Abstract
Foreign assistance to developing countries has been a norm for the western world especially after the Second World War, as an attempt to assist in building and enhancing non-developing and developing countries around the world to encourage social economic growth and sustainable development. Unfortunately U.S. Foreign assistance has over the years failed to meet its expected goals and objectives of promoting democracy, economic development, social growth, youth empowerment, education and health-care reform, amongst others in developing and non-developing economies, it has instead in most cases contributed to exacerbate it. In the implementation of foreign aid assistance, certain guidelines and procedures must be adhered to ensure successful fulfillment of the goals and expectations of the aid where the giver and recipients are mutually beneficial. These processes can be realized by a change in policy in the current framework of aid distribution that puts emphasis on country ownership, transparency, accountability, equity and fairness, and independent evaluation of progress for development.
Introduction
The Foreign Assistance Act of 1961 formalized the extent and process for implementing foreign assistance to countries. The act promulgated that, Congress’ intent in foreign assistance is “…to promote the foreign policy, security, and general welfare of the United States by assisting peoples of the world in their efforts toward economic development and internal and external security, and for other purposes.” The act foresaw the need for the United States as a World Power and a developed nation to assist other countries that are not at the same level of political, economic, and technological development in singularity or in collaboration with other countries or organizations to provide the best assistance to help them reform and develop, and according to the act, “eliminate hunger, poverty, illness, and ignorance.”
The Foreign Assistance Act of 1961 further asserts that, the principal objective of the foreign policy of the United States is, “…the encouragement and sustained support of the people of developing countries in their efforts to acquire the knowledge and resources essential to development and to build the economic, political, and social institutions which will improve the quality of their lives.”
Prior to the Foreign Assistance Act of 1961, the United States has been involved in foreign assistance to other countries especially those that they have mutually economic, political, and nationally security interests in protecting. These mutual interests have led them to provide assistance or aid to these countries with the hope of protecting their own interests and to advance society. Foreign assistance after World War II often called the Marshall Plan is an example, which led largely to the formation of the World Bank, of which the U.S. is a major contributor, to provide loans and assistance to rebuild Europe after the devastating effects of the war.
The Marshall Plan, initiated by former U.S. Secretary of State George Marshall after World War II was done with the hope of rebuilding Europe after the devastation of the war, providing approximately $13 billion over four years, up from a proposed $5 billion, and amounting to between 5 and 10 percent of the federal budget over the recovery program period, or about 2 percent of the gross national product over the same period. This staggering amount represented a huge portion of U.S. budget; a huge variation from current allocations for foreign assistance which was approved overwhelmingly by Congress under the Economic Cooperation Act of 1948 due mostly to lobbying efforts convincing the public and private sector that the financial commitment would not pose a risk to the economic sustainability of the United States.
The successful implementation of the Marshall Plan required and led to the formation of the Economic Cooperation Administration (ECA), which consisted of an administrative office headed by an administrator in Washington, D.C., a special representative in Paris, and local missions in each of the participating countries of Europe. The Economic Cooperation Administration (ECA) was constituted to have complete control over operational matters in providing rebuilding assistance, requiring active interaction with the U.S. Department of State in shaping policy relating to effectively implementing rebuilding and foreign assistance aid. The goal and objective of the ECA amongst its bodies was to revitalize production in the economy, help resolve complicated trade and financial problems, and manage other tasks involved in Europe’s successful recovery. Hence, this required the sourcing of a pool of experts and practitioners with professional working experience in the areas of business, labor, agriculture, and the professions to help lead in the rebuilding and development effort.
The Marshall plan also required that participating countries in the program take initiative and play a major role in their own recovery; this was met with the establishment of the Organization for European Economic Cooperation (OEEC), with the mission in joint partnership and agreement with ECA to “devise annual economic recovery plans, optimal methods to allocate and use American aid, make currencies convertible for the benefit of the economy, and loosen restraints in terms of barriers and policies on production and trade.” With the influx of American imports of consumer goods and manufactured products, other forms of American Aid Assistance, and the development and implementation of strong economic policies in the participating countries led to the revitalization and resurgence of the European economy which can be verified in the dramatic increase in gross national product, agricultural production increase from prewar levels, and industrial output increase by 40 percent from pre-war levels.
Analysis of Foreign Aid Assistance Implementation Now
The implementation of U.S. foreign assistance is initiated principally by the United States Agency for International Development, an independent agency created by an executive order of the United States Government as a result of the Foreign Assistance Act of 1961 and operating on a budget allocation of less than one-half of 1 percent of the federal budget, armed with the objective “to extend assistance to countries recovering from disaster, trying to escape poverty, and engaging in democratic reforms,” through supporting “…economic growth, agriculture and trade; global health; and, democracy, conflict prevention and humanitarian assistance in Sub-Saharan Africa; Asia and the Near East; Latin America and the Caribbean, and; Europe and Eurasia.”
USAID as the principal government agency that coordinates U.S. bilateral development and humanitarian assistance to foreign countries in operating and implementing its mission works with other agencies through collaboration with the National Security Council’s Policy Coordination Committee (PCC), including representatives from key departments, offices and agencies represented in the NSC to provide policy analysis and ensure the timely response to policy decisions initiated by the President dependent on legislation and appropriations authorized by Congress. USAID along with 50 separate government units implement the aid-related activities it seeks to promote overseas.
USAID promotes its development activities focusing on key areas including promoting democratic governance, driving economic growth, improving environment and health, mitigating and managing conflict, providing humanitarian assistance, and accounting for private foreign aid through programs and projects in partnership and collaboration with public and private enterprise through contracts, grants, cooperative agreements and purchase orders. These agencies include the Bureau of Population, Refugees, and Migration; Immigration and Naturalization Service (INS); United States Trade Representative (USTR); Bureau of Oceans and International Environmental and Scientific Affairs; Department of Treasury International Programs; Bureau for International Narcotics and Law Enforcement Affairs; etc.
U.S. official assistance aid which currently stands at about $10 billion a year, has risen by 50% to about $15 billion in 2006 and will likely increase some more, mostly due to the recently announced Millennium Challenge Account, a major new policy initiative announced by President Bush in March 2002 to reform aid assistance to select qualifying countries pending them meeting some provisions. This initiative and others have funded projects including Afghanistan Road Initiative, a plan that has already been implemented since 2003 to construct a highway from Kabul to Kandahar; the Africa Education Initiative, a project to provide access and opportunity for primary school education for 925, 000 African children; the Global Fund to Fight AIDS, Tuberculosis, and Malaria, a program in Morocco to provide 3, 400 HIV victims voluntary counselling and testing, and providing antiretroviral therapy for about 583 people; and under the Initiative to End Hunger in Africa formed a partnership between about 157 public and private agencies to empower citizens, strengthen markets, improve technologies, and better manage strategic planning goals for the future. These programs among others continue to contribute in sustaining the goals and objectives of U.S. foreign policy intention to encourage democracy, strengthen markets, broaden educational and healthcare opportunities and access for people, and empower citizens of these countries to be worthy assets and major contributors to their countries’ success and development.
Challenges in Foreign Aid Implementation
The United States works to implement the vision of its foreign assistance aid goals and objectives not only through bi-lateral relationships like USAID but also through multi-lateral partnerships and collaborations. These collaborations or partnerships take the form of contributions of knowledge, tools, and resources to such organizations as the World Bank, International Monetary Fund, United Nations, African Development Bank (AfDB), United Nations International Children Education Fund (UNICEF), World Health Organization (WHO), the World Trade Organization, etc to promote development in certain regions.
Foreign aid assistance to developing regions whether bilateral or multilateral have been found to be an ineffective and inefficient way of promoting development in developing and non-developing regions due to the problems of mismanagement, lack of ownership, misappropriation, lack of accountability and transparency, poor training and understanding on how to implement, investment in the wrong initiatives, encroachment by the West in forcing their plan on the assisted, and over emphasis on rules and stipulations that limit the implementation of the aid program. According to the 6th Edition of the Cato Handbook of Policy, it reiterates what most economists have echoed, that most foreign aid assistance as expressed by Paul Coulier, a renowned Oxford Economist that, “…No one who has seen the evidence on aid effectiveness,’’ even a bipartisan Meltzer Commission of the U.S. Congress found that 55 to 60 percent of the World Bank projects failed based on the their own evaluations. The same report found that most government to government aid showed as reproduced and modified here that, “there is no correlation between aid and growth (in development), that aid that goes into an area with poor policy framework doesn’t work and exacerbates debt, that aid provided on the condition on market reforms have failed.”
A Congressional Budget Office report on foreign aid and development showed the inefficacies of current foreign aid to developing or non-developing nations to encourage development and economic growth. The report showed that in the presence of political instability, lack of honest and competent government officials, weak government institutions, and the presence and influence of strong domestic policies affect economic development. A case study on foreign assistance to Pakistan showed both positive and negative effects of foreign assistance on developing economies. The United States has provided substantive foreign aid to Pakistan through both bilateral and multi-lateral aid sources especially after the aftermath of events of September 11 when Pakistan became an important ally of the U.S. in their way on terror. Foreign aid assistance in Pakistan according to the case study has provided both positive and negative results; positive in the sense that, “…it helped boost GDP through structural transformation of the economy, provided foundation for industrial and agricultural sectors, provided technical assistance through exchange and investment of expert talent and resources, policy advice for reform and development of modern technology, assistance in reducing budget deficits and ensuring the funding of projects for social sector development.” The conclusion is that the overall impact of the aid on the economic development was positive. On the negative analysis it showed that aid replaced domestic savings thereby increasing the debt burden. A detailed analysis of this case here shows that aid failed in large part due to lack of strong institutions and incentive to sustain the development due to lack of sufficient monetary, fiscal, and other policies to regulate sustainable growth and development. Pakistan, a non-democratic, political unstable region, though having experienced some growth due mainly to the positive effects of globalization has not advanced beyond the expectations of the huge aid provided to it over the years, instead it is stuck with a huge debt burden that is disrupting economic productivity.
Another case study is presented in the much acclaimed book, “The White Man’s Burden,” by renowned economist William Easterly on Liberia. Liberia, a country ranked at the top 5 most corrupt countries in the world and has experienced political instability throughout its history, even more so when it collapsed into anarchy in 1985 and taken further into oblivion with the rise of dictator Charles Taylor received mass influx of aid. The result of the aid is that Liberia has experienced one of the worst per capita growths amongst countries, after being the recipient of most of the aid during the period of 1980-2002. Most of the aid that came to Liberia went to brutal and corrupt dictators who used the funds to suppress their people, pursue wars and instigate violence, fatten their pockets and those of their buddies, destroyed the economy and every institution that supported growth and development, and generally wasted tools and resources to fund non-working or obsolete goals and objectives. The failure attributed here and is evident in these cases and others show the danger of foreign assistance when unfair and unrealistic standards and expectations are placed on the aid, no level of accountability or evaluation of progress, no monitoring to ensure positive impact of the aid, unstable governments, and weak political and economic institutions.
Recommendations- The Way Forward
In order to transform and learn from these failures in foreign assistance to developing countries, certain recommendations are encouraged that will form a part of a new U.S. foreign assistance framework. Some recommendations for example by the Cato Institute, calls on congress to eliminate USAID as well as government to government aid assistance; withdraw and stop contributing to the World Bank and the five regional multilateral development banks; prevent foreign aid for use as reward for market reforms in the developing world; forgive the debts of heavily indebted countries on certain conditions, etc. Alternatively, a viable option that has shown promise of working and has been heralded by most experts and institutions calls for promoting market reforms in the developing countries by encouraging assumption of government ownership for needed fiscal and monetary reforms for development, assistance with knowledge and resource capital to facilitate the development, calling for democratic institutions, challenging human rights violations and corrupt and incompetent officials, and encouraging accountability, transparency, and evaluation of country progress in development. Further, assisting in the development of the private sector; providing debt relief to qualifying countries especially HIPCs; provide micro financing through the private sector to facilitate development; support humanitarian assistance when needed and required; redefine and reform methods and process bilateral and multilateral aid is administered; and promoting foreign direct investment, among others.
Implementation of Policy
To implement this policy, a reform of the institutions and agencies that are involved in administering foreign assistance aid is required. USAID the foremost agency in implementing the country’s foreign assistance aid will have to take a stronger and more responsible leadership role in this issue. USAID as a government agency would have to change and reform its tactics to adjust and address the problems that have been presented above. In this regard, it is suggested that while USAID is an independent government agency, it should not be housed under the State Department. USAID can and should serve as an independent agency with knowledge and expertise to support all of the United States foreign assistance aid. USAID will continue to provide bilateral aid and work with organizations and institutions like the World Bank, UN, etc to provide multilateral aid assistance. The President will continue the tradition of appointing the General Administrator with approval of Congress. The administrator must be an expert in foreign policy administration, proven and tested leader that can liaise between the administration and Congress on the proper procedure and process to administer aid optimally, must possess knowledge and understanding of regional politics, an expert in human relations and capacity building, and able to work appropriately with the different cabinet departments as required to provide the best knowledge and expertise required to implement the aid.
The reformed UNAID will be a searcher not a planner, that is, the new agency will actively seek out opportunities to invest whether individually or in partnership with other public and private enterprise, to build, develop, and contribute to the implementation of the administration’s foreign assistance aid goals and objectives. Working with Congress and the administration, USAID will present annual and periodic reports to Congress on its activities and the progress it has made. USAID in seeking to implement or provide foreign aid assistance must be invited and requested to help by the recipient government. USAID must assess the situation before commitment to ensure that the recipient country is a democratic country, will take ownership of their own reforms, promote good governance and advance an atmosphere for strong and effective monetary and fiscal policies to exist, promote the sustainability of good institutions that will support economic growth and development, promote the social well being of society (health, education, professional development, etc), and will seek to invest in human capital. USAID must not force their planned reforms on the countries either as a pre-condition or as a condition for aid but must work closely with the country as needed and required to access best practices and solutions that meet the desires and expectations of the recipient country based on their culture and tradition. USAID must also work with private enterprise especially in unstable and undemocratic governments to build morale, develop the private sector, empower the citizenry, and provide the best help and assistance to those who need the help and should receive the help. USAID must have staff that will work as partners with aid recipients to access how aid is being utilized, how much positive impact it is making, what changes may be needed to implement, and how best to continually provide aid to people in the most optimal and cost-benefit method, as well as to obtain a lessons learned approach to improve in the future. USAID will work in bilateral and multilateral fashion with other agencies, institutions, and organizations to provide knowledge, expertise, tools, and resources to countries and people that need it most, especially during times of disaster to help them recover, advance, and be better prepared for future situations.
Conclusion
Foreign assistance aid is an important tool to promote and advance the goals and objectives of the United States of ensuring a safe, and as the act states, to help “…developing countries in their efforts to acquire the knowledge and resources essential to development and to build the economic, political, and social institutions which will improve the quality of their lives.” A strong foreign assistance aid policy can be achieved and sustained, when the U.S. in its implementation of its foreign policy activity reforms to reflect the dynamics of the development community and access the political stability climate of recipient aid countries; the motivation and justification for aid; the nature of the social structure and government institutions in the recipient nations; the receptiveness of the recipient nations to take ownership for reform and be accountable and transparent in their implementation; the level of knowledge and technical expertise of the recipient nations to implement the reforms expected of the aid; and the ability of the private sector to absorb the reform, empower citizens, and advance the social well being of its people.
The Marshall plan heralded a new moment in U.S. foreign policy direction. Lessons learned from the past must be used to make the future better. It is the responsibility of the United States to contribute as the act promulgates to, “eliminate hunger, poverty, illness, and ignorance.” It can be achieved when the U.S. reforms its foreign assistance aid, if and when provided, to reflect the times we live in and give more power to the recipients to implement the reform that works best for their economic, social, and political well being.
