DEVELOPING COUNTRIES NEED TRADE ,NOT AID

There has been a continuing discussion about the impact of economic, and especially financial, aid on the development of underdeveloped countries. (I do not have in mind humanitarian help in catastrophic situations but aid as an economic phenomenon). India being a developing country is a perfect example of a nation that needs trade and not financial aid for it's development. There is usually a huge gap between the foreign aid rhetoric and foreign aid reality. It is in the interest of the foreign aid community (which is a specific rent-seeking group) to make the gap as wide as possible. Its form and structure is not very good either, because it is based on the interests of the donors, not on the needs of those who are supposed to receive and use it. The interests of the donors, concealed in their missionary moral progressivist rhetoric, are very “earthly”. As a result, much of foreign aid is wasted.

And, finally, we should know that the aid is never free. It is, in many cases, very costly in the long run and even the gifts, not to speak about soft loans, turn out not to be free or so soft after all. The donors have their interests, priorities and prejudices. The lending institutions have a bureaucratic incentive to lend and to be involved. They are not ready to watch reforms passively, risking that their irrelevance will be revealed.

The best example we have of a not so developing country that has been used by many powerful developed countries is Pakistan. Every here it takes millions in loan from USA not for it's development but for defense purposes ,despite of the fact that the entire world knows that major portion of the loan is used to fund terrorist outfits in LOC! Yet the USA is not only ready to grant loans but even revoke it in exchange for Pakistan’s aid in it’s ‘Fight Against Terrorism’. Not only this Pakistan also receives military and monetary aid from China that has it’s interests in the Arunachal region of India. A major reason for Chinese submarines guarding Pakistan border’s in the Arabian Sea.

What is essential is the free, not fair, trade, because fair trade means protectionism in disguise. To expect that politicians and bureaucrats are better and fairer than markets is a myth. Free trade is not only about elimination of tariffs, quotas and contingents. The export subsidies of developed countries are even more important, because the less developed countries do not have the financial resources to do the same.

Economic activities of the less developed countries are often being hindered by another obstacle – the imposition of the so called international standards (upon these countries). This tends to create a rather unpleasant tension between domestic imperatives, considerations and possibilities based on the understanding of – and respect to – domestic conditions, aspirations and constraints, and external requirements imposed on such countries from abroad.

It has become “politically correct” (and claimed as morally superior) to advocate the implementation of various external “standards” and to consider them obligatory, regardless the level of economic development. Labor, social, safety, environmental, hygienic standards which are presented to developing countries as exogenous “constants” of globalized human society whereas they are “variables” dependent not only on traditions, customs and habits but principally on GDP per capita levels. The imposition of such standards– is an effective way to eliminate the existing comparative advantages of economically less developed countries and to block their successful participation in the world trade. To be acceptable (and fair), however, the standards should be introduced by domestic politicians and legislators, not by international organizations.

As is evident from America ’s change of statements for India becoming a member of the Security Council of the UN. Before visiting India President Obama asked India to become a good neighbour to Pakistan for securing the seat ,despite India never harming Pakistan’s interests, and now on his visit he asks India to change it’s policy on Iran and Myanmar in terms with the USA. It becomes naturally evident that all America wants is India to act like a dummy in it’s hands. Bureaucracy in it’s most superior form!

Very prominent role is currently played by the environmentalists with their new and very dangerous weapon called global warming and climate change. Different levels of development, income and wealth in different places of the world make world-wide, overall, universal solutions costly, unfair and to a great extent discriminatory. The already developed countries do not have the right to impose any additional burden on the less developed countries. Developing countries must be allowed to go along the same path of development as the countries that did so a century ago.

The only meaningful help for developing countries would be the radical opening of markets on the side of developed countries and the genuine end of protectionism. The developed countries must be aware of the fact that the absence of free trade creates huge discrepancies in income and wealth and as a consequence growing migration, which destabilizes their own societies. Either the goods and services move freely and the people stay where they are, or the movement of goods and services is blocked and the people move around, searching for better economic opportunities abroad.

Thus, developing countries need political democratization and creation of institutions of market economy. They need open markets in the rest of the world .They need such social, labor, environmental, safety, hygienic and other standards that they define on their own and that reflect their economic level, not standards imposed upon them from the outside. They need trade, not aid.