The Anti-Market-Agenda of International Organizations
LI-PAPER. There is no evidence to suggest that higher government spending led to better development.
Several international organizations were originally formed to promote the development of countries, advocating for a liberal policy of free trade, sound national budgets, deregulation and a market economy. Today, the former recommendations of the OECD, the IMF and other international organizations are being turned into their opposite. These organizations now advocate more government, higher taxes, less competition and less market-oriented policies.
International organizations argue that higher government spending leads to better development. But there is no evidence to this claim. Historically, the opposite has always been the case, which can be well observed in the rise of Western nations. There are many countries that have expanded their public sectors after becoming wealthy. But these countries would hardly have come to riches in the 1800s and early 1900s if they had had a large tax burden.
The European Bank for Reconstruction and Development (EBRD) serves as a prime example of the misunderstanding of «development» within international organizations. The EBRD was created to promote market-friendly reforms in the former Eastern Bloc. However, the EBRD, with its practice of subsidized lending to selected companies, is currently preventing an increase in living standards in Eastern countries, distorting markets on the one hand and favoring nepotism and corruption on the other.
(10 pages, PDF)