Economic Warfare

“Foreign aid is definitely a scam.”

This is what I thought to myself when I was beginning to take interest in politics in high school and was reading about foreign aid.

The debate about whether wealthy nations are obligated to financially assist developing countries or if these countries should allocate these funds to social services that increase the welfare of its own citizens is one that makes sense to have.

However, even with the relatively little knowledge my 16-year-old self had about geopolitics at the time, my gut knew that it was too good to be true that these countries were simply donating billions of dollars to “poor” countries out of the goodness of their heart; there simply had to be a catch.

And boy, is there a catch.

Underneath the surface of the perception of generous donations lie the reality of money laundering, fraudulent financial reports, rigged elections, payoffs, extortion, and murder.

Economic Hit Men

An essential component of the foreign aid scam are highly paid professionals who work either for large multinationals or organizations like the World Bank, the International Monetary Fund, and the United States Agency for International Development. Their sole mission is to convince the leaders of developing countries to accept aid, either directly from the U.S. or from the aforementioned institutions.

These highly paid professionals are known as economic hit men.

An obvious question arises: why do they need to be convinced if they’re simply receiving free money?

You guessed it: because it’s not free.

Most, if not all, of the aid generally take the form of loans that must be fully repaid plus interest.

At a high level, this is typically how the scheme works.

First, the HIC (high income country) identifies an LIC (low income country) that possesses oil or other valuable resources but lacks the technological means to adequately develop them.

Then, the HIC will convince the LIC to accept loans, usually from the World Bank or IMF, in massive amounts, typically with the resource itself acting as collateral.

The capital received must then be spent to hire companies from the HIC to build the infrastructure that properly utilizes the resource and drives “economic growth,” typically resulting in a significant boost in the energy sector.

This where the hit men come in; their job is to build complex economic, specifically econometric, models that justify the burdensome loans because it will lead to unprecedented growth over the next few decades.

In an ideal world, they compose the model in an ethical way and after running all of their statistical analyses, the results genuinely display that this “partnership” will be reward the country handsomely.

However, most times, it was the hit men’s job to essentially manipulate the data, create fraudulent reports, and use their title of “econometric expert” to convince whoever needed convincing.

The end result is that the companies winning the contracts to build the infrastructure projects make a boatload of money, and a handful of politicians and business owners in the LIC have their pockets lined.

Most importantly, the LIC usually ends up defaulting on the debt after diverting public funds that should ideally be spent on essentials to pay back the loans.

This situation is best case scenario for the HIC because now, simply put, they own the LIC.

The first step is usually the demand that the LIC either hands over the collateralized resource, typically oil, or sells it to them at rock bottom prices.

If this isn’t enough, the HIC could assert its dominance either through controlling the LIC’s UN votes, installing military bases, or requesting access to other key resources.

This type of scheme was most popular from the 1960s to the 1980s, as the realization of the importance of global economic dominance being just as pertinent as militaristic dominance crept into the psyches of America’s elite.

While it seems that America has always been unnecessarily meddling in other countries’ affairs, it was, in fact, not always this way.

Your Business is My Business

The genesis was the Iranian rebellion against the British government and its main oil conglomerate BP by nationalizing its oil assets in 1951. Iran’s leader, Mohammad Mossadegh, had become immensely popular in Iran and had just won Time Magazine Person of the Year.

For obvious reasons, this was problematic for the Brits so they asked the US for help.

The US and UK tandem didn’t want to directly intervene militarily at the time, given the potential for retaliation from the Soviets.

Luckily for the US, the Truman administration just four years prior had created the Central Intelligence Agency, and this was the perfect job for them.

Washington dispatched Kermit Roosevelt, grandson of Theodore, to coordinate street riots and violent demonstrations through payoffs, bribery, and threats. Ater a short time, Mossadegh’s favorability among the public began to decrease drastically, and he was soon replaced with a pro-West leader in Mohammad Reza Pahlavi.

The fate of Mossadegh was more fortuitous than most leaders that proceeded him and found themselves in the same situation.

Jaime Roldós became the first democratically elected president of Ecuador in 1979 and, similar to Mossadegh, was beloved by the people.

Roldós didn’t appreciate the relationship that the US had over the years with Latin America and proclaimed to his country that the days of being bullied were over. His policies included nationalizing oil and other valuable resources and cutting relations with American multinationals that he felt were exploiting Ecuador.

Roughly two years later, in May of 1981, he died in a plane crash and was replaced by Osvaldo Hurtado, who immediately granted Texaco numerous contracts to continue drilling in the Gulf of Guayaquil and Amazon basin.

Omar Torrijos, president of Panama at the time, had similar sentiments to Roldós and was looking to implement nearly identical policies. After Roldós’s death, he was allegedly having nightmares about his assassination in which he saw himself “dropping from the sky in a gigantic fireball.”

Just two months later, he fulfilled his prophecy and also died in a plane crash.

Can one say it was the CIA with 100% certainty? Probably not.

I would say 99% is more appropriate.

It is well known that the CIA takes people out in one of three ways: plane crashes, heart attacks (using the heart attack gun), and “suicides” that are definitely not suicides.

Given these facts, it is usually in a LIC leader’s best interests to nod their head yes to whatever the US tells them.

This type of relationship between the US and poorer countries from Latin America, Africa, and the Middle East has been labeled as abusive and exploitative, and in all honesty, rightly so.

However, the assertion that schemes like this are the reason that the US is wealthy and these other countries are poor isn’t very accurate.

The main, and obvious, reason for this is simply because the US was already a developed country and Ecuador, for example, was not, so clearly there were other factors at play that preceded the “exploitation.”

The real explanation is similar to the idea that old money families, companies, and industries are in favor of large amounts of regulation. While regulations can be a bit of a nuisance to them, its main utility is to increase the barrier to entry so that competition remains at a minimum and potential rivals are kept out.

Because regulation and competition are inversely related, it is no coincidence that the industries with the most regulations are oligopolies and consist of a handful of large players.

Weaving back to foreign aid, this is the US’s version of keeping potential competitors out before they can ever ascend to that position.

It also helps that there is a clear incentive to do so, due to the potential profit its biggest companies will rake in.

When inspecting the situation closer, it becomes evident that this strategy should be taught in Money Laundering 101.

The US government bankrolls the World Bank and IMF and obviously uses taxpayer dollars to do so. What this means is that the tax dollars that people think are building shelter or hospitals for poor people in the middle of nowhere is really being slid under the table to corporations.

It’s funny how anything related to government or politics always seems to revert back to Machiavelli.

In this case, the drastic difference in perception and reality of foreign aid is astounding, and governments are able to pull it off due to their collaboration with the press. Even up until today, with the free flow and wide variety of information today, most people have no idea about the dark side of foreign aid.

The real question is this: is foreign aid still being executed exactly as described?

The answer is most likely not. The shady dealings of the government and its proxies are not usually uncovered until several decades after, in which they have already evolved and moved on to something else.

Books like Confessions of an Economic Hit Man have done a good job of uncovering the corruption and blowing the cover on this operation, but it’s clear that they’ve adapted and changed with the times, because a wise man once said “whoever desires constant success must change his conduct with the times.”

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Thanks for reading and until next time.

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