Grappy's Soap Box

Wednesday, 14 October 2026

Is Foreign Assistance Perpetuating Dependence?

The world lends billions to developing countries in the hope of creating prosperity. Yet many remain trapped in debt, borrowing more simply to repay what they already owe. Is the international development system helping countries become self-reliant—or perpetuating their dependence?

The Debt That Never Goes Away

The World Bank has a problem.

Its president, Ajay Banga, recently revealed that the Bank is discussing possible emergency financial assistance with between 30 and 40 countries.

The immediate causes are familiar: rising energy and fertiliser prices, economic disruption and increasingly expensive borrowing.

But behind these emergencies lies a much older problem.

According to the World Bank's latest International Debt Report, developing countries paid $741 billion more in principal and interest on external debt between 2022 and 2024 than they received in new financing.

Think about that.

Countries desperately needing capital to develop their economies are collectively sending hundreds of billions of dollars more to creditors than they receive in new loans.

The system designed to finance development has, for many borrowers, become an enormous drain on their resources.

And the proposed solution?

More financial assistance.

When Borrowing Becomes a Way of Life

There is nothing inherently wrong with borrowing.

A developing country might borrow to build a port, improve its electricity network or establish a reliable water supply. If the investment generates economic growth, jobs and additional income, the country becomes better able to repay its debt.

That is productive borrowing.

But suppose the money finances government consumption, an uneconomic prestige project or infrastructure that never delivers the expected return.

The debt remains. The additional income does not materialise. Eventually another loan is required, or the original debt must be restructured.

The country is no closer to self-reliance.

Of course, education, public health and sanitation may deliver enormous long-term benefits without generating immediate financial returns.

But the principle remains: borrowing should improve a country's future capacity to prosper, not merely finance its present expenditure.

Where Does the Money Go?

When an international institution lends hundreds of millions of dollars to a developing country, how confidently can it establish where that money ultimately goes?

The World Bank's 2025 report on debt transparency provides a disturbing answer.

Although more than 75% of low-income countries publish some debt information, only 25% disclose loan-level information about newly contracted debt.

The Bank also warns about hidden liabilities, off-budget borrowing and increasingly complex financing arrangements.

This does not mean that most development loans are stolen or wasted. But it does mean that citizens, lenders and international institutions may lack the information needed to judge how effectively governments are managing their obligations.

Governments borrow. Projects are announced. International institutions report the money committed or disbursed.

But who returns five or ten years later to establish whether the investment actually delivered the promised improvement in living standards?

The Perverse Incentive

Here lies a deeper problem, one regular readers will recognise.

The incentives of those making decisions are not necessarily aligned with the interests of the people they are supposed to help.

A government may benefit politically from spending borrowed money today, leaving future taxpayers to repay it.

A lender may be rewarded for expanding its loan portfolio, even when the long-term economic benefits are uncertain.

A development agency may measure success partly by the money it distributes and the projects it supports, rather than by how quickly recipients become independent of assistance.

And when a country gets into trouble, creditors may prefer restructuring the debt to acknowledging that the original lending decision was unsound.

None of this requires corruption or bad intentions.

It simply requires people responding rationally to the incentives confronting them.

Unfortunately, those ultimately paying the price are often the people least responsible for the decisions.

The Missing Ingredient: Economic Freedom

What makes a poor country prosperous?

Foreign assistance can help. But sustained prosperity requires something more fundamental.

Businesses must be able to invest, employ people, trade and retain enough of their earnings to make further investment worthwhile.

Governments need functioning courts, enforceable contracts, reliable infrastructure and predictable rules. Entrepreneurs need opportunities rather than political connections.

Without these foundations, even substantial foreign investment may deliver disappointing results.

South Korea, Singapore and Vietnam followed very different political and economic paths, but each demonstrates that long-term growth ultimately depends on productive capacity, not permanent foreign assistance.

Money can finance development. It cannot substitute for the conditions that make development possible.

Should We Stop Helping?

Certainly not.

Humanitarian assistance is essential when people face famine, disease or disaster. Development grants can finance vital services, while carefully designed loans can help build productive infrastructure.

But these activities should be judged differently.

Humanitarian assistance should be measured by the lives it saves.

Infrastructure loans should be assessed by the economic and social benefits they deliver.

Development programmes should ultimately be judged by whether they reduce the need for further assistance.

Debt relief may be necessary when repayments become unsustainable. But forgiving debts without addressing the conditions that produced them risks restarting the same cycle.

And creditors must accept responsibility for imprudent lending. Financial discipline cannot be demanded only of borrowers.

What Would Success Look Like?

Imagine an international development institution that measured success not primarily by how much money it distributed, but by how many countries no longer needed its assistance.

It would insist upon transparent borrowing, independently assessed projects and measurable long-term results.

It would help countries attract productive private investment, improve institutions and participate in international trade.

And it would be prepared to acknowledge when its programmes had failed.

The objective would not be to create better-managed debtors.

It would be to create prosperous, self-reliant countries.

Helping People or Financing Dependence?

The World Bank and other international institutions have helped finance genuine improvements in health, education and infrastructure. Those achievements should not be dismissed.

Nor can every debt crisis be blamed on irresponsible spending. Wars, pandemics, natural disasters and global interest-rate shocks can overwhelm even well-managed economies.

But after decades of development lending, why do so many countries remain dependent upon further borrowing and assistance?

Perhaps we have concentrated too heavily on how much money the world provides, and too little on whether that money produces lasting independence.

The ultimate measure of successful foreign assistance should not be how much we give, but how little assistance the recipient eventually needs.

Monday, 12 October 2026

COVID-19 and the Perverse Incentives of a Crisis

When those making the decisions don't bear the consequences, whose interests are really being served?

Some time ago, I wrote about perverse incentives — situations in which individuals or organisations, acting quite rationally in their own interests, produce outcomes that are contrary to the interests of society as a whole.

It is one of the most important, and least appreciated, explanations for why institutions so often fail to deliver what they were created to achieve.

A recent article in TrialSite News, Was the COVID-19 Pandemic a Trojan Horse?, by Dr Ronald N. Kostoff, provides a fascinating case study.

The article asks a provocative question: did the extraordinary measures introduced during the pandemic serve purposes beyond protecting public health?

My interest is in a somewhat different question.

What happens when the people making decisions benefit from those decisions, while the costs are borne by someone else?

The Problem with Good Intentions

Consider a public health official confronting a new and potentially dangerous virus.

If the official recommends severe restrictions and those restrictions later prove excessive, the consequences are largely borne by businesses, workers, schoolchildren and families.

But if the official recommends restraint and the disease spreads disastrously, the professional and political consequences could be devastating.

Which course is the safer one for the official?

The answer is obvious. And therein lies the problem.

The decision that minimises personal or institutional risk is not necessarily the decision that produces the best outcome for society.

This does not require dishonesty, corruption or even bad intentions. It requires only ordinary human behaviour responding to a particular set of incentives.

During COVID-19, this asymmetry was particularly pronounced. The consequences of doing too little were immediate and visible. Many of the consequences of doing too much — educational losses, business failures, delayed medical treatment, psychological distress and social isolation — emerged more slowly.

The incentives favoured caution, even when caution imposed enormous costs on others.

Follow the Benefits

Kostoff's article examines the extraordinary redistribution of economic activity, institutional power and financial resources during the pandemic.

Consider some of the outcomes.

Large businesses versus small businesses. While many small shops and restaurants were forced to close, large retailers and online businesses were often able to continue operating. Some emerged with stronger market positions, while smaller competitors disappeared.

Pharmaceutical companies. Vaccine manufacturers benefited from substantial government funding, enormous purchasing commitments, accelerated regulatory processes and significant liability protections. Some of these arrangements may have been justified by the emergency, but they also created powerful commercial incentives.

Technology companies. Lockdowns accelerated the shift to online shopping, remote working, digital education and electronic communication. Companies already dominating these markets benefited enormously.

Government agencies. Emergency powers allowed executives and administrators to make decisions that would ordinarily have required extensive consultation, parliamentary scrutiny or judicial review. Once acquired, such powers are not always surrendered enthusiastically.

Public spending. Trillions of dollars were distributed through emergency programmes, often with reduced scrutiny. The United States Government Accountability Office subsequently documented extensive fraud and weaknesses in oversight.

None of these outcomes proves that the beneficiaries engineered the policies that benefited them.

But that is not the point.

Once a policy creates winners and losers, the winners acquire a powerful incentive to preserve it — even when its original justification has weakened.

The Trojan Horse — or Something More Ordinary?

Kostoff goes further than this.

In his concluding remarks, he advances the hypothesis that the pandemic was used deliberately to bring about political change in the United States, with economic disruption and changes to voting procedures serving that objective.

That is a serious allegation, and one that requires considerably stronger evidence than the identification of those who benefited.

Indeed, an important part of the analysis presented in the article makes precisely this distinction.

It separates four questions:

What actions were taken?
What consequences followed?
Who benefited?
Is there evidence that those benefits motivated the original decisions?

The first three questions can often be answered with reasonable confidence. The fourth is considerably more difficult.

And here is where I think the concept of perverse incentives offers a more compelling explanation.

We do not need to believe that someone planned the entire sequence of events.

A genuine emergency can create extraordinary opportunities. Individuals, businesses, bureaucracies and political institutions then respond to those opportunities in ways that advance their own interests.

The resulting pattern may look remarkably coordinated, even when no central coordination exists.

It is the cumulative consequence of many people pursuing their own objectives.

The Missing Feedback Loop

In a competitive marketplace, poor decisions generally carry consequences for those making them.

A business that repeatedly misjudges its customers risks losing those customers. An investor who makes poor investments loses money.

But government and large institutions frequently operate under a different set of rules.

The people making decisions are often insulated from their consequences.

A bureaucrat who imposes an unnecessary restriction does not personally compensate the business owner who loses everything.

A policymaker whose decisions damage children's education does not necessarily bear the long-term costs.

An institution that expands its authority during an emergency may have every reason to defend that expansion long after the emergency has passed.

This is not an argument against government, public health or collective action.

It is an argument for recognising that good intentions do not eliminate bad incentives.

Indeed, the more noble the declared objective, the easier it can become to overlook the incentives operating beneath it.

What Should We Have Learned?

The pandemic presented governments with genuine and difficult choices, particularly when knowledge of the virus was limited. Some interventions saved lives; others imposed substantial collateral costs. Their effectiveness and proportionality varied by policy, place and time.

But whatever one's assessment of the individual measures, the experience should have taught us something about institutional behaviour.

Emergency powers require independent scrutiny.

Temporary measures need clear conditions for their termination.

The people advising governments should be required to consider not merely the benefits of their recommendations but also their economic, social and human costs.

And where possible, the consequences of decisions should be visible to — and influence the accountability of — those making them.

Most importantly, we should resist the temptation to judge a policy solely by the intentions of its proponents.

The relevant question is not simply, "What are they trying to achieve?"

It is also, "What incentives are driving their behaviour, and who bears the cost if they get it wrong?"

Perverse Incentives — A Recurring Theme

Regular readers of Grappy's Soapbox will recognise this as a theme I have explored before.

In Perverse Incentives — How Good Intentions Go Bad and its follow-up, Perverse Incentives — Part 2, I explored how individuals and institutions, acting quite rationally in pursuit of their own interests, can produce outcomes that are contrary to the interests of society as a whole.

The COVID experience provides another, particularly dramatic illustration of the same underlying problem.

The essential question is not whether the decision-makers believed they were doing the right thing. Many undoubtedly did.

It is whether the incentives governing their decisions encouraged outcomes that were also right for the wider community.

When personal or institutional success becomes disconnected from the public good, even well-intentioned decisions can lead us badly astray.

A Lesson Far Beyond COVID

Perverse incentives are not confined to pandemics.

They can be found in climate and energy policy, financial regulation, education, welfare, corporate management and virtually every field in which decision-makers are rewarded for achieving narrow objectives while the broader costs fall on others.

They explain why bureaucracies expand, why temporary programmes become permanent, why regulations sometimes protect established businesses against competition, and why policies that demonstrably fail can nevertheless survive.

We often look for villains when institutions produce bad outcomes.

Sometimes villains exist. Corruption and deliberate exploitation are real.

But often the explanation is more mundane — and therefore more troubling.

Ordinary people, pursuing entirely understandable personal and institutional interests, can collectively produce extraordinary harm.

The greatest danger may not be a conspiracy of bad people. It may be a system in which perfectly ordinary people are rewarded for making decisions that are bad for everyone else.

And unless we understand that, we are destined to repeat the same mistakes.

For readers interested in the detailed analysis, Dr Ronald N. Kostoff's article, “Was the COVID-19 Pandemic a Trojan Horse?”, published by TrialSite News on 6 October 2026, examines the economic, political and institutional consequences of the pandemic response. It is an opinion article, and some of its more far-reaching hypotheses should be distinguished from its documented observations.

Weekly Roundup - Top Articles and Commentary from Week 42 of 2026

Here are links to some selected articles of interest and our posts from this week.

Cartoon of the Day

We welcome all feedback; please feel free to submit your comments or contact me via email at grappysb@gmail.com or on X at @grappysb

Wednesday, 30 September 2026

The World Has Changed, Did We Notice?

We live our lives one headline at a time.

A war flares up. The price of petrol rises. Donald Trump says something outrageous. Another protest erupts. Markets fall, then recover. Politicians argue. The media moves breathlessly from one controversy to the next.

And somewhere in all that noise, we can lose sight of something much more important:

What if the world itself has changed?

That is the provocative argument made by historian Victor Davis Hanson in a recent Daily Signal video. His starting point is worth considering regardless of whether you agree with all his conclusions.

Hanson says that living through periods of great change can be rather like standing in the eye of a hurricane. The events around us are so immediate that we fail to recognise the larger pattern.

His suggestion is simple: stop looking at today's headlines and compare the geopolitical map with the world of five years ago.

When you do that, the picture becomes rather interesting.

Russia: From Expansion to Attrition

Start with Russia.

When Vladimir Putin invaded Ukraine in 2022, there was widespread concern that Russia might overwhelm Ukraine and demonstrate the impotence of the West.

That didn't happen.

Hanson describes the invasion as a strategic disaster for Russia: enormous casualties, economic damage, attacks on Russian infrastructure and the erosion of Moscow's wider sphere of influence.

Some of Hanson's language is stronger than the evidence warrants — Russia remains a formidable military and nuclear power and the war is certainly not over. Ukraine itself continues to suffer devastating Russian attacks.

But the economic strain on Moscow is real. Russia is proposing significant increases in defence spending for 2027 while cutting planned expenditure on health, education and social programs.

Whatever the eventual territorial settlement in Ukraine, this is hardly the triumphant Russian resurgence many feared in 2022.

China: Powerful, But Not Invincible

Then there is China.

For much of the past two decades, China's rise has often been discussed as though it were almost inevitable — a rapidly growing economy, an expanding military and an authoritarian government capable of thinking decades ahead.

Hanson sees something rather different.

He points to China's ageing population, very low fertility, economic difficulties and turmoil within its military leadership.

China's manufacturing sector has recently returned to modest growth, and it remains an enormous economic, technological and military power. But weak domestic consumption, a prolonged property slump and low investment remain significant problems.

More strikingly, two of China's most senior generals have recently been expelled from the Communist Party and military amid allegations of corruption and disloyalty. Analysts differ over what this means: it may temporarily weaken military readiness while simultaneously strengthening Xi Jinping's personal control.

China remains America's principal strategic competitor.

But inevitability is a dangerous word in history.

Latin America Turns

One of Hanson's more interesting observations concerns Latin America.

For years we heard about the region's "pink tide" — the movement of Latin American governments towards the political Left.

That picture has changed considerably.

Hanson argues that much of Latin America is moving towards governments more favourably disposed towards the United States and less receptive to Chinese, Russian and socialist influence.

The details are more complicated than his sweeping description suggests, but the broader rightward movement is visible. Reuters recently described the election of Keiko Fujimori in Peru as extending a wider regional shift towards conservative governments, driven partly by public concern over crime, weak economic growth and political instability.

That represents a significant change in America's own strategic neighbourhood.

Greenland: The Outrage and the Outcome

Remember the ridicule when Trump started talking about Greenland?

At the time, much of the discussion centred on the apparent absurdity of America wanting to "buy" a vast territory belonging to Denmark.

Strip away Trump's characteristically extravagant language, however, and the strategic issue becomes clearer.

The Arctic is becoming increasingly important. Russia has enormous Arctic interests. China wants greater access. New shipping routes and natural resources are increasing the region's strategic value.

And the shortest missile routes between Russia and North America pass across the Arctic.

Hanson's argument is that Trump's underlying objective was never really about real estate. It was about ensuring that Greenland remained securely within the Western strategic system.

And look at what has now happened.

The United States, Denmark and Greenland have signed a new security agreement permitting an expanded American military presence, including two additional bases, while Greenland remains under Danish sovereignty and retains its right to self-determination.

One can dislike the negotiating style while acknowledging the strategic result.

And Then There Is Iran

This is where Hanson's argument becomes most consequential — and most uncertain.

He believes we may be witnessing the collapse of the geopolitical order that Iran constructed across the Middle East over several decades.

Iran's economy is under enormous pressure. Its oil revenues have been severely constrained, sanctions have intensified and ordinary Iranians are suffering substantial economic hardship.

Hanson goes much further. He argues that if sustained pressure ultimately causes the Iranian regime itself to crack, the consequences could rival the fall of the Berlin Wall as a geopolitical turning point.

That remains a prediction, not an established fact.

Iran has not collapsed. It retains the ability to inflict considerable damage, directly and through regional allies. The Strait of Hormuz remains a critical bargaining chip, and negotiations between Washington and Tehran have so far failed to produce a settlement.

Indeed, this is precisely why perspective matters.

History has a nasty habit of refusing to follow anyone's timetable.

Join the Dots

Now stand back.

Russia is badly damaged by a war that was supposed to demonstrate its strength.

China remains powerful but faces serious demographic, economic and internal military challenges.

Much of Latin America has moved politically towards governments seeking closer relationships with Washington.

American and NATO strategic control of Greenland and the Arctic has been strengthened.

Iran — for decades one of the principal challengers to Western interests in the Middle East — is under extraordinary military and economic pressure.

Look at each event separately and you see today's news.

Join the dots and you may be looking at a geopolitical realignment.

That is Hanson's helicopter view.

His further argument is explicitly political. He credits much of this transformation to Donald Trump's willingness to abandon conventional diplomatic assumptions and use American economic and military power much more aggressively in pursuit of American and Western interests.

That interpretation is certainly contestable.

Critics point to the continuing Iran war, higher energy prices, tensions with traditional allies and unresolved confrontations with Russia and China as evidence that American power has limits. Recent reporting from the UN described considerable international scepticism about Washington's approach and noted that several of Trump's foreign-policy objectives remain unresolved.

But perhaps that disagreement actually reinforces the value of Hanson's argument.

It forces us to ask the right question.

Not: What did Trump say today?

Not: Who won today's news cycle?

But:

Is the strategic position of the Western world stronger or weaker than it was five years ago?

That is a much bigger question.

History Doesn't Arrive With a Headline

There is another lesson here.

The fall of the Soviet Union didn't begin on the day the Berlin Wall came down. The forces producing that extraordinary event had been accumulating for years.

Only afterwards did the pattern appear obvious.

Perhaps nothing comparable is happening today.

Perhaps Hanson is too optimistic, particularly about Iran. Russia could recover. China may overcome its present difficulties. The Middle East could descend into another cycle of conflict. American alliances could weaken rather than strengthen.

History hasn't finished writing this chapter.

But Hanson is surely right about one thing: we should occasionally lift our eyes from the daily headlines and look at the map.

Because while we have been arguing about tweets, personalities, opinion polls and the controversy of the day, some of the geopolitical assumptions that shaped the world only five years ago have changed substantially.

Whether Donald Trump ultimately receives credit or blame for where this leads will be argued for decades.

For the moment, something simpler is worth recognising.

The world has changed.

And there is at least a reasonable case that, from the perspective of Western security and influence, some of those changes may ultimately prove to have been for the better.

Watch Victor Davis Hanson's argument here:

Monday, 28 September 2026

Weekly Roundup - Top Articles and Commentary from Week 40 of 2026