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What’s Foreign Aid? Why Does the U.S. Provide It?

It's time to reassess the good, the bad, and the ugly.

by
Dan Miller

Bio

March 14, 2011 - 12:00 am

Jordan

Consider briefly Jordan’s successful but precarious political history — beginning with King Hussein, a “pragmatic leader,” as the CIA Factbook has it, who

successfully navigated competing pressures from the major powers (US, USSR, and UK), various Arab states, Israel, and a large internal Palestinian population. Jordan lost the West Bank to Israel in the 1967 war and barely managed to defeat Palestinian rebels who attempted to overthrow the monarchy in 1970. King HUSSEIN in 1988 permanently relinquished Jordanian claims to the West Bank. In 1989, he reinstituted parliamentary elections and initiated a gradual political liberalization; political parties were legalized in 1992. In 1994, he signed a peace treaty with Israel. King ABDALLAH II, the son of King HUSSEIN, assumed the throne following his father’s death in February 1999. Since then, he has consolidated his power and undertaken an aggressive economic reform program. Jordan acceded to the World Trade Organization in 2000, and began to participate in the European Free Trade Association in 2001. In 2003, Jordan staunchly supported the Coalition ouster of Saddam in Iraq and following the outbreak of insurgent violence in Iraq, absorbed thousands of displaced Iraqis. Municipal elections were held in July 2007 under a system in which 20% of seats in all municipal councils were reserved by quota for women. Parliamentary elections were held in November 2010 and saw independent pro-government candidates win the vast majority of seats.

Jordan’s economy is among the smallest in the Middle East, with insufficient supplies of water, oil, and other natural resources, underlying the government’s heavy reliance on foreign assistance. Other economic challenges for the government include chronic high rates of poverty, unemployment, inflation, and a large budget deficit [...]. King ABDALLAH has implemented significant economic reforms, such as opening the trade regime, privatizing state-owned companies, and eliminating most fuel subsidies, which in the past few years have spurred economic growth by attracting foreign investment and creating some jobs. The global economic slowdown, however, has depressed Jordan’s GDP growth [...]. The budget deficit is likely to remain high, at 5-6% of GDP, and Amman likely will continue to depend heavily on foreign assistance to finance the deficit in 2011. Jordan’s financial sector has been relatively isolated from the international financial crisis because of its limited exposure to overseas capital markets. Jordan is currently exploring nuclear power generation to forestall energy shortfalls.

This suggests that America’s $682,700,000 in aid for Jordan may be highly beneficial to the United States — at the least, to a greater extent than foreign aid expenditures elsewhere.

Somalia

Somalia, receiving $84,958,000 in U.S. assistance, is a true basket case that hardly merits the designation “country.” Ostensibly it is governed by a transitional form of government — PC-speak for virtually none. It nevertheless is said to have “maintained a healthy informal economy, largely based on livestock, remittance/money transfer companies, and telecommunications.” No information is provided on the growing piracy sector of the Somalian economy. Without it, perhaps the rest of the economy would do far better. But without serious efforts to eliminate piracy, nearly eighty-five million dollars seems a high price to pay for any present or likely future good it may do for the people of Somalia or for the United States. Those funds could be used instead to diminish piracy by hitting it where it breeds and grows — as well as offshore, in a big ocean where successes have been few.

Russia and China

Russia ($68,700,000 in U.S. assistance) and China ($12,800,000 in U.S. assistance) most likely do not need the assistance the United States seeks to provide. Russia is establishing a ten billion dollar fund to attract foreign capital and wants to become a center of international finance; it is also testing a fifth generation stealth fighter aircraft while China is trying to establish dominance in the Asia-Pacific region. These efforts cost money.

China’s military has been on a spending spree at a time that the debt-ridden U.S. government is looking to cut defense costs. On Friday, China announced a 12.7 percent hike for this year, the latest in a string of double-digit increases.

That trend has triggered worries in Congress and among security analysts about whether the United States can maintain its decades-long military predominance in the economically crucial Asia-Pacific.

China continues to be up to mischief with Iran and reports say a multimillion dollar military base in Zimbabwe is on the way. “Touted as an intelligence academy, the new facility is the largest investment in a military base here in a decade.” Zimbabwe, for which the Obama administration has requested $99.1 million in U.S. foreign aid in 2011, slightly more than last year, plans to sell yellowcake uranium to Iran.

The economies of China and Russia are doing fairly well, although China’s is doing better than Russia’s. Beijing is not only our principal foreign creditor, but is spending money hand over fist throughout the world. Significant sums are being spent in South and Central America to gain influence and boost the Chinese economy. China badly needs to sell products in foreign countries.

Already, China has substantial investments in Venezuela. As a further step to expand its lending and other economic ties with South and Central America, China is pursuing the construction with Colombia of a 134-mile long railway system, a “dry canal” linking Colombia’s Atlantic and Pacific coasts. The rail system would be built, at a cost of about $7.6 billion, south of Cartagena, the major Colombian port, necessarily close to Colombia’s border with the Darien Province of Panamá. A later phase of the development would include the construction of a new industrial area to the south of Cartagena “to assemble part-finished Chinese exports.” It has been cited as a potential rival to the Panamá Canal that would crown China’s economic push into Latin America. Trade between China and Colombia amounted to five billion dollars in 2010, making China Colombia’s second biggest trade partner after the United States. It has been suggested that one reason Colombia is working on this deal with China is to apply pressure to the United States to approve the free trade agreement (FTA), signed four years ago but not yet approved by the Senate. In January of this year, Colombia urged approval of the long-delayed agreement. It’s probably now too late for approval of the FTA to scuttle the Chinese canal.

Both China and Russia have stable governments, historically aligned against United States interests, and they haven’t done the United States much good lately. Both are increasing their military strength and the United States and her legitimate allies are potential targets. There seems to be no significant justification for aid from the United States to either country.

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