In an alarmist post for UK newspaper The Independent interviewed the head of the International Monetary Fund, Christine Lagarde, who argues that the delays in Washington could create another recession in a “massive disruption the world over.”
I say: good riddance.
Forgive me if I sound callous, but there has to be a point where the United States answers international requests for funds with a firm “no.” The reality is that the developing world has gotten used to using the United States as its personal piggy bank. Yes, the U.S. put itself into this position after World War II, using mainly the World Bank as its puppet, but these relief efforts have not worked—in fact, many argue that international development efforts have made matters worse for the countries we are trying to help. We have to remember that these bailouts create an enormous moral hazard, and have a failure rate of around 55%-60%.
In other words, the World Bank and IMF are doing far more harm than good.
In all reality, I don’t think that giving money to developing countries is necessarily a bad idea. There is a strong and growing interest in the private sector to aid ailing states. The United States is a rich superpower. Its citizens benefit from that greatly, and as we would expect people to give to the poor at home, there is nothing wrong with offering a helping hand to those poor abroad.
However, that does not mean that the entirety of the economy should be behind foreign aid—only consenting individuals privately donating to their charity of choice should help these developing countries. Lagarde of the IMF highlights the entitlement of the international community, asserting, “When you are the largest economy in the world, when you are the safe haven in all circumstances, as has been the case, you can’t go into that creative accounting business.” The unfortunate truth is that the debt ceiling debate is bringing to light a very old debate within United States foreign policy. Should we help the international poor? If so, how, and with how much money? The Independent is right to note that “As the talks drag on, the risk is rising of market turmoil,” but maybe its time for that unfortunate situation—one that the United States has been putting off for decades—to come to head. If not, lawmakers will continue to pass the buck onward from generation to generation as the world, in the long term, suffers for our decisions.
The United States’ first priority should not be of some intergovernmental agency with good intentions and terrible execution. If its citizens want to help the poor abroad, we will pay for it privately.