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Unconditional Aid Destroys Economic Growth and Infantilizes Its Recipients

(Weekly Standard) Irwin M. Stelzer - * Corruption helped to turn the international sanctions against Iraq into a largely ineffective program, and there is no reason to believe that, with millions sloshing around every month, a wave of integrity will overtake the dispensers of aid to the Palestinians, or its recipients. The question of whether the U.S. and the EU should continue to send aid to an organization pledged to destroy Israel is irrelevant because it ignores the more important one: why do the Palestinians continue to need massive infusions of charity? * We should have learned after pouring billions into Africa and other badly governed nations that an assured continued flow of aid infantilizes and debilitates its recipients, and prevents the local economy from becoming self-sustaining. It diverts local politicians from the hard work of creating the institutions that make private-sector development possible, and instead sets them wandering from one world capital to another, begging bowl in hand. * There is no denying that Israel's reactions to specific threats to its security often do collateral damage to the economies of Gaza and the West Bank, just as suicide and rocket attacks by Hamas damage tourism and other sectors of the Israeli economy. But it seems obvious that the Palestinians can eliminate the problem by reining in the terrorists. Before Arafat launched the second intifada in 2000, the PA was running a small surplus. The intifada, in short, was the event that contributed to the perennial PA deficit - a self-inflicted wound that forced the Israelis to take security measures. * Donor aid is used primarily to feed a voracious bureaucracy, heavily weighted with armed security forces used for factional wars when not being deployed against Israelis, and to operate a welfare state of the sort that all experience, here and elsewhere, teaches is self-perpetuating. The Palestinians would be better served by their well-intentioned donors if financial assistance could be converted from a handout into a hand up the ladder of self-sufficiency. * It is not impossible for the donors to recognize the folly of blank undated checks, and to take two steps that would turn perpetual charity into tough love. First, aid should be made conditional on reform. Second, the donors should tell them that aid will be reduced by, say, 10% per year over the next ten years. Then, instead of stripping the pipes from the greenhouses that wealthy Jewish donors made available to them, Palestinians might realize that they must build a private sector economy capable of providing a decent standard of living for themselves, a stake too important to risk in a continuing war with Israel. The writer is director of economic policy studies at the Hudson Institute.
2006-04-07 00:00:00
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