Better Foreign Aid
By Ambassador Mark Green and Rob Mosbacher | FEBRUARY 17, 2016
We begin this transition year in American politics at a time of anxiety about an increasingly dangerous world and the United States’ leadership role in it. As Congress and the large class of presidential candidates grapple with competing visions of how to face those challenges, the role of foreign aid and global development – typically an afterthought of national security debates – must be treated as an essential tool of our foreign policy.
When foreign assistance programs are properly designed and executed, they advance our national interests through humanitarian relief, alliance-building, and economic development. Yet even as the need for our leadership in development becomes more acute, rapid changes to the global economy and political environment are rendering traditional development assistance decreasingly relevant to the fight against global poverty and less effective at advancing our larger policy goals.
When President Kennedy signed the original Foreign Assistance Act in 1961, aid constituted 70 percent of capital that flowed from the United States to the developing world. It now accounts for only nine percent, dwarfed by private capital flows of investment and remittances. This shift in capital flows is due not so much to a decline in foreign assistance, but instead to the remarkable increase in investment and economic growth in the developing world. It is good news for both the United States and the countries we seek to help.
But this growth and shift in capital flows also means that the nature of our aid’s leverage has shifted significantly over time. It suggests that some of our traditional approaches to development are stuck fighting the last war against global poverty and not the current one. These approaches still see our “development strategy” largely as an “aid strategy,” even as it has become clear that the two are not interchangeable terms. To be clear, no one is suggesting that aid is irrelevant or unimportant – because it is both relevant and important. But an approach that focuses only on aid fails to embrace and take advantage of the transformative potential of private sector economic growth.
At home, even though our aid makes up a tiny portion of the federal budget, many in the public arena (especially conservatives) are reluctant to support foreign assistance. In our experience, this reluctance is less an objection to the idea of providing aid and more about questioning whether traditional aid programs are really effective. Educating policymakers and opinion leaders about how reforms in foreign assistance can serve America’s (and the world’s) best interests is essential.
The Consensus for Development Reform (CDR), for which we serve as co-chairmen, believes that aid is an essential element of an effective foreign policy. We also believe there are important reforms that will yield better results for those we help and more faithfully serve our national interests. These reforms can also help policymakers demonstrate both that they are good stewards of taxpayer money and that the America’s development strategy reflects our values and fills a critical role globally.
CDR proposes a simple, clear approach to development reform that begins first with the question What do we want our aid to accomplish? We have identified four principles for answering this question and providing a path to make our development assistance more effective and build public support for it.
First, our aid must promote economic opportunity and growth. Private sector-led economic growth is the only sustainable solution to global poverty and our foreign policy must embrace it as our overarching development goal. Unlike America’s competitors, we have an unrivaled ability to drive growth, with clear benefits abroad and at home. To do so we must reform and modernize our foreign assistance to incentivize growth, reduce barriers to trade and investment, and expand economic opportunity.
Second, we must reward effectiveness and commit to identify and reinforce what works and quit doing what doesn’t work, regularly and systematically determining which aid programs are delivering real results and supporting strategic objectives. Funds should be redirected toward more effective programs, thereby demonstrating at home a judicious use of taxpayer resources and demonstrating abroad that our support requires dedication to real results. Congress has already shown an appetite for such a constructive aid reform agenda, with the Foreign Aid Transparency and Accountability Act moving through both chambers now. The legislation, which has been led by Sen. Marco Rubio (R-Fla.) and Rep. Ted Poe (R-Texas) and enjoys strong bipartisan support in the Senate and House, requires improved performance measurement and transparency for U.S. foreign assistance programs.
Third, our aid should aim to build institutions that are effective, accountable, and ultimately replace aid. Such democratic institutions and the rule of law are essential for broad-based economic growth and the establishment of prosperous middle class-based societies. Building domestic capacity hand in hand with responsibility for outcomes – where a government can raise revenues, address citizen priorities, and be held accountable for results – is true country ownership and the only success-based “exit strategy” from foreign aid for donor and recipient alike.
Fourth, we must maintain our humanitarian efforts that have been the cornerstone of the United States’ global leadership for 70 years. Our humanitarian leadership commands broad public support at home and creates lasting goodwill abroad, demonstrating to the world that Americans are generous, innovative, problem solvers, and able to mobilize global action. President Bush built a global legacy with innovative, ambitious humanitarian programs with clear accountability and performance standards. Those successes, reforms, and lessons can be applied throughout our foreign assistance.
Effective development assistance is an essential part of our global leadership, but our approach requires a clearer sense of purpose in what it seeks to achieve and greater relevance to the new economic and political landscape. Principle-based reform is an opportunity for greater relevance to the challenges of those we seek to help and a better use of taxpayer money.
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Mark Green served in the House from 1999 to 2007 and was U.S. ambassador to Tanzania from 2007 to 2009. He is president of the International Republican Institute (IRI). Rob Mosbacher was chief executive officer of the Overseas Private Investment Corporation and chairs the board of directors for the Initiative for Global Development (IGD). The two serve as the co-chairmen for the Consensus for Development Reform.