Organizing U.S. Foreign Aid: Confronting the Challenges of the Twenty-First Century

The Mission and Purposes of U.S. Foreign Aid

for three years or more are not considered official development assistance , but rather official assistance (OA). Thus the DAC would not include aid to countries such as Israel, Russia, Ukraine, the Baltic countries, Poland, and Romania in its definition of ODA. Because the DAC’s distinction between ODA and OA underestimates the full development assistance effort of the United States, this study includes both OA and ODA in its examination of U.S. international assistance. Funding for cultural exchanges, covert intelligence action, export promotion , the purchase of military equipment, and training or peacekeeping missions will not be counted as international assistance. Aid can be provided as cash grants, concessional loans, debt cancellation or relief, or in the form of commodities such as food or medicine . It can fund discrete projects, such as road construction; it can be used to finance research, technical assistance and training for individuals in recipient countries; or it can be provided as an incentive for recipients to adopt policies favored by the donor. In this last case, aid is often provided as “non-project assistance,” in the form of budget or balance-of-payments support. In 2003 the United States provided more than $16 billion in international assistance. Total aid worldwide (net of repayments) amounted to approximately $88 billion.7 Since 1946 the United States has provided nearly $350 billion in international assistance, making it the largest single source of international assistance over the past half century . At the same time, the United States has long been the smallest donor relative to the size of its economy, as figures 1 and 2 show.8 The Mission and Purposes of U.S. Foreign Aid People often complain that the mission of American foreign aid is unclear. In fact, the missions of public policies and programs are often unclear because they tend to be so general. For example, the closest ORGANIZING U.S. FOREIGN AID ❚ 7 thing to a statement of mission on the U.S. Agency for International Development website is the following: The U.S. Agency for International Development (USAID) is an independent agency that provides economic, development, and humanitarian assistance around the world in support of the foreign policy goals of the United States. On the other hand, the Department of State’s mission is to Create a more secure, democratic, and prosperous world for the benefit of the American people and the international community. 8 ❚ ORGANIZING U.S. FOREIGN AID 5 10 15 20 1950 1955 1960 1965 1970 1975 Tqa 1980 1985 1990 1995 2000 Billions of dollars Sources: U.S. Agency for International Development (Greenbook and USAID website, Budget and Policy [www.usaid.gov/policy/budget/]). a. TQ = transition quarter when the federal government changed its fiscal year. FIGURE 1. U.S. Financial Aid—Official Development Assistance and Official Assistance, 1946–2003 Neither of these statements provides much enlightenment, especially with regard to the mission of foreign aid. For that, we need to look at how aid is given, to whom, and for what purposes. We need to take into account what donor governments say they are trying to do as well as what they actually do with their aid. Aid for better-off countries or for countries with extremely corrupt or incompetent governments is likely to be for purposes other than development. Aid to poor countries with little geostrategic value to the donor government is likely to be for development or humanitarian purposes. In many cases, a mix of motives drives aid giving. ORGANIZING U.S. FOREIGN AID ❚ 9 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 Percent UN target: 0.7 Average country effort: 0.42 Norway Luxembourg Denmark Sweden Netherlands Portugal France Belgium Ireland Switzerland United Kingdom Finland Germany Canada Spain Australia Austria New Zealand Greece Japan United States Italy Total FIGURE 2. DAC-OECD Financial Aid—Official Development Assistance as Percentage of Gross National Income, 2004 Source: OECD, April 11, 2005. ...