March 2, 2011
by Carol Adelman
When the Republican Study Committee recommended cuts in the State Department and USAID budgets for 2011, including slashing USAID's operating budget and eliminating $250 million for Egypt, the Administration hit back strong. Secretary of State Clinton called these cuts "devastating to our national security" and ones that "will damage our leadership around the world." Rajiv Shah, head of USAID, followed suit on the proposed cuts, warning, "That would have massive negative implications for our fundamental security."
National security has long been an objective of foreign aid, along with international disaster relief, development, and democracy. The push now to justify our foreign aid programs more and more on national security grounds is an attempt to bring Republicans along, since aid for security has been a strong reason for Republican support over the years.
What's interesting to me is that no one has examined the track record of foreign aid for security purposes. Have we achieved foreign policy and national security goals with our aid to Egypt, Vietnam, the Philippines and other countries whose aid budgets come from the so-called "economic support funds" allocated by the State Department and administered by USAID?
It's clear why aid for development purposes is singled out for cuts and criticisms. It's because there is overwhelming agreement that the business model is broken. And it's not just Bill Easterly and Dambisa Moyo, making this case. African writers and leaders such as Rwandan President Paul Kagame, Andrew Mwende, Gebreselassie Tesfamichael (former Eritrean finance minister), George Ayittey, among many, are saying that foreign aid has failed because it has excluded African entrepreneurs and grassroots organizations from being part of the solution. In a Financial Times opinion piece, President Kagame wrote: "The cycle of aid and poverty is durable: as long as poor nations are focused on receiving aid they will not work to improve their economies."
Leaders such as Donald Kaberuka, President of the African Development Bank and former Finance Minister of Rwanda, like others, are facing the fact that poor governance and corruption are key problems in Africa.
So, it's not surprising that the Obama Administration recognizes these problems too. The President, in one of his first major addresses on foreign aid in 2009 said "One of the concerns that I have with our aid policy generally is that western consultants and administrative costs end up gobbling up huge percentages of our aid overall." He went on to say that development in Africa has been hampered because, for many years, we've made excuses for corruption and poor governance on the continent.
In a major speech on foreign aid, USAID Administrator Rajiv Shah underscored the need for a completely new foreign aid business model when he rejected the traditional assumption that "a series of development projects alone can lead to sustained economic growth. Instead," he said, "we are developing partnerships for growth with countries committed to enabling private sector growth…." That partnership means that USAID has to help create lasting institutions in developing countries, not lasting contracts with expensive consultants.
Administrator Shah put it well: "Our industry [the foreign aid business] is full of incentives designed to prolong our efforts rather than reduce them…. There's always another high-priced consultant that must take another flight to another conference or lead another training." He wants USAID to work itself out of a job. I haven't heard that in a long time. Quote for Raj: "Both this nation and the countries we help have a stake in their reaching the point of self sustaining growth….when their economies will have been launched with sufficient momentum to enable them to become self supporting…the record clearly shows that foreign aid is not an endless or unchanging process." John F. Kennedy, Message to the Congress, April 1963.
Equally important, Shah is taking on traditional USAID evaluations, likening them to the relationship between investment banks and ratings agencies, i.e. too close for comfort, let alone for knowing what works and what doesn't in USAID projects. He's calling for performance evaluations to be "conducted by independent third parties, not by the implementing partners themselves." Note for Raj: Change that to independent third parties who are not getting USAID funds, and you'll really know what's happening in the field.
So, the prescription is clear for how America can help nations with their development: 1) help countries that want to help themselves and are implementing economic, democratic, and social reforms; 2) partner with local organizations that have skin in the game; and, 3) use aid funds to leverage successful private endeavors through public private partnerships such as those programs in USAID's Global Development Alliance program.
Where the prescription is not so clear is how to conduct foreign aid for our national security purposes. It's long been held that foreign aid increases our national security when we give money - over $20 billion dollars per year - to countries that support our geopolitical goals. When you look back at some of our largest foreign aid for security programs, however, it's actually a mixed bag.
While experts will differ on exact country rankings, there is likely to be at least some agreement that our economic support funds to South Korea, Taiwan, Israel, and to countries during the Persian Gulf War were generally successful in increasing our security in Asia, supporting democracy in the Middle East, and preventing a dictator from threatening our oil supplies. On the other end of the spectrum, there is likely agreement that, over the years, our security aid to Afghanistan, Pakistan, and Vietnam have not qualified as success stories. We have not succeeded in creating democracies or development in these countries. Their rankings on measures such as the Index on Economic Freedom and Freedom in the World are below average on economic and political freedoms.
The jury is still out on countries such as the Philippines, Iraq and Egypt, whose economic rankings are also below average, as David Brooks pointed out in his analysis of Egypt's economic and political world rankings. It can be argued that keeping our bases in the Philippines for many years was important for our national security and protection of sea lanes. But then, in the 1990s, they were abandoned without negative repercussions to the U.S. In Egypt, many say that our annual billion plus economic aid to the autocratic Mubarek government was vital to keeping the peace in the Middle East. One could ask, however, why we should have to pay countries to do what is in their best interest, i.e. having peace in their region. And how could anyone take our democracy programs seriously in Egypt, when the Mubarek Government had to approve local NGOs that received U.S. Government funds?
With the Middle East in turmoil, now is a good time to take a critical look at whether and how we've achieved national security goals through our aid programs. We can't really know how much and what we should be giving to governments hostile to us or who can threaten our supply sources and economic stability if we don't examine the past.
We have a clear and new model for how to do foreign aid that can result in lasting development, but we've not asked the hard questions about our aid for foreign policy purposes. Nor have we come up with lessons learned from the success stories as welll as the Afghanistans, Vietnams, and Pakistans.
We might just learn that holding governments more accountable, promoting democracy and freedom without excuses of needing authoritarian regimes for stability, partnering with civil society, helping to create lasting local institutions, and evaluating our aid for results, in all countries is a prescription that works for both development aid and national security aid. As Nicholas Kristof puts it: "In the 21st Century, there's no realistic alternative to siding with people power." Open markets and open societies are two sides of the same coin, and our national security depends on both. We owe it to ourselves to figure out how best to protect America's interests by asking the hard questions on foreign aid for security.
Carol Adelman is a Senior Fellow at Hudson Institute and director of Hudson's Center for Global Prosperity. She served as a career foreign service officer for ten years and as an assistant administrator from 1988-1993 at the Agency for International Development (USAID).
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