With Help From the Famous, Foreign Aid Resurges

Lael Brainard
Lael Brainard National Economic Advisor - National Economic Council

June 26, 2002

The end of the Cold War, deep disillusionment with the many failures of U.S. foreign aid and the drive to balance the budget produced a slash-and-burn approach to foreign aid during the 1990s. By the end of the decade, foreign economic assistance had fallen to just over one-half of 1% of budget outlays, compared with more than 3% in 1962.

Finally, things are beginning to swing the other way. Why?

First, aid advocates have developed a powerful four-part recipe for mobilizing public support: a simple, compelling goal; surprising spokespersons, such as U2’s Bono, Microsoft’s Bill Gates and the pope; transnational coalitions such as Drop the Debt and the Global AIDS Alliance that unite opposite ends of the political spectrum; and a focus on high-profile international gatherings, such as annual meetings of the World Bank and the International Monetary Fund. The first big victory came in 1998, when the unbeatable team of Bono and the pope, working with activists, persuaded leaders of the richest nations to adopt an unprecedented initiative to forgive the debt of the poorest nations. A similarly eclectic coalition, including Gates and some of the economics profession’s best and brightest, helped rivet world attention on the global HIV/AIDS crisis.

As a result, in 2000, even as budget authority for development aid fell overall, President Clinton won authorization for nearly $1 billion for debt forgiveness for the poorest nations and for global efforts to fight HIV/AIDS. Second, since Sept. 11, the campaign against terrorism has provided a rationale for foreign assistance missing since the end of the Cold War. Having enlisted critical foreign partners in the fight against international terrorism, the Bush administration could hardly ignore the need to do more in the fight against international poverty. This was evident in President Bush’s proposal for a $10-billion increase in U.S. development spending. And leading Democrats have sounded a similar call. House Minority Leader Richard A. Gephardt has called the case for foreign aid a “strategic rationale.”

But achieving genuine gains on international poverty will be harder than mustering bipartisan support for upping the budget. For one thing, our security and development goals are not the same.

It is tempting to use development assistance to reward those who are “with us” in the fight against terrorism. But during the Cold War, that same logic led to many horror stories of corrupt leaders using aid to line their own pockets or fund pet projects, which discredited foreign assistance and contributed to a decade of aid fatigue.

And in too many cases, U.S. aid curried favor with foreign leaders without advancing democracy, improving health and education or helping poor economies sustain growth.

Finally, focusing on a single issue in isolation is not good development policy. For example, it does not make sense to help pay for increases in global HIV/AIDS funding by reducing U.S. spending on international malaria and tuberculosis, as is proposed in Bush’s 2003 budget.

There is no silver bullet in the fight against global poverty. That is why the international community has begun asking poor nations to present their spending priorities within a coherent overall framework.

It would be easy to dismiss the recent tour of Africa by Bono and U.S. Treasury Secretary Paul H. O’Neill. But Bono and Paul’s excellent adventure is emblematic of a broader political shift that could put development aid back in play.

At the G-8 economic summit in Canada, which opens today, leaders of the richest nations will devote a day to the new partnership for African development. President Bush has announced increases in spending on HIV/AIDS and primary education that, while modest, are a step in the right direction. The coming together of opposite ends of the political spectrum and heightened public awareness present a tantalizing opportunity to make progress in fighting debilitating poverty. But it is critical to invest the money soberly—or risk another backlash.