Another look at foreign aid
The bipartisan Commission on Security and Economic Assistance is currently studying the history, value, and potential of US foreign assistance. Once again the questions of whether foreign aid ''works,'' how much is ''needed,'' whether it is best administered on a bilateral or a multilateral basis, and whether it is truly in the US interest are to be given public scrutiny.
Does foreign aid work? Beyond a doubt. It can always be improved, and should be, but it is clear that infusions of foreign aid have in many cases made a decisive difference.
Foreign aid has contributed to the building of political and economic institutions and to the transfer and adaptation of important technologies. It has, on balance, augmented, not simply substituted for, internal savings. It has eased foreign-exchange bottlenecks, and it has speeded development.
Receiving aid is no picnic, either psychologically or politically. The fact that the recipients, especially the poorer countries, still want it so urgently, even when its use is subject to fairly exacting performance standards, is a pretty good sign that it has substantial value for them.
Is more official development assistance needed? Of course it is. Except for the United States, all other donors are steadily and significantly raising their foreign aid contributions. Yet for the remainder of this decade the prospective supply is far short of the priority needs.
Sub-Saharan Africa, for example, with more than half the world's poorest countries, has enormous needs. These countries, with average annual per capita incomes of less than $400, do not attract private foreign investment, and have little access to commercial or other nonconcessional borrowing. Foreign aid is their only potential source of outside funds.
Americans like to think that the US is a generous provider of foreign assistance. But the United States, which invented development assistance, is no longer holding up its end of the official development assistance effort. It is not enough to say that, because we are so large, it is our absolute input, not our relative input, that should be counted when one is talking about shared burdens - or that the poor countries' absorptive capacities are so limited they wouldn't know what to do with substantially more American aid. Of the 17 members of the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD), the United States is near the bottom of the list, when aid is measured as a share of GNP. And our ratio is going down, while that of other countries is going up.
Yet economic aid is a relatively small-money program. The whole program could be lost in the cracks and crevices of the defense budget. US official development assistance could be doubled simply by redirecting about one-fiftieth of the defense expenditures that are planned for FY 1986. This would, of course, not be easy to do. But is is clear that the issue is more one of priorities than of absolute shortages of resources.
Should our foreign aid funds be distributed bilaterally or through multilateral channels? A 1982 study by the US Treasury Department gave high marks to the multilateral development banks. It found their operations mostly efficient, well managed, conceptually and professionally sophisticated, yielding good returns, and consonant with US foreign policy interests. When aid is channeled through the multilateral development banks it is concentrated on the low-income countries which need it most; it is allocated sensibly among sectors; and it strikes a good balance between growth promotion and equity promotion. If these institutions have the resources to back up their advice, they are the best situated of all donors to encourage policy reform, especially those market-oriented policy changes in the developing world that the US administration rightly advocates.
Because of other countries' commitment to burden sharing, our participation in the World Bank and other multilateral aid agencies carry considerable leverage. Decreases in our aid program result in similar decreases in other countries' programs. But increases by the US would surely lever other countries' contributions upward.
Is economic assistance of any benefit to the US? The commission's mandate to study economic and security assistance is somewhat misleading. It suggests that economic assistance is something other than security-related assistance when, in fact, it is a major foreign policy tool for preserving and strengthening the global economic system.
Our security depends on keeping a whole set of subsystems - trading, financial, energy, food, demographic, ecological subsystems - reasonably benign. It depends on the maintenance of sufficient growth and equity in the poor, including the poorest, countries to keep the turbulence they project into the global system manageable. Foreign economic assistance is an important - and a comparatively cheap - tool for furthering our stake in this kind of systems security.
Unlike many other donor countries, the US does not have a strong constituency that recognizes and agitates for a large or growing foreign aid program. Yet, as is the case in many countries, a serious leadership initiative could turn the foreign aid issue around.
The needed leadership should be of a joint executive-legislative character; it should have the full and priority support of the president as well as of a few key congressional leaders. It should be bipartisan, since neither party will wish to have undivided credit for pushing foreign aid.
The amount of money involved is not large. All that is needed is the recognition that foreign economic assistance can and should be at the cutting edge of a broadening foreign policy which, along with its other goals, addresses our national interest in maintaining a global system that works as a first-order concern. On that basis, a powerful argument can be made.
The current bipartisan commission is ideally suited to exercising leadership in this area and encouraging a new foreign aid initiative. One can only hope that it does not miss the opportunity.