Foreign aid isn’t the best way to help developing countries – but a blanket cut isn’t either

(Flickr / MK Luo)

President Trump’s reported plan to slash foreign aid by as much as one third has been harshly criticized by many on both sides. But as with many of the president’s policies, there is some merit behind the controversy — in this case, the principle of reexamining foreign aid spending.

Though cutting the State Department’s budget by 37 percent seems excessive and heavy-handed, the president should take a harder look at the efficacy of the more than $30 billion in foreign aid the United States sends abroad every year.

Critics argue that cutting foreign aid is equivalent to opposing global poverty reduction. But the actual link between government foreign aid and sustained economic development that lifts people out of poverty is weak, if it exists at all.

Consider a report by the Brookings Institution that recently concluded that only 2 percent of foreign aid is directed toward social transfers directly addressing poverty. Most of foreign aid is used to support infrastructure or institutions (which, admittedly, are still important factors in economic development) or for military support — assuming the money is not derailed by corrupt leaders first.

“If the elimination of extreme poverty is to be achieved through targeted transfers, it depends on sources other than foreign aid,” the authors argue. A similar report published in 2013 by the Economist celebrated the decrease in global poverty, while noting that foreign aid played only a marginal role at best.

Nicholas Eberstadt and Carol Adelman of the American Enterprise Institute reviewed several studies that attempt to measure the relationship between foreign aid and growth. The result? “It has not been demonstrated that official development assistance makes a regular and predictable contribution to overall macroeconomic growth.”

These findings are consistent with a 2002 study showing that more corrupt governments often get just as much, if not more, in foreign aid than less corrupt governments. Foreign aid money is often distributed based on strategic foreign policy goals rather than effective outcomes in poverty reduction.

These are important problems to fix for the world, even though they don’t have much of an impact on the U.S. budget. In fact, Americans drastically overestimate how much foreign aid affects the national debt. “A whopping 46 percent said foreign aid contributes ‘a great deal’ to government debt, whereas only 18 percent said the same about Medicare,” reported Catherine Rampell in a Washington Post op-ed. Yet spending on Medicare is almost 20 times that of foreign aid.

In framing the cuts as a budgetary measure, the president misses the real target. Foreign aid is not a major driver of the national debt, but we should still scrutinize those expenses carefully to ensure the money is actually helping, not hurting, citizens of developing nations.

As a former Kenyan government official once told me as we discussed the corruption that plagued U.S. foreign aid to Kenya: “Local expertise is absolutely necessary.” Knowledge from local citizens needs to be incorporated, and projects funded by aid need to have local ownership — otherwise, there will be no accountability or lasting success.

The solution is not to apply a blanket percentage cut, but rather to reevaluate our foreign aid to make sure it is not fueling corruption, propping up dictators, or funding projects that have no sustainable impact.

Published on Opportunity Lives

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