Small numbers, big story

Development Policy13 Apr 2010Michael Soussan

Lifting US aid out of the past

The Obama administration faces the unenviable task of persuading sceptics of the need for a revamped and relevant foreign assistance policy. But is the administration’s message falling on deaf ears?


  • Originally shaped by Cold War ideology, US foreign assistance policy is now driven by a narrow vision of the country’s global security objectives, which has resulted in a large share of earmarked funds being allocated to just five countries.
  • US policy needs to be radically reassessed and realigned to address broader needs such as climate change and its impact on poverty and migration, the food crisis and global health challenges.
  • The creation of a centrally managed agency and a cabinet-level post to oversee US foreign assistance programmes would greatly increase efficiency and accountability.
  • The Obama administration must sell the concept of foreign assistance to sceptical taxpayers and partisan critics if it is to succeed in demonstrating America’s commitment to global development.

In a bid to fulfil his campaign promise to elevate America’s commitment to international aid and development, President Barack Obama recently asked Congress for a 3% increase in the foreign assistance budget for the fiscal year 2011. Occasionally, small numbers tell a big story. Especially when they forecast the reversal of a critical historical trend in the spending habits of the world’s largest economy.

In absolute terms, the United States remains the world’s largest provider of economic assistance dollars, with a proposed 2011 budget of US$36.4 billion for overall development-related spending, to support programmes in 153 countries. In relative terms, however, the share of America’s budget spending on global aid programmes has shrunk dramatically over the past half century, sinking below those of most Western European countries. Today, America ranks seventeenth, i.e. near the bottom of the Commitment to Development Index of the world’s 22 richest economies.

What went down may go up again

This slide down the scale was accentuated by the end of the Cold War, when the implosion of the Soviet Union suddenly left the United States in a position to reconsider the ideological rationale behind its foreign assistance strategy. For nearly half a century, America’s economic assistance programmes had been shaped by one overarching political objective: to contain Soviet influence and roll back communism throughout the world.

Stripped of its Cold War rationale, the United States suddenly found it easier to assess the true impact of many of its aid programmes. It found that much of the money it had spent propping up anti-communist dictatorships in Central America, or rebel groups like UNITA in Angola, had done more to inflate the Swiss bank accounts of corrupt opportunists than to boost sustainable economic development. On the positive side, this awakening sparked a renewed effort to tie future aid to measurable efforts to promote democracy.

Ironically, America’s new emphasis on good governance abroad was offset by less than exemplary governance at home. Two decades since the fall of the Berlin Wall, Washington has yet to replace the Cold War-inspired legislation that has governed its foreign assistance strategy with an updated policy framework. Until this failure is addressed, experts charge, it will continue to hamper the overall coherence of America’s approach to foreign aid.

The United States currently gives roughly as much to its top-five aid recipients – Iraq, Afghanistan, Egypt, Israel and Colombia – as it does to other developing countries. The only country that is set to join this exclusive club is Pakistan, which has become a reluctant host to much of the Taliban’s surviving leadership structure. This stark imbalance is certainly not driven by any assessment of actual needs as they exist around the globe today but by a narrow conception of America’s global security objectives.

The US Agency for International Development (USAID), created by John F. Kennedy in 1961, has never denied the role US national interests play in shaping its resource allocation strategy. In the agency’s own words, ‘US foreign assistance has always had the twofold purpose of furthering America’s foreign policy interests in expanding democracy and free markets while improving the lives of the citizens of the developing world’. From the postwar Marshall Plan to this day, American assistance dollars have indeed been closely pegged to the country’s foreign military deployments and the perceived hierarchy of threats to its national security interests. After US reconstruction dollars had helped lift up the economies of Western Europe and Japan, much of America’s aid to the developing world focused on supporting so-called friendly regimes such as the Shah’s Iran or Suharto’s Indonesia, countries deemed to have strategic value within the context of global superpower rivalry.

Half of America’s aid dollars now flow to only a few countries, some of which (notably Iraq and Afghanistan) remain notoriously corrupt despite their recent forays into democratic governance. Not surprisingly, this has done little to convince US taxpayers to change their minds about the overall effectiveness of foreign aid programmes. According to a Pew Research poll in June 2009, foreign aid was the most unpopular item in the national budget, with 33% of Americans expressing a desire to see it reduced.4 Therein lies the key challenge now facing the Obama administration.

The political landscape

The US Foreign Assistance Act of 1961, which was designed, in Kennedy’s words, to help ‘countries that are on the rim of the communist world and under direct attack’, is incompatible with twenty-first-century needs. Critics of US aid policy argue that it needs to be abandoned in favour of new legislation that focuses on issues like terrorism, climate change and its impact on poverty and migration, the food crisis and a variety of global health challenges.

It may, of course, be wildly optimistic to expect a country that had such difficulty reforming its own healthcare system to act decisively on the global health front. Nonetheless, these new priorities have begun to influence thinking in Washington in recent years and have now made their way into Obama’s 2011 budget proposal to Congress. If the proposal survives the increasingly partisan mood on Capitol Hill (which is far from certain at the time of writing), it may set the stage for wider reforms on the foreign assistance policy front. And even if some of Obama’s initiatives are opposed, they will not have been submitted in vain if they manage to at least spark a renewed (and long overdue) public debate that highlights the need for change Americans can believe in on the foreign assistance front.

The ‘good news’, according to Todd Moss of the Center for Global Development, a Washington think-tank, is that ‘the new international affairs budget, by being placed within the broader national security budget, is being exempted from the freeze on discretionary spending’, which previously shackled US aid programmes. The bulk of the increases will go to Afghanistan, Pakistan and Iraq, three ‘frontline states’, as Moss calls them, that already account for about one-fifth of the total US foreign operations budget. ‘This leaves about US$2.5 billion in new money to be spread across anything new the administration wants to do’.

Most of it is expected to go to food security initiatives and modest increases in global health investments and climate change, while an additional US$900 million will go to increase America’s contribution to international financial institutions. Moss describes this move as a ‘sensible response to the global financial crisis and its impact on poor countries’. He warns, however, that Obama’s budget proposal remains modest, and may only ‘add to the growing impatience among developmentistas who had been expecting so much more from an administration that had made such lofty promises about U.S. leadership in the fight against global poverty’.

True enough, the US president barely mentioned foreign aid and development at all in his first address to Congress in January 2010. It also took his administration over a year to appoint a new chief for USAID, which certainly does not reflect a high sense of urgency when it comes to reshaping America’s foreign spending apparatus. At the same time, pressure is growing within conservative circles to promote new, across-the-board cuts in US foreign aid. ‘We’re Broke, So Let’s Give Our Money to Foreigners,’ writes Alan Caruba, in a widely re-posted article that reflects the growing isolationist mood currently shaping the Republican ‘Tea Party’ movement. The notion that America, the single largest money borrower in the world, with the highest debt-to-earnings ratio to match among the world’s largest economies, can ill afford to send money abroad at a time when its own economy is at risk, is not without resonance with American voters in the current climate. Given widespread expectations of Republican gains at the polls in next October’s mid-term elections, for now the best way for Obama to prioritize development assistance may be to move his agenda forward a few small steps at a time.

Selling foreign assistance

If the Obama administration really wants to improve the overall coherence and effectiveness of its foreign spending, it will need to find new arguments to convince a sceptical American public. This, in turn, will require an honest assessment of the shortcomings of America’s current foreign assistance framework.

For inspiration, the White House may wish to turn to a milestone 2008 report by the Modernizing Foreign Assistance Network (often referred to as the Wye River Consensus Group), an umbrella organization whose members include some of the most prominent thinkers and professionals in the development community (including Gayle Smith and Steve Radelet of the CGD, Brian Atwood, Lael Brainard, Francis Fukuyama, Ray Offenheiser, Larry Diamond, Stewart Patrick and Charles MacCormack). Indeed, their assessment pulls no punches.

According to the report, U.S. foreign assistance is allocated to 24 government agencies and 50 programmes, many of which have similar functions. This means that, unlike, say, Sweden or Denmark, where international aid is managed centrally by foreign ministries, the US State Department is dependent on a myriad of agencies that report to various departments to execute aid programmes. The group of experts also laments the fact that in ‘the executive branch, there is no single person, office or department with a mandate to coordinate these programmes, promote policy alignment or, importantly, to be accountable for the efficient and effective expenditure of taxpayer resources’. White House leadership, they say, is clearly needed, as is ‘a nimble and effective foreign assistance system’, employing ‘sufficient numbers of highly-skilled personnel who are coordinated across government, who articulate clear jurisdiction and who are governed by institutional arrangements that ensure transparency, effectiveness and efficiency’.

Is this just a polite way of saying that current US aid organizations perform with an alarming lack of transparency, effectiveness and efficiency? In Iraq alone, the USAID-led reconstruction effort lost track of nearly US$8.8 billion due to inefficiencies and bad management. Stuart W. Bowen, director of the Office of the Special Inspector General for Iraq Reconstruction, notes that the Coalition Provisional Authority ‘did not establish or implement sufficient managerial, financial and contractual controls to ensure that funds were used in a transparent manner’. Ironically, this happened at the very same time that the US Congress was investigating massive fraud under the UN Oil-for-Food programme, from which the US$8.8 billion in question had been transferred in the first place.

The Wye River Consensus Group argues that the best way to improve the accountability of US foreign assistance would be to establish a cabinet-level post to oversee the implementation of all US aid programmes and help lead an effort to redraft the Foreign Assistance Act from scratch so that it better reflects contemporary challenges.

Thus far, the White House has remained shy about adopting recommendations from its think-tank community. But in a speech on 10 January 2010, US Secretary of State Hillary Clinton signalled that she had got the message about the need both to reform and raise the profile of US foreign assistance. She also outlined her ‘3D’ strategy, centred on Development, Diplomacy and Defence. One might conclude that she is proposing a massive reallocation of money, given the stark imbalance between US defence and development budgets. Not so, we learned from Obama’s recent budget proposal, or, at least, not yet.

But some analysts, like Sarah Jane Staats of the Center for Global Development, have opted to put a positive spin on the new proposals. ‘Is this a development-friendly budget? Yes. Does it elevate development alongside diplomacy and defence in a national security framework? Yes. Was the development community hoping for more? Of course. But in my mind, the fact that the international affairs budget wasn’t thrown to the wayside and is instead presented as part of critical national security spending and gets a modest increase is significant.’10

Questions remain about how Clinton’s new objectives will be implemented in practice. She may have raised expectations higher than future budgets can accommodate, but at least her ambitious agenda stems from a clearly articulated vision.

As she shared her rationale for elevating development to a central pillar of US foreign policy, Clinton said: ‘We cannot stop terrorism or defeat the ideologies of violent extremism when […] young people see a future with no jobs, no hope and no way ever to catch up to the developed world. We cannot build a stable global economy when hundreds of millions of workers and families find themselves on the wrong side of globalization, cut off from markets and out of reach of modern technologies.’

While such language does a good job of massaging the ears of professionals within the development community, what kind of real appeal does it have to the average US taxpayer? Will it make sense to Joe the Plumber?

The Obama administration cannot assume that Americans will easily be sold on the proposition that development assistance is indeed essential to combat terrorism. Perhaps it does not help that many of the terrorists implicated in the attacks against New York and London, including most recently the so-called ‘underwear bomber’, were not only highly educated but also, more often than not, from well-to-do families (if not very rich ones, like Osama Bin Laden’s own). Yet in a broader sense, the idea that America’s own security and prosperity is indeed linked to stability and economic growth in the rest of the world has been a dominant tenet of US foreign policy throughout the twentieth century. So it is not as if the Obama administration has no foreign policy tradition to lean on, when it comes to making the case for renewed US engagement in the realm of international development.

Charitable donations

The recent declining trend in US foreign development commitments is not, as some international critics have charged, a function of America’s increasing stinginess. Americans give around US$300 billion to charities per year. It would take three Frenchmen, seven Germans or 14 Italians to equal the charitable donations of one American. Even as federal foreign assistance declined as a proportion of GDP, an increasing number of US charities and foundations became active internationally.12 Web-based charities have capitalized on the surge in public interest for ‘do-it-yourself’ programmes, which allow individual citizens to invest directly in microfinance enterprises, or in such popular charities as Heifer International, through which donors can trace which family receives every single goat or cow they agree to purchase.

Wealthy individual American donors, like Bill and Melinda Gates, have radically altered expectations of what private foundations can contribute in support of global health programmes. At this year’s World Economic Forum in Davos, Gates announced his intention to invest US$10 billion in the fight against a number of diseases such as AIDS, tuberculosis, rotavirus and pneumonia over the next 10 years.

In addition to pouring previously unheard of sums of cash into the humanitarian sector, foundations such as the Gates’s are pushing through innovative benchmarks for project evaluation and impact assessment. They do away with much of the obtuse bureaucratic language that has done so much, over the years, to confuse the public’s understanding of what many international organizations actually manage to achieve. And so beyond the record dollar amounts they are able to funnel into a sector that used to be dominated by government programmes, they are also setting new managerial standards in the field, which in turn have begun to inspire more traditional bureaucracies to find better ways to promote accountability and transparency in their own programmes.

Private foundations have also become increasingly influential in setting the international agenda. The notion that some causes become trendier than others following high-profile involvement of pop-culture icons like Bono or Angelina Jolie has a way of offending many career professionals in the industry. Yet these Ambassadors from the world of entertainment have a way of channelling public attention to issues that might have taken diplomats and government bureaucrats years to rally attention for on their own. In Darfur, it took the UN system nearly nine months to sound a real alarm bell after the systematic killings began in earnest in 2003. Once George Clooney hitched a ride to nearby Chad with The New York Times’ Nicholas Kristof, the Save Darfur movement in the United States quickly gained public momentum.

But grassroots mobilization is by no means restricted to initiatives that employ star power alone. NGOs and civil society lobby groups within the United States have also played a key role in launching a wider array of what we might call mega-trends in the development sector. In recent years, for example, there has been a notable surge in public support for a range of new international women’s rights initiatives. Plays like the Pulitzer-Prize winning Ruined, which dramatized the fate of African women in conflict zones for full-house Broadway audiences, is only one of many media productions that have fuelled this trend.
Humanitarian entrepreneurs have built up impressive new organizations from scratch. Take Zainab Salbi and Amjad Atallah, two Arab-Americans, who started Women for Women International (WWI) with a shoestring budget and a small team of dedicated volunteers in 1993. WWI has grown to provide some of the most effective support for women survivors of wars in Bosnia and Herzegovina, Rwanda, Kosovo, Nigeria, Colombia, Afghanistan, Iraq, the Democratic Republic of the Congo and Sudan. It has assisted more than 243,000 women, distributed more than US$80 million in direct aid and microcredit loans, trained thousands of women in rights awareness and helped thousands more to start their own small businesses.

Today, Hillary Clinton is at the forefront of the US government in promoting women’s rights across the globe, and she would be the last to deny how much inspiration for her own initiatives in this area draw on private sector achievements that preceded her appointment as secretary of state. Wherever she travels, Clinton makes the case for women’s empowerment, even if it sometimes annoys her hosts. Unfortunately, the Washington bureaucracy is slow to adapt to such new priorities. A call to USAID revealed that the organization has no way of computing how much money it actually spends in support of women’s empowerment programmes internationally. This is regrettable, especially since this is one of the issues that appeal to Americans across party lines.

Pragmatism first

Since Obama took office, the administration has been hard pressed to manage the public’s expectations about what can reasonably be achieved during his first term. The development community appears moderately encouraged by Obama’s first budget proposal to Congress, and by Clinton’s promising rhetoric. Both point to a genuine desire by the administration to elevate America’s commitment to global development. The real test of this commitment will come when the Obama administration begins to formulate its 2012 budget. At that point, the development community will get a clearer sense of whether this president intends to get behind an effort to overhaul America’s international spending and bring its foreign assistance strategy into the twenty-first century.

As the competition to sway the administration on this critical issue gains momentum in coming months, the development community would do well to remember that Obama’s approach to foreign policy to date has been driven less by ideology than by pragmatism. In this regard, the ideological developmentistas may need to revise their own arguments to match Obama’s avowed pragmatism before they can count on him to champion real changes they can believe in on the national stage.


Unfortunately, due to the age of this contribution and several migrations to online content management systems, the footnotes in the text may have been lost. The footnotes below are listed in its original order of appearance in text.
    1. This figure does not compare directly to official development assistance (ODA) in European national budgets, as it includes several budget items that are outside ODA calculations. The State Department FY 2011 budget summary is available online at The figure of US$34.6 billion represents the official budget earmarked for ‘foreign assistance’, cited by the State Department, in its official budget proposal to Congress FY 2011. For a detailed breakdown, see The New York Times’ interactive budget navigator at
    2. The CDI index is compiled by the Center for Global Development, an independent think-tank based in Washington, DC.
    3. See
    4. See
    5. See
    6. For the full text of this report, see
    7. See the Modernizing Foreign Assistance Network’s proposal entitled ‘New Day, New Way’ at:
    8. ‘Audit: U.S. lost track of $9 billion in Iraq funds’, CNN online, 31 January 2005
    9. See also Frans Bieckmann’s blog post, 11 January 2010, at
    10. Global Development: Views from the Center, 3 February 2010: ‘Obama’s First Budget Request: Modest Increases but Strong Signaling for Development’, by Sarah Jane Staats. See
    11. Samuel Joseph Wurzelbacher, famously dubbed Joe the Plumber, gained significant attention during the 2008 US presidential election. A plumbing contractor by trade, he was given the nickname Joe the Plumber after he was videotaped questioning then-Democratic candidate Barack Obama about his small-business tax policy during a campaign stop in Ohio. The Republican McCain–Palin campaign later used Joe the Plumber as a metaphor for middle-class Americans.
    12. See the Charity Navigator, the National Center for Charitable Statistics and The Center on Philanthropy.