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June 1996
Volume 14, Number 6

Ron Brown's Corporate Welfare Scam
Thomas J. DiLorenzo

The death of Commerce Secretary Ron Brown in a Balkans plane crash exposed the real reason President Clinton sent American troops to Bosnia: to make the world safe for corporate welfare.

An aspect of the so-called Dayton Peace Accords, which led to the deployment of U.S. troops, was an initial installment of $600 million in U.S. foreign aid, much of it for construction contracts.

As was the case in Vietnam, Kuwait, Panama, Somalia, Haiti, and now Bosnia, America's corporate elite are shamelessly bilking the taxpayers and putting American lives at risk, all under the guise of patriotism and "nation building."

What Mr. Brown and his party of traveling CEOs were doing in the Balkans when their plane crashed was assuring that select American businesses, i.e. major contributors to the Democratic Party, received the bulk of the foreign aid funds through construction contracts.

"Many companies represented on Mr. Brown's missions were Democratic donors," the Wall Street Journal reports. "The opportunities for contracts are quite considerable," a spokesman for Riggs Bank told the Washington Post. Such opportunities even included "the import of 5,000 pregnant heifers."

Promoting war and military interventionism is very profitable for America's political and business elite, which is probably why the Bosnian intervention had bipartisan support in Congress. According to a March 23, 1996, AP story, the company headed by former Defense Secretary Dick Cheney--Brown and Root--is expected to make $500 million for construction work to serve the "expanding needs of U.S. troops in Bosnia."

The General Accounting Office recently blamed Cheney's firm for being "the primary source of $327 million in budget overruns for the Bosnia operation." Brown and Root has made $260 million for barracks construction in Somalia, Rwanda, Haiti, and Italy--on top of the $500 million it will rake in from Bosnia.

In short, war profiteering is why high-ranking executives from such corporations as Bechtel, the Barrington Group, Guardian Industries, Riggs, AT&T, Ensearch International, Air and Water Technologies, Harza Engineering, Bridge Housing Corp., and Foster Wheeler Energy International accompanied Ron Brown to Bosnia.

There are big bucks to be made in the "war reconstruction" and "nation building" industry. Such riches, however, create a perverse incentive for these firms to lobby for even more military adventurism. The stupid notion of "nation building" in places like Haiti, Somalia, and Bosnia is simply a smokescreen for the dispensing of corporate welfare to politically connected businesses. The same can be said of the misnamed "Mexican bailout," which was really a bailout of Goldman Sachs and other American holders of Mexico's bad debt.

Worse yet, social engineers at the World Bank, the Clinton administration, and in Congress see the destruction of former Yugoslavia as a brand-new opportunity for international social engineering schemes and pork-barrel politics. The World Bank promises an initial $5 billion in "reconstruction efforts." Since U.S. taxpayers supply a large part of the World Bank's budget, this means they are on the hook for additional untold millions.

But foreign aid has been an unmitigated disaster for a very fundamental reason, as explained by Peter Bauer in The Development Frontier. Foreign aid does not go directly to a country's population, but to its government. That "increases its resources, patronage, and power in relation to the rest of society." Life becomes more politicized and government increases its control over its subjects. People "divert attention, energy, and resources from productive economic activities to concern with the outcome of political and administrative processes and decisions."

Foreign aid tends to destroy free enterprise in recipient countries. It has a history of leading to the persecution or expulsion of: productive entrepreneurs who oppose the bureaucratization of their economy; restrictions on the inflow of foreign capital and businesses; forced collectivization, sometimes as a prerequisite for aid; price controls; protectionism; state-owned enterprises; and massive government regulation in general. Even though they are economically disastrous, writes Bauer, such policies are pursued by foreign aid recipients "because they accord with the purposes and interests of the ruling group, including promotion of government power."

Forty years of foreign aid to the third world--including $300 billion from the World Bank alone since the 1950s--has inflicted incalculable economic harm. Latin America's foreign debt exceeds $400 billion; per capita incomes in sub-Saharan Africa are lower today than they were twenty-five years ago; and most foreign aid recipients have experienced no economic growth at all for years.

Even the New York Times, normally a supporter of the international welfare state, concluded recently that "three decades of foreign development assistance in the third world has failed to lift the poorest of the poor in Africa and Asia much beyond where they have always been." It has only "fattened political elites" as the donor countries have used the money to subsidize well-connected corporations and private groups like the Red Cross.

Former Yugoslavia, and the rest of Eastern Europe, will only be economically revived if they jettison their socialist politicians and policies and rapidly cultivate a regime of private property and free enterprise. The worst of all possible economic worlds is the one that is beginning to take shape there, however: an economy strictly controlled by domestic government regulators along with bureaucrats from the World Bank, IMF, and the European Bank for Reconstruction and Development.

None of this seems to matter to the American supporters of foreign aid to Bosnia. What matters to them is that it is yet another excuse to gain wealth and political power for themselves through a corrupt system of international corporate welfare.


Thomas J. DiLorenzo teaches Economics at Loyola College and is an adjunct scholar with the Mises Institute


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