T. Bauer, among other economists of development, has noted, foreign aid rarely affects those most in need and, in most instances, creates a level of dependency that militates against the development it was designed to produce.

This proposal, however, has little to do with sensible policy and a lot to do with ideology and a global equalization program. For decades Americans have been besieged with a drum beat of have and have-not nations, Northern hemisphere v. Southern hemisphere disparities and those who luxuriate in wealth and the dispossessed.

To some degree, it is understandable that the urge to spread the wealth around is irresistible. But taking from Peter to give to Paul may make Paul happy, but it doesn’t do much for Peter. In fact, it doesn’t help either of them if Paul becomes dependent on Peter for assistance and Peter grows tired of handing over his wealth. How long before Peter also asks for a handout?

This global equalization program concentrates solely on the role of government, a point made by U.N. officials and the proposed Obama legislation. Yet most foreign assistance is organized by churches, unions, foundations, universities. In fact, contributions coming from the private sector dwarf those from government.

That condition means very little for those who are persuaded a reallocation of world resources is necessary. What these activists overlook is that their program is essentially beggar thy neighbor. Their plan for redistributing wealth implicitly argues for a static economy, one in which growth is unlikely to occur.

Of course, economies that cannot grow ultimately fail. If taxes are used as the method for redistribution, workers will pretend to work and employers will pretend to pay wages. Envy becomes the prevalent theme and opportunity is relegated to the back burner of economic life. We are a long way from that practice, but if the legislative path we are on isn’t curbed the American economy could easily become Europeanized, i.e. stagnant, static and filled with free loaders.

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