The US Isn’t "Stingy"; It’s Strategic

Uncle Sam is not Ebenezer Scrooge. The U.S. government is the world’s largest foreign aid donor, contributing economic assistance to more than 150 countries. The United States is also the largest national source of humanitarian and emergency relief aid. Before President Bush took office in 2001, the U.S. government was providing foreign nations with nearly as much development aid and humanitarian assistance as did France, Germany, and Great Britain combined.

When Jan Egeland, UN undersecretary-general for humanitarian affairs, called the U.S. “stingy” last week in the wake of the tsunami disaster, he affirmed the belief of many that the Bush administration was not only arrogant and aggressive but also lacking in compassion and generosity. The failure of the president to make a personal statement of support and condolence until three days after the tragedy–and the paucity of the U.S. initial commitment of emergency humanitarian aid–gave widespread credence to the charge that the U.S. is not a good global neighbor but rather a self-centered Scrooge.

Egeland was quick to note that his measure for generosity was not total aid but economic aid as a percentage of national income or GDP. A decade ago at the Earth Summit in Brazil, the United States and the rest of the developed world promised to increase aid levels to at least 0.7% of national income. “If the foreign assistance of many countries is now 0.1 or 0.2% of national income, I think that is stingy,” said Egeland.

Can the $45 billion U.S. economic and military aid budget of 2004–roughly three times what the Clinton administration allocated in 1997–be described as “stingy”

How does the U.S. economic aid commitment as a percentage of national wealth compare with the other 22 large aid donors? The latest comparative figures from 2002 place the United States–with its 0.13% commitment–dead last behind Italy and Greece with their 0.2% contributions of national income. If military aid is included, the percentage jumps to nearly 0.2%.

Only five countries have met or exceeded this promised 0.7% benchmark set a decade ago: Denmark, Norway, Sweden, Netherlands, and Luxembourg.

As a percentage of national income, U.S. foreign aid has steadily and dramatically dropped since 1949. Not since the Alliance for Progress years of the Kennedy administration has the economic aid budget exceeded one percent of annual GDP. According to an April 2004 report by the Congressional Research Service, even with the increases in U.S. aid commitments since 2001 (excluding the nearly $25 billion committed to Iraq), current aid levels are among the lowest in a half-century of U.S. foreign assistance programming.

Post-Cold War Blues

During the Cold War, U.S. foreign aid enjoyed what aid reformers now call “policy coherence.” As the CRS analysts rightly point out in their recent report, until the 1990s “the underlying rationale for providing foreign aid was the same for all U.S. foreign policy–the defeat of communism.”

During the 1990s the U.S. government was hard-put to find a new rationale to support Cold War aid levels. No longer could foreign aid–either economic or military–be justified as part of the Cold War against the advance of communism. The Clinton presidency settled on the concept of promoting “sustainable development” as the core principle of U.S. foreign assistance, which proved to be a hard sell to the U.S. public and Congress. This new difficulty in explaining how U.S. aid served U.S. national security and national interests, combined with the administration’s determination to balance the budget, resulted in a gradual decline in foreign assistance.

In the last years of Clinton’s tenure, foreign aid started to climb again–not out of any new congressional or executive branch determination to foster sustainable development–but to complement U.S. military operations in Colombia, Haiti, Bosnia, and Kosovo.

If one looks solely at the changing allocations of U.S. foreign assistance, the Clinton years seem the age of austerity and the Bush administration in contrast appears generous. Starting in fiscal 2002, economic aid began a steady and dramatic rise–rising $4.3 billion over 2001. By 2004 the U.S. government’s economic aid commitments had risen to historic levels–rising to levels not seen since the post-World War II years with the Marshall Plan for European reconstruction.

Depending on how you view foreign assistance–total aid or as a percentage of income–Uncle Sam is either generous or a miser. But a narrow focus on dollar amounts and percentages misses the bigger picture of the changes in U.S. economic aid in the past several years. What cannot be debated is that U.S. economic aid is increasingly strategic.

The administration’s “global war on terrorism” is the main determinant in the distribution of economic aid–not development needs, not humanitarian disasters, not hunger or the increasing numbers of the world population living on a dollar a day or less. In providing a new rationale for U.S. foreign aid, the war on terrorism has provided a new policy coherence that integrates foreign assistance with foreign and military policy. When the officials of the State Department and the U.S. Agency for International Development (USAID) justify their aid requests before congressional committees, they stress that aid is part of the country’s national security strategy. The war on terrorism has replaced the war on communism as the underlying rationale for foreign assistance. That makes selling increasing foreign aid budgets much easier on Capitol Hill and has restored a bipartisan consensus in support of USAID programs.

Guns and Butter

The 2004-2009 strategic plan produced by the State Department and USAID defines “security” as the main goal of U.S. foreign assistance. The strategic plan aims to “align diplomacy and development assistance” with the president’s National Security Strategy of September 2002–the document that lays out the case for preventive war and for building the capacity for global military intervention.

Increasing equitable development, reducing poverty and hunger, and protecting the global environment don’t figure into the strategic goals and objectives of this strategic plan. Instead, the main priorities are the Arab-Israeli tensions, stabilizing Iraq, restructuring the “Muslim world” to increase democracy and economic freedom, stabilizing Afghanistan, North Korea, India-Pakistan tensions, drug eradication in the Andean region, strengthening alliances such as NATO, and reforming the United Nations. Further down on the list of priorities for USAID and the State Department are the HIV/AIDS crisis; food security, particularly in crisis countries such as Sudan, Iraq, Ethiopia, and Afghanistan; and providing “accountable” development assistance through the new Millennium Challenge Account.

Responding to a spate of criticism in the 1990s that U.S. economic aid lacked a strategic coherence, USAID over the past few years has addressed that criticism head-on by its determination to make foreign assistance coherent with U.S. national security strategy. This challenge to establish “policy coherence” was also addressed in the January 2004 USAID-commission report, U.S. Foreign Aid: Meeting the Challenges of the 21 st Century, written in part by neoconservatives from the right-wing Hudson and Hoover think tanks. The paper calls for greater “selectivity” in U.S. foreign assistance based on two criteria: “relevance to U.S. national security” and “greater aid effectiveness.”

Selective and Strategic

One has only to look at the major recipients of U.S. economic aid to grasp the policy coherence with national security strategy. But this new selectivity based on security imperatives can also be seen in the significant rise in economic (and military aid) to what USAID calls “front-line” states in the war on terror–those like Poland that joined the “coalition of the willing” in the Iraq occupation, countries in Central Asia that have opened their countries to U.S. military bases, and others like Indonesia that are regarded as key allies in containing Muslim militancy.

Starting in 2002 the executive branch began to underscore the war on terrorism as a top foreign aid priority. According to the Congressional Research Service, the State Department now highlights the amount of U.S. assistance going to some 30 “front-line” states in the terrorism war. Aid to Pakistan, for example, jumped from $1.7 million in 2001 to $275 million in 2004.

Leading the list of top economic aid recipients in 2004 was Iraq, which received $18.5 billion–more than the total USAID budget prior to 2002. Next comes Israel ($2.6 billion), followed by Egypt and Afghanistan, both of which received approximately $1.8 billion. Other top recipients were Colombia, Jordan, Pakistan, Peru, Bolivia, Turkey, Sudan, and Indonesia.

Additional top recipients of U.S. aid in 2004 were Sudan and Liberia as part of U.S. conflict-resolution and humanitarian aid initiatives, along with Uganda, Ethiopia, and Kenya, reflecting the president’s $15 billion Global AIDS Initiative in Africa.

Clearly, the Bush administration was slow on the uptake to see the strategic implications of tsunami disaster relief. But the strategic and public relations benefits of U.S. humanitarian aid in largely Muslim countries like Indonesia are now recognized. Although Washington and U.S. society desperately need some favorable PR, the U.S. government’s apparent use of its aid efforts in Indonesia to solidify working relations with the Indonesian military (TNI), including the use of U.S. helicopters by the TNI, may only contribute to strengthening the position of the highly abusive military forces in that conflicted nation.

Selective and Effective

Foreign assistance is one of the most flexible instruments of U.S. foreign policy, since it can be used alternately as a carrot and a stick. Countries that cooperate with the U.S. national security initiatives–no matter their record on such foreign aid objectives as democracy, human rights, or good governance–receive aid as carrots.

In addition to aid selectivity measured by national security goals, USAID has established its own criteria of “effectiveness” when evaluating how development funds should be spent. In the past, USAID has used its project funding to foster such goals as privatization, economic liberalization, and austerity.

The World Bank’s 1998 report Assessing Aid concluded that a “good policy environment” is an essential precondition for effective development assistance. The Bush administration has taken up this theme with a vengeance with its much-vaunted Millennium Challenge Corporation. Established following the 2002 Monterey Conference on Financing and Development, the $5 million in promised development funds are available only to countries that meet strict preconditions–including a commitment to free trade, cooperation with U.S. foreign policy initiatives, and no-holds-barred economic liberalization, as well as national treatment for U.S. investors. In other words, instead of conditioning new aid to agreed-up reforms, countries need to meet U.S.-imposed political, economic, and governance conditions in advance of new aid commitments. Largely as a result of this onerous pre-conditionality, the government corporation has been hard-put to find countries who have met the challenge of satisfying all the U.S. requirements.

A long-running measure of the effectiveness of U.S. aid has been its ties to U.S. exports and technical assistance. According to USAID, 81% of its procurement comes from U.S. sources. This falls short of the 87% U.S. procurement rate for U.S. military aid. That figure would be 100% if it were not for a special provision that allows Israel to use U.S. military aid to buy from its own military contractors.

Promises, Promises

A few days after the criticism of penny-pinching in its tsunami disaster aid, the administration increased its promised aid from $15 million to $350 million. However, unlike the supplemental aid packages it has secured for Iraq and Afghanistan reconstruction aid, this $350 million doesn’t represent an increase in the economic aid budget, but rather is a commitment that is not backed by available resources. If the U.S. is to deliver on its promise, it will either have to draw disaster aid from other accounts, ask Congress for supplemental aid, or go into the next fiscal year with a budget deficit. Because of U.S. strategic priorities, U.S. humanitarian aid and emergency disaster assistance–which represents 12% of total foreign and military aid–is largely used in conjunction with U.S. humanitarian interventions and in conflict zones where U.S. national security interests are at stake. As the U.S. global reach expands, the need for associated humanitarian aid also increases, thus compounding U.S. budgetary pressures.

There is good reason to doubt whether the promised $350 will be anything more than just another broken promise by the Bush administration. The Bush White House has established a record of promising large sums of aid to reduce poverty, to fight HIV/AIDS, and to help governments that are helping themselves with good governance and economic reform. The Millennium Challenge Corporation has failed to deliver any of the promised $5 billion, although the account continues to whittle down its resources in studies and evaluations that are establishing exactly what a “good policy environment” means with respect to U.S. foreign, economic, and military policy.

At first glance, a country’s generosity in foreign aid seems a good measure of whether the U.S. or any other nation is a good global neighbor. Certainly the high percentage contributions of the Nordic and other Western European countries make them immune to charges that they are stingy. Moreover, these same leading aid donors don’t tie their aid to their own products and technical assistance.

But foreign aid is not always an unqualified good, especially when it comes from a country whose aid strategy is so closely tied to its global war strategy and to its neoliberal economic policies.

TOM BARRY is policy director of the International Relations Center, online at He is the author of books on U.S. economic aid including The Soft War: Uses and Abuses of U.S. Economic Aid in Central America (Grove Press).


Tom Barry directs the Transborder Program at the Center for International Policy and is a contributor to the Americas Program