The economics and politics of immigration


The economics and politics of immigration



U.S. Foreign Assistance: Reinventing Aid for the 21st Century

Lael Brainard
Lael Brainard National Economic Advisor - National Economic Council

January 23, 2008

Chairwoman Lowey, Representative Wolf, distinguished members, I appreciate the opportunity to testify before the House Subcommittee on State, Foreign Operations, and Related Programs today on the subject of Reinventing Aid for the 21st Century. I applaud your efforts to look over the horizon and ask the critical question of how to achieve the best impact from our aid dollars, especially recognizing you will soon turn to the immediately pressing challenge of allocating those scarce dollars against a compelling set of competing priorities.

A Critical Instrument for Advancing National Security, Interests, and Values

As we prepare for a world where global population is projected to expand by one third over the next 20 years and with 90 percent of that expansion concentrated in developing countries, many poorly equipped to provide for the growing ranks of their young, America’s national security strategy must place development on par with defense and diplomacy. As we prepare for a world where seemingly distant threats can metastasize into immediate problems, the fight against global poverty is becoming a fight of necessity—not only because personal morality demands it, but because global security does as well. Extreme poverty exhausts governing institutions, depletes resources, weakens leaders, and crushes hope—fueling a volatile mix of desperation and instability. Impoverished states can explode into violence or implode into collapse, imperiling their citizens, regional neighbors, and the wider world as livelihoods are crushed, investors flee, and ungoverned territories become a spawning ground for terrorism, trafficking, environmental devastation, and disease. Yet if poverty leads to insecurity, it is also true that the destabilizing effects of conflict and demographic and environmental challenges make it harder for leaders, institutions, and outsiders to promote human development.

The fight against global poverty hearkens back to the best traditions of the Marshall Plan, the founding of the Bretton Woods institutions, and John F. Kennedy’s Alliance for Progress. But it also appeals to the best instincts of a new generation of Americans who are engaged as never before in major advocacy campaigns, in global service commitments, and in philanthropy both big and small on behalf of the world’s poor. Our consciences, our hearts, and our faith demand that we tackle deprivation and social injustice because it is the right thing to do. But helping the poor gain access to shelter, medicine, sustenance, education, and opportunity does more than make Americans feel good: it makes the world feel good about America. When the United States leads in helping lift the lives of the poor, we enhance our own influence and authority in the world community—building support for U.S. interests in other areas.

With hard power stretched thin and facing 21st century threats from poverty, pandemics, and terrorism, we need a national security strategy that gives development a Cabinet-level voice alongside defense and diplomacy. We need a national security strategy that deploys foreign aid as a key instrument of American soft power and a key determinant of the face of America seen around the world, while leveraging the resources and dynamism of the American public, NGOs, and private sector.

An Outdated System

Our aspirations and our aid dollars are likely to exceed our impact on the ground unless and until we modernize our aid apparatus. The urgent demands of post-conflict reconstruction in Iraq and Afghanistan and humanitarian disasters have led to a faster rate of expansion of foreign assistance dollars in the last seven years than at any point since the Cold War. But instead of modernizing our Cold War era aid infrastructure, the administration has responded to each new global challenge by creating new ad hoc institutional arrangements along side the old ones, such as the President’s Emergency Plan for AIDS Relief (PEPFAR), the President’s Malaria Initiative (PMI), the Millennium Challenge Corporation (MCC), and the State/F Bureau. Meanwhile, by default rather than design, the Defense Department is taking on a growing role, now accounting for 1/5th of U.S. Official Development Assistance (ODA).

As shown in this chart, fifty separate units share responsibility for aid planning and delivery in the executive branch, with a dizzying array of fifty objectives ranging from narcotics eradication to biodiversity preservation. Different agencies pursue overlapping objectives with poor communication and coordination. 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, the impact of American foreign assistance falls short of the value of aid dollars expended—which remains unmatched among bilateral donors.

Modernizing America’s Aid Infrastructure for 21st Century Challenges

It is no coincidence that there have been several high level task forces and commissions—many represented here today—focused on different aspects of aid effectiveness in recent years. I want to reiterate my appreciation for the efforts of HELP Commission Chair Mary Bush and Vice Chair Leo Hindery, along with other members, which led to a set of important recommendations, following considerable analysis and deliberation. Other efforts such as the 2006 Task Force on Transforming Foreign Assistance for the 21st Century, which I co-chaired, the recent Smart Power Commission, on which George Rupp served, and the 2004 Commission on Weak States arrived at a similar diagnosis of the problems and many similar recommendations.

All of these efforts call for greater U.S. engagement on development—not less. All call for elevating development on a par with diplomacy and defense-not subordinating it. All emphasize the need for stronger civilian operational capabilities for development, humanitarian, and post conflict missions. All call for coordination of aid with other soft power tools such as trade and debt relief. And all emphasize the urgent need to modernize an aid infrastructure designed for the challenges of a different century—not tweak the status quo.

Let me highlight a few of these critical points before closing.

1. Elevate the Development Mission: If there is one principle that applies above all others to the revitalization of the U.S. foreign assistance enterprise, it is that the development mission must be elevated to equal status and independent standing alongside defense and diplomacy not just in principle but also in practice. Many applauded when the President’s 2002 National Security Strategy recognized development alongside defense and diplomacy as a third critical pillar of national security. Many now worry that the 2006 decision to create the State/F bureau with oversight over USAID subordinates development to diplomacy—a concern heightened when the State/F framework failed to make a single reference to “poverty.”

While complementary, development and diplomacy are fundamentally different missions. The primary function of diplomacy is state-to-state relations, whereas development and democratization often require working around foreign governments, and sometimes with groups opposed to them. Development seeks not solely or even primarily to develop state capacity—the overarching objective of the State/F framework—but societal capacity more generally to ensure that poor communities have the tools and resources to lift up their lives. Importantly, maintaining the integrity of independent diplomatic and development functions makes it far easier to manage the frequent tension between short term political objectives—which often require working with undemocratic regimes—and longer term economic and political reform objectives.

The development mission—vital to America’s interests as well as to global peace and prosperity—must be restored in order to elevate stature and morale and attract and retain the most talented professionals in the field. One compelling reason for standing up the MCC independently was to attract top talent; while the MCC was recently rated among the top 5 in a ranking of the best small government agencies to work, a less and less independent USAID was ranked among the bottom 10, a troubling trend.

2. Invest in Operational Civilian Capabilities: Development, humanitarian, and post conflict missions are by nature operational—informed by policy but not policymaking functions per se. The U.S. organizations entrusted with managing foreign assistance must recruit personnel with the right technical, operational, and project management skills; reward effective performance; and work relentlessly to improve on-the-ground results. Unfortunately, recent years have seen systematic weakening of our operational civilian capabilities while responsibilities and disbursements have grown. As a result, there is a readiness deficit in civilian development, humanitarian, and post conflict missions, and an urgent need to invest in specialized expertise on science, engineering, economic analysis and program evaluation. Defense Secretary Gates emphasized this need in his recent Landon Lecture: “Indeed, having robust civilian capabilities available could make it less likely that military force will have to be used in the first place, as local problems might be dealt with before they become crises.”

Since the 1990s, the number of professional USAID staff has fallen by a third. Between 1998 and 2006, reductions in direct-hire staff were accompanied by a sharp increase in foreign assistance spending, with the result that aid disbursement per staff member grew by 46 percent to $2 million. And by some counts nearly one third of USAID foreign service officers are currently eligible for retirement.

Paradoxically, at a time when the premium is greater than ever before on specialized expertise for addressing important development challenges, USAID has had to reduce technical expertise in favor of general management skills. From USAID’s earliest days, scientists, engineers, and other technical experts were central to its mission, operating out of both specialized functional offices and regional bureaus and missions. However, by 2004, according to USAID, of 1,821 professionals at the agency, roughly 55 percent were working in civil society, general development, or other general areas. And only 3 percent of the technical experts are engineers. The government’s thin bench on science and technology for development means we are poorly equipped to leverage the considerable capacity of the U.S. private sector, universities, and foundations.

In addition, economic analysis and program evaluation capabilities have declined at a time when these skills are vital in order to learn from the U.S government’s vast foreign aid experiences and to enhance operations based on that learning. Evaluation of U.S. assistance too often relies on input accounting rather than true impact analysis and is undertaken in a defensive manner. Ideally, the emphasis should be redirected to evaluation methodologies such as randomized trials and control groups to foster a learning environment.

3. Support Country Ownership: Aid works best when it supports priorities determined locally, and recipients are invested in achieving success. Just three years ago, congress made country ownership one of the central tenets of the design of the MCC. Obviously, the extent of U.S. oversight and control of aid implementation should vary with the quality of local governance, with poorly governed countries less likely to formulate national strategies based on the priorities of poor communities, thus requiring greater oversight in the aid process. But the principle of stakeholder ownership applies to the entire aid enterprise—even if it requires different mechanisms of implementation depending on circumstances on the ground.

4. Achieve Coherence across Policies: Foreign assistance is but one of several tools to support development. The United States could wield greater influence per aid dollar spent than any other nation simply by deploying its influence in trade, investment, debt, and financial policies in a deliberate manner as a force multiplier. Nowhere is this more apparent than on agriculture, where our development and trade policies too frequently work at cross purposes. Regular mechanisms for policy integration are vital either by coordinating across agencies or assigning authority to a single empowered agency—as in the UK, where the cabinet-level Department for International Development (DfID) takes the lead on trade related to developing countries. And integration is also important in planning and operations, as illustrated by recent post conflict experiences. Improving integration requires removing disincentives and creating positive incentives, such as reserving budgetary funds to reward collaboration on priority goals and tying career advancement to participation in joint operations.

5. Rationalize Agencies & Clarify Missions: Ultimately, the mark of a successful reform will be a reduction in the number of players and the elimination of overlapping jurisdictions. This will allow for more unity of voice. Current reforms superimpose another player into the mix—the new State/F bureauwithout eliminating any of the offices or criss-crossing lines shown in the chart. Instead of the 50-odd objectives these offices currently pursue, we should have no more than five strategic aid priorities—addressing poverty and need, supporting the emergence of capable foreign partners and countering security, humanitarian and transnational threats. Instead of the current spread of 50 offices managing aid, we should have one capable operational agency.

Window of Opportunity for Bold Reform

What kind of organizational structure would ensure the greatest impact from U.S. foreign assistance dollars? To answer that question, we analyzed the four organizational models prevalent among the major bilateral donor countries for their fit with the US political context. The U.S. currently employs a Decentralized Structure, along with several other large donors. By and large, the countries employing a decentralized approach are known for punching below their throw weight on aid and are disadvantaged by the perception that they do not speak with a unified voice.

This administration has moved in the direction of making USAID an Implementation Arm of the State Department—a model adopted by several other bilateral donors. While this helps to clarify the missions of State and USAID and enables them to speak with one voice, it solidifies the divide between policy and operations, has failed to improve operational civilian capabilities or address coordination outside of State/USAID, and subordinates development to diplomacy.

Some have proposed the Merger of USAID into a Super State Department. Although this would be a logical progression and would rationalize actors, clarify missions, and reduce confusion about who speaks for the United States, it would undoubtedly subordinate development to diplomacy. Moreover, proponents tend to greatly underestimate the massive transformation of the culture, mission, and staffing of the State Department that would be required. While the alignment of development and diplomacy is important, so too is the alignment of defense and diplomacy, yet no one would advocate submerging the State Department into the Defense Department.

Creating a Cabinet-level voice for development would be the best way to insure against the subordination of long-term investments in democratization, development, and poverty alleviation to short-term political objectives. Ultimately, this approach holds the greatest promise of boosting U.S. standing in the world and transforming the United States foreign assistance enterprise to address the global challenges of the 21st century. Interestingly, Secretary Gates seemed to open the door for such a bold reform when he argued that, “New institutions are needed for the 21st century, new organizations with a 21st century mind-set,” rather than repopulating institutions of the past or expanding current agencies. The creation of the UK Department for International Development (DfID) in 1997 demonstrates that this approach is both achievable and likely to improve effectiveness. DfID boosted the overall coherence of UK development policy and impact, while elevating the stature of the development mission and improving recruiting.

The next president, in collaboration with Congress, can capitalize on the growing consensus in favor of modernizing our aid infrastructure. The Task Force on Transforming Foreign Assistance for the 21st Century identified past episodes of successful U.S. foreign assistance reform that offer important lessons today. The conditions for successful reform include an emerging political consensus surrounding the urgency of the mission, support from key groups outside government, and personal commitment on the part of the president and key congressional champions. Any successful reform process must engage stakeholders across the executive and legislative branches, across agencies, and outside government. Congress has an integral role in shaping the organization and delivery of U.S. foreign assistance by holding hearings such as this, mandating independent analysis of the current structure and operations such as from the HELP Commission, and requesting expert recommendations. Finally, timing is critical: successful instances of 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 countdown to the start of a new administration has begun.

The conditions for fundamental reform are favorable—if there is sufficient political will. Our institutional and process recommendations do not require big budgetary resources but instead magnify the impact of every dollar spent. Improving the effectiveness of foreign assistance commands bipartisan support. And Americans clearly understand the need to show a more compassionate face of America to the world even as they support the fight against global poverty in growing numbers.