Helping foreign aid.

Helping foreign aid.

Helping foreign aid.

Events beyond our borders.
Dec. 16 2003 10:44 AM

First Aid

Bush should support private development assistance, not create another government bureaucracy.

One of the more unexpected initiatives of the Bush presidency—although not as headline-grabbing as the metamorphosis from Fortress America to nation-builder extraordinaire—has been a proposed 50 percent increase in the U.S. foreign aid budget over the next five years, signaling an end to the decades-old Republican aversion to development aid. Unfortunately, the additional funding, to be routed through a brand-new government bureaucracy called the Millennium Challenge Corp., may wind up ignoring the terror-breeding countries that the United States should be most concerned with helping—while not doing enough to support and leverage what is by far the most important source of foreign aid.

Most of the nearly $10 billion in official development assistance (that is, funds for humanitarian assistance and economic development, rather than military assistance) that the U.S. government currently distributes annually to developing nations flows through the World Bank, State and Defense Department humanitarian assistance, the U.S. Agency for International Development, and the Peace Corps. Most of that goes toward supporting economic reform, fighting HIV/AIDS, promoting education, and myriad other development activities.

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The unfortunate reality of foreign assistance, though, is that it is sometimes used as cheap geopolitical insurance—a quiet way to spread the love in countries that might be too ugly to deal with today but might someday become strategically important to the United States. In these cases, aid money is more about winking and nudging than bringing about sustainable change. "Who believed that Zaire's dictator Mobutu Sese Seko would ever use American largess to vaccinate children or train teachers?" asked Steven Radelet of the Center for Global Development in a recent article in Foreign Affairs, referring to one of the more notorious recipients of U.S. governmental aid.

One result of using aid as a Trojan horse for other ends has been the distortion of the definition of American foreign aid, which aims to do everything from cultivating democracy, to promoting security, to providing grass-roots education, to disseminating humanitarian assistance. So it's no surprise that critics of U.S. foreign aid focus on the apparent inability of development assistance to achieve its stated aims. That mandate uncertainty isn't an exclusively American problem: The European Bank for Reconstruction and Development (which is only partly U.S.-funded), for example, can't figure out whether it's a profit-oriented venture-capital fund or a public sector investor focused on investing (and losing) money in markets no one else would touch with a vaulting pole.

In response to U.S. government development-assistance directive drift and to the Republican perception that aid has been hijacked by touchy-feely liberals, in March 2002 the Bush administration proposed the creation of the Millennium Challenge Account, which would be distributed via the Millennium Challenge Corp. In contrast to USAID, which administers funds to developing countries of pretty much every stripe and inclination, MCA moneys would be allocated only to those nations judged to be most committed to promoting economic freedom, governing fairly, and investing in education and health—based on scores in 16 quantitative areas (such as government effectiveness, primary education completion rate, inflation, etc.) using data collected by the World Bank, the International Monetary Fund, and other third parties. In order to qualify for MCA funds, a country must score above the median of all candidate nations in half the individual criteria in each of the three broad categories, and above the median in a corruption indicator—unless, of course, it is given a bye by the administration.

Under the current foreign aid regime, the U.S. government, often through USAID, crafts developmental priorities and projects, usually in conjunction with local governments, and oversees their implementation through mostly American contracting organizations. One of the key innovations of the MCA will be to give recipient governments a larger role in designing development programs and make them accountable for achieving results.

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Through the MCA, the Bush government aims to support development efforts in their most uncorrupted form and to help those countries that have already proved that they are moving in the right direction. "One of the big problems with aid now is that it's given to countries that in fact have not reformed themselves, and have only made promises," said Sara Fitzgerald of the Heritage Foundation. A study the Center for Global Development's Radelet published in May suggests that only 11 of 74 potential candidate countries would receive funding during the first year of the program.

In principle, it sounds good. But showering attention on those countries that are doing relatively well—as defined by the MCA's parameters—means paying less attention to those failed states that are the most fertile grounds for terrorism. (No points for guessing whether prewar Afghanistan or Iraq—even if their governments would have been amenable—would have qualified for MCA funding, had it existed at the time.) On another front, the MCA could minimize the likelihood that aid funding will—as is too often the case currently—be used to curry favor with otherwise nasty foreign governments (although the rules give the executive branch plenty of wiggle room to make terrorism-related exceptions). But the MCA could have the opposite effect in recipient countries, where being asked for ideas about how to spend relatively lavish sums of aid money is an invitation for pork-barrel politics, Third World style. In the meantime, it's taken the Bush administration nearly two years to create a blueprint for the MCA, and funding levels will likely be well below earlier indications—perhaps as aid reality collides with development fancy.

In the bigger picture, official foreign aid is just a grain in the rice bowl. Carol Adelman, a senior fellow at the Hudson Institute, a policy think tank, estimates that annual U.S. private foreign aid—via foundations, private voluntary organizations, corporate charity, religious organizations, and, most important, remittances sent home by emigrants and their descendants in the United States—amounted to roughly $35 billion in 2000, or more than three and a half times the aid handed out by the U.S. government. Private aid, like private enterprise, tends to be more focused on the bottom line of success—so the chances are better that (unlike, all too often, development funding from governments) a delivery mechanism or program that isn't getting the job done will be replaced, pronto.

In the final analysis, development aid—regardless of its origin—can only do so much, and by far the most important development policies are those implemented by local governments to improve the welfare of their citizens. Aid is no panacea for terrorism, but the Bush administration needs to demonstrate its willingness to support the military side of its war on terror with development aid focused on reducing the likelihood of the necessity of military force. And in terms of the total aid picture, the market-driven, bottom-line nature of private development funding is inevitably more efficient than funds handed out by munificent governments. The Bush administration would do well to focus its development energies on figuring out how to facilitate and leverage private aid rather than creating another aid-related bureaucracy.

Thanks to Lawrence Robertson of Partners for Democratic Change, and Sara Fitzgerald of the Heritage Foundation.