A Review of Part VII of Ron Paul"s "Pillars of Prosperity"
Dr.
Ron Paul has published a new book this year, entitled "Pillars of Prosperity: Free Markets, Honest Money, Private Property," which contains an extensive compilation of his thoughts on economics and presents an excellent opportunity for a special book review.
This the first installment of a longer review of the entire book, the full review of which will examine each individual part of the book and present a summary of the positions and arguments presented, which have been woefully underrepresented to most Americans.
"Part 7 - International Affairs" is discussed here.
This section is really a continuation of the previous discussions on free trade and managed trade by the international bureaucrats.
Instead of a more general overview of what free trade consists of, Ron Paul spends more time looking at specific institutions and policies that undermine trade, such as the International Monetary Fund, World Bank, World Trade Organization the American practice of giving direct foreign aid to other countries, deservedly or not.
He has consistently argued that US foreign policy is often a choice between countries obeying the US government and receiving generous aid packages, or becoming the target of economic sanctions and war.
The practice of giving out American taxpayer money to foreign nations has been a complete failure, according to Paul.
Although it is meant to prop up socialist governments or to be used in the support of their economies, the aid only promotes the status quo, while taking money from poor Americans to give to the rich elite in poor, Third World Nations.
This helps neither Americans nor people living in foreign countries.
Not surprisingly, though, the entire concept of foreign aid is sold to Americans as helping them, as well as helping poor people in poor countries.
For example, Plan Colombia and its successors have been sold throughout the years to the American people as fighting the "War on Drugs" and the "War on Terror.
" In fact, though, the real purpose is to provide a subsidy to the Colombian government and US oil companies to protect their pipelines from damage in the civil war that has been going on in the country for decades.
Foreign aid also helps these poor countries cover up the weaknesses in their economies and weakens the American economy.
Paul writes that "foreign government welfare, and there is no better name for it, takes money out of the productive sectors of the economy - the paychecks of middle-class Americans - to reward economic mismanagement and political corruption.
" The foreign governments are able to put the aid money in sectors that would not be able to compete in a free market, and this fosters corporatism.
Businesses can ally themselves with the government and receive the international welfare from the US politicians.
This obviously leads to the political corruption that is endemic in Third World nations that receive foreign aid, with families and cronies of the leaders setting up shell businesses and absconding with the aid money.
Even though most countries do not benefit from US foreign aid, refusing to do as the government instructs results in even more serious consequences, usually in the form of economic sanctions, such as are on Cuba and Iran and were on Iraq during the 1990's.
As he states, "Congress passes legislation calling for regime change, sanctions are imposed, and eventually we are told that only an attack will solve the problem.
" According to Paul, this act is just one half-step short of war and will usually lead to war, with Iraq being the most obvious example of sanctions that failed to depose the dictator, caused tremendous damage to the people of the nation, and led to an undeclared, no-win war in the Middle East.
Paul argues against both foreign aid and sanctions for their propensity to lead to war, which has far more negative consequences to the American people and economy.
To finance the wars, the government must inflate the money supply, taxes increase during wartime, and deficits skyrocket.
But even in the waging of the war, all of these extra funds get sent overseas, which creates the desire for certain segments of the US economy for protectionist policies and tariffs.
The government also grows during war, with a corresponding loss of civil liberties for the people.
But sanctions, even when they do not lead directly to war, have extremely negative effects on the economies of both countries who are parties to the sanctions.
In addition to costing jobs and hurting the people of the nations, sanctions also cause the people to back dictatorial leaders who would not have popular support if sanctions were not imposed.
As well, they hurt American businesses that have markets closed to them by government fiat, not by the working of the free market.
Besides the US government's involvement in this whole charade, there are a host of extra-government agencies who also participate.
The World Trade Organization, despite its stated benefits, does not promote free trade and it attacks American sovereignty.
According to Paul, membership in the organization is illegal, as the government is bound by WTO decisions and obligated to change laws that the WTO panels deem necessary.
Likewise, the Export-Import Bank subsidizes the main competitors of American business, with China receiving more aid than any other country.
The World Bank, as well, promotes state-run corporate capitalism by lending money to Third World dictators who steal the money, run off, and leave the people to pay the bills, which they are frequently unable to do.
However, it is the International Monetary Fund that draws most of Paul's ire in this part of the book.
Just a few of the ills of the system he mentions include the IMF's promotion of worldwide inflation, foreign aid to insolvent nations, and the fact that membership in the Fund specifically forbids countries from linking their currency to gold.
Although its stated purpose was to provide reserves to solve international payment problems, the IMF instead creates liquidity throughout the world, facilitating a transfer of wealth in the form of subsidies to Third World socialists and First World banks.
As Paul states, "By creating added liquidity, the IMF can indeed redistribute wealth, but it cannot create new wealth.
" Thus, billions of dollars from the IMF goes to large international banks and when the loans to the poor nations go bad, the American taxpayer is left with the bill.
According to Paul, "the IMF forces American taxpayers to subsidize large, multinational corporations and underwrite economic destruction around the globe.
" This is despite the fact that the institution has over 100 million ounces of gold on reserve and no reason to burden taxpayers; when their programs go under water, the bureaucrats appeal to the US government for more money to bail out the banks that made the bad loans.
But this possibility of receiving a bailout courtesy of the American people goes a long way to creating the moral hazards that make the collapses a certainty.
Banks know there will be no consequences for their poor lending decisions, so they keep investing in bad sectors of poor economies, and the recipient countries of IMF funds end up with huge amounts of unserviceable debt.
These very conditions were seen in the failure in Argentina and the 1997 Asia crisis, when numerous countries' currencies' values dropped dramatically in the space of weeks or months.
The cost and problems associated with these international policies, according to Paul, far outweigh any supposed benefits received by the American government or taxpayers.
In fact, many of the policies only create more problems that the bureaucrats will then feel the need to step in and "solve" with more of the same solutions that caused the original problem.
Ron Paul has published a new book this year, entitled "Pillars of Prosperity: Free Markets, Honest Money, Private Property," which contains an extensive compilation of his thoughts on economics and presents an excellent opportunity for a special book review.
This the first installment of a longer review of the entire book, the full review of which will examine each individual part of the book and present a summary of the positions and arguments presented, which have been woefully underrepresented to most Americans.
"Part 7 - International Affairs" is discussed here.
This section is really a continuation of the previous discussions on free trade and managed trade by the international bureaucrats.
Instead of a more general overview of what free trade consists of, Ron Paul spends more time looking at specific institutions and policies that undermine trade, such as the International Monetary Fund, World Bank, World Trade Organization the American practice of giving direct foreign aid to other countries, deservedly or not.
He has consistently argued that US foreign policy is often a choice between countries obeying the US government and receiving generous aid packages, or becoming the target of economic sanctions and war.
The practice of giving out American taxpayer money to foreign nations has been a complete failure, according to Paul.
Although it is meant to prop up socialist governments or to be used in the support of their economies, the aid only promotes the status quo, while taking money from poor Americans to give to the rich elite in poor, Third World Nations.
This helps neither Americans nor people living in foreign countries.
Not surprisingly, though, the entire concept of foreign aid is sold to Americans as helping them, as well as helping poor people in poor countries.
For example, Plan Colombia and its successors have been sold throughout the years to the American people as fighting the "War on Drugs" and the "War on Terror.
" In fact, though, the real purpose is to provide a subsidy to the Colombian government and US oil companies to protect their pipelines from damage in the civil war that has been going on in the country for decades.
Foreign aid also helps these poor countries cover up the weaknesses in their economies and weakens the American economy.
Paul writes that "foreign government welfare, and there is no better name for it, takes money out of the productive sectors of the economy - the paychecks of middle-class Americans - to reward economic mismanagement and political corruption.
" The foreign governments are able to put the aid money in sectors that would not be able to compete in a free market, and this fosters corporatism.
Businesses can ally themselves with the government and receive the international welfare from the US politicians.
This obviously leads to the political corruption that is endemic in Third World nations that receive foreign aid, with families and cronies of the leaders setting up shell businesses and absconding with the aid money.
Even though most countries do not benefit from US foreign aid, refusing to do as the government instructs results in even more serious consequences, usually in the form of economic sanctions, such as are on Cuba and Iran and were on Iraq during the 1990's.
As he states, "Congress passes legislation calling for regime change, sanctions are imposed, and eventually we are told that only an attack will solve the problem.
" According to Paul, this act is just one half-step short of war and will usually lead to war, with Iraq being the most obvious example of sanctions that failed to depose the dictator, caused tremendous damage to the people of the nation, and led to an undeclared, no-win war in the Middle East.
Paul argues against both foreign aid and sanctions for their propensity to lead to war, which has far more negative consequences to the American people and economy.
To finance the wars, the government must inflate the money supply, taxes increase during wartime, and deficits skyrocket.
But even in the waging of the war, all of these extra funds get sent overseas, which creates the desire for certain segments of the US economy for protectionist policies and tariffs.
The government also grows during war, with a corresponding loss of civil liberties for the people.
But sanctions, even when they do not lead directly to war, have extremely negative effects on the economies of both countries who are parties to the sanctions.
In addition to costing jobs and hurting the people of the nations, sanctions also cause the people to back dictatorial leaders who would not have popular support if sanctions were not imposed.
As well, they hurt American businesses that have markets closed to them by government fiat, not by the working of the free market.
Besides the US government's involvement in this whole charade, there are a host of extra-government agencies who also participate.
The World Trade Organization, despite its stated benefits, does not promote free trade and it attacks American sovereignty.
According to Paul, membership in the organization is illegal, as the government is bound by WTO decisions and obligated to change laws that the WTO panels deem necessary.
Likewise, the Export-Import Bank subsidizes the main competitors of American business, with China receiving more aid than any other country.
The World Bank, as well, promotes state-run corporate capitalism by lending money to Third World dictators who steal the money, run off, and leave the people to pay the bills, which they are frequently unable to do.
However, it is the International Monetary Fund that draws most of Paul's ire in this part of the book.
Just a few of the ills of the system he mentions include the IMF's promotion of worldwide inflation, foreign aid to insolvent nations, and the fact that membership in the Fund specifically forbids countries from linking their currency to gold.
Although its stated purpose was to provide reserves to solve international payment problems, the IMF instead creates liquidity throughout the world, facilitating a transfer of wealth in the form of subsidies to Third World socialists and First World banks.
As Paul states, "By creating added liquidity, the IMF can indeed redistribute wealth, but it cannot create new wealth.
" Thus, billions of dollars from the IMF goes to large international banks and when the loans to the poor nations go bad, the American taxpayer is left with the bill.
According to Paul, "the IMF forces American taxpayers to subsidize large, multinational corporations and underwrite economic destruction around the globe.
" This is despite the fact that the institution has over 100 million ounces of gold on reserve and no reason to burden taxpayers; when their programs go under water, the bureaucrats appeal to the US government for more money to bail out the banks that made the bad loans.
But this possibility of receiving a bailout courtesy of the American people goes a long way to creating the moral hazards that make the collapses a certainty.
Banks know there will be no consequences for their poor lending decisions, so they keep investing in bad sectors of poor economies, and the recipient countries of IMF funds end up with huge amounts of unserviceable debt.
These very conditions were seen in the failure in Argentina and the 1997 Asia crisis, when numerous countries' currencies' values dropped dramatically in the space of weeks or months.
The cost and problems associated with these international policies, according to Paul, far outweigh any supposed benefits received by the American government or taxpayers.
In fact, many of the policies only create more problems that the bureaucrats will then feel the need to step in and "solve" with more of the same solutions that caused the original problem.
