{Tied Aid}[6th February 1980]

[Redbook2:163][19800206:2150b]{Tied Aid}[6^th February 1980]

19800206.2150

[continued]

If, as Peter Bauer says in The Times yesterday, overseas aid tied to donor's products is no better for the donor than would be having his own shop till burgled by a burglar who then spent the money in the shop (which, of course, assumes ability freely to sell elsewhere), then (leaving aside balance of payments considerations) it might seem in theory that a monetarist inflation-suffering donor should give substantial overseas aid to donees forbidden to use it in the donor economy: so the money supply decreases relative to the static amount of goods, leading to a deflationary rise in the internal value of money. This would be incredible. (But of course the external value would fall, leading, in a high-importing economy, to increased import prices and cost-inflation, or to a decrease in the number of goods relative to money!)

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