Genuine plunder of one nation or people by another has been all too common throughout
human history.
During the era before the First World War, when Germany had colonies in Africa, only 4
of its 22 enterprises with cocoa plantations there paid dividends, as did only 8 of 58
rubber plantations and only 3 out of 49 diamond mining companies.
At the height of the British Empire in the early twentieth century, the British invested
more in the United States than in all of Asia and Africa put together. Quite simply, there
was more wealth to be made from rich countries than from poor countries. For similar
reasons, throughout most of the twentieth century the United States invested more in
Canada than in Asia and Africa put together. Only the rise of prosperous Asian industrial
nations in the latter part of the twentieth century attracted more American investors in
that part of the world.
Perhaps the strongest evidence against the economic significance of colonies in the
modern world is that Germany and Japan lost all their colonies and conquered lands as a
result of their defeat in the Second World War—and both countries reached
unprecedented levels of prosperity thereafter.
Wealthy individuals in poor countries often invest in richer countries, where their money
is safer from political upheavals and confiscations.
What we call “foreign aid” are transfers of wealth from foreign governmental
organizations to the governments of poorer countries. The term “aid” assumes a priori
that such transfers will in fact aid the poorer countries’ economies to develop.
Because it is a transfer of wealth to governments, as distinguished from investments in
the private sector, foreign aid has encouraged many countries to set up government run
enterprises that have failed.
The vast sums of money dispensed by foreign aid agencies such as the International
Monetary Fund and the world Bank give the officials of these agencies enormous
influence on the governments of poorer countries -- regardless of the success or failure of
the programs they suggest or impose as preconditions for receiving the money.
Sometimes a richer country takes over a whole poorer society and heavily subsidizes it,
as the United States did in Micronesia. So much American aid poured in that many
Micronesians abandoned economic activities on which they had supported themselves
before, such as fishing and farming. If and when the Americans decide to end such aid, it
is not at all certain that the skills and experience that Micronesians once had will remain
sufficiently widespread to allow them to become self-sufficient again.
One of the leading development economists of his time, Professor Peter Bauer of the
London School of Economics, has argued that, on the whole, “official aid is more likely
to retard development than to promote it.”
Whatever the merits or demerits of various political proposal, what must be kept in mind when evaluating them is that the good fortunes and misfortunes of different sectors of the economy may be closely related as cause and effect - and that preventing bad effects may prevent good effects. It was not accidental that Smith Corona was losing millions of dollars on its typewriters while Dell was making millions on its computers. It was not accidental that Safeway surged to the top of the grocery business while A&P fell from its peak to virtual oblivion. The efficient allocation of scarce resources, which have alternative uses, means that some must lose their ability to use those resources in order that others can gain the ability to use them Typewriters were no longer what the public wanted after they had the option to achieve the same end result and more with computers. Scarcity implies that resources must be taken from some places, in order to go to other places.
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