WSJ.com - Foreign Aid and Bad Government

WSJ.com - Opinion: Foreign Aid and Bad Government

Entrepreneurship, not aid, is essential to rejuvenate markets in the developing world and, in turn, help America prosper.

During the Cold War, the U.S. instituted a policy of sending money to governments in poor countries to buy their political loyalty. While studies show that sending aid to foreign governments creates allegiance, it does not lead to economic progress. Instead, it makes governments in poor countries dependent on the U.S. rather than their citizens' taxes. 

Tragically, the Cold War aid approach actually preserves suffering in poor countries. Aid empowers bureaucracies, promotes statism, and weakens government incentives to boost tax revenues through growth. Economic assets are often kept in the hands of the state, leading to monopolies, stagnation and extortion. All of this hurts entrepreneurs, who have the potential to create wealth and promote governmental accountability.

The history of Western economic and political advancement illustrates that it is the economic strength of citizens -- not governments -- that gives rise to checks and balances.