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Policy Options for the 21st Century

by Steve Dobransky

Eight options for the future of Foreign Aid are listed in the following research paper.  One of them surely is the road forward but which one?  The author raises some interesting issues and makes some convincing arguments. –Ed.


The U.S. now stands at a crossroads in foreign aid.  With the creation of the Millennium Challenge Corporation (MCC) in 2004, the government has set foreign aid on a collision course with the long-established United States Agency for International Development (USAID), which was created in 1961 by President Kennedy.  The MCC and USAID have operated in relative cold, separate and redundant bureaucratic corners and they have not produced any noticeable differences in foreign aid distribution and results in the last half-decade.  The growing instability throughout the world and the continued mass poverty and hopelessness of billions is testament to the failures and limitations of U.S. foreign aid. 


The MCC was imposed upon USAID without due diligence to the history and appearance of supplication.  The very lack of vigor, proportional resources and, most importantly, concentrated effort towards one unified vision of U.S. foreign aid goals appears to have relegated both institutions to minor footnotes and potential targets to blame for the current failures.  As people throughout the world rise up to demand better lives and more economic development and job opportunities, the last half century-worth of foreign aid policies appear to be exposed as failures once and for all.  It is crucial that Americans reassess their existing foreign aid policies and institutions, particularly the divisions of USAID and the MCC.  The U.S. and Western countries have spent trillions of dollars in foreign aid in the last half century and there is relatively little to show for it.  If the general goal of foreign aid has been to produce wealthy and self-sufficient countries in the developing world, then it has failed.  More countries than ever are in need of massive amounts of foreign aid in order to just stay afloat, let alone develop to a higher socio-economic level.  Major population increases have watered down the effects of foreign aid and contributed to serious tensions and demands upon seriously depleting natural resources.

This paper analyzes USAID and the MCC in order to determine whether they should continue to operate in a divided manner.  This paper presents a number of policy options in conjunction with the status quo.  It evaluates each recommendation based upon the existing circumstances and future expectations.  It examines the strengths and weaknesses, pros and cons of each policy alternative.  And makes a recommendation for the United States’ foreign aid structure.  The paper’s goal is to start a lively debate on the existing foreign aid framework and whether it can be improved and updated to meet the great challenges of the emerging new world order.

Historical Context and Key Institutions

U.S. foreign aid has been an important component of U.S. national security policy since the end of WWII.  With the Marshall Plan to rebuild Europe and stave off communism, the U.S. government expanded its economic and military aid to countries throughout the world to promote containment, security and economic development.  The U.S. has given billions of dollars in foreign aid to many countries every year for over half a century.  Sometimes successful and other times a failure or with no substantial impact, U.S. foreign aid has expanded into a major bureaucratic component of the U.S. government.

U.S. foreign aid has been justified and explained on both national security and humanitarian grounds.  Baldwin, Hook, and others have stressed the importance of using foreign aid to promote and protect a country’s national interests, whether military or economic.  Lumsdaine and others have argued that foreign aid should emphasize humanitarian goals and help other countries get out of poverty and become more prosperous and self-sufficient.  Given the many mixed messages from the U.S. Government over the past 65 years there is still a debate as to whether past U.S. foreign aid has been based upon national interests or humanitarian grounds.  Both arguments have created strong public support, which might explain why two different justifications for foreign aid are used.  The more broadly appealing the foreign aid policy is, the more people will likely support it.

The U.S. government created the United States Agency for International Development (USAID) in 1961 to take the lead in formulating and implementing foreign aid policy throughout the world.  The Pentagon and other security organizations developed and released military aid within their jurisdiction.  Scholars have attempted to distinguish economic from military aid.  Foreign aid tends to imply economic and other non-military aid unless stated otherwise.  Furthermore, the major Western industrialized countries have come together and pooled their foreign aid resources through the Organization for Economic Cooperation and Development (OECD).  The Development Assistance Committee (DAC) has been the most active component of the OECD in promoting what is known as Official Development Assistance (ODA), which is the total amount of economic aid that each member state gives to developing countries.  The OECD defines a developing country in need of ODA as any country that has an average per capita income of less than $1000 per year.  With this standard, this paper will examine current U.S. foreign aid based upon the economic and ODA principles.

The U.S. gives approximately 0.16 of its Gross National Income (GNI) to developing countries in the form of ODA (GNI is similar to GDP).  This is actually lower than other industrialized DAC members who call for all members to contribute at least 0.7 of the ODA/GNI as foreign aid.  The United States gives the largest amount of ODA but one of the lowest in terms of proportional percentages.  The United States has distributed hundreds of billions of dollars in economic aid to countries throughout the world.  In most cases, the developing countries have continued to remain poor and mired in hopelessness.

With the end of the Cold War, more emphasis has been placed on aiding countries that are intent on promoting democracy and free markets.  During the Cold War, security factors often played a key role in the distribution of foreign aid; and often issues of foreign dictatorships, corruption and command economies were pushed aside in the name of fighting the Soviet Union and the Communist World.  Since USAID was at the forefront of implementing these Executive-Legislative policies, it became a target of many critics and politicians during and especially after the Cold War who declared that USAID was not in line with American political and economic values.  The events of 9/11 exacerbated the issue and highlighted the past discrepancy over USAID’s pursuit of humanitarian and diplomatic interests over American/universal ideology, i.e. democracy and capitalism.  As a result, in 2002 President George W. Bush proposed the creation of the Millennium Challenge Corporation (MCC) to distribute aid and determine recipients based upon a new set of criteria that was focused solely on democratic and free market institutions.

A New Foreign Aid Regime: The Creation of the MCC

The MCC was a policy response to USAID’s appearance of supporting authoritarian regimes with billions of dollars while failing to unleash the promised development and free markets in recipient countries.  The continued mass poverty of many developing countries for the past half-century called into question the relevancy and efficacy of USAID as well as the security threats these conditions could foster.  The creation of the MCC in 2004 highlighted USAID’s downfall in importance within the U.S. government.  The MCC was intended to establish critical criteria for determining recipients based upon their intentions and pursuit of democracy and free markets.  The MCC was meant to promote American values through foreign aid.  Ideology had risen to the fore (once again) and had now become an absolute condition for the MCC’s operations throughout the world.

The MCC was intended to make up for USAID’s apparent gap in political and economic “morality.”  The MCC was portrayed as America’s conscience and will to enact a new world order and not just talk about it.  The MCC conditioned all its aid on recipients’ nature and intentions in terms of democracy and free markets.  The MCC would use data from Freedom House, the World Bank, and other outside institutions.  Never before has a U.S. bureaucracy outsourced its primary judgment and decision-making authority to external organizations. The creation of the MCC also reflected a sizeable distaste for past U.S. policies and their apparent amorality.

The legislation for creating the MCC was passed in 2004 with strong bipartisan support, though Republicans controlled both houses.  It is important to note that USAID continued to exist and there was no reduction in its funding or personnel.  To this day, there has been no detailed explanation as to why USAID was not ordered to carry out the new foreign aid agenda and extend itself.  It is unheard of in the annals of U.S. history that a new bureaucratic organization is created to implement the same primary function(s) as an existing organization.  Changes in standard operating procedures (SOPs) and criteria evaluation have never been grounds for departure; new orders to old institutions are the norm.  The MCC was created next to USAID in an apparent cold and distant alliance.  The MCC was expected to distribute aid to any and all members of the developing world just like USAID but with the absolute requirement that countries first pass through a detailed set of tests and criteria in order to ensure that they were pursuing democratic and free market policies.

The MCC was slow to start up and many developing countries had to complete mountains of paperwork to prove that they were in line with democratic and free-market values.  Since 2004, the MCC has distributed several billions of dollars in a very slow and deliberative process.  The MCC itself has about 300 employees, which is far fewer than the nearly 2,000 employees in USAID.  But, the MCC has moved to the forefront of U.S. foreign aid and it has received strong public and bipartisan political support including through the Obama Administration.  Yet, there is still no evidence that the MCC or USAID has made a significant and decisive impact on the political and economic development of other countries in the last half-decade.  And, there appear to be no major changes or progress on the horizon.

U.S. Foreign Aid and the Future: Policy Options and Likely Outcomes

With the United States’ major economic problems combining with the growing insecurity and instability throughout the world, foreign aid is becoming increasing threatened by domestic elements that seek to use the money and resources for other pressing problems.  At the same time foreign aid appears critical to any U.S. effort to reduce its global commitments and overall military operations and expenditures. In the future, U. S. foreign aid may become critical in achieving U.S. foreign policy objectives and maintaining the existing international system.  So far, U.S. foreign aid has not lived up to or achieved expectations.  It appears imperative to open the foreign aid issue to vigorous scholarly debate.

The continued fragility and risks in the international system suggest that major changes in U.S. foreign aid may be necessary to better pursue and achieve U.S. national security objectives.  The challenges are new and plentiful.  This paper lays down a number of policy alternatives to the current U.S. foreign aid structure. There is a wide range of options, from reforming the existing foreign aid regime to completely eliminating it all together and replacing it with a whole new and unified foreign aid structure.

The following problem-solution analysis is based upon the following questions: How best can the U.S. achieve its foreign policy objectives through foreign aid?  And, What is the best means for distributing U.S. foreign aid?  The following questions tend to follow: 1) Should USAID or the MCC continue to exist as a foreign aid organization or should one be eliminated and/or merged with the other?  2) Should an entirely new foreign aid organization be created that will consolidate all the disparate components into one unified structure?  3) Should the U.S. government remain in the foreign aid arena despite more than a half-century of major failures and many unimpressive results?  And, if not, then 4) Should foreign aid be privatized, internationalized, or completely eliminated all together.  These questions lead to the policy options examined below.  There are eight policy alternatives presented as follows (but not necessarily in any preference or valued order):

(1) Maintain the status quo and keep both USAID and the MCC in existence and functioning as they have been for years.

(2) Eliminate USAID.  After half a century of failures and uninspiring results, it is time to go.

(3) Eliminate the MCC.  Nice try in the short run but it has not produced any substantial results.  Let the government return to just having one lead foreign aid organization.

(4) Merge USAID and the MCC.  Combine the best of both organizations into one mighty foreign aid instrument.

(5) Create an entirely new foreign aid organization that will unify the whole U.S. foreign aid apparatus.  Eliminate both USAID and the MCC, along with the other smaller foreign aid components.  Begin with a new slate.  Establish a strong and centralized foreign aid organization that can meet the needs and challenges of a newly emerging world order.

(6) Add private organizations to the overall foreign aid structure, with or without USAID, the MCC, and/or other governmental organizations.  Remove or reduce the politics and seek more efficient and productive foreign aid operations through the private sector.  The U.S. government will still fund foreign aid and establish goals and recipients, but it will not interfere in the daily operation and distribution of foreign aid or in personnel and leadership choices.  In short, combine the best of the public and private worlds.

(7) Eliminate USAID and the MCC and create one major international foreign aid organization.  The U.S. and other countries will contribute substantially to this global organization and allow it to disperse the funds at its own discretion.  This would be an all-powerful OECD with complete autonomy and hold over all the ODA funds.

(8) End all U.S. government foreign aid.  Save money and return to standard practices that existed prior to 1945 and the Marshall Plan.  If countries cannot survive on their own by now and need to be massively subsidized for another half century to come, then they probably are not a good fit in the overall international system and should consider a reorganization within or a merging with their neighbors or region.  Military aid could continue.  But foreign aid for economic, social, and humanitarian goals should be left to non-governmental organizations, both national and international.

Each of these eight options has its advantages and disadvantages.  There are tangible and intangible costs for each. It ultimately is up to the policymaker to decide on which policy option is best.  There can be many more options and combinations of options. 

Policy Option #1: Maintain the Status Quo in U.S. Foreign Aid

The U.S. can maintain the status quo in U.S. foreign aid and keep USAID and the MCC as they are.  The U.S. can make incremental improvements and minor changes but nothing more.  This policy option is based upon the simple reasoning that these organizations have sufficient public and political support and that there is no strong opposition to either organization.  They have become “normal” for the public.  Congress approves of them.  The President supports them.  Foreign recipients have accepted them.  There is no strong opposition calling for their elimination and, thus, any major changes in one or more organizations could lead to a strong political and public backlash.  In the end, these foreign aid organizations are doing a satisfactory job, at least in the public’s perceptions, and they are the most experienced implementers of U.S. foreign aid.

The criticism for maintaining the status quo involves the fact that relatively little progress has been made in overall global development.  Most countries are in the depths of poverty and they have remained there for decades despite hundreds of billions of dollars in U.S. foreign aid.  Maintaining the status quo also ensures redundancy and high costs within the foreign aid regime.

USAID and the MCC cost substantial amounts of money, personnel, and other resources, while carrying out many of the same functions.  They guarantee that aid is minimally focused and watered down, since resources cannot be concentrated under a single policy.  Furthermore, maintaining the status quo suggests complacency and acceptance of the dismal socio-economic statistics that continue to exist after more than half a century of U.S. foreign aid.  Moreover, a divided leadership is kept, divergent messages sent, and there remains public and political confusion as to who is the primary leader in U.S. foreign aid.  In other words, who is the face of U.S. foreign aid and who should be held accountable for the successes and failures?  In the end, divided up responsibilities and leadership tend to produce modest and mediocre results.  Micro steps and the current system are reflected in any decision to maintain the status quo.  Just getting by is the message sent to the American public and foreign nations.  And the recipients of foreign aid, on the one hand, may appreciate stability and what they know, but they also may question the U.S.’s desire to produce real change and results after more than half a century of foreign aid.  The status quo, basically, means uncertain and often-crossed objectives, visions, and purposes, along with the allocation of resources.  Overall, what you see is what you get.  If you are a developing country and you think everything is going well, then the status quo is your best policy option.  If you are unsatisfied with the current situation and past results, then this may not be your best alternative.

Policy Option #2: Eliminate USAID

Eliminating USAID is a powerful call among a number of vocal critics of the long-standing foreign aid regime.  USAID is old and a proven failure at worst, mediocre at best.  There is substantial evidence of this for over half a century.  There is no strong public or political support for USAID, just modest support or indifference.  USAID does not reflect vigor or dynamics, it has not attracted much more resources, it does not inspire, and it may have questionable recruitment and training methods that suggest average standard operating procedures, i.e. minimal behavior and qualifications trump results.  USAID also has a long history of supporting authoritarian regimes and socialist economies.  It does not require countries to conform to American values and political and economic goals.  It has no greater vision than what is now.  Given the past results and likely future, USAID is very costly and unproductive for the billions of dollars given to it each year.  The typical bureaucrats are attracted and retained by it.  USAID’s bureaucratic culture and path dependency make it highly unlikely that it will really change and improve its operations and results by any substantial margins.

The argument against eliminating USAID includes many positive reinforcing claims.  USAID is the most experienced and tested foreign aid organization in the U.S. government.  It has a lot of expertise and foreign operators.  It has a structure in place that can deliver billions of dollars in goods and services.  It has professional leadership and personnel.  It may have the ability to change its ways and culture and even its standard operating procedures.  If the public and/or Congress have issues with it, the problems should be addressed and resolved by USAID. If USAID is unable or unwilling to change other policy alternatives should be considered.  So far, USAID has done everything it has been told to do.  In addition, USAID has nearly 2,000 employees and they are experienced and skilled.  They are a known quantity with the foreign recipients.  U.S. credibility is also on the line.  Shaking things up may raise doubts about the U.S.’s commitment and long-term capabilities.  Since there is no major opposition to USAID on either the domestic or international fronts, it would seem premature and unnecessary to eliminate such a large bureaucracy without compelling reasons to do so.

Policy Option #3: Eliminate the MCC     

The best argument for eliminating the MCC is that it is costly, redundant and everything it does can be done by USAID.  The only purpose for MCC’s creation was to tie part of U.S. foreign aid to promoting democracy and free markets.  These value-based objectives can be incorporated into USAID.  Or they can be removed altogether as essential criteria.  U.S. foreign aid is about promoting America’s best interests and that may not necessarily mean undermining it by demanding ideological conformity from recipients.  The MCC has proven to be very slow and inefficient in allocating its funds.  This is largely due to the 17 sets of criteria that are used to analyze and evaluate potential recipients and their ideological acceptability.  These criteria are cumbersome, costly and highly questionable, especially when the data and conclusions are being made by external organizations like Freedom House and the World Bank (who have their own interests, values and perceptions).  Furthermore, whether a country is already a democracy and free market or claims that it wants to be are two very big differences.  Most recipients are a long way from becoming like the U.S.  But, if they are desperate for aid, they can just simply claim that they want to be like the U.S. and this is sufficient justification for the MCC to allocate all or some of the funding.  This practice, unfortunately, has resulted from long delays, superficial verification and many complaints.  It raises the question as to the true intentions of recipients let alone the MCC’s rigorous standards of demanding compliance.  How can the MCC determine intentions unless the recipients are examined in detail over many years and possibly decades?  In the end, the MCC is a new and inexperienced organization that has only a few hundred of employees.  It does not currently have the capacity to operate efficiently, productively, and consistently with its original expectations, goals, and SOPs.  The MCC can quickly and easily be ended.  And, any personnel and resources can be shifted into USAID.

The arguments against eliminating the MCC stress the importance of the possibility and potential of the MCC.  USAID had a half a century to prove itself and came up noticeably short.  The MCC is the new kid on the block, so to speak, and may have a lot of potential.  It is too early to tell or close the book on it.  In addition, the MCC has generated some strong support in the public, Congress and the White House.  It has bipartisan support.  The Bush White House and Republican-controlled Congress created it and it continues to be supported by the Obama White House and the Democrats.  There is no strong opposition to it domestically or internationally.  Furthermore, the MCC has adjusted to its co-leadership role with USAID.  Proponents contend that the MCC’s resources and personnel would have been an expansion of USAID, so there really are no additional resources being wasted.  The MCC is just one part of U.S. foreign aid.  Moreover, the MCC reflects a number of important American values like democracy and free markets.  Ideology can often be a powerful component of foreign policy, in terms of mobilizing popular support and giving direction.  The MCC also emphasizes monitoring and enforcement, as well as careful analysis of recipients before, during and after the foreign aid.  The public and Congress have demanded more stringent criteria for America’s foreign aid, especially given decades of corruption, waste and abuses by recipients.  The MCC has done a seemingly better job at least in demanding more accountability and evidence of operations, in its first seven years of operations.  Overall, the MCC should be given more time to prove itself and deliver the foreign policy results before a final decision can be made on its future.  If the MCC were eliminated so early on in its lifespan, then it would greatly embarrass the U.S. and discredit all of its supporters throughout the government and public.  American credibility would be undermined.  Thus, the MCC should be allowed to adapt and improve itself as it enters a more mature political state.  Give it at least five more years and then see what it has done.

Policy Option #4: Merge USAID and the MCC

As early as 2005 Lancaster and Van Dusen called for the merging of USAID and the MCC.  It is on the surface a logical option.  Proponents argue that it is better and more cost-efficient to have just one major central foreign aid organization than two.  A united front offers much more cohesive and effective leadership, a strong policy voice and much more credibility and influence: One leader, one voice, one face and one source.  Merging is incorporating the best of both worlds.  No more bureaucratic infighting.  The merged organization can keep the best personnel and operational methods and resources.  A merger will bring about a very dynamic and demanding organization that can benefit both the public and the international constituencies.  Much more resources and personnel can be concentrated on the problems.  And the thousands of employees can have the full confidence that their jobs are safe for the long-term and can concentrate fully on the foreign aid objectives.

The arguments against merging USAID and the MCC are plentiful.  There is the high cost of combining both organizations.  Any merging would not likely eliminate any jobs or resources, but may actually increase the size of the bureaucracy since there will be a lot more layers involved to interconnect the two organizations.  There may be significant redundancy and surplus personnel, as well.  Furthermore, merging would greatly embarrass the U.S. government and the MCC, since it would be interpreted by many here and abroad as a major failure.  Seven years and the MCC goes down in flames.  Who made this decision and why, many will cry?  Also, merging raises the problem of who really ends up leading the newly united organization.  Should the MCC or USAID personnel take the lead?  How should any transition take place?  Who exactly should do what and how should the resources be allocated in this newly merged structure?  The exact details of what this merger entails could be great and costly and may lead to much bureaucratic in-fighting.  There may be a lot of bad blood left over.  What would be the primary goal(s) of this merged organization: Humanitarian (USAID) or ideological (MCC)?  Which valued goal takes precedence?  And what about national interests?  In the end, any merging would hurt U.S. credibility and make it look chaotic in the foreign aid area.  It may lead to years of problems trying to finalize the details and establish agreeable standard operating procedures.  There could be all types of transitional problems.  What would be the final determinants of who receives future foreign aid and how much and for how long?  What standards are to be used?  How should they be monitored?  How will this all be sorted out as the world continues to be mired in major economic problems?  And what if this merged organization fails substantially in one previous direction or the other?  What eventually turns out?  How would any adaptation be possible without seriously undermining the public and international community’s confidence in the U.S. government and foreign aid institutions?  All these questions have yet to be answered by key policy makers and others.

Policy Option #5: Create an Entirely New Foreign Aid Regime That Is Monolithic 

This policy option assumes that USAID and the MCC cannot be improved significantly to produce sufficient results and, thus, should be given up on.  It calls for a completely new foreign aid organization to be created on the ruins of the old ones.  It starts with a new slate of goals, personnel and operational methods.  It consolidates all former foreign aid organizations into one centralized location.  It can bring the best of everyone and everything together.  It can carry out foreign aid in a much more efficient and productive manner.  It will present a single and very powerful voice to the world that can instill much greater confidence and cooperation.  Overall, this policy option conforms with many other countries’ foreign aid organizations in terms of having one centralized institution.  It starts fresh but recruits the best and most experienced people and, then, builds a new ethos and set of SOPs for the challenges of the 21st century.  It ensures maximization and cost-efficiency by starting from scratch and not being tied down to past structures and personnel.  It can start at the here-and-now and proceed from there.  It will be the most modern government organization in existence and utilize the best and most recent methods and technologies.

The arguments against creating an entirely new foreign aid organization are many.  The opponents of a foreign aid “leviathan” can twist around all the pros and cons.  Opponents can state that any major disruption of the current U.S. foreign aid structure would have detrimental and possibly long-term effects on U.S. national security.  The country cannot afford such a transition phase to something unknown and untested.  And the country should not expect much better operations and results from any new foreign aid organization, no matter how centralized and it is not worth the costs, risks and time.  Opponents will stress the past value and experiences of the existing foreign aid system and they will point to the MCC as proof that the foreign aid regime can change and improve with the times and to the public’s demands.  Furthermore, both  publicly and politically that there is no great impetus at this time for a fundamental change in the U.S. foreign aid structure or delivery.  Moreover, there is the historical American tendency to fear centralized powers and monoliths.  On top of all this, there are many different constituencies inside and outside the government who want to maintain the existing system and their own components.  In addition, there are no foreign recipients or other groups who are demanding to alter substantially the current foreign aid structure.  Overall, creating an entirely new foreign aid regime that centralizes everything into one set of hands would be a radical departure from American tradition and foreign aid policy.  It holds much risk and could have major ramifications for decades to come.  And, if it in the end it gets fully established, then what happens if the monolith fails?  What then happens to American credibility and foreign policy?

Policy Option #6: Promote Private Organizations in addition to USAID and/or the MCC

This option calls for increasing the number of private organizations that are involved in U.S. foreign aid operations.  The option here designates free enterprise as the best means of delivering foreign aid.  It assumes that market-oriented and voluntary foreign aid organizations will be much more productive and cost-efficient, since they will be a lot leaner than a typical government bureaucracy.  This option also assumes that the private option will lead to higher demands and objectives, i.e. results-oriented goals and operations.  In addition, one or more private organizations may offer a non-politicized approach to foreign aid and use much more objective standards and approaches to allocating foreign aid.  Privatization does not mean that there is no government support or oversight.  It means that non-governmental personnel will make decisions on overall foreign aid and international economic development.  It may be along the lines of the United Way or Salvation Army, and it may be similar to the government corporations of the U.S. Post Office, Amtrak and the Tennessee Valley Authority (TVA).  All stress the primary elements of private enterprise but with different degrees of government influence.

The argument against privatized foreign aid is based mainly on finite resources and overall government control in the foreign policy arena.  The U.S. government cannot afford to pay for more foreign aid organizations.  There is too much bureaucracy as it is.  There will be much redundancy regardless of claims.  There will be a lot of inefficiency, costs, and over complexities.  There will inevitably be people stepping on each other’s toes and there will be much political infighting.  Sooner or later there will be winners and many sore losers.  And, there could be substantial problems in terms of coordination, cohesive policy and leadership.  There will be too much confusion, too many voices and no firm direction; all leading to a potential loss of U.S. credibility.  There likely will be a greater loss of oversight capabilities with the many new private organizations, which will make it much harder to monitor and regulate, thus reducing their accountability to the American people.  All the different groups will not be on the same page and there will be many more differing visions and operations.  Moreover, private organizations do not have the bureaucratic connections that USAID and the MCC have, so they will be out of the loop with all the other U.S. government organizations, like the State Department, and many other domestic and foreign organizations.  Privatized foreign aid is also relatively untried and untested.  It may lead to many failures and serious circumstances.  In addition, new private organizations cannot make up for decades of expertise and experience as a whole, even if they can draw in some skilled foreign aid personnel.  And, there may not be enough qualified personnel for the private organization to hire, especially if there is more than one private organization that is created.  Overall, privatization of foreign aid will produce major costs, political conflict and possibly chaos in the U.S. government and foreign aid establishment.  Just witness the government’s experience with the contractor Blackwater (now, Xe).

Option #7: Eliminate All U.S. Foreign Aid Organizations and Create One Central International Organization to Handle Foreign Aid
This option presents a number of interesting points.  The supporters for this option can argue that one central international organization is the most cost-efficient option for the major industrialized countries.  It will eliminate much U.S. bureaucratic waste and inefficiencies.  It will depoliticize the foreign aid regime.  It will promote global unity and coordination.  It will be able to fully concentrate all global resources on ending poverty and promoting economic development.  It will encourage long-term and tailor-made solutions to complex problems.  It will concentrate the best experts and experience into one international organization.  And, it will allow better response times, adaptation, and monitoring of global socio-economic problems.  Overall, this may be the basis for transforming the Organization for Economic Cooperation and Development (OECD) into what many people had always hoped that it would become.  Until now, the OECD’s limited powers and finances, essentially, have been sole extensions of many state governments.  The OECD can be more than a central coordination point and data distribution center.  Under this option, it can become the primary political decision maker, holder of the purse and implementer of all international foreign aid.  Every wealthy country in the world can unite behind it.  All members can support and follow it in making foreign aid and economic development a top global priority.

The opposition to this proposal is that it will cause the U.S. to lose complete control over a major foreign policy instrument, let alone American taxpayers’ money.  There will be a major loss of U.S. expertise and advice to political leaders.  It may lead to aid going to countries hostile to the U.S.  And, it may cause major problems in training and recruiting sufficient numbers of foreign aid personnel, since there will be a massive complexity of operations.   What happens in terms of foreign crises and wars?  Will this lead to constant breakdowns, divisions and defections among personnel?  What will be the costs?  Moreover, what should the decision making structure be like?  Who should make the final decisions?  How?  Will the largest donors have the most influence? Furthermore, who will make up this international organization?  How will employment and recruitment and training take place? Should there be a national quota system?  What about language differences?  In the end, there are just too many complications to one central international organization carrying out major foreign aid operations.  In the sovereign state system a global foreign aid regime that reigns supreme over national foreign aid institutions may not be able to exist successfully and operate properly for the long term,

Policy Option #8: End All Foreign Aid

This option calls for eliminating all foreign aid from the international equation at the governmental level.  It allows for private organizations to operate at the international level.  The proponents suggest that foreign aid has created a mass group of welfare recipients throughout the world and that ending foreign aid is the only way to wean countries away from dependency.  Others argue that foreign aid has stifled development and encouraged countries to go down unnatural paths.  Many developing countries have lost the ability to feed themselves, for example, because of foreign aid.  In addition, foreign aid has cost countries hundreds of billions of dollars and has little to show for it all.  Eliminating foreign aid may also encourage greater economic growth and savings in the donor countries and this may lead to greater purchases in the previous recipients’ countries, if encouraged and coordinated at a private economic level.  Foreign aid, many argue, is manipulation and imposition and, thus, ending it may remove many negative foreign influences and imperialism in the developing world.  The U.S., moreover, would save large amounts of money and the public will be very happy.  And, in the end, foreign countries will follow Lao Tzu’s saying that it is better to teach a person how to fish than to just give away a fish, since the former lesson can feed a person for a lifetime while the latter feeds that person for just a day and creates dependency and subservience.  Ending all governmental foreign aid will return the U.S. to focusing on international security issues and leaving the socio-economic development issues to the native countries and their external non-governmental supporters.  Countries have operated without foreign aid for hundreds and thousands of years.  People can and will adapt to new conditions.  The U.S. should accept that no country can fundamentally alter another country’s system for the long term.  The U.S. can allow other countries to learn how to be self-sufficient or force them to adapt in ways in which current foreign aid system has prevented or discouraged from happening.  New roads and realities to development can emerge beyond the current international welfare system.

The opposition to this policy option is obvious.  Ending all foreign aid could cause massive disruptions throughout the world, especially if it is done precipitately.  It may lead to greater poverty, starvation, and violence.  It may create large amounts of instability.  And it will lead to a major loss of U.S. power, influence, leadership, and credibility.  It also will make the U.S. and others look very selfish and cold-hearted.  And, since foreign aid has altered so much of the world, it will be a long time before recipients can make the necessary adjustments in a world without foreign aid.  The whole purpose of foreign aid now is to help assist less fortunate countries make their way out of poverty and become sufficient enough so as not to receive any foreign aid.  Ending foreign aid before this goal is accomplished would make the U.S. and others look like massive failures.  And, if other countries like China continue foreign aid while the U.S. stops it, then they may gain substantially in world power and influence at the expense of the U.S.

Foreign aid produces some degree of influence and can promote U.S. foreign policy objectives and values, however limited.  Whether or not foreign aid brings countries out of poverty, it does assist in stabilizing many countries, moderating and neutralizing many people and negative forces and encouraging incremental improvements.  And, if giving out even small bags of grain and other supplements help get people by on a daily basis and reduce their anxieties and potential desperation, then even this can contribute to maintaining order and the U.S.-created global system.  U.S. foreign aid expenditures are just a tiny percentage of its overall budget and it has relatively few negatives for the U.S. while it has the potential of producing some positive gains.


Foreign aid involves a complex array of issues and problems.  Based upon the policy analysis above, this paper concludes that it is best to merge all U.S. foreign aid operations into one new organization, i.e. Option #5.  After more than half of century of foreign aid, it is time that the U.S. recognize the failures and limitations of a highly decentralized foreign aid system and its inability to adapt to the emerging new world order.  The U.S. can no longer afford to have a divided group of foreign aid institutions.  The existing system is weak and unfocused.  The inability to have one unified policy and voice undermines the impact of U.S. foreign aid.  The lack of concentration and coordinated vision increasingly threatens the U.S. power and influence throughout the world.  With major domestic economic problems and a collection of security requirements that have greatly overextended America’s capabilities, it is increasingly imperative that foreign aid and other soft power instruments become much more effective and powerful.  The current foreign aid system does not give the U.S. the essential capabilities and potential that it needs.  Unifying the entire U.S. foreign aid establishment is the best means and chance for the U.S. to maximize its resources and influence.  It will be highly beneficial for the U.S. and the world.

A more powerful and successful foreign aid regime will be a universal good.  The best personnel, resources, methods etc. of all the various foreign aid institutions can be consolidated into one entirely new organization.  The slate will be clean, but the experience will be there.  There will be a transition period but it will not last long.  There are more than enough professionals who can “hit the ground running” in this new institution.  The U.S foreign aid regime can be reinvigorated and the world can watch a determined America reform its institutions for the benefit of all.  The U.S. should immediately begin the dismantling of its existing foreign aid institutions and the creation of an entirely new foreign aid structure.  One supreme and monolithic voice, goal and power in the foreign aid realm.  The U.S. should be very proactive in creating a foreign aid institution that can meet the global demands and challenges of the rest of this century and beyond.  American national security and global development stand at the crossroads.  Only a new foreign aid regime will be able to fulfill the U.S.’s and world’s goals and visions.  So let a new foreign aid institution be built for a newly emerging world order that corresponds with American and international interests.



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Steve Dobransky
Steve Dobransky

Steve Dobransky is an Adjunct Professor at Cleveland State University.  He is completing his Ph.D. studies at Kent State University, majoring in International Relations and Justice Studies.  He has an M.A. from Ohio University and a B.A. from Cleveland State University.

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