Reforming Foreign Aid

August 2008 — Providing assistance to poor countries has helped the U.S. build positive relationships with other nations and demonstrates the best aspects of U.S. engagement on the world stage. When invested wisely, foreign aid both reflects American values of compassion and justice and serves our national interest in a stable, peaceful world.

But America's foreign assistance is not reaching its potential in responding to today's global challenges. Aid programs often lack bold, measurable goals and are not guided by a coherent global development strategy. Restrictions on how U.S. assistance can be spent, and failure to invest in local industries and infrastructure keep poor countries dependent on aid rather than helping them to become self-sufficient. Inadequate tracking and evaluation of foreign aid limits the opportunities to build on success and learn from failure.

Eight years ago, the United States joined the world in adopting the Millennium Development Goals,[1] a set of eight objectives to fight poverty and disease globally. The goals include targets for poverty and hunger, education, gender equality, child and maternal health, infectious disease, the environment, and global cooperation. However, the U.S. still has no clear plan to work in partnership with the world to do our part in achieving these goals, and President Bush has barely made mention of them in his eight years in office.

The Bush administration has noted that development joins defense and diplomacy in making up the "three D's" of the U.S. national security strategy.[2] However, the current fragmented foreign aid bureaucracy fails to serve the ultimate development goal of ending poverty as responsibility for U.S. foreign assistance is spread out over 26 separate departments and agencies.[3] The United States has an opportunity for bolder, more effective leadership in the world, but this will require a substantial overhaul of our current development structure and a clear focus on poverty alleviation.

Food Aid: A Case for Reform

This year, the effect of rising food prices exploded in the headlines. While the global food crisis continues to rage, the practice of "tying" U.S. aid, or requiring recipients to spend all or some of the aid on purchasing U.S. goods and services, is counterproductive in a food crisis.

U.S. law requires that most food aid dollars are spent on U.S. goods and services, despite the fact that this practice is 50 percent more expensive than purchasing food locally or regionally in the areas that need aid.[4] Carrying food on U.S. ships may add 50 to 75 percent to delivery costs.[5] Additionally, the Government Accountability Office found these restrictions result in long delivery delays and 65 percent of food aid being spent on "noncommodity expenses" (not food).[6]

If that aid were given in cash grants to purchase food locally or regionally, about twice as much food could be delivered for the same amount of money in a fraction of the time. In addition, food purchased locally could provide an economic boost to farmers in developing nations and stimulate agricultural productivity and greater food security in those countries. The European Union has shifted its policies so that approximately 97 percent of its food aid is bought locally or regionally, compared to only 1.4 percent the U.S. obtains from local sources.[7]

The U.S. approach to addressing the food crisis and other root causes of poverty, while well-intentioned, is extremely inefficient and points to the need for an overhaul, not just of food aid, but of U.S. foreign aid more broadly. Congress can begin to remedy the situation by insisting that the majority of U.S. food aid be purchased locally or in the region where it is received. Flexible funding would allow assistance to be delivered quickly to those who need it most.

Reform Requires Commitment of Administration and Congress

Meaningful reform of U.S. foreign assistance programs will require the political commitment of a new presidential administration and bipartisan support in Congress. Certain key leaders in Congress have already expressed that foreign aid reform is a top legislative priority. Rep. Howard Berman (D-CA), the chairman of the House Committee on Foreign Affairs, has stated his intent to rewrite the Foreign Assistance Act of 1961, the body of law governing foreign aid programs, next year. In a committee hearing on foreign aid reform, Rep. Berman stated, "I strongly believe that America's foreign assistance program is not in need of some minor changes, but, rather, it needs to be reinvented and retooled in order to respond to the significant challenges our country and the world faces in the twenty-first century."

With a new presidency in 2009 comes the opportunity to transform our broken system into one that prioritizes the needs of the poor. It is critical that both of the major candidates for president acknowledge the previous commitments the U.S. has made to alleviate poverty around the world. The newly elected president should affirm our commitment to achieving the Millennium Development Goals in his inaugural address and send a powerful message that the U.S. is prepared to do its part to fight global poverty.

House Resolution 1268 on Modernizing U.S. Foreign Assistance

Members of the House of Representatives have recognized the need for foreign aid reform and introduced House Resolution 1268. H.Res.1268 captures the broad consensus that foreign assistance serves our nation, but as currently structured is ill-equipped to meet poverty reduction and other goals. The resolution calls for a renewed partnership between Congress and the administration to develop a foreign aid regime that:

  • Provides sufficient resources to meet clear objectives
  • Strengthens the government's civilian capacity and cadre of skilled international development experts
  • Measures results through strengthened monitoring and evaluation and by publicly reporting the impact of investments against objectives
  • Works with recipient governments to ensure fiscal accountability, reduce corruption and increase local capacity
  • Aligns assistance with national priorities of host governments and collaborate with other donors to leverage investments

Currently, RESULTS volunteers around the country are urging their representatives to cosponsor this legislation as a first step in addressing the need to reform foreign aid.

A Department of Global Development

Bold foreign assistance reform should include the creation of a cabinet-level Department of Global Development to provide a powerful voice for poverty issues within and across the U.S. government. Countries such as the United Kingdom and Canada have already instituted similar positions with a good deal of success, providing a model for what this new position could look like. Led by this new department, foreign aid reform should be guided by the following principles:

  • Maintain a clear focus on ending poverty.
  • Maximize the impact of foreign assistance for greater efficiency, including channeling assistance through effective multilateral mechanisms, such as the Global Fund to Fight AIDS, TB and Malaria. Aid should minimize overhead, and prioritize building and supporting local capacity wherever possible.
  • Require accountability for concrete results, such as an increased number of children in school and getting an education, fewer deaths from treatable diseases, etc.
  • Provide our fair share of development assistance, comparable to that of other wealthy countries.

We have already passed the halfway point for achieving the Millennium Development Goals of cutting hunger and poverty in half by 2015. The U.S. signed on to these goals, but these targets become ever more elusive. The United States can help get the world back on track by focusing our foreign aid more clearly on the goal of ending poverty. Reforming foreign aid would not just benefit the world's poorest. It would ensure that our foreign aid dollars are well-spent, and reach those who need it most.

[1] The Millennium Development Goals, http://www.un.org/millenniumgoals/.

[2] 2006 National Security Strategy, National Security Council, http://www.whitehouse.gov/nsc/nss/2006/sectionVII.html.

[3] The United States: Development Assistance Committee (DAC) Peer Review 2006, OECD.

[4] The Development Effectiveness of Food Aid: Does Tying Matter? OECD, 2005.

[5] The United States: Development Assistance Committee (DAC) Peer Review 2006, OECD.

[6] Various Challenges Impede the Efficiency and Effectiveness of U.S. Food Aid. General Accountability Office, April 2007.

[7] Food Aid Flows 2006, Food Aid Monitor, INTERFAIS 2007, World Food Program.