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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

According to this article, a recent poll revealed that “respondents thought the foreign aid part of the federal budget was an average of 27 percent. The real amount is about one percent.” That suggests either that the amount of foreign aid is small or that the federal budget is very big. The one percent figure is supported by government data. Leaving aside the question of whether we can afford it, some foreign aid is useful because it may in various ways serve the interests of the United States; beyond that, we might supply aid which will do the United States little or no good, or aid which is even likely to harm the United States. With an administration often asleep at the switch and dithering, attempting to figure out which is which is a difficult, but necessary, exercise.

According to the Obama administration’s foreign aid appropriations request for 2011, in many cases slightly less than last year, we should provide direct foreign aid to the following countries in the amounts indicated (not all countries to receive aid are included):

Table I
Afkghanistan $3,923,700,000
Pakistan $3,053,600,000
Israel $3,000,000,000
Egypt $1,558,000,000
Jordan $682,700,000
Zimbabwe $99,100,000
Somalia $84,958,000
Russia $68,700,000
Nicaragua $44,457,000
Cuba $20,000,000
China $12,800,000
Venezuela $5,000,000
N. Korea $2,500,000
Libya $875,000
S. Korea $0
Iran $0

Based on the (confusing) data provided by the United States government, the amounts shown in Table I above apparently do not include funds requested for multiple regional foreign aid offices serving two or more countries. Nor do they seem to include the $646,500,000 requested by the Obama administration for demon climate change or the $9,836,600,000 requested for health matters, including approximately $5.85 billion for HIV/AIDS and $231 million for nutrition. They apparently do include funds requested for military assistance, exclusive of the involvement of United States military forces most of which falls under Department of Defense budgets. The various assistance categories are provided here:

Table II
Peace and Security $10,843,000,000
Health $9,386,600,000
Economic Development $4,656,400,000
Humanitarian Assistance $4,005,800,000
Democracy, Human Rights and Governance $3,333,000,000
Education and Social Services $1,585,700,000
Environment $815,300,000

Egypt and Pakistan

Aid requested by the Obama administration for Egypt includes both military and economic assistance. Of the total $1,558,000,000, $1.3 billion is for Peace and Security, which encompasses

peacekeeping, humanitarian, coalition/multinational and peace support operation. Support security sector reform through training and operational support. A host nation’s security forces include military, paramilitary, law enforcement (includes civilian police, specialized units, border security, maritime security, etc.) Security sector reform activities are not limited to post-conflict situations.

Reductions in aid to Egypt have been suggested. Aid to Pakistan, three times more than that given to Egypt, might also be reconsidered.

Afghanistan

Aid requested for Afghanistan ($3,923,700,000) also includes both military and economic assistance (exclusive of most U.S. troop involvement). Alas, the United States is increasingly viewed as an enemy. Most recently, President Karzai voiced what appears to be widespread public sentiment that collateral damage inflicted by NATO forces on the civilian population is completely unacceptable and said that

regret is not sufficient [...] civilian casualties during military operations by coalition forces is the main reason for tension in relations between Afghanistan and United States [...]. It is not acceptable for the Afghan people anymore. Regrets and condemnations of the incident cannot heal the wounds of the people [...] repetition of such incidents would affect relations and the environment of trust between us. The continuation of such incidents is not tolerable and not acceptable for the Afghan people and government.

When fighting a war against “civilians” who are not in uniform and are indistinguishable from others, mistakes happen; they also happen in conventional wars with uniforms.

Hundreds of people from a left-wing political party marched through Kabul to protest U.S. military operations and demanded the withdrawal of foreign troops.

They chanted, “Death to America, death to the American government,” and carried pictures of Afghans killed or wounded in recent airstrikes. They burned an effigy of Mr. Obama.

I have seen no reports of similar demonstrations against “civilian” insurgents who also kill civilians, sometimes rather indiscriminately. It seems to be a losing battle for the United States and for NATO, and it may be that when we leave Afghanistan little will remain of what we have tried to accomplish. Unless ways can be found to reverse this unfortunate momentum, the expenditure of nearly four billion dollars in aid as well as American lives and military resources not included in the nearly four billion dollar amount is likely to continue to harm rather than to help the United States.

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.

Nicaragua, Cuba, Venezuela and North Korea

Economically speaking, Nicaragua ($44,457,000 in U.S. assistance), Cuba ($20,000,000 in U.S. assistance), Venezuela ($5,000,000 in U.S. assistance) and North Korea ($2,500,000 in U.S. assistance) are doing poorly to horribly. With dictatorial governments and economic systems, they are not likely to be helped in ways beneficial to the United States by any form or amount of U.S. assistance to their governments. To the extent that assistance is provided, it almost certainly helps their leaders in their activities contrary to the interests of their subjects as well as contrary to those of the United States and of her remaining allies.

Venezuela is tightly controlled by el Presidente Chávez, who has for years been trying with success to expand his influence in South and Central America. With few exceptions, he has gained significant influence.

Venezuela and Iran have been assisting Nicaragua to develop a canal to connect her Atlantic and Pacific coasts. That has long been considered feasible and was one of the alternatives explored prior to the construction of the Panamá Canal. There are substantial questions about its viability, due in part to the severe weather common at that latitude and along the trade routes, particularly during hurricane season. From the perspective of United States security, the alliance between Iran and Venezuela is itself potentially dangerous.

North Korea is self-evidently dangerous to the United States as well as to the rest of the world. Any assistance from the United States, even a measly $2.5 million, will fail to alleviate the suffering of the Kim regime’s subjects and will in the long term merely delay the departure of the regime. The same will be true should North Korea succeed in obtaining United Nations registration under the Clean Development Mechanism for its hydroelectric facilities. “This scheme allows developing countries to earn tradeable carbon credits for emissions reductions from clean-energy projects.” There is obviously legitimate concern that the funds likely to be obtained from carbon credit sales (roughly 276,000 euros annually) would go to nuclear arms and other military ventures. China, always looking for ways to keep the DPRK in line for its own purposes, seems likely to push this initiative forward.

Costs are important, but by no means the only factors to be considered.

We should give serious thought to terminating aid to the countries above, and also look closely at aid to many others. Libya? $875 million is peanuts. Depending on what happens there it should be stopped or increased. Iran? Zero. We did not support the insurgents there last year; maybe the time to do so has come. It’s a bit late and much earlier would have been better, but still…

Attention should also be paid to the various purposes for which aid is given. For example, climate change assistance makes little sense and seems more likely to retard than to stimulate economies. Such initiatives have had the former effect in the United States.

The total funds provided worldwide are not, relatively speaking, staggering; at fifteen billion dollars, they would be “only” about one percent of the estimated 2011 budget deficit. Even double that amount would be “only” two percent. However, with only about forty-seven percent of the 115,000,000 U.S. households paying income taxes, roughly fifty-seven and one half million households pay; based on fifteen billion dollars in foreign aid, that would amount to about $260 per tax-paying U.S. household. Since collections for the Social Security “trust fund” actually go into the general fund with other tax dollars, the amount per household may well be higher.

The direct aid funds provided to Afghanistan, Pakistan, Egypt, Zimbabwe, Somalia, Russia, China, Nicaragua, Cuba, Venezuela and North Korea totals about nine billion dollars or 0.60% of our budget deficit. Were the aid to those countries benefiting the United States significantly, it might be worth the cost. Some of it seems not to be and even “small change” adds up, at least for those actually footing the bill.

Dan Miller graduated from Yale University in 1963 and from the University of Virginia School of Law in 1966. He retired from the practice of law in Washington, D.C., in 1996 and has lived in a rural area in Panama since 2002.
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