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What Insight Katrina Lends to the International Aid Industry

Over the last half century, the developed world has spent almost $2.5 trillion to develop the less developed world. By any accounting, that spending was all for naught, as no correlation, much less causal link, has been established between aid inflows and economic progress. In fact, during an especially intense period of assistance, roughly the 1980s and 90s, continental Africa's economy actually contracted. Despite evident failure, the money flows forth still, to the tune of about $100 billion a year. And if the Bonos of the world have their way, that sum will increase. More starkly than any academic or professional analysis of foreign aid's success, the ongoing situation along America's Gulf Coast demonstrates why development assistance has been, is, and always will be ineffective. There, federal authorities are “swamped” investigating almost 33,000 cases of Hurricane Katrina federal aid fraud. In the aftermath of that tragic storm, the feds dumped $7 billion dollars in relief aid into the region, the imperative being to do something—anything—to alleviate suffering, the same reasoning employed by proponents of international assistance. The people of the Gulf Coast, being human, did what humans do where the incentive of free stuff exists: they got their free stuff, in spades. The most oft-abused handouts were the $2,000 debit-cards FEMA dispersed after the storm, seemingly to anyone with a Louisiana street address. Two especially sleazy roommates in Houston, equipped only with a bogus street address, received the $2,000 thirty-nine times over. By any cost benefit analysis, the Katrina relief effort was a boondoggle. In addition to the debit card fiasco, the feds can count among their failures the thousands of Winnebagos gathered in Texas and left to rot, undelivered. All in all, the feds logged so many bookkeeping errors, it's unlikely that it will ever be sorted out. Even within the borders of the United States, managerial incompetence and vulgar opportunism mark development assistance efforts. If ever such an effort were to prove viable, this would have been the case. But it failed, for exactly the same reasons that international aid continues to fail. No government is capable of planning an economic recovery, which is far too complex for any single entity to orchestrate. Recovery and development can occur only spontaneously, as the result of individuals operating in their own best interests. Government aid—especially in such vast sums— distorts this otherwise natural process, usually to the detriment of the intended recipients; the most readily available gratification becomes that provided by government assistance. Rational self interest leads people to rely on the easy government money, rather than taking steps to forge a lasting economic recovery. The Katrina relief debacle is merely a microcosm of the $100 billion dollar a year international aid establishment. Bureaucrats in Washington are no more capable of promoting development abroad than spurring recovery at home—if anything, they're less capable abroad. Humans, whose primary commonality is rational self-interest, are no less likely to be corrupted by handouts in New Orleans than in Nouakchott.