America, the Kid With No Lunch Money

[Purveyor]

By Daniel P. Malito

Throughout the history of our (formerly?) great country, we have taken pride in assisting other burgeoning democracies throughout the world. As the quintessential example of that "shining city on a hill," we provide money, arms, and other assets to fledgling nations in order to further the cause of freedom. Apparently, the grand design was that someday we would be able to look at the map and realize that the good old U.S. of A. was now the patron saint of a slew of democratic states. After that, I guess the entire globe would then join hands and sing a song of peace, freedom, and love, with one glorious voice. Huzzah! Three cheers for the United States, mother of the world and father of free citizens everywhere!

Or, at least, that's how this whole foreign aid thing started, way back around World War I. High minded idealists like Herbert Hoover used the cover of WWI reconstruction to create organizations such as the Commission for Relief in Belgium, and the American Relief Administration. No one argued back then that it was a good thing to help war-torn countries get back on their feet, especially when we needed their assistance to win World War I. The total monies spent on both of these organizations from 1920-1943 was around $400 million, with 98 percent of that money going to Belgium in the form of loans. Of course, when you hear loans, you think "payback." Unfortunately, most of the loans the U.S. made to Belgium were eventually forgiven. Not only that, but we had also forgiven Belgium's pre-armistice debt and agreed to seek the money from Germany. Germany -- the country that had just been decimated when they lost the war.

Interestingly enough, when the terms were laid out in the treaty of Versailles, it was decided that Belgium would be able to offer its creditors a small percentage of its debts repaid in Bonds. Well, the United States Congress failed to ratify the treaty while Britain and France did. Hoover put the question to congress a few days before his administration ended, but the question never reached a vote. It seems the average U.S. citizen at that time was just a bit smarter than the average Joe today -- they knew that Belgium was trying to welch on its debts, and they told their representatives they wanted no part of it. Of course, even though Belgium knew the U.S. was under no "legal obligation" to agree to the terms of the Versailles Treaty, they apparently considered it a "breach of faith" on the part of the U.S., and felt there was a moral obligation for America to forgive these debts. You can read all about it yourself.

So, as you can see, the foreign aid habit of the United States started off on the wrong foot altogether. Why no one in power saw this as a harbinger of what was to come is certainly a question for the ages. One only had to ask the very obvious question: "What do we do if other countries don't pay us back?" in order to see how flawed the entire concept of foreign aid was. The only choices we had to punish a deadbeat payer were to invade the country, which we would never do, or smile and shake hands while we take it right up Route 66.

After World War II ended, the United States really upped the foreign aid ante. We started the Lend-Lease program, which resulted in billions of outgoing dollars, supplies, food, and other goods to war-torn European countries. The final tally was around $50 billion spent, which has a value of around $750 billion today. Of course, when it was time to repay what the U.S. had made clear were "loans," the recipient countries began to come up with every single excuse in the book. Claiming things like "men sacrificed count monetarily," and "land lost is common loss," the countries we freely gave to decided that paying us back was a very low-priority issue. In fact, Britain just finished paying its lend-lease debt of about $89 million in December, 2006. That's $89 million out of about $4 billion, and it took them 50 years to do it. The United States, once again, becomes the patsy on the world lending stage. Is anyone beginning to see a pattern here?

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