Roosevelt Institute | Cornell University

Understanding Current Deficiencies in U.S. Foreign Development Aid

By Tony ZhouPublished February 28, 2016

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This blog post examines current United States foreign development aid policies and finds two critical deficiencies: 1.) A fostering of aid dependence in recipient economies and 2.) A bureaucratic inefficiency in implementation. In addition, studies show that in some cases, the overall effect of these two deficiencies may nullify or even reverse prior progress seen in developing regions. Lastly, this blog post emphasizes the importance of addressing the previously mentioned deficiencies in the upcoming years.
This blog post examines current United States foreign development aid policies and finds two critical deficiencies: 1.) A fostering of aid dependence in recipient economies and 2.) A bureaucratic inefficiency in implementation. In addition, studies show that in some cases, the overall effect of these two deficiencies may nullify or even reverse prior progress seen in developing regions. Lastly, this blog post emphasizes the importance of addressing the previously mentioned deficiencies in the upcoming years. 
 
The Obama Administration currently identifies development aid around the globe as indispensable toward key objectives such as the promotion of democracy, the expansion of international economic cooperation, and the alleviation of climate change, poverty, hunger, and disease. In accordance with the Obama Administration's statement, the United States Agency for International Development (USAID) is responsible for development aid policy. Containing 12 foreign operations accounts in total, USAID's FY 2016 funding is $22.3 billion, $10.7 billion of which belongs to the 7 core accounts that cover the majority of operations. In 2014, USAID implemented aid programs in a multitude of countries worldwide, including Afghanistan, Pakistan, Kenya, Nigeria, Ethiopia, Bangladesh, Cambodia, and Indonesia. Finally, USAID not only serves to complete the development objectives of the United States, but also serves as a role model for international development efforts lead by entities such as the United Nations or private non-governmental organizations.
 
However, two key deficiencies currently exist within USAID efforts: 1.) A fostering of aid dependence in recipient economies and 2.) A bureaucratic inefficiency in implementation.
 
With regards to first deficiency, aid dependence is defined as the condition where continued foreign aid becomes necessary for economic survival. Aid dependence can be best conceptualized as a cycle of perpetual underdevelopment in which the governments of developing regions choose to consume a continuous stream of readily available aid while neglecting to construct and reinforce a self-sustainable economy. As a result, if that stream of aid were to ever be cut off, the economy and welfare of the region would immediately flounder. One study finds that across Africa, partially as a consequence of USAID policies and programs, over 70 percent of government budgets are funded by foreign aid while growth in economy was less than comparable, showing the clear dependence upon aid as a bulwark for prosperity instead of organic economic growth.
 
Beyond the problem of dependence itself, aid dependence is harmful because it actually reverses the prior progress of aid efforts or organic development. This phenomenon can be explained by the fact that local economic entities spearheading efforts toward organic economic growth simply cannot compete with the readily accessible capital and resources of USAID-backed economic entities within a region, and are thus edged out of any potential markets. As a result, one case study finds that in the Federated States of Micronesia, U.S. development aid has actually pushed the economy beyond the point of self correction, meaning that the Micronesia economy has regressed to the extent that any downturn cannot be compensated for without additional aid.
 
With regards to the second deficiency, bureaucratic inefficiency can be defined as the overusage of resources or the lack of effectiveness that occurs when aid policy is created from external interests beyond the goals of development. This type of inefficiency can be seen as a widespread issue, as exposed by one study which found that USAID food shipments are not dependent upon the needs of recipients, but rather upon the types of abundant crop within the U.S., resulting in frequent waste. In the study, the external goal of helping the U.S. agricultural industry as opposed to genuinely seeking to advance development was indicted as the sole direct causal factor. Furthermore, another study found that following the 2011 Haiti earthquake, only $9.5 million of USAID funding was spent developing Haitian firms as opposed to the $750 million spent rewarding U.S. based firms. Similarly, in this study, the interests of U.S. companies was prioritized over genuinely helping Haitian economic growth.
 
Ultimately, the overall system of USAID has historically proven to be well-intentioned and has garnered some great results, as evidenced in regions such as Guatemala, El Salvador, and Ukraine. However, both of the previously mentioned deficiencies have also persisted as systemic problems which may nullify or even reverse the prior progress of aid efforts or organic development seen in developing regions in the future. Therefore, it is of the utmost priority that these deficiencies be addressed.