No Easy Fix for U.S. Foreign Aid

During a Wednesday speech at the U.N.’s Millennium Development Goals Summit, U.S. President Barack Obama rolled out the results of his administration’s long-delayed review of America’s global development policy. The take-away was simple: The United States has to start being picky about how it distributes aid. Gone are the days when Washington can help everyone everywhere. As Obama declared, "We must be more selective and focus our efforts where we have the best partners and where we can have the greatest impact."

Reform of U.S. foreign assistance programs is long overdue. Development efforts have been governed by a messy and often conflicting set of approaches — the administration itself notes that government agencies are today pursuing over 1,000 different development goals, objectives, and priorities. Every Congress and administration for the last five decades has tacked on additional language to the 1961 Foreign Assistance Act and other regulations about what aid should look like. The increasing number of agencies now operating overseas has only added to the confusion.

The good news is that Obama gets it. The bad news is that all of this is much easier said than done.

Obama’s plan is simple: Pick your countries, pick your priorities. Once America selects a country to focus on, its re-vamped aid system will focus on sustained economic growth, innovation and technology development, and country "ownership" — that is, getting local input into figuring out what’s most important and tailoring the aid specifically to the stated need. The policy requires the administration to update its global development strategy every four years. And the United States will work with other donors to hammer out a sensible division of labor on the plethora of global needs.

There is little to argue with in all of this, except for the fact that it will need some luck — and a lot of vigilance — to actually work. The central concept that aid dollars should only go to countries that will use them wisely, for one, is certain to add complications. The George W. Bush administration had in fact begun a limited-scale program based on this principle, the Millennium Challenge Corporation, which applies strict standards and a clear application process to potential recipients. But to this day, some of the top recipients of Washington’s funds include countries in which reform remains an afterthought.

Beyond this basic roadblock, there are five main points of tension that could make the bright ideas in the new strategy highly difficult to realize:

Rhetoric versus Reality

Since taking office, both Obama and Secretary of State Hillary Clinton have repeatedly said they want to make the U.S. Agency for International Development (USAID) the "world’s premier development agency." But their actions and the actions of the administration generally have people wondering if this is actually the case. The pace of political appointments at the agency has been nothing short of glacial; less than half of the senior political staff positions at USAID have been filled. The State Department, of which USAID is a part, has also resisted provisions that would give the aid agency a stronger voice at the policymaking table. And despite several efforts negotiated between State and the National Security Council to staff USAID more robustly, the agency remains firmly under State’s purview. This is problematic because the diplomatic corps is notorious for wanting to use aid dollars to curry short-term favor and influence with host countries, rather than focusing on long-haul development efforts.

The true test of the limits of rhetoric will come when the administration faces the decision whether to help a country that’s friendly but not reform-minded. The evidence so far doesn’t bode well: Ethiopia and Rwanda, two important U.S. allies, are featured prominently in the administration’s new Global Health Initiative — despite a crescendo of complaints about human-rights violations in both countries.

The Division of Labor

Obama’s new policy emphasizes a clear division of labor with other donors and multilateral institutions. But making this happen will be extraordinarily difficult. Developing countries have long complained that every different donor brings with it a variety of different requirements — and reams of corresponding paperwork. Very little is said in the review about how this division of labor will take place and how donors will collectively reduce or unify the paperwork burden they place on aid-receiving countries. This isn’t just about getting everyone to agree; some of the key multilateral agencies, such as the World Bank, are both quite slow in instituting programs and reluctant to impose standards related to good governance or human rights.

PEPFAR versus Everything Else

PEPFAR, the President’s Emergency Plan for AIDS Relief, was a signature Bush initiative that substantially increased U.S. assistance around the globe, particularly to Africa. It has grown into a huge financial commitment for the United States, and politicians of all stripes have been loath to criticize a lifesaving program launched by a Republican president. But no single area of aid spending is probably more sharply at odds with Obama’s commitment to promote sustainable, country-driven economic growth and reform.

Huge chunks of PEPFAR money are now flowing into countries like Zimbabwe, Ethiopia, and Uganda — not exactly high on the list of democratic or free market reformers. But PEPFAR has a strong and vocal constituency and remains vital in saving lives. The resolution of the PEPFAR dilemma will be a key barometer of how seriously the administration takes its new approach. The compromise will likely entail using greater percentages of PEPFAR funds to focus on reforming local health ministries rather than simply relying on external aid to serve as a substitute.

The Economic Growth Problem

The troubled state of a beneficiary country’s politics isn’t the only measure that could derail its aid relationship with the United States — economics also matters, something that could create some serious challenges in the long-term, especially given that USAID has steadily been drained of expert personnel on economic issues. The agency now relies heavily on outside contractors to fill the gap.

In light of the recent global economic meltdown, as well as the very, very mixed results of World Bank recommendations in the 1980s, developing countries may not be entirely receptive to listening to American economic advice. Given that Washington has been unwilling to take on hard issues like the U.S. domestic agricultural subsidies that prove an anti-competitive drag on many African countries, cooperation could become even more difficult. It will be hard to convince a developing country of the joys of the free market if the U.S. still doesn’t have the political courage to reduce handouts to our own farmers.

Solving the Crisis du Jour

The policy review has surprisingly little to say about work in post-conflict settings such as Iraq and Afghanistan or high-profile settings like Haiti or Pakistan that are seen as strategic priorities — despite their abysmal record of helping themselves. In terms of dollars and importance, these programs have been the most visible and the most visibly problematic over the last decade. Administrations rarely get to choose their crises, and they have to deal with the fact that  development is extraordinarily difficult without stability and a government committed to reform. Still, simply shoveling money out the door, as has often taken place in Iraq and Afghanistan, won’t do much good.

Obama is to be congratulated for taking on the tricky business of g
lobal development in a credible and thoughtful manner. But after the policy review begins the hard part.