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

A Short History of Aid

A Short History of Aid U.S. foreign aid has always been a multipurposed instrument. Foreign aid as we know it today began in 1947 as a tool of early cold war diplomacy to stabilize the governments and economies of Greece and Turkey in the face of communist pressures at home and abroad. Foreign aid gained prominence soon thereafter in the four-year, $13 billion Marshall Plan for Western Europe—motivated by both humanitarian and diplomatic concerns—to rehabilitate Europe after the war and prevent a slow recovery, especially in France and Italy, from leading to communist electoral victories. The Marshall Plan also sought to encourage Europeans to collaborate on important economic policy questions, helping to create the foundation for what was to become the European Union. Some also saw the Marshall Plan as motivated by U.S. commercial goals—to expand markets for U.S. exports in Western Europe. With decolonization and the spread of cold war competition to developing countries in Asia, the Middle East, Latin America, and Africa in the late 1950s and early 1960s, foreign aid was seen as a tool to reduce discontent generated by poverty and the consequent temptations of communism by spurring economic progress in these regions and addressing the social and political tensions created by rapid economic change. In 1961 USAID was created by merging several separate aid programs with the primary mission of furthering international development as well as U.S. diplomatic goals. Special efforts were made in Latin America (under the Alliance for Progress), and significant amounts of aid were also provided to Vietnam, Cambodia, and Laos to stabilize those economies during the war in Indochina. U.S. contributions to the World Bank and other multilateral aid agencies increased in the early 1970s, reflecting not only the increasing international focus on development goals, but also the expectation that the United States would lead in both multilateral and bilateral forums. 10 ❚ ORGANIZING U.S. FOREIGN AID During this decade, U.S. aid also became an instrument of peace making , especially in the Middle East where economic assistance to Egypt and Israel served as an incentive to maintain a ceasefire and work toward peace. Later, American aid was mobilized during the 1980s to promote political stabilization and development in Central American countries supportive of U.S. policies that challenged the Sandinista government in Nicaragua and assisted the government in El Salvador in its guerilla war. The methods used to deliver aid, whether to foster development or support diplomacy, also evolved. In the 1960s America financed balance-of-payments and government budgetary gaps and made investments in infrastructure, education, and health. In the 1970s the United States funded projects intended to meet the basic human needs of the poorest in developing countries (for example, primary health care and education, shelter, clean water and sanitation, and agricultural services) and in the 1980s promoted growth through economic policy reforms and investments in private sector development. In short, while the means may have changed, the goals of U.S. aid for the past forty or more years have been principally to further diplomatic goals, related both to the cold war and peace making in the Middle East, and to further economic and social development in poor countries. In addition, this assistance has traditionally provided food aid and other humanitarian relief during natural disasters such as the several severe droughts in the Sahel and the Horn of Africa during the mid-1970s and mid-1980s or manmade catastrophes such as the Biafra War in Nigeria of the late 1970s or the decades-long civil war in the Sudan. The end of the cold war did not so much remove foreign policy exigencies as a principal focus of aid-giving as shift the direction of foreign policy concerns. After 1991 promoting economic and social transitions in former socialist bloc countries quickly gained prominence. The intensi fication of global integration helped raise concerns about the international transmission of disease. In the United States, fears that environmental degradation abroad would affect health and quality of life ORGANIZING U.S. FOREIGN AID ❚ 11 around the world and in this country led to an increased emphasis on addressing transnational issues through aid. The spread of democracy in developing countries during the 1990s—especially in sub-Saharan Africa and Latin America—gave rise to the use of aid to promote democratic institutions. The many civil conflicts that persisted...