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Could It Be that Both Parties Agree on Foreign Aid?

Carol Adelman

At the 2012 Clinton Global Initiative held in New York City, Secretary Hillary Clinton pointed out the changes in the developing world and the rise of private financial flows. Similarly, the next day at the same venue, Republican presidential nominee Governor Mitt Romney laid out his vision for foreign assistance. Among his comments, he too pointed out how the developing world has changed and applauded the involvement of the private sector through partnerships “public and private, for-profit and nonprofit, charitable and commercial. The Center for Global Prosperity (CGP) was pleased to notice that both speakers used figures published in the Index of Global Philanthropy and Remittances to make their points, with portions of their speeches sounding uncannily similar.

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It is no news to the readers of the Index of Global Philanthropy and Remittances that private flows from the United States to developing countries far outpace U.S. Official Development Assistance (ODA). In fact, in 2010 (the latest year for which complete figures are available), U.S. private flows in the form of philanthropy, investment, and remittances amounted to $296 billion while U.S. ODA was $30 billion. Furthermore, in 2010 private flows from all OECD donor nations to developing countries made up some 80% of total economic flows, while ODA amounted to 20%. (see graph)

For nearly a decade, CGP has stressed the value of private resources in international relief and development. Fortunately, CGP’s long-time push for better engagement between government aid and private actors has not gone unheard. As was demonstrated at this Clinton Global Initiative, key figures on both sides of the aisle touted the importance of private actors in development. With the ongoing presidential campaign, it’s refreshing to see both parties agree at least on one thing. The chart below shows the similarities between Obama administration’s and Governor Romney’s foreign aid strategies.

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Secretary Clinton went on to mention three objectives of the Obama administration’s foreign aid strategy: moving from aid to investment, ensuring country ownership, and finally, “putting ourselves out of business.” The last point has been CGP’s mantra for nearly a decade and hearing it said on stage was music to our ears. The Secretary clarified that she looks forward to “the day when our development assistance will no longer be needed, when it is replaced by strong public institutions and civil societies, when private sector investments and trade are robust in both directions, and people have the chance, through their own hard work, to build better lives for themselves and their families.”

Romney made similar remarks on the important role of the private sector, although his speech focused more on the role of private investment and free enterprise as a means to a free society. The Governor went on to state the three objectives of aid: humanitarian relief, diplomacy, and improving people’s lives. To reach these objectives, the governor proposes “Prosperity Pacts” which would provide aid packages to countries that have removed barriers to investment and trade. Thus, countries after removing barriers would theoretically open their markets to foreign investment and additionally receive U.S. aid for rule of law and institution building. Romney’s “Prosperity Pacts” suggest a similar set up as Millennium Challenge Corporations’ (MCC) compacts. However, instead of meeting the various scores on health, corruption, education, and other indicators required by the MCC, Romney’s plan calls for countries to remove trade barriers and improve their investment climates.

After months of debates over taxes, budgets, and jobs, it seems that foreign aid has become the least partisan matter. Both parties agree that in the vast sea of private resource flows, government aid is a minority shareholder and that government aid needs to be transformed. This is good news for prosperity in developing countries.

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