Three - Getting Better Value: An Agenda for Effective U.S. Development Assistance

U.S. foreign assistance is a vital tool for rebuilding shattered societies like Afghanistan. Anna Badken, who writes for Foreign Policy, reported online from several areas of war-torn Afghanistan in the spring of 2010. Her report “Where Have All the Children Gone?” illustrates vividly how good intentions can go awry when it comes to foreign assistance.

Developing countries are now asked to do a lot of work before presenting their development priorities to the U.S. government. As we saw in the last chapter, a thorough process of consultation involving multiple stakeholders is generally expected. The consultative process is designed to make the governments of developing countries more responsible partners, since they must demonstrate that they are serious about growth that is geared toward significantly reducing poverty.

Foreign aid is considered “tied” when it comes with conditions that the goods and services funded must come from suppliers in the donor country. For example, 75 percent of U.S. food aid must be shipped on U.S.-flagged vessels, a requirement written into the 1936 Merchant Marine Act. And under the 1961 Foreign Assistance Act, virtually all commodities purchased with U.S. food aid resources must come from the United States.

Assistance that is earmarked is legally set aside by Congress for a specific issue or country. The programs that receive earmarked assistance today are worthwhile—sanitation, microfinance, childhood immunization, women’s education, biodiversity, and so on. The problem is that earmarks steer resources to programs or countries without a process of using objective criteria to determine where assistance is needed most and/or how it can achieve the best results in catalyzing sustainable development. In other words, earmarks cost flexibility and coherence in development assistance.

Following the end of El Salvador’s civil war in 1992, USAID began a program to help rural communities displaced by the fighting. The project focused on cashew nut production, providing families with trees to plant and technical assistance. After that, the farmers established a farmers’ cooperative with support from USAID. Next, USAID coordinated with European aid agencies to help farmers begin to process their cashews so they would be worth more at market.

Rwanda provides an inspiring example of how smallholder farmers in developing countries can compete in global markets. Rwanda produces some of the highest quality coffee in the world. A winner of international competitions, Rwandan coffee is virtually guaranteed a spot on menus in Starbucks and other upscale coffee shops around the world.

Showing how foreign assistance can work better has been the main aim of this chapter. The reforms we recommend could help tens of millions of people escape hunger and poverty. Effective aid matters to poor countries and to the United States, as it creates partnerships that fuel the growth of both. Moreover, effective aid that reduces poverty helps to build a more stable world, improving the security of all.

In the 1960s and 1970s, USAID was one of the most respected development agencies in the world, and it was a respect earned by having technically qualified staff to respond to the most difficult development challenges of the day. Starting in the 1980s, a transition occurred to change a respected organization of “doers” into one of “managers,” as one USAID official put it.

In 2009, a coalition of U.S.-based non-governmental organizations, including Bread for the World, produced a five-year plan called the Roadmap to End Hunger designed to improve U.S. food aid and agricultural development programs.