QUESTION: The Marshall Plan was a success--why have aid programs since that time been less successful in bringing about change and economic growth?
Mr.JOHNSON: Well there's one major reason why the Marshall plan was a success and today's foreign aid program is mainly judged as not being successful, the Marshall Plan distributed money to countries which were essentially already industrialized. And a lot of money that went to the post WWII nations of Germany, Britain and France were going into projects like building bridges, building hospitals and building schools in countries that already had established free markets. Today's foreign aid program is going to countries in less developed areas of the world that do not have free markets. So if we go into a country and build a bridge or we build a hospital in those countries it doesn't really do any good because it doesn't help that country develop a free market, which I don't really think foreign aid can do anyway. There's also another argument to the Marshall Plan. Those countries that got most of the Marshall plan money, Britain for example, turned out to be some of the most economically poor performers in post Cold War Europe, compared to countries that didn't receive money from the Marshall Plan like Switzerland, which wasn't in the war, was neutral, and didn't receive a lot of or any Marshall Plan money. And that economy, they're the richest economy in Europe right now. So even some of the money that went to the Marshall Plan helped European countries maintain socialist economies, socialist economic policies that they would not have been able to afford had that money not gone to that area of the world. Also, the biggest point that helped European countries grow economically after the war was the level of foreign investment from the United States into Europe. Foreing investment was ten times more in value than the money that was going in through the Marshall Plan because investors saw that post cold..post Europe, WWII Europe was a good investment for their money because they had basically established free markets.
QUESTION: Why do you believe that the US should eliminate foreign aid?
Mr.JOHNSON: Well you have to look at the long term recipients of foreign aid, you can't judge foreign aid on a five year study, you have to look at the countries that have been receiving this money for a long time. There's over 60 countries who have received foreign aid from the United States for over 35 years, many of them as long as 50 years. Of those 60 countries more than half of them are no better off today economically than they were before they received that aid. And most of those countries that are no better off are actually worse off. You really have to look at how these countries have developed their economies, how they've achieved any type of wealth, and most of these countries have not. Whereas if you look at countries that have developed in post WWII, which are mainly the Asian Tigers, Taiwan , Hong Kong, Singapore, South Korea and Chile in Latin America, are the only examples of countries that have developed since 1950. None of those countries, with the exception of South Korea, have been major recipients of American foreign aid, European foreign aid, or money from Japan. These countries reformed their economies, they cut their taxes, they reduced regulations, and most importantly they opened their economy to foreign investment. And when they were cut off from foreign aid in the mid-60s, in some cases for example Singapore or Taiwan, they opened their economy to foreign investment and foreign investment ran in and rushed in and that's how the country developed, that's where the money came from to build bridges to build roads build the infrastructure to allow telecommunications to come in, computer systems, that helped these countries establish the type of economic system they have today and now they're among the most economically best performers and the richest.
QUESTION: Should we eliminate all types of foreign aid?
Mr.JOHNSON: I think you really need to divide the foreign aid program into its three basic areas. You have development assistance, which is the overwhelming majority of the program, that's money that the United States spends to help countries develop free markets and grow economically. There's humanitarian assistance, which helps countries establish health programs, education, as well as disaster relief for earthquakes and tidal waves and so on. Then you've got military assistance, which the United States spends money to combat drugs, illegal drug imports, into the United States, and military training programs. Of those three programs the biggest program is development assistance and its the biggest waste of money because we're giving money to countries that do not have the fundamental basis of a free market, and no matter how much money you give those countries, like Rwanda, Somalia, and Haiti, who have been historically large recipients of American foreign aid. If they don't have the type of free market system that's necessary, like Hong Kong has, they're never going to grow, no matter how much money you spend there. So that program should be eliminated almost immediately, and allow the countries to develop the type of foundations that doesn't cost money: having a commercial code, having..guaranteeing private property rights, allowing foreign investment. It doesn't money. Those are government policies and laws that can be passed that do not cost money in the form of foreign aid. That's what those countries have to do. And then humanitarian aid, American citizens spend $14 Billion a year of their private money through private charities to help immunize babies, to help bring health care to regions of the world that do not have hospitals. That's how that money should be spent, not through the US government. And then in the military assitance, a case can be made that the overwhelming majority of that can be diminished and reduced over the long term. Some of that money gonna still need to be spent. We're stillfighting a war on drugs, and unless the government comes out and legalizes it we're going to need to maintain that type of policy, and you're going to have to have some money to combat that and help nations who are producing these drugs combat the illegal drug trade in those countries.
QUESTION: But the money for drug policies is so small compared to the amount they spend on giving grants of weapons to several countries.
Mr.JOHNSON: Well, I think if you if you take that portion of the military aid, the grants, where we help countries purchase American weapons, that is only about half of the overall military budget, the rest of it is military training, and in drugs and a host of other issues. In military training, for example, we found that that was essential for operations like the war in the Persian Gulf, it allowed American military to already have established lines of communication with foreign militaries without which if you didn't have those training programs you would have to re-invent or invent all those things on the fly as these international crises developed. And if America is going to be involved in those types of international crises mainly to defend its own interests, then you're gonna have to provide money for America's military to train with foreign militaries. Now see that really is not a foreign aid program in my mind, that is, it should be a military, part of the military budget, part of the Department of Defense who spends that money, which is where it is but it's included in the overall foreign aid budget each year.
QUESTION: What about the fact that there's a lot of countries that are given IMET, International Military Education and Training, but to train 3 or 4 officers which they send back to their countries and you've seen no benefit and in a lot of cases, such as El Salvador, you've seen it actually cause more problems?
Mr.JOHNSON: Well, I think with any government program you're going to find deficiencies where you're not obtaining your overall goals. But I think a good case can be made, and a very strong case for the most part the IMET program, military training program is a very effective program. When you bring members of foreign militaries into the United States to train with the American military, whether it be through what type of communications systems that are used on the battlefield, how do you interpret imagery from satellites, these types of programs are necessary if the United States is going to be the type of military power that it is today.
QUESTION: If we give arms to other nations, does this then increase the likelihood of conflict in those areas?
Mr.JOHNSON: In a lot of cases it does, I think you can find specific examples during the Cold War when we provided grants to countries to buy military weapons that we wanted to have them as allies during the Cold War and they turned out not to be so. A good case is the Horn of Africa where you had the United States and the Soviet Union fighting amongst each other to who was going to control the Horn. Whether it be through Ethiopia or Somalia. And we provided a lot of money to those two countries in opposite tandem with the Soviet Union. When they were supporting one we supported the other and vice versa. Where that didn't necessarily occur the United States interests weren't necessarily being fulfilled. Other examples are India who proceeded a lot of the money to build an entire navy that threatens that region of the world right now and they're not a hard core American supporter as we know. In the UN, for example, they're America's fifth largest foreign aid recipient they vote against the United States in the UN 87% of the time which is as much as Cuba does, and more than Iran votes against the United States, so this is not a US ally, but yet they're still our fifth largest aid recipient.
QUESTION: Which countries deserve to receive aid? Why?
Mr.JOHNSON: I don't think that any country deserves to receive aid. We have to remember that this money comes from the pockets of the American public, the taxpayer, they're the people who deserve to have that money, they should be able to keep it. No foreign country deserves to have that money, especiallly when it doesn't work. I think that the facts show that development assistance doesn't work, and hasn't worked, and it never will work. No real hard core examples where the development community can say this money produced this type of economic growth. What you what the facts do show is that the money that has gone to those countries over long periods of time have not done any good whatsoever. The only evidence out there of countries that have developed over the last 40 or 50 years are again the Asian Tigers and Chile, and none of those countries have been major recipients of foreign aid, with the exception of South Korea. And South Korea, of those five countries, is the worst of the economic performers.
QUESTION: Isn't aid a way of giving countries money to start up programs to start up small businesses and in that case wouldn't it be a good idea to provide economic aid?
Mr.JOHNSON: In many cases, the development community, the proponents of foreign aid argue that the way that you distribute wealth from the developed world to the less developed world is thru these foreign aid programs, through the World Bank, through the IMF, and through bilateral economic assistance from Europe, from America, from Japan. I think again that the facts show that historically this doesn't work. The preferable way to distribute money from the developed world to the less developed world is through private investment. When individual investors determine there's a particular country somewhere in the world that they want to put their money at risk, and they want to put their money in there to build a hospital, or to build a bridge, or to build a semi-conductor manufacturing plant, or a computer plant, they're identifying countries that have done internal economic reforms, that have established private property rights, that have good legal institutions that can enforce contracts, that allow foreign investment to have low taxes, access to labor, there's a host of issues that foreign investors look at when they give money to these countries. And the countries that are getting a lot of foreign investment dollars are countries who are reforming their economies, and they're also countries that are growing. Those countries that have not done that, the Somalias, the Haitis, the Tanzanias, those countries, have not made these types of economic reforms, but yet they're still big and large foreign aid recipients. Where's the economic growth there. Where's the economic benefits to those countries. I don't see any evidence that shows that that money has had any impact.
QUESTION: So why are we still giving aid?
Mr.JOHNSON: Well I think there's a lot of reasons. If you listen to the debate on foreign hill, really in Washington, a lot of people defend the program for one reason: not because it helps foreign countries, but because it helps American companies. $0.70 out of every foreign aid dollar stays right here in the United States, it goes to contractors, it goes to exporters and so on. So they'll defend it on their program. And when you have people lobbying Congress saying I'm from your district I'm getting this amount of money from the Aid budget, if you cut it, you know it's going to effect jobs in my company and so on, that's where you have pressure on the policy makers to maintain these types of policies. But again, I think if you look at the program on those bases, I mean, does America really need an international welfare program, the foreign aid program, which really is a corporate welfare program. It's money that's being taken out of the economy of the United States and funneled to particular businesses. I think most Americans would be opposed to that. And I don't really see it as a legitimate function of the federal government.
QUESTION: Dr Holmes has written that foreign aid should be reformed, not necessarily eliminated, but that it should serve three fundamental purposes: enhance US national security, advance American national interests, and promote economic growth around the world. How can we make foreign aid meet those goals?
Mr.JOHNSONWell what we're talking about there is that the money that is being spent is not going necessarily to either one of those goals. It's not supporting America's national interests. If you look at the countries that are foreign aid recipients of the United States, 3 out of every 4 of them vote against the United States in the UN more than 50% of the time. These countries are not defending America's interests internationally. And then if you look at the area of promoting economic growth, it's not doing that. What we're saying is, is that if there is going to be a program, that's what is should achieve, it's not achieving that so lets get rid of those programs that are not achieving those goals, mainly the development assistance.
QUESTION: Can foreign aid prevent conflict, or bribe countries towards a peace process, and prevent situations such as Somalia, Rwands?
Mr.JOHNSON: Well like all bribes, the bribe is only good if you get the intended outcome, and foreign aid is a bad investment in that matter. Somalia, for example, and Rwanda, are long term recipients of American foreign aid and it still didn't prevent a crisis. Then we rushed in there with more foreign aid after the crisis, and conditions there are really not all that much better. You really, again, have to look at the countries who have achieved sustainable economic growth. Hong Kong is really a very good example of this. In 1965 they were on par with several countries in Sub-Saharan Africa as far as their per capita wealth is concerned. What happened was Hong Kong went one direction and Sub-Saharan Africa went another direction. Hong Kong went towards economic liberalization and free markets, Sub-Saharan Africa went towards socialism and closed economic markets. And the outcome shows itself. Hong Kong is now one of the richest countries in the world, fastest growing economies. Sub-Saharan Africa is no better off than it was in 1965.
QUESTION: Many say that foreign aid has provided money for immunizations which have prevented diseases from reaching our borders, it's provided oral rehydration therapy which has saved millions of lives. Should these programs be funded?
Mr.JOHNSON: They shouldn't be funded through the American government. Again, the American public spends $14 billion a year in private charities that go towards immunizing babies, towards providing healthcare to the poor, providing education to the poor, that's how that money should be spent. American citizens voluntarily giving money through contributions to charitable organizations who then take that money. There's been a lot of press recently about how these private charities are corrupt, that only 30 cents, that they keep 30 cents out of every dollar, well that's much better than the US government which keeps 70 cents out of every dollar right here in the United States, even though the programs might not be 100% managed correctly, they're managed better than the way the federal government runs it, and that's the best way to provide humanitarian assistance. The American public is a very generous nation. We spend a lot of money, $14 billion a year, bigger than the entire foreign aid budget, that includes military everything, in this type of area, in humanitarian assistance and I think that that's going to continue because America being the most wealthy nation in the world, and the American people being basically generous and providing money around the world in this function will continue.
QUESTION: Is it possible to improve foreign aid or restructure it so that it does meet our goals? Or is it a matter of completely eliminating foreign aid, and what otehr ways can we improve economic growth in Third World countries? Some say that the future of the US economy depends on developing markets in the Third World. Is this a correct assessment? And if so, how can we help develop markets abroad without economic aid?
Mr.JOHNSON: Well first and foremost, our own wealth as a nation in the United States doesn't depend on foreign nations, it depends on what the United States does through its own economic policies here in the United States. If the United States can maintain low taxes, low levels of regulation, allow businesses to expand by eliminating policies like the capital gains tax, that's where America's overall economic wealth is at stake what the US government is doing through its policies right here. Now a case can be made that as far as exports are concerned, which weknow are becoming a more important aspect of the overall US economy and contributing a large portion of our Gross Domestic Product this year. In those areas, we need to have opening and expanding markets overseas. Not necessarily just in the Third World, but everywhere. Europe needs to continue to expand economically to provide bigger markets for us. Asia, including Japan and China, need to expand their markets. And then there is the less-developed world which needs to provide open markets for the United States. The way that you achieve those open markets is not through a foreing aid program which in many cases actually restrict markets. A good example of this is some of our foreign aid goes to countries that have tariff rates to our exports going into those countries at over 50%, and the reason we can afford those types of tariff rates is because the United States is subsidizing that government by providing them foreign aid. What you want to do is you want to open those markets up through the General Agreement on Tariff and Trade (GATT), which is now the World Trade Organization (WTO). You want to use the OECD, the developed world, you want to use those G-7 summits that we see happen every year. Those are the avenue where we can negotiate with these countries and use the world multilateral types of agencies and fora to open up foreign markets and that's going to provide the long term access to foreign markets for our exports, and America's future.
QUESTION: As the Cold War has ended there isn't one enemy that we are fighting, and a lot of people claim that it's things like disease, population growth, refugees from several countries and that these things are becoming national security interests because these things are threatening the US. Can foreign aid combat these problems?
Mr.JOHNSON: Well foreign aid has been going on as we know now for 50 years and it's not combatting it now. What gives anybody the indication that it's going to work any better in the future? The best weapon against civil unrest, against deteriorating economies, against deteriorating health standards, in less developed countries is economic growth. And there is no connection between foreign aid and economic growth. Where there is a connection between is economic growth and something else is economic freedom. And that is determined by the policies that those countries develop internally: local taxes, open borders to trade and investment, low levels of regulation. And that's not something that the United States can go in and dictate to foreign countries. Those are decisions that foreign countries have got to adopt themselves. The foreign aid program helps prevent those countries from making those decisions because we're putting money in those economies that's subsidizing them, that's keeping them going, and is allowing them to continue. A good example of this is Cuba for example. During the Cold War the Soviet Union gave Cuba some $3 billion dollars a year, $3-4 billion a year in annual subsidies. That kept the Cuban economy going. After the collapse of the Soviet Union and that money was withdrawn we saw the Cuban economy go down the tubes because it cannot sustain its type of economy based on its type of Marxist system. And that's where the real lesson is. Unless countries develop free market policies that will allow businesses to grow, will allow for the creation of wealth, no matter how much money you throw at those countries its not going to help them in the long run, and it's not going to help them achieve development status.
QUESTION: Should we simply let countries sink or swim on their own?
Mr.JOHNSON: Well, you should allow them the opportunities to make the decisions for themselves on which path they want to go. They can go on the path of Hong Kong or Singapore, or they can go the path of Cuba, but that's really, again its an internal domestic decision. The United States does not have the ability to go in and determine the domestic policies of foreign countries, nor should it.
QUESTION: Anything to add?
Mr.JOHNSON: I think, one of the other aspects of the Marshall Plan was that if you look at just the growth rates and what type of policies post WWII Britain and Germany pursued, both of them were major recipients of Marshall Plan money but England went one direction and Germany went another. And it's very interesting to see what they did. England went in the direction of their labor, strong protection for their domestic industry, very high levels of taxation, very strict government regulations on health standards, setting work week standards. Germany just after WWII went the opposite direction. It slashed taxes, it opened its borders to trade and right after WWII German economy shot up and England's went down the tube. Now eventually they both kind of evened out because Germany reinstituted a lot of the socialist policies that existed during Nazi Germany, and England reduced some of its restrictions and now they're pretty much on the same level. But shortly after that, but that's another example where economic reform had a direct impact on economic growth in the case of Germany. And in the case of England, the lack of economic reform had a direct proportional relationship to their economic performance, which was to deteriorate.
QUESTION: How has aid impacted the Middle East peace process?
Mr.JOHNSON: I think that whole angle has yet to be fully realized and the outcome of the money we've spent in the Middle East has not yet been seen. The money that we give to Egypt and Israel is part of the Camp David Accords in the 1970s, and what it was was money where the United States guaranteed a certain amount of annual money to Israel and Egypt to maintain peace in the region. I think that you can make the case that that may have been effective in preventing a new war in the Middle East. But what people are ignoring is what it's done to their economies. The new Prime Minister Benjami Netanyahu, of Israel, has come out and said that this money is destructive to Israel's economy and in the long run has allowed Israel to establish a lot of socialist economic policies that's preventing the Israeli economy from growing more rapidly and becoming more free market. In Egypt, it's even a bigger case. Egypt's economy is in a shamble. They're mostly an unfree economy. They have very strong restrictions on free markets and entrepreneurs and the long term outcome of this money going to these countries has yet to be seen. Their economies may go down the tubes and maybe partially responsible the United States may be partially responsible for that for giving them $2 Billion a year in the case of Egypt, and $3 Billion a year in the case of Israel. So we don't know how that's going to impact that yet.
QUESTION: Is foreign aid maintaining the Middle East peace process?
Mr.JOHNSON: Well, I think some people will certainly make that argument and again I think you can look at the comments of Prime Minister Netanyahu of Israel that this money is overall destructive to the US uh to the Israeli economy and that they're looking forward to long term reductions in that money.
QUESTION: So they no longer want US aid?
Mr.JOHNSON: Well I think if you look at his comments you'll see that, I think, that it's clear that their looking for having a reduction of that in the long term.
QUESTION: Do they want reductions in aid because it requires specific political actions?
Mr.JOHNSON: No, because it is a subsidy on their government spending programs. And about
$3 Billion dollars a year for a country like Egypt allows them to maintain a lot
of policies that most free market economies couldn't afford.
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