By Jeffrey FRANKEL
“Don’t it always seem to go that you never realize what you have until it’s lost?” This phrase, penned by Joni Mitchell in 1970, originally mourned environmental degradation, yet it resonates with numerous concerns. In our current times, this statement could also pertain to official development assistance (ODA).
Over approximately eighty years, the U.S. has invested more resources in humanitarian support, economic development initiatives, and various forms of international aid compared to any other government.
During the fiscal year of 2023, the United States government allocated $72 billion, supplemented by significantly larger contributions from non-governmental organizations and private individuals.
However, the United States doesn’t allocate the highest percentage of its GDP for this purpose; measured in those terms, the U.S. contributes merely 0.24%, which is half the contribution made by Northern European nations, thus placing it at the 24th position worldwide.
Furthermore, foreign assistance makes up only 1% of the entire budget spent by the US government—a stark contrast to what many Americans think, as they often estimate this figure to be around 25%.
A significant number of Americans, even certain distinguished academics like Dambisa Moyo and William Easterly, hold the view that foreign assistance has little effect. Some contend further that this aid can be detrimental rather than beneficial.
Experts point out instances of ineffective assistance initiatives succumbing to mismanagement, governmental excess, or corruption, such as in Vietnam during the 1960s, Zaire in the 1980s, and Afghanistan in the 2000s.
Although some economists like Paul Collier argue that foreign aid can be beneficial—particularly under specific circumstances—the prevailing sentiment appears to suggest that foreign aid is questionable.
However, foreign assistance is disappearing, or at least dwindling rapidly. Shortly after Donald Trump reclaimed the presidency, his administration — particularly the unelected tycoon Elon Musk — started aggressively dismantling the United States Agency for International Development (USAID). Consequently, numerous accounts soon emerged indicating that many of the initiatives losing funding were crucial programs with significant positive impacts.
When George W. Bush initiated the President’s Emergency Plan for AIDS Relief back in 2003, this initiative succeeded in saving countless individuals across the globe from succumbing to HIV and AIDS, particularly within Africa. Similarly, his introduction of the President’s Malaria Initiative about twenty years ago led to an astounding reduction in malaria instances worldwide by approximately two billion cases, along with cutting down related deaths by half.
The Gavi, Vaccine Alliance, supported by the US government, has immunized over a billion children against deadly illnesses such as measles, diphtheria, tetanus, pertussis, and others. This initiative is credited with averting approximately 19 million deaths.
Poliomyelitis has been eradicated in every country except for two, and smallpox has been completely wiped out worldwide. These initiatives have led to a significant reduction in global child mortality rates: currently, only 4% of children do not reach their fifth birthday, down from an alarming 40% just one hundred years ago.
International assistance facilitated the creation and spread of advanced crop varieties, along with synthetic fertilizers, novel pesticides, and contemporary irrigation methods during the latter part of the 20th century.
The so-called Green Revolution in agriculture boosted cereal production twofold across Asia; allowed numerous nations like India to achieve food self-sufficiency; and increased earnings within various emerging markets. Consequently, this led to a decline in infant mortality rates by 2-5 percentage points, down from an initial rate of 18%, throughout the developing world.
The U.S. Marshall Plan remarkably succeeded in aiding European economic recovery after World War II and established the foundation for eight decades of relatively stable worldwide peace and affluence.
In more recent times, international assistance has been crucial in helping Ukraine endure the most severe assault on a European nation’s territorial sovereignty since World War II.
The United States enjoys significant advantages from the assistance it offers. Just consider the COVID-19 pandemic; it becomes clear that engaging in international health efforts isn’t merely charitable, particularly concerning contagious illnesses such as Ebola, HIV/AIDS, and tuberculosis.
At its core, international aid – which encompasses efforts such as disaster response and backing for human rights and democratic principles – has served as a cornerstone of American soft power.
Moreover, this soft power has been just as crucial as military strength—which requires significantly greater resources for upkeep—in maintaining America’s worldwide dominance post-Cold War. However, the current Trump administration is diligently eroding it—undoubtedly to China’s advantage.
Quantifying the impact of foreign assistance on economic development is challenging due to numerous other contributing variables. Additionally, a significant portion of American aid aims at achieving geopolitical or defense goals. Following Ukraine, the primary beneficiaries of U.S. international aid include Israel, Jordan, and Egypt.
Nevertheless, we understand that decreased illness and death rates, along with better nutrition, can enhance economic performance. Therefore, it makes sense that foreign aid plays a role in fostering development, though it may not be the primary factor.
Without a doubt, the United States profits from engaging with trading and commercial allies that boast advanced capabilities and superior performance.
Why, therefore, has the negative perspective on foreign aid been predominant in public discussions for such an extended period? One reason could be that this skeptical viewpoint of
everything
— particularly what governments do — has been dominant for years.
According to a 2018 survey, most individuals from affluent nations thought that the child-mortality rate in less developed countries had increased or remained unchanged during the preceding two decades; however, the reality was that this rate had actually decreased by half.
Moreover, an overwhelming 80% of individuals in affluent nations thought that the proportion of people living in extreme poverty had either stayed constant or increased, despite the fact that it significantly decreased between 1990 and 2013. Given this widespread misunderstanding of these trends, how could anyone accurately assess the impact of foreign aid on their development?
Certainly, foreign aid comes with imperfections and constraints, such as cases of ineffectiveness, poor administration, or unforeseen consequences. Nonetheless, regardless of these historical limitations, it is evident that Trump’s harmful strategy is exacerbating the situation significantly.
Jeffrey Frankel, who holds the position of Professor of Capital Formation and Growth at Harvard University, was part of President Bill Clinton’s Council of Economic Advisers. Additionally, he serves as a research associate for the U.S. National Bureau of Economic Research.
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