Foreign aid, like other forms of aid, is a subsidy that distorts choice. The distortion takes many forms; for example, aid is sometimes put to uses unintended by the giver; it also lets the recipient pursue activities below their real cost. Since President Harry Truman launched the foreign-aid crusade, U.S. economic aid to developing nations has totaled about $300 billion. This subsidy has encouraged other nations to make choices they might not otherwise have made.

U.S. foreign aid has been doled out for economic development in poor nations and also to military allies. However, since money is fungible, U.S. funds directed toward one purpose sometimes enable countries to pursue policies and projects that might otherwise appear unaffordable. The economic and military aid provided to Israel over several decades has directly or indirectly defrayed much of the cost of Israeli settlements in occupied territories. U.S. aid to Israel has run between three and six billion dollars annually since President Jimmy Carter signed the Camp David accords. In 2000, Israel will receive 26 percent of all U.S. foreign aid, or $4.02 billion dollars. This past winter, Israel made an additional $64 billion in U.S. aid a condition of withdrawal from the Golan Heights.

Many Israelis and supporters of Israel in the United States believe that peaceful coexistence in the Middle East is impossible so long as Israel expands its settlements in occupied territories. Numerous international agreements signed by Israel since 1990 call for its withdrawal from occupied territories and an end to new settlements. Nevertheless, the view that Israel must reach an accommodation with its Muslim neighbors in order to achieve lasting security has scarcely been a deterrent to expansion. New housing construction exceeds the well-publicized demolitions of existing Israeli communities.

Settlements in the occupied territories, and their attendant security needs, are a significant drain on the Israeli treasury, even though the country is the sixth most powerful military presence and the 17th wealthiest in the world. Funds expended on settlements are not available for other desirable public uses. The competition for funds between military and expansionist programs on the one hand, and popular domestic programs on the other, would become more acute if foreign aid were reduced. The heightened awareness of the necessity to choose among desirable goods might strengthen the resolve and influence of the peace-for-land faction within Israel, whereas continuing aid at current levels probably undermines the goal of securing Israel’s peaceful future.

The elimination of poverty and hunger in Third World countries is another widely shared goal that is not being achieved through current means. For half a century, quantities of aid have been funneled to the Third World through nongovernmental organizations, bilateral agreements, the World Bank, and the International Monetary Fund—to little effect. Need persists. The World Bank and the International Monetary Fund have failed.

A principal reason that some areas remain mired in poverty is that populations are far larger than they were when international aid began. (Populations are still growing, although the rate of growth has declined.) Plots of land per farm family are significantly smaller than 50 years ago, so rural populations are often impoverished even in countries such as Thailand, where some sectors have industrialized and modernized. Ethiopia, which received massive aid in the early 1980’s to alleviate mass starvation, is again in the throes of drought-induced famine—only now family plots are half their former size and population grows by three percent annually. (With a three percent rate of growth, a population doubles in 22 years.)

Third World populations get rapidly larger because fertility rates are higher and mortality rates are lower than when international aid began. No one would wish to withhold life-saving medical care, but the tragedy is that Western aid also artificially raised fertility rates (the total number of children born per woman). Why did this happen?

A widely accepted generalization is that families in all societies have approximately the number of children that they want. I have pioneered the “fertility opportunity model,” which further stipulates that the desire for children is innate: Couples seize upon seemingly good opportunities to have more children. Yet family-size targets are tempered by judgments about how many children can be raised well given cultural and individual expectations, aspirations that entail alternate uses of resources and subjective perceptions about resource availability.

Parents generally behave as if they wanted to provide their offspring with the best possible start in life. Over the long run, a strategy of restraint combined with good timing appears to maximize reproductive success in human societies—and, indeed, in many animal species.

People rarely measure prosperity or “plenty” by what is available to them but by what they once had, what they want, what a relevant comparison group has, and what the future is expected to bring. Humanity’s sense of scarcity can be overcome only for fleeting moments, until a new, higher standard of living comes to be taken for granted. After people become used to a particular level of affluence, fewer resources or even a slower pace of acquiring wealth may be perceived as privation.

The shortfall between wanting and having creates a perception of scarcity. Thus, the subjective experience of scarcity occurs within a wide range of economic circumstances. At the extreme of poverty, among large families in regions where per capita income or access to land is insufficient to provide life’s bare necessities, the sense of scarcity and the stark reality probably coincide. But in societies that would be considered affluent by most objective criteria, a ten-percent decline in income is also likely to be perceived as scarcity. When real wages decline to the point that current income does not cover accustomed expenditures, this creates effective scarcity, even at high levels of income.

The subjectivity of scarcity explains the relatively modest family size that we find across cultures and periods of history, because only rarely have very large families seemed affordable. Foreign aid, which so often appears as either a windfall or a rescue, made many people lose sight of essential scarcity. (See my 1993 book, Population Politics, reissued in 2000 with a new introduction.)

Continuing infusions of foreign aid combined with the heady experience of throwing off colonial governments (India, Pakistan, Indonesia, much of North Africa, sub-Saharan Africa), expropriating corporations (Saudi Arabia and other oil countries, South America), and populist revolutions (China, Bangladesh, Cuba) resulted in vast redistribution of, and increases in, wealth.

In the short term, aid provided for better health care, free and nearly universal education for children, more and better food crops, new and novel infrastructure (including electricity), and the promise of much more to come. Unfortunately, ordinar)’ people began to believe that their future prosperit)’ and well-being were assured.

In such optimistic climates, people marry young, want large families, and experience closely spaced births. The traditional, worldwide disciplines by which large family size has always been avoided—late marriage and long periods of sexual abstinence between births—were cast away.

At the same time, mortality rates, particularly for infants and children, declined dramatically after World War II because of improved health care. Theories drawn from (flawed) observation of the demographic transition in Western countries suggested that families would spontaneously reduce childbearing when they saw more of their children surviving.

In a succession of European countries, infant mortality declined after or, at best, simultaneously with a drop in the fertility rate. This means that the decline in infant mortality could not have caused the decline in fertility. Demographers were wrong in their optimistic assumptions about cause and effect. It should not have been such a shock to international planners when fertility shot up in most Asian, South American, and African countries even while more children survived, the standard of living improved, and expectations of rising opportunity took hold in the national consciousness.

The connection between perceived economic opportunity and fertility rates is not peculiar to the Third World: Motivations and hesitations around the issues of childbearing are well-nigh universal. In the United States, from the colonial era onward, periods of exuberance and economic optimism are marked by high and rising fertility rates. On the other hand, fertility is lower when the economy and the average person’s expectations are depressed. Contrast the very low fertility during the Depression era with the Baby Boom during the 1947-1962 period of postwar prosperity.

The OPEC cartel and rising oil prices in 1973-74, probably related to the onset of inflation and stagnant real wages, caused the U.S. fertility rate to decline again. Today, one would expect that the strong economy would result in significantly higher fertility rates. Indeed, there has been recovery from the below-replacement rate levels of the 1970’s.

What is interesting, however, is that tire Hispanic fertility rate in the United States is significantly higher than the black rate, and fully one child per woman higher than the non-Hispanic white rate. Moreover, an analysis by economist Diane Macunovich suggests that native-born Americans as a group are having fewer babies because of immigration’s depressing effect on wages and the conditions of work. Macunovich writes in the November 1999 issue of Population and Environment that approximately one American birth is foregone for each immigrant who comes to the United States.

Leaving Western examples, India is a country where perceived economic opportunity appears, repeatedly, to have changed population size and growth rates. India’s population was nearly stable from 400 B.C. to about A.D. 1500, but population began growing, reaching a rate of 0.6 percent a year, with the end of the Mogul invasions, the restoration of peace, and the stimulus of new trade opportunities. Southern India enjoyed particular prosperity under the Vijayanagar kings. The strongest of these, Krishna Deva Raya (1509-1530), is described “as an early advocate of free trade.” According to A. Spaeth writing in the Wall Street Journal, this king “imported velvets and damasks from Aden and China, horses from Arabia, elephants from Ceylon, gold, silver . . . and precious gems.”

European trade offered India further opportunity by creating many jobs in new enterprises. Population growth accelerated after 1900, but the real takeoff came with independence in 1947, as it was perceived that wealth being taken out of the country by the British would now devolve upon the Indian people themselves. In the following decades, the rate of growth accelerated, ultimately reaching 2.3 percent annually.

Part of the growth was due to lower mortality rates, but a major portion was caused by higher fertility. Demographer Mahinder Chaudry writes in Population and Environment that births per woman rose from less than four in the 1930’s to approximately six in the 1960’s.

The failure of a six-year program explicitly designed to lower fertility by improving child survival and family health is also revealing. In the 1960’s, British physicians John Wyon and J.E. Gordon provided a whole village with education, nutritional supplements, public health, direct medical care, and a family-planning program. Eventually, everyone knew about contraception, villagers had positive attitudes toward the healthcare providers and family planning, and infant mortality had plummeted. But the fertility rate stayed high. Further research yielded one simple answer: Villagers were delighted that now, with lower infant mortality, they could have the six children that seemed to them the ideal family size.

The fertility rate in most Third World countries has begun to decline, and developments concurrent with this decline are revealing. International aid progressively diminished after 1980, more countries were cast on their own resources, other sources of foreign exchange (such as revenue from exports) collapsed, and the size of family farms diminished. People struggled to afford benefits that had formerly been free and which they had come to value. Kenyans, for example, had learned to value education when it was a free good; by the 1990’s, families struggled to afford school fees and saw this expense as a reason to limit family size.

The Kenyan example suggests that foreign aid has had a perverse effect in two ways. Initially, it encouraged a sense of expanding opportunity that stimulated childbearing. But having raised expectations and aspirations, the withdrawal of aid has hastened the decline in fertility by heightening many people’s sense of deprivation. Ironically, scarcity is measured by deprivation of a good that had not, formerly, been wanted or valued. If this means that foreign aid made the fertility rate decline after all, one can only say that the mechanism is not what the optimists had predicted!

In Egypt, euphoria took hold in the late 1970’s due to a liberalized economy, cheap electricity from the High Aswan Dam, control over the Suez Canal, and annual U.S. payments pursuant to the Camp David accords. These developments were accompanied by a rising fertility rate. But by the late 1980’s, optimism had given way to harsher realities. Government revenues had stagnated, Egypt was importing an increasing proportion of food, Cairo schools were so crowded that several three-hour shifts had to be crowded into a day, and underemployment was rife. College professors drove taxis, and teachers (who taught only one shift due to job sharing) eked out a living as waiters. With a renewed sense of scarcity, Egyptians hastily began to reduce their fertility rate.

Many African countries that achieved historically high fertility rates in the 1960’s and 70’s have seen declines. From the time of independence in 1957, the Moroccan economy thrived and fertility rates rose; fertility remained high so long as the price of phosphates was high and the government could subsidize many of the costs of child rearing, including education, health care, food, and housing. When phosphate prices collapsed in 1974-75, the economy reversed, and so did fertility rates.

Similarly, the Nigerian economy boomed through the middle 1980’s as oil revenues and international loans poured in; fertility rates reached historic highs. Ten years later, international lending agencies had retrenched, jobs were hard to find, more education was required to get a job, parents perceived that it was harder to keep children alive, and—no surprise—the fertility rate began to fall. About two thirds of Nigerians questioned in one study spontaneously volunteered the information that life had got harder, and this was their reason for delaying marriage and childbearing.

The message is not that industrialized countries should induce hardship in countries struggling to develop. The meaning of my research, rather, is that aid should not be the means of making a bad situation worse. One should avoid creating expectations that prevent the decline in fertility rates that naturally occurs when a future-oriented sense of caution impels people to delay marriage and to increase spacing between children.

Unrealistically high expectations for the future—fueled in part by foreign aid—were a stimulus to rising fertility rates for several decades after World War II. Government-sponsored aid, concessionary loan rates, and loan forgiveness distort perceptions about international wealth and the wealth that can reasonably be transferred (that is, given away) from richer to poorer nations.

Few countries have the resources to provide out of the public purse for large numbers of children. Foreign aid, except in short-term crises, encourages Third World governments to relieve families of many of the everyday costs of life. It subsidizes large families. Subsidies distort perceptions, leading to overconsumption of goods (in this ease, children) and creating a continuing state of poverty from which few can hope to escape.

Childbearing imposes costs, as humans have understood for eons. Nothing should be allowed to impair the natural parental predisposition to weigh the value of having a child—and giving this child the best possible start in life—against other desirable or necessary uses for resources.

Discontinuation of most foreign aid would allow the return of the usual human condition—perceived scarcity—and would encourage evaluation of alternatives, including childbearing, in terms of their true cost. The goal, worldwide, should be an unsubsidized environment in which each family weighs the desire for children against other wants and needs. Such reality-testing will lead eventually to stability, or even reduction, in population size, so that the number of people remains comfortably within the carrying capacity of the environment.