This is not your grandparents’ developing world. It’s richer, freer, more capable and with more options. Gone are the days when foreign aid was the largest source of economic engagement from the U.S. to the developing world. Gone are the days when foreign aid was a large percentage of the gross national product of developing countries.
Today, foreign aid represents less than 10 percent of all economic engagement from the U.S. to developing economies. Foreign direct investment, remittances and global trade flows are all bigger. Local savings and the taxes collected in most developing countries are many multiples of foreign aid. Despite this reality, the implicit assumption among many policymakers, advocates, legislators and even development practitioners is that foreign aid is the “largest wallet in the room.” This assumption is reflected in our debates about reform and where we should put our “people, time and money.”
In the developing world of today and the near future, many countries are approaching middle-income or even upper middle-income status. These countries want a trade and cooperation relationship with the U.S. — a relationship akin the United States’ relationship with South Korea, or Poland, or Chile, countries that are all U.S. foreign aid “graduates.”
At the same time, there are 30 or so countries that are fragile and failed states. In these states, governments have a limited reach and terrorist organizations such as ISIS, Al Qaeda, and Al Shabab can incubate with limited interference. In some parts of the world, drug-funded gangs have more resources than the police or the military. Left untended, these are the places that will export and accelerate transnational threats, such as pandemic disease and human trafficking. Large populations in these countries are incentivized to risk long journeys in search of a better life, including to the United States and Europe.
Perhaps the above description is a slight oversimplification, but not by much.
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Frankly, in this context, foreign assistance needs a new mission and new thinking. It also needs some serious plumbing fixes. Not only are procurement and human resource practices in need of a serious review, so too is the broader aid architecture. The fact that around 20 U.S. government agencies “do” foreign assistance is crazy. President Kennedy sought the passage of the Foreign Assistance Act of 1961 because there were four U.S. government agencies carrying out U.S. foreign assistance and he deemed that to be too many. What would President Kennedy say about 20 agencies?
In response to the Trump administration’s call for greater effectiveness, efficiency and accountability in U.S. foreign assistance, the Center for Strategic and International Studies convened a bipartisan task force on foreign assistance reform and reorganization.
We were fortunate to have Senators Jeanne Shaheen (D-NH) and Todd Young (R-IN) as co-chairs for the task force. We brought together around 30 high-level experts: former Bush administration officials, former Obama administration officials, retired foreign service officers, former U.S. ambassadors, as well as senior officials from the Overseas Private Investment Corporation, Treasury, and the National Security Council.
There were a few clear consensus items that all members of the task force agreed upon. Not a single person said that the current system was perfect. At the same time, not a single person argued for a “full merger” of USAID into the State Department. Many of the participants have bad memories of the merger of USIA into State in the late 1990s and see it as a failure that significantly hampered America’s ability to leverage our public diplomacy assets. No one wanted to “break” development in the same way that we had crippled our public diplomacy capacities.
They all argued that we need a strategy for how we deploy our “soft power” just as we do for our military power. While all could identify potential savings in the existing aid program, none agreed with the drastic cuts proposed in the so-called “skinny budget” released for fiscal year 2018.
It was notable (and in a strange way reassuring) that only several weeks after putting forward the skinny budget that proposed eliminating a number of foreign affairs agencies, including OPIC, the Trump administration proposed the vice chair of the Trump presidential campaign as the CEO of OPIC. It was as if the Trump administration did not believe its own budget proposal.
The 30 task force members also agreed to three big ideas that constitute the core recommendations of the group:
1. Maintain USAID as an independent agency overseeing federal foreign assistance efforts, develop a clearly articulated development strategy, and assign the USAID administrator as coordinator of foreign assistance.
2. Address duplication of effort and generate budget savings while maintaining functional coherence.
3. Modernize the personnel system, make the procurements system more efficient and streamline reporting.
In the coming years, our foreign assistance is going to have to: confront the global youth bulge, enable successful urbanization, feed 9.5 billion people, combat violent extremism, enable women’s economic empowerment, and support greater political and economic freedom. To meet this challenges we need an updated and strengthened American foreign aid program that is more catalytic, enables private investment and savings, and ensures that governments “mobilize their own resources.” Now is the moment for new ideas and bold reform.
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