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Re: http://www.cato.org/pubs/pas/pa-170.html - Foriegn Aid and

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Hi Yogesh,

--- Yogesh Upadhyay <u_yogesh@rediffmail.com> wrote:
> Hi Ashish,
> Excellent article this one although I thought that this article is
> more to illustrate the evil effects of Foreign Aid (from US, World
> Bank, IMF and others) on a socialist India than on the planning of
> political ideology by the erstwhile leaders.

You are right about that.

However, one point that is missed is that alternative to Foriegn Govt.
Aid is Enron style private investments (Dabhol Power Corporation) or
public-private partnerships. This works on the principle that private
investment is guaranteed a minimum return on investment or certain
minimun purchase price by some Govt. agency (say, MSEB). The basic
problem is not the Foriegn Govt. Aid but the socialist schemes
themeselves. Foriegn Govt. only accelerates and encourages socialists
schemes compared to guranteed private investment by not exposing the
failures early. The private investment like Enron are more likely to
blow an early whistle on the failures of the socialist schemes. The
Foriegn Govt. Aid is likely to delay the exposure of the failure
because it will cause credibility of two or more Govt. to be destroyed.
The private investment cares more about profits and liquidity than

You have to remember that World Bank and IMF are very socialist in
nature. Their agenda is socialist in nature. Just because they are
financed by Govt.'s like US does not make them Capitalist. They might
encourage more free trade in principle but in practice they prolong the
socialist schemes by not allowing them to fail. I think we should allow
Govt. and their schemes to go bankrupt. That will make people aware of
thier real nature. That will make people think twice before they are
lured into the promises of subsidies etc. Because they know that if
they are overpromised those schemes will simply fail because Govt. is
either not allowed to raise taxes or Foriegn Govt.'s and institutions
like IMF, World Bank will not come to their rescue.

The policies of IMF, and World Bank are not under our direct control.
But we can convince people not to fall for such Govt. schemes. Also, we
should stop living under illusion that just because Govt. schemes have
been running for more than 50 years without failing means that they are
inherently stable. The realization of connection between foriegn aid
and socialism will help people overcome the fear of markets.

People see that Govt. schemes, with all their corruptions,
inefficiencies etc., are still stable compared to private markets. Take
for example Enron in US. Enron in US failed taking with it retirement
nest eggs of large number of workers. This causes people to go towards
more Govt. schemes because those are more stable though highly
inefficient. But those Govt. schemes like Social Security are being
deliberately saved from bankrupticies because no Politican wants to
take the blame for destroying something that has been running
"successfully" for so many years. But that's a mirage. You are just
postponing the death but not avoiding it. And by postponing it using
taxes or foriegn aid you are guaranteeing a very gruesome death, like
what happened to Russian economy. It is better to face the truth early
because effect will be mild. By postponing it we are simply pushing the
responsibility and consequences of the failures onto our next
generation, maybe.

Ashish K Hanwadikar

Ashish K Hanwadikar

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