Does Foreign Aid Promote Our Interests Abroad or Squander Taxpayer Money?
By Paul Gessing, President, Rio Grande Foundation, and Annie Pforzheimer, Senior Associate, Center for Strategic and International Studies (CSIS)
Government-Funded Foreign Aid Fails to Achieve Its Goals
By Paul Gessing, President, Rio Grande Foundation
The United States spends approximately $70 billion in federal foreign aid each year. While foreign aid is only about 1 percent of total spending, the U.S. federal government is $35 trillion in debt and counting. Our heavy financial burden is predominantly responsible for the out-of-control inflation we’ve been experiencing in recent years. If the United States is ever going to get its financial house in order, all spending must be reconsidered.
I am not advocating for cutting military aid, which accounts for 14 percent of foreign aid. However, when the aid is focused on countries like Ukraine and Israel, both of which are involved in active military conflicts, the merits of military aid are certainly open to question as well. Temporary military aid with well-defined goals may be beneficial but absent clear foreign policy goals and close oversight results in some of the same problems associated with traditional foreign aid.
Studies Confirm Foreign Aid Doesn’t Work
The remaining 86 percent of foreign aid is economic in nature, and that is what I will focus on in this debate. The U.S. provides foreign aid to many nations (mostly in Africa) that have long struggled to achieve economic progress. The rock band U2’s lead singer, Bono, has worked with impoverished nations for decades to help develop their economies. Eventually, Bono concluded that “Aid is just a stopgap. Commerce [and] entrepreneurial capitalism take more people out of poverty than aid. We need Africa to become an economic powerhouse.”
As early as 1989, a bipartisan task force of the House Foreign Affairs Committee concluded that U.S. aid programs “no longer either advance U.S. interests abroad or promote economic development.” In the 1990s, the Cato Institute pointed out that the failure of conventional government‐to‐government aid schemes was widely recognized, and resulted in the entire foreign assistance process coming under scrutiny. For example, a Clinton administration task force conceded that “Despite decades of foreign assistance, most of Africa and parts of Latin America, Asia, and the Middle East are economically worse off today than they were 20 years ago.”
Giving Foreign Aid to Politicians Is a Recipe for Failure
Free market capitalism is the only economic model that has proven effective in increasing human flourishing on a large scale. Former Texas Representative, Ron Paul once said that “Foreign aid is taking money from the poor people of a rich country and giving it to the rich people of a poor country.” Handing foreign aid to politicians (who can then use that money to pay for political favors and maintain political power) hinders the necessary embrace of free markets. Imagine that a foreign nation pumped money into politicians’ coffers in your state. Your state politicians would no longer need to rely on economic growth and reasonable tax policies to fund the government.
Nobody likes taxes but paying them does have a way of making political leaders reliant on the businesses and individuals that fund the government. Severing that relationship is not a path to prosperity or sound governance.
Foreign Aid Supports Our National Interests
By Annie Pforzheimer, Senior Associate, Center for Strategic and International Studies
While it’s true that foreign aid is part of the overall budget deficit, Mr. Gessing’s argument that we spend too much on it misses a key point: foreign aid is an important tool to defend our national interest.
When security budget choices are made to address the deficit, we should look to the Department of Defense, not foreign assistance. For example, expenses such as $12.5 billion for 68 F-35 aircraft should be weighed against $60 billion for all assistance worldwide, for (among other purposes): disaster relief, immunizations, counter-narcotics training, climate change mitigation, rule of law promotion, food aid, and agriculture. (And that $60 billion statistic includes non-traditional assistance, such as the Department of Interior’s joint environmental programs with Canada).
Foreign Aid is Proactive
Compared to security tools like economic sanctions and military might, foreign aid costs less and we gain allies and leverage rather than creating enemies. Our adversaries use this approach but spend more freely. China’s “Belt and Road Initiative” is present in 147 countries and has opened the door to the Chinese government and its businesses worldwide at an estimated cost of $1 trillion. It literally hits close to home when China builds major infrastructure in Latin America. We must take an interest in our own hemisphere–or China will.
Furthermore, in a post-Covid world, we learned that if we fail to take an active role in the world, we will find ourselves reacting to crises rather than heading them off, wasting valuable energy, time, and money. An international health early warning system is worth having. Peaceful resolution of conflicts means fewer refugees moving toward safety. We need strong international institutions to manage transnational threats, such as organized crime, pandemics, climate change, and cyber threats.
A New, Effective Way of Providing Foreign Aid
The assistance missteps of the 1980s and 1990s have given way to new forms of effective foreign aid. For example, the Development Finance Corporation (DFC), formed in 2018, uses lending and other credit tools to support investment “to partner with allies on transformative projects and provide financially sound alternatives to state-directed initiatives that can leave developing countries worse off.” The DFC is actively investing in renewable energy industries in Africa, which will increase energy supplies worldwide.
Foreign assistance benefits the U.S. as well. For example, South Korea received massive amounts of assistance from the United States in the decade after the Korean War and is now a major ally and trading partner that invests over $70 billion in the U.S. economy.
Finally, there is a moral imperative. I was a U.S. diplomat for 30 years and saw the extremes of poverty and conflict that our foreign aid helped mitigate. This moral obligation stems from the dreams of our founders and the millions of immigrants who have since populated the United States, to be a “City upon a Hill” as Pilgrim leader John Winthrop envisioned in 1630.
Taxpayers Shouldn’t Bear the Costs of Controversial Government Social Policies
By Paul Gessing, President, Rio Grande Foundation
In arguing for increased American foreign aid, Ms. Pforzheimer fails to show whether U.S. foreign aid spending is effective in achieving its goals or not. I would suggest it isn’t. In addition, she makes the case that China’s Belt and Road Initiative is a model (or at least superior) to the American status quo in foreign aid, which I also object to.
The Problems with China’s Belt and Road Initiative
The Belt and Road Initiative (BRI) that Ms. Pforzheimer cited, has cost China approximately $1 trillion over the last decade. It is funded and supported by the Chinese government and the Chinese Communist Party. Setting aside whether it helps the Chinese people who are forced to fund it (or not), the BRI has also been problematic for the nations receiving the “aid.”
According to the Council on Foreign Relations (CFR), the Belt and Road Initiative often “requires countries to take on large amounts of debt to fund infrastructure upgrades, BRI money is (thus) seen as a potential poisoned chalice.” The CFR further notes that “since the COVID-19 pandemic and the Russian invasion of Ukraine roiled global markets, a climbing number of low-income BRI countries have struggled to repay loans associated with the initiative, spurring a wave of debt crises and new criticism for the BRI.”
Americans are not likely to tolerate a major BRI-style expansion of foreign aid. Such a move would be exorbitant for a nation that is $35 trillion in debt and would only expand upon a misguided government program.
The Private Sector Should Take the Lead
The United States should increase trade and interpersonal relations with impoverished foreign countries. Rather than using taxpayer dollars to promote controversial American social policies in this country or abroad, the U.S. should emphasize adopting tried-and-true legal reforms that promote a culture of rule of law and economic liberalism.
To be clear, this does not involve direct intervention in foreign nations that do not want direct U.S. involvement or that of U.S. proxies. Instead, the private sector should be encouraged to take the lead in building relationships across the globe. Business is likely the primary way this will happen, but religious groups and tourists also further voluntary relations across national borders.
Unlike China, the United States is an open society that has always actively traded and engaged in voluntary cooperation with nations around the world. This is the American way. International cooperation and trade will prove more successful in the long term than any government-driven foreign aid.
A Path Forward with a Public-Private Partnership
By Annie Pforzheimer, Senior Associate, Center for Strategic and International Studies
Mr. Gessing and I agree that we get more out of trade and private citizens’ outreach than a militarized foreign policy. This point of view should make sense to Americans. After the shock of the 9/11 terrorist attacks, our national response emphasized the instrument of war with negative consequences not only for U.S. service members and their families but also for people in countries far from our borders. Mr. Gessing and I also agree that we are not a nation that would support predatory programs such as China’s Belt and Road Initiative.
Mr. Gessing makes the case for the U.S. private sector to be the face of foreign aid, calling it the “American way.” While our business community can share many valuable aspects with the world, history shows that when left unchecked, the U.S. private sector can be unreliable and sometimes harmful to the world. For example, we used “gunboat diplomacy” in the 1800s to open Asian ports to U.S. businesses, regardless of the cost to our diplomacy in that region and the enmity we built there, the consequences of which still affect us to this day with China. In the 20th century, the U.S. private sector sponsored dictators around the world and engaged in corruption with local elites that helped justify populist revolutions.
The Solution Lies in a Partnership
A public-private partnership, where the U.S. government sets the rules of engagement for trade and foreign investment while encouraging the private sector to build global relationships, melds the strengths of our society.
To get the most out of engagement by business and private citizens, the U.S. government still needs to maintain an active role in foreign assistance and how we engage with others overseas. Mr. Gessing notes that emphasizing “tried-and-true legal reforms” is an appropriate way for the U.S. to make the most of our national strengths and vibrant economy. In fact, promoting the rule of law is already one of the cornerstones of U.S. government-led foreign aid and I’m skeptical that it would be supported by businesses looking to make a quick profit. Oversight is needed to make good international corporate citizens. Similarly, private citizens play an important role in U.S. soft power, but Americans who travel to other countries quite often get into trouble and need help from our government to resolve.
In other words, while emphasizing all the non-military tools of power, influence, and outreach, we should strive to make foreign assistance a vibrant public-private partnership.
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Paul Gessing
Paul Gessing became the first full-time President of the Rio Grande Foundation in March 2006. Since joining the Foundation, Gessing has been a prominent voice for limited government and individual liberties in policy areas including: constitutional liberties, taxes, health care, education, and transportation. Prior to joining the foundation, Gessing headed up the lobbying efforts of the National Taxpayers Union (NTU), a respected taxpayer-advocacy organization in Washington, DC. He has published articles in the Wall Street Journal, Washington Post, US News & World Reports, The Albuquerque Journal, The Barron's and several other major publications. He writes for and appears regularly in media outlets around New Mexico. Paul has also testified in Congress and before a variety of state and local bodies. Paul graduated from Bowling Green State University in Ohio with a degree in Political Science in 1997 and he received his Masters in Business Administration from the University of Maryland. Paul is on the Board of New Mexico Connections virtual charter school.
Annie Pforzheimer
A retired career diplomat, Annie Pforzheimer is a Senior Non-Resident Associate at the Center for Strategic and International Studies, an Adjunct Professor of political science at the City University of New York, and a public commentator on foreign policy. Her thirty-year diplomatic career focused on security, rule of law, and human rights. She was the Acting Deputy Assistant Secretary of State for Afghanistan and Deputy Chief of Mission in Kabul; Director of the $700 million security assistance program in Mexico; human rights officer in Turkey and South Africa; and Director for Central America migration issues at the National Security Council. Ms. Pforzheimer is a graduate of Harvard University and the National Defense University, and a member of the Council on Foreign Relations.