Romney's Revolutionary "Free Enterprise" Foreign Aid Policy

"Work. That must be at the heart of our effort to help people build economies that can create jobs for people, young and old alike. Work builds self-esteem. It transforms minds from fantasy and fanaticism to reality and grounding. Work will not long tolerate corruption nor quietly endure the brazen theft by government of the product of hard-working men and women."

Most of the media attention is going to Obama's paint-by-numbers UN speech "violence is bad", "offensive movies are bad", "freedom of speech is good", "freedom of speech that offends Muslims is bad" and "let's join hands for a better world". But Romney's speech at the Clinton Global Initiative is really far more significant since it lays out fundamental policy changes.

Here are some important excerpts from it.

Ours is a compassionate nation. We look around us and see withering suffering. Our hearts break.  While we make up just 4.5 percent of the world’s population, we donate nearly a quarter of all global foreign aid—more than twice as much as any other country.

But too often our passion for charity is tempered by our sense that our aid is not always effective. We see stories of cases where American aid has been diverted to corrupt governments. We wonder why years of aid and relief seem never to extinguish the hardship, why the suffering persists decade after decade.

Many of our foreign aid efforts were designed at a time when government development assistance accounted for roughly 70 percent of all resources flowing to developing nations.  Today, 82 percent of the resources flowing into the developing world come from the private sector.

Private enterprise is having a greater and greater positive impact in the developing world. The John Deere Company embarked upon a pilot project in Africa where it developed a suite of farm tools that could be attached to a very small tractor.  John Deere has also worked to expand the availability of capital to farmers so they can maintain and develop their businesses.  The result has been a good investment for John Deere and greater opportunity for African farmers, who are now able to grow more crops, and to provide for more plentiful lives.

What Romney is articulating is the difference between useless and often destructive "Humanitarian Tourism" of the Peace Corps and Carter Habitat kind where activists show up to "help the natives" and leave having taken away local jobs, depressed local industries and left the natives worse off than before.

Romney's call for developing societies by cultivating free enterprise, rather than with showy charity is an important gamechanger.

Work.  That must be at the heart of our effort to help people build economies that can create jobs for people, young and old alike. Work builds self-esteem. It transforms minds from fantasy and fanaticism to reality and grounding. Work will not long tolerate corruption nor quietly endure the brazen theft by government of the product of hard-working men and women.

To foster work and enterprise in the Middle East and in other developing countries, I will initiate “Prosperity Pacts.”  Working with the private sector, the program will identify the barriers to investment, trade, and entrepreneurialism in developing nations. In exchange for removing those barriers and opening their markets to U.S. investment and trade, developing nations will receive U.S. assistance packages focused on developing the institutions of liberty, the rule of law, and property rights.

We will focus our efforts on small and medium-size businesses. Microfinance has been an effective tool at promoting enterprise and prosperity, but we must expand support to small- and medium-size businesses that are too large for microfinance, but too small for traditional banks.

The aim of a much larger share of our aid must be the promotion of work and the fostering of free enterprise. Nothing we can do as a nation will change lives and nations more effectively and permanently than sharing the insight that lies at the foundation of America's own economy--free people pursuing happiness in their own ways build a strong and prosperous nation.

There are obviously sizable elements of Bush here, but there is a basic philosophical difference from the usual humanitarian-first approaches that echoes back to the Cold War and the notion of free enterprise fighting a global struggle against socialism. It's not all good, but it's more meaningful than anything that has come out of the left and its empty humanitarianism.

A temporary aid package can jolt an economy.  It can fund some projects.  It can pay some bills.  It can employ some people some of the time.  But it can’t sustain an economy—not for long.  It can’t pull the whole cart—because at some point, the money runs out.

Here Romney links his notion of foreign aid to his notion of domestic aid, and both have to be jump starts that empower people, rather than permanent dependencies.

But an assistance program that helps unleash free enterprise creates enduring prosperity.  Free enterprise is based on mutual exchange—or, rather, millions of exchanges—millions of people trading, buying, selling, building, investing.  Yes, it has its ups and downs.  It isn’t perfect.  But it’s more durable.  It’s more reliable.  And ultimately, as history shows, it’s more successful.

The best example of the good free enterprise can do for the developing world is the example of the developed world itself.  My friend Arthur Brooks of the American Enterprise Institute has pointed out that before the year 1800, living standards in the West were appalling.  A person born in the eighteenth century lived essentially as his great-great-grandfather had.  Life was filled with disease and danger.

But starting in 1800, the West began two centuries of free enterprise and trade.  Living standards rose.  Literacy spread.  Health improved.  In our own country, between 1820 and 1998, real per capita GDP increased twenty-two-fold.

The problem here is that Romney is understating the role of culture and treating free enterprise as a supreme transformative force, in much the way that Bush treated democracy. While both are important, the idea that they will have equivalent effects across cultures, and that the only difference between 17th Century Europe and the 21st Century Middle East is that the Middle East has too many monopolies and not enough democracy is too dangerously simplistic.

Free enterprise and democracy can help transform societies over time. More importantly they can limit immigration from those societies. But they will still take place on the terms of that culture, not on our terms. And the beneficiaries of that transformation may be our enemies and lead to societies that are more dangerous and toxic than the ones before.

 In our export industries, the typical job pays above what comparable workers make in other industries, and more than one-third of manufacturing jobs are tied to exports.  Sadly, we have lost over half a million manufacturing jobs over the last three and a half years.

As president, I will reverse this trend by ensuring we have trade that works for America.  I will negotiate new trade agreements, ask Congress to reinstate Trade Promotion Authority, complete negotiations to expand the Trans-Pacific Partnership, and create what I call a “Reagan Economic Zone,” where any nation willing to play by the rules can participate in a new community committed to fair and free trade.

I’ve laid out a new approach for a new era.  We’ll couple aid with trade and private investment to empower individuals, encourage innovators, and reward entrepreneurs.

The good news here is that Romney is talking as if he will use foreign aid to leverage American manufacturing, a policy that most administrations had already left behind or practiced inconsistently. It's a smart and big plan that  can appeal to voters.