Private Philanthropy Highlights Need for U.S. Foreign Aid Changes

Lael Brainard
Lael Brainard National Economic Advisor - National Economic Council

July 1, 2006

Warren Buffett’s recent $31 billion (€25 billion, £17 billion) donation to the Bill and Melinda Gates Foundation highlights a divergence that is occurring in the arena of global philanthropy and foreign aid that must be addressed immediately by the US government.

At a time when the philanthropic sector is making huge strides in the direction of greater coordination and consolidation in order to ensure maximum impact from resources directed to the challenge of global poverty, the US government is going in the opposite direction, delivering aid dollars through a proliferating set of offices and agencies.

This disparate aid agenda can be witnessed in the way the US government has responded to each major global challenge of the past five years—HIV/AIDS, Millennium Challenge, Afghanistan reconstruction, Iraq reconstruction and counterterrorism-by creating new institutional arrangements alongside existing ones to tackle each new challenge. In one indication of this growing divergence, the Gates Foundation with its consolidated funding base is projected to disburse roughly $2.8 billion next year—more than the Bush administration’s much heralded Millennium Challenge Corporation will disburse in its third year of operation.

The result is an incongruent structure that includes 50 separate offices that address a dizzying array of more than 50 objectives ranging from narcotics eradication to refugee assistance. Different agencies pursue these overlapping objectives with shockingly poor communication and even worse coordination between them. At best, the lack of integration means that the United States fails to take advantage of potential synergies; at worst, these disparate efforts work at cross purposes. As a result, America punches well below its throw weight in the international arena as the quality of its aid strategy compromises the quantity of its absolute aid dollars.

To resolve this disparity, US foreign assistance should be guided by a unified framework that fuses America’s objectives—supporting the emergence of capable foreign partners and countering security, humanitarian and transnational threats—with differentiation based on the governance and economic capacities of poor nations. This requires integrating the national security perspective of foreign assistance as a soft power tool intended to achieve diplomatic and strategic ends with that of a development tool allocated according to policy effectiveness and human needs.

A new Brookings Institution-CSIS Task Force on Transforming Foreign Assistance for the 21st Century concluded that the United States could get a much bigger bang for its foreign assistance buck by introducing simple management principles: moving from 50 objectives to 5; insisting on joint planning, policy, and operations; and elevating the development mission to equal standing with diplomacy and defense in practice not just in principle.

There is precedence for transformation to yield immense gains. In the mid 1980s, many officials attributed failures in Vietnam as well as in Iran to inter-service rivalries and communications failures within the U.S. military. These growing concerns culminated in 1986, when the House Committee on Armed Services passed the Goldwater-Nichols Act despite initial opposition from the Reagan administration. This overhaul is widely believed to be the most significant national security reform since World War II.

Experiences in other countries also show the potential benefit of fundamental reform. In 1997, the United Kingdom dramatically increased the stature of the development mission, redefining its purpose and overhauling its organizational framework. Development was elevated to cabinet status, creating the Department for International Development. Britain became a development leader virtually overnight. With an assistance budget far below the United States, Britain nevertheless manages to field one of the most internationally influential and respected aid agencies today.

Momentum for change is building. The terrible human toll of grinding poverty and the global AIDS pandemic have attracted the international spotlight through the efforts of activists across the spectrum, from faith-based groups to celebrities like Bono and Angelina Jolie to star academics such as Jeffrey Sachs. The 2004 tsunami and other humanitarian disasters released an outpouring of private generosity from Americans of all walks of life while Buffett’s donation to the Gates Foundation and their potential impact in the field of global health and development underscore the need for effective government reform.

In the end, a powerful ally—the US military—could prove to be a decisive voice for the case of change. Increasingly, military officials are highlighting the need for greatly improved civilian capacity to be stood up as a capable partner in post-conflict reconstruction. They make a persuasive case for significantly strengthening the capacity of civilian agencies to take the helm on programs that help poor nations prevent conflicts before they begin. Therefore, should the US wish to reduce its need to deploy hard-power assets in the future, it should strengthen its soft power tools by reorganizing and reprioritizing foreign aid.

In 1961, when President John F. Kennedy created the United States Agency for International Development, he described the foreign aid system as “a haphazard and irrational structure covering at least four departments and several other agencies.” These words ring even truer today.

At the outset of the Goldwater-Nichols process, there was broad agreement on the problems confronting the military, but it took more than two years for key lawmakers and administration officials to build consensus on a road map for reform. In the foreign assistance arena, the instances of successful transformation both here and in the UK have been initiated early in the course of a new administration. If America is to develop an effective soft power response to new global challenges in this decade, the clock has already started ticking.