International affairs experts reach consensus on how to restructure foreign aid

The Trump administration has demonstrated that there is no better way to galvanize a community and activate energy than with an existential threat. The international affairs community has been heated about proposed cuts and reforms to development and diplomatic agencies, but until now, experts have failed to agree upon a unified response. 

While Secretary of State Rex Tillerson has recently acknowledged the important and unique roles of agencies like the State Department and the U.S. Agency for International Development, the administration’s call for radical reforms remains threatening. These include the proposed 30 percent reduction in funding for international affairs, reports of merging USAID into the Department of State, arbitrary cuts in staffing, and an Office of Management and Budget directive to all agencies that required reorganization plans by September to increase agency efficiency and reduce staff levels.

The reaction of the development and foreign policy experts, including allies on Capitol Hill, has been to muster the justification for existing funding levels and to enlist policymakers to roll up their sleeves and take advantage of the chaos and directive for agency reorganization to propose more effective organizational structures.

First out of the gate was an article in December in Foreign Affairs magazine by former USAID administrators Brian Atwood and Andrew Natsios that proposed consolidating all development and humanitarian programs in a global development department. Six additional plans came out this summer from an array of organizations.

All of the plans are based on an assessment of the importance of U.S. foreign assistance programs to the national interests—security, economic, and humanitarian—and a common analysis of the underlying problems. That analysis posits that U.S. development and humanitarian programs are well managed and make important contributions to advancing U.S. interests around the world, but face barriers to maximizing their potential. U.S. assistance is hamstrung by fragmentation (25 agencies are involved in the mix); a lack of alignment of functions and responsibilities and therefore accountability; and antiquated and overly complex systems for personnel, information technology, transparency, procurement, and evaluation.

The recommendations in all the plans pursue common objectives—better alignment and consolidation to create clear lines of authority and accountability; more strategic approaches to guide assistance policies; and more responsive, modernized systems.

Six (listed below) of the seven plans offer solutions (see MFAN identification of 10 common priorities) focused on a stronger, more capable, independently lead development agency, and most recommend a more robust instrument for development finance. The specifics range from two plans that propose a bold approach of creating a new cabinet level agency to house the broad array of humanitarian, development, and stabilization programs to four plans that seek to strengthen USAID as the lead development agency and fix existing systems and processes.

With multiple executive agencies and congressional committees seized with figuring out how and what elements of the U.S. aid architecture to reorder, but barraged by a maze of proposals (see USGLC report on over 60 reports), the authors of the six plans decided to plot a singular, unified path forward. Keeping their eye on the bigger aim of achieving the goal of an empowered U.S. development function, the authors reached agreement on an Aid Redesign Consensus.

This unified approach has two pillars: an empowered development agency, USAID, and a new global finance corporation (GFC).

USAID would be the lead U.S. agency for humanitarian, development, and stabilization programs and granted full authority for its budget and an enhanced policy function. The administrator would be assigned cabinet rank, have a seat on the National Security Council, chair the Millennium Challenge Corporation and the new GFC, and lead the development of a U.S. government-wide humanitarian and development strategy. Certain development, humanitarian, and stabilization functions, including President’s Emergency Plan for AIDS Relief (PEPFAR), would move from the Department of State to USAID.

The GFC would comprise the Overseas Private Investment Corporation and relevant functions of the Trade and Development Agency and would have the additional capabilities of equity investment and technical assistance. The GFC would have a long-term authorization and could retain a portion of its revenues. This would allow the GFC to operate more along the lines of its European counterparts.

The authors of these various plans still believe that more aspirational recommendations would ultimately serve U.S. interests. However, since the aid redesign discussions have been complicated by an array of plans, it has become important to identify a set of pragmatic and less controversial actions that can be taken now to move the U.S. development function to a more effective, efficient architecture.

Redesign Plans

  1. J. Brian Atwood and Andrew Natsios: Rethinking U.S. National Security: A New Role for International Development
  2. Center for Global Development (CGD) – Jeremy Konyndyk and Cindy Huang: A Practical Vision for US Development Reform
  3. Center for Strategic and International Studies (CSIS) – Bipartisan Taskforce on Reorganization: Reforming and Reorganizing U.S. Foreign Assistance
  4. USAID’s Advisory Committee on Voluntary Foreign Aid (ACVFA) Efficiency and Effectiveness in Organization (EEO) Working Group: Recommendations of the Efficiency and Effectiveness in Organization Working Group
  5. Atlantic Council: State Department Reform Report
  6. Modernizing Foreign Assistance Network (MFAN) – Co-Chairs George Ingram, Tessie San Martin, and Connie Veillette: A New Foreign Aid Architecture Fit for Purpose and MFAN’s Guiding Principles for Effective U.S. Assistance