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U.S. Foreign Aid Set To Hit 50-Year Low

by Jim Lobe

Only 0.11 percent of the country's gross domestic product
(IPS) WASHINGTON -- Despite the longest period of economic growth since World War II, U.S. development aid to poor countries will soon reach a 50-year low, according to a new report released here April 25.

While the nominal amount of assistance -- $10.7 billion as proposed by Pres. Clinton for fiscal year (FY) 2001 -- is greater than that of any other single country except Japan, its share of the huge U.S. economy or government budget is less than that of any other industrialized country, according to the Center on Budget and Policy Priorities (CBPP), which published the report.

Under Clinton's 2001 proposal, foreign aid would account for only 0.11 percent of the country's gross domestic product (GDP), less than half of what it was during the 1980s and less than one-third of what most other industrialized countries currently provide.

As a percentage of the proposed $1.8 trillion 2001 budget, foreign aid would fall to 0.6 percent -- roughly the same level as the last several years but still only one-fifth of that part of the federal budget which went to foreign aid in 1962 when the U.S. Agency for International Development (USAID) was created, according to the report.

That assumes that Clinton will get what he wants for FY 2001. In fact, the Republican-led Congress has already set forth its own budget blueprint which, if enacted, would cut six percent off of Clinton's request for next year and even more in subsequent years.

"The trends in U.S. development aid are unmistakable," said Isaac Shapiro, author of the report, "Trends in U.S. Development Aid and the Current Budget Debate." "The U.S. commitment to development aid has fallen significantly over time and is quite low now compared to the levels that other industrialized nations provide."

What makes this trend especially unfortunate, according to a companion report issued by the Overseas Development Council (ODC), a think-tank here, is that it comes at a time when a new consensus is emerging on how to make aid more effective, especially in reducing poverty.

"This is the wrong time for U.S. aid spending to decline," according to the report by ODC analysts Kevin Morrison and David Weiner. "Knowledge about what makes aid effective and how to target it better is...reshaping the U.S. aid program and the programs of multilateral institutions the United States supports."

Aid covered by the CBPP report includes development and humanitarian assistance provided both bilaterally and through multilateral agencies like the World Bank, and the Economic Support Fund (ESF), a bilateral program used during the Cold War to provide large amounts of balance-of-payments support to Third World governments closely allied with Washington.

The ESF program, at $2.3 billion for FY 2001, is now less than half of what it was 15 years ago. Almost all of its funds are used to support Middle Eastern governments involved in the Arab-Israeli peace process.

Indeed, the Middle East, despite the relative wealth of the region's countries, receives more U.S. aid than any other region. Israel, Egypt, the Palestinian Authority, and Jordan together receive more non-military aid than to all of Asia and sub-Saharan Africa, home to the world's poorest nations.

1.2 billion live on less than a dollar a day
Much like the George Bush administration before it, the Clinton administration has deplored the decline in U.S. aid which has been effected mainly at Congress' initiative. But it has done little to reverse the trend, despite the 1997 appointment of Secretary of State Madeleine Albright who had pledged to make the case for increased aid to the public more effectively than had been done in the past.

She rarely misses an opportunity to complain about the low funding and has even banned the word "aid" in her public comments due to what she considers its negative connotations. In remarks here today, for example, she said, "Most Americans are astonished when I tell them we devote a smaller percentage of our wealth to assisting overseas development than any other industrialized country.

"During the past decade," she said, "our rate of investment has declined by half. Since the days of (President Harry) Truman and (Gen. George) Marshall, by more than 90 percent. This makes it harder for us to leverage the help of others, and often leaves us with no other choice than to short-change one urgent need in order to cope with another."

Albright and the administration is not the only one complaining. Many U.S. corporations with overseas interests have also been pressing for more aid. In a report published earlier this month, the Business Alliance for International Economic Development (BAIED) called for an "aid renaissance" that would build healthier economies abroad that would, in turn, buy more from the United States.

The group, a coalition of universities and business associations, particularly those representing big food exporters, said that 80 percent of foreign aid goes for goods and services that the U.S. government buys from U.S. businesses and individuals.

The report, "Protecting America's Future: The Role of Foreign Assistance," noted that the value of U.S. exports doubled over the past decade and now make up 10 percent of U.S. GDP.

"Our foreign assistance expenditures in the 1960s and 1970s, particularly in East Asia and Latin America," according to the report, "are tightly linked to massive increase in exports and investments in the developing world in the 1980s and 1990s.

"Most of the foreign assistance we provide to developing countries today goes toward making them good customers tomorrow," it said.

The new ODC report cites the same argument for its conclusion that U.S. interests are being badly served by a declining aid budget.

But it also argues that the ongoing plunge is "also at odds with the view, held by a majority of Americans, that the United States and other wealthy countries have a moral obligation to help the world's poorest people, 1.2 billion of whom live on less than a dollar a day."

Donors, according to the report, have learned much during the past decade on how to make assistance more effective, particularly by targeting those countries which are committed to strong economic reform programs, improved governance and the rule of law, and a sense of "ownership" of the aid itself.

"The spending trends documented in the CBPP report are diminishing the impact of the U.S. aid program precisely at the time when new knowledge about aid effectiveness should be making it stronger," the report argues.

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Albion Monitor April 30, 2000 (

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