Roosevelt Institute | Cornell University

Redirecting U.S. Foreign Aid

By Morgan GreenePublished April 21, 2014

U.S. foreign aid has historically been used to compel allies and enemies comply with the U.S.'s goals. USAID is in dire need of reconstruction to repair years of corruption and misuse to once again achieve goals of strengthening key allies, promoting democracy, establishing economic leverage, fortifying domestic political coalitions, and encouraging peace and prosperity.
By Morgan Greene, 4/21/14

The U.S. has historically showered its allies and enemies with foreign aid as a carrot to reward and compel friendly behavior.  This strategy benefits the U.S. in that is strengthens key allies, promotes democracy, establishes economic leverage, and fortifies domestic political coalitions. Foreign aid is administered through the United States Agency for International Development (USAID), which, while often meaning well, has a shaky track record.

Despite a $20 billion budget, USAID has been without a definitive purpose since the Cold War. One of the most common critiques of USAID is that it is too large and blunt of a tool to deal with the details of diverse countries. USAID is often condemned for disrupting local infrastructure and creating more problems than it solves. While this agency has lain in disrepair for generations, the infrastructure and funds present a viable way forward. USAID must be restored to its former glory as an alternative to military expenditures, so that it can further promote health and democracy abroad.

USAID can and must be fixed. Steps in the right direction are already underway—implementing microfinance projects, allowing communities to use funds as they see fit, improving technology, and encouraging loans and foreign investment. Rajiv Shah is the new USAID administrator with ambitious goals to revamp USAID. Dr. Shah believes that instead of pouring billions of dollars into poorly researched and only marginally successful projects, USAID should utilize private businesses and technology to created tailored and effective solutions. According to the former British Prime Minister Tony Blair, Dr. Shah could be the missing ingredient for the success of USAID; he says, "he realizes that the purpose of aid is for long-term development, not short-term projects that you can point to as successes." Dr. Shah has already taken leaps away from large contractors that lack the specificity to deal with problems on the ground. Instead, he has raised the funds given to local organizations by nearly 20 percent.

Dr. Shah's overarching goal is to make countries currently receiving aid self-sufficient. This is achieved by setting up local institutions such as small-scale banks to provide micro-loans and small businesses that provide employment and reinforce the economic base. For instance, USAID has established a program called share-out in Malawi. This program incentivizes community members to save money by providing for generous interest and community approved savings, so that they may improve their livelihoods. Similarly, USAID provided start up capital for farmers in Timor-Leste to build greenhouses, which provide them with sustainable and profitable livelihoods throughout the year.

The tradition of foreign aid is deeply entrenched in the history of our country. This practice should not be forgotten, yet it must be modernized to deal with the world's changing economic and political atmosphere. Neocolonial practices are no longer accepted on the international stage. Thus, USAID must fill the need for structured, small scale, assistance that fosters sustainable livelihoods, instead of simply giving handouts.