United States
In the National Interest: Trends in US Foreign Aid Programs
Nitlápan-Envío team
It is hardly surprising that the US foreign aid program has always operated in the national interests of the United States. The definition of those interests, however, has shifted considerably over the years. Here we will take a brief look at the history of the US foreign aid program and then examine its current directions.
"Strengthening friendly countries"In the post-World War II era, the US aid program focused on Europe, with the Marshall Plan shoring up European economies in the effort to revive the international economy and ensure "mutual security" against the emerging Soviet bloc. Only in the mid-fifties did the US assistance program begin to include significant amounts of aid to the developing nations.
A Cold War rationale for assistance to the developing world is enshrined in the opening paragraphs of the Foreign Assistance Act of 1961. This now heavily amended act, with which President Kennedy created the Agency for International Development (AID), is still the basis for the US foreign aid program.
It is the sense of the Congress that peace depends on wider recognition of the dignity and interdependence of men, and survival of free institutions in the United States can best be assured in a worldwide atmosphere of freedom.
To this end, the United States has in the past provided assistance to help strengthen the forces of freedom by aiding peoples of less developed friendly countries of the world to develop their resources and improve their living standards, to realize their aspirations for justice, education, dignity, and respect as individual human beings, and to establish responsible governments.
The Congress declares it to be a primary necessity, opportunity, and responsibility of the United States, and consistent with its traditions and ideals, to renew the spirit which lay behind these past efforts, and to help make a historic demonstration that economic growth and political democracy can go hand in hand to the end that an enlarged community of free, stable, and self-reliant countries can reduce world tensions and insecurity.
It is the policy of the United States to strengthen friendly foreign countries by encouraging the development of their free economic institutions and productive capabilities, and by minimizing or eliminating barriers to the flow of private investment capital.
In addition, the Congress declares that it is the policy of the United States to support the principles of increased economic cooperation and trade among countries, freedom of the press, information, and religion, freedom of navigation in international waterways, and recognition of the right of all private persons to travel and pursue their lawful activities without discrimination as to race or religion.
Accordingly, the Congress hereby affirms it to be the policy of the United States to make assistance available, upon request, under this part in scope and on a basis of long-range continuity essential to the creation of an environment in which the energies of the peoples of the world can be devoted to constructive purposes, free of pressure and erosion by the adversaries of freedom...
Also, the Congress reaffirms its conviction that the peace of the world and the security of the United States are endangered so long as international communism continues to attempt to bring under Communist domination peoples now free and independent and to keep under domination peoples once free but now subject to such domination. It is, therefore, the policy of the United States to continue to make available to other free countries and peoples, upon request, assistance of such nature and in such amounts as the United States deems advisable and as may be effectively used by free countries and peoples to help them maintain their freedom...
From its start in 1961 until the early 1970s, AID focused primarily on large-scale capital investments. The aid program was based on the belief that developing nations simply lacked the capital for necessary infrastructure. Once that infrastructure was laid down, it was believed, development would "take off." The poor, who were not targeted directly by the aid program, would benefit by the trickle-down effect of this development.
By 1973, concern in Congress over the failure of AID to attend to the "poorest of the poor" led to the passing of the "Basic Human Needs" or "New Directions" mandate. This mandate called for improvements in health, education, water and sanitation, nutrition and shelter, as well as promotion of small-scale agriculture and employment opportunities for the poor. This law proclaimed that assistance should be designed "to help the poor majority of the people in developing countries to participate in the process of equitable growth through productive work and to influence decisions that shape their lives, with the goal of increasing their incomes and their access to public services which will enable them to satisfy their basic needs and lead lives of decency, dignity, and hope."
However, if this admirable mandate was ever put into practice at all, it was not for long. Starting with the Carter administration in 1976, and intensifying with the first Reagan administration in 1980, an increasing proportion of US economic aid was shifted away from development assistance to "Economic Support Funds" (ESF). These funds for balance of payments and budget support, not necessarily tied to development goals, could easily be used for political and military objectives.
In fact, recipients of US aid have consistently been chosen upon the basis of US interests rather than need. Recent top-ranking recipients, for example, have been locations for US base sites (Turkey, Philippines); Middle Eastern allies (Israel, Egypt); countries where the US promotes counterinsurgency (El Salvador, Philippines); neighbors to countries where the US is involved in conflicts (Honduras, Costa Rica, Pakistan); post-conflict areas where the US had intervened directly or indirectly (Panama, Nicaragua). Last year, countries supporting US policy in the Gulf War received payoffs of additional aid (including Egypt, Israel, and Turkey).
The US aid program, besides its security objectives, aims to promote US business at home and abroad. The PL-480 food aid program was developed in 1954 specifically to deal with the problem of US food surpluses and prop up commodity prices; this program thus has a strong following among US farmers. A considerable portion of aid also comes in the form of tied credits where recipient countries purchase US inputs, while technical assistance programs often give work to US consultants. More recently, as is noted below, aid has also focused on laying the policy conditions favorable to US investment. At times, US security and business interests are at odds, as when the State Department may request the easing of conditionality for an allied country at a strategic moment; in such cases, security interests generally prevail. More often than not, however, security and economic goals are jointly pursued.
Since 1980, aid has become increasingly tightly conditioned upon internal economic policy reforms in recipient countries. These reforms ostensibly aim to permit recipient countries to meet debt payments and lay the basis for domestic and foreign investment. The theory of development behind such conditioned aid presumes that the private sector is the engine of growth. Development will occur if the private sector, particularly the export sector, is prioritized and government regulation is minimized. A radical downsizing of the public sector and privatization of public enterprises are key elements of this policy.
AID's current agenda: More leverage with less aidIn the post-Cold War world, the US foreign aid program appears to be increasingly focused on generating the policy conditions favorable to US investment and trade in the Third World. A rhetorical emphasis on "democratization" in current AID language is in many respects simply a code word for supporting free enterprise, as will be shown below. AID's social programs are likely to continue to be focused on a minimal easing of the effects of its macroeconomic prescriptions on the poorest.
A second trend is that foreign aid budgets are likely to decrease in the immediate future, given the current recession and the enormous size of the federal budget deficit. The new religion the Bush administration is that developing nations should rely on increased trade and investment rather than direct aid as the way to build their economies.
For example, the centerpiece of the Bush administration's Latin American policy, the Enterprise for the Americas Initiative, offers reduction of bilateral debt to countries meeting certain criteria, including adhering to IMF structural adjustment programs and removing protectionist barriers to trade. The plan includes a fund for promoting privatization of state enterprises. The ultimate goal of the initiative is a hemispheric free trade zone. The US contribution towards this much-heralded plan, however, is very modest: just $100 million annually for five years.
A new focus on a partnership of donors also stems from the realization that AID's budget may be decreasing, so that it must combine its weight with that of other donors to leverage more influence over recipient countries. How enthusiastic European nations, Japan and Canada will be to participate in this donor coordination under US leadership, however, is not yet clear.
These trends are reflected in a February 1991 address to Congress in which AID head Ronald W. Roskens set forth the following new goals for the agency:
"To meet our traditional and continuing objectives of reducing poverty and misery in the developing world, we are placing greater emphasis on sound economic policies and improved governance in developing countries as a critical basis for sustained, broad-based growth. Second, we are strengthening our efforts to establish a partnership with the US and developing country private sector in advancing trade, investment and economic growth objectives in developing countries. Third, we are giving greater attention to establishing mutually beneficial trade linkages between the US and developing countries in an increasingly integrated world economy. A developing country is not only a place in need of humanitarian assistance. It is also a potentially active market for US goods and services...
"Fourth, we are moving toward increasingly close collaboration and coordination with other donors and multilateral financial institutions. A key element of our new international partnership will be joining with them in shaping basic policies guiding our common efforts, as well as sharing some of the costs involved. Fifth, our economic assistance programs must be prepared to deal effectively with new demands for flexibility to respond to rapidly changing circumstances and new, unanticipated needs. Finally, we are giving increased emphasis to managing for results. With scarce budget resources and growing domestic requirements, we cannot accept an economic assistance program which is unable to demonstrate clear results."
Roskens announced four new initiatives for AID:
"The Partnership for Business and Development" aims to involve US business "in the effort to
develop and sustain free-market principles and broad-based economic growth in developing countries." In essence, this initiative will promote US investment in recipient countries by 1) encouraging US investment in infrastructure and high-growth industries; 2) providing a matching service for US businesses with host country entrepreneurs; and 3) training US students in business practices in developing countries.
"Family and Development" is a vaguely-worded initiative to involve the family as a unit in . development planning and programs. It includes promoting parent involvement in schools, encouraging family-based businesses, increasing educational opportunities for girls, and making day care and health services more available. These often admirable goals, however, go straight against the macroeconomic reforms that the bulk of AID money is funding.
"The Democracy Initiative" proclaims a new focus on strengthening democracy in developing countries. Democracy, however, is defined in great measure as free enterprise; AID's rationale for supporting democratic institutions is that "democracy is complementary to and supportive of the transition to market-oriented economies and sustained, broadly based economic development." Democratization programs include funds for free market-promoting think tanks and consultants, as well as for "democratic" unions.
AID, in consultation with the State Department, will identify countries needing such democratization assistance and will reward countries for progress toward set goals. According to AID, this democratization assistance will include:
* training for legislators
* strengthening municipal governments
* incorporating "democratic values" into school curricula
* supporting research institutes and media
* aiding political parties in organizational development, fundraising and campaign techniques
* supporting civilian control over the military
* building up civil society in countries where the state has the preponderance of power
Experience with AID and National Endowment for Democracy democratization programs in Central America shows a consistent promotion of a conservative agenda and an attempt not just to work with already existing NGOs but to create new ones and, in effect, build a civil society in AID's own image. An additional concern is that such democratization aid will drain funds away from projects more essential to economic development.
The final initiative, "Toward Strategic Management," focuses on AID's internal problems, envisioning a downsizing of the agency with a greater proportion of work farmed out to private contractors, nonprofits and universities. It attempts to address the periodic charges Congress has made towards AID of being wasteful, corrupt and bureaucratic.
Reforming aidWhile there are few groups satisfied with the overall performance of the United States' foreign aid program, proposals to reform aid and AID are diverse and contradictory. Progressive US NGOs would like to see AID be more responsive to recipient country NGOs, and would like it to encourage popular participation in economic planning rather than impose conditions from abroad. Other proposals range from encouraging more US private sector competition with AID by decentralizing the aid distribution process, to making AID more accountable than it already is to US foreign policy considerations by bringing it under the State Department's wing. In addition, in the current recessionary climate, politicians of all political stripes, most notably Patrick Buchanan, call for a cutoff of foreign aid to concentrate resources on domestic problems. It is a proposal that now has a certain resonance with voters.
The East-West conflict and competition for the allegiance of Third World nations provided the driving force for the US foreign aid program. With the waning of the Cold War, new justifications for spending taxpayers' money abroad will have to be devised. Despite election-year jitters giving politicians a fear of voting for foreign aid, however, it is likely that such justifications will be created in the future. While foreign aid may be scaled back, it will not be abandoned, given its immense value to the United States as a tool for promoting US foreign policy and business interests at home and abroad.
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