The Other Bailout

America has been on a socialist bender, and the bills are getting large. Got a problem? Look to Washington to arrange a handout, or a safety net; if that scheme goes sour, expect a bailout. It has become politically incorrect to suggest that individual choice coupled with responsibility–including the possibility of going broke–makes for a healthier bottom line than an endless flow of subsidies and guarantees.

Hit with sticker-shock of $700 billion, give or take, American taxpayers are now taking a clear-eyed look at such policies and the risks and costs they entail. It's a healthy sign that Main Street is furious over government proposals to bail out Wall Street.

What's largely escaped notice, however, is the extent to which America in its foreign policy is increasingly in the business of subsidizing, guaranteeing and, in some instances, bailing out an array of thugocracies that make the bankers of Wall Street look like cookie-vending girl scouts. On the Third World front, this ranges from billions in so-called aid programs to some of the world's poorest countries, to a tacit understanding that in response to any disaster–an earthquake in Iran, a tsunami in Asia, a cyclone in Burma, famine-inducing bad weather in North Korea–the U.S. will dig into its deep pockets to offer relief.

That might sound laudable, some of the impulses behind it may well be noble, and in extreme emergencies, in the interest of sheer human decency, it may well be justified. But official American largesse has become so much the norm that by now it walks and quacks like a global entitlement program. And the axiom too often forgotten is that in today's world of high-tech, high-speed transportation, technology and markets, poverty is not as a rule an accident of nature. It is a result of repressive government policies that deprive people of the opportunity to help themselves.

It cannot be said too often: Official U.S. aid is by and large channeled through these same governments that cause the miseries to begin with. That can be hard to spot, because much of this American wealth transfer takes place not directly, but via opaque multilateral outfits–especially the United Nations “family” of institutions, including the World Bank and an alphabet soup of U.N. agencies. In almost every case, the U.S. is the biggest single contributor, pouring billions into both the basic capital and budgets of these entities, and often to specific relief drives, lending programs and so forth.

A classic example of how this works would be the U.N.'s package of Millennium Development Goals, which entailed the U.N. bureaucracy drawing up, in collaboration with just about every poor nation on the planet, a set of quantified development targets that the U.N. and the relevant government–Syria, Haiti, Equatorial Guinea and so forth–agreed were appropriate.

On the basis of these goals, the U.N. then called for rich countries to contribute resources. Again, that might sound laudable, but the result has been a development framework that bypasses the preferences of the impoverished individuals who are the erstwhile beneficiaries, and favors instead the trade-offs and priorities that best satisfy U.N. officials and client governments.

How does that work in practice? In Syria, for instance, the U.N. has a lively set of development programs, is currently appealing for $20 million in emergency relief contributions to help “up to 1 million drought victims,” and has already allocated some $1.97 million to this project from a standing U.N. emergency fund (to which the U.S. is a major donor).

Never mind that the Syrian government–though presumably unable to help its own drought victims–apparently had no problem finding the resources to secure North Korea's collaboration in building the illicit, secret nuclear reactor that was destroyed last year by an Israeli air strike. Resources being to a great extent fungible, the setup here is one in which U.S. aid funneled through the U.N. to the drought victims helps free up Syrian state resources for the next joint-venture weapons project with North Korea.

And yet, if we look at one of the fastest-developing nations in the world, China, we see that it's not foreign aid or bureaucratic “millennium goals” that in a generation have produced wealth undreamt of during the decades of hardcore communism. Progress has come with the opening of individual opportunity, and further progress will depend on more of the same.

For American taxpayers now deploring the murky nature of the current subprime mortgage mess and proposed remedies, it ought to be of some interest that U.S. institutions are paragons of clarity and accountability compared with the opaque dealings of the U.N. and related cross-border collective institutions. If there were outsized risks attached to de facto government guarantees of home loans on U.S. turf, then just how costly and dangerous is it to be subsidizing and enabling the U.N.'s social-engineering projects for the developing world?

Lest this sound all just a bit too peripheral, recall that Barack Obama, candidate for president, recently sponsored a bill that, as urged by the U.N., would automatically channel 0.7% of U.S. gross national product to foreign “anti-poverty” measures and relief, such as those mentioned above.

That would well and truly amount to a global entitlement program, costing upfront hundreds of billions over the next few years, and predictably fringed with a self-reinforcing bureaucracy, special interests and market-wrecking pitfalls that could in the end make subprime mortgages look small.

If there's an upside to the current crisis, it is that the U.S. debate has been suddenly revived on the true nature and costs of massive state-mandated wealth transfers. Now would be an excellent time to extend the discussion to such matters as the transfer of American resources and implied safety nets to the likes of the Iranian, Burmese, North Korea and Syrian regimes, as well as sundry African dictatorships specializing in policies that keep their own citizens chronically on the brink of calamity–and would be glad to impose what miseries they can on the U.S.

Claudia Rosett, a journalist in residence with the Foundation for Defense of Democracies writes a weekly column on foreign affairs for Forbes.com.